[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\

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    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.


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    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\


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    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 [email protected].

                                 ______
                                 
       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, [email protected] (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.

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