    [Senate Hearing 115-312]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-312

                         HEALTH CARE: ISSUES IMPACTING
                               COST AND COVERAGE

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

                                    HEARING

                                   before the

                              COMMITTEE ON FINANCE
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               SEPTEMBER 12, 2017

                                   __________

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                Printed for the use of the Committee on Finance

                               _________

                    U.S. GOVERNMENT PUBLISHING OFFICE

     31-267-PDF            WASHINGTON : 2018

                              COMMITTEE ON FINANCE

                         ORRIN G. HATCH, Utah, Chairman

    CHUCK GRASSLEY, Iowa                 RON WYDEN, Oregon
    MIKE CRAPO, Idaho                    DEBBIE STABENOW, Michigan
    PAT ROBERTS, Kansas                  MARIA CANTWELL, Washington
    MICHAEL B. ENZI, Wyoming             BILL NELSON, Florida
    JOHN CORNYN, Texas                   ROBERT MENENDEZ, New Jersey
    JOHN THUNE, South Dakota             THOMAS R. CARPER, Delaware
    RICHARD BURR, North Carolina         BENJAMIN L. CARDIN, Maryland
    JOHNNY ISAKSON, Georgia              SHERROD BROWN, Ohio
    ROB PORTMAN, Ohio                    MICHAEL F. BENNET, Colorado
    PATRICK J. TOOMEY, Pennsylvania      ROBERT P. CASEY, Jr., Pennsylvania
    DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
    TIM SCOTT, South Carolina            CLAIRE McCASKILL, Missouri
    BILL CASSIDY, Louisiana

                         A. Jay Khosla, Staff Director

                  Joshua Sheinkman, Democratic Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman,
      Committee on Finance...........................................     1
    Wyden, Hon. Ron, a U.S. Senator from Oregon......................     4

                                   WITNESSES

    Roy, Avik S.A., co-founder and president, Foundation for Research
      on Equal Opportunity, Austin, TX...............................     8
    Haislmaier, Edmund F., Preston A. Wells, Jr. senior research
      fellow, The Heritage Foundation, Washington, DC................    10
    Slavitt, Andrew M., former Acting Administrator, Centers for
      Medicare and Medicaid Services, Department of Health and Human
      Services, Edina, MN............................................    11
    Aron-Dine, Aviva, Ph.D., senior fellow and senior counselor,
      Center on Budget and Policy Priorities, Washington, DC.........    13

                   ALPHABETICAL LISTING AND APPENDIX MATERIAL

    Aron-Dine, Aviva, Ph.D.:
        Testimony....................................................    13
        Prepared statement...........................................    47
        Responses to questions from committee members................    59
    Haislmaier, Edmund F.:
        Testimony....................................................    10
        Prepared statement...........................................    61
    Hatch, Hon. Orrin G.:
        Opening statement............................................     1
        Prepared statement...........................................    66
    Roy, Avik S.A.:
        Testimony....................................................     8
        Prepared statement...........................................    68
        Responses to questions from committee members................    73
    Slavitt, Andrew M.:
        Testimony....................................................    11
        Prepared statement...........................................    73
        Responses to questions from committee members................    78
    Wyden, Hon. Ron:
        Opening statement............................................     4
        Prepared statement...........................................    80

                                 Communications

    AARP.............................................................    83
    American College of Physicians (ACP).............................    85
    America's Health Insurance Plans (AHIP)..........................    92
    American Speech-Language-Hearing Association (ASHA)..............    97
    Asian and Pacific Islander American Health Forum (APIAHF)........    99
    Blue Cross Blue Shield Association...............................   101
    Center for Fiscal Equity.........................................   104
    National Association of Manufacturers (NAM)......................   106
    Partnership to Fight Chronic Disease (PFCD)......................   109

                         HEALTH CARE: ISSUES IMPACTING
                               COST AND COVERAGE

                                  ----------

                          TUESDAY, SEPTEMBER 12, 2017

                                           U.S. Senate,
                                          Committee on Finance,
                                                         Washington, DC
        The hearing was convened, pursuant to notice, at 10:05
    a.m., in room SD-215, Dirksen Senate Office Building, Hon.
    Orrin G. Hatch (chairman of the committee) presiding.
        Present: Senators Grassley, Roberts, Cornyn, Thune, Burr,
    Portman, Toomey, Heller, Cassidy, Wyden, Stabenow, Cantwell,
    Carper, Cardin, Brown, Bennet, Casey, Warner, and McCaskill.
        Also present: Republican Staff: Jennifer Kuskowski, Chief
    Health Policy Director; Preston Rutledge, Senior Tax and
    Benefits Counsel; and Martin Pippins, Detailee. Democratic
    Staff: Joshua Sheinkman, Staff Director; Michael Evans, General
    Counsel; Ann Dwyer, Senior Health Counsel; Elizabeth Jurinka,
    Chief Health Policy Advisor; and Arielle Woronoff, Senior
    Health Counsel.

     OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM
                  UTAH, CHAIRMAN, COMMITTEE ON FINANCE

        The Chairman. The hearing will come to order.
        Before we begin, I would like to pause for a moment to say
    a few words regarding the traumatic events that have recently
    impacted so many of our fellow citizens. The damage and
    destruction we have seen with relation to Hurricanes Harvey and
    Irma have been devastating, but I will say that the acts of
    heroism we have seen over the last few weeks have been awe-
    inspiring.
        I think I speak for everyone here when I say that our
    thoughts and our prayers go out to all of these individuals and
    friends and family who have been affected by these disasters
    and that we urge all those who are able to provide assistance
    to do what they can to help the relief efforts currently
    underway.
        With that, I want to thank everyone present for attending
    today's hearing on health-care costs and coverage.
        Health care is always an important topic, as it impacts
    literally everyone. Health care has also, since the passing of
    the so-called Affordable Care Act, become a rather contentious
    topic as well. The divisiveness that surrounds the health-care
    debate is unfortunate in my mind because it has far too often
    allowed politics and partisanship to cloud our judgment. Now,
    this is true for those on both sides of the aisle.
        We have discussed these issues at length many times before
    today. This is at least the 37th health-care hearing we have
    had in the Finance Committee since final pieces of Obamacare
    were signed into law. However, recent events have spurred us to
    reevaluate the current situation.
        And while I welcome the opportunity to reset parts of the
    health-care debate, the problems plaguing our health-care
    system remain pretty much the same as they were prior to the
    passage of Obamacare, and in some regards, I would argue that
    they have become worse.
        Costs are continuing to skyrocket. According to a recent
    report from CMS, because increasing health-care costs are still
    outpacing the growth of our economy, they are projected to
    consume 20 percent of our total GDP in just 8 years. Now, that
    is one-fifth of the economy, and that is if we are lucky.
        No one should say that we do not spend enough on health
    care in this country. Currently, health-care expenditures in
    the U.S. amount to nearly $10,000 per person. That is more per-
    capita spending than any other industrialized country and,
    according to OECD data, 20 percent higher than the next highest
    spending country and nearly double the overall average among
    OECD member countries.
        From 2011 to 2016, the average health premium for employer-
    sponsored family coverage increased by 20 percent in comparison
    to a wage increase of only 11 percent during that same period.
    A recent study from the PWC Health Research Institute found
    that medical costs are projected to grow between 6 and 7
    percent between 2016 and 2018. Unsurprisingly, this trend in
    health-care costs has forced families to divert their spending
    on other items and necessities, things like food and housing,
    to pay for growing health-care costs.
        Of course, these general growth trends pale in comparison
    to those in the Obamacare exchanges, where the average premium
    has more than doubled in just the last 4 years.
        One of the chief assumptions underlying the Affordable Care
    Act was that if the government forced people to purchase health
    insurance, more young, healthy people would enter the insurance
    market, which was supposed to offset the increased costs
    imposed by all of the law's mandates and ensuing regulations.
        Instead, the law imposes a legal requirement for people to
    purchase insurance while also making insurance unaffordable for
    millions of Americans. This, as I have noted in the past, is
    the ultimate irony of Obamacare.
        Supporters of the law like to tout coverage numbers in
    order to claim that the system has actually succeeded, but
    those numbers warrant a closer look. True enough, from 2014 to
    2016, insurance coverage in the United States increased by
    about 15.7 million people; however, the vast majority of those
    newly insured people, around 14 million, were added through
    either Medicaid or CHIP.
        As we will hear from some of our witnesses today,
    enrollment in the individual market may be reaching a tipping
    point where those who previously had insurance are being priced
    out of the market and actually becoming uninsured since the
    enactment of Obamacare.
        None of this is surprising. Most of this was predicted at
    the time Obamacare was being debated. And now with virtually
    every nightmare scenario for the fate of Obamacare, they are
    coming true. We are hearing calls for bipartisan fixes to shore
    up the failing system.
        Let me be clear. I want to find a bipartisan path forward
    through this mess. At this point, it is pretty clear that the
    parties will need to work together if any of this is going to
    improve.
        That said, I am concerned that many of the proposals for a
    bipartisan solution would amount to little more than a bailout
    of the current system. This, in my view, would be a mistake. If
    we simply throw money into the system to maintain cost-sharing
    subsidies or make payments to insurers without fixing any of
    the underlying problems, we would just be setting up another
    cliff and likely another partisan showdown in the future.
        Even worse, we would not be helping to reduce premiums or
    increase insurance options for the vast majority of middle-
    class families, whether they get their plans through the
    exchanges or elsewhere.
        Of course, I am neither naive nor oblivious. I do not want
    to simply watch health-care costs increase and choices diminish
    even further while purists in Congress demand the unattainable.
        We will likely have to act at some point, maybe even this
    year, to protect American families from the failures of the
    current system. Once again, I want to find a bipartisan path
    forward to address these problems.
        But let me be clear. In my view, an Obamacare bailout that
    is not accompanied by real reforms would be inadvisable. We
    cannot simply invest more resources into a broken system and
    hope that it fixes itself over time. The status quo under
    Obamacare is not improving. I do not believe we should spend
    more energy to prop up a system that is already hurting
    millions of Americans.
        And while I may sound like a naysayer here this morning,
    that is far from the truth. I am an optimist and always have
    been.
        We had a hearing last week on the CHIP program, which
    demonstrated that we are more than capable of working together
    to address health-care needs. Hopefully, we can do the same
    when we talk about the broader effort to bring down costs and
    maintain coverage for the health-care system.
        For instance, both Senators Cornyn and Wyden each have a
    bill to repeal the Independent Payment Advisory Board included
    in Obamacare. Just last Congress, many of us worked together in
    a bipartisan fashion to delay the HIT for 1 year and the
    Cadillac tax for 2 years. We also imposed a 2-year moratorium
    on the device tax.
        I believe that we can come together again to provide some
    relief through elimination of these and other onerous Obamacare
    taxes that drive up costs for consumers and hamper innovation.
        Personally, I also believe members on both sides of the
    aisle should be open to rolling back or at least amending the
    individual and employer mandates, two of the most unpopular
    components of Obamacare.
        These are just some examples of things that members of this
    committee have been working on to address our runaway health-
    care costs and to amend a beleaguered Obamacare. Even our
    newest members, like Senator Cassidy, are eager to tackle these
    complex issues. So let us put our differences aside and work
    together on meaningful changes. We have done it before, and we
    can do it again.
        I look forward to hearing from our witnesses today and from
    my friends on both sides of the dais. Hopefully, today's
    discussion will provide some clarity on how we can better work
    together on these matters going forward.
        With that, let me now turn to Senator Wyden for his opening
    remarks.
        [The prepared statement of Chairman Hatch appears in the
    appendix.]

                 OPENING STATEMENT OF HON. RON WYDEN,
                       A U.S. SENATOR FROM OREGON

        Senator Wyden. Thank you very much, Mr. Chairman.
        And, Mr. Chairman, I want to associate myself with your
    remarks on these horrible disasters that we have seen across
    the country. What we have said on a bipartisan basis is, we are
    going to be there for communities that suffer.
        And I also want to say that much of the west is facing
    disaster as well with our communities literally on fire in
    numerous States. I was in many counties in Oregon where we are
    seeing the human toll of people losing essentially everything.
        And I can just tell you that the Chetco Bar fire near
    Brookings this last Sunday, when we were up at 6:00 in the
    morning at the base camp, we had Americans from all over the
    country pitching in to help Oregon fight that fire.
        So I very much appreciate your comments, Mr. Chairman, with
    respect to disaster and working with our colleagues in a
    bipartisan way to be there for our communities when disaster
    strikes.
        Now, with respect to this morning's hearing, I want to
    frame my discussion in two parts. First, I want to just respond
    really to some of the common arguments about the Affordable
    Care Act and then I would like to get to what the committee
    does best, which is to work in a bipartisan way on big ideas
    dealing with the health-care challenges.
        Now, with respect to the cost issue and the Affordable Care
    Act, I want to put this in the context of the 320 million
    people who live in our country. Fifty million of those are
    older Americans, and they think Medicare has been a pretty darn
    good deal.
        One hundred and sixty million Americans get their insurance
    coverage at work, so they are not touching the Affordable Care
    Act exchanges. If their premiums go up, it has not been, on
    average, by a whole lot. And nearly eight out of 10 people who
    did sign up for private coverage through the Affordable Care
    Act this year could find a plan for less than a hundred dollars
    a month after tax credits.
        So this proposition that somehow every single person in
    America, the 320 million people, are unhappy with health care
    or think their costs have gone into the stratosphere as a
    result of the Affordable Care Act--the record, the actual
    factual record, does not show that.
        Now, when you are talking about cost increases in the
    Affordable Care Act, you are really looking at a portion of the
    individual exchanges. These are the people who do not get their
    care through Medicare or the military or a large employer.
    These are the people we are talking about.
        And my own view is, one of the major reasons these folks
    have had some real challenges is that the President has for
    months and months poured gasoline on the fires of uncertainty
    in the private insurance marketplace. It strikes me as
    particularly odd because this administration is an
    administration that cites its background in private business.
        And what we are talking about is private businesses in
    these individual exchanges suffering dramatically as a result
    of the uncertainty with respect to cost-sharing and the
    administration still being unwilling to give a straight answer
    as to whether it is going to cut off cost-sharing payments. And
    that already has caused insurers to raise rates.
        And we also have had to deal with an awful lot of negative
    rhetoric and propaganda about the Affordable Care Act,
    manipulating government websites to play hide-the-ball with
    Americans who are pretty much just getting up and saying, how
    can I learn how to get coverage?
        And certainly, if you are predicting doom and gloom when
    you are supposed to be trying to work with people in the
    private sector and people of all political parties, it
    certainly does not help the individual market.
        It is a similar story in many of the States. The States
    have put serious effort into building competitive marketplaces
    and holding costs down, and many of them have been successful.
    But in some States, we have seen little effort to get people
    signed up into the insurance pool. There has not been a
    pushback against rate increases.
        Two and a half million Americans are stuck in what is
    called the coverage gap. Lawmakers in their States have denied
    them the opportunity to sign up for Medicaid, and they do not
    earn enough to qualify for subsidies under the Affordable Care
    Act. Premiums on the individual market are 7-percent higher in
    States that did not expand Medicaid than they are in States
    that did. That is a bit of context about where the Affordable
    Care Act stands.
        Now, I want to close up by talking about some of the big
    ideas that we can work on in the historic way that the Finance
    Committee has done--in a bipartisan fashion.
        The first is flexibility. I have always held fast to the
    notion that if States believe they have a plan that raises the
    bar for health care in terms of cost and coverage, rather than
    lowering it, they ought to have a chance to try it out. A
    simple proposition: if the States can do better, we ought to be
    just all-in on giving them the chance to do it. If States are
    looking for a back door to do worse, that is something
    different.
        And that is why this committee, in the Affordable Care Act,
    included section 1332. I was the lead author of it--many
    colleagues were involved--but it was our effort to make clear
    on the side of folks who are progressive, on the side of folks
    who are conservative, the Federal Government does not have all
    the answers.
        There is a lot of creative thinking going on at the State
    level. We wanted to give progressives and conservatives the
    opportunity to do that. That is what 1332 is all about.
        As the provision went into effect this year, States are
    showing more and more interest, and they are getting results
    under current law. Many States, especially those interested in
    promoting private-market solutions, are considering a section
    1332 waiver for State-based reinsurance programs. These are
    programs that help pay for some of the costliest patients, and
    they hold costs down for everybody else.
        For other States, section 1332 may be an opportunity to
    pursue one of the progressive approaches, a single-payer
    approach, a
    public-option approach. The point is, 1332 gives States the
    chance to do better, but not worse.
        I am very grateful to colleagues on the Finance Committee
    who supported that proposition and our jurisdiction. That is
    why we put it in there, and I think it is paying off.
        The next area going forward ought to be transparency. One
    of the most frequent concerns we all hear at home is the sky-
    high cost of prescription medicine. People who need treatment
    are paying through the nose, and they have no idea why. They
    cannot make heads or tails out of the prescriptions or drug
    receipts. The high cost of drugs is also driving up premiums.
        So I have introduced legislation to pull back the curtain
    on the broken drug-pricing system that burdens the country. And
    I know there are colleagues with other ideas as well.
        Improving transparency on drugs is about holding down
    costs. It is about affordability, it is about competition, and
    it can have a direct effect on premiums in addition to the out-
    of-pocket costs families pay at the pharmacy. It is long, long,
    long past time Congress took on the challenge of drug pricing.
        Finally, I would like to address competition and consumer
    choice. Over the past several months, my colleagues on the
    other side have accused Democrats of supporting a one-size-
    fits-all approach to health care. That is not the case. Choice
    and competition are essential to bringing down costs, and we
    ought to prioritize moving the needle on increasing choice and
    competition in the marketplace.
        Finally, the chairman has been clear that he wants our
    committee to work on a bipartisan basis to help shape the
    future of Americans' health care. Today we have a chance for
    all members to be part of kicking off the debate.
        I look forward to a productive conversation about it. This
    committee has done an awful lot of bipartisan work in health
    care in the past. And the chairman has issued a call to arms to
    our doing it again, and I look forward to pursuing it with him
    and colleagues on both sides of the aisle.
        Thank you.
        The Chairman. Well, thank you, Senator.
        [The prepared statement of Senator Wyden appears in the
    appendix.]
        The Chairman. I would like to welcome each of our four
    witnesses to our hearing today. And before we begin, I would
    like to thank you all for your willingness to testify and
    answer questions today. This is a complicated system. And your
    expertise is greatly appreciated at this time.
        First, we will hear from Mr. Avik Roy, the president of the
    Foundation for Research on Equal Opportunity. Mr. Roy also
    serves as the opinion editor at Forbes, where he writes on
    politics and policy and manages The Apothecary, a Forbes blog
    on health-care policy and entitlement reform.
        From 2011 to 2016, Mr. Roy served as a senior fellow at the
    Manhattan Institute for Policy Research, where he conducted
    research on the Affordable Care Act, entitlement reform,
    universal coverage, international health systems, and FDA
    policy.
        Mr. Roy attended the Massachusetts Institute of Technology,
    where he studied molecular biology, and the Yale University
    School of Medicine.
        Second, we will hear from Mr. Edmund F. Haislmaier, the
    Preston A. Wells, Jr. senior research fellow in domestic policy
    studies at The Heritage Foundation. Mr. Haislmaier has 30 years
    of experience analyzing health-care markets and public
    policies.
        He has particular expertise in the structure and regulation
    of health insurance markets, the tax treatment of health
    benefits, and pharmaceutical policy issues. He has published
    extensively on those and other health-care policy topics.
        During the last several years, his work has focused
    primarily on measuring the effects of the Affordable Care Act
    on health insurance enrollment, insurer competition, insurer
    profitability, and the law's risk-mitigation programs.
        Mr. Haislmaier is a member of the board of directors of the
    National Center for Public Policy Research and holds a
    bachelor's degree in history from St. Mary's College in
    Maryland.
        Third, we will hear from Mr. Andrew M. Slavitt, senior
    adviser to the Bipartisan Policy Center. This is not Mr.
    Slavitt's first rodeo testifying before this committee. From
    2015 to 2017, he served as Acting Administrator of CMS, during
    which time he testified several times before this committee.
        During his time as Acting Administrator, Mr. Slavitt
    oversaw Medicaid, Medicare, CHIP, and the health insurance
    marketplace programs. His tenure at CMS was marked by the
    implementation of a number of large programs, including the
    significant shift to pay-for-value payment models,
    implementation of the bipartisan MACRA legislation, and the
    Affordable Care Act.
        Mr. Slavitt has worked in a wide variety of private-sector
    companies as well, including as the group executive vice
    president for Optum, CEO of OptumInsight, founder and CEO of
    Health Allies, consultant for McKinsey and Company, and
    investment banker with Goldman Sachs.
        Mr. Slavitt is a graduate of the Wharton School and the
    College of Arts and Sciences at the University of Pennsylvania,
    and he received an MBA from Harvard Business School.
        Last but not least, we will hear from Dr. Aviva Aron-Dine.
        She is a senior fellow and senior counselor at the Center
    on Budget and Policy Priorities in Washington, DC. From 2015 to
    2017, Dr. Aron-Dine was a senior counselor to the Secretary of
    HHS, where she had responsibility for the Affordable Care Act
    implementation and for Medicaid, Medicare, and delivery system
    reform policies.
        Prior to her position at HHS, Dr. Aron-Dine served as
    Associate Director for Economic Policy and then as Acting
    Deputy Director and Executive Associate Director of the Office
    of Management and Budget and as a Special Assistant to the
    President for Economic Policy at the National Economic Council.
        She also had previously worked at the Center on Budget and
    Policy Priorities from 2005 to 2008, specializing in Federal
    tax policy.
        Dr. Aron-Dine holds a degree in philosophy from Swarthmore
    College and a Ph.D. in economics from MIT.
        So I want to thank you all again for coming today.
        And, Mr. Roy, will you please get us started by providing
    us with your opening remarks?

         STATEMENT OF AVIK S.A. ROY, CO-FOUNDER AND PRESIDENT,
        FOUNDATION FOR RESEARCH ON EQUAL OPPORTUNITY, AUSTIN, TX

        Mr. Roy. Thank you, Mr. Chairman, Ranking Member Wyden, and
    members of the Senate Finance Committee. Thanks for inviting me
    to speak with you today.
        My name is Avik Roy, the president of the Foundation for
    Research on Equal Opportunity, a nonpartisan, nonprofit think
    tank focused on expanding economic opportunity to those who
    least have it.
        A year ago, I published our first white paper making the
    case for why members of both parties and all philosophies
    should embrace the cause of universal coverage.
        Ashley Dionne is a 30-year-old who suffers from asthma,
    ulcers, and cerebral palsy. She graduated from the University
    of Michigan in 2009. In the aftermath of the Great Recession,
    she had a tough time finding work, even with her college
    degree. Employers worried that she was overqualified and would
    not stick around.
        Eventually, she went back to school for a second degree and
    found night work at a gym working 32 hours a week for $8 an
    hour.
        Despite these challenges, Ashley managed to afford health
    insurance. In 2013, she paid $75 a month in premiums, but in
    2014, after the Affordable Care Act went into effect, her
    monthly premium jumped from $75 a month to $319 a month. ``I am
    the working poor,'' Ashley said, ``and I cannot afford to
    support myself.''
        As all of you know, the high cost of American health care
    is a great burden on every American, not merely those who are
    uninsured, but also those who are insured and weighed down by
    rising premiums.
        In addition, growth in our Federal deficit and debt is
    driven primarily by growth in public spending on health care.
    The poor, the elderly, and the vulnerable have the most to lose
    if we cannot bring this growth back in line with that of the
    rest of the economy.
        The Affordable Care Act subsidies have helped millions of
    U.S. residents afford health insurance, but its regulations
    have frozen millions of others like Ashley out of the health
    insurance market by driving premiums upward.
        I am going to focus my remarks today on the individual
    health insurance market, or the non-group market as it is
    sometimes called. This market, as you all know, is
    traditionally for Americans who do not get their coverage from
    the government or their employer and shop for it on their own.
        Some people say the individual health insurance market is
    small and, therefore, not as worthy of public attention. I
    would disagree, because the health of the individual market is
    essential to 45 million U.S. residents who are either enrolled
    in individual market coverage or currently uninsured, because,
    if you are uninsured, it is individual market insurance that
    you would buy if you were trying to obtain coverage.
        Much of the talk these days of stabilizing the individual
    health insurance market has been notable for an absence of talk
    about how the market got destabilized in the first place.
        According to the Assistant Secretary for Planning and
    Evaluation, the effect of ACA regulations and taxes has been to
    double the underlying cost of individually purchased insurance,
    with even greater increases for those who are younger and/or in
    relatively good health. In 2014 alone, the ACA increased
    individual market premiums by an average of 49 percent.
        The two largest drivers of higher premiums under the ACA
    have been 3:1 age bands, which often double premiums for
    younger enrollees, and actuarial value mandates, which are
    intended to make coverage more financially generous but end up
    making premiums far less affordable.
        Other ACA provisions, such as essential health benefit
    mandates, health insurance premium taxes, and taxes on
    pharmaceutical and medical devices, play a secondary role in
    rising premiums.
        The sum total of all these provisions is to make health
    insurance unattractive and unaffordable for younger and
    healthier Americans. The ACA's weak individual mandate, riddled
    with loopholes, has done little to force these Americans back
    into the market.
        There are some in Washington who argue that section 1332 of
    the ACA gives States the flexibility to seek waivers from these
    regulations. As much as I am an admirer of Senator Wyden, I am
    not convinced that this is the case, because those regulations
    in section 1332 allow States to waive things like individual
    mandates and employer mandates, but not the age bands and other
    high-cost drivers that they need to increase enrollment and
    lower costs.
        No State will be able to meet the test that section 1332
    requires to repeal those mandates while also keeping the rest
    of the regulations in place and maintaining coverage.
        The insurance industry has been pushing Congress for
    formally appropriate cost-sharing subsidies, because today
    under the ACA, insurers are legally bound to pay out these
    subsidies regardless of whether Congress funds CSRs. So it is
    appropriate for Congress to consider ways to provide legal
    certainty to insurers.
        But it would be unfair and inappropriate for Congress to
    address the priorities of insurers without also offering relief
    to Ashley Dionne and the millions like her who have endured
    dramatically rising premiums despite the payout of CSRs for
    these last 4 years.
        Relief from rising premiums should include reforms, like
    repealing the 3:1 age band, re-legalizing affordable copper
    plans, and replacing the individual mandate with waiting
    periods and late enrollment fees, like those used successfully
    in Medicare.
        I look forward to the opportunity to discuss these ideas
    and others with you today in more detail and also in my written
    testimony. Thank you.
        The Chairman. Thank you, Mr. Roy.
        [The prepared statement of Mr. Roy appears in the
    appendix.]
        The Chairman. Mr. Haislmaier?

    STATEMENT OF EDMUND F. HAISLMAIER, PRESTON A. WELLS, JR. SENIOR
        RESEARCH FELLOW, THE HERITAGE FOUNDATION, WASHINGTON, DC

        Mr. Haislmaier. Thank you, Mr. Chairman. My name is Ed
    Haislmaier. I am Preston Wells senior fellow in health policy
    at The Heritage Foundation. I appreciate the opportunity to
    testify to you today.
        The committee has copies of my written testimony, so I will
    not go over that again.
        What I would like to do in my opening remarks is simply
    expand upon it a bit and address the applicability of the
    analysis in my written testimony to the questions in front of
    this and other committees as to what, if anything, should be
    done to stabilize the individual health insurance market.
        I would begin by pointing out that the Affordable Care Act
    has effectively produced an individual health insurance market
    with two distinct subsets of people: those who get subsidies
    for their coverage and those who do not. And it has had
    different effects on those two different groups.
        Essentially, what the Affordable Care Act did was to
    effectively convert individual health insurance from what had
    really been a financial service product into a social welfare
    program. So the size and the composition of the subsidized
    portion of the market is a fairly predictable result of the
    design of the law. As long as those subsidies remain in place,
    that portion of the market will, in my analysis, continue to
    remain essentially of roughly the same size and composition.
        In other words, the subsidized portion, about half of the
    current market, seems to be settling into its natural, stable
    state, that is, a pool of lower-income individuals with
    moderate to significant medical conditions, typically served
    by, in most places, a single insurer with a narrow network of
    providers.
        In contrast, the unsubsidized portion of the market
    consists of middle-income individuals without access to
    employer-sponsored coverage, often because they are self-
    employed, and they are the ones who traditionally comprised the
    individual market before the Affordable Care Act. And they are
    principally seeking a financial service product that mainly
    protects them against unexpected, large medical expenses.
        So they are willing to trade less-comprehensive coverage
    and higher cost-sharing for lower premiums and more choice of
    insurers and medical providers. Therefore, it should not be
    surprising that those are the people who most resent the
    Affordable Care Act forcing them to pay more for benefits that
    they do not believe they want or need and limiting their
    available choices of insurers and providers in the process.
        Given that bifurcation of the market, the various
    recommendations offered for stabilizing the current market
    should be assessed according to their effects on these two
    different subsets.
        So, proposals to address the payment of cost-sharing
    reduction subsidies and maybe reinstitute some sort of
    taxpayer-funded reinsurance program for high-cost enrollees
    would essentially stabilize the funding of what I have termed
    the social welfare segment, that is, the lower-income segment
    receiving subsidies in the market.
        The proposals to amend or repeal the Affordable Care Act's
    Federal insurance regulations would reduce premiums and
    stabilize the non-subsidized financial service segment, as I
    have called it, of the market.
        So to stabilize that unsubsidized portion of the market,
    because there is a lot of talk about how to stabilize the
    subsidized portion, let me address it briefly.
        To stabilize the nonsubsidized portion of the market,
    Congress essentially needs to reestablish a set of fair and
    balanced rules that create incentives for individuals to
    maintain continuous coverage so as to ensure that the market
    has a diverse pool of risk.
        Now, the fairest and most effective way to do that--and my
    colleague has mentioned some others--is by linking the
    prohibition on health plans apply preexisting condition
    exclusions directly to a requirement that individuals maintain
    continuous coverage.
        That was the policy successfully applied to the employer
    group coverage market by the 1996 Health Insurance Portability
    and Accountability Act. Congress should have applied that same
    policy to the individual market rather than adopting the ACA's
    approach of fining those who do not buy coverage, which has
    proven to be ineffective.
        In addition, Congress should repeal or allow States to
    waive other major ACA regulations that have most contributed to
    increasing premiums. Again, some of those have been mentioned:
    benefit mandates, minimum actuarial value requirements, and
    restrictions on age rating being the largest.
        In sum, the various stabilization proposals can be
    distinguished by whether they would actually stabilize the
    market for insurance or simply stabilize the funding for
    subsidies.
        Thank you, Mr. Chairman.
        The Chairman. Well, thank you.
        [The prepared statement of Mr. Haislmaier appears in the
    appendix.]
        The Chairman. We will go to you, Mr. Slavitt.

     STATEMENT OF ANDREW M. SLAVITT, FORMER ACTING ADMINISTRATOR,
       CENTERS FOR MEDICARE AND MEDICAID SERVICES, DEPARTMENT OF
                  HEALTH AND HUMAN SERVICES, EDINA, MN

        Mr. Slavitt. Thank you, Chairman Hatch, Ranking Member
    Wyden, members of the committee. Thank you for the invitation
    to be back here to discuss an issue of vital importance: how to
    improve health-care costs and coverage for American families.
        My name is Andy Slavitt. I had the honor to serve in an
    acting capacity as Administrator for the Centers for Medicare
    and Medicaid Services from 2015 to 2017 alongside the high-
    caliber men and women of the agency who on a daily basis help
    the American public get the care they need at all stages of
    life.
        I currently serve as a senior adviser to the Bipartisan
    Policy Center.
        Prior to serving in government, for the large majority of
    my career, I worked in the private sector, first as a health-
    care technology entrepreneur and later helping to create a
    large health-care services company that participated in
    virtually every element of health-care cost and coverage.
        Now, my written testimony contains what I see as the many
    important milestones we achieved as a country with the
    Affordable Care Act and also some of the challenges.
        But I am not here as a champion of a law that has already
    been passed. I prefer to focus my comments today on paths
    forward for improving costs and coverage in health care.
        Democrats in health policy often focus as a first priority
    on improving health-care coverage. Republicans often focus on
    the importance of reforms which reduce costs and improve
    sustainability.
        I believe we can all do a better job of understanding both
    of these very valid perspectives: that we cannot have
    affordable health coverage we need for Americans without making
    costs a priority, and at the same time, we cannot simply cut
    and expect to improve care for Americans.
        In the individual market, there are several recent
    bipartisan efforts, including one from the Bipartisan Policy
    Center which I participated in, from a bipartisan group of
    Governors, and several others which, taken together, offer
    something of a consensus on immediate reform recommendations.
        Even while we address larger reforms, the Congress ought to
    take advantage of the fact that there are several fast-acting,
    budget-friendly steps, each of which will reduce the cost of
    health care for American families: funding for cost-sharing
    reduction payments, restoring cuts to marketing and in-person
    assistance, helping States efficiently account for high-cost
    claimants, and speeding up the review of 1332 waivers while
    ensuring appropriate protections, which are an option thanks to
    the foresight of members of this committee.
        It seems to me that, despite the very challenging politics
    of health care, if the Congress can take action to make
    people's lives better, this is exactly what Americans want to
    see from Washington. Not acting when we know we can succeed is
    not what the public expects.
        So how do we know exchanges can succeed? Because we have
    seen it, from Massachusetts before the ACA, to California,
    Florida, Kentucky, and many more States since.
        Because of my 2 decades in the private sector, I have seen
    markets like exchanges work, whether Medicare Part D, Medicare
    Advantage, or insurance exchanges. But all have to have
    commitment, nimbleness, and adjustments along the way or they
    will not be successful.
        So if your goal is to increase choice and reduce costs,
    predictable rules are vital. In fact, they are fundamental.
    Companies will not participate if they cannot rely on the
    commitments they receive from the government. For that reason,
    I recommend that any steps that Congress chooses to take, it
    does so through at least 2019.
        Now, if we want to have an impact on health-care costs, we
    must address the real root-cause issues--poorly coordinated
    care, the high costs of chronic illness, our under-investment
    in primary care and prevention--and undergo a shift to a system
    that focuses on keeping people healthy and treating them in
    comfortable and low-cost settings, like their own homes.
        We must commit to moving to pay for quality outcomes and
    rewarding smart ways to bring down costs.
        And we must address the rising costs of prescription drugs
    and not accept that we can only have either innovation or
    efficiency. In America, we expect our best industries to do
    both, and we should expect that with prescription medicines as
    well.
        One thing that will not reduce costs is simply transferring
    costs to consumers or States by allowing the return of Swiss
    cheese insurance policies or cutting or capping access to vital
    programs like Medicaid for people near the poverty level, low-
    income seniors, children, and people with disabilities.
        I know you will hear a diverse set of views today. And I
    understand the difficulty of reaching compromise. As
    challenging as it is, I hope this hearing helps find common
    ground, as all Americans have a stake in improving health-care
    costs and coverage. I offer my support to your efforts and look
    forward to answering your questions.
        The Chairman. Well, thank you so much.
        [The prepared statement of Mr. Slavitt appears in the
    appendix.]
        The Chairman. Dr. Aron-Dine, we will turn to you.

     STATEMENT OF AVIVA ARON-DINE, Ph.D., SENIOR FELLOW AND SENIOR
    COUNSELOR, CENTER ON BUDGET AND POLICY PRIORITIES, WASHINGTON,
                                   DC

        Dr. Aron-Dine. Mr. Chairman, Ranking Member Wyden, and
    members of the committee, thank you for the opportunity to
    testify before you today on these crucial issues of health-care
    costs and coverage.
        I want to start by taking stock of where we stand on both
    fronts now and then turn to some of the most immediate issues
    facing the individual market.
        If we compare our health-care system to how it looked back
    in 2010, three trends stand out. First and best-known, more
    than 20 million people have gained coverage, and for the first
    time in our history more than nine in 10 Americans have health
    insurance.
        Less understood is how widespread these gains have been.
    Compared to 2010, uninsured rates are down more than 35 percent
    for low- and moderate-income people, but also for those with
    incomes too high to qualify for subsidies, for children, for
    young adults, for middle-aged and older people, for both urban
    and rural Americans, and for both sicker people--including
    those with preexisting health conditions--and among people in
    good health.
        Second, these coverage gains have translated into large
    gains in access to care and financial security, the dual
    objectives of health insurance. For example, research finds
    that the ACA's Medicaid expansion has increased the share of
    low-income adults getting checkups, getting regular care for
    chronic conditions, and reporting excellent health, and has
    decreased the share who rely on the emergency room for care,
    who skip needed care due to cost, or who struggle to pay their
    medical bills.
        Third, the last few years have seen a marked slowdown in
    health-care cost growth. Medicare, Medicaid, and private
    insurance have all seen much slower growth in per-enrollee
    spending than over the previous decade. The ACA contributed to
    that slowdown through Medicare reforms, incentives for
    hospitals to prevent avoidable readmissions and other patient
    harms, and by creating mechanisms, like the CMS Innovation
    Center, that are supporting ongoing payment experimentation and
    reform.
        Of course, there is more work to do, both to reduce costs
    and to expand coverage. But as we seek to make additional
    progress, it is also critical not to go backwards.
        Compared to if we were having this hearing 7 years ago, the
    uninsured rate has been cut almost in half. Total national
    health expenditures this year are several hundred billion
    dollars below what the CMS actuaries were projecting back then.
    And the combination of the ACA and the bipartisan MACRA
    legislation, passed with leadership from this committee, offer
    a much stronger foundation for continued delivery system reform
    than we had back then.
        In my written testimony, I provide suggestions for building
    on that foundation. And I look forward to discussing those
    options in response to your questions.
        Most immediately, though, there has been an appropriate
    focus on strengthening the individual market. Governors,
    regulators, and experts have offered a range of suggestions for
    undoing the damage done by Federal policy uncertainty while
    also addressing some of the underlying challenges they have
    seen in their markets.
        Common bipartisan recommendations, with which I concur,
    include providing an explicit appropriation for cost-sharing
    reductions, maintaining or increasing outreach, enforcing the
    law, which includes the individual mandate, establishing a
    Federal reinsurance program, and streamlining the process for
    1332 waivers if they improve stability while maintaining
    coverage and consumer protections.
        But I want to close by addressing a concern that has been
    raised about this entire paradigm for strengthening the market.
        The argument is that addressing policy uncertainty and
    other incremental reforms will not work and that the only
    option is to go back to some or all of the major features of
    the pre-ACA individual market, such as plans that excluded core
    services or exposed consumers to very high out-of-pocket costs.
        Fortunately, it is increasingly clear that if Federal
    policy uncertainty is addressed, the individual market is on
    track for stability without reversing the ACA's core
    protections. Not only are ACA markets already succeeding in
    many States, but national data indicate that the risk pool has
    been stable or improving for several years.
        Especially important, 2017 data show that individual market
    premiums and claims are now roughly in line with employer
    market premiums and claims, on average. That is exactly what we
    would expect now that individual market plans, like employer
    plans, offer robust coverage and cannot discriminate based on
    preexisting conditions. And it is a sign of a maturing,
    stabilizing market.
        Meanwhile, individual market insurers appear to be
    returning to profitability, which should mean lower rates and
    growing choice for consumers going forward.
        Consistent with that, major insurers across a number of
    States have said they would be requesting low or moderate rate
    increases this year if it were not for policy uncertainty.
        Timely action to address those concerns can still mitigate
    the damage for 2018. And importantly, it would put the market
    on track for growing stability and success in 2019 and beyond.
        Thank you again for the opportunity to testify, and I look
    forward to answering your questions.
        The Chairman. We appreciate all four of you and the
    testimony that you have given here this morning.
        [The prepared statement of Dr. Aron-Dine appears in the
    appendix.]
        The Chairman. Let me just ask this question for everybody
    at the dais. What role can health savings accounts play in
    addressing health-care costs? And how can we expand
    accessibility to these accounts?
        We will start with you, Mr. Roy.
        Mr. Roy. Senator, they absolutely can play a role in
    addressing health-care costs. The way I sort of generalize the
    principle is that the fundamental problem with our health-care
    system cost-wise is that too many Americans are removed from
    the opportunity to control the health-care dollars that are
    spent on their behalf.
        They do not shop for the coverage that is bought on their
    behalf by the government or their employer in many cases--in
    most cases--and they do not pay for health care directly where
    that is appropriate.
        So the more we can move to a system where people are
    shopping for the insurance that they want and shopping for the
    care that they want, the more accountability will be built into
    the system by consumers, the way it is in every other sector of
    the economy.
        The Chairman. Okay.
        Mr. Haislmaier?
        Mr. Haislmaier. Mr. Chairman, I think that the role is
    twofold. One, it provides the ability for individuals to have
    more control over the decisions and control the money.
        Two, it is the only thing we have right now in this country
    that encourages people to save for and pre-fund future medical
    needs. And as we get older, we inevitably, at least in the
    aggregate, wind up costing more in health care, so that pre-
    funding is important.
        As to what could be done, I think rather than the health
    savings accounts being linked to a specific product, a high-
    deductible plan, Congress should think about them being a sort
    of independent vehicle that can be used with any form of
    insurance, any type of insurance, for any payment arrangements.
        I think what we need is more diversity and creativity on
    the provider side in payment arrangements, and so you want a
    system that is responsive to that.
        The Chairman. Thank you.
        Mr. Slavitt?
        Mr. Slavitt. Health savings accounts are useful for two
    types of individuals: people who have the wherewithal to save,
    so people generally in the middle class, and people who are
    healthy enough to be able to save. And so it is a useful tool
    for those populations.
        Now, like everything else, there is a cost to it, and the
    cost to the Federal Treasury is not insignificant. So if the
    Congress decides that is where our highest priority ought to
    be, to those populations, that is when we would use a tool like
    that.
        If we decide that in fact there are other, more pressing
    needs for our Treasury, then I think that is not the right
    tool.
        The Chairman. Okay.
        Dr. Aron-Dine?
        Dr. Aron-Dine. I am also somewhat skeptical about
    broadening health savings accounts as a broad solution, because
    they are expensive and because they require people who may
    already be struggling to save in their 401(k)s to then also be
    able to save in HSAs.
        That said, I think the objective of helping consumers
    choose, make better choices about their health care, is
    obviously an important one. And I think there is more promise
    to insurance designs that encourage preventive care and other
    high-value care as opposed to HSAs.
        The Chairman. Thank you.
        Senator Wyden?
        Senator Wyden. Thank you very much, Mr. Chairman.
        Let me begin, if I could, with you, Dr. Aron-Dine. With
    respect to State flexibility--and the reason we felt so
    strongly about adding 1332 into the Affordable Care Act was to
    create more choices, choices for progressive States, choices
    for conservative States, so everybody would have the
    opportunity to get better.
        Thus far, the number-one request from the States has been
    for reinsurance. That has been their single-biggest request
    thus far.
        And Alaska used 1332 to get their reinsurance program.
    Minnesota is essentially moving forward--their Governor feels
    they are going to lower premiums 20 percent using the existing
    law.
        So States may have ideas for speeding up the process to get
    reinsurance, that kind of thing. We are open to that. But I am
    very concerned about the possibility that some may be using the
    concept of flexibility to roll back consumer protection and to
    roll back protections on making sure people get covered and
    that coverage is affordable, and we do not want to go back to
    the days when there was all this junky insurance.
        You are an authority on this subject. What does it mean if
    you roll back these basic consumer protections? I guess,
    technically, professionals call them guardrails, but, I mean, I
    think about them in terms of basic consumer protection.
        What would it mean for Americans if you were to roll back
    those consumer protections I described?
        Dr. Aron-Dine. Thank you, Senator. I think there is a lot
    of confusion about 1332 waivers, since, as you alluded to, they
    already allow a lot of flexibility. In fact, 1332 is an
    unusually broad waiver authority, and that is why it is coupled
    with, as you said, stringent standards or guardrails.
        Those guardrails are really just the common-sense
    requirement that if States are going to make big changes, the
    coverage they offer needs to be just as good, just as
    comprehensive, just as affordable, and cover as many people
    without adding to the Federal deficit.
        If you were to poke holes in those guardrails, the
    consequences could be extreme, because the waiver authority is
    so broad. Effectively, States would be able to turn back the
    clock to the pre-ACA individual market where 75 percent of
    plans did not cover maternity care, where many people with
    insurance were exposed to medical bankruptcy because their
    plans did not have out-of-pocket limits.
        Those are protections that could be waived, and that is why
    those strong standards to protect consumers are needed.
        Senator Wyden. Okay.
        Mr. Slavitt, let us talk about prescription drug prices.
        And, Mr. Roy, if you want to chime in too, I am happy to
    have you do it.
        Here is my take on this. My take is that transparency in
    this marketplace would be enormously helpful. In other words,
    this is not a debate now about price controls and discouraging
    research and development. This is a debate, in my view, about
    ways to promote more information out there that can help hold
    down costs, ensure people get access to quality products.
        I am told a number of States--the two Senators from New
    Hampshire told me recently that they are in the process of
    getting this information out to people of their States through
    their State government. And we are going to follow up on it,
    obviously.
        But I have introduced a bill that would require companies
    simply to publicly disclose online, in various kinds of forums,
    the reason for price hikes. And we can debate the details of
    getting that kind of information out. But it just seems to me
    that sunlight would be an antiseptic here that would really
    make a difference.
        One of the other reasons I believe this, and I think Mr.
    Roy is familiar with this, Senator Grassley and I did a year-
    and-a-half inquiry into the hepatitis C drugs, and we could not
    get anybody to really explain why they were raising the prices.
        They constantly said, research and development. And
    Chairman Grassley and I would go through all these documents,
    but we could not find anything.
        So I would like you, Mr. Slavitt--and, Mr. Roy, having read
    a lot of your scholarship on this, you are welcome to
    contribute as well--what would you think of the idea of simply,
    as a second big step for this committee, focusing on
    transparency with respect to pharmaceutical prices?
        Mr. Slavitt. So I think it is a very smart step. As you do,
    I greatly appreciate the work of our Nation's scientists. You
    know, with their help, we are going to make advances in
    Alzheimer's and cancer, heart disease. But if you talk to many
    of these scientists, they understand that the medicines that
    they are innovating are not getting to many of the very people
    who need them because they cannot afford them. They are as
    deeply troubled as I think the rest of us are.
        Now, the fiscal conservative in me says these are Federal
    taxpayer dollars that we spend through the Medicare and
    Medicaid program, and we ought to have complete transparency
    into where that money is going. And if someone is going to
    raise the price on, effectively, the Federal Government,
    because the Federal Government carries so much of that, we
    ought to know about it. And that, as you say, is a first step
    to helping people understand that there are a lot of costs and
    a lot of potential non-costs--actual profit margins--that are
    in different parts of the system that we all have a right to
    know about because we pay for them.
        Senator Wyden. My time is up, Mr. Chairman. But if Mr. Roy
    could answer, should he want to, that would be great.
        Mr. Roy. Thank you, Senator Wyden. And I am grateful for
    the work that you and Senator Grassley have done to shine a
    light on this very important problem.
        Transparency is an important first step. I think absolutely
    it can make a difference in highlighting reasons for price
    increases. But at the end of the day, we know why price
    increases happen. Price increases happen because the providers
    of these pharmaceutical products have the power to do so
    because taxpayers foot the bill.
        Why do taxpayers foot the bill? For the same reason that
    hospitals can charge more and more money for services every
    year, because we subsidize health care and health insurance for
    almost everybody, but we do not, as a government or as a
    country, hold people accountable for costs.
        There are only two ways to hold people accountable for
    costs at the end of the day: you can have a consumer-driven
    system where consumers are holding people accountable for
    costs, or you can have a government-driven system where
    government is regulating prices. So one of these two
    alternatives is really the only way, at the end of the day, to
    get prices down.
        And one thing, as you know, that I have written a lot about
    is the importance of competition. We have seen through the
    Hatch-Waxman law and many other amendments to it how
    competition, generic competition, can do a lot to drive prices
    down for branded drugs.
        One big problem we have right now is that FDA regulations
    and also the rules around biosimilars are not the same as they
    are for small-molecule drugs that are governed by Hatch-Waxman.
    So the more this committee and the Senate can do to make
    biotechnology drugs more reflective of the competitive
    principles embodied in Hatch-Waxman, I think that will make the
    biggest difference in drug prices.
        Senator Wyden. Thank you, Mr. Chairman.
        The Chairman. Thank you.
        Senator Stabenow?
        Senator Stabenow. Thank you very much, Mr. Chairman and
    Ranking Member.
        And I first, Mr. Chairman, want to thank you for focusing
    on health care and moving forward with this hearing and our
    bipartisan efforts on the Children's Health Insurance Program.
    Both of these are very significant.
        I would hope that the era of just moving forward on
    something partisan in a rush has stopped and that we will be
    moving forward with both this committee and the HELP Committee,
    because we have been having positive conversations about how to
    move forward and actually bring down costs and increase
    coverage.
        And I do want to just stress something that Dr. Aron-Dine
    mentioned, which is right now 50-percent fewer people are
    uninsured than were a few years ago. In other words, 50-percent
    more people have insurance.
        And in our State, that means taxpayers are saving money,
    because folks are not walking into the emergency room who
    cannot pay so taxpayers are picking up the cost, or health
    providers. So we are saving hundreds of millions of dollars in
    Michigan because people have health insurance.
        But I wanted to follow up on what Senator Wyden was talking
    about on prescription drugs, because to go a little deeper--I
    know, Mr. Roy, Mr. Slavitt, you have an August report from the
    Bipartisan Policy Center, ``Future of Health Care: Bipartisan
    Policies and Recommendations,'' where you talk about long-term
    reductions in prescription drug costs, which I would argue are
    one of the main drivers of health-care costs at this point, at
    least from what I hear from doctors and hospitals and patients
    and so on. And certainly for patients, the number-one cost
    concern right now is skyrocketing prescription drug costs.
        So I know you look at the long term, but we also need to be
    doing something sooner rather than later, when we have so many
    people who literally are choosing whether they are going to eat
    today or get their medicine. And so I wonder if each of you
    might talk in more depth about your recommendations to bring
    down the costs of prescription drugs and what the
    administration could be doing right now to make that happen.
        Mr. Roy?
        Mr. Roy. Thank you, Senator. Well, there are a number of
    specific details we could get into, and I have detailed them
    all in this document called ``The Competition Prescription,''
    which we have published at our website, freopp.org.
        A number of them, as I alluded to, involve making
    biosimilars, biologic drugs that right now are, first of all,
    more difficult to develop--and also the process for putting
    them onto the market is more difficult and more costly. That
    means that when biosimilars get onto the market to compete with
    biotech drugs, they charge higher prices and the competitive
    dynamic is not as robust as it is for the traditional Hatch-
    Waxman small molecules. So that is number one.
        There are other things we can do. The Orphan Drug Act,
    while a well-intentioned effort to make sure that drug
    companies develop drugs for very rare diseases--we have kind of
    over-corrected for the previous system, and now we have a
    system where a lot of drug companies will generate studies for
    a small slice of a disease or a subset which grants them
    another 7 years of exclusivity for a drug that should have gone
    off patent. And a lot of companies are exploiting that to gain
    higher prices and market exclusivity.
        The FDA has struggled with complex generics. So, for
    example, we know about the EpiPen controversy from a year or
    two ago. Asthma inhalers are another example. Where there is a
    generic drug, a very old drug--like adrenaline is a hundred-
    year-old drug--but a device that might have intellectual
    property, the FDA has struggled to figure out ways to allow
    generics to substitute for a generic drug but with a patented
    device.
        And so Congress can play a role and the FDA can as well in
    streamlining the process for those kinds of products to get to
    market more quickly. Those are some examples.
        Senator Stabenow. Thank you.
        Mr. Slavitt? And by the way, thank you for your service at
    CMS. It was a pleasure working with you.
        Mr. Slavitt. Thank you, Senator. So I want to start by
    saying that I think Mr. Roy is exactly right. There are things
    we can do to increase competition, I think both with
    biosimilars, but also with branded products.
        We did a study when I was at CMS which looked at the large
    amount of either branded or generic drugs that took price
    increases over 50 percent every year over the course of a
    number of years that were really invisible to people. And I
    think that the industry argued that those are retail prices and
    that they are not as important as the net price. But consumers
    pay, in the Medicare program, they pay their share based upon
    that retail price, so that is very important.
        Secondly, I am concerned about States. State Medicaid
    plans, if you take the example of hepatitis C, all charged very
    different amounts for their populations. And so the best price
    that should be there for Medicaid certainly, was not there.
        And then finally I will just say, while there is an array
    of things we can talk about, I look at the VA, and the VA has a
    very stringent--they are one of the largest purchasers in the
    country. And when I was running Medicare, I admired them: I
    wished that we had the power at CMS to be able to get
    medications as inexpensively for taxpayers as the VA does for
    veterans.
        Senator Stabenow. Well, and I would just underscore my
    support for that as well. I think Medicare should be
    negotiating best price for seniors, people with disabilities,
    and I would also love to see us open up the border. Michigan is
    pretty close to Canada, right across a bridge or a tunnel. And
    we know that FDA-approved drugs are sold on both sides of that
    bridge. And on one side they are 40-percent less, on the
    Canadian side, than on the American side sometimes. So I
    personally would like to see that happen as well.
        Thank you very much.
        The Chairman. Senator Thune?
        Senator Thune. Thank you, Mr. Chairman.
        And thank you all for being here. I appreciate the chance
    to take a look at health-care costs and coverage. It is an
    important topic, and I appreciate our panelists presenting
    their thoughts to us today.
        Unfortunately, we still have a lot of Americans who are
    feeling the pain of the Affordable Care Act, which is why I
    have long believed we need to repeal the law, and one of the
    reasons for that is because we continue to see these monthly
    premiums escalate and go up.
        If you look at the HealthCare.gov States, there has been a
    105-percent increase between 2013 and 2017. And while the
    forecasts for completely bare counties next year has changed,
    higher costs, higher taxes, and fewer options continue to be
    the experience of millions of people across the country.
        So, although it has been frustrating that efforts stalled
    this summer, I am glad that the talks continue on bipartisan
    options for market stabilization. And we certainly cannot lose
    sight of the fact that health-care spending continues to grow,
    both as a portion of our country's budget and of American
    families' budgets. And we have to look for better ways to
    reform our health-care system that will help both families and
    taxpayers in the long term.
        So I would like to ask Mr. Roy, we have heard criticism
    from some of our colleagues of the recent decision by the Trump
    administration to reduce advertising funding for the upcoming
    enrollment period. However, the administration recently took
    steps to enable consumers to purchase ACA-approved plans online
    through a private health insurance exchange or through an agent
    or insurer.
        What effect do you think these additional consumer shopping
    options will have on enrollment? And will it be more cost-
    effective for the private sector to be competing to enroll
    these individuals?
        Mr. Roy. Thank you, Senator. Brokers, of course, have a
    historical role and a well-established role of helping
    consumers find insurance products that are suited to them. At
    the end of the day, you can do a certain amount of marketing to
    convince people to sign up for health insurance, but if the
    premiums are twice what people were paying before, or three
    times in some cases, and the coverage is really no better from
    their point of view, no amount of marketing is going to make
    them buy that product. And so that is ultimately the problem.
        Marketing is not the reason why people are buying
    individual market insurance and neither is the mandate. The
    individual mandate, because of all the exemptions and loopholes
    and the weak enforcement of it--that is not really having an
    effect either.
        At the end of the day, what is having an effect on
    enrollment is the price of insurance and also the subsidies
    that are being offered to offset the price of insurance. Those
    are the two big levers that Congress has to address enrollment
    and the exchanges.
        And I would say the most effective thing we can do is make
    insurance less costly by reforming some of the regulations that
    do not have an impact on the quality of insurance or the value
    of insurance that people purchase, such as age bands.
        Senator Thune. As you know, in recent health reform
    efforts, I was interested in working to avoid the benefit
    cliffs that trap people in a situation where they cannot move
    up the economic ladder for fear of losing benefits. Have you
    done any analysis of the ACA's current tax credit structure and
    its impact on upward mobility?
        You know, as we were looking at the tax credit and the
    discussions we had over the summer, that was one of the issues
    that we were trying to address. So maybe respond on ACA's
    current tax credit structure and its impact on mobility. But
    then secondly, what could be done better to both empower
    individuals and to address costs?
        Mr. Roy. Senator, I followed closely and appreciate a lot
    of the work you did to address that problem.
        I would say that, in general, the idea of a sliding scale
    of subsidies that gradually phases out as you go up the income
    scale is the right approach, because that minimizes a cliff
    that you might otherwise see if you have a benefit, like the
    old Medicaid program, where you cross over the threshold of
    eligibility and, boom, you lose all that assistance and you are
    discouraged from lifting yourself out of poverty as a result.
        So a gradual phase-out of subsidies is the right way to go.
    Switzerland has done that with great success.
        In theory, the ACA will strive to do that as well. But the
    challenge is, because the premiums have gone up so much, there
    is this cliff at the 400 percent FPL, Federal poverty level,
    income threshold. So it is a very technically tricky problem to
    get the right balance because the prices, of course, are
    different in every State and every county.
        But at the end of the day, having a sliding scale is the
    right approach. What we have to do is really address the
    underlying cost of premiums, because, as Mr. Haislmaier
    addressed earlier in his opening remarks, we have created this
    bifurcated system where if you are over 400 percent FPL, you
    are paying through the roof for these premiums. If you are
    under 400 percent FPL, you are somewhat insulated from the
    costs. And we need to bridge that gap a little better than we
    have.
        Senator Thune. Mr. Haislmaier, you wrote papers earlier
    this year regarding continuous coverage as a key to stable risk
    pools. Could you tell this committee about your ideas in this
    space and how it would affect health-care costs?
        Mr. Haislmaier. Yes. Thank you, Senator. The issue with
    continuous coverage is that insurers spread risks and costs not
    just among a group of people, but over time. So somebody who is
    perfectly healthy--I have a college-age son who, you know,
    fractured his elbow flipping his skateboard, okay. Now,
    somebody like that is a good health insurance risk. But if you
    only get 6 months of premium for them, that does not cover the
    cost of that one incident, whereas if you get a year's worth of
    premium, it covers the cost of that incident and then some, and
    it is a profitable customer.
        And what you are hearing from the insurers is people
    jumping in, getting coverage, and exiting when they do not need
    it.
        Now the administration, the Trump administration, has tried
    to tamp that down with some regulatory changes. But in the end,
    it really comes down to the design of the law.
        And so what I have recommended and what I said in my
    opening remarks--and as you mentioned, what I have written
    about--is, if we go back and look at the structure that was put
    in place for the employer group market, which is 90 percent of
    the private market, by the Health Insurance Portability and
    Accountability Act in 1996, we have a structure that works very
    well and it says, look, if you do the right thing and you buy
    and keep coverage, you take the coverage when it is offered,
    then when you change employers or your employer changes plans
    or whatnot, there is no pre-ex, you are guaranteed issue, you
    can get the coverage. You are not charged separately at a
    different rate--you know, pre-ex does not count. You have
    earned the right to be covered. And that gives you an
    incentive.
        That created what analysts have called group-to-group
    portability. The problem was HIPAA did not go further. It did
    not do a very good job of group to individual, and it did not
    do anything about individual to individual portability.
        So what I would do is, I would condition--this is the
    single-best way to do it--condition the prohibition on
    preexisting condition exclusions that applies if you have
    continuous coverage, and then there is a path to earn it.
        And by the way, all the people who have gotten covered now
    would qualify, since they have already gotten coverage. That is
    the absolute best way to do it to make it most effective so
    that people are in the system and paying premiums when they are
    not actually needing medical care.
        Otherwise, people have found it just too easy to drop out
    when they do not need medical care. I have had insurers say, we
    could not believe that people would get this subsidized
    coverage when they needed medical care and then would not pay
    the next month's premium, even though after the subsidies it
    was only $10.
        Senator Thune. Thank you.
        Thank you, Mr. Chairman.
        The Chairman. Senator Heller?
        Senator Heller. Mr. Chairman, thank you.
        Thank you to the panel for being here today. I certainly
    appreciate your expertise and your taking the time.
        And issues related to health care are so important for the
    State of Nevada and, of course, across the country. And there
    is no doubt in my mind that every member on this committee and
    probably on this panel is committed to discussing and finding
    solutions to our health-care needs here in this country.
        So I would argue that health-care reform should do three
    things, and they are to lower costs, increase access, and
    improve the quality of health care in this country. I cannot
    imagine that anybody in this room would disagree with that.
        And one of the critical ways to accomplish these goals is
    to provide States with the tools they need to meet the unique
    health-care needs of their patients, and that is why I have
    been working with my colleagues Senators Cassidy and Graham on
    a proposal that will take the decision-making process and money
    out of Washington and bring it back to the States.
        So one of the goals of the Graham-Cassidy-Heller bill that
    I think is so important is providing States with an increased
    flexibility to innovate, come up with tailored approaches that
    are most appropriate for their citizens.
        So, I guess, Mr. Roy, I will direct this question to you.
    Are you familiar with the proposal?
        Mr. Roy. I am somewhat familiar with it. I mean, I have
    seen outlines of it and things like that that have been
    circulated. I obviously have not seen legislative text. I am
    eagerly awaiting, as many people are, your big rollout on
    Wednesday.
        Senator Heller. Does a 50-State solution make sense?
        Mr. Roy. I think it does. I mean, I certainly am a big
    believer in the value of State flexibility. I am also a big
    believer in the value of individual flexibility. And I think
    one thing that is very important is to make sure, while States
    should have more flexibility to run their health-care systems
    in a way that reflects the unique populations in their States,
    I hope that we can also make sure that individuals have as much
    choice as possible and that the Federal Government is not
    limiting the choices that individuals have to seek the coverage
    and care that they need.
        Senator Heller. One of the reasons why I am attracted to
    this piece of legislation is that recently in the State of
    Nevada we were going to have 14 bare counties as of January 1st
    next year. Fortunately, through the work of our office and the
    Governor's office, we have found a carrier that will cover
    those 14 counties, but which means no choices, this is your
    only choice. And so it has caused some great concern as to how
    long, of course, this particular carrier will stay with us.
        You talked a little bit about flexibility. What will this
    flexibility mean for premiums and for enrollment?
        Mr. Roy. Well, what flexibility could allow--and a lot of
    it will depend on the details of your legislation and other
    efforts to provide this flexibility--is that by reforming some
    of the regulations in the ACA that I described that are
    particularly responsible for higher premiums, you can bring
    premiums down, and you can expand the choices that people have
    to buy coverage that suits their need. That means more people
    will enroll in health insurance, and you will have more people
    with coverage. That means less uncompensated care.
        And it also means that States can refine the criteria for
    eligibility in ways that make sure that the maximum number of
    people who need help are getting it.
        Senator Heller. Mr. Haislmaier, I mentioned, and Senator
    Thune also mentioned, the fact that on these bare counties, the
    situation with these bare counties--and 14 of 17 counties in
    the State of Nevada would have been bare except for the
    intervention of my office and the Governor's office. Again, we
    do not know how long we will be able to keep it together.
        Do you anticipate that States will be faced with similar
    situations in the future, in other States besides just Nevada?
        Mr. Haislmaier. They will, and I would say that my take on
    it is I do not think--and I said this in my written testimony--
    that those counties will remain bare.
        I think what played out in your State of Nevada, Senator,
    is likely to play out elsewhere, and that is that there will be
    an insurer that steps in, because this subsidized market has
    really two-thirds below 250 percent of poverty. This is really
    very close to a Medicaid eligibility market. It looks like
    Medicaid, the enrollees.
        And so what will happen--and I think it was interesting in
    your State, the carrier that stepped in is Centene. It is a
    company whose basic business is Medicaid managed care. And I
    see that as the norm. I see that as the steady state for the
    ACA, which is, the subsidized market will be served most places
    outside of major, major metropolitan areas by one carrier. The
    one carrier is probably going to be a carrier that has
    experience with basically Medicaid managed care, because it is
    going to look a lot like Medicaid, the population is going to
    be looking like it.
        And this is very generous coverage, with the government
    paying the subsidies. And if you are the only carrier there,
    you can charge whatever, because the enrollee does not pay
    anything. If the price goes up, the government just simply
    gives you a bigger subsidy.
        So I think exactly what happened in Nevada will happen
    elsewhere. You know, in Ohio the same thing happened.
    CareSource is a local Medicaid managed care company. It is in
    Ohio and Kentucky and West Virginia. And they stepped in and
    filled the gaps in Ohio. I would see that happening elsewhere.
        Now you know, the good news is they will probably stick
    around, but that is what the market is going to look like. It
    is not going to grow; it does not get better from here. You are
    not going to get more healthy people in there; no amount of
    advertising is going to do that. You are going to have what you
    have today.
        Senator Heller. Yes.
        Mr. Chairman, thank you.
        And thank you to the witnesses.
        The Chairman. Thank you.
        Senator Cantwell?
        Senator Cantwell. Thank you, Mr. Chairman.
        This is an interesting discussion, and I would like to keep
    it going on this topic.
        First of all, I want to know from each of you ``yes'' or
    ``no'' if you think managed care helps drive down costs.
        Mr. Roy. It depends on how much flexibility Congress gives
    managed care to drive down costs.
        Mr. Haislmaier. It would partly do that. Managed care has
    different tools to drive down costs. What we have seen in the
    ACA is, it is mostly selective contracting with providers. That
    is, I think, part of what explains lower premium increases in
    California, because they were already doing that before the ACA
    and maybe in your State, Senator, as well.
        That runs into trouble when you have this situation which
    is occurring in rural areas where, on the one hand, you have an
    insurer monopsony, they are the only insurer, but on the other
    hand they are up against a provider monopoly, they are the only
    provider. That makes it very difficult for any plan to play
    providers off to bring costs down.
        Senator Cantwell. Mr. Slavitt?
        Mr. Slavitt. Yes.
        Senator Cantwell. Thank you.
        Dr. Aron-Dine. I would also say ``yes,'' I think both for
    the provider contracting reasons identified, but also because
    managed care can take advantage of care coordination tools and
    other things that actually reduce costs by improving health.
        Senator Cantwell. Okay. So I am going to generally take
    that as everybody is in agreement that managed care is a good
    idea. Okay.
        And I am assuming--I am not even going to ask the question;
    you can nod if you want to--the delivery system reforms that
    keep driving down costs are also good and we should pursue
    them.
        I mean, we are all having this big discussion here about
    the system and how we pay for insurance, but in reality we need
    delivery system reform to drive down the costs of health care.
    Several of you mentioned that in your testimony.
        One thing I am interested in--and maybe, Mr. Slavitt, you
    are the best person to answer this--I am also interested in a
    different concept in the purchasing market, which is: when you
    buy in bulk, you get a discount.
        Now, I guess you could say that that applies to negotiated
    rates for either drugs or for health care. But we have seen, at
    least with the basic health plan for New York anyway, that they
    were able to drive down costs because they have bundled up a
    population and 13 different providers wanted to bid on that.
    Why should we not be pursuing that more?
        Mr. Slavitt. Well, I live in a State, Minnesota, that has
    taken advantage of that, and it has worked very well. And to
    your broader question, Senator, I think what we are seeing in
    the marketplace is what we should see. We have had a major
    disruption, a new set of rules for covering folks, and some
    insurers are doing quite well with it because they focus on
    affordability, they know how to buy in bulk, they know how to
    contract. Others say, that is not us, we prefer to serve the
    large-group employer market where it is about tailoring hand-
    picked services to people.
        But affordability, if affordability and cost are the keys
    for our country, those are the people I hope are the winners in
    offering coverage.
        Senator Cantwell. Well, to Mr. Haislmaier's point about
    these people who are in that Medicaid market, I mean, what is
    wrong with that? I mean, in the concept of people who know that
    business and are getting very good at driving down the cost of
    that delivery system, what is wrong with that?
        Mr. Slavitt. Nothing is wrong with that. You know, I have
    been very close to this market, having overseen it for 4 years,
    and I would say the people who do well are the people who
    really know how to build relationships with patients. Medicaid
    plans have historically done better at that--because these are
    people with a lot of needs.
        But it is also true that there are new tech-innovative
    insurance companies that know how to build digital
    relationships with people. There are many Blue Cross plans that
    have a brand and relationships in their community that do quite
    well.
        So I suspect that it will be the commonalities will not
    necessarily be the type of plan, but their philosophy and how
    they build relationships with physicians, hospitals, and
    patients.
        Senator Cantwell. Mr. Haislmaier, what are you saying about
    that two-thirds of the population that lives below 250 percent
    of poverty? Are you saying that they should have access to
    these?
        Mr. Haislmaier. Well, what I am saying is, there is sort of
    what is and then what should be. The what is is, effectively,
    the way the law works is it is sort of like a Medicaid
    expansion-plus, basically. And so in thinking about the
    individual market, the half of the market that is not getting
    subsidized, those are the middle-class people who want a
    financial service product. They were the people who were in the
    market before the ACA.
        What this half of the market is is really something that
    looks like Medicaid and is sort of devolving down to that
    because that is the target population. It is very generous
    coverage like Medicaid. And so what I am saying is, these are
    two different groups of people who are looking for two
    different things. The people who are not subsidized, they want
    more choice of insurer, they want more choice of provider, they
    are more consumer-directed.
        The buying in bulk strategy, the downside to that, if you
    will--and this is the sort of what should be--is it presupposes
    that patients are just sort of like a herd of cattle and they
    are all the same and you just shift them around as opposed to
    them having a lot of say in the subject. You know, sort of
    ``you get what we have.''
        Senator Cantwell. Yes, but Mr. Slavitt--I think the New
    York case had 13 different providers chasing that market. What
    was interesting for----
        Mr. Haislmaier. Yes, but it is a bulk contract.
        Senator Cantwell. But, hello, like, that is the answer.
    Anybody who is going to serve up 650,000 people to you instead
    of having to search for them on the exchange, it was, like,
    they said, yes, I would like a piece of that, and here is how
    much I am willing to bid on it. So it put those individuals in
    the marketplace in a better position of having the clout that
    you would want somebody who was with a large employer to get.
        But I mean, you think we should drive down costs, right, of
    the 250-and-below market? If we can drive down costs there, we
    should drive them down.
        Mr. Haislmaier. Well, yes. I mean, the question is, as Mr.
    Roy was saying, how do you do that? Are you doing that by
    creating incentives in the marketplace for people who provide
    better value by providing lower cost and better results to get
    more business? These are providers, versus sort of the
    government at CMS saying, well, this is what you should be
    charging, et cetera.
        Senator Cantwell. Well, my time has expired, Mr. Chairman.
        But yes, that is why I started with managed care, because I
    think that managed care does that. I think managed care drives
    down the cost.
        I think when we look at this population and everything
    going forward, there is so much we need to discuss on health
    care in the delivery system that is going to drive down cost.
    But yes, getting a plan that manages that population for the
    most cost-effective way, and for us to help with the cost as
    well, that is going to be key.
        So thank you, Mr. Chairman.
        The Chairman. Thanks, Senator.
        Senator Cassidy?
        Senator Cassidy. Hey, gentlemen, I have enjoyed my
    conversations with you all.
        Dr. Aron-Dine, I have never had the pleasure to speak with
    you, but I enjoyed your testimony, so thank you.
        And I hope you do not mind me being familiar and using your
    first names, but I am kind of used to that, and I do not know
    how to pronounce Ed's last name, so it works out well.
        Andy, you and I have had a lot of conversations. The
    Graham-Cassidy-Heller amendment, I see you have written about
    that. But let me just ask conceptually, would it be acceptable
    if a State put in a combined 1332/1115 waiver if they wanted to
    combine their risk pools for the Medicaid expansion plus their
    individual market?
        Mr. Slavitt. Good to talk to you again, Senator Cassidy.
    And, you know, I think the good news is that, under the way
    that the 1332 legislation was crafted, you in fact can create
    combined 1332/1115 waivers. And for those who do not know,
    those are Medicaid and exchange-based subsidies. And I would be
    encouraging of States to take those steps.
        Senator Cassidy. So, just because I have limited time, if
    the
    Graham-Cassidy-Heller amendment basically allows a State the
    flexibility to use a combined 1332/1115, but instead of having
    two different review processes, you kind of combine it, just
    kind of in concept, is that okay, or is that something
    objectionable?
        Mr. Slavitt. No, but I have one significant concern, as you
    and I have talked about before, which is, the idea behind the
    waiver should not be to be able to take money out of the
    Medicaid program and move it into another program. That I would
    have concerns with.
        Senator Cassidy. Okay. But in concept, that is a fair
    statement. A waiver with guardrails, if you will--okay. Yes, I
    actually think you may end up being a cosponsor of Graham-
    Cassidy-Heller.
        Ed, I really enjoyed your very succinct kind of breakdown
    of the individual market. I thought you put it very well. There
    is a fellow back home, Moon Griffon. He has a child with
    special needs, he is a small businessman. He is paying over
    $40,000 a year in premiums on the individual market with a
    deductible. He has a
    special-needs child--he says this publicly; he has to buy
    insurance. He is paying the mortgage for a $500,000 home--it is
    just incredible.
        And so let me ask, though, in your testimony you suggest
    that the mandated benefits actually are a significant cost
    driver. But I have spoken to three or four different insurance
    companies, and they have all said that the mandated benefits
    are only about 4 percent of the total premium and I think 14
    percent of the cost increase since the ACA passed.
        And on the other hand, I think there is pretty good data
    that when mental health parity was put in in the Federal
    Employees Health Benefit Program, within the first year there
    was actually a cost savings. People with unmet needs were
    getting them addressed, and you actually had a cost savings
    within 1 year. Any thoughts about that? Because that is a
    little bit contrary to what you had said in your comments.
        Mr. Haislmaier. Yes. There were a number of actuarial
    studies that were commissioned by States on this subject, and
    we sort of did a review of this and looked at it and published
    it. On average, it was about a 9-percent increase in premiums,
    but the literature shows that it is 3 to 17 percent. I think
    part of that is State variation, because----
        Senator Cassidy. Just because I have limited time--so the 9
    percent does not actually seem unreasonable to me, but I have
    to pick my political battles. I have people who have never read
    my legislation condemning it. And so if I am going to pick a
    political battle, am I going to pick something which is only a
    9-percent increase, or 4 percent of the total? I guess that is
    my question.
        It sounds like, although it may increase the cost,
    relatively speaking, it is not the huge cost driver.
        Mr. Haislmaier. It is--yes, there are several. The costs
    are a product of that and other things. And that is why in my
    testimony this morning, I focused actually not so much on the
    benefits but on creating the incentives for continuous
    coverage.
        Senator Cassidy. Got it. So one more thing----
        Mr. Haislmaier. And that is actually one of the bigger
    issues.
        Senator Cassidy. And one more thing. I think you omitted
    reinsurance, such as the Maine invisible high-risk pool, which
    is essentially a reinsurance program pre-ACA. And I think it
    was thought by the folks in Maine to have lowered premiums by
    20 percent in their individual market.
        Now, I think I got from your comments that you feel like
    that helps the subsidized population more. But again, I think
    of my friend Moon Griffon--it does seem like a hidden
    reinsurance pool, in which his daughter with significant needs
    would, you know, still have care management. To Senator
    Cantwell's point, I think the real issue is care management as
    much as managed care. So she still gets the care management,
    but there is that kind of hidden reinsurance.
        But it seems as if you were nihilistic of whether
    reinsurance would help those in the non-subsidized portion of
    the individual market.
        Mr. Haislmaier. It may have some benefit to those in the
    non-subsidized portion of the market, but most of the cost
    driver has been in the subsidized section of the market. But
    you are right, there are some cases there.
        The issue with reinsurance as it is being discussed is
    basically, you are having the taxpayers step in and provide a
    back-door premium subsidy. That is really what you are doing.
    And so that raises the following question: what limits are
    there on that?
        Senator Cassidy. But you could argue, I think, if you go to
    Dr. Aron-Dine or Mr. Slavitt--both suggested that there is a
    certain premium for uncertainty. And so you get a little bit
    more bang for the buck, don't you, because you are creating
    certainty and, therefore, maybe deflating the driver of, we
    have to raise the premium because we do not know what is going
    to happen.
        Mr. Haislmaier. No. As the reinsurance program was
    implemented under the ACA for 3 years by CMS, I mean, there was
    a fair amount of certainty there. It was basically underneath
    commercial reinsurance. Commercial reinsurance, they figured,
    would kick in about 250,000 a year of claims. So they said,
    right, we will subsidize between 45,000 and 200,000 claims. And
    so basically, it is just a subsidy going in there.
        And so the issue has become, what parameters could you put
    on that in terms of both the timing and the amount? And then,
    what is to keep those parameters in place? And then finally,
    what is to keep or prevent happening, if those parameters get
    breached, the government stepping in and saying, well, to lower
    the cost to us as the reinsurer----
        Senator Cassidy. I am way over; I have to cut you off.
        Mr. Haislmaier [continuing]. We are going to dictate your
    price for what----
        Senator Cassidy. I yield back. And thank you for your
    forbearance, Mr. Chairman.
        The Chairman. Well, thank you.
        Now, I have to go to a meeting, so we are going to turn the
    time over to Senator Carper and then Cardin and then the
    Senator from Pennsylvania.
        But I want to personally thank you all for being here. This
    has been a very, very interesting committee hearing, and I have
    been personally very interested in what you have had to say.
        So with that, I am going to turn the time over to you,
    Senator Carper. If you will continue the hearing, I would
    appreciate it.
        Senator Carper [presiding]. Yes, thanks very much, Mr.
    Chairman.
        In one of my first acts as chairman of this committee----
    [Laughter.]
        I had better not go there.
        Had Chairman Hatch stayed, I would have said to him, we
    need more hearings like this, not fewer.
        And we have people like Senator Cassidy and others who have
    an idea that is worth vetting, it is worth having a hearing on,
    and that is what we should do. We should be all about regular
    order. If folks have a good idea, let us have a hearing, let us
    bring in witnesses for and against, and let us have
    conversations outside of this room. That is what we need to do.
        I think I have mentioned the importance of competition. I
    think Mr. Roy did so, I think, especially well.
        And I want to turn to, if I could, Mr. Slavitt and Dr.
    Aron-Dine to help us think about developing consensus.
        But before I do that, I want to say, Mr. Haislmaier, I just
    want to thank you and the folks at Heritage for giving us
    Obamacare. I sat here many times in this room. Where did the
    idea of the exchanges come from? Well, it was Heritage. Where
    did the idea of the individual mandate come from? Well, it was
    Heritage. Where did the idea of the employer mandate come from,
    the sliding scale tax credit, the prohibition against insurance
    companies denying coverage because of preexisting condition?
    Heritage is the gift that keeps on giving.
        I was talking to Jim DeMint, former colleague Jim DeMint,
    the other day, and I said we owe you a lot for those gifts.
        And no, no, no, you do not have a chance to respond, but we
    want to thank you for all those gifts. [Laughter.]
        And I want to ask Mr. Slavitt and I want to ask Dr. Aron-
    Dine, thinking through the need for predictability and
    certainty and Mr. Roy's points on competition, if you look at
    the States where they have a lot of competition in the
    marketplaces--California, Minnesota come to mind, maybe New
    York--where we have a lot of competition, frankly you do not
    see the kind of huge increases in copays and deductibles and
    premiums.
        And just think out loud for us, and especially looking at
    the things that our other two witnesses have said, things that
    we ought to do, should do, responding--anything that you have
    heard, either of you--saying, by golly, those are good ideas,
    whether they happen to be on this side of the panel or this
    side, really good ideas for fostering competition, because I
    think that is the key, a big part of the key.
        Mr. Slavitt, please.
        Mr. Slavitt. Yes. And look, you know, I am a believer that
    in life it is 90 percent about implementation. And what we have
    seen is that States that really set out to create a competitive
    market, to create an affordable market, to cover more people,
    did so and have done so well. And of course, us, the Federal
    Government, and our country, we ought to be looking at things
    that got in the way, that did not allow that, that could allow
    States to do that better.
        So if I were to focus on the challenges, the biggest
    challenges I think are in two places: one is, States that chose
    not to implement Medicaid expansion or their own exchanges and
    so forth, but also States that have large rural populations.
        You know, considering Senator Heller's comments, he has
    vast regions of that State that have very, very low population
    density, very few hospitals.
        So I have talked to probably more insurers about enrollment
    than probably anybody in the country, and many of them say, we
    do not have contracts with that hospital. So until we change
    the structure of how things work in rural America--and I think
    there are good ideas on the table, such as allowing people to
    buy into the Federal employee plan perhaps, allowing people to
    buy into a Medicaid managed-care plan, creating some other
    forms of competition--I think we are going to continue to see
    these sorts of needs in rural America in particular.
        Senator Carper. All right.
        Dr. Aron-Dine, I am looking to draw on ideas you have heard
    from the other two witnesses, the first two witnesses, to help
    us think about, what are some of the things that they have said
    that would help us foster greater competition and bring down
    the copays, deductibles, premiums?
        Please.
        Dr. Aron-Dine. Thank you, Senator. If you look across the
    country this year, we have seen some insurers expanding into
    new markets, and then we have seen withdrawals, almost all of
    which have had insurers linking them to the Federal policy
    uncertainty. So I do think the first and most straightforward
    thing to do to address competition is to address those sources
    of uncertainty around CSRs, mandated enforcement, and outreach.
        Another straightforward step, which Andy alluded to, even
    though it is outside the marketplace context, is to expand
    Medicaid by improving the risk pool. That can encourage insurer
    competition.
        But to respond to your request for other ideas, I think
    reinsurance is one that has come from bipartisan sources and
    can help with competition if it addresses, as Mr. Haislmaier
    said, the tail risk, the truly uncertain cases of really
    expensive people whom insurers, especially smaller, regional
    insurers in smaller markets, have trouble pricing for.
        And then I think the deeper issue, which a number of people
    alluded to, is places where there is limited insurer
    competition, often a long history of that, long before the ACA,
    and limited provider competition. And those are the places
    where I think you might want to think about some form of public
    option, which can be a way of getting at over-consolidation in
    both markets.
        But just one observation. As we talk about what is going on
    in the marketplaces, you know, one way to figure out how
    coverage is working for people is to ask them. And a survey
    last week found that more than 80 percent of people in these
    markets are pleased with their coverage, so I do think the goal
    should be to build on that with greater affordability and
    competition, as you said, but not to think that we should
    somehow be reversing the basic construct of those markets,
    which is working for most people.
        Senator Carper. All right. As a new chairman, I am tempted
    just to grant myself another 15 minutes to ask questions, but I
    have to live with these guys, so maybe I will just stop it
    there and recognize Senator Cardin.
        Senator Cardin. Well, thank you, Chairman Carper. I
    appreciate that very much.
        Let me thank the panel. I agree with Senator Carper in that
    we should have more hearings like this. This is important, and
    I think we are getting some great discussions.
        The problems of Maryland, particularly in the individual
    marketplace, are typical of problems we have around the Nation.
    And when I talk to our insurance companies of interest, they
    tell me their main problem with the increase in premiums has to
    do with the risk selection, so reinsurance will help in the
    short term, no question about that.
        Enforcing the mandate would help greatly--they mention
    that.
        But then when you get to the second problem, which is
    affordability, because you mentioned the issue of the $40,000
    premium, the problem there basically is the overall cost of
    health care and the lack of enough competition. Competition
    certainly would help, and I support a public option. I think a
    public option would be helpful.
        But let me just drill down on the cost issues. In Maryland,
    I tried to find out the per-capita cost of health care, and it
    is somewhere around $8,600. So for a family of four, that is in
    excess of $34,000. And if you do not have an employer making a
    contribution and you are not eligible for subsidies, then I do
    not care how you divide it, whether it is the premiums or the
    out-of-pocket expenses, it is going to be around $34,000, and
    that is not affordable to a lot of families.
        So we have to deal with the realities. So one of the
    suggestions that is being made is that we can solve this by
    giving more flexibility to the States. Okay, maybe that can
    work.
        And then I hear about guardrails, which to me are
    absolutely essential, because I do not want to see us do
    flexibility to States where less people have insurance coverage
    or the quality of coverage is affected, because that does not
    help deal with the out-of-pocket costs for those who are going
    to need health care in the future.
        So, Mr. Slavitt, how do you reconcile flexibility, the
    realities of which we are dealing with right now, and being
    able to politically maintain the guardrails necessary so we do
    not find millions of people losing health coverage or that all
    of a sudden certain areas of the health-care coverage are gone?
        Mr. Slavitt. Thank you, Senator Cardin. You know, I think
    the topic of 1332 waivers is getting its due, it is getting its
    15 minutes in the spotlight, as it should.
        And I think, as people are beginning to understand it, one
    of the things that is important, and Dr. Aron-Dine said as
    much, is there are tremendous flexibilities in the way that the
    law was written that allow States to do a number of things,
    from, as Maryland does, an all-payer solution, to delivery
    system reform, to reinsurance--you know, many, many other
    things.
        All that the guardrails suggest is that States have to not
    use money that is going to people's coverage in ways that cause
    them to lose that coverage or make that coverage more expensive
    or somehow bring them back to a place where they do not know
    what they are getting. And of course, they have to do it in a
    fiscally responsible fashion.
        I think those are fairly common-sense rules that have been
    big advancements in this country; they are massively popular.
        But within that framework, I hope that we live in a world
    where over time many, many States take advantage of
    opportunities, whether they are more conservative or whether
    they are more liberal, it does not matter, but that they take
    these new approaches, and those new approaches, I think, will
    be good for people and will also help us learn.
        Senator Cardin. Well, one of the problems that we run into
    on this is that there are different definitions on value added
    by the local flexibility. And if the value of the package is
    comparable, but certain services are not covered--let us just
    take behavioral health for one moment--then clearly there is an
    element in our population that is being adversely impacted by
    the local flexibility. How do you protect against that with the
    guardrails?
        Mr. Slavitt. Well look, I think the standardization of
    benefit design is to say that when you buy an insurance
    product, you do not have to worry about whether or not, God
    forbid, your child, whom you do not think will need mental
    health services, next week needs mental health services and you
    do not have to go, oh, it was not in my policy. So a certain
    amount of standardization is good.
        Actually, standardization leads to innovation. You know, we
    have very innovative automotive companies like Tesla, but they
    all have to meet a basic standard. It does not mean that they
    cannot innovate.
        So I do not think we should be going back, personally, to a
    place where 75 percent of policies do not offer maternity
    coverage. I do not think we should go----
        Senator Cardin. I am in agreement with you, but there are
    some proposals that are out there that, in the name of
    flexibility, would allow a redesigned policy that could leave
    out maternity benefits or could leave out mental health or
    could leave out addiction or could put, again, arbitrary caps
    on that.
        Mr. Slavitt. And I think that is what the guardrails are
    for.
        Dr. Aron-Dine. And if I could just add, I think the key
    issue here is that a la carte health insurance does not work.
    If you say that plans do not have to cover behavioral health,
    that is not actually a choice for people about whether to buy
    behavioral health insurance because, in practice, the only
    people buying plans with those services are those who need
    them. And the costs become unaffordable, and it is no longer
    insurance; it is just requiring people to buy their own health
    care coverage.
        So I do think that the confusion about how choice actually
    works in health insurance and the need for pooling is confusing
    some of the conversation about exactly those issues, Senator.
        Senator Cardin. Thank you all very much.
        Senator Carper. Senator Casey?
        And then it looks like, unless someone else comes, Senator
    Brown.
        Senator Casey. Thank you, Senator Carper.
        We had a long, several-month-long debate in the Senate, and
    the House as well, on health care. The principal reason that I
    remained unalterably opposed to the various Senate bills is
    that they centered on Medicaid. And I remain unalterably
    opposed to any attempt to do what they tried to do in those
    bills.
        So we had a big fight about that, and I hope that does not
    arise again. It might in the context of this discussion about
    Graham-
    Cassidy-Heller.
        At the same time, since July the 28th, there has been a lot
    of very positive bipartisan, not only discussions, but now
    actual hearings. We are in our second week of bipartisan
    hearings in the HELP Committee. It has not happened in years,
    so we are in a good place right now trying to solve near-term,
    real problems, not some problems that people point to, which
    are not significant, but real problems in the marketplace in
    terms of stabilization, cost-sharing reduction payments, and
    the like.
        So the concern I have is, not only will that bipartisanship
    that will solve real problems in the near term be derailed--
    that is concern number one--but I have a larger and more
    overarching concern about what a bill like this could do to
    Medicaid.
        Dr. Aron-Dine, I am going to direct my question to you
    first--not simply because you have a Swarthmore degree, but
    that helps enormously--and it is centered on this concern that
    I and many people have about Medicaid.
        On page 11 of your written testimony, you set forth the
    standard or the principle of building on progress. And then you
    said that, including the recent bill, that that principle of
    building on progress would be violated. Quote, ``Each,''
    meaning each bill, you say, ``each would cause millions of
    people to lose coverage and make coverage worse or less
    affordable for millions more.'' And then you go on to explain
    it. I want to read that into the record.
        But if you could, highlight or expand upon your concerns
    about the so-called Graham-Cassidy-Heller bill.
        Dr. Aron-Dine. Thank you, Senator. We have been talking a
    lot about State flexibility in this hearing, but I think what
    is clear is that for State flexibility to actually benefit
    people, three criteria need to be met. There need to be
    resources, there needs to be appropriate risk-sharing with the
    Federal Government, and there need to be standards that
    actually protect consumers.
        And unfortunately, as far as I can tell in the not-yet-
    introduced Graham-Cassidy legislation, those standards are not
    met; and therefore, the consequences would be very similar to
    the previous repeal bill.
        That is because the basic construct of the bill, as I
    understand it, is to eliminate the expansion of Medicaid under
    the ACA, completely eliminate the ACA subsidies--so it would go
    beyond the earlier Senate bill and actually leave working
    people with no guarantee of financial assistance in the
    individual market--and completely overhaul the underlying
    Medicaid program.
        And in place of expansion and subsidies, what States would
    be left with is a block grant that provides fewer resources,
    does not address any unexpected costs--including not growing at
    all during a recession when millions of people lose their jobs
    and need exactly the coverage that expansion and the subsidies
    provide--and would also redistribute across States in ways that
    would leave some States facing even deeper cuts, sort of
    counterbalancing the statement by the Senators that the goal is
    to let States maintain the ACA coverage gains if they want to.
    They just would not be feasible. It also undercuts some of the
    ACA's protections for people with preexisting conditions.
        And so, because the construct is the same as those earlier
    Senate bills, I think the consequences would be the same;
    namely, many millions of people losing coverage and big gaps in
    affordability, especially for vulnerable low-income people and
    vulnerable moderate-income people who have preexisting health
    conditions.
        Senator Casey. I appreciate that.
        I am almost out of time, but, Andy Slavitt, is there
    anything you want to add to this?
        Mr. Slavitt. Well, I agree with Dr. Aron-Dine. And as much
    as I appreciate what I interpreted from Senator Cassidy as
    basically the sponsor of the legislation, you know, I have
    significant problems with it. And he knows that. And to his
    great credit, he seeks input from his critics, which I greatly
    admire and I think is reflective of the spirit of this
    conversation today.
        But to me, it is fairly simple. Anything that cuts access
    to care for people who are low-income or modest-income or who
    are living with disability or are seniors is something that I
    am going to be opposed to, and I think the vast majority of the
    American public will as well.
        This cuts Medicaid expansion instantly. And it also cuts
    care across the populations that Dr. Aron-Dine described.
        And then further, what I think is even more challenging is,
    it takes States, big States that have significant health-care
    issues, like Florida, like North Carolina, like Ohio, and like
    Pennsylvania--by the way, I went to----
        Senator Casey. That is right, you did. I forgot to mention
    that, I should have.
        Mr. Slavitt. But as all of those States have severe cuts--
    over time everybody has a cut, that is part of the design--but
    there are significant cuts in some of these States that I do
    not think are, quite frankly, manageable, having talked with a
    number of Governors and insurance commissioners and Medicaid
    Directors. I just do not know how it is possible.
        Senator Casey. I am over time.
        But, Dr. Aron-Dine, I will submit a question for you on
    1332 and 1115, because in the HELP Committee, that is one of
    the issues we are dealing with, and there are some concerns
    that have been raised about combining those.
        But Senator Brown is waiting, and I never want to hold him
    up because he is a great questioner, and I think I do not want
    to hold him up any longer. And I am over by 1 minute and 12
    seconds. Thank you.
        Senator Carper. All right. Before Senator Brown begins, let
    me just--I had not planned on getting into this, Senator Casey,
    but those witnesses who actually went to college in
    Pennsylvania were wait-listed at the University of Delaware.
    [Laughter.]
        I just thought I would get that on the record.
        All right. Senator Brown?
        Senator Brown. And Senator Carper, not to play too much
    university stuff, went to The Ohio State University. So how
    about that?
        Mr. Slavitt, thanks; it is good to see you again. Thanks
    for your service and your speaking out about the importance of
    stabilizing the insurance market, of getting younger, healthier
    people in the market, your work to do that. And I know that you
    are particularly concerned about the repeal-and-replace debate
    and the constant threats from the Trump administration and
    about the injection of uncertainty into the insurance markets.
        You could have predicted, as many did in this body, what
    would happen in State after State after State. In my State, as
    you know, Anthem made the decision to exit Ohio's exchange for
    the 2018 plan year. Twenty counties in Ohio were left without
    an insurer for 2018. That was several months ago.
        The news today was of CareSource agreeing to offer coverage
    to the 88th county, and other insurers, including CareSource,
    stepping up after Anthem. In spite of the uncertainty injected
    by the Trump administration, in spite of the ``woe is us, the
    sky is falling'' view of right-wingers who are trying to repeal
    the Affordable Care Act, Anthem offered coverage in Paulding
    County, one of our smallest counties, at the Indiana border, so
    now we at least have that.
        Now is the time for this Congress to come together. I
    appreciate Senator Casey's comments. I know that Senator
    Alexander and Senator Murray are working to do that.
        I want to talk to you about lowering costs. My colleague
    Senator Cassidy and I recently wrote to the Secretary of HHS
    urging him to work with us to convene a panel of experts to
    discuss delivery reform, a better way to pay for care. I am
    hopeful you will be involved in that.
        We also, in addition to delivery service reform--and there
    are good ideas about what to do there, Mr. Slavitt--we must
    address the outrageous prices of prescription drugs. I get
    calls and letters pretty much every day from Ohioans who are
    struggling to afford their medicines and their premiums.
        Let me ask you a series of questions about that. What can
    Congress do to address the high cost of prescription drugs with
    a goal of lowering costs for everyone?
        If we are successful in addressing the cost of prescription
    drugs, will we better be able to control the rising costs of
    premiums?
        If you would just expand on sort of either the Slavitt
    plan, if you will----
        Mr. Slavitt. Thank you, Senator. Yes; we have this
    wonderful dichotomy in our country right now where we have the
    best scientists in the world who are working on cures to
    cancer, to Alzheimer's, to heart disease, and yet the Americans
    who most need them cannot afford them.
        And the States, including many of the States that are
    represented here on the committee, are increasingly facing
    challenges where, as the cost of prescription drugs go up, it
    becomes challenging for their Medicaid programs. So I think
    there are a number of things we ought to be thinking about and
    looking at.
        You know, I would start with where Senator Wyden has been
    focused, on transparency and making sure that the American
    taxpayer, who is actually paying the cost of these drugs, and
    the American consumer, knows what is happening, where the costs
    are, where they are increasing.
        Secondly--and I think I credit Mr. Roy for many of these
    comments--there is a lot we can do to make these markets more
    competitive, both for generics, for biologics, but also just
    for name-brand drugs that have been on the market for quite
    some time.
        And then, you know, when I ran----
        Senator Brown. For biogenerics especially, for biologics,
    yes.
        Mr. Slavitt. Yes, that would be one. And then I will say
    that when I was overseeing the Medicare program, I was envious
    that at the VA, at the Veterans' Administration, they were able
    to use the power of the VA to buy drugs for veterans in a
    really efficient, affordable fashion and to be able to direct
    people to the most effective and efficient drugs.
        We could not do that at Medicare. That cost the Federal
    taxpayer lots of money, but it also cost Medicare beneficiaries
    a lot of money in their copays. So I think those are the issues
    that we should be going at for prescription drugs.
        Senator Brown. Good, thank you so much.
        Thanks to all four of you.
        Senator Carper. Mr. Slavitt, you mentioned, I think, five
    steps that you suggested that we take in your testimony. I
    think one of them dealt with the CSRs. I think one may have
    dealt with restoring cuts to marketing. I think a third dealt
    with reinsurance. Another one was to speed up the 1332 reviews.
        I am going to ask you to just briefly restate those, and
    then I am going to ask each of our witnesses to just react to
    them briefly, to your ideas. Okay? What was the first one?
        Mr. Slavitt. Yes. So the first one is funding cost-sharing
    reductions through 2019.
        Senator Carper. Okay. Let me just ask, just very briefly,
    if I could, each of our witnesses, please.
        Mr. Roy. I support funding CSRs in concert with other
    reforms that reform underlying premiums. That is reflected in
    my testimony.
        Senator Carper. All right, thank you.
        Mr. Haislmaier? Thank you for being a good sport, Mr.
    Haislmaier.
        Mr. Haislmaier. Yes, I will correct the record on that
    later. [Laughter.]
        Funding for CSRs for a couple of years will provide
    certainty. It would equally work if, just as CBO shows, it is
    paid and put into the premium, so it is just stabilizing the
    subsidies.
        Senator Carper. All right.
        Same question, Dr. Aron-Dine.
        Dr. Aron-Dine. I agree with the recommendation, and I would
    just underscore the importance of long-term certainty.
        Senator Carper. All right.
        Restoring cuts to marketing, I think that was the second
    point. Yes? Just very briefly, how do you rate that, Mr. Roy?
        Mr. Roy. As I mentioned in an earlier question, I do not
    believe it makes much of a difference either way.
        Mr. Haislmaier. Yes, I think that is a waste of money. It
    is pretty clear that you are not going to get a more healthy
    market from this.
        Mr. Slavitt. Do you mind if I answer my own question before
    Dr. Aron-Dine?
        Look, let me just say, what we found----
        Senator Carper. Just very briefly.
        Mr. Slavitt [continuing]. Overseeing the exchanges for 4
    years is that most people do not know the options available to
    them yet, despite the fact that we think that all people think
    about is health care.
        The fact that eight out of 10 people can buy a policy for
    under $100 a month and most people do not know that--we have
    cut the open enrollment period in half, and many people think
    we have repealed the ACA to boot because of all the rhetoric.
        So that is vital money, and it comes out of insurers; it
    does not come out of the Federal Treasury.
        Senator Carper. Good.
        Dr. Aron-Dine?
        Dr. Aron-Dine. I agree. The information gaps persist, and
    they are most intense among exactly the young, healthy people
    whom we need to bring in to strengthen the risk pool.
        Senator Carper. Okay.
        What was your third point?
        Mr. Slavitt. The third point was to help States efficiently
    account for high-cost claimants through reinsurance.
        Senator Carper. All right.
        Reaction to that please, Mr. Roy?
        Mr. Roy. Yes, in general I support it, though I think Mr.
    Haislmaier's points about how it raises overall premiums are
    worth taking into account.
        Senator Carper. Okay.
        I am not going to ask you to answer this question. But
    earlier in the conversation we had with the witnesses who are
    before the HELP Committee right now--we had an earlier
    roundtable with them before they convened their hearing, and
    one of the questions I asked of those folks was, if we do a
    Federal reinsurance program along the lines that Senator Kaine
    and I have suggested and others have supported, can we do that
    in conjunction with 1332 waiver expansions to allow States to
    do their own reinsurance plan, a la Alaska? I am not going to
    get into that, but I think that is a good thing to consider.
        Mr. Haislmaier, did you want to comment briefly, or did you
    already do that?
        Mr. Haislmaier. Yes, the reinsurance program in the ACA was
    basically to account for a shift of poor risks into the
    individual market coming from previous State high-risk pools
    and employer dumping. And so that has happened. It happened
    over the last 3 years. I do not see a huge amount of that going
    forward, and I am skeptical as to how useful it would be.
        Senator Carper. All right, thank you.
        Dr. Aron-Dine?
        Dr. Aron-Dine. As I said, I think reinsurance, particularly
    if it addresses the tail risk, as Mr. Haislmaier suggested
    earlier, can be helpful for both competition and affordability.
        Senator Carper. Good.
        Senator McCaskill, the question that they are answering,
    and I will be done in just a minute, but the question they are
    answering was, Andy had given his five ideas and I am asking
    the other witnesses to respond to this.
        What was your fourth idea? Was it speed up 1332s?
        Mr. Slavitt. Yes, speeding up 1332 waivers while ensuring
    the appropriate consumer protections we have talked about.
        Senator Carper. All right.
        Mr. Roy?
        Mr. Roy. As I explain in some detail in my written
    testimony, I believe that 1332 waivers are very inflexible and
    do not give States the ability to really reform the markets in
    a way that makes them more affordable.
        Senator Carper. All right, thank you.
        Mr. Haislmaier?
        Mr. Haislmaier. Yes, the question is, where does somebody
    go to get their pre-ACA kind of coverage restored? And again,
    1332 waivers do it because that is what your average small-
    business, self-employed person is looking for.
        Senator Carper. All right, thanks.
        And, Dr. Aron-Dine, please? Should 1332 waivers speed up?
        Dr. Aron-Dine. Yes, I agree. And I would say, when Andy and
    I were working at HHS and we were working with States, we often
    found that when people came in with a good idea, they thought
    it ran up against the guardrails, but that was not actually the
    problem.
        If it was a good idea that improved coverage and protected
    consumers, it was often feasible under the guardrails, and it
    was other aspects of the process that were causing the problem.
    And that is where I think there is room for streamlining.
        Senator Carper. Okay, thanks.
        Andy, what was your last point?
        Mr. Slavitt. I think the last point is the enforcement of
    the individual mandate. It is the law of the land, and, look,
    what it suggests is that we are going to ask people to--well,
    let me just skip all of that, because that is known to you. The
    net effect of it is, it makes insurance cheaper for everybody
    by about 20 percent by many estimates.
        Senator Carper. All right.
        Mr. Roy, just a quick reaction?
        Mr. Roy. The individual mandate is having limited to no
    effect on participation in the individual market, and it should
    be replaced by continuous coverage, waiting periods, late
    enrollment penalties, and other models that have worked in
    Medicare.
        Senator Carper. All right, thanks.
        Mr. Haislmaier?
        Mr. Haislmaier. I would concur: little to no effect. And I
    would actually add to that that as premiums rise, more people
    will qualify for an affordability exemption from the individual
    mandate, so the effect not only is little to nothing now, but
    it will diminish further going forward.
        Senator Carper. I am not going to ask this question to
    anybody, just kind of an exit question. Where did the
    individual mandate come from in the first place?
        Mr. Haislmaier. The Urban Institute.
        Senator Carper. Thank you. [Laughter.]
        Mr. Haislmaier. We can prove that, Senator.
        Senator Carper. Last, Dr. Aron-Dine?
        Dr. Aron-Dine. Yes. I watch the insurer pricing behavior,
    and what we saw this year was a number of major insurers across
    States saying they would raise rates an extra 15 percent just
    because of the risks that the mandate was not enforced. So
    clearly, they think it is important to the risk pool and is
    working to broaden the pool as recommended by conservative
    experts at Heritage and in Massachusetts and elsewhere.
        Mr. Haislmaier. Actually, if I could add to that, Senator.
        Senator Carper. No, nope, we are out of time. I am sorry.
    [Laughter.]
        We will talk over lunch, okay? Thank you, though.
        All right. Senator McCaskill--saving the best for last.
        Senator McCaskill. Thank you, Senator Carper.
        I feel like a kid in a candy store. It is just me and the
    four of you. I could go for a long time, and no one is here to
    stop me.
        Senator Carper. I am going to pass the gavel to you.
    [Laughter.]
        Senator McCaskill. Yes, that is just my point.
        Let me start with Mr. Haislmaier. Let me give you the
    example I give in my town halls. There is a 27-year-old man, he
    is finally making enough money at a machine shop, where there
    is no employer insurance, that he can afford one of two things:
    a monthly health insurance premium or a monthly payment on a
    Harley-
    Davidson. And it probably will not surprise you to guess that
    he takes the Harley-Davidson.
        He gets out on the highway, he gets cut off, and he puts
    the bike on the pavement. He has traumatic brain injuries, and
    he is life-flighted to Barnes-Jewish Hospital in St. Louis.
    Nobody stops him in the parking lot or as he comes into the
    emergency room and says, ``I am sorry, you decided you would
    rather have a Harley than health insurance.''
        We take him into the hospital and we give him $2 million
    minimum of traumatic brain care. He goes bankrupt in 10
    minutes. What is the most efficient way to cover that bill?
        Mr. Haislmaier. Senator, I think you have put your finger
    on a very important point that gets missed in a lot of this
    discussion, and that is that part of the problems with this law
    are that we are working against the backdrop of something
    fairly unique in this country, and that is we actually have,
    through EMTALA, the Emergency Medical Treatment and Labor Act,
    a right for that person to get health care. They do not get
    turned away. We provide them, as you pointed out, with health
    care.
        Senator McCaskill. Correct.
        Mr. Haislmaier. The problem is, why should they buy
    insurance if they know that, if something happens, we will pick
    up the bill?
        Senator McCaskill. That is not my question. I need you to
    answer this question. How do we cover the bill?
        Mr. Haislmaier. That is what I am saying. The theory----
        Senator McCaskill. So you do not have an answer?
        Mr. Haislmaier. No, I am going to get to that. The theory
    is in the ACA that we would take the money that we are
    currently spending on the hospital to offset those losses,
    because we are spending a lot of money through Medicaid
    disproportionate share and other things.
        Senator McCaskill. DSH payments.
        Mr. Haislmaier. We would take that money and we would buy
    that person insurance. That was the theory. That was also the
    theory in Massachusetts.
        We have two problems that we have discovered in the process
    by experience with that theory. One, that individual does not
    sign up for the insurance, or, if you sign them up, they do not
    keep the insurance. The insurers tell us, you know, assuming it
    was less traumatic than that and assuming they walked out of
    the hospital, the next month they will not pay the premium,
    even though it is heavily subsidized. Insurers are telling me
    they will not pay 10 bucks a month to keep it. Why? Because
    they know that if they need it again, the same thing will
    happen.
        So the other problem is that the money never got out of the
    hands of the hospitals to pay for it. So I think, to get to the
    answer to your question, I am thinking that we need to get
    creative around making what we are spending on the hospitals
    for that more accountable and transparent and, in effect,
    rather than trying to take the money away from them, turning
    that more into a de facto insurance program.
        Because right now we have a situation where neither that
    individual nor the hospital----
        Senator McCaskill. I do not understand your answer. How do
    we pay that bill?
        Mr. Haislmaier. So the way I would do it is, I would add a
    State-level pool, all of that money, and say to the hospitals,
    when you have----
        Senator McCaskill. All of what money; money that comes from
    where?
        Mr. Haislmaier. The uncompensated care funding that States
    and Federal Governments are paying into the hospitals. We would
    say to the hospitals, if you have these claims, rather than
    dole that money out based on a formula, we are going to have
    you come to us with who are the claimants and everybody gets an
    even distribution of the money.
        Senator McCaskill. So the government should pay that bill?
        Mr. Haislmaier. Well, we are paying it today is what I am
    saying.
        Senator McCaskill. That is what I am trying to hear The
    Heritage Foundation tell me. You want the government to pay the
    health-care bill of the individual who does not take personal
    responsibility and gets insurance. You want the government to
    be responsible for his bill.
        Mr. Haislmaier. No. What I am saying is, the government
    today is paying that, okay?
        Senator McCaskill. That is not my question. I am saying
    going forward.
        Mr. Haislmaier. Oh, I would certainly want to incentivize
    that person to buy and keep private health insurance,
    absolutely. But the problem we have today is, that person is
    not incentivized under the current system to do it.
        Senator McCaskill. I think what I am trying to say here is
    that when left out of all the bumper stickers of ``repeal and
    replace'' and ``sell across State lines'' and medical
    malpractice, that anybody who really understands our medical
    delivery system in this country knows these are not even good
    Band-Aids, much less an answer to our problem. These simplified
    solutions avoid the reality that when someone does not buy
    health insurance and we take care of them anyway, those costs
    are paid one or two places. Either they are paid by the
    government, which means we are all paying for it, for the guy
    who decides he does not want to have health insurance, he wants
    to have a Harley, or they call their best customers--I think
    you would agree with this, I think that the other doctors on
    the panel would agree with me on this--they call their best
    customers to raise prices, the hospitals--and who are their
    best customers? Their best customers are the insurance
    companies.
        So they call the insurance companies at the end of the year
    when they have all this uninsured care, and the DSH payments do
    not come close to denting it because nobody has any obligation
    to get health insurance in this country, like they do car
    insurance.
        And they call the insurance companies and they say, we are
    going to raise your prices for labor and delivery; we are going
    to raise your prices for angioplasty. And then they call the
    small business down the road and say, your premiums are going
    up 20 percent.
        That is the nub of the problem here, that we provide health
    care to everyone in this country, even if they do not take
    personal responsibility to get health insurance. So I do not
    understand how doing away with the requirement of personal
    responsibility is in any way going to solve this problem.
        Mr. Haislmaier. I was simply pointing out that the design
    in the ACA is not working. I am not saying that people should
    not be----
        Senator McCaskill. But you believe people should have to
    buy insurance.
        Mr. Haislmaier. I think people should buy insurance. What I
    am saying is, the approach of ``buy insurance or pay a fine''
    is not working, so you have to have a different approach to
    that. Okay?
        Senator McCaskill. Maybe we should do it the same as we do
    for car insurance. What if we said, you cannot get your car
    license until you show proof of health insurance?
        Mr. Haislmaier. Well, there are a number of ways. I mean, I
    have heard----
        Senator McCaskill. That works with car insurance.
        Mr. Haislmaier. Years ago, before the ACA and working with
    States on this issue, I had heard of some States--Senator Casey
    is not here, but I think his was one of them--where they said,
    gee, I know how to get their attention: tell them they cannot
    get a hunting license. But the reality is that we are paying
    for those people, as you pointed out, either through Federal
    and State subsidies or through cost shifting.
        I think there is a lot that can be done, because it is very
    opaque at the hospital level. I mean, keep in mind that there
    are hospitals that are getting more in subsidies than they are
    incurring in uncompensated care, and that was one of the things
    that we discovered in Massachusetts in the reforms. So there is
    a lot of reform that could be done with the existing money in
    the system to make that more effective.
        In the earlier testimony, I was pointing out that there
    were a set of balanced rules in the Health Insurance
    Portability and Accountability Act that were applied to the
    employer group market that I would apply to the individual
    market as well.
        Senator McCaskill. We all have lots of ideas to make it
    better, but at the root of this is a country that has decided,
    I think for all the right reasons, that we are not going to
    make that man who bought the Harley die, we are going to take
    care of him. And how we more fairly and efficiently cover his
    health insurance costs is in fact what we are struggling with.
        And it is just astounding to me that the party that has
    lectured me on personal responsibility for many, many years all
    of a sudden wants personal responsibility to fly out the
    window, that it should be nobody's personal responsibility to
    buy health insurance. And frankly, it is like the world is
    turned upside down. I do not get it.
        I want to talk a little bit about prescription----
        Senator Carper. Senator McCaskill, I am going to ask you to
    ask this last question, and then we are going to wrap it up.
    Okay? Thanks.
        Senator McCaskill. Okay. So he is not going to let me get
    away with going as long as I want to go. [Laughter.]
        I am really fascinated by prescription drug advertising. I
    am fascinated that it has gone from $150 million in 1993 to $4
    billion in 2010. The average American watching television
    spends 16 hours a year just watching pharmaceutical ads. So I
    do not understand why the rest of this supposed free market is
    not moving into this space. Why are the MRI manufacturers not
    saying, tell your doctor to come to our MRI machine down the
    road at this urgent care center; if you need an MRI, we can
    give it to you for less money? Or why are doctors not
    advertising, you know, come to see me, I can lower your costs?
        And by the way, this advertising, telling people what they
    need to be prescribed to them by prescription only, is clearly
    working. It is driving our pharma costs through the roof. So
    why are the rest of the parts of this system--and I will let
    you take this, either Dr. Aron-Dine or Andy--why are the other
    parts of the system not trying to move into this advertising
    space? And if you have an opinion on whether or not we should
    be subsidizing this kind of advertising through tax cuts--the
    government is helping pay for this advertising.
        Dr. Aron-Dine. Thank you, Senator. I think what I hear in
    your question is more concern about what the pharmaceutical
    companies are doing with their advertising than an actual
    recommendation that we would benefit from seeing the same kind
    of advertising in the rest of the health-care sector.
        Senator McCaskill. I do not know about that, though,
    honestly. It might be good. I would like it if a doctor told me
    I really needed an MRI; I would like to be able to comparison-
    shop. I can find the best grilled cheese sandwich within 5
    miles from here, see pictures of it, know exactly how much I
    would pay. I have no idea what an MRI even does cost; nobody
    will tell me.
        Dr. Aron-Dine. And if the goal is to get people better
    information on both the actual cost of care and the cost-
    effectiveness of the care and what they are buying, I think
    Andy and I both at HHS looked for ways to do that across the
    health-care system for drugs, but also getting more information
    out there about other services which were high-value and
    incentivizing high-value care.
        I think, generally speaking, television advertising is not
    the best way people get that information, though there are
    exceptions and there are cases where it raises awareness of
    real health concerns.
        Senator McCaskill. Well, it is perplexing to me, because
    people say, well, we cannot advertise that because the doctor
    should be the one recommending. Well, wait a minute, these are
    prescription drugs, and we are advertising. So why isn't that
    same bromide being applied to other parts of the health-care
    delivery system?
        And if either of you who represent----
        Mr. Haislmaier. Well, actually, I see a pretty fair amount
    of hospital advertising as well.
        Senator McCaskill. Yes, for cancer.
        Mr. Haislmaier. Well, not even, just in general hospital
    advertising. I mean, you know, certain specific----
        Senator McCaskill. Labor and delivery.
        Mr. Haislmaier. Yes, cancer, whatnot, but also just general
    branding and things like that.
        Senator McCaskill. But not docs.
        Mr. Haislmaier. Yes, well----
        Senator McCaskill. But not knee or joint replacements. I
    would like to know where I could get a cheaper joint. I would
    like to know how much my joint costs and where I could get a
    cheaper one.
        Mr. Haislmaier. And this is why people like myself and Mr.
    Roy here think that what you need to do is empower more
    patients to have the ability to choose where they go, as
    opposed to simply being in somebody's predetermined network.
    And then you create a market for that and people will respond
    to that, and they do.
        We see that with the Federal Employee Health Benefits
    Program. When they created a market there, which they did in
    1960, with FEHBP and people had a choice, suddenly, what does
    the Washington Consumers' Checkbook do? It publishes a guide
    every year to comparing the different plans.
        Now, you can do this in health care. And I have had this
    discussion with insurers too. But right now, the game is all
    about, I need to have a bulk purchase, a bigger club to beat up
    the providers. I mean, I tell the insurers, look, if you want
    to go into a new market, just tell the providers, we will take
    your rates, but we will score you based on your cost and
    quality and we will tell our patients how you rank and let them
    make the decision. That is not a hard business model to do.
        Senator McCaskill. I wish somebody would do it. Thank you.
        Thank you, Mr. Chairman.
        Senator Carper. You are welcome. Thank you. You are worth
    waiting for.
        Let me just say, for the record, I am going to ask each of
    our witnesses to do this for us. I am going to ask our majority
    witnesses, Mr. Roy, Mr. Haislmaier, I am going to ask you to
    pick one of the points made by either Andy or Dr. Aron-Dine,
    pick one of the points that you agree with and communicate to
    the chair and the ranking member one point that you agree with
    and that you think we ought to do.
        And I am going to ask similarly for Mr. Slavitt, for Dr.
    Aron-Dine to do the same: pick something that our other two
    fellow witnesses have said they think we ought to do and tell
    us that.
        And the great thing about a hearing like this is, really
    excellent witnesses, very smart witnesses, and if we can
    actually get this panel to agree on the steps that we need to
    take in order to fix the pieces of the ACA that should be
    fixed, drop those that should be dropped, preserve those that
    should be preserved, if we can get the four of you in a room to
    hammer that out, that would save us a lot of time and energy.
        We are not going to get you into that room, but one of the
    things I hope we can do--and I will be talking with the
    chairman and the ranking member on it; I am sure others will
    too--we need more hearings like this. And we need more hearings
    with well-informed witnesses like you who can come in and talk
    about the existing issue there, but just really help us develop
    consensus, and I think sooner rather than later with respect to
    stabilizing the exchanges.
        And then as we get past this month and that challenge, then
    we need to look more broadly at the issues of health care.
        It is not often that people get a second chance in life. We
    do not get a lot of second chances, but we actually do have a
    second chance here to fix the ACA in ways that will actually
    get the three goals we all share: cover everybody, better
    health care, less money. That is where we are going. And we do
    that, I think, with more conversations like this rather than
    fewer and, frankly, more enlightened witnesses like you.
        So we thank each of you for spending your time and
    preparing for this and for being with us and for responding to
    those questions.
        The last thing I want to say is, for any of our colleagues
    who have written questions for the record, I ask that they
    submit them by close of business on September 19th; that is,
    about a week from today.
        With that, this hearing is adjourned. Thank you all.
        [Whereupon, at 12:25 p.m., the hearing was concluded.]

                                A P P E N D I X

                  Additional Material Submitted for the Record

                                  ----------

    Prepared Statement of Aviva Aron-Dine, Ph.D., Senior Fellow and Senior
               Counselor, Center on Budget and Policy Priorities
        Chairman Hatch, Ranking Member Wyden, and members of the Finance
    Committee, thank you for the opportunity to testify before you today.
    My name is Aviva Aron-Dine. I am a Senior Fellow and Senior Counselor
    at the Center on Budget and Policy Priorities, a non-profit, non-
    partisan policy institute located here in Washington. The Center
    conducts research and analysis on a range of Federal and State policy
    issues affecting low- and moderate-income families. Previously, I
    served in government in a number of roles, including as the chief
    economist at the White House Office of Management and Budget (OMB), as
    Acting Deputy Director of OMB, and as a Senior Counselor at the
    Department of Health and Human Services, where my portfolio included
    Affordable Care Act (ACA) implementation and Medicaid, Medicare, and
    delivery system reform policy.

        This Congress, and especially this committee, have important
    opportunities to strengthen health-insurance markets in the near term
    and to continue expanding coverage and making health care better and
    more affordable over the longer term. But legislation could also easily
    take us backwards. In my testimony, I provide an overview of the
    progress made in expanding coverage and access to care under the ACA,
    the baseline against which future policy changes should be measured. I
    then discuss some of the challenges facing the individual market and
    how they could be addressed, and recommend some objectives for health-
    care policy after these immediate issues are resolved.
                     progress under the affordable care act
        The most recent National Health Interview Survey (NHIS) data show
    that the uninsured rate in early 2017 remained at its lowest level in
    history: about 9 percent, compared to 16 percent when the ACA was
    enacted in 2010.\1\ The data also show that these dramatic coverage
    gains have been broadly shared across non-elderly Americans (seniors
    already had near-universal coverage through Medicare). As shown in
    Figure 1, uninsured rates from 2010 to 2015 fell by 35 percent or more
    for low-, moderate-, and middle-income Americans; for all age groups
    and racial and ethnic groups; across both urban and rural areas; and
    for people in both good and poor health.\2\ These gains reflect the
    combined effects of the ACA's coverage provisions, including the
    expansion of Medicaid to low-income adults, the creation of the health
    insurance marketplaces and subsidies for individual market coverage,
    allowing young adults to remain on their parents' plans until age 26,
    and individual market reforms such as prohibiting insurers from denying
    coverage or charging higher premiums based on health status.

        The quality of health insurance has also improved, including for
    people already covered through their jobs. For example, as of 2009, 59
    percent of people with employer coverage had plans with lifetime limits
    on benefits, while almost 20 percent had plans with no limit on out-of-
    pocket costs, exposing them to catastrophic costs in the event of
    serious illness.\3\ The ACA prohibits lifetime (and annual) limits on
    coverage and requires plans to cap consumers' annual out-of-pocket
    costs.

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        In the individual market, quality improvements have been even
    greater. As of 2013, before the ACA's major individual market reforms
    took effect, 75 percent of individual market health plans excluded
    maternity care, 45 percent excluded substance use treatment, 38 percent
    excluded mental health services, and up to 17 percent excluded various
    categories of prescription drugs.\4\ Today, all plans subject to ACA
    rules--the large majority of individual market policies, excluding so-
    called ``grandfathered'' and ``transitional'' plans--are required to
    cover these essential health benefits. The ACA also ended pre-existing
    conditions exclusions, which meant that even when people with pre-
    existing health conditions were able to obtain individual market
    coverage, that coverage often excluded treatment related to their pre-
    existing condition. And individual market insurance now offers greater
    financial protection. Among families with individual market coverage,
    average out-of-pocket costs (counting premiums, deductibles, copays,
    and coinsurance) fell by 25 percent in 2014, when the ACA's major
    individual market reforms and marketplace subsidies took effect.\5\

        There is growing evidence that the expansion of and improvements in
    coverage under the ACA are translating into improved access to care and
    greater financial security. Some of the most in-depth research has
    focused on the impact of the ACA Medicaid expansion, with a group of
    Harvard researchers tracking changes in access to care, financial
    security, and health for low-income adults in Kentucky and Arkansas
    (which expanded Medicaid) versus Texas (which did not). As shown in
    Figure 2, this research has found sizable increases in the share of
    people with a personal physician, getting check-ups, getting regular
    care for chronic conditions, and reporting excellent health, and
    decreases in the share relying on the emergency room for care, skipping
    medications due to cost, struggling to pay medical bills, and screening
    positive for depression.\6\

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        Other research has found that Medicaid expansion increased access
    to preventive services, increased early diagnoses of chronic
    conditions, increased use of medication-assisted treatment for opioid
    addiction, and reduced third-party medical debt collection.\7\ Research
    also finds that marketplace enrollees are accessing care at rates
    similar to people with employer coverage, that more than 80 percent of
    enrollees are satisfied with their plans, and that many marketplace
    (and Medicaid expansion) enrollees say their coverage is letting them
    access care they would otherwise have to forgo.\8\ Meanwhile, national
    surveys show a roughly one-third decline in the share of the U.S.
    population who report forgoing medical care due to cost (since 2010),
    as well as increases in the share of people with a personal
    physician.\9\

        These expansions in coverage and access to care have coincided with
    a marked slowdown in per-enrollee health-care cost growth--a slowdown
    to which the ACA has contributed, although it is certainly not the sole
    cause. As shown in Figure 3, per-enrollee spending growth since 2010
    has been slower than over the previous decade in private insurance,
    Medicare, and Medicaid. This unexpected slowdown is yielding
    substantial savings for consumers and for the Federal Government. For
    example, family premiums for employer coverage averaged nearly $3,600
    less in 2016 than if premiums since 2010 had grown at the average rate
    over the preceding decade. Meanwhile, the Congressional Budget Office
    (CBO) now projects that total Federal spending on major health programs
    will be more than $600 billion less from 2011 to 2020 than it forecast
    in January 2010, before the ACA was enacted, with lower-than-expected
    health care costs more than outweighing costs for expanded
    coverage.\10\

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        While the ACA is sometimes criticized for having focused on
    coverage expansions to the exclusion of cost concerns, in fact it
    contributed in important ways to this slowdown in health-care cost
    growth. Most directly, the ACA instituted reforms to Medicare payment
    rates to more closely align them with costs; these reforms likely also
    had ``spillover'' impacts on health-care cost growth for private
    payers.\11\ The ACA also established incentives for hospitals to avoid
    unnecessary readmissions and prevent hospital-acquired conditions (such
    as infections); these programs have contributed to large declines in
    these adverse outcomes, improving care and reducing costs.\12\

        Harder to quantify, but more important over the long run, the ACA
    created mechanisms for ongoing payment reform and experimentation in
    Medicare. Between the Medicare Shared Savings Program (the statutory
    Accountable Care Organization program created as part of the ACA) and
    payment models developed through the ACA's Center for Medicare and
    Medicaid Innovation, more than 30 percent of Medicare payments are now
    tied to ``alternative payment models'' that reward efficient delivery
    of high-quality care, rather than being made on a purely fee-for-
    service basis.\13\ Medicare's leadership has also helped catalyze
    similar efforts by private insurers and employers and State Medicaid
    programs, a number of which are engaged in large-scale shifts toward
    population- or episode-based payment.

        Of course, health-care costs remain a challenge for families, the
    Federal budget, and States, with additional reforms needed to deliver
    better care at lower cost. But the ACA put in place a foundation for
    payment reform. Congress, with leadership from this committee, has
    already built on that foundation through the bipartisan Medicare Access
    and CHIP Reauthorization Act of 2015 (MACRA), and there are
    opportunities to do more--an issue I return to later in my prepared
    statement.
              individual market trends and policy recommendations
        In the near term, however, policymakers are appropriately focused
    on strengthening the individual market for health insurance, the source
    of coverage for roughly 6 percent of Americans and the part of the
    health-care system that faces the most pressing challenges.

        Since the ACA's reforms took effect, individual market enrollment
    has grown, contributing to the overall decline in the uninsured rate.
    People with pre-existing conditions have seen especially large gains in
    individual market enrollment, reflecting the ACA's provisions barring
    insurers from denying coverage or charging higher premiums based on
    health status.\14\ Meanwhile, as discussed above, individual market
    plans offer more comprehensive coverage than before the ACA, and
    families' total out-of-pocket costs are less (on average), thanks in
    large part to premium tax credits and cost-sharing reductions.

        In the early years of the ACA marketplaces, coverage expansions
    were accompanied by moderate premium growth, with benchmark premiums
    increasing by an average of about 5 percent per year from 2014 to 2016.
    In 2017, however, premiums increased much more rapidly, with benchmark
    premiums rising by an average of 22 percent in States with available
    data.\15\ While most individual market consumers were protected from
    rate increases by the ACA subsidy structure (under which premium tax
    credits increase with premiums), rate increases were burdensome for a
    minority of enrollees with incomes too high to qualify for subsidies.
    They also raised questions about the health of the individual market.
    Did high rate increases indicate a deteriorating risk pool and health-
    care claims spiraling out of control, or were they a transitional
    pricing correction reflecting the end of the ACA's temporary
    reinsurance program and the fact that insurers in many States set
    initial premiums for the marketplaces that turned out to be well below
    costs?

        With additional data available, it is now clear that these rate
    increases were primarily transitional, and the individual market at the
    start of 2017 was poised for greater price stability going forward.
    Three graphs tell the story.

        Figure 4, from the Standard and Poor's (S&P) health-care claims
    dataset, shows the path of per-member per-month health-care claims
    costs in the individual market and in the large group and self-insured
    employer markets. As the figure shows, prior to the ACA's reforms,
    individual market costs were far below costs in the employer market.
    That's consistent with the fact that the pre-ACA individual market
    largely excluded people with serious health conditions, and (as
    discussed above) these plans covered far less than typical employer
    plans. Unsurprisingly, as the ACA's individual market reforms took
    effect, individual market per-enrollee costs more or less caught up
    with employer plans costs (overshooting a bit through 2015, perhaps
    reflecting pent-up demand for medical care among new enrollees, but
    then coming back down). Critically, over the last couple years, growth
    in individual market claims has almost exactly kept pace with growth in
    employer plan claims, with slow year-over-year growth in both markets.
    That pattern is consistent with a market that is largely stable, and
    inconsistent with a deteriorating risk pool and spiraling costs.\16\

        Figure 5, based on analysis by researchers at the Urban Institute,
    shows that premium increases in 2017 brought premiums in most of the
    country roughly in line with employer plan premiums. The Urban study
    compares 2017 benchmark premiums with average premiums for people with
    employer coverage, taking into account differences in enrollee age mix
    and plan generosity. As of 2017, the median marketplace consumer now
    lives in a State where marketplace premiums are almost exactly in line
    with employer plan premiums. In contrast, before the 2017 rate
    increases, the Urban researcher found that individual market premiums
    were well below employer plan premiums, on average.\17\ It's not
    surprising that discrepancy proved unsustainable, since employer plans
    and individual market plans are operating in the same health-care
    system and face much the same costs.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        With premiums now roughly in line with employer premiums (on
    average), and with health-care costs remaining in line with employer
    plan costs, one would expect individual market insurers' finances to be
    stabilizing as well. And Figure 6, from the Kaiser Family Foundation,
    indicates this is indeed occurring.\18\ In the first quarter of 2017,
    medical loss (claims-to-premiums) ratios in the individual market fell
    to slightly below their pre-ACA levels. Other data also suggest that
    many insurers will break even or earn profits on their individual
    market business this year.\19\

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Greater financial stability for individual market insurers should
    be good news for consumers: all else equal, it would mean lower rate
    increases and growing competition going forward. And in fact, there is
    evidence that consumers would be realizing these benefits in 2018--if
    it weren't for Federal policy uncertainty. In a number of States,
    individual market insurers have published their requested 2018 rate
    increases both with and without uncertainty around whether cost-sharing
    reduction (CSR) payments will be made, whether the individual mandate
    will be maintained and enforced, and other Federal policy choices. Many
    of these insurers--including major health plans in Arizona, North
    Carolina, Pennsylvania, and Tennessee--have said that their premium
    increases would be in line with or below their expectation for economy-
    wide trend growth in medical costs, absent uncertainty about the
    continuation of CSR payments, individual mandate enforcement, or
    both.\20\ Likewise, independent actuaries at Oliver Wyman estimate
    that, absent policy changes and uncertainty, average marketplace
    premiums would grow roughly with medical trend (plus an adjustment for
    the end of the health insurer tax moratorium).\21\ Early this year, 96
    percent of marketplace insurers surveyed by Oliver Wyman said they
    planned to continue offering plans in the marketplace in 2018, and 88
    percent said that they planned to either maintain or expand their ACA
    marketplace footprint.\22\

        Unfortunately, all else has not been equal, and consumers will
    mostly miss out on the benefits of a stabilizing market this year.
    Oliver Wyman projected that insurers would request additional rate
    increases ranging from about 10 to 20 percent due to the
    administration's repeated threats to stop reimbursing them for CSRs and
    additional increases averaging about 10 percent due to concerns that
    the individual mandate might not be enforced. Insurers have likely also
    priced in the risk--now a reality--that the administration would
    sharply cut funding for marketplace outreach, which plays an especially
    important role in drawing healthier people into the market, and have
    likely also priced in the confusion created by the congressional repeal
    debate. (Remarkably, a Commonwealth Fund survey found that among
    uninsured adults who chose not to shop for plans on the marketplace
    last year, one-third attributed their decision at least in part to
    concerns that the ACA would soon be repealed.\23\) And almost without
    exception, insurers that are withdrawing from the ACA marketplaces for
    2018 have cited Federal policy uncertainty--arising from both the
    administration's actions and the congressional repeal debate--as a
    contributing factor, if not the main driver, of their decisions.
    Notably, Anthem linked its decisions to withdraw or reduce
    participation in several States directly to the risk that the
    administration will stop CSR payments.\24\

        Meanwhile, even setting aside the harm done by Federal policy
    uncertainty, there is wide variation in the state of the individual
    market across the country. In many places, clarity about the rules of
    the road would likely suffice for stability. But some markets are
    struggling with additional challenges, including: small risk pools, in
    which a few unusually high-cost patients can make coverage less
    affordable for all or threaten insurers' bottom lines; limited insurer
    or provider competition (generally dating from well before the ACA);
    and loopholes in Federal or State law or State regulatory decisions
    that contribute to adverse selection in the individual market risk
    pool.

        Over the past 6 weeks, Governors, regulators, House members, and
    experts of both parties have weighed in on how to strengthen the
    individual market, with recommendations aimed at both undoing the
    damage done by Federal policy uncertainty and addressing some of the
    market's underlying challenges. It is striking how much overlap there
    is across these recommendations, as well as how straightforward many
    would be to implement: while some would require additional resources,
    most would not. Among the more common suggestions, with which I concur,
    are:

          Providing an explicit appropriation for CSR payments. As
    policymakers, regulators, and experts have explained, guaranteeing that
    CSR payments will continue is not a give-away to insurance companies;
    it is a critical protection for consumers, who will otherwise
    experience unnecessary rate increases and insurer withdrawals. Congress
    can and should resolve this issue for good, by providing an explicit,
    permanent appropriation for CSRs. Not only would such a measure not
    require a budgetary offset, it would actually protect the Federal
    budget from tens of billions in extra premium tax credit costs that
    would result if insurers set prices year after year without knowing
    whether CSR payments will be made (or if the administration
    discontinues these payments outright).\25\ A temporary appropriation
    for CSRs would be far less beneficial, while an appropriation limited
    to 1 year would send a damaging message to insurers already planning
    for 2019, putting them on notice to prepare for the same Federal policy
    uncertainty they experienced this year.

          Maintaining or increasing outreach and enrollment assistance.
    Going into the 2016 open enrollment season, only about half of
    uninsured Americans were aware of the financial assistance available to
    help pay for individual market coverage, even though an estimated 84
    percent of the marketplace-eligible uninsured have incomes qualifying
    them for financial help.\26\ The administration's recent decision to
    cut consumer outreach by 90 percent, and cut enrollment assistance
    through the Navigator Program by about 40 percent, will increase the
    number of people who go uninsured and forgo needed care or incur
    unaffordable medical bills. But it will also damage the marketplace
    risk pool, increasing average costs--and therefore premiums--since
    healthier consumers are the ones least likely to enroll without
    outreach. Notably, the cost of maintaining both outreach and enrollment
    assistance is low (the administration's funding cuts total less than
    $150 million), and both programs are financed largely out of
    marketplace user fees, not general appropriations.

          Enforcing the law, including the individual mandate. Outside
    experts from both parties have urged the administration to enforce and
    administer the ACA as long as it remains the law of the land. This
    includes enforcing the ACA's individual mandate, which discourages
    healthier individuals from going uninsured and shifting the costs of
    their unexpected emergency care onto others. While some have questioned
    the effectiveness of the ACA's mandate, surveys and experiments show
    that it has a significant impact in motivating younger, healthier
    people to enroll in coverage.\27\ The CBO has estimated that repealing
    the mandate would shrink the individual market risk pool by about a
    quarter and increase individual market premiums by about 20 percent,
    and rate requests from major insurers are consistent with that (with
    insurers in Maryland and Pennsylvania, for example, requesting
    additional rate increases of about 15 percent for 2018 to account for
    the possibility that the mandate might not be fully enforced).

          Reestablishing a Federal reinsurance program. Reestablishing a
    Federal reinsurance program (along the lines of the now-expired ACA
    reinsurance program) could benefit consumers in two ways. First, the
    subsidy provided by reinsurance flows through to unsubsidized
    marketplace consumers in the form of lower premiums. Second, by
    assuming some of the risk associated with high-cost claims, reinsurance
    diminishes insurers' incentive to avoid covering high-cost individuals
    (such as by exiting the geographic areas where they reside), while also
    reducing uncertainty and thereby making it more attractive for insurers
    (especially smaller insurers) to participate in the marketplaces.
    Significantly reducing premiums through a reinsurance program would
    require meaningful Federal resources (although the net cost of
    reinsurance is well below the gross cost, because a reinsurance program
    that lowers premiums also lowers Federal premium tax credit costs). But
    addressing the risk associated with unusually high-cost claims could be
    done at much lower cost. (For example, a funded reinsurance program
    subsidizing claims above $1 million, along the lines of the budget
    neutral high-cost claims pool HHS established administratively as part
    of the risk adjustment program, would likely cost well under $1 billion
    per year.\28\)

          Streamlining the process for 1332 waivers that improve market
    stability. In the absence of a Federal reinsurance program, several
    States have already followed Alaska's example and are seeking or
    developing waivers under section 1332 of the ACA to obtain Federal
    matching funds for their own reinsurance programs. The section 1332
    application process could be simplified to facilitate these and similar
    waivers that are consistent with the section 1332 guardrails: they
    maintain or increase the number of people with health coverage,
    maintain or improve coverage affordability and comprehensiveness, and
    do not increase the Federal deficit. In contrast, weakening these
    guardrails would harm individual market consumers by opening the door
    to changes that would increase the number of uninsured, place consumers
    on the hook for higher premiums or out-of-pocket costs, or allow plans
    to exclude key services that are especially crucial to people with pre-
    existing conditions.

        Other suggestions from policymakers and experts also deserve
    consideration. For example, experts have suggested a number of
    approaches to expanding choice for people in low-competition areas by
    introducing some form of public option, whether by building on
    Medicare, Medicaid, the Federal Employer Health Benefit (FEHB) program,
    or another form of coverage. Congress should also consider tackling the
    problem of providers steering high-cost Medicare- or Medicaid-eligible
    enrollees to individual market plans. Such steering benefits the
    providers involved, who get paid at higher rates in commercial plans
    than in Medicare or Medicaid. But it often harms beneficiaries, who may
    lose access to important Medicare or Medicaid benefits and cost-sharing
    protections, and it may be doing meaningful damage to the individual
    market risk pool in some States.\29\

        Some have raised the question of whether it is already too late for
    Congress to influence individual market rates and insurer participation
    for 2018. Unfortunately, it almost certainly is too late to fully
    reverse the damage done by Federal policy uncertainty. Even if Congress
    acts quickly, insurers will not fully remove the uncertainty premium
    from their rates, and most insurers that have already decided to exit
    State marketplaces are unlikely to re-enter.

        But this hearing is still timely, in that insurers in many or most
    states would still have the opportunity to lower their rates to reflect
    a Federal commitment to make CSR payments. Even more important, a
    number of insurers (for example, Anthem in Maine) have made clear that
    they could still withdraw from State marketplaces for 2018 if they
    anticipate that the administration will stop paying CSRs or cause other
    market disruption, while at least one insurer (Optima Health in
    Virginia) has stated that it might re-enter key markets if CSRs were
    guaranteed.\30\ Quick action on a stabilization measure could lock in
    these insurers' participation, not only by providing certainty around
    CSRs but by sending a signal that policymakers of both parties, with
    diverging views on the ACA, are committed to ensuring a strong
    individual market for consumers. As noted above, insurers are also
    already looking ahead to 2019; they will begin formulating preliminary
    rate requests early next year, and may start making decisions about
    marketplace participation even sooner than that. Without action within
    the next several months, consumers could miss out on the benefits of a
    stabilizing market for yet another year.
         objectives for health care policy beyond market stabilization
        The ACA was never intended to be the final word on improving the
    health-care system--far from it. But, new legislation should build on
    the progress made over the last several years in expanding coverage and
    access to care, not reverse it. The various repeal and replace bills
    considered by the House and Senate this year, as well as the repeal and
    replace plan offered by Senators Cassidy and Graham, violate that
    principle. Each would cause millions of people to lose coverage and
    make coverage worse or less affordable for millions more. That's
    because each would effectively eliminate the ACA's expansion of
    Medicaid to low-income adults; cap and cut Federal Medicaid funding for
    seniors, people with disabilities, and families with children; sharply
    increase premiums and other out-of-pocket costs for people with
    individual market coverage; and weaken consumer protections that are
    especially critical to people with pre-existing health conditions.

        As with individual market stabilization, recommendations issued
    over the past 6 weeks by Governors, State regulators, members of
    Congress, and experts of both parties can help chart a different path
    forward. Rather than shifting costs to States and vulnerable
    populations by cutting funding for Federal coverage programs, many of
    these proposals urge Congress to focus on reducing health-care costs
    and improving the quality of care system-wide by continuing Federal,
    and supporting State and private sector, delivery system reform
    efforts. For example, the health-care proposal put forward recently by
    eight Governors of both parties recommends ``resetting the basic rules
    of health-care competition to pay providers based on the quality, not
    the quantity of care they give patients,'' while avoiding changes that
    ``shift costs to States or fail to provide the necessary resources to
    ensure that (vulnerable populations) can get the care they need.'' \31\

        Congress already has a track record of working on a bipartisan
    basis, with leadership from this committee, to advance health care
    delivery system reform. The bipartisan MACRA legislation enacted in
    2015 offers financial incentives for Medicare providers to participate
    in alternative payment models, while also adjusting fee-for-service
    payments based on quality metrics. Building on the tools provided by
    MACRA and the ACA, both Congress and the administration could do more
    to promote development of alternative payment models; promote
    participation in these models by hospitals (not included in the MACRA
    incentive system); support States in shifting their Medicaid programs
    toward alternative payment models and instituting other reforms that
    promote better care coordination and increased use of preventive care;
    and support both State and private sector delivery system reform
    efforts through improved data systems, improved and more consistent
    quality measures, and other efforts.

        In contrast, the proposals considered over the past year to cap and
    cut Federal funding for Medicaid would not only cause millions of
    people to lose coverage, they could undermine ongoing State efforts to
    improve care and reduce long-term costs. Many of these efforts rely on
    up-front investments in care coordination, provider payment incentives,
    or improved behavioral health or other services. Under a Medicaid per
    capita cap, these types of investments would no longer be matched with
    additional Federal dollars, and States facing large Federal funding
    cuts would likely have to cut back on their own funding for these
    initiatives as well.\32\

        Looking forward, there is also more to do to continue expanding
    coverage. During the debate over ACA repeal, critics of the law
    highlighted the fact that, even with the historic gains in coverage
    under the ACA, about 28 million Americans remain uninsured. The repeal
    proposals under consideration would have nearly doubled that number,
    but that does not diminish the imperative to reduce it. Fortunately,
    there are many opportunities to do so, including both Federal
    legislation and State action.

        Most straightforward, an estimated 4 to 5 million people would gain
    coverage if the remaining 19 States took up the ACA Medicaid expansion,
    as the majority of States, under the leadership of Governors of both
    parties have already done.\33\ As discussed above, Medicaid expansion
    has improved coverage, access to care, and financial security for low-
    income adults. And, as Governors of both parties explained during the
    repeal debate, expansion has also strengthened State budgets, helped
    drive progress on major public health challenges like the opioid
    crisis, and had particularly large benefits for rural hospitals and
    rural Americans. (Rural Americans would also gain disproportionately if
    the remaining States expanded Medicaid, since the rural uninsured are
    disproportionately concentrated in non-expansion states.\34\)

        While many other options for expanding coverage are beyond the
    scope of this testimony and this hearing, others directly relate to the
    goals discussed above: strengthening the individual market and making
    individual market coverage more affordable. Of the remaining uninsured,
    about 8 million are eligible for but not enrolled in marketplace
    coverage.\35\ Most in this group could qualify for subsidies, but, as
    noted above, many remain unaware of them, pointing to the importance of
    continued outreach. Others find marketplace coverage unaffordable even
    with the subsidies currently available, or unaffordable because they do
    not qualify for financial assistance. Targeted increases in tax credits
    and expansions in eligibility for subsidies could meaningfully reduce
    uninsured rates. They could also catalyze a virtuous cycle. As new
    research confirms, increases in subsidies for low- and moderate-income
    consumers not only have large effects on enrollment, they attract new
    enrollees who are significantly healthier, on average.\36\ Thus,
    targeted increases in subsidies that make coverage more affordable for
    some could in turn help bring down premiums for others.

                                   End Notes

        \1\ The most recent NHIS data are for the first quarter of 2017,
    when the uninsured rate stood at 8.8 percent. Data through 2017 are
    available at https://www.cdc.gov/nchs/data/nhis/earlyrelease/
    insur201708.pdf. For long-term historical comparisons, see Council of
    Economic Advisers, ``2017 Economic Report of the President,'' December
    15, 2016, https://obama
    whitehouse.archives.gov/administration/eop/cea/economic-report-of-the-
    President/2017.

        \2\ Tabulations of NHIS data for subgroups are from Kelsey Avery,
    Kenneth Finegold, and Amelia Whitman, ``Affordable Care Act Has Led to
    Historic, Widespread Increase in Health Insurance Coverage,'' Assistant
    Secretary for Planning and Evaluation, Department of Health and Human
    Services, September 29, 2016, https://aspe.hhs.gov/system/files/pdf/
    207946/ACA
    HistoricIncreaseCoverage.pdf.

        \3\ Kaiser Family Foundation and Health Research and Educational
    Trust, ``Employer Health Benefits: 2009 Annual Survey,'' 2009, https://
    kaiserfamilyfoundation.files.wordpress.com/2013/04/7936.pdf.

        \4\ Gary Claxton et al., ``Would States Eliminate Key Benefits if
    AHCA Waivers Are Enacted?'', Kaiser Family Foundation, June 14, 2017,
    http://www.kff.org/health-reform/issue-brief/would-states-eliminate-
    key-benefits-if-ahca-waivers-are-enacted/.

        \5\ State Health Access Data Assistance Center tabulations from
    Current Population Survey, available at http://www.chcf.org/aca-411/
    explore-the-data#trend%2Caffordability%2Cfinancial
    burden%2Cfmoop%2CBars%20(InsuranceType)%2C2014%2Cindividual.

        \6\ Benjamin D. Sommers et al., ``Changes in Utilization and Health
    Among Low-Income Adults After Medicaid Expansion or Expanded Private
    Insurance,'' Journal of the American Medical Association, October 2016,
    http://jamanetwork.com/journals/jamainternalmedicine/article-ab
    stract/2542420.

        \7\ See, for example, Lisa Clemans-Cope, Marni Epstein, and
    Genevieve M. Kenney, ``Rapid Growth in Medicaid Spending on Medications
    to Treat Opioids Use Disorder and Overdose,'' Urban Institute, June
    2017, http://www.urban.org/sites/default/files/publication/91521/2001
    386-rapid-growth-in-medicaid-spending-on-medications-to-treat-opioid-
    use-disorder-and-overdose
    _3.pdf; Luoijia Hu et al., ``The Effect of the Patient Protection and
    Affordable Care Act Medicaid Expansions on Financial Wellbeing,''
    National Bureau of Economic Research Working Paper, April 2016, http://
    www.nber.org/papers/w22170.pdf; and Assistant Secretary for Planning
    and Evaluation, ``Medicaid Expansion and Impacts on Insurance Coverage
    and Access to Care,'' Department of Health and Human Services, updated
    January 18, 2017, https://aspe.hhs.gov/system/files/pdf/255516/
    medicaidexpansion.pdf.

        \8\ John Holahan, Michael Karpman, and Stephen Zuckerman, ``Health
    Care Access and Affordability Among Low- and Moderate-Income Insured
    and Uninsured Adults Under the Affordable Care Act,'' Urban Institute
    Health Reform Monitoring Survey, April 21, 2016, http://hrms.urban.org/
    briefs/health-care-access-affordability-low-moderate-income-insured-
    uninsured-adults-under-ACA.html, and Commonwealth Fund Affordable Care
    Act Tracking Survey for March-June 2017 (http://
    www.commonwealthfund.org/publications/issue-briefs/2017/sep/post-aca-
    repeal-and-replace-health-insurance-coverage) and February-April 2016
    (http://aca
    tracking.commonwealthfund.org/).

        \9\ National Health Interview Survey, https://www.cdc.gov/nchs/
    data/nhis/earlyrelease/Early
    release201705.pdf.

        \10\ Jason Furman and Matt Fiedler, ``New Data Show That Premium
    Growth in Employer Coverage Remained Low in 2016,'' Council of Economic
    Advisers, September 14, 2016, https://obamawhitehouse.archives.gov/
    blog/2016/09/14/new-data-show-premium-growth-employer-coverage-
    remained-low-2016, and Paul N. Van de Water, ``Projected Health
    Spending Falling--Even With ACA Coverage Expansions,'' Center on Budget
    and Policy Priorities, February 13, 2017, https://www.cbpp.org/blog/
    projected-health-spending-falling-even-with-acas-coverage-expansions.

        \11\ See Chapin White, ``Contrary to Cost-Shift Theory, Lower
    Medicare Hospital Payment Rates for Inpatient Care Lead to Lower
    Private Payment Rates,'' Health Affairs, 2013, http://
    content.healthaffairs.org/content/32/5/935.full, and Jeffrey Clemens
    and Joshua D. Gottlieb, ``In the Shadow of a Giant: Medicare's
    Influence on Private Physician Payments,'' Working Paper, August 31,
    2016, http://www.nber.org/papers/w19503.pdf.

        \12\ Rachael B. Zuckerman et al., ``Readmissions, Observation, and
    the Hospital Readmissions Reduction Program,'' New England Journal of
    Medicine, April 21, 2016, http://www.nejm.org/doi/full/10.1056/
    NEJMsa1513024, and Agency for Healthcare Research and Quality National
    Scorecard on Rates of Hospital-Acquired Conditions,'' https://
    www.ahrq.gov/professionals/quality-patient-safety/pfp/index.html.

        \13\ ``Department of Health and Human Services, ``HHS Reaches Goal
    of Tying 30 Percent of Medicare Payments to Quality Ahead of
    Schedule,'' March 3, 2016.

        \14\ Assistant Secretary for Planning and Evaluation, ``Health
    Insurance Coverage for Americans with Pre-Existing Conditions: The
    Impact of the Affordable Care Act,'' Department of Health and Human
    Services, January 5, 2017, https://aspe.hhs.gov/system/files/pdf/
    255396/Pre-ExistingConditions.pdf.

        \15\ Data on marketplace rate changes for 2015, 2016, and 2017 can
    be found at https://aspe.hhs.gov/pdf-report/health-plan-choice-and-
    premiums-2015-health-insurance-marketplace, https://aspe.hhs.gov/pdf-
    report/health-plan-choice-and-premiums-2016-health-insurance-
    marketplace, and https://aspe.hhs.gov/pdf-report/health-plan-choice-
    and-premiums-2017-health-insurance-marketplace respectively.

        \16\ ``S&P Healthcare Claims Indices Monthly Report,'' August 2017,
    https://us.spindices.com/documents/commentary/sp-healthcare-claims-
    montly-report-aug-2017.pdf. The S&P data have the advantage of being
    available across markets and through early 2017, but they also have
    limitations; they are based on claims for a subset of the market. They
    also include claims from grandfathered and transitional plans; the
    gradual elimination of these plans means that the S&P data most likely
    overstate the underlying individual market cost growth facing ACA-
    compliant plans. More complete data, however, confirm the conclusion
    that the individual market risk pool is not deteriorating (if anything,
    is likely improving). From 2014 to 2015, average per-member per-month
    claims for the full ACA-compliant market were roughly flat, and from
    2015 to 2016, risk scores for the full ACA-compliant market appear to
    have improved. See Centers for Medicare and Medicaid Services,
    ``Changes in ACA Individual Market Costs from 2014-2015: Near-Zero
    Growth Suggests an Improving Risk Pool,'' August 11, 2016, https://
    www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/
    Downloads/Final-Risk-Pool-Analysis-8_11_16.pdf, and Covered California,
    ``New Federal Report Shows the Individual Markets Across the Nation Are
    Stable,'' July 6, 2017.

        \17\ John Holahan et al., ``The Evidence on Recent Health Care
    Spending Growth and the Impact of the Affordable Care Act,'' Urban
    Institute, May 2017, http://www.urban.org/sites/default/files/
    publication/90471/2001288-
    the_evidence_on_recent_health_care_spending_growth_
    and_the_impact_of_the_affordable_care_act.pdf, and Linda J. Blumberg,
    John Holahan, and Erik Wengle, ``Are Nongroup Marketplace Premiums
    Really High? Not in Comparison With Employer Insurance,'' Urban
    Institute, September 19, 2016, http://www.urban.org/research/
    publication/are-nongroup-marketplace-premiums-really-high-not-
    comparison-employer-insurance.

        \18\ Cynthia Cox and Larry Levitt, ``Individual Market Performance
    in Early 2017,'' Kaiser Family Foundation, July 10, 2017, http://
    www.kff.org/health-reform/issue-brief/individual-insurance-market-
    performance-in-early-2017/.

        \19\ See for example Deep Banerjee, ``The U.S. ACA Individual
    Market Showed Progress in 2016, But Still Needs Time to Mature,'' S&P
    Global Ratings, April 7, 2017, https://www.
    spglobal.com/our-insights/The-US-ACA-Individual-Market-Showed-Progress-
    In-2016-But-Still-Needs-Time-To-Mature.html.

        \20\ See http://www.azcentral.com/story/money/business/health/2017/
    08/01/affordable-care-act-obamacare-marketplace-rates-blue-cross-blue-
    shield-of-arizona/526288001/ (Arizona); http://blog.bcbsnc.com/2017/05/
    premiums-rise-2018-affordable-care-act-plans/ (North Carolina); http://
    www.media.pa.gov/Pages/Insurance-Details.aspx?newsid=248
    (Pennsylvania); and https://bcbstnews.com/insights/what-you-need-to-
    know-about-2018-individual-plan-rates/ (Tennessee).

        \21\ Kurt Giesa, ``Analysis: Market Uncertainty Driving ACA Rate
    Increases,'' Oliver Wyman, June 14, 2017, http://
    health.oliverwyman.com/content/oliver-wyman/hls/en/transform-care/2017/
    06/analysis_market_unc.html.

        \22\ Beth Fritchen and Todd Van Tol, ``New Survey: Payers Indicate
    Cautious Commitment to ACA Exchanges,'' Oliver Wyman, April 17, 2017,
    http://health.oliverwyman.com/transform-care/2017/04/
    new_survey_payersi.html.

        \23\ Sarah R. Collins, Munira Z. Gunja, and Michelle M. Doty,
    ``Following the ACA Repeal-and-Replace Effort, Where Does the U.S.
    Stand on Insurance Coverage?'' Commonwealth Fund, September 7, 2017,
    http://www.commonwealthfund.org/publications/issue-briefs/2017/sep/
    post-aca-repeal-and-replace-health-insurance-coverage.

        \24\ Aviva Aron-Dine, ``Anthem's Ohio Withdrawal Makes Consequences
    of Marketplace Sabotage Even Starker,'' Center on Budget and Policy
    Priorities, June 6, 2017, https://www.cbpp.org/blog/anthems-ohio-
    withdrawal-makes-consequences-of-marketplace-sabotage-even-starker.

        \25\ CBO projects that failure to pay CSRs would increase total
    Federal costs by $6 billion in 2018, $14 billion in 2019, and nearly
    $200 billion over 10 years; the cost of continued uncertainty could be
    a substantial fraction of those amounts. 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.

        \26\ Commonwealth Fund, Affordable Care Act Tracking Survey, http:/
    /acatracking.common
    wealthfund.org/, and Assistant Secretary for Planning and Evaluation,
    ``About 2.5 Million People Who Currently Buy Coverage Off-Marketplace
    May Be Eligible for ACA Subsidies,'' Department of Health and Human
    Services, October 4, 2016, https://aspe.hhs.gov/system/files/pdf/
    208306/OffMarketplaceSubsidyeligible.pdf.

        \27\ Centers for Medicare and Medicaid Services, ``CMS Details
    Outreach Campaign Strategy for Open Enrollment 2017,'' October 13,
    2016, https://www.cms.gov/Newsroom/MediaReleaseData
    base/Press-releases/2016-Press-releases-items/2016-10-13-2.html.

        \28\ HHS estimates that transfers associated with a 60-percent
    coinsurance rate for claims above $1 million would equal less than one-
    half of 1 percent of premiums; total individual market premiums are in
    the range of $100 billion. See ``HHS Notice of Benefit and Payment
    Parameters for 2018,'' https://www.federalregister.gov/documents/2016/
    12/22/2016-30433/patient-protection-and-affordable-care-act-hhs-notice-
    of-benefit-and-payment-parameters-for-2018.

        \29\ See for example, Centers for Medicare and Medicaid Services,
    ``Fact Sheet: Promoting Transparency and Appropriate Coverage for
    Dialysis Patients,'' December 12, 2016, https://www.cms.gov/CCIIO/
    Resources/Fact-Sheets-and-FAQs/Downloads/ESRD-IFC-FactSheet-FINAL-2-12-
    12-16.pdf, as well as comments submitted in response to CMS's Request
    for Information regarding provider steering, https://
    www.federalregister.gov/documents/2016/08/23/2016-20034/request-for-
    information-inappropriate-steering-of-individuals-eligible-for-or-
    receiving-medicare-and.

        \30\ Louise Norris, ``Maine Health Insurance Marketplace: History
    and News of the State's Exchange,'' updated September 5, 2017, https://
    www.healthinsurance.org/maine-state-health-insurance-exchange/, and
    Anna Wilde Mathews, ``Obamacare Care Insurer in Virginia to Scale Back
    Planned Expansion,'' Wall Street Journal, September 7, 2017.

        \31\ The ``Blueprint for Stronger Health Insurance Markets'' is
    signed by Governors Kasich (OH), Hickenlooper (CO), Sandoval (NV), Wolf
    (PA), Walker (AK), McAuliffe (VA), Edwards (LA), and Bullock (MT),
    http://governor.ohio.gov/PrioritiesandInitiatives/BlueprintforStronger
    HealthInsuranceMarkets.aspx.

        \32\ Judith Solomon, ``Caps on Federal Medicaid Funding Would Give
    States Flexibility to Cut, Stymie Innovation,'' Center on Budget and
    Policy Priorities, January 18, 2017, https://www.cbpp.org/research/
    health/caps-on-federal-medicaid-funding-would-give-states-flexibility-
    to-cut-stymie.

        \33\ Matthew Buettgens and Genevieve M. Kenney, ``What If More
    States Expanded Medicaid in 2017? Changes in Eligibility, Enrollment,
    and the Uninsured,'' Urban Institute, July 2016, http://www.urban.org/
    sites/default/files/publication/82786/2000866-What-if-More-States-
    Expanded-Medicaid-in-2017-Changes-in-Eligibility-Enrollment-and-the-
    Uninsured.pdf.

        \34\ Kelsey Avery, Kenneth Finegold, and Xiao Xiao, ``Impact of the
    Affordable Care Act Coverage Expansion on Rural and Urban
    Populations,'' Department of Health and Human Services Assistant
    Secretary for Planning and Evaluation, June 10, 2016, https://
    aspe.hhs.gov/system/files/pdf/204986/ACARuralbrief.pdf.

        \35\ Rachel Garfield, Anthony Damico, Cynthia Cox, Gary Claxton,
    and Larry Levitt, ``Estimates of Eligibility for ACA Coverage Among the
    Uninsured in 2016,'' Kaiser Family Foundation, October 18, 2016, http:/
    /www.kff.org/health-reform/issue-brief/estimates-of-eligibility-for-
    aca-coverage-among-the-uninsured-in-2016/.

        \36\ Amy Finkelstein, Nathaniel Hendren, and Mark Shepard,
    ``Subsidizing Health Insurance for Low-Income Adults: Evidence from
    Massachusetts,'' April 2017, https://scholar.harvard.edu/files/hendren/
    files/commcare.pdf.

                                     ______

          Questions Submitted for the Record to Aviva Aron-Dine, Ph.D.
                     Questions Submitted by Hon. Ron Wyden
                        proposed changes to section 1332
        Question. Section 1332 of the Affordable Care Act (ACA) grants
    States the flexibility to waive certain provisions of the ACA in order
    to design and implement innovative strategies for their health
    insurance marketplaces. However, to receive these section 1332 waivers,
    the ACA requires States to meet certain substantive and procedural
    standards. States must offer plans that will be as comprehensive,
    affordable, and cover as many people as plans under the ACA.
    Additionally, State waivers may not add to the Federal deficit. Beyond
    these four substantive guardrails, States must undergo procedural
    requirements to submit their waivers for review to the Centers for
    Medicare and Medicaid Services (CMS), including enacting State
    legislation, providing a notice and comment period for public input,
    and submitting a comprehensive application. These guardrails help
    States design marketplace rules that suit their needs without
    compromising Americans' ability to access to comprehensive and
    affordable coverage options.

        Proposals to loosen section 1332's guardrails to afford States
    greater flexibility have emerged in recent discussions about how
    Congress can stabilize the individual marketplace, including during the
    hearing before this committee. However, when asked about these
    proposals, you expressed concern that pulling back these guardrails
    could undermine Americans' financial security or ability to access the
    services they need. Please describe which modifications to section 1332
    would compromise Americans' access to comprehensive, affordable
    coverage, particularly for Americans with pre-existing condition.

        Answer. Weakening the section 1332 comprehensiveness,
    affordability, or coverage guardrails would compromise access to
    qualify, affordable coverage, especially for people with pre-existing
    conditions.

        For example, section 1332 allows States to modify the essential
    health benefits (EHB) that the ACA requires insurers in the individual
    and small group markets to cover. If the comprehensiveness guardrail
    were removed or weakened, then this provision would allow States to let
    insurers go back to excluding key benefits such as maternity coverage,
    mental health and substance use treatment, or prescription drugs. Such
    exclusions would be especially harmful to people with pre-existing
    conditions and others with serious health needs.

        Likewise, section 1332 allows States to modify financial assistance
    and to waive the ACA's limits on out-of-pocket costs. If the
    affordability guardrail were removed or weakened, then this provision
    could allow States to make changes that would increase consumers' net
    premiums, deductibles and other cost sharing, or both. Again, such
    changes would likely be especially harmful to people with pre-existing
    conditions and other serious health needs.

        Eliminating or weakening the section 1332 coverage guardrail could
    open the door to even more harmful changes, since it would allow States
    to reduce tax credits or cost sharing reductions for low- and moderate-
    income people and redirect the funding toward other purposes, without
    regard to the number of people who would lose coverage.

        Question. What are changes Congress could make to section 1332 that
    would facilitate the use of section 1332 waivers by States without
    risking Americans' access to affordable, comprehensive coverage?

        Answer. Policymakers may want to consider streamlining the process
    around section 1332 waivers while protecting consumers by maintaining
    the current guardrails. Process changes that might be worth considering
    include expediting review timelines for waivers in certain cases;
    increasing transparency around Federal decision-making; or allowing
    States to demonstrate budget neutrality over the life of the waiver,
    rather than for each year.

                                     ______

                Question Submitted by Hon. Robert P. Casey, Jr.
        Question. I heard from multiple State stakeholders at last weeks'
    hearings who wish to combine the savings from section 1332 waivers and
    section 1115 waivers. I understand the motivation behind increasing
    State flexibility and the desire to share savings, but how would you
    ensure that combining the savings from both waivers wouldn't be used as
    a means of helping consumers in the insurance marketplace at the
    expense of Medicaid beneficiaries, or vice versa?

        Answer. Allowing States to pool savings across section 1332 and
    section 1115 waivers would pose significant risks to the Medicaid
    program and its beneficiaries. In particular, it could allow States to
    cut Medicaid to pay for expanded tax credits for people at higher
    income levels or for reinsurance programs that primarily reduce costs
    for higher-income, unsubsidized consumers.

        Fortunately, some of the goals behind combined waiver proposals can
    already be achieved under current law. In particular, States can
    already use a combination of section 1332 and Medicaid (section 1115)
    waivers to improve coordination across programs. For example, States
    can submit coordinated section 1332 and section 1115 waivers, could use
    a combination of waivers to make it easier for people to maintain
    continuous coverage as income and circumstances change, or could use a
    combination of waivers to improve coordination between the ACA
    marketplaces and the Children's Health Insurance Program (CHIP).

                                     ______

                   Question Submitted by Hon. Robert Menendez
        Question. At the hearing, you highlighted how the Affordable Care
    Act's 1332 waiver authority is actually quite broad. Many of the
    Republican proposals have focused on expanding State flexibility. Can
    you provide insight into what additional flexibility States would
    benefit from beyond what is available in 1332 waivers? What protections
    would consumers benefit from in any proposal to expand State
    flexibility beyond 1332 waivers?

        Answer. Policymakers may want to consider streamlining the process
    around section 1332 waivers while protecting consumers by maintaining
    the current guardrails. Process changes that might be worth considering
    include expediting review timelines for waivers in certain cases;
    increasing transparency around Federal
    decision-making; or allowing States to demonstrate budget neutrality
    over the life of the waiver, rather than each year.

                                     ______

                    Questions Submitted by Hon. Bill Nelson
        Question. I have long supported the creation of a reinsurance
    program to help health insurance companies cover the cost of larger-
    than-expected insurance claims and lower the cost of premiums for
    individuals who get health coverage through the ACA's marketplace. A
    reinsurance program can help stabilize the marketplace, and yet there
    are some who call it an insurance bailout.

        Do you consider reinsurance a bailout to insurance companies?

        Answer. No. A reinsurance program is not a bailout to insurance
    companies; rather, it improves market stability and makes coverage more
    affordable for consumers. Reinsurance benefits consumers in two ways.
    First, by assuming some of the risk associated with high-cost claims,
    reinsurance diminishes insurers' incentive to avoid covering high-cost
    individuals (such as by exiting the geographic areas where they
    reside), while also reducing uncertainty and thereby making it more
    attractive for insurers (especially smaller insurers) to participate in
    the marketplaces. Second, the subsidy provided by reinsurance flows
    through to unsubsidized marketplace consumers in the form of lower
    premiums.

        Question. How important is reinsurance for lowering out-of-pocket
    costs for consumers?

        Answer. As noted, a reinsurance program can serve two functions.
    First, by assuming some of the risk associated with high-cost claims,
    reinsurance diminishes insurers' incentive to avoid covering high-cost
    individuals (such as by exiting the geographic areas where they
    reside), while also reducing uncertainty and thereby making it more
    attractive for insurers (especially smaller insurers) to participate in
    the marketplaces. Second, the subsidy provided by reinsurance flows
    through to unsubsidized marketplace consumers in the form of lower
    premiums.

        The first of these functions benefits all marketplace consumers by
    reducing the risk of ``bare markets'' and improving choice and
    competition. The second function also benefits consumers, but only
    those with incomes too high to qualify for tax credits. That's because,
    for consumers eligible for tax credits, the amount paid in premiums out
    of pocket is determined by the ACA's ``applicable percentages'' of
    income, not by sticker price premiums.

        Reinsurance is therefore an effective mechanism for reducing out-
    of-pocket premium costs for unsubsidized consumers. But in order to
    improve affordability for the majority of individual market consumers
    who are eligible for subsidies, policymakers may want to couple
    reinsurance funding with improvements in financial assistance.

                                     ______

       Prepared Statement of Edmund F. Haislmaier, Preston A. Wells, Jr.
                Senior Research Fellow, The Heritage Foundation
        Mr. Chairman and members of the committee, thank you for inviting
    me to testify. My name is Edmund F. Haislmaier, and I am the Preston A.
    Wells, Jr. senior research fellow in domestic policy studies at the
    Heritage Foundation. The views I express in this testimony are my own,
    and should not be construed as representing any official position of
    The Heritage Foundation.

        We now have three full years of data on the effects of the major
    provisions of Affordable Care Act (or Obamacare). For perspective, it
    should be noted at the outset that during that 3-year period the ACA
    was being implemented by a strongly supportive administration. Thus,
    the results and trends for the period reflect implementation policies
    that were, or at least were intended to be, favorable to achieving the
    law's objectives.
                          health insurance enrollment
        A principal objective of the ACA was to increase health insurance
    enrollment. The design for achieving that goal was based on three key
    policies: (1) offering income-related subsidies for individual market
    coverage purchase through the new exchanges; (2) expanding Medicaid
    eligibility; and (3) applying regulatory mandates, most notably tax
    penalties on individuals who fail to obtain qualifying coverage and on
    employers of 50 or more workers who fail to offer qualifying coverage.

        The effects of the law on coverage can be seen from the enrollment
    data for the individual market, employer-sponsored coverage and
    Medicaid reported in Table 1.\1\
    ---------------------------------------------------------------------------
        \1\ Private market coverage figures are from data reported in State
    insurer regulatory filings accessed through the Mark Farrah Associates
    subscription data service (http://www.mark
    farrah.com). Medicaid/CHIP enrollment figures are from reports
    published by the Centers for Medicare and Medicaid Services (CMS),
    based on program reporting by States to the CMS. For more detail, see:
    Edmund F. Haislmaier and Drew Gonshorowski, ``2016 Health Insurance
    Enrollment: Private Coverage Declined, Medicaid Growth Slowed,''
    Heritage Foundation Issue Brief No. 4743, July 26, 2017, at http://
    www.heritage.org/health-care-reform/report/2016-health-insurance-
    enrollment-private-coverage-declined-medicaid.

        Over the 3-year period, enrollment in individual-market plans
    increased by 5.3 million individuals, from 11.8 million individuals at
    ---------------------------------------------------------------------------
    the end of 2013 to almost 17.1 million at the end of 2016.

        For the employer-group coverage market, enrollment in fully insured
    plans dropped by 8.6 million individuals, from 60.6 million individuals
    at the end of 2013 to 52 million as of the end of 2016. During the same
    3 years, enrollment in self-insured employer plans increased by 5
    million individuals, from 100.6 million in 2013 to 105.6 million in
    2016.

        The combined effect of the changes in individual-market and
    employer-group coverage was a net increase in private-sector coverage
    of just 1.7 million individuals during the 3-year period.

        Meanwhile, net Medicaid and Children's Health Insurance Program
    (CHIP) enrollment grew over the 3 years by 14 million individuals, from
    60.9 million at the end of 2013 to 74.9 million at the end of 2016. In
    those States that adopted the ACA Medicaid expansion enrollment
    increased by 11.7 million, while in the States that did not adopt the
    expansion enrollment increased by 2.3 million individuals.

        Thus, for the 3-year period the combined enrollment growth for both
    private and public coverage was 15.7 million individuals--with 89
    percent of that increase attributable to additional Medicaid and CHIP
    enrollment. Furthermore, higher Medicaid enrollment in States that
    adopted the ACA Medicaid expansion accounted for almost three-quarters
    (73.5 percent) of total (public and private) enrollment gains during
    the 3-year period.

        Table 1. Changes in Health Insurance Enrollment Relative to Prior
                            Period, by Market Segment

                           Change in    Change in    Change in   Change over
                              2014         2015         2016       3 years

    Individual Market       4,738,257    1,109,156     -582,841    5,264,572
        Fully Insured      -6,654,985     -932,066   -1,049,725   -8,636,776
         Employer Market
        Self-insured        2,131,690    1,858,189    1,045,322    5,035,201
         Employer Market
    Subtotal Employer      -4,523,295      926,123       -4,403   -3,601,575
     Market
    Total Private Market      214,962    2,035,279     -587,244    1,662,997

        States Expanding    8,389,474    2,178,566    1,141,172   11,709,212
         Medicaid
        States Not            603,251      587,743    1,112,318    2,303,312
         Expanding
         Medicaid
    Total Medicaid and      8,992,725    2,766,309    2,253,490   14,012,524
     CHIP

    Total Private and       9,207,687    4,801,588    1,666,246   15,675,521
     Public Coverage
     Change

        Looking at enrollment over time, the data show that the largest
    changes occurred in the first year of implementation (2014) and tapered
    off by the third year (2016).

        In the case of Medicaid--which accounted for the vast majority of
    the total increase in coverage--enrollment grew by almost 9 million
    individuals in 2014, for an increase in program enrollment of almost 15
    percent in a single year. However, subsequent enrollment growth was 4
    percent in 2015 and 3 percent in 2016, part of which was the result of
    additional States adopting the Medicaid expansion.\2\
    ---------------------------------------------------------------------------
        \2\ Alaska, Indiana, and Pennsylvania implemented the expansion in
    2015, and Louisiana and Montana implemented it in 2016.

        The pattern is even clearer when looking at the subset of 25 States
    that have had the expansion in effect since the beginning (January
    2014). Table 2 shows that for that group of States, Medicaid enrollment
    increased 23 percent in 2014 but then only grew by a further 3.5
    ---------------------------------------------------------------------------
    percent in 2015 and by 1 percent in 2016.

        Table 2. Medicaid Enrollment in States That Adopted the PMedicaid
                       Expansion at the Beginning of 2014

                              2013         2014         2015         2016

    Total                  33,606,965   41,540,951   42,991,324   43,456,143
    Change                          -    7,933,986    1,450,373      464,819
    Percentage Change               -        23.6%         3.5%         1.1%

        With respect to the individual market, the addition of 4.7 million
    persons to that market in 2014 represented a 40 percent enrollment jump
    relative to the preceding 3 years during which total individual-market
    enrollment had fluctuated between 11.8 million and 12 million people.
    Individual-market enrollment grew by a further 7 percent in 2015, but
    then declined by 3 percent in 2016, as shown in Table 3.

             Table 3. Individual-Market Enrollment by Subsidy Status

                              2013         2014         2015         2016

    Total                  11,807,534   16,545,791   17,654,947   17,087,652
    Percentage Change               -        40.1%         6.7%        -3.2%
    Subsidized                      0    5,430,106    7,375,489    7,648,001
    Percentage Change               -            -        35.8%         3.7%
    Unsubsidized           11,807,534   11,115,685   10,279,458    9,439,651
    Percentage Change               -        -5.9%        -7.5%        -8.2%

        Table 3 also shows a similar pattern for the subset of individual-
    market enrollees that obtained subsidized coverage through the new
    health insurance exchanges. The number of individuals with subsidized
    coverage through the exchanges was 5.4 million at the end of 2014,
    increasing to 7.4 million at the end of 2015, and 7.6 million at the
    end of 2016. Thus, after growing by 36 percent in 2015, the number of
    subsidized exchange enrollees grew by less than 4 percent in 2016.

        It is notable that the flattening of enrollment trends for both
    subsidized and unsubsidized individual-market coverage, as well as for
    Medicaid, predates the current administration and Congress. That
    suggests that, even without any changes to the law, future Obamacare
    enrollment gains would likely be, at best, only marginal.

        Indeed, just last week the Department of Health and Human Services
    noted that while its spending on advertising to promote the 2016 annual
    open enrollment period was about $100 million--double the $50 million
    it spent on advertising the 2015 open season--new enrollments dropped
    by 42 percent in 2016 and the number of people buying coverage through
    HealthCare.gov declined from 9.6 million in 2015 to 9.2 million in
    2016.

        In sum, after 3 years the ACA's coverage effects appear to have
    already reached a point of diminishing returns. That situation is
    unlikely to change. Escalating premiums will continue to discourage
    enrollment of more healthy individuals. It is unlikely that the
    individual mandate penalty for not obtaining coverage will be
    sufficient to overcome price resistance. Indeed, escalating premiums
    could increase the number of people qualifying for an affordability
    exemption from the individual mandate penalty because the cost of a
    bronze-level plan exceeds the affordability threshold of 8.16 percent
    of household income.\3\
    ---------------------------------------------------------------------------
        \3\ See Seth Chandler, ``New Research Shows Many in Middle-Aged,
    Middle Class Can't Afford ACA Policies in 2018,'' Forbes, August 17,
    2017, at https://www.forbes.com/sites/theapothecary
    /2017/08/17/new-research-shows-many-in-middle-aged-middle-class-cant-
    afford-aca-policies-in-2018/#1fd04b5b461f.

        It is also worrying that in 2016 the number of persons with
    unsubsidized individual-market coverage declined by 839,807 while the
    number with subsidized coverage increased by only 272,512. Furthermore,
    Table 3 shows that the unsubsidized individual-market has shrunk at
    successively larger rates in each of the past 3 years. After declining
    5.9 percent in 2014, the number of unsubsidized individual-market
    enrollees fell a further 7.5 percent in 2015, and then dropped another
    ---------------------------------------------------------------------------
    8.2 percent in 2016.

        That trend, particularly when viewed in the context of flattening
    growth in subsidized individual-market enrollment and no net change in
    employer-plan enrollment (see Table 1), is a disturbing indicator that
    Obamacare may be shifting from insuring the uninsured to un-insuring
    the previously insured.
                              insurer competition
        Supporters of the ACA also expected that the law would generate
    increased insurer competition. On that score the performance was
    initially somewhat mixed, but then turned negative. That pattern can be
    seen in the number of insurers offering exchange coverage in the States
    each year.

        In 2013, the last year before implementation of the exchanges and
    the ACA's new insurance market rules, 395 insurers sold coverage in the
    individual market across all States and the District of Columbia.\4\ In
    2014 there were 253 insurers offering coverage on the exchanges. That
    figure increased to 307 in 2015, but then declined to 287 in 2016, and
    to 218 in 2017. While insurer contracts for 2018 have not yet been
    signed, based on announced withdrawals and entries it appears that
    there will be only 194 insurers offering exchange coverage in 2018.
    ---------------------------------------------------------------------------
        \4\ Insurers that offer coverage through more than one subsidiary
    in a State are properly counted as one carrier (the parent company),
    while insurers that offer coverage in more than one State are counted
    for each State (as market participation is a State-level decision). The
    pre-ACA figure does not include insurers with fewer than 1,000 covered
    lives in a State's individual market on the presumption that those
    insurers were not actively selling new policies in the State at that
    time.

        In 2014, New Hampshire and West Virginia each had only one insurer
    offering exchange coverage. New Hampshire then gained four carriers in
    2015, leaving West Virginia as the only State with one exchange
    insurer. While West Virginia gained a second exchange insurer in 2016,
    the States of Alaska and Wyoming dropped to one carrier apiece that
    year. In 2017, those two States were joined by Alabama, Oklahoma, and
    South Carolina, bringing to five the number of States with only one
    insurer offering exchange coverage. That list is set to expand in 2018
    to include Delaware, Mississippi, and Nebraska, for a total of eight
    ---------------------------------------------------------------------------
    States with just a single exchange insurer.

        For consumers, the more relevant measure of competition is at the
    county level. That is because health plans are offered (and priced) on
    a local basis, and many insurers do not offer coverage statewide.
    Therefore, State-level figures can overstate the extent of choice
    available to many consumers.

        Seventeen percent of U.S. counties had only one exchange insurer in
    2014. That figure decreased to only 6 percent in 2015 and 7 percent in
    2016, but soared to 33 percent for 2017.\5\ The most recent projection
    from HHS is that 47 percent of counties will have only one exchange
    insurer for 2018.\6\
    ---------------------------------------------------------------------------
        \5\ See Edmund F. Haislmaier and Alyene Senger, ``The 2017 Health
    Insurance Exchanges: Major Decrease in Competition and Choice,''
    Heritage Foundation Issue Brief No. 4651, January 30, 2017, at http://
    www.heritage.org/health-care-reform/report/the-2017-health-insurance-
    exchanges-major-decrease-competition-and-choice.
        \6\ Centers for Medicare and Medicaid Services, ``2018 Projected
    Health Insurance Exchange Coverage Maps: Insurer Participation in
    Health Exchanges (08/30/2017),'' at https://www.cms.gov/CCIIO/Programs-
    and-Initiatives/Health-Insurance-Marketplaces/2018-Projected-Health-
    Insurance-Exchange-Coverage-Maps.html.

        In sum, it appears that during the first several years, despite
    uncertainties about the composition of the risk pool, most insurers
    were at least willing to try offering coverage through the new ACA
    exchanges. That is no longer the case. By next year the major national
    carriers (Aetna, United, Humana and Cigna) will have exited the market
    either entirely or in all but a few States. For those insurers
    individual market coverage is only a small piece of their total
    business, and the marginal increase in enrollment from the Obamacare
    individual market has proven to not be worth the risk of incurring
    additional losses. Thus, it is unlikely that they will resume offering
    Obamacare coverage anytime in the foreseeable future.
                          implications for the future
        The ACA's coverage requirements and subsidy design were
    deliberately intended to provide comprehensive benefits with limited
    cost sharing to low-income individuals needing medical care, with the
    cost of their coverage heavily subsidized by taxpayers.

        Consequently, it should not be surprising that the exchanges have
    produced a risk pool consisting mainly of lower-income individuals
    needing medical care. One telling indicator is that in each of the
    years 2014, 2015, and 2016, of the enrollees receiving premium tax
    credit subsidies a consistent 67 percent also received reduced cost-
    sharing. In other words, over 3 years consistently two-thirds of
    subsidized enrollees had incomes below 250 percent of the Federal
    poverty level (FPL) and picked silver-level plans with reduced cost
    sharing.

        Given the structure of the ACA, there is no reason to expect that
    risk profile to improve in the future. Indeed, the resulting, and
    substantial, increases in premiums have made Obamacare coverage even
    less attractive to healthier individuals, and particularly so for those
    with incomes above 250 percent of FPL. This reality has several
    implications.

        First, while there will continue to be people moving in and out of
    the subsidized coverage pool as a result of changes in incomes and
    health status, there is unlikely to be much growth in coming years in
    the aggregate number of subsidized enrollees above the current level of
    about 8 million enrollees. The only obvious exception would be an
    economic downturn that resulted in more people in poor health facing a
    simultaneous loss of access to employer coverage and reduced incomes.

        Second, the number of insurers offering exchange coverage is likely
    to continue declining for the next couple years, particularly at the
    county level. Not only have some insurers entirely exited the
    exchanges, but also a number of those that remain have reduced their
    geographic footprints in the States where they still participate on the
    exchanges.

        Third, the eventual norm will likely be a situation in which major
    metropolitan areas still have two or three insurers offering exchange
    coverage but the less populous areas have only one carrier offering
    exchange coverage.

        Fourth, the carriers most likely to continue offering exchange
    coverage will be those that have significant Medicaid managed care
    contracts, and thus substantial experience providing coverage to
    subsidized low-income populations. This summer, when it looked like a
    number of counties would have no exchange insurer for 2018, it was
    carriers whose principal business is Medicaid managed care that stepped
    in to fill the gaps (such as Centene in several States and CareSource
    in Ohio).

        Despite concerns this summer, the possibility is still low that
    some parts of the country will have no insurer offering subsidized
    exchange coverage. That is because subsidized exchange coverage can
    still be a profitable market niche if an insurer has a monopoly--
    particularly for insurers with a business focus on serving Medicaid-
    like populations. While the covered population will be costly, thanks
    to the ACA-subsidy structure those higher costs will simply be passed
    on to Federal taxpayers. Thus, an insurer with an exchange monopoly
    will have sufficient pricing flexibility. Functionally, the result will
    be very similar to pricing a contract for serving a predetermined
    subset of the Medicaid population.

        More concerning are the instances of insurers ceasing to offer ACA-
    compliant coverage outside of the exchanges to the unsubsidized
    population. In that subset of the market there is more danger of a so-
    called ``death spiral'' setting in as escalating premiums price more
    customers out of the market. To prevent that occurring, lawmakers need
    to reverse or significantly amend a number of the ACA's regulatory
    provisions that have made coverage more expensive. Failing that, the
    ACA could effectively shift in the coming years from insuring the
    uninsured to un-insuring the previously insured--particularly the self-
    employed and small business owners who comprised the pre-ACA individual
    market.
                                   conclusion
        While there was a significant increase over the first 2 years in
    enrollment in individual-market policies, those gains have tapered off
    and may even be in the process of reversing as a result of the law
    significantly driving up premiums in that market. Lower-income
    individuals who qualify for premium subsidies for coverage purchased
    through the exchanges are largely insulated from those costs. However,
    middle-
    income self-employed persons--the more typical pre-Obamacare individual
    market customers--do not qualify for subsidies and are finding coverage
    to be increasingly unaffordable or even unavailable. The danger now is
    that, if the ACA's most costly insurance regulations remain in place,
    the law will effectively force more of those middle-income individuals
    to drop their coverage. That would mean that the ACA was actually
    causing some of the insured to become uninsured.

        Mr. Chairman, this concludes my prepared testimony. I thank you for
    inviting me to testify today. I will be happy to answer any questions
    that you or the other members of the committee may have.

                                     ______

                  Prepared Statement of Hon. Orrin G. Hatch,
                            a U.S. Senator From Utah
    WASHINGTON--Senate Finance Committee Chairman Orrin Hatch (R-Utah)
    today delivered the following opening statement at a hearing entitled
    ``Health Care: Issues Impacting Cost and Coverage.''

        Before we begin, I would like to pause for a moment and say a few
    words regarding the traumatic events that have recently impacted so
    many of our fellow citizens. The damage and destruction we have seen
    with relation to Hurricanes Harvey and Irma has been devastating. But,
    I will say that the acts of heroism we've seen the past few weeks have
    been awe-inspiring. I think I speak for everyone here when I say that
    our thoughts and prayers go out to all of the individuals, friends, and
    family who have been affected by these disasters and that we urge all
    those who are able to provide assistance to do what they can to help
    the relief efforts currently underway.

        With that, I want to thank everyone present for attending today's
    hearing on health-care costs and coverage.

        Health care is always an important topic as it impacts literally
    everyone. Health care has also, since the passing of the so-called
    Affordable Care Act, become a rather contentious topic as well.

        The divisiveness that surrounds the health-care debate is
    unfortunate in my mind, because it has far too often allowed politics
    and partisanship to cloud our judgment. This is true for those on both
    sides of the aisle.

        We have discussed these issues at length many times before today--
    this is at least the 37th health-care hearing we've had in the Finance
    Committee since final pieces of Obamacare were signed into law.
    However, recent events have spurred us to reevaluate the current
    situation.

        While I welcome the opportunity to reset parts of the health-care
    debate, the problems plaguing our health-care system remain pretty much
    the same as they were prior to the passage of Obamacare, and in some
    regards, I would argue they have become worse.

        Costs are continuing to skyrocket. According to a recent report
    from CMS, because increasing health-care costs are still outpacing the
    growth of our economy, they are projected to consume 20 percent of our
    total GDP in just 8 years. That's one-fifth of the economy.

        No one should say that we don't spend enough on health care in this
    country. Currently, health-care expenditures in the U.S. amount to
    nearly $10,000 per person. That is more per capita spending than any
    other industrialized country and, according to OECD data, 20 percent
    higher than the next highest spending country and nearly double the
    overall average among OECD member countries.

        From 2011 to 2016, the average health premium for employer-
    sponsored family coverage increased by 20 percent in comparison to a
    wage increase of only 11 percent during that same period.

        A recent study from the PwC Health Research Institute found that
    medical costs are projected to grow between 6 and 7 percent between
    2016 and 2018.

        Unsurprisingly, this trend in health-care costs has forced families
    to divert their spending on other items and necessities--things like
    food and housing--to pay for growing health-care costs.

        Of course, these general growth trends pale in comparison to those
    in the Obamacare exchanges, where the average premium has more than
    doubled in just the last 4 years.

        One of the chief assumptions underlying the Affordable Care Act was
    that, if the government forced people to purchase health insurance,
    more young, healthy people would enter the insurance market, which was
    supposed to offset the increased costs imposed by all of the law's
    mandates and ensuing regulations.

        Instead, the law imposes a legal requirement for people to purchase
    insurance while also making insurance unaffordable for millions of
    Americans. This, as I've noted in the past, is the ultimate irony of
    Obamacare.

        Supporters of the law like to tout coverage numbers in order to
    claim that the system has actually succeeded. But, those numbers
    warrant a closer look.

        True enough, from 2014 to 2016 insurance coverage in the U.S.
    increased by about 15.7 million people. However, the vast majority of
    those newly insured people--around 14 million--were added through
    either Medicaid or CHIP. As we will hear from some of our witnesses
    today, enrollment in the individual market may be reaching a tipping
    point where those who previously had insurance are being priced out of
    the market and actually becoming uninsured since the enactment of
    Obamacare.

        None of this is surprising. Most of this was predicted at the time
    Obamacare was being debated.

        And now, with virtually every nightmare scenario for the fate of
    Obamacare coming true, we are hearing calls for bipartisan fixes to
    shore up the failing system.

        Let me be clear: I want to find a bipartisan path forward through
    this mess. At this point, it's pretty clear that the parties will need
    to work together if any of this is going to improve.

        That said, I am concerned that many of the proposals for a
    bipartisan solution would amount to little more than a bailout of the
    current system. This, in my view, would be a mistake.

        If we simply throw money into the system to maintain cost-sharing
    subsidies or make payments to insurers, without fixing any of the
    underlying problems, we would just be setting up yet another cliff, and
    likely another partisan showdown, in the future. Even worse, we
    wouldn't be helping to reduce premiums or increase insurance options
    for the vast majority of middle class families, whether they get their
    plans through the exchanges or elsewhere.

        Of course, I'm neither naive nor oblivious. I don't want to simply
    watch health-care costs increase and choices diminish even further
    while purists in Congress demand the unattainable. We will likely have
    to act at some point, maybe even this year, to protect American
    families from the failures of the current system. Once again, I want to
    find a bipartisan path forward to address these problems.

        But let me be clear. In my view, an Obamacare bailout that is not
    accompanied by real reforms would be inadvisable. We can't simply
    invest more resources into a broken system and hope that it fixes
    itself over time.

        The status quo under Obamacare is not improving. I don't believe we
    should spend more energy to prop up a system that is already hurting
    millions of Americans.

        While I may sound like a naysayer here this morning, that is far
    from the truth. I am an optimist, and always have been.

        We had a hearing last week on the CHIP program, which demonstrated
    that we are more than capable of working together to address health-
    care needs. Hopefully, we can do the same when we talk about the
    broader effort to bring down costs and maintain coverage throughout the
    health-care system.

        For instance, both Senators Cornyn and Wyden each have a bill to
    repeal the Independent Payment Advisory Board included in Obamacare.

        Just last Congress, many of us worked together in bipartisan
    fashion to delay the HIT for 1 year and the Cadillac tax for 2 years.
    We also imposed a 2-year moratorium on the device tax.

        I believe we can come together again to provide some relief through
    elimination of these and other onerous Obamacare taxes that drive up
    costs for consumers and hamper innovation.

        Personally, I also believe members on both sides of the aisle
    should be open to rolling back, or at least amending the individual and
    employer mandates, two of the most unpopular components in Obamacare.

        These are just some examples of things that members of this
    committee have been working on to address our runaway health-care costs
    and to amend a beleaguered Obamacare. Even our newest members, like
    Senator Cassidy, are eager to tackle these complex issues.

        So let's put our differences aside and work together on meaningful
    changes. We've done it before and we can do it again.

        I look forward to hearing from our witnesses today and from my
    friends on both sides of the dais. Hopefully today's discussion will
    provide some clarity on how we can better work together on these
    matters going forward.

                                     ______

        Prepared Statement of Avik S.A. Roy, Co-Founder and President,
                  Foundation for Research on Equal Opportunity
                                  introduction
        The two most important problems with American health care stem from
    its high cost. The high cost of U.S. health care is the reason that
    tens of millions go without health insurance. In addition, the
    unsustainable trajectory of the Federal deficit and debt are driven by
    growth in public spending on health care, a problem primarily driven by
    growth in the price of health-care services. If unsustainable public
    debt forces the United States to engage in aggressive fiscal austerity
    at some point in the future, it will be those most dependent on public
    health expenditures--the poor, the elderly, and the vulnerable--who
    will have the most to lose.

        Hence, reducing the growth of national health expenditures is the
    most important domestic policy problem facing the United States.

        Today, those most adversely affected by the high cost of U.S.
    health care are the working poor and lower-middle earners: individuals
    and households without
    employer-sponsored coverage who are not poor enough to benefit from
    Medicaid and ACA exchange subsidies, nor old enough to qualify for
    Medicare.

        While the Affordable Care Act's subsidies have helped millions of
    these individuals afford coverage, its regulations have frozen millions
    of others out of the health insurance market. Furthermore, the ACA's
    structure has exacerbated long-standing problems with the U.S. health-
    care system, and substantially weakened the long-term sustainability of
    public health-care assistance. These problems require the urgent
    attention of the U.S. Senate.
           destabilization of the individual health insurance market
        The Affordable Care Act has had the greatest impact on the
    individual insurance market: the market for people who buy health
    coverage on their own, instead of having it purchased on their behalf
    by the government or their employer.

        This market was--and is--worthy of substantial attention by
    policymakers. The individual market--sometimes called the ``nongroup
    market''--is often described as small, because a relatively small
    proportion of U.S. residents own individually purchased health
    insurance policies. However, those who are uninsured today represent an
    important part of the individual market: those who choose to remain
    uninsured, rather than buying coverage, because of its high costs.
    According to the Congressional Budget Office, 18 million U.S. residents
    purchased nongroup coverage, while an additional 27 million went
    uninsured. That amounts to a total individual market of 45 million,
    comparable in size to Medicare.

        The ACA created an entirely new layer of Federal regulation to
    restrict how nongroup health insurance policies could be designed, and
    devised new taxes on health insurance premiums and health-care
    products.

        The effect of these regulations and taxes has been to double, on
    average, the underlying price of individual market insurance premiums,
    with even greater increases for those who are younger and/or in
    relatively good health.\1\ In 2014 alone, the ACA increased individual-
    market premiums by an average of 49 percent.\2\
    ---------------------------------------------------------------------------
        \1\ ``Individual Market Premium Changes: 2013-2017.'' Office of the
    Assistant Secretary for Planning and Evaluation. May 23, 2017; https://
    aspe.hhs.gov/system/files/pdf/256751/
    IndividualMarketPremiumChanges.pdf.
        \2\ Roy, A., ``3137-County Analysis: Obamacare Increased 2014
    Individual-Market Premiums by Average of 49%.'' Forbes. June 18, 2014;
    https://www.forbes.com/sites/theapothecary/2014/06/18/3137-county-
    analysis-obamacare-increased-2014-individual-market-premiums-by-
    average-of-49/#7239193a527b.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The ACA attempts to use two tools to compensate for these premium
    increases: means-tested tax credits to subsidize premiums, and an
    individual mandate designed to force those with higher premiums back
    ---------------------------------------------------------------------------
    into the market.

        While the subsidies have worked to blunt the impact of higher
    premiums for those with incomes below 200 percent of the Federal
    Poverty Level (which amounts to $24,120 for a childless adult),
    millions of working families of limited means have not benefitted from
    the ACA's policy mix. Indeed, data from insurer filings indicates that,
    even after ACA subsidies are taken into account, most individuals above
    200 percent of FPL are paying higher premiums than they did prior to
    the ACA.\2\

        Furthermore, most independent research finds that the individual
    mandate is not doing much to drive the uninsured to enroll in the ACA's
    exchanges. In a 2016 article for the New England Journal of Medicine,
    MIT economist Jonathan Gruber and two co-authors wrote, ``when we
    assessed the mandate's detailed provisions, which include income-based
    penalties for lacking coverage and various specific exemptions from
    those penalties, we did not find that overall coverage rates responded
    to these aspects of the law'' (emphasis added).\3\
    ---------------------------------------------------------------------------
        \3\ Frean, M., et al., ``Disentangling the ACA's Coverage Effects--
    Lesons for Policymakers.'' New England Journal of Medicine. October 27,
    2016; 375:1605-1608.

        That is because, while a heavily coercive and strictly enforced
    individual mandate could drive Americans to participate in the ACA's
    high-cost market, the actual individual mandate stipulated in the ACA
    contains numerous loopholes and exemptions, with weak penalties for
    noncompliance.\4\
    ---------------------------------------------------------------------------
        \4\ Roy, A., ``Obamacare's Dark Secret: The Individual Mandate Is
    Too Weak.'' Forbes. July 9, 2012; https://www.forbes.com/sites/
    theapothecary/2012/07/09/obamacares-dark-secret-the-individual-mandate-
    is-too-weak/#34a209f26abf.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The end result has been a partial actuarial death spiral, in which
    those below 200 percent of FPL enroll in large proportions in ACA
    exchanges, while those above 200 percent do not. A study by Avalere
    Health, using HHS data, found that in 2016, only 33 percent of those
    with incomes between 200 and 250 percent of FPL had enrolled in
    exchange-based coverage, and 26 percent for those between 250 and 300
    of FPL.\5\
    ---------------------------------------------------------------------------
        \5\ Ip, G., ``The Unstable Economics in Obama's Health Law.'' The
    Wall Street Journal. August 17, 2016.

        In summary, recent discussions about ``stabilizing'' the individual
    health insurance market have been notable for the degree to which they
    have failed to address the actual causes of market destabilization.\6\
    ---------------------------------------------------------------------------
        \6\ ``Future of Health Care: Bipartisan Policies and
    Recommendations.'' Bipartisan Policy Center. August 30, 2017; https://
    cdn.bipartisanpolicy.org/wp-content/uploads/2017/08/BPC-Health-Future-
    of-Health-Care-Recommendations.pdf.
    ---------------------------------------------------------------------------
                   the principal drivers of high aca premiums
        As noted above, there are two categories of ACA provisions that
    have increased individual market insurance premiums: regulations and
    taxes. Within each category, a few provisions stand out for their
    disproportionately negative impact.

        3:1 age bands. The ACA requires that insurers charge their youngest
    customers no less than one-third what they charge their oldest
    customers. Because 18-year-olds typically consume one-sixth of the
    health care that 64-year-olds consume, this provision has the effect of
    doubling premiums on the young, without any benefit for older
    enrollees, because as the young drop out of the market, premiums rise
    for everyone who remains.

        Actuarial value mandates. ``Actuarial value,'' for a given
    insurance policy, represents the proportion of insurance claims that
    are paid by the insurer, relative to those paid by the enrollee, in the
    form of co-pays and deductibles. Prior to the ACA, the most popular
    plans in the individual market had an actuarial value of 40-45 percent.
    The ACA mandates that plans have a minimum actuarial value of 60
    percent, and benchmarks ``silver'' plans to a 70-percent actuarial
    value. Because these mandates force insurers to pay more, these costs
    are directly passed through to consumers in the form of higher
    premiums.

        Essential health benefits. Because of the plethora of State-based
    health insurance benefit mandates, the actual economic impact of the
    ACA's Federal benefit mandates is smaller than the impact of 3:1 age
    bands and actuarial value mandates. But some of the ACA's mandates,
    such as the one for normal labor and delivery, create considerable
    adverse selection in the individual market.

        Health insurance premium taxes. The ACA's sales tax on private
    health insurance premiums is passed onto consumers in the form of
    higher premiums, and has the paradoxical effect of increasing Federal
    spending on premium assistance.

        Taxes on pharmaceuticals and medical devices. Similar to the direct
    premium taxes, these taxes are passed down to the consumer in the form
    of higher premiums.

        Adverse selection. Because all of the above mandates drive premiums
    upward, they encourage high consumers of health care (i.e., the sick)
    to enroll in coverage, and discourage low consumers of health care
    (i.e., the healthy) from doing so. This degradation of the individual
    market risk pool drives premiums upward, separately from the inherent
    effects of the above mandates and taxes, because premiums are directly
    correlated to the average amount of health care consumed by enrollees
    in the individual market.
        aca's section 1332 does not provide meaningful state flexibility
        Some policymakers believe that the ACA's section 1332 waiver
    process is a sufficient vehicle for State-based insurance market
    reform, and that further statutory reforms are not needed. This is
    entirely false.

        Section 1332 of the ACA allows States to apply for waivers in which
    they would be granted exemptions from the ACA's individual and employer
    mandates, so long as they kept the remainder of the ACA's premium-
    increasing regulations in place. In addition, the Centers for Medicare
    and Medicaid Services are only allowed to grant State waivers if they
    conclude that the number of people with coverage in a given State would
    be equal to or greater than under the standard ACA model.

        While it is possible for alternatives to the ACA model to result in
    comparable coverage numbers, such alternatives must include the
    flexibility to waive the ACA regulations that increase premiums and
    worsen adverse selection.

        It is not sufficient for Congress to simply accelerate the
    decision-making timeline for section 1332 waivers, as some have
    proposed. States must have genuine flexibility in how health insurance
    can be designed and purchased in their jurisdictions, so that premiums
    can come down, and enrollment can go up.
       pairing real relief from aca premiums with cost-sharing subsidies
        At the urging of the health insurance industry, much of the recent
    policy discussions around individual market stabilization have revolved
    around congressional appropriations for cost-sharing reduction
    subsidies, or CSR subsidies. These subsidies, available to ACA exchange
    enrollees with incomes below 250 percent of FPL, substantially defray
    eligible enrollees' exposure to deductibles, co-pays, and other out-of-
    pocket expenses.\7\
    ---------------------------------------------------------------------------
        \7\ Roy, A., ``A Short-Term Bailout of Obamacare? Only if
    Accompanied by Long-Term Reforms.'' Forbes. August 4, 2017; https://
    www.forbes.com/sites/theapothecary/2017/08/04/a-short-term-bailout-of-
    obamacare-only-if-accompanied-by-real-long-term-reforms/#20d7106e39f0.

        While the ACA requires insurers to offer plans to these enrollees
    with extremely low deductibles--with actuarial values as high as 94
    percent--the law does not appropriate funds to subsidize these extra
    costs that insurers incur. In House of Representatives v. Price, a
    Federal judge ruled that the Obama administration had been illegally
    offering cost-sharing subsidies to insurers that Congress did not
    appropriate. As a result, the legal status of cost-sharing subsidies is
    ---------------------------------------------------------------------------
    in doubt.

        Insurers have said that if they are forced to offer plans to those
    below 250 percent of FPL with low deductibles, without being allowed to
    recoup those costs through Federal subsidies, they will increase
    individual market premiums by as much as 20 percent.

        While the threat of increased premiums due to the cessation of
    cost-sharing subsidies is a serious problem, it is of no greater
    seriousness than the fact that nongroup premiums have doubled since the
    ACA's insurance regulations went into effect. It would be irresponsible
    of Congress to address the issue of cost-sharing subsidies without
    offering Americans with incomes above 250 percent of FPL relief from
    rising ACA premiums.

        In theory, Congress could rectify the ACA's statutory sloppiness
    through either (1) relieving insurers of the requirement to offer high
    actuarial value plans to enrollees below 250 percent of FPL; or (2)
    explicitly appropriating funds for cost-sharing subsidies. Insurers
    have consistently advocated for the latter option, as it would lead to
    higher exchange enrollment and higher Federal spending on premium tax
    credits.

        The optimal short-term policy for Congress to consider would be to
    pair an explicit appropriation of cost-sharing subsidies for the plan
    years 2018 and 2019 with relief from high ACA premiums. This relief
    should include the following policies:

          Repealing the ACA's age bands, or widening them to 6:1;
          Repealing actuarial value mandates, or re-legalizing ``copper
    plans'' with a 50-percent actuarial value;
          Repealing the ACA's individual mandate beginning in 2021 or
    later, and replacing it with a 6-month waiting period and State
    flexibility to institute late enrollment penalties; and
          Modifying section 1332 of the ACA such that it includes the
    flexibility to waive a broad range of ACA insurance regulations.

        Relief from the health insurance premium tax, pharmaceutical tax,
    and medical device tax could be added to a package that included the
    above reforms, but they are not sufficient in and of themselves as
    relief from high ACA premiums.

        Appropriating funds for CSRs without addressing these underlying
    causes of individual market destabilization would do nothing to help
    those who are being priced out of the health insurance market today.
    Indeed, it would make that more important set of reforms more difficult
    for Congress to enact. Hence, it is of great importance that Congress
    pair these reforms in a single piece of legislation.
            addressing the broader drivers of high health-care costs
        It is, of course, important to note that the high cost of U.S.
    health care far predates the passage of the Affordable Care Act. The
    exclusion from taxation of
    employer-sponsored health insurance, rooted in World War II-era wage
    controls, is the primary driver of high American health-care prices,
    because it heavily subsidized the expansion of insurance policies into
    health-care services that would, in a normal market, not be considered
    as appropriate for insurance. Medicare, which was modeled after the
    employer-based health-care system, substantially compounded this
    problem.

        Hospitals, pharmaceutical companies, and other health-care
    industries charge extremely high prices because most patients do not
    directly purchase their insurance coverage, and are therefore in far
    less of a position to hold health-care providers accountable for high
    prices. Two monographs published in the last 12 months--Transcending
    Obamacare and The Competition Prescription--explore a wide range of
    policy options for tackling these problems.\8\,\9\
    ---------------------------------------------------------------------------
        \8\ Roy, A., ``Transcending Obamacare: A Patient-Centered Plan for
    Near-Universal Coverage and Permanent Fiscal Solvency.'' The Foundation
    for Research on Equal Opportunity. September 2016: https://
    drive.google.com/file/d/0B4VpAFwBu2fUQjNtaU82djRwM2s/view.
        \9\ Roy, A., ``The Competition Prescription: A Market-Based Plan
    for Making Innovative Medicines Affordable.'' The Foundation for
    Research on Equal Opportunity. May 2017: https://drive.google.com/file/
    d/0B4VpAFwBu2fUOUJqNjRRS3VYclk/view.

        At the end of the day, the best way to reduce the cost of health
    care is to build a consumer-driven, patient-centered system in which
    private insurers compete to provide affordable coverage to everyone.
    This is why it is so important to make the individual market work for
    every American. If and when Congress succeeds in enacting meaningful
    reform of individually purchased health insurance, it will have laid
    the groundwork for us to finally bend the cost curve and put America
    ---------------------------------------------------------------------------
    back on a fiscally sustainable path.

                                     ______

              Questions Submitted for the Record to Avik S.A. Roy
                  Questions Submitted by Hon. Robert Menendez
        Question. Mr. Roy, one of the things you repeated in the course of
    your testimony was the importance of individuals maintaining their
    continuous coverage. One of the things the ACA sought to do was reduce
    churn in the Medicaid population by expanding the program and
    integrating it with the ACA Exchanges. How have the States who did not
    expand Medicaid fared relative to those that did in maintaining
    coverage for lower income individuals and reducing churn?

        Answer. It depends on the population. For example, in States that
    did not expand Medicaid, churn was eliminated for those with incomes
    between 100% and 138% of the Federal Poverty Level, who became eligible
    for exchange-based coverage instead of Medicaid. Those with incomes
    below 100% FPL in those states, however, often do face churn, as do
    those crossing the 138% FPL threshold in expansion States.

        As I discuss in Transcending Obamacare, the ideal way to eliminate
    churn is to expand eligibility for subsidized coverage to 0% FPL. The
    authors of the ACA, as you know, considered this approach but did not
    choose it, because CBO told the Senate Finance Committee that it would
    be too costly. It would be useful for CBO (and perhaps CMS) to revisit
    this question now that we have several years of experience with both
    the Medicaid expansion and the exchanges.

        For your reference, here is the PDF of Transcending Obamacare:
    https://drive.google.com/file/d/0B4VpAFwBu2fUQjNtaU82djRwM2s/view.

        Question. In your monograph, The Competition Prescription, you
    state that, ``[T]he market for prescription drugs is not `free.' '' How
    have the government rebate programs, the industry's own programs to
    help individuals afford their medications, and the sporadic price
    negotiation that does exist clouded the market? More specifically, does
    anyone in the United States pay the list price for prescription drugs?

        Answer. Few people pay the list price for prescription drugs; those
    who do tend to be uninsured. Some observers believe that the Medicaid
    ``best price'' rebate program incentivizes manufacturers to raise
    prices elsewhere, or decline to negotiate prices elsewhere, lest they
    be forced to offer the same discounts to the Medicaid program. I do not
    believe that this is correct. Pharmaceutical manufacturers do not offer
    lower prices to PBMs or other buyers out of the kindness of their
    hearts; they do so because PBMs et al. have market leverage to force
    pharmaceutical manufacturers to accept lower prices.

        Industry efforts to fund co-pays for low-income patients actually
    increase overall costs, because they allow manufacturers to maintain
    high prices, and garner more revenue, under the guise of assisting the
    poor. Politically, manufacturers gain a win-win: they are helping low-
    income patients and also reducing the amount of attention paid to their
    prices. In reality, by eliminating co-pays for a category of patients
    using high-priced drugs, manufacturers make more net revenue from these
    patients than they would without such programs, and consumer's premiums
    (and taxpayer spending on health care) is higher as a result.

                                     ______

     Prepared Statement of Andrew M. Slavitt, Former Acting Administrator,
     Centers for Medicare and Medicaid Services, Department of Health and
                                 Human Services
        Chairman Hatch, Ranking Member Wyden, and members of the committee,
    thank you for the invitation to be back in front of this committee to
    discuss an issue of vital importance to millions of American families:
    improving access to high-quality, affordable health care. My name is
    Andy Slavitt. I currently serve as a Senior Advisor to the Bipartisan
    Policy Center after having served in an acting capacity as
    Administrator of the Centers for Medicare and Medicaid Services from
    2015 to 2017, which followed a 20-year career in the private sector.
    While at CMS, I had the honor of working alongside the high-caliber men
    and women of the agency who set out on a daily basis to help the
    American public get the care they need at all stages of life. CMS
    serves over 100 million Americans, often at the most vulnerable times
    in their lives, as they age, have children, change employment, and
    struggle with complex medical conditions and a complex health-care
    system that, left on our own, few of us could afford.

        I am grateful to the Senate Finance Committee for the role you have
    played through the years in advancing health care for our country and
    for holding this hearing. I hope that this is part of a new opportunity
    to discuss and debate bipartisan ideas to support the health-care needs
    of the people in the country. While I had the honor of participating in
    the implementation, I am not here as an unabashed defender of the
    Affordable Care Act, but as someone who believes we need to move
    forward with the best ideas to provide affordable, quality health care.
    I believe this is best done with an honest accounting of what is
    working and our challenges and a focus on practical solutions.

        I have had the opportunity to see first-hand how the Affordable
    Care Act has advanced the lives of millions of Americans over its first
    few years.

          After decades of stagnation, the ACA has provided financial
    protection and improved access to a regular source of care for millions
    of Americans, reducing the number of Americans without insurance from
    2013 to 2017 from 14% to 8.3% according to the CMS Office of the
    Actuary,\1\ its lowest recorded level.
    ---------------------------------------------------------------------------
        \1\ ``National Health Expenditure Projections 2016-2017,'' Office
    of the Actuary, Centers for Medicare and Medicaid Services, March 21,
    2017. Available at: https://www.cms.gov/Research-Statistics-Data-and-
    Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Nation
    alHealthAccountsProjected.html. The actual data referenced is in the
    ``NHE Projections 2016-2025--Tables [ZIP, 298KB]'' file, under ``Table
    17--Health Insurance Enrollment and Enrollment Growth Rates, Calendar
    Years 2009-2025.''

          The ACA also provided valuable consumer protections to all
    Americans like prohibiting discrimination against an estimated 130
    million people with pre-
    existing conditions,\2\ most of whom currently receive employer-based
    coverage. The law outlawed annual and lifetime policy limits, and the
    old insurance practice of often arbitrarily excluding coverage of
    certain benefits like pharmacy, hospital care, or mental health. Before
    the Affordable Care Act, if Americans could even qualify for individual
    coverage, they often did not know what they were getting in a plan.
    They could be charged more for existing illnesses, or could have
    limitations in their policies that excluded those illnesses altogether.
    ---------------------------------------------------------------------------
        \2\ ``Health Insurance Coverage for Americans With Pre-existing
    Conditions: The Impact of the Affordable Care Act,'' Office of the
    Assistant Secretary for Planning and Evaluation, Department of Health
    and Human Services, January 5, 2017. Available at: https://
    aspe.hhs.gov/system/files/pdf/255396/Pre-ExistingConditions.pdf.

          The ACA made health care more affordable for millions more
    Americans. By providing income-based tax credits to people in the
    individual market, individual buyers were put roughly on par in terms
    of tax treatment, for the first time, with people who receive employer
    sponsored coverage. Along with positively impacting job mobility, this
    significantly expanded health care affordability. In the last open
    enrollment, nearly 8 in 10 people who bought coverage on the exchange
    were able to buy a policy for under $100/month.\3\ Furthermore,
    according to the Kaiser Family Foundation, the cost of the most popular
    benchmark plan on the exchange has been virtually unchanged since 2014
    when subsidies are accounted for.\4\ In fact, in 2018, net premiums
    will actually be slightly lower than 2017, because the IRS has reduced
    the percentage of income that people have to pay for the benchmark
    plan.\5\
    ---------------------------------------------------------------------------
        \3\ ``Health Plan Choice and Premiums in the 2017 Health Insurance
    Marketplace,'' Office of the Assistant Secretary for Planning and
    Evaluation, Department of Health and Human Services, October 24, 2016.
    Available at: https://aspe.hhs.gov/system/files/pdf/212721/2017Market
    placeLandscapeBrief.pdf.
        \4\ Kamal, Raba, et al. ``An Early Look at 2018 Premium Changes and
    Insurer Participation on ACA Exchanges.'' Henry J. Kaiser Family
    Foundation, August 10, 2017. Available at: http://www.kff.org/health-
    reform/issue-brief/an-early-look-at-2018-premium-changes-and-insurer-
    participation-on-aca-exchanges/.
        \5\ Norris, Louise. ``Is the IRS changing how much I'll have to pay
    for my health insurance next year?'' HealthInsurance.org, August 15,
    2017. Available at: https://www.healthinsurance.org/faqs/is-the-irs-
    saying-ill-have-to-pay-more-for-my-health-insurance-next-year/.

        These impacts are real. Over and over, when I was at CMS, I met and
    heard from people who, prior to the ACA, couldn't get insured for a
    chronic condition, couldn't afford insurance, or couldn't leave their
    job without fear of being without insurance. Life is immeasurably
    ---------------------------------------------------------------------------
    better for many people as a result of the ACA.

        But as with any major legislation, there are areas ripe to address,
    some of which I will come to as I discuss policy recommendations.
    Others like the ``family glitch,'' income cliffs, and certain Tribal
    issues I encourage addressing, but are beyond the time and scope of
    this hearing.

        Nor am I here only with the perspective of a former government
    official. I understand the potential of the private sector because I
    have worked for one of the largest participants in the health-care
    private sector. Prior to joining CMS, I had a two-decade private sector
    health-care career. Most of my career has been focused directly on the
    expansion of coverage, including exchange markets, as well as major
    initiatives to improve health-care affordability for Americans. I have
    been a health-care technology entrepreneur and built a company focusing
    on online consumer access to health-care purchasing for the un- and
    under-insured as far back as the 1990s. I led an insurance company
    exclusively serving hard-to-reach rural and farming communities. And I
    helped build a large and successful private sector health-care company
    which contained among other things, a large actuarial consulting
    business, a private insurance exchange, and consumer transparency
    tools.

        I have an understanding of how exchanges work and what they need to
    do in order to be successful from several perspectives--as a regulator,
    as a market participant, and now as a consumer. If anyone tells you the
    ACA is failing, doomed, or irreparably broken, I would respectfully
    disagree and suggest that with the proper management and support, most
    challenges are addressable. This doesn't mean the ACA doesn't need
    active management to be as successful as possible. It requires an
    administration committed to the goal of getting more people access to
    coverage, particular as these are still the early years for the
    program. And, to be successful, we must continually improve and
    capitalize on lessons learned from the early years of the exchange.
                           immediate recommendations
        As a starting point, I believe we should be open to any
    improvements to current law, no matter the origin of the idea. As
    Americans, we all have a rooting interest in improving health care for
    our families, and in the communities we live in. Any improvements,
    however, should meet important criteria. We should support policies
    which are judged by an impartial body like the Congressional Budget
    Office to: (1) increase the number of Americans with coverage, (2)
    improve affordability, (3) maintain or improve the quality of coverage,
    and (4) do so in a fiscally responsible manner.

        Following my recommendations, I will provide a link to a more
    exhaustive bipartisan set of recommendations from the Bipartisan Policy
    Center. The best immediate opportunity for Congress is to take steps to
    improve the affordability of premiums and the size of deductibles
    without hurting access to coverage.

          As a chorus of bipartisan insurance commissioners, Governors,
    and advocates on all sides have indicated, by simply committing to
    paying Cost Sharing Reduction payments, Congress can take immediate
    steps to reduce premiums by 20%.\6\ This commitment should be made at
    least through 2019 and has already been accounted for in the Federal
    budget. My experience over many years echoes the sentiment from these
    bipartisan and non-partisan experts. Uncertainty is not our friend when
    operating free market exchanges. Predictability and consistency will
    lead to more competition, lower premiums, and reduced deductibles.
    Insurance companies begin the 2019 rate filing process as early as the
    Spring of 2018, and having States and insurance companies and consumers
    uncertain about the rules for 2019 will limit their participation and
    increase the cost to consumers.
    ---------------------------------------------------------------------------
        \6\ ``The Effects of Terminating Payments for Cost-Sharing
    Reductions,'' Congressional Budget Office, August 15, 2017. Available
    at: https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/
    53009-costsharingreductions.pdf.

          Another bipartisan idea that is proven to bring down premiums
    for consumers is reinsurance. Particularly in smaller States, the cost
    of insurance for everyone covered can be impacted by even a small
    number of expensive patients with complex medical conditions.
    Innovative efforts, as we have seen in Alaska, have demonstrated that
    this approach works. In both Alaska and Minnesota, the estimated impact
    of a well-structured reinsurance program has been estimated at 20% of
    premium.\7\ Reinsurance is also budget friendly as approximately half
    of the outlay is recovered by the reduction in premiums and government
    subsidies.
    ---------------------------------------------------------------------------
        \7\ ``Alaska: State Innovation Waiver Under Section 1332 of the
    PPACA,'' Centers for Medicare and Medicaid Services, Department of
    Health and Human Services, July 22, 2017. Available at: https://
    www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/
    Downloads/Fact-Sheet.pdf.

          Marketing, outreach, and in person enrollment support are vital
    to not only bring down the uninsured rate, but to improve the risk
    pool. This directly reduces premiums for American families and benefits
    the U.S. taxpayer. No additional funds need to be allocated. Rather HHS
    should be directed to commit at least the funds that have been recently
    cut from marketing, outreach and in-person assistance, as well as to
    provide appropriate levels of call center staffing. Because these funds
    generally come from user fees paid by insurers, there would be no
    budget impact to doing so. Outreach is particularly important with a
    shortened enrollment period and polls showing much of the public is
    ---------------------------------------------------------------------------
    confused about the status of the ACA and the availability of insurance.

          Due to the foresight of this committee, we have provisions in
    the law to allow States to go further and provide local State-based
    innovations through the section 1332 waiver process. This is a
    significant opportunity, and one the committee should consider making
    easier. Only two waivers have been approved, and I know there are
    States that are quite concerned about the time it takes to approve a
    waiver, particularly one that looks a lot like a previous waiver. I
    would support steps to shorten the timeline for section 1332 approvals
    and other common-sense steps to simplify the waiver process, subject to
    maintaining the critical guardrails that protect consumers. These
    guardrails are the same ones I mentioned above--(1) increasing the
    number of Americans with coverage, (2) improving affordability, (3)
    maintaining or improving the quality of coverage, and (4) doing so in a
    fiscally responsible manner--that should be criteria for any health-
    care reform proposals considered.

        All-in, while close to 85% of exchange participants don't pay the
    headline premiums,\8\ and as a result have not been subject to the
    widely reported rate increases, taken together, these recommendations
    represent an important opportunity for Congress to help reduce premiums
    for Americans who do not qualify for tax credits. These solutions are
    not beyond our scope--they are surgical, affordable, and appropriate
    for where we are at this stage of the exchanges. If the administration
    commits to enforcing the existing law and implements these
    straightforward and
    budget-friendly proposals, we can be confident of a stable, lower cost,
    competitive individual market heading into 2019.
    ---------------------------------------------------------------------------
        \8\ ``Health Plan Choice and Premiums in the 2017 Health Insurance
    Marketplace,'' Office of the Assistant Secretary for Planning and
    Evaluation, Department of Health and Human Services, October 24, 2016.
    Available at: https://aspe.hhs.gov/system/files/pdf/212721/2017
    MarketplaceLandscapeBrief.pdf.
    ---------------------------------------------------------------------------
               cost and coverage: medium- and longer-term reforms
        We cannot simply focus on how insurance markets work if we want to
    make health care more affordable, and more accessible, to all
    Americans. We must address the underlying costs of care, where 85% of a
    consumer's premium is spent.

        We must focus on root cause issues that drive health-care costs.
    Many are well-documented--poor care coordination, the costs of
    unmanaged chronic disease, the high administrative burden and
    complexity of our system, our underinvestment in primary care and the
    social determinants of health, and the costs of high need patients like
    those dually eligible for Medicare and Medicaid. Our health-care
    system, in particular, is not well situated to treat people with
    multiple chronic physical and mental conditions. Ultimately, we need to
    undergo a major conversion from institutional-based care to keeping
    people healthy and treating them in comfortable and low-cost settings,
    where the most successful and satisfying health care is delivered.

        To be effective at this, we must also alter how we pay for care if
    we want to see better, more affordable results. We must commit to
    moving to a system where we pay for quality outcomes and reward the
    smart use of resources. This means paying for care in bundles so
    physicians and other clinicians work as a team to achieve a better
    outcome. This means paying for prevention like pre-diabetes care and
    cardiac prevention. And it means we must address the rising costs of
    prescription drugs, whose costs put a significant and growing burden on
    American families and taxpayers. The Medicare Access and CHIP
    Reauthorization Act Congress passed in 2015 on a bipartisan basis was
    an important step in the direction of a smarter payment system. Now, in
    implementing this law, we must listen to patients, caregivers and
    physicians and other clinicians so the law enables better results for
    patients--rather than additional complexity.

        We also need to pay special attention to the needs of rural America
    when it comes to health care. This was one of my priorities when I was
    at CMS and we began an initiative to focus on the unique competition,
    access, innovation, and structural health-care issues in rural America.
    I held numerous sessions in rural parts of Oregon, Kansas, and other
    States to understand these issues first-hand. The issue of competition
    in rural counties on the exchanges is one that stems from the limited
    number of hospitals and contracting options. This dynamic results in
    higher costs and fewer insurers able to meet the needs of constituents.
    Special attention should be paid to these uniquely rural issues and to
    the consideration of creative solutions for consumers who lack access
    to sufficient choices, including consideration of access to the
    insurance options like the Federal Employees Health Benefits Plan or a
    modified version of the State's managed Medicaid plan.

        One thing that will not reduce costs is simply reducing what
    insurance covers or cutting or capping access to vital programs like
    Medicaid for low-income seniors, children, and people with
    disabilities. We know from experience that when fewer people are
    covered or have ``gotcha'' policies, they accrue bills that go unpaid
    and worse, defer or avoid care until their illnesses are too advanced.
    This makes health care more expensive for everyone.\9\ Vital programs
    like Medicaid must always be examined and continually reformed. There
    are bipartisan approaches that move us beyond the current debate on
    Medicaid. Dr. Gail Wilensky, a former Bush administration official, and
    I published a set of bipartisan approaches to reform Medicaid this
    summer in the Journal of American Medical Association.\10\
    ---------------------------------------------------------------------------
        \9\ Subramanian, Suhja, ``Impact of Medicaid Copayments on Patients
    With Cancer,'' Medical Care, Vol. 49, No. 9, 842-847, September 2011.
    Available at: https://www.ncbi.nlm.nih.gov/pubmed/21577164.
        \10\ Slavitt, Andy, and Gail Wilensky, Ph.D., ``Reforming
    Medicaid,'' JAMA Forum, July 11, 2017. Available at: https://
    newsatjama.jama.com/2017/07/11/jama-forum-reforming-medicaid/.

        Ultimately, as the title of your hearing indicates, covering more
    Americans and reducing health-care costs are linked. We cannot provide
    access to the care Americans need without a sustainable system.
    Likewise, covering fewer people with shoddier insurance only serves to
    drive costs up.
                                   conclusion
        The above recommendations are my own. In addition to these
    recommendations, as a senior advisor at the Bipartisan Policy Center, I
    would also suggest that you look at recent recommendations published by
    BPC's Future of Health Initiative, in which I took part. Over the last
    6 months, along with other Bipartisan Policy Center leaders,
    Republicans and Democrats, we have put together a set of
    recommendations.\11\ During this process, I have had the opportunity
    along with other members of BPC's Future of Health initiative, to meet
    with hospital and insurer CEOs, Republican and Democratic State health
    officials, and experts from across the political spectrum to explore
    the question of what immediate and long-term priorities they have to
    improve the cost, quality and access to care. I have also personally
    had the opportunity to visit many parts of the country to hear directly
    from hundreds of ordinary Americans struggling with day-to-day health-
    care concerns. There are, of course, wide ranging views but also common
    themes.
    ---------------------------------------------------------------------------
        \11\ ``Future of Health Care: Bipartisan Policies and
    Recommendations,'' Bipartisan Policy Center, August 2017. Available at:
    https://bipartisanpolicy.org/library/future-of-health-care-bipartisan-
    policies-and-recommendations/.

        Two things stand out from all of these conversations. First,
    everyone asks for additional certainty out of Washington. Uncertain
    Federal policy is not our friend and the only rational response to this
    uncertainty for many insurers and providers is to increase prices or
    ---------------------------------------------------------------------------
    decide not to participate in our programs entirely.

        The second consistent theme from the world outside of Washington is
    a hope for bipartisanship--a desire that we can all come together to
    focus on pragmatic solutions when challenges arise. I understand the
    difficulty of reaching compromise, and I am realistic enough to
    understand that the politics of health care have grown complex. I know
    there will be a diverse and substantive set of views presented today.
    As challenging as it is, in the end it matters because we all have a
    stake in the same outcome.

        With Congress's leadership, I know that I join with many in my
    commitment to supporting a collaborative path to improving both cost
    and coverage in America.

                                     ______

            Questions Submitted for the Record to Andrew M. Slavitt
                      Question Submitted by Hon. Ron Wyden
                  marketing and enrollment in the marketplace
        Question. The Trump administration has taken multiple steps to
    undercut the Affordable Care Act by impeding outreach and enrollment
    efforts. These include stopping planned ACA sign-up advertisements
    during the final week of open enrollment this year, putting out
    negative materials about the ACA, cutting the enrollment period in
    half, and slashing funding for outreach and enrollment by 72 percent
    for the coming open enrollment period. This included a 90-percent cut
    to advertisements for ACA sign-ups and a 40-percent cut to the
    navigator program.

        These changes to outreach and marketing funding could impact the
    individual market by causing fewer Americans to enroll and driving up
    the cost of premiums. A study conducted on behalf of the California
    State health exchange found that enrollment would likely drop by 1
    million and premiums would increase more than 2.5 percent due to the
    decrease in marketing support.

        Mr. Slavitt, as the former Acting Administrator at CMS, could you
    describe how these cuts to outreach could impact the cost of coverage
    offered in the individual marketplace?

        Answer. Investment in outreach and enrollment can generate a
    significant return on investment in the form of lower premiums that
    result from a healthier and more balanced risk pool of enrollees.
    Analysis by California's Health Insurance Marketplace program, Covered
    California, indicates that investment in outreach and enrollment
    activities strengthened Covered California's risk pool and is directly
    responsible for a 6-to-8% reduction in premiums.\1\
    ---------------------------------------------------------------------------
        \1\ Peter V. Lee, Vishaal Pegany, James Scullary, and Colleen
    Stevens, ``Marketing Matters: Lessons From California to Promote
    Stability and Lower Costs in National and State Individual Insurance
    Markets,'' 6-7, Covered California Research Report. September 2017.
    Available online at: http://hbex.coveredca.com/data-research/library/
    CoveredCA_Marketing_Matters_9-17.pdf.

        CMS closely studied the impact of outreach and marketing on
    enrollment during my time at CMS and confirmed the critical role it
    plays in the operation of the Federal marketplace. Outreach and
    marketing not only increase enrollment, but also increase the number of
    young and healthy people who sign up. When affordable options are
    available, people who are acutely ill or have a chronic health
    condition are highly motivated to get covered. Healthier individuals
    are less motivated to get covered. Outreach and marketing
    disproportionately drive the enrollment of healthier people. These
    healthier people improve the risk pool, which lowers costs for
    ---------------------------------------------------------------------------
    marketplace consumers.

                                     ______

                Question Submitted by Hon. Robert P. Casey, Jr.
        Question. I heard from multiple State stakeholders at last weeks'
    hearings who wish to combine the savings from section 1332 waivers and
    section 1115 waivers. I understand the motivation behind increasing
    State flexibility and the desire to share savings, but how would you
    ensure that combining the savings from both waivers wouldn't be used as
    a means of helping consumers in the insurance marketplace at the
    expense of Medicaid beneficiaries, or vice versa?

        Answer. Fortunately, some of the goals behind combined waiver
    proposals can already be achieved under current law, such as
    coordinated section 1332 and section 1115 waivers. However, combining
    funding streams for Medicaid and marketplaces through combining section
    1332 waiver authority with Medicaid section 1115 waiver authority
    presents significant concerns around the possibility of States shifting
    resources away from lower-income Medicaid enrollees and frail,
    disabled, or elderly Medicaid patients and toward coverage for higher-
    income marketplace enrollees. Such approaches would weaken health and
    long-term care coverage for the people who need it most.

                                     ______

                  Questions Submitted by Hon. Robert Menendez
        Question. During the hearing, Senator Cassidy asked for feedback on
    his proposal to combine Medicaid's section 1115 waiver with the
    Affordable Care Act's section 1332 waiver. What are the potential harms
    of eliminating the current protections in each waiver authority for
    beneficiaries? In particular, can you highlight what the potential
    impact on seniors and older Americans will be under Senator Cassidy's
    proposal if States are allowed to shift money from Medicaid to other
    programs?

        Answer. The patient protections in section 1115 and section 1332
    are paramount; and the impact of reducing or removing the protections
    would harm many Americans. For instance, those with preexisting
    conditions and others with serious medical issues could be harmed if
    insurers would once again be able to excluded key benefits such as
    maternity coverage, mental health and substance use treatment, or
    prescription drugs due to a relaxing of EHB. If the affordability
    protections were changed, States could make changes that would increase
    consumers' net premiums, deductibles and other cost sharing, or both,
    again impacting individuals with pre-existing conditions or other
    health needs.

        Combining funding streams for Medicaid and marketplace coverage and
    merging the waiver authority for each program creates significant risk
    in reducing coverage for the lowest-income Americans. These risks would
    be even higher in instances where the combined pool of funding is then
    reduced below what it would otherwise be, as is the case with the
    ``Graham-Cassidy'' legislation. By combining both waiver programs, with
    less comprehensive and clear guardrails under Graham-Cassidy, the
    legislation could pose significant risk to the highest cost, highest
    acuity, and highest frailty patients--as States may need to extract
    significant budget savings in order to work within the new, lower
    combined budgets for Medicaid and marketplace coverage.

        Question. The Cassidy proposal would end Medicaid expansion and
    eventually cap funding to States for Medicaid. What impact will that
    have on State budgets and will that put a strain on other programs?

        Answer. Many independent analyses have concluded that capping
    Medicaid funding and ending Medicaid expansion would shift significant
    fiscal risk to States, likely leading States to make difficult
    decisions between increasing revenues, reducing health coverage for
    vulnerable low income children, parents, seniors and people with
    disabilities, and reducing funding for other important State programs.
    For example, according to a non-partisan analysis from Avalere Health,
    the Graham-Cassidy legislation would reduce Federal funding for
    Medicaid and marketplace coverage by $205 billion between 2020 and
    2026, and by more than $4.1 trillion between 2020 and 2036. Although
    some States that opted not to expand Medicaid under the Affordable Care
    Act could see small increases in Federal funding for Medicaid and
    marketplace coverage during the 2020 through 2026 window, all States
    would lose Federal funding over the 2020 through 2037 window--ranging
    from $4 billion reduction (i.e., a 20% cut) in South Dakota to a $797
    billion reduction (i.e., a 47% cut) in California. Federal funding for
    Medicaid and marketplace coverage in New Jersey would be cut by $109
    billion over the 2020 through 2037 window--equivalent to a 40%
    reduction in funding. The fiscal impact of these Federal spending cuts
    on State budgets is one reason why, on a bipartisan basis, the
    leadership of the National Association of Medicaid Directors indicated
    that the legislation would ``fail to deliver on our collective goal of
    an improved health-care system.''

        Question. Beyond providing certainty on cost-sharing subsidies and
    bolstering the reinsurance program, what other immediate actions can
    Congress take to increase competition in the ACA marketplaces and help
    reduce the rate of premium growth?

        Answer. Investment in outreach and enrollment can generate a
    significant return on investment in the form of lower premiums that
    result from a healthier and more balanced risk pool of enrollees.
    Analysis by California's Health Insurance Marketplace program, Covered
    California, indicates that investment in outreach and enrollment
    activities strengthened Covered California's risk pool and is directly
    responsible for a 6-to-8% reduction in premiums.\2\
    ---------------------------------------------------------------------------
        \2\ Peter V. Lee, Vishaal Pegany, James Scullary, and Colleen
    Stevens, ``Marketing Matters: Lessons From California to Promote
    Stability and Lower Costs in National and State Individual Insurance
    Markets,'' 6-7, Covered California Research Report. September 2017.
    Available online at: http://hbex.coveredca.com/data-research/library/
    CoveredCA_Marketing_Matters_9-17.pdf.

                                     ______

                    Questions Submitted by Hon. Bill Nelson
        Question. The Trump administration has proposed to cut funding for
    outreach and education for enrollment in the Affordable Care Act's
    individual exchange by 90 percent. The administration has also
    announced plans to reduce funding for the ACA Navigator program. One
    Florida Navigator announced it is shutting down its operations because
    it has not received notice from the administration about whether there
    will be a continued contract.

        What role did outreach efforts and navigators play in getting
    people to sign up for a health insurance through the ACA's individual
    exchange?

        Answer. We know that enrolling in health insurance is confusing for
    most people; having a trusted resource to walk through each complicated
    enrollment decision is very important. During the Open Enrollment
    Period for plan year 2017, CMS studied the impact of outreach and
    advertising on enrollment. CMS found that through the December 15th
    deadline 37 percent of enrollment was directly attributable to CMS's
    outreach efforts. Navigators and assisters play a critical role in
    reaching vulnerable populations and providing that in-person assistance
    that many may need because of language barriers, lack of Internet
    access or disabilities.

        Question. What will be the impact of the administration's cuts to
    outreach and to the Navigator program on ACA enrollment?

        Answer. Investment in outreach and enrollment can generate a
    significant return on investment in the form of lower premiums that
    result from a healthier and more balanced risk pool of enrollees.

        Analysis by California's Health Insurance Marketplace program,
    Covered California, indicates that investment in outreach and
    enrollment activities strengthened Covered California's risk pool and
    is directly responsible for a 6- to 8-percent reduction in premiums.\3\
    ---------------------------------------------------------------------------
        \3\ Peter V. Lee, Vishaal Pegany, James Scullary, and Colleen
    Stevens, ``Marketing Matters: Lessons From California to Promote
    Stability and Lower Costs in National and State Individual Insurance
    Markets,'' 6-7, Covered California Research Report. September 2017.
    Available online at: http://hbex.coveredca.com/data-research/library/
    CoveredCA_Marketing_Matters_9-17.pdf.

        Question. Florida did not expand Medicaid under the Affordable Care
    ---------------------------------------------------------------------------
    Act, denying over 800,000 Floridians access to primary care.

        How would expanding Medicaid have helped the State of Florida's
    bottom line? How much of an impact would expansion have on insurance
    coverage in Florida?

        Answer. According to recent estimates from the Kaiser Family
    Foundation, approximately 384,000 uninsured Floridians currently fall
    into the ``Medicaid coverage gap'' due to the fact that their income is
    too high to qualify for Florida's current Medicaid eligibility
    thresholds and too low to qualify for premium tax credit-
    financed coverage through Florida's health insurance marketplace. If
    Florida agreed to expand Medicaid coverage, as authorized and
    federally-financed under the Affordable Care Act, many if not most of
    these 384,000 uninsured Floridians would be eligible for Medicaid
    coverage.\4\ In addition, Florida would get an estimated $26 billion in
    Federal funding for Medicaid expansion over the next decade, according
    to a 2017 Avalere analysis prepared for The New York Times.\5\
    ---------------------------------------------------------------------------
        \4\ Garfield, Rachel, and Damico, Anthony, ``The Coverage Gap:
    Uninsured Poor Adults in States That Do Not Expand Medicaid,'' Kaiser
    Family Foundation Research Brief. November 1, 2017. Available online
    at: https://www.kff.org/uninsured/issue-brief/the-coverage-gap-
    uninsured-poor-adults-in-states-that-do-not-expand-medicaid/.
        \5\ Margot Sanger-Katz and Kevin Quealy. ``What Red States Are
    Passing Up as Blue States Get Billions.'' New York Times, November 13,
    2017, www.nytimes.com/2017/11/13/upshot/what-red-states-are-passing-up-
    as-blue-states-get-billions.html.

                                     ______

                     Prepared Statement of Hon. Ron Wyden,
                           a U.S. Senator From Oregon
        I want to take my remarks this morning in two parts. First I'd like
    to respond to some of the common arguments about the ACA. And then I'd
    like to get to what this committee does best and look at big ideas to
    take on health-care challenges.

        First let's look at a few issues dealing with the ACA, starting
    with the idea that it's sending everybody's health costs into the
    stratosphere. And let's examine this in the context of the more than
    320 million people who live in this country. Fifty million of those
    people are older Americans, and they're overwhelmingly happy with their
    Medicare. One hundred sixty million Americans get their insurance at
    work. They don't touch the ACA exchanges, and if their premiums go up,
    it isn't by much, on average. And nearly 8 out of 10 people who did
    sign up for private coverage through the ACA this year could find a
    plan for less than $100 a month after tax credits.

        So when you talk about cost increases and the Affordable Care Act,
    you're really looking at a portion of the individual exchanges. That
    leads us to fact that the President is pouring gasoline on the fires of
    uncertainty in the private market.

        The administration can't give a straight answer as to whether it'll
    cut off cost sharing payments, and it's already forcing insurers to
    raise rates. It spreads negative propaganda about the Affordable Care
    Act, manipulating government websites to play hide-the-ball with
    Americans who are trying to learn how to get coverage, and touring the
    country predicting doom and destruction in the individual market.

        It's a similar story in a lot of the States. The States that have
    put serious effort into building competitive marketplaces and holding
    down costs have largely been successful. But too many Governors and
    Statehouses have neglected to do the work. They haven't worked on
    getting people signed up and into the insurance pool. They haven't
    pushed back adequately against rate increases. Two and a half million
    Americans are stuck in what's called the ``coverage gap''--the
    lawmakers in their States have denied them the opportunity to sign up
    for Medicaid, and they don't earn enough to qualify for subsidies under
    the Affordable Care Act. Premiums on the individual market are 7-
    percent higher in States that didn't expand Medicaid than they are in
    States that did.

        That's a bit of context about where the Affordable Care Act stands.
    Now let's turn to some of the big ideas and opportunities that lie
    ahead of this committee, which has the authority to improve health care
    in sweeping ways that few others can.

        First is flexibility. I've always held fast to the notion that if
    States believe they've got a plan that raises the bar for health care
    in terms of costs and coverage--rather than lowering it--they ought to
    be able to try it out. After all, as is often said, States are the
    laboratories of democracy. That's why I authored section 1332 of the
    Affordable Care Act.

        As this provision went into effect this year, States have been
    showing more and more interest, and they're getting results. Many
    States--especially those interested in promoting private-market
    solutions--are considering section 1332 for State-based reinsurance
    programs, which help pay for some of the costliest patients to hold
    down costs for everybody else. For other States, section 1332 presents
    an opportunity to build a single payer system. The bottom line is that
    section 1332 is all about giving States the chance to do better, but
    not worse.

        Next is transparency. One of the most frequent concerns I hear back
    home is the sky-high cost of prescription medicine. People who need
    treatment are paying through the nose, and they have no idea why--they
    can't make heads or tails of their prescriptions or drug receipts. The
    high cost of drugs is also driving up premiums. I've introduced bills
    to pull back the curtain on the broken drug pricing system that's
    burdening this country, and I know my colleagues have a number of other
    ideas as well. Improving transparency on drugs is about affordability--
    it has a direct effect on premiums in addition to the out-of-pocket
    costs families pay at the pharmacy. It's past time Congress took on the
    challenge of drug pricing.

        Finally, I'd like to address competition and consumer choice. Over
    the past several months, my colleagues on the other side have accused
    Democrats of supporting a one-size-fits-all approach to health care for
    consumers. That's just not the case, colleagues. Choice and competition
    are essential to bringing down health costs. With that in mind, this
    committee should prioritize moving the needle on increasing choice and
    competition in the marketplace.

        In the coming weeks and months, the Finance Committee will have a
    chance to take a leading role shaping the future of Americans' health
    care. Today's hearing is where members can kick off that debate, and
    it's my hope that the discussion is productive and conducted with an
    eye towards bipartisan consensus on bringing down health-care costs and
    ensuring every American has access to the health care they want and
    deserve.

                                     ______

                                 Communications

                                  ----------

                                      AARP

                                601 E Street, NW

                              Washington, DC 20049

                                  202-434-2277

                                 1-888-687-2277

                              TTY: 1-877-434-7598

                                  www.aarp.org

    Chairman Hatch and Ranking Member Wyden, AARP appreciates the
    opportunity to share with the Committee our priorities for protecting
    and strengthening our health-care system and the coverage that millions
    of Americans depend on. Older Americans care deeply about their health
    care, and they need and deserve affordable premiums, lower out of
    pocket costs, and coverage they can count on as they age. We recognize
    that current law is not perfect, and believe Congress should focus on
    commonsense, bipartisan solutions that will increase coverage, lower
    costs, stabilize markets, and improve care. On behalf of our 38 million
    members and all older Americans, we stand ready to work with you on
    solutions to protect and strengthen the affordable coverage that
    millions of Americans need and depend on.

    Overall Goals

    AARP will continue to support health-care principles that are vital to
    people 50 and older and their families.

          We support strengthening access to affordable health care and
    oppose increasing costs for older Americans through an age tax.

          We support strengthening Medicaid and increasing access to
    benefits that allow older Americans to live independently in their
    homes and communities.

          We support protecting and strengthening coverage for Americans
    with pre-
    existing conditions and will continue to defend against any weakening
    of the protections provided under current law.

          We support keeping Medicare strong and will strongly oppose cuts
    to Medicare funding that could open the door to benefit cuts and
    vouchers that would shift more costs and risks to seniors.

    Access and Affordability

    Over 6 million Americans 50-64 years old with median incomes of less
    than $25,000 a year get their coverage through the Affordable Care Act
    (ACA) marketplaces. Furthermore, 25 million (40 percent) 50-64 year
    olds have a pre-existing condition.\1\ As Congress looks for ways to
    lower health-care costs, we believe that any efforts to improve ACA
    marketplace risk pools must not come at the expense of older Americans.
    We strongly oppose any changes to the maximum age-rating limit of 3:1,
    reducing the tax credits that make health care affordable, and any
    weakening of protections for those with pre-existing conditions.
    Accordingly, we would strongly oppose any changes to the law that would
    permit a state to waive these critical protections and result in health
    care becoming more expensive and less accessible for millions of older
    Americans.
    ---------------------------------------------------------------------------
        \1\ http://www.aarp.org/ppi/info-2017/affordable-care-act-protects-
    millions-of-older-adults-with-pre-existing-conditions.html.

    We believe that solutions to strengthen the marketplace should increase
    enrollment, create greater stability and competition in the
    marketplace, and lower costs for consumers. Congress should initially
    remove uncertainty from the market by moving market stabilization
    legislation. Common-sense market stabilization solutions include
    committing to paying for cost-sharing reductions (CSRs), which provide
    critical assistance to those with modest incomes purchasing coverage,
    as well as improving the law's risk mitigation programs, such as
    through reinsurance, to help strengthen the ACA markets and reduce
    premiums. We have seen insurance companies file 2018 plan rates with
    double digit premium increases to account for the current uncertainty.
    In addition, greater certainty would help foster more robust
    competition among insurance companies in a given marketplace and help
    ---------------------------------------------------------------------------
    provide more financial stability to expand enrollment.

    Congress could further help seniors and other Americans with long-term
    care costs by returning the medical expense itemized deduction
    threshold from 10 percent to 7.5 percent of adjusted gross income. The
    tax increase caused by the change to the higher threshold has fallen
    disproportionately on the sick--even those at more moderate income
    levels--especially since the deduction provides help to those with
    large medical costs that often include expensive long-term care costs.

    Medicaid

    Medicaid is a vital safety net and intergenerational lifeline for
    millions of individuals, including over 17.4 million low-income seniors
    and children and adults with disabilities who rely on the program for
    critical health care and long-term services and supports (LTSS, i.e.,
    assistance with daily activities such as eating, bathing, dressing,
    managing medications, and transportation). Older adults and people with
    disabilities now account for about 60 percent of Medicaid spending. As
    we have previously stated, we have serious concerns that cuts to the
    program, including recently proposed per capita cap or block grant
    proposals, would result in a loss of coverage and benefits and services
    for this vulnerable population.

    Similarly, individuals with disabilities of all ages and older adults
    rely on critical Medicaid services, including home and community-based
    services (HCBS), for assistance with daily activities such as eating,
    bathing, dressing, and home modifications; nursing home care; and other
    benefits such as hearing aids and eyeglasses.\2\ Individuals may have
    low incomes, face high medical costs, or have already spent through
    their resources paying out-of-pocket for LTSS, and need these critical
    services. For these individuals, Medicaid is a program of last resort.
    ---------------------------------------------------------------------------
        \2\ Kaiser Commission on Medicaid and the Uninsured, Kaiser Family
    Foundation, ``Medicaid at 50,'' May 2015, 13. Available at: http://
    files.kff.org/attachment/report-medicaid-at-50. Not all 17.4 million
    people receive LTSS.

    AARP encourages Congress to finally address Medicaid's longstanding
    institutional bias. When Medicaid was created in 1965, nursing homes
    were the only option for a person who needed LTSS. States receive the
    funding they need to provide nursing home care for those who are
    eligible, but they can only provide HCBS to a more limited extent in
    practice. It is time to update the law to reflect where and how people
    want to receive services today. We recommend that states be given the
    ability to use Medicaid dollars for HCBS--without having to request
    permission from the federal government. HCBS are more cost effective--
    states can serve 3 people in HCBS for every one person in a nursing
    home on average per person in Medicaid--and help people live in their
    homes and communities where they want to be. The change thus makes both
    fiscal sense and common sense.

    Medicare

    Our members and other older Americans believe that Medicare must be
    protected and strengthened for today's seniors and future generations.
    This requires investment in Medicare, not cuts and cost shifts. The ACA
    put in place a strong framework for developing and testing new ways to
    deliver care with the goals of reducing cost and improving outcomes. We
    support the work that the Center for Medicare and Medicaid Innovation
    is doing, and urge Congress to enhance its ability to improve care
    coordination across Medicare. This includes investing in quality
    measurement and reporting infrastructure. Providers, patients, and
    policy makers deserve to know more about how health-care dollars are
    spent relative to the care being received.

    Congress should also continue to invest in waste, fraud, and abuse
    prevention. Increased funding coupled with more rigorous oversight and
    enforcement by the Centers for Medicare and Medicaid Services and the
    Internal Revenue Service would reduce bad actors and help Medicare's
    finances. Considering that the return on investment for program
    integrity efforts is approximately $5 for every $1 spent,\3\
    maintaining adequate resources is crucial.
    ---------------------------------------------------------------------------
        \3\ The Department of Health and Human Services and The Department
    of Justice Health Care Fraud and Abuse Control Program, ``Annual Report
    for Fiscal Year 2016,'' page 8, https://oig.hhs.gov/publications/docs/
    hcfac/FY2016-hcfac.pdf.

    Lastly, Congress should explore ways to strengthen the Medicare
    program. Medicare efficiently and effectively delivers high-quality
    care at affordable prices for consumers. Yet, traditional Medicare does
    not cover many aspects of health care, such as hearing, vision, and
    dental, which Americans rely more and more upon as they age.

    Prescription Drugs

    We believe that any health-care discussion must include solutions to
    combat the ever-growing problem of rising prescription drug costs.
    Older Americans use prescription drugs more than any other segment of
    the U.S. population, typically on a chronic basis. We strongly
    supported the closing of the Medicare Part D coverage gap (``donut
    hole'') under the ACA and would support an acceleration of that
    closure. Since the enactment of the law, more than 11.8 million
    Medicare beneficiaries have saved over $26.8 billion on prescription
    drug costs.

    AARP urges that any changes to the health law also tackle the issue of
    high prescription drug costs, including steps such as giving the
    Secretary of Health and Human Services the ability to negotiate drug
    prices on behalf of Medicare beneficiaries; reducing barriers to better
    pricing competition worldwide by allowing for the safe importation of
    lower priced drugs; reducing the amount of market exclusivity for brand
    name biologic drugs; prohibiting agreements between brand and generic
    manufacturers that delay timely access to affordable drugs; and greater
    transparency in prescription drug pricing. AARP stands ready to work
    with Congress and the Administration on commonsense solutions to combat
    rising prescription drug costs.

    Conclusion

    Thank you for the opportunity to provide input on the health-care
    priorities of AARP on behalf of our 38 million members. We look forward
    to working with you to ensure that we maintain a strong health-care
    system that includes robust insurance market protections, controls
    costs, improves quality, and provides affordable coverage to all
    Americans.

                                     ______

                      American College of Physicians (ACP)

                     25 Massachusetts Avenue, NW, Suite 700

                           Washington, DC 20001-7401

                                  202-261-4500

                                  800-338-2746

                         190 N. Independence Mall West

                          Philadelphia, PA 19106-1572

                                  215-351-2400

                                  800-523-1546

                               www.acponline.org

    The American College of Physicians (ACP) is grateful for the
    opportunity to share our views regarding the hearing in the Senate
    Finance Committee on ``Health Care: Issues Impacting Cost and
    Coverage.'' We applaud the Chairman of the Committee, Senator Orrin
    Hatch, and Ranking Member Ron Wyden for convening this hearing and hope
    that it will provide a platform to act on bipartisan solutions
    impacting the cost and coverage of health care. Although the health-
    care debate has turned more partisan in recent years, we believe that
    common ground can be reached on a pathway forward on policies that
    share bipartisan support. To that end, in May of this year, ACP
    released a forward-looking document that provides a prescription for
    Congress to implement a broad array of bipartisan solutions to improve
    the quality of health care. The intent of this statement is to provide
    a guide for Congress to work together on solutions that will lower cost
    and improve coverage of health care for our citizens.

    EXPAND ACCESS TO COVERAGE

    We urge Congress to act to sustain gains in coverage from the
    Affordable Care Act (ACA) rather than working to repeal and replace the
    current law. ACP has submitted letters of opposition to legislation to
    repeal and replace the ACA such as, the Better Care Reconciliation Act
    (BCRA), or the most recent legislation unveiled in September by
    Senators Lindsey Graham and Bill Cassidy that would take our country a
    step backward by vastly increasing the number of uninsured citizens and
    rolling back consumer protections on existing health insurance plans.
    We know that the Graham-Cassidy proposal is gaining some traction in
    the Senate, and we urge you to set aside this legislation and instead
    allow the Senate to follow the pathway forward on health reform through
    a more deliberative process of regular order, in which hearings are
    held to solicit the advice of health-care experts and stakeholders,
    with any such improvements considered in a bipartisan manner in which
    both parties may offer amendments. This process will allow the Senate
    to ensure that any changes to current law, first, do no harm, to
    patients and build upon the gains in coverage provided by current law.

    As outlined in detail below, ACP believes that there are steps that
    Congress can take now to build upon current-law coverage, including:
    stabilizing the insurance market, continuing cost sharing reduction
    payments, encouraging reinsurance programs, promoting ACA enrollment,
    preserving and strengthening the Medicaid program, and allowing
    individuals to buy into Medicare coverage. It is also vitally important
    that Congress extend funding for critical programs that will soon
    expire, such as the Children's Health Insurance Program (CHIP), the
    Title VII Health Professions Program, the National Health Service Corps
    (NHSC), and Teaching Health Centers Graduate Medical Education
    (THCGME). Finally, to further aid in driving down costs while also
    improving the quality of care, Congress must address ways to improve
    care for those with chronic illnesses, reduce the cost of prescription
    drugs, and promote value-based care.

    Enact Reforms to Stabilize the Market

    We are also encouraged that a bipartisan process for considering
    improvements to the ACA has also been started by the Senate, Health,
    Education, Labor, and Pensions (HELP) Committee as it recently hosted
    hearings on ways to stabilize premiums and help individuals in the
    individual insurance market for 2018. ACP offered the following
    statement to the HELP committee on reforms that could be enacted to
    lower premiums and stabilize the individual insurance market. We urge
    the Senate Finance Committee to work with the Senate HELP Committee to
    enact the following reforms to stabilize the insurance market, improve
    coverage, and lower costs.

    Ensure Cost Sharing Reduction Payments

    ACP believes that Congress must make a clear, immediate, and
    unambiguous commitment to preserve the ACA's cost-sharing reduction
    (CSR) payments to insurers at least through 2019, and better yet, for
    the long term. In 2016, about 6 million enrollees relied on CSR
    payments to help reduce the burden of co-payments, deductibles, and co-
    insurance. Without a guarantee that the CSR payments will be continued,
    many insurers will have no choice but to leave the exchanges or to
    raise premiums by up to 23 percent to make up the shortfall according
    to preliminary insurer rate filings for plan year 2018.\1\ Insurers are
    deciding now whether they will be able to offer insurance through the
    exchanges for the 2018 enrollment cycle and several have already
    announced substantial premium increases because of the uncertainty over
    whether the CSR payments will continue. The Congressional Budget Office
    (CBO) has determined that gross silver plan premiums would increase by
    20 percent in 2018 and 25 percent in 2020 compared to the March 2016
    baseline if CSRs are not continued after 2017.\2\ While enrollees who
    receive premium tax credits would be largely insulated from rate
    fluctuations, individuals who do not qualify for subsidized plans would
    be forced to pay the higher premiums or switch to less-expensive, off-
    market place plans. However, eliminating CSR payments would in fact
    cost the federal government $194 billion more over 10 years according
    to the CB0.\3\ Therefore, it is imperative that CSRs be preserved into
    the future.
    ---------------------------------------------------------------------------
        \1\ http://www.kff.org/health-reform/issue-brief/an-early-look-at-
    2018-premium-changes-and-insurer-participation-on-aca-exchanges/.
        \2\ https://www.cbo.gov/system/files/115th-congress-2017-2018/
    reports/53009-costsharingre
    ductions.pdf.
        \3\ Congressional Budget Office. ``The Effects of Terminating
    Payments for Cost-Sharing Reductions,'' August 2017. Accessed at
    https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/
    53009-costsharingreductions.pdf.

    Encourage Reinsurance and Other Stabilization Efforts Through State
    ---------------------------------------------------------------------------
    Waivers

    The College believes that the Department of Health and Human Services'
    (HHS) March 13, 2017 letter encouraging states to seek Section 1332
    waivers for reinsurance programs was a step in the right direction.
    There is ample evidence that reinsurance can help to ensure that
    patients retain the coverage they have while protecting insurers from
    high costs. The ACA's temporary reinsurance pool ended in 2016 and was
    proven to be effective by HHS's June 30, 2017 report on transitional
    reinsurance payments and risk adjustment transfers for plan year 2016.
    That report showed that the ACA's transitional reinsurance program
    stabilized insurers with a substantial amount of high-cost enrollees,
    and, in concert with the risk adjustment program, reduced the risk of
    adverse selection.\4\ Alaska's reinsurance program has successfully
    reduced premium costs,\5\ containing premium hikes to just 7 percent,
    down from a projected 42 percent increase. Minnesota has also applied
    for a Section 1332 waiver to help finance its reinsurance program.
    Congress can also embrace initiatives that have proven effective in the
    Medicare Part D program by establishing permanent reinsurance and risk
    corridor programs as well as emergency fallback protections to provide
    coverage when no plans are available in an area.\6\
    ---------------------------------------------------------------------------
        \4\ Centers for Medicare and Medicaid Services. ``Summary Report on
    Transitional Reinsurance Payments and Permanent Risk Adjustment
    Transfers for the 2016 Benefit Year,'' June 30, 2017. Accessed at
    https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-
    Stabilization-Programs/Downloads/Summary-Reinsurance-Payments-Risk-
    2016.pdf on July 6, 2017.
        \5\ Alaska Department of Commerce, Community, and Economic
    Development Division of Insurance, Alaska 1332 Waiver Application,
    December 7, 2016. Accessed at https://aws.state.ak.us/
    OnlinePublicNotices/Notices/Attachment.aspx?id=106061.
        \6\ http://www.commonwealthfund.org/publications/blog/2017/apr/
    shoring-up-the-health-insurance-marketplaces.

    Congress should consider additional policies to encourage state
    innovation and bring more choice and competition into insurance markets
    without rolling back current coverage, benefits and other consumer
    protections guaranteed by the ACA and other federal laws and
    regulations. Provided that coverage and benefits available in a
    particular state would be no less than under current law, Congress
    should encourage the use of existing Section 1332 waiver authority to
    allow states to adopt their own innovative programs to ensure coverage
    and access. Section 1332 waivers offer states the opportunity to test
    innovative ways to expand insurance coverage while ensuring that
    patients have access to comprehensive insurance options. However, ACP
    believes that Congress should not weaken or eliminate the current-law
    guardrails that ensure patients have access to comprehensive essential
    health benefits and are protected from excessive co-payments and
    deductibles. If existing requirements were removed (e.g., that waivers
    provide comprehensive, affordable coverage that covers a comparable
    number of people as would be covered under current law), a backdoor
    would emerge for insurers to offer less generous coverage to fewer
    people and to make coverage unaffordable for patients with preexisting
    conditions. As long as a state's waiver program meets the ACA's
    standard of comprehensiveness at the same cost and level of enrollment,
    it can test a more market-based approach, or make other, more targeted
    revisions to continue existing state initiatives.

    Enhance Enrollment Through Promotion and Engagement

    ACP supports robust outreach to patients to encourage patient
    enrollment in health coverage. Congress should support and properly
    fund this outreach and other education efforts to avert declining
    enrollment that could lead to higher premiums and market
    destabilization. The administration's recent actions to cut marketing
    funding for advertising by 90 percent and cut navigator program grant
    funding by about 41 percent are steps in the wrong direction and are
    counter to the available evidence. Distressingly, the administration
    has also interrupted the current funding for the navigator program and
    it is unclear when the funding will resume.\7\ With open enrollment
    starting November 1st and the administration already stating that the
    funding will not be retroactive, Congress must step in with its
    oversight authority to properly ensure that the navigator programs are
    properly funded.
    ---------------------------------------------------------------------------
        \7\ Cliff, Sarah. ``This is the most brazen act of Obamacare
    sabotage yet.'' Vox, September 8, 2017. Accessed at https://
    www.vox.com/platform/amp/policy-and-politics/2017/9/8/16268572
    /trump-obamacare-navigators.

    ACP strongly believes that more intensive outreach and enrollment
    efforts will be needed because the open enrollment period for 2018 was
    considerably shortened. Many uninsured people remain unaware of
    marketplace-based coverage options and subsidies \8\ and in 2017
    marketplace enrollment declined after HHS prematurely ended its open
    enrollment publicity and outreach campaign. Evidence suggests that
    efforts such as enhanced television advertising can increase
    enrollment.\9\ Curtailing funding for such advertising, as the
    administration is planning to do, will not only reduce overall
    enrollment, leading to more uninsured persons, but also lead to adverse
    selection (and higher premiums and federal premium subsidies) if
    younger and healthier persons do not get the information needed to
    encourage and help them enroll. Therefore Congress must encourage the
    administration to redouble efforts to promote marketplace awareness and
    attract more people to shop and purchase the right coverage for them.
    ---------------------------------------------------------------------------
        \8\ http://www.commonwealthfund.org/publications/blog/2016/jan/
    better-outreach-critical-to-aca-enrollment-particularly-for-latinos.
        \9\ Karaca-Mandic, P., Wilcock, A., Baum, L., Barry, C.L., Fowler,
    E.F., Niederdeppe, J., and Gollust, S.E. ``The Volume of TV
    Advertisements During the ACA's First Enrollment Period Was Associated
    With Increased Insurance Coverage.'' Health Affairs. 2017; 36(4):747-
    754. Accessed at http://content.healthaffairs.org/content/36/4/747 on
    June 13, 2017.
    ---------------------------------------------------------------------------

    Preserve and Strengthen Medicaid

    Medicaid is another program that provides a foundation for low-income
    children and adults to obtain quality affordable coverage. We remain
    opposed to attempts in this Congress to enact substantial cuts to
    Medicaid by converting the current federal financing formula for this
    program to a per capita cap or block grant model. Legislation to repeal
    and replace the Affordable Care Act, such as the Graham-Cassidy
    legislation, would significantly decrease federal funding for the
    Medicaid program by converting the current federal financing formula to
    a per capita cap model. The proposed per capita cap on federal funding
    would be devastating to coverage and access to care for many of the 72
    million people currently enrolled. Because most states are required by
    law to balance their budgets, a reduction in and/or a cap on federal
    matching funds will necessarily require them to greatly reduce benefits
    and eligibility and/or impose higher cost-sharing for Medicaid
    enrollees, most of whom cannot afford to pay more out of pocket--or
    alternatively and concurrently, reduce payments to physicians and
    hospitals (including rural hospitals that may be forced to close),
    enact harmful cuts to other state programs or raise taxes.

    The Graham-Cassidy proposal would also allow states the option to
    participate in a Medicaid Flexibility block grant program beginning in
    Fiscal Year 2020. Under the Medicaid Flexibility Program, states would
    receive block grant funding instead of per capita cap funding for non-
    elderly, non-disabled, adults who are not eligible for the Medicaid
    expansion. We remain opposed to this block grant funding structure as
    we believe it would be devastating to coverage and access to care
    especially under this legislation as overall federal funding for
    Medicaid would be reduced from current law. Under block grants, because
    states do not get any additional payment per enrollee, strong
    incentives would be created for states to cut back on eligibility,
    resulting in millions of vulnerable patients potentially losing
    coverage. Block grants will not allow for increases in the federal
    contribution should states encounter new costs, such as devastating
    hurricanes, flooding, or tornadoes that may injure their residents or
    destroy health-care facilities. Under either block grants or per capita
    spending limits, states would be forced to cut off enrollment, slash
    benefits, or curb provider reimbursement rates.

    We are also concerned that the substantial cuts to Medicaid included in
    the
    Graham-Cassidy legislation will threaten coverage and treatment of
    individuals with substance-abuse disorders. ACP supported the
    bipartisan-enacted provisions to address the opioid crisis through the
    21st Century Cures Act and the Comprehensive Addiction and Recovery
    Act. However, those laws are simply not a replacement for the
    comprehensive, continuous coverage furnished through the Medicaid
    program, which not only covers substance-use disorder-treatment but
    also a host of services to prevent and manage other chronic illness,
    including those that disproportionately affect opioid users, like HIV
    and hepatitis C. Medicaid also plays a crucial role in financing
    treatment for people in recovery, funding counseling services and vital
    medications like buprenorphine and naltrexone. Medicaid has also
    greatly expanded access to life-saving naloxone, which all states cover
    in their Medicaid programs. Unfortunately, the Graham-Cassidy
    legislation will cap and cut Medicaid as well as phase out the Medicaid
    expansion, endangering comprehensive insurance coverage for patients
    and their families as well as the Medicaid beneficiaries with mental
    illness and substance-use disorder conditions who were covered as a
    result of the Medicaid expansion.

    We urge the Committee not to restructure the Medicaid program to impose
    punitive work requirements as a condition for the receipt of Medicaid
    medical assistance. The Graham-Cassidy legislation would also permit
    states, effective October 1, 2017, to require non-disabled, non-
    elderly, non-pregnant individuals to satisfy a work requirement as a
    condition for the receipt of Medicaid medical assistance. We oppose
    this work requirement because Medicaid is not cash assistance or a job
    training program; it is a health insurance program and eligibility
    should not be contingent on whether or not an individual is employed or
    looking for work. While an estimated 80 percent of Medicaid enrollees
    are working, or are in working families, there are some who are unable
    to be employed, because they have behavioral and mental health
    conditions, suffer from substance use disorders, are caregivers for
    family members, do not have the skills required to fill available
    positions, or there simply are no suitable jobs available to them.
    Skills--or interview-training initiatives, if implemented for the
    Medicaid population--should be voluntary, not mandatory. Our Ethics,
    Professionalism, and Human Rights Committee has stated that it is
    contrary to the medical profession's commitment to patient advocacy to
    accept punitive measures, such as work requirements, that would deny
    access to coverage for people who need it.

    There is a substantial body of research that shows that the Medicaid
    program has improved access and outcomes to patients who depend on it
    for their care. Medicaid is an essential part of the health care safety
    net. Studies show that reductions in Medicaid eligibility and benefits
    will result in many patients having to forgo needed care, or seek care
    in costly emergency settings and potentially have more serious and
    advanced illnesses resulting in poorer outcomes and even preventable
    deaths. As an organization representing physicians, we cannot support
    any proposals that would put the health of the patients our members
    treat at risk. We believe though that improvements can and should be
    made in Medicaid, including more options for state innovation, without
    putting the health of millions of patients at risk.

    Support Medicare Buy-In Option

    Currently, some exchanges have difficulty attracting enough insurers
    and some patients may have only one insurer from which to obtain
    coverage. Congress should enact a public option that would provide more
    options and increase competition. Several avenues exist to achieve a
    range of public options including a buy-in program for traditional
    Medicare and Medicare Advantage, Medicaid, and other publically funded
    health programs to offer real competition to private insurers in the
    marketplaces.

    For instance, ACP supports the development of a Medicare buy-in option
    for people age 55-64. Older adults would have the opportunity to enroll
    in the popular Medicare program while potentially improving both the
    Medicare and ACA marketplace risk pools and driving down premiums.
    Specifically, ACP recommends that: (1) a Medicare Buy-in Program must
    include financing that assures that premiums and any subsidies are
    sufficient to fully cover expenses without further undermining the
    solvency of the Medicare trust funds; (2) a Medicare Buy-in Program
    should include subsidies for lower-income beneficiaries to participate;
    (3) eligibility for a Medicare Buy-in Program should include adults age
    55-64 regardless of their insurance status; (4) enrollment in a
    Medicare Buy-in program should be optional for eligible beneficiaries
    and should include the full range and responsibilities of Medicare
    benefits (Parts A, B, Medicare Advantage, and Part D); and (5)
    reimbursement for services, including evaluation and management
    services, should be no less than under the traditional Medicare
    reimbursement rates.

    The benefits of a Medicare Buy-in program, according to the American
    Academy of Actuaries, may expand patient access to providers and
    enhance the continuity of care for individuals changing over to
    Medicare while at the same time helping to reduce premiums for
    individuals in the marketplace exchanges.\10\
    ---------------------------------------------------------------------------
        \10\ http://election2016.actuary.org/sites/default/files/Medicare-
    Buy-In-Option.pdf.
    ---------------------------------------------------------------------------

    Extend Funding for the Children's Health Insurance Program (CHIP)

    One of the first steps that Congress could take to ensure that
    individuals continue to maintain affordable quality health-care
    insurance would be to reauthorize the CHIP program. We commend the
    Finance Committee Chairman Orrin Hatch and Ranking Member Ron Wyden for
    recently introducing legislation, S. 1827, the Keep Kids Insurance
    Dependable and Secure Act of 2017, that will extend funding for the
    CHIP program for the next 5 years. This legislation would ensure that
    the nearly 9 million children who are currently insured through the
    CHIP program will not lose coverage. ACP was pleased to offer a
    statement of support for the legislation and we urge Congress to act
    quickly on the consideration and passage of this legislation before the
    CHIP program expires at the end of the month.

    The Title VII Program

    It is also imperative that Congress continues to provide adequate
    funding for a primary care workforce to ensure that individuals who
    have insurance coverage have access to a physician to meet their
    health-care needs. ACP strongly supports increasing funding for Title
    VII, a critical resource as it is the only federal program dedicated to
    funding and improving training of primary care physicians. We urge
    Congress to provide $71 million in funding for Fiscal Year 2018.

    The National Health Service Corps (NHSC)

    We urge Congress to continue funding for the NHSC that provides
    scholarships and loan forgiveness to encourage primary care physicians
    to work and care for patients who live in underserved communities. This
    College requests the Congress to provide $380 million for the NHSC for
    fiscal year 2018.

    Teaching Health Centers Graduate Medical Education (THCGME)

    The THCGME program was established by the ACA to provide funding for
    primary care residents in community settings. This program enriches the
    training of primary care residents by allowing them to see a wide
    variety of patients in an office based setting rather than solely in
    the hospital. The College recently signed on in support of
    reauthorization of the THCGME program to ensure stable funding. ACP
    supports the Training the Next Generation of Primary Care Doctors Act,
    H.R. 3394 and
    S. 1754 that would fund THCGME at $116.5 million each year for three
    fiscal years until 2020.

    STEPS CONGRESS CAN TAKE TO LOWER THE COST OF HEALTH CARE

    As Congress considers proposals to expand health insurance coverage, it
    must also move forward with the consideration and passage of
    legislation that will lower the cost of health care for all Americans.
    ACP has been supportive of bending the cost curve of medicine and urges
    Congress and the administration to enact the following measures to
    reduce health-care costs to preserve access to affordable health care.

    The Creating High-Quality Results and Outcomes Necessary to Improve
    Chronic (CHRONIC) Care Act of 2017

    ACP commends the Senate Finance Committee for a commitment to advancing
    legislation to improve the quality and lower the cost of treating
    patients with multiple chronic illnesses. In April of this year, we
    submitted a letter of support to the sponsors of the legislation
    Senators Orrin Hatch, Ron Wyden, Johnny Isakson, and Mark Warner, that
    also included our recommendations to improve the bill. This legislation
    reforms Medicare to give physicians additional incentives to treat
    patients with chronic diseases in their homes, through advancements in
    telemedicine, and provides additional flexibility for Medicare
    beneficiaries to receive care through Accountable Care Organizations
    (ACOs).

    This bill has been approved by the Senate Finance Committee and is now
    pending consideration by the Senate. We urge the Senate to move forward
    with debate on this legislation and ask Senators to offer the following
    amendments to strengthen the bill:

            ACP Recommendation
            We urge the Senate to add an amendment to the CHRONIC Care Act,
            that would require CMS to establish two new codes (perhaps
            initially as G codes) that would recognize the value of care
            for clinicians who treat patients with chronic conditions
            between 20-40 minutes and 40-60 minutes.

            ACP Recommendation
            We urge the Senate to add an amendment to this legislation that
            would move chronic care management services to the preventive
            services category under Medicare Fee-For-Services (FFS) to
            eliminate any beneficiary cost sharing associated with these
            services. Alternatively, a provision could be added that would
            allow CMS to give physicians the option of routinely waiving
            the copay for chronic care management codes for patients with
            chronic conditions.

    Lower the Cost of Prescription Drugs

    ACP recognizes that ensuring and improving patient access to
    prescription drugs and biologics is a growing need. Over the past
    several years, we have seen a dramatic rise in the cost of prescription
    drugs in this country. These increases apply not only to specialty
    drugs that treat life-threatening illnesses like cancer, but also
    common drugs like antibiotics that treat bacterial infections. Our
    internists see first-hand how the impact of rising prescription drug
    costs threatens the health of their patients. Approximately, 18 percent
    of retail prescription drugs were paid for out of pocket in 2012, and
    patients used various techniques to reduce costs, including not taking
    a medication as prescribed (7.8 percent), asking the doctor for a
    lower-cost medication (15.1 percent), purchasing drugs from another
    country (1.6 percent), or using alternative therapies.

            There are several bills that we support and that Congress
            should approve to lower the cost and increase access to
            prescription medication. We urge Congress to enact the
            following measures to reduce the cost of these life saving
            medications:

            The Creating and Restoring Equal Access to Equivalent Samples
            (CREATES) Act of 2017
            ACP supports S. 974, the CREATES Act of 2017, that aims to
            prevent anti-
            competitive practices by brand names drugs to prevent or delay
            other companies from developing alternative lower-cost
            products. This bill would allow lower cost manufacturers to
            bring a cause of action in federal court for injunctive relief
            if a brand name company deliberately uses FDA protocols to deny
            samples of their product in a manner that prevents the
            development of lower-cost alternatives, thereby decreasing
            patient access to lower-cost medications.

            The Medicare Prescription Drug Price Negotiation Act
            We urge Congress to approve S. 41, the Medicare Prescription
            Drug Price Negotiation Act that will empower the Secretary of
            Health and Human Services to negotiate with pharmaceutical
            manufacturers the prices that may be charged for prescription
            drugs covered under Medicare Part D. The ACP has a longstanding
            policy in support of this legislation as a way to lower the
            cost of prescription drugs purchased by the federal government.

    Promote Value-Based Care

    One of the most effective ways to reduce cost and improve the quality
    of care provided to patients is to accelerate the transition from FFS
    payment systems toward a more value-based payment system. We urge the
    Senate Finance Committee to use its oversight authority to encourage
    and work with the Centers for Medicare and Medicaid Innovation (CMMI)
    to develop, test, and expand Alternative Payment Models that promote
    value based care authorized by MACRA, as well as in the broader context
    of value-based payment and delivery system reform.

    Support Funding for CMMI

    The College strongly supports CMMI and its essential role in
    developing, financing, implementing, evaluating, and expanding
    innovative physician-led Advanced APMs as authorized by MACRA, as well
    as in the broader context of value-based payment and delivery system
    reform. ACP encourages CMS to fully use its authority under CMMI and
    the Physician-Focused Payment Model Technical Advisory Committee (PTAC)
    process to expand the availability of Advanced APMs and other models.
    The creation of additional APMs, including those that are specialist/
    subspecialist-focused, would provide additional pathways for practices
    to transition from traditional FFS to more valued-oriented payment
    approaches. It is also imperative that CMMI continues to have adequate
    funding to support its critical role in MACRA/QPP and the movement
    toward value-based payment.

            Encourage and Promote the Testing of Accountable Care
            Organizations, the Patient Centered Medical Home, Bundled and
            Capitated Payments
            The College strongly supports the movement from traditional FFS
            toward a more value based payment system. This should be
            achieved by testing a variety of payment models, such as
            accountable care organizations (ACOs), PCMH and patient-
            centered specialty practice models, bundled payments, capitated
            payments, and others. These models should include risk
            adjustments including adjustments for socioeconomic status, to
            the extent possible. In recognition that all clinicians are not
            willing or able to move directly into models with significant
            payment at risk, there should be pathways to help clinicians
            transition to models with increasing levels of risk at stake.
            In order to accelerate the movement toward value-based
            payments, ACP encourages CMS to develop an expedited process
            for CMMI to develop, test, and expand APMs. This should include
            a pathway for testing models recommended by PTAC, as well as
            models from other payers including Medicaid and private payers.
            Accelerated implementation of models should prioritize APMs for
            clinicians who currently lack opportunities, such as
            specialists/subspecialists and clinicians who are unable to
            participate in current models such as those in regions where
            models are not being tested and those who are unable to
            participate due to limitations in the model design. Additional
            options for PCMH models and patient-centered specialty practice
            models should also be prioritized, including models that do not
            require physicians to bear more than nominal financial risk.

    Conclusion

    We appreciate the opportunity to provide our thoughts on the pathway
    forward on enhancing coverage and reducing the cost of health care. We
    remain concerned that rushing through any legislation to repeal and
    replace the Affordable Care Act, without following regular order,
    securing complete cost estimates, and inviting stakeholder input, would
    only destabilize the insurance marketplace and increase the number of
    uninsured in our country. Instead, we urge you to work with your
    colleagues, in a bipartisan fashion, to improve coverage and reduce
    cost through a more deliberative process. ACP stands ready to assist in
    that effort and to provide feedback on any policies that impact the
    medical profession and patients.

                                     ______

                    America's Health Insurance Plans (AHIP)

                          601 Pennsylvania Avenue, NW

                           Suite 500, South Building

                              Washington, DC 20004

    America's Health Insurance Plans (AHIP) is the national association
    whose members provide coverage for health care and related services to
    millions of Americans every day. Through these offerings, we improve
    and protect the health and financial security of consumers, families,
    businesses, communities and the nation. We are committed to market-
    based solutions and public private partnerships that improve
    affordability, value, access, and well-being for consumers.

    We appreciate the committee's interest in examining both health-care
    costs and the availability of high quality, affordable coverage
    options. These issues are particularly important in the individual
    health insurance market, where consumers are facing significant
    challenges due, at least in part, to uncertainty about government
    policies for the Affordable Care Act's (ACA) Health Insurance
    Exchanges.

    Our members are strongly committed to advancing solutions that address
    these immediate, short term challenges while also supporting long-term
    reforms that are needed to help ensure a stable, competitive market
    that delivers real choice, high quality, and affordable care. To
    contribute to the discussion at today's hearing, our statement focuses
    on four priorities: (1) making coverage more affordable by bringing
    down the cost of care; (2) legislative solutions that could be enacted
    right now to provide relief to consumers, reduce uncertainty, and
    address the immediate challenges in the individual market; (3)
    regulatory steps to promote a stable market in the short term; and (4)
    principles for longer-term improvements in our nation's health care
    system.

    Make Coverage More Affordable by Bringing Down the Cost of Care

    Rising health-care costs have been a financial burden for too many
    families for too long. The affordability crisis poses a serious
    challenge to the U.S. health-care system--not only for consumers, but
    also for employers and government programs. Bold steps are needed to
    meet this challenge. From out-of-control drug prices to bureaucratic
    regulations to outdated payment models, we need effective solutions
    that bring down the cost of health care to U.S. health systems, thus
    reducing the overall cost of care for families.

    More market competition, better coordination, using evidence-based
    medicine, and prioritizing value can deliver the affordable coverage
    and quality care that every American deserves. Below we highlight
    numerous areas where we see opportunities for decelerating the growth
    in overall health-care costs:

          Competition, Transparency, and Consumer Engagement: Encouraging
    competitive market forces and more market-oriented regulatory systems
    and promoting greater transparency--with respect to information on
    price, quality, and value--to support greater consumer engagement in
    health-care decisions;

          Wellness, Prevention, and Care Coordination: Moving beyond the
    sick-care paradigm to focus more strongly on wellness and prevention
    and increasing the integration and coordination of programs (e.g.,
    Medicare, Medicaid) to address the burden of chronic disease;

          Greater Options for Care Management: Creating a broader range of
    options for wellness, acute care, chronic condition management, and
    end-of-life care--with greater discretion for individuals and families
    in selecting health-care providers and sites of care;

          Paying for Value: Accelerating the move away from volume and
    toward value by adopting value-based payment approaches that
    demonstrate their effectiveness in improving both quality and
    affordability;

          Leveraging Data and Technology: Investing in data- and
    technology-driven innovations to reduce costs, enhance quality, and
    improve outcomes, including expanding the use of remote monitoring, at-
    home solutions, telehealth, and other innovative approaches to health-
    care delivery;

          Additional Options: Promoting an adequate and diverse health-
    care workforce; reducing and resolving medical malpractice disputes;
    and supporting initiatives at the state level to meet quality- and
    cost-related goals.

    In addition, any discussion about health-care costs must include a
    strong focus on pharmaceutical costs and the need for market-based
    solutions to ensure that consumers have access to affordable
    medications. A March 2017 analysis by AHIP's Center for Policy and
    Research concluded that 22 cents of every dollar spent on health
    insurance premiums goes to pay for prescription drugs--outpacing the
    amount spent on physician services, inpatient hospital services, and
    outpatient hospital services.\1\ Prescription drug prices are out of
    control, and this is a direct consequence of pharmaceutical companies
    taking advantage of a broken market for its own gain. When drug
    companies are effectively granted extraordinary protections through the
    patent system or market exclusivity protections in federal law, they
    can set any price they choose--and raise prices at any time for any
    reason. To put it simply, they have a monopoly on medications. And the
    result is that everyone pays more, from patients, businesses and
    taxpayers to hospitals, doctors, and pharmacists.
    ---------------------------------------------------------------------------
        \1\ ``Prescription Drugs Are Largest Single Expense of Consumer
    Premium Dollars,'' AHIP, March 2, 2017, https://www.ahip.org/health-
    care-dollar/. This AHIP estimate understates the actual impact of
    prescription drugs on insurance premiums, as drugs administered in
    hospital inpatient settings were excluded.

    As the committee explores strategies for reducing prescription drug
    prices, we urge you to consider our recommendations for effective,
    ---------------------------------------------------------------------------
    market-based solutions in three areas:

          Delivering Real Competition: Promote a robust biosimilars market
    and ensure that providers and patients have unbiased information about
    the benefits of biosimilars; provide the necessary resources for the
    Food and Drug Administration (FDA) to clear the backlog of generic drug
    applications, particularly for classes of drugs with no or limited
    generic competition; prohibit anti-competitive tactics such as ``pay
    for delay'' settlements and ``product hopping''; preserve the Inter
    Partes Review (IPR) process through the U.S. Patent and Trademark
    Office; require brand manufacturers to share information and scientific
    samples to promote the development of generic drugs; and ensure that
    the Orphan Drug Act's incentives are used by those developing medicines
    to treat rare diseases--not as a gateway to premium pricing and
    blockbuster sales beyond orphan indications.

          Ensuring Open and Honest Price Setting: Require pharmaceutical
    manufacturers to disclose information regarding the intended launch
    price, the use of the drug, and direct and indirect research and
    development costs; examine and address the impact of drug coupons and
    co-pay card programs (and related charitable foundations) on overall
    pharmaceutical cost trends; and assess the impacts of the growth in
    direct-to-consumer (OTC) advertising, particularly broadcast
    advertising, and evaluate the best approaches for conveying information
    to consumers.

          Delivering Value to Patients: Support private and public efforts
    to provide information to physicians and their patients on the
    comparative and cost-effectiveness of different treatments; promote
    value-based payments in public programs like Medicare for drugs and
    medical technologies , based on agreed-upon standards for quality and
    outcomes; and address existing statutory and regulatory requirements
    (e.g., Medicaid best price rules) that may inhibit the development of
    pay-for-indication and other value-based strategies in public programs.

    Legislative Solutions Are Needed to Provide Relief to Consumers and
    Stabilize the Individual Market

    The individual insurance market has been a challenge for many years--
    both before and after the ACA. Certainty regarding key government
    policies and other improvements is needed to ensure that the individual
    market delivers lower costs and more choices.

    Just 7 weeks from now, November 1st will mark the beginning of the 2018
    Open Enrollment Period for coverage offered through the ACA Exchanges.
    Less than 6 months from now, health plans will begin the process of
    building products for the 2019 plan year. As a result, we strongly
    believe that any legislative stability package considered by Congress
    must continuously cover at least a 2-year period--2018 and 2019.
    Otherwise, market uncertainty will persist, and Congress will need to
    revisit these same exact issues early next year. Below we suggest
    several steps that can be taken in the short-term to ensure that
    Americans have real choices of quality, affordable coverage options.

          Provide funding for cost-sharing reduction (CSR) benefits that
    help lower-income individuals afford the care they need: This funding
    is important in the remaining months of 2017 and through at least the
    next 2 years. Nearly 85 percent of consumers who buy coverage through a
    health-care exchange receive tax credits to help them pay their
    premiums.\2\ Well over half--and as much as three quarters--of these
    consumers receive additional assistance to lower their deductibles and
    cost-sharing for the care they receive. The Congressional Budget Office
    (CBO) estimates that terminating CSR funding after December 2017 would
    cause premiums for silver plans to be 20 percent higher in 2018 and 25
    percent higher by 2020. This would have the additional consequence of
    increasing the federal budget deficit by $194 billion from 2017 through
    2026.\3\
    ---------------------------------------------------------------------------
        \2\ ASPE Research Brief, ``Health Plan Choice and Premiums in the
    2017 Health Insurance Marketplace,'' October 24, 2016, https://
    aspe.hhs.gov/sites/default/files/pdf/212721/2017
    MarketplaceLandscapeBrief.pdf.
        \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/530
    09-costsharingreductions.pdf.

          Establish a premium stabilization program to improve market
    stability: A federally funded premium stabilization program would
    offset some of the costs of patients who have the most complex health
    conditions and need the most care. This will put downward pressure on
    premiums and help keep coverage affordable for more healthy people who
    buy their own coverage. Depending on the size of the program, this
    could reduce premiums in the individual market by 10 percent or
    more.\4\ There has been broad bipartisan support in Congress for such
    efforts.
    ---------------------------------------------------------------------------
        \4\ Congressional Budget Office, ``Private Health Insurance
    Premiums and Federal Policy'' (page 16), February 2016, https://
    www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51130-
    Health_Insurance_Premiums.pdf.

          Provide relief from burdensome, anti-consumer taxes and fees
    that raise health care costs: Eliminating taxes and fees, such as the
    tax on health insurance, will reduce premiums and promote
    affordability. Congress provided relief from the health insurance tax
    for 2017, but it is slated to return next year. A recent Oliver Wyman
    study estimates that under current law, a total of $267 billion will be
    assessed and collected as a result of this tax over the next 10 years
    (2018-2027). The same study projects that stopping the tax on consumer
    health insurance would lower premiums by an average of $158 per member
    in 2018 in the individual market.\5\
    ---------------------------------------------------------------------------
        \5\ Oliver Wyman, ``Analysis of the Impacts of the ACA's Tax on
    Health Insurance in 2018 and Beyond,'' August 8, 2017, http://
    www.stopthehit.com/wp-content/uploads/2017/08/Oliver-Wyman-2018-HIT-
    Analysis%E2%80%8E-August-8-2017.pdf.

          Promote innovation and state flexibility: Many Governors and
    state insurance commissioners have called for more flexibility and
    control over their markets. This flexibility can be provided with
    improvements to the ACA's Section 1332 waiver process, including
    shortening the federal review time, creating a fast-track option, and
    establishing a process to waive the requirement for new state
    authorization legislation in an emergency. Changes to expedite the
    Section 1332 waivers should be balanced with requirements for state
    legislation within 2 years. Policymakers should maintain guardrails to
    ensure that 1332 waiver proposals provide coverage that is at least as
    comprehensive and as affordable for as many people as without the
    waiver and does not result in separate health insurance markets--one
    for healthy individuals and another for those with significant health
    ---------------------------------------------------------------------------
    conditions.

    We also want to highlight several additional policies and
    considerations that will help promote a more stable individual market
    for consumers and families:

          Ensure any legislative reforms are extended for an adequate
    duration: As Congress considers legislation to stabilize and reform the
    individual market, these proposals should span at least a 2-year period
    (i.e., through 2019). This would ensure that reforms are in place long
    enough to promote public confidence and allow adequate time for states
    and health plans to implement them. It will also avoid the need for
    Congress to revisit these issues in early 2018.

          Consider changes to premium tax credit eligibility to level the
    playing field: In states that did not expand Medicaid, Americans with
    incomes below 100 percent of the federal poverty level (FPL) do not
    receive premium tax credits to help them afford their coverage. These
    Americans should also have access to premium tax credits.

          Avoid policies that could further destabilize the individual
    market: Policymakers should avoid legislative proposals that would
    introduce new elements of risk for the individual market. For example,
    repealing the individual coverage requirement without a strong
    alternative incentive to maintain continuous coverage would drive up
    premiums, increase the number of Americans without health insurance
    coverage, and exacerbate adverse selection and market instability. As
    noted above, policies that seek to segment insurance markets and
    narrowly divide risk pools would also contribute to market instability,
    especially for individuals with greater health-care needs. Instead,
    policies that encourage personal responsibility and help keep coverage
    accessible, available, and continuous should be promoted.

    Regulatory Steps Also Are Needed, Along With Legislation, to Promote a
    Stable Market

    The following administrative actions, in tandem with legislative
    policies, will help promote a more stable individual market in 2018 and
    beyond:

          Continue to enforce the individual coverage requirement to
    promote a balanced risk pool: Insurance markets are strong and stable
    when everyone participates--those who need the coverage to access
    needed care as well as those who purchase coverage in case they need
    care in the future. If the coverage requirement under current law is
    not enforced, costs will increase while choices will decrease because
    fewer younger, healthier individuals will be incentivized to get
    coverage.

          Continue to conduct marketing, outreach, and education before
    and during open enrollment to ensure consumers understand their
    coverage options and encourage broader participation of healthy
    individuals: In addition to broad participation, stable health
    insurance markets require that consumers enroll for a full plan year
    and maintain 12 months of coverage, as opposed to enrolling only when
    they need care. Marketing, outreach, and education are critical to
    ensure that all consumers are aware of the upcoming open enrollment
    period, understand the new timeline, and enroll by the deadline. This
    is especially critical for 2018 open enrollment due to the new earlier
    deadline to enroll.

          Issue regulations regarding third party payments so health plans
    are not required to accept premium payments from entities with a
    financial interest in the enrollment, while improving transparency to
    allow payments from appropriate charities: Consumers should be enrolled
    in the health insurance program that best meets their needs, not
    because it offers higher payments to some providers. Those who are
    eligible for public programs (e.g., Medicare and Medicaid), which offer
    additional benefits and services, should not be inappropriately steered
    into the commercial insurance market and health plans should be
    permitted to reject third party payments in such situations. Similarly,
    prescription drug co-pay cards are decreasing overall affordability by
    promoting greater use of high-priced branded drugs where lower cost
    generic alternatives may be clinically appropriate.

          Extend prior coverage requirements to all special enrollment
    period (SEP) qualifying events to minimize inappropriate movement in
    and out of the individual market risk pool: Prior coverage is currently
    required for a limited number of qualifying events and is not
    sufficient to encourage consumers to maintain continuous coverage
    throughout the plan year. The Secretary should extend this requirement
    to all SEP qualifying events, with certain exceptions (e.g., newborns)
    and require state-based marketplaces to implement similar pre-
    enrollment verification of SEP eligibility.

          Prevent enrollment or reenrollment of Medicare enrollees in
    qualified health plans (OHPs) through the exchanges: While individuals
    enrolled in Medicare are not eligible to receive subsidies, they are
    currently not prevented from enrolling in coverage, or renewing
    coverage, through the exchanges. Inappropriate enrollment of Medicare-
    eligible beneficiaries in the individual market results in higher
    premiums for all individuals enrolled in the individual market. It also
    means Medicare beneficiaries could be paying for unnecessary or
    duplicative coverage and receiving tax credits for which they are not
    eligible and must repay upon filing taxes. The exchange should prevent
    enrollment or reenrollment of individuals enrolled in or eligible for
    Medicare and conduct periodic checks to identify current QHP enrollees
    who become eligible for or enroll in Medicare. This would ensure that
    consumers enroll in the program that is designed to meet their needs
    and avoid inappropriate payment of tax credits for ineligible
    enrollees.

          Change the rules around individual market dental coverage to
    ensure a streamlined shopping experience for consumers: The ACA
    requires coverage offered in the individual market to provide essential
    health benefits, including pediatric oral health benefits. Currently,
    families shopping in the Exchange for a dental benefit have several
    coverage choices and options between stand-alone dental plans and
    qualified health plans that embed this dental benefit, but this is not
    the case when shopping outside of the Exchange. To level the playing
    field for stand-alone dental plans with pediatric benefits, the same
    rules should be applied to Exchange plans and off-Exchange plans.

    Principles for Longer-Term Improvements to Ensure a Stable, Competitive
    Market

    Looking beyond the immediate and urgent priority of stabilizing the
    individual market, additional steps are needed to ensure a stable,
    competitive market that delivers real choice, high quality, and
    affordable care. When Congress resumes the debate on long-term health
    reform, we ask you to consider the following key principles.

    1.  Bring down the cost of care and coverage: As we discussed earlier,
    bold steps are needed to bring down the cost of care for families. More
    market competition, better coordination, using evidence-based medicine,
    and prioritizing value can deliver the affordable coverage and quality
    care that every American deserves.

    2.  Preserve a strong Medicaid program: The individual market and
    Medicaid are closely related with respect to the partial overlap in the
    populations they serve. For example, many low-wage employees do not
    have access to employer-
    sponsored coverage and need help accessing affordable coverage; if
    their incomes fall due to loss of employment or other reasons, Medicaid
    becomes an important safety net. Conversely, individuals with Medicaid
    who move up the economic ladder may lose eligibility and need
    affordable coverage in the individual market. Given how the two markets
    interact with respect to a diverse and often vulnerable population,
    Congress should ensure that federal policies are designed to ensure
    both the long-term stability and affordability of the individual market
    and continued strength and long-term sustainability of the Medicaid
    program, which delivers real value to more than 70 million Americans.
    This includes providing states with adequate resources to administer an
    efficient, effective program that helps beneficiaries improve their
    health.

    3.  Guarantee access to coverage for all Americans--including those
    with pre-existing conditions: No individual should be denied or priced
    out of coverage because of their health status. As modifications to
    existing insurance reforms are considered--e.g., such as greater state
    flexibility to adopt wider age-bands to make coverage more affordable
    to younger adults--those with pre-existing conditions should continue
    to be protected. To ensure coverage is more affordable for everyone,
    these protections must be coupled with strong incentives for
    individuals to maintain continuous coverage.

    4.  Implement more effective risk pooling programs: An improved and
    reformed risk-adjustment program and permanent federal funding for
    state-based risk pool programs, such as reinsurance, will improve risk
    sharing and deliver more market stability. The permanent risk pooling
    and mitigation programs in the Medicare prescription drug benefit (Part
    D) are another example that have been proven to work and promoted that
    program's success and high rates of beneficiary satisfaction.

    5.  Expand consumer control and choice: Consumers and patients need
    more control over their health care. Nearly 20 million Americans have
    Health Savings Accounts (HSAs) because they deliver affordable coverage
    and more consumer control. We need to expand HSAs so consumers can
    accumulate savings for the future, buy affordable coverage today, and
    take a more active role in making decisions about their care.

    6.  Promote state innovation and appropriate state flexibility:
    Consumers do not want one-size-fits-all approaches. That is why states
    should have more flexibility to develop affordable and lower premium
    individual market plans. Building upon any initial steps taken in the
    current short-term stabilization effort, the longer-term debate should
    focus on giving states additional flexibility around coverage
    requirements, state benchmarks, Section 1332 waivers, premium payment
    grace periods, risk pool mechanisms, and plan designs that promote
    innovations in care delivery, such as value-based insurance designs. We
    caution, however, that state flexibility should not come at the expense
    of consumers with pre-existing conditions or greater health needs and
    their coverage.

    7.  Preserve, protect, and expand employer-sponsored coverage:
    Employer-sponsored health benefits are essential to the American
    economy. This system serves as a bedrock of stability and encourages
    employers to offer robust health plans with low deductibles while
    allowing workers the freedom and flexibility to invest more money in
    their families and communities. The current tax treatment of employer-
    sponsored health benefits should not change. Strengthening and
    supporting employer-sponsored health benefits, rather than eroding or
    taxing them, should be a priority of the Congress.

    Conclusion

    We thank the committee for considering our recommendations on these
    critically important issues. While the individual health insurance
    market faces significant challenges, we are committed to helping
    advance solutions that deliver short-term stability and long-term
    improvement. We look forward to continuing to work with Congress in a
    good faith and bipartisan manner to improve and protect the health and
    financial security of consumers, families, businesses, communities and
    the nation.

                                     ______

              American Speech-Language-Hearing Association (ASHA)

                            2200 Research Boulevard

                         Rockville, Maryland 20850-3289

                           30l-296-5700 Voice or TTY

                                  www.asha.org

    I, Gail Richard, President of the American Speech-Language-Hearing
    Association (ASHA), appreciate the opportunity to provide comments to
    the Committee on health-care costs and coverage in the individual
    private health insurance market.

    ASHA is the national professional, scientific, and credentialing
    association for 191,500 members and affiliates who are audiologists;
    speech-language pathologists; speech, language, and hearing scientists;
    audiology and speech-language pathology support personnel; and
    students. Our members work in health-care settings to habilitate and
    rehabilitate the language, hearing, swallowing, cognition, and
    communications skills for individuals across the life span.

    Overview

    While policy provisions are needed to enhance the Health Insurance
    Marketplace (health insurance ``exchange'') it is critical that the
    efforts are focused on ensuring continued access to affordable, quality
    health care for consumers. In order to contain costs and provide
    meaningful, comprehensive coverage, the Marketplace, as well as
    insurers and providers contracting with private health plans, must have
    predictability and assurance that government requirements, regulations,
    and financial support will remain steady and secure.

    The unpredictability of the regulatory and financial environment makes
    stabilization of both costs and coverage difficult to achieve in the
    exchanges. However, expansions of coverage into every county in every
    state demonstrates the commitment of insurers and providers, including
    audiologists and speech-language pathologists, to meet the health-care
    needs of consumers. Therefore, Congress should continue to work with
    Governors and State Insurance Commissioners to ensure that all
    Americans have access to affordable health insurance coverage
    regardless of where they live.

    ASHA urges the Committee to take action to reform and improve the
    private health plan markets in order to meet the needs of the millions
    of Americans who rely on the exchanges for health insurance coverage.

    Cost Considerations

    Cost-Sharing Reductions. Uncertainty about continued funding for cost-
    sharing reductions (CSRs) is contributing significantly to market
    uncertainty and volatility. If these subsidy payments cease, insurers
    would withdraw from the market to avoid financial losses, which would
    leave their enrollees without coverage. The most significant way that
    the Trump Administration and Congress can help to stabilize the
    exchanges is to commit long-term funding to CSRs. Cost sharing
    subsidies are necessary to make health-care services affordable for
    individuals with low income, and to stabilize the exchanges.

    Reinsurance. ASHA suggests Congress consider extending the reinsurance
    program through 2019 to help stabilize the exchanges. The goal of the
    Patient Protection and Affordable Care Act's (ACA's) temporary
    reinsurance program was to stabilize premiums during the early years of
    new market reforms (e.g., guaranteed issue). The reinsurance program
    transfers funds to individual market insurance plans with higher-cost
    enrollees. This reduces the incentive for insurers to charge higher
    premiums due to new market reforms that guarantee the availability of
    coverage regardless of health status. As reinsurance is based on actual
    cost rather than predicted, reinsurance payments will also account for
    low-risk individuals who may have unexpectedly high costs (such as
    costs incurred due to an accident or sudden onset of an illness).

    Section 1332 Waivers. ASHA agrees that states can develop innovative
    approaches with the potential to strengthen health insurance for all
    Americans. An example is the current Administration's approval of
    Alaska's 1332 waiver to implement the Alaska Reinsurance Program for
    2018 and future years. Under Alaska's Reinsurance Program, Premera, the
    state's only exchange insurer, filed for a 7.3% premium increase for
    2017 (down from the estimated 42%). Several other states are also
    pursuing a 1332 waiver proposal for reinsurance. For example, Oregon
    passed H.B. 2391 to fund a reinsurance program and is now applying for
    a 1332 waiver to leverage funding. To leverage state flexibility to
    meet their residents' needs, Oregon also passed H.B. 2342, which gives
    the State's Department of Consumer and Business Services emergency
    powers to enact market stabilization rules if the life or health of
    Oregonians are threatened. Essential Health Benefits (EHBs) are
    consumer protections that cannot be undermined and would be saved
    through this emergency order.

    Pre-Existing Condition/Continuous Coverage. ASHA is aware that the
    Administration and Congress have expressed an interest in deciding
    whether the policies that promote continuous enrollment in health
    insurance coverage are a necessity. Currently, the ACA insurance market
    reforms do not require the maintenance of continuous, creditable
    coverage in order to avoid pre existing condition exclusions; nor does
    it impose waiting periods in order for an individual to enroll and use
    Marketplace health insurance coverage. ASHA advises against the
    development of policies that link pre-existing condition exclusions to
    a continuous coverage requirement.

    Under a continuous coverage requirement, individuals who miss a one-
    time open enrollment period and/or those who experience a period of
    being uninsured, could face medical underwriting without limits, which
    would effectively lock many of these individuals out of affordable
    coverage. Middle and lower-income individuals are more likely to have
    gaps in insurance coverage due to changing employment, life, and/or
    financial circumstances. They are the least likely to be able to pay
    for medically underwritten coverage that would have higher premiums,
    fewer covered benefits, higher cost-sharing requirements, or a
    combination of all. As a result, they are the most vulnerable to
    becoming uninsured and going without access to care under a continuous
    coverage requirement. For example, an individual who has a pre-existing
    condition, which might affect their ability to maintain employment for
    a certain period due to a health crisis, could lose coverage as a
    direct result of their pre-existing condition. Their pre-existing
    condition could make it impossible for them to maintain employment;
    thus, making it impossible to maintain coverage.

    Coverage Considerations

    Essential Health Benefits: Coverage for Rehabilitative and Habilitative
    Services and Devices. The ACA's requirement that individual and small
    group markets cover EHBs in 10 benefit categories ensures that patients
    have access to basic coverage. ASHA strongly supports the preservation
    of the EHBs, particularly the EHB category of rehabilitative and
    habilitative services and devices. Rehabilitation services and devices
    are essential in helping Americans retain, improve, or reacquire skills
    and functions that may have been lost or diminished due to an injury,
    illness, or disability. Americans who need habilitation services and
    devices rely on their health-care coverage to: (a) acquire skills and
    functions that were never learned due to a disability, and (b) retain
    those skills so that they can live as independently as possible.

    One of the criticisms of the EHB requirement is that it significantly
    increases premiums. However, evidence suggests that factors such as
    community ratings may actually have more of an impact on premiums than
    EHBs. Moreover, Milliman provides an estimate of the total cost of
    providing selected hearing services, speech-
    language therapy, and hearing supplies, devices, and related
    professional services, in a commercial employer group population,
    noting a utilization rate of approximately one per thousand, with per
    member per month premium costs of approximately $1.48 for 2014. These
    estimates are based on current levels of coverage, eligibility and
    benefit design. An analysis from the Urban Institute and the Robert
    Wood Johnson Foundation indicates that EHBs covered under the ACA, if
    removed, will not trim the cost of monthly premiums by very much.
    Instead, they would add a considerable, if not insurmountable, increase
    in costs, which would be assumed by policyholders. According to the
    analysis, rehabilitative and habilitative care represent only 2% of the
    premium. ASHA remains steadfast in its support for the continued
    coverage of rehabilitative and habilitative services and devices within
    the individual insurance market.

    Conclusion

    ASHA appreciates the Committee's attention to this important issue.
    Currently, more than 18 million Americans rely on the exchange plans to
    meet their health insurance needs and more than a 100 million more in
    private health plans are impacted by the structure, requirements, and
    general stability of the exchanges.

    Thank you for the opportunity to provide this statement for the record.
    ASHA looks forward to continuing to work with the Committee and
    Congress to find an enduring solution to affordable health-care
    coverage for all Americans. For more information, please contact
    Ingrida Lusis, ASHA's director of federal and political advocacy, 202-
    624-5951 or ilusis@.asha.org.

                                     ______

           Asian and Pacific Islander American Health Forum (APIAHF)

                          1629 K Street, NW, Suite 400

                              Washington, DC 20006

    The Asian and Pacific Islander American Health Forum (APIAHF) submits
    this written testimony for the record for the September 12, 2017
    hearing before the Senate Committee on Finance entitled ``Health Care:
    Issues Impacting Cost and Coverage.''

    We believe it is time for Congress to put aside attempts to repeal the
    Affordable Care Act (ACA) and instead take needed steps to ensure that
    all Americans are able to afford and access health insurance that meets
    their needs. APIAHF is the nation's leading policy organization working
    to advance the health and well-being of over 20 million Asian Americans
    (AA), Native Hawaiians and Pacific Islanders (NHPI) across the U.S. and
    territories. From our work with AA and NHPI communities, we understand
    the role the ACA has played in improving access to health insurance.
    Since 2010, the uninsured rate has fallen from 15.1 percent to 7.5
    percent in 2015 for AAs and from 14.5 percent to 7.8 percent for NHP
    is, higher than any other racial group.\1\
    ---------------------------------------------------------------------------
        \1\ American Community Survey Table S0201 (2010 and 2015 1 year
    estimates).
    ---------------------------------------------------------------------------

    Fund Consumer Outreach and Assistance

    The results of the ACA's four open enrollment periods have demonstrated
    that health insurance enrollment is not always straight forward
    particularly for populations who may never have had coverage before,
    are new to private coverage or the U.S. health-care system, and/or have
    limited English proficiency or health literacy. These communities, due
    to higher poverty, lower English proficiency levels and other
    disparities, face barriers to both knowledge about their health
    insurance options and more complex eligibility scenarios when they
    enroll. For example, 47 percent of uninsured eligible AAs and NHPIs
    were limited English proficient before the first ACA open enrollment
    period.\2\
    ---------------------------------------------------------------------------
        \2\ Wendt, Minh et al., ``Eligible Uninsured Asian Americans,
    Native Hawaiians, and Pacific Islanders: 8 in 10 Could Receive Health
    Insurance Marketplace Tax Credits, Medicaid, or CHIP,'' Department of
    Health and Human Services Offices of Minority Health and the Assistant
    Secretary for Planning and Evaluation (March 18, 2014), https://
    aspe.hhs.gov/system/files/pdf/180311/rb_UninsuredAANHPI.pdf.

    Since 2012, APIAHF and partners have outreached to, educated, and
    enrolled nearly 1 million AAs and NHPIs in more than 56 languages
    through Action for Health Justice, a national collaborative of more
    than 70 AA and NHPI national and local
    community-based organizations and health centers. We and our partners
    have seen firsthand that assistance is critical to encouraging
    enrollment, particularly for younger and healthier populations who may
    not seek out health insurance by themselves.\3\ The Navigator program,
    in particular, plays a critical role in providing enrollment assistance
    to populations who would otherwise not know about the ACA or have the
    knowledge or skills needed to enroll in coverage. In this way, the
    Navigator program helps to ensure stable marketplaces by maximizing
    enrollment. Therefore, we urge Congress to robustly fund Navigators and
    other outreach, enrollment assistance and advertising efforts by the
    U.S. Department of Health and Human Services. Congress should ensure
    that, in addition to improved funding for outreach and enrollment, CMS
    specifically uses some of those funds for outreach to racial and ethnic
    minorities and to those who are limited English proficient.
    ---------------------------------------------------------------------------
        \3\ Asian and Pacific Islander American Health Forum et al.,
    ``Improving the Road to ACA Coverage: Lessons Learned on Outreach,
    Education, and Enrollment for Asian American, Native Hawaiian, and
    Pacific Islander Communities'' (September 2014), http://www.apiahf.org/
    sites/default/files/
    2014.10.14_Improving%20the%20Road%20to%20ACA%20Coverage_National%20
    Report.pdf.
    ---------------------------------------------------------------------------

    Permanently Fund Cost Sharing Reduction Payments

    The ACA's Cost Sharing Reductions (CSR) for lower-income consumers in
    the marketplace have been critical to ensuring deductibles and copays
    are not barriers to care for those who cannot afford them. Sixty-five
    percent of AAs and 70 percent of NHPIs uninsured in 2010 and eligible
    by income for subsidies, were also eligible for CSRs.\4\ The
    Congressional Budget Office estimates that ending CSR payments to
    insurance companies would add uncertainty in the insurance market and
    increase premiums by as much as 25 percent, particularly for
    unsubsidized consumers.\5\ Congress must take immediate action to
    permanently appropriate funds for CSR payments.
    ---------------------------------------------------------------------------
        \4\ APIAHF calculation of 2010 ACS PUMS data.
        \5\ Congressional Budget Office, ``The Effects of Terminating
    Payments for Cost-Sharing Reductions'' (August 15, 2017), https://
    www.cbo.gov/publication/53009.
    ---------------------------------------------------------------------------

    Improving Affordability

    While the ACA has led to nearly 20 million people gaining coverage,
    including 11 million from communities of color, we still have work to
    do to make sure health insurance is affordable for everyone.\6\ Many AA
    and NHPI groups struggle with poverty compared to whites. For example,
    Pakistanis (16.6 percent poverty rate), Hmong (26.1 percent poverty
    rate), and Marshallese (40.6 percent poverty rate) all had higher rates
    of poverty compared to whites (12.9 percent) in 2015.\7\ Given these
    continuing barriers, Congress should take a number of steps to improve
    affordability in the private market:
    ---------------------------------------------------------------------------
        \6\ Bowen, Garrett and Anuj Gangopadhyaya, ``Who Gained Health
    Insurance Coverage Under the ACA, and Where Do They Live?'', Urban
    Institute (December 2016), http://www.urban.org/sites/default/files/
    publication/86761/2001041-who-gained-health-insurance-coverage-under-
    the-aca-and-where-do-they-live.pdf.
        \7\ APIAHF analysis of 2015 ACS data.

          Resolve the ``Family Glitch'' that bars access to tax credits to
    families where employer sponsored insurance is affordable for
    ---------------------------------------------------------------------------
    individual policies but unaffordable for dependent coverage.

          Increase access to lower deductible plans, such as by increasing
    the value of tax credits for higher metal plans or by increasing the
    income threshold eligibility for cost sharing reductions.

          Create a stabilization fund that offsets the risks of expensive
    patients for insurance companies, encouraging greater competition in
    the marketplace.

    Renew Funding for the Children's Health Insurance Program (CHIP)

    Funding for CHIP expires on September 30, 2017. We urge Congress to
    fund CHIP for 5 years, as recommended by the Medicaid and CHIP Payment
    and Access Commission, with no policy riders reducing access to health
    care.\8\ Failing to continue CHIP funding will put 3.7 million children
    at risk of losing their CHIP coverage.\9\ CHIP is an important program
    for AA and NPHI communities, and alongside Medicaid, covers 28 percent
    of AA children and 40 percent of NHPI children. In large part due to
    these programs, AA and NHPI kids have achieved a 95.9 percent insured
    rate.\10\ Access to quality medical and preventive care through CHIP is
    essential for children from these communities. For example, the rate of
    new diagnoses of Type 2 Diabetes in Asian American and Pacific Islander
    children rose 8.5% annually between 2002-2012, compared to 4.8% amongst
    all youth.\11\
    ---------------------------------------------------------------------------
        \8\ Medicaid and CHIP Payment and Access Commission, ``MACPAC
    Recommends 5-Year CHIP Funding Extension'' (December 15, 2016), https:/
    /www.macpac.gov/news/macpac-recommends-5-year-chip-funding-extension/.
        \9\ Medicaid and CHIP Payment and Access Commission, ``Report to
    Congress on Medicaid and CHIP'' (March 2017), https://www.macpac.gov/
    wp-content/uploads/2017/03/March-2017-Report-to-Congress-on-Medicaid-
    and-CHIP.pdf.
        \10\ Elizabeth Cornachione, et al., ``Children's Health Coverage:
    The Role of Medicaid and CHIP and Issues for the Future,'' Kaiser
    Family Foundation (June 27, 2016), http://www.kff.org/health-reform/
    issue-brief/childrens-health-coverage-the-role-of-medicaid-and-chip-
    and-issues-for-the-future/.
        \11\ Lenna L. Liu, MD, MPH, et al., ``Type 1 and Type 2 Diabetes in
    Asian and Pacific Islander U.S. Youth,'' Diabetes Care, Vol. 32 (Suppl.
    2) (March 2009), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2647693/.

    As health-care leaders, we look to Congress to ensure consumers are
    able to find and enroll in affordable health coverage. In addition to
    these priorities, we strongly believe that civil rights in health care
    must be protected. As Congress works to improve the stability of the
    health insurance markets, we urge you to also continue to ensure access
    to health care is not denied due to discrimination on the basis of
    race, gender, national origin, gender identity, sexual orientation, or
    age. Congress must conduct strong oversight to ensure that existing
    federal civil rights protections, including Section 1557 of the ACA and
    ---------------------------------------------------------------------------
    Title VI of the Civil Rights Act of 1964, among others, are enforced.

    For questions, contact Amina Ferati, Senior Director of Government
    Relations and Policy, aferati@apiahf.org (202-466-3550).

                                     ______

                       Blue Cross Blue Shield Association

    The Blue Cross Blue Shield Association (BCBSA) appreciates the
    opportunity to comment on issues impacting health-care cost and
    coverage and what can be done to stabilize premiums and help
    individuals purchase coverage in the individual health insurance
    market.

    BCBSA is a national federation of 36 independent, community-based and
    locally operated Blue Cross and Blue Shield companies that collectively
    provide health-care coverage for one in three Americans. BCBS companies
    have an 85-year history providing coverage across all markets in their
    local communities and are major providers of health coverage in the
    individual market and in the majority of Exchanges.

    BCBSA commends Chairman Hatch, Ranking Member Wyden, and other members
    of the Senate Finance Committee for holding this important hearing on
    issues impacting health-care cost and coverage.

    BCBS companies believe that Americans are best served by a competitive
    private health insurance market that offers consumers the choices they
    want at a price they can afford. Over the past decade, there have been
    great strides in expanding access to health insurance, but premiums and
    out-of-pocket costs are too expensive for many Americans, particularly
    in the individual market. It is critical that policymakers take action
    to stabilize the individual insurance market; return more authority to
    the states; and focus directly on addressing the underlying drivers of
    health-care costs, which are rising at unsustainable levels for
    individuals, families, employers, and taxpayers.

    Current Challenges Facing the Individual Market

    The individual market today is facing significant challenges and
    uncertainty. Premiums and cost-sharing have increased dramatically and
    consumers will have fewer health insurance options in 2018. The
    national average premium for a silver plan in 2017 for a 50-year old
    non-smoker is $6,888--about 29 percent higher than 2015--with advance
    premium tax credits covering about 80 percent for those who are
    eligible.\1\
    ---------------------------------------------------------------------------
        \1\ HealthPocket 2015, https://www.healthpocket.com/healthcare-
    research/infostat/early-trends-2015-obamacare-premiums#.WahaYT6GMnQ.
    HealthPocket 2017, https://www.health
    pocket.com/healthcare-research/infostat/2017-obamacare-premiums-
    deductibles#.WahTvD6GN
    EY.

    Today, about 84 percent of individuals who purchase coverage on the
    Exchanges get advance premium tax credits, while approximately 57
    percent get help with out-of-pocket costs like deductibles and copays
    through the Cost Sharing Reduction (CSR) program.\2\ The CSR program
    serves millions of working, middle-income families making up to $60,750
    for a family of four who otherwise cannot afford to pay deductibles
    that average around $7,500 for a silver plan if they do not have the
    benefit of CSRs.
    ---------------------------------------------------------------------------
        \2\ CMS 2017, Effectuated Enrollment Snapshot, https://
    downloads.cms.gov/files/effectuated-enrollment-snapshot-report-06-12-
    17.pdf.

    However, nearly half of enrollees in the individual market do not
    qualify for premium tax credits. This contrasts with the employer
    market, where the average employer contribution was more than 82
    percent for self-only coverage and 71 percent for family coverage in
    2016.\3\ As costs rise in the individual market, more of those who
    purchase coverage on their own are no longer able to afford health
    insurance and are forced to find other sources of coverage or go
    uninsured. The major driver of rising premiums is the cost of covering
    people with significant medical needs. While the ACA took an important
    step by providing access to everyone regardless of medical condition in
    the individual market, the cost of individuals enrolled in the
    individual market has increased substantially given the lack of an
    adequate balance of people enrolled to assure affordable premiums.
    Health-care costs for new individual market enrollees were on average
    19 percent higher than the group market in 2014 and 22 percent higher
    in 2015.\4\ Individual enrollees also had higher rates of certain
    conditions--such as hypertension, diabetes, depression, coronary artery
    disease, human immunodeficiency virus (HIV), and Hepatitis C--as well
    as higher use of medical services across all sites of care (e.g.,
    inpatient, emergency, prescriptions, etc.).\5\
    ---------------------------------------------------------------------------
        \3\ Kaiser/HRET 2016, Employer Health Benefits Survey, http://
    kff.org/report-section/ehbs-2016-summary-of-findings/.
        \4\ BCBSA Health of America Report, March 2016.
        \5\ Id.

    Insurers have faced significant regulatory uncertainty and higher-than-
    expected risks, which has directly led to financial losses. In 2015,
    insurers lost $6.6 billion on individual ACA coverage--$495 per person
    per year. While there was slight improvement in 2016, insurers still
    lost $4.7 billion or $310 per person per year.\6\ In this environment,
    fewer insurers are participating. As a result, consumers will have
    access to only one health insurer in more than 40 percent of U.S.
    counties in 2018. By comparison, in 2014, only 17 percent of counties
    had only one insurer offering coverage in the Marketplaces, and nearly
    50 percent of counties had three or more insurers participating.
    ---------------------------------------------------------------------------
        \6\ NAIC Supplemental Health Care Exhibits for 2016 and 2013. Does
    not include entities that file exclusively with the CA Department of
    Managed Healthcare.

    Immediate Action Needed to Stabilize the Individual Health Insurance
    ---------------------------------------------------------------------------
    Market

    In light of these challenges, Congress and the Administration must take
    immediate steps to stabilize the individual health insurance market and
    make it more affordable for consumers. This includes:

      Providing immediate clarity on cost-sharing reductions. Congress
    should act immediately to provide certainty about funding for the CSR
    program, at least through 2019, in order to bring down premiums,
    increase choice and competition among insurers and decrease costs for
    taxpayers. Failure to provide immediate clarity on CSRs would further
    destabilize the market--not only for the nearly 6 million people who
    rely on CSRs, but also for all 18 million people in the individual
    market who could see premiums rise by as much as 20 percent according
    to some estimates. It would also cost taxpayers $2.3 billion more in
    2018 as federal expenditures for tax credits increase.

      Ensuring a smooth and effective Open Enrollment period for 2018.
    Beginning on November 1st--less than 2 months from now--17 million
    Americans will begin re-enrolling in coverage in the individual market
    for 2018. Aggressive outreach to consumers is critical to a successful
    Open Enrollment period.

    BCBSA believes all Americans should be able to obtain health insurance
    regardless of any medical conditions. However, in order to have an
    affordable health insurance system in which everyone can obtain
    coverage regardless of their health status, there must be a balance
    among those enrolled that includes healthier individuals along with
    those who need significant care. Congress and the Administration should
    take steps that will make the market more affordable and sustainable by
    assuring:

      Broad-based funding for those with significant medical needs. Five
    percent of people who buy coverage in the individual market now
    represent almost 60 percent of health care claims' costs. A sustained
    federal funding mechanism to support the cost of caring for those with
    serious health conditions is essential to make premiums more affordable
    for everyone. A $3 billion federal investment would fund a $15 billion
    dollar program for those with costly medical needs that would reduce
    premiums by about 15 percent.\7\
    ---------------------------------------------------------------------------
        \7\ Oliver Wyman recently reported that a $15-billion reinsurance
    program would be about 80 percent offset by savings in tax credit
    expenditures, http://health.oliverwyman.com/transform-care/2017/08/
    analysis_impact_of.html.

      Reduced ACA taxes and fees, including a permanent repeal of the
    health insurance tax (HIT). In 2018, the HIT is estimated to add $500
    ---------------------------------------------------------------------------
    to the cost of a family policy.

      State flexibility to stabilize markets, increase choices, and lower
    costs. States best understand their local health-care markets and are
    in the best position to protect consumers and ensure insurance plans
    meet their needs. We support making it easier for states to innovate to
    establish more flexible rules and foster a more competitive and stable
    market for health insurance that expands access to comprehensive
    coverage with adequate federal funding.

      Tax credits and rating rules encourage a balanced risk pool. In
    order to create a more balanced mix of enrollees and bring down costs,
    it is critical that premiums be made more affordable for everyone,
    especially younger, healthier people who may not value health
    insurance. The current 3 to 1 age rating limitation requires younger
    consumers to pay much more on average in premiums than they spend on
    medical care. Rating rules that give younger people more value for
    their premium dollar would help create a more balanced risk pool and
    would lower costs for everyone. At the same time, Congress should age-
    adjust the premium tax credits to encourage younger people to buy
    coverage. It is important that tax credits remain sufficiently funded
    and adjusted for income and geography to help those with moderate
    incomes and in higher-cost areas purchase coverage.

      Stable, fair, and less burdensome regulations. Health insurers, like
    any other business, cannot operate sustainably or offer affordable
    products under continually changing governing rules. The rules and
    regulations governing the individual market should be streamlined and
    finalized with sufficient time for health plans to incorporate changes
    into products and pricing.

    Avoiding Actions That Cause Additional Harm

    At the same time, it is also critical to avoid any actions that may
    disrupt the market for comprehensive coverage. For example, Congress
    and the Administration should take steps to ensure:

      Powerful incentives for individuals to maintain continuous coverage.
    It is important for people to maintain coverage throughout the year.
    Those who do not stay covered continuously drive up costs for everyone
    because they buy coverage when they need medical care and then often
    drop it again. Under current law, the individual mandate is the key
    incentive for individuals to maintain coverage. While the individual
    mandate has not been fully effective in ensuring individuals maintain
    coverage year-round, it should be enforced unless and until Congress
    can enact a package of reforms to adequately assure a balanced risk
    pool.

      No market disruption from entities that are exempt from
    comprehensive insurance rules. Policymakers should not undermine the
    individual market by promoting the use of health care sharing
    ministries, individual membership associations, or other entities that
    are not subject to the comprehensive regulations that now apply to
    individual health insurance. To assure effective competition and
    prevent adverse selection, requirements must apply equally to all
    competitors selling insurance in the market. In addition, it is
    critical that product lines such as short-term limited-duration
    insurance continue to be regulated in a manner that prevents adverse
    selection while allowing them to meet the needs of persons with true
    short-term needs.

      Patients are enrolled in the appropriate insurance program and
    insurers are not forced to accept premium payments from financially
    interested third parties. Health plans are seeing substantial increases
    in financially interested providers inappropriately steering patients
    from Medicare and Medicaid to private individual coverage to boost
    their own reimbursement. This practice results in higher premiums for
    everyone else.

    Promoting Policies That Bend the Cost Curve

    While the health-care debate in Washington has focused mainly on
    coverage issues over the last 8 years, there is an urgent need to shift
    attention to addressing the cost of care. The U.S. is spending more
    than $3 trillion a year on health care, straining budgets for families,
    businesses, and taxpayers. The cost of medical care, which includes
    caring for chronic or long-term medical conditions and the rising cost
    of prescription drugs, is the single biggest factor behind overall U.S.
    health-care costs, accounting for 90 percent of spending. To improve
    affordability--which will benefit all stakeholders, including states
    that seek to reform their health-care markets--we recommend the
    following:

      Accelerate away from fee-for-service (FFS) to new payment and
    delivery models that incentivize value. BCBS companies are spearheading
    innovative approaches to rewarding providers not for volume but for
    achieving good outcomes. The federal government should create and
    sustain an environment that promotes, rather than hinders, private
    sector experimentation by giving private sector payers flexibility in
    aligning their innovative models with Medicare payment reforms,
    strengthening Medicare Advantage, and creating safe harbors for payers,
    providers, and suppliers who implement innovative models.

      Enable providers to provide value-based care, especially in new
    delivery models (e.g., medical homes, ACOs), through data-rich tools
    and analysis. Policymakers should advance interoperability by giving
    top priority to advancing a use case for reciprocal exchange of
    integrated clinical and administrative data between payers and
    providers, eliminating barriers to exchanging data, and empowering
    providers with actionable data will enable providers--working in
    partnership with payers--to make better decisions that improve
    patients' outcomes.

      Leverage consumers' power to drive change and make health-care
    choices that best fit their needs. Policies like expanding HSAs and
    giving payers more room to innovate with value-based insurance designs
    will help steer consumers towards high-value providers. It is critical
    that private payers, not government, take the lead in giving consumers
    clear, meaningful information about local price variation, cost-
    sharing, quality metrics and other factors to choose providers that
    will deliver the best care at the best price for them.

      Address the key drivers of health-care costs. Accelerating drug
    spending, site of care payment imbalances, defensive medicine, and
    anticompetitive provider consolidation are major cost drivers that need
    to be remedied. For drugs, this includes providing greater transparency
    into drug valuation, promoting competitive practices such as shortened
    exclusivity periods, and ensuring flexibility in formulary design. For
    site of care, this includes equalizing public and private payments to
    ensure payers do not spend more for the same treatments in different
    settings. For defensive medicine, this includes medical malpractice
    reform. And for consolidation, this includes rigorous enforcement of
    anticompetitive behaviors, and safeguarding against policies that could
    lead to further provider concentration that drives up costs.

    Conclusion

    The individual market continues to face significant pressures and
    uncertainty--making health insurance more expensive for everyone and
    resulting in limited consumer choice as fewer insurers and consumers
    participate in the market. Keeping premiums affordable is crucial to
    increasing participation and coverage among healthier individuals who
    help balance the overall risk pool and stabilize the market. BCBSA
    urges Congress to take immediate action to stabilize the individual
    market and make it more affordable and sustainable for consumers.

                                     ______

                            Center for Fiscal Equity
    Chairman Hatch and Ranking Member Wyden, thank you for the opportunity
    to submit these comments for the record to the Committee on Finance. As
    usual, we will preface our comments with our comprehensive four-part
    approach, which will provide context for our comments.

          A Value-Added Tax (VAT) to fund domestic military spending and
    domestic discretionary spending with a rate between 10% and 13%, which
    makes sure very American pays something.

          Personal income surtaxes on joint and widowed filers with net
    annual incomes of $100,000 and single filers earning $50,000 per year
    to fund net interest payments, debt retirement and overseas and
    strategic military spending and other international spending, with
    graduated rates between 5% and 25%.

          Employee contributions to Old-Age and Survivors Insurance (OASI)
    with a lower income cap, which allows for lower payment levels to
    wealthier retirees without making bend points more progressive.

          A VAT-like Net Business Receipts Tax (NBRT), which is
    essentially a subtraction VAT with additional tax expenditures for
    family support, health care and the private delivery of governmental
    services, to fund entitlement spending and replace income tax filing
    for most people (including people who file without paying), the
    corporate income tax, business tax filing through individual income
    taxes and the employer contribution to OASI, all payroll taxes for
    hospital insurance, disability insurance, unemployment insurance, and
    survivors under age 60.

    Under our proposal, Medicare, Medicaid, and subsidies for private
    insurance will be through the Net Business Receipts Tax (or Subtraction
    VAT). This would also include the unearned income payroll taxes passed
    as part of the Affordable Care Act.

    Unlike a VAT, an NBRT would not be visible on receipts and should not
    be zero rated at the border--nor should it be applied to imports. While
    both collect from consumers, the unit of analysis for the NBRT should
    be the business rather than the transaction. As such, its application
    should be universal--covering both public companies who currently file
    business income taxes and private companies who currently file their
    business expenses on individual returns.

    The key difference between the two consumption taxes is that the NBRT
    should be the vehicle for distributing tax benefits for families,
    particularly the Child Tax Credit, the Dependent Care Credit, and the
    Health Insurance Exclusion, as well as any recently enacted credits or
    subsidies under the ACA. In the event the ACA is reformed, any
    additional subsidies or taxes should be taken against this tax (to pay
    for a public option or provide for catastrophic care and Health Savings
    Accounts and/or Flexible Spending Accounts).

    Employees would all be covered and participants in government funded
    remedial education programs would receive coverage and tax credits
    through the training providers health plan as if they were employees.
    No more separate Medicaid programs for the poor who are able to learn
    or work.

    The NBRT would replace disability insurance, hospital insurance, the
    corporate income tax, business income taxation through the personal
    income tax and the mid-range of personal income tax collection,
    effectively lowering personal income taxes by 25% in most brackets.

    Note that collection of this tax would lead to a reduction of gross
    wages, but not necessarily net wages--although larger families would
    receive a large wage bump, while wealthier families and childless
    families would likely receive a somewhat lower net wage due to loss of
    some tax subsidies and because reductions in income to make up for an
    increased tax benefit for families will likely be skewed to higher
    incomes.

    For this reason, a higher minimum wage is necessary so that lower-wage
    workers are compensated with more than just their child tax benefits.

    We believe that our current insurance system adds no value to health
    care. Theoretically, insurance pools everyone's costs and divides them
    up with everyone paying a monthly share, regardless of the risk they
    pose.

    The profit motive has given us differential premiums based on risk and
    age. Indeed, the age-based premiums in the last attempted health reform
    were so unaffordable to older Americans in individual plans that the
    bill could not pass the Senate. Single payer plans, funded through the
    NBRT, would not have this feature and insurance companies doing claim
    processing for the government would be paid an adequate profit with
    little risk.

    Short of that, an NBRT subsidized Public Option would allow sicker,
    poorer, and older people to enroll for lower rates, allowing some
    measure of exclusion to private insurers and therefore lower costs. Of
    course, the profit motive will ultimately make the exclusion pool grow
    until private insurance would not be justified, leading-again to Single
    Payer if the race to cut customers leads to no one left in private
    insurance who is actually sick.

    The NBRT can provide an incentive for cost savings if we allow
    employers to offer services privately to both employees and retirees in
    exchange for a substantial tax benefit, either by providing insurance
    or hiring health-care workers directly and building their own
    facilities. Employers who fund catastrophic care or operate nursing
    care facilities would get an even higher benefit, with the proviso that
    any care so provided be superior to the care available through
    Medicaid. Making employers responsible for most costs and for all cost
    savings allows them to use some market power to get lower rates, but no
    so much that the free market is destroyed.

    This proposal is probably the most promising way to arrest health-care
    costs from their current upward spiral--as employers who would be
    financially responsible for this care through taxes would have a real
    incentive to limit spending in a way that individual taxpayers simply
    do not have the means or incentive to exercise.

    While not all employers would participate, those who do would
    dramatically alter the market. In addition, a kind of beneficiary
    exchange could be established so that participating employers might
    trade credits for the funding of former employees who retired
    elsewhere, so that no one must pay unduly for the medical costs of
    workers who spent the majority of their careers in the service of other
    employers.

    Thank you for the opportunity to address the committee. We are, of
    course, available for direct testimony or to answer questions by
    members and staff.

                                     ______

                  National Association of Manufacturers (NAM)

                         733 10th Street, NW, Suite 700

                              Washington, DC 20001

        Chairman Hatch, Ranking Member Wyden, and members of the committee,
    thank you for the opportunity to submit a statement about the issues
    impacting the cost and coverage of health care. The National
    Association of Manufacturers (NAM) appreciates the effort you are
    undertaking to bring attention to ongoing health-care issues.

        On behalf of the NAM, the nation's largest industrial trade
    association and the voice of 12 million men and women who make things
    in America, I am writing to urge continued action on issues left
    unresolved during the Senate's July consideration of legislation on
    health care. The Senate Committee on Finance have held many critical
    hearings and discussions on health care and today's hearing is an
    important signal to those impacted by escalating health-care costs.

        Manufacturers continually rank rising health-care and premium costs
    as a top business challenge. The past several years under the Patient
    Protection and Affordable Care Act (ACA) has made it more difficult and
    costly to provide these important health-care benefits. Over 175
    million Americans--nearly half of the nation--rely on employer-
    sponsored health coverage. As leading health-care stakeholders,
    employers continue to face increasing health-care costs, partially
    driven by the ACA. The permanent elimination of the medical device tax,
    the health insurance tax, the pharmaceutical tax, and Cadillac tax
    would go a long way to assist manufacturers in helping to contain
    costs.

        Earlier this year, NAM board member Joe Eddy from Eagle
    Manufacturing testified before the House Committee on Education and the
    Workforce and offered an important manufacturing perspective related to
    health-care costs and coverage. The taxes, paperwork, fees, and
    mandates under the ACA cost Eagle almost $1,000 per year per employee,
    not including the hiring of an additional human resources professional
    to manage health care and new requirements. Additionally, coverage
    changes were part of the many shifts brought about by the ACA according
    to Mr. Eddy's testimony. Health-care choices available to manufacturers
    and other business owners became more limited in certain regions,
    further adding to costs and uncertainty. Unfortunately, Eagle's
    experience is all too familiar for many manufacturers and employers
    around the country. For consideration of your committee, a copy of Mr.
    Eddy's testimony is attached to this statement and I request its
    inclusion for the record because it strongly resonates with the goals
    of today's hearing.

        In the absence of positive legislative action that corrects the
    many failings of the ACA, the health insurance tax (HIT) and the
    medical device tax will go into effect in 2018 and the Cadillac tax in
    2020. According to an August 2017 report by Oliver Wyman,\1\ the HIT
    could raise the cost of premiums by an additional $540 for employees'
    families receiving health benefits from fully insured larger employers.
    Small business owners and their employees could shoulder an additional
    $500 for family coverage as a result of the HIT. Manufactures believe
    immediate relief from the HIT is in order.
    ---------------------------------------------------------------------------
        \1\ http://health.oliverwyman.com/transform-care/2017/08/
    analysis_HIT_impact.html.

        Similarly, 2-year relief of the onerous 2.3-percent excise tax on
    medical devices is soon to expire at the end of 2017 and full repeal of
    this tax is urgently needed. The temporary suspension of the medical
    device tax was smart policy in 2015. Unfortunately, it took thousands
    of job losses and adverse economic and competitiveness impacts to the
    medical device industry to temporarily reverse this misguided ACA tax 2
    years ago. Manufacturers urge the Senate not to wait and repeal the
    ---------------------------------------------------------------------------
    medical device tax before the end of the year.

        The negative impacts of the 40-percent excise tax on high-cost
    health-care plans are well documented.\2\ While this tax on employee
    benefits, also known as the Cadillac tax, has been delayed until 2020,
    health plan cost increases that follow historical averages, will put
    average health insurance plans for employees in harms way of the
    Cadillac tax, even if not a Cadillac plan. As the health-care cost
    curve continues to rise, such anticipated cost increases of health
    insurance and the associated ACA tax on benefits will eventually impact
    nearly every employee benefits package in the manufacturing sector.\3\
    Manufacturers urge the Senate to fully repeal this adverse tax and
    firmly oppose using the Cadillac tax to pay for broken ACA programs.
    ---------------------------------------------------------------------------
        \2\ http://healthaffairs.org/blog/2016/04/25/about-that-cadillac-
    tax/.
        \3\ http:/www.nam.org/Issues/Health-Care/EBT-One-Pager---December-
    8--2015.pdf.

        To ensure employers can continue to provide competitive health-care
    benefits to their workers, the Senate should abstain from weakening the
    Employee Retirement Income Security Act of 1974 (ERISA) or modifying
    the tax treatment for employer-sponsored health care. The economies of
    scale that have come to define employer-sponsored coverage create a
    vehicle to design benefits that are more flexible, innovative and
    efficient, but this only works if health care innovation is encouraged
    and permitted. Employers can no longer be strangled by additional
    regulations or the burdens of 50 different ways to comply. Any
    legislative actions to undermine ERISA or change the tax treatment of
    employer-sponsored health care would further raise costs and could
    ---------------------------------------------------------------------------
    hamper the ability of employers to provide health-care benefits.

        As your committee continues to address the consequences of the ACA
    and considers removing federal hurdles that hinder growth and
    innovation, the NAM looks forward to working with you to reduce
    additional compliance burdens, advance the potential of wellness
    programs, increase Health Savings Account (HSA) limits, establish
    association health plans, realize the full potential of outcomes-based
    health-care arrangements and further encourage overall improvements to
    health-care delivery and systems that manufacturers support as
    significant consumers of health care.

        Despite the continued cost increases and challenges in providing
    health care, approximately 98 percent of NAM member companies offer
    health benefits. Manufactures believe quality health benefits support a
    healthy workforce, attract and retain talent, but moreover, NAM members
    believe offering health insurance is the right thing to do for
    employees. However, employees are spending more of each paycheck on
    health care and the rising costs of premiums paid by employers continue
    to erode any gains in wages. The NAM appreciates the opportunity to
    share the manufacturing perspective with your committee. Reducing
    excessive taxes to ensure that manufacturers can continue to provide
    these benefits must be a primary goal moving forward.

        While many of these taxes have been temporarily suspended, the
    uncertainty of future premium increases and additional health-care
    costs resulting from the ACA only continue to curtail innovation and
    economic growth. The impacts of a volatile health insurance market,
    legislative uncertainty and anticipated onerous health-care taxes
    cannot be underestimated. Manufacturers appreciate your continued
    legislative focus to chart a new course for health care and unlock the
    stranglehold of the ACA on manufacturers.

    Attachment:  February 1, 2017 Testimony of Joe Eddy, President and CEO
    of Eagle Manufacturing, before the U.S. House Committee on Education
    and the Workforce

                                     ______

     Testimony of Joe Eddy, President and CEO, Eagle Manufacturing Company

             On Behalf of the National Association of Manufacturers

         Before the U.S. House Committee on Education and the Workforce

      Hearing on ``Rescuing Americans From the Failed Health Care Law and
                     Advancing Patient-Centered Solutions''

                                February 1, 2017

        Good morning, Chairwoman Foxx, Ranking Member Scott, and
    distinguished members of the committee. Thank you for the opportunity
    to appear before you and for holding this hearing today.

        My name is Joe Eddy, and I am president and CEO of Eagle
    Manufacturing Company in Wellsburg, West Virginia. I am on the Board of
    Directors of the National Association of Manufacturers (NAM) and also
    serve on its Small and Medium Manufacturers Group.

        The NAM is the nation's largest industrial trade association and a
    voice for more than 12 million men and women who make things in
    America. The NAM is committed to achieving a policy agenda that helps
    manufacturers grow and create jobs. Manufacturers appreciate your
    attention to the burdens of the Affordable Care Act (ACA) that are
    impacting the competitiveness and growth of manufacturers around the
    nation. My story is not unique; it is one of many experiences that
    manufacturers have experienced over the past several years.

        Eagle Manufacturing Company is a family-owned business established
    in 1894. We employ 195 employees and are a prime manufacturer of safety
    cans, safety cabinets, secondary spill containment products, poly
    drums, and material-handling products. At Eagle, we design and
    manufacture all of our own products. We are a respected brand name for
    consistent quality and value, and all of our products are ``Made in the
    USA.'' We supply nearly every industrial and commercial sector:
    contractors, manufacturers, utilities, military, professional,
    government, printing, chemical, fabricators, transportation, textile
    mills, automotive, agricultural, medical, oil and gas, and electrical.
    In 2015, Eagle received the NAM's Sandy Trowbridge Award for Excellence
    in Community Service, and last year, Secretary of Commerce Penny
    Pritzker awarded us the President's ``E'' Award for Exports, the
    highest recognition any U.S. entity can receive for making a
    significant contribution to the expansion of U.S. exports.

        Manufacturers have a proud tradition of providing health insurance
    for their employees. More than 98 percent of NAM members offer health
    benefits to their employees. At Eagle, our tradition has been to cover
    100 percent of medical costs for our employees. We have done this
    because it's the right thing to do for our employees and our community.
    No government policy or mandate leads us to provide this generous
    benefit. We often hear that people specifically want to come to work at
    Eagle because of our reputation of taking care of our employees. We
    live by our mission statement: ``Protecting People, Property, and the
    Planet.''

        Unfortunately, the past few years under the ACA have made it more
    difficult to live up to the standards we have set for ourselves. Rising
    health-care costs have forced us to make some difficult choices, and
    the ACA has further limited our options. In 2009, prior to the ACA, we
    were paying about $13,500 per year per employee, and by 2013, those
    costs increased to more than $15,800 per year per employee. At that
    time, I was tasked with specifically looking at the added costs to the
    company resulting from the impacts of the ACA because our health-care
    costs were on the rise and posing a risk to the company's financial
    health. The taxes, paperwork, fees, and mandates cost us almost $1,000
    per year per employee, and this does not include the hiring of an
    additional human resources professional who specifically manages health
    care and all the new requirements. As much as we work to keep costs
    down, our plan now costs more than $22,800 per year per employee, so we
    are at even more risk if the ``Cadillac'' tax is not repealed. In
    addition, as a fully insured company that works directly with insurance
    brokers to purchase employee health plans, we are exposed to the health
    insurance tax in 2018.

        We do not think our benefits are excessive; they are necessary to
    attract, retain, and maintain a strong, quality, and healthy workforce.
    Unfortunately, the cost of health care remains a top business concern
    for both large and small manufacturers based upon quarterly survey
    results conducted by the NAM that focus on manufacturing sentiment.
    While the overall business outlook is improving, there has been limited
    relief in sight to address escalating health-care costs. Since being
    added to the NAM survey 2 years ago, it has been listed as a primary
    business concern each quarter. Rising health-care costs impact all
    facets of any company hiring new workers, maintaining competitive pay
    rates and making capital investments as well as researching and
    developing new products.

        Part of the challenge that the ACA ushered in was the paradigm
    shift in health-care choices available to manufacturers and other
    business owners. Options that were once available to us became more
    limited over time. More specifically, the insurance that we had for
    more than 10 years was no longer available. It put a whole new meaning
    to the oft-repeated words of the previous President, ``If you like your
    health-care plan, you can keep it.'' Many of our employees had to find
    new doctors, and we had to learn to manage a new system. Furthermore,
    the new product we purchased was more expensive, driving our health-
    care costs up an additional $4,000 per year per employee. Unhappy with
    the outcomes of this change, we switched carriers again to another
    insurer. We are hopeful that our situation has stabilized. Businesses
    such as ours need flexibility and competitive options so that we can
    always find the best and most cost-effective plan for our employees.

        But the most challenging part of the ACA is the effect it has had
    on our employer employee relations. As I mentioned earlier, Eagle
    Manufacturing has 195 employees, but it should be noted that 150 of
    those are unionized through the United Steelworkers Union. We have
    traditionally had a strong relationship with the union and those
    employees. However, last year during contract negotiations, for the
    first time, we had to negotiate a cost-sharing arrangement with the
    union because of the untenable rise in health-care costs facing Eagle.
    It was a difficult choice, and I am proud that for the competitiveness
    and well-being of the company, the union agreed. Employees now
    contribute $35 per pay period ($910 per year) toward monthly health
    insurance premiums. As you would imagine, those were not easy
    negotiations. It broke down the trust and partnership between the
    company and our employees. For our non-union employees, we now have to
    charge $50 per pay period ($1,200 per year) for their co-share.

        The years following ACA passage have been costly, disruptive, and
    distracting from the things we are good at doing as manufacturers.
    Moreover, the dose of uncertainty delivered to us more than 7 years ago
    still has not been fully resolved. We look forward to working with you
    to help address these mounting issues, and I appreciate the opportunity
    to share my experiences on behalf of my company and other
    manufacturers. In speaking for myself and others, we urge Congress to
    focus its efforts on solutions that will successfully eliminate the
    costliest and most problematic aspects of the ACA. The challenges
    ahead--a continued escalation of health-care costs paid by employers
    and employees through the anticipated ``Cadillac'' tax on comprehensive
    health plans, an excise tax on medical devices, a health insurance tax,
    and other administrative burdens-all demand immediate and thoughtful
    attention from Congress.

        Eagle is very proud of our 123 years in West Virginia,
    manufacturing innovative, quality products for our customers. As a
    leader in the Wellsburg community, we strive to provide health-care
    benefits that allow for a strong, healthy workforce, but it is a
    struggle given the limits, restrictions, and mandates of the ACA. I
    know that my struggle is not unique and that other manufacturers around
    the country are facing the same challenges.

        I very much look forward to working with you to find workable
    solutions that will help control outrageous costs and provide the
    flexibility for employers to continue to provide the benefits their
    employees deserve. Thank you for inviting me to testify before you
    today, and I am happy to answer your questions.

                                     ______

                  Partnership to Fight Chronic Disease (PFCD)
    The Honorable Orrin Hatch           The Honorable Ron Wyden
    Chairman                            Ranking Member
    Committee on Finance                Committee on Finance
    United States Senate                United States Senate

    Re: Statement for the Record for Senate Finance Committee Hearing,
    ``Health Care: Issues Impacting Cost and Coverage'' on September 12,
    2017

    Dear Chairman Hatch, Ranking Member Wyden, and Senate Finance Committee
    Members:

    The Partnership to Fight Chronic Disease (PFCD) applauds the Senate
    Finance Committee's continuing efforts to improve the quality of care
    for people living with chronic conditions. We particularly appreciate
    the inclusive, transparent, and bipartisan nature with which the
    Committee's Chronic Care Working Group (CCWG) worked to develop
    bipartisan recommendations to the Department of Health and Human
    Services and the proposed CHRONIC Care Act. We are submitting a
    statement for the record for the Committee's hearing, ``Health Care:
    Issues Impacting Cost and Coverage'' scheduled for September 12th and
    have attached a copy of that statement in case in may be of use during
    the hearing.

    PFCD, a non-partisan coalition of hundreds of patient, provider,
    community, business and labor groups, and health policy experts active
    at the state, federal, and international level, advocates for policies
    that work to better prevent and manage the number one cause of death,
    disability and rising health-care costs: chronic diseases.

    Given that treating people with chronic conditions accounts for 90
    cents of every dollar spent on health care, any discussion on issues
    relating to health-care costs and coverage should include a focus on
    the burden of chronic illness.

    PFCD welcomes the opportunity to continue working with the Committee to
    address these import ant issues.

    Sincerely,

    Kenneth E. Thorpe, Ph.D.
    Chair, Partnership to Fight Chronic Disease
    Robert W. Woodruff Professor and Chair
    Department of Health Policy and Management
    Rollins School of Public Health, Emory University

                                     ______

      Statement for the Record of the Partnership to Fight Chronic Disease

    The Partnership to Fight Chronic Disease (PFCD) is a non-profit, non-
    partisan coalition of more than 100 patient, provider, and community
    organizations, business, and labor groups, and health policy experts
    committed to raising awareness of the number one cause of death,
    disability, and growing health-care costs in the U.S.: rising rates of
    preventable and treatable chronic diseases.

    Simply put, we cannot lessen rising health-care costs and the economic
    losses of poor health without addressing chronic disease. Tackling
    these challenges relies on a willingness to adopt policies that help
    Americans enjoy better health by preventing and managing chronic
    illnesses.

    The increasing burden of chronic disease is the single most important
    threat to the health of American families and places major downward
    pressure on the U.S. economy. Today, more than one in two American
    adults lives with at least one chronic condition--such as diabetes,
    heart disease, or depression--and nearly one in three lives with two or
    more chronic conditions. We cannot lower health-care costs without
    addressing the epidemic of chronic disease. The burden of chronic
    disease is staggering. According to RAND Health's Multiple Chronic
    Conditions in the United States, 90 cents of every dollar spent on
    health care goes to treating people with a chronic condition. For each
    additional chronic condition a person has, his or her medical costs
    increase by more than $2,000 a year on average. If nothing changes,
    chronic diseases will cost the U.S. $92 billion 2015-2030 in medical
    costs and economic losses.

    People living with more than one chronic condition spend more out-of-
    pocket on medical expenses, but medical costs are only part of the
    burden. Chronic diseases are the number one cause of death and
    disability in America. Major chronic conditions such as Alzheimer's can
    also lead to increased reliance on uncompensated care provided by
    family members, and lessen overall quality of life. Research also shows
    that the onset of a chronic condition is associated with a reduction in
    individual earnings, affecting both the individual and families. Any
    discussion on reducing health-care costs must include a focus on
    addressing the burden of chronic diseases in America.

    Health-care costs are highly concentrated with 5 percent of the
    population accounting for more than half of all health-care spending.
    Often, these individuals have multiple chronic conditions and complex
    care needs that are not well met by the fragmented way health care is
    currently structured and delivered. This concentration in costs lends
    itself to targeted reforms to improve access to care, coordinate care
    and integrate services, and empower self-management. Compared to a
    person without any chronic conditions, spending is almost 2.5 times
    more for those with one chronic condition; 6 times more for people with
    3 chronic conditions; and 13.5 times more for people with 5 or more
    chronic conditions.

    Chronic diseases also place a tremendous burden on the U.S. workforce,
    reducing our competitiveness in the global marketplace. Nearly one in
    two working age adults (49 percent of those aged 45-64) has more than
    one chronic condition.

    The growing burden of chronic disease drives health-care spending and
    is unsustainable. Without change, as the population ages, the number of
    people living with more than one chronic condition is projected to grow
    dramatically, driving medical spending, and hindering economic growth.

    Lowering health-care costs requires reducing the burden of chronic
    disease. To be most effective, reforms targeted at realizing the
    opportunity from improved prevention and management of chronic disease
    should:

          Prioritize prevention and management of chronic conditions.
          Encourage continued innovation in treatment and delivery of
    health care.
          Improve access to recommended care.
          Promote health across generations.
          Translate knowledge into action.

    Prioritize Prevention and Management of Chronic Conditions in a Value-
    Drive System

    To lower health-care costs and lessen the human toll of chronic
    conditions, our health-care system needs to align incentives to
    encourage payers, providers, employers, and individuals to better
    prevent, detect, treat, and manage chronic diseases--both physical and
    mental--before they become acute, costly problems. There is a growing
    push toward value-based care delivery through which provider payment is
    based not only on services provided, but also on health and cost-
    related outcomes. If new payment models are designed correctly and
    recognize the importance of personalized care, they have potential to
    improve the management of chronic diseases, slow their spread, and
    prevent people from developing multiple chronic conditions.

    Similarly, value-based contracting for drugs, devices, and other care
    components hold promise in enhancing quality while managing costs and
    increasing competition. Policy changes are needed to remove regulatory
    hurdles that prevent insurers and manufacturers from developing these
    arrangements.

    As we move away from the misaligned incentives in the fee-for-service
    system to emphasize value, we must ensure that appropriate quality
    measures are in place to capture outcomes important to patients. Most
    currently available quality measures are disease-specific, provider
    focused, and process-oriented. There remains a gap of meaningful
    quality measures that capture patients with multiple chronic
    conditions. This leads to serious questions about whether quality will
    be improved for this population, or if patient health could be
    compromised in the pursuit of cost control. It will also be critical to
    ensure that this transformation is done in a way that allows for
    continued medical progress in the treatment of chronic disease.

    Encourage Continued Innovation in Treatment and Delivery of Health Care

    Our health-care system could also become more efficient and effective
    by adopting and supporting continued development of innovations that
    enhance quality and outcomes. Continued innovation in use of health IT
    to support improvements in coordinated care delivery and improved
    management of chronic diseases holds great promise. The value of
    innovation in medical treatments and technology also cannot be
    overstated in the fight against chronic disease. Biomedical innovation
    in America is the envy of the world, fueled by robust investments in
    research in both the public and private sector. The benefits include
    longer life with less disability and a strong job growth in health-care
    industries.

    One of the hallmarks of the U.S. health-care system is the scope and
    pace of biomedical innovation and discovery. Continued progress depends
    upon having an environment that encourages and rewards advances in
    detection, treatment, and care delivery. Our understanding of human
    health and our growing arsenal of treatments are testaments to the
    benefits of a robust ecosystem for biomedical innovation that both
    needs and deserves protecting.

    Proposals that undermine that ecosystem, including importing drugs from
    other countries and reference pricing for goods and services, carry
    significant risks for already vulnerable populations. For example,
    legalizing drug importation would make it far easier for harmful
    counterfeit and contaminated medicines to enter the U.S. drug supply.
    Because of the risks involved, the last four FDA Commissioners have
    expressed strong opposition to importation.

    Instead, maximizing the potential of innovations in health IT to
    facilitate care coordination, patient engagement, and self-management,
    and integration of traditional medical care, behavioral health
    services, public health, and social supports holds significant benefits
    for patients and creates cost efficiencies while improving outcomes and
    overall quality.

    Improve Access to Recommended Care

    Americans must have an opportunity to obtain health insurance that
    supports access to care recommended to prevent and treat chronic
    diseases. Having health-care coverage is important, but does not
    necessarily mean care is affordable and accessible to the people who
    need it. Chronically ill Americans receive only about half (56 percent)
    of the recommended preventive care services.

    Skipping appointments, not filling prescriptions, and testing less
    often than recommended represent missed opportunities to improve health
    that drive costs higher. Without affordable out-of-pocket costs, being
    covered doesn't improve access for people with complex health needs.

    Accordingly, efforts to reduce preventable hospitalizations,
    readmissions, and other intensive care services should include
    improving access to chronic disease care by reducing out-of-pocket
    spending for people with complex health-care needs.

    There are also rising concerns about shortages among primary care
    providers. Primary care is the ``tip of the spear'' in the management
    of chronic diseases. Many underserved areas in the country already have
    provider shortages, impacting health status in those communities. As of
    June 2014, there are approximately 6,100 geographic areas with primary
    care shortages with less than one physician for every 3,500 people, and
    projected primary care shortfalls range from 12,500 to 31,000
    physicians by 2025. Fully integrating physician assistants and primary
    care nurse practitioners into the health care delivery system could
    assist with primary care shortages, though several states are projected
    to experience nursing shortfalls.

    Promote Health Across Generations

    America's economic prosperity hinges on the health of Americans across
    the generations. Good health habits established in childhood carry the
    promise of better health throughout life. However, when it comes to
    health improvement, we are failing our children. The prevalence of
    chronic health conditions among children in America has risen
    dramatically in a generation. For example, childhood obesity rates
    alone have more than tripled just since the 1970s.

    Poor health status headed into adulthood not only increases health-care
    costs, but also presents challenges for employees and employers and
    hinders economic growth overall. For example, the U.S. Army estimates
    that 28 percent of applicants are rejected for medical reasons,
    including weight. Preventable and poorly managed chronic diseases also
    drive workplace health care costs, including productivity losses.
    Better management of chronic diseases like depression and addressing
    risk factors such as obesity and smoking could help qualified workers
    stay on the job, improving competitiveness of the American workforce.

    Health promotion should not end at retirement, and Medicare has an
    important role to play in keeping America's seniors healthy. Preventive
    screenings, a ``welcome to Medicare'' physical, annual wellness visits,
    are important pieces of the puzzle, but treating and managing existing
    chronic conditions are also critical to ensure that patients don't
    develop multiple chronic diseases. For example, poorly managed diabetes
    greatly increases incidence of cardiovascular and kidney disease and
    increases disability relating to blindness and amputations. Medicare
    coverage of the Diabetes Prevention Program will help in reducing the
    burden of diabetes within Medicare and is as an example of population-
    focused interventions that work to reduce risks for chronic conditions
    and associated costs while safeguarding patient access and quality of
    care.

    Translates Knowledge Into Action

    In communities across the nation, people have developed innovative
    programs that promote wellness and prevent and manage disease. We
    aren't doing enough to tap into that knowledge and to replicate
    nationwide those programs that work. Government support to analyze
    programs for best practices, facilitate dissemination of lessons
    learned, and financial support to facilitate replication and adoption
    is critical to maximizing the potential of these efforts.

    The need to replicate successful programs is particularly acute in
    underserved areas and with populations in which health disparities
    persist, lowering health status and leading to lost economic
    opportunities. Given the bi-directional nature of economic opportunity
    and health status, addressing chronic disease among populations of
    color offers significant promise in promoting income growth and
    reducing socioeconomic disparities.

    Conclusion

    Simply put, we cannot lessen rising health-care costs and the economic
    losses of poor health without addressing chronic disease. Tackling
    these challenges relies on a willingness to adopt policies that help
    Americans enjoy better health by preventing and managing chronic
    illnesses. It requires a multi-faceted approach that views health
    status as an asset both to the individual and our nation as a while.
    Enhancing health requires investment and focusing resources on
    preventing and better managing chronic disease. It also requires
    adopting a different perspective on health care spending that assesses
    the overall value derived, including gains in quality of life, reduced
    disability, and economic gains.

    We applaud your continued efforts to seek solutions to rising health-
    care costs and reducing the burden of chronic disease in America. We
    stand ready to help build on those efforts.