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Hearing of the Senate Committee on Health, Education, Labor and Pensions - Learning from the States: Individual State Experiences With Health Care Reform Coverage Initiatives in the Context of National Reform



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SEN. KENNEDY: We'll come to order. Senator Enzi was telling about the good old days when this committee was really called to order, and provided a great variety of our difficult -- of our different colleagues, and had a great success in bringing an entirely different kind of way of considering the work of this committee. So it's good to see all of you and appreciate very much today.

I think the topic for today -- and I think most of you have a pretty good idea about where we, where we are. I think our committee over a period of time has been looking for a variety of different issues. We've been looking over that period for the more recent years when we've looked at Medicare and the Medicaid programs, the CHIP programs, those had all been issues that we've been focused on and attentive to over the period probably of the past several years.

And we know now we still have very important work to do, and we're very, very hopeful that our committee will be able to deal effectively in these areas have we have in some of the others. We have an extraordinary group of individuals who have -- we have called on to be of help and assistance of this committee.

Rarely have we had a group of individuals who have worked as conscientiously and fellowly on the issues which we're facing before the Committee. So we're enormously on this committee -- enormously grateful to all of those who have been a key part of all of our efforts.

We're especially thankful for Jon Kingsdale and Eileen McAnneny, we are joining with us today from Massachusetts. We've had a good representatives from a variety of different -- of our colleagues, and we'll have a chance to introduce all of those that are here. And we'll start with our members, and start with Senator Enzi.

We're very thankful that Senator Enzi has been willing to take on so much of the responsibility of this Committee for these pasts weeks, and has just done an extraordinary job. And we're all very, very appreciative and grateful to him. And we'll ask him, and then we'll go along with the other members of the Committee.

SEN. MIKE ENZI (R-WY): Thank you, Mr. Chairman, and I want to thank you for the way that you've distributed the workload on your side while you've -- while it's been necessary for you to be gone. You've had some outstanding people that have been willing to work, and as a result we've gotten results.

And since everybody's kind of concentrating on healthcare a little bit today because of what's happened in Mexico and is now spreading to the United States, I do want to mention that Senator Burr spent about a year and half of his life working on a bioterrorism bill, and everybody on this committee got to, got to work on it. And because of the efforts of this committee, they're in place already, 50 million dozens of the TAMIFLU vaccines, which will take care of what we have so far, and puts in place a way to develop a vaccine through the fall -- for the fall epidemic that could hit, that we'll make a huge difference to people possibly all over the world.

But just as importantly at putting in place some of the tools for quickly identifying the kinds of things that are happening right now. And it's not very often that a committee or a person can take a look into the future and find something that actually becomes necessary and lifesaving in the future. And so I congratulate the committee and Senator Burr and Senator Kennedy for the particular work that they did on it.

I do want to thank you for holding this roundtable today on state-based health care reform initiatives. The states are always kind of -- (inaudible) -- for what can happen, and they find a lot of the successes, and they find a lot of the problems for us so that we don't have to experience them on a national level. And I do believe it's crucial for us as we consider national reforms to hear from people across the country about what they've learned while enacting healthcare reforms.

I always say if you want to know how things are really going all around you just talk to the folks that have actually done something. That's what we we're going to do today. And so this isn't a normal situation where the Chairman invites four people and I invite one, and then both sides show up to beat up on everybody. This is where we actually want to know what you did, how you did it, what the effect was, and then the chance for some interaction among the people on the panel about how one person's idea might work pretty well with another person's idea. And that's very helpful for us as we begin drafting a bill.

And the national health care reform will impact the lives of millions of Americans in every state. In fact, probably before we're done, it will affect every single American. And it's important for us to remember that our states are sometimes very different, and that is what makes America great. We're a diverse country with differences of opinion and unique ways of solving problems.

Represented here today are states that span both the political spectrum and the geographic width of our nation. They've all taken on the (allowable ?) goal of improving health of our citizens, but have done so in different ways. And I feel strongly that we need to keep this in mind as we continue to peruse national reforms.

Throughout my discussions on healthcare reform, I've insisted that we cannot just focus on expanded coverage. We also have to focus on improving quality and getting more value out of our healthcare system. Our current pace of spending is not sustainable, and we must get healthcare costs under control.

I believe we can do that, and I'm interested in hearing ideas from those on the panel that have experience in working to bring down costs.

Another topic of discussion I'm interested in is insurance market reforms. I understand that Massachusetts reforms like guaranteed issue and modified community rating were imposed several years prior to the development of the Connector, and the implementation of the individual mandate.

I do worry that forcing states to dramatically change their insured's market rules too quickly could result in some very serious unintended consequences. I also note in Massachusetts that there is no public plan option.

While it is crucial that we get the policy of insurance market reform right and increase the value of healthcare dollar, I would be remiss if I didn't at least mention the perils of process. Without the right process, we can't move forward on the best healthcare reforms for the American people. The first rule of test of whether the new administration and summit leaders are serious about developing bipartisan solutions was how the budget conference report addressed health care reform. The majority failed that test.

Reconciliation would cut out most avenues for real debate in senate, and is intended primarily as a tool to reduce the deficit. If those in the majority do use the budget reconciliation to jam the health care reform through the senate, they'll be sending a clear signal that they're not interested in truly bipartisan effort. And I hope that's not true.

With that, I will look to our witnesses to make recommendations for how we should shape the policies of health care reform.

And, Mr. Chairman, I thank you for holding this roundtable today.

SEN. KENNEDY: Thank you very much. I'll let that comment that you've aimed at the democrats go by. This is pretty early in the game.

(Cross talk)

SEN. KENNEDY: But we want to have Senator Bingaman and Senator Hatch, if they would make a comment. And we'll call on Senator Bingaman to make an additional comment.

SEN. JEFF BINGAMAN (D-NM): Mr. Chairman, let me thank you for having the hearing. This is the -- I think the third of these hearings we've had on the whole subject of coverage, and how to expand coverage. And I do think it's very useful to have people here from these four states that are represented. And your own state of Massachusetts has probably done more than any state to take on this difficult job of reforming health care and expanding coverage.

I know -- we have a couple witnesses here from Senator Sanders' state of Vermont, and that's very welcome, as well. We have two witnesses from Utah, Senator Hatch's state, and a representative from California. So we're glad to have all these witnesses. I do think there's a lot we can learn at the federal level from the experiences we've observed with individual states. And I think there's -- they can, they can start us down the path toward a solution at the national level, as well.

So again, I thank you for having the hearing, and I look forward to hearing from each of these witnesses.

SEN. KENNEDY: Thank you very much. And we'll now hear from -- I think our -- Senator Hatch.

SEN. ORRIN HATCH (R-UT): Well, thank you, Mr. Chairman. I appreciate you, and I appreciate your leadership in this committee, and your leadership in healthcare, in particular.

I welcome all of you to the committee, and we're very grateful to you to come and spend time with us and help us to understand these problems better. We especially like to recognize speaker, David Clark, from my home state, and Dr. Brent James, who has a well reputation in health care, both from my great state of Utah, for lending their time and their expertise to this important conversation.

Just like me, I'm sure that every member will find their insights extremely helpful as we look toward reform of our nation's healthcare system.

We've been talking about policy, and let me take a couple of minutes to talk about process. Health care reform is an important national priority that is too big for political gamesmanship. We're talking about an issue that makes up one-sixth of our total economy. I'm very disappointed that the upcoming budget conference report will include partisan reconciliation instructions for health care reform.

And any success of health care reform proposal must be subject to the full scrutiny of both parties in the Senate and House of Representatives, and the American people. Using the budget reconciliation process, in the Senate for example, would limit debate to only 20 hours and restrict the ability of Senators to amend and perfect a proposal that is intended to steer one-sixth of our economy in the new direction.

And this would make it difficult, if not impossible, to gain broad bipartisan support for the effort. And I think it would be a tremendous disservice to the American people and our nation. The notion of a 51-vote health care reform legislation that is jammed through after being debated only 20 hours with a limited amendment process should scare every person in this room.

And having said that, let me now focus on the incredibly important policy being discussed in the room today. As we move forward on comprehensive reform, it is important to recognize that all states are not created equal. Every state has its own unique mix of challenges, based on everything from the insurance market to demographics and regulations. I'm sure that both speaker, Clark and Jon Kingsdale will agree with me when I say that Utah is not Massachusetts, and Massachusetts is not Utah.

Although Senator Kennedy has tried -- been trying all these years to make Utah like Massachusetts. (Laughter.) What works in one state will not necessarily --

SEN. KENNEDY: The issue is cut.

SEN. HATCH: (Laughter.) Yeah. This is cut, yeah. I'm just --

(Cross talk.)

SEN. HATCH: I'm just beginning. (Laughter.) Those that are new in this reservoir, and his expertise, experience in field test and reform at the state level, which is represented well on this panel. I personally believe in 50-state laboratories that help us to arrive in final conclusions on things as important as this.

And we should take advantage of that -- of you folks here by pressing states at the center of efforts to meet coverage and affordability goals. Although, it would be a naturally important role for the federal government in the partnership, but it will have to give the states flexibility in the systems to meet coverage and affordability objectives.

We should not make the mistake of assuming that the federal government is the solution to all problems. I think the focus should be on families, not Washington.

But having said that, let me just say that I unfortunately have to leave at the conclusion, where I'm -- (inaudible) -- to attend a very important briefing on the Senator Intelligence Committee in the secure room. But I will be submitting questions for the record. A:

And I just want to thank you, Mr. Chairman, for this courtesy, and I thank all of you for the great testimony I know you will give, and the help that you will give to every member of this committee. And I hope they all pay strict attention to what you have to say. We're grateful to you. Welcome to you, and of course we'll learn from you. And I'll pay attention to what you have to say, regardless.

Thank you, Mr. Chairman.

SEN. KENNEDY: Well, thank you very much.

Jeff Bingaman. And we're very lucky to -- I mean, Bingaman. And we're very lucky to have Jeff to moderate this meeting. And we'd ask him if he'd be good enough to moderate this -- us today?


SEN. BINGAMAN: Well, good. I'm glad to do that. Let me just briefly reintroduce our witnesses. And then we'll just start over at the left, and have each of you tell us what you think we need to know about this subject.

And Jon Kingsdale is the Executive Director of the Commonwealth Health Insurance Connector in Boston. Thank you very much for being here. You're right at the center of the reform efforts that are involved in Massachusetts, and we're anxious to hear your views on those.

And Ms. McAnneny is the Senior Vice-President with Associated Industries of Massachusetts, and also in Boston. Thank you for being here.

And Ms. Liu is the Senior Director of Health Policy and Health Reform with Kaiser Permanente in California. Thank you for being here.

Let's see, and Vermont, we have Susan Besio, who is the Director of the Office of Vermont Health Access with the Human Services Agency in Vermont and Burlington.

Harry Chen is a MD, Emergency Room Physician and Board of Vermont Program for Quality in Health Care, also in Burlington. Thank you for being here.

And then as Senator Hatch indicated, we have the Majority Leader of the Utah House of Representatives here, The Honorable David Clark. Thank you for being here. I appreciate it very much.

And Brent James is the Executive Director with the IHC Institute for Health Care Delivery Research with Intermountain Health Care Inc. in Salt Lake City.

So thank you all for being here. Why don't we start with you, Mr. Kingsdale, if you'd, if you'd advise us as to the things you think we need to know about the experiences you've had in Massachusetts.

MR. KINGSDALE: Well, good afternoon, and thank you so much. With my 60 seconds, I won't reintroduce myself, but just jump right into it. Perhaps the most important lesson for Massachusetts is that it can be done with Senator Kennedy's help.

With all but 2.6 percent of our residents insured, we enjoy near universal coverage. We're learning of course as we go. But I would offer five lessons for your consideration.

First the individual mandate has proven essential to covering the uninsured, as the keystone of our theme of shared responsibility among many parties. Second, that implementing health reform is a campaign built on the theme of shared responsibility, and supported by coalitions of progressive advocacy groups, health insurers, employers, such as Eileen McAnneny represents.

Thirdly, that there are, of course, many twists and turns to implementing complex reform, which really could not be anticipated in statute. Rather the legislature, I think wisely delegated some key decisions to a representative board of the Connector, which conducts its activities in public with great transparency, and as kind of a learning organization. I think Senator Daschle made a similar point in his -- (inaudible) -- argued book about the importance of delegation.

Fourth, that exchanges can be a valuable component of a broader set of reforms. And I've supplied Committee's staff with some thoughts on their design. Here, I would stress the need for independence if a public agency is to create and regulate a market.

And finally, I would prompt that Massachusetts has succeeded in covering most of our people by starting with coverage expansion. We are now moving to address costs. And I would urge you to consider Massachusetts' example in not holding the uninsured hostage to cost control, but I would hope that you would devise a political strategy for progressing from the very difficult challenge of covering -- expanding coverage to the nearly impossible challenge of controlling costs.

So thank you, and I look forward to your questions.

SEN. BINGAMAN: Thank you very much.

Ms. McAnneny.

MS. MCANNENY: Good afternoon. (Off mike.)

SEN. BINGAMAN: Oh, I'm mispronouncing your name. It's --



MS. MCANNENY: There's --


MS. MCANNENY: Thank you.

SEN. BINGAMAN: All right. Please go right ahead.

MS. MCANNENY: I'm like Jon Kingsdale, I won't waste part of my 60 seconds on an introduction. But I would like to thank you for the opportunity. It's truly an honor and a privilege to participate in this, and especially to appear before Chairman Kennedy, who has been an outstanding senator for the state of Massachusetts, and whose Herculean efforts and influence really made health care happen in Massachusetts. So thank you, Senator.

Robert Blendon, who is a professor at Harvard School of Public Health spoke recently, and he had mentioned that there has been 61 prior efforts to-date between states and the nation to obtain universal health care coverage. And that 60 of those efforts have not, have not succeeded. Massachusetts is the exception. And I believe Massachusetts' success, at least in part, can be attributed to the support of the business committee. So I think that that is a critical component to any health care reform on the national level.

I also agree with Jon Kingsdale that the individual mandate has been a critical component in motivating people to purchase the insurance. Often it has been available to them and for whatever reason, they have not taken it. So that has been a great motivating force.

I also think our incremental approach has been key because it has allowed us to deal with the bumps in the road, and it did not upheave our current system. It didn't require an, it didn't require an employer mandate. Rather -- or it didn't repeal the employer- sponsored insurance. Rather, it worked within those confines and target populations that needed insurance, and was successful as a result.

So I look forward to a discussion. Thank you.

SEN. BINGAMAN: Thank you very much.

Ms. Liu, you're going to give us the word on what's happening in California, and what we can learn from that.

MS. LIU: Yes, I'm happy to do so. And I want to thank you for the invitation to be here today to discuss what's in California. I think as you know, the California effort didn't quite succeed, so my testimony may be a little different than some of my colleagues. But I still think there are many lessons that we can learn from the effort.

I am currently with Kaiser. I did want to inform the Committee that at the time of the California health reform effort, I was Associate Secretary at the California Health and Human Services under the Schwarzenegger Administration. But my views here today are my own, and not that of the Governor or the Administration.

I think that we have three key lessons to learn from the California experience.

The first is that in the California effort, we did focus on a broad definition of health reform, including prevention and wellness strategies. A strategy for universal coverage and financing, and a focus on cost containment. And I believe that it's essential to focus on all three aspects simultaneously to ensure that any reform effort is financially sustainable in the long?term.

Second, we wrestled with issues around affordability, both affordability for purchasers of coverage and keeping the cost of the reform proposal affordable for the State. There are many lessons learned in terms of benefit design, subsidy design and shared responsibility that I think will translate well nationally.

And Finally, I want to say that we spent considerable time and effort designing an approach that would allow us to transition as smoothly as possible from an underwritten, but fairly robust, individual market to a guaranteed issue market without health status rating that preserved comprehensive offerings.

So I think we -- it would make sense to look at that transition very carefully as Senator Enzi has raised.

So once again, I want to thank you for the opportunity to be here, and I want to thank you, especially Senator Kennedy, for your efforts in Massachusetts and for the national reform effort that we're all looking forward to in California.

SEN. BINGAMAN: Ms. Besio, tell us about Vermont.

MS. BESIO: Okay, first I'm going to correct the pronunciation of my name, which is Besio, Susan Besio. I'm also the Director of Health Care Reform for Vermont, and also the Director of the state's Medicaid Program. And I want to thank you, along with the other panelists for asking the folks to be here today, and for your leadership.

Vermont has long valued coverages as an important part of our residence -- as important for our residents. However, Vermont's reforms were very, very comprehensive, and that they did address both coverage, care delivery, prevention and wellness and trying to control costs. So hopefully we'll get a chance to talk about all those aspects today.

In terms of coverage, Vermont has always had coverage as a key component of our state's values. We have a very expansive Medicaid program. We actually cover children up to 300 percent of federal poverty level, childless adults, up to 150 percent, and adults with attendants up to 185 percent of the federal poverty level.

That was a key core stone of our coverage expansions that we initiated in 2006. We also wanted a few states in the country that has guaranteed issue and community rating, which again is part of our Vermont values, but we want to provide affordable and comprehensive coverage to all of our residents, regardless of age or health status.

Since the Fall of 2007 when we implemented our reforms, our uninsured rate has dropped from 9.8 percent to 7.6 percent for all of our residents, and from 4.9 percent to 2.9 percent for our children. We're very proud of that progress. We did this without an individual mandate, but we did do it with more comprehensive private market product, called Catamount Health, approving assistance for people up to 300 percent of the federal poverty level for both Catamount Health and for their employer-sponsored insurance for people with employer- sponsored insurance.

We did integrated private and public outreach in marketing and enrollment. And we insisted that coverage be comprehensive and affordable with low deductibles and low out-of-pocket costs. And the reason that is so important to us is because we recognize that if people have high out-of-pocket costs, they are not going to access preventative care, even if preventative care is free, because the follow-up care is not.

And so we think that that's an important value to consider when you're developing benefit designs that might be standardized at the national level.

We also would think that we have some experience around the role of insurance regulation, the implications of Medicaid and Medicare, in terms of the complexity of those systems, and how they interface with our state's abilities to expand and maintain coverage. Obviously, the importance of simultaneous system redesign in terms of care delivery, which has to go hand-in-hand with coverage initiatives.

So we very much appreciate you asking Vermont to be at the table today. We think that we have a lot of learning to offer. We also believe that each, as Senator Hatch mentioned, each state has unique values, conditions, state and local regulations that cannot be dismantled in any kind of health care reform effort. Because we have made significant progress, and we do not want to go back.

Again, thank you very much for having us here today, and we look forward to your -- to our discussions.

SEN. BINGAMAN: Thank you very much.

Dr. Chen.

DR. CHEN: Thank you. Thank you, Senator Bingaman, and other Senators and Senator Sanders. As a practicing emergency physician, I can speak directly to the human toil of being uninsured. All of these are all the more compelling when they look you right in the eyes.

I've been privileged for the past four years to be -- to play a role in shaping health care reform in Vermont, and I'm proud of our results as some of the lowest uninsured rates in the nation. And again, we discussed -- or (justly ?) to mandate, and came up with our answer not to do the mandate in Vermont. But I certainly could understand how it helped Massachusetts. We haven't reached their goal, but we're hopeful that we'll get there.

Coverage initiatives in the part of health care reform must be comprehensive. A high deductible plan is not health care reform. It's (asset ?) protection, and it's important for our goal to get the right care to the right person at the right time.

Coverage initiatives must be part of comprehensive health care reform that simultaneously address quality, efficiency and costs. We won't succeed without an adequate workforce, without more emphasis on prevention to do system reform and payment reform. (Inaudible) -- problem that can unravel our efforts at real health care reform.

As you move forward, please be careful that your efforts don't undermine what we've done in the states. It's clear from Vermont's efforts that one size does not fit all. And I would encourage the Committee to, as I do in my practice of medicine, to first do no harm.

I'm sure this committee will wrestle with some the same issues that we did in Vermont in terms of the individual mandate. We opted not to have the mandate, but with the proviso that we should go back to it at a later time. We also wrestled with the issue of public or private, and in Vermont, we -- as you might expect in politics, we came up with what was possible, which was a mixture of both.

At present, I'm delighted that this committee is taking on this important issue. I'm sure that most of us in this room consider universal access to health care a moral imperative. I'm proud of our progress in Vermont, and I hope our experiences can help inform other states in this committee as we move forward. Thank you.

SEN. BINGAMAN: Thank you, very much.

Representative Clark, I mistakenly tried to demote you to the job of Majority Leader. I understand you're the Speaker. And we are very glad to have you here. Please go right ahead.

MR. CLARK: Well, thank you very much. I appreciate the opportunity to be here, and especially I want to extend the thanks to Senator Kennedy, and to you, Senator Bingaman, for the invitation to testify on a number of issues that are related to health system reform.

It's interesting to note that if two states has a widely differing culturally, politically and systematic backgrounds as Utah and Massachusetts can pursue similar reforms, then other states can do the same, provided they're given the ability and the tools necessary to make those adjustments and the adaptations to the same basic model that fits each one of their own state's unique circumstances.

As we proceed to developing a national health system policy, we would propose that the best way for the federal government to be involved is to respect the starting points of each individual state, their distinct systems, their institutions, their values, their attitudes by allowing significant flexibility to implement reforms and systemic changes consistent with all of our own local circumstances.

I appreciate the recognition of looking at what's going on in the states or we wouldn't have the invitation to be here today. But I would like to challenge the federal government that they should take more action that should further reduce the ability of states to develop -- (inaudible) -- solutions by reducing health care spending and expanding coverage.

By ordering different states to experiment should be encouraged on their ability enhanced by allowing reasonable exemptions or waivers from some of the federal laws and regulations. They're constrained innovations right now in the state level.

Our reform efforts have included several items such as creating affordable plans, developing data transparency, creation of privacy market, marketplace or an exchange, and also look to creating incentives that will enhance consumerism, and order the private market to come up with the solutions.

We suggest that a similar focus on market-oriented solutions is the basis for any action that should be taken on the federal level. In the state of Utah, we feel confident that the invisible hand of the marketplace, rather than the heavy hand of government with the effectiveness whereby reform should take place.

Thank you.

SEN. BINGAMAN: Thank you very much.

Mr. James, go right ahead.

(Off mike.)

MR. JAMES: Thank you. I first need to apologize, Senator Bingaman and Senator Kennedy, I run a big training program that teaches clinical quality to physicians and nurses. I have about 45 senior physicians, nurses and executives sitting in my classroom in Salt Lake right now. So this for me is a daytrip. I have to hit the 4:30 flight to be home. I'm on the spot tomorrow, so I'm going to quietly slip out of here in a few minutes, I hope.

Senator Kennedy, I have to mention that quite a number of those folks are from Massachusetts General Hospital and -- (inaudible) -- at the moment, so we're having a delightful discussion.

At my old home state some years ago -- on Saturday I'll be there to deliver a keynote at a lecture on electronic medical records to maintain my faculty appointment at the Harvard School of Public Health.

(Cross talk)

MR. JAMES: It's essential to say the least. It's good to be going home at least for a visit.


MR. JAMES: Short version. The key to universal access is controlling the rate of increase in health care cost. The key to building -- controlling health care costs is something called utilization risk. It's not how much we pay per unit, it's the number of units.

We've just completed a study that will soon appear in a major journal, where we estimated at approaching 50 percent of all health care expenditures in the United States today are technically waste, using the quality model. That's almost 50 percent of a $2.4 trillion budget. I think that's where the real solution to this lies.

MS. : Sir, could you --

MR. JAMES: Pardon me?

SEN. BINGAMAN: Could you just pull the microphone a little closer, that helps.

MR. JAMES: Is that better?

SEN. BINGAMAN: Thank you, yes.

MR. JAMES: About 50 percent, we estimated using a rigorous model that leads directly to action of current health care expenditures, are waste from a patient's perspective, non-value adding; and represents a huge opportunity.

We think one of the ways to approach that, which we're starting to experiment with in support of Representative Clark's initiatives, is bundled payment through accountable care organizations. Quality measurement and accountable are essential parts of that. We know an awful lot about that today. We know how to do it. And there are a series of well established principles by which we could build effective quality measurement in the country. We're not following them very well today.

SEN BINGAMAN: Okay, thank you very, very much. Thank all of you for your presentation. And let me see if -- Senator Kennedy, did you have --

SEN. KENNEDY: I'll join you in a minute.


Let me ask a question or two just to get started. One of the issues that obviously we have to grapple with; and I guess each of your states has grappled with it in a different way, is this issue of whether or not to mandate coverage, or mandate that people go out and obtain insurance if they're not covered by a plan. Massachusetts has chosen to do that; and believes that that has been a key factor in the success that they've had. The other states have not, the other states represented here. And I guess in Vermont, Dr. Chen, you were indicating.

Ms. Besio, you were indicating that this is a decision that was consciously made the other way in Vermont. Let me just ask those of you from Vermont to explain your decision a little more, as to why you think it wasn't the right thing to do in Vermont; and what you recommend that we consider doing here.

MS. BESIO: (Off mike)

DR. CHEN: In terms of the mandate, I was on the conference committee when we were negotiating the health care reform bill. And we really found that people on, I'll use a euphemism, on the right of us and on the left of us both of them really were opposed to the mandate. Some of their concern was could we afford it? And I think that really came down to the issue of affordability. That if we had mandated and everybody had taken advantage of it, we wouldn't have enough money.

So from a fiscal point of view, we couldn't implement a mandate. Now, as we develop our products, as we work towards our goal of 96 percent insured, we put in our bill a chance, an opportunity to relook at that mandate. So if we didn't make enough progress, that's certainly something that we would consider, I believe in this upcoming year 2010.

SEN. BINGAMAN: Have you been able to implement some of the insurance market reforms? I mean, in an earlier roundtable discussion that we had, the strong message that I picked up from some of the representatives of the insurance industry was that they would support a mandate. Or they would support insurance market reforms such as prohibiting them from excluding people for pre-existing conditions, requiring guaranteed coverage or guaranteed coverage; but they would only support that if it was in the context of a mandate where everybody had to sign up.

Have you been able to implement any of these insurance market reforms? And if so, how does that work?

MS. BESIO: We actually have in Vermont guaranteed issue. And we also have community rating, meaning that we don't differentiate in terms of the cost of products according to age or geographic location or any other thing that is out of an individual's control.

So we have a very high standard in terms of our market and the standards behind it. The dilemma for -- in terms of affordability for the individual mandate, is that you have to provide products that are affordable for everyone. And if you have a standard that we in Vermont believe is very important, that you want to have low out-of- pocket costs in your benefit design to encourage people to actually access care early and use that insurance in the way that it was initially designed; and not just be catastrophic coverage.

Then you've got a relatively expensive product or products that are going to be offered on the market. So the way to make those affordable are either to have a high-risk pool that helps cover those high-risks cases, or to offer premium assistance. Either of those options costs money to bring down the costs of the coverage. So I think that that's the dilemma from our perspective really around the mandate. And can we provide affordable comprehensive coverage that people would have access to and can we afford that?

SEN. BINGAMAN: And you determined that you cannot afford it?

MS. BESIO: We cannot afford it at this point in time and in the foreseeable future given the current state of our economy.

SEN. BINGAMAN: Let me ask Mr. Kingsdale if he had any comment on this issue, this set of issues.

MR. KINGSDALE: Just a -- actually I think Ms. Besio articulated the issue quite well. In Massachusetts we also had adjusted community rating, guaranteed issue, guaranteed renewal prior to the individual mandate. I believe there are five states in the country that do. And we in Massachusetts, and I believe this is true of the other four, without the mandate and some other reforms, experienced what any economist or underwriter would predict, which is, a shrinking market for -- made up largely of old or younger people -- old or sicker people buying a product that nobody who wasn't pretty sure they were going to use a lot of it would buy voluntarily on their own part.

So the thing about the individual mandate, it is definitely expensive because you're trying to get everybody insured; and that's expensive. You have to subsidize people of lower income. But it does create what an underwriter or an actuary would call a state-wide, credible risks pool. It brings in the young invincibles and others, so that actually the premium rate for the cost of coverage for people who were previously buying non-group insurance actually fell as a result of reform. And as a result, we have a lot more product. We have more than doubled the size of our non-group market in just the first year of reform.

So it's expensive. I think you've described the challenge very aptly. But that's the challenge of getting universal coverage.

SEN. BINGAMAN: Senator Kennedy, did you want to ask a question or Senator Enzi; what's your preference?

SEN. KENNEDY: Senator Enzi.

SEN. BINGAMAN: Mike, why don't you go ahead.

SEN. ENZI: Well, I thank everybody for the brevity of their statements so that we can have questions. And I want you to know that from each of you I learned something that will help us on health care reform. And I think it's because you kept your statements very succinct.

But I do have a few questions; and one of them would be for Ms. Liu. What do you attribute to California not being able to pass their bill? What was the -- there probably were a lot of roadblocks. But you know what ones could you share with us?

MS. LIU: Certainly, there were a number of roadblocks, as you said. One of them actually was a lot of controversy around a number of the policy issues that we were trying to pursue, one of them being the individual mandate, frankly. But we were able to take a lot of the stakeholders, who normally would not support an individual mandate, and discuss with them the reason that it was required in order to get universal coverage. And that's really what the governor had asked us to do.

Absolutely, there needed to be a number of market reforms that were in place in order to achieve guaranteed issue under an individual mandate. And we took a lot of precautions in trying to move those forward. Why didn't it pass in California? You know, there are a number of reasons.

We built a very large stakeholder coalition, but obviously not quite large enough. I think a lot of it also had to do with the timing of the proposal. It did pass, the governor signed it; and it did pass the Assembly Health Committee. But by the time it got to the Senate Health Committee, a few days prior to that, notice had come out that California had a budget deficit of $14.5 billion.

And at the time, that frankly was the cost of the new reform proposal -- would have been $14.5 billion. Now, we had financed that completely separate from the state budget. So there wouldn't have been an impact on state revenues. But that made it difficult for us to get that message across. I can go into a number of other reasons, but I'll leave it there for now.

SEN. ENZI: Well, as you think of others, you could write them down for us. And we'd appreciate that.

MS. LIU: Certainly.

SEN. ENZI: I just want to mention that your budget -- our budget deficit dwarfs yours.


MS. LIU: Fair enough. That's the only place it does actually dwarf the California budget deficit.

SEN. ENZI: For the other states, one of the things that I'm very proud of with the Wyoming legislature and the volume of bills that they're able to pass. One of the things I always watch is to see how many correction bills they have to do. Any time you pass something major there's usually something that got left out.

Could one person from each of the states kind of mention some things that they're still mulling over that probably need to be fixed? If you don't have anything, that's okay too.

MR. KINGSDALE: I'll take a crack at it. Obviously, as I said in the opening statement, I think often it is generally recognized we took on access with a nod towards cost containment. But I think that a real battle over costs is still to be fought in Massachusetts. I would point out that our reforms did not exacerbate the costs issues in Massachusetts, or any of the other sort of national problems that characterize health care delivery in the United States.

But everybody now recognizes in Massachusetts that that near universal coverage is simply not sustainable financially unless we do address health care costs. And so, I think we now sort of confront that issue from the moral high ground of a commitment to -- a moral commitment to universal access and maintaining and protecting that. But that's clearly a major piece still to be dealt with.

There have been a number of other sort of smaller issues that -- all the way from technical corrections to recognizing for example that the already growing national problem of inadequate or shrinking primary care supply is an issue that if we're going to deal with finances; we ought to deal with labor supply as well. And so, there is legislation passed last August, chapter 305 of the Act of 2008, which build on some private efforts to fund retention and recruitment of primary care physicians and nurse practitioners in Massachusetts. And I understand that 92 such physicians and nurse practitioners have been recruited and retained as a result of that program.

Massachusetts --

SEN. ENZI: I don't mean to cut you off, but I do want to hear from others; and my time is running out. If you think of some more, let us know; because you're the laboratory for us to work from.

Vermont -- do you have any corrections?

MS. BESIO: Well, let me just say that our reforms were very comprehensive. And we didn't set up a lot of study groups.

We actually in our legislation, we created things like loan forgiveness funds, loan repayment funds to help with our primary care work force and other work force areas in rural areas.

However, the two things that have been continued to be discussed over the last two legislative sessions -- and there have been actually bills that have been passed to augment on the first bill, 2006 reform legislation. Primarily dealt with increasing our Blueprint for Health, which is our effort to change the way care is delivered at the local level. And that includes payment reform, community care teams to multi-payer approach to support primary care practices both in terms of prevention and managing chronic conditions better.

On the covered side, there's been a lot of discussion about expanding access to our new product, the Catamount Health product and the Premium Assistance programs. And honestly, the roadblock there has been money. The -- can we afford to do any more expansions, allow more people into that Premium Assistance program and access that product that is subsidized by the state? And that has been a roadblock for us consistently over the past two years.

SEN. ENZI: Thank you.


MR. CLARK: Thank you very much. Utah is on a -- well, I'm just a southern Utah banker by profession. So I try and make things simple. Numbers are what I'm more comfortable with. So I've taken our health care into this and said it's a one, three, six, ten, is our formula. First year of upward a three-year path, we identified six major areas, in which we think we need to implement reform, including insurance modernization, which we're talking about here.

But we anticipate that it will take us a decade to fully implement that. This is a long and major process. We're beginning to take what I call the old carpenter rule. We have a good health system in the state of Utah, high quality, low costs.

So we're attempting to do the carpenter rule where you measure twice and cut once, before we do anything. So we're having a very major -- (inaudible) -- process and one which we continually look back in the rear view mirror to make sure that our course corrections providing us where we thought we'd be and not the unintended consequences.

Let me put my legislative hat on, and what I want when I'm sitting in the chair. I want somebody sitting at this microphone giving me succinct answers to what I need to know, what the problems are. What you've heard across here is in fact that it's dollars. It is truly a very, very costly process to go through this. Massachusetts was approaching having some serious problems with a large Medicaid retraction; and they needed to make some alternative directions. So they began looking at finding what they can do to retain that money and still work within the system.

In Utah, we never got the deposit slip. We never got to the bank to get that money. Dish (ph) payments according to different states. There isn't anyone here from New Hampshire. I was told there was $8,300 for every man, woman and child. Wyoming, I don't think receives any; they're 50th; 49th is Utah. We get less than $100 per person.

The tools we have to solve these problems -- (inaudible) -- from Washington are entirely different. And that's what allows -- and I think why it's so important for each state to retain its own economy, to try and have some maneuverability in this process. It is really critical.

And I would hope that if nothing else, perhaps maybe a five-year partnership. Give us a demonstration project, the opportunity, the flexibility to come back and report. I think it's going to take a partnership between all 50 states and the federal government to find the right solution. But the bottom half of those solutions might be as independent as all 50 states.

Let me tell you one of the challenges we have and why it's important that we look at partnerships. Right now, ELISA in the state of Utah covers the large employers. States off federal mandate, federal guidelines, we have no say whatsoever. That's one third of my market completely gone. Government, Medicare, Medicaid, CHIP, while we do have some influence statewide, most of the guidance and direction where we do comes from the federal government. The state maneuvers slightly through there. But we've got just this much movement in high risks and the federal government controls most of it.

So I have 30 to 32 percent of the market that I'm trying to influence and control with a limited source of resources. And when you start taking and putting mandates and guarantees, I have these whole other markets I don't impact. But all of the adverse selection and the narrow trouble it comes to gets funneled down right directly on to that 30 to 32 percent, the small businesses around the country that are carrying the burden on this.

In my state, 70 cents out of every dollar paid for insurance comes from an employer-based program. I have to be careful and be mindful of the business community and their efforts; and make sure that we're responsive to those needs and not continue to layer back on top of it. That work is just beginning.

SEN. EZNI: Thank you very much. I apologize for running over so dramatically. I usually don't do that, but I hope --

SEN. BINGAMAN: Oh no, this was very useful.

SEN. EZNI: I hope those were questions that were in the general spirit rather than to make a point.

SEN. BINGAMAN: Very good questions and answers too.

Senator Kennedy, did you want to ask a question?

SEN. KENNEDY: Just very quickly, Mr. Chairman. And one that I've been thinking on as we've gone through these excellent kind of questions. And that is, what we know about is that an enormous fraction of our health care costs are generated by the very small proportion of patients with serious illness. And how can we reduce that through better care or coordination? We have all of these pressures that we find out and particularly as we listen to so many of those that have testified and have done so well today.

And I think we're going to hear from some of those that have been dealing with the health care challenges that all of us are going to be faced with; those on this committee and those that aren't in this committee. And we're going to have the macro costs that are going to come in there. But we're also going to face about this enormous amount of costs that are going to be coming our way. And we're all going to be asked how we are going to be able to deal with those.

We've also seen the situation where some of these -- certainly some of these costs of these individuals that we've heard about, they go through a rather small window. And yet, they have a large window that they're going to have to pay out through. So it's going to come on them through -- in terms of expenditures. And so, how generally is your sense about these costs that we're going to be facing over a period of time? There is nothing new in this comment; but what I think is something we all ought to be reminded about; and that is, what we can do to try and help the states to constantly work so that the states themselves have a reasonable opportunity for success.

SEN. BINGAMAN: Mr. James, go right ahead.

MR. JAMES: I first ought to correct that. I trained originally in surgical oncology. So, I make the second physician on the group. In my specialty area, the first is, the higher quality care usually costs less. I think we did the first clinical demonstration of that in Utah way back in 1986. We've shown it consistently since that's why my colleagues from partners in Boston are spending so much time out in Utah right now.

The second part is that we understand which parts of it really don't serve patient needs and really need to be modified. Just as one example, about 30 percent of all Medicare expenditures going to end of life care, if you measure it different ways six months of life will lasts six months, the last year. I occasionally actually identify the actual episode. There are significant differences across the states in terms of how much that spend is.

The Dartmouth Atlas currently identifies Utah specifically Intermountain as the most efficient.

We spend about $12,000 per Medicare enrollee who dies. Los Angeles is actually the highest right now, $58,000 for the same course of care. Interestingly, the same group shows that the quality of care in Utah is higher. Five times more expense, worst medical outcome. My favorite term for that is rescue care. We're understanding that fairly slowly.

When I talk about approaching 50 percent waste in the system, that's what I mean, right there. It's not care delivered in good service to patients. Their optimist care if they were doing a fair choice is not what they would have selected to be chosen. And we need to get it right, frankly, within the health profession.

SEN. BINGAMAN: Just one or two quick -- I don't want to hold up, maybe there's one or two brief comments.

Dr. Chen, did you want to comment? And then, Ms. McAnneny?

DR. CHEN: Sure. I think Dr. James raised a very good point about the variation in the health care spending in medicine. And there has been some wonderful work done by Elliott Fisher using the Dartmouth Atlas. I think there is a lot of opportunity to deal with some of the waste in medicine there.

I think I would also turn our attention to another part of medical care and that is what I'll call effective care. Those are the things that we know that people need with their chronic diseases. So when you have diabetes, we know you need that eye exam. We know you need that urinalysis. We know you need that foot exam. So it's very important that these people get that care because that prevents more expensive complications down the line.

And so, what Vermont has done is created this -- what was originally a chronic disease management program, the Blueprint for Health. We've enhanced it, we've put the -- as we say, the blueprints on steroids. And we've put it into medical home projects, in demonstration projects throughout Vermont. Where people will be tied together by information technology following standard protocols where there is a unified pair reimbursement based on a per member, per month to provide the kind of case management. And where there is a community care team that makes sure that it deals with all the other patient needs, whether it be mental health needs, whether it be making sure the patient has transportation to get to the doctor's appointment. Or to make sure that the patient has enough money to pay for nutritious food.

So that's all I think what you're going to have to address when we try to deal with those very costly people that end up having the chronic disease. And that where we spend 70 percent of their health care dollars on those 20 percent of the people.

SEN. BINGAMAN: Go right ahead.

MS. MCANNENY: Thank you, sir.

There is a growing focus in Massachusetts among employers on work place wellness initiatives. I think we're increasingly of the sentiment that the best way to control costs is not to incur them at all. And so, folks are trying to keep their employees healthy.

Large employers can use a very holistic approach. They change the food offerings in the cafeteria. They set up walking paths and so forth. But for smaller businesses that don't have those resources, they're collaborating with our state's Department of Public Health trying to give them the tool kit they need to make some changes and to focus on wellness.

MS. LIU: And if I could just add very briefly, that what this really revolves around is over utilization of care. And what we need in place is changes in our care delivery system and our payment system so that we're incenting value-based care as opposed to the volume of care delivered. Certainly, at Kaiser Permanente, that is what we focus on -- about giving people the right care at the right time, in the right place. And we have some of those tools in place to be able to allow us to do that. So, when you're thinking about affordability that's what I would focus on.

SEN. BINGAMAN: Thank you very much.

SEN. : Can I jump in?

SEN. BINGAMAN: It's your turn, so why don't you just go ahead and ask your question?

SEN. : Let me just mention, we've heard about payment reform. And the classic study down at Duke where they opened a congestive heart failure clinic. And they lowered hospitalizations by 25 percent. But they had to shut it down because it couldn't get recognized for the payments under our payment system, under Medicare and Medicaid to drop this magnificent amount of money by putting people back in the hospital rather than going to a managed, accountable care organization, a medical home where we're actually having performance per pay rather than pay for performance, where you perform and you get paid.

And Duke modeled this and they said we've got a plan that works, but the payment reform is key on this. The payment reform is key on retention of primary care. We have a payment system that is broken and it's broken in the government's payment system; and it's broken in the private insurance model.

I'm interested to ask the folks from Vermont how are you without an individual mandate, you've moved two percentage points in terms of coverage. Most of the people we've had testify before this committee and in the study groups that are going around here is you can't have guaranteed coverage if you don't have an individual mandate. How have you done -- have you incentivized so well in terms of the copayments where the subsidization -- is that how you've moved people?

MS. BESIO: I think it's too, too -- that is part of it. The Premium Assistance program has been very powerful in terms of getting the people enrolled. But actually, when we did our initial reform, prior to doing our reforms, we did a state wide survey that indicated that half of the people who are uninsured were already eligible for our existing Medicaid programs and expansion programs but had not enrolled.

And 77 percent of those folks, all of our uninsured said it was because of costs. Well, Medicaid is free. So part of what we did as a strategy, when we developed our new Catamount Health Plan and our Premium Assistance Programs, we did integrated marketing with the private carriers that offered the new Catamount Health Plan. And our message to Vermonters was, every Vermonter needs insurance; that was it. Every Vermonter needs insurance. Here's the 800 number and we asked people to call that number. And we would help determine which program they might be eligible for.

And we think that that message actually got out. We have an employer contribution component to help finance our health care system so that has also helped I think. But our most recent survey that gave us our new numbers, which just happened this fall, showed us that only about .5 percent of Vermonters have experienced a loss of employer- based insurance. So, our employers while they may be increasing cost sharing, they are still continuing to offer that insurance. And we think it's because we've put that message out there and people have taken it to heart.

SEN. : A couple of questions for Massachusetts. In looking at your own administrative budgets, and reading all the press reports and what we hear about the difficulties, you had a mandate. And you had guaranteed issue. And yet, we see that the costs rise -- and one of the statements I think you said earlier is that it wasn't -- it didn't have anything to do with the plan in terms of the costs increases. I wrote it down exactly what you said. You said the plan didn't affect the costs; the costs were there any way. And you also said that the most impossible challenge that we have is costs.

Well how are you all going to address the costs as I read what's published about the Massachusetts Plan, that's a big issue for you. And where do you go since you've got coverage, but now, it looks like you can't afford the coverage because you've got costs. How are you going to handle that challenge?

MR. KINGSDALE: Well, that's a great question, it's the question of the hour in Massachusetts, I believe. I would point out that the major new coverage program that we have Commonwealth Care that comes out of the Connector, we actually had a premium reduction this year to the --

SEN. : I'm talking about your administrative budget. I'm not talking about those -- (inaudible).

My question was related to your total costs, but you've got a 33 percent increase in your administration of it this year over the 2008.

MR. KINGSDALE: Actually, we're going to come in just about flat. But we also have a lot more members this year. But I think we will, but as I --

(Cross talk)

SEN. : The real costs --

MR. KINGSDALE: The real question is costs of health care, yes. And I actually have, I am very enthusiastic. I spent 30 years trying to design coordinated care systems, and endorse some of the comments made earlier about systems; and your own comments about payment reform and payment systems being broken. But I do believe that all that stuff takes a long, long time to develop. And these systems you don't just change them overnight.

So this is a long struggle. Frankly, part of it is putting less money out. We have extremely, extremely smart doctors and health plan administrators and hospital administrators. And if we give them the right incentives, I believe it's much better for them to figure out than for government to micromanage changes in the delivery system. But that is going to take time. So we have one cost containment policy in this country, we have only one that I'm aware of. We ration access to health insurance. We have 50 million people who don't get care because of --

SEN. : We don't have --

(Cross talk)

MR. KINGSDALE: I think we need a better cost containment policy than that.

SEN. : You all don't have that option in Massachusetts right now. So you're going to be -- what you do is going to be a great model for us to look at in terms of how you handle it. And do you have the flexibility being a single state to modify some of the things you need to get to the costs issue?

MR. KINGSDALE: Well, we know Medicare is the biggest payer; it's at 18, 19 percent of the health care sector. And we are -- there is a payment reform commission set up by the chapter 305, I mentioned was passed in August. They are actively considering -- they've already sort of voted to recommend movement over the next five years to global budgets as a way of paying, and a way from fee for service.

And we probably would -- if we can legislate that, seek something like a Medicare waiver to try to involve the biggest payer in the country in that. But it is a challenge when you're at the state level.

SEN. : One short follow up. Is everybody looking at accountable care organizations?


MS. LIU: Yes.

SEN. : Okay, thank you.

SEN. BINGAMAN: Senator Sanders.

SEN. BERNARD SANDERS (I-VT): Thank you, Mr. Chairman. And welcome to all of our guests. This is in fact an important hearing. I think what Senator (sic) Clark and Orin Hatch and others have pointed out, a lot of interesting things are happening at the state wide level that we want to include those experiences and any ideas that we have for national legislation.

And in fact, in that regards, while I suspect my ideas may be different than Speaker Clark's, we have introduced legislation that would provide five states of the country who want to go forward with universal health care waivers to do it their way. You may do it in Utah one way; Vermont may chose to go a single-payer route. Let's analyze the results of those and see how it's applicable to national legislation. Does that make sense to you?

MR. CLARK: Absolutely. I think the incubation to what we're talking about -- I look at Utah and Massachusetts. Massachusetts began this process of their reform by going to the public sector first to do that reform and now we're beginning to look at the private sector --

SEN. SANDERS: Let me just say, but the idea of giving states the freedom to have support from the federal government do the waivers, you mentioned ERISA, so you can have those waivers to go forward in the way you think makes sense.

Does that make sense to you?

MR. CLARK: It does if I can add COBRA, HIPAA, the Department of Labor and the tax code.

SEN. SANDERS: And that Mr. Chairman, that's what I think we have introduced. And I think we can learn from those experiences. And I think what states do will be very different. I mean, Utah will probably be different in Vermont. Let's look at those results.

Number two, we have obviously, the theme of the hour is cost, all over the country. And I want to say some good news here is that in the stimulus package we have put $2 billion dollars more. We have doubled the funding for community health centers, the program that Senator Kennedy developed some 40 years ago. We have tripled the funding for the National Health Service Corps to provide debt relief for those physicians who want to go into primary health care, and dentists and nurses as well. And the beauty of that is that what the studies tell us is that if you have strong primary health care and a medical home, you save money at the end of the day.

Does anybody not think that we should continue that effort in strengthening primary health care and the National Health Service Corps. Is that a good idea? Anyone think it's not a sensible idea?

Mr. Speaker?

MR. CLARK: Well I -- the devil is always in the detail. The 30,000-foot view you said, right there. I think that we're all in complete agreement.

SEN. SANDERS: Okay. Great. The one issue when we talk about the cost of health care that does not come up, and it amazes me that it hasn't, is that we spend twice -- almost -- twice as much per person on health care as any other industrialized nation. And yet we have 46 million Americans without any health insurance. We are the only country in the world without a national health care program.

I know it will shock people to hear this, but the one program, as I understand it, that has more support from physicians than any other program in the country, is called single payer. At least 15,000 physicians, a number of state legislations have come on board the single-payer concept. And the strength of the single-payer concept is that it eliminates all of the waste, administrative costs, bureaucracy, profiteering, that currently takes place within private insurance companies.

So we talk about saving money, I wonder how we do not talk about the fact that there are private insurance companies who take 25, 30 percent or more of every health-care dollar for administration, rather than putting that money into doctors, nurses, medicine, etcetera. Anyone want to comment on whether or not we think we have a good system if some private insurance companies are making 30 cents of every dollar in bureaucracy and billing and every other thing, driving everybody nuts in terms of the billing process?


What? We don't talk -- are we not allowed to talk about that issue? Are the private insurance companies quite so strong that we're not allowed to raise it? Jesus.


DR. KINGSDALE: Well I'll address it if you want.


DR. KINGSDALE: Okay. Actually the plans and two exchanges -- we run two exchanges. One of them, the largest one, run about 8 percent administrative costs, and the exchanges can function, I think, to take that part of our health insurance industry, which has the highest administrative costs, the highest costs of distribution, now on the order of 15, 20 percent, and I'm talking about the non-group market, and introduce substantial efficiencies into the distribution of insurance so that when you have guaranteed issue, guaranteed renewal, community adjusted rating, and we get 80 percent of our applications in our private market online. You can actually take 10, 12 percent out of the cost of non-group insurance.

So, I'm not going to address your larger question. I know there are issues about waste and billing and claims, and so forth, but there is a concrete way to take a substantial chunk out of that.

SEN. SANDERS: But let me just -- I think that it was Dr. Chen who made the point, maybe I'm paraphrasing him, is coverage is not coverage. We have to get into the specifics. You can have a catastrophic plan, which really doesn't mean much, huge deductibles, co-payments -- so what? You're -- on a statistic it's covered but it's not a good plan.

Now let me ask Dr. Kingsdale. I have a statistic. Tell me if I'm right. This is on the Massachusetts plan. As I understand it, and I know you don't have the figures in front of you, but tell me if this sounds right. As of December 29, 2008, fairly recently, a 56- year old -- why we selected 56 I don't know -- a 56-year old middle income person, man, would spend 48 hundred and 72 dollars -- that's the cheapest plan available to that person. The policy has a $2,000 deductible; it has a 20 percent co-payment of up to $3,000. So that means that if A guy has a bad year, breaks his leg, he could be spending $10,000, he has exposure of $10,000 for a middle-income guy. Is that what is true for the Massachusetts plan?

DR. KINGSDALE: You're right. I don't have the numbers in front of me, but I think for an individual that would be a $5,000, not a $10,000. And yes, health care is god-awful expensive. In that example --

SEN. SANDERS: No. It's not 5,000 (dollars). Under the Massachusetts plan, an individual is 48 hundred. Is that correct, for an individual?

DR. KINGSDALE: Well I don't want to argue with the numbers.


DR. KINGSDALE: I think it's 5,000, but your point nevertheless, whether it's five or ten (thousand dollars), is it's a huge amount of money.


DR. KINGSDALE: And somebody else made the observation that that's really financial protection. Now, that bill could well be $100,000, of which the insurance only covers 95,000. And yes, 5,000 is outrageously expensive. But that's medical care in this country.

SEN. SANDERS: No, I understand that. My only point was that before we look at Massachusetts as some kind of Utopian solution, to understand that a middle income person who breaks his leg could be spending $10,000 a year. That is not a solution, frankly. That is just far too much money.

So, that's all.

Okay. Thank you very much, Mr. Chairman.

SEN. BINGAMAN: Senator Alexander.

SEN. LAMAR ALEXANDER (R-TN): Thank you very much. I wonder if any of you have looked at the Tennessee experience with TennCare in trying to see what mistakes you could avoid. You know, back in the nineties I remember riding along and hearing on the radio, after I was governor of the state, that we were going to cover twice as many people for the same amount of money. And I thought, that probably won't work. And for a while it seemed to, because there were a high level of children insured at relatively low cost, but by a few years later, it was threatening to consume 40 percent of the state budget. And the current governor has had to even recommend taking 170,000 people off the rolls, which is a very painful experience.

So I wonder if that can provide any lessons that you were able to avoid in developing your plans, although it wasn't relevant to your plans.

Yes sir.

DR. CHEN: Yes, I think that we did actually learn about the TennCare lesson in Vermont. And I would say that throughout our expansions, both in Medicaid and also in the Catamount health program, we put in what we'll call circuit breakers. So there was always an ability to stop enrollment when we thought that things were going too -- (inaudible) -- was going too strong and costs were kind of overwhelming the system itself. So that was a lesson we did learn.

SEN. ALEXANDER: Mr. Clark. You talked about federal regulatory barriers preventing states from pursuing wellness initiatives or personal responsibility elements of a health reform program. Do you want to specify some examples of that?

MR. CLARK: Well right now there are, as I carved out, there is some, about two-thirds of the market that we have no impact on whatsoever, or very, very little, when it comes to the government program. It's always a matter of asking them for a waiver for direction. The ERISA plans are out of bounds, so we have our small commercial barrier. So right around, the funnel starts to come down.

When it comes to these studies, a lot of regulatory issues that deal with how we do incentives. What would be wrong with incentivizing an individual, a diabetic, five years down the road, to receive back a portion of their premium if they were able to drop? Or share it with the physician that is able to improve the quality of health?

You've got a baseline medical. You drop that down. They show the improvement. Here you are. Right now, IRS code -- there's all kinds of challenges out there that are almost insurmountable to try and move forward. Well, I'll answer that question if I can take 10 seconds. I know the senator left, but we don't have 37 percent administrative costs in the state of Utah.

I'm very -- the companies that we deal with, if they did, I would give them about 24 months, and they would be in Chapter Seven. I'm a little bit disturbed sometime at the abstract numbers that get pulled out. There may be those around there, but they are the outliers there, not the mainstream performers that have viability and substance over the term.

SEN. ALEXANDER: Thank you, Mr. Chairman.

SEN. BINGAMAN: Thank you.

Senator Hagan.

SEN. KAY HAGAN (D-NC): Thank you, Mr. Chairman. One of the challenges I think we face in passing a health care reform bill this year is convincing the 250 million people in our country who currently have health insurance, and convincing them that reform will be as good for them as it will be for the 50 million people who don't have insurance.

So with the uninsured, our goal is fairly straightforward even if our accomplishing it is not. We want to get them into an affordable, reasonable plan. For the people who have insurance now, the challenge isn't quite as clear. Of course, we need to make sure that the people who are happy with their insurance can keep it.

But we also need to improve the system in such a way that even the people who are already covered see the benefits.

For example, I think it is generally true that health insurance is a source of stress even to the people who currently have it. I believe Kaiser conducted a poll late last year that showed that 29 percent of the people who have health insurance are worried, are very worried about losing it, and another 20 percent are somewhat worried about losing it. So, as we're trying to get more people covered, half the people that are already covered are worried about losing their insurance.

Well, with that background, can those of you who have been a part of the efforts in Massachusetts and California address the reactions of the insured population to the plans that were proposed in those states, and any lessons we can learn at the national level how to best insure that the buy-in of those who have health insurance.

MS. McANNENY: Sure, thank you. I think in Massachusetts, for those who had insurance prior to health care reform, I would put, at least for the employer community, I would categorize them in three different buckets, if you will.

The first would be the large self-insured that were mentioned, and I think, through health care reform, they were largely unaffected. There certainly were some implications for them, but they continued to purchase as before.

I think for the very small employers, those with 11 or fewer full-time equivalents, they too are unaffected because we chose to exempt them from health care reform or at least any responsibility. For that smaller employer community, with more than 11 but still in the fully insured market, it has been a challenge. Those are the folks who have faced the greatest new responsibilities under health care reform.

I think for all employees who get their care through the employer-sponsored system as health care costs continue to rise, it is a growing concern because there has been more of a cost sharing with employees, and I think that in this down economy that will probably only exacerbate. So I think that it is a critical point, and I think from the employer community, one that we're watching very closely.

In Massachusetts, we chose to expand coverage first. The employer community's preference would have been to tackle the cost- containment issue. We do have payment reform efforts underway. We're watching them closely, and we do think that that's absolutely necessary if we are going to contain costs. But I agree that for those who do get their insurance through their employer, the cost is important, and I think they are very concerned.

One of the issues with the individual mandate that I would like to raise has to do with, if you do have a mandate, it begs the question: How much insurance is enough to satisfy that? And in Massachusetts the term is minimum credible coverage. That was a very contentious issue because what we did not want to do in Massachusetts was disturb the employer base.

For those people who had insurance, most people are satisfied with their employer-sponsored coverage and wanted to keep it. So we didn't want to make employers have to significantly amend the insurance that they offered. At the same time, we wanted to make sure it was more than just catastrophic, and provided coverage for a whole host of things, like in-patient, out-patient prescription drugs, and the like.

So that was one of the biggest challenges, in my opinion, for Massachusetts, and I think that that's still a work in progress. There are folks who want minimum credible coverage to be more expansive than it is. The employer community continues to push back, that you don't want it to be overly generous so that it disturbs the market. So there is, there is tension there.

MS. LIU: Yes, in California, you're absolutely correct, that one of the lessons we learned, and one of the things we focused on, is that we had to think about how the health reform proposal was useful for people who currently do have insurance. One of the things that we took a look at; one, there was the issue of, as you said, of people being afraid of losing their coverage, especially in these kind of economic times.

So we were moving, in California, from an underwritten market to a market of guaranteed issues, so that people would be sure that they could get products when they needed it, and we also put in some market reforms that would lower the cost of care for people who had health conditions. So we were going to phase out health-status rating.

So those things were very -- that's the kind of things that the public wanted. Now, in order to make that work, we needed to have in place, because we have such a highly underwritten market, an individual mandate to make sure that you could offer guaranteed issue at an affordable rate.

One of the other things that we looked at in terms of cost containment for people who currently do have insurance, is tackling something that we called the hidden tax, and that's how we talked about it with people. What we really meant by that is that today if you purchase through the commercial market, you're paying for your premium, but you are also paying for those who are uninsured, and you are paying for the underpayment, frankly, of public programs, especially in California, the Medi-Cal program significantly has very low reimbursement rates.

So as part of our health reform process we increased Medi-Cal reimbursement rates by over $4 billion, and that was really, the focus there was to say, we want to lessen the cost shift on the people who are currently purchasing coverage, as well as make sure for people who might lose that coverage, that they have that security that you are talking about.

SEN. BINGAMAN: Senator Merkley.

SEN. JEFF MERKLEY (D-OR): Thank you very much, Mr. Chair. Very quickly, in Massachusetts, when folks do not comply with the individual mandate, how do you address that? What is the combination of incentives or punishments, if you will, that create the framework for that?

DR. KINGSDALE: Well I mentioned earlier that health care reform is a campaign and first of all, we complement the individual mandate with an assessment on employers to make, if they don't make a fair and reasonable contribution with significant subsidized subsidies for low income, uninsured, and I think Susan (Besio) referred to the cost of that.

Beyond that, we implement the individual mandate with sort of a -- we phased it in; we made additional coverage programs available before it went into effect; it didn't have any penalties attached to it for the first six months less one day; it had a modest penalty in the first year, 2007 that goes up in '08 and '09; we have a very robust appeals process which the connector runs. So we basically try to run it, and we complement it with this campaign of shared responsibility.

We use the Red Sox, the number one brand name in New England, has connector day, has a whole connect to health. We try to message that health insurance is good for you and administer the mandate from that perspective rather than from sort of a gotcha perspective; we're going to bend over backwards to try to penalize you.. We try to bend over backwards not to penalize people.

SEN. MERKLEY: Thank you very much, Doctor. And I have a number of questions so I'm going to just keep it moving quickly here.

One of the questions on cost containment is how you create incentives, and there's been a lot of observation in various forms that when you have pay for service you incentivize doctors to do lots of services, lots of tests, lots of etcetera, and so on and so forth.

It's also been pointed out that the Mayo Clinic has one of the least expensive but highest quality services and that one of the components of that is that the doctors are paid on salary, thereby eliminating incentives for them to do, if you will, additional tests. Is that part of the discussion in any of your states?

MS. LIU: I'm Ruth Liu. I'm actually with Kaiser Permanente, and we agree with you because that's how we pay our doctors, as well, is on salary, and that makes the financial incentives work for people so that you do have the, you have the incentive to give the member appropriate treatment since you're getting a capitated payment in your salary but you don't have the incentive to over treat. At the state level, it's really hard to implement a lot of strategies.

SEN. MERKLEY: Do you have the reverse problem, by the way, in which doctors receive more reimbursement if they provide less services? Or is it just the same, regardless? Is the salary fixed?

MS. LIU: The salary is fixed.

SEN. MERKLEY: It's fixed.

MS. LIU: Yes, absolutely. And the doctors make the decisions about what care is appropriate. It's not the health plan making the decisions. But what I'm saying is, the incentives are in place because obviously you need to manage that member's care as effectively as possible because they are your member, and you are getting paid a capitated fee on that.

I think, at the national level, you have a much broader opportunity to make those changes in care delivery and payment reforms, that states are a little bit in a bind in terms of making that. I don't know if any of the other colleagues want to chime in.


DR. CHEN: So in Vermont, a significant proportion of the physicians, actually probably half, are employed by hospitals or hospital systems. So to the extent that we already have some of that in place, we can tailor some other reform, whether it be the blueprint ahead, medical home, toward that using, taking advantage of that. I think the rest of the physicians are small, very small practices of individual practitioners, and it really would be hard to change that culture in terms of trying to contain costs.

SEN. MERKLEY: I see I'm starting to run out of time, so let me try one more question, and Mr. Speaker, I'd be happy to get your follow-up to that afterwards. But you are in fact, it is speaker, isn't it? Speaker Clark. You referred to, I think if I've captured it right, doesn't it make sense for someone to get compensated for managing their diabetes? Is that, was that the comment?

And there has also been -- the CEO of Safeway was here, saying, hey, we, in our self-managed health plan, have a number of incentives we have incorporated, combined with real opportunity and encouragement to address disease management regarding diabetes, regarding heart conditions, certainly regarding smoking and smoking cessation.

Have any of your states succeeded in overcoming the bureaucratic obstacles or the cultural issues? Has it been a useful application of these sorts of incentives to encourage people to make themselves healthier and help lower the costs of health care in the process for all?

Mr. Speaker.

MR. CLARK: The wellness aspects of this I think is the one that's been probably the deepest, richest vein, but hasn't been tapped as much as it needs to be. In Utah, part of our health system reform is involving a number of demonstration projects with large models that will allow them both to do bundle pricing, so that the entire product, now, the physician, the hospital, is all one price and they have to manage to that price for the quality that they deliver.

Two, we're looking at other demonstration projects where we can enhance just what we talked about here. Let us find out what it is we can to try and find proper incentives. We spend a considerable amount of the task force this last summer in trying to drill down what the different insurance that are in our state, what they do for incentives.

Some have gathered the vision. Some call an incentive a gift card. If you do certain things we'll mail you a gift card to Target. Now those might be, I think they are for all the insured, what I would call a wellness program. We need to get a more holistic program, and we're trying to do some demonstration projects on a large enough scale that we can find out statistically and try and move forward in a measured process.

MS. BESIO: In Vermont we've just passed legislation that allows our carriers, even though we do have community rating, to allow our carriers to offer incentives, monetary incentives in their different products for people adhering to wellness initiatives.

That's just getting underway, so we don't have any data, but I do want to make the point that we do have these integrated medical home pilots that are incentivizing practitioners, primary care providers, as well as their patients, to adhere to better practices by using evidence-based care; having community care teams to support those patients that the doctors don't have time to support in 15-minute visits; giving them health information technology to know how many people on their panel need foot exams this year, I mean this month -- most providers don't have that kind of information --; getting the lab tests in, so that when you go to a specialist they don't have to repeated, another unnecessary cost and concern for patients themselves.

But Medicare is not at the table We cannot get Medicare at the table. So we've got Medicaid and our three primary insurers all agreeing to provide the same monetary incentive to providers for evidence-based care, agreeing to support the same community care teams -- they are all paying for this community care team -- and agreement to, in the future, in a year from now, if those show that they are cost effective, to take the money that is currently being invested in their 1-800 disease management program, and support moving this integrated model statewide, but we can't afford to do it without Medicare's involvement.

And because Medicare is so rigid in their demonstration programs, and their approaches to states, we can't get their involvement because we need to apply to be part of a singular Medicare demonstration project, which makes no sense when you are at the provider level trying to manage care for your entire patient panel.

SEN. MERKLEY: Thank you.

SEN. BINGAMAN: Senator Enzi, did you have additional questions?

SEN. ENZI: Mr. Chairman, I do, but they are somewhat more detailed, and so I would be happy to submit those and would hope that I could get responses. This has been tremendously helpful. I always feel that round tables are the best way to get the information if we are all working toward a common goal. And of course our common goal is to get everybody covered and hopefully not to put states, in particular, in constraints either, so.

I've got pages of notes here, but I'm also curious as to you know what the benefit packages are in each of these states and how you derive that and how you change it and how long it takes to make changes. But what we've gotten is just valuable beyond calculations, so I hope that you'll answer questions from myself and others that -- maybe even some that weren't here. But I'll be sharing my notes with a number of people.

Thank you very much.

SEN. BINGAMAN: Thank you.

Senator Merkley, did you have any other questions that you need to ask at this point?

SEN. MERKLEY: I do have a couple, if it would be appropriate.

SEN. BINGAMAN: Why don't you go ahead.

SEN. MERKLEY: Senator Coburn mentioned pay for performance as a reform, and I'm not sure that I understand that, exactly, but rather than just pay for tasks, I assume it's the outcome of a successful treatment of a disease. Have any of you incorporated pay for performance? Exactly how have you applied it? And what are the results?

DR. CHEN: Well I think that it's fairly common in the insurers in Vermont, at least, that following well-described evidence-based metrics, if you do x,y,z on your patients, you get an enhanced payment, and that happens with Blue Cross Blue Shield and MBP, the two non-profit insurers.

One of the things that we have tried to stress so that providers and physicians aren't really going crazy with all these different metrics is that the blueprint says, everyone will use the same metrics. So whether you are Blue Cross, whether you are MBP, or whether you are Medicaid, we're going to follow the same thing. But we'll come to agreement on what they look like in the beginning.

So we are doing it. It is certainly a part of health care in Vermont at this time.

SEN. MERKLEY: So when you talk about evidence-based practices, you've applied and determined that here are the best cost-effective steps for addressing a particular situation. If a medical practitioner follows those steps, they get an incentive payment --

DR. CHEN: Right.

SEN. MERKLEY: -- or a bonus or a reward. So it's not based on the outcome or the effectiveness that the person is healed, if you will, but it's based on following the process.

DR. CHEN: Right. It's a process-based measure, at least those, the classic pay for performance, is process based.

MS. BESIO: I just want to point out that incentives can also take other forms. So giving those practitioners the kind of information technology tools that they need that will help guide them in their care delivery, is also a form of incentive to help them provide that better care.

So we've got, we've used a tool called DocSite that we're starting to provide to any practitioner in Vermont -- we are starting with primary care practices -- that literally had in it, embedded, the evidence-based practices that we are trying to promote, that also has in it preventive care, evidence-based practices for preventive care, not only to chronic disease management, so that those, so that it gives doctors reminders of the preventive care that people need when they show up.

It actually has, when people come to their office you can get a printout on how they compare to the national norms or to the state norms or regional norms on different indices, to show what they are at risk for, etcetera. So that, there's not only payment incentive, but also giving practitioners the tools and resources that they need in order to better manage care.

SEN. MERKLEY: Have you all extended the best practices into the formulary world?

(Off mike.)

MR. CLARK: That's a very interesting question. I think that the formulary has probably been more focused on cost rather than on best practice. I think it has been more driven by the dollars, but there has been some effort to try and do that.

I just want to emphasize that I wish Dr. James were here. What he has done has been recognized worldwide in those particular efforts that you talked about here in best practices, quality measurements. And in fact, I've heard him speak numerous times where he says that the cost access and quality, typically the three-legged stool, it is not not a three-legged stool but is a liminary equation, and that if you want to have lower costs, then you need to make sure you have the quality. You get that and you will then solve the access question accordingly.

DR. CHEN: I think in terms of the formulary, there are some certain items like an ACE inhibitor if you're a diabetic and you're spilling protein, that are recommended, and those are part of, in some areas, the evidence-based guidelines, but as Speaker Clark mentioned, a lot of the other best practices in formulary come down to: Is there a better drug, the same drug but equally effective drug that costs a lot less? So it's really a cost issue, which is important.

SEN. MERKLEY: In -- I'll just wrap this up here -- in Oregon, we had a lot of discussion of formulary, and essentially the strategy was to lay out a recommendation to the physician that they adopt this drug first because of the evidence that it's been most cost effective. If they wished, they could waive that recommendation. They had to fill out a form and say, I'm waiving it. So a little bit of a hurdle, but there was no sort of bonus involved.

That's the first -- I found it quite interesting, but it was extremely controversial to have any sort of embodied advice, if you will, or, this is the best idea, and not an easy discussion to hold as we were attempting to reduce costs.

MS. BESIO: We actually used formularies in our Medicaid program. We don't provide incentives for it, but we actually require that people go through a formulary process.

MR. CLARK: But I think that in many states, it's the same thing. It's the formulary, and if you want to do something outside of that, then it requires that additional effort on behalf of the physician.

SEN. MERKLEY: So thank you all very much. I appreciated your responses.

Thank you, Mr. Chairman.

SEN. BINGAMAN: Yeah, let me just thank everyone as well. I think it has been very useful, as Senator Enzi indicated. This helps us to figure out what we ought to be trying to get consensus on around here. So thank you very much, and that will conclude our round-table discussion.


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