[Senate Hearing 115-544]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-544

     STABILIZING PREMIUMS AND HELPING INDIVIDUALS IN THE INDIVIDUAL
                  INSURANCE MARKET FOR 2018: GOVERNORS

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

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                                   ON

     EXAMINING STABILIZING PREMIUMS AND HELPING INDIVIDUALS IN THE 
      INDIVIDUAL INSURANCE MARKET FOR 2018, FOCUSING ON GOVERNORS

                               __________

                           SEPTEMBER 7, 2017

                               __________

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                                Pensions
                                
                                
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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
          
          
 LAMAR ALEXANDER, Tennessee, Chairman
MICHAEL B. ENZI, Wyoming		PATTY MURRAY, Washington
RICHARD BURR, North Carolina		BERNARD SANDERS (I), Vermont
JOHNNY ISAKSON, Georgia			ROBERT P. CASEY, JR., Pennsylvania
RAND PAUL, Kentucky			AL FRANKEN, Minnesota
SUSAN M. COLLINS, Maine			MICHAEL F. BENNET, Colorado
BILL CASSIDY, M.D., Louisiana		SHELDON WHITEHOUSE, Rhode Island
TODD YOUNG, Indiana			TAMMY BALDWIN, Wisconsin
ORRIN G. HATCH, Utah			CHRISTOPHER S. MURPHY, Connecticut
PAT ROBERTS, Kansas			ELIZABETH WARREN, Massachusetts
LISA MURKOWSKI, Alaska			TIM KAINE, Virginia
TIM SCOTT, South Carolina		MARGARET WOOD HASSAN, 
                                         New Hampshire
                                  
                                         
               David P. Cleary, Republican Staff Director
         Lindsey Ward Seidman, Republican Deputy Staff Director
                  Evan Schatz, Democrat Staff Director
              John Righter, Democrat Deputy Staff Director

                                  (ii)         
          
          
                            C O N T E N T S

                               __________

                               STATEMENTS

                      THURSDAY, SEPTEMBER 7, 2017

                                                                   Page

                           Committee Members

Alexander, Hon. Lamar, Chairman, Committee on Health, Education, 
  Labor, and Pensions, opening statement.........................     1
Murray, Hon. Patty, a U.S. Senator from the State of Washington, 
  opening statement..............................................     4
Warren, Hon. Elizabeth, a U.S. Senator from the State of 
  Massachusetts..................................................     6
Bennet, Hon. Michael F., a U.S. Senator from the State of 
  Colorado.......................................................     6
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......     7
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming..    37
Isakson, Hon. Johnny., a U.S. Senator from the State of Georgia..    41
Sanders, Hon. Bernard., a U.S. Senator from the State of Vermont.    43
Collins, Hon. Susan M., a U.S. Senator from the State of Maine...    45
Franken, Hon. Al, a U.S. Senator from the State of Minnesota.....    47
Young, Hon. Todd, a U.S. Senator from the State of Indiana.......    48
Cassidy, Hon. Bill, MD., a U.S. Senator from the State of 
  Louisiana......................................................    52
Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode 
  Island.........................................................    54
Baldwin, Hon. Tammy, a U.S. Senator from the State of Wisconsin..    56
Murkowski, Hon. Lisa , a U.S. Senator from the State of Alaska...    58
Hassan, Hon. Margaret Wood, a U.S. Senator from the State of New 
  Hampshire......................................................    62
Casey, Hon. Robert P., a U.S. Senator from the State of 
  Pennsylvania...................................................    64
Kaine, Hon. Tim, a U.S. Senator from the State of Virginia.......    65
Murphy, Hon. Christopher S., a U.S. Senator from the State of 
  Connecticut....................................................    70

                               Witnesses

Haslam, Hon. Bill, Governor, Tennessee...........................     8
    Prepared statement...........................................    10
Bullock, Hon. Steve, Governor, Montana...........................    12
    Prepared statement...........................................    14
Baker, Hon. Charles D., Governor, Massachusetts..................    19
    Prepared statement...........................................    20
Hickenlooper, Hon. John W., Governor, Colorado...................    24
    Prepared statement...........................................    26
Herbert, Hon. Gary R., Governor, Utah............................    32
    Prepared statement...........................................    34

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.
    Letter from Governors (Aug. 30, 2017) to Speaker Ryan, Leader 

      McConnell, Leader Pelosi, and Leader Schumer...............    28
    Letter from Governor Bullock to Chairman Alexander and 
      Ranking 
      Member Murray..............................................    78
Response by Hon. Charles D. Baker to questions of:
    Senator Whitehouse...........................................    79
    Senator Hassan...............................................    80

                                 (iii)

  

 
    STABILIZING PREMIUMS AND HELPING INDIVIDUALS IN THE INDIVIDUAL 
                  INSURANCE MARKET FOR 2018: GOVERNORS

                              ----------                              


                      THURSDAY, SEPTEMBER, 7, 2017

                                       U.S. Senate,
                    Committee on Health, Education, Labor, 
                                              and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:05 a.m. in room 
SH-216, Hart Senate Office Building, Hon. Lamar Alexander, 
chairman of the committee, presiding.
    Present: Senators Alexander, Murray, Enzi, Isakson, 
Collins, Cassidy, Young, Hatch, Murkowski, Sanders, Casey, 
Franken, Bennet, Whitehouse, Baldwin, Murphy, Warren, Kaine, 
and Hassan.

                 Opening Statement of Senator Alexander

    The Chairman. The Senate Committee on Health, Education, 
Labor, and Pensions will please come to order.
    This morning we are holding our second of four hearings on 
stabilizing premiums and ensuring access to the individual 
health insurance market for the year 2018. That is our focus.
    We are delighted and honored to have the Governors of five 
States here with us today. Thank you, gentlemen. We know how 
busy you are. You have come long distances to be here, and we 
appreciate it very much. We look forward to learning from you.
    Senator Murray and I will each have an opening statement. 
We will introduce the five Governors. It almost sounds like a 
singing group. Does it not?
    [Laughter.]
    The Chairman. After that testimony, Senators will each have 
an opportunity to ask the witnesses 5 minutes of questions.
    We just left a meeting where the Governors met with 
Senators not on our committee. We had 30 Senators there, 
similar to yesterday when we had the State insurance 
commissioners here. We had 31 Senators, most of them not on the 
committee, meet for an hour. And then at our hearing, we had 22 
of our 23 committee members. For 2 consecutive days, we have 
had half the Members of the U.S. Senate focused in a bipartisan 
way on a single, narrow objective: what can we do in the next 
couple of weeks--that is a tall order--the next couple of 
weeks--that the Senate can pass, the House can pass, and the 
President will sign that will help 18 million Americans who are 
in the individual insurance market in the year 2018?
    The individual insurance market is 18 million Americans. It 
is just 6 percent of those who have insurance, and about half 
of those do not have any government help to buy insurance. And 
it is those Americans who are getting hammered the most by the 
higher premiums and the higher co-pays and deductibles.
    Tennessee's insurance commissioner testified yesterday. She 
said our State's individual market is very near collapse. At 
the end of September last year, Blue Cross pulled out of the 
individual market in Knoxville, Nashville, and Memphis, not 
just for Tennesseans with Affordable Care Act subsidies but for 
everybody. Even the people who did not get government subsidies 
could not buy it from Blue Cross in those markets.
    Just yesterday, an insurer in Virginia announced it will 
pull out of parts of the State for the 2018 plan year, leaving 
62,000 Virginians facing the very real prospect of having zero 
options for insurance next year.
    This could happen again next year in Tennessee and in 
Virginia if Congress does not act. In our State, Tennessee, up 
to 350,000 Tennesseans, songwriters, the self-employed, 
farmers, and millions of Americans across our country could be 
literally left with zero options as some in Virginia may be.
    If we do act, we can limit increases in premiums in 2018. 
We can continue support for co-pays and deductibles for many 
low-income families. We could make certain that health 
insurance is available in every county and lay the groundwork 
for future premium decreases.
    Yesterday, we had a focused hearing on this narrow part of 
the market, the 6 percent. We asked our witnesses then, as we 
do today, to focus on the individual market and what we could 
do to help keep premiums down in 2018. Now, we are interested 
in anything you have to tell us, but that is our focus today.
    Yesterday, I heard three things mostly: addressing high-
cost individuals through reinsurance, or some other model; 
continuing the cost-sharing reduction payments; and third, more 
flexibility for States in the law's 1332 waivers.
    One important discussion is how do we address the high cost 
of care for the sickest population. It seems to me that 
Senators on both sides of the aisle, as I listened to it, 
understand that that discussion is likely to be part of any 
long-term solution on the individual market because the 
individual market has some exceptionally sick people, it is 
small, and we have to find some way to deal with the complex 
cases. Some Senators have suggested a new Federal program. 
Under the Minnesota and Alaska plans, States are already using 
some of the Federal money they are already getting to set up 
reinsurance programs through the 1332 waiver, and they are 
lowering rates a predicted 20 percent without more Federal 
money.
    We heard a number of good ideas for the short term 
yesterday. One of the things I would like to know from you--we 
all would--is there anything that we could do to section 1332 
specific in the next 2-3 weeks to make it easier for more 
States to do what Alaska and Minnesota are doing with their 
reinsurance program?
    And let me say as a former Governor, with respect to the 
five Governors who are here, unless the Affordable Care Act is 
changed over the next 10 years, according to the Congressional 
Budget Office, the Federal Government will be spending about a 
trillion new dollars on Medicaid expansion and about 866 
billion new dollars to subsidize the individual insurance 
market. That number, according to CBO, comes out to about 
$4,200 per subsidized individual in the individual market. And 
the Federal Government has a $20 trillion debt.
    The question arises, if we need to address complex health 
issues or reinsurance, why do the States themselves not do it? 
For example, Alaska came up with its own State funds to help 
with its plan. It is using some Federal dollars, $48 million, 
it was already getting in premium subsidies and redesignating 
them for reinsurance. And Minnesota came up with even more 
money, planning to use roughly $135 million in State Federal 
funds that it was already getting. Maine did it by adding a $4 
charge per health insurance policy per month. As we think about 
the need for more funds to deal with complex health cases, 
whether it is reinsurance or an invisible high-risk pool or 
stabilization fund, we need to think about what the States' 
share ought to be.
    At yesterday's hearing, we also heard several suggestions 
for the short term on improving the 1332 waiver. These 
suggestions ought not to be too controversial, including 
reducing the 6-month waiting period, allowing a copycat 
application. If Montana already gets a waiver, why should 
Massachusetts have to go through all the same things again? 
That ought to speed things up. Another idea is to allow just 
the Governor or perhaps the insurance commissioner to apply for 
a waiver and not wait for the legislature to pass a law since 
some State legislatures only meet every 2 years.
    I was intrigued by the suggestion by a Senator that we make 
sure that we calculate the budget neutrality requirement in a 
common sense way to support States' long-term plans. Then is 
there a way to combine the State innovation 1332 waiver, one 
Senator asked, with the State Medicaid 1115 waiver so that a 
State could share any savings it has across the two 
interconnected markets?
    I know that New Hampshire has tried to do some things in 
that area, and even though the Democratic Governors and the 
Republican Governors support it, they are not able to do it 
under both the Obama and Trump administrations.
    Another possibility mentioned by several Senators on both 
sides of the aisle would be allowing lower cost copper plans to 
be sold--that is already in the law--plans that are often more 
appealing to younger and healthier people that the insurance 
commissioners said we need in the markets to bring down 
premiums. Right now, if you are 29 or under, you can buy this 
plan with higher deductibles at lower costs but not if you're 
over 29.
    That is a short list of some of the things that might make 
some real difference in the 23 States that have actually 
started the process for applying for a 1332 waiver.
    I am hopeful maybe some combination of continuing cost 
sharing for some period of time and significant changes in 
flexibility for States, probably through changes to section 
1332, since it is already in the Affordable Care Act--that 
those two things might provide a basis for action that we can 
take this month. Then if we act, we will count on the House of 
Representatives and the President to take advantage of that, I 
hope as they would.
    This action would not end the process. That would only be 
step one, and then we would go pretty quickly to step two on a 
long-term, strong, vibrant individual market. I hope we can 
begin to spend most of our time on the larger issue of health 
care costs.
    I mentioned this yesterday, but it is worth repeating. 
Several of the Governors have mentioned it this morning 
already. For 7 years, we have been stuck in this partisan 
stalemate on health insurance, with most of the argument--not 
all of it, but most of it--about 6 percent of the insured 
Americans who buy their insurance on the individual market, 
when we really should have been spending more time on the 
fundamental problems with the American health care system that 
have caused it to grow from consuming 9 percent of the gross 
domestic product in 1980, about 40 years ago, to nearly 18 
percent in 2015 and a predicted 20 percent in 2025. At the same 
time, we have the phenomenon of 5 percent of those who receive 
health care consuming 60 percent of the costs.
    We should be doing more on those larger questions of health 
care costs. There is no question about it. Look at how we pay 
to visit the doctor, how to get a test at the hospital, what we 
spend on prescription drugs, how much excessive paperwork and 
administrative burdens increase our costs, what can be done to 
encourage wellness, what can be done to prevent more serious 
illness and disease and the high costs that come from being 
ill. We should be looking at the real ways to bring down the 
cost of health care, which is the best way to reduce the cost 
of health insurance.
    Senator Murray.

                  Opening Statement of Senator Murray

    Senator Murray. Thank you very much, Chairman Alexander.
    As I said yesterday, after so much partisanship around the 
future of health care in our country, I am really glad that 
these hearings give us an opportunity to take a different 
approach and hopefully find some common ground. I appreciate 
your leadership in starting this conversation, and I am really 
grateful to all of our colleagues who are joining in on this.
    Of course, I want to thank all the Governors who are here 
today. I notice that their names either start with B or H. Was 
that the requirement, or did that just happen?
    [Laughter.]
    It is great to have all of you here today as well.
    As you know, Governors have added a really valuable 
perspective to the health care discussion so far. I am really 
glad that our committee will have the chance to get your input 
as we enter this next phase of working to really stabilize the 
markets and lower costs for our constituents in the near term.
    The truth is that there is actually a lot many Democrats 
and Republicans agree on when it comes to the specific goal. As 
a starting point, even if we do not all agree on the cause, we 
do agree on the problem itself. Families are facing higher 
premiums and fewer options as a result of uncertainty in our 
health care system. Democrats have a number of ideas, which I 
will be interested in discussing with all of you today to 
address this problem. I want to just give a few examples.
    Senator Shaheen introduced a multi-year fix to ensure out-
of-pocket cost reductions under the Affordable Care Act are not 
cutoff. We will need a long-term stability for this program if 
we want insurers to stop worrying about uncertainty long enough 
to actually lower premiums for patients.
    Senators Kaine and Carper put forward legislation to help 
with coverage costs for our sickest patients.
    Senators McCaskill and Schatz have proposals on how we 
prevent their counties moving forward.
    Many of us are also interested in ensuring open enrollment 
is as effective as possible this year, given the President's 
decision to slash efforts to help people get coverage. And it 
is not just Democrats in the Senate who are looking at a wide 
range of ideas to strengthen markets and lower families' health 
care costs in the near future. Governors Kasich and 
Hickenlooper, who is here with us, have put forward a plan 
including many policies that parallel those I have mentioned, 
and their plan should help inform our conversation here in 
Congress.
    I was especially pleased, the Governors' plan would 
maintain protections in current law for patients like those 
with preexisting conditions and women seeking maternity care 
because as I said yesterday, this needs to be a conversation 
about moving our health care system forward not backward. It is 
certainly not an opportunity to roll back protections for 
patients or a chance to hand power back to the insurance 
companies.
    I hope we can focus on areas of common ground rather than 
getting bogged down in ideology again that drove that Trumpcare 
debate. If we can do this, I believe a bipartisan agreement on 
health care reform is possible, not easy, but possible. I am 
very hopeful we will not only succeed but be able to build on 
the near-term steps to tackle the larger challenges families 
continue to face in getting the affordable care they need.
    Again, I want to thank Chairman Alexander for moving us 
forward on this. I want to thank all of our colleagues who are 
here and all the Governors who are here to help us with this 
discussion, and I really look forward to it. Thank you.
    The Chairman. Thank you, Senator Murray. I think people 
know the high respect I have for Senator Murray. When she gets 
involved and tries to get a result, we usually get one. This 
committee has gotten results on big issues in the past that are 
very complicated and very contentious, education, 21st Century 
CURES. We have been able to do it. We are trying to take a 
small step here that will lead to bigger steps.
    I am going to introduce the first two witnesses, then call 
on Senators Warren, Bennet, and Hatch, former chairman of this 
committee and chairman of the Finance Committee, to introduce 
the other Governors.
    The first witness is Governor Bill Haslam of Tennessee. He 
will not say it but I will say it. I think I am right. 
Tennessee has the lowest taxes, the lowest debt, fastest 
improving schools, and the No. 1 State for auto jobs. That is 
our story and we are sticking to it.
    [Laughter.]
    Governor Haslam has been indispensable in that. He has been 
a really terrific Governor. He is in his seventh year.
    Governor Bullock is from Montana. Steve Bullock is a 
Democratic Governor in a State with a Republican legislature. 
They worked together to expand Medicaid. He has put the State's 
checkbook online so Montanans can see how their tax dollars are 
spent. Governor Bullock, we welcome you and thank you for 
coming all the way across the country to be with us today.
    Senator Warren.

                      Statement of Senator Warren

    Senator Warren. Thank you, Mr. Chairman.
    I am pleased to introduce Massachusetts' Governor, Charlie 
Baker. Governor Baker has served as the Governor of 
Massachusetts since 2015, and he is currently the co-chair of 
the National Governors Association's Health and Human Services 
Committee.
    There is a particular reason to have him in this hearing 
today, and that is that he previously served as Massachusetts 
Secretary of Health and Human Services, as well as Secretary of 
Administration and Finance, and before becoming our Governor, 
he served for a decade as the President and CEO of Harvard 
Pilgrim Health Care, which is a non-profit health care 
insurance company based in Wellesley, Massachusetts and serves 
the entire New England region.
    I just want to add that Massachusetts has a long history of 
bipartisan cooperation on health reform, which is one of the 
reasons that our State's health care system has become a model 
for the rest of the country. The Governor and I have continued 
that bipartisan cooperation and tradition in recent months, and 
I am glad that Congress is starting to move in this direction 
as well.
    Governor, thank you for being here and thank you for 
contributing your considerable expertise to this conversation.
    The Chairman. Thank you, Senator Warren. And welcome, 
Governor Baker.
    Senator Bennet.

                      Statement of Senator Bennet

    Senator Bennet. Thank you, Mr. Chairman. As I said 
yesterday, thank you for your bipartisan approach to the work 
that is in front of us.
    There is not anybody I know who epitomizes bipartisanship 
more than our Governor, John Hickenlooper, my old boss. I was 
his chief of staff when he was mayor of the City and County of 
Denver. Some things I know about John is that he came to 
Colorado as a geologist, and he promptly lost his job during a 
downturn and his insurance, by the way, his health insurance.
    That did not stop him. He created the first microbrewery 
that existed between Chicago and Los Angeles in the City and 
County of Denver, became a very successful businessman, became 
Mayor of Denver. One of the first things he did was go out and 
wrangle 34 mayors in the Denver metro area, many of them 
Republicans, to raise the sales tax to pay for what is now the 
newest light rail system in the country. It covers an area the 
size of the State of Connecticut. When he became Governor, he 
continued that bipartisan work, brought environmentalists and 
industry together to create the first methane regulations in 
the United States. He has worked, as has been mentioned by the 
ranking member, with John Kasich from Ohio to create a 
bipartisan path forward that other Governors have supported.
    I would close just by saying to our chairman we have the 
lowest unemployment rate in the United States of America, and 
that is our story and we are sticking to it.
    [Laughter.]
    The Chairman. Thank you, Senator Bennet. Welcome, Governor 
Hickenlooper.
    Senator Hatch.

                       Statement of Senator Hatch

    Senator Hatch. Thank you, Mr. Chairman.
    I am pleased to be here today to introduce my friend and 
colleague, Governor Gary Herbert. Governor Herbert's guidance 
and leadership have been tremendously important to both my 
staff and me on a whole variety of issues impacting the great 
State of Utah. Governor Herbert has been a leader in addressing 
opioid abuse in Utah and has truly been a trailblazer in 
examining how the opioid crisis addresses homeless populations. 
States are laboratories for transformative policies and 
innovations in our country, and Governors deserve our respect 
and appreciation for their tireless advocacy to improve daily 
life for their citizens.
    Furthermore, under Governor Herbert's leadership, Utah has 
been at the forefront of providing innovative, cost-effective, 
high-quality health care to its constituents.
    I am pleased Governor Herbert is here today to share his 
perspectives. Governor Herbert and I have frequently discussed 
the issues that plague the individual market as a result of 
Obamacare. He is engaged in these policies and is intricately 
aware of how they interact with other State efforts that aim to 
provide access to affordable care to all Utahans.
    The Governor is also aware of the need to deregulate the 
individual and small group health insurance markets to put the 
power back in the hands of the States. This requires structural 
reforms to Obamacare, not just bailouts.
    The committee is fortunate to have Governor Herbert here 
today, and I look forward to continuing to work with him to 
advance the health and well-being of all Utahans.
    While I wish I could stay for the discussion today, I need 
to go and chair my Finance Committee hearing on the children's 
health insurance program, which also is important. That is a 
must-pass piece of legislation that I know each of the 
Governors before us today supports. I leave the commentary for 
Utah in the very capable hands of our beloved Governor, who I 
am happy to say is a very close personal friend.
    I appreciate you allowing me to do this, Mr. Chairman and 
Madam Chairman, as well. Thanks so much.
    The Chairman. Welcome, Governor Herbert.
    Thank you, Senator Hatch. Just for the Governor's 
information, when it comes to taxes, Medicare and Medicaid, the 
Finance Committee under our system has the jurisdiction over 
that, but you are speaking to a lot of members of the Finance 
Committee when you speak to this committee because many are 
members of both committees. We thank Senator Hatch for his 
leadership.
    Now we will go to the Governors, and we will ask each of 
you, starting with Governor Haslam, down the line, if you could 
please summarize your remarks in about 5 minutes. That will 
give us an opportunity to have a conversation with you between 
the Senators and Governors. Governor Haslam, welcome.

       STATEMENT OF HON. BILL HASLAM, GOVERNOR, TENNESSEE

    Governor Haslam. Thank you and good morning to members of 
the committee, to Ranking Member Murray and to one of the 
Tennessee's all-time favorite sons, Chairman Alexander.
    It is an honor to be here with this group of Governors who 
I consider friends and who I know to be problem solvers.
    My request to this committee this morning is that you do 
two things: first, that you move quickly to stabilize the 
individual insurance marketplace; then second, that you would 
undertake a serious effort to work together to address the cost 
of health care.
    As Chairman Alexander said, these are good times in 
Tennessee. Our unemployment rate is the lowest in history. We 
became the first State in the Nation to offer 2 years free of 
community college or technical school to all of our citizens. 
Our tax, as a percentage of income, and our debt per capita are 
among the lowest if not the lowest in the country.
    The crisis of health care and the uncertainty of its future 
threaten our State's citizens and the State's budget. The 
primary difference between governing Tennessee now and when 
then a very young Governor Lamar Alexander led the State more 
than 30 years ago is the impact that the cost of health care 
has on everything else that we do.
    Today, Tennessee finds itself with only three insurance 
carriers offering ACA-compliant coverage. In more than 80 
percent of our counties, citizens have only one insurance 
option. And these limited options are provided to Tennesseans 
at substantial cost increases. Our experience of fewer choices 
at higher costs is not sustainable. We are on a path where 
citizens simply will not have an option to purchase from the 
insurance marketplace or cannot pay for the limited options 
that are available to them. Either way, the system fails.
    Congress should take steps now to prevent the total 
collapse of the health insurance market by: No. 1, funding cost 
share reduction payments; two, creating a short-term 
reinsurance program; and three, providing flexibility to the 
States.
    In Tennessee, about 60 percent of our federally facilitated 
marketplace participants are enrolled in CSR plans. Failure to 
fund CSR payments will increase premiums significantly, create 
even more uncertainty around the future of participating 
carriers, and actually increase the Federal deficit due to 
higher premium tax credits. Clearly, this is not a recipe for 
success. It is also very important to understand that our 
marketplace was facing collapse before this current discussion 
of CSR payments, and other actions and reforms will be needed 
to address the crisis.
    Second, Congress can take additional action to stabilize 
markets by funding a short-term reinsurance program that would 
limit losses to carriers that provide coverage in the 
marketplace. This should produce lower premiums which, in turn, 
should attract new, healthier individuals to the marketplace.
    A third critical way to provide more stability is to offer 
flexibility to States to address their unique challenges and 
circumstances. The waiver approval process should be expedited, 
and the strict guardrails currently placed upon waiver requests 
should be loosened in a manner that will attract younger, 
healthier individuals to the marketplace.
    I realize that some of the things that I just outlined 
around stabilization costs more money, and I am asking for this 
at a time when many Governors, including myself, are 
emphasizing the skyrocketing costs of health care. The reality 
is that failure to address the immediate stabilization needs 
while Congress works on the bigger issue of cost will almost 
certainly result in collapse of the market. Some may say the 
only way to ensure legislative action on cost and realize real 
reform is total collapse. I do not subscribe to that line of 
thinking. I think every Governor here and those back at home 
believe that we can move to stabilize the market now while we 
work to take on the issue of health care costs.
    Having helped to stabilize the market, it is my strong hope 
that this committee will then turn its sights to the cost of 
health care, which is crippling businesses and families and 
overwhelming all the other needs that should be addressed in 
State and Federal budgets. We must all recognize what has been 
missing in the argument over the Affordable Care Act. The law 
was supposed to solve two critical issues around health care in 
America. The first was the large number of people who did not 
have health insurance or could not afford coverage. Second, the 
Affordable Care Act was supposed to make health care 
affordable. Unfortunately, it has provided coverage or 
government subsidies for millions of people to have coverage at 
the same exorbitant costs.
    One of the criticisms of the Affordable Care Act is that it 
took the easy part, saying that we would provide free or 
subsidized insurance to more people, without simultaneously 
addressing the hard thing, addressing costs. We should not kid 
ourselves. Addressing costs is difficult politically and 
otherwise. One of the drivers of health care costs is the 
misalignment of incentives that is created when we compensate 
providers based on the volume of care that they provide rather 
than on outcomes or efficiency.
    In Tennessee, we are working to change the way we pay for 
and deliver health care so that providers are compensated based 
on value. And Congress should make a clear commitment to this 
type of payment innovation.
    All of us, Republicans, Democrats, and Independents, should 
agree that our current path is not a sustainable one. During 
all of the debate about the Affordable Care Act, there has been 
a lot written and said about how immoral it would be to have 
millions of people lose health insurance coverage. I understand 
the argument. I am a Republican Governor who proposed a 
conservative plan to increase Medicaid coverage in our State. 
However, can we not all acknowledge that it is just as morally 
questionable to cover everyone with health insurance and put 
the bill on a credit card to be paid by our grandchildren and 
not do everything we can to make health care affordable now?
    Thank you again to the entire committee. As Governors, we 
stand ready to partner with you to secure and strengthen the 
individual market and our entire health care system.
    [The prepared statement of Governor Haslam follows:]
                 Prepared Statement of Hon. Bill Haslam
                                summary
                              introduction
     Congress must move quickly to address market stability and 
then undertake a serious effort to address health care costs.
     The crisis of health care and the uncertainty of its 
future threaten our State's citizens and the State's budget.
                               stability
     In more than 80 percent of Tennessee counties, citizens 
have only one insurance carrier option, and these limited options are 
provided at substantial cost increases--possibly as much as 40 percent 
for 2018, after increases totaling as much as 139 percent from 2014 to 
2017.
     Congress should take steps now to prevent the total 
collapse of the health insurance market. These steps include: (1) 
Funding cost sharing reduction payments; (2) Creating a short-term 
reinsurance program; and (3) Providing flexibility to States.
     Failure to address the immediate stabilization needs while 
Congress works on the bigger issue of cost will almost certainly result 
in collapse of the market.
     Some say the only way to ensure legislative action on 
costs and realize real reform is total collapse, but I and Governors 
throughout the country don't subscribe to that line of thinking.
                           health care costs
     Unfortunately, the ACA has provided coverage or government 
subsidies for millions of people to have coverage at the same 
exorbitant costs, and these costs have only continued to increase at a 
rate that far exceeds non-medical inflation. At the State level, 
spiraling health care costs in recent decades have forced States to cut 
back on other services.
     One of the criticisms of the Affordable Care Act is that 
it took the easier part--saying that we would provide free or 
subsidized insurance to more people--without simultaneously 
accomplishing the hard thing--addressing costs.
     One of the drivers of health care costs is the 
misalignment of incentives that is created when we compensate providers 
based on the volume of care they provide rather than on outcomes or 
efficiency. In Tennessee, we are working to change the way we pay for 
and deliver health care so that providers are compensated based on 
value. Congress should make a clear commitment to this type of payment 
innovation.
     All of us should agree that our current path is not a 
sustainable one. We are a country with $20 trillion in debt with even 
more staggering debt projections.
     During the debate on the future of the ACA, there has been 
much said about the immorality of millions of people losing health care 
coverage but it's just as morally questionable to cover everyone with 
health insurance and put the bill on a credit card to be paid by our 
grandchildren while not doing everything we can to make health care 
affordable.
                               conclusion
     As Governors, we stand ready to partner with you to secure 
and strengthen the individual market and our entire health care system.
                                 ______
                                 
                              introduction
    Good morning members of the committee, Ranking Member Murray, and 
to one of Tennessee's all-time favorite sons, Chairman Alexander.
    It is an honor to be here with this group of Governors who I 
consider friends and who I know to be problem solvers. My request to 
the committee this morning is that you do two things: first, that you 
move quickly to stabilize the individual insurance marketplace. Then, 
second, that you would undertake a serious effort to work together to 
address the cost of health care.
    These are good times in Tennessee. Our unemployment rate is the 
lowest in history. Our K-12 public schools are improving at a faster 
rate than any State in the country, and we became the first State in 
the Nation to offer 2 years free of community college or technical 
school to all of our citizens. Our tax as a percentage of income and 
our debt per capita are among the very lowest in the country. The 
crisis of health care and the uncertainty of its future threaten our 
State's citizens and the State's budget. The primary difference between 
governing Tennessee and when then Governor Lamar Alexander led the 
State more than 30 years ago, is the impact that the cost of health 
care has on everything else we do.
                               stability
    Today, Tennessee finds itself with only three insurance carriers 
offering ACA-compliant coverage. In more than 80 percent of our 
counties, citizens have only one insurance option. These limited 
options are provided to Tennesseans at substantial cost increases--
possibly as much 40 percent for 2018, after increases totaling as much 
as 139 percent for some from 2014 to 2017. Tennessee's experience of 
fewer choices at higher costs is not sustainable. We are on a path 
where citizens simply won't have an option to purchase from the 
insurance marketplace or can't pay for the limited options available to 
them. Either way, the system fails.
    Congress should take steps now to prevent the total collapse of the 
health insurance market by: (1) Funding cost-share reduction payments; 
(2) Creating a short-term reinsurance program; and (3) Providing 
flexibility to States.
    In Tennessee, about 60 percent of our federally Facilitated 
Marketplace participants are enrolled in CSR plans, meaning they 
receive assistance resulting in premium reductions. Failure to fund CSR 
payments will increase premiums significantly for our citizens, create 
even more uncertainty around the future of participating carriers and, 
according to the Congressional Budget Office, actually increase the 
Federal deficit due to higher premium tax credits. Clearly, this is not 
a recipe for success. It's also very important to understand that our 
marketplace was facing collapse before this discussion of CSR payments, 
and other actions and reforms will be needed to address the crisis.
    Second, Congress can take additional action to stabilize markets by 
funding a short-term reinsurance program that would limit losses to 
carriers that provide coverage in the marketplace. This should produce 
lower premiums, which, in turn, should attract new, healthier 
individuals to the marketplace.
    A third critical way to provide more stability is to offer 
flexibility to States to address their unique challenges and 
circumstances. The waiver approval process should be expedited, and the 
strict guardrails currently placed upon waiver requests should be 
loosened in a manner that will attract younger, healthier individuals 
to the marketplace. Examples of guardrail relief include more 
flexibility around rate bands and plan design. Simply put, without more 
flexibility, carriers will be left with two choices--leave the 
individual market or raise rates.
    I realize some of things I just outlined around stabilization cost 
more money and I'm asking for this at a time when many Governors, 
including myself, are emphasizing the skyrocketing costs of health 
care. In fact, I'm going to address health care costs in a moment. The 
reality is failure to address the immediate stabilization needs while 
Congress works on the bigger issue of cost will almost certainly result 
in collapse of the market. Some may say the only way to ensure 
legislative action on cost and realize real reform is total collapse. I 
don't subscribe to that line of thinking. I think every Governor here 
and those back at home believe we can move to stabilize the market now 
while we work to take on the issue of health care costs.
                           health care costs
    Having helped to stabilize the market, it is my strong hope that 
this committee will then turn its sights to the cost of health care, 
which is crippling businesses and families and overwhelming all of the 
other needs that should be addressed in State and Federal budgets. We 
must all recognize what has been missing in the argument over the 
Affordable Care Act. The law was supposed to solve two critical issues 
around health care in America. The first was the large number of people 
who didn't have health insurance or couldn't afford coverage. Second, 
the Affordable Care Act was supposed to make health care, well, 
affordable. Unfortunately, it has provided coverage or government 
subsidies for millions of people to have coverage at the same 
exorbitant costs.
    It is past time for all of us in elected office to focus our 
conversation on controlling the out of control cost of health care. In 
the last 20 years, health care has gone from 21 percent of the Federal 
budget to 31 percent. At the State level, spiraling health care costs 
in recent decades have forced States to cut back on other services. 
Ever wonder why college tuition has increased so drastically? The 
primary factor is that as States spend more money on Medicaid, there 
are fewer dollars for higher education. Surely all lawmakers can agree 
this country has a fundamental problem as long as medical inflation is 
increasing at almost twice the rate of inflation of everything else. If 
not, as someone once quipped, ``the United States government is about 
to become a large health insurance company with a small army attached 
to it.''
    One of the criticisms of the Affordable Care Act is that it took 
the easy part--saying that we would provide free or subsidized 
insurance to more people--without simultaneously accomplishing the hard 
thing--addressing costs. We shouldn't kid ourselves--addressing costs 
is difficult politically and otherwise. One of the drivers of health 
care costs is the misalignment of incentives that is created when we 
compensate providers based on the volume of care they provide rather 
than on outcomes or efficiency.
    In Tennessee, we are working to change the way we pay for and 
deliver health care so that providers are compensated based on value. 
Early results from our payment reform initiative show that we are 
saving millions of dollars while maintaining quality of care. Congress 
should make a clear commitment to this type of payment innovation by 
encouraging coordination of Medicare, Medicaid, State employee and 
private value-based care initiatives and by leveraging the Federal 
employee plan to spur payments based on quality as opposed to quantity.
    All of us--Republicans, Democrats and Independents--should agree 
that our current path is not a sustainable one. We are a country with 
$20 trillion in debt with even more staggering debt projections. During 
all of the debate about the Affordable Care Act, there has been a lot 
written and said about how immoral it would be to have millions of 
people lose health insurance coverage. I understand the argument. I am 
a Republican Governor who proposed a conservative plan to increase 
Medicaid coverage in our State. However, can't we all acknowledge that 
it is just as morally questionable to cover everyone with health 
insurance and put the bill on a credit card to be paid by our 
grandchildren and not do everything we can to make health care 
affordable?
                               conclusion
    Thank you again to the entire committee. As Governors, we stand 
ready to partner with you to secure and strengthen the individual 
market and our entire health care system.

    The Chairman. Thank you, Governor Haslam.
    Governor Bullock, welcome.

       STATEMENT OF HON. STEVE BULLOCK, GOVERNOR, MONTANA

    Governor Bullock. Chairman Alexander, Ranking Member 
Murray, and members of the committee, thank you. First, thank 
you for inviting Governors, Democrats and Republicans, to 
appear before you today. Whatever comes out of Washington, DC 
or does not come out of it, we are on the front lines of 
dealing with it. And your recognizing the importance of our 
involvement in this discussion is significant.
    Second, thank you for undertaking the hard work of working 
together. As we learned from the passage of the ACA, meaningful 
and lasting reform will be substantially hamstrung if 
implemented over the uniform objection of the minority party. I 
applaud the chair and members of the committee for doing all 
you can to ensure that Congress does not repeat errors of the 
past or even errors of the past months.
    Third, we are all familiar with the old adage, the only way 
to eat an elephant is one bite at a time. My thanks for a 
singular focus on the immediate steps Congress can take to 
stabilize premiums and help individuals in the insurance 
market. Anymore, governing in DC may seem like a zero sum game, 
with few win-win scenarios. If you are earnest in adding 
greater stability to the overall health care system and the 
individual markets, I do believe that your efforts will reap 
political rewards on both sides. Some may call me a dreamer, 
but it might even prove to be a model for further efforts.
    Following the eating the elephant analogy, it may be only 
one bite that this committee is taking, but it is an important 
one. Last time I was with Chairman Alexander again with a 
bipartisan group of Governors, he handed out his pocket guide 
to the basics of health care coverage. Sure, those on the 
exchanges only represent 6 percent of all those covered, 4 
percent of the total insured, or the individual markets, 6 
percent of all those covered by insurance. Stabilizing the 
individual market impacts all areas of coverage and also has a 
highly pronounced impact on places like where I live.
    Rural Montanans like rural Americans are less likely to 
have that option of employer-sponsored insurance. Today 8 
percent of those insured in Montana are on the individual 
market. Three out of four enrolled in a marketplace plan are 
from rural and frontier areas of our State. Eighty-four percent 
of all Montanans enrolled in a marketplace plan receive tax 
credits to make their premiums affordable, and half receive 
cost sharing reduction payments to reduce their out-of-pocket 
costs.
    I do believe that we can find common ground in driving down 
costs and stabilizing the marketplace, and the time to do it is 
now.
    While health care may be complex, it certainly does not 
take a brain surgeon to figure out how to stabilize the 
individual market. The effort I have been involved in, led by 
Governors Hickenlooper and Kasich, offer a road map and a menu 
of actions that this committee can take. And while the 
perspectives of the five Governors appearing before you this 
morning are certainly as diverse as the landscapes that we 
represent, we are uniform in insisting that cost sharing 
reduction payments be continued. All of us in our testimony 
urge you to create a temporary stability fund. We all agree 
that you need to make sure that both the healthy and the 
unhealthy continue to be covered in order to spread the risk. 
And we all seek the opportunity to innovate while still 
maintaining important consumer protections.
    If this committee will work across the aisle with one 
another to undertake even those four measures, you will 
accomplish your aim of stabilizing the individual market. If 
you just did the CSR payments, you would take significant steps 
to do so.
    It also does not take a brain surgeon to sabotage our 
current system. The inaction and the messages coming from some 
in DC are doing it now. In Montana, our largest insurer has 
proposed a rate increase for next year 10 times higher than it 
would be because of the uncertainty that the President and DC 
has created.
    Finally, more important than being Governor, I am a parent, 
and during my first State of the State address 5 years ago, I 
urged policymakers to act like our kids are watching and 
learning from our behavior, our words, and our deeds because, 
indeed, they are. I implore you to do the same. In a time of 
seeming dysfunction, this committee and this Congress can work 
together to stabilize the individual market, beginning to eat 
that elephant one bite at a time. And who knows? We all might 
find that working together is not only good for Congress, but 
it is good for our country.
    Thanks for having me and my colleagues here. I look forward 
to the conversation we will have over the next couple of hours.
    [The prepared statement of Governor Bullock follows:]
                Prepared Statement of Hon. Steve Bullock
                                summary
    I appreciate the Senate HELP Committee's attention to this 
important issue. It's heartening to see folks in Washington DC begin to 
reach across the aisle and engage in a civil, respectful dialog. And 
maybe even begin to listen to one another. Instead of debating 
proposals that would take health insurance coverage away from thousands 
of Montanans, and millions of Americans, focusing the discussion on how 
to fix the existing flaws in our health care system is the only way 
this country will move forward in the health care debate.
    I know bipartisanship works, and on an issue as important as health 
care, bipartisanship is an imperative. We must come together with real 
solutions to stabilize the market. We need certainty and stability not 
just for insurance providers but also for the people in our States that 
need insurance. While we so often speak in terms of percentages and 
aggregate numbers, we cannot forget that behind the numbers are people 
facing a cancer diagnosis or planning to care for a sick child or 
parent; young people that might think they are invincible, that seek to 
avoid coverage, then are one accident or incident away from bankruptcy. 
The millions of people currently in the individual marketplace all have 
individual stories, and individual hopes and aspirations that this 
committee and Congress can help further. These people need certainty 
that their insurance premiums will not spike beyond what they can 
afford.
    I appreciate the work of my fellow Governors in finding common 
ground on controlling costs and stabilizing the market, that will 
positively impact the coverage and care of millions of Americans. As 
Governors of both parties, both here before you today and others across 
this Nation, we stand ready to work with you in an open, bipartisan way 
to provide better insurance and health care outcomes for all Americans.
  fund the cost sharing reduction: premium increases in montana from 
                 failure to pay cost sharing reductions
    The Administration's mixed--and at times hostile--signals regarding 
the CSR payments and other destabilizing actions has led Montana's 
largest insurer to propose a rate hike for next year that's 10 times 
higher than it would have been under current provisions of the ACA.
                   create a temporary stability fund
    Although no longer in place, in 2014, the reinsurance program under 
the ACA reduced premiums in the individual marketplace by 10-15 
percent.
    encourage enrollment and enforce the individual mandate until a 
                     credible replacement is found
    Encouraging younger, healthier people to enroll in insurance will 
improve the risk pool and bring more stability and affordability to the 
market place. It will also protect our young adults, who are just 
starting their independent lives, from financial calamity if the 
unexpected happens.
     encourage state innovation to reform payment and control costs
    Strengthening primary care is critical to promoting health and 
reducing overall health care costs. Congress created the Center for 
Medicare and Medicaid Innovation (known as the Innovation Center, CMMI) 
to test innovative payment and delivery models that can reduce costs 
and improve health. Their Comprehensive Primary Care Plus model does 
that through a public-private partnership that bolsters primary care, 
provides flexibility and the right incentives to doctors, and reduces 
the overall cost of care.
                                 ______
                                 
    Chairman Alexander, Ranking Member Murray, and distinguished 
committee members, thank you for the opportunity to appear today. Thank 
you for the invitation to be here and discuss some of the ways we can 
work together--Senators, Governors, Democrats and Republicans, to 
finally begin to find meaningful solutions that will increase 
affordability and quality of health care across America, specifically 
through the individual marketplace.
    I appreciate the Senate HELP Committee's attention to this 
important issue. It's heartening to see folks in Washington DC begin to 
reach across the aisle and engage in a civil, respectful dialog. And 
maybe even begin to listen to one another. Instead of debating 
proposals that would take health insurance coverage away from thousands 
of Montanans, and millions of Americans, focusing the discussion on how 
to fix the existing flaws in our health care system is the only way 
this country will move forward in the health care debate.
    Although difficult, this discussion is imperative and it is our 
bipartisan responsibility. Indeed, while people across the political 
spectrum may find flaws and shortcomings of the Affordable Care Act--
and doubtless there are differing opinions concerning the substance of 
those shortcomings--there ought to be some agreement regarding the 
enduring problems caused by the manner in which the ACA was ultimately 
enacted. Meaningful and lasting reform in any area of policy will be 
substantially hamstrung if that policy is implemented over the uniform 
objection of the minority party. I applaud the Chairman, and members of 
the committee, for recognizing this to be the case, and for doing all 
that you can to ensure Congress doesn't repeat the mistakes of the 
past.
    While the individual marketplace is a relatively small percentage 
of all Americans covered, it's instability not only impacts millions of 
Americans, but also has impact beyond the percentages. I believe we can 
find common ground in driving down costs and stabilizing the 
marketplace, and the time to act is now. Bipartisanship on an issue as 
difficult as health care can be challenging, yet it is not impossible. 
I know this because we've done it in Montana. And my fellow Governors 
appearing before you today are working hard every day to find similar 
common ground in their States surrounding issues like health care and 
other matters of significant concern.
a strong individual market is essential to a rural, frontier state like 
                                montana
    Montana is a State of a million people spread out over 147,000 
miles. The rural nature of Montana is a celebrated part of our 
heritage, but it does present some real challenges when it comes to 
access to affordable, high quality health care and emergency services. 
Indeed, the vitality and continuing viability of our communities, urban 
and rural, depend on access to quality, affordable healthcare, and the 
facilities that provide that care.
    Until recently, far too many of our neighbors, friends, and 
coworkers went to work every day with the knowledge that access to 
health insurance--and quality, affordable health care--was beyond their 
reach. As a result, they were forced to avoid regular check-ups and 
screenings, and were often left with no choice but to access care when 
and where it is most expensive and most difficult to treat--the 
emergency room.
    Montana was the last State in the country to legislatively pass 
Medicaid expansion and we did so with true bipartisan compromise and a 
uniquely Montana approach. I am grateful to my legislative colleagues 
on both sides of the aisle for being willing to put politics aside to 
improve access to health care in our State.
    With passage of the Medicaid expansion and increased access to 
individual insurance coverage through the health insurance marketplace, 
Montana's rate of uninsured has dropped from a staggering 20 percent in 
2013 to 7 percent in 2017. The implementation of Medicaid expansion in 
2016 contributed most significantly to that drop. Growth in the 
individual market as a result of tax credits, as well as elimination of 
underwriting and pre-existing condition exclusions, were also 
significant factors.
    It is also important to note that while today's topic focuses on 
the individual insurance market, the stability and affordability of the 
private market in States like Montana are linked to the expansion of 
the Medicaid population. It has been well documented that marketplace 
premiums are about 7 percent lower in Medicaid expansion States than in 
States that have not yet expanded Medicaid.\1\
---------------------------------------------------------------------------
    \1\ Office of the Assistant Secretary for Planning and Evaluation 
(ASPE), ``The Effect of Medicaid Expansion on Marketplace Premiums,'' 
August 25, 2016, https://aspe.hhs.gov/pdf-report/effect-Medicaid-
expansion-marketplace-premiums.
---------------------------------------------------------------------------
    The decline in uninsured and the increase in access to affordable 
coverage has been particularly meaningful in rural Montana. Rural 
Montanans, like rural Americans, are less likely to have the option of 
employer-sponsored health insurance. Today, three out of four Montanans 
who enrolled in a Marketplace plan during the last open enrollment 
period are from rural and frontier areas of our State. Eighty-four 
percent of all Montanans enrolled in a Marketplace plan receive tax 
credits to make their premiums affordable; half receive cost sharing 
reductions to reduce their out of pocket costs.
     real impacts: improving health care outcomes in indian country
    The States that appear before this committee all present different 
perspectives, challenges and opportunities. One perspective that is 
more prevalent in the West, and worthy of this committee's 
understanding, is the impact on American Indians. In Montana, the 
lifespan of American Indians is, on average, 20 years shorter than 
their non-native friends and neighbors. The ACA marked the largest 
expansion of American Indian health care in a generation, as Medicaid 
expansion and the health insurance marketplace have given many American 
Indians access to health coverage for the first time in their lives.
    Indian Health Services is an important part of upholding the 
Federal Government's trust responsibility to Indian peoples, but it is 
not comprehensive health coverage. Its chronic underfunding used to 
mean that IHS clinics ran out of money part way through the year, and 
only beneficiaries in danger of losing life or limb could get care.
    The ACA, and especially Medicaid expansion, has changed that. Now, 
in Montana, more than 13,000 Native Americans have gotten covered 
through Medicaid expansion and the health insurance marketplace, which 
means they have access to the full spectrum of health services they 
need, when they need them--just like you and me.
    It also means that IHS' funding lasts longer, and IHS clinics are 
able to make up for some of the chronic funding shortfall by billing 
Medicare, Medicaid and private insurance. Montana's tribal leaders have 
told me how important the ACA is to their people's health and future, 
and the Rocky Mountain Tribal Leaders Council passed resolutions 
supporting the ACA and Medicaid expansion.
   immediate actions to restore stability to private insurance market
    At the end of the day, health care is about people, not politics or 
posturing. It is about the well-being of our citizens, and the overall 
health of our communities. The ACA certainly is not without flaws and 
we must look for bipartisan ways to improve coverage and affordability 
and to ensure a stable and fair market under the law. We will not 
achieve these goals by pulling the rug out from under people who rely 
on the coverage they receive to ensure the health of themselves and 
their families.
    We must continue working together across party lines, in public-
private partnerships, and using the latest technology and best 
practices to ensure that patients, in all corners of our country, have 
access to the best care--and that their doctors and health care 
professionals have access to the training and support they need to 
provide that care.
    Good health is the foundation of everything from a competitive 
workforce to the economic and financial security of our families.
    Recently, a number of Governors sent congressional leaders some 
thoughts on reform, and immediate steps that could be taken to make 
coverage more affordable. The perspectives of the eight Governors 
signing that letter are as diverse as the landscapes spanning the 
signatory States. Doubtless, many other Governors across the country 
would agree with most, or at least some of the recommendations included 
therein. Below, I highlight a few of the areas that I hope the 
committee will seriously consider.

A. Fund the Cost Sharing Reduction: Premium Increases in Montana from 
                    Failure to Pay Cost Sharing Reductions

    Notably, the invitation to testify before this committee wasn't to 
endeavor to solve all the challenges of the ACA or healthcare, but 
instead to present ``thoughts on the need for congressional and 
administrative action to stabilize premiums and help individuals in the 
individual insurance market for 2018.'' If this committee is genuinely 
concerned with stabilizing the individual marketplace, the most 
important step it can take in the near term is ensuring funding for the 
cost-sharing reduction (``CSR'') payments for at least the next 2 
years.
    The impact of the uncertainty of whether the CSR payments will 
continue to be funded is exemplified by the Montana experience. Montana 
has three carriers offering insurance on the exchange. The 
Administration's mixed--and at times hostile--signals regarding the CSR 
payments and other destabilizing actions has led Montana's largest 
insurer to propose a rate hike for next year that's 10 times higher 
than it would have been under current provisions of the ACA.
    In a hearing before the Montana Insurance Commissioner, the 
president of that insurer testified that the uncertainty around whether 
the Trump administration would pay the CSR and keep current provisions 
of the ACA in place resulted in a requested 23 percent average rate 
increase. He testified that that had these uncertainties not existed; 
the insurer would only have requested a rate increase of 2.3 
percent.\2\ Similarly, the non-partisan Congressional Budget Office 
recently found that not paying the cost-sharing reductions would result 
in a 20-25 percent increase in premiums, and increase the Federal 
deficit $194 billion over the next 10 years.\3\ The uncertainty 
surrounding whether the Trump administration will continue to make CSR 
payments is having a real impact on private markets, and congressional 
assurance that these payments will continue to occur will meaningfully 
impact the stability of the market--in Montana, and across the country.
---------------------------------------------------------------------------
    \2\ Matt Volz, ``Health law uncertainty balloons Montana insurance 
rates,'' Associated Press, July 26, 2017, https://www.usnews.com/news/
best-states/montana/articles/2017-07-26/health-law-uncertainty-
balloons-montana-insurance-rates.
    \3\ Congressional Budget Office, ``The Effects of Terminating 
Payments for Cost-Sharing Reductions,'' August 2017, https://
www.cbo.gov/system/files/115th-congress-2017-2018/reports/53009-
costsharingreductions.pdf.
---------------------------------------------------------------------------

B. Create a Temporary Stability Fund

    Although no longer in place, in 2014, the reinsurance program under 
the ACA reduced premiums in the individual marketplace by 10-15 
percent. With several more years of experience now behind us, it is a 
mechanism that will add to the stability of the market. Certainly, some 
States have been taking steps to do the same. However, Congress should 
create a reinsurance program or a fund that states can use to create 
reinsurance programs or similar efforts that reduce premiums and limit 
losses for providing coverage. This safety net will allow insurers to 
manage their risk and bring down premiums. As recommended in the 
bipartisan Governors' letter, it should be provided for at least 2 
years and that a funding source be identified to offset the cost so it 
does not add to the deficit.

C. Encourage Enrollment and Enforce the Individual Mandate Until a 
                    Credible Replacement is Found

    Finally, encouraging younger, healthier people to enroll in 
insurance will improve the risk pool and bring more stability and 
affordability to the market place. It will also protect our young 
adults, who are just starting their independent lives, from financial 
calamity if the unexpected happens.
    Education must remain a priority, and recent actions to reduce 
funding that would drive individuals to sign up for insurance is penny 
wise and pound foolish. Reducing the education budget by 90 percent and 
payments to navigators by 40 percent is, like the continuing threats to 
withhold the CSR payments, and overt attempt to sabotage the ACA. We 
must continue to fund efforts to educate and encourage younger people 
to enroll in coverage, including enrollment assistance.
    Research shows young adults are less confident in their ability to 
choose a health insurance plan, and that most uninsured adults would 
like to talk with someone when signing up for health insurance. 
Improving young adults' participation will lower risk and drive premium 
costs down. Investing in marketing campaigns that educate and appeal to 
this younger generation is a critical component of controlling costs.
    Moreover, at this point, it remains necessary to reduce the risk 
that only the sickest will get insurance. Coming from a rural State 
like Montana that has a strong libertarian streak, I certainly 
understand and sympathize with those who dislike individual mandate. 
However this committee's aim is near term stabilization of the 
individual market. The reality is that without participation of the 
young and the healthy we will not achieve lower premiums. We must roll 
up our sleeves and consider credible alternatives, but we must also 
have the courage to recognize that while unpopular, enforcement of the 
individual mandate is necessary to stabilize the market and prevent 
carriers from leaving the market place or offering premiums that price 
working Americans out of the private market.
   looking forward: encourage state innovation to reform payment and 
                             control costs
    In taking steps to stabilize the market for the immediate term, 
Congress must ensure that it doesn't stifle the innovation and efforts 
occurring to transform the underlying market dynamics driving the 
increasing cost of care; dynamics that were manifest even long before 
the ACA was enacted. We know that healthier Americans make for 
healthier businesses, families, and stable State economies. Individual 
health can have an enormous impact on individuals, their families, and 
the overall economy. We also know that, the current system of paying 
for repeated tests and services, not outcomes, has significant 
limitations. Ultimately, major transformation of how we incentivize and 
provide healthcare is necessary.
    Strengthening primary care is critical to promoting health and 
reducing overall health care costs. Congress created the Center for 
Medicare and Medicaid Innovation (known as the Innovation Center, CMMI) 
to test innovative payment and delivery models that can reduce costs 
and improve health. Their Comprehensive Primary Care Plus model does 
that through a public-private partnership that bolsters primary care, 
provides flexibility and the right incentives to doctors, and reduces 
the overall cost of care.
    In July of 2017, Montana Medicaid joined with the State's major 
insurance carriers and Medicare to launch a Comprehensive Primary Care 
Plus partnership in Montana that includes nearly 1/3 of Montana's 
covered lives. Smarter spending to support primary care and enhancing 
care coordination in more innovative ways is the right move. It lets us 
give providers the freedom to care for patients the way they think is 
best, and it has been proven to reduce emergency room use and costly 
hospitalizations.
    This is good news for patients, it's good news for families, and 
it's good news for the patients in States like many of yours, who are 
joining this move away from fee for service health care system: 
Tennessee, Ohio and Northern Kentucky, the Greater Kansas City Area, 
Colorado, Philadelphia, and next year, in Louisiana.
    Partnerships like this between private and public health plans, and 
innovations through CMMI, must continue. While the Federal Government 
won't always be positioned to create the partnerships or innovation, it 
can support and incentivize the efforts to do so.
                               conclusion
    Thank you again for inviting me and several of my colleagues. I 
know bipartisanship can be hard and is not without challenge. I govern 
in a State where almost two-thirds of those elected in both State 
houses serve in the Republican Party. In my experience--one that I know 
is shared by my fellow Governors--the challenges posed in finding 
bipartisan solutions to difficult issues like health care can be 
overcome. I worked with Democrats and Republicans to pass a unique 
approach to Medicaid expansion, which led to a dramatic drop in the 
number of people in my State without insurance. More than 80,000 
Montanans have gained access to health care through expansion and folks 
have finally started to receive the treatment they deserve.
    I know bipartisanship works, and on an issue as important as health 
care, bipartisanship is an imperative. We must come together with real 
solutions to stabilize the market. We need certainty and stability not 
just for insurance providers but also for the people in our States that 
need insurance. While we so often speak in terms of percentages and 
aggregate numbers, we cannot forget that behind the numbers are people 
facing a cancer diagnosis or planning to care for a sick child or 
parent; young people that might think they are invincible, that seek to 
avoid coverage, then are one accident or incident away from bankruptcy. 
The millions of people currently in the individual marketplace all have 
individual stories, and individual hopes and aspirations that this 
committee and Congress can help further. These people need certainty 
that their insurance premiums will not spike beyond what they can 
afford.
    I appreciate the work of my fellow Governors in finding common 
ground on controlling costs and stabilizing the market, that will 
positively impact the coverage and care of millions of Americans. As 
Governors of both parties, both here before you today and others across 
this Nation, we stand ready to work with you in an open, bipartisan way 
to provide better insurance and healthcare outcomes for all Americans.

    The Chairman. Thank you, Governor Bullock.
    Governor Baker, welcome.

  STATEMENT OF HON. CHARLES D. BAKER, GOVERNOR, MASSACHUSETTS

    Governor Baker. Thank you, Chairman Alexander and Ranking 
Member Murray and the members of the committee. I want to thank 
you for this opportunity to be here today to testify on 
stabilizing premiums and helping individuals in the individual 
insurance market.
    I am honored to be part of this group of Governors that are 
testifying today because we deal with these issues every day 
and we want to work with Congress and the Federal Government on 
health care reform.
    Massachusetts has achieved near universal coverage with the 
highest rate of individuals with health insurance in the 
Nation. That is a story I am sticking to, too. And that is 
because we have been working and reworking it for more than 10 
years. At the center of our bipartisan success is the belief 
that health care coverage is a shared commitment, not the 
singular responsibility of government.
    As you consider measures to stabilize premiums and address 
the individual market, I would like to emphasize four key 
points.
    First, bipartisan cooperation is essential to achieving 
quality, affordable health care coverage and stabilizing any 
market.
    Second, Congress should take immediate affirmative steps to 
resolve the Federal cost sharing reduction payments until 
longer-term reforms are enacted. Carriers, providers, and 
employers and people all need certainty about what rates are 
going to be and month-to-month resuscitation of cost sharing 
reductions is not stabilization. They should be maintained for 
at least 2 years.
    As future reforms are considered, a key contributor to 
market stability is the presence of younger and healthier 
people in the market. When Massachusetts passed its universal 
health care law in 2006, we included an individual mandate, 
which I support. For starters, no one really knows when they 
might get sick or have a tragic accident. And once it happens, 
they will seek care and it will be provided. And in many 
circumstances, they will be unable to pay for it, and that 
means everyone else who has insurance will be paying for the 
health care services rendered to those without coverage.
    In addition, if people have unlimited access to purchase 
coverage, many will purchase health insurance only when they 
need it and then drop it once their care is provided, defeating 
the whole point behind insurance in the first place.
    Continuous coverage encouraged using incentives and 
consequences is a critical element in ensuring that everyone is 
treated fairly. Different States can choose different 
approaches, but if we want to make insurance affordable for 
people that do not have access to coverage through work and do 
not qualify for public coverage, we need to nudge everyone into 
purchasing coverage and then keeping it.
    Third, Congress should establish broader parameters for 
insurance market reforms that include greater latitude for 
States to meet the unique needs of their residents and health 
care marketplaces.
    1332 waivers should be broadened for greater State 
flexibility. It is no secret that Massachusetts is committed to 
continuing to provide access to high-quality, affordable health 
insurance for all of our residents. An increased waiver 
flexibility would allow us to more effectively meet that 
commitment.
    Three areas where changes to 1332 waivers would be a 
significant benefit to States are essential health benefit 
compliance, benefit design, and budget neutrality. 
Massachusetts is a strong benefit State. We support essential 
health benefits. However, even in our State, it was a challenge 
to adapt to the overly strict Federal framework of the ACA.
    Fourth, Congress should take action to address health care 
costs, and one critical driver is rising pharmaceutical costs. 
Among other actions, safely expediting the FDA approval 
process, increasing competition by insuring generic drug 
availability, and creating greater opportunities for public 
payers to negotiate prices should be pursued.
    As you consider these and other reforms to our health care 
system, I would ask that any legislative changes occur on a 
gradual timeline, ideally with State flexibility to opt out or 
grandfather in existing programs in order to prevent market 
shocks and to improve market stability.
    Finally, as Governors, we are responsible for the fiscal 
health of our States, as well as the physical health of our 
residents. Reforms can place States at significant fiscal risk. 
Any reforms should not shift a greater financial burden onto 
States.
    Complex legislation requires fine tuning and adjustments, 
and in Massachusetts, we have repeatedly revisited health care 
reform as we have learned from implementation and as conditions 
have changed. And our commonwealth is better for that. I urge 
Congress to commit, as we did, to returning to the table in a 
bipartisan fashion to review and revise any enacted reforms in 
the coming years.
    I thank you again for this opportunity to provide testimony 
on this important issue, and we look forward to working with 
you and other Members of Congress as you consider legislation.
    I submitted written testimony that goes into greater length 
on these and other issues and would be happy to take questions 
on that or anything else. Thank you.
    [The prepared statement of Governor Baker follows:]
              Prepared Statement of Hon. Charles D. Baker
                                summary
    My testimony will emphasize four key concepts.
    First, bipartisan collaboration is essential to achieve affordable 
health care coverage and stabilize the insurance market. Massachusetts' 
success in expanding health care coverage is rooted in our ongoing 
bipartisan approach to problem solving that includes insurance, 
business, health care, political and advocacy communities.
    Second, Congress should take immediate affirmative steps to 
stabilize the insurance market as an interim step until longer term 
reforms are enacted. Month to month resuscitation of cost sharing 
reductions is not stabilization; they should be maintained for at least 
2 years. As Congress contemplates future reforms, serious consideration 
should be given to reintroducing a reinsurance program as a form of 
market stabilization.
    Additionally, as the presence of younger and healthier people in 
the market is a key contributor to market stability, continuous 
coverage should be a critical element in ensuring that everyone is 
treated fairly and should be encouraged using incentives and 
consequences.
    Third, Congress should establish broader parameters for insurance 
market reforms that include greater latitude for States to meet the 
unique needs of their residents. States are incubators and innovators 
of health care reform solutions and initiatives in both their Medicaid 
programs and commercial markets. For example, States should be allowed 
to broaden 1332 waivers for greater flexibility that will allow us to 
meet our commitment to quality, affordable health insurance for our 
residents in more effective ways.
    Fourth, Congress should take action to address health care costs. 
As we tackle reforms to the health care system, we should bear in mind 
not just the implications for Federal and State budgets, but also on 
the people and businesses struggling to keep up with the ever-
increasing costs of health care coverage and services. One critical 
health care cost driver that Congress should address is rising 
pharmaceutical costs.
    I appreciate the opportunity to testify and look forward to working 
with you and other Members of Congress as you consider legislation.
                                 ______
                                 
    Chairman Alexander, Ranking Member Murray and members of the 
committee, thank you for this opportunity to provide testimony before 
the Senate's Health, Education, Labor, and Pensions Committee hearing 
on Stabilizing Premiums and Helping Individuals in the Individual 
Insurance Market.
    Thank you for your willingness to engage in a bipartisan way in 
order to find much-needed solutions. I am especially appreciative that 
you have convened a group of Governors to testify as we are on the 
front lines and are eager to work with Congress and the Federal 
Government on health care reform.
    As a former State secretary of Health and Human Services, former 
CEO of a health plan and current Governor of a State justifiably proud 
of its excellent and robust health care system, I care deeply about 
access to and the affordability of health care. These are challenges 
that must be tackled in a bipartisan, collaborative way, between the 
States and the Federal Government, and with full participation from 
patients, employers, insurers and providers. I appreciate the 
opportunity to share my thoughts with you this morning.
                the massachusetts health care landscape
    Massachusetts believes strongly in health care coverage for its 
residents. For more than 10 years, the Commonwealth has been engaged in 
designing and implementing health care reform solutions, first on a 
State level with our comprehensive, bipartisan State reform in 2006, 
and later with implementation of the Affordable Care Act. Working with 
the Federal Government, we have made considerable progress toward the 
goal of near universal health care coverage for our residents. Ninety-
nine percent of our children and youth, and more than 96 percent of all 
of our residents have health care insurance, the highest percentages in 
the country. Today more than 257,000 individuals are covered through 
our State exchange, with 190,000 low to modest income residents 
receiving Federal and State subsidies. An additional 300,000 adults 
have Medicaid as a result of the expansion permitted through the 
Affordable Care Act. The Massachusetts State-based exchange, known as 
the ``Connector'' maintains a robust individual insurance market with 
62 plans offered from 10 carriers for the current plan year.
    Additionally, while health coverage is important first and foremost 
for its benefits to residents, health care is an economic engine for 
Massachusetts due to our standing as a global center of excellence in 
field medical research and home to some of the best treatment 
facilities in the world. The health care industry contributed $19.77 
billion to the State's economy in 2014, outpacing any other industry. 
One out of every ten workers is employed in health care related fields.
    Massachusetts' success in expanding health care coverage is rooted 
in our ongoing bipartisan approach to problem solving that includes 
insurance, business, health care, political and advocacy communities 
and that began in the 1990s. At the center of that success is our 
shared belief that health care coverage is a shared commitment, not the 
singular responsibility of government.
    As you consider legislation to stabilize premiums and address the 
individual insurance market, I would like to emphasize four key 
concepts.
                        bipartisan collaboration
    First, bipartisan collaboration is going to be essential to achieve 
affordable health care coverage and stabilize the insurance market. The 
current debate in Washington about health care reform has destabilized 
the insurance market; carriers have responded by leaving some markets 
altogether or proposing to markedly increase rates to adjust for the 
uncertainty. The majority of Americans support a bipartisan approach to 
stabilizing the market and engaging in meaningful health care reform 
that yields affordable health care coverage.
                          market stabilization
    Second, Congress should take immediate affirmative steps to 
stabilize the insurance market as an interim step until longer term 
reforms are enacted. Carriers need certainty in order to finalize rates 
for plan year 2018 and begin preparing rates for plan year 2019, and 
providers and employers also need certainty about what those rates are 
going to be. Month to month resuscitation of cost sharing reductions is 
not stabilization; they should be maintained for at least 2 years.
    I cannot stress enough how critical it is for Federal cost sharing 
reduction payments to be resolved affirmatively in order to maintain 
market stability and to constrain rate increases. It is also important 
to note that the Congressional Budget Office recently reported that 
ending the cost sharing reduction payments will actually cost the 
Federal Government more than making the payments, because they will be 
paying out more in premium tax credit subsidies.
    As Congress contemplates future reforms, serious consideration 
should be given to reintroducing a reinsurance program as a form of 
market stabilization. As you know, reinsurance simply reimburses a 
portion of high cost claims exceeding a given attachment point.
    A key contributor to market stability is the presence of younger 
and healthier people in the market. When Massachusetts passed its 
universal health care law in 2006, it included an individual mandate, 
which I support. I support it for two reasons. First of all, no one 
really knows when they might get sick or have a tragic accident, and if 
they do get sick or have an accident, they will seek care, it will be 
provided, and in many circumstances, they will be unable to pay for it. 
That means everyone else who has insurance will be paying for the 
health care services rendered to those without coverage. Second, if 
people have unlimited access to purchase coverage, many will purchase 
health insurance only when they need it, and then drop it once their 
care is provided, defeating the whole point behind insurance coverage.
    Insurance coverage is about shared risk. We all have coverage so 
that together, we can pay for the care provided to the small number of 
people who need very expensive care. And for those who do get sick, 
costs can be very high. It is not unusual to have 1 percent of the 
population incur 30 percent of the total cost of care provided to that 
group. In many cases, 5 percent of the population incurs 50 percent of 
the cost of care received by that group.
    If people do not have to carry coverage when they are healthy, and 
can access it only when they get sick, break a leg, need to have a 
procedure, or something else, then the rest of us are unfairly tagged 
with paying for the cost of their care.
    Continuous coverage, encouraged one way or another using incentives 
and consequences, is a critical element in ensuring that everyone is 
treated fairly. A mandate is one way to encourage continuous coverage. 
It can also be done using financial penalties for people who do not 
have continuous coverage, or by establishing limited open enrollment 
periods. Different States can choose different approaches--or some 
combination--but if we want to make it easy for people to purchase 
insurance if they do not have access to it through work, and they don't 
qualify for public coverage, we need to nudge them into purchasing 
coverage, and keeping it.
                       federal/state partnerships
    Third, Congress should establish broader parameters for insurance 
market reforms that include greater latitude for States to meet the 
unique needs of their residents. States are incubators and innovators 
of health care reform solutions and initiatives in both their Medicaid 
programs and commercial markets.
    States should be allowed to broaden 1332 waivers for greater 
flexibility. These waivers are still very new tools for States to 
utilize as they have only been available since January 1, 2017. 
Massachusetts is committed to providing access to quality, affordable 
health insurance for our residents; rather than walking away from that 
commitment, we believe that increased flexibility would allow us to 
meet that commitment in more effective ways. In fact, this week, 
Massachusetts will be submitting a section 1332 waiver seeking 
additional flexibilities that promote market stability with a premium 
stabilization fund in the event that Congress does not appropriate 
funding of cost sharing reductions. Additionally, I will be submitting 
a letter to Secretary Price that seeks transitional relief regarding 
reviving the State's employer shared responsibility program and 
continuing to use specific State based rating factors. Finally, later 
this year, we will be submitting an additional waiver seeking 
permission to administer the Federal small business health care tax 
credit at a State level in order to promote commercial group coverage 
among small businesses with lower wage workers.
    I offer the following three examples where changes to 1332 waivers 
would be of significant benefit to States as we continue to reform our 
health care system. These examples concern essential health benefit 
compliance, benefit design and budget neutrality. Massachusetts is a 
strong benefit State; we support essential health benefits (EHB). 
However, even in our State, it was a challenge to adapt to the Federal 
framework. Technical improvements to the process should be allowed that 
support sufficient benefits that comport with best practices and market 
mechanisms. A prime example of one of these challenges which we still 
grapple with is the inclusion of pediatric dental coverage into the EHB 
standard. The need for dental coverage for children and youth is not in 
question, but addressing that need shouldn't require a rigid link 
between dental and health benefits within the same plan. EHB required 
that plans sold in the individual and small group market included 
pediatric dental benefits, which has not historically been included in 
most medical plans. There can be more than one efficient and effective 
way that States can ensure children covered by individual or small 
group plans are assured access to pediatric dental care. Even today, 
despite good faith efforts, most of our medical carriers still struggle 
to efficiently integrate dental benefits into their health plans, 
facing significant technical and operational barriers. All of these 
changes result in the carrier passing the cost down to the consumer. 
All the while, our dental insurance carriers had been providing dental 
coverage for children, adults and families with proven success and with 
the efficiencies that come with specialization and scale. It is 
critical that health plans provide coverage for the care that keeps 
people healthy, but Federal mandates should leverage common sense 
market practices and provide States with flexibility to match local 
requirements to local needs. Federal frameworks can balance local 
experimentation without sacrificing essential benefit categories.
    Greater flexibility is also needed around benefit design. Value-
Based Insurance Design (V-BID) approaches to benefit design seek to 
align patients' out-of-pocket costs, such as copayments and 
deductibles, with the value of services. Certain technical parameters 
of EHB make important kinds of benefit design innovation difficult. For 
example, in many areas, bronze and silver plan deductibles are 
extremely close to the maximum out of pocket (MOOP) limits. States may 
want to experiment with designing plans in which there are lower MOOP 
levels for high-value care (like chronic illness care) in exchange for 
a slightly higher MOOP overall, perhaps exceeding the existing EHB MOOP 
limit for relatively lower-value services. This would help make sure 
people who opt to buy high deductible plans don't put off care that 
will keep them healthy and also help make sure they don't develop an 
even more costly medical condition.
    Finally, the current 1332 regulations require that proposals are 
examined on their own terms with regard to Federal deficit neutrality 
impact. This can greatly limit creative proposals by not allowing 
commercial innovations to draw from savings enabled on the Medicaid 
program and vice versa. Opportunities for change could range from 
coupling savings from 1115 and 1332 waivers that are filed together or 
to determine savings over the course of several years. These types of 
common sense adjustments along with consumer protection guardrails 
could widen opportunities for meaningful innovation and allow for far 
more comprehensive waivers that integrate the ACA, Medicaid and CHIP 
programs into a coherent health care insurance program at the State 
level.
    In addition to increased flexibility and waiver authority, 
Massachusetts supports the development of ``fast-track'' waiver 
authority to expedite Federal processing and approvals.
                        health care cost drivers
    Fourth, Congress should take action to address health care costs. 
Having achieved near universal coverage in Massachusetts, we are now 
focused on health care affordability for individuals, families and 
employers. As we tackle reforms to the health care system, we should 
bear in mind not just the implications for Federal and State budgets, 
but also on the people and businesses struggling to keep up with the 
ever-increasing costs of health care coverage and services.
    One critical health care cost driver that Congress should address 
is rising pharmaceutical costs. In 2013, Massachusetts established a 
health care cost growth benchmark; originally set at 3.6 percent, it 
was recently lowered to 3.1 percent. Although the growth in hospital 
and physician spending has been near or below the benchmark, drug 
spending is a major driver of health costs, far exceeding the State's 
benchmark, growing at 8 percent last year.
    Unfortunately, States have limited ability to control 
pharmaceutical costs. Among other actions, Congress should consider 
safely expediting the FDA approval process, increasing competition by 
ensuring generic drug availability, and creating greater opportunities 
for public payers to negotiate prices.
                       medicaid and other reforms
    While this hearing is focused on insurance market reforms, the 
prospect of reforms to the Medicaid program also looms large.
    There are a number of reforms to Medicaid and the Affordable Care 
Act that would be welcomed by many States, including Massachusetts. I 
look forward to continuing to engage with Congress on those ideas. I 
cannot support under any circumstances any Medicaid reform resulting in 
a substantial loss of Federal revenue to Massachusetts and loss of 
health coverage for thousands of currently insured individuals. 
Additionally, I am opposed to Federal sanctions regarding family 
planning and efforts to diminish support for behavioral health and the 
opioid epidemic.
                                closing
    As you consider these and other reforms, I ask that Congress 
introduce any legislative changes on a gradual timeline, ideally with 
State flexibility to opt out or grandfather existing programs in order 
to prevent market shocks and to improve market stability.
    We are making progress in our individual States, innovating with 
new ideas and we should avoid disrupting ongoing systems that work.
    Additionally, I urge that whatever reforms are enacted, there be a 
bipartisan commitment to return to the table in the coming years to 
review and revise those reforms. Complex legislation requires fine-
tuning and adjustments, no matter how perfect or well-intentioned the 
legislation is. In Massachusetts, we have returned to health care 
reform several times since 2006 as we have learned from our 
implementation of the law and as conditions have changed, and our 
Commonwealth is better for it.
    Finally, as Congress takes steps to stabilize the insurance market 
and turn its attention to longer term reforms in Medicaid and health 
insurance markets, we should ensure that States have the necessary 
Federal fiscal support to maintain important health care services. This 
includes stability of funding for cost sharing reductions, the 
reauthorization of the Children's Health Insurance Program (CHIP), as 
well as the annual discretionary appropriations and Health Centers Fund 
and a delay in the implementation of the proposed Disproportionate 
Share Hospital rule.
    Massachusetts currently has approximately 160,000 children on CHIP 
and failure to reauthorize CHIP will cause uncertainty for the families 
that rely on this program for health care services. Likewise, community 
health centers are an integral part of our health care delivery system, 
providing access to lower cost care in underserved locations.
    For many States, including Massachusetts, this core funding 
provides a safety net for many of our lowest income children, adults 
and families which should be protected.
    Thank you again for the opportunity to provide testimony on this 
important issue. I look forward to working with you and other Members 
of Congress as you consider legislation.

    The Chairman. Thank you, Governor Baker.
    Governor Hickenlooper, welcome.

   STATEMENT OF HON. JOHN W. HICKENLOOPER, GOVERNOR, COLORADO

    Governor Hickenlooper. Good morning. Thank you, Chairman 
Alexander, Ranking Member Murray, and all the members of this 
committee. I appreciate, as well as the others, the opportunity 
to testify and briefly share our bipartisan plan for 
stabilizing the individual health insurance market.
    In 1932, Justice Louis Brandeis popularized the idea that 
States are the laboratories of democracy. He said, ``a State 
may, if its citizens choose, serve as a laboratory; and try 
novel social and economic experiments without risk to the rest 
of the country.'' In other words, States are where the rubber 
meets the road on the highway of the American experiment.
    In Colorado, we have implemented the Affordable Care Act 
for 7 years, as long as I have been Governor. For many 
Coloradans, it has been a success. With bipartisan support, we 
expanded Medicaid and created a State-based marketplace. Around 
600,000 Coloradans now have care because of the ACA. That is 10 
percent.
    Many people are angry and they have a right to be. The 
United States is on a lonely island among high-income nations. 
We spend almost twice as much for worse care. And this has been 
the case long before the Affordable Care Act. We need to move 
toward a system that compensates quality and good health, not 
quantity.
    For the 400,000 Coloradans in the individual marketplace, 
many continue to struggle. Colorado has 14 counties--that is 
almost 25 percent of our counties--with only one insurer on the 
exchange. It is also home to some of the highest premiums in 
the country. A 60-year-old in rural Craig, CO making less than 
$50,000 will pay over $12,000 a year on premiums alone, around 
25 percent of their income. That is simply unacceptable.
    Even worse, our Division of Insurance is projecting 
premiums will increase by as much as 27 percent for 2018.
    It is a big problem. Our bipartisan group of Governors, 
including Governor Kasich, who is not here, Governor Bullock, 
who is, have been working on a common sense set of solutions to 
help make insurance more affordable and markets more stable for 
this crucial 7 percent of the population.
    We can do a lot at the State level, especially with 
congressional support.
    Our plan asks you to explicitly fund the cost sharing 
reductions at least through 2019. Funding the CSRs for 2018 
alone only will put us right back where we are now in a matter 
of months. It will foster uncertainty, threatening to drive up 
premiums and force insurers out of the market.
    We also need your support by creating a stability fund that 
will help us set up reinsurance or similar programs.
    We hope you will fully fund and strengthen Federal risk 
sharing programs.
    We are also requesting tax incentives for insurance 
companies to enter counties with only one insurer, while giving 
Americans who live in these counties the option to buy the same 
insurance that Federal workers have.
    Section 1332 of the ACA gives States the ability to 
innovate to lower costs while ensuring that certain basic 
guidelines are met. Existing regulations limit our ability to 
come up with creative solutions. That is why we are asking for 
a streamlined waiver submission and approval process and 
additional flexibility in applying the budget neutrality 
provisions of this section.
    We believe all of this can be done in a fiscally 
responsible way by offsetting costs.
    We need to address the underlying drivers of health care 
costs as well. That is why we are asking the Federal Government 
to empower consumers with price and quality information. We 
cannot stabilize the market without funding health priorities 
that reduce costs like weight management, tobacco cessation, 
family planning, and injury prevention.
    Governors and the States have proven that we can innovate. 
We are like startup companies. We learn from mistakes. We tweak 
and constantly improve. Fine is never good enough. That is part 
of being laboratories of democracy.
    In Colorado, we are trying to stretch Federal dollars and 
to pinch pennies. We are reducing costs and promoting a 
competitive market while improving care and increasing 
transparency.
    We have a lot to be proud of, but recent Federal action and 
inaction is undermining our efforts. It is time for the Federal 
Government to work with us not against us.
    Without your help, it is like climbing one of Colorado's 
famous 14,000-foot mountains in winter without a parka or 
crampons. It cannot be done. We need immediate Federal action 
and responsible reforms that preserve coverage gains and 
control costs.
    I appreciate your efforts in calling this hearing and 
returning to regular order in the Senate. Lasting solutions 
that make health insurance more affordable and markets more 
stable will need support from both sides of the aisle and 
leadership from States.
    I look forward to answering your questions.
    [The prepared statement of Governor Hickenlooper follows:]
            Prepared Statement of Hon. John W. Hickenlooper
                                summary
    ``In Colorado, we have implemented the Affordable Care Act . . . 
For many Coloradans, it has been a success. . . Around 600,000 
Coloradans now have care because of the ACA. Many people are angry, and 
have a right to be . . . For the 400,000 Coloradans in the individual 
marketplace, many continue to struggle.''
    ``It's a big problem, but our bipartisan group of Governors, 
including Governor Kasich, who is not here, and Governor Bullock, here 
today, has been working on common sense solutions . . . ''
    ``Our plan asks you to explicitly fund the cost sharing reductions 
at least through 2019. Funding the CSRs for 2018 only will . . . foster 
uncertainty surrounding these payments, threatening to drive up 
premiums and force insurers out of the market.''
    ``We also need your support as we work to stabilize the market by 
creating a stability fund, that will help us set up reinsurance or 
similar programs.''
    ``We're also requesting tax incentives for insurance companies to 
enter counties with only one insurer on the exchange, while giving 
Americans who live in these counties the option to buy the same 
insurance that Federal workers have.''
    ``Section 1332 of the ACA gives States the ability to innovate to 
lower costs while ensuring that certain basic guidelines are met. . . 
We're asking for a streamlined waiver submission and approval process, 
and additional flexibility in applying the budget neutrality provisions 
of this section. We believe all of this can be done in a fiscally 
responsible way by offsetting costs.''
    ``Recent Federal action--and inaction--is undermining our efforts. 
It's time for the Federal Government to work with us, not against us.
    ``We need immediate Federal action and responsible reforms that 
preserve coverage gains and control costs. . . Lasting solutions that 
make health insurance more affordable and markets more stable will need 
support from both sides of the aisle, and leadership from States.''
                                 ______
                                 
                              introduction
    Good morning. Thank you Chairman Alexander, Ranking Member Murray 
and members of the committee. I appreciate the opportunity to testify 
and share with you our bipartisan plan for stabilizing the individual 
health insurance market.
    In 1932, Justice Louis Brandeis popularized the idea that ``States 
are the laboratories of democracy.'' He said ``a State may, if its 
citizens choose, serve as a laboratory; and try novel social and 
economic experiments without risk to the rest of the country.''
    In other words, States are where the rubber meets the road on the 
highway of the American experiment.
    In Colorado, we have implemented the Affordable Care Act for 7 
years--as long as I've been Governor. For many Coloradans, it has been 
a success. With bipartisan support, we expanded Medicaid and created a 
State based marketplace, known as Connect for Health Colorado. Around 
600,000 Coloradans now have care because of the ACA.
    We have dealt with its complicated provisions, benefited from its 
good intentions, and created a culture of innovation.
    Many people are angry, and have a right to be. We need to move 
toward a system that compensates quality, not quantity. The United 
States is on a lonely island among other high-income nations: we spend 
almost twice as much for worse care.
    For the 400,000 Coloradans in the individual marketplace, many 
continue to struggle. Colorado's Western slope--which includes some of 
our most rural areas--has 14 counties with only one insurer on the 
exchange. It is also home to some of the highest premiums in the 
country: A 60 year old in rural Craig, CO making less than $50,000 will 
pay over $12,000 per year on premiums alone--around 25 percent of 
income.
    That is simply unacceptable.
    Even worse, our Division of Insurance is projecting premiums will 
increase by approximately 27 percent for 2018.
    It's a big problem, but our bipartisan group of Governors, 
including Governor Kasich, who is not here, and Governor Bullock, here 
today, has been working on common sense solutions to help make 
insurance more affordable and markets more stable for this crucial 8 
percent of the population.
    We can do a lot at the State level, especially with congressional 
leadership.
    Our plan asks you to explicitly fund the cost sharing reductions at 
least through 2019. Funding the CSRs for 2018 only will put us right 
back where we are now in a matter of months. It will foster uncertainty 
surrounding these payments, threatening to drive up premiums and force 
insurers out of the market.
    We also need your support as we work to stabilize the market by 
creating a stability fund, that will help us set up reinsurance or 
similar programs.
    We hope you will fully fund and strengthen Federal risk sharing 
programs that will help amplify our efforts.
    We're also requesting tax incentives for insurance companies to 
enter counties with only one insurer on the exchange, while giving 
Americans who live in these counties the option to buy the same 
insurance that Federal workers have.
    Section 1332 of the ACA gives States the ability to innovate to 
lower costs while ensuring that certain basic guidelines are met. 
Existing regulations limit our ability to come up with creative 
solutions. That's why we're asking for a streamlined waiver submission 
and approval process, and additional flexibility in applying the budget 
neutrality provisions of this section.
    We believe all of this can be done in a fiscally responsible way by 
offsetting costs.
    Bringing down health insurance premiums will require us to address 
the underlying drivers of health care costs. That's why we ask the 
Federal Government to fully commit to paying for value over volume and 
empower consumers with price and quality information.
    We can't stabilize the market without funding health priorities 
that reduce health care costs like weight management, tobacco 
cessation, family planning and injury prevention, just to name a few.
    Governors and States have proven we can innovate. We're like 
startup companies--we learn from mistakes, fix, tweak, and constantly 
improve. Fine is never good enough. That's why we're the laboratories 
of democracy.
    In Colorado, we are stretching Federal dollars and pinching 
pennies. We're reducing costs and promoting a competitive market while 
improving care and increasing transparency.
    We have a lot to be proud of, but recent Federal action--and 
inaction--is undermining our efforts. It's time for the Federal 
Government to work with us, not against us.
    Without your help, it's like climbing one of Colorado's famous 
14,000 foot mountains in winter without crampons; it can't be done.
    We need immediate Federal action and responsible reforms that 
preserve coverage gains and control costs.
    I sincerely appreciate your efforts in calling this hearing and 
returning to regular order in the Senate. Lasting solutions that make 
health insurance more affordable and markets more stable will need 
support from both sides of the aisle, and leadership from States.
    I look forward to answering you questions.
                                 ______
                                 
                                           August 30, 2017.
Hon. Paul D. Ryan, Speaker of the House,
H-232, The Capitol,
Washington, DC 20515.

Hon. Mitch McConnell, Senate Majority Leader,
S-230, The Capitol,
Washington, DC 20510.

Hon. Nancy Pelosi, House Minority Leader,
H-204, The Capitol,
Washington, DC 20515.

Hon. Charles E. Schumer, Senate Minority Leader,
S-221, The Capitol,
Washington, DC 20510.

    Dear Mr. Speaker, Leader McConnell, Leader Pelosi and Leader 
Schumer: As Congress considers reforms to strengthen our Nation's 
health insurance system, we ask you to take immediate steps to make 
coverage more stable and affordable. The current state of our 
individual market is unsustainable and we can all agree this is a 
problem that needs to be fixed. Governors have already made restoring 
stability and affordability in this market a priority, and we look 
forward to partnering with you in this effort.
    Most Americans currently have access to a stable source of health 
insurance coverage through their employer, or from public programs, 
like Medicare and Medicaid. While rising costs are a concern throughout 
the system, the volatility of the individual market is the most 
immediate concern, threatening coverage for 22 million Americans.
    Continuing uncertainty about the direction of Federal policy is 
driving up premiums, eliminating competition, and leaving consumers 
with fewer choices. Proposed premiums for the most popular exchange 
plans are expected to increase 18 percent in 2018 and 2.5 million 
residents in 1,400 counties will have only one carrier available to 
them on the exchange.
    Despite these headwinds, States continue to try to stabilize the 
individual market and have developed innovative solutions to preserve 
coverage while making insurance more affordable.
    Previously, we have written that changes to our health insurance 
system should be based on a set of guiding principles that include 
improving affordability and restoring stability to insurance markets. 
Reforms should not shift costs to States or fail to provide the 
necessary resources to ensure that the working poor or those suffering 
from mental illness, chronic illness or addiction can get the care they 
need.
    Based on these guiding principles, we recommend (1) immediate 
Federal action to stabilize markets, (2) responsible reforms that 
preserve recent coverage gains and control costs, and (3) an active 
Federal/State partnership that is based on innovation and a shared 
commitment to improve overall health system performance. Just as these 
proposals have brought together Governors from across the political 
spectrum, we are confident they can attract support across party lines 
in both chambers of Congress.

1. Immediate Federal Action to Stabilize Markets

    Congress should continue its work to identify reforms that 
strengthen insurance markets in the long term, but we need immediate 
action to ensure consumers have affordable options in the short term. 
Insurers have until the end of September to make final decisions about 
participating in the marketplaces. Congress and the Administration need 
to send a strong signal now that the individual market will remain 
viable this year, next year, and into the future.

    Fund Cost Sharing Reduction Payments. The Trump Administration 
should commit to making cost sharing reduction (CSR) payments. The 
National Association of Insurance Commissioners (NAIC), National 
Governors Association, and United States Chamber of Commerce have 
identified this as an urgent necessity. The Congressional Budget Office 
(CBO) estimates not making these payments would drive up premiums 20-25 
percent and increase the Federal deficit $194 billion over 10 years.
    Also, Congress should put to rest any uncertainty about the future 
of CSR payments by explicitly appropriating Federal funding for these 
payments at least through 2019. This guarantee would protect the 
assistance working Americans need to afford their insurance, give 
carriers the confidence they need to stay in the market, increase 
competition, and create more options for consumers. Because the cost of 
this initiative is already included in the budget baseline, the 
appropriation would not have budget consequences.

    Create a Temporary Stability Fund. Congress should create a fund 
that States can use to create reinsurance programs or similar efforts 
that reduce premiums and limit losses for providing coverage. The House 
and Senate each recently proposed $15 billion annually for States to 
address coverage and access disruption in the marketplace with a goal 
of lowering premiums and saving money on premium subsidies. We 
recommend funding the program for at least 2 years and fully offsetting 
the cost so it does not add to the deficit.

    Offer Choices In Underserved Counties. Congress should foster 
competition and choice in counties where consumers lack options because 
there is only one carrier on the exchange. We ask Congress to encourage 
insurance companies to enter underserved counties by exempting these 
insurers from the Federal health insurance tax on their exchange plans 
in those counties. We also ask Congress to allow residents in 
underserved counties to buy into the Federal Employee Benefit Program, 
giving residents in rural counties access to the same health care as 
Federal workers. While these proposals may be temporary solutions, they 
will help provide Americans with additional choices until other 
policies have improved the market dynamics.

    Keep The Individual Mandate For Now. Finally, to prevent a rapid 
exit of additional carriers from the marketplace, Congress should leave 
the individual mandate in place until it can devise a credible 
replacement. The current mandate is unpopular, but for the time being 
it is perhaps the most important incentive for healthy people to enroll 
in coverage. Until Congress comes up with a better solution--or States 
request waivers to implement a workable alternative--the individual 
mandate is necessary to keep markets stable in the short term.

2. Responsible Reforms That Preserve Coverage Gains and Control Costs

    Federal action to stabilize markets is only the first step. 
Governors have been eager to pursue reforms that strengthen health 
insurance markets in our States, but uncertainty about the ACA and the 
status of Federal subsidies to support the individual market have made 
it difficult to proceed. Working alongside States, the Federal 
Government must make reforms that will preserve and expand gains in 
coverage, while controlling costs for consumers.
    In efforts to augment the potential Federal actions we recommend in 
this letter, we attach a menu of options that individual States may 
consider or pursue. The options can be considered alone or assembled 
into a comprehensive strategy to achieve the interrelated goals of 
maximizing market participation, promoting appropriate enrollment, 
stabilizing risk pools, and reducing cost through coverage redesign. 
Different States will take different approaches. We all agree on and 
support the proposals contained in this letter, but each State will 
choose the State-based approaches that best fits their individual 
situation.
    Maximize Market Participation. Approximately 22 million people now 
purchase coverage through the individual market, but another 27 million 
remain uninsured. Increasing coverage uptake among the uninsured would 
improve the risk pool and set in place a virtuous cycle of lower 
premiums leading to higher enrollment.
    First and foremost, encouraging younger, healthier people to enroll 
in insurance and educating Americans about the importance of coverage 
can help improve the risk pool. The Federal Government should continue 
to fund outreach and enrollment efforts that encourage Americans to 
sign up for insurance. Many States invest in similar efforts, and all 
States need the Federal Government's support to maximize participation 
from younger, healthier people.
    Also, making insurance more affordable is a key part of increasing 
participation in the marketplace. For example, current law includes a 
glitch that makes some families who can't afford insurance through 
their employer ineligible for tax credits on the exchange. Congress 
should fix the ``family glitch'' and give more working families access 
to affordable coverage.
    Promote Appropriate Enrollment. Some consumers choose to enroll in 
a plan only when they need health care, stop paying premiums at the end 
of the year, or purchase exchange plans even though they are eligible 
for Medicare and Medicaid--all of which drives up costs in the 
individual market. Congress and individual States can reverse this 
effect, for example by shortening grace periods for non-payment of 
premiums, verifying special enrollment period qualifications, and 
limiting exchange enrollment for those who are eligible for other 
programs.
    Stabilize Risk Pools. The ACA created several risk sharing programs 
to help effectively manage the risk of the individual insurance market. 
However, the Federal Government has gone back on its commitment to 
these programs, in some cases refusing to fully fund risk sharing 
programs. Congress should modify and strengthen Federal risk sharing 
mechanisms, including risk adjustments and reinsurance. This commitment 
to Federal risk sharing will augment the State efforts that are 
supported by the stability fund.
    Reduce Cost Through Coverage Redesign. States have an important but 
limited role in selecting essential health benefits (EHB). The 
Secretary of Health and Human Services (HHS) should allow States more 
flexibility in choosing reference plans for the 10 EHB categories than 
are currently allowed by regulation. HHS should give States that 
develop alternatives to EHBs that meet the requirements of Section 1332 
of the ACA the opportunity to pursue and implement innovative 
approaches.

3. An Active Federal/State Partnership

    States can pursue many reforms without Federal assistance. However, 
in some cases States are constrained by Federal law and regulation from 
being truly innovative. We urge Congress and Federal agencies to work 
with States to overcome these constraints, focusing first on improving 
the regulatory environment, supporting State innovation waivers, and 
controlling costs through payment innovation.
    Improve the regulatory environment. The ACA created a greater role 
for the Federal Government in State health insurance markets, but 
retained States as the principle regulators of those markets. 
Recognizing the need for some common Federal standards, the Federal 
Government should not duplicate efforts or preempt State authority to 
regulate consumer services, insurance products, market conduct, 
financial requirements for carriers, and carrier and broker licensing 
in States that already effectively perform these functions. Also, 
Federal agencies should review the list of regulatory reforms 
identified by NAIC to stabilize markets.
    Support State innovation waivers. Section 1332 of the ACA permits a 
State to request permission to waive specific provisions of the ACA, 
including the individual and employer mandates, as well as requirements 
for qualified health plans, essential health benefits, tax credits and 
subsidies, and exchanges. A State may not waive community rating 
requirements, prohibitions on preexisting condition exclusions, 
lifetime maximum coverage limits, preventive care mandates, or coverage 
for adults as dependents through age 26. To obtain a waiver, a State 
must demonstrate its plan would not increase the Federal deficit, would 
not reduce the number of people with health coverage, and would not 
reduce the affordability or comprehensiveness of coverage.
    Many States view Section 1332 as an opportunity to strengthen 
health insurance markets while retaining the basic protections of the 
ACA. We recommend HHS streamline and coordinate the waiver submission 
and approval process, including an option for States to easily build on 
approved waivers in other States, and an option to fast-track waiver 
extensions. We also recommend HHS rescind its 2015 guidance on Section 
1332 and clarify that States may combine waivers into a comprehensive 
plan and measure deficit neutrality across the life of the waiver and 
across Federal programs.
    Control Cost Through Payment Innovation. Coverage is important, and 
coverage reforms can help contain costs, but eventually our Nation 
needs to confront the underlying market dynamics that are driving 
unsustainable increases in the cost of care. With the support of the 
Federal Government, States are resetting the basic rules of health care 
competition to pay providers based on the quality, not the quantity of 
care they give patients. This is true in our States, where we are 
increasing access to comprehensive primary care and reducing the 
incentive to overuse unnecessary services within high cost episodes of 
care.
    Congress and the Administration should make a clear commitment to 
value-based health care purchasing. For example, Medicare and other 
Federal programs should be allowed to participate in multi-payer State 
Innovation Models. The Administration should align priorities for 
value-based purchasing across all Federal agencies, including HHS, CMS, 
SAMHSA, CDC, VA, AHRQ, HUD, DOL, OMB and others. Payment innovation 
projects should be funded through the Centers for Medicare and Medicaid 
Innovation and expanded to more States.
    Empowering consumers with information about the cost and quality of 
care can help to drive competition that will lower costs. New tools 
should be developed to provide consumers with better information about 
how much health services cost or which providers offer the best quality 
of care. For example, the Federal Government should work with States to 
promote consumer-facing websites and apps that let consumers shop for 
health care based on quality and cost. Many States have developed all 
payer claims databases to provide greater transparency for consumers, 
and should be allowed to include claims information from federally 
regulated ERISA plans in these databases.
    We strongly encourage that Congress and the Administration take 
immediate action to stabilize the individual health insurance 
marketplace. If there is a clear signal to consumers and carriers that 
the individual market is viable, then additional State-based reforms 
will be more manageable and we can succeed in preserving recent 
coverage gains and controlling costs. As we move beyond the immediate 
crisis, the real challenge over time will be to confront the underlying 
cost drivers of health care spending, and reset incentives to reward 
better care for individuals, better health for populations, and lower 
cost.
    Lasting solutions will need support from both sides of the aisle, 
and we applaud the bipartisan efforts that have now commenced in both 
the House and Senate. We ask that you support these efforts to return 
to regular order, allowing committees to work in an open, transparent 
and bipartisan manner. Governors have extensive expertise implementing 
changes to our health insurance system, and we stand ready to work with 
you and your colleagues to develop solutions that are fiscally sound 
and provide quality, affordable coverage for our most vulnerable 
citizens.

            Sincerely,
    John Kasich, Governor, State of Ohio; John Hickenlooper, Governor, 
State of Colorado; Brian Sandoval, Governor, State of Nevada; Tom Wolf, 
Governor, State of Pennsylvania; Bill Walker, Governor, State of 
Alaska; Terence R. McAuliffe, Governor, State of Virginia; John Bel 
Edwards, Governor, State of Louisiana; Steve Bullock, Governor, State 
of Montana.

                                 ______
                                 

  A Bipartisan Approach to Strengthen Our Nation's Individual Health 
                           Insurance Markets

       menu of state reform options to supplement federal reforms
Maximize Carrier Participation
     Waive exchange fees for carriers who are the last 
remaining carrier in a county.
     Encourage participation across lines of business (Medicaid 
MCO, State employee, etc.).
     Streamline payor compliance (quality reporting, coverage 
transparency, etc.).
Maximize consumer participation
      Increase outreach to attract healthier individuals.
     Provide adequate and effective subsidies and/or premium 
tax credits.
     Encourage younger people to get coverage.
     Encourage continuous coverage (e.g., reward those who 
renew coverage every year, penalize those who stop paying premiums, 
require SEP enrollees to maintain coverage, and/or late enrollment 
penalties or waiting periods for non-continuous coverage).
Promote Appropriate Enrollment
     Verify special enrollment period (SEP) enrollment 
qualifications (NAIC).
     Limit individual market enrollment for those eligible for 
other public programs (NAIC).
     Prevent third-party payers from diverting consumers from 
Medicare coverage (NAIC).
     Shorten the 90-day grace period for non-payment of 
premiums (NAIC).
Stabilize Risk Pools
     Administer a reinsurance or similar program.
     Pursue strategies to create larger, more stable pools 
(e.g., consider combining individual and small group markets, or 
consider combining Medicaid and marketplace populations).
Reduce Cost Through Coverage Redesign and Payment Innovation
     Apply for a State Innovation Waiver to pursue innovative 
strategies to strengthen health insurance markets while retaining the 
basic protections of the ACA. Section 1332 of the ACA allows a State to 
request permission to waive provisions related to individual and 
employer mandates, qualified health plans, consumer choices and 
insurance competition through marketplaces, and premium tax credits and 
cost-sharing reductions in the marketplace provided that State covers 
as many people with coverage that is as affordable and as comprehensive 
without adding to the Federal deficit.
     Encourage the adoption of population-based payment models 
that reward the effective management of total cost of care.
     Encourage the adoption of episode-based payment models 
that reward the effective management of specialty care.
     Enable the use of value-based insurance design and 
wellness incentives to tie the level of coverage for chronic care to 
personal responsibility for health outcomes achieved.
     Increase transparency in cost and quality (e.g., promote 
the use of consumer facing websites, include ERISA plan data in all 
payer claims databases).

    The Chairman. Thank you, Governor Hickenlooper.
    Governor Herbert, welcome.

       STATEMENT OF HON. GARY R. HERBERT, GOVERNOR, UTAH

    Governor Herbert. Thank you, Chairman Alexander and Ranking 
Member Murray and members of the committee. We are all honored 
to be here to address you on this very important issue.
    The market for individual health insurance protect, among 
others, the families of Utah's entrepreneurial self-employed. 
It would be irresponsible to allow these markets to collapse 
simply because of political paralysis or inaction.
    Having served as Chairman of the National Governors 
Association, as well as the Western Governors Association, and 
soon to be the next President of the Council of State 
Governments, I have a broad appreciation for the role that 
States have in our Federal system. I would, therefore, urge 
Congress to get past the health care impasse and delegate the 
responsibility to find solutions to the laboratories of 
democracy, as Governor Hickenlooper has mentioned, our 50 
States.
    I would recommend allowing each State to take on the full 
role of regulating our health insurance markets. You can 
diversify the social, economic, and political risk associated 
with this policy change by letting the States experiment as 
laboratories of democracy to determine what policy works and 
what policy does not work.
    For your information, the State of Utah has one of the 
lowest health care costs in the Nation. That certainly stems 
from our local culture and our favorable demographics, but it 
also comes from such practices as evidence-based measures of 
effectiveness, eliminating duplication of services, innovative 
use of managed care organizations, and empowering doctors and 
patients alike to make more informed choices.
    I believe that if you will empower the States to determine 
their own health care destiny, the States will innovate and 
create practical solutions for the most complex health care 
issues of the day. We will learn from each other, and therefore 
we will improve.
    Under current law, empowering States means greater 
flexibility in defining essential health benefits and 
simplifying the State innovation waiver process.
    True self-determination goes well beyond coming to the U.S. 
Department of Health and Human Services with hat in hand on 
bended knee and with a hope for favorable treatment. True self-
determination would mean a block grant of Medicaid and 
Affordable Care funds with a formula that gets us to funding 
parity in the 50 States.
    Before achieving that vision of a vibrant State-based 
approach, Congress needs to provide immediate certainty to the 
individual insurance markets.
    To that end, I recommend establishing a clearly defined 
transition period. This would allow markets to incentivize the 
broadest, continuous participation in the individual insurance 
market. This should be done while anticipating the adjustments 
in a market based on greater State-level autonomy.
    I personally am not a fan of cost sharing reduction 
payments. Nevertheless, in the near term, individual insurance 
markets need predictability in order to price their products 
adequately. The sudden demise of CSRs would destabilize Utah's 
individual insurance market, putting at risk some 110,000 
Utahans who benefit from this program. A transition should 
include funding for CSRs through at least 2018 or 2019.
    We should also look to market-oriented incentives to 
maintain and increase continuous participation in individual 
health insurance markets. For example, Congress could 
immediately reduce the cost of premiums by eliminating the 
health insurance tax. Insurance products could be better 
tailored to demand by allowing insurers to underwrite a wider 
array of cost-effective products, including more affordable 
high-deductible plans. Participation could be incentivized by 
greater flexibility in health savings accounts. The Federal 
Government should fund a temporary insurance program for high-
risk pools with an option for States to operate their own risk 
stabilization programs.
    At the bottom of all this, health insurance needs to be 
able to do its job of pooling risks and protecting against 
unforeseen health care costs instead of being used for some 
vehicle for social justice reform.
    To get there, the excessive burden of regulatory 
restrictions that we have placed on insurance policies needs to 
be peeled back, and that needs to be done with predictability 
and transparency.
    Frankly, most of America's consumers do not care whether or 
not a lot is repealed and replaced or modified and improved. 
Utahans want us to know that if they are prudent in their 
planning and budgeting, that they will be able to purchase 
reliable health insurance to protect them against life's 
unexpected health challenges. And they need to know that if 
they experience a medical catastrophe, that there is a safety 
net that will keep them from spiraling into a financial 
catastrophe.
    The States are better able to address these issues for the 
unique populations and unique demographics than is the Federal 
Government, which is too often trapped in a one-size-fits-all 
mentality. I would urge you to consider a health care future 
that gives back to the States the lion's share of 
responsibility. It is something that both sides of the aisle 
can support, giving more authority to Governors and State 
houses. Returning control to the States is both prudent policy, 
but it is also prudent politics.
    Thank you for listening.
    [The prepared statement of Governor Herbert follows:]
               Prepared Statement of Hon. Gary R. Herbert
                           executive summary
    Allowing our individual health insurance market to fail without 
providing a viable path forward would be irresponsible, but political 
paralysis threatens such a collapse.
    Our Nation's healthcare impasse stems from principled differences 
about the proper role of government with regard to health insurance and 
healthcare. Congress can break this logjam by pushing this debate to 
each of the 50 States. By letting the States experiment with what works 
and what doesn't, Congress can diversify the social, economic and 
political risk associated with major policy change.

    As it devolves this issue to the States, Congress needs to create a 
clear glide path to improved individual insurance markets. To that end, 
Congress should:

     create a clearly defined transition period during which 
Congress should continue to fund cost sharing reduction (CSR) payments;
    promote market-oriented incentives to maintain and increase 
continuous participation in individual health insurance markets, e.g., 
by expanding high deductible health plans and health savings accounts;
     help educate and financially reward individuals for taking 
advantage of continuous coverage (vetted outreach programs may be 
useful);
     reduce the cost of premiums by eliminating the Health 
Insurance Tax;
     fund a temporary reinsurance program for high risk pools;
     peel back the layers of regulatory restrictions that have 
been placed on the basic health insurance contract in a predictable, 
transparent way.

    As Congress points the way to a more stable individual health 
insurance market (which in Utah would likely mean fewer market 
distorting taxes and subsidies) it should then foster policies that 
promote the breakthrough innovations in finance, education, governance 
and technology needed for to improve and reduce the underlying costs 
associated with medical care.
                                 ______
                                 
                              introduction
    Thank you Chairman Alexander, Ranking Member Murray and members of 
the committee for the opportunity to share my perspective on how to 
stabilize our individual health insurance markets.
    As you know, the primary regulation of both insurance and medicine 
have traditionally been at the State level. It is not immediately 
evident that Federal intervention has helped to improve upon the 
States' role.
    Careful observers agree that the status quo of our individual 
health insurance markets is unsustainable.
    And most agree that allowing these markets to collapse without 
providing a viable path forward would be irresponsible.
    And yet, because of Washington DC's political logjam, it appears 
that lawmakers might indeed allow this important insurance market that 
protects, among others, the families of Utah's entrepreneurial sole 
proprietors, to collapse.
    This morning I want to share my thoughts about how Congress can 
overcome its healthcare impasse, how we can create a smooth glide path 
toward a broad and stable individual health insurance market with fewer 
market distorting taxes and subsidies, and why we should shift the 
national dialog about healthcare from debates about our healthcare 
payment system to how we can promote cost-reducing innovations medical 
care.
 congress can overcome its impasse by returning greater control to the 
                                 states
    I believe the Nation's healthcare impasse stems from two deeply 
rooted differences of thought. The first is that lawmakers have 
principled differences about the proper role of government with regard 
to health insurance and the second is that lawmakers also have 
different viewpoints about which level of government--Federal or 
State--should be the primary regulator.
    As the past chair of both the National Governor's Association and 
the Western Governor's Association, as the next president of the 
Council of State Governments, and as one who has governed in a State 
where productive collaboration toward shared aims is more important 
than ideological purity, I would urge Congress to get past your impasse 
on these issues by delegating the issue of government's proper role to 
the 50 States.
    Please allow each of the States, in their various hues of blue, red 
and purple, to take on the primary role of regulating their health 
insurance markets. Instead of foisting huge social and economic 
experiments on the entire country--too often along narrow party-line 
votes--Congress has an opportunity to diversify the social, economic 
and political risk associated with major policy change by letting the 
portfolio of States experiment with what works and what doesn't.
    Utah enjoys among the lowest health care costs in the Nation. Our 
costs may be lower because we have the youngest population in the 
Nation. They are also lower because of the healthy lifestyle choices of 
our people, many of whom regularly enjoy the unparalleled opportunities 
for sport and outdoor recreation in our State and many of whom 
religiously abstain from alcohol and tobacco.
    It is not just our demographics. Utah has been able to keep our 
healthcare costs low because of deliberate efforts within our private 
healthcare system to use evidence-based measures of effectiveness, 
eliminate duplication of services and empower doctors and patients 
alike to make more informed choices. We have worked to reduce Medicaid 
costs low because of innovative use of managed care organizations.
    If you will empower Utah to determine more fully its own healthcare 
destiny, I promise you that we will provide the other 49 States with 
proven and scalable solutions for their most complex healthcare issues. 
And Utah will learn from and emulate the success of others.
    Under the Patient Protection and Affordable Care Act, empowering 
Utah would mean giving us greater flexibility in defining Essential 
Health Benefits. It would mean dramatically simplifying the State 
Innovation Waiver process under Section 1332. And it would mean 
expanding what could be waived under Section 1332.
    Please appreciate that our vision for greater State self-
determination goes well beyond coming to the U.S. Department of Health 
and Human Services to ask permission for how we would organize our 
insurance markets.
     creating a glide path to improved individual insurance markets
    In order for the Nation to glide into that vision of a vibrant and 
innovative State-based approach, Congress needs to act today to provide 
immediate certainty and stability to the individual insurance market.
    To that end, I recommend establishing a clearly defined transition 
period that allows markets to incentivize the broadest, continuous 
participation in the individual insurance market possible while 
anticipating the adjustments needed to a market with less 
subsidization, less taxation, and less socialization.
       continue cost sharing reduction payments in the near term
    I do not believe that cost sharing reduction (CSR) payments are the 
most transparent and effective way to assist low income individuals. 
Nevertheless, in the near term, our individual insurance markets need 
predictability in order to price their products adequately. The sudden 
demise of CSR support would destabilize Utah's individual insurance 
market. In 2016, 110,000 Utahns benefited from the CSR program, 
accounting for 63 percent of those receiving health care coverage 
through healthcare.gov. As a part of a transition, I recommend funding 
for CSRs through 2019.
           incentivize the broadest, continuous participation
    As Congress considers the fate of the individual mandate, we should 
look to market-oriented incentives to maintain and increase continuous 
participation in individual health insurance markets. Congress can 
immediately reduce the cost of premiums by eliminating the Health 
Insurance Tax. The supply of insurance products can be better tailored 
to demand by allowing insurers to underwrite a wider array of cost-
effective products.
    For example, we would support broadening the kind of wellness 
incentives that can attract younger populations, the expanding high 
deductible health plans and health savings accounts, and providing 
greater flexibility within health savings accounts--such as the ability 
to pay for insurance premiums from an HSA. Individuals also need to be 
educated about and financially rewarded for taking advantage of 
continuous coverage. Publicly funded outreach programs may be useful, 
but should be evaluated for their effectiveness.
                     stabilize through reinsurance
    The Federal Government can further stabilize the market by funding 
a temporary reinsurance program for high risk pools with an option for 
States to operate their own risk stabilization programs.
                       allow insurance to insure
    Insurance pools risk in order to contractually cover the costs 
associated with defined contingent losses. Although straightforward in 
concept, pooling risk in a way that is affordable to the insured and 
profitable to the insurer has never been easy.
    If losses and costs are not contingent, in other words, if they are 
certain and known, then insurance premiums no longer pool probabilistic 
risk, but instead they socialize known costs. By forcing the coverage 
of pre-existing conditions, by narrowing the bands of risk, by 
dictating coverages and uniforming prices, government has largely 
robbed insurance of its risk-pooling function. And the Federal 
Government has further complicated matters by providing an opaque 
substitute for income support by instead creating public subsidies for 
insurance contracts.
    Congress can help stabilize the individual health insurance market 
by allowing it to do the job of insuring against unforeseen health 
costs instead of using it as a vehicle for other social policies. To 
get there, Congress should peel back the layers of regulatory 
restrictions that have been placed on the basic insurance contract in a 
predictable, transparent way.
                          focus on innovation
    The national debate about health care has been primarily about our 
healthcare payment system. I believe that if States were to play a 
larger role in facilitating their insurance and healthcare markets that 
the conversation would turn to how to dramatically reduce the cost of 
health care. I don't believe States, for example, would choose to stunt 
innovation in medical technology by putting an excise tax on medical 
devices the way Congress has.
    If we can help support robust competitive markets to operate in 
health care, we can turn from asking about who should be paying for 
medical care to questions like: How can we spur disruptive innovation 
in telemedicine, artificial intelligence, medical robotics and 
genomics? How can we continue to develop new breakthrough drugs without 
bankrupting those who pay for the drugs? How can we creatively increase 
the use of non-physician medical labor? How can we deliver more cost-
effective education for nursing, health sciences, and medicine? How can 
we empower patients to manage better their own health with well-
informed choices?
                               conclusion
    Thank you for letting me visit with you today about some aspects of 
our Nation's healthcare challenges.
    My strong sense is that when it comes to their healthcare, the 
people of Utah--like most Americans--care about results rather than 
slogans. Whether or not a law is repealed and replaced, or modified and 
improved, what they need to know is that if they are prudent in their 
planning and budgeting, that they will be able to purchase reliable 
health insurance that will protect them from life's vicissitudes. And 
they need to know is that if they should (heaven forbid) experience a 
medical catastrophe, that there is a safety net that will keep it from 
spiraling into a financial catastrophe.
    My constituents don't particularly care about the details of ``cost 
sharing this'' or ``mandated that.'' What they would appreciate, 
however, is a realistic vision for an affordable, reliable, responsive, 
professional, and patient-focused healthcare system.
    I believe that the States can do this better for their unique 
populations than can the Federal Government. That is why I would urge 
you to consider a healthcare future that gives back to the States the 
lion's share of responsibility. Given the impasse at the Federal level, 
federalism is both prudent policy and prudent politics.
    As you point toward that future--which in our State would mean 
fewer market distorting taxes and subsidies--please provide a measured 
and transparent transition rather than shock therapy. And as you step 
back from debates about who should pay for what, please consider how to 
foster an environment where financial, organizational and technological 
innovations for improved, less-expensive medical care can thrive.
                                 ______
                                 

    The Chairman. Thank you, Governor Herbert. And thanks to 
all of the Governors.
    The Governors stuck to 5 minutes. I am going to ask the 
Senators if you will as well. And we will begin with Senator 
Enzi.

                       Statement of Senator Enzi

    Senator Enzi. Thank you, Mr. Chairman and Ranking Member.
    Thank you, Governors. A lot of good suggestions there.
    I am going to refer to what we are trying to do and what 
Senator Alexander is suggesting is biting off some pieces, but 
I am going to call it eating the whale one bite at a time to 
make it more bipartisan.
    [Laughter.]
    Governor Bullock. There was no intent on that one, sir.
    Senator Enzi. And we have a whale of a problem that we have 
to solve, and you are kind of at the heart of the laboratories 
of being able to do that. I used to serve in the Wyoming 
legislature, and of course, naturally then have a lot of 
confidence in the ability of legislators.
    Earlier today we talked about the section 1332s and having 
the possibility of, if it is approved for one, doing it for 
all. I would add to that--and I think that was part of the 
discussion--that there be a Governor opt-out of that particular 
thing. I would add to that--and I know that there is a 
difference between when the Governors that are around all the 
time and the legislators who are around some of the time. I 
have always suggested that there be an opt-out or an opt-in by 
the Governor provided when the legislature meets, they agree. I 
do not know what happens if there is not agreement. I am 
certain that there would be some good suggestions that would 
come out of that.
    Yesterday, we talked with the insurance commissioners, and 
they talked about the need for reinsurance and the high-risk 
pools. And Maine has an invisible high-risk pool that I think 
could be useful, again provided there was an opt-out by the 
Governors with the approval of the legislature.
    We also had a good explanation yesterday of small business 
health plans or association health plans and how that could 
help to reduce the individual market by having people be a part 
of a bigger group that would have more clout for doing 
legislating.
    Let me start my questions with Governor Baker because you 
have explored the 1332 waiver. I think all of you have explored 
it. I would be interested in all of your opinions on that, 
where you are in the process and what suggestions you would 
have for changing that process for the 1332 waiver.
    Governor Baker. Thanks very much for the question.
    Let me just say this. We literally are filing a 1332 waiver 
this week, but that is the official filing. We have actually 
submitted what I would call kind of a template or an outline of 
what it is we would like to talk about doing under 1332 
previously to the folks at CMS. One of the innovations that the 
current administrator brought to this program was to stay 
instead of having you file a waiver and then have us get into a 
big debate about every element of it, how about you file what 
she called kind of a pro forma on what it is you would like to 
do. Let us review the game plan you have in mind, tell you 
where you think have soft spots and weaknesses, and then we 
will help you make sure that by the time you actually submit a 
formal document, we have some agreement about what it is you 
are trying to do and where we think our opportunity to support 
that might be. And I thought that was administratively a 
terrific reform.
    The one thing I would say generally about this is there are 
things that are program issues which I think have, for all of 
us, consequences in terms of how we deal with our legislature 
on some of this. A lot of the administrative stuff that is part 
of the relationship that goes on between States and the Federal 
Government is not particularly useful to us, and I would argue 
it is not particularly useful to the Federal Government either. 
It chews up an enormous amount of time.
    If I had to pick the one thing I would say on 1332 is if 
you could help Washington figure out the difference between 
what is a debate over how you administer something and what is 
a debate over what a program design looks like, that would be 
great. There is a ton of time that is being spent on this 
administrative stuff that I do not think translate into much 
value-added for anybody.
    Senator Enzi. Thank you.
    Governor Herbert, would you care to quickly comment on the 
difference between Utah and Massachusetts?
    Governor Herbert. There are significant differences. He has 
a lot more people than we have for one thing. We have a younger 
population. We have a median age of 30. Our health care needs 
would be different. That is why I say we need to respect the 
regional differences and the demands in the marketplace for 
health care coverage. They are not all the same, and that is 
why we would encourage flexibility.
    On the waiver requirements, the biggest problem really is 
it just takes so long. We put in a waiver ourselves this past 
August. That is a year ago. We still have not received an 
approval or denial. Streamline the process for waivers. I 
expect that every State would have some idea of what a waiver 
would look like, what they would need in their respective 
States. We just need to streamline the process. Once it has 
been approved by one State, it ought to be automatically 
approved by another State.
    Senator Enzi. Thank you. My time has expired.
    The Chairman. Thanks very much.
    Senator Murray.
    Senator Murray. Again, thank you to all of you for being 
here. This is really valuable.
    Governor Hickenlooper, I want to start with you and thank 
you again for testifying today and for working with bipartisan 
Governors across the country to propose some solutions to 
stabilize the individual market. It is really my hope that we 
can use some of that same bipartisan approach here in this 
committee to come up with solutions and really appreciate your 
input on that.
    In your proposal with the eight other Republican and 
Democratic Governors, you made several recommendations to 
immediately stabilize the market. One of those is to establish 
funding for reinsurance. Can you talk to us a little bit about 
why that will help bring premiums down?
    Governor Hickenlooper. Yes. Thank you. As you say, 
especially this committee has a record of bipartisan solutions 
to some of the most vexing problems the country has faced. If 
we are going to have any committee in whose hands to put our 
fate, we are glad it is you guys.
    We looked at the reinsurance as one of the--I would say the 
cost sharing is the most important thing. Reinsurance is a very 
close second just because so many of these pools end up being 
dominated by the least healthy individuals, especially people 
that have chronic diseases. End stage renal disease end up in 
dialysis all the time. These are very expensive patients. When 
they end up in one pool--one of our carriers has three 
different patients that cost more than $5 million a year. That 
raises everybody's premium. What happens is if you are able to 
find some sort of cost sharing--it could be by disease. It 
could be by the cost to the patient, but some way to have a 
reinsurance pool, which is what happens in pretty much every 
other industry, then you are able to drive down the premium 
cost, the average cost for everyone, and dramatically increase 
people's participation.
    I think one thing we all agree is that one of our great 
challenges is to make sure that we get more people 
participating in the system because that is what drives down 
premium costs. It is a reinforcing feedback loop. Reinsurance 
pools I think is one of the best ways to do that, and whether 
we do it by the Alaska model where they took existing revenues 
and were able to see--I think they saw a 30 percent--a 28 
percent reduction in premiums costs. That is remarkable.
    Senator Murray. I was really glad to see that you agreed 
that we should not roll back the guardrails that protect people 
with preexisting conditions and appreciate that input as well. 
That was very important.
    Governor Bullock, thank you for being here. Senator Tester 
is always talking to me about this. It is great to have a 
fellow Montanan here to talk about this.
    This is actually our second hearing on market 
stabilization. And yesterday, as you know, we heard from five 
of our Nation's insurance commissioners about the unusual steps 
they are being now forced to take because they do not know 
whether the Trump administration is going to maintain the out-
of-pocket cost reduction program, CSR.
    Governor Baker noted in his testimony that almost as soon 
as the 2018 rates are finalized, insurers will begin preparing 
their premium proposals for 2019.
    In the recommendations that you made with Governors Kasich 
and Hickenlooper, you propose Congress provide more than just 1 
year of certainty for out-of-pocket cost reduction. Talk to us 
about why 1 year of certainty is not enough?
    Governor Bullock. Thank you, Senator Murray. I fully 
recognize that Congress will continue to work on health care 
reform as we talk about immediate stabilization of the 
individual market.
    In Montana, we have three insurers. All 56 counties are 
covered. As I said in my testimony, a 10X increase for 2018 
because it is already filed because of the uncertainty of the 
CSR payments going forward. Those same insurers are already 
working on the 2019 rates, and they will be in earnest by doing 
it by next spring of 2018.
    The only way that we are going to get some sort of 
certainty is if insurance companies and others feel that there 
will be predictability at least for a period of time while you 
all discuss greater reform. I do not think the cost sharing 
reduction payments of 1 year is sufficient for that. I would 
love to see 3 years. Certainly if you do overall reform in 
other areas, you could always trim that back. You are sending a 
message to the market that there is going to be some stability 
there, and then they can plan accordingly.
    Senator Murray. Thank you very much.
    Governor Baker, Massachusetts has a very long history with 
health care reform. I know your State is always looking at ways 
to promote stability and bring down costs. As was just talked 
about, you are currently applying to create a State-based 
premium stabilization fund to protect against the possibility 
that the Trump administration discontinues the out-of-pocket 
cost reductions. I assume that developing the premium 
stabilization fund proposal requires a lot of State resources. 
Correct?
    Governor Baker. The answer to that would be yes.
    Senator Murray. Would you not agree that it would be better 
to have long-term certainty for the out-of-pocket cost 
reduction program rather than your State taking up these 
extraordinary steps?
    Governor Baker. In addition to the fact that open 
enrollment begins within the next 30 to 40 days, you have a lot 
of people who have made a lot of decisions, including people 
who buy insurance, based on assumptions about what products are 
going to be available to them and what they are going to pay 
for them. I think the reason the CSRs are so important at this 
point in time--I agree with what others have said, which is it 
creates stability and a sense of consistency for people at a 
point in time when they are literally going to be purchasing 
coverage for the next year.
    As I said in my remarks, we basically had people price this 
stuff based on the assumption that the CSRs would be in place. 
If the CSRs are not in place, the carriers are going--and our 
market mostly is nonprofit carriers, too, who are local. If the 
CSRs are not in place, they are going to have to reprice those 
products, and they are probably going to go up by somewhere 
around 20 percent, which is going to be a real problem for the 
people who buy those plans. By the way, it is also going to 
shift a whole bunch of spending onto the advance premium tax 
credits to support those people who would have been buying 
coverage with the support of the CSRs.
    Senator Murray. I appreciate that. I apologize to all of 
you. I am going to have to leave shortly. We are doing a markup 
on the Health, Education Committee that I am ranking member on. 
I really appreciate all of you being here and our committee 
members for being here as well. Thank you.
    The Chairman. Thank you, Senator Murray. We want you to go 
to that other appropriation hearing because it is a good bill, 
and from what I have heard about it, I am looking forward to 
voting for it.
    Senator Isakson.

                      Statement of Senator Isakson

    Senator Isakson. Thank you, Senator Alexander. Thanks to 
you and Senator Murray for the approach that you have taken on 
this. You have been commended by these Governors, and that 
should be echoed again by us on the committee. We do have a 
bipartisan challenge and a bipartisan problem that is going to 
require a bipartisan solution. I appreciate all of you 
recognizing that. I appreciate Lamar and Patty's effort to make 
sure we do the same on the committee.
    Governor Haslam, welcome. You are a great neighbor. You all 
were, unfortunately, a rude guest when you all beat Georgia 
Tech the other night as we opened up the Mercedes Dome. It was 
a great football game. Congratulations.
    Governor Haslam. A lot of us stayed up later than we should 
have.
    Senator Isakson. As usual, when you talk about Tennessee, 
Governor Alexander was involved because he was also the 
President of the University of Tennessee before he was 
Governor--before or after he was Governor of Tennessee.
    Governor Haslam. After.
    Senator Isakson. We share a lot of things together. One of 
them is we have a large rural area, and we have a huge problem 
in Georgia and I think Tennessee does too in terms of rural 
health care and the loss of hospitals in our State in the rural 
area. Are you all dealing with that in Tennessee now?
    Governor Haslam. We are. Governor Bullock referred to that 
in his testimony. I think that is a pretty national issue, but 
we definitely are. I think caught up in that you have some 
issues around coverage, but quite frankly, the health care 
industry itself is changing a lot. As they consolidate, I think 
all of us are afraid that the trend will be to lose more 
hospital beds in rural areas.
    Our challenge, quite frankly, is tied to that. It is about 
rural economic development. It is keeping jobs and people in 
those areas. That is what will attract the hospital beds. 
Governor Bullock's point was that it is a little bit of a 
chicken and egg. As you lose the hospitals, it is hard to 
attract jobs. That is a consistent challenge, I would bet, for 
everybody in this group.
    Senator Isakson. Rural areas have a higher percentage of 
non-insured patients coming to their doors, and that doubles 
and triples and exacerbates the problem.
    Governor Haslam. I do not know this, but I have been in 
Tennessee. Steve again showed Lamar's chart about how many 
people are in the individual marketplace. I bet a 
disproportionate share of those are rural folks in Tennessee.
    Senator Isakson. You just used the magic phrase in terms of 
disproportionate share.
    Are you familiar with the DISH payment?
    Governor Haslam. I am very much.
    Senator Isakson. Those were being phased out under the 
Affordable Care Act under the belief that if health insurance 
was available to everyone and everyone was covered, then those 
who are indigent and could not pay and are poor, would not just 
go to a indigent care hospital but would go to one where they 
were covered because they had insurance. That did not happen. 
Those payments are going away, which is causing big problems in 
Nashville I am sure, which is one of the major health centers, 
and it is in Georgia.
    Do you have any suggestions on this disproportionate share 
and what we should do in the short term?
    Governor Haslam. Ultimately I think it is part of this 
larger issue that we are talking about. You addressed it when 
the DISH payments went away, and then particularly in States 
like Georgia and Tennessee that did not expand, those hospitals 
were caught in a particularly difficult situation.
    In terms of short term what we can do about that within the 
confines of the budget bill that you have, I do not have an 
answer for that right now.
    Senator Isakson. I think Governor Baker, Governor Bullock 
mentioned this. Maybe others did as well. One of the key things 
that we have got to do is find some way to get everybody 
covered, get everybody participating, and getting people who 
are young and not at high risk for expensive diseases in their 
early years to help us ameliorate the cost of the senior 
citizens like me who are going into the hospitals at higher 
cost health care.
    I was listening to you talk. I remember when I was in the 
State legislature in the 1970s and 1980s, the States faced a 
big crisis in terms of automobile insurance and liability 
insurance and finally created something called no fault. I have 
forgotten the first State to do it, but the States, one at a 
time, created no fault laws where you could not get your car 
tags or you could not drive your car unless you had minimum no 
fault insurance for liability.
    Is there a comparison anybody has thought about doing in 
terms of health care in the States where you could have a quid 
pro quo where you get health insurance when you get your car or 
whatever it might be?
    Governor Baker. We have not gone there. In Massachusetts, 
basically each year when you file your State income tax, you 
have to demonstrate that you have coverage continually for the 
previous 12 months. If you do not have coverage for the 
previous 12 months, you pay a fee, and that fee goes into the 
fund that pays for uncompensated care. Generally speaking, most 
people choose to either take the insurance through their 
employer--by the way, that was the single biggest take-up when 
we put the individual mandate in place, which was people who 
had access to coverage through their employers who had not been 
taking it took it. That was, in fact, probably the single 
biggest move with respect to the number of people who are 
covered. We should remember here that a lot of people do have 
access to coverage through their employer. They just choose not 
to take it for a whole bunch of different reasons. When we put 
the mandate in place, they took it, which made a really big 
difference with respect to the number of people we actually had 
covered.
    Senator Isakson. Which is why we put the mandate in the ACA 
as well.
    Thank you for your leadership. I thank all of you for being 
here.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Isakson.
    Senator Sanders.

                      Statement of Senator Sanders

    Senator Sanders. Thank you, Mr. Chairman. Let me concur 
with virtually everybody by thanking you for holding these 
hearings. I think a lot of pain and time would have been saved 
perhaps if we held these hearings 6 months ago rather than 
going through what we went through.
    I want to thank the Governors for being here. As a former 
mayor, I am more than aware that a whole lot of innovation 
comes at the local and State level and the Federal Government 
can learn a lot from what happens locally.
    Mr. Chairman, in your opening remarks, you talked about the 
need to ask larger questions, and I think that is exactly 
right. One of the larger questions comes about--I think 
Governor Baker made the point that young and healthy people 
today may have an accident tomorrow and they will not be so 
healthy and they are going to run up large insurance costs. In 
my State and all over this country, I have talked to people who 
are scared to death about losing the health insurance they have 
if some of these Republican proposals were passed.
    That raises the larger question. Why is it that in the 
United States of America we are the only major country on earth 
that does not guarantee health care to all people as a right? 
It is not a question of whether you are young and healthy or 
older and sicker. If you are an American, should you be 
entitled to health care as a right? Increasingly the American 
people believe that is the case. That is a larger question that 
we have got to address.
    In my view the Affordable Care Act had significant 
successes. It also had failures. It is no small thing that 20 
million more Americans have insurance who previously did not, 
and it is no small thing that we eliminated the obscenity of 
preexisting conditions and brought some other provisions.
    I think, Mr. Chairman, the time has come when we as a 
Nation and what the polling now tells us, 60 percent of the 
American people now believe the Federal Government should take 
responsibility working with the States in guaranteeing health 
care to all people as a right, something that I believe.
    No. 2--and Governor Hickenlooper made this point. I think 
you made the point that we are now spending about twice as much 
per capita on our health care as do the people of any other 
country. Mr. Chairman, I think it is great that we have the 
Governors here today, and we should do more of that. We might 
want to ask our friends from Canada or the UK or Scandinavia or 
Germany what they are doing, and we might ask why it is that we 
are spending almost $10,000 per person on health care today, 
which is clearly unsustainable, while other countries are 
spending half of that.
    I think, Governor Hickenlooper, you made the point in many 
ways that health care outcomes in other countries are as good 
or better as they are in this country. Life expectancy is 
longer abroad. Infant mortality is less.
    Those are some of the larger questions that we have to ask.
    The third larger question. We keep talking about the 
insurance companies. Let me break the bad news. The function of 
insurance companies is not to provide quality care to people. 
It is to make as much money as they possibly can. Maybe 
insurance companies are part of the problem as to why we are 
spending so much money on health insurance.
    In terms of some of the questions I would like to ask. All 
of us are aware the cost of health care is much too high and it 
is rising too rapidly. One of the factors for that is the high 
cost of prescription drugs. In that area, as everybody knows, 
we are spending far, far, far more than any other country on 
earth. The last statistics that I have seen, five major drug 
companies make $50 billion in profit, while one in five 
Americans cannot afford the prescription drugs they need.
    Governor Haslam--let us work on down the line--what do you 
suggest that we do to lower the outrageously high cost of 
prescription drugs in this country?
    Governor Haslam. I think there are a couple of things that 
come to mind. Having the FDA speed up the approval process for 
generics is one. Looking at how government as a major payer 
negotiates for those costs is two.
    Senator Sanders. You would have Medicare negotiate prices 
with the pharmaceutical----
    Governor Haslam. I would.
    Senator Sanders. Good. OK.
    Governor Haslam. No. 3, I think one of the things that the 
Affordable Care Act has done is it has not allowed States in 
their Medicaid programs to limit the number of prescriptions. 
In Tennessee, unfortunately we lead the Nation in prescriptions 
per cap or we are in the top two or three. We had a program in 
place that we thought was very effective providing the care 
that we needed that took away our right to do that.
    Those are three things that come to mind.
    Senator Sanders. Thank you.
    Governor Bullock.
    Governor Bullock. There may be some unique ideas, but from 
the perspective of--Governor Baker spoke very eloquently on the 
State as a formulary and the idea of how long it takes for 
generics to pass through.
    Allowing the State more market power, the ability to 
negotiate I think would be significant.
    Senator Sanders. What about reimportation of drugs?
    Governor Bullock. I think that certainly health and safety 
standards need to be met. To the extent that health and safety 
standards are met, it is worth a discussion.
    Also, it took 19 extensions to get a 6-year highway bill 
through. I worry in some ways--I fundamentally and 
philosophically agree we need to address prescription drug 
prices. I am a realist enough to try to say what is going to 
actually come out of this Congress.
    Governor Baker. I would agree with what Governor Haslam----
    The Chairman. We are running out of time. If you can give a 
real short answer.
    Governor Baker. I think the generic piece absolutely has to 
get worked on.
    I think giving States the ability to create formularies and 
programming around prescriptions generally--one part of the 
high cost of drugs is the high cost of individual drugs, but 
another part of it is--you talk about opioids for example. We 
are 5 percent of the world's population. We consume 80 percent 
of the world's opioids. We have real issues with respect to 
volume.
    The Chairman. We are running too far over.
    Senator Sanders. Can Governor Hickenlooper get 30 seconds?
    Governor Hickenlooper. One sentence. I would argue for 
transparency of prices so that consumers can have choices, and 
there are apps out there that could make those choices freely 
available.
    Governor Herbert. Can I add my 20 seconds? If it takes 20 
years and a billion dollars to get a drug approved, that is way 
too long. That causes the pharmaceuticals to try to recover 
their costs. Streamline the time, reduce the cost, we will have 
cheaper drugs.
    The Chairman. Thank you, Senator Sanders.
    Senator Collins.

                      Statement of Senator Collins

    Senator Collins. Thank you, Mr. Chairman.
    First, let me thank the Governors for appearing today and 
offering your excellent testimony.
    Governor Haslam, your insurance commissioner yesterday 
testified about the benefits of reinsurance and said that, ``it 
should bring premiums down remarkably.'' That is consistent 
with the experience in my State of Maine and also in Alaska. It 
suggests that a reinsurance pool can be successful in helping 
to drive down the cost of premiums.
    Unfortunately, as a practical matter, many States are 
simply not in the position to immediately stand up their own 
high risk pools and to finance them. Alaska was very creative 
using some savings from the premium tax credits, but still put, 
I think it was, $55 million into the plan.
    So my question for you is, is there a need for financial 
assistance from the Federal Government in the short term to 
help set up reinsurance pools?
    Governor Haslam. I think in the short term, States will 
have two issues setting it up in terms of getting it through 
our legislature. You have got to have a legislative process, 
and then No. 2, where are the funds going to be? If Alaska is 
55, I am not sure what Tennessee would be, but I assume it is 
something in that neighborhood.
    Long-term, though, I definitely feel like the States should 
run those programs. We can run them and we will run them 
better.
    Senator Collins. I agree with that. I am just worried about 
the short term.
    Governor Haslam. I think our Commissioner McPeak was right. 
I think for the first year, you are going to have to have the 
Federal Government help on that, but then quickly let the 
States do it.
    Senator Collins. Thank you.
    Governor Baker, great to see you here again. Another key to 
driving down premiums is broadening the number of people in the 
individual market. You have an individual mandate in 
Massachusetts, which has been in existence for many years. 
Obviously, the ACA has an individual mandate, which is 
extremely unpopular. We know that young people can stay on 
their parents' policies until age 26, but then they age off 
those policies. That is the vulnerable group. What I hear in 
Maine from young people is they would rather pay the fine 
because it is less expensive for them, particularly if they do 
not qualify for a hefty subsidy. They would rather pay the fine 
than get insurance.
    So Senator Cassidy and I at the beginning of the year 
introduced a bill that called for auto-enrollment of 
individuals with the opportunity to opt out if they wanted to. 
We know from the experience with 401K plans, that if you auto-
enroll employees, they stay in the plan overwhelmingly. I think 
it is 75 percent do. Whereas, if you hand them a packet of 
information, they never get around to signing up.
    I realize the mechanics are difficult, but if the 
individual mandate were to go away, which is not something you 
support I know, but if it were to go away, what would you think 
of our having an auto-enrollment system so that you could get 
people into insurance plans, perhaps starting with a copper 
plan for young people, and then allowing them the option of 
opting out?
    Governor Baker. I think what I would say is that--and by 
the way, I am glad you are thinking about this stuff this way. 
Maybe this is because I am a Governor and not a Senator.
    I think the way you folks should think about this is there 
are a lot of ways for people to broaden the pool. You could do 
it with an auto-enroll. You could do it with an individual 
mandate. You could do it with a penalty for people who do not 
maintain continuous coverage. You could do it with access to 
certain kinds of plans and not others if you do not maintain 
continuous coverage. There is a whole bunch of different ways 
people could nudge people into the market and encourage them to 
stay in it. Frankly, you ought to leave it up to the States and 
let the States figure out which ways work best, as long as they 
pursue one.
    The other thing I would say to you is you could put 
criteria--this would make sense financially--in there that says 
if you want us to play in your reinsurance pool, you have to 
demonstrate to us that you are doing something to encourage 
people to be covered because, as Governor Hickenlooper pointed 
out, 5 percent of the population spends 50 percent of the 
money, and that is in a random risk pool. You get into the 
individual market where typically there is a lot more people 
who know they are going to need the system and that is why they 
buy it in the first place, it is a different game.
    There is definitely an opportunity here for States and 
Federal officials to work together to do things collectively 
that would broaden the risk pool, lower the premiums, encourage 
people to buy, and share some of the risk associated with what 
I think Governor Hickenlooper is talking about is the 5 
percent. I really do believe you ought to make that a flexible 
opportunity and have States do the things that are going to 
work best in each State rather than trying to come up with one 
answer at the Federal level and then apply it across the whole 
50.
    Senator Collins. Thank you.
    The Chairman. Thank you, Senator Collins.
    Senator Franken.

                      Statement of Senator Franken

    Senator Franken. Thank you, Mr. Chairman. I want to thank 
you and the ranking member again for holding these hearings. I 
found yesterday's hearing with the insurance commissioners to 
be informative and constructive, as is today's.
    As I mentioned yesterday, Minnesota has applied for a 1332 
waiver to set up a Federal-State reinsurance program. This 
would bring down the premiums by a whole lot, like 20 percent 
more. And speaking of getting more people in to get a bigger 
risk pool--and on the cost sharing, may I say CBO scored the 
cost sharing where without the cost sharing, it said the rates 
would go up 20 percent, and because the rates would go up and 
the Federal Government has to pay the subsidies, our deficit 
would go up. Talk about a no-brainer on the cost sharing. I 
agree that it should be more than 1 year and 3 better than 2.
    Anyway, let us go to the Federal-State reinsurance program, 
which has the same kind of dynamic. If this waiver is 
approved--and we are hoping for news any day now. Minnesota's 
has not been approved yet. Our health premiums will be 20 
percent lower than they would otherwise be in 2018.
    During the hearing, we talked about how State and Federal 
reinsurance programs could be financed. In Minnesota, the State 
estimates that the reinsurance program will cost about $230 
million in 2018. Of this, the State will pay somewhere between 
$104 million and $132 million, with the Federal Government 
paying the rest. The State has authorized the program for 2 
years. Even with a partial funding the State could receive from 
the Federal Government, if Minnesota's waiver is approved, the 
State's reinsurance program represents a significant financial 
commitment.
    As documented in a letter all of our offices received from 
the executive directors of 12 health insurance marketplaces, 
other States face budget constraints that limit their ability 
to fund either a State-level reinsurance program or to meet the 
Federal matching requirements for a Federal-State reinsurance 
program like the one proposed in Minnesota. Given this, the 
letter argues for a federally funded reinsurance program that 
would help improve competition and stabilize the individual 
market over the long term. The panel of bipartisan insurance 
commissioners we heard from yesterday offered similar support 
for a federally funded insurance program.
    To all the panelists, would your State be able to fund and 
sustain either a State-based reinsurance program or fund the 
State match for a State-Federal reinsurance program under a 
1332 waiver?
    Governor Haslam. Again, if you would give us a year, we can 
run that ourselves.
    Governor Bullock. Certainly we would have to crunch the 
numbers. It would be better to start at the Federal level. We 
also have a legislature that meets 90 days every 2 years. Also 
under the ACA when you had reinsurance, rates had decreased. 
The ability to be able to show here is what this temporary 
stability fund does would make it a lot easier then for the 
States following thereafter.
    Governor Baker. I would say it is more a question of time 
than anything else and figuring it out. This gets to one of 
those budget neutrality questions we talked about. There are 
Federal and State dollars that go into a whole variety of 
programs here. Thinking about them in their totality so that 
you understand the complete picture with respect to Federal 
funds and we understand the complete picture with respect to 
State funds and how a reinsurance pool would affect what we are 
all spending now, it may make it possible for folks like us to 
apply more appropriately funds to support a reinsurance pool. 
It would be something we would have to figure out. I certainly 
believe that working collaboratively on that is something we 
would be very interested in doing and figuring it out.
    Senator Franken. Colorado.
    Governor Hickenlooper. I would echo that. The 
interconnectedness of what the Federal Government spends on all 
these different programs emphasizes community health centers, 
the large network of where people have a medical home and avoid 
costs. It sounds like that is not a direct aspect of making 
sure we have reinsurance pools. Without question, the savings 
the reinsurance pools would create allow community health 
centers, which I guess you guys do not have funding 
jurisdiction on that, but that is coming up at the end of the 
month, so it is worth being aware that that is a very important 
thing that we get funded.
    Senator Franken. Senator Sanders is a big fan. I see him 
animated and happy.
    [Laughter.]
    Everybody look at that. He is happy.
    [Laughter.]
    Senator Sanders. I will be happier if they are adequately 
funded.
    Senator Franken. Yes, OK. Now I got him grumpy again.
    [Laughter.]
    Governor Hickenlooper. My answer is that for any State, 
especially low tax States, funding those reinsurance pools 
would be a difficult step in a year, but we would do it, 
absolutely.
    Governor Herbert. The answer is yes. We had high-risk pools 
before the Affordable Care Act and they worked pretty well. I 
think the issue is transition. Again, I think the model we see 
in Alaska where they have identified 33 high-cost conditions 
that would allow them to redirect money into a reinsurance pool 
is something we could all look at and copy and emulate. The 
answer is yes.
    Senator Franken. Thank you. My time is up. My first 
question went a minute over. I will have questions for the 
second, third, fourth, and fifth rounds.
    [Laughter.]
    The Chairman. Good. I will not say anything.
    [Laughter.]
    Thank you, Senator Franken.
    Senator Young.

                       Statement of Senator Young

    Senator Young. Thank you, Chairman.
    Thank you, Governors, for being here.
    Obviously, our near-term focus here is trying to stabilize 
the individual markets. Governor Herbert, you mentioned in your 
testimony that we can then turn to what I would regard as the 
more exciting questions. I will just kind of lay some of them 
out here.
    How can we spur disruptive innovation in telemedicine, 
artificial intelligence, medical robotics, and genomics?
    How can we creatively increase the use of non-physician 
medical labor?
    How can we deliver more cost-effective education for 
nursing, health sciences, and medicine?
    How can we empower patients to manage better their own 
health with well informed choices?
    This is where ultimately we all want to end up because if 
you are not controlling the cost of health care, the cost of 
health insurance is going to continue to go up.
    You are the chief executive officers of the laboratories of 
democracy, and so I would like to hear from you since 
innovation does, indeed, occur at the State level, in addition 
to the local level, the Federal level perhaps to a lesser 
degree than we would like, and most importantly in the private 
sector. I would like to hear what you have done in your States 
to promote innovation, to bend the cost curve down, and then 
touch on the Federal barriers to that State-level innovation.
    We will start, since I have already invoked your name, with 
Governor Herbert please.
    Governor Herbert. We believe in the private sector. We are 
free market people in Utah and we believe that is what has made 
America great. Most innovation does not come from government. 
It comes from the private sector. We all carry around these 
iPhones that have more computing power now than we had during 
World War II on our hip. The telecommunication capability we 
have and access to the Internet, et cetera has come from the 
private sector innovation.
    In Utah, we have a significant growth sector in life 
sciences, medical health devices. We have a number of companies 
that are innovating things all the time. One of the challenges 
we have had with this program is the tax on medical devices, 
which has stymied innovation and actually makes it less 
affordable for those who really need to have a medical device.
    Senator Young. Thank you so much.
    Governor Hickenlooper.
    Governor Hickenlooper. We have something called the 
regional care collaboratives, which are all over the State. 
There are 29 clinics that allow people to have a medical home, 
but they are basically bare bones. The focus there is to try 
and make sure we get ahead of chronic diseases or issues well 
before they become huge, cost-driven issues that they often 
are.
    We also steal. We call it facilitated larceny among 
Governors, but we steal the best ideas.
    I would be remiss if I did not mention New Hampshire's 
efforts at transparency. Transparency is going to be one of the 
most important things. We all talk about controlling health 
care costs. Knowing what you are buying when you are buying it, 
whether it is pharmaceuticals or getting your broken leg fixed 
in a hospital, knowing what it is going to cost you one place 
versus another in real time and what your co-pay is going to be 
would go a long way. New Hampshire has that.
    Senator Young. Thank you, Governor. You did mention the 
1332 waiver, which we discussed the need for some reforms 
there.
    Governor Baker.
    Governor Baker. I would agree with Governor Hickenlooper 
about transparency. The same service, the same person, the same 
outcome, five different places in Massachusetts, the price can 
vary by 300 or 400 percent. There is a huge opportunity there. 
I really do believe we are getting there on that one.
    I would also say that one of the things we are currently 
doing with our Medicaid program is contracting with health care 
systems on an ACO basis as opposed to a traditional fee-for-
service basis and basically saying you have a big group of 
folks that you worry about and you take care of. You make the 
decisions with respect to how the best way to serve them would 
be and trying to get from under this volume-based approach to 
care delivery, which I think everybody agrees does not 
necessarily deliver high quality but certainly delivers high 
volume.
    The other thing I would point out--it may be small in the 
grand scheme of things but it has had a big impact on 
prescribing--is we completely redid our prescription monitoring 
program and made it much more 21st century. As a result, we 
have five times the number of searches being done on it by 
doctors and other prescribers now as we saw before, and it has 
had a real impact on prescription writing on both opioids and 
on benzodiazepines and other schedule 2 and 3 drugs, which is 
from my point of view a good thing.
    Senator Young. Time is limited here. To the other 
Governors, my apologies.
    One note is we refer to laboratories of democracy on a 
regular basis. I think there are some opportunities for 
improvement in terms of sharing best practices between 
laboratories. That may or may not be something that we in the 
Federal Government need to do, to provide clearinghouses of 
these best practices that result in innovative approaches, 
bring down costs and so forth. It may be. It may be an area 
where we can make some improvements. Perhaps we could work 
together on that.
    Senator Enzi [presiding]. Senator Bennet.
    Senator Bennet. Thank you, Mr. Chairman. Senator Alexander 
has left, but I want to call our attention to what he said at 
the outset of this hearing. By the way, I am so deeply grateful 
for his bipartisan approach to this work. That is that we need 
to address larger questions. He is right about that. What we 
are talking about today and what has consumed our politics over 
the last 8 years is the individual market, which covers only 6 
percent of the people that are insured in this country. It is 
important for us to deal with it, and it is important for us to 
deal with it in a bipartisan way.
    What we really need to grapple with--all these Governors 
have talked about it--is the fact that we are spending twice 
what any other industrialized country in the world is spending 
on health care and we are getting worse results, increasingly 
worse results. And that is not satisfactory to people in 
Colorado. Whether they support the Affordable Care Act or 
whether they do not, they are deeply unhappy with the way they 
intersect with the health care system in our country.
    I want to thank all the Governors for being here, and I 
want to thank you for your bipartisan leadership on what for 
people I represent is not a political issue. They realize they 
are having to make choices about their lives and their small 
businesses that no one else in the industrialized world is 
having to make because our system is fundamentally broken. And 
they know that.
    I agree with Governor Hickenlooper, not surprisingly 
because he tells me what to believe.
    [Laughter.]
    That transparency is a very important part of this. There 
is no other market in America where you cannot know what 
something costs. And by the time you have finished fighting 
with your insurance company, you do not even know what you are 
being charged anymore.
    We do have big issues, and I hope you will come back to 
deal with them.
    Governor Hickenlooper, you mentioned the Colorado 
Accountable Care Collaborative, and I wondered whether you 
might be willing to talk a little more about that. Colorado was 
able to save over $100 million by implementing that program 
which fosters integration and collaboration across providers. 
It has resulted for better outcomes for Coloradans in the 
Medicaid program and savings from the State. I wondered if you 
could talk a little more about that and whether it might inform 
the work that we are doing on the individual market.
    Governor Hickenlooper. Sure. We started this about--it took 
a year and a half to kind of think it through and then a year 
to implement. The idea is that in each region of the State, 
there is a central integration of everything. It includes 
mental health so that now when you go to your basic care 
provider and you have some serious depression issues, whatever, 
your child is acting really bizarre--the idea was to integrate 
that care. We have 29 different clinics, and they are set up in 
seven regional care collaboratives.
    These regional care collaboratives are driven by two 
things. One is that they cannot diminish quality. Their whole 
focus is to make sure quality--nothing stays the same, so 
quality has to improve. Second is how can they control costs. 
They are focused relentlessly on controlling costs. With that 
effort, obviously, we want--and I think have done a good job of 
expanding coverage and making sure more people have a medical 
home. The notion that we can get to people that have 
potentially crippling diseases, that we can get to them sooner 
and make sure that they get the care that will mitigate and in 
many cases can avoid those really drastic conditions has been a 
huge part of saving that $100 million.
    Senator Bennet. Thank you for that. I hope we pay attention 
to it as we go forward.
    I also wanted to ask you one additional question. As you 
mentioned, 600,000 Coloradans have been covered as a result of 
the Affordable Care Act. We are now at a record low of 6.7 
percent uninsured people, but we still have a lot more to do 
especially in our rural areas where there is often only one 
hospital. Fourteen of our counties only have one insurer. It is 
especially difficult--Governor Baker mentioned this--for 
families that are facing this opioid crisis that we have.
    You mentioned in one of your bipartisan proposals with 
Governor Kasich the idea that people in such counties might be 
able to buy into the Federal employee health benefit plan. I 
wonder if you could talk about that a little bit and how you 
came to that proposal.
    Governor Hickenlooper. We have 14 counties, almost a 
quarter--we have 64 counties in Colorado--that have only one 
insurance company that provides coverage. We wanted to, A, 
provide incentives for other companies to come into that market 
and they would avoid all taxes, a number of different tax 
incentives to encourage that competition. We also wanted to 
make sure that the Federal employee benefits program--that 
people could then choose to be a participant in that plan as 
well. Again, another choice. For many people, not necessarily 
the right choice, but for some it would be exactly the right 
choice, but again, expanding those choices. I think the goal 
there is to make sure that the Federal Employee Health Benefit 
Plan is available in those States where we have the greatest 
challenge--in those counties.
    Senator Bennet. I would say, Mr. Chair--I know I am out of 
time--that another possibility here that I have heard of might 
be for people to be able to buy into the State employee plans 
as well. These are all interesting.
    Governor Hickenlooper. We agree with that, and we did want 
to speak for all the other States. There was some resistance 
among other Governors.
    Senator Enzi. Senator Cassidy.

                      Statement of Senator Cassidy

    Senator Cassidy. Gentlemen, thank you all. You have all 
thought deeply about health care. I have had the privilege to 
speak with some of you. Thank you all for being here.
    I apologize I came late. You may have already addressed 
this.
    Each of you--I walked in just as you all were speaking I 
think you, Governor Baker, or maybe you, Governor Haslam, about 
the need for flexibility, implying that if you have 
flexibility, frankly you do a little bit better job, more bang 
for the buck, if you will, than right now what we do from 
Washington, DC.
    That said, we have a CPIM, a rate of inflation which is 
higher than the normal rate of inflation, and in some areas of 
health care, it is a little bit higher than that. There is some 
stuff in there you cannot control. I think, Governor Baker, in 
your testimony you say States cannot do much about the cost of 
pharmaceuticals. We stipulate that. With flexibility, do you 
think that you could bring down the rate of inflation of health 
care in your State? With flexibility, you get a lump sum of 
money. You can combine risk pools. You can do reinsurance 
programs. You can--you name it. You can work with that.
    Governor Haslam. I will make a couple of comments. I think 
Senator Young has talked about innovation. There is nothing 
that makes you innovate quite as much as having to balance your 
budget. All of these Governors, I guarantee you somewhere 
during the year we say we balanced however many budgets for 
however many years you have been in office. The truth is most 
of our constitutions make us do that. That causes us to think 
innovatively.
    Governor Herbert is right. The market thinks of innovative 
ways to change products. That is not our job. Our job is to 
think of creative ways we can address that.
    Senator Cassidy. The simple answer, it sounds as if you 
think as you could.
    The question is, though, because critics would say if the 
Federal Government is not telling you what to do, then coverage 
will suffer. You will have folks with a fig leaf of coverage 
but in reality Governors do not care enough to make sure that 
they have adequate coverage.
    Governor Haslam. Right. The question particularly for folks 
will be, well, will you care about the least of these if we 
give you that control. I would argue this committee just went 
through an exercise last year where you really passed an 
unprecedented amount of control not just to States but to local 
governments through schools. I think you are going to see that 
process work.
    Senator Cassidy. Governor Bullock.
    Governor Bullock. I think the ability to innovate certainly 
when there are consumer protection safeguards on such, we can 
do a lot with. One of the things that the Affordable Care Act 
did is provided some essential health benefits that did not 
exist certainly prior in so many areas.
    Senator Cassidy. Let me ask. Let me interrupt because I 
have limited time.
    The CHIP program gives you an essential health benefit 
package essentially. You are all familiar with CHIP. I do not 
have to define it. What about the CHIP as a vehicle that would 
give you that safeguard but perhaps a little bit more 
flexibility than the ACA?
    Governor Bullock. I think flexibility can be helpful. If 
the funding is not there, it is fairly meaningless. In some of 
the proposals that I have seen, talking long-term, if I lose a 
third of my Medicaid funding, I am not going to be able to do 
what I am currently doing.
    Senator Cassidy. Got it. If funding is adequate, then you 
would feel like you can do something a little bit more cost-
effective than maybe what you are required to do.
    Governor Bullock. Adequacy defined by the terms of a 
Senator or a Governor may be two different things.
    Senator Cassidy. My daughter and me. We have different 
definitions of adequate funding.
    [Laughter.]
    Governor Bullock. The distinction is there that, we are 
providing the coverage, and if it all gets shifted to the 
States, it is going to substantially change what can be done I 
think no matter how much flexibility we are given.
    Senator Cassidy. Let me just shift gears.
    One thing I have noted under the ACA, the expansion is 
generous, obviously, but in 2020 States will be required to put 
up 10 percent in order to draw that down. For the expansion 
State Governors, frankly my State will be about $310 million. 
And if we are frank, financing gimmicks will make up some of 
that, but it is still a lot of money.
    For the expansion State Governors, is that going to be 
problematic or do you think, oh, no, we can handle the 10 
percent, no big deal, and send it on?
    Governor Baker. Massachusetts started covering more people 
through a variety of 1115 waivers back in the 1990s. We 
negotiated literally the fifth Federal waiver that we have 
negotiated over the course of the past 20 years and signed it 
last fall, just about a year ago now. That waiver has certain 
parameters on the Federal side and on the State side that we 
have to live with for 5 years. Our assumption is we are going 
to deliver on our share of the puzzle on that one, and we 
expect the feds to deliver on theirs. There are all kinds of 
shared responsibility and accountability in that.
    Senator Cassidy. Yes, but again, that 10 percent on the ACA 
2020 Medicaid expansion, that is a chunk of change for States 
that typically are paying more for their Medicaid expansion 
population than their traditional Medicaid and they have 
enrolled a lot of people.
    Governor Baker. Yes. No, I know. My point here is that we 
have a 5-year expansion. We signed the waiver. We expect to 
live up to our end of the bargain.
    Senator Cassidy. It may not be easy, but you are going to 
do it.
    Governor Baker. Yes.
    Senator Cassidy. Sounds good.
    Anyone else?
    Governor Bullock. It is real money, but I can also say 
uncompensated care has dropped by 25 percent. My overall 
uninsurance rate has dropped from 20 percent in 2013 to 7 
percent today. And for a rural State, if I do not have health 
care in those smaller communities, I lose those communities. Is 
it a big chunk of money? Yes. Is it an investment in Montanans 
that we will be asking the legislature to make? Yes.
    Senator Cassidy. Thank you. I yield back.
    Senator Enzi. Senator Whitehouse.

                    Statement of Senator Whitehouse

    Senator Whitehouse. Thank you very much. I know that both 
the chairman and the ranking member had to go on to other 
things. It is a very busy time here as you all know very well 
from all the many issues you have in other committees here in 
the Senate, as well as ours.
    I want to join my colleagues in expressing my appreciation 
for both the bipartisan nature of the committee's work that 
Senator Alexander and Senator Murray have led and particularly 
Senator Alexander's stated commitment this morning that he 
wishes to move on to address other issues, cost-related issues, 
in the system.
    What I would like to spend my time doing with our 
distinguished Governors here this morning is to ask for you to 
take a look at a couple of questions and then get back to us 
because I am going to make a bet that we will, in fact, move on 
to those other topics once we get through the market 
stabilization. I am not sure we are going to get you back 
before we move on. I want to take advantage of you while you 
are here. These are questions that I will ask for the record so 
that you have a chance to have your staffs get back to us here, 
but I really think it would be helpful for us as we move on 
into that next area to get your views on some of the specifics 
in those areas.
    I have a number of them. The first has to do with patient 
safety and medical errors. It strikes me that hospitals who 
give their patients hospital-acquired infections are a good 
bipartisan topic. I do not think there are Democratic or 
Republican hospital-acquired infections. There have been a lot 
of studies that show there is significant cost to patient 
safety problems and medical errors with hospital-acquired 
infections being one example among many, perhaps the most 
watched example. I would like to get your thoughts on whether 
you think that ought to be an area of focus for us.
    A second somewhat related topic is the wild variations in 
care and in outcomes that we see in different States and for 
different conditions. It seems to me that the areas where 
people are showing really good results ought to be leadership 
areas and other States ought to be induced to move toward those 
results and we should try to encourage that kind of behavior in 
whatever way we can. That is the second point is what you can 
give us by way of advice in trying to move the bad performers 
where there are wide variations in care and outcomes more 
toward the higher performers.
    The third is in the area of administrative overhead and 
dispute. There are lots of areas under that general category, 
but the one that most readily comes to mind to me is the 
continuing bureaucratic warfare between insurance companies and 
providers over getting paid. Insurance companies have built an 
enormous stable of staff who are dedicated to telling providers 
no, we are not going to pay you for that. Providers in return 
have had to staff up with an armamentarium of their own to 
fight through that insurance industry blockade, and the entire 
exercise back and forth contributes exactly zero health care 
value by my judgment anyway. There are ways that we can reduce 
those burdens.
    I know that years ago when I visited our Cranston community 
health center, they told me that they had more bodies on the 
payroll devoted to trying to get paid than they had on the 
payroll--boy, do I see a lot of heads nodding when I said 
that--devoted to actually delivering health care services to 
their clients and customers.
    Fourth is trying to support--and Wisconsin has been 
particularly good in this--making sure that what a patient 
wants as he or she nears the end of life is what that patient 
gets. There is a combination of bad preparation for that 
inevitability and bad Medicare and other billing rules around 
that predicament that very often lead families to get trapped 
into a machinery of hospital--the grind that they cannot get 
out of in time for their loved one to actually have their 
wishes honored at home. There is no Democratic or Republican 
way to have a family's wishes honored.
    The last thing I will mention is payment reform. We can do 
a lot more to encourage health care as opposed to just 
treatment when people get sick. My time is up, but let me just 
brag on Coastal Medical, a primary care practice in Rhode 
Island, and Rhode Island Primary Care Physicians, another big 
primary care practice in Rhode Island, both of whom have 
demonstrated that they are driving down costs year over year on 
an average annual patient basis while seeing the service to 
their patients and the happiness and satisfaction of their 
patients soar because they are getting better treatment. Better 
treatment in this area actually has the happy benefit often of 
reducing cost.
    If you could look at those specific things, together with 
any particular local things that I have not mentioned that you 
would like to flag for us, that would be a very useful thing 
for us to put to work in later hearings.
    I thank the chairman for indulging me in the extra minute, 
and I thank all of you for your cooperation in this effort.
    The Chairman [presiding]. Thank you, Senator Whitehouse.
    I apologize. I had to step away and vote. I am glad I did 
because for the third consecutive year, we recommended to the 
Senate a $2 billion increase in appropriations for the National 
Institutes of Health. That does not make many headlines, but it 
is very important.
    [Applause.]
    That was good. That does not happen much.
    [Laughter.]
    Senator Baldwin.

                      Statement of Senator Baldwin

    Senator Baldwin. Thank you, Mr. Chairman. I am glad you are 
calling on me next because I want to get down there to cast 
that same vote. We have two committees meeting, overlapping.
    I want to reiterate what I said yesterday about how pleased 
I am that we are at this point of bipartisan hearings, and your 
work together with our ranking member is so important. It is 
great to have this excellent panel of Governors representing 
both parties in diverse States.
    We are focused predominantly on market stabilization issues 
that we hope to expeditiously see move through the Senate and 
hopefully the entire Congress. I know that there have been a 
number of elements of that legislation that we have heard 
reflected in our chairman and ranking member's opening remarks 
and in all of your statements to this committee. Those areas of 
growing consensus relate to the cost sharing reduction 
payments, the State flexibility issues with 1332 waivers, and 
some of the areas emerging around reinsurance and risk 
management tools.
    Most of you also mentioned the incredible importance of the 
participation of young and healthy people in the markets in 
your States. Prior to the passage of the Affordable Care Act, 
young people in particular were one of the most uninsured age 
demographic in our country often because graduating from high 
school, an entry level job that does not provide insurance or 
going to school where the insurance offerings might be lacking, 
all sorts of barriers for young people.
    We have been talking about the growing consensus. At the 
same time that Congress is working together, we have an 
Administration that has announced recently some changes in 
spending plans, if you will, and other administrative policies 
that may work against that or will work against that. There is 
a 90 percent cut in the outreach expenditures for this next 
open enrollment period, shrinkage of the actual time for that 
open enrollment period, cuts to programs like The Navigator 
program, and last, I think a question mark around enforcement 
of the individual mandate. It might be called an individual 
aspiration rather than an individual expectation of seeking 
coverage.
    I guess in terms of stabilizing the markets in your States, 
how important is it that we focus on addressing these 
administrative changes? And if you could answer sort of quickly 
about the aggregate impact of those, that would be helpful 
because I would love to get one more question in. Governor 
Haslam?
    Governor Haslam. I do not know if there is a quick answer 
to what you said, so I will do my very best.
    Obviously, the individual mandate is not working. We have a 
lot of folks that it is intended to sign up who have just said 
I am still not going to do it. On the other end, the sick 
people are sicker than we anticipated, and that is why we are 
in the situation we are in. I will let some other folks have a 
minute to talk about that.
    Governor Bullock. Quickly-- I referred to this in my 
written testimony--we need to make sure we have a risk pool. 
The idea that we will cut 90 percent of the education dollars 
and 40 percent of The Navigator dollars, when what we need to 
do is draw these people in, does not make sense. In Montana, we 
are a Libertarian State. We do not like the government telling 
us what to do. By the same token, we need to make sure people 
are in that risk pool. Until a credible alternative, either 
incentives or other things, are created that we need to 
continue to have that mandate. In some respects, it is like the 
no fault insurance that Senator Enzi had referenced at the 
start. It made everybody get insurance, and we got to make sure 
of ways to do that if we are going to hold down costs in the 
individual market to ensure that we have a decent risk pool.
    Senator Baldwin. Governor Baker.
    Governor Baker. We are in a slightly different spot because 
we run our own exchange, and if you run your own exchange, you 
are required under the Federal law to actually have a Navigator 
and an outreach program, which we do. We run it and we pay for 
it ourselves in Massachusetts.
    What I would say about that is it is at least important 
what you are doing as it is how much you spend on it. We made a 
lot of changes to the way we do outreach over the course of the 
past couple years and have tried to do things that actually 
seem to move the needle with respect to enrollment and have 
stopped doing things that were not moving it at all. I would 
say this is a good example of Senator Young's comment about 
States could learn from each other about this. I am telling you 
there is some stuff that you and we pay for that does not get 
us anything with respect to enrollment, and there is some stuff 
we do that does and we should be talking more about the how on 
that one.
    Senator Baldwin. Great.
    Governor Hickenlooper. Without repeating anything anyone 
else said, we started using social media for the first time. We 
are getting rock and roll bands and musicians. You have to look 
at who your target is and then how you get to them. The notion 
of using trusted advisors, trying to do outdoor recreation 
opportunities to get people to sign up, all those are different 
ways--and cutting back the revenues by which when you're 
finally figuring out how to make it work is probably bad 
timing.
    Governor Herbert. Let me just say that talking to Senator 
Franken earlier, we debate over how we pronounce ``insurance.'' 
We actually are debating what insurance is. And the challenge 
of having a pool created, whether it is by mandate or by 
incentive--we have kind of violated the program. We have said 
we have a lot of young people that do not want to be involved. 
In Utah, our uninsurance rate was 11 percent before the ACA. 
The national average was 13. Of those 11 percent, half of them 
could afford it but chose not to. A lot of it was the young 
invincibles. If we are reinventing the definition of what 
insurance really is, recognize that we have some of these 
problems. Should we have a mandate or should we have incentives 
to create that proper pool? And that is part of the debate we 
have overall that undergirds this whole thing.
    The Chairman. Thank you, Senator Baldwin.
    Senator Murkowski.

                     Statement of Senator Murkowski

    Senator Murkowski. Thank you, Mr. Chairman. We are all kind 
of popping in and out of other meetings, but it was important 
for me to come back.
    I personally wanted to thank each of you for being here, 
each of you for your leadership on these issues. Governor 
Hickenlooper, what you have done in leading a bipartisan group 
of Governors to come forward with some suggestions for us--I 
think this is exactly what many of us had been hoping that we 
would have an opportunity to do is this level of engagement. We 
can do a lot up here in the capital here in Washington, DC, but 
you all have to translate it on the ground. The fact that we 
have not had this open dialog to this point in time on this 
particular issue area is I think part of what has taken us so 
long to get here. I just thank you for that.
    It has been described that we got to figure out how we 
approach this, and I appreciate the chairman's leadership in 
focusing on a very discrete area in terms of how we stabilize 
the individual market. Whether we are eating the elephant one 
bite at a time or Senator Enzi's analogy, which was eating the 
whale, I will tell you that I actually know how to eat the 
whale.
    [Laughter.]
    It is a very prescribed way that you cut the whale so that 
it is shared according to tradition.
    I am not going to suggest that I have all the answers with 
health care, but I do think that Alaska has provided a little 
bit of some guidance here as an extremely high-cost State in a 
very remote and rural area with a very small population. 
Everyone is now looking at what we have done in leading on 
1332. It is not perfect, but it does provide an example.
    I want to recognize that with the approach that the 
chairman and the ranking member have taken, that we are going 
to look specifically to how we can stabilize the individual 
market, there are some very clear areas of consensus whether 
you are Republican or Democrat, rural or urban.
    First is dealing with the CSRs, and whether it is a 1-year, 
2-year, or perhaps longer, we can figure that out. It is about 
the predictability. I think that that has to be key.
    The flexibility given to the States. Again, there is 
uniformity there.
    The fact that it has to be bipartisan. This cannot be the 
Republican solution to health care, just as just having a 
Democrat solution to health care was not the answer for us 
either.
    Getting us to where we are today--the process is better 
when it is open like this, and I appreciate your input here.
    The question that Senator Baldwin had just posed about how 
we deal with ensuring that we have significant numbers that are 
enrolled. Yesterday, there was discussion about the cuts to The 
Navigator program. It was very interesting because the 
insurance commissioner from Oklahoma said we have insurance 
agents on every corner. In Alaska, I can tell you we do not. 
Recognizing that we might need to look at different approaches 
given the demographics of the respective States I think is 
important for us.
    One thing that came up in a letter that you had led, 
Governor Hickenlooper, was the opportunity for some creative 
solutions in underserved markets. Alaska is clearly an 
underserved market. The proposal that was out there was that 
you might be able to buy into FEHBP, the Federal Employee 
Health Benefit Plan. That might not be the answer, but it is 
intriguing to me. In Alaska, we have 18,000 people on the 
individual market. That is it. Why are we creating a new system 
for 18,000 people?
    Can you speak a little bit more to the discussions that you 
had amongst Governors on some of these proposals for how we 
deal with those in underserved markets?
    Governor Hickenlooper. Sure. And thank you for your 
leadership on health care as well. Obviously, you do represent 
a different part of the United States.
    It is worth saying that all these Governors--Governor 
Kasich and I talked to over 20 Governors to try and collect 
information around this. One of the hard parts was figuring out 
how do you distill that down into a set of recommendations that 
can have a real material bearing on something like those 
individual markets in certain parts of the world where it 
almost does not make sense.
    Obviously, I think the Federal plan is a viable solution. 
When you look at it, for a lot of individual markets, it is too 
expensive. They get things they do not necessarily want. It is 
not a perfect solution. Also trying to provide incentives for 
basic health insurance plans and companies to go into these 
markets and give it at least a fighting chance to make a sliver 
of profit out of it is probably the most important thing.
    Governor Kasich and I--we disagree about an awful lot of 
this stuff. Ohio has a big rural population. We have a big 
rural population. Everybody up here has a big rural population. 
That is a consistent effort that I think if we had more 
bipartisan support and I would say more work with the Governors 
as well, we would make more progress.
    Senator Murkowski. I want to do that.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murkowski.
    Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    I also apologize for having to be in and out. We are doing 
a hearing on North Korean sanctions, another easy issue.
    As Governor Baker has already emphasized, in Massachusetts 
making sure that everyone has high-quality, affordable health 
insurance has not been a partisan issue. Democrats and 
Republicans work together to make sure everyone has access to 
health care.
    Governor Baker, I want to ask you a question about costs. 
If President Trump follows through on his threat and refuses to 
pay the cost sharing reduction subsidies that help keep 
insurance premiums down, Massachusetts would lose about $146 
million in 2018 alone. Does that mean that the Federal 
Government will save $146 million in Massachusetts 
expenditures?
    Actually no. This is one of the things we talked about with 
respect to the fact that there is a whole bunch of places where 
Federal money is involved in health care. According to the 
CBO--we have talked about this a little bit--you would end up 
at the Federal level paying more in advanced premium tax 
credits if you did not have the CSRs. And net-net, it would be 
a negative for the Federal Government over the course of the 
next 10 years.
    Senator Warren. In fact, I think it is about $194 billion 
nationwide.
    Let me ask the question the other way then. If insurance 
companies and people in Massachusetts are going to get Federal 
money either way, then why do you care whether or not President 
Trump makes the cuts to these cost sharing programs?
    Governor Baker. The big part about the cost sharing piece 
and the uncertainty associated with it is what it does to the 
behavior of people in the market. Whether you are health 
insurance plans or you are individuals or you are providers, 
you are all basically trying to figure out what are the rules 
of the game and what is the Federal Government's role going to 
be in participating.
    Part of the reason why we have talked about the fact that 
you probably need to put this in place for 2 years and then 
figure out what some of the larger issues we have been talking 
about this morning should be about is because you need to 
create some certainty here for the individuals and the families 
who buy in the individual market, who participate in the 
exchanges, and send the same message to the carriers and to the 
provider community.
    Senator Warren. If the President's threat to cut cost 
sharing makes no sense financially either for the Federal 
Government or for the States or for the families, can you think 
of any policy justification for threatening to blow up the 
health insurance marketplaces in Massachusetts and around the 
country by deliberately driving up costs in this way?
    Governor Baker. Having listened to my colleagues here talk 
about what the impact of the elimination of the CSR program 
would be in their States and knowing that it would probably 
represent a 20 percent increase in the cost of insurance for 
individuals and small businesses, which is really who we are 
talking about here in Massachusetts, and the fact that I do not 
think the Federal Government would save money, I said before I 
think it would be a bad idea. I really appreciate the fact that 
you all are having a conversation about how to make sure that 
we continue to provide stabilization or create stabilization in 
a market that clearly needs it.
    Senator Warren. I think failure to stabilize is reckless 
and preventing that should be our No. 1 priority here.
    I want to ask a question about market stability. Some 
people are asserting that in order to improve the ACA's 
insurance markets, we need to let States reduce the quality of 
coverage that people are allowed to buy, garbage plans, you 
know, weaker and weaker plans or plans with much higher out-of-
pocket costs. Governor Baker, in order to stabilize its market, 
does Massachusetts let insurers offer garbage plans, plans that 
toss out coverage for things like maternity care or addiction 
treatment, or let insurance companies offer plans that have 
such high deductibles that people will go bankrupt even though 
they have health insurance when they get sick?
    Governor Baker. We have a fairly robust exchange. We have 
10 carriers. We have 60 plans. And by the way, depending upon--
within the essential benefits framework which we support, you 
can buy a different level of cost sharing. You buy a bronze 
plan, a silver plan, a gold plan, depending upon what your 
particular interests are.
    Massachusetts pays--people think of us as a high-cost 
State, but actually families and individuals in Massachusetts 
pay less as a percent of their income in health insurance than 
the national average. People in Massachusetts have lower out-
of-pocket expenses as a percent of their personal income than 
people do at the national average level. And the total cost of 
coverage in Massachusetts, even with the fact that we have 
pretty robust plan designs, is plus or minus about 5 or 6 
percent higher than the U.S. average but nowhere near as a lot 
of people think it is. We do not think the path to success with 
regard to market stability is reducing in draconian ways the 
options that are available to people.
    What I do believe--and I said this earlier--is our ability 
to create stability in that market over the course of 10 years 
to get a lot of people into it and to encourage people to 
participate. As I said, I support--the mandate has been a much 
more effective way for us to manage costs.
    The other thing I would say--and this gets back to the 
question that was asked earlier about risk sharing and 
reinsurance--we do support with State funding on the premium 
side because we think that is a good idea with respect to 
making sure people have access to plans they can afford. That 
is part of what would become the conversation in Massachusetts 
if we headed down the road of trying to play to support a 
reinsurance model as well.
    Senator Warren. Thank you very much. I think Massachusetts 
is the example of showing that we can stick with strong 
insurance plans that protect families and at the same time have 
market stability and that ultimately that works for everyone. 
Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Warren.
    I do not usually do this--and I will give Senator Warren 
time if she wants to say anything else. I do not disagree with 
what she said about the President and the cost sharing thing 
except one other fact is the United States District Court for 
the District of Columbia ordered the President to stop paying 
the cost sharing reduction payments because he is not 
authorized to do that under the Constitution because we, the 
Congress, authorized the payments but did not appropriate the 
money.
    What we would like to do is clear that up--I would like to 
do is clear that up by appropriating the money for a period of 
time. Then if the President did not do it, that would be 
another question.
    Senator Warren. Mr. Chairman, I need no rebuttal. If this 
Congress moves forward and authorizes the money and gives our 
States the ability to stabilize their markets under the 
Affordable Care Act, I am all in.
    The Chairman. Good. Thanks very much. You and I agree on 
that. Thank you, Senator Warren.
    Senator Hassan.

                      Statement of Senator Hassan

    Senator Hassan. Thank you, Mr. Chair. And my thanks to you 
and Ranking Member Murray for these hearings.
    To our very distinguished panel, thank you for being here. 
As a former Governor, you are some of my favorite people. 
Welcome.
    Thank you for offering the different perspectives of your 
States. As I said yesterday, I think one of the things that is 
so useful about these hearings--yesterday we heard from 
insurance commissioners. Today we are hearing from you. You all 
actually are on the front lines making things work, and I think 
sometimes when we move out of our ideological debates and into 
problem solving, we actually can find a way forward.
    To that end too, a shout out to Governor Hickenlooper and 
Governor Kasich and all of you who have come together on the 
bipartisan proposal from the Nation's Governors because it has 
really helped us focus on problem solving and I appreciate it 
very much.
    We have talked a lot about two issues that seem to be 
everybody's focus in terms of the task of immediately 
stabilizing our markets, reinsurance and the cost sharing 
reductions.
    I want to ask quickly about the discussion we have been 
having here about whether the Federal Government should fund at 
least a temporary reinsurance option for States, whether the 
States have the wherewithal to do it all themselves. I sat here 
today thinking that if I were still in the Governor's seat, I 
would be making the argument that at least some of the seed 
money should come from the feds because the feds are going to 
save money if we put in place a reinsurance program and 
premiums go down.
    Is that an assumption or a belief you all share too, that 
there are savings both on the State side and on the Federal 
side, if the Federal Government could put up the seed money and 
get the reinsurance program up and running at least 
temporarily? Any one of you.
    Governor Baker. I certainly look at the funding you spend 
on the advance premium tax credits and the money you spend on 
the CSR program and the money you spend on Medicaid generally. 
And I would say yes. If you reduce the cost of coverage, then 
that is going to impact all the other things that the Federal 
Government puts money into to pay for the cost of coverage.
    Senator Hassan. Thank you.
    Anyone else?
    Governor Herbert. Let me just add. Senator, I think we all 
want to have a cost-to-benefit analysis. Whatever the cost is, 
there ought to be a benefit. If there is a better way of doing 
things and spend the money in a better way, let us do it. We 
want stability in the marketplace. We want predictability. We 
know that is what the marketplace wants.
    We find, though--and Governor Haslam kind of mentioned 
this--that States kind of have to govern under a different set 
of rules than you do here in Congress. We really do have to 
balance the budget. We have to live within our means. When you 
say provide seed money, if you have that in the budget to 
provide seed money or any other kind of whatever you want to 
call the money, if we could find a cost-to-benefit where we 
have a reduction of the overall deficit being spent here in 
Congress, that is probably a good thing. If it just adds to the 
deficit, I think the concern that many have in this country is 
where is the end going to be. If we are approaching $20 
trillion, how much more can you generate.
    Senator Hassan. If we are talking about the actual program 
that we have up and running, the advance premium tax credits 
that we would have to pay as opposed to using that money as 
seed money for reinsurance and bringing down the overall cost I 
think weighs to the benefit side of the cost-benefit analysis.
    Governor Herbert. I agree, and I think we need to think in 
terms of short term, but you also need to be thinking in terms 
of long term.
    Senator Hassan. Thank you.
    I know that others may want to chime in, but I wanted to 
move on to at least one other point. Governor Baker, I will 
start with you because as neighboring States, we have worked 
together on combating the heroin and opioid/fentanyl crisis in 
our States. It is an epidemic that impacts States around the 
country. I wonder if you could comment on the importance of 
having predictability, participation in the insurance coverage 
market, and essential health benefits to the capacity to stand 
up treatment and recovery services in your State.
    Governor Baker. Certainly the fact that we already had sort 
of virtually universal coverage made it much easier for us to 
expand our recovery and treatment capability in Massachusetts, 
which we have done over the course of the past couple years. We 
have probably increased our support for that by about 50 
percent.
    The other thing--and I mentioned this earlier--that really 
made a difference was being able to work collaboratively with 
our colleagues across the New England region on prescription 
monitoring, which because the system is now a lot more 21st 
century and a lot more user friendly, we have far more 
prescribers using it and they are using it a lot more often. 
The data that they are getting from it not just in terms of the 
person that is in front of them, but also in terms of sort of 
best practice standard and where they sit relative to their 
peers, has had a big impact on prescribing patterns. For the 
first time in 15 years, in the first 6 months of 2017 over the 
first 6 months of 2016, the number of people who died in 
Massachusetts went down. We still have a long way to go. That 
number had gone up year over year every single quarter for 
literally 15 years. I do think that having a system where for 
the most part coverage was not the first question that people 
had to deal with with respect to accessing treatment made a big 
difference.
    Senator Hassan. Thank you.
    Mr. Chair, I see my time is up. I will submit maybe a 
question. We have talked about transparency of cost, which is 
something that New Hampshire has led in. We also need to be 
talking in transparency of outcomes because my experience has 
been that people think that if we are talking about lowering 
the cost of their care, we must be talking about giving them 
lower quality care. In fact, the inverse is often true. I think 
combining those metrics is really important. I will include a 
question to the record about that.
    The Chairman. Thank you, Senator Hassan.
    Senator Casey.

                       Statement of Senator Casey

    Senator Casey. Mr. Chairman, thanks. I want to reiterate 
our thanks to you and Ranking Member Murray for these 
bipartisan hearings. Good news for the country when they see 
these hearings playing out.
    We are grateful and certainly grateful to the Governors who 
are here. You have very difficult jobs every day, and the time 
you are spending here not only here today to give testimony and 
answer questions, but both your advocacy and the way you convey 
a sense of urgency about these short-term issues, especially 
CSR payments, and other issues we hope to get consensus on, we 
are particularly grateful.
    I was just running back and forth literally across one 
hallway to the Finance Committee. We are dealing with yet 
another matter of urgency which is the Children's Health 
Insurance Program deadline on September 30th. Lots to do on two 
major health care issues.
    The one part about this discussion today that is 
encouraging--and it has been evident now for a couple of weeks 
at least, if not longer--is that there is consensus about the 
need to make the cost sharing payments and to legislate, as 
Chairman Alexander has indicated to us, and to also get to some 
other issues like 1332.
    One thing I wanted to ask about is--because there was 
discussion I think today that I may have missed but certainly 
yesterday as well about the 1332 waiver but also the 1115 
waivers. Governor Baker, I wanted to start with you.
    On the thinking to combine savings from both waivers, one 
concern raised with regard to that by combining those savings 
from those waivers, the intent would be to help folks in the 
marketplace. Would there be a cost or an adverse impact on 
Medicaid or Medicaid beneficiaries? Anything you can tell us 
about that or any concern you have about that.
    Governor Baker. That is a big part of why we appreciate the 
opportunity to think about this stuff holistically in our 
conversations with folks at CMS and at the Federal level. The 
number of different revenue streams and the number of different 
programs that the feds finance different parts of the health 
care community, when you are talking about the population that 
is sort of somewhere between, call it, 100 percent of poverty 
and 300 percent of poverty, working people for the most part, 
folks who do not typically have access to coverage as directly 
as folks who are either automatically qualified for Medicaid 
sort of across all 50 States because of their status and their 
age and they are disabled or they are very poor and the folks 
who just have access to coverage because they have been working 
for 20 years and they make enough where it does not really 
affect their ability to access employer-based coverage--that 
whole area in there, which represents a lot of people, has with 
it a lot of different sources of State and Federal money. One 
of the things we believe would be helpful to you and to us is 
to make sure that we account for all of that when we try and 
figure out what the best way, as Governor Herbert said before, 
to deliver the highest benefit and the most appropriate level 
of cost across what we at the commonwealth put in but also what 
you at the Federal level put in as well.
    Senator Casey. I appreciate that. I know I will be short on 
time, but if we can do it by way of written response to an 
additional question.
    Governor Hickenlooper, I want to thank you for the work you 
have done in a bipartisan fashion with Governor Kasich, 
including Governor Wolf of Pennsylvania working with you as 
well. I know that others at the table are equally engaged. 
Because you have some Pennsylvania roots, I will direct this 
question to you.
    With regard to the age rating limit, some States have 
proposed balancing the risk pool, which is obviously of great 
significance and priority, but some States have proposed 
balancing that risk pool in a way that potentially could 
negatively impact seniors. Is there anything that you would 
want to say about that with regard to both the age rating 
limits or otherwise? Any concern you have there?
    Governor Hickenlooper. Yes, of course, I think we all have 
a lot of concern on that, and I will be brief.
    Expanding the calculations by which older people end up 
paying even more than they have been seems unconscionable. 
Certainly there are other ways to approach some of those 
discrepancies. The real issue here is how do you get more young 
people to join up. This is probably the wrong way. If you talk 
to AARP or any of the advocates for older Americans, they get 
very agitated when they hear this. It is unfortunate to take 
that direction when there are other choices.
    Senator Casey. Governor, thanks very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Casey.
    Senator Kaine.

                       Statement of Senator Kaine

    Senator Kaine. Thank you, Mr. Chair. To the chair and 
ranking, these are great hearings.
    The chair mentioned in his opening comments just yesterday 
in Virginia, there was an announcement that a major company 
that was thinking about going into markets that Anthem had 
pulled out of--individual markets--that Optima, which was 
thinking about doing it, had decided not to do it. Virginia is 
going to grapple with what so many States are, a real now 
division between urban, suburban, and rural communities. The 
Optima decision, the Anthem decision is going to hit rural 
Virginia the hardest. Virginia did not expand Medicaid. That 
has hit rural Virginia the hardest. One of the issues we have 
to grapple with--and I think many of your States are facing 
this too--is we do not want to become two nations separated 
between rural America and the rest of the country.
    I thank all the Governors. I really admire what you do. You 
are on the front line. And you are before a committee that is 
uniquely situated to do this job. This is a committee that has 
Governors, mayors, doctors, insurance commissioners, State 
auditors, small business owners, professional humor therapists.
    [Laughter.]
    We have the bases covered. We can do good work.
    I am struck by both yesterday and today the commonality in 
testimony between the insurance commissioners and Governors 
around a number of concepts: stability and hopefully 2 years of 
stability and predictability around the CSRs, what we can do to 
get more young people in, a variety of strategies on that 
flexibility to States under 1332, and the viability of 
reinsurance, whether it is a Federal program or Federal funding 
for State reinsurance programs. These are bipartisan ideas.
    One thought that has been ventured by critics of some of 
these approaches--and these are not the people on this 
committee, by the way, but they are some people in Congress and 
elsewhere--is things like CSR and reinsurance is, ``bailing out 
insurance companies.'' You are elected Governors of your 
States. I assume that you are not here with the primary purpose 
of bailing out insurance companies. That is a rhetorical 
question. I know that is not why you are here. It is 
interesting that is sort of a critic that some would level 
about CSR and reinsurance in particular.
    As I understand the CSR payments, they are basically 
payments to help individuals deal with out-of-pocket costs, 
deductibles and co-pays.
    You have done a very good job, each of you. As you have 
collectively described the benefits of reinsurance, you can 
lower premiums. By lowering premiums, you can bring in more 
young, healthy people and other people who just find 
affordability more attractive, obviously. By lowering premiums, 
you reduce the advance premium tax credit, the subsidy call on 
the Federal budget. You can protect high-risk people, and you 
can also send a signal of stability to insurers that there will 
be a backstop against high-cost claims keeping them in the 
market.
    The strategies that we are talking about here and that have 
been validated by yesterday and today, two groups of bipartisan 
leaders at the State level, are anything but a bailout for 
anyone. They are really designed to help people and to provide 
at least some temporary stability with a predictability that 
will enable us to find bigger picture items.
    I am going to ask a general question kind of along the line 
of Senator Whitehouse since there is such consensus around the 
basic points. When we get to the longer-term discussion, if you 
could start Governor Haslam, and come across the table, what 
would be the one thing you would most want us to focus on if we 
get to step two, we take the stabilization steps?
    Governor Haslam. I think we have to begin to align 
incentives. Some of you have talked about payment reform and 
doing that on the provider side. Quite frankly, you have to do 
something on the user side as well to incentivize better 
behavioral choices. Today, I tell people all the time health 
care is like going to the grocery store. The assistant manager 
meets you when you walk in the door. You walk up and down the 
aisles. You get to the cash register and they say thank you 
very much. You can see why we have gotten to where we are. We 
all know the history. Aligning incentives would be where I 
would start.
    Governor Bullock. I largely agree with Governor Haslam. We 
need to move from paying for just repeated services and tests 
to paying for value.
    It is also important through all of this too--I think 
Tennessee has done it. Montana has done comprehensive primary 
care plus reform. We did it through the Center for Innovation. 
As you go forward, do not mess with things like that because we 
are trying to do some good work already in payment reform and 
starting to look at care coordination, which did not always 
exist.
    Senator Kaine. Governor Baker.
    Governor Baker. To build on what my colleagues have already 
said, I would add to that the transparency issue that has been 
discussed before. There is a lot of variation--let us leave it 
at that--not just in the way care gets delivered but also how 
much we pay for basically the same kinds of things.
    I also think, as Senator Whitehouse brought up, this whole 
issue around variation in both approach to providing care in 
certain situations and circumstances and outcomes. There is a 
lot of research on that, and not a lot of it finds its way into 
daily practice. That would be a great place I think for, 
frankly, the Federal Government to actually take the lead. You 
have a lot of resources and a lot of knowledge and a lot of 
opportunity there.
    Senator Kaine. Mr. Chair, I am over time, but could I allow 
Governors Hickenlooper and Herbert to answer? Thank you.
    Governor Hickenlooper. I would just reemphasize 
transparency. I think that is going to be the next big 
opportunity. Just go into a Walmart or any big--you know, 
Target, and they have hundreds of thousands of SKUs, all 
different colors, every little thing you can buy, and yet 
hospitals come and tell us or other care providers tell us, 
well, there is too much complexity. We cannot predict what 
something might cost. Ultimately we have got to be able to have 
some system by which people know and can easily through their 
handheld device or whatever get a sense of what it is going to 
cost them to get their broken leg fixed or stitches in their 
arm or maybe a serious medical procedure and know what that is 
going to cost and what their co-pay is going to be and what the 
quality is going to be at, let us say, the five different 
places that are within a 5-minute drive of where they live.
    Senator Kaine. Governor Herbert.
    Governor Herbert. Let me say I agree with what has been 
said. I think we learn from each other. If Massachusetts has a 
great plan and the people of Utah like it, we will probably 
adopt it. It should not be mandated to us. We should be able to 
choose what we think is best in our own respective areas of 
responsibility.
    I do believe we need to move the conversation, once we get 
through the stabilization here, but there has got to be a 
discussion about the cost of health care. The undergirding 
cause of the rise of premiums and insurance. What are we doing? 
Why are we not putting more doctors in the marketplace? Why are 
we not incenting people to go into the field of medicine? How 
about tort reform? What about more information and consumer 
choice where they can pick and choose and be informed in their 
choice on their medical issues? Those things will help us drive 
the cost down for the cost of health care and drive down the 
cost of insurance.
    Senator Kaine. Thanks, Mr. Chair.
    The Chairman. Thank you.
    Senator Murphy is here and he has not asked questions. The 
Governors have been very generous with their time this morning, 
including the hour they spent with about 30 other Senators. 
After Senator Murphy, I am going to move to wrap up the hearing 
unless Senators have other--Senator Franken and Senator 
Whitehouse, you may have other comments.
    Senator Franken. I do.
    The Chairman. OK. Then we will make time for that. Then I 
am going to give the Governors a minute or 2 each in case there 
is one more thing you would like to say to us. Then we will 
wrap it up after that.
    Senator Murphy. If Senator Franken has a question, he can 
go ahead.
    Senator Franken. Is that OK, Mr. Chairman?
    The Chairman. Sure.
    Senator Franken. Yesterday we briefly discussed the Graham-
Cassidy proposal. I want to say that I have a great deal of 
respect for both Senators Graham and Cassidy. Though if Cassidy 
were here, I would say more for Graham.
    [Laughter.]
    He is not here.
    I have grave concerns with this proposal, and I want to ask 
our panel about the plan's potential implications. Although the 
plan's specifics have changed over time and reportedly will 
change again, what we know from earlier versions of the Graham-
Cassidy plan and from recent news reports is that it could 
eliminate funding for premium subsidies, eliminate the cost 
sharing reduction payments, and eliminate the enhanced Federal 
funding for the Medicaid expansion. Instead, starting in 2020, 
the Federal Government would return some but not all of this 
funding back to States in the form of a block grant. This means 
that States will be receiving less money under these block 
grants than they would be projected to receive under the ACA.
    Not only that, but the proposal significantly redistributes 
funding across States such that States that have been more 
proactive in enrolling individuals in the Medicaid expansion 
and marketplace coverage like, Governor Baker, yours and my 
State, will see billions in losses, while other more sparsely 
populated States and those that have not expanded Medicaid 
coverage could see funding increases at least in the initial 
years.
    After 2026, all the State funding would be eliminated, 
which means States would be on the hook for all costs 
associated with Medicaid expansion, premium subsidies, and 
other cost sharing reduction payments after that point.
    Earlier versions of the Graham-Cassidy plan also included a 
proposal to cap and cut Medicaid funding just like the proposal 
that was included in the Republican bill to repeal the ACA, 
which failed to pass the Senate a few weeks ago.
    Governor Baker, based on what we know about the Graham-
Cassidy proposal, is this a reform that you could support for 
Massachusetts?
    Governor Baker. I am also a big fan of Senator Graham and 
Senator Cassidy, but no. The proposal would dramatically 
negatively affect the Commonwealth of Mass. We are talking 
billions and billions of dollars over the course of the next 4 
or 5 years. That is not to say that there are not plenty of 
programs where the Federal Government block grants money to 
States that work. A lot of our child welfare money comes 
through a block grant. We get money for substance abuse 
services and mental health services through block grants. We 
get money for--I would argue some of the transportation money 
we get looks a lot like a block grant. This particular 
proposal, in part because of the way it is designed, has major 
consequences for a State like Massachusetts.
    I would also argue when we talk about Medicaid generally--
and I know this is not supposed to be about Medicaid--your 
income level as a State, your wage as a State is calibrated 
into what you get from the feds. We are a 50 percent match 
State. I am pretty sure you are a 50 percent match rate. 
Governor Herbert is a 70 percent Federal match rate. Governor 
Bullock I think is a 65 percent match rate, and I think 
Governor Haslam is a 65 percent match rate. I have no problem 
with that. Higher income States should get a lower share of 
reimbursement from the feds than lower income States. I 
completely understand that. That formula is framed in a way 
that is deemed to be sort of equitable based on that.
    The problem I have with the Graham-Cassidy piece, 
especially for a State like us, is it assumes that the cost of 
health care across the country should be the same everywhere. 
We are a high wage State, as I just pointed out. Because we are 
a high wage State, wages make up about 70-75 percent of the 
cost of health care at the provision level in most States, 
which is why we get paid less on the Medicaid match than some 
other States. To promote the idea you could build a block grant 
model around the idea that the cost of care that is higher in 
Massachusetts than it might be in Florida because somehow 
Florida is just smarter and better, that is not accurate. The 
simple truth is we have higher wages than they do in Florida, 
and that has a lot to do with why our health care costs are 
higher.
    Senator Franken. I am out of my time. I would note that 99 
percent of children are covered in Massachusetts, and more than 
96 percent of all Massachusetts residents have health care. 
These are the highest rates in the country, and with a 
bipartisan effort, Massachusetts developed a system of health 
coverage that works. I know that this Graham-Cassidy plan would 
be not beneficial to States like yours and like mine----
    Governor Baker. Correct.
    Senator Franken [continuing]. That do cover--I think we may 
be second in the country.
    Governor Baker. You just need to know my mom is a Democrat 
from Rochester, MN.
    Senator Franken. I so love you.
    [Laughter.]
    The Chairman. With that, we will thank Senator Franken and 
go to Senator Murphy. Then we will conclude the hearing.

                      Statement of Senator Murphy

    Senator Murphy. Thank you, Mr. Chairman.
    You all have been so fantastic for giving us so much of 
your time.
    I wanted to just probe this question of guardrails a little 
bit more, and maybe I am going to pose this question to 
Governor Hickenlooper.
    I understand the need to allow for States to be 
laboratories of experimentation. Lord knows, we still need more 
experimentation to figure out what works and what does not work 
in health care. We also do exist in a national economy with a 
decent amount of fluidity between people and businesses. There 
is an argument that having some floor on what insurance plans 
cover protects States and actually creates stability in the 
overall economy.
    You have all recommended giving States more flexibility, 
but where is the natural end of that? Because I think there is 
some benefit to knowing that no matter what State you go to, 
you are going to be able to have folks that are sick or have 
higher levels of medical acuity be insured. There is probably 
some benefit to know that there is some relatively uniform 
standard of benefit, maybe not exactly what is in the ACA 
today, but at least some modicum of regularity.
    Talk to me a little bit about whether you see some benefit 
in having some floor of benefits or protections and how far you 
would go in taking down the guardrails.
    Governor Hickenlooper. We discussed this at great length in 
trying to come to consensus with Republicans and Democrats. In 
the end, we support the concept of essential health benefits 
and what those guardrails are, as they are now. In other words, 
we do not address that.
    What we really focused on was how do you make the 
bureaucracy easier so you can get these various waivers that 
pretty much all of us agree offer not only cost savings, but in 
many cases will improve the actual outcomes of health care 
delivery. At some point, that will get discussed and debated, 
and that is a longer issue than we have here. We were very 
specific to make sure that those essential health benefits, 
those guardrails, should be maintained.
    Within that, there are all kinds of places where 
maintaining those health benefits can be done less expensively. 
Governor Baker talked about the alignment of medical, you know, 
dental benefits. Rather than having your basic insurance 
company set up whole new systems to provide dental benefits, 
you have companies that do that already, and they were not 
permissible under the Affordable Care Act. Those kinds of 
waivers I think are the driving force of a lot of the change we 
are going to see in the short term, and if one State has 
already qualified, other States should qualify as well.
    Governor Haslam. Senator Murphy, can I jump in on that real 
quick?
    Senator Murphy. Sure.
    Governor Haslam. Undoubtedly you are right. I will say 
this. It is way out of whack now. The balance is--back to 
Governor Herbert, it is the States going to the Federal 
Government hat in hand, and there is an assumption from the 
Federal Government--and it is a little offensive, to be honest 
with you--that says you will not care for the least of these 
unless we tell you exactly how to do it. You trust us with 
education. You trust us with so many other things. And there is 
a sense in which like you are saying we do not trust you to 
care for the least of these. I know Governors of all types, and 
we get it. We understand that is part of our deal. We are just 
so caught up in the bureaucracy that we know there are a lot of 
dollars being wasted.
    Senator Murphy. I want to ask you one other question on 
another topic. Governor Baker, I want to talk to you about the 
individual mandate because as part of the President's executive 
order at the beginning of the year, he required that the IRS 
start to unroll the enforcement of the individual mandate. And 
they actually declared on February 14th that they would scrap 
plans to reject tax returns that do not include information on 
coverage status. And at least one actuarial firm suggested that 
this order, this uncertainty around whether the individual 
mandate is going to be enforced, is contributing to about 10 
percent of the premium rise.
    You were sort of first out of the box as a State to 
understand the importance of the individual mandate. Can you 
just talk a little bit more about your experience with the 
mandate and what it potentially does to rates if there is at 
the very least great uncertainty from the perspective of 
insurers as to whether anybody is going to bear consequences if 
they do not abide by it?
    Governor Baker. I was an insurer once. I am not anymore. I 
am not going to try and speak for them today.
    What I would say is that the mandate, at least in 
Massachusetts, did three things. The first thing was it 
encouraged people who had access to coverage through their 
employer to take it, and that actually represented a huge part 
of the increase in covered lives after the mandate took effect, 
which was not something anybody was anticipating or 
appreciated, I do not think, before we put the mandate in 
place. We were thinking about it mostly as a way to make sure 
that everybody was in the game, including folks who 
historically had just chosen not to buy.
    The second thing I would say is that we have been at it for 
10 years now, and it does create a certain level of sort of 
shared responsibility and a cultural understanding that there 
is a reason why you buy insurance because you do not know 
necessarily if there might be some point in time when you are 
going to need to use it. We are also a mandatory auto insurance 
State. I think people for the most part get that, and I think 
it has helped stabilize the market in some respects.
    I really do believe that the CSR issue is a much bigger 
issue for the carriers than what shows up on your income tax 
return. This is me being the Governor as opposed to a Senator. 
I would push you folks to think about encouraging States to 
come up with ways, especially if you are going to create 
reinsurance pools in conjunction with them, that create some 
semblance of a reasonable market. There are a lot of ways 
people could encourage folks to buy insurance and to keep 
insurance other than a mandate. I happen to like the mandate 
because it is what we have been using. It is what people are 
familiar with, and people understand it in Massachusetts. I do 
think this is one thing where States, which are a lot closer to 
people and have a lot more engagement with them day in and day 
out, could pursue a whole variety of different options. You 
need to find out that some work better than others, and that 
would end up being useful and appropriate, especially if you 
decide you want to get into the business of doing shared 
reinsurance pools.
    Senator Murphy. Thank you.
    The Chairman. Thank you, Senator Murphy.
    Governors, thank you. I want to give you the last word in 
just a minute to ask you to take a minute or 2 for anything you 
would like us to have for the record or you would like to 
emphasize.
    First, let me ask you. There has been a good deal of talk 
about attracting younger people into the individual market. A 
couple of Senators on both sides of the aisle actually have 
suggested that with what is now the copper plan in the 
Affordable Care Act, which is essentially a low premium, high 
deductible alternative--you could call it a catastrophic plan 
in a sense. Its goal is to keep, as I think one of you 
described, a medical catastrophe from turning into a financial 
catastrophe. In the Affordable Care Act, you can only buy that 
if you are 29 or younger. The suggestion was to take off the 
age cap and allow anybody of any age to buy the copper plan.
    Do any of you have an opinion about that? Let me put it 
this way. If it were part of a bipartisan package that included 
extension of the CSR and other things, what are the pros and 
cons of that?
    Governor Haslam. I do not know enough actuarially to know 
how big a difference that is going to make. I do not know.
    Governor Bullock. I think when you are actually hearing 
some real consensus on what needs to be done to stabilize it, 
if Charlie Baker does not know what it is going to do, chances 
are none of the Senators will. I think that it goes a little 
further than where we ought to be talking about if we are 
really looking at immediate stabilization.
    Governor Baker. Going back to when we did health care 
reform in Massachusetts 10 years ago, we did set up plans that 
you could buy if you were under the age of 29. This was before 
the Federal law that said you could carry your parents' 
coverage until you are 26. We were really thinking about a 
particular market there. And that was designed to encourage 
young, healthy people to purchase insurance, many of whom are 
thinking differently about this than other people are.
    I agree with Governor Haslam. I do not know what the 
actuarial impact of applying that more broadly across the whole 
marketplace would be. Obviously, my answer to that would be it 
would be good to have somebody do the analysis and let you know 
what they think.
    In Massachusetts, it was designed to serve a very 
particular purpose, and that purpose only. It was not made 
available to the whole market for a reason, and the reason was 
we wanted to make sure that the market overall maintained some 
degree of actuarial soundness within the folks who were buying 
who were sort of over the age of 30.
    The Chairman. Anybody else?
    Governor Hickenlooper. I would agree that we do not have 
actuarial information, but there was a huge process of 
discussion that went into that decision to put the age limit on 
there. If you were going to change it--it is not impossible to 
imagine changing it incrementally, in other words, just do not 
abolish it but look at what you might add or take away from the 
plan and then how you might adjust the age in some way.
    The Chairman. It is a thought. Thank you.
    Governor Herbert. Let me add that I do not know that we 
know the impact actuarially, but I do believe that more choice 
is better than less choice. I think government puts barriers in 
place that draw lines and it probably distorts the market. If 
there is a demand out there for lower cost, high deductibles, 
we ought to allow that to happen and see, in fact, what the 
market will, in fact, result in.
    The Chairman. Thank you for your answers. This is the kind 
of thing that you deal with in your States with your 
legislatures. I am looking for a way to get a result, and it is 
pretty easy to be for extended cost sharing payments. That is 
just more money, and we can argue about how long it should be 
and that is one thing. We will have no chance of getting that 
unless we have, in addition to that, some restructuring of the 
market, part of which could be with making section 1332 work 
better. That is an opportunity to do that, and the reason I am 
emphasizing that, I think there is generally consensus about 
that. It is already in the law. It is easier for people to 
accept on the Democratic side who approved the law. If we are 
fixing it, that is easier for them to do.
    To get a Republican President and a Republican House and a 
Republican Senate just to vote for more money will not happen 
in the next 2 or 3 weeks unless there is some restructuring. A 
different policy, which is already in the law for people under 
the age of 29, is some restructuring and would be welcomed by, 
I think, a number of the Senators, which is why I asked that.
    I have two questions to ask you. And a number of you have 
your staff and insurance commissioners here. It would help us 
if you could give us specifically the things you would like to 
see us change in flexibility on 1332, and you can add 1215 if 
you want--those two waivers--very specific. For example, the 
waiting period, the me-too plan, the things you have mentioned. 
If you could give them to us in the next 3 or 4 days. We have 
written down what you have said, but this train may move 
through the station, and this is a chance to change those 
things. If you want to tell us exactly what those are and we 
got it by the middle of next week, we could use it and it would 
help us get a result.
    The same would be true if you can think of anything that 
would help States do what Alaska and Minnesota have done, if 
any change in the law is helpful to that because many of you 
have talked about reinsurance. Reinsurance is one way to deal 
with individuals with complex care. Stabilization funds is 
another, a variety of ways. Creating a brand new Federal 
reinsurance pool in the next 10 days is not going to happen. 
There is just not any way to do that. What we see in Alaska and 
Minnesota is you are using dollars that are already there in a 
way that does not cost any more and you are actually reducing 
premiums without more Federal dollars. If there is any 
impediment in the law to any other State doing that, it would 
be very helpful to know it.
    Another thought, something we might be able to do in the 
short term, is pilot programs for a good idea. Senator Heitkamp 
suggested that. She suggested, for example, association plans, 
which we go back and forth about, but she suggested before this 
hearing, let us try a pilot program for a few States who have 
ideas about association plans. If that idea were appealing, 
that would be helpful. Or if you want to suggest another kind 
of a pilot program that we might include in our short-term 
plan. I am trying to be very specific with you because all of 
you are Governors. You do this all the time. This is what you 
do every day. You try to get a result right out of competing 
points of view.
    We have, just to put it bluntly, Democrats who have no 
trouble voting for more money for the Affordable Care Act 
because they wrote the act, they passed it, and they like to 
fund it. You have Republicans who have 7 years of opposing more 
funding for the Affordable Care Act. Republicans want more 
flexibility.
    Those are the two things that will help us get a result to 
help stabilize the individual market in 2018.
    All the other ideas are very welcomed. Anything that has to 
do with taxes--for example, the health care tax was mentioned. 
That is $145 billion over 10 years. There is no way we are 
going to find a way to get $145 billion in the next 10 days. 
Plus, all those things are the jurisdiction of the Finance 
Committee and it would be more complicated.
    I am trying to keep it very simple. We know how to do big 
issues. Senator Murphy is here. He and Senator Cassidy solved a 
big complicated problem on mental health, and we know how to do 
that. I think we have been so much at a stalemate on this that 
any small step that helps stabilize the market in 2018 will, A, 
keep the premiums down and that step would include some 
extension of the CSRs. As Governor Bullock pointed out, it 
would be a signal to the country and to the markets that we 
know what we are doing and a second and third step may be 
coming down the road.
    I was going to ask this question, but I will not. I will 
just state it. I am intrigued with the fact that Maine set up 
its own reinsurance program. You can pay for these. I think 
there is general consensus among Republicans and Democrats that 
an individual market that is small, has people that do not fit 
into all the other markets, some very sick people, that any 
long-term solution is going to have to address especially some 
amount of people with complex cases, some of the sickest 
people. And that takes money. There are different places the 
money can come from. It could come from Federal dollars or 
savings from Federal dollars. It could come from State tax 
dollars. I pointed out in my statement your budgets are 
balanced and we are $20 trillion in debt. We are spending a 
trillion on Medicaid expansion in the next 10 years, another 
trillion on subsidies--866 on subsidies, so a little money 
problem here. Or what Maine did was they just tacked $4 on 
every policy and created a fund, and it worked pretty well for 
them.
    As we think about reinsurance as one way to deal with 
complex cases, I think there is a State role in this as we go 
along.
    Finally, thank you so much for coming. I know how busy you 
are. You have busy schedules every day. You have come a long 
way. You have given us an enormous amount of time. You have 
been very specific and helpful. I hope we can come to some sort 
of result this month. I would like to give you the last word 
going down the line, and then we will conclude the hearing.
    Governor Haslam. I would just say I think you have a group 
of people who are willing to help. When you walk through the 
political situation, we get that. We deal with it every day and 
we want to help.
    I also need to beg your forgiveness. I have to jump out. 
Thank you very much for hosting us.
    Governor Bullock. I would say ditto to my colleague, 
Governor Haslam. It was striking to me, as I read the testimony 
of the five of us, how much similarity there was. I think we 
all know what we need to do. I think Congress knows what we 
need to do in the immediate term under your charge. I do 
fundamentally and philosophically believe if this committee and 
this Congress can take this step, that it also sends a much 
more significant message as far as the opportunities for reform 
going forward.
    Governor Baker. Ditto my colleagues to my right here.
    I would also just add there are a number of other things 
that would be interesting to incorporate into a bill that would 
involve reform on the 1332 piece. One is section 125 plans. We 
used to have those. Pre-tax basis, individuals could buy 
coverage if they did not qualify for coverage available at 
their employers. That is another thing that the ACA just wiped 
away. And there are a lot of people who used to play in the 
section 125 space, and it is a good solution for a lot of 
people. It is unfortunate that it is gone.
    The family glitch, which we talked about earlier--that is a 
total winner. Republicans and Democrats should be all in on 
that one.
    States that have established rating factor models that have 
worked for years and years--and they are a small group in their 
individual market, which again was just wiped away by the 
Federal reform.
    I frankly do not understand why we should be running rating 
factors for individual and small group insurance in 50 States 
out of Washington, DC. It just does not make any sense to me.
    We will put all these on a list, but I think there is a 
bunch of things we can offer up with respect to that.
    The Chairman. It would be very helpful. The more specific, 
the better.
    Governor Baker. The final thing I just want to say is I 
really appreciate your leadership on this, and I have always 
appreciated the tone and the civic-minded approach you have 
taken to everything you have done in public life. Thank you.
    Governor Hickenlooper. I want to echo that too.
    I will echo also the gratitude. It is refreshing not just 
for us but for all the Governors and I think for a lot of 
people around the country to see this work being done on a 
bipartisan basis. Actually Governors being the people that have 
to implement these laws and these sets of regulations--we find 
it very important for us to be involved in the process and 
obviously recognize the work you have to do is not easy and it 
has got a long way to go.
    I want to emphasize--I was going to emphasize the family 
glitch, but Governor Baker did that already.
    I do want to reemphasize community health centers and 
making sure that people have a medical home at the least 
possible cost with the highest possible quality, which is what 
community health centers stand for.
    I also just want to frame the question because this gets 
into the partisanship, but at least from my perspective, the 
Republican inclination is more focused around individual 
freedom, individual responsibility; Democrats around the power 
of collaborative efforts. Democrats care just as much about 
that self-responsibility and that individual freedom, and 
Republicans care just as much about that collaborative effort.
    When I was in business, I spent 15 years renovating old 
buildings and building restaurants--aligning self-interests 
where you can get both sides to see that they can get a benefit 
from a possible compromise is the single reliable way to make 
progress through really difficult issues. And I think this case 
is a classic case in point that we all have self-interests, the 
Republicans, the Democrats, and then all the different players. 
We talked about the pharmaceutical companies. We talked about 
the care providers. We can go right down the list. There is a 
way, by having them at the table, that we could thread that 
needle I think and really begin to control costs, for the first 
time maybe in the last 50 years at the same time that we are 
improving quality and expanding access.
    The Chairman. You have the very last word, Governor 
Herbert.
    Governor Herbert. Very appropriate too. Thank you.
    [Laughter.]
     Let me say amen to what my colleagues have said. I think 
it is an opportunity for us in fact to address you and to give 
you some what we think is a common sense approach to things, 
which Governors have to do, and I know as a former Governor, 
you understand that.
    I wrote down three things I learned here today, maybe 
reemphasized.
    One, there are philosophical differences. We have some that 
argue that health care is in fact a right, while others think 
it maybe is not a right.
    We have the same kind of goals. We differ on process. That 
is the debate you have around here all the time. We want to 
make sure everybody has health care, access to good quality 
health care at affordable prices. How we get there is where we 
in fact have disagreement.
    We also emphasized--and you mentioned it in your remarks, 
Mr. Chairman--that we have different rules. We balance our 
budgets. We have to do that. They do not do that here in 
Washington, and you are approaching $20 trillion in debt and 
rising. The question is how much is too much and what do we do 
about it. I think you are going to have to finally decide how 
much money are you going to spend, how much are you going to 
commit on health care. That is a decision that is yet to be 
made. Again, I think that is one that you are going to have to 
look at.
    I would also say we cannot let perfect be the enemy of 
good. You have heard that before. There are some great 
solutions and opportunities here, but sometimes they get 
stymied. If we look at just our immigration debate forever, and 
yet we cannot seem to get anything done because we have perfect 
being the enemy of good.
    And last but not least, there is clearly a lack of trust 
exhibited in my opinion by Congress toward the States. That is 
why they feel like they have to put out every jot and tittle of 
what we need to follow. Nobody cares more about Utahans than 
Utahans and those who have also been elected to represent them. 
Please give us the confidence that we will find a way. Let the 
States be the laboratories of democracy on all of these issues, 
and we will find a better solution. If in fact Massachusetts 
has a better way, Utah will be the first in line to try to copy 
and emulate. If we think that is good or bad or we will modify 
and improve, we will do what we need to do in the Utah way. I 
would say the same thing for all the States. Give us that 
opportunity and we will solve the problem much more 
effectively, much more efficiently with lower cost to the 
taxpayers and getting better outcomes.
    The Chairman. Thank you, Governor Herbert. Thanks to all of 
you.
    I noticed that Senator Carper, former chairman of the 
National Governors Association, has been sitting there in the 
front row for most of today. Governor King, Senator King, was 
here as well.
    On September 12th, our committee will meet again to hear 
about the State flexibility and advance many of the topics 
mentioned today.
    The record will be open for 10 days for comments and 
questions.
    Thank you again for being here.
    The committee will stand adjourned.
    [Additional Material follows.]

                          ADDITIONAL MATERIAL

                            Office of the Governor,
                                     Helena, Montana 59620.
Hon. Lamar Alexander, Chairman,
Hon. Patty Murray, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510.

    Dear Chairman Alexander and Ranking Member Murray: Thank you again 
for the opportunity to appear before your committee to discuss 
stabilization of the individual market. I hope the committee will act 
quickly and introduce legislation to stabilize the individual market. 
As outlined at the hearing, ongoing funding for the cost sharing 
reduction is a critical first step.
    This letter responds to the follow-up questions submitted by the 
committee. Those questions ask for thoughts on how to improve 
transparency and address costs and improve quality outcomes in our 
healthcare system. My answers are provided below.
               improving transparency & addressing costs
    Fragmented health information is a major barrier to understanding 
and improving the true value of health care services being delivered to 
all patients in all care settings. While many ideas have been proposed 
to correct the ills of the health care system, it's clear that there is 
no one single solution.
    Instead, a collection of improvements need to be made to the health 
care delivery and payment systems to lower costs while improving the 
quality of care that individuals receive.
    The electronic exchange of health information is integral to any 
health care transformation, both because of its potential to prevent 
medical errors and improve costs, efficiency, and quality and as a tool 
for monitoring system performance. Without the right data to 
demonstrate accountability, funding that should go to patient care goes 
to insurers and providers to build new buildings, pay executive teams 
millions of dollars in wages and executive perks, maintain incredibly 
wasteful and costly systems and operations with no proof of impact, and 
otherwise avoid transparency and accountability for actions that 
diminish and impair access to care for patients.
Montana Data Infrastructure Pilot
    Montana has established a stakeholder group to explore the 
feasibility of establishing a State Health Information Exchange (HIE), 
built on a successful pilot underway in the State's largest community 
of Billings. Success of this initiative is based on performance that 
delivers a great experience, high care quality outcomes, optimal 
utilization of services, and ultimately curbs costs. Comprehensive 
Primary Care Plus (CPC+) elevates the bar for a provider or health 
system's need to demonstrate and be accountable for the level of value 
of their services. All of this requires interconnected, reliable 
information. A Montana HIE solution will create significant 
opportunities throughout Montana not only in health care, but in the 
health of Montanans by:

     Informing decisionmaking at all levels including 
consumers, healthcare providers, payers, healthcare associations, 
policymakers, and State leadership;
     Promoting and helping fulfill regulatory compliance for 
healthcare providers and payors more efficiently;
     Illuminating healthcare utilization trends, and individual 
and population health risks and needs; Connecting emerging delivery 
models like home and community based services; And improving 
understanding of value-based performance of healthcare delivery and 
payor systems.

    For such an effort to be successful, Congress should hold HIT 
vendors accountable to strong interoperable data infrastructure 
standards necessary to support a sophisticated network of care 
coordination partnerships. The result will be a higher-performing 
health system, with measurably better outcomes and value.
                       improving health outcomes
Integrated Behavioral Health and Access to Behavioral Health Services
    The American health care system should better address social 
determinants of health, which underlie management of chronic disease 
and utilization of healthcare resources. Integrated behavioral health 
services not only demonstrate positive impact for high risk patients, 
but also positive impact on productivity and sustainability for 
practices using these services. If we are going to look to develop a 
high-performing health care system that deals with the totality of 
medical costs, ignoring mental health and substance use as drivers of 
costs will not work. Primary care providers are already on the front 
lines of this fight, as they prescribe 70 percent of the anti-
depressants in the United States.
    This year, Montana launched the first public-private partnership to 
fund a project ECHO clinic to help integrate behavioral and physical 
health care. Montana Medicaid is partnering with commercial carriers to 
use tele-health technology to provide psychiatric expertise and 
consultation to remote collaborative care teams at primary care 
practices across the State. These integrated behavioral health 
collaborative care tele-clinics are the result of a public-private 
partnership between Montana Medicaid, the Montana Mental Health Trust, 
Blue Cross Blue Shield of Montana, and PacificSource Health Plans. The 
initiative launched this year and already serves 16 primary care 
practices across Montana.

    The care teams work on topics that include:
     Basic and advanced psychopharmacology
     Suicide and substance use screenings
     Unipolar and bipolar depression
     Anxiety disorders
     Child and adolescent psychiatric disorders

    If you have additional questions, please contact the Governor's 
Senior Health Policy Advisor, Jess Rhoades, at Jrhoadesmt.gov. or 406-
444-5503.

            Sincerely,
                                             Steve Bullock,
                                                          Governor.
                                 ______
                                 
     Response by Charles Baker to Questions of Senator Whitehouse 
                           and Senator Hassan
                           senator whitehouse
    Question. Following the HELP Committee's work to stabilize the 
individual market, I hope the committee will move on to other efforts 
to address cost and improve quality in our health care system.
    I believe the following areas are ripe for bipartisan 
collaboration:

    a. Improving patient safety by preventing medical errors and 
healthcare-acquired infections;
    b. Addressing the dramatic variations in care quality and outcomes 
across States;
    c. Identifying ways to reduce administrative overhead and dispute, 
specifically the bureaucratic warfare between insurance companies and 
providers over reimbursement;
    d. Ensuring that a patient's wishes are honored at the end of his 
or her life; and
    e. Advancing payment reform to encourage prevention and primary 
care.

    Which of these areas should be a priority for the HELP Committee 
going forward? What strategies would you suggest to lower costs and 
improve quality in these areas? Is there innovative work in your States 
and communities that you would like to highlight?
    Answer. Thank you again for the opportunity to address the HELP 
Committee on stabilization of the individual market. Stabilizing the 
market is necessary in order to address the underlying issues of health 
care affordability and costs. States are incubators and innovators of 
health care reform solutions and initiatives, and I continue to 
advocate for increased flexibility within the 1332 waiver process to 
allow States to innovate in meeting the unique health care needs of 
their States, while also maintaining the coverage gains we've achieved. 
Below please find my responses to the questions submitted for the 
record. I am available should the committee have any further questions.
    I believe addressing cost and quality in our health care system 
with bipartisan solutions is an important undertaking. Having achieved 
near universal coverage in Massachusetts, we are now focused on health 
care affordability for individuals, families and employers.
    I suggest the HELP Committee prioritize policies that advance 
payment reform and encourage preventative and primary care. 
Massachusetts has been advancing payment reform on various fronts, most 
notably in our Medicaid program (known as MassHealth). Through the 
State's innovative 1115 Medicaid waiver, Massachusetts is implementing 
a nation-leading model of Accountable Care Organizations (ACOs). Under 
the new model, networks of physicians, hospitals and other community 
based health care providers will be financially accountable for cost, 
quality, and member experience for over 850,000 MassHealth members.
    Historically, MassHealth has operated under a fee-for-service model 
that has resulted in the inefficient delivery of care. Under the ACO 
model, health care providers will be paid to improve the care 
coordination and health outcomes for MassHealth members. Notably, the 
ACO program will allow for investment in primary care providers and 
innovative ways of addressing social determinants of health. As of 
August of this year 2017 health care organizations across the State 
have executed agreements to participate in the program, which is set to 
go live March 1, 2018.
    Administrative simplification and reducing overhead for payers and 
providers are equally important policies to pursue. In Massachusetts, 
we have undertaken several initiatives to address burdens cited by our 
own health care market participants. Examples of such initiatives 
include:
     the establishment of a quality measurement taskforce 
comprised of government and industry representatives to develop a 
standardized, multi-payer quality measurement set; and
     the establishment of a cross-agency working group to 
identify and reduce State reporting requirements on payers and 
providers.
                             senator hassan
    Question. During the September 7th HELP Committee hearing, many of 
you mentioned curbing rising health care costs as an important part of 
stabilizing premiums in the individual market. In this effort, I 
believe we should consider not only health care cost transparency, but 
also transparency in health care outcomes. Lowering health care costs 
should not mean that patients experience worse outcomes; instead, we 
should take steps to incentivize value-based care--we should give 
patients the tools they need to choose quality health care providers, 
and reward providers for lowering costs while simultaneously improving 
outcomes. I am interested to know your thoughts related to not only 
cost transparency but also on transparency of outcomes--and how we can 
combine these metrics to improve our health care system. Are your 
States engaged on this front, and if so, how?
    Answer. In Massachusetts, we believe that transparency around costs 
and quality is fundamental to curbing costs and improving our health 
care system. It also allows consumers to be better informed about their 
health care options and the decisions they make. We are actively 
engaged in several transparency initiatives:
      Consumer Website--One of our State's quasi-public 
agencies, the Center for Health Information and Analysis (CHIA), will 
be launching a consumer transparency website later this fall. The first 
phase of the site, largely modeled off of New Hampshire's health care 
cost website, will contain a pricing tool that allows consumers to look 
up the price of certain procedures based on their zip code and 
insurance plan using data from the Massachusetts' All Payer Claims 
Database. Initially, the website will include existing quality data, 
with the goal of eventually layering in more sophisticated quality 
measurements.
      Quality Measure Alignment--Massachusetts has also 
established a quality measurement taskforce, comprised of government 
and industry representatives to develop a standardized, multi-payer 
quality measure set. Standardized metrics will allow for meaningful 
quality comparison across providers and plans, thereby increasing the 
utility of such quality information by health care consumers and 
policymakers.

    [Whereupon, at 12:10 p.m., the hearing was adjourned.]

                                 [all]