    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

                       EXAMINING THE EFFECTIVENESS OF THE
                          INDIVIDUAL MANDATE UNDER THE
                              AFFORDABLE CARE ACT

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

                                    HEARING

                                   before the

                           SUBCOMMITTEE ON OVERSIGHT

                                     of the

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

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                JANUARY 24, 2017

                                   __________

                              Serial No. 115-OS01

                                   __________

             Printed for the use of the Committee on Ways and Means

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                         U.S. GOVERNMENT PUBLISHING OFFICE

    33-361                    WASHINGTON : 2019

                          COMMITTEE ON WAYS AND MEANS

                          KEVIN BRADY, Texas, Chairman

    SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
    DEVIN NUNES, California              SANDER M. LEVIN, Michigan
    PATRICK J. TIBERI, Ohio              JOHN LEWIS, Georgia
    DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
    PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
    TOM PRICE, Georgia                   JOHN B. LARSON, Connecticut
    VERN BUCHANAN, Florida               EARL BLUMENAUER, Oregon
    ADRIAN SMITH, Nebraska               RON KIND, Wisconsin
    LYNN JENKINS, Kansas                 BILL PASCRELL, JR., New Jersey
    ERIK PAULSEN, Minnesota              JOSEPH CROWLEY, New York
    KENNY MARCHANT, Texas                DANNY DAVIS, Illinois
    DIANE BLACK, Tennessee               LINDA SANCHEZ, California
    TOM REED, New York                   BRIAN HIGGINS, New York
    MIKE KELLY, Pennsylvania             TERRI SEWELL, Alabama
    JIM RENACCI, Ohio                    SUZAN DELBENE, Washington
    PAT MEEHAN, Pennsylvania
    KRISTI NOEM, South Dakota
    GEORGE HOLDING, North Carolina
    JASON SMITH, Missouri
    TOM RICE, South Carolina
    DAVID SCHWEIKERT, Arizona
    JACKIE WALORSKI, Indiana
    CARLOS CURBELO, Florida

                         David Stewart, Staff Director

                     Brandon Casey, Minority Chief Counsel

                                     ______

                           SUBCOMMITTEE ON OVERSIGHT

                        VERN BUCHANAN, Florida, Chairman

    PAT MEEHAN, Pennsylvania             JOHN LEWIS, Georgia
    JASON SMITH, Missouri                JOSEPH CROWLEY, New York
    DAVID SCHWEIKERT, Arizona            SUZAN DELBENE, Washington
    JACKIE WALORSKI, Indiana             EARL BLUMENAUER, Oregon
    CARLOS CURBELO, Florida
    GEORGE HOLDING, North Carolina

                                C O N T E N T S

                                   __________

                                                                       Page

    Advisory of January 24, 2017, announcing the hearing.............     2

                                   WITNESSES

    John R. Graham, Senior Fellow, The National Center for Policy
      Analysis.......................................................     5
    Thomas Miller, Resident Fellow, American Enterprise Institute....    14
    Dr. John E McDonough, DrPH, MPA, Professor of Practice,
      Department of Health Policy & Management, Harvard TH Chan
      School of Public Health........................................    28

                           SUBMISSIONS FOR THE RECORD

    AHIP, statement..................................................    58

                       EXAMINING THE EFFECTIVENESS OF THE
                          INDIVIDUAL MANDATE UNDER THE
                              AFFORDABLE CARE ACT

                                  ----------

                           TUESDAY, JANUARY 24, 2017

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

        The Subcommittee met, pursuant to call, at 2:26 p.m., in
    Room 1100, Longworth House Office Building, Hon. Vern Buchanan
    [Chairman of the Subcommittee] presiding.
        [The advisory announcing the hearing follows:]

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        Chairman BUCHANAN. The Subcommittee will come to order.
        Welcome to the Ways and Means Subcommittee Oversight
    hearing on Examining the Effectiveness of the Individual
    Mandate Under the Affordable Care Act. My focus today is on
    affordability.
        In Florida, 65 percent of our counties only have one
    carrier offering insurance to individuals in 2017. The State
    went from eight carriers in 2014. Today, we have five carriers,
    almost half, in 2017. In Manatee and Sarasota Counties, two
    counties I represent in my district, individuals went from
    being able to choose from among three different providers down
    to two. This happened in just a single year. In addition to
    less options to choose from, the average monthly premium
    Floridians enjoyed under the ACA increased by 19 percent this
    past year, according to the Florida Office of Insurance
    Regulation.
        Let me pause and look back 4 years ago when the Affordable
    Care Act was just beginning to be implemented in 2013. Then,
    the HHS secretary released a report stating the goal of
    Affordable Healthcare Act is to increase competition and
    transparency in the markets for individuals and small group
    insurance leading to higher quality, more affordable products.
    Fast forward 4 years later, 2017, what we are seeing not only
    in Florida but across the country is a decrease in competition,
    an increase in premium costs. This increase cannot continue. It
    is not sustainable.
        We are here today to understand why the individual mandate,
    which today I think those fees that we are paying in over $3
    billion was a key component. The ACA is failing to stabilize
    the health insurance marketplace. This discussion is important
    not so that members on our side of the aisle or the other side
    of the aisle can score political points, but that, so we can
    focus on the facts. We need facts because there are real
    people's lives that are being impacted.
        When I talk to people in my district, it is clear to me
    that they are struggling. Although I mentioned some statewide
    and county-level statistics, those numbers touch the lives of
    real people in Florida in terms of Florida families. We cannot
    stand idly by as health insurance under the Affordable Care Act
    becomes less and less affordable for our constituents. I hope
    this hearing serves as the first step to fixing what is broken.
    I look forward to listening to our witnesses and learning from
    the past so that we can develop better solutions for the
    future.
        I now yield to the distinguished Ranking Member Mr. Lewis
    for the purpose of an opening statement.
        Mr. LEWIS. Again, Mr. Chairman, thank you. I want to thank
    you again and congratulate you on your new role as chairman of
    the Oversight Subcommittee.
        The two Democratic Members of the Subcommittee have now
    arrived. They didn't get lost in the tunnel. So they are here.
    Joe Crowley of New York and Danny Davis of Illinois.
        Mr. Chairman, I hope we can continue our tradition of
    strong oversight of the Administration as we have in past
    Congresses. I would also like to thank each witness for being
    here this afternoon.
        Let me begin by saying what I have said at countless other
    hearings. The Affordable Care Act works. It works. Now, I want
    to be crystal clear for the record. The topic of today's
    hearing is a Republican idea. In fact, Governor Romney called
    it the ultimate conservative idea because it was based in
    personal responsibility. The individual mandate became a core
    part of the health care law. There is not a family in this
    country that has not been touched by sickness or injury. By
    sickness or injury.
        I have said it before and I will say it again. I believe in
    my heart of hearts that health care is a basic human right. It
    is not a privilege for the wealthy. It should not be reserved
    for the people that insurance companies have decided worthy of
    the risk.
        This Committee has a mission, an obligation, and a mandate
    to think of those that have been left out and left behind. We
    cannot forget the 100 million Americans with preexisting
    conditions. We cannot forget the struggle of those people whose
    care costs more than the insurance limit. We cannot forget the
    seniors in the doughnut hole who were unable to afford their
    medicine.
        I know that we can come together to make health care more
    affordable, more accessible for every person in our great
    country. I speak for the members on this side of the aisle who
    are ready to do the good work, the people's work.
        We must be mindful not to harm the marketplaces where
    Americans buy insurance. We must protect children from being
    kicked off of their parents' plan. We must ensure that a woman
    is not charged more simply because she is a woman.
        Mr. Chairman, today we face a moral issue. In the coming
    weeks and months, we should come together to improve the law
    and not destroy it. At stake are not just the detail of policy
    but the fundamental principles of justice and the very
    character like our great Nation.
        Thank you, Mr. Chairman. And I yield back.
        Chairman BUCHANAN. Thank you, Mr. Lewis.
        Without objection, other Members' opening statements will
    be made part of the record.
        Today's witness panel includes three experts. First, John
    Graham is a senior fellow at the National Center for Policy
    Analysis. Tom Miller is a resident fellow at the American
    Enterprise Institute. And finally, Dr. John E. McDonough is a
    professor of practice at the Department of Health Policy and
    Management at Harvard TH Chan School of Public Health.
        The Subcommittee has received your written statements and
    they will be all made part of the formal hearing record. You
    will each have 5 minutes to deliver your oral remarks. We will
    begin with Mr. Graham. You may begin when you are ready.

      STATEMENT OF JOHN R. GRAHAM, SENIOR FELLOW AT THE NATIONAL
                       CENTER FOR POLICY ANALYSIS

        Mr. GRAHAM. Thank you, sir.
        Chairman Buchanan, Ranking Member Lewis, my name is John R.
    Graham of the National Center for Policy Analysis. I will take
    my short time today to emphasize some of the commentary I
    brought up in my written comments, which I have already
    submitted to you and which I drafted before President Trump
    issued his executive order, which I think makes the individual
    mandate of even more pressing concern.
        Will it be enforced by the next HHS secretary? If it is not
    enforced, will it cause ObamaCare to collapse? Or perhaps some
    of us might say collapse more or faster than we have seen it
    collapsing already.
        Politically, it is very easy to go after the individual
    mandate. It is the least popular part of ObamaCare. However, it
    counterbalances the most popular part of ObamaCare, the
    protection against being underwritten for preexisting
    conditions.
        I think my message today could be worry not. Although the
    individual mandate is also--is bad politics, I would also
    assert it is bad economics or at least weak economics. Now,
    this is a very different message than we have heard for many,
    many years. It is true that it can properly be characterized as
    a conservative idea. And the high water mark of that was what
    we call RomneyCare in the Massachusetts health reform. The idea
    which is meant to appeal to conservatives is that this is--
    demonstrates individual responsibility. We have a problem that
    hospitals' emergency rooms are jammed with patients who are not
    paying their bills, and so we have an uncompensated care
    crisis. Fair enough.
        Further, if people are encouraged to buy more insurance,
    they are more likely to get preventative and timely care and
    not have to go to the emergency room in the first place. Well,
    that would be fine. But the reality on the ground is it would
    only work if the mandate or the uninsured crisis was
    concentrated among high-income households. If it was folks like
    Bill Gates or Warren Buffett who were crowding the emergency
    rooms. I am sorry. I should update that given the current
    Administration. Peter Thiel or Sheldon Adelson were crowding
    the emergency rooms. But they are not. It is low-income people
    who are largely uninsured. They cannot bear to pay the fee or
    tax or penalty or whatever we want to call it for violating the
    mandate.
        So although it is appealing to conservatives to think that
    this imposes individual responsibility, in fact what its real
    effect is to give cover to significant growth in government
    spending and government programs, which is fine in some
    people's minds but not for conservative minds, I would suggest.
        Now, whatever we want to call it--the law, as you know,
    calls it a penalty. CMS healthcare.gov now calls it a fee. But
    whatever we want to call it, it is inefficient in a very
    mechanical sense. A recent memo from the Internal Revenue
    Service points out that 6-1/2 million people paid the fine in
    2015, but 12.7 million were exempted for various reasons.
    Again, emphasizing the point that most people whom you think
    you are affecting with a mandate cannot afford to pay it.
        How much was raised from the mandate? $3 billion. Now, to
    me that sounds like a lot of money. But as you know, in the
    health care system that is nothing. We spent $3.2 trillion on
    health care in this country in 2015. If we compare the
    Congressional Budget Office score to--about ObamaCare, the
    Affordable Care Act in 2010 versus the update in March 2016, it
    shows there is a slight reduction in anticipated revenue from
    the tax or penalty from the people who do not obey the mandate.
    But this is not because more people are getting private
    coverage and exercising their responsibility.
        In the original CBO score, the CBO estimated, this is back
    in 2010, that the Affordable Care Act would leave 22 million
    uninsured in 2016 through 2019. Recently, that has been upped
    to 27 million. Those with employer-based coverage, according to
    the original estimate, was 163 million. In the new estimate, it
    is down to 159 million. Sorry. Down to 152 million.
        In 2010, the Congressional Budget Office estimated
    ObamaCare exchanges would enroll 21 million people in 2016, and
    we know where that has gone, increasing to 24 million in 2019.
    It is down to an estimate of 20 million people in 2019 under
    the current law, according to the latest CBO estimate.
        Who is getting insured? It is Medicaid. And the Medicaid
    dependency, the estimates according to the CBO, have gone up by
    about one-third. So the coverage through ObamaCare is not
    through enforcing any kind of individual mandate. It is through
    more government dependency on Medicaid, which is costing us far
    more than we are getting from an individual mandate.
        Chairman BUCHANAN. Thank you.
        [The prepared statement of Mr. Graham follows:]

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        Chairman BUCHANAN. Mr. Miller, you are up next.

         STATEMENT OF THOMAS MILLER, RESIDENT FELLOW, AMERICAN
                          ENTERPRISE INSTITUTE

        Mr. MILLER. Thank you, Chairman Buchanan, Ranking Member
    Lewis, Members of the Subcommittee, for the opportunity to
    testify today to examine the effectiveness of the individual
    mandate under the Affordable Care Act.
        The shaky case for the individual mandate is based on
    mistaken premises, faulty economic analysis, shortsighted
    politics, and flawed health policy. Opponents have found the
    mandate to be administratively challenging, politically
    unsustainable, economically unnecessary, beyond the scope of a
    proper role of government, and constitutionally questionable.
        Most arguments in favor of the individual mandate usually
    present it as a necessary, though far less popular, means to
    more laudable ends. Well, they certainly got the last part
    right. The individual mandate touches exposed nerves and
    offends core principles in ways that other elements of the
    modern regulatory state do not. The individual mandate has
    consistently remained the most intensely unpopular provision of
    the new health care law since it first took shape.
        One of strongest driving forces behind officeholders
    resorting to the individual mandate is the desire to substitute
    off-budget mandated private funds in place of more visible
    taxes that they would otherwise find hard to impose to meet
    their insurance coverage goals and finance additional health
    care spending. But shifting costs less transparently is not the
    same as actually reducing them.
        The type of mandate that the U.S. political economy and
    health care system is likely to deliver in practice is very
    different and more complicated than what might be assumed under
    best case theories. Trying to force people to buy insurance
    they cannot afford or pay much more for such coverage than it
    actually appears worth to them remains politically and
    economically difficult.
        As a consequence, the individual mandate continues to face
    significant political limits on how large the mandate's
    penalties can be, how aggressively they can be enforced, and
    how much compliance the mandate will produce. Hence, the
    mandate's best future for continued survival involves operating
    much more as a gentle suggestion or nudge rather than a more
    polarizing command. Because the penalties for failing to comply
    with the mandate are rather modest in proportion to the
    average--likely average premium cost of required coverage,
    millions of individuals have calculated that it is much less
    expensive to pay the penalty than to purchase mandatory
    insurance.
        Projections for compliance versus penalty payment under the
    individual mandate by the Congressional Budget Office
    consistently have overestimated the degree of compliance. In
    practice, the Internal Revenue Service has reported noticeably
    higher numbers of individual mandate penalty payers despite
    lower amounts of actual revenue collected. CBO also has tended
    to be on the high side of claims that the Affordable Care Act
    would rapidly and substantially increase coverage in the new
    law's exchanges for individual coverage as well.
        Rather than reexamine the flawed foundations of its
    previous assumptions, CBO appears to have recently doubled down
    on them. The CBO estimates are flawed in overstating baseline
    assumptions for future growth in the ACA's version of
    individual market coverage, exaggerating the response rate of
    those subject to the mandate before and after its possible
    repeal, misestimating Medicaid coverage effects, and setting
    unrealistic parameters for future health policy changes. In
    fact, the most significant force behind the size and shape of
    insurance coverage gains has been large taxpayer subsidies
    primarily through the expanded Medicaid program.
        Enrollment rates for the ACA exchanges are highly sensitive
    to one's income and premium tax subsidy level. Enrollment by
    younger and healthier risks, which is supposed to be the
    primary target of the individual mandate, has failed to reach
    expected levels. There are a variety of alternative policy
    remedies that could be pursued if the individual mandate is
    either limited further or repealed. They include extension of
    HIPAA-like protection against health status risk rating to
    individuals in the nongroup market who maintain continuous
    qualified insurance coverage while switching between health
    plans. Or imposing penalties in the form of higher insurance
    premium surcharges when eligible individuals fail to obtain or
    maintain minimum qualified coverage during annual open
    enrollment periods. Or tightening eligibility verification
    further for special enrollment periods between annual open
    seasons in ACA exchanges. Or enabling default enrollment in
    minimum qualified coverage costing no more than the value of
    applicable Federal taxpayer subsidies for insurance. Or
    providing a different mix of taxpayer subsidies for obtaining
    and maintaining qualified insurance coverage in the individual
    market that are more generous to younger and healthier
    individuals who have declined coverage thus far. Or as a last
    resort for some and a first resort for others, actually
    enabling and incentivizing insurers to offer coverage that is
    less expensive and more attractive to potential uninsured
    customers.
        Thank you, Mr. Chairman. I look forward to your questions.
        Chairman BUCHANAN. Thank you, Mr. Miller.
        [The prepared statement of Mr. Miller follows:]

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        Chairman BUCHANAN. Dr. McDonough, it is your testimony.

        STATEMENT OF JOHN E. MCDONOUGH, DRPH, MPA, PROFESSOR OF
     PRACTICE, DEPARTMENT OF HEALTH POLICY AND MANAGEMENT, HARVARD
                    TH CHAN SCHOOL OF PUBLIC HEALTH

        Mr. MCDONOUGH. Thank you, Chairman Buchanan and Ranking
    Member Lewis and Members of the Committee.
        Chairman BUCHANAN. Turn your mike on.
        Mr. MCDONOUGH. Pardon me. Thank you.
        Thank you, Chairman Buchanan, Ranking Member Lewis, Members
    of the Committee. I am John McDonough from the Harvard Chan
    School of Public Health. I would just note from my bio in my
    statement that I, between 2008 and 2010, was a staff person for
    the Senate Committee on Health, Education, Labor, and Pensions,
    and worked on the writing and passage of the Affordable Care
    Act. So I am a former Senate staff person in recovery. And I
    think most of you will understand that that is unfortunately a
    terminal, lifelong preexisting condition that I just can't
    shake as much as I might try.
        So thank you for the honor of speaking before you. I have a
    written statement, and I will just highlight my six main points
    in it and then engage in conversation on whatever matters you
    find of value talking with me about.
        First, the individual mandate, so-called the individual
    responsibility requirement of the ACA, is a core mechanism to
    ensure a healthy risk pool and more stable premiums in a
    guaranteed issue market that bans the practice of medical
    underwriting and preexisting condition exclusions in the
    individual health insurance market. It is core and it is
    recognized, and is not the only way to address it, but it is an
    essential component of the law. What we in Massachusetts where
    I was involved in the passage of the Massachusetts health
    reform law refer to as the three-legged stool.
        Secondly, to eliminate the mandate and to leave in place
    guaranteed issue is a sure and proven formula for major
    disruption in the individual health insurance market
    nationally. And that is a concern that I think is neither
    speculative nor hypothetical. We have seen it played out in a
    number of States over the past 25 years.
        Thirdly, I would mention, as Dr. Graham has also mentioned,
    that between the late 1980s and the latter part of the last
    decade, the individual mandate was largely a policy idea that
    was championed by conservatives, starting with Professor Mark
    Pauly and Stuart Butler in the late 1980s. And only in the
    latter part of the last decade was it embraced and accepted by
    Democrats. Its roots are entirely based on the notion of
    individual responsibility and shared responsibility as Governor
    Mitt Romney stated repeatedly during the Massachusetts health
    reform experience.
        Fourthly, there are other ways to get at the intent and
    purpose of the individual mandate. It is not that mechanism or
    anything else. One mechanism is in late enrollment penalties.
    Another mechanism is referenced in Speaker Ryan's Better Way
    plan in terms of continuous coverage requirements. I would
    caution that I think that if you compare the individual mandate
    and continuous coverage requirements, I would regard the
    continuous coverage requirements as far more onerous and
    punitive in terms of consumers and would urge caution before
    you go too far down that path.
        Fifthly, I find no empirical evidence that suggests that
    the individual mandate has anything to do with the stresses
    that have been experienced in the State and Federal health
    insurance exchanges over the 2007 enrollment and now carrying-
    out period. There are other causes that I think more
    effectively explain those problems that are going on in those
    markets and be happy to talk with you about those.
        And finally, I would only suggest that the suggestion that
    the size of the individual mandate penalty should be increased
    to enhance the uptake of individual health insurance is a
    mistaken notion. I think far more at the core in terms of
    enhancing enrollment would be to address the lack of adequate
    affordability in the health insurance exchanges right now,
    particularly for consumers between 250 and 400 percent of the
    Federal poverty level.
        Those are my main points, and I look forward to further
    conversation. Thank you.
        Chairman BUCHANAN. Thank you, Doctor.
        [The prepared statement of Dr. John E McDonough, DrPH, MPA
    follows:]

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        Chairman BUCHANAN. I want to thank all of you. It is
    excellent testimony. We now proceed to questions and answer
    session. For the purposes of today's hearing, I will hold my
    question until the end.
        I will now recognize the gentleman from Pennsylvania, Mr.
    Meehan.
        Mr. MEEHAN. Thank you, Mr. Chairman and the Ranking Member.
    And I am going to look forward to working with both of you and
    the full Committee on this important agenda before us. And
    there couldn't be a more appropriate place to start than with
    this particular issue.
        One of the concerns that I hear back in my district
    frequently is the frustration of everyday Americans with
    Federal Government mandates telling people this is the way you
    are going to live your lives. It would be bad enough if that
    was all that there was to it. But the fact of the matter is we
    are talking about something which, notwithstanding the opening
    statement of my good friend the Ranking Member, the ACA does
    not work. And I was pleased to see Mr. Miller talk about the
    concept of exposed nerves from the Federal mandates that are
    happening. And we hear words about mandate, coercion. Those are
    the kinds of things that I think are affecting people.
        And then you look at the facts. We have had this program.
    Premiums have been rising by double digits for the very people
    that Mr. McDonough talked about in the hardest places to be
    able to pay. One-third of the counties now have only a single
    insurer. The exchanges are consisting largely now of older and
    less healthy people.
        And I look at my own district in Pennsylvania. And we have
    taken the time to ask people to weigh in. Premiums for
    ObamaCare plans of Pennsylvania are up 33 percent in 2017. Each
    year there is fewer to choose from. In 2016, there were 13
    plans. Next year, there will be eight. Now listen to the
    individuals in their own words. Mike from Boyertown shared with
    me his concern, the cost of our health care insurance. ``We
    have coverage from healthcare.gov and our rates are increasing
    from $1,600 to $2,600 a month.'' These are working class
    people. ``Only six plans are available, and the lowest cost one
    is still over $2,000 per month just for my wife and I.'' Fred
    from Lansdale wrote, ``I received my annual health insurance
    rate increase for 2017 yesterday. My rates went up from $2,500
    to over $3,750 per month. Per month. Last year's increase was
    devastating. This year's increase is even more overwhelming. I
    am self-employed. I only had a few short years ago. This news
    is devastating to my family.''
        People are voting with their feet in this. The CBO just
    came out and released its most recent, just this week. Expects
    a sharply lower number of participants in the Affordable Care
    Act for exchanges in 2017. CBO said the number of participants
    in the exchange was expected to be 10 million in 2017. So
    clearly, we have been sold a bill of goods. It isn't working.
        Mr. Miller, what conclusions can you draw from this kind of
    revised estimate?
        Mr. MILLER. Well, it is not working according to plan is
    the short answer. To connect this up with the subject of
    today's hearing, one of this--this reflects, in effect, an
    overinvestment in a set of policies that did not come together
    and work as promised. And part of what you are seeing in the
    higher premiums and the restricted availability of plans, the
    losses in plans, is everybody was supposedly saying it is all
    going to work like clockwork. Everybody is going to go into the
    exchanges. That is what CBO projected. They weren't talking to
    the people on the ground. And so we have got a different
    experience in practice than the one that was proposed to us in
    theory.
        Now, we can keep trying to implement that theory saying
    sooner later it will work out. That seems to be what CBO is
    mostly projecting. On the other hand, we can try to say we need
    to take this into the shop and change the mix around. And we
    need to get back to having health care coverage that actually
    matches what people are willing to pay for and can pay for.
        Mr. MEEHAN. I am so glad you said that about taking it into
    the shop. Because here is the big misnomer in this whole
    discussion. This idea that somehow there is this Republican
    effort to just drop the thing and leave everybody on the
    street, instead of the real genuine effort which is to take
    something that isn't working and try to get it to work better.
        We only get 40 percent of the people who are eligible for
    these exchanges into it. And yet we need about 72 percent to
    make them work. So how do we incent that other 30 percent to
    get in? Is it by mandates or is it by working on the kinds of
    things which are being put in place to lower the cost, to make
    better availability, to make their--allow the programs to be
    the kinds of things in which they have a choice to find the
    insurance that fits them? Isn't that the better way to get that
    remaining 30 percent so we can get the kind of exchanges that
    can actually work?
        Mr. MILLER. We have tried the weak punitive approach or we
    know what is best. We might want to try some positive
    incentives to find out what in fact--where the market is.
        Mr. MEEHAN. Mr. Chairman, thank you. I yield back.
        Chairman BUCHANAN. I now want to recognize the
    distinguished Ranking Member, Mr. Lewis, for any question he
    might have.
        Mr. LEWIS. Thank you very much, Mr. Chairman.
        Dr. McDonough, one of the things I am most proud of in
    today's law is that because of the ACA, Americans with
    preexisting conditions are able to get insurance. Can you
    discuss why the individual mandate is so necessary?
        Mr. MCDONOUGH. So thank you for the question,
    Representative. The concept of guaranteed issue, which means
    that insurers must issue coverage to applicants regardless of
    their prior medical history, regardless of their current
    medical status, is one of the most popular features of the
    Affordable Care Act. It is a policy that was implemented in
    various States starting in the 1990s. About eight States in
    particular. Five States implemented it. All eight States
    implemented it without an individual mandate. And all States,
    when they did it, saw significant substantial disruption in
    their individual health insurance market because people were
    going in and purchasing coverage when they felt they need it
    and then dropping out of the market when they got whatever
    services they needed.
        And so it was a damaging risk pool that created what some
    refer to as an insurance death spiral where premiums go up, and
    as premiums go up, more people drop out. We saw that in
    Massachusetts, New York, New Jersey, Vermont, and other States.
    Kentucky, New Hampshire. Some States did guaranteed issue
    without a mandate. And when they saw the impact, they withdrew
    and they stopped guaranteed issue. Other States, like
    Massachusetts and New York, did it and had damaging impacts in
    the market and kept the policy in place.
        But guaranteed issue is one of the most popular features of
    the law. Americans don't like the idea that to get coverage you
    can only get it if you don't have any adverse medical history
    that would disqualify you from coverage. And they don't like
    the individual mandate. And they usually don't understand that
    there is a link between the two of them. And that guaranteed
    issue can't function effectively in an environment without some
    kind of coverage responsibility, some kind of shared
    responsibility on the part of individuals. So that is where it
    comes from, and so--the linking together.
        And so Massachusetts, in 2006, in its Health Insurance
    Reform Law, for the first time put together and actually
    implemented an individual mandate and guaranteed issue
    together. We saw a dramatic drop in our rate of uninsurance. We
    saw a stabilization, a stabilization of premiums in the
    individual market. And it was a strikingly successful
    experiment in terms of the intended influence on the individual
    health insurance marketplace. So we saw it at work.
        And it was then the design feature that people thought made
    sense in terms of coming up with the national reform that is
    the Affordable Care Act. So that's where it came from and that
    is why it is in there. It is an essential piece. So Americans
    love guaranteed issue and don't want to lose that. But
    guaranteed issue without some kind of coverage requirement
    creates a serious market disruption which people would not want
    to see.
        Mr. LEWIS. Thank you very much, Doctor. Would you talk
    about the best ways to get people enrolled in insurance and
    engaged in their health care? Is it better to increase
    financial assistance or to follow the Republican suggestion
    such as the Better Way health proposal?
        Mr. MCDONOUGH. So the concern that I have with the Better
    Way health proposal and with some of the other plans that are
    forward is that, you know, the United States in January 1,
    2014, banished medical underwriting from our health insurance
    market for the first time in our history. And overwhelmingly
    Americans like that reform. Don't want to go back. And that
    seems to be fairly bipartisan.
        The concern that I see in terms of the suggestion to have
    guaranteed issue but only for people who can maintain
    continuous coverage is that there will literally be, in a very
    short period of time, tens of millions of Americans who will
    then fall back into the circle of people who will be newly
    subject to medical underwriting and have their insurance-
    ability, their ability to buy insurance, rated based upon their
    medical history. I think that would be a terribly unfortunate
    step backward that Americans would not appreciate and have
    rejected that approach.
        Mr. LEWIS. And thank you very much, Doctor.
        I yield back.
        Chairman BUCHANAN. I now recognize Mr. Smith from Missouri.
        Mr. SMITH. Thank you, Mr. Chairman.
        Back in December, I held health care roundtables throughout
    our congressional district in southeast and south central
    Missouri to just hear from farmers, small business owners,
    families of the experiences that they have had under ObamaCare.
    And the message was very consistent. Forcing citizens to buy a
    product they simply didn't want or suffer a tax penalty is un-
    American, especially when in many cases that product is too
    expensive and not adequate.
        As the gentleman from Pennsylvania mentioned briefly of the
    exchanges in his State going from 13 to 8 I think were the
    numbers, out of the 30 counties in the Eighth Congressional
    District of Missouri, individuals who are forced under the
    individual mandate, you know what their options are? Out of 30
    counties, 26 of those 30 counties has one choice. Looks like
    adequate options. Absolutely not. Take the case of Doug from
    southeast Missouri. He is a 61-year-old divorced cabinetmaker
    who helps his 20-year-old daughter and ex-wife pay for their
    health insurance. Doug started a small business just over 3
    years ago. He wrote me. This is what he wrote: ``My business is
    beginning to be profitable. However, with startup costs and
    normal business costs, cash flow, et cetera, there is nothing
    left of the budget for my personal health insurance. I have
    been without coverage for 2-1/2 years. I make too much to
    qualify for subsidies, not that I would take advantage anyway,
    and do not make enough to pay the premiums after paying for
    everyone else. The ACA penalty adds injury to insult. Insult
    because the whole mandated mess is unconstitutional. And injury
    because I usually have to take out yet another business loan to
    pay my income taxes after the ACA penalty.''
        I checked prices for insurance for a 61-year-old man in his
    county of Missouri, and it is somewhere in the neighborhood of
    $900 a month. That is more than the typical rent payment in
    southeast Missouri and would likely represent one of the
    largest expenses he would be paying. So who is the policy
    really helping, I ask? It is definitely not the lower and
    middle class in southeast Missouri. The mandate targets
    individuals, but it also hurts the health care facilities and
    hospitals who help serve them.
        During one of our roundtables, the Chief Executive Officer
    of one of the federally qualified health centers testified that
    in their area, 37.3 percent of the population they serve are
    uninsured. But yet everyone is required to have health
    insurance under the individual mandate.
        The mandate was designed to address uncompensated care, but
    it didn't. Here is the bottom line. ObamaCare's individual
    mandate has failed. Special enrollment periods and exemptions
    by the Obama Administration created an environment that goes
    completely against the idea of a mandate that created an unfair
    burden on facilities in my district that offer care to low-
    income individuals.
        My question is to Mr. Miller. Your testimony highlighted
    weak enforcement and weak compliance as challenges with the
    individual mandate. Can you explain in more detail how the
    individual mandate harms the low- and middle-income people it
    was supposedly designed to help?
        Mr. MILLER. Well, I am trying to go backwards from where
    you are talking about. Part of it is because it didn't deliver
    what it said it was going to do. In terms of the coverage
    effects you saw, where those people went was primarily into
    Medicaid to the extent they were lower income. That is what
    they ended up choosing rather than the exchange-based coverage.
    And that is where they have ended up. However, insurers along
    the way have incurred some substantial losses within these
    exchange markets because their original business plans assumed
    a different set of enrollment and a different level of
    compliance with a mandate which was never enforced in that
    manner. So that the mismatch has created, in effect, a
    compression of plans and the rising premiums. There are other
    distinctions along the way.
        Some of the statements that have been made about the scope
    of uncompensated care costs, if you look at the vast historical
    record, vastly exaggerated. Now, this law has a lot of moving
    parts. We took away some of the funding for that uncompensated
    care as--on the assumption it was going to be made up for by
    the increased enrollment. That didn't match up. We have had
    behavioral changes which indicate that people who are nominally
    insured are still going to emergency rooms anyway.
        So it is hard to isolate the mandate alone along this
    broader mosaic of basically a floundering law which has many
    different theories behind it that don't work out in practice.
        Mr. SMITH. Thank you, Mr. Chairman.
        Chairman BUCHANAN. I now recognize the gentleman from New
    York, Mr. Crowley.
        Mr. CROWLEY. Thank you, Mr. Chairman. Thanks very much. I
    appreciate this hearing today.
        If I can, I just want to--my good friend, I mean this with
    all sincerity, from Pennsylvania. I think the world of Pat
    Meehan and he knows it. He made the reference at the end of his
    comments where this notion or idea come from that Republicans
    want to repeal without replacing. And I would just note for the
    record that we have had 65 attempts to repeal the Affordable
    Care Act, or ObamaCare, over the last 6 or so years without
    ever once offering a replacement. Maybe that is where we might
    get the idea that you simply want--you all simply want to
    repeal the bill without replacing it. That is just an
    observation.
        Mr. McDonough, my home State of New York provides a
    valuable example of how the requirement to buy insurance is a
    critically important aspect of the ACA to provide stability in
    the individual insurance market. Before the ACA, New York's
    individual market did not include an individual mandate. So the
    market did not have enough healthy individuals. As a result,
    monthly individual premiums reached over $1,500 and less than
    20,000 people had enrolled.
        Now as a result of the Affordable Care Act, premiums for
    individuals are 50 percent lower than they would have been
    without the ACA. The number of New Yorkers in the individual
    market has grown by 270 percent. And plan participation in
    more--is more robust. Sixteen insurers offer coverage in the
    individual market and 21 serve the small group market.
        Mr. McDonough, would you say that New York's experience
    with the mandate illustrates just why it is so critical and the
    dangers that could happen if it is repealed or undermined?
        Mr. MCDONOUGH. So thank you, Representative, for that
    question. I think it is important to recognize that the issues
    with the Federal and State health insurance exchanges from New
    York, from Pennsylvania, from Missouri, from all of the
    different States vary. So there are some States that are going
    through very significant disruption and very critically high
    rises in premiums. There are other States like, for example,
    New York and California, that are doing very well actually in
    terms of a moderate rate of growth.
        There is the striking example that we have of the State of
    Alaska. Alaska last spring had projections that the premiums in
    their individual market were going to go up by over 40 percent.
    In the summer, the Alaska legislature with their governor
    agreed to create a reinsurance pool within the State individual
    health insurance market just in Alaska. When they did that,
    that single act, they brought their projected premium increases
    from 40 percent down to 7 percent.
        So part of the difference, and it is not exclusively this,
    but it is very much a factor, part of the difference is that
    States that have aggressively grabbed and worked to take a
    leadership role in helping this new health insurance market to
    work and succeed have seen strikingly better results in terms
    of premium growth and in terms of plan participation than
    States that have, for their own legitimate reasons, been very
    hostile to the implementation and have had not only nothing
    that they wanted to do to help it, but actually worked
    consciously and proactively to try to undermine the
    implementation of the law.
        So there is a real difference there. And I think it is
    worth understanding that you can make differences happen here.
    States need to be part of the solution. And the States that
    have done that have made a real difference. Sorry for too much
    time in that answer.
        Mr. CROWLEY. That is all right.
        Mr. Chairman, I have a letter from the Department of
    Financial Services in New York State which oversees the
    insurance industry in the State. I would just ask that we
    include that for the record to the Committee.
        Chairman BUCHANAN. Yeah, that is fine.
        Mr. CROWLEY. I just wanted to say, listen, this is
    incredibly complicated, all the parts that go into making the
    Affordable Care Act work itself. We talked about, you know, the
    mandates. We haven't talked about other aspects that have--in
    the whole, that make it actually work or in theory work. So,
    listen, I understand the frustration. We have been frustrated
    for the last 6 years. We haven't found any partners to actually
    improve the Act as opposed to just repealing it.
        I think my colleagues on the other side of the aisle
    realize now, as does the new President, how difficult it is to
    take away the sweets. It is the vegetables, I think, my
    colleagues have had a difficult time swallowing in order to get
    to the sweets first. But I think they are learning that. And I
    yield back.
        Chairman BUCHANAN. I now recognize the gentleman from
    Arizona, Mr. Schweikert.
        Mr. SCHWEIKERT. Thank you, Mr. Chairman. And those of us
    with a sweet tooth, we will work on that. And, Mr. Chairman and
    fellow Members and obviously the panel, being from Arizona,
    when you use the term ``disruption,'' we're one of the
    epicenters of it. You know, if it wasn't for almost a
    charitable gift by I think our Blue Cross Blue Shield going
    into a couple counties, I would have had counties--remember, my
    State has only 15 counties. So our counties are huge. They
    would have had no offering.
        So could I beg of you, and this is going to be a little
    different, but this is something staff and I have been trying
    to hunt for years. Could we do a little math together? I need
    some help on something. What I am hunting for is--and we have
    even had researchers from Kaiser and other people try to help
    us. And the Administration has been willfully difficult, and
    maybe it is because the way the data sets are collected. Maybe
    it is obfuscation. Maybe it is perfectly innocent.
        If I go back at the end of fiscal year 2016, we
    functionally have had what? Three years out there where there
    was product offered. How many of our brothers and sisters
    gained coverage that either did not have coverage before or who
    were not Medicaid eligible? And when I say did not have
    coverage before, truly had gone long term. Not where they had 3
    days between jobs and we called them uncovered. But how many--I
    mean, what is the real number? How many folks now have coverage
    by the end of fiscal year 2016 that did not have any either
    access to coverage or weren't Medicaid eligible? And can anyone
    give me an honest number? This is an open--I mean, this is a
    fly ball for whoever can pitch it back.
        Mr. MILLER. I don't usually like to do this in a hearing. I
    may have to quote Jon Gruber. And I only do that every couple
    of years. Because even a stopped clock may be right a couple of
    times a day.
        Based on those recent calculations, approximately 60
    percent of the coverage gains came from Medicaid. There is a
    little bit of a dispute as to how much of that is expansion
    Medicaid and how much of that is old Medicaid.
        Mr. SCHWEIKERT. Look, we have 2 minutes and 30 seconds to
    play here. So, okay, let's say it is 60 percent of the
    population gained it through Medicaid. Then of the remaining
    40, I have seen some numbers out there that say a substantial
    portion of that had either access to or had coverage at some
    time before. And my----
        Mr. MILLER. Some of that is old Medicaid. There is a
    provision where if you go into the hospital, you can get signed
    up for Medicaid. That is under old Medicaid as well as new
    Medicaid. There were States who were already expanding before
    2014. It makes that old Medicaid.
        Mr. SCHWEIKERT. So is it----
        Mr. MILLER. Some of it came from the individual exchanges,
    though. That is a fact.
        Mr. SCHWEIKERT. Okay. So who----
        Mr. MILLER. But probably about only about half of the
    exchange coverage more or less are actually net uninsured
    getting coverage. Some of them were people who got pushed out
    of the other part of the individual market.
        Mr. SCHWEIKERT. And, look, I understand this is a little
    difficult and there is a lot of moving parts here. As someone
    just said, it is complicated. So are we now down to 7 million?
        Mr. MILLER. We could be down to 6 or 7 million. And, again,
    these are fuzzy numbers because we pretend that our data is
    excellent and you can raise four or five different surveys and
    get different numbers and make different assumptions.
        Mr. SCHWEIKERT. In the next minute and 30 seconds, let's
    pretend we are accountants. Okay. So over the beginning of this
    law till the end of 2016, how much has been spent? And when I
    say ``spent,'' I mean by the Federal Government, the State
    government, individual premiums, losses from insurance
    companies, others. What is my total dollar amount? Because I
    have seen numbers at, you know, $500 billion. I mean, I have
    seen some really interesting numbers that if you do a true all-
    in math, and I am--you see where I am going. For 3 years of
    coverage, my all-in cost to help 7 million, I could almost do
    that in the top of my head. Someone is going to correct me
    later. $68,000 per life? I mean, I am buying their health
    coverage, and I could have probably bought them a really nice
    car.
        So something's wrong. And just if we take a step backwards,
    whether it be the individual mandate or just the basic math of
    if we all agreed we want to help our brothers and sisters out
    there, our total dollars per total life coverage, something is
    horribly wrong in what we are doing. Am I being unfair?
        Mr. MCDONOUGH. I would just respond, Mr. Schweikert, by
    saying that I think that 6 million is a significant
    understatement. And I don't want to put out a number that I
    can't defend.
        Mr. SCHWEIKERT. Okay. I would be elated if you could do me
    one of the grandest favors of all. Because we really--and my
    staff is back there laughing at me. I have spent a couple years
    of my life looking for this number, and talking to really smart
    people like yourself. Help me find real math. Because I come
    from a world of the math is the math is the math. But right now
    I am looking at numbers where I could have bought their
    coverage and bought them a nice car. Something's horribly wrong
    in what we're doing.
        Thank you. And I yield back, Mr. Chairman.
        Mr. MCDONOUGH. Happy to do that, sir.
        Chairman BUCHANAN. I now recognize the gentlewoman from
    Indiana, Mrs. Walorski.
        Mrs. WALORSKI. Thank you, Mr. Chairman.
        President Obama promised over and over again, if you like
    your doctor, you can keep your doctor. If you like your health
    plan, you can keep your health plan. And despite these repeated
    pledges, we know now that these statements were completely
    untrue. In fact, in the fall of 2013, millions of Americans
    started receiving plan cancellation notices. PolitiFact ranked
    President Obama's statement as its lie of the year in 2013. But
    it wasn't just the immediate loss of plans. People are still
    losing them. For example, in Indiana last year, four insurers
    left the exchange, leaving Hoosiers with fewer options. That is
    50 percent loss of our own plans. Recently, I heard from a
    constituent of mine from Starke County in Indiana. He has had
    two open heart surgeries at Mayo Clinic that requires him to be
    on blood thinning and other medications, as well as periodic
    checkups. He had a private health insurance plan that he liked.
    Covered his medical needs. But in 2015, it was knocked out by
    ObamaCare. He was forced to buy a health care policy on the
    marketplace, but unfortunately discovered at an annual checkup
    at Mayo Clinic that his doctors were not in the network. And
    because of that and because they were out of State, they were
    out. He was forced to pay thousands of dollars out of pocket
    for the visit, in addition to thousands more out of pocket for
    the prescriptions. When he appealed to the Indiana Department
    of Insurance, he was told there was no marketplace insurance
    plan that would cover his doctors at Mayo Clinic as a Hoosier
    living in the State of Indiana.
        He recently learned that his marketplace plan through
    UnitedHealthcare won't offer individual market plans for his
    area in 2017. He was forced back into the marketplace again to
    find a new health care plan that still will not cover his out-
    of-state doctors. It reinforces to me that for many Americans,
    this law is not working as promised.
        And Mr. Miller and Mr. Graham, I wanted to direct this to
    you. Isn't it true that the individual mandate was supposed to
    increase competition on the exchanges by ensuring that people
    sign up, thereby encouraging insurance carriers to offer more
    choices and broaden those networks?
        Mr. GRAHAM. That was the stated objective. And as you have
    described it, it has not been the case. So I agree, I guess,
    would be my answer.
        Mrs. WALORSKI. Mr. Miller.
        Mr. MILLER. As I like to say, it seemed like a good idea at
    the time. Although, unlike Mr. McDonough's testimony, it has
    been a bad idea for many of us for a long period of time on the
    conservative Republican side of the aisle, just to rewrite
    history a little bit, going back to the 1990s.
        What was proposed wasn't executed. And it wasn't going to
    work that way because of the grand design, in theory, did not
    reflect the reality on the ground. Some people gained under
    this arrangement. There is no question about that. If you were
    a low-income person suddenly getting substantial subsidies for
    coverage, you might not be crazy about that coverage, but you
    will say you came out ahead. There are other people in that
    market, though, who had something that they were comfortable
    with or at least were ready to settle for. They were told that
    is not good enough. These are the folks who got moved out of
    other parts of the individual market and ended up with less
    effective choices and ones they didn't want. And that is what
    you are mostly hearing from among your constituents.
        Mr. GRAHAM. And that is not going to turn around on its
    own. I think President Obama's Council of Economic Advisers
    just before they left asserted that the insurers have now got
    it figured out, everything is under control. The first 3 years
    you had the training wheels on board and--but now we are good
    to go. That doesn't make any sense. You know, the last year,
    from 2016 to 2017, you had by far the worst premium increase,
    25 percent nationwide average. It is not getting better, it is
    getting worse. It is like the insurers are having more and more
    trouble every year they stay in the exchange.
        Mrs. WALORSKI. Well, I guess my follow-up is, when
    insurance networks have become so narrow that individuals like
    my constituent, and there is many of those in Indiana, I just
    talked about one. When they lose access to their doctors, what
    does that say about the individual mandate's effectiveness to
    begin with?
        Mr. GRAHAM. I think it says you are on the route to
    Medicaid for everybody where there is very poor access to care
    in many cases. So folks like--I know some of the Members have
    given testimony from their constituents. The whole structure is
    so terrible. You know, you earn an income that is--you are not
    Medicaid eligible so you can't even get the poor access to care
    that Medicaid offers. You might get some tax credit in the
    ObamaCare. Maybe you make too much money for that. Hard work to
    figure all that out, you know. And then the IRS comes after you
    next year and says you owe money back. So the complexity is far
    too complex. And I think when you go from one insurer to no
    insurer, as in Arizona, you were very lucky. I mean, what is a
    market where there is no insurance offered? It is not a market.
        Mrs. WALORSKI. Right. I appreciate it.
        Mr. Chairman, I yield back.
        Chairman BUCHANAN. I now recognize the gentleman from
    Illinois, Mr. Davis.
        Mr. DAVIS. Thank you very much, Mr. Chairman. And I want to
    thank all of our witnesses who are being very helpful as we
    deal with one of the most complex issues and problems that I
    think we face today as it relates to health care.
        I represent the State of Illinois in the seventh district,
    which contains more hospital beds than any other congressional
    district in the country. The Affordable Care Act, which also
    has been beneficial to the four major medical center
    operations, medical schools that we are all so fortunate to
    have, the Affordable Care Act has greatly improved access to
    care for tens of millions of Americans. Enrollees now have
    access to medical homes, in general no longer have to rely
    solely on hospital emergency rooms, and have the comfortability
    of knowing that when they need care, it is available there for
    them.
        Today, more than 1 million Illinoians have health insurance
    coverage as a result of ACA, either due to the law's Medicaid
    expansion or its health insurance marketplace, and the majority
    of whom were uninsured prior to September 2013 when the ACA's
    coverage expansions were first implemented. Because of ACA the
    Nation's insurance uninsured population has dropped
    dramatically to less than 11 percent currently from nearly 17
    percent in 2013.
        If Congress repeals health insurance coverage, Illinois
    would sustain a potential loss of $11.6 billion, $13.1 billion
    in annual economic activity, and about 95,000 jobs lost.
    Ultimately, any attempt to repeal the ACA should be accompanied
    with an appropriate and responsible replacement plan that, at a
    minimum, ensures access to coverage for the more than 20
    million U.S. residents who now have coverage as a result of the
    law.
        If Congress does not make repeal of coverage contingent on
    adoption of an ACA replacement plan, then lawmakers should also
    correspondingly repeal the significant hospital payment cuts
    that help pay for ACA's coverage expansions. This is important
    for Illinois's hospitals and health systems which, to date,
    have had to absorb the more than $1 billion in Medicare
    reimbursement cuts to pay for the cost of the law's coverage
    expansion. For example, Northwestern Medical has seven
    hospitals alone, including Northwestern Memorial Hospital. They
    have absorbed more than $273 million in Medicare cuts since
    2011.
        Mr. McDonough, can you see institutions sustaining those
    kind of cuts and expenditures and continue to provide the level
    of care and service that they currently provide?
        Mr. MCDONOUGH. Thank you, Mr. Davis. And no, I don't see
    that. I think there is a real difference across the country
    right now in terms of the financial health of hospitals,
    frankly between States that have expanded Medicaid under the
    ACA and States that have not. The States that have expanded
    along with the robust expansions through the marketplace have
    seen much greater financial health. And in States that have not
    expanded, there has been a far higher rate of hospital closure
    and of serious financial dilemma facing hospitals and other
    medical providers in those States. So it is a real difference
    and an indicator of what may come were there to be total
    repeal. Sorry.
        Mr. DAVIS. Thank you.
        Thank you, Mr. Chairman.
        Chairman BUCHANAN. I now recognize the gentleman from
    Florida, Mr. Curbelo.
        Mr. CURBELO. Mr. Chairman, thank you very much for holding
    this hearing. It will be my honor to serve under you in this
    Congress and with my colleagues here, especially Ranking Member
    Mr. Lewis, who I was proud to welcome to my community recently
    to celebrate Dr. Martin Luther King Day. And I also want to
    thank the witnesses for their testimony today.
        Dr. McDonough, we share someone in common, Dr. Julio Frenk
    was the dean at your school. He has since moved up in the
    world, transferring to the University of Miami where he serves
    as president, which happens to be my alma mater.
        Mr. Chairman, although enrollment in the ACA is relatively
    high in Florida, particularly in the Miami-Dade metropolitan
    area, choices continue to decrease and premiums continue to
    rise. This year, the counties in my district have lost
    insurance carriers. Monroe County lost one carrier and Miami-
    Dade lost two carriers participating on the exchange. I have
    heard people in my district about how the current system has
    reduced their choices and increased their out-of-pocket costs.
        Emily, my constituent, explained that she is paying over
    $700 per month for a plan with a deductible that is over
    $6,000. But still she has been unable to find a doctor in her
    area who will accept her insurance. Even though she has
    insurance, her options are severely limited and premiums
    continue to increase.
        Mr. Miller, I have a question for you. These examples that
    you have heard here today, and I think it is important that we
    raise them because statistics are fundamental to understanding
    what is happening in the world, but these real life human
    examples matter also. Do you believe that these examples are
    isolated, unique to our districts or are these the types of
    things that are happening all over the country?
        Mr. MILLER. Well, there is a battle of warring anecdotes
    and everybody has to have their respective horror story, and
    you can get them on both sides. In the aggregate, though, we
    know that this is not working out in reaching its residual
    level. I comment somewhat in light of some of the discussions
    here that I am surprised that this embrace by folks who are
    more favorable to the Affordable Care Act of what you might
    think of as trickle-down economics. Let's first take care of
    the hospitals, let's first take care of the insurers, and maybe
    some people on the ground might eventually get some benefit
    from this.
        This was a very interesting academic study of the Medicare
    expansion population, one showing that it had grown quite
    larger in terms of the cost per capita for the new adult, newly
    eligible able-bodied adults, but it hasn't necessarily
    delivered any more services. There is another study that
    indicated the Medicaid beneficiaries actually valued the
    coverage they received at about 20 to 40 cents on the dollar.
    So we are pumping more money into the system, but it isn't
    necessarily getting down to the ground level where it is
    actually improving people's care. And that is because the
    system is designed not for the beneficiaries at the end of it
    to be calling the shots, but somewhere along the line we
    determined what is good for them and what they should receive.
    And it works for other people in the system; doesn't
    necessarily deliver that value at the bottom line for the
    consumers we supposedly care about.
        Mr. CURBELO. So, Mr. Miller, are you suggesting that
    perhaps major health care special interests such as hospital
    chains, insurance companies and pharmaceuticals were too
    influential in the drafting of the last health care reform
    legislation?
        Mr. MILLER. The previous Administration had to cut a deal
    and in some cases they had to give as well as take. And part of
    that deal was to make sure that they had placated those
    interests first in order to get the legislation passed.
        Mr. CURBELO. Mr. Graham, with regards to the individual
    mandate, some suggest, well, this is, as we have kind of
    concluded here, not working very well, perhaps the solution is
    to raise the penalty and coerce more people into signing up for
    health insurance. I don't think that would be a very popular
    measure, and I assume most Members of this Committee and in
    this House would probably not be predisposed to supporting that
    kind of measure. What are some alternatives?
        Mr. GRAHAM. I think Mr. Miller proposed some good
    alternatives. I think Professor McDonough's criticisms of those
    alternatives is also valid. There is a certain population, if
    you are just going to say you have got to maintain continuous
    coverage, you have got to--or pay a fine or whatever, there is
    some level of population that will not pay that. This is just a
    reality.
        You know, when you lose your job, your mortgage payment or
    your rent comes first and you are going to drop your health
    insurance premiums. So there will always be some population
    that has to--you know, I hate to say it--be taken care of, but
    the social safety net. And I know on your side of the aisle you
    have talked about high risk pools, things like that.
        I would just like to point out that, you know,
    Massachusetts had a reform that had some good things, some bad
    some things, the gentleman from New York who has left, every
    State had all these tools at their disposal. So what I would
    like to say is if we don't know the perfect answer, the magic
    bullet, let's let 50 States try and figure it out and learn
    from them.
        Mr. CURBELO. Thank you. I yield back.
        Chairman BUCHANAN. I now recognize the gentleman from North
    Carolina, Mr. Holding.
        Mr. HOLDING. Thank you, Mr. Chairman.
        I am going to pick up where my colleague, Mr. Meehan, left
    off. He listed some good testimony regarding the mandate not
    panning out, producing the numbers. We have got a slide, if we
    could put up there, of ACA exchange enrollment expectations
    versus reality. There. And you have done a good job of talking
    about some of the problems with the mandate. But it is clear
    that the economic modeling that the Obama Administration was
    using, they overestimated the strength of the mandate.
        So perhaps, Mr. Miller, you could pick up here. Why would
    the models overestimate the mandate strengths so pretty
    dramatically there?
        Mr. MILLER. I would say the first reason is they relied
    upon evidence from Massachusetts and Massachusetts' experts,
    which was unique to Massachusetts as opposed to the rest of the
    country. And that was built into a lot of the over assumptions
    of the high yield from the mandate. They also assumed they
    would have larger effects further up the scale. And the reality
    is if you subsidize people heavily, as turned out to be the
    case for basically those below 200 percent of Federal poverty
    level, you will get a lot of people, even though they are not
    crazy about the coverage, they will take it because it doesn't
    cost them much of anything when you add in the cost-sharing
    subsidies. You've got a lot of complaints about high
    deductibles. That has differential effects because of the way
    in which those cost-sharing subsidies in the exchanges tend to
    mute those out.
        So when you were trying to get more people to come into
    this market who are either younger or had a little bit more
    money or were healthier, it turned out it was a bad deal for
    them. There's plenty of work done by some economists at the
    University of Pennsylvania, Wharton School, which talked about
    why you just didn't pay for people to take this coverage
    compared to either paying a penalty or dodging it in one form
    or another.
        So all of this idea that new revenue was going to come in
    to pay for what we wanted didn't work out that way. And some of
    that is reflected in the reduced enrollment that was assumed
    but never materialized because you run out of subsidies to pay
    for people. And when it turns out that people have to pay for
    something they don't want, they don't buy it.
        Mr. HOLDING. Right. Well, you know, speaking of subsidies,
    I find it kind of remarkable that according to some estimates
    that we have seen, that only about 40 percent of the subsidy
    eligible population signed up on the exchange. Now, this is
    concerning. I mean, do you find it concerning and why do you
    think it is?
        Mr. MILLER. Well, that reflects the fact that as you move
    further up the ladder beyond what I just cited, which is about
    60 to 65 percent, those subsidies aren't particularly generous.
    They are there, but they begin to phase out. This is a highly
    skewed, very progressive, if you want to use that term,
    approach to subsidizing very low-income individuals, even more
    so in the Medicaid-eligible population.
        So mission accomplished in terms of getting that target
    population, but it didn't fit into the larger economic model
    which assumed that somewhere there was something else to pay
    for this. They tried a lot of other gimmicks in order to do
    this, but it didn't actually materialize in the way in which it
    was originally designed. And part of that is because it was a
    built-in ceiling on how much the individual mandate could ever
    produce, despite all the theories to the contrary, and also how
    much money that was actually there to subsidize people. And we
    found out that we are going to have come up with some other
    solutions.
        Mr. HOLDING. Well, you know, you have got the benefit now
    of some history; you know, you have got a graph, we have got
    some real numbers in. And, you know, you mentioned at the top
    of the hearing in your prepared remarks, you know, the CBO is
    doubling down on these flawed estimates. I mean, what would the
    rationale be behind that?
        Mr. MILLER. Well, people when they do models have
    assumptions and they tend to not want to let go of them. There
    are some things external to what originally started out that
    are moved around. Certainly, the Supreme Court decision changed
    some of the projections in terms of Medicaid enrollment. But
    the ingrained view that somehow the individual mandate was
    going to draw in all these people and they were going to comply
    and was going to be enforced didn't work out that way.
        Potentially by some, you know, standard you could have
    about--you know, at one time they had a 30-million target
    population, and it turned out that only 3 million of those
    people were actually--you know, were paying into the individual
    mandate as opposed to staying uninsured. It is the difference
    between theory and practice. We have learned a lot about
    theories. We need to go back to reexamining what will work in
    practice.
        Mr. HOLDING. Thank you very much.
        Mr. Chairman, I yield back.
        Chairman BUCHANAN. We have been joined at this hearing by
    our fellow Ways and Means Committee Member, Mr. Kelly. As is
    our custom, he will be permitted to ask witnesses questions.
    Now that the Members of the Subcommittee have concluded their
    questioning, Mr. Kelly from Pennsylvania, you are now
    recognized for 5 minutes.
        Mr. KELLY. Thank you, Chairman. And again, thank you for
    allowing me to participate today.
        All three of you are here for a reason. We talked today the
    purpose of the hearing is to examine if the individual mandate
    penalty is actually stabilizing health markets. Okay? And we
    talked about a lot of different things. I have got so many
    constituents back home that now have a policy, but don't have
    any health care.
        So between premiums being where they are, deductibles being
    where they are, copays being where they are, I know there is
    reference made to Medicaid. The question is who all accepts
    Medicaid as payment? How many actual providers of health care
    say, no thanks, it doesn't begin to cover my cost of delivery?
        So here is what it comes down to. If we are talking about
    this and if a big part of the individual mandate was going to
    cover the cost of all these things, the question is did it
    work? Is there anybody of the three of you that could say this
    was--it was well intended? I am going to say it wasn't well
    intended.
        And, Mr. Miller, I love the fact it is three versus
    practice. Again, it is assuming things without looking at
    reality. People usually don't buy things they don't want and
    they certainly don't overpay. It is okay if they are being
    subsidized, but they--out of their own pocket, will say, you
    know what, thanks, but no thanks. Has this worked at all? Go
    ahead. I mean, if we are trying to get to an end here, what has
    it done?
        Mr. MILLER. Well, I always try to be a little more balanced
    in this approach. We had a lot of bad policies incorporated
    into the Affordable Care Act, not the individual mandate alone.
    The way I would first put it is the individual mandate, not
    only did it not work, it didn't save those other bad policies.
    So we need to reexamine more than just the individual mandate
    itself.
        The reason why coverage may not be attractive to people may
    be a part of the way in which we tried to standardize coverage
    in certain ways, which meant that suddenly it no longer
    appealed to people in the same manner when they were paying
    more of the cost than they did before and weren't highly
    subsidized. So we have got a lot of different things to take
    out of the bottle and reassemble. But the individual mandate
    itself did not provide some extra boost.
        And you can't keep subsidizing people to basically say,
    come on. Instead, what we got were limited networks, lower
    actuarial values, and higher deductibles for people who saw the
    cost and they didn't want that coverage and they are
    complaining to you about it. That is how we created a new
    distortion to deal with the old distortions.
        Mr. MCDONOUGH. Can I address?
        Mr. KELLY. Oh, yes. Please. Sure.
        Mr. MCDONOUGH. Thank you for the question. So just the
    question, does this work? Well, work is obviously in the eye of
    the beholder. But just let me give you some responses to does
    this law work.
        Mr. KELLY. Can you do that, Mr. McDonough, if it is in the
    eye of the beholder? Yeah, I have got two or three pages of
    people back home in my district, they are saying it doesn't
    work. So in the eyes of a lot of beholders, including the
    majority of this country, it doesn't work.
        Mr. MCDONOUGH. Okay. So lowest rate of uninsurance in the
    history of the United States. Drop the----
        Mr. KELLY. But, sir, listen, I don't want to equate having
    an insurance policy with having health care. Huge difference.
        Mr. MCDONOUGH. Rates of satisfaction among people who have
    been enrolled in Medicaid and people who have been enrolled in
    exchange policies, around 80 percent satisfaction. Drop in the
    rate of uninsurance among America's children, by 50 percent
    over the past several years. The rate of financial security and
    the drop in medical debt experienced by Americans across the
    country, a substantial drop. Rate of increase in per enrollee
    Medicare spending is the lowest it has been in the history of
    the program since it was created in 1965. Those are just five
    things. We can go on and on.
        Mr. KELLY. Where is this study from?
        Mr. MCDONOUGH. These are all different studies, sir. I
    would be happy to share the sources of all of those with you.
        Mr. KELLY. Okay. I would like to see that information. And
    I appreciate that.
        Mr. MCDONOUGH. Happy to do that.
        Mr. KELLY. Mr. Graham.
        Mr. GRAHAM. I think what Professor McDonough stated, those
    facts are certainly cohere with what I understand of a lot of
    things, but very little of that has to do with the individual
    mandate. You know, there has been some Medicare changes going
    on. Most of the effect of the Affordable Care Act in terms of
    coverage is Medicaid. And I know I am going to provoke some
    folks here, but I don't like to include Medicaid as insurance
    because Medicaid is a welfare program. So as long as we include
    more Medicaid enrollment as insured, that is like saying more
    TANF with having a job, it doesn't make any sense, you know.
        So if we are going to be coherent or whatever, giving
    people more welfare benefits, that's fine. If that is what you
    all want to do, that is your prerogative as the folks who tax
    and spend, that's what you are going to do. But let's not
    pretend that we are making people more individually responsible
    through this mandate. And as you say, for very many people, the
    small business owner, the self-employed person, it is just
    driving them crazy, as we have heard from you and so many of
    your colleagues, trying to figure out what the heck is going
    on, how to get an affordable plan and----
        Mr. KELLY. I know. We are going to continue to work,
    Chairman, and I appreciate, again, being included. We are going
    to continue to try to work to make sure that the American
    people understand. They are not going to lose, by the way,
    their insurance. I mean, Mr. Trump was sworn in last Friday. I
    don't think anybody is walking around the country right now and
    had their insurance pulled away from them, so that is kind of a
    false narrative. But we have got to find something that makes
    sense. None of this makes sense to me economically. Why would
    anybody stay in the insurance business to lose money?
        Thank you.
        Chairman BUCHANAN. I now recognize myself. We spent a lot
    of time on the mandate. I want to shift gears a little bit and
    talk about affordability and access.
        My background before I got here, I have been here about 10
    years, but before that, 30 years. And I think back 30, 40 years
    ago, companies paid or people had access to low cost, high
    quality health care. I thought back a few days ago and I was
    thinking back 20 years ago when I was chairman of the chamber
    in our area, we had 2,500 businesses, most of them 15 employees
    or less. The number one issue, 20 years ago--and this before
    the ACA to give them--you know, we can talk about that a little
    bit.
        But 20 years ago, the number one issue, we surveyed all our
    members, was access and affordable health care. And it just
    seems like it has accelerated to the point of being absurd that
    typical individuals--it is not unusual in my area in Florida,
    Sarasota Florida, a couple could be paying $2,000 a month for
    health care. That is outrageous. That is more than a car
    payment and a house payment.
        I read the other day, and I shared this with our people, in
    the front page of I think it was USA Today, 62 percent of
    Americans don't have $1,000 in the bank. I thought to myself
    when I looked back, you know, you can talk about wages and
    everything else, that one of the things that is gutting the
    middle class I think is health care cost. You get the subsidy.
    You know, maybe it works for you, but people just outside the
    subsidy, because small businesses and everybody else, they
    can't afford to provide it. It's $1,400 for a family of four,
    $1,600. So the small business might pick up $600, $700. It is
    getting passed to the workers. And that is why nobody has
    anything.
        So my thought when I first heard about the ACA, I was
    concerned back then about the cost of health care and I was
    open-minded, if it bent a curve on health care. But I heard
    what you said, Doctor. But I can just tell you in our region in
    Florida, it is not unusual to hear every single day rates going
    up 20 and 30 percent for small businesses and individuals. That
    is the reality.
        So I guess I would ask any of you, Mr. Miller, Mr. Graham,
    let's start there, what are we going to do about, or your
    thoughts, in bending the curve? It is just--and I know it is a
    big discussion, but I would like to just have maybe 30 seconds
    each of you just to give me your point.
        Mr. MILLER. All right. That is a bigger discussion.
        Chairman BUCHANAN. I know it is a big discussion.
        Mr. MILLER. So let me simplify. This may not be the
    politically astute answer.
        Chairman BUCHANAN. No. I just want----
        Mr. MILLER. If we keep pumping more money into health care,
    it is going to cost more. Now, if we want to do that, we need
    to think about that a little bit more surgically. So the
    approach might be to actually have the individuals supposedly
    benefiting from this to control those dollars and decide how
    they want to spend it. That will be a different type of result
    in terms of better quality health care at a lower price over
    time. We have tried subsidizing it, we have tried regulating
    it, we have tried placating everybody in between. We need to
    get it down to the ground level and decide what people actually
    want to spend their money on. And that includes trading off
    health care with better wages. And we need to stimulate
    economic growth and we need a healthier population. We need a
    better health care delivery system.
        Those are all things well beyond the little games we play
    with individual mandates and insurance subsidies. That is a
    bigger discussion, but we need to focus more on that.
        Mr. GRAHAM. I would agree with Mr. Miller. And I would
    point out that all this money going into the ObamaCare
    exchanges, it really goes to insurance companies, you know. We
    advocate consumer-driven health care. We don't give any tax
    credits to individuals that they can spend directly. And I know
    one of the Members talked about the premium is more than the
    rent. Well, when I pay my rent, I move in that day and I start
    living there, you know. I pay for these insurance policies and
    they don't kick in until I go to the hospital. So if we are
    going to help people, let's help them pay directly for care.
    And we had some good experience that that can help reduce some
    cost.
        Chairman BUCHANAN. Doctor, I will give you an opportunity.
    Take a few seconds and wrap up.
        Mr. MCDONOUGH. The major challenge, it seems to me and to
    many other experts with whom I work, is to change the
    underlying incentives in terms of the delivery of medical care
    to move away from a system that rewards providers to do more
    and more through fee-for-service and, instead, to move toward a
    system that rewards providers when they actually provide
    quality, value service. And we have a number of important
    directions that we are going in.
        The Nation is moving in this direction, regardless of what
    happens to the fate of the ACA. You saw it in the MACRA law,
    the bipartisan bill that passed the House and the Senate in
    2015. That is not a rejection of the direction that the ACA
    started, it is an enhancement and an acceleration of it. That
    is going to continue. And I think that is really probably the
    most important dynamic that is going on right now in terms of
    moving our system to a different place.
        Chairman BUCHANAN. Let me just conclude. In Florida--I was
    chairman actually in the floor of the chamber down there too--
    it is the biggest issue. The cost of health care keeps going.
    It is not just the last 8 years. It has been the last 20 years.
    It is out of control, out of hand. We have got to find a way we
    can work together for the betterment of everybody in the
    country.
        I would like to thank our witnesses for appearing before us
    today. Please be advised that Members have 2 weeks to submit
    written questions to be answered later in writing. Those
    questions and your answers will be part of the formal hearing
    record.
        With that, the Subcommittee stands adjourned.
        [Whereupon, at 3:45 p.m., the Subcommittee was adjourned.]
        [Public Submissions for the Record follows:]

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