[Congressional Record (Bound Edition), Volume 155 (2009), Part 19]
[House]
[Pages 25557-25564]
[From the U.S. Government Publishing Office, www.gpo.gov]




     THE IMPACT OF HEALTH CARE REFORM ON SMALL BUSINESS IN AMERICA

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 2009, the gentleman from Colorado (Mr. Coffman) is 
recognized for 60 minutes as the designee of the minority leader.
  Mr. COFFMAN of Colorado. Thank you, Mr. Speaker.
  Tonight, I am joined by Congressman Doug Lamborn of Colorado and by 
Congressman Glenn Thompson of Pennsylvania.
  What we want to talk about tonight is the impact that health care 
reform, or the Democrat proposal, is having on small businesses 
throughout this country. It wasn't that long ago that the President's 
chief economic adviser, Christina Romer, looked at the proposal, H.R. 
3200, and said that this could cost up to 5.5 million jobs. So it is 
important that we talk about why this happens.
  About $900 billion is the target for the cost of the proposal, of 
H.R. 3200, with half of it coming from Medicare and with half of it 
coming from increased taxes, surcharges and penalties.
  So, with that, let me first refer to my colleague from Colorado, 
Congressman Doug Lamborn, to talk about the effects of these new taxes, 
surcharges and penalties on small business.
  Mr. LAMBORN. Well, I thank the gentleman for yielding. Representative 
Coffman, I want to thank you for your leadership and for taking the 
time to speak on this important issue of the economic impact of H.R. 
3200, the Democrats' health care proposal, here in the House. It's a 
little different from the one in the Senate, but there is an impact 
that it will have on small business.
  I remember very fondly, Representative Coffman, when you and I served 
in the Colorado legislature together. It was before you were either the 
State treasurer or the Secretary of State in Colorado. I really knew at 
that time, as I think you knew with me, that we were proponents of 
small business and that we wanted to have lower taxes and a more 
favorable economic environment and climate for the State of Colorado so 
that young people would have jobs when they graduated from high school 
and college, so that we would have a strong economy and, I think, as a 
result of that, so that we would have a better quality of life.
  Sure enough, with some other tax-saving kinds of measures the State 
voters passed, like TABOR, Colorado had the best business environment 
in the United States. Now it has slipped a little bit, but we're still, 
in the latest ranking I've seen, No. 4 in the country. That's an 
excellent thing. It's because of trying to hold the line on taxes. So 
I'm concerned that, when we talk

[[Page 25558]]

about H.R. 3200, the Waxman bill for health care which my colleagues on 
the other side of the aisle are promoting, it is going to have a 
negative impact.
  For instance, House Democrats pay for a portion of their health care 
in this bill by imposing a 2 percent surtax on individuals with more 
than $280,000 in income, or $350,000 for a couple. That's a lot of 
money. Keep in mind that many small businesses file as individuals. 
They use the subchapter S type of status for their tax returns. So this 
is actually the income that a small business can have when it's hit 
with a 2 percent surcharge.
  Mr. COFFMAN of Colorado. Will the gentleman yield back just for a 
moment?
  Mr. LAMBORN. Yes, Representative Coffman.
  Mr. COFFMAN of Colorado. Congressman Lamborn, let's talk about that 
whole thing.
  It starts out at 2 percent. As we know, in looking at section 313 of 
the bill, when we talk about the gross annual payroll of $250,000 to 
$300,000, it's at 2 percent. Then it moves up to 4 percent when going 
to $350,000. Then with $400,000 of gross annual payroll and above, it 
goes to 8 percent. So it's at 4, 6 and 8 percent.
  Many small businesses which cannot afford health care insurance are 
going to be hit with a penalty of 8 percent. Clearly, they're going to 
have to make a decision: Either they're going to have to reduce that 
payroll to be able to pay that tax or they're going to have to close 
their doors--one of the two.
  I think what Washington doesn't understand is that these small 
businesses are hanging on by their fingernails right now trying to keep 
their doors open, and unlike the Congress of the United States, they 
can't simply print money when they don't have it. So this is putting 
them in an impossible position. I think, simply, that the liberals in 
this Congress just don't get it. They're just not understanding the 
stresses of small businesses in America today, small businesses which 
have been, historically, the greatest job creators in our economy.
  I yield back.
  Mr. LAMBORN. I thank the gentleman.
  Yes, you're right. You're exactly right. There is that 2 to 8 percent 
surcharge on small business or on individual income, and there's the 8 
percent penalty if you don't provide government-approved health care 
for all of your employees.
  So, when you add that all together, like you said, Barack Obama's own 
economic adviser, Christina Romer, said that there would be about 5 
million jobs lost as a result of those tax increases, and this is the 
worst possible time to have tax increases on small business. Small 
business is the backbone of our Nation's economy. I think the figure is 
72 percent of new jobs created in this country are created through 
small business.
  So, in the middle of a recession, is this the time to be raising 
taxes? I really don't think so. In Colorado alone, Representative 
Coffman, 16,500 small businesses will be required to pay this surtax.
  I yield back.
  Mr. COFFMAN of Colorado. At this time, I would like to recognize 
Congressman Glenn Thompson from the State of Pennsylvania.
  Congressman Thompson, what do you think about this issue in terms of 
H.R. 3200, which is the Democratic bill before the Congress, and its 
impact on small business in the State of Pennsylvania?
  Mr. THOMPSON of Pennsylvania. Well, it certainly will have.
  First of all, I thank my good friends--both of my colleagues from 
Colorado--and I thank Mr. Coffman for hosting this very important 
session tonight because what we're talking about is truly the economic 
engine of this country, and that's small business. Small business is so 
important. It has been and always has been our economic engine. You 
know, small businesses employ half of the workforce, and they create 72 
percent of all new jobs.
  Old fables would refer to small businesses as the geese that laid the 
golden eggs, and last month, unfortunately, we lost 263,000 jobs in 
this country.
  Now, we normally would encourage small business, with incentives, to 
help the economy and to grow those jobs and to maintain those good 
family-sustaining jobs--jobs that provide health care benefits in most 
of those positions. Well, unfortunately, instead, the Democrats are 
going to tax the few golden eggs that are left and will probably kill 
the goose.
  According to data from the IRS, more than half of those targeted 
under the Democrats' health care surtax are small business owners. When 
you look at those businesses that are organized as S corporations or as 
limited liability corporations, they constitute over 60 percent of 
individuals who file their taxes as individuals who are making over 
$200,000. These are small businesses. Out of those moneys, they pay a 
payroll every week. Then there will be the $208 billion in new taxes on 
businesses that can't afford to pay now for their employees' health 
care.
  I was in the little town of Emporium, which is in Cameron County. 
It's a great county. It's in the middle of my district. Unfortunately, 
unemployment there is significant. Cameron County unemployment is among 
the highest in the Commonwealth of Pennsylvania.
  I was there. I was with a young lady who was an entrepreneur. She was 
somebody who had that American dream, that drive to strive for 
something better. She had created this small business, and she had a 
payroll she was maintaining. In fact, it was early in the first couple 
years of this small business where she was at the point she was willing 
to sacrifice, and she wasn't taking a salary because she was dedicated 
to seeing this business be successful and because she was faithful to 
her employees and to the jobs that she had created. She chooses not to 
take a salary, and she doesn't offer health care. She would like to, 
but she can't.

                              {time}  2130

  She knows that under the proposals, any kind of mandation, any taxes, 
any penalties that would be incurred wouldn't result in health care for 
the employees she has. She wouldn't be able to sustain that business.
  Mr. COFFMAN of Colorado. I yield to my fellow Congressman from the 
State of Colorado, Mr. Jared Polis.
  Mr. POLIS. Sometimes there is common sense that we share across the 
aisle. I have said from the start, I think this surtax is a bad idea.
  To explain it, there is a set tax structure for those of us who 
haven't--and I have run small businesses, created over several hundred 
jobs. There is C corps, S corps, and LLCs. When we are talking about 
increasing this rate, this is the rate that affects S corps and LLCs. 
Those tend to be the small to midsize businesses, the backbone of 
America, a lot of family businesses, a lot of stores. I talked to a 
brewery in my town, those are the types of businesses that we are 
talking about.
  The big corporations pay a tax rate of 35 percent. That is the 
corporate income tax rate. Currently, the marginal rate for these S 
corps and LLCs is also that same 35 percent. Now it's scheduled to go 
up, that rate for S corps and LLCs anyway, because the Bush tax cuts 
are set to expire.
  Now, I support that. I expect that you might oppose that, but that 
will raise it to 39.6 percent. It is that very same rate that this 
surcharge is scheduled to impact that would increase it at the margins 
an additional 5 percent. It would actually go up to 44.6 percent. In 
many States, that means that small businesses would be taxed at above 
50 percent.
  Now, I am hopeful that in the final version they will make some 
adjustments to that surtax. I sure hope they do. But I think it's an 
excellent point to bring up to show this disparity between what large 
businesses and corporations are paying, 35 percent, and what our 
family-owned businesses and small businesses are paying, which could, 
under the taxation mechanism, be a higher one.
  Now, there are several ways to address that. We could, of course, 
reduce the cost of the bill, and I hope that that's a path that my 
party takes. There also are alternative payment

[[Page 25559]]

mechanisms out there, some of which have been discussed in the Senate, 
some of which have more bipartisan support. I think it's critical, 
particularly in a recession, but at any time, that we make sure that 
however we pay for health care is not harmful to small business, which 
is the goose that laid the golden egg and the job engine that will lead 
us out of this recession.
  Mr. COFFMAN of Colorado. In this proposal, that it is not--I think 
the Congressman well-stated it as to the issues on the income tax and 
that this is an additional burden, but this is on the payroll tax. This 
is a payroll tax. This is whether or not the business is profitable.
  The business could be hit hard, could be stressed, losing money, 
trying to keep his doors open. If it cannot afford health care, then it 
will be hit with an 8 percent surcharge of its gross annual payroll.
  We also have Congressman Rob Bishop. I yield to Congressman Bishop to 
address this issue.
  Mr. BISHOP of Utah. I appreciate the gentlemen both from Pennsylvania 
and our good friends from Colorado, all over the place here from 
Colorado. If I am going to take you off on a stretch that you don't 
want to go into, I will stop and you can come back to me later.
  I do want to try and hit this particular issue, because there are 
other options out there which we have not explored. There are those who 
are saying we have got to do something now, because if we don't do 
something now, we will lose the opportunity. It doesn't matter what it 
is, as long as we are doing something. That's not necessarily, I think, 
true.
  If you look at the history and organization of this country, what the 
Founding Fathers wanted to do, and look at federalism, you will see why 
that is not necessarily true. The federalism system that we have is in 
line so that if something has to be uniform throughout this entire 
country, everyone has to be doing the exact same thing at the exact 
same moment. We are the only level that can do that.
  But if you allow States to become involved in this particular system, 
these laboratories of democracy, you can have creativity, you can have 
justice because they are attuned to the demographics of each individual 
area. What's more important is, if you mess up, you don't destroy the 
entire country.
  On this floor, we have heard of States that have tried to get 
involved in health care reform who have messed up. We aren't paying for 
that. There are States who are doing it the right way. I am proud that 
one of them is my State, because the President admitted and praised 
Utah in its efforts to do it, and it is going in the exact opposite 
direction of what we are talking about on the national level.
  It is going to a system that is based on consumers getting 
individuals empowered to make choices in a system that comes up with, 
first of all, allowing three goals, of allowing real information so 
that you can allow consumers to prepare and choose and then provide an 
easy way of enrollment. It's not just about insurance, which I am 
afraid we end up talking about here in Washington. It's about the cost 
of health care. Because, let's face it, if we don't control the cost of 
health care, even with insurance, you still can't afford to do it.
  Let me try to tell you exactly what they are doing right there, which 
is another avenue, which is essential to understanding as to what our 
opportunities are and what could happen if we go further with what is 
proposed with many of the leaders of this particular Congress.
  Utah is establishing a health exchange, which means any licensed 
company in Utah can place their programs online. The entire amount of 
bureaucracy to run this is two State employees. So far, there are 66 
individual plans that are out there. This is its first year, and the 
pilot program already has 136 small businesses with over 2,000 
employees. They average 17 employees in each company going online to 
use this system. Now, that's important because you have already 
mentioned the cost that's implied by small business.
  Only 43 percent of the small businesses in America provide insurance 
for their employees because they can't afford it any other way. Utah is 
even worse--only 32 percent. This is an effort to get around that 
problem.
  What you allow is the workers to choose, not a one-size-fits-all 
that's chosen by the employer, but a program that fits the workers' 
needs. They can use that option with pretax dollars. The responsibility 
is with the consumer who gets an annual choice. With that, there is a 
pressure to keep prices down and to get quality up because everyone now 
is a consumer in the system.
  Businesses in Utah like this because their overhead of mandatory 
insurance increases now cease, small businesses especially. The reason 
they are not giving insurance is they can't handle the insurance price 
increases. In this process, the worker gets money that the company 
would be paying and any money they want to use. Then they go into this 
plan, and from the 66 programs, they get to choose what is there.
  Businesses now have a predictable cost of doing business, not 
arbitrary. Employees, if they don't like the one-size-fits-all, can 
have the opportunity of finding what they want to do.
  It's easy to navigate. You go into a computer system, put age, family 
size. One thing we don't have today are agents of insurance companies 
who now work with the employer to try to sell a plan. Now they work 
with individuals to try and service plans because they have freedom to 
go after any employee in the entire State.
  It's also portable. If you change jobs and the insurance is still in 
the system, you take your insurance coverage with you. Even if you 
don't have a job, you can keep that same insurance coverage with you.
  There are fewer uninsured, and those that are uninsured, the State of 
Utah now has a plan to handle this.
  This is like when I go to the grocery store and I want to pick 
cereal. I go down the aisle and there is all these different choices of 
cereal for me to pick. I always pick the one with almonds because I 
like almonds, but there are a whole lot of people that don't like 
almonds. They get the chance to pick their cereal.
  It is not the situation in which the government should be telling me 
what kind of program is right for me. Not even should the business be 
telling me what kind of program is right for me. I should be able to 
pick my own program. If you do that, you expand the consumer into the 
system, which puts pressure to lower the actual cost of health care. 
That's the real solution.
  Now, the problem is we have some plans being presented both in the 
Senate and in the House. Those plans crush these State initiatives. 
Those plans not only cost hundreds of billions of dollars, they 
decrease choices. They have the potential of raising taxes. They 
destroy State initiatives. Utah and other States have found a better 
way.
  What we need to do is make sure we have a system that empowers States 
to be creative to help consumers become involved, and that's not what 
is being proposed on the floor of this House and in the Senate. What is 
being proposed would destroy this initiative. It would take it off the 
table. That's the exact wrong direction.
  We need to look at what the Founding Fathers had when they envisioned 
the concept of federalism and recognize that in federalism, in choice 
and in options is our salvation. It is the future. We need to embrace 
that, not a one-size-fits-all government mandate which has enormous 
impact, as the gentleman has been saying, especially on the small 
businesses of this country.
  Mr. COFFMAN of Colorado. Let me go to Congressman Thompson and then 
we will go to Congressman Lamborn.
  Mr. THOMPSON of Pennsylvania. Well, I thank my good friend from Utah. 
I feel like I am in the wild, wild west between Utah and Colorado. It 
is very good to be with you here.
  This is a very important topic. It comes down to that very bold sign 
you have there, Mr. Coffman, 5.5 million jobs. That's what we are at 
the risk of doing, going down the direction we are

[[Page 25560]]

going, which is not necessary. We have other alternatives. We have 
other bills, just like the idea that you outlined just a few minutes 
ago.
  We have, as we look, you know, the National Federation of Independent 
Businesses, just one of the voices for small businesses, have been very 
clear about what it would like to see in health reform. It would like 
the ability to pool with other businesses to enjoy the economies of 
scale in purchasing health insurance. That's a fundamental part of what 
you just outlined. They want tax credits to be able to help them to be 
able to afford the insurance. I guess to come back to my opening 
analysis, but what we have here is an unhappy fable under the 
Democrats' health care plan in which no small business will live 
happily ever after.
  I come out of a small business. I grew up in a small family sporting 
goods business. It was my job as a teenager to get up at 6 a.m. on 
Saturday morning to open the store that was down in the front yard in 
front of my parents' home where I grew up.
  I have to tell you, 6 o'clock in the morning felt like the middle of 
the night then. I got up because of people coming in for either picking 
up their supplies for hunting or for fishing, and small business is 
what we did. I mean, we worked hard at it. My mom and dad had that.
  They were looking for the American Dream, and they were willing to 
put whatever it took into it, the hours and the days. They created jobs 
and they created prosperity for other people, and they provided 
benefits for folks that worked for that family business.
  I saw the toll that one of the biggest obstacles that ran up against 
being successful--and I am sad to say that the business does not exist 
today because those barriers eventually overtook it--it was government. 
It was government that did that business in, and it's government that's 
a barrier that impedes many, many of our small businesses. It was the 
taxes. It was the regulations. It was the mandates. Today we are 
talking about health care is one more mandate that is put on our small 
businesses.
  Health care costs for small businesses across the country continue to 
outpace the rate of inflation. We know that we could do a better job of 
bringing the costs of health care down. But it's the path that we 
choose that is so important.
  The path that the Democrats' plans are on will make matters worse. 
They will drive many small businesses out of existence, and we will 
lose jobs, many jobs. We have 5.5 million jobs at risk in this debate. 
But there are other paths that we can take, such as the ideas outlined 
by my good friend from Utah that we can take.
  There is another bill that we have out there, Putting Patients First 
Act, H.R. 3400. That's a good plan. It's been introduced. We have been 
talking about it for some time.
  I think the American people really need to know and get to know more 
about this, because it does so many different things. It allows being 
able to access across State lines for health insurance. It provides 
that competition, which is healthy, and which is important. It 
addresses tort reform.
  When we talk about fraud, abuse, and waste of health care, I came out 
of working in health care for 28 years. We tried, as health care 
professionals, professionally and ethically, we worked very hard to 
make sure that we used every health care dollar wisely to treat the 
patients that are there, to help make them better where we can. One of 
the largest wastes, I feel, is the cost of medical liability.

                              {time}  2145

  Nationwide, we spend $26 billion annually in medical liability 
premiums, and in addition to that, the practice of defensive medicine. 
I understand defensive medicine. If you're practicing as a physician, 
when you come out of medical school, you may have $250,000 in loans as 
a part of that education. If you're a specialist, it may be a half a 
million dollars.
  And because of a lawsuit, and frequently a frivolous lawsuit, you're 
at risk of losing not just your practice, but your family's home. And 
because of that, you may order these tests to be able to treat 
specifically this patient at this time, but these other tests are 
ordered and put in the medical record to be able to establish that you 
followed a standard of care. It's to protect you in the event that you 
are sued.
  Well, that probably is, at a minimum, $100 billion a year annually in 
this country. So in terms of wasteful costs in health care that we 
could bring down, there is $126 billion annually just by good tort 
reform.
  H.R. 3400 does that. H.R. 3400 provides some commonsense approaches 
to medical liability and brings down that cost for everybody, which 
would bring down the cost of health care for our small businesses and 
individuals all across the Nation.
  Mr. COFFMAN of Colorado. Thank you, Congressman Thompson.
  Congressman Lamborn, when we look at this, H.R. 3200, it not only 
says that there could be up to an 8 percent surcharge on a small 
business that doesn't have health insurance, the schedule goes to 8 
percent if they have adjusted gross wages of $400,000 or more, which 
isn't a lot for a small business, given the number of employees that it 
might have, but it also goes beyond that. And it says they have to pay 
72.5 percent, at a minimum, of a federally qualified plan under the 
insurance exchange, and for the family, for a full-time employee, they 
have to cover about 65 percent. And so what impact is that going to 
have for your folks in the Fifth Congressional District in Colorado?
  Mr. LAMBORN. I thank the gentleman for yielding. That's an excellent 
question.
  Just on Monday, I had a town hall meeting with standing room only. It 
was packed with 600 people there to listen to and debate and discuss 
health care. And I'm hearing their--and at other times from small 
business owners, Representative Coffman--and I brought with me some 
statements that small business owners in my district, which is Colorado 
Springs and surrounding counties and communities in Colorado, are 
saying about this Democratic proposal on health care.
  Here is from a man who is a registered Democrat, ``I do not believe 
the government can do a better job than the private market in providing 
health insurance.'' Another business owner said we need to put a halt 
to the rampant government spending. The estimated $1.6 trillion for new 
government health care on top of all the other crazy government 
spending will bankrupt the economy and will require a significant raise 
to our taxes. As the owner of a small business in Colorado Springs, I 
can't afford to subsidize all of these government programs.
  Another business owner said, I am opposed to any health care reform 
that includes a public option, co-op or any other government 
involvement by whatever name you may choose. My business training and 
life experiences have taught me that competition is created in a free 
market environment and that government only serves to interfere with 
this process. I do not agree that a public option will introduce 
efficiency and lower cost. And he goes on to say we should be buying 
insurance across State lines. We should have tort reform. We should do 
some of the free market reforms that we can and should do, instead of 
H.R. 3200.
  Mr. COFFMAN of Colorado. Congressman Bishop, when we talk about the 
issue of competition, you have mentioned some innovative things that 
Utah is doing. But it is amazing to me that right now, by law, we don't 
allow small businesses to band together for the purchase of health 
insurance to get the same kind of discounts that large corporations 
have. We have a law in the Federal books that provides an antitrust 
exemption for the insurance industry, and small businesses and 
individuals in particular are limited and can't purchase health 
insurance across State lines to get the most price-competitive policy, 
the best quality that they can afford.
  What, in your view, is needed to fix this system? Because one of the 
reasons why we are talking about the public option is because the 
Democrats are saying there's not competition, there's not adequate 
competition, and so we

[[Page 25561]]

have to introduce government into this equation. Is there a free market 
solution to this?
  Mr. BISHOP of Utah. I think you have gone to what I think is the crux 
of the two paths that are offered to the American people in this 
session. The one path is about a government option. But the only part 
about options is the title itself. It actually would be a government 
program that would then be given the power, by a small group of people, 
to establish what its competition would be. So what you're doing is 
having the heavy hand of government establishing what the options will 
be and giving them to all people whether they want them or not. That is 
indeed the very problem that small businesses are facing. There are 
options right now that do not take their needs into account.
  What I think we are hearing, and what the gentleman from Pennsylvania 
talked about in House bill 3400, what Congressman Shadegg has in his 
bill and what Congressman Ryan has in his bill is the idea that if you 
really want to solve this problem, you've got to attack what causes the 
price of health care to go up, and that is the lack of competition. 
Having a government option superimposed does not necessarily equate to 
more competition. In fact, it will lessen that competition; and that's 
what we are hearing from those who really understand the industry.
  Even Margaret Thatcher in 1989 recognized that the health care system 
of Britain, which is, once again, a one-size-fits-all government 
mandate, even though there is a private option, does not necessarily 
help her people. She said it simply meant that once you put the heavy 
hand of the British Government on them, that it produced fewer doctors, 
fewer nurses and that patients, when they wanted to see a doctor, in 
some cases had to wait a few weeks, in other cases wait a few years, 
depending on the area in which they were.
  Now, what we really need to do is look at other options that are out 
there that transform the debate so that what we're talking about is 
empowering individuals to make choices that meet their particular 
needs. That's what the State of Utah is doing. That's what the Price 
bill is doing. That's what the Shadegg bill is doing.
  And the sad part about our debate is we are not allowed to discuss 
those on the floor in any form other than in a Special Order in the 
evening. Look, we weren't here in session on Monday. We only did a few 
suspensions on Tuesday. We adjourned very early on Wednesday. It was a 
wonderful day. I was happy to go outside. But we adjourned early.
  Those are times in which the Price bill and the Shadegg bill should 
be brought to the floor and allowed to be debated, discussed and voted 
on to see if indeed these other kinds of options that we have, these 
other kind of programs that inspire and empower individuals to make 
choices for themselves have some merit. That's what we should be doing 
here. Instead, the entire debate has been moved off the floor, out of 
committees, behind closed doors. That does not help.
  Indeed, you have hit the objective. If we choose the wrong choice and 
have one Federal program that's going to be superimposed on everyone, 
we have the chance of doing great harm to our small business, which is 
the backbone of the American economy with 5 to 6 million people losing 
their jobs. That's what the danger is. We should have an open and 
honest debate about these other options which try to look uniquely 
outside the box, creatively. That's what Congress should be doing. And 
we're not doing any of that.
  I yield back to the gentleman.
  Mr. COFFMAN of Colorado. Thank you, Congressman Bishop.
  Congressman Thompson, when we talk about the safety net that exists 
today, and you came from the health care industry, the first bill that 
the President signed was the SCHIP bill that went four times above the 
poverty level to provide a public insurance program for children, so 
that's $88,000 for a family of four, and States can do income 
disregards and raise the amount up more; we have Medicaid for the poor 
and disabled; we've got Medicare for elderly.
  In my State, we have 183 community health clinics that, if you look 
at their Web site for the 2008 annual report, shows that they had about 
400,000 patients in 2008, not patient visits, but patients that 
received preventive care, primary care, dental care and mental health 
services. This is in a State of 5 million that is publicly funded. Some 
of it folks can pay as they have the ability to. It's for the uninsured 
and the underinsured.
  We have a high-risk insurance pool in the State of Colorado for 
everyone who buys an insurance product, pays a premium tax, and part of 
that goes into a pool for anybody, regardless of their income, that 
can't qualify for a public program; and irrespective of their 
preexisting condition, they receive health insurance that is capped at 
140 percent of the average premium price in the State of Colorado.
  Can you address to us your view as a former health care professional 
about the safety net that exists in America?
  Mr. THOMPSON of Pennsylvania. Absolutely, and I really appreciate 
that question. It's been one of the biggest disappointments. I came to 
this body out of health. I thought I would actually retire from 
nonprofit community health care, which meant my hospital would have 
provided me a discount on my nursing home bed. But instead, I have the 
privilege of coming here to work on behalf of the citizens of 
Pennsylvania's Fifth District.
  And I came here knowing that we've got a pretty good health care 
system. And we can do better, and we can improve it, and improve on all 
four principles: access, affordability, quality and patient choice.
  So I was excited when the President said we were going to work on 
health care. And I get here, and do you know what we're working on? 
We're working on access to health insurance; we're not working on 
access to quality health care. That's what we should be working on. 
That's what the American people deserve: we work on things like we've 
been talking about, H.R. 3400 and the different bills that are 
presented here that would improve health care in all four dimensions. 
But instead, we're talking about health care insurance. And I guess I 
should have had some indication of that when I looked at the individual 
that was selected.
  Mr. COFFMAN of Colorado. Would the gentleman yield for a question?
  Mr. THOMPSON of Pennsylvania. Absolutely.
  Mr. COFFMAN of Colorado. Representative Thompson, the bill, H.R. 
3200, strips hundreds of billions of dollars out of the Medicare 
system, and it effectively shuts down the Medicare Advantage program. 
The trustees of Medicare have already said that in 2017, not by 2017, 
but in 2017, Medicare is expected to go broke. So there's solvency 
issues in Medicare. And yet we're stripping hundreds of billions of 
dollars out of the Medicare system.
  Can you speak to that and its impact on the elderly?
  Mr. THOMPSON of Pennsylvania. Sure. Medicare actually is the central 
component of this debate for many different ways. And let me start with 
the question that you raised. The Democrats' health care bill, the 
accounting of it, cuts essentially $128 billion from Medicare part A. 
Medicare part A pays for end-patient services. That pays for hospital 
services. It pays for up to 100 days if an individual, an older adult, 
is qualified in a skilled nursing facility, $128 billion.
  I have to tell you that most hospitals I know, and I have probably 
about 20 hospitals in my congressional district, I would say that my 
hospitals are like most, many in America, either in rural settings, 
certainly underserved urban areas. They are lucky to be making a margin 
of 3 to 4 percent annually. And to cut $128 billion from part A will 
certainly impact--I think what it will do actually, it could very 
easily move towards bankrupting many of these facilities. Certainly 
Medicare part B, which is the Medicare coverage that individuals choose 
to purchase. It helps to pay for physician services. It helps to pay 
for therapy services, if you're an outpatient. And that's scheduled for 
$130 billion in cuts for Medicare in order to fund this Democratic 
health care plan.

[[Page 25562]]

  The Advantage plan you talked about is Medicare part C. Medicare 
Advantage is managed care Medicare, and it's essentially a plan where 
individuals choose to enroll. It gives them a little more flexibility. 
It provides them a little more coverage. It's a choice that they make. 
And the Medicare Advantage plan has really been targeted by my 
Democratic colleagues. And that's scheduled for, within this, $133 
billion in cuts.
  Finally, the pharmaceutical program, one of the newest parts of 
Medicare, Medicare part D, that's the drug benefit that President Bush 
put in place here a few years ago. Under the Democrat's proposed health 
care plan, Medicare part D, the pharmaceuticals, the drugs, is 
scheduled for a cut of $20 billion, totaling $411 billion in Medicare 
cuts. Now, that impacts people. It impacts individual lives. It impacts 
jobs.
  In my district, in a very rural district with rural counties, my 
hospitals are actually important economic engines. It's a place with 
some really good jobs. They're economic engines. They buy a lot of 
resources to operate the hospital. They try to buy them locally to 
support the local economy. And when you start to make these types of 
Medicare cuts on facilities, health care facilities that are at best in 
a banner year making a 4 percent margin, we're talking about closing 
those. We're talking about losing jobs. And that's not good for anyone.
  You never want to see a hospital close. But in a city, you can make, 
I guess, an argument that if you close one hospital, somewhere in the 
city, probably within blocks, you'll find another one. In rural 
America, rural Pennsylvania, if you close a hospital and what you wind 
up with is a commute, that makes a difference between life and death.
  Mr. COFFMAN of Colorado. Would the gentleman yield for a question? 
Congressman Thompson, we talked about cost shifting, and I know clearly 
there's cost shifting for uncompensated care, but there's also cost 
shifting for Medicare and Medicaid. The underfunding of those 
government programs have done much more in terms of cost shifting on to 
the private insurance market and have had a big factor in escalating 
premiums.

                              {time}  2200

  But when we talk about how government sets rates, it doesn't set 
rates really to the market, as a private company would have to do. It 
can set rates at an artificially low level because it doesn't have to 
respond to the market.
  I wonder if you could address that, and why the public option would 
destroy private insurance?
  Mr. THOMPSON of Pennsylvania. Absolutely. I see three reasons, three 
primary reasons why commercial health insurance is so expensive. One is 
we need more competition, and that is allowing a broader pool. I am 
really interested in learning more about the model in Utah. It is 
intriguing. It sounds like a great model to look at. But more 
competition is important.
  Secondly, it is the need for tort reform. I talked about those 
numbers, $126 billion a year. It drives costs up. It drives the cost of 
providing care up. Therefore, commercial insurance goes up.
  Finally, there is the necessary cost-shifting that occurs. Now, some 
of my colleagues in this body, particularly across the aisle, when you 
hear the term ``cost shifting,'' they see that as an evil thing. When 
you come out of health care, you begin to understand what happens in 
health care.
  I would say the primary reason that health insurance is so expensive 
is because government creates an entitlement, Medicare, medical 
assistance, and then from day one, after they created it, discovers 
they can't afford it and they systematically underfund it.
  Let me talk about the numbers specifically. Medicare: For every 
dollar of cost that a hospital or a physician has, Medicare pays 80 to 
90 cents, 80 to 90 percent. If it is medical assistance, that is 40 to 
60 cents for every dollar of cost. If you are just operating on 
Medicare or medical assistance, a hospital and doctor, you could see, 
they have these costs and this reimbursement, they are not going to 
keep their doors open very long because they can't cover their costs.
  So what they do is negotiate with commercial insurance, and 
commercial insurance average, average across the Nation, pays at least 
140 percent; 140 percent of cost. Now, why do they do that? Well, they 
do that because in the negotiation process, doctors and hospitals need 
to achieve that 140 percent from commercial insurance to offset what 
medical assistance and Medicare, what the government doesn't pay.
  So that is where the cost shifting occurs, because if you don't get 
that higher rate for commercial insurance, you are not going to be able 
to make payroll. You are not going to be able to invest in lifesaving 
technology. You are not going to be able to keep the lights on in the 
facility.
  So, the fact is the government creates these new programs, with the 
best intentions, I am sure, but quickly finds that the costs are just 
so tremendous that they begin to systematically underfund those costs.
  One of the biggest concerns I have with the public option, as I read 
H.R. 3200 in the Education and Labor Committee when we marked that bill 
up, is that the public option would pay Medicare rates. Medicare rates 
are 80 to 90 percent of costs, 80 to 90 cents for every dollar of cost.
  I do believe that the public option will be cheaper than commercial 
insurance because the public option will also underfund the cost of 
health care. And if the public option replaces the commercial insurance 
of today, that really today funds and keeps the lights on and our 
hospitals operating and our doctors in practice, we are going to lose 
health care providers.
  Mr. COFFMAN of Colorado. Congressman Bishop, you have talked about 
some of the health care reform measures before the Congress, some of 
the Republican measures. I think you referenced one by Congressman 
Shadegg, and you referenced another one, let's see, Congressman Shadegg 
and Congressman Price. I think you referenced two Republican health 
care proposals.
  I think that everybody in the Congress agrees that reform is 
necessary, that the system isn't working as it should, that people are 
paying too much for health care, that we need to do more for the 
uninsured. It is a question of how we get there, and do we do a 
government takeover of the system by inserting a government-controlled 
health care plan, or are there market-based solutions.
  I wonder if you could give your view on how you see reform.
  Mr. BISHOP of Utah. I appreciate that, and I think the conversation 
you have had so far with Congressman Thompson is fascinating, because 
he has explained some of the problem you have when the government steps 
in to run the system.
  If we look back at the history of the Medicaid portion, it does not 
give us a whole lot of confidence for moving forward and allowing the 
government to take a larger role in this area. Since Medicaid was 
founded in 1965, costs have escalated at 2.3 percent higher than the 
rate of inflation. Today, Medicare costs 37 times what it cost back 
then after being adjusted for inflation.
  So when Congress first established Medicare, they thought it would 
cost $238 million a year. That first year it was closer to $17 billion. 
They projected by 1990 it would cost $12 billion. The actual number was 
more like $90 billion. And if as the gentleman suggests the government 
therefore has taken over those particular options and you no longer 
have this cost-shifting that you can go to the private sector, the only 
other option you have in the health care system to try and deal with 
those real costs--well, you can go bankrupt--but the only other option 
you have is cutting services that are given, which is why this debate 
is so significant and why these other bills we are talking about are so 
important that they be debated here on the floor.
  So people can realize that rather than having the government explain 
what you can and cannot do, if you simply open up the option so 
individuals have a choice and become part of the system, there is a 
responsibility of

[[Page 25563]]

the consumer as part of the system, then these changes can happen.
  In every other kind of insurance, you can buy insurance across State 
lines, for auto, for housing. Why not for medicine? A simple change in 
the Federal restrictions would allow that to take place. You can pool 
for almost everything, except in this area. Why not change those 
restrictions, which is what we are talking about.
  Why not allow people to buy their own insurance with pre-tax dollars, 
not post-tax dollars? Why not simply allow a benefit to the small 
businesses the way big businesses have for HSAs? These are portable, so 
when a person leaves the employ of that company they still have a pot 
of money, and they still have some kind of security with them to go on.
  These are the kind of ideas that are going to change the dynamic of 
the system, because, as has clearly been stated is, all we are talking 
about so far with leadership's plans they have been presenting is how 
to assure that everyone has insurance, not how to make health care 
affordable for all Americans, and the only way you can do that is by 
allowing the consumers to take responsibility, to have choices, to do 
the comparison shopping.
  That is the entire program in Utah. It is a defined contribution 
approach. So the employer gives money to the employee, and that 
employee can then go online and look at everything out there and pick 
what is important for them, not necessarily what the company is 
offering. A small business that can't afford to do that can now give 
the employee money, they can add with their money if they want to, to 
go out and pick what is available from what are the options out there. 
And we can even expand that wider. That is the only way you get 
competition that will have the effect of adding pressure on the system 
to lower the price and to increase the quality.
  We do that all the time. It is cheaper today to get your nose fixed 
than ever before because it is not covered by insurance. Individuals 
negotiate with doctors for medical services and the costs have come 
down. Laser eye surgery is cheaper today than ever before because 
employees negotiate with doctors and the prices are coming down.
  Why don't we allow that system to work in other ways? That is what 
these other programs are talking about, allowing people to be empowered 
to make choices for themselves that they are competent and capable of 
doing, and with those kind of market forces now in the system, the cost 
will come down.
  But it has never happened when the government has decided to step in 
and force those costs to come down. It didn't work with Medicare. It 
hasn't worked in foreign countries. And the real fear is if you are not 
destroying jobs, you are destroying the quality of health care, because 
the only other option you are left with is minimizing what can be given 
to an individual, denying services. That is not where we want to go.
  Unfortunately, if we only have this one bill that the leadership 
wants to put forward here, that is the end result of that bill. We need 
to beg leadership to allow other debates and other options to be fully 
vetted on this particular floor.
  I may have gone too far off from what your initial question was, but 
that is still the bottom line. It is we should be empowering people 
with options and choices. That is not what the leadership of this House 
is trying to do with their particular bill, and that is why we need to 
bring these other bills to the floor for open discussion and open 
debate and an open vote.
  I yield back to the gentleman from Colorado.
  Mr. COFFMAN of Colorado. Thank you.
  Congressman Thompson, there is a great deal of discussion, 
particularly among seniors, that are very concerned about changes in 
their health care--is their health care specifically going to be 
rationed? When we look at the fact we are stripping hundreds of 
billions of dollars out of Medicare to fund the public option, and the 
fact that Medicare has solvency problems of its own, it is projected to 
run out of money in 2017, so then we have a commission. If they revert 
to the public option, the services that are allowed to be provided in 
the public option are going to be defined by bureaucrats. It is not 
going to be about a doctor-patient relationship in terms of what is 
going to be provided. There is a commission, I believe, that is 
established to decide what services will be provided in the public 
option.

                              {time}  2210

  And seniors are concerned because 25 percent or more of health care 
is used in the latest stages of life. And so what does that mean for 
them? And maybe you could address that.
  Mr. THOMPSON of Pennsylvania. Well, thank you. And actually, the 
commission is a body of individuals. But even more frightening to me is 
just the one lone bureaucrat, the Health Insurance Commissioner, as 
defined within House Resolution 3200.
  And as we worked our way through this thousand-plus bill in the 
Education and Labor Committee over a course of 20 hours back in the 
very end of July, I found that many times there was so much left 
undefined, and everything was referred to according to the Health 
Insurance Commissioner, the Health Insurance Commissioner, the Health 
Insurance Commissioner.
  Well, you know, our health care is, there's probably few things that 
we could debate on this floor that's more intimate than our health 
care, and certainly few things that are as large a part of our economy. 
And our colleagues who were here just the previous hour from the 
Progressive Caucus talked about how those of us who oppose, those of us 
who oppose their health care plan, those of us who would support more 
smart government solutions, more free-market solutions to health care, 
that we have these scare tactics, and one of them is rationing. 
Rationing could never occur. Rationing just won't happen. Well, I've 
got news for them. Rationing happens today. And where does it happen? 
It happens, first and foremost, under the government plans.
  Let me tell you about Medicare part B. You know, part of my 
background is I've had the privilege of working with older adults for 
my entire career, in rehabilitation services. The last number of many 
years of my career, 15 years I worked in skilled nursing as well, and I 
became licensed as a nursing home administrator. And I've talked 
briefly about the cuts to Medicare part B.
  Medicare part B is slated for additional cuts of $130 billion. And 
Medicare part B--think about the individuals who come into a nursing 
home. They come there because they're the sickest of the sick. They're 
there because they don't have any other alternatives in terms of the 
care, the health care that they require. They have intense needs. These 
are folks who have just a lot of very intense needs. And today, the 
government, under Medicare part B, if you need therapy services, it 
arbitrarily puts a number. There's a maximum amount of dollars.
  And now I've been out of that for about 10 months, but it was 
somewhere around $1,800 a year, $1,800 to $1,900 a year of therapy 
services. Arbitrary number. Now, that's rationing, in my line. You 
know, it doesn't matter the fact that you have maybe suffered a stroke 
or you have fallen or you have a debilitating weakness that you 
develop. Once you max out on that Medicare part B benefit, that's it. 
That's the upper limit of what you receive. So we have rationing today, 
and rationing occurs under the current, one of the current government 
programs for Medicare part B.
  So I don't know where you--when you look at--you know, I've worked in 
the inpatient hospital side for almost 30 years as a part of my 
practice. As I said, a 2 to 4 percent margin is a banner year, okay? 
And out of that, you want to be able to, out of that 4 percent, give 
cost of living adjustments so you continue to retain the best and the 
brightest.
  Personally, if somebody's going to use a scalpel on me, I want them 
to be the smartest person in the county, and we want to be able to 
retain, recruit, and retain those individuals. So 4 percent margin. 
Most of my hospitals, I

[[Page 25564]]

would say, are probably not doing that well, and most hospitals across 
the Nation are probably challenged and not doing that well. And then 
you have skilled nursing facilities where, honestly, nobody's getting 
rich operating skilled nursing facilities. They're providing good, 
compassionate care. They're treating people with intense needs, and 
yet, those are slated for significant cuts.
  Specifically, in skilled nursing, $14.6 billion in designated cuts. 
Now, this is out of the Senate Finance bill, the Baucus bill, Senator 
Baucus' bill, and so those cuts have to come somewhere, and they're 
going to come out of services. They're going to come out of--it won't 
come out of the compassion, because the people that work in those 
areas, they're truly dedicated to serving the needs of older adults and 
people with needs. But they will come out of the care. Those dollars 
have to impact access to services.
  Mr. COFFMAN of Colorado. Thank you, Congressman Thompson, and thank 
you Congressman Bishop. And we had Congressman Lamborn from Colorado, 
Doug Lamborn earlier, and Congressman Polis as well talked about these 
issues. I certainly hope that we can have a bipartisan solution on what 
I think is a very critical issue, and that really needs to involve both 
parties of Congress in a negotiation that we don't have right now. And 
I think that's a great tragedy that it hasn't been a bipartisan 
process. But I believe that there are market-based solutions that will 
not endanger this economy in terms of creating unemployment through the 
burdens on small business and driving the deficit and driving the debt 
of this country beyond what it is today. And from the Republican point 
of view, thank you.

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