    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                          TAX TREATMENT OF HEALTH CARE

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

                                    HEARING

                                   before the

                          COMMITTEE ON WAYS AND MEANS
                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 APRIL 14, 2016

                                   __________

                              Serial No. 114-FC12

                                   __________

             Printed for the use of the Committee on Ways and Means

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                          COMMITTEE ON WAYS AND MEANS

                          KEVIN BRADY, Texas, Chairman

    SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
    DEVIN NUNES, California              CHARLES B. RANGEL, New York
    PATRICK J. TIBERI, Ohio              JIM MCDERMOTT, Washington
    DAVID G. REICHERT, Washington        JOHN LEWIS, Georgia
    CHARLES W. BOUSTANY, JR., Louisiana  RICHARD E. NEAL, Massachusetts
    PETER J. ROSKAM, Illinois            XAVIER BECERRA, California
    TOM PRICE, Georgia                   LLOYD DOGGETT, Texas
    VERN BUCHANAN, Florida               MIKE THOMPSON, California
    ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
    LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
    ERIK PAULSEN, Minnesota              RON KIND, Wisconsin
    KENNY MARCHANT, Texas                BILL PASCRELL, JR., New Jersey
    DIANE BLACK, Tennessee               JOSEPH CROWLEY, New York
    TOM REED, New York                   DANNY DAVIS, Illinois
    TODD YOUNG, Indiana                  LINDA SANCHEZ, California
    MIKE KELLY, Pennsylvania
    JIM RENACCI, Ohio
    PAT MEEHAN, Pennsylvania
    KRISTI NOEM, South Dakota
    GEORGE HOLDING, North Carolina
    JASON SMITH, Missouri
    ROBERT J. DOLD, Illinois
    TOM RICE, South Carolina

                         David Stewart, Staff Director

             Janice Mays, Minority Chief Counsel and Staff Director

                                C O N T E N T S

                                   __________
                                                                       Page

    Advisory of April 14, 2016 announcing the hearing................     2

                                   WITNESSES

    Joseph Antos, Wilson H. Taylor Scholar, American Enterprise
      Institute......................................................     6
    Steven Kreisberg, Director of Research and Collective Bargaining
      Services, AFSCME...............................................    21
    Avik Roy, Senior Fellow, Manhattan Institute.....................    16

                            QUESTIONS FOR THE RECORD

    Rep. Jason Smith.................................................   105
    Rep. Tom Price...................................................   107
    Rep. Charles Boustany............................................   111
    Rep. Mike Kelly..................................................   112

                           SUBMISSIONS FOR THE RECORD

    Alliance of Health Care Sharing Ministries.......................   113
    Alliance to Fight the 40.........................................   119
    Campaign to End Obesity Action Fund..............................   126
    National Association of Specialty Health Organizations (NASHO)...   130
    AARP.............................................................   132
    The ERISA Industry Committee.....................................   134
    National Association of Worksite Health Center (NAWHC)...........   138
    HR Policy Association............................................   145
    The National Association of Health Underwriters..................   146
    U.S. Chamber of Commerce.........................................   149
    Yoga Alliance....................................................   154

                          TAX TREATMENT OF HEALTH CARE

                                  ----------

                            THURSDAY, APRIL 14, 2016

                 U.S. House of Representatives,
                           Committee on Ways and Means,
                                                        Washington, DC.

        The Committee met, pursuant to notice, at 10:00 a.m., in
    Room 1100, Longworth House Office Building, the Honorable Kevin
    Brady, [Chairman of the Committee] presiding.
        [The advisory announcing the hearing follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman BRADY. The Committee will come to order.
        Welcome to the Ways and Means Committee hearing on the tax
    treatment of health care.
        It is only fitting that this important discussion falls
    during Tax Week, a time when Americans are reminded how unfair
    and overly complex tax policies are hurting workers, job
    creators and families.
        We can all agree Americans deserve better, which is why we
    are working toward solutions to make our Tax Code simpler,
    fairer, and flatter for everyone. Today we will examine
    proposals to reform the Tax Code to help all Americans access
    more affordable health care, including proposals to create a
    new fair tax credit and encourage greater use of consumer
    driven health care models to spur innovation and lower costs.
        The Tax Code is full of provisions affecting the quality
    and the cost and the accessibility of health care for millions
    of Americans. Currently the Tax Code contains over a dozen
    health related tax expenditures, all intended to help more
    Americans access health care by subsidizing many of the costs.
        Unfortunately, using the Tax Code in this way also can have
    the opposite effect, increasing premiums and costing taxpayers
    trillions of dollars in the process. Let us consider the
    largest health tax expenditure for employer-sponsored health
    insurance plans, commonly referred to as the employer
    exclusion.
        Congress incorporated this high popular tax break in the
    Tax Code decades ago so that employers could attract and keep
    workers during a time of wage freezes. At the time this
    provision was created, the labor market and the health
    insurance market both looked very different.
        Today, more than 150 million Americans under the age of 65
    get their health insurance through their employer. Our
    conversation today is about how we can preserve and modernize
    this important tax incentive at work while also expanding tax
    benefits to Americans who seek additional health care choices.
        And perhaps the crux of this hearing specifically is how
    can we make this nearly 100 year old tax break more flexible so
    Americans can have a new, modern option to choose a health plan
    that fits their needs and can travel with them to a new job, to
    start their own business, or to raise their family at home.
        Some consumers today feel confined by their employer-
    sponsored arrangement because they are required to choose a
    plan from options determined by their employer rather than
    getting to shop around for the plan that best meets their
    needs.
        Others who select health insurance through their employer
    feel trapped in their current job because they do not want to
    lose the coverage they like. The Tax Code compounds those
    concerns because this pre-tax benefit is tied to the job, not
    to the person. This approach limits options, is unfair to those
    who do not get their health insurance through their job, and
    creates what many economists call job lock.
        Additionally, the employer exclusion is a contributing
    factor to our country's stagnant wage growth. That is because
    the Tax Code incentivizes putting a greater share of
    compensation toward non-taxable health plans and less to
    taxable paychecks. So as health care costs rise, employers
    divert increases in salaries to health care at the expense of
    take-home pay.
        Evidence also suggests that the employer exclusion leads to
    higher health care costs for all Americans. Oftentimes someone
    who participates in an employer-sponsored health plan does not
    face the act and increasingly expensive cost of care. This
    encourages beneficiaries to consume more health services,
    including services they may not even need, driving up overall
    costs.
        I cannot emphasize enough the employer-sponsored health
    insureds' market is a vital one. The question we must wrestle
    with is how we can sustain this option while advancing reforms
    that make the Tax Code fair and health care more affordable and
    flexible for all Americans.
        We need bold solutions to tackle this challenge, not in my
    view, Obamacare's punitive tax on high cost health insurance
    plans that the law itself has made even more expensive.
        We also need to consider expanding consumer-driven health
    care, the model that empowers consumers, not the government, to
    unleash the forces of choice and competition to lower costs and
    increase quality. Yet for many people Obamacare has limited the
    consumer-driven plans they liked, including health savings
    accounts and flexible spending accounts.
        This Committee will continue to protect and expand
    opportunities for Americans who want to take control of their
    health care dollars.
        I want to thank our expert panel of witnesses for being
    here today. I look forward to a robust discussion about how we
    can help all Americans, regardless of employment status, access
    the affordable, portable, quality health care choices they
    deserve.
        Chairman BRADY. With that I will yield to the distinguished
    ranking member of the Committee, Mr. Levin, for his opening
    remarks.
        Mr. LEVIN. Thank you, Mr. Chairman.
        And welcome to the panel.
        Since the Affordable Care Act was signed into law six years
    ago, the progress we have seen in health care in this country
    is undeniable. Twenty million Americans who were previously
    uninsured now have quality coverage they can afford.
        Health care costs are growing at the slowest rate in more
    than 50 years. Millions of young adults have been able to stay
    on their parents' plans until age 26, and nearly 130 million
    Americans no longer have to worry about being denied coverage
    or charged higher premiums because of preexisting conditions.
        Yet despite these gains, Republicans continue to try to
    cook up ways to destroy the law. There have been 63 votes in
    the House to repeal or undermine ACA. That is a dangerous
    prospect on its own. But when it is paired with the fact that
    Republicans have come forth with no viable comprehensive
    alternative with which to replace the ACA, that is a recipe
    doomed to fail.
        Take, for instance, the Republican proposal to eliminate or
    limit the tax exclusion that employers receive when they offer
    health insurance to employees as part of a compensation
    package. This would disrupt the employer-based health insurance
    system that the 155 million working Americans and their
    families rely on for coverage and likely would result in many
    employers no longer offering health care at all to employees,
    and it would leave many, including employees who are older or
    in poor health, without the ability to find affordable
    coverage.
        Republicans have also proposed expanding the use of health
    savings accounts, which are associated with health plans that
    have high deductibles and most often used by wealthier
    households. HSAs are not an adequate replacement for
    comprehensive health care coverage as they can actually lead
    low and middle income Americans to put off medical care because
    they simply cannot afford to pay high deductibles or copays.
        Repealing the ACA as Republicans want to do would have
    devastating effects for millions of Americans who use the tax
    credits that the law offers. The advanced premium tax credit
    and premium tax credit are integral in making health insurance
    plans in the marketplace affordable for Americans. Unlike a
    once a year tax credit, we chose real time tax credits to help
    hard-working American families afford coverage throughout the
    year.
        Earlier this year, I met a woman who came down with breast
    cancer. She lost her job and health care coverage. Because of
    the ACA, she was able to become covered again with health
    insurance. Her breast cancer reoccurred, and she made clear to
    us that this new health coverage, as she said to us looking at
    us straight in the eye, saved her life, saved her live.
        Stories like these remind us of just how vital this law is,
    and for that woman and for millions and millions of people in
    this country, the Republican alternative has simply been 63
    votes to destroy or undermine the coverage that people have
    received.
        Now is the time to keep building on this success, not to
    start over and risk losing all that we have achieved for
    millions and millions and millions of Americans.
        I yield back.
        Chairman BRADY. Without objection, other members' opening
    statements will be made a part of the record.
        Today's witnesses in the panel includes three experts.
    First we welcome Joseph Antos, the Wilson H. Taylor Scholar in
    Health Care and Retirement Policy at the American Enterprise
    Institute.
        Next we will hear from Avik Roy, a Senior Fellow at the
    Manhattan Institute.
        Finally, we will hear from Steven Kreisberg, the Director
    of Research and Collective Bargaining Services with the
    American Federal of State, County and Municipal Employees, AFL-
    CIO.
        The Committee has received your written statements. They
    will all be made part of the formal hearing record. We reserve
    five minutes to deliver your oral remarks.
        We will begin today with Mr. Antos. Welcome, and you may
    begin when you are ready.

    STATEMENT OF JOSEPH R. ANTOS, PH.D., WILSON H. TAYLOR SCHOLAR,
                     AMERICAN ENTERPRISE INSTITUTE

        Mr. ANTOS. Thank you, Mr. Chairman and Ranking Member Levin
    and Members of the Committee. I appreciate the opportunity to
    talk about this very important issue today.
        I am going to focus on the problems created by the way that
    the tax system subsidizes health insurance and need for
    Congress to replace the Affordable Care Act's Cadillac tax on
    high cost, employment-based health insurance with a better
    approach.
        I will first address the tax exclusion.
        Premiums paid for employment-based health insurance are
    excluded without limit from both income and payroll taxes. That
    reduces the cost of health coverage for the average worker by
    about 30 percent. In the aggregate the savings amount to more
    than $250 billion annually.
        While the tax exclusion has made workplace health insurance
    affordable, it has also fueled the rapid growth of health
    spending, contributed to stagnating wage growth, and is
    regressive.
        The exclusion encourages workers to buy insurance that
    offers lower cost sharing but higher tax free premiums. That
    makes consumers less sensitive to prices and promotes the use
    of medical services, and some of those services may not provide
    full value to the patient. I think that is the issue. We have
    waste in our health system. IOM says 30 percent of the money we
    spend is wasted.
        Compensation also has shifted from taxable cash wages to
    greater health benefits which are not taxed. Between 1999 and
    2015, the average employer contribution for family coverage
    nearly tripled, while wage rates increased by only about half.
    It is likely that many workers, given the choice, would prefer
    somewhat lower health benefits for somewhat higher cash wages.
        And then finally, workers with higher incomes, of course,
    benefit the most from the exclusion. The Joint Committee on
    Taxation found that average savings for tax filers with incomes
    less than $30,000 was about $1,700 compared to about $4,600 for
    those with incomes over $200,000. So it is a regressive kind of
    a tax or kind of a subsidy.
        We can restructure the tax subsidy to promote better health
    insurance choices that will lead to more efficient, higher
    value care. The subsidy can be made fairer without eliminating
    the financial incentive employers have to offer health coverage
    to their employees, and reforms can free up funds to help
    stabilize coverage for the 27 million who are left uninsured by
    the ACA.
        Unfortunately, the Cadillac tax is not that reform. The 40
    percent excise tax on high cost health insurance was intended
    to offset some of the excessive health spending arising from
    the tax exclusion. It is levied on employers. It is levied on
    insurers and other health plan sponsors, and the tax is paid on
    the cost of a health plan that exceeds certain thresholds.
        Even though it is billed as a tax on insurance companies,
    workers ultimately bear the burden through lower compensation.
    Moreover, the tax is regressive. The same 40 percent tax is
    imposed on the production worker and the CEO regardless of how
    much they are paid in cash wages. They either pay higher
    premiums or their health benefits are cut back to avoid having
    to pay the tax. Either way, there is more cost for workers.
        The tax will eventually impact everyone with employer
    coverage. The cost thresholds are indexed to general inflation.
    Health care costs rise faster than general inflation, and so
    ultimately all employer health plans will exceed what the ACA
    considers acceptable levels of health care coverage.
        Simply repealing the Cadillac tax, I think, would be a
    mistake. First of all, you need to find offsetting budget
    savings.
        Second of all, simply repealing would ignore the problems
    with the tax exclusion and other tax provisions affecting
    health insurance.
        Reasonable reform would repeal the Cadillac tax and modify
    the tax exclusion to produce both budget savings and better
    incentives for the health sector. Two generic options, tax
    exclusion instead of the refundable tax credit or I mean to
    replace the tax exclusion with a refundable tax credit. Tax
    credits would break the financial link that motivates employers
    to offer health insurance and employers to buy it. There still
    would be a reason for employers to offer health insurance, but
    the money would not be there from the taxpayer.
        Money wages can be expected to increase with the loss of
    health benefits and firms to drop their own plans, although
    some firms will continue to offer the benefit because it is a
    recruitment tool.
        A credit would be a fair subsidy. The amount of the credit
    could be adjusted to account for regional variations in health
    care cost, for example. There are lots of ways to design it. It
    can be very complicated, but fundamentally it is a better
    system.
        Alternatively, we could cap the amount of the tax
    exclusion. That would give employers an incentive to offer
    lower cost plan options, but would not drive employers to offer
    only low cost plans. Capping the exclusion is a less dramatic
    reform than shifting to a tax credit and could be a reasonable
    compromise that would promote more efficient health plans
    within the current employer framework.
        Chairman BRADY. Thank you, Mr. Antos. I understand that you
    can be with us until 12:15 today?
        Mr. ANTOS. Yes.
        Chairman BRADY. Great. Thank you very much.
        [The prepared statement of Mr. Antos follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman BRADY. Mr. Roy, you are up next. Welcome.

       STATEMENT OF AVIK ROY, SENIOR FELLOW, MANHATTAN INSTITUTE

        Mr. ROY. Thank you, Chairman Brady, Ranking Member Levin,
    and members of the Ways and Means Committee. Thanks for giving
    me the chance to speak with you today about the tax treatment
    of health care.
        In my remarks today I will focus on three areas. First I
    will discuss how the tax treatment of health care is the
    central flaw in our health care system.
        Second, I will address arguments made by opponents of
    health tax reform.
        Third, I will discuss the principles of sound reform.
        Republicans and Democrats may occasionally disagree on
    health care policy, but we all agree that health care needs to
    be more affordable. Nearly all of the growth in future Federal
    spending and thereby future tax increases is driven by health
    care, in particular, health care inflation, and the high and
    rising price of health care is the reason we have so many
    uninsured.
        According to the CBO, 98 percent of the long-term uninsured
    cite the high cost of health insurance as a barrier to
    coverage. Only six percent cited poor health status, such as a
    preexisting condition.
        The median worker's paycheck has barely increased in three
    decades, but overall compensation has grown. The problem is
    that most of the growth in compensation has been eaten up by
    the rising cost of health insurance. In 1996, the cost of
    coverage was 11 percent of per capita income. In 2010, it was
    19 percent, nearly double.
        The high cost of U.S. care originates in 1940s wage
    control, as you know, and is enshrined in the employer tax
    exclusion. Hospitals, doctors and drug companies have a
    powerful incentive to charge high prices here because the
    exclusion from taxation of employer-based insurance prevents
    patients from controlling their own health care dollars and
    thereby holding companies accountable for the prices they
    charge.
        Today the employer tax exclusion, its value in terms of
    Federal, state and local income taxes and Federal payroll
    taxes, exceeds $500 billion a year. So it is extremely
    important to handle reform of the exclusion with great care.
        But that is different from opposing reform altogether. If
    we want to make health care affordable, done properly we have
    to reform the exclusion. Health tax reform the right way would
    put more dollars in the pockets of workers rather than
    insurance companies.
        Some opponents of health tax reform say that employer-based
    coverage protects us from single payer health care. That is
    manifestly untrue. The rising cost of employer-based coverage
    has actually been the principal argument for every major
    expansion of government-run health care in the United States.
        Switzerland, by contrast, has a market-based system in
    which everyone purchases private coverage on their own
    individually. That system is not perfect, but it has been a far
    better check on the government. In 2014, the Swiss rejected a
    referendum to replace their system with single payer health
    care by a margin of 62 to 38 percent. People like choosing
    their own plans and will never allow the government to take
    away that right if they control it.
        There are two keys to high quality health care tax reform.
    The first is that any reform should give workers more options
    to buy the coverage that they want.
        The second is that reform should be enacted gradually. The
    ACA's Cadillac tax resembles such reform by taxing high value
    employer coverage, but that tax contains many exceptions and
    does not deploy the revenue it raises to aid all those who
    would like to purchase insurance on their own.
        The best way to expand health insurance choices for
    individuals is to truly equalize the tax treatment of employer-
    purchased and individually purchased coverage. Congress could
    design a cap that raised an equivalent amount of revenue as the
    Cadillac tax, gradually phased in over time while also
    providing tax relief to those who purchase coverage on their
    own.
        There is wide, bipartisan agreement on the utility of
    refundable tax credits for expanding coverage to the uninsured.
    The ACA, of course, deploys tax credits for this purpose, but
    that law has imposed costly mandates on insurers and
    individuals that have made coverage less affordable for
    millions, especially those ineligible for subsidies.
        Some say that we should offer Americans an identical tax
    credit to every American with which to purchase coverage, but
    such a system would necessarily under-subsidize the poor, the
    sick, and the vulnerable while over-subsidizing the wealthy.
        Tax credits for the uninsured should embrace the best of
    both worlds. They should be means tested to best help those in
    need. They should apply to health savings accounts and maximize
    the ability of people to choose the care and coverage that is
    best for them.
        In this way we can achieve the goals that every member of
    this Committee shares: ensuring that every American has access
    to quality, affordable health care.
        Thanks, again, for having me. I look forward to your
    questions and to being of further assistance to this Committee.
        Chairman BRADY. Thank you, Mr. Roy.
        [The prepared statement of Mr. Roy follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

         Chairman BRADY. Mr. Kreisberg, welcome and please proceed.

        STATEMENT OF STEVEN KREISBERG, DIRECTOR OF RESEARCH AND
     COLLECTIVE BARGAINING SERVICES, AMERICAN FEDERATION OF STATE,
                     COUNTY AND MUNICIPAL EMPLOYEES

        Mr. KREISBERG. Thank you very much, Mr. Chairman, and thank
    you, Ranking Member Levin. It is a pleasure to be here today.
        My name is Steve Kreisberg. I am the Director of Research
    and Collective Bargaining with AFSCME, a large, public employee
    union of the United States.
        And we do not think we can start talking about the American
    health care system without talking about the Affordable Care
    Act. This is an Act that we supported. We have a long history
    of supporting health care reform and expansion of coverage to
    all Americans.
        Now, as public employees, virtually all of our members have
    adequate health care coverage, which is a great thing. So a lot
    of folks have asked us why would we be supporting the expansion
    of coverage. In the view of our union, this is a fundamental
    piece of what it takes to be a developed Nation. It is a
    fundamental part of the American dream, is to have health care
    so you can go on to achieve your full potential.
        The Affordable Care Act for the first time really brings
    that within reach of virtually all Americans. We have expanded
    coverage. Ranking Member Levin referred to the figures.
    Unfortunately, we did not expand it as much as we should have
    or we intended to because 20 states still refuse to extend
    Medicaid coverage to their citizens. We think that is a
    mistake, and we think over time we expect to see further
    expansion of Medicaid.
        But our members are also very much focused on cost, and
    like the other two panelists before me, we recognize that cost
    in our system is something that must be addressed.
        Under the Affordable Care Act, we have seen a moderation of
    cost increase year over year. This is a trend that we are
    pleased to see. Cause and effect are often difficult to
    determine, but we believe the Affordable Care Act has gone a
    long way in helping us achieve the cost moderation that
    everybody seeks.
        But it is not enough. We all know there is plenty of work
    to be done, not just with expansion of coverage, but also in
    cost, and we think the Affordable Care Act and the Obama
    administration have made a pretty good start in this regard.
        The most important aspect of this in our view is the
    alignment of financial incentives to achieve quality and value
    in our health care system. We think the problem of cost is on
    the supply side, not on the demand side, and I think that is
    very important that you consider the issues in front of you.
        I think what Mr. Roy was implying in part is that we need
    to change consumer behavior, and that will lead to a reduction
    in our health care expenditures. We do not have faith that that
    will be an effective solution to our problems. We think that
    the problem with our health care system is that we do not have
    a free market and we never had a free market in health care. It
    does not operate like other markets.
        So we need to align incentives from the payers who are not
    individual consumers for the big ticket items, but through our
    insurance companies and form our government, and by that we
    mean that we have to move away from the fee for service system,
    and I think there is universal agreement that that is probably
    a wise approach, and we are starting to do those kinds of
    things right now.
        We also feel we need, and this is part of the same
    approach, to further expand access to primary care and imbed
    primary care with your other avenues of care so we're not
    running into specialists uncoordinated from primary care
    providers.
        We also must address prescription drug prices. They are
    accounting for the large part of our trend in cost increases.
    Every other developed nation, including Switzerland, regulates
    prescription drug prices. We do not do so here. We should
    consider that or some other alternatives to help bring our
    prescription drugs under control, and we expand on those
    remarks in our written testimony.
        I do want to talk a little bit more about the tax
    exclusion. The foundation of our health care system right now
    is employer-based coverage. We believe changes and caps to the
    tax exclusion undermine that. In fact, we believe changes and
    caps to the tax exclusion will have the same aberrant results
    of the excise tax, which the two panelists oppose. So we cannot
    figure out how you can reconcile the position on tax exclusion
    with the position they take on excise taxes.
        We think both will have the unintended consequence of
    shifting more cost to consumers. Now, some consumers may prefer
    high deductible health plans. When you are young and healthy
    you do. But those very same consumers hope to get old. This
    beats the alternative.
        When they get old, they are going to want more
    comprehensive coverage. So we are going to see people perhaps
    enjoy high deductible coverage when they are younger and
    healthier, but eventually, as age catches up with them, opt
    into the higher cost plans and the more comprehensive coverage.
        That makes no sense. Everybody should have comprehensive
    coverage from day one to keep our risk pools intact. We believe
    the high deductible plans are not the effective way to reform
    health care. In fact, if you ask your constituents what the
    problems are with the American health care system, I do not
    think any of them will say the problem is that they do not pay
    enough. I think they believe the problem is they pay too much.
        Thank you very much.
        Chairman BRADY. Thank you, Mr. Kreisberg.
        [The prepared statement of Mr. Kreisberg follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman BRADY. Thank you for the panelists' opening
    remarks. We will go to the question and answer period, and I
    will begin with myself.
        I said it in the opening. I want to be perfectly clear.
    Most Americans get their health care at work, more than 150
    million Americans. We are going to preserve incentives to get
    health care at work.
        But the world has changed, and the question is: can we
    create flexibility and expand and make equal that tax incentive
    so that Americans have more choices?
        Mr. Antos, do you believe we can create or modernize that
    tax exclusion at work in a way that creates flexibility and
    keep the important incentives for health care at work?
        Can we do both?
        Mr. ANTOS. Yes, I think we can. As I mentioned, if you cap
    the exclusion, that does not mean you remove completely the tax
    subsidy through employer sponsored coverage, but what it does
    do is it discourages the purchase of very expensive coverage
    that tends to have very low cost sharing and which prevents
    people from understanding what the cost of health care is.
        I mean, the fact is that health insurance through the
    employer is kind of a mystery to most people. Because the
    premiums are taken out of your pay, you do not often know what
    your premiums are, and the employer contribution is also a
    mystery. People think that it is not coming out of their
    paycheck.
        Chairman BRADY. Yes, and it is.
        Mr. Roy, we talked about the Tax Code being stuck, you
    know, in the past because it has been 30 years since we have
    reformed it, but this tax incentive actually first appeared in
    1918, got serious 70 years ago, and effectively is stuck there,
    but workers are not stuck. Many of them change jobs multiple
    times throughout their life. Many will go home to start a small
    business. Others choose to want health care individually so
    they can raise their families.
        How in your view is it appropriate to modernize that tax
    incentive that worked to be able to create that flexibility for
    workers to live a 21st Century life because, frankly, their
    lives are different from then when this first got serious seven
    decades ago?
        Mr. ROY. Absolutely. I would make two points. The first
    point is that employer-based tax reform or health tax reform is
    not about having workers pay more. It is actually about workers
    paying less for their health care. All of these efforts are
    about making workers paying less for their health care. All of
    these efforts are about making sure that workers pay less for
    health care and that health care is more affordable in the
    future than it is today.
        And the second point that I would make is that what is
    really important, aside from making health care more affordable
    is putting patients and workers more in control of their own
    health care dollars. Today those health care dollars are
    controlled by the government, by employers, by insurance
    companies, by hospitals, by drug companies. They are not
    controlled by the consumer, by the worker, by the patient.
        And all of our efforts on tax reform are about putting the
    control back in the hands of that individual and those
    families.
        Chairman BRADY. Well, can I follow up with that? This is
    sort of my final question. I may have another after that, but
    this is really about a world where most people are told, ``Here
    is your health care. You will like it. Just take it or leave
    it, and we will decide what is best for you.''
        This is about actually giving consumers control, picking a
    plan that is right for them, not what Washington wants, not
    what someone else wants, but what they need for their family
    and their lifestyle. It seems to me in the 21st Century, what
    we need armed through life is a health care backpack that
    includes a health plan that works for you and can travel with
    you whether it is to another job or a home or to start your
    small business.
        You need a health savings account to be able to better
    afford the day-to-day costs of health care and prevention, and
    you need easy access to your medical records so you can share
    that with the doctor or emergency room if you are traveling at
    the time.
        It seems to me that how we modernize, how we get health
    care to work actually unlocks and creates that flexibility for
    Americans.
        So, Mr. Antos, in your view, what is the best way to
    modernize this tax incentive at work, and Mr. Roy as well, that
    creates that flexibility for Americans to control more of their
    health care plans?
        Mr. ANTOS. Well, I think the question is: what are the real
    bounds here? In the sort of ideal world, I think you would
    definitely go to a tax credit type of a subsidy which would
    free workers to buy the kind of coverage that they want on the
    individual market.
        That would, of course, require some additional health
    insurance reforms.
        Chairman BRADY. But in that case you would keep the tax
    incentives that work, but you have an option for the first time
    really ever, an option to equalize that tax credit and make
    some choices.
        Mr. ANTOS. Right. I think the key principle is to make it
    possible for people, wherever they buy insurance to have the
    same level of support.
        Chairman BRADY. Yes, yes, sort of equal treatment.
        Mr. Roy.
        Mr. ROY. Yes, I would agree with my colleague over here,
    Mr. Antos, and I would add that one of the important things
    about giving people that choice to buy the health insurance and
    the health care that makes sense for them is the profound
    innovation it would trigger in the health care system.
        Today in most states, one health insurance company has 80
    percent of the market, and that makes it very, very difficult
    for people even if they do choose their own health insurance to
    have true choice. But if you actually give people control of
    those health care dollars again, give it back to them to spend
    the way they want, you will see profound innovation and
    competition in not just how health insurance companies have to
    compete with entrepreneurs, but also how health insurance would
    be used versus health savings accounts versus urgent care
    versus all the other things that are out there.
        So people should have those choices, and we will not know.
    We will not be able to anticipate how the consumers, how
    individuals will decide to use those dollars in the future, but
    it will be much better than it is today. That we can be very
    confident of.
        Chairman BRADY. Thank you.
        Because what we have is not working in the Affordable Care
    Act. There are a number of people in the Eastern Region. They
    get cancer under Obamacare, can go to M.D. Anderson for the
    best cancer cure in the world: zero.
        This number of PPOs that are now available, and it was
    zero, by the way, that are available in our part of the world
    for families under Obamacare, and I cannot count the numbers of
    the extra dollars out of pocket that people pay now in the
    exchanges under the Affordable Care Act that they cannot
    afford.
        In fact, in Texas, half of the people who are supposed to
    be forced in Obamacare have elected to pay a tax than to go
    into a health care plan they do not want and cannot afford and
    cannot see the doctors and get the medicines they want.
        So we ought to be thinking about a 21st Century option for
    the first time ever that recognizes what people need, not what
    Washington needs.
        With that, I will now recognize the distinguished ranking
    member from Michigan, Mr. Levin, for any questions he may have.
        Mr. LEVIN. You know, I want to be polite, but let me just
    say this. I think the Republicans have failed for five years to
    come up with a plan because there is so much double-talk. You
    say you do not want to eliminate the exclusion, but then you
    want to come up with a tax credit and give people control of
    their health care.
        Essentially if you think it through what you want to do is
    to replace employer-based health care coverage. You do not say
    that. You kind of modify it. The Cadillac thing, modify it.
        So you have been handcuffed because you just talk out of
    both sides of your mouth constantly. In listening to the two of
    you, I do not know what your plan would ever be. You say keep
    the exclusion, but cap it, and then come up with credits. You
    do not say how much. If it is enough, employers will not
    provide health care anymore. You are going to destroy the basis
    upon which we have built.
        You can talk about 100 years ago, but this started after
    the Second World War when employers began to provide health
    care coverage, and it spawned for the first time most people
    having health care coverage.
        And you talk about Switzerland. I want to say this
    politely. This is not Switzerland. This is not Switzerland.
        Do you favor continuing Medicaid? Yes or no, Mr. Antos?
        Mr. ANTOS. You say continuing Medicaid?
        Mr. LEVIN. Yes.
        Mr. ANTOS. Yes, I favor continuing Medicaid, but with
    substantial reforms.
        Mr. LEVIN. You favor continuing it.
        Mr. ANTOS. Yes. We have to help poor people have access to
    appropriate health care.
        Mr. LEVIN. Medicaid provides coverage for more than just
    poor people.
        Mr. Roy, do you favor continuing Medicaid?
        Mr. ROY. Yes. If you want to know all about the details of
    my own views on health reform and how to achieve universal
    coverage, I have published them at the Manhattan Institute.
        Mr. LEVIN. Okay. I understand that. But do you favor
    continuing Medicaid?
        Mr. ROY. Yes. What we need to do though is dramatically
    reform Medicaid because right now health outcomes for people
    enrolled in Medicaid are no better than people with no
    insurance at all, and that is because the system is so poorly
    designed.
        So reforming Medicaid is essential to providing high
    quality health coverage for the poor.
        Mr. LEVIN. So health care under Medicaid is no better than
    for people with no health insurance at all?
        Mr. ROY. According to the New England Journal of Medicine,
    which published a study looking at Medicaid enrollees in
    Oregon, people enrolled in Medicaid showed no better health
    outcomes than people with no insurance at all.
        Mr. LEVIN. They were talking about outcomes. That was one
    study, but that does not mean that people----
        Mr. ROY. There are many other studies.
        Mr. LEVIN [continuing]. That people who have Medicaid are
    no better off than people who have no insurance at all.
        Mr. ROY. Well, just to be very clear, I support universal
    coverage. I support health coverage for the poor. I think we
    should do it in a very different way.
        Mr. LEVIN. Mr. Kreisberg, talk a bit if you would about
    this notion giving people control over their health care.
        Mr. KREISBERG. Well, you know, as I indicated in my
    statement, the health care marketplace simply does not work the
    way other marketplaces work. When somebody has a disease, they
    are often in the hands of their trusted physician who will
    direct them to a lab for tests, direct them to a hospital for
    services.
        What we have now, we group people, and we group them in
    insurance plans. We group them in self-insured plans offered by
    employers. And this grouping mechanism provides the ability to
    negotiate with the provider. At the time that I am diagnosed
    with cancer, I am not in a position to start shopping around
    and negotiating with various hospitals who may or may not even
    give me the time of day in those negotiations.
        Those are the big ticket items in health care. We are not
    talking about a doctor's office visit when I have the flu.
    Those are not the issues that are driving our health care cost
    increases. So we have to start from the premise that consumers
    are not empowered in a health care marketplace and they will
    not be regardless of what we do.
        I think Mr. Roy talked about the fact that there is a
    monopoly in some states among insurers. How would one
    individual be able to negotiate with a monopoly? How does that
    plan, if you will, deal with the issue of a monopolist?
        We are better off with large employers and self-insuring to
    create some confidence.
        Chairman BRADY. Thank you all. The time has expired.
        Mr. Johnson, you are recognized.
        Mr. JOHNSON. Thank you, Mr. Chairman.
        Mr. Antos, I have a few questions, but I would ask if you
    would just answer yes or no.
        Mr. ANTOS. Sure.
        Mr. JOHNSON. First, is it not true that about 155 million
    Americans receive health insurance through their employer?
        Mr. ANTOS. Yes.
        Mr. JOHNSON. Next, you stated that the average employer
    contribution to health care has grown faster than wages, but
    have health care costs not also grown faster than inflation?
        Mr. ANTOS. Yes, absolutely.
        Mr. JOHNSON. Now, you also testified that workers would
    likely prefer lower health care benefits in exchange for higher
    wages, but depending on how Congress caps the tax exclusion,
    could the employee not end up paying even higher taxes?
        Mr. ANTOS. It is possible. You know, the details do matter.
        Mr. JOHNSON. Lastly, your testimony cites a study showing
    that 30 cents per dollar is wasted, which includes increased
    spending from consolidation. Do you agree that Congress should
    also address these issues?
        Mr. ANTOS. I think the health system should address the
    waste in the health system. That is where the solution is going
    to be.
        Congress can help by passing reasonable laws and HHS can
    help by interpreting them in an appropriate way through
    regulation, but ultimately it is up to the health system to
    solve these problems.
        Mr. JOHNSON. Well, you know, we always try to pass
    reasonable laws.
        Your answers clearly show that Congress must be very
    careful though with any changes to employer-provided coverage.
    The bottom line is that employer health insurance has worked
    for over 60 years and provides affordable quality insurance to
    over half of all Americans.
        We also cannot lose sight of the importance of promoting
    free market ideas to reduce cost and increase access, things
    like FSAs and HRAs and my bill to allow employers to band
    together to purchase insurance.
        I also think this Committee should take a serious look at
    repealing Obamacare's anticompetitive prohibition on physician-
    owned hospitals.
        Mr. Chairman, I yield back.
        Chairman BRADY. Thank you.
        Dr. McDermott, you are recognized.
        Dr. MCDERMOTT. Thank you, Mr. Chairman.
        If Tip O'Neill were here today, he would say, ``Well, this
    is another smoke and mirrors hearing. You blow smoke up in the
    air, hold up a mirror, and let people see whatever you want.''
        It has been six years since we passed the Affordable Care
    Act. We hear rumblings from time to time that the Republicans
    are about to have a replacement plan, somehow achieving the
    goals of ACA by tearing it apart.
        Now, the truth is we will never get a plan out of the
    Republicans any different than the ACA. In the six years there
    has not been a coherent plan in spite of all the attempts to
    repeal and everything else. They never put anything on the
    table in writing. It is all smoke and mirrors, folks.
        There is good reason they do not have a plan. There is no
    place to go. The few ideas that have floated would create
    economic and personal chaos. Paul Krugman wrote a piece in the
    New York Times this week called ``Obamacare Replacement
    Mirage,'' and I ask unanimous consent to have it included in
    the record.
        Chairman BRADY. Without objection.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. MCDERMOTT. And it describes Speaker Ryan's problem
    precisely. It is that there is no place to go. If you want to
    cover all Americans and secure financial security and control
    costs, you have limited options.
        One is a single payer system. I support that, but we do not
    have that. So I am supporting what we have and trying to fix
    it. That cuts the greed and the insurance industry waste out of
    the program, the single payer system.
        The other alternative is to rely on the existing system,
    while eliminating abuses in the insurance industry, and that
    would mean community rating and guaranteeing coverage for
    consumers with preexisting conditions.
        Because a system like that would require insurers to cover
    sicker populations you need a mechanism to balance the pool of
    people, and that is where the individual mandate comes in. You
    cannot have a pool of just sick people in the insurance plan
    and have the sick ones out here waiting for the day when they
    can run in and get their insurance. They all have to be in.
        Now, if you have an individual mandate, you need to be able
    to afford the coverage. That is a common sense understanding.
    So you need to subsidize premiums and you need to reduce cost
    sharing for lower income people. That is also common sense.
        In essence, it is the only reasonable alternative to a
    single payer system. It looks like the Affordable Care Act, and
    that is why the Republicans have nowhere to go. They will not
    fix it. We will not have hearings in this Committee about
    consolidation in health care or on drug prices.
        You bring up Switzerland. Switzerland has a highly
    regulated government system that is run by insurance companies.
    They negotiate the drug prices in Switzerland. We do not allow
    the government to negotiate the drug prices in this country
    because this Committee will not have a hearing, will not have a
    hearing on what is going on with drug prices in this country.
        Now, if you want to get rid of the individual mandate and
    keep in place the issue for people with preexisting conditions,
    you put the insurance industry into a death spiral. We did
    exactly that in an experiment in Washington State in the 1990s,
    and we lost the individual market because you cannot have
    guaranteed issue and not have some way to save the insurance
    companies.
        Now, if you want to take away American subsidies, that will
    mean you are going to have financial hardship for everybody,
    and you will not be able to have insurance because most people
    cannot afford it without either employer help or government
    help.
        That is what is going on right now in the ACA, and if you
    want to continue these hollow efforts to repeal the ACA, what
    you are saying is one of two things. Either you want to replace
    the ACA with a single payer system--and I am for that. I will
    sign up today for that--or, two, you do not want to provide
    health care coverage for the American people, for all the
    American people. You only want it for the financially able
    American people.
        The health savings accounts are for rich people. Poor
    people do not have those things. They cannot use that because
    they cannot pay the deductibles.
        So you cannot have it both ways, and unfortunately we are
    having another hearing for this smoke and mirrors business. We
    will not get it without having adjustments to the Affordable
    Care Act because that is the Republican program.
        Chairman BRADY. We may need to call on Switzerland to
    mediate the differences between the Committee on health care.
        Mr. Tiberi, you are recognized.
        Mr. TIBERI. Thank you, Mr. Chairman.
        You know, one of the things I love about this Committee and
    my friends Mr. Levin and Mr. McDermott, and I do believe their
    hearts are in the right spot, but you never cease to remind me
    as to why I am a Republican, and I appreciate that a lot.
        Because I do care about people. Everybody on this side of
    the aisle like your side of the aisle cares about people, but
    it is a challenge for me because Mr. Roy said he is for
    universal health care. I am for universal health care, and in
    fact, in my state--it is probably different in Michigan--we
    expanded Medicaid, but I run into people every day when I am
    back home, whether it is a hospital administrator, whether it
    is a physician, whether it is somebody on Medicaid or a family
    member of somebody on Medicaid, who cannot get access to a
    primary care doctor because the primary care doctor thinks that
    Medicaid is flawed.
        I think that was your point. So, Mr. Levin, Mr. McDermott,
    to sit up here and say that just because Obamacare passed,
    everything is well and good and there are no challenges for
    people, not the rich by the way, is frustrating to me.
        Because what Obamacare also did at least in my district,
    maybe not yours, is that people who were excited about it
    passing were excited also about the President saying if you
    like what you have, you can keep it, and I continue to run into
    people who have not gotten to keep what they had and are paying
    more and getting less, quite honestly.
        I get frustrated up here when every time we have a hearing
    to try and improve the health care system for patients, for my
    mom and dad, and we have talked before. Mr. Thompson is looking
    at me, with respect to this silver bullet of negotiating
    prescription drugs and how great that is. Well, my dad
    experienced how great that is not and how wonderful Part D,
    quite frankly, has been.
        I have an aunt who does not have to go to Canada anymore
    because of Medicare Part D.
        So, Mr. Roy, this was supposed to be about the tax
    exclusion. I have a sister who many years ago had a little boy.
    He is now going to graduate from Ohio State, Go Bucks, in a
    couple of weeks, and when he was a little boy, they moved away
    to Cincinnati, and she came back over the Christmas holiday. He
    got sick. The former pediatrician gave him a drug to take.
    During the Christmas holiday she gave him this prescription. He
    got better, and before New Year's Day, she threw away the
    prescription.
        And I said to her, ``What are you doing? If he gets sick
    again, there is still medication left.''
        She said, ``Do not be so cheap. It costs $3. I will get
    another prescription.''
        But the point is, just like what Mr. Brady talked about,
    she is excluded from the true cost of that drug. My mother-in-
    law had a stroke a year ago. My wife is a pretty smart person.
    She is an accountant. Everything was focused on where to go
    after the hospital for rehab on what insurance covered, not on
    quality, not on cost. We do not know to this day how much it
    cost.
        Well, thank goodness we had good quality or she had good
    quality care, but the consumer, the patient because the system
    is not patient centered. Whether it is a Medicaid patient who
    cannot get in to see a primary care doc and ends up in the
    emergency room in Columbus, Ohio, or my mother-in-law who is
    going to a rehab facility, the patient is excluded from the
    cost of the care.
        How do we get patient-centered care and patients focused on
    the cost so that there is not over utilization, so that there
    is more transparency, and all of us know that there is not just
    some tree in the backyard we are pulling money off of, and we
    do not have any competition?
        Mr. ROY. The only way to have patient-centered health care
    is for the patient to control the health care dollars. We do
    not have patient-centered health care today because employers
    and insurance companies and the government control the dollar,
    and that is why we have government centered health care, not
    patient-centered health care.
        I want to bring up a point that was brought up earlier
    about Switzerland and how it allegedly has regulated prices.
    What it has is insurance companies that can jointly negotiate
    prices with hospitals and drug companies, and that is a system
    that I have written about with Forbes we could have here. All
    you have to do is have an antitrust exemption for those kinds
    of negotiations for private insurers in Switzerland or in the
    United States.
        So there are market-based systems elsewhere that we can
    learn from, but you are never going to have a patient-centered
    health care system unless the patient is controlling the
    dollars.
        Mr. TIBERI. And you are for quality health care.
        Mr. ROY. Absolutely.
        Mr. TIBERI. Thank you.
        Mr. ROY. And, again, I have written about this extensively.
    I would encourage anyone who is interested in a detailed plan
    on health reform to download it from the Manhattan Institute or
    the American Enterprise Institute, for that matter.
        Mr. TIBERI. I yield back.
        Chairman BRADY. Thank you.
        Mr. Lewis, you are recognized.
        Mr. LEWIS. Thank you very much, Mr. Chairman.
        Thank each one of you for being here this morning.
        I would just like to note whether you believe in health
    care as a right, as a right, in a country such as ours, health
    care for all. Do you subscribe to that idea?
        Mr. ROY. Is the question addressed to me, sir?
        Mr. LEWIS. Any of you.
        Mr. ROY. First let me just say, Mr. Lewis, it is always a
    pleasure to speak with you. You are a personal hero of mine.
        I support universal coverage. I think, like many of your
    colleagues, a country that is as wealthy as ours should strive
    to provide quality health coverage for every American.
        But the way to do that is to maximize the degree to which
    individuals are controlling those health care dollars and
    subsidize through tax credits or refundable tax credits those
    choices for those who need the help.
        Mr. KREISBERG. Good morning, Mr. Lewis. Yes, our union
    definitely supports health care as a right. It is really a
    matter of----
        Mr. LEWIS. A fundamental right?
        Mr. KREISBERG. A fundamental right to health care is
    something that we fully support.
        Mr. ANTOS. I agree with Mr. Roy. I would also make the
    distinction between health care and health insurance. Just
    because you have health insurance does not necessarily mean you
    are getting appropriate care.
        So I think we need to work on both financing and delivery
    reform.
        Mr. LEWIS. But if you accept the idea that it is a right,
    in a democratic society such as ours.
        Mr. ANTOS. Yes. I agree with Mr. Roy. I think I probably
    agree with everyone in the room that everyone should have
    health insurance, and those who need support to obtain that
    coverage should get it.
        Mr. LEWIS. But do you see the Affordable Care Act as a down
    payment, as a major down payment for all citizens? It is not
    perfect.
        Mr. ANTOS. I am sorry. You referred to the Affordable Care
    Act?
        Mr. LEWIS. Yes.
        Mr. ANTOS. Well, it is a down payment in a sense, but I
    would argue for fairly substantial reforms. Certainly the idea
    of----
        Mr. LEWIS. Will you subscribe to the idea that it is a
    major down payment?
        Mr. ANTOS. So part of the down payment was to change, and I
    think it is a very important change, to change insurance rules
    so that if you have a preexisting condition, that cannot be
    held against you in terms of access to insurance or premiums. I
    think that is a good change. I do not see us ever moving back
    from that.
        But as far as the way we are financing it, as far as the
    complicated way we are making people try to understand what
    options they have, as far as the restrictions on what insurance
    must cover, I think those are things that need to be dealt
    with.
        Mr. LEWIS. What would you say to the average person who is
    receiving health care now that did not have it before? What
    would you say to them if you get rid of the Affordable Care
    Act?
        Mr. ANTOS. Well, I support reforming the law that exists
    today, and so I would argue that the appropriate reform would,
    in fact, give everyone access to insurance and give those who
    need help the most have support from the taxpayer, and that
    includes the people obviously, most of the people who are
    signing up on the exchanges.
        Most of the people are signing up because they are getting
    substantial subsidies. The people who do not get substantial
    subsidies are not signing up, which is a major problem with
    risk selection in the exchanges.
        Mr. LEWIS. Mr. Kreisberg, do you care to respond, sir?
        Mr. KREISBERG. Yes. The first thing I would say is I
    appreciate that everybody does join in the idea of universal
    coverage, and I would ask Manhattan Institute and AEI to join
    AFSCME in going to those other 20 states so we can adopt
    Medicaid expansion, so that we can really go a lot further in
    getting to universal coverage.
        Because we have 20 states that do not buy into the idea
    that it is a fundamental human right, and it is a fundamental
    part of being American to have health care coverage. Because
    they have that opportunity at no cost to the state, and yet
    they refused to participate in the Medicaid expansion.
        Now, with that said, I think the----
        Mr. LEWIS. Is that true in many of the states where the
    Republicans are governors?
        Mr. KREISBERG. Well, you have these Republican governors,
    Republican legislatures. You know, I do not want to necessarily
    make it overly partisan, but it is a partisan issue, I suppose.
    It is ideological. It is ideological opposition to the idea
    that we are going to have a government program that addresses a
    real pressing problem that affects real people.
        We know that a child will not reach his or her potential if
    they do not have health care.
        Chairman BRADY. Thank you. All time has expired.
        Mr. Smith, you are recognized.
        Mr. SMITH OF NEBRASKA. Thank you, Mr. Chairman.
        And thank you to our witnesses.
        I want to focus on consumerism and health care because I do
    not think the American people are offended that there is a
    suggestion that we should have health insurance. It is that the
    government is forcing people to have insurance coverage that
    many would find personally objectionable.
        And I think it is a good idea to have health insurance. I
    look back at when I had my first real job out of college. I
    assumed that the group plan was the best for me. So I did not
    shop around. I would later learn that I could have saved a lot
    of money by shopping around, and so I was not the best of
    consumers then.
        And I certainly see policies today that discourage
    consumerism and certainly discourage, well, prohibit people
    from exercising what I would call freedom to decide what is the
    best coverage that would be there for their families or
    themselves as individuals.
        So what can we do to encourage more consumerism? And I do
    not want to take coverage away.
        Another concern that I have, is push to expand Medicaid.
    All the while we know that it pulls people off of private pay
    in some cases, and Medicaid provides lower reimbursements to
    hospitals and doctors, and so it becomes this vicious cycle of
    who loses, consumers, patients, and drives up the debt and
    fewer choices are out there.
        What can we do to encourage more consumerism? Mr. Roy.
        Mr. ROY. Yes. So, again, I would say that the biggest thing
    that you can do to encourage consumerism is to have the patient
    control the health care dollars. The reason why we do not have
    an Uber for health care or we do not have the kinds of
    technological innovations that have changed the rest of our
    economy. Why is that not happening in health care? It is
    because those things can only happen when the consumer can
    direct his or her dollars to the health care service that he or
    she needs.
        When the government or the insurance company or large
    employers control those dollars, then the consumers are not
    involved in those decisions. So you have to have the patient in
    charge of the health care dollars and health tax reform, which
    this Committee is considering, is the central key step to
    achieving that goal.
        Mr. SMITH OF NEBRASKA. Mr. Kreisberg, in your previous
    comments, you were talking about the overall health care issue.
    Is it possible that there would be a good health care plan that
    would not be drafted or controlled by the government?
        Mr. KREISBERG. Of course.
        Mr. SMITH OF NEBRASKA. What can we do to head in that
    direction?
        Mr. KREISBERG. Well, I am in a good health care plan that
    is not controlled by the government. It is in private
    insurance.
        Mr. SMITH OF NEBRASKA. Is it a plan that millions of
    Americans would not find personally objectionable?
        Mr. KREISBERG. I think the plan that I am in, most
    Americans would be satisfied with.
        Mr. SMITH OF NEBRASKA. Okay.
        Mr. KREISBERG. But I think to be more precise with my
    answer, Mr. Smith, we need minimum standards for plans just
    like we regulate who can call themselves a physician. We need
    people to have adequate coverage because what happens is if I
    am in inadequate coverage and I now have a dread disease and
    this plan does not cover me, in our system and in this country,
    I am not going to die on the streets, and that is a good thing,
    but yet I have shirked my individual and personal
    responsibility to have adequate coverage, and now the rest of
    you are paying for my health care.
        So that is why we have things like an individual mandate
    and minimum benefits, essential health benefits, so that we can
    ensure that our plans provide the services that will keep
    people healthy and treat them when they are sick and they are
    sufficient.
        We cannot just let anything be sold and be told that it is
    health insurance because when consumers shop for these, they do
    not know all of the intricacies of that.
        Mr. SMITH OF NEBRASKA. But the government should tell
    people what health insurance is, that individuals themselves
    should not be able to decide for themselves?
        Mr. KREISBERG. I think they can decide for themselves, but
    I think we need minimum standards. It is just as we regulate
    many other things in our society. Individual consumers at a
    point of sale for health benefits have time and again in the
    individual market been caught by surprise. This is in the old
    days before the Affordable Care Act. They have been shocked
    that their plan did not cover certain services, and then they
    were sick and they were not covered.
        Chairman BRADY. Would the gentleman yield?
        Mr. KREISBERG. Because of a lot of fine print.
        Chairman BRADY. If I may, would the gentleman rest?
        Mr. SMITH OF NEBRASKA. Yes.
        Chairman BRADY. You know, he has made a key point here. You
    know, if your employer said, ``Here are the clothes you will
    wear in your personal life and here is the car you will drive
    in your personal life,'' most of us would say no, but today
    they say, ``Here is the health care you will have in your
    personal life. Just take it or leave it.''
        And the point I think Mr. Smith was making was that why can
    we not give Americans more choice over maybe the most personal
    spending they will ever make in their lives, and I think that
    is his point.
        With that, let me yield back, Mr. Smith, since I took the
    rest of your time.
        Mr. SMITH OF NEBRASKA. No, I think we want consumers with
    their providers to be driving the bus, not the heavy handed
    Federal Government.
        Thank you.
        Chairman BRADY. Thank you.
        Mr. Neal, you are recognized.
        Mr. NEAL. A quick comment on the chairman's analysis. I
    think what he is really saying is that under their plan you
    would have no car and no new clothes because when you consider
    that there were 30 million people----
        Chairman BRADY. And no jobs under Obama.
        Mr. NEAL. No 30 million people--we are going to take that
    question up right now, Mr. Chairman--there were 30 million
    people without health insurance, at least, and by all objective
    analysis 20 million people have secured health insurance under
    the Affordable Care Act.
        Now, we all acknowledge that there has been a net gain of
    about 14 million private sector jobs over the post-recession
    period, and all of that net gain in employment has been in
    full-time work. Reform opponents have repeatedly suggested that
    the ACA is having an adverse effect on jobs. To date there is
    no evidence that the ACA has had a negative impact on economic
    growth or jobs, and in fact has moderated health care costs,
    which is generally accepted.
        But, Mr. Kreisberg, based on your experience and analysis,
    would you address the point that I have just raised? And I am
    going to give you sufficient time to go through it from A to Z,
    please.
        Mr. KREISBERG. Sure. First of all, I agree with you. I do
    not think there is any evidence that the ACA has been, as it
    has been alleged to be a job killer. First of all, it is a
    very, very difficult thing to ascertain, cause and effect, and
    I think everybody will agree with that.
        And with all due respect to the CBO, they have been wrong
    far more than they have been right about everything that they
    have estimated about the Affordable Care Act, and this is one
    of those things where they have estimated.
        But if you read the CBO report carefully, what you will see
    is they are not saying that people are losing their jobs. They
    are saying people are withdrawing from the labor force. There
    is a reduction of labor supply, not a reduction in labor demand
    because of the Affordable Care Act, and that is a significant
    distinction.
        What we are seeing is people as they are approaching age 65
    but are not yet eligible for Medicare and do not feel that they
    can work any longer, now they have an option not to work.
        We are also seeing on the margins, for instance, people in
    the Medicaid program maybe reducing hours, which is what CBO
    has said. We do not know if that is true or not. I think it is
    really hypothetical, and I think, again, it is very difficult
    for cause and effect, and it is almost impossible to do the
    empirical analysis to validate some of the hypothesis that we
    have made.
        But we do know that after the fact you can look back and we
    know they have been wrong time and again when it comes to the
    Affordable Care Act.
        So I think when we look at labor market effects we really
    need to focus on the fact that the Affordable Care Act has
    probably changed more of the supply factors than the demand
    from employers. So it is not a job killer in that sense, and I
    do not necessarily think it is a bad thing if people withdraw
    from the labor market at the age of 62, 63 or 64.
        If one of the problems we have in our society is stagnant
    wages, perhaps a reduction in supply of people who no longer
    feel they can work will help create a little bit higher wage
    growth in this country because you have less supply, and demand
    should be relatively static.
        So I think, you know, this could be one of the things that
    actually help us as we move forward.
        Mr. NEAL. Since we have a minute and 44 seconds, Mr.
    Kreisberg, we had a conversation earlier about the role that
    deductibles play, and I thought that your analysis of that was
    pretty interesting. Could you give us a quick analysis?
        Mr. KREISBERG. Yes. In our view, the high deductible health
    plans are really not where the action should be, and I think
    when we talk about how the consumers should control the
    dollars, we are really talking about more consumer payments,
    and I touched on this in my statement.
        Very, very few people are responsible for most of our
    health care costs. Those people are profoundly sick. It is not
    necessarily the same people year after year, but it is episodes
    of care that drive our expenses.
        The high deductible health care system does not get at
    that. In fact, what we are also seeing with high deductible
    health care is the trend in health care cost increases actually
    exceeds those of the other plan designs. So we are not seeing
    any long-term moderation, you know, from those high deductible
    health plans.
        And ultimately the shifting of costs to consumers and
    putting, you know, consumers in control of the dollars, we do
    not see as very effective because the consumer has no ability,
    none, to negotiate with a hospital. They may be able to choose
    their provider and maybe some providers provide better rates
    than other providers, but the idea is that we have insurance
    companies and self-insured employers who do those negotiations
    for us, and they are in a much better position to negotiate
    with those providers because they represent hundreds of
    thousands or millions of covered lives as opposed to an
    individual consumer trying to do the negotiation.
        So if we are going to drive down costs, we need to keep the
    groups together. We need large groups, large negotiating
    bodies, and most importantly, we need to change the incentives
    in our health care system. We need to align our financial
    incentives with quality and value.
        Mr. NEAL. Thank you, Mr. Chairman.
        Chairman BRADY. Thank you, Mr. Neal.
        Mr. Reichert, you are recognized.
        Mr. REICHERT. Thank you, Mr. Chairman.
        I would like to echo the statements of the chairman and my
    colleagues about the value of employer-sponsored health
    insurance. The current exclusion is an important part of why so
    many of my constituents enjoy quality health coverage today.
    Employer-based coverage is not only popular, but businesses in
    my district absolutely need it.
        We have heard today, however, there are some issues
    surrounding the exclusion. Obamacare took one approach to
    tackling this through the Cadillac tax, and unfortunately
    Obamacare got it wrong. It is crude; it is complex; and it's
    wrong policy, and there is bipartisan support for its repeal.
        So I would like to look further at some of the shortcomings
    of Obamacare's approach through the Cadillac tax. So, Mr. Antos
    and Mr. Roy, does the Cadillac tax currently adjust for health
    care costs that might be higher simply because they are
    delivered in a place with a high cost of living?
        Mr. ANTOS. No.
        Mr. REICHERT. Same answer, I am assuming?
        Mr. ROY. No. Yes, actually it does. The Cadillac tax is
    designed to have a certain band in terms of its thresholds
    based on health costs in a particular area.
        Mr. REICHERT. Okay. Well, I do not think it does either. I
    agree with Mr. Antos. I think Congress might better address
    though these geographic variations, and there is a variation in
    cost of living that should be, considered. The cost of health
    care varies throughout the country.
        How might we address these geographic variations in future
    reforms, Mr. Antos?
        Mr. ANTOS. It is a difficult question. Obviously part of
    the solution is to reduce some of the unnecessary regulations
    that are keeping costs up. States are part of the problem, not
    part of the solution in many cases.
        But beyond that we need to have the kind of coverage that
    promotes a closer relationship between the consumer and the
    insurance company. I agree that the consumer is not going to
    negotiate individual prices with the hospital. That is the job
    of the insurance company.
        But right now the insurance company really does not see the
    driver of this as their consumers. They are being driven by
    government regulation and the relationship to employers. So we
    need to turn that around so the consumers are more in charge in
    that practical sense.
        Mr. REICHERT. Another major concern is that employee
    contributions to their health care through an HSA are counted
    toward the cost of care that is measured against the Cadillac
    tax threshold. Likewise, spending on wellness is also counted.
        Can you tell me why? Mr. Roy.
        Mr. ROY. Yes. This is one of the major design flaws of the
    Cadillac tax, is that it is designed effectively to prevent
    people from having more consumer-based health insurance plans.
    HSAs are inhibited by the Cadillac tax. As you noted, wellness
    programs are somewhat inhibited, and also there are a number of
    loopholes and exceptions in the way the Cadillac tax applies to
    different constituencies, different employer groups and
    different areas of the country.
        So it would be much cleaner to have a gradually introduce
    cap on the employer tax exclusion as some others and we have
    discussed today so that it is a simple system that applies
    fairly to everyone.
        The challenge is if you heavily vary the tax deduction or
    the tax exclusion based on particular regions of the country,
    you might actually have the perverse consequence of rewarding
    high regulation states that drive up the cost of insurance in
    their state because they do not face the tax consequences.
        Mr. REICHERT. Do you have any idea why it was designed this
    way?
        Mr. ROY. I was not in the room when the Affordable Care Act
    was designed, but I understand that various interest groups
    lobbied for exceptions and changes to the Cadillac tax so that
    it could serve their interests better.
        Mr. REICHERT. Mr. Antos.
        Mr. ANTOS. So one other aspect of this, I think that the
    philosophy was that we did not want to have any leakages. So we
    are going to include these other health related benefits in to
    count the cost. It was basically trying to keep everything, you
    know, in the same corral and not have leakages that would have
    employers, for example, subsidizing health savings accounts
    more fully.
        Mr. REICHERT. Thank you.
        I yield back.
        Chairman BRADY. Thank you.
        Mr. Becerra, you are recognized.
        Mr. BECERRA. Thank you, Mr. Chairman.
        Gentlemen, thank you for your testimony.
        Let me see if I can run through a few areas, and first, Mr.
    Antos, to you and Mr. Roy. I understand you all have put
    together the elements of a plan that could be an alternative to
    the Affordable Care Act. Have you asked that that be placed in
    legislative writing so we could actually see it as a form of a
    bill?
        Mr. ROY. There are two plans. There is a plan that Mr.
    Antos and I collaborated on with some other colleagues that was
    published by the American Enterprise Institute. I think there
    were ten coauthors, if that is the plan that you are referring
    to.
        Then there is the one that I published through the
    Manhattan Institute individually. Neither of those plans has
    been introduced as legislation or put in legislative language,
    but our hope is that that may happen at some point.
        Mr. BECERRA. Do you have any supporters on the Hill, on the
    House or Senate side, for either of those two plans?
        Mr. ROY. I think that a lot of the general concepts are
    being considered in a lot of the working groups that the
    speaker has organized.
        Mr. BECERRA. So we are six years past the enactment of the
    Affordable Care Act. We were told by those who objected to the
    Affordable Care Act, didn't vote for the Affordable Care Act,
    that we need to repeal it, get rid of it, and replace it.
        We have yet to see a proposal in legislative language that
    has been able to garner any kind of support that could pass to
    replace the repeal of the Affordable Care Act, and I am
    wondering: can you name any member of Congress who is ready to
    endorse by submitting your plan into legislation?
        Mr. ROY. What I would say is----
        Mr. BECERRA. No, no. Can you name me a member in the Senate
    or the House who is prepared to endorse----
        Mr. PRICE. I will volunteer.
        Mr. BECERRA. I'm sorry?
        Mr. PRICE. I will volunteer.
        Mr. BECERRA. Okay. So Mr. Price is willing to introduce
    your plan. So you have got a taker. Will you submit it to
    Congressman Price so he could submit that into legislative
    writing?
        Mr. ROY. More than happy to work with Mr. Price.
        Mr. BECERRA. So this way we can actually have something to
    compare because we will need to have the Congressional Budget
    Office, Joint Tax Committee, everyone do the analysis so we can
    see what we are talking about. Because until then we are
    talking apples to oranges. We want to see what your apple looks
    like. We see what the Affordable Care looks like.
        Twenty million Americans today as a result of the
    Affordable Care Act have health access, health insurance, and I
    think for those who kept saying that it was going to cost us
    jobs, in the time that the Affordable Care Act has been in
    place as a law, we have had close to 1.7 million Americans go
    to work or go back to work not overall, just in the health care
    sector. Overall some 14 million Americans have gone back to
    work.
        So it is going to be interesting to see what your plan,
    once it is scored, out really shows us.
        Mr. RANGEL. Will the gentleman yield?
        Mr. BECERRA. Certainly, I will yield.
        Mr. RANGEL. Dr. Price, I would like to join with you in
    cosponsoring this fictitious plan that has been out there for
    six years, and if they can really help the Republicans come up
    with something, Mr. Roy would you contact my office and Dr.
    Price's office so that we will get some legislative language to
    know exactly what you are talking about?
        Mr. BECERRA. I am going to reclaim my time. Mr. Roy, you
    can talk to Mr. Rangel afterwards. I want to reclaim my time so
    I can ask a couple more questions.
        Mr. Antos, Mr. Roy, so I have seen some elements of your
    plan. High deductible with HSAs, you are trying to make them a
    little bit more robust. Those are parts of what the plans
    typically include?
        I am not trying to name everything.
        Mr. ROY. You can choose a plan. So the key element is----
        Mr. BECERRA. I do not want to get into all of it, but I
    just want to make sure. It does rely to some degree on high
    deductible plans?
        Mr. ROY. No, that is not correct.
        Mr. ANTOS. No.
        Mr. BECERRA. Okay. I apologize. Do you support high
    deductible plans?
        Mr. ANTOS. As a choice, yes.
        Mr. BECERRA. As a choice, okay. And let me ask this. Would
    you support high deductible plans with access to an HSA, health
    savings account--because that typically is the way that they
    are packaged, right, so you can make the most use of them?--for
    seniors under Medicare?
        Mr. ANTOS. Yes, I think that is a feasible possibility,
    too.
        Mr. BECERRA. Mr. Roy.
        Mr. ROY. Yes.
        Mr. BECERRA. Okay. Final question. I think Mr. Kreisberg
    answered the question about whether you believe health care is
    a right in this country for Americans. I do not think I heard
    you say yes or no. If it is not a right, then obviously it is a
    privilege that we can try to get access to.
        Do you believe it is a right?
        Mr. ROY. Let me tell you a story.
        Mr. BECERRA. Oh, no, no, no. I do not have time. I have a
    lot of questions.
        Mr. ROY. Because health care----
        Mr. BECERRA. I do not have time for a story.
        Mr. ROY. You have to understand what health care is.
        Mr. BECERRA. Mr. Roy, Mr. Roy.
        Mr. ROY. You have to understand what a right is.
        Mr. BECERRA. If you do not wish to answer the question that
    is fine, but I just asked the question. Yes or no?
        Mr. ROY. I refer you to an Article I wrote for Forbes
    called ``Yes, Health Care Is an Individual Right.''
        Mr. BECERRA. Mr. Anthos? Yes or no?
        Chairman BRADY. All time has expired.
        Mr. BECERRA. Mr. Chairman, if I could just ask him to
    answer the question.
        Chairman BRADY. Mr. Boustany, you are recognized.
        Mr. BOUSTANY. Thank you, Mr. Chairman.
        Mr. Chairman, I believe I have the time now.
        Mr. BECERRA. Mr. Chairman, could I get just five seconds so
    that the gentleman could answer?
        Mr. BOUSTANY. Mr. Chairman, I believe I have the time.
        Chairman BRADY. I will tell you what. Another member can
    ask that question or perhaps you could submit the answer in
    writing.
        Dr. Boustany.
        Mr. BOUSTANY. Mr. Chairman, prior to coming to Congress I
    was a cardiothoracic surgeon, had extensive clinical experience
    over many, many years, and really got to know our health care
    system with all of its warts and good things about it at a very
    intimate level, and now I have had the benefit of serving on
    this Committee and understanding all of the policy
    ramifications and how we deal with the problems inherent in the
    system.
        And I could certainly talk for hours about this, but I do
    want to dovetail off of what my friend from California just
    talked about when he asked a very, I think, artificial question
    about creating a dichotomy: is it a right or is it a privilege
    with regard to health care?
        Actually it is neither. It is a personal responsibility.
    Nobody can be responsible for my health other than me because
    there are different dimensions to health care. Yes, you need
    all of the care. You need the coverage, but what is missing
    right now in our health care system today is the fact that
    individual responsibility and education and information is
    missing, and that is one of the reasons we do not have a good
    functioning market in health care.
        That is one of the reasons I like HSAs and other patient
    driven forms of coverage that lead to an informed consumer of
    health products that gets to where we need to be.
        And I was very pleased I heard the testimony before I had
    to step out for just a moment, and, Mr. Roy, you talked about
    equalizing the treatment, and that is what has been missing in
    all of this, is equalizing treatment and letting people decide
    what is best for them.
        You cannot get to high quality, low cost health care
    without a robust doctor-patient relationship. I can tell you
    from personal experience, clinical experience expanding over
    many years in my life both here and in clinical practice we
    have got to inject personal responsibility into this. Otherwise
    we cannot save on the front end.
        I mean, some of the issues with Medicaid, again, it does
    not lead to a meaningful doctor-patient relationship. The
    access is very severely inhibited.
        So let us explore this concept a little bit about the
    injection of personal responsibility. Mr. Roy.
        Mr. ROY. Health care is a right, and what I mean by that is
    that it is the right of individuals in this country to choose
    the health care that they want, to choose the health coverage
    they want, to choose the doctor they want, the nurse they want,
    the form of urgent care that they need.
        Those rights have been abridged by Congress over an 80-year
    period, and if we believe that health care is a right, then we
    have to maximize the ability of people to control their own
    health care dollars, not the government, not insurance
    companies, not employers.
        Mr. BOUSTANY. Thank you.
        Mr. Antos, do you want to comment?
        Mr. ANTOS. I completely agree with Mr. Roy. The distinction
    between personal choice and personal responsibility is often
    overlooked. You need both.
        Mr. BOUSTANY. Thank you.
        Mr. Kreisberg, do you want to comment?
        Mr. KREISBERG. Yes. You know, I agree in some respects, but
    I think where we part ways is this idea of personal
    responsibility because we also----
        Mr. BOUSTANY. But is not that the American way of doing
    things?
        Mr. KREISBERG. Well, let me finish please--because we agree
    with personal responsibility, and I think the approach that my
    colleagues here take discards personal responsibility because
    personal responsibility connotes adequacy of coverage. So the
    government mandates that we sometimes criticize and rebel
    against are really just providing a basic standard because if I
    have inadequate coverage because health care is a right, I am
    still going to get treated. We have a law. EMTALA will take
    care of me.
        Mr. BOUSTANY. But it is not the most efficient, high
    quality way, and the problem that you are overlooking in all of
    this, coverage does not necessarily equate to high quality
    care, and that is a fundamental problem in our health care
    system today because whether it is the Medicaid or Medicare
    system increasingly those individuals do not have access to a
    high quality doctor-patient relationship. It is in the
    emergency room. It is treatment after the fact, much later in
    the disease process.
        I can tell you from years of clinical experience you have
    got to establish a high quality doctor-patient relationship on
    the front end. Coverage is important, but there are two sides
    to that equation. There is what the doctor does and recommends,
    but there is also the personal responsibility element and
    informational element for the patient.
        And you can have the very best surgeon or physician caring
    for a patient, but if there is no element of personal
    responsibility or even diminishment in that level of personal
    responsibility, you are not going to get a good outcome. So you
    have to empower individuals, and that fits into our American
    system of economics, economic freedom, individual liberty, and
    informed consumers.
        That is what is missing in our system.
        I yield back.
        Chairman BRADY. Thank you.
        Mr. Doggett, you are recognized.
        Mr. DOGGETT. Thank you very much, Mr. Chairman and to each
    of our witnesses.
        Mr. Kreisberg, I believe that you are the first witness to
    appear in front of our Committee in some time to raise the
    issue of exorbitant pharmaceutical prices. It has been a
    concern of mine. I think it is appropriate to raise this
    morning because high pharmaceutical prices are taxing to the
    American people. In fact, I think they are overtaxing.
        Mr. Chairman, I would respectfully ask that we make part of
    the record a letter sent to you back on November 5th requesting
    a full Committee hearing on prescription drug pricing from ten
    members of our Committee.
        Chairman BRADY. Without objection.
        [The information follows:]

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        Mr. DOGGETT. Mr. Chairman, that letter emphasized the
    dramatic impact that high prescription drug prices are having
    on so many American families and the tremendous financial
    hardship to not only get a diagnosis of cancer or some other
    dread disease, but to face a prognosis of personal financial
    ruin for many drug treatment programs that are exceeding
    $100,000 a year.
        It also pointed to the big impact on taxpayers of the
    increased cost of public health programs in Medicare, in
    Medicaid, in other programs because of rising prescription drug
    prices, and while much of the attention back at the time the
    letter was written centered on an increase on one particular
    generic drug from $13.50 to $750 overnight, this is not about
    one pharmaceutical or one type of pharmaceutical.
        As you point out, Mr. Kreisberg, in your testimony, this is
    not just about brand name pharmaceuticals or generics. It is a
    systemic problem of which there are many aspects, and you
    pointed to some of the solutions that might be raised.
        I would just like to see our Committee and this Congress
    recognize that there is a serious pharmaceutical price problem
    and begin to look for some answers rather than simply to ignore
    the problem.
        You made reference, Mr. Kreisberg, in your testimony to the
    work that the AARP, the American Association for Retired
    People, has done on this. In February of this year, since the
    November letter that we sent requesting that this Committee
    focus its attention on this matter, AARP put out a report that
    noted the average cost of a year's supply of a prescription
    drug has doubled in just the last seven years. It talked about
    the incredible set of price hikes that have been occurring and
    referred to a Kaiser Family Foundation study that said that
    almost half of sick Americans, of people that were not in good
    health, said they were having serious trouble in paying for
    their medications.
        We see year after year prescription drug prices soaring far
    in excess of the level of inflation. Among the suggestions that
    you have made, Mr. Kreisberg, is that we recognize that there
    is not true competition, that the marketplace does not work for
    some brand name pharmaceuticals.
        I believe there is already a remedy under existing law
    through a law that was written by Senator Bayh and Senator Bob
    Dole that would give, when taxpayers have funded the research,
    would give the National Institutes of Health an opportunity to
    say if the price has gotten so exorbitant, then we are going to
    let competition try to bring it down by licensing to
    competitors.
        Do you believe that when taxpayers pay for the research
    that leads to a new pharmaceutical that we have a stake in the
    price that consumers will ultimately be charged for that
    pharmaceutical and that the administration should be asserting
    its rights?
        Mr. KREISBERG. Yes, sir. I absolutely do believe that if
    the taxpayers have funded the development of a prescription
    drug, there certainly should be a fair return to the taxpayer.
    I think we have to recognize for those of us who believe in a
    free market system that one of the biggest interventions and
    impediments is intellectual property rights. So if we withdrew
    intellectual property rights, I mean, that interferes with the
    free market.
        Now, no one is advocating that completely because we do
    need to fund research and development costs, but in the case
    you are talking about, if the NIH or some other government
    agency has funded that research and development, certainly the
    benefits of that should flow to the American people who paid
    for the research associated with the brand name drug.
        Mr. DOGGETT. Thank you.
        Thank you, Mr. Chairman.
        Chairman BRADY. Thank you, Mr. Doggett.
        Mr. Roskam, you are recognized.
        Mr. ROSKAM. Thank you, Chairman Brady, for initiating this
    hearing.
        You know, it is interesting to listen to the back-and-forth
    a little bit, and let me put this into a little bit of a
    context. In his opening statement the ranking member talked
    about a constituent where she said the Affordable Care Act
    saved her life.
        I have a constituent who had a different experience, and
    her experience was she relied on the President's promises that
    if you like your doctor you get to keep your doctor; if you
    like your coverage, you get to keep your coverage, and her
    experience was as a nine-year breast cancer survivor she found
    herself very happy with her health care and completely turned
    around as a result of the Affordable Care Act.
        So we can go back anecdote for anecdote, but I think there
    is a restlessness that is out there, and it was interesting to
    listen to you, Mr. Kreisberg, about some of the things that you
    were pointing out accurately. We have got problems as it
    relates to primary care.
        I do not know if you said this, but I am thinking this. We
    have got problems as it relates to increased coverage for
    people, and yet those were all promises that the Affordable
    Care Act were going to remedy. Remember it was, hey, there is
    going to be all of this primary care coverage. ERs, you are not
    going to have to see people, and yet none of that has turned
    out to be true.
        So it was oversold. It has underperformed, and it has
    created a national restlessness. I would argue a restlessness
    that cost the majority for the Democratic Party, God bless
    them, the House of Representatives and it cost them the United
    States Senate.
        And what was interesting about the reconciliation bill a
    couple of months ago was it was the first time that it became
    clear to the American public that there is only one office that
    stands between them and the repeal of Obamacare, and that is
    the White House. That is really interesting, and it is a long-
    term trend, and it is a restlessness that the country is
    articulating.
        Now, Mr. Becerra makes a fair point, and his point is that
    we know you do not like the bill. You have been very clear that
    you do not like the Act. Where is your replacement? And that is
    a fair criticism, and it is a fair admonition, and I accept
    that.
        So I think what the chairman is trying to do, and I know
    what Speaker Ryan is trying to do is to do the prelude work
    because it has been very clear that the President will not sign
    something that is orthodoxy for him. So rather than bumping our
    heads up against the wall, let us instead try and do the robust
    work now.
        It also seems to me that sitting back and listening to the
    totality of the debate is there is nobody that is really
    defending how we got here with this large employer-based
    system, and there is a general recognition that there are two
    things that are really wrong with our health care system. One
    is it is too expensive and it is irrationally expensive, and
    many of the cost drivers are not making anybody healthier.
        And the second thing is we as a country are essentially now
    scandalized by the notion that people with a preexisting
    condition would not have access to coverage. That bothers just
    about everybody.
        And I think the weakness of the Affordable Care Act was
    rather than focusing on those two core themes and really
    attacking those around which there was largely a national
    consensus, the decision was made, and it is the President's
    prerogative sine he is the President, to go a different
    direction.
        But I think in our democracy, and I have used this phrase
    now a couple of times, this restlessness, this level of
    anxiety; so I am heartened by the notion that today we are
    talking about how it is going back to wage and price controls
    after 1945. That is an interesting thing because you can
    contrast it with other insurance markets, and all three of you
    agree that we do not have a health care market like we have
    other markets.
        Other insurance markets are completely rational. Why?
    Because if you have auto coverage, you can change. You can
    move. It is flexible and so forth, and yet the brokenness that
    came in as a result of the wage and price controls created a
    distortion.
        So I am listening this morning. I am learning from all
    three of you in terms of your perspective, and I think that
    there is something significant that is going to be happening in
    health care because the country is demanding it. The country
    with Obamacare has oversold and it has grossly under delivered,
    and God bless my friends on the other side of the aisle who
    find themselves in the awkward position of having to defend
    every bit of it as orthodoxy when I think if you scratch
    underneath the surface, they would say, yes, it really does
    need to be improved.
        And there is nobody that wants to go back. That is also a
    strawman argument. Like let us go back to the old days. There
    is nobody that wants to do that.
        And so I think what the chairman now is trying to do is say
    let us move forward. Let us have a discussion about it, but I
    appreciate the historical context in which you are putting all
    of this.
        I yield back.
        Chairman BRADY. Thank you.
        Mr. Thompson, you are recognized.
        Mr. THOMPSON. Thank you, Mr. Chairman.
        I want to thank all of the witnesses for being here.
        A couple of things that were mentioned early on I just want
    to address right up front, and there was some talk about the
    government controlled, socialized health care and Obamacare,
    and it was kind of grouped somewhat together.
        I am one of those people who has received my health care
    from both the government-controlled, socialized health care,
    and that was when I was in the Army, and now I get my health
    care, as all members of Congress do, from Obamacare. So I have
    got a little bit of experience from both.
        And I can tell you that I used my government-controlled,
    socialized health care. I was wounded in Vietnam and spent a
    lot of time in about five or six different Army hospitals, and
    as you point out, I did not have a lot of choices with my
    health care. You show up and you get what they give you, but I
    got good health care.
        But the idea that Obamacare is somehow the same and it
    truncates your choices I think is a real stretch. We all have
    choices. We all get our health care through Obamacare, and we
    have choices in the private sector as to what health care we
    purchase.
        And I would like to ask unanimous consent to have this list
    put into the record. It is a list of 54 choices that those of
    us who buy our health care through Obamacare have when we sit
    down to decide which one it is we are going to purchase, and I
    think it is important to note that, that we do have those
    choices, and in this case for those of us on the dais, it is
    54, 54 different private sector plans from which to choose.
        Mr. Chairman, I would like unanimous consent to have this
    submitted into the record.
        Chairman BRADY. Without objection.
        [The information follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. THOMPSON. Thank you very much.
        I also want to just point out, and it has been said a
    couple of times, that 20 million more people have health care
    today because of the Affordable Care Act or Obamacare, and I do
    not think that can be overlooked.
        We know also that because Health and Human Services just
    let this information out that Medicare saved $473 billion
    between 2009 and 2014 because of the lower growth rate in
    health care, and that is significant for all taxpayers and all
    Americans.
        Someone brought up the Tip O'Neill. The other thing that
    Tip O'Neill said is all politics are local, and in my home
    state, the local part, the premium growth rate slowed from 2011
    when it was at nine percent to four percent last year. That is
    significant. That means something to people.
        And in my district, the uninsured rate went from 15.9
    percent in 2012 to 9.8 percent in 2014. That is about 50,000
    people in my congressional district who because of Obamacare
    have access to health care coverage today. They did not have it
    before. It is good for them, and it is good for taxpayers who
    were subsidizing any health problems that they had prior to
    that happening.
        And so I think those are all good things. The other thing
    that I want to mention, as one of the folks on the other side
    talked about, now they want to do the work. It has been pointed
    out a number of times we have been doing this for six years,
    and the only work that has been done by my friends on the other
    side is to repeal the health care access that people did not
    have before.
        And to say we want to do the work now, it is about six
    years too late, but I do not think anyone on our side has said
    that we think it is perfect. We have all recognized there are
    problems. We have all recognized that we are willing to work to
    try and fix some of those problems.
        We could fix the family glitch. We could work on the
    advanced premium tax credits so people who live in high income
    areas are able to get health care similar to those who do not
    live in as wealthy areas.
        Mr. Boustany and I have legislation regarding the health
    reimbursement accounts. They work. We should not penalize
    people for using those. What we all want to do is make sure
    people have health care, and just because one particular access
    point is not within the law, we should not ignore that. We
    should figure out how to bring it in the law.
        So I would hope that my friends on the other side of the
    aisle are honest in what they are saying, that this is a means
    by which we can figure out some of these problems and work it
    out. We are ready to work together. Let us fix this thing. Let
    us improve it. Let us find out where the glitches are and close
    those up.
        Chairman BRADY. The gentleman's time has expired.
        Mr. THOMPSON. Let us stop this nonsense.
        Chairman BRADY. Thank you.
        Ms. Jenkins, you are recognized.
        Ms. JENKINS. Thank you, Mr. Chairman.
        And I thank the panel for being with us today.
        One particular issue that I have discussed here in
    committee before and I would like to bring up in the context of
    this hearing is that of consumer directed accounts, such as
    health savings accounts and flexible savings accounts. These
    types of structures allow individuals to make their health care
    choices while incentivizing them to be financially prudent with
    those decisions.
        And in Kansas, along with the whole U.S., these accounts
    are increasing in number every year. For example, in 2010,
    there were about 82,000 HSAs in Kansas, and in 2015 there were
    over 134,000 accounts, an increase of over 60 percent.
        Mr. Antos, are you familiar with the President's health
    care law and what they did to HSAs and could you just summarize
    for us quickly?
        Mr. ANTOS. Well, the ACA severely cut back the allowed
    contributions that can be made and made other limitations, and
    obviously, the Cadillac tax further penalizes these.
        As the health benefits consulting industry knows, the
    easiest thing to lop off if you are faced with that is an HSA.
        Ms. JENKINS. Yes, and did it not require that you have to
    have a prescription now if you want, an over-the-counter
    prescription to use one of those accounts?
        Mr. ANTOS. Yes.
        Ms. JENKINS. Limiting these types of structures or
    accounts, as Obamacare does, does not help keep health care
    costs down. If more Americans were empowered to manage their
    own health care decisions and had more skin in the game, when
    it came to their health care cost decisions, then what would
    you predict the impact to be on our health care spending, Mr.
    Roy?
        Mr. ANTOS. So--oh, I am sorry.
        Ms. JENKINS. Mr. Antos, go ahead.
        Mr. ANTOS. Just quickly, that the added complications will
    only make it more difficult for consumers to operate in the way
    that we would like them to do, which is efficiently.
        Mr. ROY. It would reduce costs and increase choice and
    increase quality and increase patient service, customer
    service. Customer service is lacking so much in our health care
    sector because the patients do not control the dollars. The
    government, the insurance companies, and the employer do. So
    everyone orients and caters to them, not to the patient.
        Ms. JENKINS. Thank you.
        Mr. ROY. So one thing that is important I want to mention
    because it has been raised a number of times by one of my
    colleagues here is this idea that consumers are incapable of
    making health care choices, that if you are unconscious because
    you have had a stroke, well, you cannot choose your hospital.
        That is true. That is the proper role of health insurers,
    to negotiate those prices and those networks on your behalf.
    But there is an enormous ecosystem of health care choices that
    we can make on our own, the choice to which eye doctor you go
    to or who you get your primary care from, whether to get knee
    surgery in your state or a neighboring state from a low priced
    center or higher quality center.
        There is an enormous range of choices that can be opened up
    to patients to make for themselves, and there can be no doubt
    that they will make those choices better than the government or
    their employer.
        There was a study done last year that showed there is
    enormous price variation for common procedures that all of us
    often use, but we have no transparency into how much those
    procedures cost because none of us are in control of our own
    health care dollars.
        So the more patients are in control of their own health
    care dollars, those prices will come down massively because
    providers will have to compete for patients' business instead
    of the other way around.
        Ms. JENKINS. Great point. One particular limit in Obamacare
    that obviously has me concerned is the over-the-counter drugs.
    They were designated as qualified medical expenses by the IRS
    in 2002, yet Section 9003 of the Affordable Care Act mandated
    holders of tax preferred accounts, like FSAs and HSAs, seek a
    doctor's prescription in order to be reimbursed for purchases
    of these OTCs.
        How does requiring a script for products the FDA has
    already determined safe and effective for over-the-counter use,
    and the IRS has determined to play a key role in health care
    delivery, improve customer choice and access to health care?
        Mr. ROY. This is one of the least rational provisions of
    the ACA. It forces you to go to a doctor to obtain a medication
    that is available over the counter. That is the kind of thing
    that drives up health care cost, and it was solely done as a
    revenue raising measure to pay for the ACA's coverage
    expansion.
        That would be a great example of something that this
    Committee could do something to reform.
        Ms. JENKINS. Great. Thank you.
        I yield back.
        Chairman BRADY. Thank you.
        Mr. Larson, you are recognized, and after your questioning,
    we will go two to one to balance it out.
        Mr. LARSON. Thank you, Mr. Chairman.
        And I want to thank our witnesses here today as well. As
    always these are great discussions.
        Reuters noted almost six years ago and several other
    institutions follow that there is, on average, somewhere
    between $700 to $800 billion annually in waste, abuse, fraud,
    and a system as it currently existed that is not capable of
    lowering cost.
        Today's discussion seems to have been a little bit all over
    the place, but nonetheless, as a number of my colleagues have
    pointed out, I hope as a committee we can get beyond this
    notion of for the 63rd time we are going to repeal the
    Affordable Care Act. It has been six years, and the Act is not
    going to be repealed, and as many on our side have said, it
    needs to be improved. There are many on our side that would
    have preferred a single payer act that as, Mike Thompson
    pointed out, in the military he got pretty good service with
    that and very efficient service, I might add, as well.
        But because of the advance of technology and science and
    innovation and all the things that entrepreneurialism can
    bring, you would think that we would even be able to do better
    because we are Americans. And yet what happens is rather than
    us sitting down collectively and coming up with a program and a
    system that is better, for six years we have heard, ``We are
    going to repeal it,'' instead of, ``okay, you guys. We are
    going to sit down with you and that plan that Mitt Romney
    submitted in Massachusetts that you then submitted that we
    called Obamacare, we are going to work together to make sure
    that we produce the most efficient outcomes on behalf of
    patients and people.''
        Those people cannot have individual responsibility if they
    are sunk at the bottom and have no means or capability or
    accessibility to do so. But collectively, just like we did when
    David Camp said, ``Let us get together and work. Let us go into
    the subcommittees that require us to examine what aspects of
    health care we can do to help the patient out.''
        I note that companies like the Aetna, Mark Bartolini may be
    one of the most progressive and interesting entrepreneurs in
    the country talking about patient-centric care and making sure
    they meet the patient at the household and making sure they are
    doing everything for the patient there to avoid stays in the
    hospital that cost money; to care for the patient at that level
    and to do so that will combine both the best that all public
    health has to offer, meaning governmental public health and
    common sense solutions along with entrepreneurial, science and
    technology.
        I hope, Mr. Chairman that that is ultimately what we can
    get to. This is nonsense. This is why the public hates us. We
    are having a light beer discussion here: tastes great, less
    filling. Repeal Obamacare.
        No, Obamacare has done a lot for people. The public says,
    ``A pox on all your houses. Fix the problem for us.''
        Today, frankly, you have a solution. I was happy to see Mr.
    Becerra say it and see Mr. Price join, that the bill will be
    submitted. The people will be able to look at it. At least that
    is a start.
        This nonsense, this ongoing thing that we are going to
    repeal Obamacare for the 63rd time drives people crazy. They
    are concerned about their health and their well-being and want
    to make sure that it is there for them, and frankly, Mr.
    Chairman, I hope we can quickly get to a position where the
    capable people on this Committee can sit down with one another
    and come up with solutions.
        Do you want to know why the general public is so upset with
    us? It is because we do not do a thing. Six years, you do not
    like Obamacare? Fine. What is the solution? The solution
    resides within this room and with the American people. Let us
    sit down and get it done instead of this light beer commercial
    that we are having.
        Chairman BRADY. Thank you.
        Mr. Paulsen, you are recognized.
        Mr. PAULSEN. Thank you, Mr. Chairman.
        And I also want to thank our witnesses for being here this
    morning.
        I actually want to just focus some of my time on some of
    the reforms that are needed particularly on the patient-
    centered ideas. We heard some other comments already about
    lowering costs, and I want to address some inaccuracies that
    were mentioned by some of my colleagues, Mr. Levin and Mr.
    McDermott, regarding health care savings accounts and that only
    wealthy people use these accounts.
        It is important to note that according to IRS data, the
    IRS, only 20 percent of HSA account holders have family incomes
    below $50,000. So these are, you know, below $50,000 incomes,
    and 83 percent of HSA account holders live in neighborhoods
    with median incomes below $75,000, 83 percent of those account
    holders, and only two percent of account holders actually even
    spend or contribute up to the amount of the maximum amount you
    can contribute to an HSA, which is like 6,550 bucks for a
    family.
        Clearly, if wealthy people are taking advantage of it, are
    using it, why would they not contribute up to the maximum
    amount if it was some tax shelter.
        And finally, just to mention, 24 percent of Americans, that
    is like a quarter of the population across the country, have an
    HSA or an HRA eligible insurance plan that they can participate
    in, which is actually a really, really big number.
        I personally think we need to go more in that direction
    because people appreciate the choice, the flexibility when it
    comes to making sure that they can use health care for
    themselves or for their families. From a consumer perspective,
    they want to be able to shop around for the best quality care
    at the lower cost just like they can shop for anything else.
        And it is probably one of the reasons why there is such a
    high percentage of Americans now, 20 million, that are using
    HSAs actively. In Minnesota, you know, we have a population
    just over five million people, but 800,000 people have opted
    now for some health savings account eligible health plan, which
    is a big number.
        And I just really believe, and I think we are hearing some
    more conversation in some of your testimony today as well, that
    these HSAs should be a central component of health care; that
    these accounts give more people more choice on how to use their
    health care dollars, control over the care that they receive,
    and ultimately they are going to be smarter consumers.
        And I will just say also I have introduced legislation, the
    Health Savings Act, with Senator Hatch in the Senate that will
    expand the use of these HSAs and make sure that people are able
    to lower their costs. The bill would allow more people to
    access these accounts, including seniors who are on Medicare,
    active military personnel and active military members, Native
    Americans who are enrolled in Indian Health Services, and
    members of health care sharing ministries.
        And I will just say off the bat after I introduced the
    bill, positive comments are coming in from some of my
    constituents. I hear from Aaron who said, ``This is a great
    idea. I love my HSA as it makes me into a health care
    consumer.''
        Robert put out, I think, on Facebook saying, ``Thanks for
    taking this common sense step to help defray our health care
    expenses.''
        And then finally Ed responded in saying, ``Why are these
    not available for seniors already?''
        So I think this is moving in a positive direction, and also
    with the bill will make sure that we are going to be expanding
    what the accounts can be used for, as Ms. Jenkins had
    mentioned, for instance, but we will be able to include
    preventative care prescription drugs. Health insurance premiums
    will be included, over-the-counter medications without that
    doctor's prescription, physical fitness programs, wellness,
    nutritional supplements, and membership fees for innovative
    direct primary care models.
        So clearly these accounts can be a key solution for
    everyone who is dealing with higher health care costs. You
    know, Mr. Roy and Mr. Antos, I know you have written a little
    bit about this as well. You have talked about it. Anything else
    you want to share about the importance of these accounts and
    how we should make this a highlight of the reforms where we are
    trying to go?
        Mr. ROY. You have made a lot of great points, Mr. Paulsen.
    One I would emphasize in what you alluded to is that health
    savings accounts have the potential to transform health
    coverage for the poor. Imagine if we took the cost sharing
    subsidies that are on the ACA and converted those into health
    savings account deposits. That means if you are sick, you can
    use that HSA deposit to pay off your deductible, but if you are
    healthy and you stay out of the hospital, that HSA can
    accumulate and roll over and generate compound interest, and
    over time that person who today is low income with negative net
    worth can actually have a positive net worth, pass that nest
    egg off to their children, and you actually can transform the
    entire economic trajectory of that family and future
    generations of that family.
        So that is the power of health savings accounts. They can
    do more for poor people than any other approach to health
    reform.
        Mr. PAULSEN. Mr. Antos, anything else to add in the final
    seconds?
        Mr. ANTOS. Well, we have a long way to go.
        Mr. PAULSEN. Right.
        Mr. ANTOS. But beyond that, yes, absolutely. A properly
    funded system that includes HSAs with smarter regulation so
    that people can actually buy the kind of coverage that they
    need will take us a long way.
        Mr. PAULSEN. Thank you.
        Chairman BRADY. Thank you.
        Mrs. Black, you are recognized.
        Mrs. BLACK. Thank you, Mr. Chairman.
        And I thank all of the panelists for being here today. This
    is a very important topic obviously, and I think my colleague
    from Illinois used a great word, ``restlessness,'' that we feel
    restlessness by the people and especially the people in my
    district as I hear from them about health care and about the
    uncertainty and all of the things that go along with it.
        So I as a health care practitioner for over 45 years being
    a nurse and having seen that pendulum go from here to here and
    now back maybe toward the middle, I just wrote down four things
    that I think are the key pieces of this.
        One is choice. One is access. One is portability, and the
    other is affordability. So I want to go through each one of
    those just very briefly and talk about choice, which has
    certainly been a topic here within the panel today.
        And one of the things I can tell you is that the Affordable
    Care Act has not helped with choice in my district. It has
    limited the number of insurance companies that actually
    participate in the Affordable Care Act. So I have constituents
    who tell me, ``I really like my doctor. I cannot go to my
    doctor anymore. I cannot go to my physical therapist. I cannot
    go to this, that or another.'' So choice has really been
    limited, although it has been lifted up as, you know, like the
    panacea that has solved everything.
        The affordability piece on that is folks will tell me,
    ``Yes, I have a subsidy that helps me pay my premium, but do
    you know what? I cannot afford my deductible. I cannot afford
    my copay.'' So do they really have insurance? No, they do not.
        I also know that it has driven the cost up in the private
    sector. People are telling me now every day, and I am not
    exaggerating when I tell you every day in my office we get a
    call or an email about how their insurance has been affected by
    what has happened most recently with the Affordable Care Act.
        So the portability piece and the access.
        So let me go to my question before I run out of time. Mr.
    Roy, I want you to answer this for me. What happens if a person
    currently with employer-sponsored insurance loses their job?
    Can they keep their plan?
        Mr. ROY. Well, they can have COBRA for 18 months, but it is
    very difficult to transfer that coverage to individually
    purchased insurance. There is a gap in the transition. They do
    not have the ability to protect the exact plan they had before.
        Mrs. BLACK. So that brings up a really good point. They
    have COBRA, and I have constituents who are in this situation.
    Let us just say that the employee does get the COBRA, but their
    benefit value for their plan was $3,000. That is probably even
    low considering what insurance really costs today. But does
    that employee get to take that benefit with them while they
    search for a new job and take that $3,000 so that they can help
    pay their COBRA?
        Mr. ROY. I do not believe so. I mean, I think it depends.
    Joe might know the answer to that.
        Mrs. BLACK. Mr. Antos? I think the answer clearly is no. At
    least that is what I am learning from my constituents.
        So you have that insurance, but it is not really portable
    because you cannot afford the COBRA. Many people will tell me,
    ``I cannot afford the COBRA. Yeah, it is there. It is a benefit
    for me, but I cannot afford it.''
        So we put them into a difficult situation where they had
    employer-sponsored insurance, but they do not really have an
    option there when they leave because it is really not portable.
        So for all the benefits of the employer-sponsored base
    system, which there are many, and I am not at all saying they
    are not, but one great drawback is if this employee loses their
    job, then he or she loses support for the purpose of their
    health care insurance.
        If we were to design from scratch a health insurance
    system, then how would you mitigate against this profound loss?
        Mr. Roy, do you want to answer that?
        Mr. ROY. Yes. You know, one analogy that was made earlier
    or one comparison that was made earlier today was between auto
    insurance and health insurance. I think that is a really great
    way to think about what health insurance should look like.
        We do not expect auto insurance to pay for our gasoline or
    our oil changes or our wiper fluid. We expect it to protect us
    against catastrophic and financial loss if our car gets
    totaled, if it gets stolen, if it gets cracked, we get into an
    accident.
        That is what health insurance should be. Health insurance
    should protect every American from bankruptcy due to medical
    bills, but the moment we expect it to dominate all of our
    health care choices is the moment that it becomes too
    expensive.
        And to your point, we do not ask our employer to sponsor
    our car insurance for us. That would be completely irrational,
    and similarly, it would make a lot more sense for individuals
    to have the ability or the option to choose their own health
    insurance.
        Now, there are arguments for employer-sponsored health
    insurance. It should continue because there is a certain
    scalability. If you have a large group with 300 employees, the
    ability to purchase health insurance that is more affordable
    for that population is greater sometimes than if you purchase
    it for your own.
        But that should not just be about large employers or even
    small employers. That should be your church group. That should
    be a professional association. That should be any group of
    people that wants to get together to pool their risk and pool
    their options.
        Mrs. BLACK. So there are other options out there which we
    should be speaking about, and just to conclude, if you have
    somebody who is on the Affordable Care Act, they really do not
    have a lot of choice either, and that is not portable either
    because if they want to take those subsidies that they get from
    the Federal Government and purchase something outside of the
    system that they are required to use, they do not have that
    choice either.
        Mr. ROY. Let me make an analogy there. You know, the
    choices in the Affordable Care Act are you can buy a car from
    GMC or Honda or Ford or Toyota so long as it is a green pickup
    truck.
        Mrs. BLACK. My time has expired. More than my time has
    expired. Thank you.
        Chairman BRADY. Thank you.
        Mr. Pascrell, you are recognized.
        Mr. PASCRELL. Thank you, Mr. Chairman.
        This is the first time I have ever heard anybody testify
    and compare one's health to one's automobile, and I would just
    like to note perhaps when we get to that point which should not
    be covered in terms of your own health. I think people have
    some debate over that.
        That is exactly what got us into trouble from the very
    beginning. The fact is, sir, that we cooperated after Plan D
    was defeated, the very prescription drugs you are talking about
    here. We cooperated, even those of us, myself included, who
    voted no against that plan. We voted. We sat down and worked
    out, and then finally when we got ACA, we changed the law so
    that we would not have that gap where people were paying
    premiums and not getting any benefits.
        We can do this. So this is about myth. I take Mr. Larsen,
    my brother here. You know, he talked about light beer. This is
    the age of mythology. There are now two ways about it.
        Yesterday we had the mythology of blaming the IRS for
    everything except the weather, and then when we found out they
    are the people we can most rely upon in government and we
    looked at the Treasury Department, which had the lowest tax
    delinquency rate in the Federal Government, and guess where we
    were. They are 1.2 percent, and we are 5.1 percent, and the
    general public is eight percent.
        This is about myth. That is what it is about, and we are
    going to dispel that myth between now and November. Let us make
    it clear. We are not going to be the foolish folks that ran
    away from this after they voted for it in 2010. Those days are
    over. They are done.
        A conversation, if it produces a plan at all that is
    centered around idea that we know will not provide the same
    level of consumer protections that the ACA will do, will not
    result in as many people getting coverage and will not help
    balance risk pools. We have not even talked about that today,
    have we? And which is key to keeping premiums down is what we
    should be discussing rather than trying to tear down what is
    the law.
        Sixty-three times, how many times can we do this? Obviously
    maybe 100. There is no cap.
        Let me ask this to you, Mr. Kreisberg. We have yet to hear
    about a concrete alternative. By the way, we not only do not
    have an alternative plan. We do not have what we are going to
    do in the transition period when we tell the 20 million new
    people who have insurance, ``Wait, because the new plan is on
    the way. It is in the mail.''
        So this alternative, one of the favorite centerpieces when
    talking about the alternative to the ACA is that they would
    allow people to buy insurance across state lines. Every state
    had a different insurance commissioner. Every state has
    different insurance lines. You hear these presidential
    candidates talk about why can we not go across the state. They
    should know the facts, unless they are talking without them
    knowing what the system is, like immigration. If you do not
    know what the system is now, how can you criticize it and say
    let us have reform?
        Allow people to buy insurance across state lines. That is
    the fix, generally without any regulatory role for the Federal
    Government. With a policy like that, what kind of impact would
    that have on the consumer, sir?
        Mr. KREISBERG. Well, it would have virtually no effect on
    rates. I think there have been a number of studies that, you
    know, since the Affordable Care Act has been adopted, we have
    essential minimum benefits across state lines now from the
    Federal Government.
        There are a number of state benefit mandates which those
    states are entitled to enforce within their own states, and we
    have always supported that. We have always opposed interstate
    sales because we think it is a violation of states' rights in
    this particular regard.
        So we do not think it has right now much of an impact on
    rates. We think it is adverse to consumers. We think you lose
    regulatory oversight. You may have some difficulties with
    reserve requirements that insurance companies are allowed to
    hold, and ultimately I do not think it serves any productive
    purpose at this time.
        Mr. PASCRELL. One final question. The last myth we have
    time for today, and that is it is a job killer. Now, I have
    seen data from different universities, Labor Department. I
    cannot find that. Would you help me?
        Mr. KREISBERG. Sir, it is not a job killer. It is not a job
    killer whatsoever.
        Mr. PASCRELL. Well, then spell it out.
        Mr. KREISBERG. As I indicated before, even CBO has said
    that it is really a matter of labor supply. People may now have
    the ability to get insurance outside of their workplace and
    withdraw voluntarily from the labor market as opposed to
    employers laying off employees because of the Affordable Care
    Act.
        Mr. PASCRELL. Thank you.
        I yield back.
        Chairman BRADY. Thank you.
        Mr. Kelly, you are recognized.
        Mr. KELLY. Thank you, Chairman.
        What I am going to start off with is the actual purpose of
    the hearing, and so the purpose of this hearing is to learn
    about the different health care tax expenditures in the Tax
    Code and determine those in need of reform, and I think as so
    often, everything gets lost in the translation.
        So when we talk about tax expenditures, what we are talking
    about is the government giving up anticipated revenue to
    subsidize, and each of you is here today representing a certain
    agency. You are all either 501(c)(3)s or 501(c)(5)s, right?
    Those are nonprofit organizations. By definition in the Tax
    Code, you pay no taxes.
        Each of you for the organizations that you work for have
    health care supplied by those people. You do not have to pay
    for it. The question today was about who pays for this because
    we talked initially, and I may be wrong on this, Chairman,
    about 150 million people being covered by employee-sponsored
    insurance. Part of the Patient Protection and Affordable Care
    Act is how are you going to pay for it? Because we always worry
    about how are you going to pay for it.
        So let us say all of a sudden employers said, ``We are just
    not going to do it anymore.'' You would lose 150 million who
    are paying for their own insurance to begin with, right?
        Now, is it true that we are talking about a loss of
    revenue, tax revenue here? This is what we are talking about of
    all the different Tax Codes right now, right? This is money
    that will not be garnered by the Federal Government.
        And so we are saying that in some cases we have to
    subsidize those plans for people who cannot pay for them. I
    just want to read to you. ``A subsidy is a sum of money granted
    by the government or a public body to assist an industry or
    business so that the price of a commodity or service may remain
    low or competitive.''
        My question to each of you: who supplies the money for the
    subsidy?
        Mr. KREISBERG. In both cases it is the worker, right? You,
    Mr. Kelly, had said that----
        Mr. KELLY. I am with you. It is okay, Mr. Kreisberg. Mr.
    Roy, I will come back to you. I will come back to you. I
    understand, but who pays for the subsidy?
        Mr. ROY. If you are talking about the----
        Mr. KELLY. I am talking about subsidies.
        Mr. ROY. The advanced premium tax credit on the Affordable
    Care Act exclusions?
        Mr. KELLY. I am talking where does the revenue for the
    subsidy come from?
        Mr. ROY. It comes from the taxpayers.
        Mr. KELLY. Taxpayers.
        Mr. ANTOS. Right, from the taxpayers.
        Mr. KELLY. It is all generated by hard-working American
    taxpayers. It is not generated by the government. The
    government looks at every single dollar we make and says, ``We
    are going to allow you to keep a fractional part of what you
    earned.''
        The government says to every hard-working American
    taxpayer, ``We are going to allow you a portion of each dollar
    that you earned.''
        The government will take from taxpayers the amount of money
    they need to run programs and say, ``We will use it better
    because we know how to use it better, but you will supply it.''
    Am I wrong on that?
        Mr. ROY. No.
        Mr. KELLY. Okay.
        Mr. ROY. And one thing about the employer tax exclusion
    that is------
        Mr. KELLY. I am running out of time, Mr. Roy, and I do not
    want to get a lecture, but the purpose of this meeting was to
    talk about tax expenditures and capping what an employer is
    allowed to deduct.
        I happen to be in a private business. I have always
    provided health care for my people. Now I am being told that
    you are not going to be able to deduct that as a cost of doing
    business because you have actually gamed that in order to avoid
    paying taxes.
        Yes, excuse me. And, by the way, the people that receive
    that benefit, they should be taxed on that because that was
    actually revenue.
        We are trying to adopt some source of revenue from hard-
    working American taxpayers again. All of this stuff is being
    driven by taxes.
        Mr. KREISBERG. It is not to raise taxes. It is actually to
    lower taxes and increase out-of-pocket----
        Mr. KELLY. Mr. Roy, do you pay taxes on your health care
    plan?
        Mr. ROY. Yes, I do.
        Mr. KELLY. Do you really?
        Mr. ROY. Absolutely.
        Mr. KELLY. Okay. It is provided by the agency you work for.
        Mr. ROY. We all pay taxes.
        Mr. KELLY. You pay wage taxes.
        Mr. ROY. Our taxes pay for the cost of our health care
    system.
        Mr. KELLY. Okay. I get that part. I get that part. Listen.
    I understand that world. I get that part.
        The reality of it is it comes from people who go to work
    and earn income and companies that are profitable. That is
    where the taxes come from, and the other part of it is we get
    it from printing money or borrowing money, which, by the way,
    we have every single taxpayer sign on because they are
    cosigners on that debt.
        But the purpose today was to talk about different health
    care expenditures, and I am just submitting to you that we are
    forgetting the most important part of this, and that is the
    people that provided the revenue. There is nobody here that
    says they do not want health care for people. The question is
    how do you pay for it.
        And at the end of the day, it is going to be by Americans.
        Mr. ROY. Let them make that choice.
        Mr. KELLY. And there are going to be some that can afford
    their own, some that cannot. I get that whole part of it, but
    we are going to change the Tax Code in order to collect more
    revenue, and when the government says they are losing revenue,
    what they are actually saying is, ``Mr. and Mrs. Taxpayer, you
    are going to get to keep more of your own money. It is going to
    stay in your pocket. You can decide how to spend it.''
        That is what it is about. It is about a loss of tax
    revenue. That is all this meeting is about. All the rest of it
    is political talking points or election year talking points. It
    is not about the issue which we have all been addressing, and
    that is: how do we pay for this? And the answer is every hard-
    working American taxpayer is going to contribute to it.
        My question, and it always comes down to the same thing. I
    love the fact that as an employer I have been able to do things
    for the people that I work with, but I do not think I should be
    held to only using that as a tax. Then the people you give it
    to should be taxed for it. We are looking at a cap on what
    employers are allowed to deduct as a cost of doing business.
        I would submit to you there is a heck of a lot more to
    running a business----
        Chairman BRADY. All time has expired.
        Mr. KELLY. Thank you. I yield back.
        Chairman BRADY. Mr. Renacci, you are recognized.
        Mr. RENACCI. Thank you, Mr. Chairman.
        I want to thank the witnesses for being here.
        It is interesting. I said this yesterday. The American
    people, if they wanted this, they would get very frustrated,
    and as my friend Mr. Larsen said, they get frustrated, but it
    is not because we are talking about ACA. They get frustrated
    because we are talking at each other instead of listening, and
    that is the problem.
        We need to listen to our witnesses. We need to listen to
    the people we represent.
        So I am going to go back. I am glad that Mr. Kelly got us
    back on track as to what the hearing was about.
        You know, employers cover, according to the CBO, 63 percent
    of health care through an employer-sponsored plans. You guys
    would agree with that, right?
        Mr. ROY. The worker is paid that because it is part of the
    worker's overall compensation.
        Mr. RENACCI. I understand, but employers are covering----
        Mr. ROY. When an employer hires someone, the cost of their
    overall compensation is calculated.
        Mr. RENACCI. We are going to get to that. We are going to
    get to that.
        So employers, in fact, cover 155 million people through
    employer-sponsored health care. I think, Mr. Antos, you said
    yes to that.
        So I go back in the district and I talk to my employers. I
    talk to my employees, too. Do you know what my employees say?
    They say, ``I do not want the responsibility of trying to find
    my own health care. It is complicated. I like the idea of an
    employer covering my health insurance.''
        And by the way, I have hired many employees, and do you
    know what they say? ``I want a good wage,'' and you hire them
    for a good wage, and then you give them health insurance. So
    the health insurance does not stop me from paying them a good
    wage.
        You guys are saying that it is reducing. They do not come
    in there saying, ``I am only going to work for this and you
    should pay me more because of health insurance.'' Most of them
    love that we are covering health insurance.
        So they say to me, when I talk to the employees, ``We do
    not want to be burdened with trying to select. We like the idea
    of the employer doing this. We like the idea of the employer
    covering everything. We like the idea of being part of a bigger
    plan because I cannot do it on my own.'' That is the other
    thing they say.
        Then I go to the employers, and I ask them, and do you know
    what they say to me? ``Congressman, that big wet blanket the
    government keeps throwing on top of us, you are raising our
    costs for health insurance. You are raising our cost,'' which
    has shown for the last couple of years with the Affordable Care
    Act and other ways, ``and now you want to cap it and cut it at
    the top. You want to hurt us again.''
        That is not fair to the employer. It is not fair to the
    employee. We have to go back to what the basis is. If we went
    to those 63 percent and asked them are they happy they are
    covered with health insurance, they would say I bet you they
    are happy they are covered with health insurance.
        So here is my concern. We know health care costs are going
    up. We want to capitate it and say, ``Mr. Employer, you can pay
    it, but anything above that is going to be a tax increase to
    you because we are not going to have it as a deduction.'' That
    is a problem.
        So the only way, in my estimation, and this is what drives
    me crazy, and I now come to you Mr. Roy. You keep saying an
    employer-sponsored plan does not give the employee choice, but
    I would ask you this. Are there not employer sponsored plans
    that give and could give employees a choice over their health
    care decisions, if structured properly?
        Mr. ROY. So there are a couple of points to make in
    response to that. The first is that----
        Mr. RENACCI. I do not have a lot of time.
        Mr. ROY [continuing]. Nobody is talking about tax
    increases. People are talking about letting patients control
    those dollars themselves, increasing their take-home pay, and
    letting them----
        Mr. RENACCI. I know that, but let us get back to it.
        Mr. ROY [continuing]. Decide what they want to fund.
        On the issue of choice for health insurance plans----
        Mr. RENACCI. If the plan is structured properly.
        Mr. ROY [continuing]. Employers can decide whether to offer
    one plan or two plans or three plans, but should workers not
    have the choice to choose between their employer-sponsored plan
    and 100 different plans that are out there independent of their
    employer?
        Mr. RENACCI. They can do that right now. They can do that
    right now.
        Mr. ROY. It is much harder for them to do that because the
    inequities in the Tax Code made that much more expensive.
        Mr. RENACCI. They can do that right now, but I guarantee if
    you talk to the employees, and you see this is what happens.
    The American people get frustrated with us in Congress because
    they want us to listen to them. They do not want to make those
    decisions. They like the idea of selecting a plan that their
    employer gives them, and they definitely do not want to have
    somebody come to us and say, ``This is what we think is best
    for you.''
        They know what is best for them. They want us to represent
    them. That is what is so frustrating, but that is what is great
    about these hearings because I do like to hear some of your
    thoughts, and I have listened.
        The next question I have, Mr. Antos: will more people lose
    their employer-sponsored plan if we cap the employer exclusion?
        Mr. ANTOS. More people will move off of employer-sponsored
    plan, but let me clarify something.
        Mr. RENACCI. Wait a minute. Will they lose----
        Mr. ANTOS. What you and Mr. Kelly said I believe is
    incorrect, which I do not think anybody is proposing that the
    employer's ability to take off their top line legitimate costs
    of doing business, which includes their contributions to all
    forms of compensation for employees, nobody is talking about
    capping that or eliminating that in any way.
        What we are talking about is limiting what the employee can
    essentially exclude form his income taxes, but it is not going
    to affect the employer.
        Mr. RENACCI. That is even worse.
        Mr. ANTOS. Thank you.
        Mr. RENACCI. Now you are going to add taxes to the
    employee. Again, if the American people hear what you just
    said, they are going to be really upset.
        I yield back.
        Chairman BRADY. The time has expired.
        Mr. Davis, you are recognized.
        Mr. DAVIS. Thank you very much, Mr. Chairman.
        And I, too, want to thank all of our witnesses.
        Newsweek has an article written March 3rd titled ``How
    Obamacare May Lower the Prison Population More than Any Reform
    in a Generation.'' It was written by Elijah Wolfson. Toni
    Preckwinkle, who is president of the Cook County Government,
    second largest county in the country with one of the largest
    jails in the country, responded to that article by writing a
    letter to the editor, and here is what President Preckwinkle
    wrote.
        She said, ``I commend Newsweek for recognizing the vital
    connection between Obamacare and safer communities.'' She went
    on to say that in November 2012, Cook County was granted a
    Medicaid waiver that has already allowed us to provide health
    insurance to over 86,000 low income residents, including 2,600
    formerly detained individuals.
        Mr. Chairman, I would ask that both of these articles be
    inserted into the record.
        Chairman BRADY. Without objection.
        [The information follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. DAVIS. Since we have not seen any alternative to what
    is often called Obamacare, except a national health plan,
    preferably single payer, let me mention a few of the
    accomplishments and benefits our country has experienced from
    the Affordable Care Act.
        Twenty million people have gained health insurance coverage
    who did not have it. The gains since 2013 have been the fastest
    and most rapid since the decade following the creation of
    Medicare and Medicaid. The uninsured rate is below ten percent
    for the first time in the history of this country. The
    uninsured rate among young adults, ages 19 to 25 has fallen by
    52 percent through the third quarter of 2015.
        We know that states that expanded their Medicaid programs
    have seen rapid gains in health insurance, much more than those
    states that have not. Millions more workers are now protected
    against unlimited out-of-pocket spending.
        Since the Affordable Care Act became law, health care
    prices have risen at the lowest rate in 50 years. Hospital
    readmission rates have fallen sharply since the passage of
    Obamacare. The private sector has added jobs every month since
    the Affordable Care Act became law.
        Thanks to the Affordable Care Act an estimated 20 million
    people have gained health insurance, and for the first time in
    history nine of ten Americans have health insurance.
        Among African American adults, the uninsured rate declined
    by 53 percent. Among Latino adults the uninsured rate dropped
    by 27 percent. The gains for women have been rapid, and among
    young adults has dropped 47 percent.
        It prohibits coverage denials and reduced benefits and
    protects 129 million people who have some type of preexisting
    health condition. More than one million Illinois residents have
    obtained health insurance coverage, and on March 22nd of this
    year, the Department of Health and Human Services announced
    that Medicare spent $473.1 billion less on personal health care
    expenditures between 2009 and 2014 than previous spending
    trends would have indicated.
        Mr. Kreisberg, let me ask you: have you heard of, seen
    anything or know of anything that would do a better job of
    meeting the health needs of our country than that?
        Mr. KREISBERG. I do not think there is anything in the
    current dialogue today, Mr. Chairman, given where the American
    people are that would do a better job than what the Affordable
    Care Act has done in terms of expanding coverage.
        As I said earlier, I do not think we have met the full
    potential, and I think we do need to work on fully implementing
    the Medicare expansion provisions of the Act so we can bring
    some of the benefits that you have described to more people.
        Mr. DAVIS. Thank you very much. I yield back.
        Chairman BRADY. Thank you.
        Mr. Meehan, you are recognized.
        Mr. MEEHAN. Thank you, Mr. Chairman.
        And I appreciate the panelists here today. I wish they had
    a chance to actually answer questions instead of being lectured
    to because I guess this is hearing.
        But in any event, look. I thank you for your work, and I
    know one thing. When I go back in my district and I talk to my
    employers, Obamacare is not working to them, and the
    frustration level is the highest I have ever seen. Eight
    percent costs per year in increase, but I also have questions
    about how we work this system.
        So I am going to ask four things if you can address them as
    best you can. If we are going to do some sort of a cap, and it
    is designed to make it more available to everyday people, not
    just to the benefit of the more wealthy members in that; so if
    we try to create caps, how do we keep the young, healthy
    employees inside that system?
        My second question is: if we are going to create a tax
    system that does some kind of a refundable tax credit, how do
    you deal with people or families that do not currently have
    access to employer-sponsored programs?
        And what do you do with those who have an income level
    below, you know, the 300 percent?
        A third question that my colleague talked to: how do you
    make consumers understand what to buy when they have a doctor
    tell them they are sick? First they are sick. It is a hard time
    to make a lot of choices.
        Second, you do not understand what you are buying. You are
    being told you have got to get this test.
        And then the last question. I have thrown a lot at you if
    you have it. I am anxious to hear us make this, but how do you
    know that employer is not going to keep the savings themselves
    and not pass it on in the form of wages that will increase?
        A lot of questions, but if you can, help me.
        Mr. ROY. Those are all great questions. I think you have
    asked the right questions.
        So on the issue of whether the employer will keep the money
    or raise wages, the economic literature is overwhelming in
    indicating that there is an exact one-to-one correlation
    because it is overall compensation that the employer thinks
    about, and it is a competitive market, right? If you want to
    retain those workers and not lose them to a competing firm, you
    have got to pay them what the market is paying them.
        So if health care costs go down, the cost of insuring your
    workers goes down. That gets returned to workers in the form of
    higher wages. So we can be optimistic about that.
        On the question of patient choice and how if you got to the
    doctor you do not actually know. The doctor says you are sick.
    How do you deal with that? It is a classic problem in health
    care.
        There is a flip side to that, which is a lot of times you
    as a patient know a lot more about why you are sick and your
    family history and your background than the doctor does who is
    just glancing at your chart, has forgotten a few things. Your
    medical records are all over the place.
        So there is asymmetry in both directions, and the more the
    consumer is in charge of his own health care dollars, the more
    that doctor has an incentive to be really responsive to that
    patient and that patient's needs and that patient's unique
    medical history, and that is what our current system works
    against.
        And so if I missed anything that you have addressed,
    please.
        Mr. MEEHAN. Well, no, I asked two other questions. I want
    to know about young, healthy employees. How do you keep them in
    if we cap this system?
        Mr. ROY. Right. So the issue of whether the young, healthy
    employees will withdraw from employer-based care and go off and
    shop on their own, you could see that to some degree, but you
    could also see that a lot of people stay, and the reason why
    they would stay in the employer-based system is because of the
    economies of scale that come from a large employer or even a
    smaller employer purchasing health insurance in bulk for a
    group of its employees and having that negotiating power that
    comes with that versus being an individual shopping for
    coverage.
        So I think employers should retain some confidence that
    they have a lot to offer to that employee, and they can provide
    other incentives to say, ``Hey, you know, we want you to stay
    in our risk pool. Here are some other things that we can offer
    you that if you brought insurance on your own, maybe you would
    not get as good of a deal.''
        Mr. MEEHAN. Okay. I wish we had time for follow-up
    questions, but I wanted to get my fundamental questions
    answered, and the last one was: how about a refundable tax
    credit for somebody that is not in an employment situation?
        Mr. ROY. That is essential. So if you only have a
    nonrefundable tax credit, then people who do not have income
    tax liabilities, they cannot get the financial assistance they
    need. So refundable tax credits are a very important part of
    equalizing the tax treatment of health care.
        Mr. MEEHAN. Mr. Antos, have you got any response or any
    thoughts on any of those issues?
        Mr. ANTOS. Well, one other aspect has to do not just with
    wages, but also with people being able to keep their jobs. You
    know, there are many margins of adjustment that employers face,
    and by giving more flexibility to the system we will not only
    have people with higher wages, but in some cases when there are
    loose labor markets, when the labor markets are not doing well,
    the people will less likely be laid off.
        Mr. MEEHAN. Thank you. I appreciate that.
        Chairman BRADY. Thank you.
        Mr. Holding, you are recognized.
        Mr. HOLDING. Thank you.
        Mr. Roy, in your testimony you stated that reform should
    give workers more choice to purchase the kind of health
    coverage that is affordable for them and their families, but
    you know, unfortunately many of the new requirements of
    Obamacare made employer-sponsored coverage increasingly
    unaffordable, with higher deductibles, premiums and cost
    sharing. Employees are also presented with fewer choices as we
    have discussed when it comes to employer coverage.
        So rather than dictating exactly what benefits must be
    offered, would it make more sense to allow employers to provide
    a defined contribution to their employees so that they can shop
    around and find the products that meet their needs a little bit
    better?
        Mr. ROY. Absolutely. That would be a tremendous innovation
    in the delivery of health insurance in the employer market. You
    have a defined contribution that they can then say, ``Look.''
    Let us say it is $5,000. If I want to spend $6,000, then I can
    do that with my additional funds. If I like the $5,000 health
    insurance plan, let me buy whatever we want.
        There is an intermediate way of getting there, which is
    private health insurance exchanges that some large employers
    like Walgreens are using to say, ``We are going to give you
    this much money. Buy whatever health insurance among these ten
    plans that are on the exchange.''
        There are a number of people working on improving that
    modality for delivering health coverage to the employer market.
        Mr. HOLDING. Well, defined contributions are pretty common
    practice in the world of pensions.
        Mr. ROY. Yes.
        Mr. HOLDING. But not health benefits. So is there something
    in the Tax Code or Federal law that treats defined
    contributions differently than defined benefit plan?
        Mr. ROY. Yes. Unfortunately, if you just give them the
    money to buy whatever health insurance they want, it does not
    qualify for the employer tax exclusion, except in these private
    exchange contexts where you can convert it in a certain way.
        With the self-insured population you have a little bit more
    flexibility than through the conventional employer tax
    exclusion.
        Mr. HOLDING. So do you think that treating defined
    contributions in the same way we do defined benefits under the
    Tax Code would help to make the health care costs more
    manageable and predictable for employers, employees and
    employers?
        And similarly, do you think it would give employees more
    flexibility in their insurance coverage?
        Mr. ROY. Absolutely, and you know, there has been a lot of
    concern expressed today about if you reform the employer tax
    exclusion, would that disrupt coverage in the employer market
    for those who prefer it, and one of the best ways to ensure
    that employer-based health coverage continues to be robust is
    to give employers exactly the option that you are describing,
    to say, ``Do you know what? We are going to get out of the
    business of picking the health insurance plan for you, but we
    are going to be allowed to have a defined contribution which
    then you can use to shop for coverage that you want,'' because
    that is a benefit that employees would love to have and would
    loath to give up.
        Mr. HOLDING. Now, importantly, on the flip side do you
    think this would create incentives for insurers to compete for
    this business? Correct?
        Mr. ROY. Absolutely.
        Mr. HOLDING. And competition ultimately would drive costs
    down because your insurers are competing, correct?
        Mr. ROY. It would drive costs down. It would also improve
    quality and customer service because, again, insurers would
    have to compete for your business.
        Mr. HOLDING. Thank you.
        Mr. Chairman, I yield back.
        Chairman BRADY. Thank you.
        Mr. Dold, you are recognized.
        Mr. DOLD. Thank you, Mr. Chairman.
        And I want to thank our witnesses again for your time, and
    I, too, join my colleague, Mr. Meehan, in hoping that this
    could have been more question and answer to hear from you as
    opposed to taking the short period of time really more for
    speaking at you.
        I will kind of try to get to some questions, but I will
    tell you as a small business owner the frustration level that
    is out there not only amongst the employers, but amongst those
    looking and seeking to provide insurance for their families is
    extremely high. They are frustrated largely because as an
    employer, and I am a small employer, we see our premiums and
    have seen traditionally year after year, even before the
    Affordable Care Act, they would rise up pretty significantly,
    sometimes 44 percent a year, and yet certainly as someone that
    runs a multi-generational business, we consider the people that
    we work with part of our family.
        And honestly, that is where that trust comes in because
    many, especially in these small businesses that are out there,
    they trust the people that they have been working with for ten,
    15, 20 years and trying to provide or make the choices that
    they believe would be best.
        As we look at the flexibility which I think is absolutely
    critical, I think we are also getting away from the idea that
    what our goal should be is that we want quality care for
    everyone, and we want to make it as affordable as possible,
    more recently we have seen premiums go through the roof.
    Deductibles have gone sky high, and so for a family of four, it
    would not be uncommon for them to pay $2,500 a month in
    premiums and have a deductible of $12,000-plus.
        So for that family of four, they are paying, you know, 20-
    some odd thousand dollars of insurance before they get dollar
    one of coverage.
        And we have done a masterful job of actually disguising the
    costs of health care, right? How much does it cost to go to the
    pediatrician? Well, I will tell you some people say it is just
    $20. No, no, that is the copay.
        And so really what we have done is we have taken consumers
    completely out of the equation, and what we really need to be
    focused on is how do we enable that competition.
        And the other thing that I would argue, we would like to
    have the flexibility for employees not to feel trapped into a
    job because if I leave I am going to lose my health coverage
    and, therefore, I potentially might not be able to have that
    coverage as I move forward for my family, and that is really
    terrifying, obviously, for those that have family members that
    have great need.
        I am reminded of a study that was done up in Wisconsin.
    Hospital A had a knee replacement. It was $57,000 for the knee
    replacement. Hospital B, three miles down the road, not far and
    still basically right there in the neighborhood, was $38,000.
        Now, we associate better care with $57,000, and yet what
    was amazing was better outcomes actually happened at the
    hospital for $38,000. My point is: should we not know that?
    Should we not be able to get that data out there and drive more
    people to the hospital that is doing it for $38,000?
        Mr. Antos, what happens to the hospital that is doing it
    for $57,000?
        Mr. ANTOS. They are making a lot more money.
        Mr. DOLD. Well, but what happens to them if we are able to
    figure out that the hospital three miles down the road is doing
    a----
        Mr. ANTOS. Well, if there is actually usable consumer
    information about their cost and the quality of the services,
    what is going to happen is that it is going to drive the
    expensive hospital to revamp the way it does its business. It
    is going to drive the hospital to talk to their doctors about
    how you manage care.
        Mr. DOLD. Ultimately what we are trying to focus on in this
    hearing is what can we be doing with regard to our Tax Code to
    make better decisions, and frankly, we do not want to talk
    about an increased tax on hard-working taxpayers. We want to
    encourage those employers to be able to continue to do it.
        Because I would argue as a small business person, we want
    to make sure that we are able to attract and retain good
    people. But I do believe that we have to come up with a
    mechanism that provides that flexibility for employees, for
    those hard-working taxpayers to say, ``I have good quality
    care,'' regardless of where they are working and for those even
    that are not working.
        And that is where I think that refundable tax credit really
    has to come into play.
        Can you talk to us about what we can really be doing in
    terms of focusing on that flexibility, so we do not have the
    job lock, as it were, Mr. Roy?
        Mr. ROY. Yes. So as both of us described in our prepared
    remarks, if you gradually cap the taxable exclusion in a way
    that is revenue neutral so that it would involve no tax
    increase on any worker relative to what current law is, you
    give people the flexibility to opt out if they want to and shop
    for coverage on their own.
        And also if they change jobs, they own their own health
    insurance plan just like with auto insurance. Your auto
    insurance does not change when you switch jobs. It is your auto
    insurance, your life insurance, et cetera.
        The same with health insurance. It should work the same
    way. You should be able to transition. You should be able to
    continue your coverage, and it should not have to be sponsored
    by the employer to do that.
        And one mechanism to do that and integrate it into the
    employer-based system is what we were talking about just a
    minute ago, which is to have a defined contribution at the
    employer level, which then the individual can take and use to
    buy the insurance and keep the coverage as he changes jobs.
        Mr. DOLD. I would love to hear the responses, but my time
    has expired, Mr. Chairman.
        Chairman BRADY. Thank you, Mr. Dold.
        Mr. DOLD. Thank you.
        Chairman BRADY. Mr. Rangel, you are recognized.
        Mr. RANGEL. Thank you, Mr. Chairman.
        And let me thank the panel for your patients and indulgence
    in coming here to share with us.
        Mr. Roy, you know, facetiously Dr. Price and I said we will
    adopt your policy, but I will be serious to find out is it at
    all possible for you to present the plan that you have to us
    for us to look at?
        And how soon could we get it?
        Mr. ROY. I would be happy to do it at any time that is
    convenient to you and your office, Mr. Rangel, at any time that
    you on your Committee or anyone in the Congress.
        Mr. RANGEL. Can you send it to us directly? And then I
    would arrange with Dr. Price and others to be able to discuss
    it because it pains me to have struggled so long for expansion
    of health care to find people that would be anxious to repeal
    it and not to have a plan to suggest how the vacuum will be
    filled.
        Mr. ROY. Absolutely, and you know what I would say, Mr.
    Rangel, is that I have reached out many times to Democrats both
    in the----
        Mr. RANGEL. No, no, no.
        Mr. ROY [continuing]. House and in the Senate.
        Mr. RANGEL. You do not have to reach out any further.
        Mr. ROY. It sometimes is very difficult.
        Mr. RANGEL. You also are a journalist, right?
        Mr. ROY. Say that again?
        Mr. RANGEL. You are a journalist as well?
        Mr. ROY. Yes.
        Mr. RANGEL. You can prepare the press release now that I
    have said that I am anxious to see what is on your mind because
    with all of the activity on the floor to repeal the Affordable
    Care Act, I have not seen an alternative, and you are prepared
    to show that to me.
        Now, you are not a health care provider, are you?
        Mr. ROY. No. I am a----
        Mr. RANGEL. But you are considered an expert in delivery of
    health care, are you not?
        Mr. ROY. Well, I will defer to this Committee that invited
    me here as to whether I have expertise or not.
        Mr. RANGEL. Well, you have provided this advice to Governor
    Mitt Romney, have you not?
        Mr. ROY. I was an advisor to Mitt Romney in the past year.
        Mr. RANGEL. And as well as Rubio. You advised him.
        Mr. ROY. Yes.
        Mr. RANGEL. And Rick Perry?
        Mr. ROY. Yes, sir. And so in addition to an expert in
    health care, you also could be considered political analyst in
    terms of providing political advice as relates to health care.
    Is that true?
        Mr. ROY. I provide policy advice, not political advice.
        Mr. RANGEL. But you have given a lot of policy advice to
    outstanding Republican politicians, right?
        Mr. ROY. I am happy to give policy advice to anyone who
    asks, and it is mostly Republicans.
        Mr. RANGEL. I know you would. You do get paid for giving
    advice, do you not?
        Mr. ROY. No, I was a volunteer on----
        Mr. RANGEL. Have you ever been paid to give advice?
        Mr. ROY. Have I ever been paid to give policy advice?
        Mr. RANGEL. Policy advice as relates to health care.
        Mr. ROY. Well, I am an employee of the Manhattan Institute.
    So I do research on policy.
        Mr. RANGEL. So what I am saying is of course, you would
    welcome giving advice. No Democrat ever accepted your services.
        Mr. ROY. But I would be eager to provide that.
        Mr. RANGEL. Okay. Now, what group did you mention, the
    Financial Institute? Are you with them now?
        Mr. ROY. The Manhattan Institute for Policy Research. That
    is the nonprofit think tank.
        Mr. RANGEL. Are you with them now?
        Mr. ROY. Yes. I am a senior fellow with the Manhattan
    Institute.
        Mr. RANGEL. Did you ever work for J.P. Morgan?
        Mr. ROY. I did many years ago, yes, before I started
    working in health care policy.
        Mr. RANGEL. And when you went to work for health care
    policy, did you form or become partner in a firm called Tarea
    Funds?
        Mr. ROY. No, I was not a partner in Tarea.
        Mr. RANGEL. Were you a part of Tarea?
        Mr. ROY. I was an outside consultant. I worked with some of
    their individuals.
        Mr. RANGEL. So you gave advice to Tarea?
        Mr. ROY. I was a consultant, yes.
        Mr. RANGEL. Does consultant mean giving advice to them?
        Mr. ROY. Sometimes, yes.
        Mr. RANGEL. And is Tarea a hedge fund organization?
        Mr. ROY. No.
        Mr. RANGEL. Do they advise a hedge fund organization?
        Mr. ROY. No, they mostly advise companies, such as
    biotechnology companies that are trying to develop new
    therapies.
        Mr. RANGEL. Have you been described as an advisor to hedge
    fund investors?
        Mr. ROY. Yes, I have sometimes given advice to investors as
    I give advice to policy makers and other people who are----
        Mr. RANGEL. But since your specialty is in health care,
    would you have concentrated in giving investment advice or
    policy advice to hedge funds that are concerned with providing
    health care? That is where your expertise is.
        Mr. ROY. I am not sure I understand the question. If the
    question----
        Mr. RANGEL. I am trying to connect you with hedge fund
    providers. That is what I am trying to do.
        [Laughter.]
        Chairman BRADY. That has become clear, Mr. Rangel, yes.
        Mr. RANGEL. And so I do not know what it is. What part of
    my question is it that you do not understand?
        Mr. ROY. So after I----
        Mr. RANGEL. Hold it. You are not a doctor. You are not a
    health provide----
        Mr. ROY. I worked as an investor.
        Mr. RANGEL. Please, just one minute.
        Mr. ROY. Sorry.
        Mr. RANGEL. You are not a doc. You see, you took my time
    away, but perhaps the chair might afford you some time to
    separate yourself from hedge fund investors as relates to
    health care.
        Mr. ROY. My policy advice is entirely independent of my
    previous career as an investor in the health care system.
        Chairman BRADY. Thank you.
        Mr. Roy is an acknowledged expert and credible witness on
    health care reform. We welcome your attendance today.
        Mr. Rice, you are recognized.
        Mr. RICE. Mr. Kreisberg, you work for a big public sector
    labor union, correct?
        Mr. KREISBERG. Yes, sir.
        Mr. RICE. And you do design work and consulting, I guess,
    for their health plans?
        Mr. KREISBERG. For the staff health plan?
        Mr. RICE. For whatever health plan they have.
        Mr. KREISBERG. I have collectively bargained health plans
    covering hundreds of thousands of workers.
        Mr. RICE. How many of those workers are covered under the
    Obamacare exchanges?
        Mr. KREISBERG. I am sorry. I am having a little bit of
    trouble----
        Mr. RICE. How many of those workers are covered under the
    Obamacare exchanges?
        Mr. KREISBERG. The ones that I negotiated for are not in
    the exchanges, but other members of ours are in the exchange.
        Mr. RICE. What percentage would you say?
        Mr. KREISBERG. Of our members in the exchanges?
        Mr. RICE. Yes, yes.
        Mr. KREISBERG. I would probably say five percent, if that
    high. Excuse me. We do have more in the Medicaid expanded
    coverage program.
        Mr. RICE. Do you think if you moved all of your members to
    the exchanges that that would increase their satisfaction with
    their health care coverage or decrease it?
        Mr. KREISBERG. I believe it would decrease their
    satisfaction.
        Mr. RICE. The Cadillac tax, you know, you are sitting here
    saying that you like the Affordable Care Act, but you do not
    want your members on it.
        Mr. KREISBERG. That is not what I said.
        Mr. RICE. Okay. Well, explain it to me then.
        Mr. KREISBERG. Well, for many of the people who are covered
    in the health care exchanges, they had coverage in the
    individual market, which was not working well at all or they
    had no coverage at all. So we believe the Affordable Care Act
    health care exchanges are very positive things for those
    members.
        But we are a firm believer in the traditional employer-
    sponsored insurance, which our members are fortunate enough to
    normally be able to access.
        Mr. RICE. All right. Well, Jonathan Gruber testified that
    when he was helping design the Affordable Care Act that the
    Cadillac tax was specifically designed to increase the cost of
    employer provided insurance over years and thus force everybody
    into the exchanges, and what I am asking you is if the Cadillac
    tax works as Mr. Gruber designed it and forces all of the
    employer-provided health insurance to become so expensive that
    people cannot do it and all of your members are transferred
    onto the exchanges. Are they going to be happy with that or are
    they going to be disappointed?
        Mr. KREISBERG. Well, first of all, I think Gruber is wrong.
        Mr. RICE. Well, he designed the plan.
        Mr. KREISBERG. Some controversy over that, but he is wrong
    in terms of what would happen. What would happen, I would
    argue----
        Mr. RICE. Excuse me. Mr. Roy, is Gruber wrong or is he
    right?
        Mr. ROY. Is Gruber wrong about what specifically?
        Mr. RICE. That the Cadillac tax was designed to make
    employer-provided health insurance more and more expensive so
    that people would eventually be forced onto the exchanges?
        Mr. ROY. I do not believe he said that the Cadillac tax
    would make health insurance more expensive and that people
    would go on the exchanges. I do not believe he said that.
        Mr. RICE. Employer-provided insurance.
        Mr. ROY. I think he has stated that the Cadillac tax was
    designed, because it is back-loaded in terms of the way it
    appears, as the way it comes in, that would be less
    transparent.
        Mr. RICE. It was back-loaded so that people will not figure
    it out until years later. He said the American public was too
    stupid to figure it out.
        Mr. ROY. Its convoluted design was what he was celebrating
    because people would not understand how it worked.
        Mr. RICE. It does not apply until 2018, and then it is
    indexed based on inflation, not on inflation in health care
    cost.
        So, Mr. Antos, moving to you, that would result in
    employer-provided health insurance becoming more and more
    expensive, correct?
        Mr. ANTOS. Absolutely right. In fact----
        Mr. RICE. And it would force people onto the exchanges,
    correct?
        Mr. ANTOS. Well, it might force them out of insurance
    altogether.
        Mr. RICE. So, Mr. Kreisberg, coming back to you, when the
    health insurance that you collectively bargain for and that you
    provide to your population becomes so expensive that you cannot
    collectively bargain for it anymore because of the Cadillac tax
    and your guys get moved back onto the Obamacare exchanges, are
    they going to be happy with that?
        Mr. KREISBERG. Well, what would happen is that the health
    plans that they are in would change so they would fit under the
    cap. We would not necessarily lose our coverage. We would still
    probably have a----
        Mr. RICE. But you would lose your benefits.
        Mr. KREISBERG [continuing]. But it would be less valuable.
        Mr. RICE. I am sure they would be happy with that.
        Mr. KREISBERG. They would not be happy with that, which is
    why we oppose the excise tax.
        Mr. RICE. Over half the American population is covered by
    employer health providers. A large part is covered by Medicare.
    A large part is covered by Medicaid. Poor people are covered by
    Medicaid. Retired people are covered by Medicare.
        Most of the rest of the people are covered by employer-
    provided health insurance, and they really like it, right? Is
    the Affordable Care Act not an attack on employer-provided
    health insurance?
        Mr. ANTOS. Well, former White House official Ezekiel
    Emanuel argued that the Cadillac tax would pave the way towards
    eliminating the employer market altogether.
        Mr. RICE. Thank you.
        I yield back.
        Chairman BRADY. Thank you.
        Mr. Reed, your final question?
        Mr. REED. Well, thank you, Mr. Chairman.
        You are at the end, and I guess this is the penalty for
    showing up late, and I take responsibility for having the last
    five minutes.
        First, I just want to make sure this is clear, and I was
    offended by my colleague on the other side of the aisle who
    referenced that somehow the Republican agenda is to take away
    health care for people in America. That is just not accurate,
    and our Committee is better than that, and I will talk to that
    member personally to make sure that we always raise our
    discourse.
        Because I think what is here between us on both sides of
    the aisle is a recognition that the health care system is not
    working in America, and that we have to get to the issue of
    health care cost in particular.
        And I understand that the heart of this conversation today
    is about employer-sponsored health care, and it is a big change
    if we go down the path of removing that exclusion in the Tax
    Code, and I am very concerned about that. But I am willing to
    put all options before us to have a wide open debate in order
    to make sure that we are attacking the fundamental problem, and
    that is health care cost and accessibility for our fellow
    American citizens.
        That being said, we are six years into this experiment with
    the Affordable Care Act, Obamacare. So let me ask you a
    question. Who has been to the doctor in the last 60 days on the
    panel?
        [Show of hands.]
        Mr. REED. Anyone else?
        How much did it cost?
        Mr. ROY. I do not know.
        Mr. REED. You do not know, right?
        Mr. ROY. Well, because it was covered by insurance, and I
    do not really get a bill that explains to me how much it cost.
        Mr. REED. So each of you had indicated that you have
    insurance through your employer. What did you pay last month
    for that insurance?
        Mr. ROY. I do not know.
        Mr. REED. Mr. Kreisberg, do you know?
        Mr. KREISBERG. The insurance plan that I am covered in, my
    employer pays for it. It costs probably about $2,500 a month.
        Mr. REED. How much does it cost you?
        Mr. KREISBERG. I do not pay a premium.
        Mr. REED. You are 100 percent covered by your employer.
        Mr. KREISBERG. Yes.
        Mr. REED. And it is approximately how much by your
    employers?
        Mr. KREISBERG. Approximately I would believe somewhere
    about 23 to----
        Mr. REED. You would guess, right?
        Mr. KREISBERG [continuing]. 23 to $2,500 a month. Yes, I am
    guessing.
        Mr. REED. You are guessing.
        Mr. KREISBERG. An approximation.
        Mr. REED. Does that not illustrate the point? You are three
    leading experts testifying before the U.S. House of
    Representatives' Ways and Means Committee. Is this not the
    point?
        Mr. ROY. Absolutely, and it is a question I often ask.
        Mr. REED. You do not know. You do not know the answer to
    that fundamental question, and does that not in a large part
    drive the problem we are facing in America's health care?
        Mr. KREISBERG. I think your conclusion is wrong from the
    point you are trying to make.
        Mr. REED. The lack of transparency by you as an expert not
    knowing the cost, not knowing how much it cost you in the
    system is not causing the problem or at least contributing?
        Mr. KREISBERG. No.
        Mr. REED. Would you concede it contributes to the problem?
        Mr. KREISBERG. The problem is not what can consumers know
    about cost. The problem is what the costs are. As you are
    trying to point out, the cost----
        Mr. REED. Hold on. Mr. Kreisberg, hold on. I waited two and
    a half hours to have this time.
        Mr. KREISBERG. Yes.
        Mr. REED. This is the issue. There are in my mind two tools
    that we can use to control costs: market pressure driven by
    people or government mandate driven by D.C. Are there any other
    tools out there that you can think of?
        I see a bunch of noes across the table here, right?
        Mr. KREISBERG. Yes.
        Mr. REED. What we are trying to do is to say to the
    American people we stand on the side of you. We stand on the
    side of a market. Now, you may not agree that it could work in
    the health care industry, and there are going to be situations
    where a true market does not exist in health care. I get that.
        But our fundamental tool that we are trying to use is
    market driven pressure to drive the cost down. The other side
    when they celebrate the Affordable Care Act they are saying
    government is going to drive those costs down. I am concerned
    about that as well as the hundreds of millions of people across
    America that say if a government can tell you how we are going
    to drive that cost down in a personal transaction such as
    health care, that is an extensive, big government type of power
    being exercised over us.
        So I am open to try to empower individuals to have that
    market-based pressure giving them their money in an employer-
    based situation. I have great concerns about it. I will be
    perfectly honest with you because we have all become accustomed
    to it, but I do understand the power of what that would
    represent.
        Is that not what we are trying to do by recognizing the
    exclusion and saying if we give that power to the employee,
    that they may be in a better position to determine and put that
    market pressure on the system to drive the cost down?
        Is that what we are trying to get to, Mr. Roy?
        Mr. ROY. I thought you laid it out beautifully.
        Mr. REED. Well, thank you.
        As we end on that, I yield the balance of my time, and
    thank you to the entire panel for that exchange.
        Chairman BRADY. Thank you.
        We would like to thank our witnesses for appearing before
    us today.
        The question is as we preserve the incentives for employer-
    sponsored health care, can we update this tax incentive,
    provide more options in the 21st Century world to workers at
    work or those who want health care outside their work in a way
    that works for their family and their lives.
        And we have had great testimony and very constructive
    dialogue today. I appreciate the witnesses.
        Please be advised I would like to submit for the record an
    analysis from the Congressional Budget Office that shows that
    drug price savings are not obtained by negotiating with
    Medicare.
        [The information follows:]

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        Chairman BRADY. Please be advised Members have two weeks to
    submit written questions to be answered later in writing. Those
    questions and answers will be made part of the formal hearing
    record.
        With that, again, thank you for being here. The Committee
    stands adjourned.
        [Whereupon, at 12:56 p.m., the Committee was adjourned.]

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