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Public Statements

Hearing Of The House Education And Labor Committee - The Tri-Committee Draft Proposal For Health Care Reform

Chaired By: Rep. George Miller

Witnesses Panel I: Christina Romer, Chair, Council Of Economic Advisers; Panel Ii: Ron Pollack, Founding Executive Director, Familiesusa; Gerald Shea, Assistant To The President, Afl-Cio; Paul J. Speranza Jr., Senior Vice President, General Counsel And Secretary, Wegmans Food Markets Inc.; Jacob Hacker, Professor And Co-Director, Berkeley Center On Health, Economic And Family Security, University Of California Berkeley; Michael J. Stapley, President And Chief Executive Officer, Deseret Mutual; John Arensmeyer, Chief Executive Officer, Small Business Majority; Fran Visco, President, National Breast Cancer Coalition; Panel Iii: Karen Pollitz, Research Professor And Project Director, Health Policy Institute, Georgetown University; Celia Wcislo, Assistant Division Director, Seiu; James A. Klein, President, American Benefits Council; William Vaughan, Senior Health Policy Analyst, Consumers Union; Robert E. Moffit, Ph.D., Director, Center For Health Policy Studies, The Heritage Foundation; Reshonda Young, Small Business Owner, Alpha Express Inc. And The Main Street Alliance; Fitzhugh Mullan, Murdock Head Professor Of Medicine And Health Policy, George Washington University

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REP. MILLER: Good afternoon. The Committee on Education and Labor will come to order for the purposes of conducting a hearing on the "Tri-Committee" discussion draft for health care reform in our country.

But before we begin this hearing I would like to welcome Congressman Kline to his first hearing as our new, incoming ranking member from the Republican Party, the senior Republican on our committee, and welcome him to the committee in that position and say congratulations to him and that I look forward to working with him to continue our efforts to rebuild our country and improve the lives of American families.

Welcome, Mr. Kline.

REP. JOHN KLINE: Thank you.

REP. MILLER: Congratulations to you. (Applause.)

Today, as I said, we will examine the House Tri-Committee discussion draft for health care reform. This hearing marks the next step in our critical and historic effort to guarantee all Americans access to quality, affordable health care.

No one can argue that our nation's current health care path is sustainable. Premiums and health care costs have skyrocketed for families and businesses alike. In today's system insurance company bureaucrats hold all of the power. They get to decide whether to cover a care that a doctor recommends for their patient; they can deny coverage or delay treatment based upon pre-existing conditions, sending millions of people into devastating debt and prolonging anxiety or suffering from unintended care. Americans with health care are deeply concerned that their employer may scale back or even cancel their coverage and if they lose their job they will lose their health insurance, too.

The cost of 47 million uninsured people in our country is also unsustainable. The lack of coverage jeopardizes not only their personal health but our nation's economic condition. The uninsured cost the rest of us about $1,100 per family in higher premiums. The numerous and serious weaknesses in our health care system have combined to deliver a crushing blow to America's families, businesses and to our countries' fiscal future.

Last Friday the three committees of jurisdiction in the House of Representatives unveiled our discussion draft for health care reform. It reflects months of hard work, of extensive meetings with Democrats and Republicans, with the senators, with the Congressional Budget Office, with administration officials and stakeholders in an open and collaborative process. Consistent with President Obama's goals, our draft builds on what works and fixes what's broken in our current system. It lays the foundation for an American solution that will reduce costs, guarantee choice of doctors and plans, and ensure access to affordable quality health care for all.

For Americans just beginning to pay attention to this health care debate, here are some critical ways that the reform will directly help you and your family. Our proposed reforms will cover about 95 percent of all Americans. If you like your doctor, your health care plan, you can keep them. You won't have to worry about coverage if your employer drops it or you lose your job. Co-pays for preventative care won't exist. Premiums or coverage will not be based upon pre-existing conditions, gender or occupation. You'll have a choice of high- quality affordable public health insurance plans and your doctors and nurses will have access to the best information organized in the best way to offer you individualized care.

Our draft will help drive down health care costs in several ways. First, it ensures competition in the marketplace by establishing a new health insurance exchange that includes a strong public health insurance option that will compete on a level playing field to keep the insurance companies honest. This will help lower costs for everyone.

Second, it trims costs by simplifying paperwork and preventing waste, fraud and abuse.

Third and most importantly, it controls costs by reducing spending. Health care reforms will be -- and these health care reforms will be fully paid for. President Obama has outlined a menu of cost reductions that we will consider and have to make some very tough decisions about, but this weekend's pledge by the pharmaceutical companies demonstrates that the president is successful in building in a diverse coalition committed to reducing spending while improving affordability.

Our draft outlines what other significant portion of this funding will come from, promotes efficiencies in Medicare and Medicaid, and ending overpayments to private plans. This does not mean that we will be cutting services; instead we will improve them and strengthen the long-term sustainability so we can continue to provide the quality and dependable health care service for years to come.

Next, our reform will guarantee people a real choice of doctors, nurses, insurance plans through the exchange. Under our draft, as we said, if you like it you can keep it. People who aren't covered will be able to choose a menu of affordable plans, both public and private. This coverage will be portable and guaranteed no matter if an employer drops coverage or people lose their jobs.

Finally, our draft ensures that all Americans can afford quality health care based upon a sliding scale. Every plan offered through the exchange will include essential benefits, including no co-pays for preventative service, coverage for dental and vision coverage for children, caps on annual out-of-pocket expenses that will protect against medical bankruptcy.

It ensures that care will be as it should be and that is patient- centered, driven by patients' needs and the expertise of doctors. It will simply not invest in utilization but more so in outcomes. It invests in prevention and wellness. It ends the insurance companies' discriminatory practices. It also requires shared responsibilities by individuals, employers and the government to ensure that all Americans have access to these benefits.

In the coming weeks we will continue to seek input from stakeholders and lawmakers, but many are also clamoring for inaction. Let me be clear on this one point: On behalf of every parent seeking care for their sick child, for every American hoping that health care costs are not their last stop before bankruptcy, I assure you that the one thing that is in fact off the table in this effort is saying no to health care reform.

To succeed we will need the cooperation of all of our colleagues and of our president. There will be a tremendous pressure to think only about one narrow interest or another, but instead we must think about the future of our country and every American who expects that this year this will be the year that we will make a health care system part of America's shining future and not a cause of further financial chaos.

With that I'd like to recognize Mr. Kline for the purpose of an opening statement.

REP. KLINE: Thank you, Mr. Chairman.

And thank you for your kind welcome. That may be the only time I ever get a round of applause from you, Mr. Chairman, so I'm going to savor it as long as I can. (Laughter.)

I want to thank our witnesses for being here. I know you're going to introduce some very distinguished panels. A lot of interested parties sitting out here in front of us today, as well they should be because health care spending today accounts for approximately one-sixth of our economy, more than any other industry.

Millions of Americans have limited coverage or no coverage at all. Some of them, particularly young adults, voluntarily choose not to secure coverage, whether from a youthful sense of invincibility or an understandable skepticism that the cost is not worth the benefit. Still others are eligible for coverage through their job but choose for a variety of reasons not to enroll. Many of the uninsured work for small businesses, which cannot achieve the efficiencies or economies of scale of larger employers. As a result, their costs are much higher, often too high for both the small-business owner and the worker.

I could go on, but the point is simple: The root causes of the high rate of uninsured Americans are many and varied, as are the reasons for the sustained increase in cost for those who are covered. The solution, however, is far from simple. A one-size-fits-all approach will not eliminate the problem or its root causes, yet here we are this afternoon looking at the very definition of a one-size- fits-all approach, a health care system increasingly controlled and administered by the federal government. This draft legislation, as far as I can tell, fails to address many of the structural flaws at the root of our current crisis.

The president has pledged, and I quote: "If you like your doctor you will be able to keep your doctor, period. If you like your health care plan, you'll be able to keep your health care plan, period. No one will take it away, no matter what," closed quote. But the Congressional Budget Office projects that 23 million Americans would lose their current coverage under a plan being debated in the U.S. Senate.

Ideas in the bill before us, such as the national heath exchange, would shift millions of Americans out of their current coverage and into a government-run plan. It might be the 23 million in the Senate plan. It might be more. We just don't know.

What we do know about the Democrats' plan -- and it is the Democrats' plan; we haven't seen it until we got a glimpse of the 852- page monster on Friday. The Democrats' plan increases the role of the federal government through a new government-run plan and an expansion of Medicaid. With government spending on health care already exploding and the federal Medicare and Medicaid programs already on the road to insolvency, I can't imagine the reasoning behind intensifying the stress placed on these programs.

Employers are struggling to maintain coverage for their workers at a time when costs continue to rise and the economy continues to flail, but rather than offer relief, the Democrats' plan saddles employers with a pay-or-play scheme that threatens harsh financial sanctions and puts jobs at risk.

This may be my first hearing as the Education and Labor Committee's senior Republican, but today we're all first-timers. In fact, this is the very first hearing on health care reform held by the full committee in the 111th Congress. And unfortunately, it may be the only hearing before the Democrats' plan is marked up.

The speaker has announced earlier this year that a health care overhaul would be voted on in the House before the August District Work Period. That doesn't give us much time for a serious debate. And that's too bad, Mr. Chairman, because this is a very serious issue. It deserves a real debate. The American people deserve an opportunity to weigh in. You haven't allowed that to happen.

The so-called Tri-Committee Draft is 852 pages. It was released on Friday afternoon. Perhaps most troubling, today's hearing is taking place when many members of Congress are still in their congressional districts or on their way back to Washington. And I have to say, Mr. Chairman, I'm very pleased at the turnout here today. I was skeptical that we would get this many to come in this early.

It doesn't have to be this way. Last week the Republican Health Care Solutions Group released a plan that we believe could serve as the basis of a bipartisan reform package. It contains common-sense solutions such as allowing children to remain covered by their parents' plans until they reach age 25 and making it easier for Americans to get health coverage when they lose or change jobs. It makes these changes while maintaining an improving upon the parts of the system that function well.

Of particular interest to this committee the Republican plan keeps much of the ERISA-based system in place, which would enable Americans who like their current coverage -- many of whom receive it through their employer -- to keep what they have.

But as much as I support these principles of the Republican plan, I wish we didn't need to frame this debate in partisan terms. Health care reform is far too important for partisan gamesmanship. It is also far too important to rush.

Today may be our first hearing, but I hope it won't be our last. The proposal we are debating today is clearly partisan, but I continue to believe that Republicans and Democrats can and should come together to develop an American plan that will make health care more affordable, reduce the number of uninsured Americans and increase quality at a price that our country can afford.

Thank you, Mr. Chairman. I yield back.

REP. MILLER: Thank you.

I would now recognize the chairman of the subcommittee of jurisdiction, the Subcommittee on Health, Employment, Labor and Pensions, Mr. Andrews, for an opening statement.

REP. ROB ANDREWS: I thank the chairman for yielding.

I also would like to welcome Mr. Kline to his new position and wish him the best.

And we'll get to Dr. Romer as well, soon. Thank you.

I did want to take a minute and respond to some of the things that Mr. Kline said in his remarks -- that there's an estimate that 23 million would lose their coverage under the Senate bill. The Congressional Budget Office has not yet reviewed the House draft that was released on Friday. I'm confident that when they do they will find that employer-based coverage will be very strong for a very long time.

As the president has promised, if you like the plan that you're in, you get to keep it. That's one of the cornerstones of the legislation that we have here. And the substance that backs up that promise is this: About 80 percent of American employers are already doing what this bill calls for -- that is, to provide a very healthy benefits package for people, and when they do that employer gets exposed to what we'd call the Hippocratic principle: We do no harm. We say to about 80 percent of American employers, thank you for what you are doing; we are leaving you alone; we're not making any significant change to your ERISA preemption; we're not forcing you to join any exchange or any other marketplace; we are leaving you alone.

What we are trying to do for American businesses and families and labor unions and other institutions is to make health care more affordable. And the way that we're doing that is to require something that's really never been required before under federal law but that's always been required under our system of organizing our economy, which is competition.

In too many instances Americans live in circumstances where insurance companies are not compelled to compete for their business. In 36 states -- in 36 states the top two companies in the marketplace have at least 65 percent of the business. Let me say that again. In 36 states today the top two providers have about two-thirds of the covered lives and two-thirds of the business. There is insufficient competition.

Americans benefit from competition at our grocery stores, housing market, financial services and so many other areas of American life. When someone has to compete for your business, you as a consumer do better. You have higher quality, more choice, and lower cost. That is not the reality of the health care insurance market in our country today. And this plan makes it the reality.

One of the ways we make it the reality is to assure that every American who's in the exchange -- who's uninsured and looking for health care -- and eventually every buyer of health care in this country will have the choice of a robust, nonprofit public competitor to the private insurance plans.

Be very clear about this -- rhetoric has been thrown about about nationalizing health care and forcing everyone to live under a government health care system. I would first of all say we should ask some of our moms and dads how they feel about a government health care system called Medicare. They're rather happy with it for the most part.

But putting that aside for the moment, what this plan does is to say that uninsured people will have a choice -- a choice -- of which health insurer is better for them. If they choose a private employer that's where they'll go. And they'll make a significant contribution from their own income to get there. And they'll receive a subsidy to help them get the insurance they don't presently have.

If they prefer the public option they will have that. But for the first time we'll have a marketplace in health insurance policies that really does require competition among the insurance companies who offer this coverage.

The final thing that I would say is that there was a reference -- my friend from Minnesota about the pay-or-play structure and the confiscatory problems for employers. Let me be very clear about this. This plan divides the employer world into three categories. The vast majority of American employers who do provide very generous benefits voluntarily, this plan leaves them alone.

For small businesses, for the person who's running a small business and struggling to stay ahead, this plan recognizes that an exemption from the employer mandate is necessary. The draft does not specifically speak to the scope of that exemption. Part of the purpose of the debate that begins today is to fill in that blank -- it is for the members on both sides of the aisle to come up with their best analysis of what that exemption ought to be.

But I assure you this: There will be a small-business exemption that takes into account the hardworking, struggling entrepreneur who simply can't afford health insurance because her business or his business would go under.

And there's a third category of employer that is an employer that has the wherewithal to insure his or her employees but chooses not to. That will change. That employer will have the obligation to cover employees at a decent level, because when he or she chooses not to do that everyone else pays for that now -- the employer who does insure, the family who does insure, the taxpayer who pays taxes.

So we look forward to this beginning of a process to deliberate, look at these issues and come to a solution.

I just close with this one thought, Mr. Chairman; there is some concern about this being rushed. I think it's about 50 years too late. (Laughter.) And I think it's long past time we got to this business. I look forward to it and yield back.

REP. MILLER: The gentleman's time has expired.

Dr. Price is recognized.

REP. TOM PRICE: Thank you. Thank you, Mr. Chairman.

And I want to thank you and Ranking Member Kline for holding this hearing today. I want to thank our distinguished panels of witnesses today, many with great experience. I appreciate the time that they've taken out of their busy schedules to be with us.

As a physician there is one certainty that I hear from my former colleagues. And that is that the status quo in health care is unacceptable. So no one -- let me be clear -- no one is clamoring for inaction.

Today we're at a crossroads. Our broken medical delivery structure is in dire need of meaningful reform. And today's hearing represents the beginning of an historic debate on how we achieve full access to affordable quality health care while preserving the patient- doctor relationship without undue governmental interference. When Congress established Medicare -- a national health insurance program for seniors -- over 40 years ago it wrote into the law, quote, "Nothing in this title shall be construed to authorize any federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided." And that remains the law of the land.

However, as any physician on the front lines of health care can tell you, these words ring hollow, as does its promise. As time has passed, and as I can attest to firsthand after nearly a quarter of a century as a practicing surgeon, there may have been no greater negative impact on the, quote, "manner in which medical services are provided," unquote, than the intrusion of the federal government into health care.

Under the current Medicare program, patients are often told which doctors they may see and how frequently.

Doctors, in turn, are often told which procedures or tests they may or may not order or provide. This has eroded the ability of patients and doctors to make independent health care decisions -- some of the most personal that we make. And the doctor-patient relationship, once sacrosanct, is being trampled by coverage rules, inflexible regulations and one-size-fits-all policies.

To exacerbate the matter, most medical practices, including some of the largest and most respected institutions in our nation, find it necessary to limit -- yes, limit -- the number of Medicare patients they see. The delivery system devised and controlled by Washington is clearly not the model for reform.

As this committee begins to critically analyze this Tri-Committee Draft Proposal I raise these specific points because I fear that we are not only repeating the same mistakes but taking them a step further by permanently institutionalizing them into our health care delivery system for all.

Take, for instance, the newly created Health Benefits Advisory Committee. It's being established to make recommendations on minimum health benefits standards and cost-sharing levels. It will be comprised of mainly of federal bureaucrats and presidential appointees. And it -- just like the Comparative Effectiveness Research Council, enacted earlier this year -- will not necessarily have a single actively practicing physician among its members -- not one.

This is the very type of federal health board envisioned by some proponents of a government takeover which would dictate personal medical treatments allowed solely on the basis of cost.

Having the government defining what quality medical care is -- this is not what Americans view as the right direction or the change they desire. They know what you know and that is that quality is best evaluated by patients and their families making decisions with a knowledgeable, concerned and compassionate physician.

Ask the veteran waiting endlessly for needed surgery because the surgical unit has met its quotas. Ask the senior, the new Medicare patient who can't find a doctor able to see any more Medicare patients. Ask those who utilize the Indian Health Service if they receive the choices necessary to respond appropriately to their needs. And ask the Medicaid mom if the system facilitates her treatment.

Ask them. Ask them if their health care delivery system best responds to their needs.

These are the four health systems Washington currently controls. And none of them meet the principles of health care we all hold dear: accessibility, affordability, quality, responsiveness, innovation, choices.

Now, there are positive solutions -- ones that would improve each of these systems and ease coverage opportunities for those currently uninsured or underinsured. And that is what we should be doing, not forcing every single American into a system that of necessity will betray those principles dear to all.

In the final analysis, the question becomes, will we allow Americans the opportunity to opt out. Will we allow free people the right to decide that this isn't the system that they want for themselves or for their family?

And I would hope that the panelists would address that question.

This is hardly a step in preserving the patient-doctor relationship. When you pour through the pages of this bill -- as you'll note, Mr. Chairman and others on the panel, isn't on our desk this morning -- we see that it's based on a government-as-solution philosophy. This means more federal supervision and more federal administration.

And it will ultimately come to rely on mandates, rationing, bureaucracy and third-party decision making, all of which interfere with personal, private medical decisions. This is hardly a step that preserves the patient-doctor relationship -- the one thing that arguably has allowed America to have some of the greatest health care in the world.

This bill offers an approach that is incapable of providing quality care which is accessible and innovative and responsive. Achieving this positive type of change will only be possible by embracing a fundamental rethinking of our health care delivery system which champions personal ownership of coverage.

There are positive solutions to the challenge we face. And I'm hopeful that the committees in the House will allow for an open, vibrant, robust debate and deliberative process -- one that respects America's doctors but, most of all, one that respects America's physicians.

And I yield back.

REP. MILLER: I thank the gentleman.

Pursuant to Committee Rule 7C, all members may submit opening statements in writing which will be made part of the permanent record.

Our first panel this morning will be made up of Dr. Romer. Dr. Christina Romer is the chair of the Council of Economic Advisers in President Obama's administration. She is also the former vice president of the American Economics Association and the Garff B. Wilson professor of economics at the University of California- Berkeley. Dr. Romer holds a B.A. form the College of William & Mary and her Ph.D. from Massachusetts Institute of Technology.

Dr. Romer, welcome to the committee.

I know there was a lot of scheduling changes over the weekend to get you here. And I appreciate your cooperation and the administration's cooperation to make you available to the committee.

I also know that we have a very short leash on your time. And Dr. Romer, we'll be leaving pretty close to 1:30 if everybody holds to their schedule. That means not everybody is going to get to ask her a question. But we will go as rapidly and as quickly as we're allowed under the rules.

Welcome to the committee. And your entire statement will be placed in the record. And you proceed in the manner in which you're most comfortable.

Thank you.

MS. ROMER: Thank you very much.

REP. MILLER: The lights here -- yeah, you'll have 10 minutes. And then at nine minutes an orange light will go on, I believe, and then you can start summarizing, and then we'll allow for questions. Thank you.

MS. ROMER: Wonderful.

Well, Chairman Miller, Ranking Member Kline and members of the committee, it is indeed an honor to be with you today to discuss the economics of health care reform.

The president, as you know, has identified comprehensive, meaningful health care reform as a top priority. And the administration is grateful to the Congress for working so quickly and tirelessly on this important issue.

In my remarks today I will discuss the economic imperative of reform that satisfies the president's dual goals of slowing the growth rate of health care costs significantly and providing quality, affordable health insurance coverage for all Americans.

The figures and the analysis that underlie my testimony today are contained in the Council of Economic Advisers' report "The Economic Case for Health Care Reform." With your permission I would like to include a copy of that report in my testimony so that the sources and methodology are full documented for the committee.

Well, many of the crucial trends in American health care are well-known, but the Council of Economic Advisers worked with others in the administration to develop projections of what will happen in the absence of reform. Spelling out these facts and trends makes a compelling case that the status quo is simply not an option.

Now, one key fact is that health care expenditures in the United States are about 18 percent of GDP, by far the highest of any country.

Now, if we can go to the first figure -- this figure shows our projections of the likely path of national health care expenditures. These expenditures are projected to rise sharply. By 2040, health expenditures could be roughly one-third of total output in the U.S. economy.

All right, how about for households? Well, for households, rising health care expenditures will likely show up in rising insurance premiums. Even if employers continue to pay the lion's share of premiums, both economic theory and empirical evidence suggest that this trend will show up in stagnating take-home wages.

This next figure shows our projections of total compensation and compensation less insurance costs, both in inflation-adjusted dollars. The wedge-shaped area between the two lines shows our predicted level of insurance premiums. What you see is that without reform, the non- insurance part of compensation will grow very slowly and will likely fall eventually as premiums rise rapidly.

All right, rising health care costs also mean that government spending on Medicare and Medicaid will rise sharply over time. We go to the next figure. This picture -- the dashed line shows the projected path of combined federal and state spending on Medicare and Medicaid. Our projections show that these expenditures, which are currently about 6 percent of GDP, will rise to 15 percent of GDP by 2040. In the absence of tremendous increases in taxes or reductions in other types of government spending, this trend implies a devastating and frankly unsustainable rise in the federal budget deficit.

Another trend that is too crucial to be ignored is the rise in the number of Americans without health insurance. Currently 46 million people in the United States are uninsured. In the absence of reform -- we look at the next picture -- this number is projected to rise to about 72 million in 2040, an increase of 26 million people over the next 30 years.

Well, the president has emphasized that providing quality, affordable health insurance for all Americans is a key goal of reform. For the many Americans who currently have health insurance, as has been noted here this morning, the president has promised that if you like your doctor and your existing plan you can keep them. The president and Congress are also proposing methods to make the existing system work better for all families, such as simplification of insurance forms and electronic health records that reduce duplication of tests and prevent medical errors.

For the millions of Americans without insurance, the president is committed to working with Congress to design a sensible, cost- effective method of coverage expansion. Expanding coverage will likely involve the creation of a health insurance exchange that give individuals and small groups the same benefits of risk pooling and elimination of adverse selection that employees of large firms enjoy.

One feature of health reform that the president has emphasized is that no one should be denied health coverage due to pre-existing conditions. Americans with health problems need the security of knowing that if they change jobs or lose their job, they will still be able to get health insurance coverage.

Now, there are important benefits to the economy and to society of coverage expansion. The most important of these involves the health and economic well-being of the uninsured. In our report we use the best available estimates to try to quantify the costs and benefits of expanding coverage to all Americans.

Among the benefits that we attempt to put a dollar value on are the increase in life expectancy, the improvement in health and the decreased risk of financial ruin from high medical bills. We find the benefits of expanding coverage to the uninsured are very large and substantially greater than the costs. Our estimates show that the net benefits, the benefits minus the costs, are roughly $100 billion per year, or about two-thirds of a percent of GDP.

Another effective coverage in increased labor supply. With expanded coverage, some people who'd not be able to work because of disability would be able to get health care that prevents or effectively treats the disability. They would therefore be able to stay in the labor force. Similarly, some workers currently in the labor force would be more productive if they had health care. We believe that the net impact on effective labor supply will be positive and will increase GDP.

Expanding coverage will also improve the efficiency of the labor market, creating an insurance exchange. And eliminating restrictions on pre-existing conditions would end the phenomenon of job lock, where worries about health insurance cause workers to stay in jobs even when better ones are available. Our estimates are that this benefit could be about two-tenths of a percent of GDP each year.

Similarly, we examined the fact that small businesses are disadvantaged in the labor market because current employer-sponsored insurance is so expensive for them. Moving to a system that removes that disadvantage could be beneficial to the competitiveness of the important small-business sector of the economy.

Now, while the benefits of expanding coverage are substantial, slowing the growth rate of health care costs is essential to moving the economy off its unsustainable path and securing a better economic future for the American people.

And in discussing cost containment, I want to focus on the slowing of the growth rate of costs. This is the so-called "curve- bending" that can last for decades. Slowing cost growth is quite separate from actions that we might take immediately to cut the level of government medical spending. These immediate reductions are crucial for paying for the expansion of coverage and other health care reforms in the short run. But for thinking about the changes that will save us from the unsustainable long-run trends, slowing cost growth year after year is essential.

Now, many meaningful reforms are necessary to slow the growth rate of costs over time. The CEA report focused on the conceptual importance of reforms, rather than the mechanics, but the report does describe in broad terms the kind of changes that might be implemented. We discussed, for example, changes in payments systems, such as bundling of payments for hospital and post-hospital care, and change in the organization of care delivery, such as the formation of accountable care organizations and medical homes, as ways to reduce fragmentation and promote more effective and more efficient care. We emphasize the crucial role that investments in health information technology and research on what works and what doesn't could play in reining in cost growth.

The president in his speech last week to the American Medical Association made some specific suggestions for reform along the lines that I've described. He also said that he was open to changes that would give the recommendations of the Medicare Payment Advisory Commission greater chance of adoption and implementation. The Congressional Budget Office has also outlined a large number of "game changing" reforms that experts believe would slow cost growth.

In our report, we speak of the benefits of slowing the growth rate of health care costs. But each of our figures implicitly shows the impact of not slowing the cost growth. To help emphasize the importance of doing reform well, I will describe them from that perspective this morning.

Fundamentally, what slowing cost growth does is to free up resources. If we restrain costs by eliminating waste and inefficiency, we can have the same real amount of health care with resources left over to produce the other things that we value. This causes standards of living to be higher.

In our analysis, we consider varying degrees of cost containment. In particular, we look at the effect of slowing the annual growth rate of health care costs by 1.5, 1.0, and just half a percentage point. We analyze the effects of freeing up resources in a standard growth accounting framework. Our framework includes the effect of slowing cost growth on the deficit and capital formation or investment.

All right, well, if we go to the next figure -- this figure shows the crucial importance of slowing cost growth for standards of living. To make these numbers more concrete we translate them into the effects on the income for a typical family of four, again in constant inflation-adjusted dollars.

The bottom line shows the projected path of real family income without reform. The higher paths show family income under different degrees of cost containment. Our numbers suggest that failing to slow cost growth results in substantially lower standards of living for American families. Without reform, our analysis predicts that the typical family income in 2020 will be roughly $2,600 lower than it would be if we managed to slow the growth rate of costs by 1.5 percentage points. By 2030, it will be nearly $10,000 lower than if we managed to slow cost growth.

Failing to control the growth of health care costs will condemn American families to much lower standards of living than they would experience with successful reform. Slowing the growth of health care costs will also have enormous effects on the budget deficit. This last figure shows the reduction in -- oops, we lost it -- shows the reduction in the federal budget deficit due to different degrees of cost containment.

Consider the numbers in the middle for 2030. They show that slowing the growth rate of health care costs by 1.5 percentage points will reduce the deficit by 3 percent of GDP. Put another way, failing to slow cost growth by 1.5 percentage points per year will result in a deficit that is higher by 3 percent of GDP. By not slowing costs we will leave our children a budget deficit in 2040 that is 6 percent of GDP higher than it would have been with successful reform. The numbers illustrate the crucial truth that serious health care cost growth containment is central to our long-run fiscal stability.

Taken together, the analysis by the Council of Economic Advisers shows that doing nothing on health care reform is simply not an option. Expanding coverage will unquestionably have benefits for economic well-being, the efficiency of the labor market and the competitiveness of small businesses, but only by undertaking meaningful reforms to slow the growth of health care costs can we assure American families of rising standards of living and falling, rather than ever-increasing, budget deficits.

The president has spoken frequently of the need to provide the American economy with a new foundation. His goal is that we not only come through the current economic crisis but emerge a stronger, more durable economy. Health care reform that provides quality, affordable coverage for all Americans and genuinely slows the growth rate of costs significantly is a crucial part of that new foundation. Successful reform is fundamental to the long-run health of the American economy.

Thank you.

REP. MILLER: Thank you very much. Thank you for the study that the council did and also, again, for your testimony and being with us.

I would like to return to the -- and speak in a concept level that the -- the idea that the president has put on the table now I think twice or more times and that is that there are internal savings and cost cutting that need to be made within how we deliver medicine today, how we deliver health care today.

You, I believe, said it was 18 percent of the gross domestic product -- Mr. Kline or one of you said that in your statements -- and I think that's much higher than almost every other nation in terms of what we're spending, and yet we are saddled with the other side of that argument, which is our health status is not much better and in many important indicators is worse than nations that spend less.

And, you know, the president has suggested now I think almost $600 billion in cost-cutting changes and savings that need to take place. Some of those I expect will not be adopted by the Congress, but they all reflect the understanding that the current system, we're sort of just paying for utilization -- the more you use, the more you're getting reimbursed wherever you are, almost without whether you're -- whatever plan you're in; whether you're in Medicaid, Medicare, that's how it -- and the private health insurance plans. And it also suggests that providers of health care, because of consolidation and changes, are becoming more and more powerful in how that is done.

So we back up and these costs really become fundamental to -- you talk about bending the curve, but if in fact we're going to get out of this box where now most middle-class working people, any wage increase that they might get is taken over by increased share of their premiums or exclusions or co-payments that have been added and that's been the trend over the last 10 years -- they're offloading that onto workers -- so as you point out they essentially eat up any possible wage increase that you might have; any discretionary income that you might get from that increase is essentially gone in those payments.

I'd just like you to expand a little bit on that idea that to change from a utilization-based system to a system that's based upon outcomes and procedures and efficiencies. There's an awful lot of studies suggesting that that would make a dramatic difference in the total cost to this nation, whether it be a government program or with the -- businesses and families who are paying for their coverage.

MS. ROMER: I couldn't agree with you more that we absolutely, at the rate we are going, what -- the numbers that we have show that very much that most of that rising in total compensation that come to workers because of productivity changes and all of that will be taken up by bigger health insurance premiums so that they see their take- home wages basically being flat or even going down towards the end of the period.

I think the important -- a crucial point that you make is that when we talk about curve-bending, slowing the growth rate of costs, we're talking about doing it through improving efficiency. And the crucial part is that as good as the American health care system is -- we know it is a technological leader, for example -- we do feel there's a lot of inefficiency. And you mentioned the international evidence; people also talk about the huge differences in expenditure on medical care across the country or even in the same counties within a state that people say we -- that researchers say we just can't explain by differences in health needs or differences in the demographics of the population.

So the experts tell us there's up to about 30 percent of health care expenditure that's just being wasted. All right, what that means is we've got a lot of fat that we can cut out of the system without having any diminution of care. And indeed what the president is committed to is maintaining and improving the quality of care.

And I will just give you one other number, which is, you know, we've talked a lot about can we slow the growth rate of costs by, say, 1.5 percentage points a year. Well, the crucial thing is with the kind of inefficiency that's there we can do that for 25 years before we actually use up the existing amount of inefficiency. So the kind of changes that we've mentioned, that the president has talked about, absolutely can do that and they're just absolutely crucial to do.

REP. MILLER: They're not without controversy, I might add. They're crucial, but I know the president met with a number of the providers, with the pharmaceutical groups, the insurance groups and hospitals and others and they talked about taking out I guess about 1.5 percent, about $2 trillion over the next 10 years. Obviously laying pencil to paper became more controversial than the discussions, but I think we as policymakers should recognize what they were telling us. We may have to screw up the courage to make the decisions, but that kind of money is lying on the table with that kind of rather small annual change in outlays.

And again, if it's a company with a policy directed toward efficiencies and better outcomes and a better health care status for American citizens, it seems to me that -- a big chunk of this bill should take us in that direction.

Thank you very much. My -- oh, go ahead if you --

MS. ROMER: I was going to say you're absolutely right, the 1.5 percentage points may sound small but it's enormous in terms of its effect on the economy. And you're absolutely right that it is going to step on some toes to get any of these.

You know, one example that I'd give, the bundling of care -- one of the things we often talk about is a bundling -- you know, your hospitalization and the 30 days after. That is just such a win for patients and for cost-effectiveness because we think it gives hospitals and providers the right incentives to make sure you don't get sent home too early and that you don't end up back in the hospital. And that's just one that's going to be just a win-win and should absolutely not be as controversial as some of the others.

REP. MILLER: Thank you. Mr. Kline?

REP. KLINE: Thank you, Mr. Chairman.

Thank you, Dr. Romer, for your testimony.

I think that there is absolute agreement on both sides of this aisle here, as Dr. Price mentioned, that we all recognize that we need health care reform. And certainly if you could be reducing costs, that needs to be part of it.

I must say that I always cringe a little bit when I think about the government being the one stepping on toes, as you say, to make that happen. And I've also got to say that I'm a little skeptical. Getting the government to cut out the fat would seem to defy its history. (Laughs.) But I guess hope does spring eternal.

We don't know, of course, right now what the cost of this draft is. We've looked at the CBO estimates already on the version in the Senate. We don't know what this is; almost certainly you're going to be over $1 trillion. So it's a little bit hard I would think for an economist -- and you're here as an economist -- to really assess the impact.

But I know that or I suspect that you have looked at the issue of employer mandate and what it might -- the employer mandate to provide health insurance coverage -- what it might do to job losses. Do you know, is there in the professional literature some estimate of what the job losses might be with an employer mandate?

And by the way, I might as well -- I might note that this draft has not only an employer mandate but an individual mandate, thereby solving the debate that's been going on for several months about which way it should be. And I'll have to give you credit; you did solve the debate, Mr. Chairman. Not in the way I expected, but there it is.

No, so back to you, Dr. Romer, have you seen estimates as to what job losses might be with an employer mandate such as is held in this draft?

MS. ROMER: So I think in answering that question the first thing we have to make clear is that the vast majority of employers currently do provide health insurance for their employees and so an employer mandate will just be telling them to keep on doing what they have been doing, so it'd have no effect at all on them.

And then what effects it could have on other employers depends very much on how it is structured. And as has been mentioned, one of the things that people are being very cognizant of is how do we treat small employers and those kind of things. So I think there's a literature, but it certainly has a whole range of estimates depending on how the system is structured.

I do think it's important to realize the reason people talk about having shared responsibilities with employers and that is that we do think that the employer-based system that we have is something that people are familiar with and the president is committed to keeping that as a system going forward.

REP. KLINE: So you don't have any estimates of what the job losses might be?

I've seen numbers as high as 4 or 5 million job losses with an employer mandate. You haven't --

MS. ROMER: I certainly have not seen numbers like that. That would be I would think exceptionally large.

REP. KLINE: Okay.

But, again, we simply -- we just don't know. And there are certainly some concerns with this draft bill that there would be reverse incentives or incentives for employers to drop their coverage and that's something we're going to be analyzing as we go forward here with the debate on this and the other versions that are out there. And of course we're anxiously awaiting a score from the CBO so we know what we're talking about in terms of dollars here.

I have several of my colleagues here who want to ask questions, including -- I think we have three physicians with us here today -- so in the interest of time and being ever the optimist that we can keep moving, Mr. Chairman, I'm going to yield my time back.

REP. MILLER: Mr. Kildee is recognized.

REP. DALE E. KILDEE: Thank you, Mr. Chairman.

Following through somewhat on Mr. Kline's question, Ms. Romer, CBO scores the Senate bill at $1.6 trillion, largely because it does not provide an employer mandate or a payroll tax. The House bill will cost about $1 trillion, largely due to the mandate to provide insurance or pay the 8 percent payroll tax except for small employers.

How important is it that the employers continue to provide insurance or pay the 8 percent payroll tax along with other non- providing employers? Is 8 percent adequate or realistic? Does the Senate bill meet the president's standards?

MS. ROMER: So I think you're all getting at certainly a key issue, which is how one structures the employer-shared responsibility that is important to maintaining the system that we have, the insurance -- the employer-based and for controlling costs, so that is certainly important.

I think the detail is something that we will be analyzing more and I'm sure the Congressional Budget Office and your staffs will be analyzing more.

One issue I do want to bring up that, as Mr. Kline was talking about employment effects from the mandate, I have to tell you that slowing the growth rate of costs, in our report one of the things that we say is that that has a beneficial effect on employment, that by having a period when costs are not rising as much that helps to give us a period of unusually good economic performance. And so I think we certainly want to look at the totality of the plan because we think it can certainly have some positive employment benefits.

REP. KILDEE: But the omission in the Senate bill of the employer mandate is not a small issue; it's a rather fundamental part of the president's plan, is it not?

MS. ROMER: The president has certainly expressed the view that he does very much want to stay within the current largely employer- sponsored health insurance, and some sort of shared responsibility is very important.

REP. KILDEE: And the cost to the government of $1.6 trillion must concern the president, too, rather than have part of that cost retained or taken up by the employer?

MS. ROMER: Absolutely. So the president has from the beginning said that we need to certainly make sure that anything we do does not increase the deficit in the 10-year budget window and it needs to have the fundamental kind of reforms that I was talking about that will actually lower the budget deficit outside that window, so that is a top priority for the president.

REP. KILDEE: Thank you, Ms. Romer.

REP. MILLER: Dr. Price?

REP. PRICE: Thank you, Mr. Chairman.

And I want to thank you for your testimony, Dr. Romer. And you mentioned at the beginning of your testimony that you were an economist and were going to talk about the economics of it, but you delved into the health care so my questions will bounce back and forth, if that's all right.

You started out talking about the fact that we spend 18 percent of our GDP on health care in this nation. As an economist, how much should we spend?

MS. ROMER: I think there's no single number. You're getting at a point -- a good point -- that is there's not some fixed amount.

What I do feel we know is that we shouldn't be wasting, right? And so the estimates that maybe as much as 5 percent of GDP that we're spending is just wasted --

REP. PRICE: But it's not your testimony that the government ought to set a specific amount that we ought to be spending on health care. Is that correct?

MS. ROMER: No, of course not.

REP. PRICE: And in your testimony you also say that 46 million folks are uninsured. Is that uninsured today?

MS. ROMER: That's actually a crucial point. It's at a point in time because experts will certainly tell you over, say, a two-year period probably twice that many people go through some period of lack of insurance.

REP. PRICE: Isn't the 46 million number, though, those that are episodically uninsured at some point during the course of the last 12 months?

MS. ROMER: No, that is at a point in time. The number is like 82 million for over some two-year period.

REP. PRICE: If you could provide the data on that I'd appreciate that.

MS. ROMER: I believe the citations are in our report, but I will absolutely make sure have them.

REP. PRICE: Thanks. And a breakdown of those 46 million is helpful to decide how we in fact get them insured, right? So it would be helpful to know exactly who those folks are and why they're not insured.

You also mentioned, as other folks have, that the president's goal -- and it's reiterated over and over and over -- that if you like your current plan or if you like your current doctor, you can keep them. Do you know where that is in the bill?

MS. ROMER: Absolutely. And things like the employer mandate is part of making sure that large employers that today -- the vast majority of them do provide health insurance. One of the things that's --

REP. PRICE: I'm asking about if an individual likes their current plan and maybe they don't get it through their employer and maybe in fact their plan doesn't comply with every parameter of the current draft bill, how are they going to be able to keep that?

MS. ROMER: So the president is fundamentally talking about maintaining what's good about the system that we have. And --

REP. PRICE: That's not my question.

MS. ROMER: One of the things that he has been saying is, for example, you may like your plan and one of the things we may do is slow the growth rate of the cost of your plan, right? So that's something that is not only --

REP. PRICE: The question is whether or not patients are going to be able to keep their plan if they like it.

What if, for example, there's an employer out there -- and you've said that if the employers that already provide health insurance, health coverage for their employees, that they'll be just fine, right?

What if the policy that those employees and that employer like and provide for their employees doesn't comply with the specifics of the bill? Will they be able to keep that one?

MS. ROMER: So certainly my understanding -- and I won't pretend to be an expert in the bill -- but certainly I think what's being planned is, for example, for plans in the exchange to have a minimum level of benefits.

REP. PRICE: So if I were to tell you that in the bill it says that if a plan doesn't comply with the specifics that are outlined in the bill that that employer's going to have to move to the -- to a different plan within five years -- would you -- would that be unusual, or would that seem outrageous to you?

MS. ROMER: I think the crucial thing is, what kind of changes are we talking about? The president was saying he wanted the American people to know that fundamentally if you like what you have it will still be there.

REP. PRICE: What if you like what you have, Dr. Romer, though, and it doesn't fit with the definition in the bill? My reading of the bill is that you can't keep that.

MS. ROMER: I think the crucial thing -- the bill is talking about setting a minimum standard of what can count --

REP. PRICE: So it's possible that you may like what you have, but you may not be able to keep it? Right?

MS. ROMER: We'd have -- I'd have to look at the specifics.

REP. PRICE: Good, good.

You talk about portability and the importance of portability. And it's extremely important. You've got to be able to take your insurance with you. Isn't there a different way to do that? Or aren't there other ways to do that besides what's being outlines in the bill? For example, if you own your health insurance policy, regardless of who'd pay for it -- wouldn't that be a way to accomplish portability?

MS. ROMER: We certainly have seen for example that a lot of trouble -- people have trouble with portability. Certainly given that the vast majority of Americans have employer-provided -- they don't have something --

REP. PRICE: Dr. Romer, if an individual owned their policy, regardless of who paid for it, couldn't they take it with them regardless of their job situation?

MS. ROMER: Yes. That would be -- seem to me that that would --

REP. PRICE: Okay. I noticed that in your testimony you didn't mention either liability reform or regulatory reform. Would you be able to tell the committee how much that contributes to the cost of health care in the nation -- liability costs and regulatory costs?

MS. ROMER: We've actually been looking at that. I mean, one of the things in our report is to point out that there're a large number of things that are behind how much health care costs are today and how much they've been rising.

My read of the professional literature is that the estimates are all over the map. But it's certainly a part of why costs are high and a part of why they're rising. I think my read of the evidence is it's not the primary reason.

REP. PRICE: As an economist, though, you could put a number on that and you could get that for the committee?

MS. ROMER: I will certainly do the research.

REP. PRICE: Thank you so much.

Thank you, Mr. Chairman.

REP. MILLER: Mr. Payne.

REP. DONALD M. PAYNE (D-NJ): Thank you very much.

With expanded coverage I assume that there would -- should be more wellness prevention. You know, when you're poor -- you know, when I was young, you know, people would think you're crazy to go to the doctor if you weren't sick, because well people didn't -- you know, couldn't afford to go to the doctor even when we were sick, more or less, when you weren't.

However, if -- how much do you think, as this moves on -- the wellness, prevention -- if that can be an educational part of the coverage. Is there any quantifiable number that you think would show a slowing in the increase? Or is -- have you kicked in any leveling off by virtue of the preventive part?

MS. ROMER: That's an excellent question because it does -- you know, in our report we often talk about the benefits of coverage expansion and the benefits of slowing the growth rate of costs. And of course those two things do intersect exactly where you talk about with wellness and prevention, because when someone has health insurance coverage they tend to have a relationship with a primary care physician who does do the education and the focus on wellness -- that we do think can slow the growth rate of costs, especially, you know, again, my understanding of the literature -- things like smoking cessation programs, weight management are absolutely things that can slow the growth rate of costs over time.

I think the important thing is it's not the only thing we need to do and that there are other things like how we reward value over volume and changing the delivery system that are also very important to slowing costs. But certainly wellness is one component.

REP. PAYNE: Thank you.

Also, I have had concerns -- as we do know, there are certainly underserved communities in rural areas where it's difficult -- and of course in urban areas -- type of -- part of the district that I represent. And of course my concern continually be -- is access to a physician or to quality care. And I'm wondering -- you know, kind of getting ahead of things -- but how are we going to ensure that in towns in the district that I represent that there will be the opportunity for wellness and the opportunity for preventive services? Because we do know that there is certainly a lack of quality or lack of any physicians in general in many of the underserved districts.

Well, I think, again, one of the very strong features of the Tri- Committee bill is that it does address these work force issues that we know -- especially if we're going to move to a system where more people have coverage, more access to primary care -- we need more primary care physicians. And so I think these work force issues are going to be important and something, I know, that my staff and others in the White House are absolutely thinking about because that is going to be an issue. And your point about the geographical -- it's not just the numbers but the geographical distribution I think is going to be very important.

REP. PAYNE: Well, since we have other members, I'll just yield back the balance of my time. Thank you.

REP. MILLER: Mr. Cassidy. I thank the gentleman.

REP. BILL CASSIDY: Thank you Ms. Romer -- Dr. Romer, I'm sorry.

I enjoyed your Council of Economic Advisers report on the problem. But there is no prescriptions, as you say. And this effectively is a prescription. And in your testimony you allude to some stuff. Some of it -- it really seems as if you're telling me down is up and up is down.

For example, Medicaid and Medicare quite impressively is driving cost, and yet we're going to increase Medicaid to 133 percent of federal poverty level.

I have an article here from Health Affairs out of the Lewin Group that points out that when you have increased Medicare and Medicaid as a proportion of your payer mix -- for the private insurance company it drives their cost up -- the hydraulic effect. You push down here, because you use your monopsony power to drive down rates, and it pushes up there -- gaming the system for the public thing.

So one question I have is how are we going to control Medicaid when we're increasing the reimbursement levels and when we're increasing eligibility? Again, that's just cross purposes.

Secondly, you know, next Tuesday morning I'm going to be treating lots of Medicaid patients in a public hospital in Louisiana, as I have for 20 years. I don't think a single one of them would say it's patient-centered.

As I went through the 800 pages this past weekend I frankly didn't see much that said patient-centered. We're using that rhetoric, but as a guy who's been spending 20 years trying to address that, I don't see it.

And the accountable care organization is an unproven concept. And even the advocates admit that there's lots of obstacles for it to be instituted. Bundling is unproven, frankly.

I keep on wondering how we're going to save money unless it's by using the state's monopsony power to drive down the provider reimbursement, which brings me back to this, which says that you're going to drive up the costs for the private insurance companies, effectively gaming the system so that people migrate towards the public.

I've asked several questions, and I apologize, if you can address those, please.

MS. ROMER: I think that the crucial thing that you're mentioning, and something that the president is well aware of is that what we're talking about -- in terms of expanding coverage and some of the reforms that we're doing now like health information technology and the payment reforms -- those are absolutely going to cost money. And that is why he has put ($)948 billion of suggested savings and other revenue sources to pay for those kind of expansions now, in the budget window, and then to make the kind of fundamental changes that will slow the growth rate of costs over time.

And one of the things you did mention, like the accountable care organizations -- one of the strengths again of the bill -- the pilot programs -- that's surely going to be a part of how we move forward on this is figuring out --

REP. CASSIDY: Well, now --

MS. ROMER: -- what does slow the growth rate of costs.

REP. CASSIDY: Yes, we do know a couple of things that do slow the growth rate. ACOs have not been proven to do so. But one thing that slows the growth rate is HSAs -- health savings accounts.

I have a Kaiser Family Foundation thing which shows that for similar benefits -- similar demographics among beneficiaries an HSA has 30 percent lower costs than a fee for service.

There's nothing in here -- and that's a very patient-centered concept. There's nothing in here about an HSA.

Secondly, I would say that there's nothing in here about what the Safeway program has, which has variable premiums for people who enroll in preventive medicine. Indeed, as best as I can tell, this would not allow that in the public option. And yet the one preventive measure that has worked is actually making the patient a little fiscally responsible for lifestyle choices.

MS. ROMER: So the main thing I would say is I would highly recommend the big, thick CBO volume -- that I actually keep on my bedside table -- on budget options. Right -- 108 things that they've proposed as things that could help to slow the growth rate of cost.

What you're pointing out is there are a range of things. The Tri-Committee bill has some of them in it. Other bills have mentioned some others. Right? The important thing is we've absolutely got to take these measures. And they are absolutely ones that the vast majority of --

REP. CASSIDY: Let me ask you -- I'm almost out of time. Let me ask you -- except for using monopsony power to negotiate lower rates, is there one thing in here that is proven to lower cost?

MS. ROMER: I mean, absolutely things -- I believe things like bundling that the evidence is that that has worked in other places where we're bundling.

So we're thinking of expanding that.

REP. CASSIDY: If you had to bet your house on that --

MS. ROMER: Prevention is certainly going to help.

REP. CASSIDY: -- would you bet your house on that evidence? Because it's slender, and it goes both ways.

MS. ROMER: So it is absolutely cited in our report, but I will make sure that we track it down for you.

REP. CASSIDY: Okay.

Do I still have time? Well, thank you very much.

REP. MILLER: Mr. Andrews.

REP. ANDREWS: Dr. Romer, a lot of Americans are betting their house; that's the problem. They lose their coverage, they lose their house, they lose everything they had. So we're betting on fixing the problem.

I want to come back to Dr. Price's questions to you about the president's commitment that if you like your plan you get to keep it.

Dr. Price posed an example where if a plan that an employer provides falls short of the credible minimum coverage that's in the House draft, what would happen? The answer is that employer would have to come up to that. That's true.

But I want to examine with you whether someone's very likely to like that plan or not. What the president said -- if you like your plan you get to keep it.

MS. ROMER: I think most people like something that's better even more.

REP. ANDREWS: Well, I would think so. And let's talk about what that standard is. It's my understanding in the House draft that the minimum coverage is based upon 70 percent of the actuarial value of the federal health employees' benefit plan. Now, that's a pretty modest number. And do you think it would be likely that a plan at that -- below that number might not have access to primary care like ob-gyn care or annual checkups?

MS. ROMER: There certainly are going to be limitations with --

REP. ANDREWS: Do you think it's very likely that a plan that would fall below that would probably have an immense co-pay in the middle or deductible in the middle where you get some primary care coverage but then have an enormous doughnut hole -- something the erstwhile majority is very familiar with -- and we're going to fill. Do you think it's very likely that they'd have that huge doughnut hole in the middle?

MS. ROMER: I think it's likely to have many --

REP. ANDREWS: How likely do you think it's -- someone have catastrophic care coverage if their plan fell below that 70 percent threshold?

MS. ROMER: Exactly. They're likely to have very high out-of- pocket expenses.

REP. ANDREWS: I would think so.

So look, I guess it's metaphysically possible that someone would like that kind of plan. We think the reality is that people would not want something like that.

Let me come back to the question about employer mandates that one of the other members -- I think Mr. Kline asked about.

Your projections of economic growth are based upon the president's conceptual plan, is that right?

MS. ROMER: They are based -- I mean, the crucial thing -- the principles that the president laid down, not any --

REP. ANDREWS: And one of those principles would have some fair share of responsibility, right?

MS. ROMER: The main thing we were focusing on is slowing the growth rate of costs and how one did it --

REP. ANDREWS: So your projections I would assume take into account the dynamics of a requirement of employer responsibility, is that correct?

MS. ROMER: So our projections I think are on a much broader level so they don't have those kind of details in them, but they are based on --

REP. ANDREWS: But that's one of the ways that we get that cost growth curve to bend, I assume.

By the way, what happens -- you're an economist; I'm sure you can tell us this -- that -- let's say that you run a retail store and I run a retail store. And you voluntarily insure your employees and you're in excess of this minimum standard, so this bill leaves you alone, lets you do whatever you want to keep doing. And I don't. I don't provide health care to my employees. And one of my employees gets in a motorcycle accident tonight and goes to the emergency room. Who pays her bill?

MS. ROMER: Depends on whether they had private -- either they paid it if they had private coverage --

REP. ANDREWS: Well, let's assume that she doesn't.

MS. ROMER: -- or it falls on the American taxpayer

REP. ANDREWS: Let's assume she's one of the uninsured.

MS. ROMER: Right, so then it would be uncompensated care.

REP. ANDREWS: And who pays for uncompensated care?

MS. ROMER: Well, it's both all of us as taxpayers and all of us that have private insurance pay higher fees.

REP. ANDREWS: So you as the retail store owner that does insure your employees is picking up part of the cost for me who doesn't; is that right?

MS. ROMER: Absolutely, as do the rest of us.

REP. ANDREWS: And so this plan would also take into account that economic issue where we're leveling that playing field a bit. And there are taxes imposed, aren't there, also at the state and local level to cover uncompensated care?

MS. ROMER: Absolutely.

REP. ANDREWS: What would happen to those state and local taxes if this draft were enacted and people got health insurance under this plan?

MS. ROMER: We absolutely expect that uncompensated care would go down and so that kind of burden would go down on the state.

REP. ANDREWS: Let me ask you one other question about your economic assumptions and projections here. How many jobs do you think it would cost us to do nothing? And I know the other side says they don't want to -- no one is in favor of doing nothing. Well, that's rather odd since everyone's in favor of doing something but nothing's been done for 50 years. What would it cost to do nothing in terms of lost jobs for the economy?

MS. ROMER: Well, certainly what we have numbers on are just what it's going to cost in terms of, you know, our total standard of living. And there we have just enormous numbers about how we are absolutely going to have lower standards of living. We certainly have the short-run impact on jobs. Our numbers were that by not having successful reform, we get numbers like we're costing ourselves maybe 500,000 jobs that we could be having if we had successful reform, at least for a while, in terms of better economic performance.

REP. ANDREWS: I thank you and yield back.

REP. MILLER: Congressman Castle.

REP. MICHAEL N. CASTLE: Thank you, Mr. Chairman.

Doctor, I'm, I think, sort of straightening out exactly under what context you're here. Is the administration supporting the Tri- Committee bill or -- there are other bills out there. There's Senate bills; there's Republican propositions. And I'm not exactly sure where the administration is per se. Is this now your bill?

MS. ROMER: The crucial thing is I am here representing the administration to tell you that health care reform is the president's number one priority. And I think what I was describing is what the president sees as some of the key principles. We do know that there are lots of bills and, you know, each one of them has certain strengths and so we're here to help move that conversation along.

REP. CASTLE: So you're not supporting this bill per se, but you're supporting the principles that you've outlined.

MS. ROMER: We are absolutely supporting successful health care reform, which is the number one thing on the president's agenda.

REP. CASTLE: My numbers may not be exactly correct and you can correct them if you will, but I've seen a chart on the 46 million people who are uninsured. And something like 9 or 10 million of those are people who are not legally in the United States of America. My question to you is what would this plan, or what does the administration propose, with respect to those individuals, that they would have to be insured and would the government be in a position if they're low income to have to pay for that insurance? I mean, you're dealing with a situation where what do we do with somebody who should -- who perhaps should not be here to begin with.

MS. ROMER: All right, so there's several things to point out. One is we talked, we mentioned with Dr. Price about the 46 million, but actually it's more like 82 million when you think of people who are uninsured at a point in time. And a crucial fact is that is probably 80 percent of those are workers, most of them are middle- class families that go kind of in and out of insurance.

On the issue of undocumented workers, the president has said that he does not support government-provided health insurance for undocumented workers. But he has certainly also talked about the importance of comprehensive immigration reform as something that he thinks is important.

REP. CASTLE: So we should take that number away from the 46 million in terms of those who we're concerned about protecting at this point.

I'm from Delaware and in my state, but this is probably true of all of our states, there's a lot of free or subsidized medical help. The federal community health centers are a perfect example of that, but prescription drug programs that exist throughout the country, volunteer physician programs. I just read about a cancer program we have in Delaware for people who are low income. We have employer- based clinics; we have hospital clinics, et cetera.

If we go to a universal system, what is going to happen to those programs? And my concern is that all the sudden these people are going to say, well, everyone's insured now and now we don't have to do these, and we're going to lose a lot, from an economic point of view, a lot of relatively free medical help which is being provided in this country. Has that been factored economically into what is being done at the White House or in this legislation or anywhere else that you know about?

MS. ROMER: I mean, we certainly do know that there is a lot of uncompensated care in the country. And a lot of it ends up being paid for by the government. So I would think as we move certainly from government-run programs that are providing uncompensated care, we'd just be changing how they're paid for by making these now -- workers that are currently uninsured would now have insurance. But so many of these, you know, these wonderful programs, I would assume they would continue but in a different guise.

REP. CASTLE: I wish somebody would look at that. I mean, I don't think a lot of these are necessarily with costs shifting over to the government, with the exception of federal community health centers. The things I named are mostly volunteer activities by either corporations or different entities who are willing to help, and I'm concerned about that loss.

MS. ROMER: It would be a very good thing for us to study.

REP. CASTLE: I think it's more substantial than we realize.

Another thing that concerns me is the whole area of prevention and wellness, which I think is probably in this legislation. I haven't read it carefully at this point. And certainly, I think we all agree it's a key for improving health care of all of us in America. But has anybody looked at what cost savings can realistically be obtained by imposing prevention and wellness programs, preventing diabetes, that kind of thing? That may be a little bit too difficult to do, but do you have a grasp on that?

MS. ROMER: It is something that I know physicians -- I mean, it is something that is heavily studied. I will actually, I'll tell you about it -- I was doing an interview on television and someone said, aren't you just going to make people live longer? And I said, yes, guilty as charged. But that is sort of the, one of the key issues here is that we do know wellness often, you know, is cost-effective over a range, but then people live longer. And so figuring out what it saves in general, you're absolutely right; there's some range of estimates.

I do believe the estimates, the things I cited, like smoking cessation, I think, is very important, weight management; those do seem to help, but we -- if we make people live longer, I don't apologize for that.

REP. CASTLE: Thanks, Dr. Romer.

REP. MILLER: Thank you.

At this point, I want to call on Mr. Scott, and then Dr. Roe, and then Ms. Woolsey and then Mr. Hunter. And then Ms. Romer is going to be allowed to leave the committee under our arrangement of getting her here today. Then we'll hear from our second panel.

So Mr. Scott.

REP. ROBERT C. SCOTT: Thank you.

And thank you, Dr. Romer.

I wanted to follow up on the comments from Mr. Andrews on the cost-shifting. I've heard that it's about $100 per family that goes to paying for the costs of indigent care. Is that about right?

MS. ROMER: I'd have to check the numbers, but it's certainly substantial.

REP. SCOTT: Thank you. Can you say a word about the importance of covering prenatal care and early child comprehensive care?

MS. ROMER: I think that certainly goes to Mr. Castle's point that in terms of preventative care that has a good payoff, I feel very strongly that the evidence suggests that prenatal and child well care is crucial.

REP. SCOTT: Now, the Medicaid program has a program called EPSDT. Are you familiar with that? It's a comprehensive set of benefits. Is it essential that that same comprehensive set of benefits, which includes preventive and screening tests be available on all policies?

MS. ROMER: So I think the specifics -- I mean, that is part of -- this bill certainly talks about setting up a professional advisory board to decide what benefits. I think that certainly is a crucial issue and something that requires very careful thought.

REP. SCOTT: Thank you. And in terms of competition, what portion of the public plans, Medicare and Medicaid, actually go to health care and how much is spent in administration compared to the private plans? How much is spent on administration and how much goes -- actually goes to health care?

MS. ROMER: So I think you're making an important point, which is we do know that the public plans tend -- the public, you know, Medicare and Medicaid, do have lower administrative costs. And that is one of the reasons when we think about setting up a public option, one of the ways that it will be able to put competitive pressure on private firms is because it is likely to have lower administrative costs.

REP. SCOTT: Is there much difference between the two?

MS. ROMER: Yes, I believe it is substantial.

REP. SCOTT: Does 25 to 40 percent administration in most private plans -- is that on the order of magnitude, do you understand, and about 3 percent in the public plans?

MS. ROMER: I would definitely have to check the numbers to make sure I was answering correctly, but I'm very happy to get back to you on that.

REP. SCOTT: Thank you.

Now, one of the things we're trying to do is transform health care at the same time we're trying to get coverage and change the health delivery system at the same time we're doing financial access. Should we do them one at a time or all at the same time?

MS. ROMER: I think the president has very smartly said that we can certainly do many things at once and I have complete confidence in the Congress as well and these are crucial issues. They're all part of what the president has called the "new foundation" and they're all aimed at the same thing, which is making this a healthier, stronger economy.

REP. SCOTT: One of the questions that's been asked is how we pay for it. We're going to be making some decisions on taxes in the next few months -- the estate tax, what I call the bare minimum fair share tax -- that's the alternative minimum tax. Where would these be on the list of priorities compared to universal health care?

MS. ROMER: What the president has said is absolutely that he thinks comprehensive health care reform is crucial and he has given a list of ways to pay for it. About two-thirds are suggested savings from Medicare and Medicaid and about one-third coming from new tax revenues. And he had a suggestion, which is limiting the itemized deduction on high-income earners. You listed some others.

REP. SCOTT: Should we enact health care and then figure out how much in terms of tax cuts we can afford, or should we pass all the tax cuts first and see if we can get around to health care?

MS. ROMER: I think we should do a sensible health care reform that does what we need to do for health care and make sure that it doesn't increase the deficit in the crucial 10-year budget window.

REP. SCOTT: Thank you, Dr. Romer.

I yield back, Mr. Chairman.

REP. MILLER: Dr. Roe.

REP. PHIL ROE: Thank you, Mr. Chairman.

Thank you, Dr. Romer, for being here today.

I would like to agree with all your economic arguments if they didn't go exactly the opposite of what happened to us in Tennessee. We got a Medicaid waiver, as you well know, 16 years ago in this state to form a managed care health care plan called TennCare to cover, hopefully, most of the people in the state of Tennessee. And what happened was was that it was a very rich plan, offered a lot of benefits like I believe this government-run option's going to be, and what happened was small businesses first, but others, made a perfectly logical decision to drop their private health insurance and go into the government-run TennCare plan, which is what happened. And 45 percent of the people who are in the TennCare plan, or were in the TennCare plan, had private health insurance but dropped it for this government option.

The problem with the government plans is this: When you talk to the providers, the hospitals and the other providers, TennCare paid 60 percent of the cost of providing the care -- very rich in promises, but only 60 percent of the costs. Medicare pays about 90 percent of the costs, so you've got two of the government plans that don't pay the cost of the care, and the uninsured pay somewhere in between, shifting more and more and more cost onto the private insurers.

And to answer Mr. Scott's question, it's about ($)100 to $150 a month is what the answer is, the cost that's shifted. That's the data I've seen.

What we fear and what I fear in a government option, a government-run bureaucratic plan, is this very thing will happen again on a national scale, is that you're going to have a very rich plan that's offered all these benefits and here you are in private health insurance out here and you're going to have your cost shifted to you even more and more and businesses will make a perfectly logical decision, which is to drop to the government option. So over time -- it won't happen immediately, it will happen over time.

And in Tennessee, what our Democratic governor did, along with the legislature, was he cut the rolls because it was bankrupting the state. And your assumption that it's going to save money goes in the face of what our experience has been in Tennessee. Could you respond to that?

MS. ROMER: I think the crucial thing is what it shows is how important it is to get the details correct and that absolutely how one sets up the public plan and all of that is going to be important. But one of the things that the Tri-Committee bill does, and that the president has certainly emphasized, is it needs to be on a level playing field, and that, for example, being paid for by premiums that are paid into the public plan. So I think that's important.

REP. ROE: If what you just said happens, you don't need a public plan. You can have another insurance plan. It will be a subsidized plan. The premiums, I will guarantee you, will not pay for the cost of that care.

Now, let me answer a question Dr. Price had just a moment ago. I went back to my own group. I'm in a medical group at home that had about 350 employees. And this astonished me. We had offered last year a high-deductible insurance plan, a health savings account. First we offered it to the physicians and then we offered it to everyone in our group, which is over 300 people. How many do you think took that plan? What percent would you think -- 10 percent, 15? Eighty-four.

And the reason was because they could look at a $5,000 deductible -- this is a plan that will be gone with this current plan right here. I can tell you those will be gone because there is no health savings account in this current legislation or any that I've seen -- and what these employees found out along with me -- that's what plan I had -- was if you do believe in wellness and prevention, this economically incentivizes you to do that. You get to keep the money at the end of the day.

So all the health savings accounts in the country -- and I was amazed at that 84 percent; of the 294 that we have health insurance, 248 got a high-deductible plan in our group and didn't take traditional insurance.

Could you speak to that?

MS. ROMER: So I think I would -- certainly I'd like to do more research to know whether that's a common experience. We do know that health savings accounts tend to be most popular with the healthy and the affluent.

The other -- I want to come back to your TennCare example because one of the things, if you're worried about the private, you know, the employers dropping their coverage, again, that goes to much of our discussion of how important the shared employer responsibility can be to make sure that that system remains.

REP. ROE: What they did was they didn't drop the coverage, they just allowed them to get the government plan which, again, didn't pay the providers but two-thirds of the cost of providing the care, which shifted costs back to private insurers.

So I'd certainly like to know how many people will lose because all the HSAs lose theirs. We all lose; there are 250 people right there I know that will.

And what I would like to know also, when you provide all this extra, when all this other care comes in, who's going to provide it? Right now we don't have enough nurses and doctors in America. We have more doctors dying and retiring in the next 10 years than we're producing in this country.

I'm sorry, my time is up.

REP. MILLER: (Off mike.)

REP. LYNN WOOLSEY: Thank you, Mr. Chairman.

Well, Dr. Romer, you give me great confidence that we're on our way to doing something very reasonable and we've got some leadership and thank you for yours.

I have a short question and then I have a little bit larger discussion.

Choice -- when we're assuming that employer coverage is something that every single employee likes, if you like your coverage you get to keep it, how many people are going to feel trapped because they have to keep it? Have you looked at that at all and how do you see phasing in when everybody will have a choice?

MS. ROMER: So that certainly is I think an issue that we do need to look at more. I mean, what the president has emphasized is the importance of choice. That is one reason, for example, he wanted the public plan in the -- to exist in the exchange, to make sure that even in areas where there might only be one or two providers that you do have choice, so that is certainly a principle that he thinks is important.

REP. WOOLSEY: Well, I'll move on to a kind of broad question that a lot of us ask ourselves up here.

What exactly is the economic value for having private insurance carriers in the system in the first place?

MS. ROMER: I mean, we certainly think that in general -- I mean, what I tell my introductory students is that competition is a good thing and that that is something that does tend to lead to innovation, it does tend to lead to, you know, cost containment. And so I think that would be certainly one of the benefits that one could see from having a private system.

REP. WOOLSEY: But real competition, I mean, if we don't offer a robust public plan as one of our choices, will there actually be competition in the system when we rewrite it?

MS. ROMER: Well, we certainly think that there are, again, depending on how narrow, say, the insurance exchange is, we do know that there are many markets where there isn't robust competition now, where there are just one or two providers. So that is a role that the public plan can play.

REP. WOOLSEY: And do you have any hesitation in the federal government providing that good plan with the -- are you worried that insurance companies can't compete? They seem to be quite worried.

MS. ROMER: I think the important thing is how it is designed. And I think the committee, the Tri-Committee, proposal certainly is trying to address that and make sure that the public plan is on a level playing field, and I think that is important.

REP. WOOLSEY: Is our role, our primary role, to offer the public a choice of a good public plan if they want it or is our role to be very worried about what happens to the insurance companies?

MS. ROMER: I think in general your role is to come up with a comprehensive reform of health care and that is -- I do want to say that the Tri-Committee bill I think is an important step in coming up with a bill that does encompass so many of the principles that the president has said was important and that dual thing of expanding coverage and making the kinds of meaningful reforms that will slow the growth rate of costs. Those are absolutely crucial.

REP. WOOLSEY: Well, thank you very much.

REP. MILLER: Mr. Hunter?

REP. DUNCAN D. HUNTER: Thank you, Mr. Chairman.

Thank you, Dr. Romer, for being here.

A quick question: Under the draft bill individuals face an actual tax penalty of 2 percent of adjusted gross income up to the amount of the national average premium through the new exchange if they fail to obtain "acceptable" coverage.

Have you, your office or anybody in the administration done any projection as to the level of a tax on an individual that will make it effective as a penalty? So basically, how much of a punishment tax is it going to take to make people sign on to this to get an acceptable coverage that meets 100 percent of all the mandates? How much do we have to punish them?

MS. ROMER: I think, you know, certainly there are a range of estimates out there. I mean, one of the things that the administration has been very cognizant of is just how important things like auto-enrollment can be for getting people to sign up for things, that we think we can actually get a very long way by just making the information available or making it easy.

And then I'd have to do more research to know how much more shared responsibility it's take --

REP. HUNTER: Well, what I'm asking is it's in this bill that you basically punish through different taxes people until they sign on to acceptable coverage. So you haven't done any projection of what equals an acceptable punishment tax for people to sign onto this?

MS. ROMER: I think one of the things the Congressional Budget Office will do is kind of figure out if what has been proposed is large enough to get, you know, a large number of people covered.

REP. HUNTER: But there will have to be something? There will have to be some punishment tax, some acceptable level of -- some kind of inclination for people to sign on to this, those that don't want to?

MS. ROMER: I think certainly that is one of the issues. My understanding is there are lots of different views in the different bills coming through Congress.

One of the things I believe is true in the Tri-Committee bill and I know is a focus of many bills is to have a hardship waiver for a family that says, you know, they can't do it for a particular reason, and I think most of the bills do have a clause like that.

REP. HUNTER: Thank you, Dr. Romer.

I'm going to yield the balance of my time to Mr. Guthrie.

REP. BRETT GUTHRIE: Thank you.

Just a quick question. I was in human resources for a manufacturing company that offered a plan better than the federal plan and my question is this: If we're going to tax employer-based benefits -- which is certainly on the table and I think the president has not ruled that out -- and you say you can keep what you currently have -- and I assume most people that are satisfied with their health insurance are probably getting it from an employer because it's subsidized from the employer -- if we tax that benefit it'll go up 38.5 percent, what the corporate income tax rate is. So wouldn't you -- economics would say the business would probably lower what they offer in order to meet that benefit.

So, for instance, if we're going to increase the cost of an employer-based benefit 38 percent, then it will probably drop down to the credible minimum coverage, so people will actually lose their value of their benefit.

And the second thing is I'm from Kentucky and we did health care reform in the mid-1990s and people were allowed to keep the plan that they had if they were happy with it, but it disrupted the marketplace and that was impossible because people quit offering insurance.

So basically I want to focus on in the remaining time on taxing the benefit and what that -- the behavior you think that will cause people who provide employer-based benefits.

MS. ROMER: All right. Well, one of the things that you're getting at, the president has not supported getting rid of the exclusion for employer-provided health insurance for some of the reasons that you talked about and for the second one, the issue of disruption. He does -- I mean, part of saying that if you like what you have you can keep it is he doesn't want to make changes that will cause major changes in who's providing health insurance. And so --

REP. GUTHRIE: So he's not supporting a bill that will include taxing the employer-based benefit? Because it will cause disruptions. He's not supporting that?

MS. ROMER: The crucial thing is the president has put forward a suggestion. He thinks a better way to pay for this is limiting the itemized deduction with these $600-plus billion of savings from the Medicare and Medicaid programs and that's what he supports.

REP. GUTHRIE: I yield back.

REP. MILLER: Thank you.

Dr. Romer, thank you very much for taking your time to appear before the committee and to answer questions. I apologize to other members of the committee who did not get a chance to speak with Dr. Romer, ask her a question. I think there may be some who would like to submit questions to you. If you could respond to those in a timely fashion, we would appreciate it.

Thank you so very much.

MS. ROMER: We would be happy to. Thank you.

REP. MILLER: Our second panel will be made up of Ron Pollack, Gerald Shea, Paul Speranza, Dr. Jacob Hacker, Michael Stapley, John Arensmeyer and Fran Visco. If they would come forward please, I think we have places for you.

If I might take a moment to introduce our panel to the members and to the audience, Ron Pollack is the founding executive director of FamiliesUSA, a national organization for health care consumers whose mission is to achieve high-quality affordable health care for all Americans. Mr. Pollack received his J.D. from New York University.

Mr. Gerald Shea is the assistant to the president of government affairs to the AFL-CIO. Mr. Shea's a member of the Prospective Payment Advisory Committee, a congressionally appointed advisory board on Medicare, and also a founding member of the Foundation on Accountability, a national coalition of organizations that helps consumers make health care choices based upon quality. Mr. Shea earned his B.A. from Boston College.

Mr. Paul Speranza is the senior vice president and general counsel and secretary of Wegmans Food Markets, a family owned supermarket chain. He is the senior counsel of the Board of Directors of the U.S. Chamber of Commerce and the past chairman of Lifetime Health. Mr. Speranza holds a B.S. degree from Syracuse University and a J.D. and LLM from New York University.

Dr. Jacob Hacker is a political science professor, the co- director of the Berkeley Center on Health, Economic and Family Security at UC-Berkeley, and Dr. Hacker's also the author of, "Health Care for America: A Proposal for Guaranteed Affordable Health Care for All Americans." Dr. Hacker has a B.A. from Harvard University and a Ph.D. from Yale University.

Mr. Michael Stapley is the CEO of Deseret Mutual Insurance Company and Deseret Mutual Benefit Administration. He is the founder and chairman of the board of Utah Health Information Network, an electronic health care company. Mr. Stapley earned his B.A. and his MPA from Brigham Young University.

Mr. John Arensmeyer is the founder and CEO of Small Business Majority, a leading small business advocate for comprehensive health care reform. Mr. Arensmeyer earned his B.A. from the University of Pennsylvania and his J.D. from Rutgers University.

Ms. Fran Visco is the first president of the National Breast Cancer Coalition and Fund and is serving as a member of the board of directors and executive committee. In 1993 Ms. Visco was appointed to the President's Cancer Panel and was reappointed in '96 and 1999. Ms. Visco is a graduate of St. Joseph's University and earned her J.D. from Villanova Law School.

Welcome to the committee. We look forward to your testimony. We thank you for taking your time to share your expertise and experience with the committee.

As you know, those who have testified before, when you begin to testify a green light will go on. You'll have five minutes. At the four-minute mark an orange light will go on and you can think about wrapping up your testimony, but we want you to feel free to finish in a way that you get to present a coherent case.

And Ron Pollack, we're going to begin with you.

MR. POLLACK: Thank you, Mr. Chairman. And thank you members of the committee.

REP. MILLER: Can we ask you to pull the microphone a little bit closer to you?

MR. POLLACK: Mr. Chairman, I want to thank you. Can you hear me?

REP. MILLER: I guess we can. I can hear you but I --

MR. POLLACK: There we go. There we go.

REP. MILLER: Now I can hear you better. (Laughter.)

Medical technology here is (the worst swamp ?) in the room. (Laughs.)

MR. POLLACK: Can I just recapture half a minute?

MS. : I reset it.

MR. POLLACK: Good. (Laughter.)

REP. MILLER: You want to -- out of my time? (Laughter.)

MR. POLLACK: Mr. Chairman, I want to thank you and in particular you and Congressman Rangel, Congressman Waxman for coming up with a unified bill. Those of us who've been around in other iterations of health care reform, it's rather unusual to have a unified bill and we thank you very much for doing that.

We at FamiliesUSA strongly endorse the House bill that's been introduced because we think it significantly deals with the key values that consumers are really looking for as part of health care reform. It provides choice. It makes coverage affordable. It ensures that coverage will be stable. And it ends discrimination among insurance companies.

Now with respect to choice, we've heard it said numerous times that this plan, as well as the president's principles, you can keep the coverage that you have if you like it. I remember Mr. Kline indicated early on in the hearing that he raised questions about 23 million losing coverage as a result of a CBO score of the Senate HELP Committee.

Of course, if you look at the CBO score you'll see that they've said it's an incomplete analysis of an incomplete bill, and I don't think we're going to see anything like that with respect to the House bill.

This provides new opportunities to get coverage if you're in a small business. It creates a health insurance exchange which does something which the American public wants, namely they want to have the same kind of options that members of Congress have and the health exchange is going to provide that opportunity, and in so doing it'll provide accurate and helpful information about benefits and rights.

It creates reasonable rules about how insurance companies should operate so that if you have insurance you actually know what you're getting as opposed to find out that you didn't have something at a point when you need care.

And it provides a public option that we think is very helpful because it not only provides more choice but it provides a real opportunity for getting costs down and it provides a stable portable option.

Now, another value that consumers care deeply about is making coverage affordable, and one of the key ways that his plan makes coverage affordable is through the new subsidies that are provided on a sliding scale up to 400 percent of the federal poverty level. We think that is absolutely critical. It also places a cap on out-of- pocket costs. It's not simply the premiums that people pay in order to get coverage; they also pay deductibles, co-pays, and there may be a cap in how much an insurance company pays out. Now when people have coverage they won't be bankrupted, they won't be surprised, and that care will be affordable to them.

And it provides an important safety net through the Medicaid program by establishing a floor on eligibility of 133 percent of the federal poverty level.

Mr. Andrews and Mr. Scott were talking earlier about the kind of cost shifts that take place when people don't have coverage and we released a study that the president cited last week that showed that in 2008 the cost shift -- the hidden health tax, if you will, for those who have coverage to pay for the uncompensated health care costs of the uninsured in 2008 was $1,017. And I would suggest that this year it's considerably higher because more people lost their jobs and in the process lost their health care; it's probably closer to $1,100.

This plan also ends insurance company discrimination. You no longer can be denied coverage due to a pre-existing condition. When you get coverage you're not going to have a loophole so that everything is covered other than your pre-existing condition. It means that insurance companies are not going to drop you or raise your rates due to the filing of a claim. It's going to mean that post- claims underwriting that happens all too frequently -- that you get coverage and then when you need care the insurance company says to you, you actually didn't disclose certain kinds of things and they drop you from your coverage. And it makes sure that insurance premiums are not going to vary based on health condition.

Lastly, this plan provides coverage we can count on. It provides coverage for preventive services that are very important. It will provide coverage based on the best science. Yes, there will be a health benefits council that will work with the secretary, but that health benefits council will be charged with coming up with the best science so that health plans are developed that really make sense and therefore we won't have enormous waste in our system, which we have today. And it will provide a range of insurance options.

In short, I don't remember -- one of you talked about health insurance coverage like a house. Well, this plan doesn't make you get out of the house. It doesn't make you sell the house. But what it does do is it gives you tools. So if you've got a leak in your roof, it can be fixed. If you need an addition to your house, it can be fixed. It means if you need some remodeling, it can be fixed.

And so I say to you, Mr. Chairman, we are delighted to be able to say we strongly support the bill that has been introduced, and we will work tirelessly to see that it is enacted this year.

REP. MILLER: Thank you.

Mr. Shea, welcome to the committee.

MR. SHEA: Thank you, Mr. Chairman. Good afternoon. And good afternoon to all the committee members.

I want to start by congratulating you for putting forward a bill which we think really addresses the issues that the American people are concerned about and we look forward to working with you on this bill.

Our druthers might be to be talking today about a single-payer plan, but we think that the bill you've put forward, based on the current system anchored in employment-based coverage, does provide a way to get the kind of reform we need. And what I want to talk to you about briefly today is what we think it takes to stabilize the employment-based system, which is the backbone of both the coverage and the financing of health care in the United States, as you know.

It has proved remarkably resilient, despite enormous cost pressure. It has shown that employers wan to continue to offer coverage and that employees highly value the coverage they get at work. But we've lost five percentage points in coverage of people between the ages of 18 and 64 in an employment-based coverage from 2000 to 2007, and, frankly, this is a pretty fragile system at the moment.

We think that it takes three things to stabilize the system and we think that your draft version of the bill is a very good start on providing those three things.

One, we need to control costs. That's the core problem that we're facing in health care. If we don't do that and we don't take strong steps to do that, nothing else that we want to do will be possible.

Secondly, we have to put everybody into coverage. And that means everybody has coverage, everybody participates in financing coverage, everybody takes some responsibility for their own personal health coverage. And then, lastly, we really do need to reform the way care is delivered. We've started on that in the last few years. There is a consensus, I think, in the health field that we can do that. We really need to move that forward and this bill is a great opportunity to do it.

I wanted to start just by commenting on your provisions that all employers would be required to pay along with all employees. This pay-or-play kind of proposal is essential, in our view, if you're going to base the reform on the employment-sponsored insurance, because, one, it takes some cost pressure off the federal government for providing the subsidies. Everybody we get covered in this is somebody who doesn't need to have a federal subsidy out of tax dollars. Two, it helps stabilize those employers who are providing coverage because they're no longer picking up the extra costs, you know, covering the cost of care for people whose employers are not covering. And the overwhelming majority of businesses do now provide coverage, as has been cited here, and want to continue providing it.

The only firms that would really see an increase in costs are those firms that are not now currently offering benefits, mostly small, low-wage firms. And your bill addresses their concerns in terms of subsidies and tax credits to provide benefits but also offers the option that they could pay into a fund that would provide -- that would allow employees to get coverage not based on the workplace.

In terms of controlling costs, there are two core issues here, or strategies. One is the public insurance plan option. This is an important element in terms of assuring coverage and guaranteeing benefits. But it is essential, from our point of view, in terms of introducing competition into the insurance market. We now don't have any. In our experience, bargaining health benefits for 50 million people a year, we do not have any effective competition in the insurance market. But we believe that a public insurance plan would spur that kind of competition.

I know there are a lot of issues, and some of those issues have been raised here, about the design of a public plan. And you know the list as well as I do. I think these are design issues that can be addressed and they can be solved and we can do this in a way that protects all of the interests in health care. No one has an interest in turning the situation topsy-turvy.

The second strategy that's really key in terms of controlling costs is delivery system reform and your bill makes a very strong start in that direction. You put an emphasis on primary care and that's important. We would urge you also to look at the quality improvement sections of the legislation to make sure that all health care workers are involved in this quality enterprise. We have to not only address the supply of physicians and nurses, we have to address the quality of the jobs we ask them to do. And, frankly, in the last 15 years, we've turned it, certainly for nurses and other front-line health care workers, this caring profession into some lousy jobs in many places. We can correct that, but it takes addressing the work situation, not just the supply situation, of health care workers. You have vehicles to do that and we're talking with staff about the best way to approach that.

There has been a strong collaboration between payers and consumers and people in the medical professions and hospitals over the past 10 years in terms of doing this delivery system reform and changing to a system that is based on quality and rewards value. It starts with measuring a quality performance on standardized measures, reporting those results and then linking payments to the performance in terms of quality. This is really the opportunity to take what has been developed in the wake of, and is based on, President Clinton's quality commission some years ago and put it actually into practice.

And then lastly, Mr. Chairman, I just want to comment on the financing aspects. As I said, we think that everybody needs to participate in this. And we believe that there's enough money in the system to pay for health reform and to cover everybody. But those people who want to say we have to pay for reform solely out of money in the system, we think are just chasing fool's gold, that it's not possible to do this without additional monies. We believe we have to look outside the health care system to do it, even though, over time, the system reforms will reap substantial advantage. And additionally, and finally, this really is a way to undermine the political and the public support for reform for reasons that have been discussed here earlier.

Thank you.

REP. MILLER: Mr. Speranza, welcome to the committee.

MR. SPERANZA: Good afternoon, Chairman Miller.

REP. MILLER: Your microphone.

MR. SPERANZA: I want to thank you for being here this afternoon.

I'm vice chairman and general counsel of Wegmans Food Markets and I'm here representing the United States Chamber of Commerce, where I'm the former past chairman of the board. I'm also representing the Rochester Business Alliance, which is the Rochester, New York Chamber of Commerce.

As I've had the opportunity to travel around the country on behalf of the U.S. Chamber of Commerce, my number one issue was the quality and affordability and accessibility of health care. And as I would talk to audiences large and small, this is what was on people's minds -- the quality, affordability in health care. And they also want to have programs that they can understand and programs that are transparent, which we think is of critical importance.

The two words that I'd like to share with you today are finding common ground and collaboration. The United States Chamber of Commerce, the Rochester Chamber of Commerce, we agree to at least 90 percent of what's in this bill. And I think it needs to be stressed that that's indeed the case.

I'd like to share with you an example. Rochester, New York, back in the early 1990s -- according to President Bill Clinton when he did a nationally televised speech on health care last time around, he said Rochester, New York was a community that got it right. It was the only community that got it right.

What's transpired since is four years ago the U.S. Chamber that I represented, the American Medical Association, the American Hospital Association, large insurers, large health care companies came together in Washington, about 15 people, and their task was find programs and policies that can be rolled back to local communities that didn't cost a lot of money, could be done relatively quickly, that didn't require a change in law and regulation.

We in Rochester took that seriously. We put together a consortium of seven large businesses -- Wegmans is one of them -- and we've had very good results. For example, we've put into place a regional health information organization. We took efficiency experts from our manufacturing companies and put them in the hospital systems to make them more efficient. We developed a wellness program called Eat Well, Live Well that my company developed. We encourage employees to walk 10,000 steps a day, eat five cups of fruits and vegetables a day. We turned it over to this group and last year we had over 200 organizations in Rochester participate, more than 44,000 employees. It's the largest communitywide wellness program in the world.

More recently, we have entered into a partnership, this consortium of businesses, with a health systems organization, the only one of its kind in the state that's given statutory authority by New York. They represent all the health care stakeholders in our community. They also represent labor unions. They represent the religious organizations, minority communities, et cetera. We have figured out how to collaborate in Rochester. Common ground is the key to that.

What we'd like to be able to do is invite members of this committee and President Obama to come to Rochester to see how we've done it. We think we owe it to the American people to get collaboration right.

With respect to the bill before us today, a couple of points: We need to have enough time to digest the bill. Each member of Congress needs to do that. We do as well. I had 24 hours notice to be here today, two hours to write my testimony. My sense is we don't want to take so long that this idea gets killed, but we need to take enough time where people will really understand. And there are best practices in the country that you can look at. Rochester isn't the only community. Many others do as well.

Second, cost -- we've heard costs anywhere from 1 to 1.6 trillion dollars. Either there are not enough rich people in this country to pay for that cost, so directly or indirectly many more Americans will pay for the cost of the programs. And also, with programs like this and other ones that have been put in place over the last months and the last number of years, there will be more inflation and inflation is a tax on everyone in America, including the poorest of the poor.

In terms of a couple other points, with respect to the health care government option for insurance, I disagree with that approach. Mr. Andrews had talked about food companies a little bit earlier. I wouldn't want to have a government-run grocery store across the street from me. A manufacturer wouldn't want to have a government-run manufacturing plant across the street from them. Yes, there should be competition. But it seems to me the Congress could figure out a way to change state and federal regulation and law to enhance that competition. We think that's the important and the way to be able to do that.

With respect to pay-or-play, we disagree with that approach. With respect to ERISA -- I know my time is running short -- we think ERISA works and works well. There are so many complexities as it relates to this bill; we think that ought to be left alone.

So, in conclusion -- in conclusion -- we need to find the common ground -- believe me, there's a lot of common ground -- for the good of the American people. The American people do want change. We want change. And we want meaningful change, transparent change. We should be able to buy health care the same way we buy automobiles and other goods and services in this country. Health care should be no different. If you give people the information and transparency and equality, they will do the right thing. Competition is the American way.

Thank you.

REP. MILLER: Thank you.

Dr. Hacker, welcome.

MR. HACKER: Thank you, Chairman Miller, and members of the committee.

REP. MILLER: Microphone, please.

MR. HACKER: Thank you, Chairman Miller and members of the committee. It's an honor to speak with you today.

Health care is at the epicenter of economic insecurity in the United States, a reflection of our nation's uniquely fragmented and costly framework of health insurance. Now, this framework is distinctively American and any effort to improve it must be distinctively American as well, building on the best elements of the present system, large group health plans in the public and private sectors.

But an American solution must also fix what is not working by allowing Americans without access to secure workplace coverage to choose among group insurance plans to provide strong guarantees of quality, affordable coverage over time.

To succeed, these reforms must be based on three strong pillars: shared risk, shared responsibility and personal responsibility. Shared risk means we need a new national insurance exchange that allows workers without secure coverage to access good group health plans with premium assistance to ensure affordability. To promote competition and accountability, this exchange must also include as a choice a public health insurance plan competing with private insurers.

Now, this public health insurance plan is a linchpin of a distinctively American strategy. It will provide a backup for those without workplace insurance in all parts of the nation. Indeed, in most of the country, especially rural areas, insurance markets are highly consolidated. And private plans are passing on costs to enrollees and employers rather than bargaining with increasingly consolidated provider groups or improving their own efficiency.

A public plan must also provide a benchmark for private plans, pressing them to focus on value and innovation rather than shifting costs or screening out high-risk patients. And finally, a public plan will provide a cost control backstop. Public insurance has lower administrative expenses than private plans. It obtains larger volume discounts. It does not have to earn a profit. And experience suggests it has a superior ability to control spending while maintaining broad access over time.

Now, I would encourage the committee to ensure that the public plan has an extensive network of hospitals and doctors immediately. And the simplest and most efficient way to build the network is to assume that all doctors and hospitals that accept Medicare payments are in the network but give them the choice to opt out.

The plan should also have the authority to use modified Medicare rates and to employ information technology and new payment approaches and care coordination strategies to improve efficiency and quality.

If we are to truly bend the curve of health spending, the public and private sectors will have to work together, competing on a level playing field. This task cannot fall on private insurers or the Medicare program alone.

Make no mistake: Americans want to have the choice of enrolling in a public insurance plan. In a recent poll 72 percent supported this option, including a majority of Republicans. Another recent poll found 83 percent support.

The other two pillars of an American solution are shared and personal responsibility. This means that employers and individuals should be expected to contribute to the cost of their coverage once affordable options are available.

Employer responsibility, sometimes known as play-or-pay, is vital in ways that are not always properly understood.

Yes, it provides an important source of funding, reducing the direct cost of reform to the federal government. But it also ensures that reform will not undermine employment-based health insurance. In the absence of a play-or-pay requirement firms with large numbers of low-wage workers who qualify for new subsidies for insurance within the exchange will have less incentive to insure their workers directly.

Moreover, employer responsibility requirements serve to level the playing field between firms that do and do not provide coverage.

In play-or-pay proposals employer contributions are not penalties, they are payments for the coverage of workers whose enrollment in the exchange flows from the employer's decision to contribute. This ensures that the roughly 95 percent of non-elderly Americans who work or live in the family of a worker have access to good insurance through the workplace connection.

And while there are valid concerns about small employers, a survey by Small Business Majority found support for more than half of small-business owners in California for reform along these lines. They were willing to accept the requirement to contribute to health care in return for the ability to access an affordable plan for their workers.

Concerns about small businesses, where most uninsured workers are employed, will be best addressed through a sliding-scale requirement on firms rather than by excluding small firms from the requirement altogether.

Shared risk, shared responsibility, personal responsibility -- these are the pillars of a uniquely American solution. Together they will create accountability in American health insurance, expand coverage while making it more affordable for workers and their families, and adequately fund our health care priorities while putting in place the preconditions for long-term savings to the federal government.

REP. MILLER: Thank you.

Mr. Stapley, welcome.

MR. STAPLEY: Is this on? Thank you.

Thank you, Chairman Miller and Congressman Kline, for the opportunity to testify today on behalf of the ERISA Industry Committee, whose members provide comprehensive health benefits directly to some 25 million active and retired workers and their families.

ERIC has long supported reforms to the nation's health care system that change the way we pay for health care, increase its efficiency, reduce costs, extend health coverage to those who are uninsured or underinsured and improve quality.

To that end we released in 2007 "A New Benefits Platform for Life Security" that lays out in innovative national framework for health and retirement security.

Now, as we contemplate the issues that are before us, there are three basic principles that we think are important.

First: do no harm. There's been a stated commitment to the employer-based system by the president and others. Health care reform should build in the success of this system that serves 170 million Americans and their employers, not hurt it.

Second: control costs. Spiraling health care costs threaten our global competitiveness as well as our national solvency.

Reform must focus on reducing these costs and ensure that what we pay for has value. Without cost containment -- effective cost containment -- we will not change the system.

Thirdly: expand access. Access to the 47 million or 82 million, however you choose to count it, Americans who do not have it must be expanded while recognizing that a chief cause of inadequate access is the high cost of care.

Now, we recognize as an organization that there's a lot in our current system that is not working well. To this end we created the new benefits platform that we released a couple of years ago. With these principles in mind that we just articulated -- in this new benefits platform we've articulated the following things that we support that are a part of health care reform and, in large measure, a part of the many proposals that are being considered by the president and Congress.

First, we support a competitive, pluralistic health care system in which employers and individuals have choices among health plans that compete on the basis of quality, cost and effectiveness.

Second, we support an insurance exchange or gateway provided that it follows uniform national standards.

Thirdly: broad flexibility for employers to choose how they provide health benefits to their employees and their families while protecting employers from systematic adverse selection.

Fourth: incentives in the current financing system that promote responsible cost management rather than risk avoidance and aggressive claims administration.

Fifth: improvements in the transparency and accountability of both providers and health plans.

Sixth: payment reform to secure financial incentives that drive desired changes.

And lastly: an individual mandate with subsidies to assist financially disadvantaged individuals. Now, there're also some issues, some concerns with the current proposals that we feel like need more discussion.

First, the tax cap is difficult to define so that it could be administered in a fair and equitable way.

Second, it may mean that some employers would redesign their plans so that the benefits they provide would fall below that -- the level that was taxed. In fact, we might create an incentive to do that, with the result that their employees would be provided with less generous health coverage.

Other employers would choose to keep their existing plans, which could result in adverse selection as young and healthy employees leave the employer plan to seek cheaper coverage elsewhere that would not be taxed.

This could compromise many large, viable risk pools and could also greatly diminish an employer's ability to offer efficient and innovative health care coverage to its employees. As the cost of providing benefits increases, more employers would exit the system.

The public plan: If a public plan could fairly be fashioned it must be structured in a way that employers -- employer plans end up bearing the burden of additional -- do not end up bearing the burden of additional cost shifts.

There is currently -- and there's no question about it -- there's currently unfair cost shifting from Medicare to employer plans in the current system. Expansion of cost shifting would cause employers to rethink whether they can afford to provide high-quality health care to their employees. And it also compromises the notion -- with respect to whether or not you really got a plan that is competing on a fair and equitable basis.

We're also concerned about the adverse selection that would be experienced if individuals and employer-sponsored plans were permitted to opt out of the employer plan and into a public plan, especially if the employer were compelled to pay for the individual's participation in the public plan and/or finance any subsidy given low-income individuals who opted out.

Employer mandates: Including minimum benefit packages by definition restrict our ability to devise and operate health care plans that best meet the need of our employers.

Mandates increase cost and limit the flexibility. They are also difficult to define so they could be simply and uniformly applied. Coupled with punitive regulatory regimes, employer mandates will discourage employers from continuing to provide quality, affordable health care to their employees.

Finally, talking about preemption: Without national uniformity made possible by ERISA's preemptive doctrine, large, multistate employers simply could not offer quality health care coverage to their employees. Any future legislation must continue to accord preemption and national uniformity of regulation in a similar priority. There are many employers that offer benefits in all 50 states. And we can testify to the fact that in most states where we have some responsibility to comply with state mandates, the administration is costly and complex and difficult to comply with.

In conclusion, ERIC is committed to the goal of responsibly reforming the nation's health care system to cover the uninsured, control costs and improve quality and do all three in a manner that does not undermine the system that currently offers quality health care to 170 million satisfied Americans.

ERIC members have a major stake in America's health care system and we intend to continue to play a constructive role in this debate.

Thank you for your time.

REP. MILLER: Thank you very much.

Mr. Arensmeyer.

MR. ARENSMEYER: Thank you, Chairman Miller, Ranking Member Kline and members of the committee.

Small Business Majority appreciates this opportunity to present the small-business perspective on the House Tri-Committee draft health care reform plan.

We support the effort to move this legislation through the Congress expeditiously, and thank you for bringing this forward in a timely manner.

Small Business Majority is a nonprofit, nonpartisan organization founded and run by small-business owners and focused on solving the biggest problem that we face today: the skyrocketing cost of health care.

We represent the 27 million Americans who are self-employed or own businesses of up to 100 employees. Our organization uses scientific research to understand and represent the interests of all small businesses.

I have been an entrepreneur for more than 20 years, including 12 years owning and managing an Internet communications company. Together with other senior managers in our organization, we have a total of 70 years running successful small businesses ranging from high-tech to food production to retail.

We hear stories every day from small business owners who can't get affordable coverage. Louise Hardaway, a would-be entrepreneur in Nashville, Tennessee, had to abandon her business dream after just a few months because she couldn't get decent coverage. One company quoted her a $13,000 monthly premium.

Others such as Larry Pierson, owner of a mail-order bakery in Santa Cruz, California, struggle to do the right thing and provide health care coverage. Larry notes that, quote: "The tremendous downside to being uninsured can be instant poverty and bankruptcy. That's not something my employees deserve."

Our polling confirms that controlling health costs is small- business owners' number one concern. Indeed, on average we pay more than 18 percent more for health care coverage than big businesses.

An economic study that we released earlier this month, based upon research by noted MIT economist Jonathan Gruber, found that without reform health care will cost small businesses $2.4 trillion over the next 10 years.

As such, we are pleased to see that the House bill addresses key cost-containment measures such as expanded use of health IT, transparency, prevention, primary care and chronic disease management.

Our polling shows that 80 percent of small-business owners believe that the key to controlling costs is a marketplace where there's healthy competition. To this end, there must be an insurance exchange that is well designed and robust. We are very pleased that the committee's bill proposes a national insurance marketplace with the option for state or regional exchanges that adhere to national rules.

Moreover, we're encouraged by the committee's proposal that there be standardized benefit packages along with guaranteed coverage without regard to pre-existing conditions or health status, a cap on premiums and out-of-pocket costs and marketplace transparency.

We understand that a balanced set of reforms will require everyone to participate. Sixty-six percent of small-business owners in our recent polls in 16 states for which we're releasing preliminary data today support the idea that the responsibility for financing a health care system should be shared among individuals, employers, providers and government.

It should be noted that respondents to our surveys included an average of six -- of 17 percent more Republicans than Democrats -- that's 40 percent to 23 percent -- while 28 identified as independent.

According to the results of the economic modeling done for us by Professor Gruber, comprehensive reform that includes even modest cost- containment measures and a well-designed structure of employer responsibility will offer a vast improvement over the status quo.

A system with appropriate levels of tax credits, sliding scales and exclusions will give small businesses the relief they need, potentially saving us as much as $855 billion over the next 10 years, reducing lost wages by up to $339 billion and, in response to the question that the ranking member asked Dr. Romer, minimizing job losses up to 72 percent.

We are very pleased that the committees have addressed some of the affordability concerns of the smallest businesses. Professor Gruber has modeled specific scenarios described in detail in our report. And we look forward to working with you to ensure the best balance between the need to finance the system and our ability to pay.

Finally, another issue of great concern to us is the unfair tax treatment of the 21 million self-employed Americans.

Under the current tax code self-employed individuals are unable to deduct premiums as a business expense and are required to pay an additional 15.3 percent self-employment tax on their health care costs. We encourage that this inequity be rectified in the final bill passed by the House.

Chairman Miller, when you announced this historic bill, you noted that health care premiums had spiraled out of control, quote, "placing our fiscal future in peril." As small-business owners, we agree wholeheartedly. Health care reform is not an ideological issue, it's an economic and practical one.

We are encouraged by the overall approach of this bill and look forward to working with you to make it a reality this year.

Thank you.

REP. MILLER: Thank you.

Ms. Visco.

MS. VISCO: Chairman Miller, Ranking Member Kline, members of the committee, I'm a 22-year breast cancer survivor and I represent the National Breast Cancer Coalition, a coalition of hundreds of organizations and tens of thousands of individuals dedicated to ending breast cancer.

We recognize that we will not achieve that mission unless everyone has access to the quality care they need.

NBCC is grateful for the opportunity to present our positions to this committee, and we're excited about the possibility -- which we want to make a certainty -- that this country will enact guaranteed access to quality health care for all now.

We have a grassroots board of directors; it's 25 of our member organizations. And they spent several years working on this issue. We invested resources in educating them, our field network and the public about the various approaches and issues surrounding health care reform. And we developed a framework for a health care system guaranteeing access, which was submitted for the record with my written testimony.

We need a system of patient-centered care -- yes, a term that gets thrown around quite freely. But you know the problems. There were some stories I identified in my written testimony, and there were so many more: women sharing prescription drugs, delaying treatments, losing their jobs, then losing insurance facing a diagnosis of breast cancer.

Our focus as a nation should be on solving those issues, always centered on the patient, on the individual. How do we reform the system so that everyone has access to the quality care they need when they need it, that guarantees everyone a comprehensive set of basic benefits that are based on evidence or contributing to the evidence base?

We know you have many pressures from many different fronts, but we need to always keep focused on the patient, on the individual, centered on that goal. We should not begin by figuring out how to maintain drug prices or physician reimbursement or maintain the existing insurance industry. Those issues should only be addressed within the context of, first and foremost, the patients, the health of the individuals in this country.

The history of health care reform is the story of all constituencies that don't want to give anything up. We all have to give something up to achieve our goal -- money, certainly -- and the National Breast Cancer Coalition understands that. And our framework makes clear we believe in shared responsibility; we should all share the financial costs of reforming the system. Perhaps we have to accept a longer wait for a test that would adversely impact our expectations but not our health, but what we don't want to give up is our health, our lives.

We've all been working on these issues for many years. We know what to do; we just need the courage to do it. We applaud the approach outlined by this committee. It meets many of the principles of our framework for access to care.

Our efforts in this area were led by Carolina Hinestrosa, the executive vice president of NBCC. She died on Sunday as a result of side effects from her breast cancer treatment. She spent her last days working on this and we will work our hearts out, passionately committed for Carolina but also because we know it is the right thing to do and it's necessary to reach our goal of ending breast cancer.

We need to make certain that this system supports the right care. We need comparative effectiveness research to reach that goal. Now, we have spent some time understanding the issue beyond the sound bites and recognize without question the need for this approach in health care. Comparative effectiveness research is research in the real-life settings all doctors and patients face.

This is an extraordinary time; we're ready to change for the better the system of health care in this country. The infrastructure we build to get there needs consumers and patients at all tables. Their perspective is necessary to ensure that decisions regarding health care will have a meaningful, positive impact for those on the receiving end of care: the patients and their families. And they are the ones who will have to navigate the complex web of rules and requirements in any health insurance system.

It is important that it's not just any patient or consumer. They must be accountable. They must represent to and report back to organizations that represent those affected by their issue, by their medical condition, and must be knowledgeable about the health care system and well trained.

I didn't understand why in the 1990s when health care reform efforts failed the American public did not storm Washington and demand that Congress and the White House make access to care a reality. This time we are ready and we are passionately committed to achieve that reality.

On behalf of the National Breast Cancer Coalition, we pledge to work with you to achieve the goal of guaranteed access to quality health care for all.

Thank you.

REP. MILLER: Thank you very much.

Thank you all for your testimony and again for taking your time to be with us and sharing your expertise and your experience with us.

We will pick up where we left off with the members on our side. Mr. Hinojosa is recognized.

REP. RUBEN HINOJOSA (D-TX): Mr. Chairman, I apologize that I was at another commitment and I am going to yield back my time and listen to my colleagues ask their questions.

REP. MILLER: Why don't you yield your time to Ms. McCarthy? That all right?

REP. HINOJOSA: I yield my time to the gentlewoman from New York, Ms. McCarthy.

REP. CAROLYN MCCARTHY: I thank you and I thank the gentleman for his time.

Listening to the testimony from the first panel and this panel, one of the things that I'm going to be focusing on, I spent 32 years as a nurse and the nursing shortage in this country is severe, not only the nursing shortage but almost all health care workers plus primary care doctors. I don't see how this plan can actually work unless we have the work force that can go behind it.

I'm pleased that we have some initiatives in this bill that will work towards primary doctors and nurses but also the public health centers, if that's where we're going to go, especially for those that have the insurance. I grew up with a public health center. That's where I went for all my medical care, my shots, my polio shots, all of that because my mother and father didn't have health care insurance.

There is nothing wrong with that as long as we teach the patient or give the patient the dignity that they should deserve wherever they go to get an examination. And to be very honest with you, on some of our hospitals, which are overworked, have no money to improve their facilities and to see those that don't have health care insurance -- and that's a lot of people that have just gotten out of work -- you're treated like cattle, and the dignity is taken away from the person and that patient. And that is totally wrong.

You know, they say that a country is as great only as the health of their people and I consider this a great country, but I do not believe that our health care is the best out there.

So with that being said, we have a lot of work to do. And I hope that both sides actually come together because this is the time that we need to have this done. It is the time to have it done.

From the first witness, Dr. Romer, she talked about bundling, but a lot of people don't understand or know how the bundling is actually going to work between the hospital and the patient. The waste and fraud, where is that going to -- you know, how are we going to weed that out to save money but not punish the doctors that are out there? Payment to the doctors and the hospital -- I have to tell you, if anyone gets the health care that I have, I see what they pay to the doctors and to the hospital, and I'll tell you, it's outrageous. They don't get paid enough. And you wonder why a lot of them are not accepting any patients. That has to be taken care of.

So I'm hoping as we go forward that we can work on this. I'm glad to see that the doughnut hole has been closed. I think that's terrific. Certainly that was the biggest complaint from --

REP. MILLER: Not closed yet. (Laughter.)

REP. MCCARTHY: Sorry?

REP. MILLER: We have a contribution toward closing it. It's not closed yet. It's a fairly large doughnut hole -- (laughter) -- but it's very helpful what's taken place. (Laughs.)

REP. MCCARTHY: If we're going to make that sacrifice, I mean, this is the time. This is our time to do the right thing. That's my opinion.

And the doughnut hole for all my seniors is something that should be concerned about because let's face it, the majority of our seniors unfortunately start getting the most care, health care, when they're over 65 to 70 to 75. That's when our body starts breaking down.

So with that I'm hoping -- again, with all the witnesses, they had -- I know this is kind of more of a speech and everybody here knows I don't give many speeches, but this is something I feel passionate about. You know, when you talk about your cancer patients and not being able to get the care that they need because they can't afford it, to talk about the cancer patients that the families will spend all of their money to take care of someone that they love, I mean, if we as a nation can't share those costs to be helpful to the family and to the people -- I believe our country, I believe our Americans, actually do believe in taking care of each other.

With that, I yield back the balance of my time.

REP. MILLER: The gentlewoman yields back.

Mr. Thompson?

REP. GLENN THOMPSON : Thank you, Mr. Chairman and Ranking Member, for having this hearing today.

This is -- health care's been, you know, up until January I spent 28 years in health care. I thought I would retire from there actually. It wasn't to be and I find myself here today. And I come to Congress actually with many of my freshman colleagues with health care backgrounds.

And, you know, my commitment, I got involved in public policy because of health care and working to ensure access, affordability, quality and choice of health care, frustration of costs that I saw that were being driven up frankly by government intervention as a result of regulations that were piled on like layers on an onion. The regulations probably made sense at one time, but we have to go back into the 1960s to find the roots of many of them. And the one thing we don't do is peel things away in government; we just add layers on and the frustration that I had on behalf of my patients of how that was increasing costs and decreasing access.

And I appreciate this opportunity today. This is really one of the first opportunities to engage in this discussion, which has been pretty frustrating for someone who came to Washington after almost 30 years in health care with ideas that we could do things a little better. And so I appreciate the opportunity today.

Frankly, the change that we need needs to be the proper change and as a result of full debate and full discussions and we have not had that opportunity. That's been a real frustration of mine and I think of a number of my colleagues.

There's some serious concerns, a few of these I'll just mention briefly, with the proposal on the table. It's creating a taxpayer federal government provider that will not really compete but only will consume the private health providers. It'll create -- we'll wind up with a monopoly and there'll be a government provider. Most of my frustration has been a result of dealing with Medicaid and Medicare in terms of the access and the quality of services for the consumers I've served for three decades.

Frankly, I find the flawed funding mechanisms in terms of your competition being named yet we're going to ultimately, I believe, decrease competition because of this new government entity that's taxpayer funded. The savings from HIT I have concerns with. I think there are immediate gains for HIT obviously, for health information record, but in the long run, is it sustainable? That's the type of thing that you have to be able to reinvest in every time a new generation of technology comes along.

And I raised that question in a previous forum and there were no thoughts about what happens a number of years from now when the technology changes and our health care providers find themselves without the resources to do that.

So, frankly, marching ahead -- my first question: Mr. Speranza, you noted that an employer mandate will lead to a loss of jobs. Some studies have found that using economic analysis prepared by our previous witness, Dr. Romer, that an employer mandate costing $300 billion over 10 years would result in a loss of 4.7 million jobs. Can you elaborate on how an employer mandate would work in your company?

MR. SPERANZA: Wegmans Food Markets provides full health insurance, has for decades. As a matter of fact, one of the things we take pride in is Fortune Magazine has listed us as one of the top 100 companies to work for. And the last five years we've either been -- either number one through number five on the list and we're the only company in America to have that designation.

So our corporate philosophy is our employees always come first and we mean it. If we take care of our employees, our customers take care of themselves. And if our customers are taken care of, our bottom line takes care of itself.

Our view as it relates to our own business, and, quite frankly, our industry is we make our own decisions as to what benefits we should provide. If competition doesn't do that we attract, we think, better employees as is shown -- how we've done this in the past.

I'll share one other thing with you. I talked about collaboration before. Over the years -- we have 39,000 employees; about 2,000 are in unions, Teamster unions and the bakers' union -- and for years it would be the company against the union and we changed that and we worked very hard. Right now we have provision in our labor contracts where if there are enhancements in our employee benefits and health care without negotiation the union people get them as well. If unfortunately there has to be a reduction in health care benefits without negotiation, that happens as well.

We built a team and we built a team that works. That's what I think America is all about. You make those choices at the lowest possible level, which is company by company. If there are companies, Mr. Thompson, that choose not to do that under the present system I think they'll pay the price by not being able to retain employees, which is very costly, or not get the quality of employees. That's one approach.

The only other thing I would say going back to the testimony is that there hasn't been much said about the fact that we don't have enough physicians, we don't have enough nurses, we don't have enough health care workers. Why shouldn't there be incentives? I'm a lawyer. Do you know that there are three times more law schools in this country than there are medical schools?

Creating incentives for health care workers, I'd love to come back on another day when you're talking about education. Quite frankly one of the things -- and if you want to come to Rochester I invited you with respect to health care; perhaps you'd come back as it relates to education -- we have some wonderful programs to help economically disadvantaged children. We encourage them to go into the health care industry, whether as physicians, whether to -- anything else in health care.

So my sense is let the market prevail as much as we can. That is the American way.

REP. THOMPSON: I appreciate your comments on the supply side of providing accessible and affordable health care. I think that's been pretty much ignored.

And with that, my time's expired, Mr. Chairman.

REP. MILLER: Mr. Kucinich?

REP. DENNIS J. KUCINICH: Thank you, Mr. Chairman.

To Mr. Speranza, I want to call to your attention a documented letter that was in The New England Journal of Medicine in the June 4th, 2009 edition where it says that the insurance industry has over $4.4 billion in investments in tobacco companies.

Do you have any comment on that?

MR. SPERANZA: Well, I guess my first comment would be we were the first major chain in the United States to stop selling cigarettes, so I think that's -- (laughs) -- where we stand.

REP. KUCINICH: No, I'm asking about the industry, though. I'm not asking for --

MR. SPERANZA: Yeah. I guess I would say with respect to that I haven't given that a lot of thought. I do know that the insurance companies most likely have a fiduciary responsibility to do the best they can with their investments.

REP. KUCINICH: Right, right. I thank --

MR. SPERANZA: I'm not an economist.

REP. KUCINICH: No, thank you. Well, you know, Milton Friedman said this -- I'm not often someone who quotes him, but it's worth quoting in light of what you just said -- he said, "Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible." That's a quote that's included in this article in The New England Journal.

Now I'd just like to say, Mr. Chairman, the fact that insurance companies can invest in tobacco companies, seemingly contradictory assumptions if you're talking about public health, ought to be of note to this committee when we start marking up the legislation.

Now, Professor Hacker, I believe health care is a human right. I think everyone deserves it. That means no financial barriers to care. It means all medically necessary services are covered. The draft bill under consideration today has many badly needed reforms and has a very strong public plan option, but even with this, it's clear that millions will still remain uninsured and underinsured.

What are the models for health care finance that would be consistent with the principle that health care is a human right?

MR. HACKER: Thank you, Congressman.

I think that there -- it's first worth noting that the broadening of coverage that I would think is going to be foreseen when we look seriously at the effects of this piece of legislation is going to be very substantial. The proposal that I developed some years ago -- Health Care for America, which is very similar to this draft legislation -- would cover almost all Americans. And when I say almost all, my proposal would cover all but a tiny, tiny share, roughly --

REP. KUCINICH: But are you saying that this bill that we've heard widely discussed that this committee will soon be marking up, a bill that's been fairly well described, meets the test of health care as a human right?

MR. HACKER: I think that it meets the test of providing affordable quality coverage to the broadest -- (inaudible) -- of Americans.

REP. KUCINICH: Does it meet the test of health care as a human right?

MR. HACKER: Yeah, I think that it does. That is a very high standard. It's like I teach in my university the idea of democracy as an ideal; no system actually lives up to that standard.

REP. KUCINICH: So you're saying some people have the rights and other people don't even in a democracy, is that what you're saying?

MR. HACKER: No, I'm actually saying that I believe that the standard of health care as a human right, that this proposal will move us dramatically closer to that ideal than our present system.

REP. KUCINICH: Well, I'm concerned about medical bankruptcies.

As an update of a landmark Harvard study published on June 4, 2009 found that two out of every three bankruptcies are related to medical bills. In 2001 that number was about 50 percent. Seventy-eight percent of those medical bankruptcies happened to people who actually had insurance before they got sick. It's a stark illustration of the consequences of giving health insurance companies the ability to sell plans that don't provide an adequate level of coverage.

How many medical bankruptcies would the bill under consideration today allow?

MR. HACKER: I can't give you an exact estimate, but I can tell you it would dramatically reduce the number of medical bankruptcies in two ways --

REP. KUCINICH: Will there be no medical bankruptcies? Would you predict that?

MR. HACKER: Well, I don't know if there would be no medical bankruptcies; however, it's worth noting that some of those medical bankruptcies are due to lost income due to sickness in the Himmelstein-Warren study. So it's not clear to me that those would be prevented even if we had the most stringent requirements of affordability.

But let me just say --

REP. KUCINICH: Well, this study says two out of every three bankruptcies are related to medical bills. This is the landmark Harvard study.

MR. HACKER: Right.

REP. KUCINICH: It didn't say it's related to people losing their income. Are you --

MR. HACKER: Some portion of that total is due to people that lost income due to sickness rather than to medical costs.

REP. KUCINICH: Did you read the study?

MR. HACKER: I have, indeed.

REP. KUCINICH: And you're saying that it has to do with -- that the two out of every three bankruptcies which the Harvard study says relates to medical bills, you're saying that a more correct characterization would be that it's also related to people losing their income?

MR. HACKER: I don't know the exact division within the study. I'm saying that some portion of medical bankruptcies in that study are due to lost income due to sickness.

But I want to reiterate that two ways in which this legislation would dramatically reduce medical bankruptcies are, one, it would make a dramatic move towards ensuring that coverage is affordable through the exchange as well as through employer coverage plans that now have to meet minimum requirements; two, it would create a true public insurance plan competing with private plans that would have set benefits in law that would offer people guaranteed security.

REP. KUCINICH: Mr. Chairman, I just want to point out that just saying that, you know, the insurance is affordable doesn't mean the hospital bills are.

Thank you.

MR. HACKER: But there are limits on cost sharing within in the bill of $5,000.

REP. MILLER: The gentleman's time has expired.

Ms. McMorris?

REP. CATHY MCMORRIS RODGERS (R-WA): Thank you, Mr. Chairman.

And I too want to say thank you to everyone for their testimony and I think this is an important issue that we are facing.

I'm a big supporter of health IT. I think it has huge potential to save costs and also improve health care delivery. I'm excited about wellness. I think we as a country have become way too lax in our own personal responsibility for taking care of our health.

I do have very deep concerns about this government option, though, and I wanted to direct a question to Mr. Stapley because when you look at who's insured today, 50 percent are on some kind of a government plan -- Medicare, Medicaid, TRICARE -- 50 percent are in private and then we have the uninsured that we need to address.

And I continue to hear that the reason that we need this government plan is to control cost, and yet what happens today is that we know Medicare, Medicaid, TRICARE doesn't pay the cost and that it's the private sector that has to subsidize the cost of government not paying the cost of these plans.

So I wanted to ask Mr. Stapley if he would just comment on what you believe the impact of the government option would be on private health insurance. Will it create competition, or is it simply going to centralize control with the federal government?

MR. STAPLEY: Those are outstanding questions. You know, I don't know that I could quantify what I think the impact is. I think from the perspective of employers it's more of a fear of the unknown in terms of what might happen.

I would say, first of all, that in terms of an insurance exchange, aside from the issue of the public plan that it is very important that the plans that are offered through the insurance exchange be accountable. And I think it's a fair criticism of the current system. I don't think the financing system in the United States today is accountable. I think they do all kinds of things that are abusive and so forth and so forth that we have to correct.

Now, when you move to the public plan the concern is that if they pay at Medicare or Medicaid-like rates or they continue to do some of the sorts of things they do on the administrative side, it could create problems.

Now, let me give you two examples that I think are very appropriate. I was involved in the creation of the Utah Health Information Network. I'm the current chairman of their board. I think it's one of the most successful health information exchanges in the United States.

We transact an enormously high percentage of our administrative transactions in Utah electronically. We do Medicare's transactions as well. We do all of their transactions. We send them from providers in the state of Utah to the intermediary in South Dakota. They pay us not one red cent for those transactions. We transact them free.

UHIN, the Utah Health Information Network, is made up of a consortium of payers, physicians, hospitals and so forth. Those transactions are not free; they cost money. Every transaction costs something. And so the fact that Medicare pays nothing means that the rest of us have to pay more to accommodate that. That's true, as I understand it, with every health information exchange in the United States.

Now, if you move to the care side, I think it's a little more complicated question. But I can tell you that we sit down every year and negotiate with a very respected health care system in the state of Utah that all of you have probably heard about in the last couple of weeks because they've been part of the debate. And we sit down and we say okay, let's talk about what we're going to pay you next year. And they say well, I'll tell you what's going to happen here; our charge masters or our cost of doing business has gone up by, say, 3 percent or 4 percent. Medicare comes along and says guess what, we're going to give you 1 percent. Now, this is a theoretical example. Therefore, they tell us you're going to pay 5 percent because we've got to make up what Medicare is not going to pay to us.

Now, how that translates out into the system in its entirety in terms of higher health care costs I don't know. I personally think that one of the questions you have to ask is if 100 percent of the reimbursement in our health care system today were based on Medicare rates what kind of an impact would that have on the health care system?

REP. MCMORRIS RODGERS: I'm going to -- I'm sorry.

MR. STAPLEY: And I'm not in a position to answer that question. But it would have an impact.

REP. MCMORRIS RODGERS: Thank you. I appreciate your answer.

I'm going to quickly run out of time and I had a question I wanted to direct to Ms. Visco.

Just talking about cancer in this country and survivability -- because, you know, we actually lead the world in survivability rates when you compare America with breast cancer, 84 percent survival versus 69 percent in the U.K.; prostate 92 percent survival rates in America, 51 percent in the U.K.

Are you concerned or what would you attribute that to compared to what's happening around the world?

MS. VISCO: Well, I think it's a very -- the answer to that question is incredibly complex, the extent to which you look at survivability and see what percentage is due to earlier detection in some situations, what is due to better treatment. Of course, the incidence of cancer is incredibly high in this country compared to many other countries, and certainly the incidence of breast cancer is incredibly high compared to many other countries.

But it's an incredibly complicated analysis to sort of tease out what results in a mortality benefit or a survival benefit.

REP. MCMORRIS RODGERS: Thank you.

Thank you.

REP. MILLER: Ms. Davis of California.

REP. SUSAN A DAVIS: Thank you very much, Mr. Chairman.

I wanted to just quickly -- and I know that this probably would have been a better question for Ms. Romer -- but I wanted to just focus on the Medicaid and Medicare issue and the concern that we would be trying to pick up some cost savings through that.

As you know, in California and New York people start getting a little nervous about this because we looked at those costs. Could any of you comment on that and whether or not -- she had mentioned limiting the itemized reductions for Medicare and Medicaid, that that would be one place of picking up some savings?

Do you all have experience with that enough to know what are we talking about there realistically and does that bring us to a question of whether the large states and the small states, if the competition is going to be such that both are paying essentially the same thing for that care, which we know today is not true?

You want to comment on that, Mr. Shea?

MR. SHEA: Congresswoman, if I understand your question correctly, let me answer it this way: There has been under way ever since the first of the Institute of Medicine reports an effort, a cooperative effort across the board, in health care to understand how it is that we can address the systemic quality problems that we have because it's clear that we have problems. And there are costs, enormous costs, linked to that. The institute's own estimate, well publicized, is that 30 percent of the money that we spend every year is for care that really doesn't help people.

So we need to have -- and the field knows this and they recognize it and people are working on doing this -- so that we're on track now to change the way care is done and the way care is paid for to make it based on quality in a way that it's never done before.

I like to quote something my business colleagues say to us across the bargaining table. They say we pay for health care like nothing else we do in business. We don't know -- we pay the same regardless of whether it's world-class care, "okay" care or downright dangerous care, and we don't even know which is which because we don't get that information.

REP. DAVIS: Yeah.

MR. SHEA: We've just got to change the way we approach this. And the current system has done some things -- some things -- very well, but it's caused a train wreck of costs.

REP. DAVIS: Yeah. Is there a way that we can talk, though, about the cost of health care as being equitable across all states? Is that a realistic even assumption that that can be done?

MR. SHEA: I think it's really part of this whole approach.

People were shocked when the numbers first came out that showed in controlled studies how the cost in Florida was much higher than the cost in Minnesota in one of the famous ones. People know that these are practice patterns. They don't have to do with the science of care. They don't have to do with what is best medicine.

These are solvable problems, as are many of the other things in health care. We know how to go about it. We need the structure that your bill would give us or at least begins to give us to get at that so that we can take a coordinated national strategy in dealing with this.

I could go on for several hours about this if you'd like, but there are elements in your bill that really put us on this road to an entirely different kind of health care delivery system.

REP. DAVIS: Mr. Pollack -- and then I wanted to go to a cost- sharing question; I know that Mr. Kucinich raised that in terms of co- pays and, again, how we -- whether or not we can include equitable cost-sharing provisions in the health care reforms themselves.

Mr. Pollack?

MR. POLLACK: Well, in terms of cost sharing, obviously cost sharing affects people at different income levels very differently. And one of the things that I think is of real benefit in this legislation is you provide certain kinds of cost-sharing protections that are predicated on income. And I think that's very important.

Now, with respect to your --

REP. DAVIS: You're talking about limiting co-payments?

MR. POLLACK: I'm sorry?

REP. DAVIS: Limiting co-payments by income -- is that specifically what you mean?

MR. POLLACK: There should be some out-of-pocket cap which this legislation includes which would preclude the kind of things that Congressman Kucinich was worried about in terms of medical bankruptcies. I think this legislation goes a long distance in providing protection on that.

Now, with respect to differences in care, I'd just say two quick things: One of the most remarkable pieces of work that I've seen in a long time was in a recent article in The New Yorker by Dr. Atul Gawande, who actually examined not just the differences, say, between Miami and Minneapolis, which is often what people look at, but he actually compared McAllen, Texas with El Paso, Texas, and he found that McAllen, Texas, the costs were about double what they are in El Paso.

I think there are a number of things that we can do. I think there's some things that this bill would do that would help change those disparities. I think the promotion of comparative effectiveness research is very important and getting that proliferated as substantially as possible-- not precluding a doctor from, you know, making a clinical decision, but at least providing guidance to the physician and to the patient. I think that's very important. So I think there are some things that can be done which I think will reduce this wasteful spending that occurs in too many places.

One last thing and that is --

REP. MILLER: That'll be your last thing. (Laughter.)

MR. POLLACK: Sorry.

REP. DAVIS: (Laughs.) The chairman is ready to gavel us down here. I wanted to follow up with Mr.Speranza, but we'll have to --

REP. MILLER: I didn't know if Mr. Speranza wanted to jump in on your question. He looked at one point like he wanted to jump in in response.

Go ahead.

MR. SPERANZA: Just very briefly, with respect to the cost of care -- and I think we really need to focus in on that. There's so many things that communities can do -- unwarranted variation in hospitals, infection rates in hospitals, those sorts of things. And if there were medical guidelines, evidence-based, throughout the country, that would go a long way toward this.

So if you gave incentives to physicians -- right now they're on piecework, like a manufacturing line. If you paid physicians based on outcomes and encouraged them to get into wellness and those sorts of things -- and that's the last thing I'd say, whether it be Wegmans or Safeway and others -- we want to have the opportunity as employers to work with our employees to change behavior. It helps the employee. Nobody wants to get a heart attack, nobody wants to get sick, and so this bill, it looks like, stops you from doing that. We really ought to be looking at it the other way. We need to change behavior in a positive way.

REP. MILLER: Mr. Loebsack?

REP. DAVE LOEBSACK: Thank you, Mr. Chairman.

And thanks to the witnesses; great questions all around.

I think the idea of personal responsibility, Mr. Speranza, is really important and I agree with my colleague Congresswoman McMorris Rodgers on that and I think we can all agree on that. Obviously I think we have to do all we can to promote personal responsibility, and when it comes to wellness I think that's absolutely critical. There's no doubt about it.

There's a lot to like, I think, about this bill. Certainly I think wellness is a part of it, important part of it; health IT is an important part of it as well, as was mentioned. I think a public plan option is the way to go and I'm going to ask Dr. Hacker about that in a second. Dealing with catastrophic costs, clearly that's something we have to deal with; there's no doubt about it. And I could go on and on.

I do want to pick up a little bit on the regional and geographic disparities question. I'm from Iowa so that may not surprise you why I want to pick up on that, right? Iowa, as maybe everyone on the panel -- maybe not -- knows is consistently ranked at or near the top in terms of outcomes and efficiency, quality of service, all the rest. We're among the best, if not the best. Yet Iowa -- and not just Iowa, but there are a number of states that rank high in terms of outcomes but rank low in terms of reimbursement rates.

I just want to ask any of you here to offer any remarks that you might with respect to the current bill and whether it really gets at that issue or not and what we might be able to do to really remedy some of those geographic disparities that we see.

In particular I think Mr. Pollack and Mr. Shea might be willing to speak to that.

MR. SHEA: Yes, I appreciate the question, Congressman, and I think you're right on track.

One of the ideas that has been widely discussed is the notion that we need to be able to, as we link payments to quality, we need to be able to do rapid-cycle testing of the way to do that so that we're not in the system where Medicare once a year makes set rates and so forth. We need a more flexible, nimble approach that really matches the quality improvement efforts that are being done around the country and rewards those and incentivizes those.

I know that in the Senate HELP bill I was admiring some of the things they did that were just beginning steps to do this but just sensible kind of things like, well, we're going to pay a physician's office extra money if they do follow up on hospital discharges. This is a huge problem. It costs us an enormous amount of money. It's very simple to solve. But the current system we have has nobody responsible for that. Well, why not pay a little bit extra money to save some money? So I think this is one big point.

The other thing I would just say is I really think that with the advent of a public plan we're going to see a much more responsive public system to payment rates because it is not going to be just the elderly or just the poor. If we mainstream public insurance I think we're going to get a much more responsive public insurance system all the way around.

REP. LOEBSACK: Okay, thank you.

Did you want to say anything, Mr. Pollack?

MR. POLLACK: I would just add to it that I think the more we move health care into a more group plan system I think we're going to create a lot of efficiencies and we're going to provide greater coordination of care.

And particularly for people who've got chronic conditions -- many of them have multiple chronic conditions, and if they go to one specialist and then they go to another specialist, this specialist may be terrific but may not know how that treatment affects another problem.

So we do need greater coordination in care. We need medical homes. And I think if we do that I think we're going to not just improve quality but I think we're going to create cost efficiencies in the process.

REP. LOEBSACK: Thank you.

Dr. Hacker -- I'm a former political scientist, by the way, so nice to see you here.

MR. HACKER: Thank you.

REP. LOEBSACK: I do want to ask you about the public plan choice and how it will create competition and in particular if you could rebut the argument that private insurers are simply going to be pushed out of business by the creation of a public plan. Can you sort of help us resolve that issue?

MR. HACKER: Well, first of all, I'm glad to be speaking to a fellow political scientist. We don't get a lot of representation, no pun intended, and that was why I immediately reached for the ideal of democracy in talking to Congressman Kucinich.

This argument that is often made that a public plan would undermine or destroy private insurance I think is absolutely backwards. It will change the business of private insurance, but it won't put private insurance out of business. And I think there's two reasons why that's the case.

First of all, remember that the core of this legislation and this approach is to build on employment-based coverage and encourage employers to continue to provide insurance, which is why I emphasize requiring that employers either provide health insurance or help fund coverage for their workers, which will prevent the kind of erosion of employment-based coverage that's often a source of concern.

Second of all, the public plan would be an option within the exchange, right, alongside private plans, and that's why I think it's so crucial because, as I said, it would be a benchmark for the private plans, creating accountability where it often doesn't exist. In your own home state I believe the largest insurer has 80 percent of the market, so having this benchmark and this competitive pressure is going to improve private insurers. And second of all, it will be a crucial backstop for cost control and a backup for people who want to have an alternative to these dominant insurers.

But I think that just as was said with regard to public insurance -- that it needs to innovate and improve its practices -- that that kind of innovation needs to take place in the private insurance market, and having that competition will encourage innovation. Within the Medicare program, for example, plans like Kaiser, for example, do very well precisely because they have an innovative business model. Private plans have more flexibility to adapt provider networks. They have what might be called a brand advantage in many cases. As we know, for many Americans the idea of a public plan is still something that does need to be mainstreamed.

And I think that we should understand this, therefore, as not a threat to private insurance but a threat to the old way of doing private insurance. It is healthy competition that will improve both the public plan and private insurers.

REP. LOEBSACK: Thank you.

Thank you, Mr. Chair.

REP. MILLER: In calling on the members, the chair has made a mistake. We're going to keep doing what we're doing on our side, working down the members who haven't had a question, but I should have come back and recognized, since this is the second panel, recognized the Republican members for a second round.

So we're finished with Mr. Loebsack; we'll go to Mr. Kline.

REP. KLINE: Thank you, Mr. Chairman.

REP. MILLER: We'll come back to our side, working through our members.

REP. KLINE: Thank you, Mr. Chairman, for sorting that out.

I must admit, it got a little bit confusing -- a lot of members, a lot of panels, my first day, that's my excuse. I don't know, but --

REP. MILLER: It's mine, too. (Laughter.)

REP. KLINE: Mr. Arensmeyer, I wanted to talk a little bit about small businesses. There's some unanswered questions in the draft legislation, but there are some things that are in there.

So the first thing I want to sort of grapple with here for a minute is what you're defining as a small business. Is that 10 employees, 25, 50, 100 -- do you have a working definition that you're working with?

MR. ARENSMEYER: Well, we represent the interests of those of 100 employees or fewer, but it may be that that legislation ends up setting different standards at amounts that are less than that.

REP. KLINE: Okay, it does. I was just trying to put in context what the bulk of your comments were addressed -- concerning businesses up to 100 employees.

But in the legislation it seems to me it says it provides a health insurance tax credit for small businesses equal to 50 percent of the cost of coverage for firms where the average employee compensation is less than $20,000, which I suppose is an incentive to keep your wages low. Firms with 10 or fewer employees are eligible for the full credit, which phases out entirely for firms with more than 25 workers, so that certainly clearly wouldn't address a large portion of the small businesses that you represent, if they stop at 25.

MR. ARENSMEYER: In the modeling that Professor Gruber did for us, we did look generally at tax credits that were a little bit more robust than that. That is absolutely true.

There's a series of dials and levers as you look at sliding scales and tax credits and exemptions and you can't look at these in the absolute, but we definitely have some models, and clearly those models that are more, quote-unquote, "generous" in the sense of tax credits for larger amounts, sliding scales that aren't as high, greater exemptions, there's obviously going to be a greater benefit financially to small businesses. So you have to look at this all together.

REP. KLINE: Well, this sliding scale apparently stops at 25. And we're not sure about the exemptions yet. That'll be an interesting question.

I notice that modeling, Jonathan Gruber's model, the scenario that was most advantageous for small employers was the scenario that exempted small businesses, and I think that was a 1 to 10 employer. Was that what he was looking at there?

MR. ARENSMEYER: Correct.

REP. KLINE: Okay. So we still haven't answered the question of the 11 to 100.

MR. ARENSMEYER: But there were substantial benefits for -- even with that model, huge benefits for small business with the reform and with the shared responsibility.

REP. KLINE: But it depends upon where that small-business exemption comes in, is that not true?

MR. ARENSMEYER: Well, pretty much every model that Professor Gruber modeled produced a better result than the status quo because the status quo is such an absolute disaster for small business. Fewer than 50 percent of the smallest businesses are even offering anymore.

So clearly, it -- we would love to work with the committee to figure out the right balance of tax credits and sliding scales and exemptions. But virtually any system where some recognition is given to the special needs of small business, that has reform in it, that deals with the cost containment is going to be far better for small businesses than the status quo.

REP. KLINE: I certainly agree that small businesses need some help in a lot of areas.

Let me move to Mr. Speranza, if I could. I appreciate your comments about Rochester. Of course, in Minnesota we have Rochester, Minnesota, which had been referred to a couple of times here. We're pretty proud of the Mayo Clinic and the work that it's done there -- some real collaborative work and changing things.

You -- can you comment -- you have any more comments about reforms that were left out of the bill that you would liked to have seen from your perspective, such as strong medical liability provisions, things that would help control costs?

Microphone, please.

MR. SPERANZA: Yes, I think the -- a few things that I think would make the most sense are, as I mentioned earlier, liability reform is very important. We know that medicine is practiced in a defensive way, which is very costly. That would be number one.

Health information technology -- I know there's already $19 billion allocated to that. But doing that with -- having nationwide standards, being able to actually implement that and to get the savings would be very important.

Wellness: With respect to the kinds of programs we've talked about, we would like to have more incentives to change behavior, not less. Those are very important.

And the last point I'd make, with respect to what was in the bill, is the insurance option. This has everything to do with capitalism. It really does. There are other ways for us smart people in a collaborative way to solve that problem.

In a different forum I would like to challenge Dr. Hacker to a debate on capitalism. We'll do that at a different time and different place, or we can agree to collaborate and find a way and come back to you, because quite frankly, I think he's got it backwards. I firmly believe in the American way and capitalism.

And that's a slippery slope you're talking about going down.

REP. KLINE: Thank you.

I yield back.

REP. MILLER: Ms. Hirono.

REP. MAZIE HIRONO (D-HI): Thank you, Mr. Chairman.

I have a very quick question for Mr. Stapley, and then I want to move on to some questions for some other members of the panel.

Mr. Stapley, since you're representing the ERISA Industry Committee, I'm wondering whether you're familiar with Hawaii's exemption from ERISA?

MR. STAPLEY: Yes, I am.

REP. HIRONO: And if so, do you think that --

MR. STAPLEY: We have our largest employer in Hawaii, as a matter of fact.

REP. HIRONO: And if so, do you think that Hawaii's exception or waiver from ERISA should continue in any health care reform bill, just to make sure that, you know, they can continue doing what they're doing?

MR. STAPLEY: Well, you've put me really on the spot. (Laughter.)

REP. HIRONO: If you can answer the question; I realize it might be more complex.

MR. STAPLEY: I can tell you Hawaii's been one of my favorite states. We have a couple of large employers -- the Polynesian Cultural Center, for example, Brigham Young University-Hawaii -- there are employers in the state of Hawaii.

I would say this -- I guess I would say, no, very simply. And my concern is is that in a restructured system -- which I do think needs to be significantly restructured -- you have to have national uniformity. To the extent that you don't have national uniformity it does create interesting challenges.

Now, we comply with the Hawaii Prepaid Health Act. And we appear before the Hawaii Prepaid Health Council all of the time. And I would say that we spend enormously more effort in one state than we spend in combinations of other states by virtue of the fact that we have to comply with unique requirements.

At the same time, I know that it does provide some benefits to the citizens of the state of Hawaii.

But we -- the other thing that it does is we have -- we actually have an employer in the state of the Hawaii and their employees that have requested a plan that we offer in all 49 states except for Hawaii. And we don't offer it simply because we cannot comply with the Hawaii Prepaid Health Act.

And from their perspective, that's wrong. We would like that choice, but because of Prepaid Health we can't provide it.

REP. HIRONO: Thank you for that perspective. Obviously I have to think about it a little bit more.

For some of the other panelists -- I think that from what I know about the private health care insurance system there is really a lack of transparency. For example, I don't know of any state that requires the health insurers' carriers to file their rates and justify their rates. And we do that in workers' compensation and for those states that have no-fault auto insurance it's prior approval.

And so there's really a lack of transparency. I do think that the public option will bring more transparency into the whole system.

Some of you also mentioned that we should have nationwide standards. And Mr. Shea, Dr. Hacker, it is astounding to me that such a high percentage -- Dr. Romer mentioned that maybe 30 percent of the money that we spend on health care is really wasted.

And so I wanted to ask you gentlemen in particular whether there's enough specific requirements or language in this bill that addresses the waste that's in the system currently.

MR. SHEA: If I may, Congresswoman, thank you.

I think that the bill as drafted has a number of the elements of what we need to have a national effective strategy for addressing quality problems and for improving delivery system. I don't think it's as well integrated or as robust as it could be. And we had discussions even over the weekend with some of the staff about this. I think it needs some work.

And one of the things that I think is really important is that currently we have a consensus development process for quality standards. It is not mandated by HHS. It is developed in a public- private organization called the National Quality Forum. And this has full representation of all the people who are going to be asked to live up to this: the physicians' organizations, the hospital organizations. And so if we're going to get the kind of change, the really big change we want, the people who deliver the care have to be bought into this. And they have to have their two cents.

So that's sort of a process we think needs a strong place in the bill and in the draft. It doesn't appear at this point.

REP. HIRONO: Do you agree, Dr. Hacker?

MR. HACKER: I do agree. And I also would say that you're absolutely right to emphasize the benefits of transparency in this broad process. It is the case that we know about this 30 percent precisely because Medicare has collected this information and made it public so that researchers can use it.

The Dartmouth Atlas studies that have been so influential are based on Medicare data. And I think that just a starting point, a commitment has to be towards much greater availability of the kind of information that we need to make these judgments.

I would say that we often understand the public plan quite rightly as a central way of providing people with secure coverage. But it also really needs to be on the forefront of improving the delivery and quality of care in conjunction with and in coordination with private insurance plans and these kind of public-private partnerships that Mr. Shea mentioned.

And I would say on that front, one thing that hasn't been mentioned is that President Obama has rightly said that the Medicare Physicians Payment Advisory Commission should play an improved role in trying to make sure that Medicare is paying for services more efficiently.

And I believe strongly that both Medicare and the new public plan should be doing a much better job of encouraging the right care and quality care rather than just more care.

REP. HIRONO: I've run out of time, but with the chair's indulgence I just want to say that as we move toward a national standard I think it is really important that these standards acknowledge evidence-based differences based on race -- for example, American Indians, native Hawaiians. Would you agree? (No audible reply.) Thank you.

REP. MILLER: Mr. Price.

REP. PRICE: Mr. Chairman, in my opening statement I did something that I know you'd never do and that is misspeak.

REP. MILLER: (Laughs.)

REP. PRICE: My final comment in my opening statement was that there are positive solutions to the challenges that we face. And I'm hopeful that the House will allow for an open, vibrant, robust debate and a deliberative process -- one that respects America's doctors but, most of all, America's patients.

And we've heard less talk about the patients, specifically, in this discussion than I had hoped.

I think there's a lot of common ground, however -- common ground being in health IT, common ground being in the area of wellness and common ground being in the area of prevention.

But I want to have folks address, if you would, the -- one of the comments that I made in my opening statement, and that is, if this grandiose plan comes to pass, and if there are some Americans out there who believe that it's not addressing their health care needs, and if, for example, they want to go visit a physician of their choosing and decide that they want that physician to treat him or her for a specific illness or malady or problem, should they have the right to do that outside of the current structure, Mr. Pollack?

MR. POLLACK: I think they should have that right. They may be required to pay some additional amount of money outside of the network.

REP. PRICE: So if they wanted to use their own resources to do that, they ought to have that right?

MR. POLLACK: I do believe that, yes.

REP. PRICE: And are you aware that that isn't included in the present bill? Would that give you pause?

MR. POLLACK: Well, most health plans, even things like PPOs -- I'm in a PPO -- we can go outside of the network. I'm presuming that that will be retained.

REP. PRICE: Thanks.

Mr. Shea, you would agree with that?

MR. SHEA: Yes, sir. I would.

REP. PRICE: Everybody would agree -- anybody disagree that Americans ought to be able to opt out if they so desire?

Mr. Pollack and Mr. Shea, I'm interested in following up on the issue of who decides what quality is and who decides what specific care patients receive? As a physician I was always frustrated when somebody stepped between me and my patients and said, "You can't do that," even though I felt it was in the best interest of the patient and the patient clearly trusted that decision.

On the Comparative Effectiveness Research Council and on this new Health Choices Panel that's in the bill, there doesn't appear to be any language that provides for specialty societies to be the final determinant of what is quality and what care ought to be provided patients.

Is that something that you believe to be important?

MR. POLLACK: As I read the bill, what happened is the Health Benefits Council would provide some recommendations concerning what would be in the standard benefit. That should then go to the secretary.

Now that does not mean that somebody can't get care that might not be included as part of a plan. That happens today. If you look at --

REP. PRICE: But that language itself is not in the current bill as it relates to the government option.

MR. POLLACK: I'm not sure I follow.

REP. PRICE: That the final determinant of who decides what care to be provided is --

MR. POLLACK: No, there is nothing in the bill that says that somebody is going to make a decision -- a clinical decision about what care you receive.

REP. PRICE: I would --

MR. POLLACK: There is -- there are --

REP. PRICE: Reclaiming my time, I would respectfully disagree. And I would hope that what we could agree upon is that that language itself needs to be in the bill, that clinical decisions ought not be provided by the Comparative Effectiveness Research Council, the Health Benefits --

MR. POLLACK: I don't think anyone disagrees with that. You know, today an insurance company decides what's in a plan.

REP. PRICE: Exactly. Exactly. And that's wrong.

MR. POLLACK: And that, some might say, might come in between a clinical decision --

REP. PRICE: Without a doubt.

MR. POLLACK: I guess what I'm saying is you will know what your coverage is, but nobody's going to tell you, you can't get this procedure or that procedure. There's nothing in the bill --

REP. PRICE: I hope that that's included in the bill. And I look forward to your support for that kind of language.

MR. POLLACK: It's already there.

REP. PRICE: Then please show me where it is -- not this second, but as we move forward. I look forward to talking with you about it.

Dr. Hacker, you talked about there being no real worry about crowd-out if there's a government option. You're familiar with Medicare Part B, the physicians' component of Medicare?

MR. HACKER: Am I familiar with Medicare Part B? Yes.

REP. PRICE: Yes. It's a public option. It's a voluntary program -- voluntary program. What percentage of the market share does it hold?

MR. HACKER: The market share of Medicare Part B is about -- essentially 99 percent of elderly Americans are enrolled in it. But --

REP. PRICE: Do you not believe that it -- that that has resulted in crowd-out of other private entities that would have provided health coverage for seniors if they had been given an opportunity to without the subsidies that are placed in Medicare?

MR. HACKER: Well, Medicare Part B is essentially a faux voluntary program in the sense that it's 75 percent financed by general revenues. At the time it was created there very few private options that were of any quality for elderly Americans.

What we're talking about here with the public plan choice is an option available only to people within the exchange, where there would be no subsidies from general revenues.

So I think that they're not analogous examples at all.

REP. PRICE: And I would agree -- at the very beginning of this bill. But over a period of five years everybody comes into the plan that's defined by the government through this bill as it's currently constructed. And that's the concern that many of us have.

MR. HACKER: I understand that's a concern. I really don't believe that it's a valid concern and I tried to explain why: Because I think that it's important to understand that first of all many people will want to be in a private plan. Second of all, many private plans are offering an innovative alternative to what the public plan would be providing.

Third, most people would still get private coverage through their place of employment through under this legislation.

And fourth, I've argued, and the bill embodies this argument, that this should be on a level playing field with no special treatment for the public plan vis-a-vis the private plans.

REP. PRICE: And I would suggest, Mr. Chairman, that that is not what's incorporated in the bill. I would hope that that's what the final product will be. But at the current moment that's not what's incorporated in the bill.

REP. PHIL HARE (D-IL): Thank you, Mr. Chairman.

I'm not a physician. I'm not an attorney. I'm a former clothing worker to cut lining for men's suits in a factory for 13 years. But I'm trying to look at this from a common-sense perspective.

Dr. Hacker, if I'm correct, you said that 72 percent of Americans support a public option.

MR. HACKER: That was in the recent New York Times/CBS poll.

REP. HARE: So almost three fourths of the people in this country support a public option?

MR. HACKER: Yes. In fact, 83 percent supported it in a Employee Benefit Research Institute poll just before this one.

REP. HARE: Well, I do, too. So count me in on one of those 75 percent of the -- 72 percent of the people. And I think it will grow large when they find out about it.

What I find interesting about all this -- and, you know, I'm not here to defend the trial attorneys, but I was just at my doctor's the other day. He's been an internal doctor -- an internist now for 20 years. He's never had a med mal suit ever filed against him. His insurance rates have quadrupled in the last three years -- never had a claim.

Spoke to another doctor who had a -- one claim files against her in 18 years, said it was frivolous. Her insurance company -- supposed to be representing her -- told her to plead it out, because it was easier and it would take too much time to go to court.

So I think if we're going to beat up on one end of it I think we ought to take a look at the other end of it. I mean, usually under an automobile policy if you have a -- if you're driving safely don't you get a discount for safe driving? My doctor got his rates quadrupled for never having anything filed against him. And one doctor was told by her insurance company to plead out.

I said, "Doctor, why did you do it?" I said, that'd be like the equivalent of my going into a store, walking out and being accused of shoplifting when I didn't do it and my attorney says, just plead out because you don't want to have to take time off from work. The fact of the matter is your reputation's at stake here.

So I think we need to take a look at that aspect of it, too.

The other thing -- and the reason I support this public option -- and I want to ask Mr. Shea about this and Mr. Pollack. We've heard today about the wonders of medical savings accounts. I don't know how in heaven's names people can save money when they're barely holding onto their homes, their hours are cut. And then we hear about what a great thing it is.

Quite frankly, isn't it true that the vast majority of people in health savings accounts are wealthy people? They're not middle-income people, lower-income people, really, are they? Or am I missing this?

MR. POLLACK: I would say that the assumption that medical savings accounts is going to save this country money on health care is a mistake.

The overwhelming majority of costs in our health care system are for major interventions. It's not at the front end with deductibles. And so if you create higher deductibles, it's not going to save significant money for America's health care system. What it might do is it might prevent people from getting preventive care, from getting tests, from getting initial examinations. And I think that's a mistake.

And I also think it's a mistake to provide tax incentives that are clearly regressive, because the higher the tax bracket you're in, the higher tax benefit you get from a medical savings account.

It turns out that those people who tend to opt into a medical savings account are somewhat wealthier and are somewhat healthier. Those who are wealthier are not so worried about a high deductible. It's not going to faze them at all. Those people who are less wealthy, it is going to faze them. And that wealthy person is in a higher tax bracket and is going to get a higher tax benefit.

So I think it's a mistake to go in that direction. It's not going to save money. It is regressive. And I think it's a disincentive to getting the preventive care we should be encouraging.

REP. HARE: Mr. Chair, I want to ask about the portability thing here for -- because my time's going to run out.

I met a couple whose son worked in a factory in Galesburg, Illinois. Factory closed -- he had nine years in, did not have enough to -- went to -- you know, they shut down -- lost his insurance, went to work part time doing some jobs until he could find a job; died at 31 years of age because he had a heart attack and he had no insurance.

His parents said to me -- he said, I'm not -- the press asked him, are you mad at God for taking your son? He said, God didn't take my son, he made a special place.

This government did because they did not have an insurance plan that would cover him when he lost a job and went to another.

Under this bill, that person -- that man could have gone into the public system. How in heaven's name do people who lose their jobs -- how are they going to afford -- if we don't have a public plan, how are they going to afford a health care plan? I mean, are these benevolent insurance companies just going to hand it to them and charge them basically nothing?

MR. SHEA : Congressman, we just released a survey this morning -- we did an online survey, which we've done for a couple years. Twenty-three thousand people responded to the survey. It's not scientific, but 23,000 people is a pretty good number. And one of the phrases that kept -- and 6,000 people wrote us their individual stories. One of the phrases that kept on coming up is, you know, "I lost my insurance" or "I ran into the cap on my insurance. I never knew about it."

And people say: "Well, you know, I'm now on the faith-based plan. I pray I don't get sick."

There is no way without -- it's just -- and I think we're -- just going back to Ron's point, I think what we need to focus on is basic health security. Let's make -- let's get the trains running right, which they are not now, and then if we want to talk about bells and whistles and special -- you know, that's a different story. But we don't have the basics right.

REP. MILLER: (Inaudible.)

REP. CASTLE: Well, thank you, Mr. Chairman.

Mr. Chairman, I've been listening to this panel, which I think has been excellent and obviously been reading and studying all this as well as all the rest of us. And I've got to tell you, my concerns are almost increasing rather than diminishing at this point.

When I look at the costs in the health care system, when you look at the cost of prescription drugs -- and you can argue whatever the reasons for that may be -- or you want to do something like take the prescription Part D plan and close the doughnut hole, for example, or medical inventions, both hard inventions and procedures, which are going on now, which are becoming more and more extensive and complicated out there -- the costs of education for medical personnel -- somebody mentioned there are three times as many law schools as medical schools. That's going to go up probably to about six to one.

Law schools make money for universities, in case nobody's realized that. Medical schools are generally losers for universities.

It's just a high-cost item.

The medical malpractice costs, which we're not doing a lot about in this particular legislation -- with the insurance rates -- the salaries of medical personnel, be it those running hospitals or whatever it may be -- the whole idea of adding portability and pre- existing conditions to existing health care plans in this country -- I look at Medicaid and Medicare and how they are driving the budgetary situations of this country in to a corner in terms of where we are going.

I even worry about the cost of things like health information technology, which I think ultimately is something we need to do and might even be helpful in terms of saving money. But the initial cost of it is so great. And I even worry about the cost of the public option, even though it's theoretically paid for. My hunch is there'll be a lot of backroom cost to that that we haven't seen completely yet.

I just would encourage us as we do this -- and I happen to believe in a lot of the concepts I'm hearing about today. And I'd love to see everybody insured in some way or another -- at least provided for health care in some way or another.

But I am worried that we're biting off a lot here. And I've seen the estimates for the Senate plans. I'm not sure what the estimates -- costs for these plans are going to be. But can we afford it or are we just going to make the political decision that if we are going to afford it we're going to pay for it?

But I would just hope as a committee, as we listen to expert witnesses, as we put this together that we are being thoughtful and careful about what we're doing. Maybe we have to do something less. I don't mean lesser, just perhaps less than the grand approach in this particular situation so there'll be a manageable circumstance. And we have to continually look at every single cost-saving component we can, in terms of how we're dealing with any of these issues.

So I have no questions of the panel. And I'll be happy to yield back my time. But as just one member sitting on this committee, I do express concerns about where this is going to all end up. And I think we need to always know the details of the costs and how we're paying for it.

REP. MILLER: Mr. Tierney.

REP. JOHN TIERNEY (D-MA): Thank you, Mr. Chairman.

I just generally want to ask a little bit here -- it seems to me that everybody has sort of walked away from the single-payer thing without much of a fight, which sort of surprises me for a number of people on the panel here, but -- on others.

So we're looking at how we're going to try to make this -- keep costs down. When I talk to people, they're usually more than a little alarmed when they find out the size of the salaries that private insurance companies are getting, when they find out the amount of money that's being spent on overhead and marketing, when they see the size of the profit that's out there.

We're going to have to do something in regulation in order try and make people that are paying health insurance premiums already think they're getting something for their buck -- if they're going to be paying more money -- in some way to help other people get insured.

So it would seem to me that the idea of the medical loss ratio is something that we ought least consider and try to make that a reasonable number.

Mr. Hacker, what do you think about that?

MR. HACKER: I think that the one reason to have the public plan is precisely to address those concerns. And I think that it's also worth noting that while there's no intention in this public plan to have a Medicare-for-all system, that some of the virtues of having that system are achieved by having a competitor in the market, in this exchange, that embodies those values of putting patients before profits, of making sure that people have broad coverage, of making sure that the focus is on improving care and innovating over time.

REP. TIERNEY: Well, you know, that might eventually -- that sense of corporate competition may eventually bring some sense back to the premiums -- the usage of the private companies. But why don't we just initially require that if they want to get into the exchange or whatever it is you want to call it, why shouldn't they have to meet some sort of a particular level as a consumer right here -- that they have to spend at least a certain number of the premium dollars on direct medical care?

MR. HACKER: I believe there actually is a medical loss ratio standard in the legislation.

REP. TIERNEY: Well, I know; I know who put it there. But the point is, still, do you agree that it ought to be there?

MR. HACKER: I do.

REP. TIERNEY: What's the purpose for it? And I think it's at a rather low number at 85 percent, and it ought to be more.

MR. HACKER: (Laughs.) Well, actually it may sound very low, but unfortunately, as you well know, that many insurance companies today spend well less than 85 percent of their income -- (laughs) -- on care.

And even within Medicare Advantage plans there are many cases where they're spending -- where only 82 or 83 percent of their spending is on actual delivery of care to patients.

REP. TIERNEY: Because of course in Pollack's USA Families (sic) today had a study done where it shows people do far less than that. Some do as low as 60 percent, am I right?

MR. POLLACK: Some of them go as low as 60 percent.

REP. TIERNEY: Okay. I guess the only point I'm trying to make -- and I don't mean to be too sarcastic about it -- is, you know, it's ridiculous that we're worried -- I hear people say, "Oh, we're worried about a public option plan, might put these private companies out of business or they won't make enough profit." What should be our primary concern is making sure we get the best deal for the consumer. They get health care and they get their premium dollars spent on health care.

I don't care whether you're from the United States Chamber of Commerce or from the labor unions or anybody else, all of your members want to get a decent deal on this. And all of them, when I talk to them, are outraged at the high salaries the executives make, at the amount of money that's spent on marketing, at the amount of money that goes into not just profit but outrageous profit. And I don't understand the sensitivities of all of us around here about being so concerned about their existence and their ability to keep on doing that to the consumer.

So I think that's the point made. If we're going to waltz away from single payer -- which, you know, sort of disturbs me considerably that we did that so early in the bargaining process -- at least we ought to fight to make sure that they're going to participate in the exchange, which is going to be a benefit to them -- but they ought to at least have to give something back to the consumer and not be allowed to continue to do that.

And if anybody wants to -- Mr. Shea, if you want to respond to that, it's fine with me.

MR. SHEA: I was just sitting back and saying, "Well said."

I think that's right. And the other thing I'd say, though, Congressman, is that we have to realize that these costs are not just at the highest level, they're not just with the advertising or all the marketing or the obscene executive salaries, as I would consider them, as I've read the numbers. They have to do with the basic relationship between insurance companies and the people who are providing the care. And you -- we have -- there is a great example done by The Boston Globe recently of the relationship -- usually these things are not revealed -- that revealed the Blue Cross relationship with Partners HealthCare, the biggest system in Boston.

We need public service organizations -- they may be private companies, but they're really -- they claim to do a public service. We need them to be watchdogs, not lapdogs, in terms of this issue.

And so I think you're exactly right.

REP. TIERNEY: Yeah, I won't ask it again, because the last panel that Mr. Pollack was on I asked it, and I don't think anybody was satisfactorily answering it.

But I've yet to hear a description of what value-added insurance companies really bring to direct patient care. Just what is it they bring to the table?

Mr. Hacker, do you want to tell me what it is insurance companies do to move a patient's care forward?

MR. HACKER: I think the best insurance companies have been able to innovate and provide high-quality care and good customer service to their patients. I believe that insurance companies in the current environment have incentives to engage in the kinds of practices that Mr. Shea just spoke about, that is, passing cost on to consumers and employers rather than bargaining for better prices with providers or trying to weed out unhealthy people rather than providing care to those who need it.

But I think that if we change the incentives and say, "as a condition of entering the exchange you have to abide by these strict rules, and you are going to have to compete with a public-service- oriented plan, a public health plan on fair and equal terms," I think the public -- that insurance plans -- I hope that they can rise to this moment and provide the kind of innovation, customer service and delivery system benefits that we have seen among the best plans.

REP. TIERNEY: That certainly would be a statement of hope over experience.

REP. MILLER: Mr. Roe.

REP. ROE: Thank you, Mr. Chairman.

Just a couple things -- Mr. Pollack, you are wrong about who would have that plan. In our own practice, out of a 294 people that have a health savings account, I would dare say that the people that work in doctor's offices consider themselves wealthy. Those are the folks that have those plans.

Just a comment: Having practiced medicine for 31 years, let me explain to you how until you get malpractice straightened out you're going to have a difficult time controlling costs. If you came to me in the emergency room 30 years ago, you had right-sided pain, right low quadrant pain, I would examine you and say, you know, let's get a blood count that costs 25 bucks, a temperature and a physical exam." That's what we did -- "come back if you're not feeling better."

Today when you come in you're going to get a CT scan, because that's now the standard of care to diagnose appendicitis. And what happens is that's a $1,000 test as opposed to a $50 emergency room visit. And if you don't do that, just get the pencil out and write commas and zeroes, because that's what you're going to pay.

That has -- that -- the access to this technology and into the legal climate has created this. Unless you get meaningful malpractice reform, doctors are going to behave in their own self-interest, and that's not to get sued. And if they are sued what they're going to do is they're going to have all the documentation they can possibly get their hands on to prove they didn't do malpractice.

And so that's -- I'm just pointing that out as a given.

One of the things that I think Ms. Visco said that was very, very important and one of the reasons that I am concerned about this government plan is that you're absolutely right: Patients and doctors should be making decisions, not health insurance companies and not public plans.

And let me give you an example: When I began my practice, about 50 percent of women died of breast cancer when I started practice. And that was why the big argument came, do you do a radical surgery or a simple surgery? It didn't matter, the results were the same.

What has occurred now over time is we have almost what -- above a 95 percent five-year survival rate. And that is a wonderful thing when a patient comes in to be able to tell them, "You're going to live through this awful disease."

And our practice averaged seeing one new breast cancer a week. That's how often we saw that disease.

In England they've quit doing screening mammography. And the reason they quit doing it was that the wire-guided biopsy -- the false-positive rate of the test, of the -- it tells you you have something when you don't -- the wire-guided biopsy, using a radiologist, costs more than the screening mammography.

So (NHS ?), their comparative effectiveness made a decision not to continue to do routing mammography.

And I would argue as you just did so eloquently that screening mammography is -- the new digital mammograms, with patient education, new medicines -- raise this level of survival. And in the single- payer system what happens, the way they all work at the bottom -- at the end of the day is they ration care. That's how they work. You have so many dollars spent on health care and then after you've spent those dollars, waits occur.

In Canada -- a great place -- it takes 117 days to get a bypass operation. If you have -- this is not Phil Roe talking, this is the president of the Canadian Medical Association in the past has stated you can get your dog's hip replaced in a week, but it takes you two to three years to get your own hip replaced in that system.

So that's my concern is that a government bureaucrat will be making that decision based on a budgetary number, not the patient and the doctor.

Let me tell you what: I'm not here to defend private health insurance companies, I can promise you. When I was a young doctor I thought they would provide health care. And I think Mr. Pollack pointed out, they're there to make money.

Comment.

MS. VISCO: What I'd like to say is that what we want, what patients want is care based on evidence. That's what we want.

I didn't mean to say that decisions should be made solely by patients and doctors. I didn't mean to say that decisions should be made by insurance companies.

What we want is a system that supports decisions based on a high level of evidence or -- or -- interventions that are helping us get evidence. And that's the way it should work. It does not work that way now. And a significant percentage of care isn't based on a high level of evidence. And those are decisions that unfortunately are often made by physicians.

But if we had a system that supported evidence-based intervention and supported care --

REP. ROE: Excuse me, I want to -- you would not support a system that would not do screening mammography and a -- would you?

MS. VISCO: I would support a system that only used screening mammography in appropriate age groups and in appropriate situations.

REP. ROE: But not at -- absolutely, I agree. But not at all -- this is not at all at any age.

MS. VISCO: I'm unaware of that. And I will go back to my office and look up that the U.K. has stopped screening mammography. I was unaware that that happened.

REP. ROE: One other question, Mr. Stapley: Medical loss ratio -- would you comment on that?

MR. STAPLEY: You know, I think that there are a lot of plans that have been abusive -- have very, very terrible loss ratios. But there are a lot of private plans that have very good loss ratios -- in the neighborhood of 94, 95, 96 percent.

And so we have a tendency to focus on the extreme. And I'd simply say that there are plans out there that are private plans that have a community focus, that are interested in the people they serve, want to make sure they get cost-effective, high-quality health care, and they do it at a very low cost.

I'd also point out that there are -- I mean, I'm not opposed to Medicare. I think Medicare is one of the -- in terms of consistent, fair administration, they're probably one of the best plans in the marketplace. They're a very good plan.

But I don't think it -- Medicare is a sterling example of what we want our financing system to look like, because Medicare has issues, too, with respect to the fact that they incentivize a lot of unnecessary care. And in fact, a lot of the things that you saw in McAllen, Texas, that's been referred to -- and the contrast with El Paso -- are based on a reimbursement system that's been perpetuated by Medicare.

Now I don't say that they're -- that the private system's any better. It's not. They followed suit. They've done the same thing. They're incentivizing more care, not high-quality care, not cost- effective care.

But there are examples of private plans that do a pretty good job.

REP. JOE COURTNEY (D-CT): Thank you, Mr. Chairman.

I'd like to focus the panel for a moment on the self-employed, which Mr. Arensmeyer talked about a little bit in his testimony. And he told the story about Louise Hardaway who couldn't find insurance, or was quoted $13,000 a month.

You know, this is -- I just want to ask you just to confirm what I think is true and actually know is true, that this is -- her situation is not created by government, by government option programs or by mandates. I mean, in fact, the self-employed right now are completely exposed to the marketplace with absolutely no protection under prior HIPAA laws and, in most states, virtually no regulatory protection.

I mean, that group needs help. Isn't that correct, Mr. Arensmeyer?

MR. ARENSMEYER: Absolutely. It's a growing part of our economy -- 21 million now and growing. It's a critical part of our 21st century, high-tech economy.

And you're absolutely right. I mean, the system couldn't work worse for any group than it's working for them. And it's directly impeding our economic growth.

REP. COURTNEY: And I'm trying to, Mr. Speranza, to sort of decipher where the chamber is on this issue. I mean you sort of at the end of your statement talked about the chamber thinks it's time to reform insurance markets. But you sort of danced around the question about making the folks in that end of the market participate or not.

I mean, I guess the question I want to ask you is, does the chamber support or does it not support an individual mandate?

MR. SPERANZA: I would say that we would certainly consider that.

Again, as I said, I'm not an accountant --

REP. COURTNEY: So, I mean, you know, but wait a minute. You're here representing the chamber --

MR. SPERANZA: Yes.

REP. COURTNEY: -- as someone speaking on health insurance. I mean, I come from Connecticut. And we're surrounded by insurance companies. And when you talk about reforming the market, their response always is, "Fine, but you have to have an individual mandate, because otherwise you're basically creating a system of adverse selection and rates are just going to go through the roof."

And the chamber is smart enough and experienced enough to understand that dilemma. And really, I think this committee and the people of this country and frankly your members, of which I was one of them up until about two years ago, deserve an answer in terms of where the chamber stands on this issue.

MR. SPERANZA: I can't make policy for the chamber. They represent --

REP. COURTNEY: Well, I would ask that the chamber come back --

MR. SPERANZA: -- but what I would say is that --

REP. COURTNEY: -- sir, I would ask --

MR. SPERANZA: -- from my discussion -- with my discussion with the health care experts, it's something, as I understand, they would seriously consider.

REP. COURTNEY: Well, I think --

MR. SPERANZA: And personally I would as well.

REP. COURTNEY: You know, I frankly think the issue's been out there for years. And the chamber has enough staff and experience in this issue and, frankly, has enough members who are directly impacted by it that they deserve an answer. And we need to understand that as we go forward over the next six weeks or so.

MR. SPERANZA: And what I would promise is getting an answer back from staff on that point.

REP. COURTNEY: Mr. Hacker, in your testimony -- I mean, I noticed you were very clear about supporting an employer mandate. There was sort of an absence of comment in terms of the individual mandate. And I was just wondering if you wanted to chime in.

MR. HACKER: In my original proposal, "Health Care for America," there is indeed an individual mandate. All I would say is that I think that it's essential that you have both an employer and an individual requirement that there be a real emphasis on the affordability of coverage if you do have an individual requirement.

My main concern is always, how do you ensure that people get enrolled? And an individual requirement without strong measures to ensure enrollment will not work. And I think this is particularly true with populations like the self-employed that I think would benefit the most of any employment group in many ways from having the choice of plans within an exchange.

So what I would say -- and this is not in the legislation -- is if there is a tax penalty associated with failure to provide insurance, that at the same time that that penalty is assessed or before it's assessed, people should be given the menu of options within the exchange and given the option to enroll within the -- in coverage within the exchange.

I think that's exactly the kind of constructive step that is being proposed in a lot of other areas. Try to give people these choices. Make sure that when possible that people are opting out rather than opting in -- automatic enrollment. And I think if we did that we would move towards a system of seamless coverage that would get us very close to covering all Americans and achieving Congressman Kucinich's goal of health care as a human right.

REP. COURTNEY: And Mr. Arensmeyer, I mean, again, your members, I mean, again, they go though the experience of applying for insurance as a self-employed -- again the risk-takers, the capitalists who want to go out and pursue their dream. But if they have an old sports injury or a cesarean or a chronic illness, they get shut out either with outrageous premiums or no -- or denial of coverage completely.

And for them, I mean we've got to fix this. And if we really care about the market and a capitalist system, these are the people that we have got to create a path to health insurance coverage.

Isn't that correct, Mr. Arensmeyer?

MR. ARENSMEYER: Exactly. And there's tax inequality, too. The 15.3 self-employment tax that a self-employed person can't deduct the way a business owner can deduct. I mean, if you think about -- this country prides itself on entrepreneurism.

The health care system does nothing but put impediments in the way of going out on your own, striking out, taking risks.

And also, if you look at traditionally pulling out of recessions in the past, it's the small-business sector that leads the way out of the recession. And usually at some point in time the small-business sector's creating 100 percent of the net new jobs as we're moving out of recession.

So it's completely crazy -- I've heard a lot of talk today about the private sector and competition. But we don't have a system that's got the kind of competition we need. We don't have a system that encourages competition among businesses. And it's precisely this type of approach that the committee's put forward that's going to enhance the ability for everyone in the system to compete. And ultimately the businesses out there who are building products and providing services -- to allow them to compete.

REP. COURTNEY: Thank you, Mr. Chairman.

REP. THOMPSON: Mr. Stapley, you note in your testimony that private employers already subsidize the cost of Medicare. Can you provide an example of that?

MR. STAPLEY: I provided two examples earlier. There's the situation, for example, on electronic transmittal of claims where Medicare does not pay for that. And so the private payers out there -- the private participants in the system have to subsidize that.

On the other hand, I just gave the example of our, just of a classic negotiation when you're working out rates so that you're going to pay providers where they said: "Medicare's giving me a 2 percent increase and my charge master's going up 4 percent; that means yours is going up by 6 percent."

Now, you know, from my perspective, the issue really is if the public plan truly does compete on a level playing field. In other words, I'm not having to pay them money to compete against me so they can compete on an unlevel playing field. I mean, if you can resolve that issue, then I think that you'll find large employers would probably feel a little better about it. I don't know they'd feel totally good about it. But if you can guarantee that the public plan is absolutely -- in terms of reimbursement, from a reimbursement perspective, is playing on a level playing field, that makes it easier to deal with.

But we don't want to subsidize them, then turn around and they have lower rates and so they create an incentive, actually, for our employees to leave the system and go to the public plan.

REP. THOMPSON: Some of the recurring themes I've heard this afternoon were innovation, competition, decreasing costs, all important things when it comes to improving our health care system. Are there, other than rolling out, taking out of the equation a taxpayer-funded government competitor, are there other methods -- and this is for the whole panel -- that you would recommend or that would do that among private health insurance providers, that would encourage competition, that would decrease costs, that would motivate innovation?

And I'll open that up to the entire panel.

MR. STAPLEY: I'd be happy to speak to that to a degree.

I think the establishment of an insurance exchange is a huge step forward in a positive direction. And if you do that so that you level the playing field for the system -- I think it's very true that the current small group and individual market is totally dysfunctional. It's an embarrassment to this country that has to be reformed.

And in the process of putting together the ground rules for in terms of how the insurance exchange works, you have to make sure that every individual American, whether they come from an employer plan, a small employer plan, or they're individuals, they access the exchange and the plans in the exchange on the same basis. That means that the private plans have a set of rules they have to play by. There's community rating, there's perhaps risk adjustment. You might do modified community rating. There's guaranteed issue, all of those things that are essential insurance reform that must absolutely, unequivocally, uniformly, equitably apply to every plan that's offered through the exchange.

That in and of itself is a huge step forward in creating a better basis for competition than we have in the present system.

Now, beyond that, I'd say that, in my opinion, the centerpiece for reform still has to be cost management. Now, we talk about competition. You have to have payment reform. And you have to create an incentive for the payers and the health care systems that are engaged with the system to do something differently than incentivize the provider system to do more, even if it has no value.

So you got to look at episodic reimbursement, different kinds of reimbursement systems that reward providers that provide high-quality, low-cost care that's focused on medical guidelines and so forth, and then it dis-incentivizes the provision of care that has no value.

So, I think there are challenges in terms of the number of plans that are available in some marketplaces. You would hope that the availability of exchange and the establishment of a uniform, level playing field would make it so you'd have more entrants in the system. I think we'd all hope that that would be the case and that that in and of itself would promote competition.

MR. ARENSMEYER: Congressman, I think we need to look at the exchange as the ultimate free marketplace. And that needs to be as robust as possible. There need to be rules of the road, but beyond that, insurance companies, whoever's providing insurance, whether it's a public plan or a private, they're going to be judged, their success is going to be based on their level of service, the quality of what they're providing.

And, you know, it's something that's going to be transparent. It's going to be there for everyone to see, for individuals, for small employers, for whatever size you decide can participate in the exchange. It's got to be as robust as possible in order for, you know, to really get the level of competition that's needed.

MR. STAPLEY: You know, can I make one more statement?

One of the unique provisions of the proposal that was set forth by ERIC a couple of years ago is the section that deals with health plan transparency. And I guess I would honestly have to say that the regulatory structure in the United States has not done a very good job of regulating insurance companies.

And you have to have transparency to the extent that a lot of things that are not public now with respect to how insurance companies do business become public -- denial rates, for example. That has a huge impact on what your ultimate benefit is. You might have a plan that says, "I pay 90 percent of your benefit after a deductible," but at the end of the day, their administrative practices in terms of how they adjudicate claims can actually result in a lesser benefit.

We've experienced that. We offer benefits in all 50 states. We've seen insurance plans that we offer in some states that, because of their aggressive administrative practices, end up delivering lower benefits.

So health plan transparency, which is a cornerstone of the initiative put forth by ERIC, is critical to the proper functioning of the exchange as part of leveling the playing field, part of making sure that the public knows exactly what they're buying when they purchase it.

REP. ROBERT C. SCOTT (D-VA): Thank you, Mr. Chairman.

We've heard a lot about the difference in reimbursement rate of the Medicaid, Medicare programs as opposed to the private plans. I wasn't aware that there was that much difference. Do any of the insurance plans pay less than Medicare and Medicaid? Did anybody know? Well -- Dr. Hacker?

MR. HACKER: I should just say, Medicaid rates are substantially lower than private insurance paid rates, so that is highly unlikely.

There are probably some plans that do not pay on the same basis as Medicare -- that is, on a more or less fee-for-service basis -- that are paying something equivalent, close to equivalent to what Medicare pays. But the evidence is that most private insurance plans that pay on a fee-for-service basis pay something higher than what Medicare rates are.

REP. SCOTT: Well, should we require all insurance companies in the exchange, including the public option, to pay the same reimbursement rate, including --

MR. HACKER: This is an idea --

REP. SCOTT: -- including HMOs?

MR. HACKER: Well, I don't think that we should require HMOs to pay the same reimbursement rate precisely for the reason I just mentioned, that they pay in a different way.

If you're paying your doctors on a per-person basis, or a salary, or if you're using bundled payments, then it's not comparable to the way in which Medicare pays. And as we've argued, as Mr. Shea and I have argued, we think strongly that Medicare should move towards innovative ways of paying for care.

There is proposals that have been discussed in the past for having private plans that pay on a more or less fee-for-service basis with -- that are competing with a public plan or separately from a public plan, pay at the rates that a public plan would. In many countries, they have something like this. It's called all-payer rate setting. It's not actually being discussed today. The Medicare Advantage fee-for-service plans are allowed to pay Medicare rates, the private fee-for-service plans.

I think it's -- one thing that should be said, and this is very important, is that Medicare's past innovations in the way it pays for care, such as the DRG system for hospitals, have frequently set the standard for the way in which private plans pay for care. So this is one of the reasons why I think we need a private plan that is focused on the non-elderly, who have very different needs than the elderly, that is coming up with new and innovative payment methods that I believe strongly will be -- not only through transparency will be made available but also will disseminate into the private sector.

REP. SCOTT: Well, one of the ways you could make money is to underwrite, make sure you only get healthy people in the plan. And this is technically prohibited in the plan. How do you avoid informal underwriting -- that is, where you mark it and the benefits -- if you have very poor benefits for diabetes, HIV/AIDS and things like that so that those with those problems won't chose your product? How do you avoid informal underwriting?

MR. STAPLEY: I think, let's see -- (laughs) -- got to learn how to run this thing here. Why would you listen to me when I can't even run the microphone here?

I think there are a lot of things that have to be part of the exchange to prevent that sort of thing from happening. My opinion is that there are lots of ways to avoid risk.

In fact, the name of the game in the current system, the private system, is risk avoidance. And the reason that that's the case is because the incentives in our system create that. You can make a lot more money if you're a for-profit plan, for example, by avoiding risk than you can by being an efficient administrator.

So what you have to do is you have to structure the design of the exchange in such a way that you take away those incentives. Now, there are things like -- you have the classic things like underwriting that you have the small group and individual market and so forth. But beyond that, you can have benefit design that is intended to make it so that sicker people wouldn't pick your plan. So you have to have some, in my opinion, some standardization of benefits to make it so it's harder to do that.

You can have, for example, a geographic risk selection. We have employers in Illinois -- it's really fascinating to me the kind of coverage that we can get in Chicago that we can't get in Nauvoo, which is in the central part of Illinois. And that's simply because those plans have made the decision "I can't make as much money in central Illinois as I can make in Chicago; therefore, I'm not going to offer my coverage there." So the plans ought to be required to cover the entire service area. And so forth. That has to be kind of a regulatory scheme to eliminate the externalities that make it so plans compete on an unfair basis --

REP. SCOTT: I'm trying to get another question in before my time runs out.

Mr. Shea, there's a pay-or-play in Massachusetts where you can pay and your employees don't get any insurance. Is it important that if you chose the pay option, that the employees actually get coverage?

MR. SHEA: Oh, absolutely. And it's also important that there's a meaningful payment option, not like Massachusetts at their $300 a year per employee, or whatever it is. I mean -- and you're proposing something that is substantial. I think that's the right way to design it.

REP. MILLER: Yes. You, Mr. Cassidy.

REP. CASSIDY: Ms. Visco, my wife's a breast cancer surgeon. And when you speak, I just think, oh my gosh, isn't that just music to my ears and to my wife's ears. We share your concern.

Dr. Hacker, a couple things: You know, as I think about it, your proposal -- and by the way, congratulations; I think this is your brainchild. And obviously, it's really become something.

The public option really is innovative, though, only in the sense that it nationalizes an insurance company or creates, if you will, a government-run health insurance company. But as you're speaking about the need for innovative payment methods, really, Medicare and Medicaid have lagged far behind ERISA companies, for example, in coming up with innovative payment schemes -- way behind.

And so as I look at this and I try to think, the patient is central. And this proposal, which we have, I don't really ever see that the patient is central to cost savings or the patient is central to improving outcomes. What I do see is that there's a great emphasis upon using bargaining power to decrease cost, even though in your paper you mentioned that, probably for physicians, that bargaining power has been used to excess and you can demonstrably show, in some cases, that physicians -- that access has decreased because of it. Indeed, the CBO scoring of this, or maybe the Senate document, the CBO scoring said there'd be limited access to some specialists because of rates paid by the public option.

So I don't see that much innovative. And so let me bounce it back to you. If we're really going to come up with a patient-centered plan, I think the only way that history has shown us that we can save money is by doing so. The only way that we're going to improve outcomes is by doing so. Why not HSAs?

HSAs, according to Kaiser -- I keep on saying this, but it's just, I feel like a tree falling in the forest -- for a similar demographic, a similar set of benefits, HSAs cost 30 percent less than do a fee-for-service plan. The patient is now in control.

Yesterday I was speaking to someone, they have an HSA. They said that their doctor prescribed them a $150 proton pump inhibitor. They went to him and said, "Listen, we're paying for this out of our HSA," and they asked for a substitute and they got a $20 generic substitute. That's because the patient initiated it. And by the way, her health care was not compromised.

So a couple questions: One, I don't see much innovative beyond using monopsony power to drive down costs, and presumably shifting, whatever degree you shift. We can argue over that. Two, how do we effectively make the patient central, as opposed to the payment mechanisms or the government bureaucracy, which must administer this program?

MR. HACKER: Well, thank you very much for your question. And thanks for the compliment, I think.

At this particular moment, I'm not sure I want to be considered the author of this proposal but --

REP. CASSIDY: I wouldn't either, by the way. But that's okay. (Laughs.)

MR. HACKER: So I want to address each of your questions in turn. With regard to the question of whether or not this is an innovative approach, I think it's very important to emphasize, as I have, and as is emphasized in the legislation, that the idea would not be to replicate the Medicare program but to create a new program that had a broader set of benefits, a different risk pool --

REP. CASSIDY: Yes, but you're using -- you're very explicit that you're using the same way to control costs as Medicare, which is through monopsony power and using your bargaining power to lower rates.

MR. HACKER: I believe I say that it should be one tool that the plan should have, and that --

REP. CASSIDY: But the other tools you suggest have not been proven to work. For example, accountable care organizations are theoretical, but even the proponents will admit that it's basically a pilot project. Now, health IT -- and in your paper, and thank you for your intellectual honesty, you point out the preventions benefits in controlling costs are limited.

MR. HACKER: That's interesting. I don't remember it saying that prevention is limited. I do say that some of the -- that there has been great skepticism on the part of the Congressional Budget Office with regard to the cost control effects of some of these measures. And it should be noted that whether or not prevention reduces costs, it's a good thing to do.

But I was going to just say quickly that one tool that the plan should have is to use is bargaining power, but that it should be allowed to innovate.

I was very pleased to see in this legislation that after a period of time, that the plan would actually be developing new payment modalities. And I've said -- and care coordination strategies. And I've said repeatedly that I believe that that's what needs to happen and that it will be easier to do with a public plan that's focused on the non-elderly than it is within the current Medicare program.

I also think it's important to think about how to separate this plan from some of the political forces that have made it hard for Medicare to do the more value-oriented kind of purchasing that we'd like it to do.

I agree completely that patients should be central. I mean, it is worth noting that, for all its flaws, within the Medicare program, there are very high levels of patient satisfaction.

REP. CASSIDY: Yes, but that's because they are relatively screened from the costs. And that's one of the reasons it's going bankrupt in 2017. And in your proposal, there's no requirement for market capitalization or for business capitalization. Rather, it's the full faith and credit of the federal government. That concerns me.

MR. HACKER: Well, I believe that there are many reasons why patients are satisfied with Medicare. But my read of the surveys are that they are favorable toward it because of the ease that they have in finding physicians and having access to specialists and the sense that they don't have to wait for doctors. And those are things that I think that the public plan can provide.

REP. CASSIDY: Thank you.

REP. MILLER: Thank you very much for your patience with the committee and for all of your testimony that you have given us today. I hope that we can continue to engage you as we move forward in this process. There's a number of very good and relevant suggestions that have been made by this panel, and we hope that you would agree to let us continue to pick your brains on this one.

Thank you very much.

MR. HACKER: Thank you.

REP. MILLER: Our third panel will be, if they would come forward, Ms. Karen Pollitz, Ms. Celia Wcislo, Mr. James Klein, Mr. William Vaughan, Robert Moffitt, ReShonda Young and Dr. Fitzhugh Mullan.

Now you two guys go out and settle this outside. We need your seats.

Ms. Karen Pollitz is the research professor and project director at the Health Policy Institute at Georgetown University, where she directs research on health insurance reform. From 1993 to '97, she served as deputy assistant secretary of health legislation at the U.S. Department of Health and Human Services. Ms. Pollitz has a B.A. from Oberlin College and an MPP from the University of California at Berkeley.

Ms. Celia Wcislo is the executive board member of the Service Employees International Union as well as assistant division director of 1199 SEIU United Healthcare Workers East, a union of more than 300,000 health care workers. She also serves as a board member of the Commonwealth Connector Authority. And Ms. Wcislo holds a B.S. from University of Massachusetts, Boston, and is a graduate of Harvard Trade Union Program.

Mr. James Klein is the president of the American Benefits Council, a trade association representing Fortune 500 companies that sponsor and administer health and retirement accounts. Mr. Klein is a graduate of Tufts University and a graduate of the National Law Center at George Washington University.

Mr. William Vaughan is the senior health policy analyst for Consumers Union. Starting in 1965, he worked for various members of the House of Representatives, the Ways and Means Committee, and retired in 2001 as the Health Subcommittee minority staff director. Mr. Vaughan graduated with a B.A. from American University.

Dr. Robert Moffitt is the director of health policy studies at the Heritage Foundation, specializing in health policy issues. He's a former senior official at the U.S. Department of Health and Human Services and was involved in the Massachusetts health reform initiatives in 2005. Mr. Moffitt holds his B.A. from La Salle University and his Ph.D. from the University of Arizona.

Ms. ReShonda Young is the operations manager of Alpha Express, a small business in Waterloo, Iowa, where she serves as the company's operations manager. Ms. Young is also a leader in the Iowa Main Street Alliance, a coalition of small businesses across Iowa. Ms. Young has a B.A. from Wartburg College.

Dr. Fitzhugh Mullan is a Murdock head professor of medicine and health policy at George Washington University. He earned his rank of assistant surgeon general when he directed the Bureau of Health Professions, an arm of the Federal Health Resources and Services Administration. Dr. Mullan holds a B.A. from Harvard and an M.D. from the University of Chicago.

Welcome to all of you. Thank you for your patience today. You know that -- you've watched the drill here -- you will be given five minutes to summarize your written statement. I also, if you think there's something you want to comment on during your presentation of what you've heard from the previous panels, feel free to do that also within that time limit, if you think it would be helpful to us.

Professor Pollitz, welcome.

MS. POLLITZ: Thank you, Mr. Chairman. Good afternoon to you, members of the committee. And congratulations on the very fine Tri- Committee Draft Proposal for Health Care Reform. It is an impressive accomplishment, worthy of the challenge we face to make health coverage available, affordable and adequate for all Americans. Your hard work and wisdom and practicality, and that of your excellent staff, is evident in this proposal. And this time, I know you will get the job done.

Your proposal defines a minimum health benefits standard. It requires all Americans to have at least that level of coverage with shared responsibility for paying for that by employers.

It creates tax credits for small businesses. It expands Medicaid and creates new premium and cost-sharing subsidies for private insurance coverage to help other Americans of modest means.

The proposal also establishes strong new market reforms for private insurance with important consumer protections. It creates a new health insurance exchange, an organized marketplace that will give consumers, individuals and small employers a great deal of assistance with enrollment, appeals, application for subsidies, provide comparative information about plan choices, and on their behalf, the exchange will negotiate with insurers over the premiums for health insurance in order to get the best possible bargain. And importantly, consumers and employers who buy coverage in the exchange will also have the choice of a new public plan option.

You've heard about the recent national poll that indicates Americans strongly favor such an option. It can address the failures of competitive health insurance markets today.

First, it offers consumers an alternative to private health plans that, for years, have competed on the basis of discriminating against people when they are sick. Just last week, your colleagues on the Energy and Commerce Committee held a hearing on health insurance rescissions. One woman who was battling breast cancer testified that her coverage had been revoked for failure to disclose a visit to a dermatologist for acne. When consumers are required to buy coverage, having a public option that doesn't have a track record of behaving in that way will give many peace of mind.

And second, a public plan option will promote cost containment. Research shows that insurance markets today do not compete to hold down costs. Rather, insurers and providers negotiate to pass costs through to policyholders while maintaining and even growing profits.

For the first few years, the public plan option will be allowed to base its payments to doctors and hospitals on the fee schedules used by Medicare. Thereafter, it will develop innovative payment methodologies to hold down costs and promote quality.

Mr. Chairman, clearly, as this bill moves through the legislative process, there will be opportunities to modify and improve it. And in my written statement, I offered several recommendations in that regard and would briefly just describe three of those for you now.

First, with respect to the essential benefit package, the bill does create a benefits standard, and it appears to be a solid one. But it doesn't create an out-of-pocket limit on cost sharing for care received outside of a plan network. And that is an important omission to correct. And your bill does not specifically reference, as a benchmark, the Blue Cross Blue Shield standard option plan offered through the FEHBP today.

Many have talked about that plan, which so many members of Congress have as coverage today, as being an appropriate benchmark of minimum coverage for all Americans. It's not clear whether your essential benefits package meets that standard, but it should. And if it doesn't, the standard should be improved. And if that raises the cost of the bill, it will be imperative to find additional resources.

Over the next decade, our economy will generate more than $187 trillion in gross domestic product, and we will spend a projected $33 trillion on medical care. Investment in health care reform that guarantees adequate protection for individuals and families is worthwhile.

Second, with regard to rules governing health insurance, new rules won't be meaningful unless there are resources for oversight and enforcement. After the enactment of HIPAA, a witness at a congressional hearing for the Department of Labor testified that the department had resources to review each employer-sponsored health plan under its jurisdiction once every 300 years.

For health reform bills, your final health reform bill must appropriate resources for the Department of Labor as well as for HHS and state insurance departments so that there is capacity to oversee and enforce the new standards. Your colleague on the Appropriations Committee, Congresswoman DeLauro, has introduced legislation to do this. And I hope you will work with her to accomplish that.

And finally, with regard to subsidies, the bill creates sliding scale assistance so that middle-income Americans with incomes up to 400 percent of the poverty level will not have to pay more than 10 percent of their income toward premiums.

As charts in my written statement illustrate, however, some consumers, including self-employed, who've been mentioned a lot today, who have incomes above that level may still face affordability problems.

This is especially likely for people who have to buy family coverage and for baby boomers who could face much higher premiums under age rating that is allowed under this bill. I hope the committee will consider setting a premium cap so that no American has to spend more than 10 percent of their income on health insurance.

Thank you very much.

REP. MILLER: Thank you very much.

Ms. Wcislo.

MS. WCISLO: My name is Celia Wcislo and I am testifying today on behalf of the Service Employees International Union.

Chairman Miller, members of the committee, SEIU applauds you for your draft bill that was released last week. I'm a local and national officer as well as a board member of the Connector, which is implementing health care reform in Massachusetts.

First, Americans are ready to fix health care. Have no doubt about it. And your draft bill includes many of the essential elements that will start that fix today.

SEIU supports a robust health insurance exchange. That's what I do on a regular basis as a Connector board member. And we found three very good reasons for it.

One, it's allowed consumers to compare and find insurance plans all in one place so they have some choice and they understand their choices. Secondly, we built on our Medicaid program so as people move off Medicaid into subsidized care or into the employer market, they have a path through which they can go and they can call one place to find out what they're entitled to. And finally, we have set a minimum standard of what health insurance is, which has protected our markets and models what you were going to do in the advisory committee.

SEIU supports the public health insurance option in your bill as a way to keep costs down and foster price competition in the private market. While the Connector board has been very effective at providing subsidized care to the low-income folks, we do not have a model of how to intervene in the private market. And I believe this approach will do it.

It could pool the costs for small employers and individual folks in the market. In our state, when we did that, it saved 30 to 40 percent for individuals who are forced to buy it on their own.

One way of addressing some of the concerns about unfair competition that I heard today is to make sure that the public plan pays rates equivalent to Medicare or a little higher. In particular, I'm concerned that Medicare does not pay as well for primary care, and you would have to look at that, but that would level the playing field because it will provide a closer to a single, a sole, you know, a joint payer system where people are each paying the same amount and will limit the amount of shifting onto the private insurance premiums.

SEIU supports the setting of minimum benefit standards. The Connector sets such standards for our health insurance, and we applaud the House for this proposal in this bill. Our standards have been critical to keeping the floor from dropping out of our insurance market and have protected consumers from predatory insurance companies.

We also support the 400 percent affordability scale. Our scale stops at 300 percent. And clearly, 60,000 of the people who were waived out of our individual mandate were waived out because they could not afford it. Your bill fixes that.

And finally, we support shared responsibility.

Employers, individuals and the government must all do their part to make it a sustainable and affordable system that covers everyone. Massachusetts' reform continues to be successful for many reasons. But I would say the major reason is the approach of shared responsibility that the House Tri-Committee bill adopts.

We have an individual mandate. We have government support. And we have an employer mandate. And it has worked. And in fact, a recent study by Health Affairs by Bob Blendon showed that people more likely, the public more likely supports any kind of change in health care if all of us chip in, and they're more resistant if it only falls on individuals.

Our individual mandate and our employer mandate have worked, and 70 percent of our residents still approve of the reform.

SEIU applauds your proposal to make employers continue paying. One of the representatives mentioned Tennessee. There was no pay-or- play system in Tennessee, and it, you know, employers I would not like chose to dump it and dump it onto the backs of government. I think we need to keep the monies that employers put into the system in the system. And your pay-or-play idea would do that.

To date, those two combined approaches in Massachusetts of individual and an employer mandate appear to have worked. We have 440,000 people out of 650,000 insured in less than three years. That's pretty amazing. That's 70 percent of our uninsured. Of those, 191,000 were paid through by employers or individuals buying through the Connector. That is 44 percent was paid not with government subsidies at all, but through business and individuals contributing. That's very important, and your plan will do that.

Additionally, since 2003, the number of our employers that provide insurance has gone up 68 percent to 72 percent. That is contrary to the entire national states markets. We've proved that by having such a mandate we will bring in employers who weren't offering it before. And your requirement that looks at the entire payroll, your pay-or-play that looks at the entire payroll, is more fair because it does not hit low-income employers in a more difficult way. It's based on the size and their ability to pay.

It's critical that reform mandates both businesses and individuals to contribute to the costs of insuring everyone, along with government. We must build our safety net for those individuals and small businesses that do not have access now and access to affordable insurance. We want a public plan to provide needed competition and continuity in the market. We believe your draft bill is a great step forward in that and we support it.

REP. ANDREWS: Thank you very, very much for the testimony.

Mr. Klein, welcome to the committee. You're recognized for five minutes.

MR. KLEIN: Thank you very much, Mr. Chairman, Mr. Kline, members of the committee.

American Benefits Council represents companies that either sponsor directly or provide services to health and retirement plans that cover more than 100 million Americans, so we're very privileged and grateful for the opportunity to be here today.

President Obama and many congressional leaders, and certainly many people who we've heard from today, have all said that health care reform should ensure that if people are happy with their health care coverage, they should be allowed to keep it. That seems to be a basic understanding that everyone agrees upon.

Over 160 million Americans receive their coverage from employer- sponsored plans at a cost to employers of over $530 billion per year. According to recent surveys, over two-thirds of Americans rate their coverage as either excellent or very good. So that means that for many people, letting them keep the coverage that's right for them and for their families requires maintaining the employer-sponsored health coverage system.

But frankly, to give meaning to President Obama's pledge, it's essential that the ability to retain one's coverage is not just true as a technical legal matter that the employer-sponsored system would continue but, rather, that as a practical matter that what emerges from health care reform legislation is a system that employers want to continue to participate in and a system that does not skew individuals' choices as to whether or not they should remain with their employer plan or seek their coverage elsewhere.

To respond to a question that Representative Woolsey asked earlier, we're not interested in trapping employees in their employer plan. But neither do we want the structure of the system to be such that they would be induced to leave their employer plan.

So with that by way of background, let me just briefly share some of the chief concerns that employers have as they examine the emerging health care debate.

First: the employer play-or-pay mandate. Of course, one employer concern is the proverbial slippery slope argument, that even if employers can meet the financial obligations of the mandate today, that over time, it will grow and become unaffordable. But frankly, that's really only one part of the concern. The equally if not more compelling concern for employers is that the regulatory structure that would necessarily accompany a mandate of this type would inevitably, if unintentionally, lead many employers to chose to pay rather than to play. Put another way, employers so strongly believe in the value added by employer sponsorship and administration of health plans that they are concerned that the structure could erode rather than build upon the employer-based system.

Secondly: ERISA. It's well known that ERISA's federal framework is essential to design and maintain a consistent set of benefits for workers, wherever they live or work, operating under a uniform regulatory structure. But again, that is only part of the story. The other dimension of employers' concerns around potential changes to ERISA is that Congress might make substantive changes to ERISA itself that will expose employers to substantial financial liability. So, that one put another way, it's not enough to just have uniform federal rules; the rules themselves have to be reasonable and administrable, protecting the interests and concerns of participants and beneficiaries, at the same time not inducing employers to exit the system -- again, not causing them to pay rather than to play.

From our initial review of the Tri-Committee draft proposal, it appears that three different penalty regimes would result from this bill. For employers operating outside the insurance exchange, the current system of remedies would largely continue. For employers and individuals obtaining coverage within the new insurance exchanges, varied and unlimited state remedies would be permitted. And for the new public plan operating within the exchange, the uniform federal rules that currently apply to Medicare would prevail.

This does not create the proverbial level playing field for employers selecting to obtain their coverage for their workers through one of the exchange plans.

Third: the public plan. Many people assume that employers have some sort of visceral philosophical opposition to any program run by the government. That's not so. It certainly is not the case for the American Benefits Council, and our very comprehensive proposals on reforming the health care system certainly call for an important role for the government to play.

There really are two important roles for the government to play. First, public plans are essential to help the lowest income individuals and those whose connection with the work force may be so intermittent that an employer-based plan may not be the best venue for them to obtain coverage. And of course, a reformed individual insurance market also helps that group. And secondly, the government can facilitate and regulate the system whereby people select from a variety of different competing private plans, such as the role of government to operate these exchanges, for example, or a Medicare Part D type of a model where people select again among different private plans.

Employers' concerns about a public plan option emerges from decades of experience that we've heard a lot about, particularly on the prior panel, of massive cost shifts from public plans, notably Medicare. The government sets the reimbursement rates to providers very low, and then other purchasers end up paying more. There are no cost savings achieved. They're merely moved from one payer to another.

If -- I see that my time is up here, so, on the other hand, I was just about to get to the part of the bills that I like -- (laughter) -- which, I assure you, won't take very long.

I guess the last point I would make about the public plan, though, is that if they're going to operate by different rules, then obviously, it won't fairly compete with the private plans. If they're going to operate by the same rules, what's the point?

But on the positive note, employers want to be sure that health care reform gives full attention to improving quality outcomes. If health reform only results in expanding coverage for the uninsured, it will be a magnificent achievement but also a terrible missed opportunity. We want to commend you for recognizing the need to address quality issues in the legislation. Perhaps rather than taking up more time during the prepared portion of the remarks, I'll just answer any questions.

REP. MILLER: Thank you.

Mr. Vaughan, welcome.

MR. VAUGHAN: Thank you. Thank you for inviting us to testify. And with Consumers Union, the independent, non-profit publisher of Consumer Reports, we don't just test tires and toys, we try to help people with good medical products. And we are enthusiastic users of comparative effectiveness research to help consumers save money and get the cheapest but most effective and safest drugs. And Dr. Cassidy, we would support go with that $20 generic over that purple pill because it's -- they're scientifically the equivalent.

REP. CASSIDY: (Off mike.)

MR. VAUGHAN: Wasn't the purple pill. Okay. Well, anyway.

And we, for a long time, advocated health care for everybody. And we've written to our subscribers saying that it has become obvious that the people of the country intend to see to it that the whole population shall benefit from the discoveries of modern medical science. The only question before the country now is how soon.

That unfortunately is our 1939 auto issue, 70 years. Chairman Andrews, you were saying 50 years. I'd argue 70 years. And if we'd only had reform -- this was the old Dingell's dad's bill, Wagner- Dingell, we were endorsing -- if we had passed that, I think some of the auto plants of northern Ohio and Michigan would still be making great models that are in this issue.

So we think that not only would it be good for the industries of those states, but, more importantly, the Institute of Medicine has noted that each year, about 18,000 people die prematurely and unnecessarily because of not having health insurance. And when you think about it, since this magazine issue, about twice as many people have died from not having health insurance as were killed in World War II and all of our conflicts since.

So it is so far past time to do something. And this will be one of the great Congresses of all time if you can pass a good bill. And we think the draft bill that you have before you is such a bill.

We are pleased to endorse its principles and intent. We assume that there'll be some more savings or progressive financing to make it budget-neutral and sustainable. But this is a bill that would bring health security, peace of mind, affordable and comprehensive care to American families.

And there are too many good things in the bill to list in a five- minute statement, but some that haven't got a lot of attention -- well, Mr. Scott had mentioned well baby care. That's a benefit spelled out on Page 25. And Dr. Price and the other doctors who take on Medicaid patients, which is basically charity care now you do, the rates you're reimbursed, for primary care, you'll be paid a lot more. And I think that's important. Major nursing home reforms for quality; exposing the flood of drug and device money to doctors and medical schools that we think can so often distort medical practice, and promoting primary care in the training of new doctors -- the bill is filled with these kind of provisions.

Our testimony lays out our health reform principles from our August magazine and how well the bill matches with those. And it's a great match, so we thank you.

A bill this size, you'd be shocked if we didn't have just a few suggestions for small improvements. And we hope you'll consider them.

One is help consumers drive towards quality more. We've been here for about four and a half hours, and that means that about 51 to 52 fellow Americans have died of hospital-acquired, health care- acquired infections. During the course of a day, it's an Air France plane crashing. We need to know more about how hospitals do in fighting these infections and help consumers with that kind of public information.

And the other thing is both the chamber and ERIC spoke about consumers being better shoppers. We're lousy. We're lousy health insurance shoppers. We leave a lot of money on the table, we're confused by the whole process. If you give us exchanges where there's insurance definitions are identical, where we can compare hospitalization means hospitalization, not starting on the second day or some fine print like that, and if you make the plans more like Medigap policies so that people can shop on identical plans, then we can drive price and we can move towards quality.

But thank you very much. And a great good luck in this wonderful project you've started. Thank you.

REP. MILLER: Thank you.

Dr. Moffitt.

MR. MOFFITT: Thank you very much, Mr. Chairman. I wish to express to you my deep appreciation for the opportunity to present my views this afternoon. I hasten to add that the views that I express today are solely my own. They do not necessarily represent the views of the Heritage Foundation or its officers or board of trustees.

You and your fellow committee members are considering an ambitious and comprehensive health care reform proposal. The draft bill contains both an individual and an employer mandate. As the Congressional Budget Office reported in 1994, an individual mandate on American citizens to purchase health insurance is unprecedented.

I deeply understand and appreciate the rationale for that mandate to offset the cost shifting and to address the free-rider problem. Individuals do in fact have a personal responsibility to protect themselves and impose no unnecessary costs on the rest of us. Nonetheless, an individual mandate is a restriction on personal liberty. And given the fact that it is such a restriction on personal liberty, I think we ought to look for other opportunities to expand coverage, such as possible incentives combined with mechanisms to facilitate the ease of enrollment in health insurance, and that way achieve a dramatic reduction in health insurance.

I've suggested such alternatives in the Harvard Health Policy Review. And with your permission, Mr. Chairman, I would like to submit those for the record.

REP. MILLER: We'll make that part of the file of the committee. Thank you.

MR. MOFFITT: Okay. And as for the employer mandate, the costs of an employer mandate are invariably visited upon employees, not employers, in the form of reductions in wages or other compensation or even a reduction in employment. In my view, it's inadvisable to impose such a mandate, especially during a recession.

In the limited time available to me, I would like to focus my remarks on three key areas in the bill: the national health insurance exchange, the public plan, and federal regulation of insurance.

The concept of a health insurance exchange is hardly new. It has had only limited application at the state level. Some may argue that the Federal Employee Health Benefits Program, a defined contribution arrangement, is analogous to an exchange, a national exchange.

But I would note that there is no government-sponsored health plan in the FEHBP. Nor does the FEHBP have anything remotely approaching the statutory or regulatory regime that is embodied in the draft bill.

The former governor of Massachusetts, Mitt Romney, and state officials who framed the major 2006 reform in Massachusetts developed an exchange. One of the key advantages of that state-based health insurance exchange, called the Connector, which one of my colleagues actually is involved with, was that it would allow employers and employees in small businesses to get access to personal and portable health insurance, tax-free. In other words, since the coverage would be available through the exchange, and because the exchange itself would be considered group coverage, it would enjoy the powerful advantages of the existing federal tax treatment of health insurance.

In my own view, the health insurance exchange is an excellent idea. It should, however, be aggressively promoted as a state institution at the state level.

With regard to the public plan, the bill proposes that the secretary of the Department of Health and Human Services establish the public insurance plan, and it's to play on a level playing field, in the plain language of the bill. However, I would add that in basing the public plan's payment to providers on Medicare payment rates, which are routinely set below those of the private sector, as Professor Hacker pointed out, the public plan would naturally enjoy an advantage over competing private health plans.

Independent analyses show that the use of Medicare payment rates would result in an erosion of existing private health insurance.

I would just add one more point with regard to this issue of the level playing field. It has been said constantly. If you are serious about a level playing field, that means that all the rules and regulations that apply to private health insurance must apply -- must apply -- to the public plan. If Congress wishes to achieve a level playing field between public and private health plans, then the public health insurance option, just like any other private option, should be allowed to compete for market share and should also be allowed to fail -- that means without being kept on artificial life support through the infusion of taxpayers' money. That would be a key test of congressional commitment to a level playing field.

With regard to federal benefit setting, under Title 1 of the bill, the Congress would require every American to have health insurance coverage that Congress would define as acceptable. The bill specifies various standards. I'd only say in closing that my concern about the federal benefits setting is that you may very well undermine the creativity of states in insurance market reform. States as culturally and politically different as Massachusetts and Utah have undertaken some very far-reaching and consequential reforms. Those kinds of experimentations and innovations should be encouraged.

Thank you, Mr. Chairman.

REP. MILLER: Ms. Young?

MS. YOUNG: Chairman Miller, Ranking Member Kline and other members of the committee, I am honored to be here today. I thank you for inviting me.

My name is ReShonda Young, and I serve as the operations manager for my father's small business in Waterloo, Iowa. It's called Alpha Express. We -- I'm also a member of the Iowa Main Street Alliance, which is a coalition of small businesses across Iowa working for a solution on health care.

I'm here today to share some experiences of an actual small business desperately trying to provide health care coverage for our employees. My father started Alpha Express 20 years ago. And when he started it, it was him and one other person. Since then, we've grown to almost 40 employees. And now that my father is 68 years old, he is ready to retire for a second time. And we're hoping that my oldest brother will come back and help me to run the business because I do not want to do it by myself.

So as operations manager for the business, I am constantly thinking of how to provide health insurance for our employees. We have 33 total employees, 13 of whom are full-time employees. The quotes that I've been getting since 2006 are only for our full-time employees. And even with that, the quotes that I got in 2006 raised our payroll expenses by 13 percent, which was absolutely unaffordable to us at that time.

So instead, we were left offering a small stipend to employees who decided to purchase health insurance on their own to just help them out a little bit. Even with doing that, most of them still could not afford the coverage. Actually, there are only three people right now who are purchasing their own health insurance because they can afford it.

My father has retiree coverage from his days of working at John Deere. And I have coverage through my husband. So neither one of us are worried about our own personal health insurance, but most of our employees are not in that position. And we have a really tight-knit group of people. We have husband-and-wife teams and, you know, other people who are like our family members. And we really want to be responsible to them and for them and be able to provide them with coverage.

The other thing is my brother, who's wanting to come back from St. Louis to help out in the family business, has a family and two small children and cannot afford to go without health care. And a decision that should be really easy to come back and help to run the family business and leave a legacy is really becoming really complicated because he just, he can't afford to go without the health insurance.

So from a small-business perspective, after looking at the draft proposal, I believe the legislation that's been drafted by this and the other two House committees is a major step forward in addressing the health insurance problems that we face. It meets the priorities identified by the Main Street small business owners. And I hope that action will be taken sooner rather than later to help with passage by the full House of Representatives.

The thing that I think is most important with the insurance market reform, though, is the creation of a really strong public health insurance option. Having a public option that will compete on a fair basis with the private plans will be a huge benefit to small businesses. And it will guarantee that even in local insurance markets that are dominated by only one or two private insurers, that we'll still have real choices and the leverage that comes with being able to take our business elsewhere if we don't like the plans that are being offered.

And what I hadn't told you is as I was looking for plans this past year, I got eight quotes, and all eight quotes were from one company, which was Wellmark. There are no other companies that would provide quotes for our business within our area. And in our area, there are really only two companies that really hold the market share, which is Wellmark and UnitedHealthcare.

So small businesses across Iowa are really looking to Congress to act quickly on the health reform to rein in costs and increase the competition to give us some real choices instead of just one company with eight plans. We're looking for you for leadership and we need your support to enact some real health care reform that will solve this problem for our business and other family businesses like ours.

Thank you.

REP. MILLER: Thank you.

Dr. Mullan.

DR. MULLAN: (Off mike.)

REP. MILLER: We need you to use your microphone, Dr. Mullan.

DR. MULLAN: Chairman Miller, Mr. Kline, members of the committee, thank you. You certainly get kudos for stick-to- itiveness, not only writing the bill but now sticking through as much testimony as you have. Credit to you.

My name is Fitzhugh Mullan. I'm a pediatrician. I'm a medical educator. I once was in the National Health Service Corps. I once ran the National Health Service Corps. Today, I'm a professor of health policy and pediatrics at George Washington and work force is my area, and I'm happy to be able to bring that to the deliberations today.

This bill comes with context, and I want to give a little bit of work force context very quickly. In the United States we have large numbers of health professionals, large numbers of physicians. In my judgment we have an adequate number of physicians. We need to grow the physician work force as the population grows and we need to make much better use of it.

The work force is not well distributed. It tends to be in urban areas, it tends to be in areas that are more well-to-do. Rural areas and poor areas have great trouble not only with physicians and nurses but other health workers.

One out of three physicians in the United States is in primary care, two-thirds are specialists and interest and commitment to primary care is flagging in the pipeline. Good evidence suggests across the board that primary care is associated with better outcomes and less cost. Nurse practitioners and physician assistants are very important components of our work force today and they need to be grown as this bill suggests they do.

And finally, in terms of the context, we do very little planning. One-sixth of our economy is in health. We have a large health work force. We do little or no downstream planning. No business would run like this. We need to put more brain power and more data and more thoughtful deliberation into what we invest in in regard to the work force.

I want to suggest a way to look at the work force. The last graphic that I have in my testimony suggests three parts to the life cycle of a health professional, and the first would be the pre- service, the training in medical school in the context of physicians. The second would be post-graduate or specialized training, graduate medical education, and the third is practice.

If we are going to reform the work force and build a work force that is more aligned with our needs, particularly in regards to primary care, we need to move in all three sectors: medical school, graduate medical education, practice -- same for the other health professions. Very important concept and I will talk about the bill in regard to those three areas of the work force.

The committees have done, in my judgment, a very creative job of putting many ideas to work in the proposed legislation that would move us considerably in terms of building a better work force. The National Service Corps, a very tried and proven program, has increased support for Title 7 and Title 8 -- that's training in medicine for MPs and PAs -- and diversity is upscaled and reinvigorated.

In terms of graduate education, Medicare fund and graduate education, unused slots, funded slots, are repurposed for primary care. There is a teaching health center demonstration proposal which would put young doctors to work in committee health settings. There are significant payment improvements for primary care physicians, something very important in terms of a demoralized and underpaid work force.

There is support for new instruments, new structures to organize the work force, primary care medical homes as well as accountable care organizations, and there is attention to planning and brain trust and that's in an advisory committee for health work force evaluation and assessment, and a National Center for Health Workforce Analysis.

Concerns: The National Health Service Corps is funded insufficiently in the judgment of many. I would agree -- great unmet needs and many, many young people in medicine and other health professions prepared to do community service for reduction of student debt; could be a much more effective instrument, even more so than proposed in the bill.

Teaching health centers I mentioned are an important instrument. They are demonstration project. Many feel that having them as an actual permanent part of how we do business would be important, along with start-up funds to get health centers able to host residencies and residency programs.

Primary care payment, while upgraded, is modestly so. Five percent in the basic E&M services for primary care, which that's out to about 2(,000) to 3,000 dollars a year per primary care provider -- hardly the kind of incentive that we want to have thousands of more of our young physicians choose primary care.

A 50 percent upgrade, which sounds like a lot, would net about $25,000 -- arguably a pretty good incentive -- and that would cost about .6 of 1 percent of Medicare. So it would cost rather modest because of course the primary care space is very modest.

A primary care extension program has been proposed like the agricultural extension program that would help translate new findings and new ways of doing business, including better organizational practice, health IT, from the university, from the centers of knowledge and innovation into primary care practice -- not in the bill; something worth considering.

And finally, the planning activity, I would like to see not an advisory committee but a national commission level. This is the level of importance that I think it deserves.

Once again I think this bill is a great start. It does bring to the legislative agenda, the national agenda ideas that have floated around but have not really been taken seriously or codified previously and sets the stage for what could be a very, very important renovation in our health work force thinking to build a base for the overall bill and the overall effort.

Thank you, Mr. Chairman.

REP. MILLER: Thank you.

Thank you, all of you, for your testimony.

Mr. Kildee.

REP. KILDEE: Thank you, Mr. Chairman.

Mr. Klein and Mr. Vaughan both spoke of quality issues and we all understand the ethical aspect of quality in health care.

Can both of you address the fiscal aspect of quality in this field?

Mr. Klein?

MR. KLEIN: The fiscal aspect of it?

REP. KILDEE: Fiscal, mm-hmm.

MR. KLEIN: Yeah, thank you for that terrific question, some of which is elaborated more fully in the written statement.

Admittedly this is a very difficult area to quantify, but it's one that we really urge Congress to pay attention to if it's seriously about these quality initiatives, which we believe you genuinely are. There's every reason to believe that there would be substantial savings through the kinds of things that we've talked about, comparative effectiveness efforts.

You know, health care is the one product or service in this country where we pay as much, if not more, for poor quality as we do for good quality. We wouldn't tolerate that in any other area of our commerce. Having disclosure about outcomes and aligning what we pay providers based upon those outcomes, those are all examples -- and again, I can't give you a specific dollar amount to it -- but those are all examples of where efforts that are geared toward improving quality will also achieve savings.

REP. KILDEE: Mr. Vaughan?

MR. VAUGHAN: Yes, just in March the CDC said that on the infections alone that kill about 100 "thou" a year, the extra cost of treating people -- and there's, like, 2 million people get some infection -- treating that is 35.7 to 45 billion dollars extra a year, and that's just in the infection area.

And there's some great quotes. Dr. Thompson out of Pennsylvania of hospital administrators, saying, we didn't like this public reporting thing right away but we're finding out if we do it right the first time, if we keep that infection from happening, we're saving money.

So we think quality is a big saver, sir.

REP. KILDEE: And Mr. Klein, you mentioned that one of the -- I think the better part of the bill was the quality control. Do you think we have touched that adequately in this Tri-Committee bill?

MR. KLEIN: You know, we would like to examine it more fully, quite honestly, having just received it. I think that there definitely are provisions in there around comparative effectiveness and around, obviously, some wellness promotion efforts as well. I didn't see and so forgive me if I have sort of overlooked it in my review of that part but chronic disease management programs, having sort of a whole safe harbor protections for practitioners who follow evidence-based standards, all of those kinds of things would be areas that if they're not fully developed need to be included as part of that.

REP. KILDEE: Mr. Vaughan, how close do we come to achieving a good level of quality control?

MR. VAUGHAN: Well, I think the bill is -- we think it's a great step forward and we're very excited about it. We'd just urge -- this is almost a technical amendment but in the seven conditions that the bill calls for for when you're readmitted to the hospital for bad quality, tell the public. Tell the public what the readmission rates are so that the public can go out there and say to a local hospital, hey, how come you're not as good as the hospital in the next county? So we'd like more public -- but that's a tricky thing.

It's a good bill, sir.

MR. KLEIN: Mr. Kildee, one additional one in response to your question. Right now a lot of employers would like some clarity from Congress that as part of the health risk assessments that they conduct of their work force that asking certain kinds of information relative to family history and other kinds of conditions like that do not violate the terms of the Genetic Information Nondiscrimination Act. So clarity around something like that which has definitely shown these health risk assessments can play a meaningful role in promoting good health would be a very, very helpful feature.

REP. KILDEE: Thank you.

Thank you very much.

Thank you, Mr. Chairman.

REP. MILLER: Mr. Kline.

REP. KLINE: Thank you, Mr. Chairman.

Mr. Kline, you mentioned comparative effectiveness research. Dr. Price was talking about it earlier. I'm not sure -- it's 852 pages. I'm not sure how many of you have had a chance to really look at this, but I was looking a little bit deeper into this comparative effectiveness research and I'm a little bit concerned about it.

This says in Title 4 that a center for comparative effectiveness research is established, gives a number of duties. There's 17 members, I think. Dr. Price would be very relieved to know that one of the 17 is indeed a physician.

And I know he'll be doubly relieved to know that that includes surgeons, Dr. Price, in the physicians category.

In the language it says there'll be a prospective advisory panel for each research priority determined under sub-paragraph so forth that says that they will advise the center on research questions and methods for the specific research inquiry to be examined with respect to such priority to ensure that the information produced -- the information produced from such research is clinically relevant to decisions made by clinicians and patients at the point of care.

And I'm a little bit concerned there because I think where Dr. Price was going earlier -- I don't see the language in here that says that this cannot be prescriptive for doctors providing care. And it seems to me that that would be, if I were a physician, and we have a whole row of them here, that would be very useful to make sure you have the protection that says that this panel and this center will not be prescribing which treatment you have to use.

And I have another concern with that that even if it doesn't, if it prescribes or puts out standards from the government from this panel, hard to argue with that the physicians who choose not to opt for that would expose themselves to some serious litigation.

I don't know if any of you have had a chance to really look at that and would like to comment. If so, please do. If not, I'll move on to something else.

Okay, Mr. Klein?

MR. KLEIN: Directed it to me. I think that those are all legitimate points and I think the issue here has to be not on overarching prescriptive regulation but on making sure that we have much better information for people to make decisions around. So I think that all of the concerns that you referenced are ones that would benefit if there's any lack of clarity in the legislation.

REP. KLINE: Well, thank you.

I think that having research by experts is very useful but I am concern that leaves this sort of open-ended. It may be exposing physicians to some liability.

Mr. Vaughan, you wanted to comment? Go ahead, please.

MR. VAUGHAN: I just think in the earlier part of the bill where they set up in these insurance plans that there has to be -- it doesn't say model, but there has to be grievance and appeals and exceptions processes and it sort of gets us back to the old patient bill of rights discussions.

But most medicines -- that generic, Dr. Cassidy, will work for most people most days, but it might not work for everybody and that person ought to be able to get an exception real quickly. And I would urge that people work on that language a little bit more and maybe worry less that the knowledge of having more data in comparative effectiveness is going to be some sort of stranglehold.

What we need to do is take that science and make it usable and if it's wrong for a person, good gosh, get help --

REP. KLINE: Well, then -- excuse me, let me -- reclaiming my time here, don't you think it'd be useful to have language like that in the bill that says it cannot be used to dictate a treatment? I mean, I really would like to have the research done out there that gives you some idea of standards but we want to make sure that physicians are allowed to use their art and skill in a way that they see fit with the patients.

I'm about out of time. I want to go back to Mr. Klein really quickly because we've talked a lot here in the hearing today about President Obama's quote, "If you like your health plan, you'll be able to keep your health care plan." And you started to make some comments that you were concerned that that wasn't specifically covered and that there may be some reasons why employees or employers would part.

MR. KLEIN: Well, I guess -- thank you. I guess my point really is that it's not enough to simply say that as a technical legal matter that under this legislation or any legislation that the employer-based system, you know, would continue to exist.

The issue really is a more practical one that looking at the totality of the changes that would have to be made, the establishment of a public plan, the existence of a pay or play mandate and the nature of it -- we, by the way, happen to agree with the importance of having an individual mandate -- the possible tax consequences to individuals, and all of that, will it lead to a system where the employers simply don't want to participate anymore?

If the structure is such that because the public plan, for example, is less expensive, that people opt in or the nature of the subsidies will be such that younger, healthier employees, for example, will do better by going into the plan through an exchange in getting the subsidy than staying with their employer, that will clearly destabilize the employer-based system.

So it will exist as a legal matter, but it will suffer very significant consequences as a practical matter.

REP. KLINE: Thank you, Mr. Chairman.

REP. MILLER: Thank you.

Mr. Andrews?

REP. ANDREWS: Thank you, Mr. Chairman.

It strikes me that we've had a lot of expert testimony all day about how small employers can try to buy health insurance. We've had one person, Ms. Young, speak very authoritatively about what it's really like because she's tried to do it. And if I heard her testimony correctly she put out bids for her business and got eight proposals, all from the same insurance company. And in her testimony she says in her area, which is Waterloo, Cedar Falls in Iowa, there are one or maybe two health insurers to choose from. That's not competition.

Dr. Moffit, I want to ask you about the idea of a public option being available to people like Ms. Young and her colleagues to have some competition, and I read through your testimony and I identified some criteria that you've identified that would constitute a level playing field, if I read this correctly.

You say the simplest way to achieve the stated goal of a level playing field is to require the public plan to compete for doctors and hospitals by negotiating market rates. That's what the bill does, doesn't it? It doesn't require anybody to take the public option, does it?

MR. MOFFIT: It doesn't require anybody to take the public option, but if the plan is going to pay Medicare rates, the plan is going to have an advantage over private competitors.

REP. ANDREWS: Well, it's going to pay them for a while, but as I read the bill there's no hospital or doctor required to take a public plan participant. They can negotiate and say, no, we don't want that; isn't that right?

MR. MOFFIT: It's my understanding, too, though --

REP. ANDREWS: Am I right or wrong?

MR. MOFFIT: Yes, you're right.

REP. ANDREWS: Okay, let's see. Your second criteria that you talk about is the tort liability. It's a very subtle point that the public option would have to have the same tort liability and not be able to hide behind 11th Amendment sovereign immunity. I agree with that, and I think that's a very arcane point we have to work out, but I think you're right.

The third thing that you talk about is the accounting standards, the FASB and other standards that the insurers have to deal with that the public plan would have to as well. I think that's basically right. I think that the bill takes us in that direction. Probably it's not 100 percent there, but it takes us in that direction.

And finally, I think most importantly, you say that the public health insurance option, just like any other private health option, should also be allowed to fail without being kept on artificial life support through the infusion of taxpayer monies. It's correct, though, isn't it, that the draft before us, the only public appropriation that's mentioned in the bill would be some startup capital to get them started? And would you support the public option if we require that to be repaid out of revenues of the public option?

MR. MOFFIT: That would not be the only reason to support the public option.

REP. ANDREWS: But if we made that change, would you do that?

MR. MOFFIT: But your point -- no, your point is quite correct but let me just make one other --

REP. ANDREWS: Okay.

MR. MOFFIT: Let me make a clarification on this. What I noticed is -- I noticed that and I marked it when I was reading it and I thought to myself, well, there's nothing in this account. Of course, the next sentence in my testimony is the question is whether -- there's nothing in the bill that doesn't prevent Congress basically from coming back and doing precisely that -- keeping the public option --

REP. ANDREWS: Well, of course there's nothing that prevents us from appropriating funds to Bank America or --

MR. MOFFIT: I agree.

REP. ANDREWS: Yeah, we did that too.

MR. MOFFIT: You read my mind.

REP. ANDREWS: But you do agree with me here that the present bill that's before us contemplates the public option having two sources of revenue, premiums and earns and investment income on those premiums, just like any other insurance company; isn't that right?

MR. MOFFIT: Well, yes, but there's one other issue. When this --

REP. ANDREWS: What issue is that?

MR. MOFFIT: Well, I'll tell you. When the secretary is given the authority to contract for administrators, and I'm thinking that the idea here of contracting for the administrators is to contract out with maybe some third-party carrier to carry out the functions of the public plan.

REP. ANDREWS: Right.

MR. MOFFIT: The one thing I noticed about that was is that in any contractual agreement the secretary cannot make a contractual agreement that would involve the transfer of risk, which means that in the public plan the taxpayer assumes all of the risk to the plan. The private sector health plans do not, are not in the same wavelength in that sense. They are going to have to assume risk on their own. My view is that it's clearly an unlevel playing field.

REP. ANDREWS: Okay, I understand you but I just want to be clear that you do agree that the proposal before us does not require anyone to take a public plan participant, a doctor or hospital. Tort liability, I agree there's some work has to be done on that. The same accounting rules, I think we're basically in the same place, and that the only revenues that the public plan, public option, gets is the premiums and the earned investment income, right?

So doesn't it meet your criteria? Are you now for the public option?

MR. MOFFIT: No, I'm not for the public option.

REP. ANDREWS: Why not?

MR. MOFFIT: Because there are other --

REP. ANDREWS: What's missing?

MR. MOFFIT: Well, let me say this to you and maybe I'll answer the question with a question.

REP. ANDREWS: I'd rather you answer it with an answer. So are you for it -- why aren't you for the public option?

MR. MOFFIT: Right. (Laughs.)

REP. ANDREWS: It meets your criteria, doesn't it?

MR. MOFFIT: My view is is that if all the health plans basically are on the same level playing field, we all have the same rules, everybody is guaranteed access to affordable health insurance and that's true everywhere, why would you need a public option?

REP. ANDREWS: Well, maybe because of what Ms. Young is talking about that in 36 states the three largest providers have at least 65 percent of the market. Maybe that's why.

MR. MOFFIT: Well, I would say that there are a lot of other ways to promote competition than just creating a public option. In fact, Congressman, one of the problems I have with Professional Hacker's views on this is he's saying we have a problem with consolidation in the health insurance market.

My difficulty with Professor Hacker's argument and implicitly perhaps yours is that the public option doesn't necessarily solve that problem of consolidation. In fact, it may make it worse because you may even have a greater erosion of private health insurance options.

REP. ANDREWS: My time is expired. I appreciate that; I just -- thank you very much.

MR. MOFFIT: Thank you, Congressman.

REP. MILLER: Mr. Price?

REP. PRICE: Thank you, Mr. Chairman.

I want to continue to go down this thought line because I think it's incredibly important. The fact of the matter is that no public option can be on a level playing field with private industry just virtually by definition.

Dr. Moffit, it is the -- in the bill, would the public option or the government-run program be required to pay local and state and federal taxes?

MR. MOFFIT: It's not clear in the bill that they would.

REP. PRICE: And if it weren't, wouldn't that be a subsidy to the public plan and therefore put it on an unlevel playing field?

MR. MOFFIT: Yes, Congressman, it would, in effect.

REP. PRICE: Mr. Klein, would you agree with that?

MR. KLEIN: I was just reading my notes here about the payment rate so I want to make sure that I'm responsive to your question. But under the public option, one of the reasons that we have tremendous concerns about it quite frankly is that the public plan would get to use these Medicare payment rates for the first three years to pay providers, generally, as we heard on the earlier panel, at a substantially lower level than private payers pay them, and then after three years, there's really no requirement that the public plan set its rates competitively at all.

REP. PRICE: Right. My question, however, was to whether or not the public plan, the government-run plan, would have to pay local, state and federal tax.

MR. KLEIN: It's hard to see how it would or would be -- how you could even make the same type of reserve requirements.

REP. PRICE: And therefore it would have an unfair advantage over some private plans.

MR. KLEIN: That would be our view, yes.

REP. PRICE: I think it's also important to point out that sometimes Medicare rates are thrown out there as the panacea. In fact, new Medicare patients all across this land are having extreme difficulty providing a Medicare provider because of the rates that are paid. So just because the government-run program would pay Medicare rates for a period of three years and then who knows what doesn't give -- ought not give anybody warm fuzzies about the availability of physicians out there being able to care for these patients.

Dr. Moffit, I want to talk also about the government-defined parameters for the benefits package in the bill. My reading of the bill is that within a period of five years every single plan offered out there must comply with the government-defined parameters for a benefits package. Is that --

MR. MOFFIT: That's correct.

REP. PRICE: And therefore, there must be individuals out there in society right now I believe who are happy, content, desirous of a plan that doesn't necessarily fulfill all of the options that would be present in a government-defined program. Is that correct?

MR. MOFFIT: I'm quite sure that's true, Congressman.

REP. PRICE: Do you believe in your reading of the bill, then, that those individuals would not even be able to find those policies out there in the marketplace?

MR. MOFFIT: There seems to be in the bill, if I read it correctly -- it was good beach reading this weekend -- but if I read it correctly, it seems like in the bill there is a grace period for the small group market and there is a limitation that is unspecified for individual insurance. And at a certain point in time the bill was very, very specific that the individual insurance policy will no longer be acceptable coverage under the terms of the bill. That's in black and white.

REP. PRICE: And Mr. Klein, would you agree with that?

MR. KLEIN: That's right. I also would like to clarify one earlier point.

REP. PRICE: Please.

MR. KLEIN: When I cited the Medicare reimbursement rates for the first three years, it was not to suggest that that should give any great comfort; to the contrary, that they traditionally are substantially lower and we in the employer purchaser private sector world end up being the recipients of that cost shift. And the problem is that after the three years they're not even bound by the Medicare rate, even.

REP. PRICE: You're absolutely right.

I would also like to just point out that the president apparently today in his news conference said that this line that has been used by so many, if you like the plan that you have you can keep it, in fact, what he said is that that's not actually the case. It would be that the government wouldn't mandate that you had to give it up.

But if, for example, the plan that you like is no longer available in the marketplace, then you can't keep it, right? Wouldn't that be the case? In fact, doesn't that get to your issue of crowding out not by law, Mr. Klein, but by effect of the rules put in place?

MR. KLEIN: Yeah, we would like to -- that's correct. We would like to have, you know, the plurality, multiple choices from among which people can select. And I think that's the stated goal of the legislation, but I don't know that it's necessarily the outcome.

REP. PRICE: Thank you.

Thank you, Mr. Chairman.

REP. MILLER: Mr. Hare.

REP. HARE: Thank you, Mr. Chairman.

Ms. Young, how many employees again do you have?

MS. YOUNG: I have 33 full and part-time, 13 full-time.

REP. HARE: Okay. If there was a public plan available, would you be able to provide insurance for your employees?

MS. YOUNG: Yes.

REP. HARE: Yes, for all of them? And you can't do that now because the insurance companies, there's no competition. You have two to pick from, if I understand.

MS. YOUNG: We have one to choose from.

REP. HARE: Wow, that's real competition out there, those poor insurance companies. I don't know how they can --

MS. YOUNG: Yeah.

REP. HARE: I don't know how they do it every day. But so you have one person, one company right now, and you can't afford that. The public plan, you could provide those 33 people with health care?

MS. YOUNG: Yes.

REP. HARE: For them and their spouse and their families?

MS. YOUNG: Yes.

REP. HARE: So while we nitpick this public plan, the fact of the matter is those people go without health care because you have no other option.

MS. YOUNG: We have no other options.

REP. HARE: Okay.

You know, I just sit here today and I just feel so bad for our friends in the insurance company. I don't know -- I suppose I'll, you know, have to send them a card.

Professor Pollitz and Mr. Vaughan, I have a district that is very rural in west central Illinois and the majority of Americans live in rural communities yet access to mental health treatment is limited. Of the almost 1,700 federally designated mental health professional shortage areas, more than 85 percent of those are designated as rural.

So my question is to maybe both of you. In light of that, do you think we should expand the capacity of front-line community mental health centers to offer safety net providers for mental health care? Because we haven't -- that hasn't come up at all today but I think it's clearly something that we need to be looking at here. And that's something I like in the bill is the mental health perspective, but in a rural community it's just very tough to get access there.

MR. MOFFIT: Absolutely, and one of the neat things in this bill is in efficient areas like Iowa, low-cost areas, there's going to be a bonus for primary care docs and I think that's important.

REP. HARE: Professor?

MS. POLLITZ: And I remember seeing in the bill requirements to contract, for plans to contract with essential community providers that would include those very providers.

REP. HARE: Ms. Wcislo, were you going to say something?

MS. WCISLO: Yes. In Massachusetts we have allowed for that and in fact require that they have adequate contracting with mental health providers as well as community health centers. So we've done it already and I think it's an important point to raise.

REP. HARE: If you wouldn't mind for just one second, could you repeat the numbers in your testimony again that you talked about for the people that -- the insured people you were talking about? I'm sorry I didn't write them down. I really want to, because --

MS. WCISLO: No -- so 650,000 were uninsured at the beginning of reform.

REP. HARE: Six hundred fifty thousand were uninsured.

MS. WCISLO: Right. Four hundred and forty (thousand) have now been insured, of which 191(,000) are paying for it themselves or through their employers. So 44 percent of the ones we have insured have come through business or through the individual market where we've lowered the rates for individuals because we've pooled them with small businesses.

REP. HARE: So wow, that actually can work.

MS. WCISLO: And we only had three plans for small businesses, and you had the choice of -- you could only pick one, so exactly what she's saying is true. And you had to have 75 percent of your employees to sign up or they wouldn't take you.

REP. HARE: Dr. Mullan, just a quick question. Do you believe that the draft bill provides doctors and hospitals with enough incentives to encourage participation of the providers?

DR. MULLAN: In regard to the incentives for payment around primary care, yes. Beyond that, in terms of hospital incentives, I don't think I saw that in the bill in a way that would directly -- the bill doesn't directly direct those payments.

I think what they provide or what the strategy is within the bill is to try to provide incentives for those areas of the system which we know are in short supply, and that is particularly rural areas, underserved areas and primary care providers.

So there's an effort to upscale the incentives in practice and also in training, particularly around loan repayments for either working in very tough areas, the National Health Service Corps, or there's also loan repayment for people who go into primary care who don't necessarily want to go into the most remote rural areas or the toughest inner city. There's also loan repayment there.

So it's a strategy to incentivize loan repayment and you get the most benefit if you're willing to serve in the toughest areas.

REP. HARE: I just have one quick question, Mr. Chairman; I promise I'll go fast.

Dr. Moffit, I just want to know -- and we can agree to disagree here; you don't support the public plan. My question would be to you for people to lose their jobs and they close the factory and move it someplace, if there's' no public option for these people to go into, they're forced to either have COBRA or something, what do they do?

MR. MOFFIT: Well, I actually strongly believe that what you have just talked about is the core of reform of the health insurance market, and that's one of the reasons why I was involved with Governor Romney in creating the Connector in the state of Massachusetts where, in fact, you don't have a public plan. What you have is you have health insurance that's available to people within the market and they can pick and choose the plans they want and take it with them. It's not necessarily dependent upon their place of work.

What we need is portability in health insurance. We don't have that today, Congressman.

If we had portability in health insurance, even without spending any money, because we know an awful lot about the uninsured, if we had portability in health insurance where people could -- where the insurance was tied to the person, not just simply the place where they work, the numbers of the uninsured would drop dramatically.

That's what we have to do. That's where we have to get to. Believe me, I agree with you entirely on this issue. We have too many people who are moving jobs, leaving jobs, going from one place to another and they lose their health insurance. They don't lose their life insurance or their auto insurance or their homeowners insurance, but they lose their life insurance or their health insurance and that's frankly terrible social policy and we should fix it, and I would like to see it fixed.

REP. MILLER: (Off mike.)

REP. CASSIDY: Couple things, Mr. Vaughan. It's been a -- well, I love what Consumer Reports does; I subscribe -- at least online I do -- when I need to buy a new washing machine --

MR. VAUGHAN: You pay my salary.

REP. CASSIDY: (Laughs.) And so -- but let me say that one of my concerns about this bill, you've always been very consumer-oriented and you were speaking earlier about my gosh, if the purple pill didn't work do we have an intervention process? In this 865 pages, which was plane reading for me, there's one paragraph about an ombudsman. And so my concern is that this is more about government than it is about the patient.

That said, Mr. Moffit, going back to the point of whether or not there's an additional subsidy, frankly, theoretically until a year ago we didn't give additional taxpayer subsidy to Fannie Mae or Freddie Mac, correct?

MR. MOFFIT: I don't recall.

REP. CASSIDY: Yeah, they didn't -- they're just GSE, government whatever. And so in this document where we don't require that, there's one line that says that the public health insurance plan must have contingency -- very kind of ill-defined --

MR. MOFFIT: Contingency margin was the phrase.

REP. CASSIDY: Yeah. Mr. Hacker in his document says that it would be backed by the full faith and credit of the federal government.

MR. MOFFIT: Well, that's it -- then the taxpayer is on the hook, of course.

REP. CASSIDY: Yeah.

MR. MOFFIT: And that's why I raised the question earlier in response to Congressman Andrews.

REP. CASSIDY: I'm with you.

MR. MOFFIT: The question is who assumes the risk at the end --

REP. CASSIDY: Hang on, man, I got -- we're in agreement. I just want to make that point, because we are on the hook whether or not -- and in Medicare, as of 2018, we will be.

Dr. Mullan, up until, like, six months ago, man, I was full-time teaching young internists hepatology. He's the only guy in here that knows hepatology. And so I'm very familiar with the fact that these young folks are not going in to primary care.

Let me give you a scenario and you tell me how reasonable it is. It's been what I've learned is that if you go to the pediatrician and you tell her listen, we're going to decrease your reimbursement by 5 percent because we now have a public health option plan which quite overtly is going to negotiate down and save money by hard-balling you, so she's got a fixed overhead and she's got to see patients but now she's getting paid less per patient. Her only option is to increase volume. Now, if she's increasing volume and spending less time with that patient, she's going to make more referrals and she's going to order more tests. She's just got to move patients, because otherwise she goes out of business.

Now that's been my observation in primary care. In fact, I'll say it's kind of like when I inflate a helium balloon for my daughter. I press the spigot, I'm squeezing that cost a little bit. The public health option is going to just, man, get that ounce of blood out of her and then costs inflate because she's making so many referrals and she's ordering so many tests because she has to move that many more patients. Paradoxically, when public health, Medicaid or Medicare, squeezes the primary care doctor, spending goes up.

Would you agree with that or would you dispute that?

DR. MULLAN: I think the law speaks to Medicare payments, which are within the parameter of the law in the federal government, and indeed, the proposal within the law is to create two buckets of funding. One would be for primary care; the other would be for all other services.

To the extent there's squeezing to be done, it is not in pediatrics where there's no money to begin with, either on the practitioner side or the government side.

REP. CASSIDY: So if there's -- I'm sorry, whoa. If they squeeze more, and that's what they say quite overtly, we're going to save money by using our monopsony power, our bargaining power, to bring down what we pay providers, what you're saying, they're already being squeezed and we're going to squeeze them a little bit more.

DR. MULLAN: I mean, Medicare is constructed with a sustainable growth rate, with a relative -- with the annual upgrades and the various aspects that control or attempt to control physician costs within Medicare. That's in law already. That's not at issue in the bill in particular. And the public health option does not speak to that directly.

REP. CASSIDY: Except it does say, again quite overtly, that it's going to use the Medicare-type paradigm and it's just going to now apply it to pediatrics. And again going back to what Dr. Hacker had to say in his paper, which again is the inspiration for this, is that they would use their bargaining power to lower rates to reimbursements.

He had one reference he cited: It's the prices, stupid, meaning that we're paying too much -- stupid -- and therefore if we just squeeze those providers a little bit more, we save money. Now, that actually seems a recipe for disaster for the average pediatrician.

MS. POLLITZ: Well, we do have a problem with the costs of Medicare, I think we all agree, and with the costs of a system in general. And there have been over the years a history of attempting --

REP. CASSIDY: But let me ask you again: If they reduced reimbursement to the average pediatrician, what would that do to our practice?

DR. MULLAN: Well, there's a long history of increasing volume when fees are limited. That's largely not been in the primary care sector; that's largely been in the specialty sector where fees are much larger and volume has grown much more rapidly, and that's distorted the system.

REP. CASSIDY: Isn't it fair to say that that's because the internists or primary care physician has such limited time? There's only so much you can stack in, but they have stacked in.

DR. MULLAN: Well, to the extent that all of us are being required to be accountable for our time it is a tight day, and the pediatrician's day, the primary care day, is a tight day and people are not happy with that. But the question of how you control costs is one that is not the problem of the public health plan or the problem of Medicare, it's a problem of all of ours, I think, in terms of how we manage it.

REP. CASSIDY: I agree with that.

DR. MULLAN: It's been out of hand for a long time and I think there are efforts which are in this bill to try to get a better handle on that.

REP. CASSIDY: And it's more of the same, in my book. It hasn't work in the past -- a triumph of hope over experience.

Thank you. I yield back.

REP. MILLER: Thank you.

Mr. Roe.

REP. ROE: Thank you, Mr. Chairman.

A couple of things to start with: Ms. Young, I certainly appreciate the fact that I've been in small business my entire career also. I think that competition is a good thing; there's no question about it. It makes me better as a physician. But because there is a public option there it doesn't necessarily mean the price will be less. It might be, but it might not be.

And what my concern is that every single government plan we have right now relies on the private sector to pick up their not paying their fair share of the costs. TennCare, for instance -- our Tennessee Medicaid system -- pays only 60 percent. Now, the person getting the care could care less. They're getting their care and it's being taken care of, and that's a prescription for over-utilization. I can tell you that's exactly what we saw where we were.

Medicare does not pay its total expense. I mean, the Medicare payments are not paying the costs, at least in Tennessee, of providing the care. And what Dr. Cassidy and others have said -- I did a lot of pelvic reconstructive surgery and I had a difficult time finding a primary care physician for my patients.

So there's a lot of this plan that I like in here. Certainly there needs to be insurance reform, I have no question about that. But that doesn't necessarily mean that your costs would be less. I would hope they would be, but that doesn't necessarily mean they would be.

MS. YOUNG: And I agree with that. Before working with my father I worked in the insurance industry for 12 years so I'm really knowledgeable about how the insurance industry works, and I do agree that there does need to be a fix to Medicare. But there absolutely needs to be a fix to the private health insurance industry as well --

REP. ROE: No, I agree.

MS. YOUNG: -- because it's very unfair for the little person like us to have to try and compete with the big businesses or whoever else for competitive rates, because we're not getting them.

REP. ROE: No question. I think one of the things that you can do -- this is an extremely complex plan. Let me just give you one little view here of the affordable health care choices, the private insurance market, just the individual market, is that an insurance purchased on the individual market after the bill's effective date would not be considered acceptable coverage for purpose of compliance with federal mandates. These plans would also be prohibited from enrolling new members, ensuring that their risk pools can only get sicker and older, increasing the cost of coverage under the plan, which means you're going to shift people to the government plan.

I guess a question to the panel is, what happens when they don't pay the cost of care? What happens? And here you are, I mean, the patient doesn't care, but the facility's got to provide that care and get the money from somewhere.

MR. KLEIN: Two things: One, I think that a lot of this dialogue has led to a point that hasn't maybe been explicitly stated, and that is it makes no sense to argue on behalf of the need for a public plan based upon the current flaws of the insurance system when everyone, Republican and Democratic alike, employer community, the insurance industry itself, acknowledges that there have to be widespread and fundamental reforms to insurance rules -- no pre-existing condition exclusions, guaranteed issue and renewability and all of those things.

So it's a bit of a false straw man. And to answer your question, the answer is that somebody else in the system ends up paying for it.

REP. ROE: Either the taxpayer or it's shifted. One of the simplest -- I've never understood why the Congress -- last year, I worked for myself in the medical practice; we got 70 providers, 350 employees. I retired and ran for Congress.

The next day, I have to pay the first dollar for my health insurance. It makes no sense to me to not make that tax deductible for an individual. That would make health care cheaper for what, 21 million I heard, automatically.

Ms. Young, even if you couldn't afford whatever, it would lower whatever your tax rate is. It would lower your cost that much, like a large business can do. Any comments on that?

MR. VAUGHAN: Well, sir, I would like to say the March MedPAC report to Congress, one of the most important pages in it is Page 67 where basically they found an eighth of the nation's hospitals that are the best in terms of getting people well and not killing you and not giving you an infection, they make money on Medicare.

And the point of MedPAC is the private insurers are paying 132 percent of cost. We keep saying, oh, gosh, Medicare doesn't pay enough. Maybe it's the private guys who aren't able to manage and aren't able to get a handle on costs.

REP. ROE: I would argue -- my time's short. I would argue they're paying 132 percent of cost because of what Medicare and the others are not doing, and I think you won't find that across the country. I'll be glad to look at that later.

One other quick comment: Until we get our malpractice under control in this country -- when I began my practice, it was $4,000 a year. When I left, it was $72,000 for an obstetrician. We've got to do something to help the doctors and the providers out there to be able to provide affordable care.

I yield back the balance of my time.

REP. MILLER: Mr. Thompson.

REP. THOMPSON: Thank you, Chairman.

I want to thank the panel for all of your contributions this afternoon. It's an important debate, an important discussion, and I appreciate your expertise and experiences.

Dr. Pollitz, from your remarks and looking at your submitted testimony you talk about coverage adequacy and about -- and I agree that's important. That was part of my frustrations as a health care manager and administrator with health care, the inadequacy at times.

The way I read -- I want to make sure I'm portraying it accurately that you see the government entity to be created as a competitor as something that would assure that coverage adequacy, as you addressed in that testimony.

MS. POLLITZ: The public plan option would have to offer the same essential benefit standard that every private insurance plan and employer plan would have to offer. It would be subject to the exact same coverage rules.

REP. THOMPSON: Okay. And, you know, as a starting point, my concern is -- and as -- I mean, if you had looked at the record of denial, which essentially speaks to coverage adequacy of frankly cost- effective care by Medicare A and Medicare B --

MS. POLLITZ: I'm sorry, the rate of coverage denial?

REP. THOMPSON: Well, the rate -- yeah, coverage denial under the current -- two of the -- well, I guess consolidated under one; it's Medicare -- Medicare Part A and Medicare Part B -- the rate of denial of coverage of many times what I consider cost-effective care.

MS. POLLITZ: I'm sorry, I can't answer that question for you.

REP. THOMPSON: Okay. Well, you know, my point being -- I mean, that's an area for me, a source of frustration in the different health care areas where I practice in. Frankly, unfortunately, it fell on me to do many of the appeals and different levels of appeals of what I thought was very cost-effective care that was being denied under our current government plan, and the appeal process was and continues to be pretty challenging to get that coverage covered.

And my concern going forward that, you know, frankly, I don't think there's any assurance when the government gets involved in providing a plan as we're looking at now, that coverage adequacy is going to continue to -- that won't be resolved.

MS. POLLITZ: But Mr. Thompson, I do believe -- and I haven't been a Medicare expert for many years, I've sort of shifted more to private insurance over the last 10 years -- but it continues to be the case that Medicare contracts out to private insurers, different ones, one in each state, and that the coverage decisions often get made by the private insurers and they often get made differently.

That has been a long-running problem with the Medicare program, that the carrier in Indiana may say something's not covered when it's covered in 48 other states. So I think consistency in coverage decisions is certainly important, and the question that was being asked earlier, I think, about denials and the importance of getting people good coverage and other good consumer protections is an important problem that is addressed in this plan, in particular in this bill, that the standards for prompt and available appeals programs for everybody. Those aren't available for everybody now, and particularly external appeals are not available to a lot of people and most people in employer-sponsored plans.

And prompt payment of claim standards, I think those are incredibly important. My daughter plays soccer. She broke her arm in a soccer game two years ago when she was 12 and I had to fight with my insurance company for 10 months to get that claim paid. They said I had to send it to workers' comp. And I had to fight about that for 10 months. That was just silly.

So I mean, I think when we talk about changing -- not leveling the playing field so much as changing the playing field and just starting from the assumption that health insurance is going to take care of people and it is going to pay their claims and if we could get that across the board, I think that would be just a tremendous thing for Americans.

REP. THOMPSON: No, I agree that we need change, but I would come back to my original statement. We need the right change and to do this in a systematic way that we're really designing this.

Just real quickly because I'm running out of time: Mr. Klein, can you please explain how new state law privilege -- or I'm sorry, state law private rights of action would apply to coverage offered through the health insurance exchanges?

MR. KLEIN: Yes. The Tri-Committee draft legislation permits really varied and unlimited types of remedies that would be prescribed under state law for those plans that are sold through the exchange, so it could be punitive and compensatory damages, all types of remedies that are not currently available under the ERISA regime nor would be prescribed; nor, frankly, necessarily available under the public plan that would be offered through the exchange, where the Medicare remedial scheme would apply.

That also, for example, does not provide for compensatory or punitive damages, so it really sets up a dual standard within the exchange.

REP. THOMPSON: Thank you.

REP. MILLER: Thank you.

Of course, you understand that the people in the exchange aren't in ERISA. There are not ERISA plans in the exchange.

MR. KLEIN: Right, so they --

REP. MILLER: Right, so that would be existing law, what you referred to.

MR. KLEIN: Exactly. I said in my oral remarks there would be three standards outside the --

REP. MILLER: So the privates would be treated as privates and publics would be treated as privates for the purposes of the discussion draft, and that's existing law.

MR. KLEIN: Except that employers who would want to purchase coverage for their employees through the exchange, then they would be subjected to those new remedies.

REP. MILLER: That would be a decision than an ERISA employer would have to make five years from now.

MR. KLEIN: Right.

REP. MILLER: Right, okay. But you tried to suggest that somehow this was a new level of exposure. The fact is that's existing law.

MR. KLEIN: Well, what I was trying to demonstrate was there were two different standards, and the --

REP. MILLER: No, the same people who are in the public sector today would be treated -- if you created a public plan they would be treated as if it was a public plan. You guys keep calling it Medicare, so it would be treated like Medicare. And the private parts of the exchange would be treated as private plans are today under state law.

MR. KLEIN: Right. My concern, though, is if there's a recognition that those kinds of remedies are not needed or appropriate in Medicare or under the new public plan, why then apply it to the other areas?

REP. MILLER: Well, we'll see. That's the purpose of the mark. We just decided we'd treat likes like for the purposes of the discussion, and the committees will make those decisions.

Ms. Wcislo, if I might, could you respond again what's happened to the unemployed in Massachusetts? You cited some figures in responding to --

MS. WCISLO: In fact, if you get laid off and you can't afford COBRA, let's say that's the full freight of the insurance, you can in fact come into the Connector and stay there for three months until you find another job or six months until you're under their coverage. We meet a lot of the needs of those people who are going in and out of the market, you know, in transition, and we have --

REP. MILLER: But most of those people came through the job -- from the private sector. They lost their jobs and that's how you're picking up --

MS. WCISLO: Right. And so they have COBRA and now their family plan is costing them $1,200 a month but they can't afford it because they're unemployed. They can come into the Connector. That is not considered health insurance for purposes of us and they can stay there as long as they don't have employer-sponsored insurance.

Once they have employer-sponsored insurance, they sign up at work and we're the safety net for them.

REP. MILLER: So if you go into -- you've lost your job, you had insurance; you lost your job, you go into the Connector or you go to COBRA then go to the Connector, and then you take a new job and they don't provide insurance, you stay in the Connector?

MS. WCISLO: You can stay -- if you're low income you can stay in the Connector, or you can stay in Comm (sp) Choice, which is the non- subsidized piece. If your employer offers it, you have to take what your employer's offering as long as it's affordable.

REP. MILLER: Right, I understand. And if the employer doesn't offer it how is that shared?

MS. WCISLO: If the employer does not offer it and you're low income, you can stay in the Connector products and you can have them subsidized.

REP. MILLER: And you've got a sliding scale?

MS. WCISLO: Or you can sign up for one of our three levels in the private sector, and that's where a lot of the individual market has gone. They've joined up through the Connector in the individual market because we lowered the rates of pay by 30 percent in their premiums. And they had been declining and now they're going back up. It used to be down --

REP. MILLER: I think in our draft, if I'm correct, we grandfather the individual plans in. I mean, people can keep them as long as they want.

MS. WCISLO: Right, and we allow people to keep them. But if they choose to come into one and they're all private insurance unless they're subsidized they can come in or they can keep what they have.

REP. MILLER: Now, what's happened with employers in this? You have a $300 penalty.

MS. WCISLO: Yeah, employers are starting to pay the penalty. In fact, we have such a high insurance rate now, it's now up to 72 percent, very few of them are having to pay the penalty. And what we've found is that almost half of our new insured folks are through the private sector. Our employers have stepped up to the plate.

REP. MILLER: I mean, I guess I don't think $300 to give up the cost of insurance for employees is much of a penalty, but that's what you decided on because you had ERISA --

MS. WCISLO: Well, we decided on that just because of the --

REP. MILLER: You had ERISA problems, right, yeah.

MS. WCISLO: -- ERISA limitations, and we were afraid of the challenge. And the political wisdom was we don't want the whole financing of it thrown out. You have the advantage of being able to do a larger penalty. If we had a larger penalty, in fact we would go -- the 2.5 (percent) that remain uninsured could be insured. We're down to 2.5 percent uninsured. We could do the rest of it.

REP. MILLER: But employers continuing to offer insurance turned out to be stickier than people suggested, right? There was a lot of suggestion that $300, they're out of there.

MS. WCISLO: Yeah, we thought a lot of people would drop it. If you had asked me, I wasn't -- when I was placed on this panel, the Connector, I thought, oh, the individual mandate's going to blow up, the employer thing is going to mean employers are going to dump all their employees into it. The exact opposite has happened, and I think it really is the shared responsibility. Everyone in our state understands we all have to be part of the solution.

The employers did the right thing and they're continuing to do the right things. Individuals have bought, they're continuing to do the right thing, and the government's stepped up to subsidize for low- income people. Because we're all in it together, everyone's trying to make it work. And so far, it's been successful.

REP. MILLER: So what's your take on the pay-or-play here?

MS. WCISLO: I think it's important because we were a very unusual state. We had 68 percent as we were going into it already offering insurance. We got it to go up. We were able to convince the business community. I know other states are much worse and I think getting business to rethink what their responsibility is, someone's going to pay for it.

Employers should be paying their share, individuals should, and not just government. And I think a balanced, shared responsibility approach like your bill says is the way to go after that to say everyone has to be a part of this system. You can't just transfer it over to government to pay for everything. You can't just transfer it to individuals because they can't afford it. All three of us have to pay it together, and I think your proposal is right on.

REP. MILLER: Thank you.

Well, thank you very much for -- excuse me.

Mr. Scott, I'm sorry.

REP. SCOTT: Thank you, Mr. Chairman, I appreciate it. I'd been detained at another meeting.

I just wanted to ask one question just for the record. Prenatal and well child care is an extremely important element to this plan. Does anybody disagree with that? And it has to be -- the Medicare right now has a state-of-the-art kind of benefit package called EPSDT. Does anybody question whether or not that good package would be appropriate for the public plan or the entire private or public choices?

Thank you.

Thank you, Mr. Chairman.

REP. MILLER: Mr. Vaughan?

MR. VAUGHAN: I would just urge -- it's on Page 25, the discussion where they say the things to be covered are well baby and well child and the oral health, vision, hearing services equipment and supplies, at least for children under 21 years of age, at least in report language.

You may want to flesh that out a little bit more to make the parallel to EPSDT, but it sure smells like EPSDT to me.

REP. SCOTT: That's what we're hoping. Thank you.

MR. KLEIN: Congressman, I would just respond to your question by saying I think the one thing you would want to avoid is the experience that has developed over decades now in the states where every (imaginable ?) provider group or group that wants to cover some particular disease or condition or treatment comes and advocates for why its particular treatment or condition has to be covered.

What you do want in terms of a minimum benefit package that, for example, would be applied to the individual mandate would be to allow for actuarial equivalency, and I think there's some suggestion and direction to try to go there as well. So be very, very cautious about enumerating specific things.

REP. SCOTT: The EPSDT doesn't enumerate the providers or anything, it's just a comprehensive set of benefits -- early, periodic, diagnostic, screening, treatment -- to make sure that they are covered with all necessary medical treatment.

REP. MILLER: Ms. Wcislo, did you want to --

MS. WCISLO: Well, we just ruled in the Connector that -- I beg to disagree with him. Some ERISA plans in our state will provide a family plan, but if the young daughter gets pregnant, too bad, you're out of luck, we're not covering it. And I think setting a minimal standard about prenatal care, about maternity for all individuals covered by any plan is really important, and that's a flaw in the ERISA system.

On one hand, they make choices. We as a union are in ERISA plans and often make choices, but we need to, as a government and as a people, know that someone is going to be covered and that one business can't decide oh, by the way, your daughter can't be covered even though the rest of your family and your wife is.

We need to make sure those are covered for health care costs in the long term, for the wellness of that baby, and for the impact a baby that wasn't treated appropriately has on the school system and the health care system later. I think that standard is really important to have.

REP. SCOTT: Thank you.

Thank you, Mr. Chairman.

REP. MILLER: Thank you.

Mr. Tierney, any questions?

Thank you very much. Thank you for your patience but more importantly thank you for your testimony and your answers to the committee members' questions and your experience.

With that, the committee will stand adjourned.

The record is open for 14 days for all members. And again, if members have questions that they want to submit for the record, we would appreciate it if you could get back to us in --

REP. SCOTT: Mr. Chairman, there's a report on EPSDT, a policy brief by the Department of Health Policy. I'd like this entered for the record.

REP. MILLER: It will be made part of the file of the hearing, thank you.

Thank you.


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