[Congressional Record (Bound Edition), Volume 156 (2010), Part 2]
[Senate]
[Pages 2101-2110]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              HEALTH CARE

  Mr. ALEXANDER. Mr. President, it was my privilege last Thursday, 
along with some other Members of the Senate, to attend a health care 
summit at the invitation of President Obama. It went on a long time. We 
learned one thing we already knew, that our President is smart and 
knows a lot about health care. So he stayed the whole time.
  But it gave those of us on the Republican side a chance we do not 
have the opportunity to have as often, which is, to be on center stage 
and let the American people know, A, who we are, and, B, what our ideas 
are. So it was a terrific way for us to show, for example, that our 
goal is to reduce health care costs, that we wish to move step by step 
toward that goal.
  We identified a number of areas, such as being able to buy health 
insurance across State lines, allowing small business health plans to 
pool together, reducing junk lawsuits--all of which will tend to bring 
down the cost of premiums, which is what most Americans want.
  During the discussion, early on, actually, the President and I had a 
little disagreement about whether his plan, which is based upon the 
Senate bill, which passed on Christmas Eve, would raise premiums. What 
I had said in my opening remarks on behalf of Republicans was that 
millions of Americans, under the Democratic plan, would pay higher 
insurance premiums in the individual market because of government 
mandates and taxes. The President says that is wrong. I cited a 
Congressional Budget Office report to show I was right. And rather than 
dispute the President of the United States in public--I thought I had 
enough time to make my case--I said I would send him a letter, which I 
did that same day. So I ask unanimous consent, Mr. President, to have 
printed in the Record the letter I gave to President Obama on Thursday.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                  U.S. Senate,

                                Washington, DC, February 25, 2010.
     Hon. Barack Obama,
     President, The White House, Pennsylvania Avenue, Washington, 
         DC.
       Dear Mr. President: During today's discussion on health 
     care, you and I disagreed about whether the health care bill 
     that passed the Senate on a party-line vote on December 24 
     would cause health insurance premiums to rise even faster 
     than if Congress did not act. I believe premiums will rise 
     because of independent analysis of the bill:
       On November 30, the non-partisan Congressional Budget 
     Office (CBO) wrote in a letter to Senator Bayh that ``CBO and 
     JCT estimate that the average premium per person covered 
     (including dependents) for new nongroup policies would be 
     about 10 percent to 13 percent higher in 2016 than the 
     average premium for nongroup coverage in that same year under 
     current law.''
       When you asserted that CBO says premiums will decline by 14 
     to 20 percent under the Senate bill, you are leaving out an 
     important part of CBO's calculations. These reductions are 
     overwhelmed by a 27 to 30 percent increase in premiums due to 
     the mandated coverage requirements in the legislation. CBO 
     added those figures together to arrive at a net increase of 
     10 to 13 percent--as shown in their chart in that same 
     letter.
       In that same letter, CBO wrote, ``The legislation would 
     impose several new fees on firms in the health sector. New 
     fees would be imposed on providers of health insurance and on 
     manufacturers and importers of medical devices. Both of those 
     fees would be largely passed through to consumers in the form 
     of higher premiums for private coverage.''
       On December 10, the chief actuary for the Centers for 
     Medicare and Medicaid Services--who works for your 
     administration--concurred with the CBO. In his analysis, the 
     actuary said, ``We anticipate such fees would generally be 
     passed through to health consumers in the form of higher drug 
     and device prices and higher insurance premiums.'' He also 
     said, ``The additional demand for health services could be 
     difficult to meet initially with existing health provider 
     resources and could lead to price increases, cost-shifting, 
     and/or changes in providers' willingness to treat patients 
     with low-reimbursement health coverage.''
       For these reasons, the Senate-passed bill will, indeed, 
     cause Americans' insurance premiums to rise, which is the 
     opposite of the goal I believe we should pursue.
           Sincerely,
                                                  Lamar Alexander.

  Mr. ALEXANDER. But today what I wish to do in the next few minutes is 
explain why I believe I am correct, that under the President's health 
insurance plan, which is based upon the Senate plan, for millions of 
Americans in the individual market, premiums would go up because of 
one-size-fits-all government mandates, because of taxes that are passed 
on to consumers; but for other reasons as well--by shifting costs.
  When you dump 15 million people or 18 million people into a program 
called Medicaid, what happens is, we do not pay the doctors and the 
hospitals well enough to take care of those folks. So those providers 
shift the costs to people who are paying with private insurance, and 
premiums go up.
  Costs for young people in the individual market will go up under this 
plan because if you put in a rule that says my insurance at my age 
cannot go up more than a certain amount compared with my son's 
insurance, then his insurance goes up, and because a scheme like the 
Democratic plan depends upon requiring everybody to buy insurance. 
There is a weak provision for that, and I suspect many young people 
will rather pay the $750 fine rather than buy a $2,500 insurance 
policy, which they think they cannot afford.
  The President made the point in his usual very persuasive way that, 
wait a minute, actually you would be getting better insurance. But that 
is comparing apples and oranges. As George Will said on ABC's ``This 
Week'' yesterday--he asked this question: If the government required 
you to buy a better, more expensive car, even if it was better than the 
car you have, it would still be more expensive, would it not?
  That is the case with the President's health care plan. In fact, 
premiums will go up for millions of Americans in the individual market, 
up more than they otherwise would over the next several years--and we 
all know how rapidly they are rising--and the whole exercise we have 
been going through over the last year is to bring premiums down, not 
help drive premiums up.
  What I said to the President, with respect, was that the 
Congressional Budget Office, on November 30, said this about the Senate 
bill:

       The Congressional Budget Office and the Joint Committee on 
     Taxation estimate that the average premium per person covered 
     for new nongroup--

  That means individual policies--

     would be about 10 to 13 percent higher in 2016 than the 
     average premium for nongroup--

  That is individual coverage--

     in the same year under current law.

  In other words, if you buy an individual policy--that means not a 
policy with your employer--by 2016 it will be at an average of 10 to 13 
percent higher than it otherwise would.
  I ask unanimous consent to have printed in the Record the relevant

[[Page 2102]]

parts of the Congressional Budget Office letter of November 30 to 
Senator Evan Bayh on this point.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                Washington, DC, November 30, 2009.
     Hon. Evan Bayh,
     U.S. Senate, Washington, DC.
       Dear Senator: The attachment to this letter responds to 
     your request--and the interest expressed by many other 
     Members--for an analysis of how proposals being considered by 
     the Congress to change the health care and health insurance 
     systems would affect premiums paid for health insurance in 
     various markets. Specifically, the Congressional Budget 
     Office (CBO) and the staff of the Joint Committee on Taxation 
     have analyzed how health insurance premiums might be affected 
     by enactment of the Patient Protection and Affordable Care 
     Act, as proposed by Senator Reid on November 18, 2009.
       I hope this information is helpful to you. If you have any 
     further questions, please contact me or the CBO staff. The 
     primary staff contact for this analysis is Philip Ellis.
           Sincerely,
                                             Douglas W. Elmendorf,
                                                         Director.
       Attachment.

                          Summary of Findings

       The effects of the proposal on premiums would differ across 
     insurance markets (see Table 1). The largest effects would be 
     seen in the nongroup market, which would grow in size under 
     the proposal but would still account for only 17 percent of 
     the overall insurance market in 2016. The effects on premiums 
     would be much smaller in the small group and large group 
     markets, which would make up 13 percent and 70 percent of the 
     total insurance market, respectively.


                           Nongroup Policies

       CBO and JCT estimate that the average premium per person 
     covered (including dependents) for new nongroup policies 
     would be about 10 percent to 13 percent higher in 2016 than 
     the average premium for nongroup coverage in that same year 
     under current law. About half of those enrollees would 
     receive government subsidies that would reduce their costs 
     well below the premiums that would be charged for such 
     policies under current law.

[[Page 2103]]

     
     


[[Page 2104]]

  Mr. ALEXANDER. Now, the President said: Wait a minute. The premiums 
in the individual market will go down 14 to 20 percent. That is also in 
the same letter. Of course, he is right about that. They go down 
because of administrative efficiencies and new enrollment, but he left 
out that there are other factors involved so that the government 
mandates will drive them up 27 to 30 percent or, in the end, the 
average, as the CBO said, premium per person covered in an individual 
policy would be up 10 to 13 percent.
  The bill has subsidies in it for some Americans. The same letter says 
about half of Americans who buy in the individual market will get a 
subsidy. Well, we are paying for that subsidy, but let's concede that 
point. Still, that leaves half of the people in the individual market 
for whom premiums will go up on an average of 10 to 13 percent.
  Why is that? One reason is because the Senate bill says people will 
have to buy a richer policy than they have today. That means it has a 
higher actuarial value. They call it in the bill ``minimum creditable 
coverage.'' It means this is the amount of insurance I think you should 
have before you buy a policy. That might be a good decision. It 
undoubtedly would be good to have the insurance. It just costs 27 to 30 
percent more than today's average.
  The National Federation of Independent Businesses wrote a December 12 
letter in opposition to the Senate bill saying the benefit mandates 
will put small business owners ``at risk of having to drop coverage due 
to cost increases that outpace their health budgets.''
  I ask unanimous consent to have printed in the Record the letter from 
NFIB to Senator McConnell and Senator Reid, dated December 8.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                            National Federation of


                                         Independent Business,

                                                 December 8, 2009.
     Sen. Harry Reid,
     Majority Leader, Hart Senate Office Building, Washington, DC.
     Sen. Mitch McConnell,
     Minority Leader, Russell Senate Office Building, Washington, 
         DC.
       Dear Senators Reid and McConnell: As the Senate continues 
     to debate the future of comprehensive healthcare reform, the 
     National Federation of Independent Business, the nation's 
     leading small business association, is writing in opposition 
     to the Patient Protection and Affordable Care Act (H.R. 
     3590).
       When evaluating healthcare reform options, small business 
     owners ask themselves two specific questions. First, will the 
     bill lower insurance costs? Second, will the bill increase 
     the overall cost of doing business? If a bill increases the 
     cost of doing business or fails to reduce insurance costs, 
     then the bill fails to achieve their No. 1 goal--lower costs.
       In both cases, the Patient Protection and Affordable Care 
     Act (H.R. 3590) fails the small business test and, therefore, 
     fails small business. The most recent CBO study detailing the 
     effect that H.R. 3590 will have on insurance premiums 
     reinforces that, despite claims by its supporters, the bill 
     will not deliver the widely-promised help to the small 
     business community. Instead, CBO findings report that the 
     bill will increase non-group premiums by 10 to 13 percent and 
     result in, at best, a 2 percent decrease for small group 
     coverage by 2016. These findings tell small business all it 
     needs to know--that the current bill does not do enough to 
     reduce costs for small business owners and their employees.
       Despite the inclusion of insurance market reforms in the 
     small-group and individual marketplaces, the savings that may 
     materialize are too small for too few and the increase in 
     premium costs are too great for too many. Those costs, along 
     with greater government involvement, higher taxes and new 
     mandates that are disproportionately targeted at small 
     business and are being used to finance H.R. 3590, create a 
     reality that is worse than the status quo for small business. 
     The shortcomings of the Patient Protection and Affordable 
     Care Act include:


               A New Small Business Health Insurance Tax

       Unlike large businesses, which self-insure and find 
     security under the blanket of ERISA, most small businesses 
     are only able to find and purchase insurance in the fully-
     insured marketplace. The Senate bill includes a new $6.7 
     billion annual tax ($60.7 billion over 10 years) that falls 
     almost exclusively on small business because the fee is 
     assessed on the insurance companies. CBO's most recent study 
     reinforces those costs will ultimately be passed on to their 
     consumers, leaving the cost to be disproportionately borne by 
     small business consumers in the individual and small-group 
     marketplace whose only choice is to purchase those products 
     or forgo insurance altogether.


   A New Mandate that Punishes Employers, Employees and Hinders Job 
                                Creation

       Employer mandates fail employers and employees in two ways. 
     First, mandates do nothing to address the core issue facing 
     small business--high healthcare costs. Second, mandates 
     destroy job creation opportunities for employees. The job 
     loss, whether through lost hiring or greater reliance on 
     part-time employees, harms low-wage or entry-level workers 
     the most. The employer mandate in H.R. 3590 sets up 
     potentially troubling outcomes for this sector of the 
     workforce. The multiple penalties assessed on full-time 
     workers will most certainly result in a reduction of full-
     time workers to part-time workers and discourage the hiring 
     of those entrants into the workforce who might qualify for a 
     government subsidy, hardly an outcome that contributes to a 
     greater insured population.


             A Poorly-Structured Small Business Tax Credit

       As structured, the small business tax credit will do 
     little, if nothing, to propel either more firms to take up 
     coverage or produce greater overall affordability. Due to its 
     short-term temporary nature and the limitations based on the 
     business' average wage, its benefit is, at best, a temporary 
     solution to the long-term cost and affordability problem. A 
     tax credit that is poorly structured is not going to provide 
     sustainable and long-term relief from high healthcare costs, 
     and the recent CBO finding that the tax credit would benefit 
     only 12 percent of the small business population illustrates 
     its lack of effectiveness.


     A Benefit Package that is Too High a Hurdle for Small Business

       NFIB has voiced concern over establishing a benefit 
     threshold that is too high a price tag for small businesses 
     to meet. Small businesses are especially price sensitive. 
     They need purchasing choices that provide the flexibility in 
     coverage options that reflect their marketplace and business 
     needs. If Congress doesn't adjust the actuarial value 
     standards in the legislation, what may be affordable this 
     year may be unaffordable next year. As a result, small 
     business owners will be at risk of having to drop coverage 
     due to cost increases that outpace their healthcare budgets.


    Destructive Rating Reforms and Phase-In Timelines that Threaten 
                         Affordability for All

       NFIB supports balanced federal rating reforms that protect 
     access and affordability, regardless of an individual or 
     group's health status. However, the excessively tight age 
     rating (3:1) in H.R. 3590 will increase more costs than it 
     will decrease, and make coverage unaffordable for the very 
     populations that are most beneficial to the insurance pool--
     the young and the healthy. Independent actuaries have 
     analyzed the negative impact of such tight bands and have 
     indicated that there will be devastating effects to the long-
     term viability of a pool without action to correct this 
     rating imbalance.
       Additionally, to prevent volatile spikes in insurance 
     premiums, also known as ``rate shock,'' federal rating 
     reforms must be appropriately applied to all marketplaces and 
     phased in over a responsible period of time. If this is not 
     done, then certain plans, including ``grandfathered plans,'' 
     will utilize different rating practices when underwriting 
     risk, which can create adverse selection issues. Those 
     selection problems will have a striking negative impact on 
     the new exchanges--exchanges that are meant to improve, 
     rather than decrease, affordability for small business and 
     individuals.


        National Plans that Provide Limited Promise for Success

       Leveling the playing field for small business starts with 
     allowing uniform benefit packages to be purchased across 
     state lines. If done right, this can provide a greater 
     security that, as people change jobs and move from state to 
     state, they can keep the benefit plan that meets their 
     healthcare needs. National plans would be particularly 
     helpful for states with smaller populations and where 
     consumers lack a robust marketplace with choice and 
     competition for private plans. Specifically, the state ``opt-
     out'' language in the Patient Protection and Affordable Care 
     Act would create more disincentives than incentives for 
     carriers to embark on these new opportunities. If the 
     national plan section is not significantly restructured to 
     make national plans a viable option, then these new 
     opportunities will never materialize for small business.


      Threatens Flexibility and Choice for Employers and Employees

       Small employers need more affordable health insurance 
     options and new alternatives for employers to voluntarily 
     contribute to individually-owned plans. Provisions also need 
     to be structured to insure that options are widely available 
     to both employers and employees. The simple cafeteria plan 
     language in H.R. 3590 excludes the owners of many ``pass-
     through'' business entities from participating in these 
     arrangements. If owners are unable to participate in the 
     plan, they will be less likely to provide insurance

[[Page 2105]]

     to their workforce. Finally, small business needs the freedom 
     and flexibility to preserve options that are already proven 
     to work. Prohibiting the use of HSA, FSA and HRA funds to 
     purchase over-the-counter medications, along with the $2,500 
     limit on FSA contributions, diminishes that flexibility and 
     threatens to further limit the options employers have to 
     provide meaningful healthcare to their employees.


                New Paperwork Costs on Small Businesses

       The cost associated with tax paperwork is the most 
     expensive paperwork burden that the federal government 
     imposes on small business owners. The Senate bill 
     dramatically increases that cost with a new reporting 
     requirement that is levied on business transactions of more 
     than $600 annually, leaving small business buried in 
     paperwork and increasing their paperwork compliance expenses.


          An Unprecedented New Payroll Tax on Small Employers

       Since its creation the payroll taxes that fund the Medicare 
     programs have not been wage-based and are dedicated 
     specifically to funding Medicare. The Senate bill changes the 
     nature of the tax and creates a precedent to use payroll 
     taxes to pay for non-Medicare programs.


              The Absence of Real Medical Liability Reform

       NFIB strongly supports medical liability reform as a means 
     to both inject more fairness into the medical malpractice 
     legal system, and to reduce unnecessary litigation and legal 
     costs. Taking serious steps to adopt meaningful medical 
     liability reform is a significant step toward restoring 
     common sense to our medical liability litigation system. It 
     also is especially critical to improving access to healthcare 
     for those living in rural areas, where it is becoming 
     increasingly difficult for those in need to locate 
     specialists such as OB/GYNs and surgeons.


        The Creation of a New Government-Run Healthcare Program

       A government-run plan will drive the private healthcare 
     marketplace out of business. Private insurers will be unable 
     to compete in a climate where the rules and practices are 
     tilted in favor of a massive government-run plan. This means 
     millions could lose their current coverage. This will 
     decrease choice and increase costs. On both accounts, the 
     government-run plan will leave small business with a single 
     option the government-run plan, which is the exact opposite 
     outcome small businesses want from healthcare reform.
       There is near universal agreement that, if done right, 
     small business has much to gain from healthcare reform. But 
     if it is done wrong, then small business will have the most 
     to lose. The Patient Protection and Affordable Care Act, 
     which is short on savings and long on costs, is the wrong 
     reform, at the wrong time and will increase healthcare costs 
     and the cost of doing business. NFIB remains committed to 
     healthcare reform, and urges the Senate to develop common 
     sense solutions to lower healthcare costs while ensuring that 
     policies empower small business with the ability to make the 
     investments necessary to move our economy forward.
           Sincerely,

                                                Susan Eckerly,

                                            Senior Vice President,
                                                    Public Policy.

  Mr. ALEXANDER. The one-size-fits-all provision in the Democratic bill 
says all individual and small group policies must have an actuarial 
value of 60 percent.
  Senator Susan Collins of Maine, who was the insurance commissioner of 
Maine, made a speech on the Senate floor on December 18, and pointed 
out that 87 percent of the individual policies that are purchased in 
Maine today would cost more under the Reid bill.
  I commend to my colleagues the Senator's testimony of December 18, 
2010.
  Senator Collins used the example that the most popular individual 
market policy sold in Maine costs a 40-year-old about $185 a month. 
Under the Senate bill that 40-year-old would have to pay at least $420 
a month, more than twice as much for the policy that meets the new 
minimum standard, or face a $750 penalty. It is true Maine citizens, as 
is true for all Americans--about half of them--would receive subsidies 
to help them buy that policy, but the average premium for the other 
half of the 87 percent is going to go up under the Democratic bill.
  We believe Americans ought to have more choices than that. That is a 
fundamental difference of opinion. Should Washington decide you need to 
buy a richer policy, or should you decide that for yourself based upon 
the other needs of your family?
  The Congressional Budget Office does state, as I have mentioned, that 
there are a number of enrollees--about half--who would have the 
subsidies, and that is in the letter I have already introduced into the 
Record. But someone is paying for those subsidies: the taxpayers are 
paying for them, which brings up the second reason I said on Thursday 
that premiums for millions of Americans in the individual market will 
go up.
  The commonsense idea is that if you tax an insurance company or a 
medical device company or a manufacturer of drugs, they will pass the 
taxes on to whom? To us, who are buying insurance policies or medical 
devices or drugs. So we end up paying. In fact, one part of the 
President's proposal deliberately does that. It is a 40-percent excise 
tax on insurance companies for what we call Cadillac plans, the high-
cost private insurance plans.
  A letter from the Joint Committee on Taxation, dated February 24, 
says the 40-percent excise tax will raise $32.7 billion, all of which 
will be passed along to consumers in the form of higher insurance 
premiums. That may be a good thing. In fact, I think it is because it 
helps to discourage the purchase of more expensive policies. But it 
does raise premiums in the individual market.
  The Joint Committee on Taxation Memorandum on High Cost Plans, dated 
September 29, says:

       The excise tax would be mainly passed along through 
     increases in premiums.

  Because the new tax is indexed to regular inflation plus 1 percent 
instead of medical inflation, which goes up very much higher and 
quicker, the new tax, like the alternative minimum tax, will pretty 
soon start to hit Chevy and Buick insurance policies and not just 
Cadillac policies.
  But there are other taxes in the President's proposal. There are up 
to $\1/2\ trillion in new taxes, which will be passed on to consumers: 
$20 billion in excise taxes on lifesaving medical devices, $33 billion 
on drugs, and $60 billion on health insurance companies. In the 
previously mentioned CBO letter and a JCT letter to Senator Grassley in 
October of last year, both said these taxes will be passed on to 
patients, increasing health insurance premiums.
  The Chief Actuary of the Center for Medicare and Medicaid Services, 
who is a part of the Obama administration said:

       We anticipate such fees would be generally passed through 
     to health consumers in the form of higher drug and device 
     prices and higher insurance premiums.

  That was on December 10 of last year, about the Senate bill.
  The Lewin Group, on October 30, said:

       Employer spending would increase steadily under the 
     [Democratic] act, reflecting the cost of paying the various 
     excise taxes under the act. Total employer health spending 
     would increase by 2.1 percent by 2019.

  I ask unanimous consent to have printed in the Record the executive 
summary of the Lewin Group letter.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                           Executive Summary

       In this study we estimate the impact of The America's 
     Healthy Future Act as adopted by the Senate Finance 
     Committee. The Act would require most Americans to have 
     health insurance. To assure access to affordable coverage, 
     the Bill expands the Medicaid program to 133 percent of the 
     Federal Poverty Level (FPL) for all adults. It also provides 
     a new premium tax credit for people living between 133 
     percent and 400 percent of the FPL (e.g., $88,000 for a 
     family of four).
       In addition, the Act establishes an ``exchange'' that 
     presents consumers with a selection of health coverage 
     alternatives that is available to individuals and firms with 
     fewer than 100 workers. States would have the option to 
     extend eligibility to larger employers beginning in 2017. 
     Only people participating in the exchange who do not have 
     access to employer coverage would be eligible for the premium 
     tax credit. The Act also reforms insurance markets by 
     assuring guaranteed issue of coverage and prohibiting plans 
     from varying premiums with health status.
       Employers with more than 50 workers are required to pay a 
     penalty for each uninsured worker receiving a premium tax 
     credit through the exchange. The Act also provides an 
     employer health insurance tax credit for up to two years for 
     firms with fewer than 25 workers with an average employee 
     earnings of less than $40,000. Workers offered coverage by an 
     employer are not eligible for premium subsidies offered in 
     the exchange unless the cost of employer coverage exceeds 10 
     percent of income.
       The Act is funded with reductions in spending under 
     Medicare and Medicaid, a

[[Page 2106]]

     new excise tax on high cost health plans (premiums over 
     $8,000 for individuals and $21,000 for families). It also 
     includes a second excise tax on insurance, new excise taxes 
     on branded prescription drugs and device manufacturers, and 
     other changes in revenues.
       In this study we provide estimates of the program's impact 
     on coverage and spending for the federal government, state 
     and local governments, private employers and consumers. To 
     demonstrate the long-term impact of the Act, we provide 
     estimates for a 20-year period from 2010 through 2029.

  Mr. ALEXANDER. The National Federation of Independent Business letter 
says the same. There are other reasons the premiums will go up.
  Mr. President, seeing no one else here, I wonder if I might ask 
unanimous consent for 5 additional minutes.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. ALEXANDER. I thank the President.
  Here is a third reason, in addition to government mandates and taxes, 
that will cause premiums to rise. We call it cost-shift. Premiums will 
increase because the bill dumps 15 million to 18 million more Americans 
into the government program called Medicaid. This is the analysis of 
the Chief Actuary on January 8, 2010.
  I ask unanimous consent that the relevant portions be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

         Department Of Health & Human Services, Centers for 
           Medicare & Medicaid Services,
                                                    Baltimore, MD.
     Date: January 8, 2010
     From: Richard S. Foster, Chief Actuary
     Subject: Estimated Financial Effects of the ``Patient 
         Protection and Affordable Care Act,'' as Passed by the 
         Senate on December 24, 2009.

       The Office of the Actuary has prepared this memorandum in 
     our longstanding capacity as an independent technical advisor 
     to both the Administration and the Congress. The costs, 
     savings, and coverage impacts shown herein represent our best 
     estimates for the Patient Protection and Affordable Care Act. 
     We offer this analysis in the hope that it will be of 
     interest and value to policy makers as they develop and 
     debate national health care reforms. The statements, 
     estimates, and other information provided in this memorandum 
     are those of the Office of the Actuary and do not represent 
     an official position of the Department of Health & Human 
     Services or the Administration.
       This memorandum summarizes the Office of the Actuary's 
     estimates of the financial and coverage effects through 
     fiscal year 2019 of selected provisions of the ``Patient 
     Protection and Affordable Care Act'' (PPACA) as passed by the 
     Senate on December 24, 2009 (H.R. 3590, as amended). Included 
     are the estimated net Federal expenditures in support of 
     expanded health insurance coverage, the associated numbers of 
     people by insured status, the changes in Medicare and 
     Medicaid expenditures and revenues, and the overall impact on 
     total national health expenditures. Except where noted, we 
     have not estimated the impact of the various tax and fee 
     proposals or the impact on income and payroll taxes due to 
     economic effects of the legislation. Similarly, the impact on 
     Federal administrative expenses is excluded. A summary of the 
     data, assumptions, and methodology underlying our estimates 
     of national health reform proposals is available in the 
     appendix to our October 21 memorandum on H.R. 3200.


                                summary

       The table shown on page 2 presents financial impacts of the 
     selected PPACA provisions on the Federal Budget in fiscal 
     years 2010-2019. We have grouped the provisions of the bill 
     into six major categories:
       (i) Coverage proposals, which include the mandated coverage 
     for health insurance, the expansion of Medicaid eligibility 
     to those with incomes at or under 133 percent of the Federal 
     poverty level (FPL), and the additional funding for the 
     Children's Health Insurance Program (CHIP);
       (ii) Medicare provisions;
       (iii) Medicaid and CHIP provisions other than the coverage 
     expansion and CHIP funding;
       (iv) Proposals aimed in part at changing the trend in 
     health spending growth;
       (v) The Community Living Assistance Services and Supports 
     (CLASS) proposal; and
       (vi) Immediate health insurance reforms.
       The estimated costs and savings shown in the table are 
     based on the effective dates specified in the bill as passed. 
     Additionally, we assume that employers and individuals would 
     take roughly 3 to 5 years to fully adapt to the insurance 
     coverage provisions and that the enrollment of additional 
     individuals under the Medicaid coverage expansion would be 
     completed by the third year of implementation. Because of 
     these transition effects and the fact that most of the 
     coverage provisions would be in effect for only 6 of the 10 
     years of the budget period, the cost estimates shown in this 
     memorandum do not represent a full 10-year cost for the 
     proposed legislation.

     ESTIMATED FEDERAL COSTS (+) OR SAVINGS (-) UNDER SELECTED PROVISIONS OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT AS PASSED BY THE SENATE
                                                                      [In billions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Fiscal year--
          Provisions          -------------------------------------------------------------------------------------------------------------- Total, 2010-
                                  2010       2011       2012       2013       2014       2015       2016       2017       2018       2019         19
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total*.......................      $11.6       $0.1     -$14.8     -$32.8      $14.7      $63.0      $71.4      $60.9      $55.8      $49.7       $279.5
Coverage....................        4.7        6.6        1.7  .........       86.5      128.0      150.1      156.4      167.9      180.7        882.5
Medicare.....................        2.2       -3.6      -12.1      -23.4      -62.6      -55.1      -70.2      -87.6     -104.6     -123.7       -540.7
Medicaid/CHIP................       -0.4       -0.1        0.2       -3.8       -3.1       -3.8       -3.9       -4.1       -4.0       -3.9        -27.1
Cost trend...................  .........  .........  .........  .........       -0.0       -0.1       -0.2       -0.4       -0.6       -0.9         -2.3
CLASS program................  .........       -2.8       -4.5       -5.6       -5.9       -6.0       -4.3       -3.4       -2.8       -2.4        -37.8
Immediate reforms............        5.0  .........  .........  .........  .........  .........  .........  .........  .........  .........          5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Excludes Title IX revenue provisions except for section 9015, certain provisions with limited impacts, and Federal administrative costs.
Includes expansion of Medicaid eligibility and additional funding for CHIP.
Includes estimated non-Medicare Federal savings from provisions for comparative effectiveness research, prevention and wellness, fraud and abuse, and
  administrative simplification. Excludes impacts of other provisions that would affect cost growth rates, such as the productivity adjustments to
  Medicare payment rates, which are reflected in the Medicare line.

       As indicated in the table above, the provisions in support 
     of expanding health insurance coverage (including the 
     Medicaid eligibility changes and additional CHIP funding) are 
     estimated to cost $882 billion through fiscal year 2019. The 
     net savings from the Medicare, Medicaid, growth-trend, and 
     CLASS proposals are estimated to total about $603 billion, 
     leaving a net cost for this period of $279 billion before 
     consideration of additional Federal administrative expenses 
     and the increase in Federal revenues that would result from 
     the excise tax on high-cost employer-sponsored health 
     insurance coverage and other revenue provisions. (The 
     additional Hospital Insurance payroll tax income under 
     section 9015 of the PPACA is included in the estimated 
     Medicare savings shown here.) The Congressional Budget Office 
     and Joint Committee on Taxation have estimated that the total 
     net amount of Medicare savings and additional tax and other 
     revenues would somewhat more than offset the cost of the 
     national coverage provisions, resulting in an overall 
     reduction in the Federal deficit through 2019.
       The chart shown below summarizes the estimated impacts of 
     the PPACA on insurance coverage. The mandated coverage 
     provisions, which include new responsibilities for both 
     individuals and employers, and the creation of the Health 
     Benefit Exchanges (hereafter referred to as the 
     ``Exchanges''), would lead to shifts across coverage types 
     and a substantial overall reduction in the number of 
     uninsured, as many of these individuals become covered 
     through their employers, Medicaid, or the Exchanges.
       By calendar year 2019, the mandates, coupled with the 
     Medicaid expansion, would reduce the number of uninsured from 
     57 million, as projected under current law, to an estimated 
     23 million under the PPACA. The additional 34 million people 
     who would become insured by 2019 reflect the net effect of 
     several shifts. First, an estimated 18 million would gain 
     primary Medicaid coverage as a result of the expansion of 
     eligibility to all legal resident adults under 133 percent of 
     the FPL (In addition, roughly 2 million people with employer-
     sponsored health insurance would enroll in Medicaid for 
     supplemental coverage.) Another 21 million persons (most of 
     whom are currently uninsured) would receive individual 
     insurance coverage through the newly created Exchanges, with 
     the majority of these qualifying for Federal premium and 
     cost-sharing subsidies. Finally, we estimate that the number 
     of individuals with employer-sponsored health insurance would 
     decrease overall by about 4 million, reflecting both gains 
     and losses in such coverage under the PPACA.
       As described in more detail in a later section of this 
     memorandum, we estimate that overall national health 
     expenditures under this bill would increase by an estimated

[[Page 2107]]

     total of $222 billion (0.6 percent) during calendar years 
     2010-2019, principally reflecting the net impact of (i) 
     greater utilization of health care services by individuals 
     becoming newly covered (or having more complete coverage), 
     (ii) lower prices paid to health providers for the subset of 
     those individuals who become covered by Medicaid, and (iii) 
     lower payments and payment updates for Medicare services, 
     together with net Medicaid savings from provisions other than 
     the coverage expansion. Although several provisions would 
     help to reduce health care cost growth, their impact would be 
     more than offset through 2019 by the higher health 
     expenditures resulting from the coverage expansions.
       The actual future impacts of the PPACA on health 
     expenditures, insured status, individual decisions, and 
     employer behavior are very uncertain. The legislation would 
     result in numerous changes in the way that health care 
     insurance is provided and paid for in the U.S., and the scope 
     and magnitude of these changes are such that few precedents 
     exist for use in estimation. Consequently, the estimates 
     presented here are subject to a substantially greater degree 
     of uncertainty than is usually the case with more routine 
     health care proposals.
       The balance of this memorandum discusses these financial 
     and coverage estimates--and their limitations--in greater 
     detail.

  Mr. ALEXANDER. The point is, Medicaid only pays doctors and hospitals 
about 60 percent of the cost of serving the 60 million patients who are 
now there. The Democratic bill would add 15 million to 18 million more 
patients. So what do the doctors and hospitals do? They see these 
patients, but then they shift the costs to the patients they see who 
have private insurance.
  The President himself said that adds about $1,000 to every policy 
today, this cost-shifting. I have included that comment from the Chief 
Actuary.
  The PriceWaterhouseCoopers report on the Senate Finance Committee 
bill in October of 2009 indicated that the net effect of the bills 
before Congress will make the Medicare and Medicaid cost-shift even 
more severe, raising the cost of private insurance premiums for large 
employers by $255 a year between 2015 and 2019.
  I ask unanimous consent to have printed in the Record the relevant 
portions of the PriceWaterhouseCoopers report.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

    Potential Impact of Health Reform on the Cost of Private Health 
                           Insurance Coverage


                    issue C--increased cost shifting

       Today, certain costs (e.g., hospital expenses) are shifted 
     to the private sector (employers and consumers) as some 
     participants in the system pay less than their share of the 
     cost of their care. Public programs such as Medicare and 
     Medicaid reimburse less than the cost of care for hospitals' 
     services. In addition, the uninsured or underinsured may not 
     be able to cover the full cost of care, and this cost is then 
     also transferred to the private market.
       The initial hope of health reform was that by improving 
     coverage of the currently uninsured, a significant percentage 
     of uncompensated care would be eliminated. This is still 
     anticipated to happen. However, the cost shift ``gains'' from 
     decreasing the numbers of uninsured now appear to be more 
     than offset by the losses from proposed cutbacks in Medicare 
     and Medicaid spending allocated to the hospital sector.
       It should also be noted that the impact of covering the 
     uninsured may be different in communities constrained by 
     limited hospital capacity. In those communities, covering the 
     uninsured could actually increase cost-shifting if the newly 
     insured increase demand for healthcare services and the 
     overall mix of hospital patients migrates towards lower 
     paying government programs.
       The net impact is likely to result in an increase in cost 
     shifting which translates into a 0.8 percent average annual 
     increase in the private sector spending between 2010 and 
     2019, or $145 on average per year for family coverage in a 
     large group plan (and $55 for single coverage). We note that 
     this cost burden ramps up over the projection period, with an 
     average annual increase in health costs of 1.2 percent over 
     the second five-year period. We assume that this increased 
     cost to the private sector will ultimately impact the cost of 
     coverage for individuals and businesses in both the insured 
     and self-insured market. As a result, premium costs for large 
     group plans will be $37 higher each year between 2010 and 
     2014 for family coverage ($14 for single coverage), and $255 
     higher each year between 2015 and 2019 ($96 for single 
     coverage).

  Mr. ALEXANDER. Younger Americans in the individual market will pay 
higher premiums under the Democratic plan because, as I mentioned 
earlier, it will mandate for individual coverage that I can't pay more 
than three times as much as my son can pay for an insurance premium. 
That might help keep my premiums down, but it is going to send his up 
pretty far because 42 States, including Tennessee, allow more variance 
of that. So young people across America, who include about 30 percent 
of the uninsured, are in for a big surprise when their individual 
policies jump up 30 to 35 percent, which is what the Oliver Wyman 
report on September 28 said theirs might do, or when, since they are 
uninsured, they are required to buy insurance and they find the 
insurance they are required to buy is very expensive.
  I ask unanimous consent to have printed in the Record the conclusion 
of the Oliver Wyman report.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                               Conclusion

       As Congress considers approaches to maximize health 
     insurance coverage in the United States, it is important to 
     consider the impact of premium rate compression on current 
     purchasers and the uninsured. Providing affordable premiums 
     to young people is critical to encourage their participation 
     and ensure the long-term sustainability of the insurance pool 
     in the years following health insurance reform.
       Requiring a young person to pay multiples of their expected 
     medical expenses for health insurance is likely to cause 
     these individuals to decline to purchase coverage. 
     Maintaining adequate flexibility in rating will minimize the 
     rate shock that many could see in the marketplace and 
     encourage higher levels of coverage over time. Moreover, the 
     elimination of health status as a rating factor will already 
     provide significant benefit to older individuals, who are 
     more likely to suffer from chronic health conditions.
       In conclusion, our modeling demonstrates that the 5:1 age 
     band, as originally included in the Senate Finance 
     Committee's Chairman's Mark, will reduce disruption compared 
     to tight age bands. Maintaining 5:1 age bands will encourage 
     more young people to participate in the insurance market, 
     thereby keeping average rates more affordable. This, in turn, 
     will result in higher overall levels of participation in the 
     insurance market and fewer uninsured.

  Mr. ALEXANDER. Finally, the young and the healthy can skip out of 
this. That will drive up premiums. They may decide they would rather 
pay a $750 fine than $2,500 for a health insurance policy they think 
they don't need.
  The American Academies of Actuaries wrote a letter on the Reid bill 
on November 20 that said: ``Any premium variations by age limited to a 
3.1 ratio between the highest and lowest premiums,'' and then it goes 
on to say, ``would cause higher premiums on average relative to current 
premiums.''
  I ask unanimous consent to have printed in the Record the letter from 
the American Academy of Actuaries of November 20, 2009.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                November 20, 2009.
     Re: Patient Protection and Affordable Care Act.

     Hon. Harry Reid
     Majority Leader, U.S. Senate, Hart Senate Office Building, 
         Washington, DC.
     Hon. Mitch McConnell,
     Minority Leader, U.S. Senate, Russell Senate Office Building, 
         Washington, DC.
       Dear Majority Leader Reid and Minority Leader McConnell: 
     The American Academy of Actuaries' Health Practice Council 
     commends members of the Senate as you prepare to debate and 
     vote on the Patient Protection and Affordable Care Act. We 
     share with you the goals of reducing the numbers of 
     uninsured, increasing the availability of affordable 
     coverage, controlling health spending growth, and improving 
     the quality of care. On behalf of the council, I appreciate 
     this opportunity to provide the following comments outlining 
     the three key criteria that need to be considered when 
     evaluating whether this legislation will lead to a viable 
     health insurance system, and how the legislation can be 
     improved to meet these goals. In particular:
       For insurance markets to be viable, they must attract a 
     broad section of risks. Implementing market reforms to 
     prohibit insurers from denying coverage and to restrict how 
     much premiums can vary will result in adverse selection and 
     upward pressure on premiums unless lower-risk individuals 
     have incentives to purchase coverage. An individual mandate 
     can bring lower-risk individuals into the pool. To be 
     effective, however, the penalties for not complying with the 
     mandate must be meaningful relative to the premium faced. The 
     penalties in the Patient Protection and Affordable Care Act 
     are very

[[Page 2108]]

     low, which is especially problematic given the bill's limits 
     on premium variations by age, which will raise premiums for 
     younger individuals. Strengthening the bill's individual 
     mandate through higher financial penalties is needed to 
     reduce adverse selection that would arise due to the new 
     issue and rating restrictions.
       Market competition requires a level playing field. All 
     plans, including any new public plans or health insurance 
     cooperatives must operate under the same rules. As written, 
     the public plan and cooperatives established under the 
     legislation would be subject to the same market rules and 
     benefit requirements that apply to public plans. They would 
     also be required to negotiate rates with providers. The bill 
     should retain these provisions and also ensure that start-up 
     funds provided to these plans are adequate to meet not only 
     pre-operational expenses but also solvency needs.
       For long-term sustainability, health spending growth must 
     be reduced. Provisions to control health care spending should 
     include not only one-time improvements that will help address 
     short-term goals, but also options that permanently reduce 
     spending growth to address long-term goals. The Patient 
     Protection and Affordable Care Act includes provisions that 
     aim to reduce long-term spending growth by shifting the 
     health care payment and delivery systems to focus on cost-
     effective and high-quality care. Many of these efforts take 
     the form of studies and demonstration projects. Policymakers 
     need to focus intently on finding ways to control spending 
     and ensuring that promising approaches and successful 
     demonstration projects are adopted on a broad scale in a 
     timely manner. . .
       To this end, the Act also includes provisions that would 
     help shift the health care payment and delivery systems from 
     rewarding quantity of care to rewarding quality of care. The 
     legislation includes many cost containment and quality 
     improvement strategies focused on the Medicare program, 
     including provider payment and delivery system reforms that 
     provide incentives for coordinated and cost-effective care. 
     Such a comprehensive and coordinated approach to addressing 
     quality and costs is needed to fundamentally transform the 
     health system to ensure its long-term sustainability. 
     However, acknowledging that the impact on health spending and 
     health outcomes of many potential programs is still unclear, 
     the legislation directs many of these efforts in the form of 
     studies and demonstration projects. Analyses from the Centers 
     on Medicare and Medicaid Services and from the Congressional 
     Budget Office suggest that at least in their current limited 
     form, these provisions will have only a minimal impact on 
     health spending growth. Policymakers need to focus intently 
     on finding ways to control spending and ensuring that 
     promising approaches and successful demonstration projects 
     are adopted on a broad scale and in a timely manner.


                                Summary

       The American Academy of Actuaries' Health Practice Council 
     strongly supports three key considerations for a sustainable 
     health insurance system with increased access to affordable 
     health insurance. In particular, for insurance markets to be 
     viable they must attract a broad cross section of risks; 
     market competition requires a level playing field; and for 
     long-term sustainability, health spending growth must be 
     reduced.
       Outcomes of the reforms before you, because they involve so 
     many complex interactions including market behavior, may not 
     be fully known until implementation. Even actuaries must make 
     certain assumptions in their projections, based on experience 
     and expertise, as to what the exact effects will be. However, 
     as the full Senate casts votes, we urge you to first and 
     foremost examine these criteria as a litmus for determining 
     the success of this reform effort. In particular, we believe 
     that strengthening the individual mandate through higher 
     financial penalties is needed to reduce the adverse selection 
     that would arise due to the new issue and rating 
     restrictions.
       We welcome the opportunity to serve as an ongoing resource 
     to you as health care reform legislation is considered in the 
     Senate and through remainder of the legislative process. If 
     you have any questions or would like to discuss these 
     comments further, please contact Heather Jerbi, the Academy's 
     senior health policy analyst (202.785.7869; 
     J[email protected]).
           Sincerely,
                                                  Cori E. Uccello,
                                             Senior Health Fellow.

  Mr. ALEXANDER. All in all, these factors suggest why, when Senator 
Collins took a look at Maine, she found that 87 percent of people in 
Maine are paying less for their individual policies than the policies 
would cost under the Reid bill. It is true that half or more of them 
would receive some subsidy, which would reduce their costs, but around 
half of them will pay more. In Tennessee, Blue Cross Blue Shield, which 
covers about one-third of Tennessee's individual market, estimates the 
premiums for those individuals will increase by 30 to 45 percent under 
the Reid bill.
  I ask unanimous consent to include a chart which demonstrates that.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

[[Page 2109]]





[[Page 2110]]

  Mr. ALEXANDER. At our summit on Thursday, there were a number of good 
ideas about reducing health care costs that the President seemed to 
share with Republican Members who were there. There was some obvious 
irritation on the part of the majority leader and others when we said 
things such as there is $\1/2\ trillion worth of cuts in Medicare, 
which there are. Our real objection to it is that the cuts are not used 
to save Medicare, which is going broke, but spent on a new program--
$\1/2\ trillion in new taxes. There is $\1/2\ trillion in new taxes.
  As I have just said, they tend to increase premiums for millions of 
Americans. There are premium increases. There is a deficit increase.
  It is true the CBO has said that what was presented to them didn't 
increase the deficit, but what was not included in what was presented 
was paying doctors to serve patients in the government program we call 
Medicare. That is like having a horse race without the horses. How are 
you going to have a comprehensive health care bill and not include 
within its costs paying doctors to serve patients in the government 
program? When you put it in, the deficit goes up.
  Then there is a problem of the passing off to States these expanded 
Medicaid costs without paying for them. I know as a former Governor--
and I see the former Governor of Virginia in the chair--I struggled 
with that every single year. All the Governors are today in both 
parties. They don't want us sending them a bill for expanded health 
care. They can't pay the bills they have. We shouldn't do that. If we 
want to expand it, we should pay for it. That is another part of the 
bill.
  So I came to the floor today to, No. 1, express my appreciation to 
the President for inviting us Thursday. It gave us a chance to show who 
we are and what we are for. I thought it was a good discussion. I 
believe there are 8 or 10, maybe a dozen different good ideas Senator 
Coburn and people on both sides of the aisle suggested. There are some 
differences between those ideas but, basically, they represent a way to 
move forward to reduce health care costs. That is what we ought to do. 
We don't do comprehensive very well in the Senate. Comprehensive 
immigration failed of its own weight. Comprehensive economy-wide cap 
and trade seems to be failing, again of its own weight. Comprehensive 
health care is very difficult to pass. That shouldn't be a surprise to 
any of us. This is a very big, difficult, complicated country with 
people of many different backgrounds and, in my judgment, we are just 
not wise enough for a few of us to rewrite the rules for 17 percent of 
our economy.
  I think the American people have tuned into that. They want us to fix 
health care, but they want us to reduce costs. Again, we on the 
Republican side are ready to set that goal and, as we said 173 
different times on the Senate floor the last six months of last year, 
we have offered 6 steps to move toward that goal. Maybe the President 
can think of six more. Maybe we can think of six more. We did that with 
the America COMPETES Act. We asked the national academies: What are the 
10 steps that can help us become more competitive as a country? They 
gave us 20, and we passed most of them. In clean energy, we are coming 
together on nuclear power, offshore drilling, and energy development. 
Those are steps toward a goal that would be a more sensible way for us 
to work.
  In the meantime, the unpleasant truth is, the current bill being 
considered--will cut Medicare, not spend it on Medicare--will raise 
taxes, and it will, as I have tried to demonstrate with respect to the 
President, raise individual premiums because of the one-size-fits-all 
government mandates and tax increases.
  Finally, I commend to my colleagues today's editorial from the Wall 
Street Journal detailing how the Massachusetts health care plan has 
unexpectedly caused premiums to rise over the last couple years and 
what lesson there might be in that for us.
  I yield the floor and suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. BAUCUS. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

                          ____________________