[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:]
    
    
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    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:]


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    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:]
    
    
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     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:]
    
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    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:]
    
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    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:]
    
    
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    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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