[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:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    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:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
   




    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:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    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:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    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:]


  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
  
    

                                 [all]