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70–870 2011

THE HEALTH CARE LAW’S IMPACT ON JOBS, 

EMPLOYERS, AND THE ECONOMY 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JANUARY 26, 2011

Serial No. 112–03 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

DEAN HELLER, Nevada 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

CHRIS LEE, New York 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

RICK BERG, North Dakota 

DIANE BLACK, Tennessee 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

JON TRAUB, Staff Director 

JANICE MAYS, Minority Staff Director 


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C O N T E N T S 

Page 

Advisory of January 19, 2011, announcing the hearing ....................................... 2 

WITNESSES 

Austan Goolsbee, Ph.D., Chairman, Council of Economic Advisors .................... 6 

Douglas Holtz-Eakin, Ph.D., President, American Action Forum ....................... 38 

Scott Womack, President, Womack Restaurants .................................................. 60 

Joe Olivo, Owner/CEO, Perfect Printing ............................................................... 67 

SUBMISSIONS FOR THE RECORD 

Mr. McDermott ........................................................................................................ 138 

Mr. Pascrell .............................................................................................................. 140 

Mr. Rangel, NFIB .................................................................................................... 166 

Campaign to End Obesity Action Fund ................................................................. 167 

James T. Lette ......................................................................................................... 169 

LumaCorp ................................................................................................................. 170 

Main Street Alliance ................................................................................................ 171 

National Business Group on Health ...................................................................... 174 

National Partnership for Women & Families ....................................................... 177 

National Private Duty Association ......................................................................... 179 


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THE HEALTH CARE LAW’S IMPACT ON JOBS, 

EMPLOYERS, AND THE ECONOMY 

WEDNESDAY, JANUARY 26, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC. 

The committee met, pursuant to notice, at 9:04 a.m., in Room 

1100, Longworth House Office Building, the Honorable Dave Camp 

[chairman of the committee] presiding. 

[The advisory of the hearing follows:] 


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HEARING ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

Chairman Camp Announces Hearing on the 

Health Care Law’s Impact on Jobs, Employers, 

and the Economy 

Ways and Means Hearing to Examine the Impact of 

Taxes, Regulations, and Mandates Contained in the 

Health Care Law on Economic Growth and Job Creation 

January 19, 2011 

House Ways and Means Committee Chairman Dave Camp (R–MI) today announced that the Committee on Ways and Means will hold a hearing on the impact 

the ‘‘Patient Protection and Affordable Care Act’’ and ‘‘Health Care and Education 

Reconciliation Act of 2010’’ will have on the U.S. economy and employers’ ability to 

hire new workers and retain existing employees. The hearing will take place on 

Wednesday, January 26, 2011, in 1100 Longworth House Office Building, beginning at 9:00 A.M. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A 

list of invited witnesses will follow. 

BACKGROUND: 

The Democrats’ health care overhaul imposes more than one-half trillion dollars 

of tax increases and numerous pages of mandates and onerous regulations on employers. Employers of all sizes are expressing concern that the new mandates and 

regulations will deter them from hiring new employees, threaten their ability to retain existing workers, and harm their ability to increase wages for existing employees. The new health care law compounds the uncertainty employers and entrepreneurs are facing amid the most challenging economic climate since the Great Depression. Making matters worse, some insurance companies and employers have already increased their health care premiums, in part, to comply with the new health 

care law, exacerbating the drag on the U.S. economy from rising health care costs. 

In announcing this hearing, Chairman Camp said, ‘‘Employers have repeatedly 

expressed their concerns about the effects of the Democrats’ health care 

law. This hearing provides us the opportunity to directly hear from employers about the higher taxes and new mandates that are in this law. This 

will also serve as a basis for how this Committee, and Congress, can best 

respond to the concerns of employers and workers and refocus its energy 

to develop common sense solutions that prioritize affordability, job creation, and economic growth.’’ 

FOCUS OF THE HEARING: 

The hearing will examine the economic and regulatory burdens imposed by the 

enactment and implementation of the ‘‘Patient Protection and Affordable Care Act’’ 

(P.L. 111–148) and the ‘‘Health Care and Education Reconciliation Act of 2010’’ (P.L. 

111–152). It will explore the impact on jobs stemming from the new taxes and new 

federal regulatory requirements. It will also analyze the impact of the employer 

mandate on job creation. 


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DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word or WordPerfect document, in compliance with the formatting requirements listed below, by the close 

of business on Wednesday, February 9, 2011. Finally, please note that due to 

the change in House mail policy, the U.S. Capitol Police will refuse sealed-package 

deliveries to all House Office Buildings. For questions, or if you encounter technical 

problems, please call (202) 225–1721 or (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov/. 

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Chairman CAMP. The Committee will come to order. Good morning. Today’s hearing is on the health care law’s impact on jobs, employers, and the economy. We will have two panels today. 

Our first panel will feature Austan Goolsbee, who is chairman of 

the Council of Economic Advisors. 

I will begin by making an opening statement, and then I will 

yield to my friend and ranking member, Mr. Levin. 

I want to start by reading the following quote. ‘‘I know one of the 

things that’s come up is that the 1099 provision in the health care 

bill appears to be too burdensome for small businesses. It just involves too much paperwork, too much filing. It’s probably counterproductive. It was designed to make sure that revenue was raised 


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to help pay for some of the other provisions. But if it ends up just 

being so much trouble that small businesses find it difficult to 

manage, that’s something we should take a look at. So there are 

going to be examples where I think we can tweak, and make improvements.’’ 

That was President Obama on the day after the November elections. The President was saying the health care law appears to be 

too burdensome for small businesses, that it involves too much paperwork, too much filing. And last night, in his State of the Union 

Address, the President again referred to the 1099 provision, as we 

have come to call it, as a flaw. 

But more importantly, the President asked us to identify and 

bring to him items that need to be fixed. And clearly, in a bill 

that’s over 2,000 pages long, there is more than just the 1099 provision we need to address. 

With unemployment rates stuck above 9 percent for the last 20 

months, and with my home state’s unemployment at nearly 12 percent, I have one simple question today. How is it that Congress 

passed a health care bill that is ‘‘counterproductive’’ to American 

employers? Especially at a time we need to be looking at solutions 

that encourage, not impede, job creation. 

That’s the focus of our hearing today, the health care law, and 

its impact on the economy, on employers, and their workers. If 

signed into law, the Democrat’s health care law imposes more than 

a one-half-trillion dollars of tax increases and thousands of pages 

of mandates and onerous regulations on employers. 

My friends on the other side of the dais have argued that we 

shouldn’t be debating health care anymore, that we need to move 

on, and focus on jobs and the economy. What they need to recognize is that employers of all sizes are expressing concern that the 

new mandates and regulations will deter them from hiring new 

employees, threaten their ability to retain existing workers, and 

harm their ability to increase wages for existing employees. 

The new health care law compounds the uncertainty employers 

and entrepreneurs are facing under the most challenging economic 

climate since the Great Depression. Making matters worse, many 

insurance companies and employers have already increased their 

health care premiums to comply with the new health care law, exacerbating the drag on the U.S. economy from rising health care 

costs. 

That’s the problem with the health care law that puts Washington, D.C., the Federal Government, at the center, instead of patients and doctors. And when you take a Washington-knows-best 

approach to legislation, you usually end up with a bill that only 

works for Washington, instead of working for the American people. 

At the end of the day, the health care law fails to control costs, 

it fails to let Americans keep the insurance they have and like, despite the President’s promise, it fails to protect jobs, it fails to ensure seniors have access to their doctors and hospitals, and fails to 

prevent tax increases from hitting middle-class families and the 

small businesses we need to move our anemic economy forward. 

The hearing today is just the first of many with regard to the 

health care law. It’s my intention to give the American people and 

employers, both large and small, the opportunity they did not have 


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when this law was being written, to testify in an open hearing 

about the impact this law will have on them. 

We know what the experts have said. We all know that the nonpartisan Congressional Budget Office has estimated the health care 

law will increase premiums for millions of families by up to $2,100 

on average by 2016. That’s $3,200 more expensive than the Republican alternative I offered last congress. 

We all know that the Obama Administration’s own officials have 

predicted that as many as 7 out of 10 employers will have to 

change the coverage they offer to their employees because of the 

law. 

We all know, from the joint committee on taxation, that there are well over $500 billion in new taxes, many of which will hit middleclass families and small businesses. That’s what the experts have 

told us. 

Today we will hear something different. We will also hear from 

real employers, and what they think about this law, and what they 

think the impact will be on their businesses and their employees. 

I look forward to hearing this testimony and getting more of this 

sort of insight in the future. After all, these are the very people 

who have to live with the decisions that are made here in Washington. 

But before we do, I ask unanimous consent that all Members be 

allowed to submit an opening statement for the record. 

Chairman CAMP. Hearing no objection, I now yield to the ranking member, Ranking Member Levin, for the purposes of an opening statement. 

Mr. LEVIN. Thank you, Mr. Chairman. Dr. Goolsbee, I understand, will be here until 10:30. He will have a chance, Mr. Chairman, to respond to some of your criticisms that I don’t think are 

valid. 

But we want to hear from you, Dr. Goolsbee, so I will be brief. 

Last night, the President said some very clear things about the 

health care issue. He said, ‘‘Instead of re-fighting the battles of the 

last two years, let’s fix what needs fixing, and move forward.’’ My 

concern about the hearing is that, indeed, we will be re-fighting the 

battles of the last two years. 

For example, as to 1099, we introduced legislation in the last session. It passed here. It was opposed by the then minority because 

of the pay for. Ironically, much of what is in the bill was in the 

pay for is now the law of the land. We should have acted on 1099 

last session. 

In his speech, the President also said, ‘‘What I’m not willing to 

do is to go back to the days when insurance companies could deny 

someone coverage because of a pre-existing condition.’’ He went on 

to point out that the law is now making prescription drugs cheaper 

for seniors, and giving uninsured students a chance to stay on their 

parents’ coverage. So, I repeat, he then went on to say, ‘‘Instead of 

re-fighting the battles of the last two years, let’s fix what needs fixing, and move forward.’’ 

I think that’s exactly what we should do, and I would hope that 

would be the tone of the hearing today. I yield back. 

Chairman CAMP. Well, thank you. Welcome to the Ways and 

Means Committee, Mr. Goolsbee. Under our rules you will have 


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five minutes. Your written statement will become part of the 

record. And so, welcome, and you may begin. 

STATEMENT OF AUSTAN GOOLSBEE, PH.D., CHAIRMAN, 

COUNCIL OF ECONOMIC ADVISERS, WASHINGTON, D.C. 

Mr. GOOLSBEE. Thank you, Mr. Chairman. And I would like to 

say good morning to Chairman Camp, Ranking Member Levin, and 

all the Members of the Committee. Thank you for inviting me to 

testify here today. And I know we were up late, and I saw several 

of you last night, and I appreciate your time. 

The Affordable Care Act was designed to make sure that health 

insurance coverage is affordable for individuals, families, and businesses. And while millions of people are benefitting now, much of 

the impact of that act will begin when the major coverage provisions take effect in 2014. 

The best evidence that we have gathered from outside experts 

suggests that, in addition to slowing the growth of Medicare spending and significantly reducing the deficit over the next 10 years 

and the 10 years after that, that the Affordable Care Act can be 

a significant benefit to the job market by easing the burden of 

health care costs on small businesses, and by reducing the growth 

rate of health care costs for all businesses. 

Now, the impact of the Affordable Care Act on the labor market 

is an important topic. I applaud you for having this hearing. I believe there has been a significant amount of confusion on this issue, 

and I am happy to have this opportunity to try to clarify that. 

I think the President laid out last night in a way that is most 

helpful, and you iterated in your opening statement, Mr. Chairman, that we should try to work together to improve—whatever is 

broken or problematic we should fix together. Anything that reduces costs is going to help jobs in this country. 

Health care has, for years, been one of the most pressing cost 

issues facing the business world. Those costs have been rising dramatically, long before there ever was an Affordable Care Act, and 

the Affordable Care Act’s intention is to try to address that. 

I would highlight two basic mechanisms that I think the Affordable Care Act can have a—has had and will have a significant positive impact on the job market. The first mechanism is in the area 

of small business. Now, the role of entrepreneurs and small businesses in job creation and in the economy is well known. Equally 

well known is the fact that small businesses have, for years, consistently said that the cost of health care is one of their most significant problems. 

Small businesses that want to provide insurance for their workers face much higher costs than large firms do for exactly the same 

plans. And in many states they also face the risk that a single sick 

employee, or even an employee’s ill family member, will send their 

premiums through the roof for all of their employees. 

The Affordable Care Act has begun to help make small business 

more competitive by making health insurance more accessible and 

more affordable. One of the first provisions to take effect is the 

small business health care tax credit that helps offset the costs of 

coverage. That applies to as many as four million small businesses 

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In addition, the Affordable Care act can level the playing field for 

small businesses by giving these businesses and their workers access to the same kinds of stable premiums that larger businesses 

enjoy. The exchanges pool risk and reduce administrative costs for 

small businesses. New insurers will not be able to raise rates when 

some individual in the group becomes sick. And this will allow 

small firms to offer competitive health benefits. People can start 

their own company, or go work for a fast-growing small business 

without worrying to that they would have to give up access to secure affordable coverage. And that impact on job mobility is critically important. 

The other mechanism that I would highlight are the many things 

that the act does to try to reduce costs overall, and reduce the 

health care cost inflation rate. 

These include the immediate reduction in the implicit tax from 

the uninsured. Right now, the uninsured get health care in emergency departments or in other very high-cost ways. The estimates 

suggest that that is a hidden tax passed on to everyone else of up 

to $1,000 per worker. And by covering the uninsured, the Affordable Care Act will reduce that hidden tax directly. 

Second, it makes innovations in the delivery systems in Medicare 

and Medicaid that, if we have successful innovations there that are 

adopted in the private sector, can reduce costs. 

Chairman CAMP. If you could, just sum up very quickly. 

Mr. GOOLSBEE. Sum up. Commitment to prevention and 

wellness, to patient-oriented outcomes, and to modernizing the 

health IT system. Those cost reductions and the small business 

credits can have a quite beneficial effect on the job market. 

[The prepared statement of Austan Goolsbee, Ph.D.:] 


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Chairman CAMP. All right. Thank you. And as I said, your full 

statement will be part of the record. And thank you for that. 

Last night the President did say of the ongoing health care reform debate that, instead of re-fighting the battles of the last two 

years, let’s fix what needs fixing and move forward. And he mentioned specifically the 1099 provision. What else does the President 

believe needs to be fixed in this new law? 


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Mr. GOOLSBEE. Well, I would say the 1099 provision, which 

was designed to reduce tax evasion, what put this burden on small 

business, was identified early as an important one. 

You saw the President last night also say he was open to look 

at things. I know that there have been people that said we should 

have done more on medical malpractice reform, and the President 

said he was open to looking at that. 

Now, I would highlight that the Affordable Care Act does create 

pilots that it funds in states to figure out—different states have experimented with ways to address medical malpractice reform, and 

it authorized examining and creating pilots to help us figure out 

what works in that area. But I would say that’s an area that the 

President is open to ideas, and we would want to work with you 

on. 

Chairman CAMP. So there is 1099 and medical liability reform. 

Those are two items. Are there any other items? 

Mr. GOOLSBEE. I would say that the President is open to working with you if you identify other items. But the basic thrust of the 

Act, of trying to get costs down and trying to help small business 

to afford care, is fundamentally the right approach. And so I think 

that we want to stick with it. 

Chairman CAMP. Well, in regard to holding costs down, which— 

I appreciate that sentiment and goal—both the CMS actuary and 

the Congressional Budget Office say the legislation that was enacted will likely increase, not decrease national health expenditures. And if they’re right, isn’t the health care law an economic 

failure that will increase health care spending and cost jobs? And 

I’m not asking if you agree with CMS or CBO, but I’m asking, if 

they’re right, isn’t this reform a failure? 

Mr. GOOLSBEE. I don’t view it as a failure. I think the key 

thing of the Affordable Care Act is trying to get the health care 

cost inflation rate down. 

If more people are being covered and having their health improved and have the security to know that they cannot be denied 

coverage because of a pre-existing condition, the amount of total 

health spending is different than looking at what the prices are, 

and trying to control health care cost inflation. So, in my view, that 

wouldn’t be the right way to evaluate it. 

Chairman CAMP. But the expert non-partisan agencies that we 

rely on, like the Congressional Budget Office, like the actuaries at 

CMS, tell us that overall health spending is likely to go up under 

this legislation. 

And if the stated claim that holding down health care costs is 

really a justification for this bill, and will help the economy and 

help businesses, particularly small businesses, and that isn’t going 

to happen, how is this committee expected to evaluate this legislation, other than that it doesn’t meet the stated goals, and that the 

reform that was purported was a failure? 

Mr. GOOLSBEE. Well, I was trying to make the distinction—and 

I apologize if I didn’t—between the amount of total spending and 

the, essentially, spending per person, or the cost of the same procedure. 

So, the Congressional Budget Office and many health economists 

out in the country believe that the things that I have described in 


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my testimony are ways that we can, for any given business, reduce 

the health care cost inflation rate, and make them more competitive for small businesses, giving health care credits that they can 

use to help offer health care to their workers, where they do not 

now. 

That is important. That will facilitate job creation. That is a different question than the one I think you’re asking, Mr. Chairman, 

which is what will be the total spending on health care, overall, not 

on the prices, but on total spending. And total spending has been 

rising quite dramatically for many years. And I would observe that 

CMS’s data suggested that health care spending overall rose at the 

slowest rate this past year that it has since they have been keeping 

records. 

Chairman CAMP. Well, the Congressional Budget Office also indicated, as I said in my opening statement—I don’t want to repeat 

that, though—but that health care premiums for millions of families will also go up by over $2,000 per family. And, obviously, in 

contrast to a reduction in premium, which occurred with the bill 

that I offered. 

So, whether you—however you slice it, whether you look at the 

macro sense or you look at individual families, costs are going up. 

And as you said in your opening statement, getting costs under 

control in health care is a very important goal, and absolutely one 

we should look at. 

Well, thank you very much. At this time I will yield to the ranking member. He has five minutes. 

Mr. LEVIN. Thank you, Dr. Goolsbee. You are very polite. And 

I think proceeding that way is important. 

But I think there needs to be driven home very clearly the distinction you make. Driving down costs does not mean necessarily 

that expenditures will not go up. We have now over 50 million people who have no insurance, whatsoever. And bringing most of the 

50 million people so they have health care insurance and have 

health care may increase overall expenditures while we drive down 

the cost per patient. And there is nothing inconsistent. 

And John Boehner’s proposal has been analyzed. It would add 

only three million people to the insured. We are the only country, 

industrial country, on this globe that has anything like 50 million 

people who have no insurance whatsoever, the only nation like 

that. 

So, you said it very discreetly, but I think it was clear. And I 

think we need to make those distinctions very clear, indeed. 

Now, let me ask you about another argument that’s made about 

the health care reform. And now that language has been somewhat 

moderated, I will use what’s been said here, that it’s a job-killing 

bill—reform. I don’t think we should use that language, whatever 

language we use. Would you comment on that? 

Mr. GOOLSBEE. Well, I would say, as a strictly factual matter, 

I think it’s an inaccurate statement to say it’s job-killing. I think 

the evidence suggests that the role of small business in job creation, and the role of reducing the health care cost inflation rate 

in job creation suggests that the two primary tenets of the Affordable Care Act may have even a significant positive impact on the 

job market. 


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You may have seen a health economist at Harvard, David Cutler, 

look at the best evidence we have of the projected impacts of these 

various inflation-reducing measures, and ask, ‘‘What would that 

mean for job creation or destruction,’’ and found it would be job creating, in the nature of hundreds of thousands of jobs per year. 

If you look at the evidence on employers, health care costs have 

been rising dramatically every year for many years. And that has 

been a tremendous burden on them, and has limited employment 

growth. 

So, anything that we can do to reduce that inflation rate will 

have a positive impact. And I did not mean in any way to say to 

the chairman or to anyone else that we should close our minds and 

not be open to important ideas of how to improve this, or how to 

find other ways to get costs down. We should. The President has 

made that clear, and I would like to reiterate that, that we are 

open to sensible ways to improve care, to improve coverage, and to 

get costs down. I think to describe it as job-killing is not accurate, 

based on the evidence that we have. 

Mr. LEVIN. Okay, just briefly in your testimony you refer to Patient-Centered Outcomes Research Institute as something that can 

help make treatments work better. And that means, I think, it will 

affect costs and try to get a hold of costs. Do you want to comment 

briefly on that? You have about 30 seconds. 

Mr. GOOLSBEE. Well, I would say—— 

Mr. LEVIN. Some have said that Washington is going to dictate 

the care patients receive. 

Mr. GOOLSBEE. It’s not—that institute is not a dictation machine, it’s not meant to do that. It is meant so that we can share 

information across the country of what do we find, what kind of 

treatments work. 

The best analogy is my own. When I was a kid, it was routine 

to take everybody’s tonsils out. I got my tonsils out, I was in the 

hospital three days. And of our own kids—I have three children— 

the studies indicated that that was not effective, except in certain 

circumstances. Now, our middle son had—I’m not a doctor, but— 

some kind of inflamed tonsils, had his tonsils removed. But our 

other two kids did not. 

And that is a case where looking across the country, studies 

showed that it was more effective—that it was, in some sense, 

more dangerous to routinely just take all kids’ tonsils out, and it’s 

quite a significant expense to both families and to the health system that we were routinely doing that. 

I would use that as kind of a personal example of what the intention of this would be, would be to share that information so doctors—— 

Chairman CAMP. All right, thank—— 

Mr. LEVIN. Thank you. 

Chairman CAMP. Thank you very much. Mr. Herger is recognized. 

Mr. HERGER. Thank you very much, Mr. Chairman. And, Mr. 

Goolsbee, I thank you for appearing before us, and your testimony. 

But as I listen to you, there seems to be, in the Administration, 

a night and day difference between what I hear you saying on lowering of health care costs and what this Obamacare is doing for our 


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small business and creating jobs, and what I hear small businesses 

in my district telling me. And later this morning we will be hearing 

from some small business owners who do know firsthand what it 

takes to create jobs. 

It’s one thing to come up with academic arguments for why a 

particular policy will be good for job creation. It’s another thing to 

have those results actually demonstrated in the real world. What 

we are going to hear from business owners in my district, and what 

I have heard from small businesses, is a very different story than 

the one you have presented. Their near-unanimous opinion is that 

this health care law is going to absolutely be devastating to their 

small businesses, and to creating jobs. 

Let me share with you some of the feedback that I have received 

from business owners in my northern California rural district. Robert Boisey of Burney, California, writes, ‘‘I am a small businessman 

who is retired and collecting Social Security. I started my business 

in January of 2008, and it immediately took off. In 2009, I made 

more money than I ever have in my life, and I was ready to add 

1 or 2 employees when they started talking about Obamacare. I 

have now decided not to expand, and to contain my business at a 

smaller size.’’ 

And then, from a Charles Watts of Chico, California, writes, ‘‘I 

have been a business owner builder/contractor for 35-plus years, 

and have survived 3 other recessions, this being the worst. What 

I don’t understand is how our government figures that business 

owners can maintain work in an economy with a collapsed housing 

market, with no future in sight of recovery for years. Our company 

is hanging on by a thread. And if I have to provide health care for 

employees, I will have to close it down, no questions asked. I would 

have no other option.’’ 

And then a Mike Mullin in Cottonwood, California, writes, ‘‘As 

it stands right now, I can’t afford to grow or hire new employees. 

Currently, the paperwork alone is a nightmare in labor costs. If 

Obamacare is not repealed, it will definitely increase labor costs, 

which is the most expensive part of running a business. Also, the 

1099 deal definitely needs to go. If I have to cut a 1099 to every 

vendor I use, I won’t have time to do my work.’’ 

Mr. Goolsbee, this is just a sample of what I and other members 

of this Committee are hearing from small business owners in the 

real world. I have double-digit unemployment in every one of the 

10 counties in my district. We cannot afford this—to get this 

wrong. Can you explain why the Administration’s claims are so out 

of touch with what we’re hearing from people who are actually creating jobs? 

Mr. GOOLSBEE. Well, Congressman, I respect that question, 

and I appreciate you bringing that evidence. I think the one thing 

I have noticed when I have talked to many small business people 

and large business people is some misunderstanding on the part of 

some business people of what’s in the law, or what provisions 

would apply to them. 

So, small businesses are—if you have 50 employees or fewer, you 

are not required to provide coverage to your employees. Second, 

small businesses, up to four million of them right now, would qualify for a very substantial tax credit to help cover their costs 


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that—they have never had such a credit before. And third, as we 

move to the exchanges, for the first time, small businesses will be 

able to get insurance coverage at a price that is comparable to the 

price that large businesses currently offer. 

So, among very small businesses in the country, the majority do 

not offer any health care coverage now. And the surveys of the 

NFIB and other small business organizations have shown again 

and again—before there ever was an Affordable Coverage Act—that 

health care costs are one of the most pressing problems facing 

small business, that they had very hard times hiring employees to 

come work at their businesses, because the employees that were at 

large companies would say, ‘‘I would love to work at that start-up, 

but I can’t get coverage if I move there, it will be too expensive.’’ 

Chairman CAMP. Thank you. 

Mr. GOOLSBEE. So, I think—— 

Chairman CAMP. Your time has expired. 

Mr. GOOLSBEE. I apologize, Mr. Chairman. 

Chairman CAMP. Mr. Johnson is recognized. 

Mr. JOHNSON. Thank you, Mr. Chairman. You know, you have 

said a lot of things that don’t seem to be true in the real world. 

Maybe you better get out there and talk to people. 

But, you know, that health care tax credit, for instance, very few 

small businesses that I talk to and their employees will benefit 

from the credit. In fact, CBO estimated that 88 percent of those 

who get health insurance from a small business work for a business that will not receive the credit. There are different credit 

amounts and eligibility requirements prior to 2014 than exist after 

the exchanges are operational. And after 2013, an employer can 

only claim the credit for 2 years. That’s not giving them much. 

One of the purposes of this hearing is to look at the impact of 

health reform law on jobs. I think we can all agree it is critical to 

pursue policies that create jobs, not eliminate them. And the health 

reform law places significant restrictions on physician ownership of 

hospitals. You’ve almost put it to a complete halt. And yet, my experience with physician-owned hospitals, they are far above in benefits to the patients of a regular hospital. They are precise, they 

know what they’re doing. 

Many projects, in planning, had to stop. And expansions were 

curtailed. Every one of those decisions had a negative impact on 

jobs in states like Texas. Industry experts tell me at least 30,000 

jobs would have been created if this provision had not been enacted. Can you explain to me how the Administration could have 

supported a provision they knew would negatively impact well-paying health care jobs in many communities? 

Mr. GOOLSBEE. Well, Congressman, I will need to look into this 

exact provision, and I will get back to you. I know that the primary 

goal of the various provisions in the act are how do we provide the 

best possible care at the lowest possible price, or with the lowest 

rate of inflation. If there are things about physician ownership of 

hospitals or any other subject that we can get together and work 

on, and find evidence that it could improve care and reduce costs, 

the President is open to look at any such ideas. 

So, I will have to get back to you on this. I am not familiar with 

the details. 


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Mr. JOHNSON. Okay. Well, that’s just one area of that bill that 

doesn’t appear to be beneficial to the industry. 

You know, we talked about 1099 reporting requirements, and I 

presume now you are in agreement that we need to get rid of that 

provision. Is that true? 

Mr. GOOLSBEE. That is true. 

Mr. JOHNSON. Okay. I’m hearing it from you and the President, 

I think. 

Mr. GOOLSBEE. Yes. 

Mr. JOHNSON. All right. Then let’s do it. The health care, overhaul, provides health plans in existence on the date of the law’s enactment, that they would not be required to meet all the requirements of the new law. And you all argued that it would allow individuals to keep the health insurance they have, and like. The statute did not define grandfathered plans, other than to ensure that 

all plans resulting for the length of the agreement—it’s clear that 

many employer plans will not enjoy the grandfathered plan protections from the new law. Can you discuss that a little bit? 

Mr. GOOLSBEE. Yes. What I would say is the—clearly, the intention and the overall impact of the Affordable Care Act is to— 

the President believes in the private system, and it is designed to 

try to preserve the option that if the employer is happy with the 

plan that they have, they can stick with the plan. 

The intention of the grandfathering clause is to make it so that 

if there are things in the Act that would have some impact that 

the employer or patient doesn’t want, they could just stick with 

what they have. 

Now, you always have to choose the lines of what to draw—what 

counts as the same plan. Now, there is flexibility. You can—if you 

are getting the same insurance, but you want to change providers, 

that’s still permissible, and you still keep the grandfathering. If 

you fundamentally change the nature of what health care you’re 

getting, then the point of the grandfathering would not apply. And 

so that’s why we put—— 

Mr. JOHNSON. Yes, but isn’t that only for two years after you 

do that? 

Mr. GOOLSBEE. It depends which, but on some of these there 

are phase-outs. 

Mr. JOHNSON. All right. Thank you, Mr. Chairman. 

Chairman CAMP. Thank you. Mr. McDermott is recognized. 

Mr. MCDERMOTT. Dr. Goolsbee, I fly across the country 35 

times a year for 20 years, and I have been flying with United Airline attendants who have now gotten a little older. And I doubt 

there is a single flight I fly on where there isn’t one flight attendant who is working simply to keep her benefits because her husband has a job that doesn’t have benefits. 

And when I read the attack on the job-killing aspects of this bill, 

I—they read the report from CBO and it sounds like they’re saying 

we’re going to kill jobs. But, in fact, that flight attendant would 

gladly give up her job at age 60 if she had health care for her family in some other mechanism. 

Now, is that killing the job, or is that her choosing to leave the 

work force? 


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Mr. GOOLSBEE. To me, that sounds like a retirement. And the 

CBO report that you’re citing, they did make clear that there would 

be a reduction of total jobs, but that most of those would be on 

what they call the labor supply side, of people not having to work 

as many years just to keep their medical benefits. So, to me, that 

would not be a job killing, that would be a retirement. 

Mr. MCDERMOTT. So it really is political theater, hyperbole, to 

make it seem like this bill kills jobs. 

Mr. GOOLSBEE. I’m just an economist—— 

Mr. MCDERMOTT. You’re not going to—— 

Mr. GOOLSBEE. I’m not—— 

Mr. MCDERMOTT. Okay. Let me ask another question. You 

know, I—we’re going to have another panel, and they’ve rounded 

up some people who say this doesn’t help small business. And I’m 

sure that if you go through this country of 300 million people, you 

can find some small businessman or woman for whom it doesn’t 

work. 

But my—from reading your testimony, it sounds like more small 

businesses are buying insurance today. If I read the figures you 

had for United Health and for Kansas City’s Blue Cross Blue 

Shield program, it sounds like people are actually getting in because of the small business tax credits. 

Mr. GOOLSBEE. I think that’s true. I would make three points. 

The first is if you don’t have insurance, which, the smaller the employer you get, the greater the share that do not offer insurance 

now, because they would have to pay substantially more for exactly 

the same policy as large employers do, this—the small business 

health care credit gives them the opportunity to offer insurance for 

the first time, and you have seen substantial take-up. 

Second, even if you already offer it, the small business tax credit 

reduces the cost to you in a way that has never existed before. 

And third, we should not underestimate the importance of the 

exchanges that will be coming online, which will allow small businesses to get insurance at the kinds of prices and steady levels that 

large employers have had. 

Those three things are critically important to small business. 

And for years, before there was an Affordable Care Act, they have 

been wanting to have, for some time, these types of credits and access to this type of insurance. 

Mr. MCDERMOTT. And they have also talked about wanting to 

pool and—so that small businesses could join a pool—— 

Mr. GOOLSBEE. Yes. 

Mr. MCDERMOTT [continuing]. And they could then buy, like 

Boeing or Weyerhaeuser, or one of the large company buys. So this 

really gives them the ability to get that kind of benefit, is what 

you’re saying? 

Mr. GOOLSBEE. Yes, that’s a better way to say what I was saying, is it allows them to pool. That’s what the exchanges are for, 

it allows them to pool and get prices as if they were a large employer. 

Mr. MCDERMOTT. You may not have read the testimony of the 

people who are following after you, but I—can you think of any reason why a small business man or woman could not find a way for 

health care, if they’re making money? Is there any reason why, beVerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00023 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870

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yond they don’t want to do it? I mean is there some economic reason? 

I don’t understand, if you’re making money in a business, how 

you can’t put some of that money toward the health care of your 

workers. You would certainly care about your workers, I would 

guess. 

Mr. GOOLSBEE. Well, look. It would be presumptuous of me to 

tell other folks. I don’t know what the circumstances of different 

businesses are. I do know this, that if you take employers that are 

employing people without giving them health care coverage, the 

reason that there would be a mandate is to try to get away from 

the system we have now, which is people don’t have coverage, still 

get sick, and they go down and they get medical care at the highest 

possible expense, and it doesn’t become free just because it was in 

the emergency department. That’s a cost that gets passed directly 

on to the employers who do cover their employees. And that cost 

is as high as $1,000 a worker. 

So, I don’t put any moral judgement of any kind. I know we’ve 

been through a very tough spot in the last few years, and everybody has been trying to get by, and we’re trying to turn the corner 

to grow our way out of these problems. I think small business credits to help them afford to give coverage, as well as giving them the 

opportunity to buy at the kind of prices that larger businesses do, 

and doing everything we can to slow the growth rate of health care 

cost is important. 

Chairman CAMP. All right, thank you. The time has expired. 

Mr. MCDERMOTT. Thank you. 

Chairman CAMP. Mr. Tiberi is recognized. 

Mr. TIBERI. Thank you, Mr. Chairman. Dr. Goolsbee, the President repeatedly mentioned throughout the debate and afterwards 

that Americans making less than $200,000 or families earning less 

than $250,000 would not see their taxes increased, with respect to 

the Democrats’ health care bill. 

I would like you to tell me whether each of the following—in a 

yes or no answer—would suffice that were included in the health 

care law constitutes an increase in taxes for individuals or families 

making less than $200,000 or $250,000: a new tax on individuals 

who did not purchase government-approved health insurance. 

Mr. GOOLSBEE. I don’t think that’s an accurate way to describe 

it, no. 

Mr. TIBERI. Not a new tax? 

Mr. GOOLSBEE. I don’t think that’s an accurate way. 

Mr. TIBERI. A new ban on the use of flexible savings accounts, 

HSAs, HRAs on using pre-tax income to purchase over-the-counter 

drugs? 

Mr. GOOLSBEE. I don’t—that’s not a tax increase of a normal 

form, and that’s part of a broader reform effort, obviously. 

Mr. TIBERI. An increase from 7.5 percent to 10 percent of income, the threshold after which individuals can deduct out-of-pocket medical expenses? 

Mr. GOOLSBEE. [No response.] 

Mr. TIBERI. Not a tax increase? 


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Mr. GOOLSBEE. I—as I’m saying, if you—I do not consider the 

Affordable Care Act, as a whole, to be a tax increase in people 

making less than $200,000. Mr. TIBERI. I’ve got two more. Impose a new $2,500 cap on families’ ability to use pre-tax dollars to fund an FSA. 

Mr. GOOLSBEE. Could you—— 

Mr. TIBERI. A $2,500 cap—— 

Mr. GOOLSBEE. $2,500 cap—— 

Mr. TIBERI [continuing]. On—— 

Mr. GOOLSBEE. I don’t consider that a tax increase. 

Mr. TIBERI. A new 10 percent tax on indoor tanning services. 

[Laughter.] 

Mr. GOOLSBEE. [No response.] 

Mr. TIBERI. Not a tax increase? 

Mr. GOOLSBEE. Well, that seems like a strictly voluntary thing 

that one could choose. 

Mr. TIBERI. But not a tax increase? 

Mr. GOOLSBEE. [No response.] 

Mr. TIBERI. Here is the point, Dr. Goolsbee. We have, in this 

bill—and I’m quoting from the bill—a number of things that are 

going to—that’s going to impact people, individuals, who make far 

less than $200,000. 

I had a lady contact me in December who said she had just found 

out from her employer and her doctor that she could no longer 

manage her kids’ health care costs with respect to prescription 

drugs, over-the-counter drugs, and now she was going to have to 

contact the doctor every time she wanted to deduct something from 

her flexible savings account, and had just found out in December, 

months after the health care bill was signed into law, that actually, 

her tax was going to increase, her income tax was going to increase, because her FSA was going to go from $5,000 to $2,500. 

And thus, her income was going to go up, with respect to her taxes, 

which means she was going to be paying more taxes. 

So, two things were occurring in her mind that she had no idea 

with respect to the health care debate, that she was going to be 

paying more taxes, and her ability to mention her health care was 

going to be taken away from her, that she was not going to have 

to call her physician’s office, which is going to make, ironically, the 

physician’s office more involved, not less involved, and there is a 

cost to that, as well. 

So, I know you chuckle about this, but the President was very, 

very firm in that nobody making less than $200,000, or families 

less than $250,000, would see income taxes go up, any taxes go up. 

And now we see a Department of Justice defense that this bill is 

constitutional because it’s a tax, the individual mandate is a tax. 

So, on one side, we say it’s not a tax—or you say it’s not a tax, 

the Administration. On the other side, you say it is a tax. So, which 

is it? 

Mr. GOOLSBEE. Well, Congressman, first, let me apologize. I 

was only chuckling about the tanning salons. I wasn’t meaning to 

make light of it. 

As I say, we are open to work—if we look at the FSA rules, all 

I would say on FSA’s is this was part of a broader package, that 

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count other benefits. If you are paying for something with a pay 

for, but it’s going to reduce health care cost inflation, or we’re going 

to get additional coverage that you didn’t have before, you do have 

to take it in totality before—— 

Mr. TIBERI. Here is my point, sir. I am just saying if you are 

telling the American people, and the President is telling the American people—if I am advising you, and you repeatedly say it’s not 

a tax increase, and Mrs. Smith, who sees her FSA go from $5,000 

to $2,500, and now she can’t buy baby aspirin at the store and deduct it from her FSA, she looks at that as a tax increase. 

So, there is a credibility issue. And again, we can chuckle about 

it, but this is a tax increase—— 

Mr. GOOLSBEE. I didn’t chuckle about it, and I don’t mean 

to—— 

Chairman CAMP. Just respond briefly, and then we will move 

on. 

Mr. GOOLSBEE. Okay. My only brief response is if it changes 

the FSA rule, but simultaneously gives her a significant reduction 

in the cost of her health care, that should not be viewed as a tax 

increase on her, even though just looking at one component, you 

would say, ‘‘I had a disallowed expense on an FSA.’’ But the point 

is taken in totality, it’s not a tax increase. 

Chairman CAMP. All right. Thank you. Mr. Davis is recognized. 

Mr. DAVIS. Thank you, Mr. Chairman. I guess it all depends on 

what the meaning of ‘‘is’’ is. This is a big of a Back to the Future 

moment, when taking it in totality it’s a huge tax increase. 

I deal with constituents at all places in the economic spectrum, 

and they talk about a lack of purchasing power, they’re seeing their 

dollars go down. And small business owners, in particular, contrary 

to the gentlemen that say this is not job-killing, I have met with 

hundreds of business owners over the last two years, and, really, 

since this bill implemented this year, business after business, our 

Chambers of Commerce members are telling us, and telling our office and me, they’re not hiring people because they cannot afford 

to provide coverage, which leads me to a question. 

Since we referred to the tanning tax as a strictly voluntary 

thing—I don’t think the IRS agents would feel that way—but I 

want to ask you about the burdens of the Democratic health care 

law on small business. 

For example, suppose you own a small business with 50 or more 

employees, and that business is not eligible for the small business 

tax credit, and can’t afford to purchase health care for your employees. Contrary to the propaganda, rates have gone up significantly; 

they’re going to continue to go up, because we didn’t go after the 

cost drivers. The health care law requires you to provide health insurance or pay a fine. 

Now, how would having to afford the cost of health insurance or 

paying the fine help your company grow and create jobs? Because 

when we get into this pricing issue here, there is, I think, a faulty 

assumption that businesses have unlimited supplies of money. The 

vast majority deal with vendors that have fixed costs on materials, 

as part of a supply chain. 

And hence, on the outside, they often—and particularly if they’re 

dealing with larger, established businesses, price ceilings that they 


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cannot exceed. So that margin skinnies down. The average manufacturing company that’s considered successful in this company 

(sic) might make an eight percent profit margin at the end of the 

year. And we’re watching health care just go up at an astronomical 

rate. 

Here is my question. How would having to absorb the cost of 

health insurance or paying the fine help you grow jobs? Tell me 

that. 

Mr. GOOLSBEE. Well—— 

Mr. DAVIS. That is a tax in your bill. 

Mr. GOOLSBEE. Well, here is what I would say, Congressman, 

and I appreciate the evidence, and we are open to working and 

looking at the evidence. 

If you take large employers, more than 95 percent of them offer 

health care. If you go to the five percent that do not and say, ‘‘Isn’t 

it going to hurt those five percent, that they will be required to provide health care,’’ I do think it is appropriate that we consider 

what is the cost that they are applying on to other employers when 

they aren’t offering health care, and that’s the hidden tax that already exists. The growth of health care costs has been astronomical 

year after year, before there ever was an Affordable Care Act. And 

the Affordable Care Act is trying to bring that more under control. 

So, that there are—that the majority of small businesses in the 

country, some four million, would qualify for the credit is good for 

those businesses. To try to find an individual business who did not 

provide health care before, has over 50 employees, is not planning 

to use the great benefit of the exchange to get—so that they would 

have the opportunity to get significantly lower prices for their 

health care, to me feels a little bit of a selected example, when 

taken in totality—— 

Mr. DAVIS. Well, let’s take this to a simple—the small companies, why couldn’t they just pool together? Wouldn’t that make 

sense? And—to be able to handle this issue, and to have the government stay out of it? Let the private market work. 

Mr. GOOLSBEE. Well, they haven’t—— 

Mr. DAVIS. I mean I ran a business for 12 years, and we ran 

into this time after time, where costs did go up. And the costs 

under this bill are going up dramatically. I know people who won’t 

hire employees because they’re going to go over the 50 threshold. 

Why should I hire somebody, if I’m going to be taxed? And you 

called just a minute ago, that—— 

Mr. GOOLSBEE. Well, as I say—— 

Mr. DAVIS [continuing]. Didn’t tax—— 

Mr. GOOLSBEE [continuing]. You’re selecting a group of employers that’s at some specific sliver, and I am highlighting that there 

are millions of businesses just below that, which are the majority 

of small businesses in the country, who are getting a very significant tax credit—— 

Mr. DAVIS. Well, let me just point something out. You’ve asked 

us to take it in totality. And, just between Mr. Tiberi and I, we’ve 

probably pointed out 20 individual examples that, taken in totality, 

all point to significant increases in costs on business under this 

bill. 


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And I think we come back to the details. We’re going to have to 

address the cost drivers. And we don’t address the cost drivers, beginning here in Washington, with creating a huge new bureaucracy 

that places more overhead—if you ask any business owner about 

this bill, they will ask the question, ‘‘How can you create over 100 

new agencies, commissions, and boards, massively increase the regulatory side of this, and somehow reduce costs, while raising taxes 

on businesses and cutting the direct access to benefits?’’ 

Every doctor that I know calls this a denial of care bill, when 

they look at the economic aspects of this. And we are dealing with 

very different sets of definitions of terms, and we can’t be fluid 

about that. I yield back—— 

Chairman CAMP. All right. His time has expired. Mr. Neal is 

recognized. 

Mr. NEAL. Thank you, Mr. Chairman. Mr. Chairman, I would 

like permission to insert the CBO’s preliminary analysis of the repeal of this health care legislation into the official record. 

Chairman CAMP. Without objection. 

[Information as follows: Mr. Neal] 

Rep. Charlie Rangel 

Statement for the Record 

Wednesday, January 26, 2011 

1099 Repeal 

The House voted on July 30, 2010, on HR 5982, which would have repealed the 

expanded 1099 reporting requirements. 

One of the revenue provisions in the health care reform law is an expanded reporting requirement that would have increased business to business information reporting (using form 1099). Repealing the provision in 2010 would result in revenue 

loss of $19.1 billion. The repeal in HR 5982 was fully paid for through the closing 

of a number of tax loopholes, including loopholes that incentivize companies to send 

U.S. jobs overseas. 

Repealing the provision in 2011 would result in revenue loss of $21.9 billion. 

Because HR 5982 was brought up under suspension of the rules, it needed support of two-thirds of Members to pass. Unfortunately, it was defeated by Republican 

opposition: 

Yeas Nays NV 

Democratic 239 1 14 

Republican 2 153 23 

Mr. NEAL. Thank you. And, Mr. Goolsbee, if we were to repeal 

the health care bill, as some are proposing, that means eliminating 

$40 billion worth of tax credits. Doesn’t that represent a tax increase? 

Mr. GOOLSBEE. It would be very problematic, and it would be 

particularly problematic on small business. But it would be a major 

tax increase. 

Mr. NEAL. All right. Let me take you to some of the facts here. 

One of the difficulties in the discussion of this legislation is that 

if our friends on the other side are asked by the local news media 

in their respective constituencies whether or not they favor banning pre-existing condition, they will say yes. If they are asked, ‘‘Is 

it not a good idea to keep your children on your health care plan 

up until they’re 26,’’ they will say, ‘‘Yes.’’ If they are asked if it’s 


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a good idea to cap out-of-pocket expenses, they will say, ‘‘Yes.’’ Carrying insurance from one job to the other? They will say, ‘‘Yes.’’ 

The problem with that argument is, from an actuarial reality, or 

from risk analysis, how do you accomplish those outcomes if you 

don’t require those who can afford insurance to buy it, and to help 

those who can afford it to get into the risk pool through the mandate? 

I mean that—by the way, I wanted to say something for the 

record. This is very important. The mandate was the compromise 

in Massachusetts that was proposed by Governor Romney. That’s 

how we got there. Senator Kennedy advocated for years, spent a career talking about health care. The difficulty is that, in attempting 

to do it, the compromise became the mandate. 

Would you speak to that issue about actuarial reality, risk analysis, and what insurance companies might do to suggest that they 

could accomplish the former, as I’ve outlined it, to get us to the latter? 

Mr. GOOLSBEE. Well, look. I do think the basic point of the 

matter is to get away from the economic problem of cream skimming and figuring out who is more likely to get sick and dropping 

them. And when you have circumstances like that, a lot of times 

markets can—the free market can fail when you have big differences of information like that. 

That has plagued the health care system all along, and that is 

the point of the Affordable Care Act, is to try to get everybody into 

the system, so you can’t either free-ride off your neighbor and, so 

on the other side, they can have some assurance that the probability of whatever illness is approximately the probability in the 

overall population, as opposed to everybody that knows they have 

the—some disease signing up only once they get sick. I think that’s 

the basis. 

Mr. NEAL. I would encourage all the members of this committee, 

and others, to visit an emergency room on a Friday or Saturday 

night. And if you can’t do that, or you live in a rural area and it’s 

more difficult, then I would encourage Members to be in touch with 

their local hospitals to find out what health care delivery is in the 

emergency room. 

And for that man or woman who walks out of that emergency 

room thumbing their nose by suggesting that they beat the system, 

they didn’t really beat the system. In fact, those costs are passed 

on to all of us. That’s the whole idea of spreading risk, which I 

would have thought the other side would have paid a great deal of 

attention to, given their proclivity for the suggestion that we ought 

to allow the market to work. 

Mr. GOOLSBEE. Look, I think that’s the uncompensated 

care—— 

Mr. NEAL. Precisely. 

Mr. GOOLSBEE [continuing]. Is a hidden tax on everybody, and 

it’s a big one, $1,000 a worker by some estimates. And we cannot 

forget that that tax exists. It’s very important. And we can get that 

cost down. And that is a big cost driver. 

Mr. NEAL. Thank you, Mr. Chairman. 

Chairman CAMP. Thank you. Mr. Nunes is recognized. 


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Mr. NUNES. Thank you, Mr. Chairman. Mr. Goolsbee, were you 

involved at all in the President’s State of the Union address, in designing it or writing it or reviewing it, previewing it? 

Mr. GOOLSBEE. Yes, a little bit. 

Mr. NUNES. Okay, so you’re familiar with the health care portions of the speech last night? 

Mr. GOOLSBEE. Yes. 

Mr. NUNES. Okay. So the new 1099 reporting requirements. 

Last night, to paraphrase, the President called it a ‘‘flaw,’’ I think. 

At what point did he have the epiphany that it was a flaw? 

Mr. GOOLSBEE. I don’t know the answer to that, specifically, 

but the chairman quoted the President from a significant time ago. 

It wasn’t at the State of the Union that he had it. 

Mr. NUNES. Did the President or White House or anyone affiliated with the executive branch ever hear from any Members of 

Congress that this was a problem, 1099 problem, during the yearlong health care debate? 

Mr. GOOLSBEE. I wasn’t involved in the legislative discussion, 

but I think it’s probably fair to say yes. 

Mr. NUNES. Okay, thank you. What—so the President has now 

admitted that the policy he supported was flawed. He asked for 

other creative ideas. Where should this committee start? What creative ideas should we look at to identify possible additional flaws, 

other areas that we could reduce costs, improve the quality of 

health care, where should we start? 

Mr. GOOLSBEE. Well, I do think that the previous congress people have identified, hearing from constituents and from business 

leaders themselves, if there are ways that we can reduce administrative costs, reduce regulatory or compliance burdens of the form. 

Mr. NUNES. Any specific ideas? Is there anything like 1099 that 

we should strip out of the current health care law, or anything that 

we should put in? 

Mr. GOOLSBEE. Well, I think 1099 is a good one, and the President outlined that we should look together at the medical malpractice issues that can lead to defensive medicine and those 

things. That strikes me as also a productive place to look. 

Mr. NUNES. So medical malpractice we should look at. Any 

other areas—— 

Mr. GOOLSBEE. I mean—— 

Mr. NUNES [continuing]. You can think of? 

Mr. GOOLSBEE. Those two, plus the general approach of talking 

to the small business community strike me as three important ones 

to begin with. 

Mr. NUNES. I want to focus on the uninsured now, move to the 

uninsured. We have heard members of this Committee already this 

morning say that there is 50 million uninsured, I think was the 

number, and maybe there is more than that. Or possibly—at least 

people think there is more than that. 

I was under the understanding when we passed this, two new 

entitlements adding to the two old entitlements of Medicare and 

Medicaid in the health care law, that this would be the Utopia for 

health care, and that everyone would now be covered. Is that happening? 


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Mr. GOOLSBEE. I would say we are dramatically increasing the 

number by tens of millions in who is covered. There obviously was 

the issue of undocumented immigrants who are not—were never 

intended to be getting covered under the—— 

Mr. NUNES. So how many new people have we covered since the 

law has been implemented that wouldn’t have been covered under 

the old laws? 

Mr. GOOLSBEE. Well, the full coverage provisions don’t go into complete effect until 2014. But the estimates are in excess of $35 

million. 

Mr. NUNES. Why did it take so long to—why did we wait until 

2014 to implement this, when we have this health care crisis and 

all these folks uninsured? 

Mr. GOOLSBEE. I—— 

Mr. NUNES. I know you didn’t write the law, but you look at the 

numbers. 

Mr. GOOLSBEE. Yes, I look at the numbers. On any significant 

change of this nature, usually there is some transition period. Historically—— 

Mr. NUNES. Was it possible to hide the budget consequences of 

the health care provision? 

Mr. GOOLSBEE. No. 

Mr. NUNES. So we don’t have a debt problem? 

Mr. GOOLSBEE. We have a long-run fiscal problem facing the 

problem, for sure. But—— 

Mr. NUNES. Does health care have a part in that? 

Mr. GOOLSBEE. In reducing it, yes. 

Mr. NUNES. So this health care bill is going to reduce the—— 

Mr. GOOLSBEE. The deficit. 

Mr. NUNES. The deficit? 

Mr. GOOLSBEE. Yes. According to the non-partisan Congressional Budget Office, to repeal the health care act would increase 

the deficit by a quarter trillion dollars over the next 10 years. 

Mr. NUNES. Wow. Thank you, Mr. Chairman. 

Chairman CAMP. All right. Mr. Reichert is recognized. 

Mr. REICHERT. Thank you, Mr. Chairman. Mr. Goolsbee, I’ve 

been taking some notes while you have been answering questions. 

So, this Affordable Health Care Act, you say, was designed to reduce costs, yes? 

Mr. GOOLSBEE. Yes. 

Mr. REICHERT. Improve access, increased access for people? 

Mr. GOOLSBEE. Yes. 

Mr. REICHERT. Slow the growth rate of health care costs? 

Mr. GOOLSBEE. That is its intention. 

Mr. REICHERT. And reduce the deficit? 

Mr. GOOLSBEE. Yes. 

Mr. REICHERT. All of those things. I’m just an old retired cop, 

so I think—you know, I’m not a doctor. I’ve not been in the medical 

profession. So I’m just trying to understand this, like every other 

American across this country. 

So, these were the goals. But I really—I want to go back to what 

Mr. Nunes and some others have pointed out. I’m really having a 

tough time understanding how a provision like the 1099 form gets 

included in a bill that’s supposed to accomplish all these things, reVerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870

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ducing costs, et cetera. Because, if I’m not mistaken—do you know 

how the 1099 provision was inserted in the bill? 

Mr. GOOLSBEE. I do not. 

Mr. REICHERT. You don’t know what Member of Congress, or 

who came up with the language? Or was it the Administration that 

suggested the—— 

Mr. GOOLSBEE. It wasn’t an Administration proposal, but I 

wasn’t involved in the—— 

Mr. REICHERT. So you have no idea? This is your project, right? 

Mr. GOOLSBEE. I’m just—well, it’s not my—I’m just an economist. 

Mr. REICHERT. You’re just a spokesperson? 

Mr. GOOLSBEE. I’m not a spokesperson, I’m an economist. 

Mr. REICHERT. So why are you here today? 

Mr. GOOLSBEE. I am here to help evaluate the economics of the 

Act. 

Mr. REICHERT. Well, let me just ask you. The 1099 form—— 

Mr. GOOLSBEE. Yes. 

Mr. REICHERT [continuing]. We don’t know how it got in there. But somehow it increases the cost of the bill by $19.2 billion. You 

have to hire 16,000 IRS agents. How can that just be overlooked? 

I think the American people have a credibility issue when you say 

that you’re here to reduce costs, then all the sudden, miraculously, 

you discover that there is a $19.2 billion cost in there that 

shouldn’t be there. How does that happen? 

Mr. GOOLSBEE. Well, as I say, I wasn’t involved when Congress—— 

Mr. REICHERT. But how does that happen? 

Mr. GOOLSBEE [continuing]. Passed the legislation. But what I 

will say is, the people that supported it were trying—the goal, 

which has been a bipartisan goal, of reducing the amount of tax 

evasion, people who do not pay taxes on income that they should 

pay. 

Mr. REICHERT. I know what—— 

Mr. GOOLSBEE. This was designed in a way—— 

Mr. REICHERT. Excuse me, excuse me—— 

Mr. GOOLSBEE [continuing]. That was excessively burdensome—— 

Mr. REICHERT. Excuse me. Okay. I know what the goal was. 

My question was, how did it get into the bill. And your whole 

premise is that this was to reduce costs. And $19.2 billion gets 

somehow inserted into the bill, and no one knows how. 

Mr. GOOLSBEE. My understanding—— 

Mr. REICHERT. Did I hear you say just a little bit earlier, too, 

that you can keep your health care plan if you like it, or something 

like that, in one of your answers? 

Mr. GOOLSBEE. That is the intention, yes. That’s why the 

grandfathering clause exists. 

Mr. REICHERT. Okay. I remember President Obama visited our 

retreat last year, and he was asked that question. And we have 

heard that time after time after time. ‘‘You can keep your health 

care plan, if you like it.’’ 

However, in his comments to us—and I will paraphrase his 

quote—he said, ‘‘Well, there may have been some language snuck 


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into the bill that runs contrary to that premise.’’ How do you explain that? I mean you’re telling me today that you can keep your 

health care plan if you like it, but the President says there is language in the bill that runs contrary to that premise. 

Mr. GOOLSBEE. I apologize, Congressman. I’m not trying to be 

coy. I haven’t heard the President say that. But I would like to look 

at that before I made any comment on it. 

Mr. REICHERT. Yes. Well, it’s in print. 

Mr. GOOLSBEE. Okay. I will—— 

Mr. REICHERT. Can you see why the American people are confused about this bill, and whether or not it provides any benefits 

at all to them? Whether or not it does all those things that you laid 

out earlier, decreases cost, increases access, and is good for business and reduces the deficit? 

I mean I just pointed out two things here that have quite a bit 

of controversy around it, and seems to be rather serious conflicts 

with the premises that you have laid out in this bill. Mr. Chairman, I yield back. 

Chairman CAMP. Thank you. Mr. Thompson is recognized. 

Mr. THOMPSON. Thank you, Mr. Chairman. Dr. Goolsbee, 

thank you for being here. My colleague, Mr. Neal, asked that the 

independent CBO analysis be read into the record. And I would 

like to just ask you on that issue—I’m glad he did that, it’s an important fact that I believe we need to take into consideration—but 

that analysis says—and I think you pointed this out, that this—repeal of this bill would actually drive the deficit up by about $250 

billion over the first 10 years, over a trillion in change over 20 

years. 

So, if that were to happen, and it had this upward push on the 

deficit, how would that impact business and investment in this 

country? 

Mr. GOOLSBEE. Well, I believe that the—certainly addressing 

our longer-run debt issues is an area of bipartisan agreement, that 

we do need to do that, and that to not do it contributes uncertainty. 

And so I think repealing this and making that problem worse 

would likely add more uncertainty on that score. 

Mr. THOMPSON. And a hit on the businesses that we’re trying 

to—or hopeful will get going—— 

Mr. GOOLSBEE. Could be. 

Mr. THOMPSON [continuing]. Get the economy up. Thank you. 

On the uncompensated care issue, I just want to point out I think 

everybody can find this out. I know that I did the run, and in my 

rural district in northern California last year the uncompensated 

care cost was $70 million. And the uncompensated care fairy 

doesn’t deliver a check to the hospital when that happens. That’s 

spread out, and the rest of us pay for that through higher taxes, 

higher insurance premiums, et cetera. 

On the 1099 issue, I think it’s important to point out that we 

took up the repeal of that bill last year in congress. And I think 

everybody on this side of the dais voted to repeal that. So this is 

not a newfound issue. This is something that we tried to fix in the 

last congress. 

And I also want to point out that when this came up in the debate, I went out to every one of my counties and asked business 


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people, chambers of commerce, as to the impact of that. And there 

was concern that it was going to be problematic. A lot of folks said, 

however, that it’s just a matter of time before the software catches 

up to it, and the problems resolve. But everybody, irrespective of 

their position on it, noted that it was trying to solve an almost $20 

billion tax evasion problem. 

So, as we repeal this, which we will do, we’re going to need to 

figure out how to solve that problem. 

And, Mr. Chairman, on the issue of the cost going up, I just want 

to read from a statement by Blue Cross—or by Blue Shield of California. And I think everybody knows that premiums have been 

going up in my home state. But the head of Blue Shield writes, 

‘‘These rates reflect trends that were building long before health reform. Our individual market medical costs are rising rapidly, due 

to higher provider prices, increased utilization, and the fact that 

healthier people are dropping coverage during a bad economy. 

Health reform will help slow down this trend by expanding coverage, which will keep healthier people in the system, and, through 

quality and cost containment initiatives, such as the independent 

payment advisory board, Center for Medicare and Medicaid Innovation, Patient Centered Outcomes Research Institute, and other initiatives for prevention and coordinated health care.’’ 

And I would like to ask that the head of Blue Shield’s statement 

specifically stating that health care reform has nothing to do with 

their increased price be read into the record. 

Chairman CAMP. The statement will be—— 

Mr. THOMPSON. And I yield back the balance of my time. 

Chairman CAMP [continuing]. In the record, without objection. 

[The information follows: Mr. Thompson:] 


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Chairman CAMP. Dr. Boustany is recognized. 

Mr. BOUSTANY. Thank you, Mr. Chairman. To my friend from 

Massachusetts, I have spent countless hours in emergency rooms, 

and there is a hidden tax, as you suggest. But also, your solution 

in expanding Medicaid coverage is also a hidden tax. And it’s basically an unsustainable situation. We can do better. 

Mr. Goolsbee, my medical career spanned 1978 through 2003. 

And to put it in perspective for you, in medical school I saw the 

first drug to treat peptic ulcer disease, which radically changed not 

only the quality of care for folks, but the cost of care. And since 

then, of course, we have seen all kinds of developments in pharmaceuticals and medical devices that have given patients more than 


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just a hope and a prayer. I remember dealing with heart attack patients, giving them an aspirin and a first-generation beta block. 

And now—you know, in my career we did complex open heart surgery using all kinds of assist devices and things that have saved 

lives, improved the quality of life. 

I can go on and on about all the problems of cost, coverage, quality, and so forth, but I’m going to focus on one particular issue. 

Last night the President talked about innovation, research and development, American competitiveness. And one area where we have 

stood out, as a country, is in our development of medical devices 

and pharmaceuticals. We are first and foremost in the world on 

this. And we stand to lose that competitiveness, partly as a result 

of what’s being proposed here: the innovation tax, a 2.3 percent tax 

on medical devices. 

Now, let me—why is this not only a danger for innovation? It’s 

also a danger to job growth, and could potentially lead to significant job loss. Let me just point out a couple of statistics. 

Sixty-two percent of the companies that develop these devices, 

that do the research and development, are very small businesses. 

Sixty-two percent have less than twenty employees. Only 2 percent 

have greater than 500 employees. These are small and mid-sized 

firms that really take on the responsibility of creating that innovation in research and development. 

So, my question is, will this tax on innovation run contrary to 

the President’s plan to expand research and development? Secondly, will it hurt job growth, along with innovation? And, thirdly, 

how do you reconcile this with, on one hand, the President wants 

to extend the R&D tax credit, and, on the other hand, wants to impose a new innovation tax? This is just very inconsistent. 

So—and then, finally, as we look at tax reform and the big picture—and the President has talked about fundamental tax reform, 

cleaning it up, simplifying it—if you look at this bill, this law, it 

has added significant complexity to the Tax Code, way beyond 

where we were, just a year ago. And so, I would like you to address 

those three points. 

Mr. GOOLSBEE. Okay, Congressman. Well, first, let me thank 

you for your service to the country, as a medical professional, as 

well as a doctor (sic). We need more people in the medical profession with a commitment like that. 

I would say on the issue of medical devices the area of innovation, medical innovations particularly, are critically important, both 

for our health and for our industrial base. In this case, the medical 

devices fee is being offset to some considerable degree by the fact 

that there will be an expansion in the demand for those devices by 

the fact that we are having 35 million-plus new customers—— 

Mr. BOUSTANY. But, sir, that’s debatable, because a lot of these 

patients are getting that care. It’s just not being compensated for. 

Mr. GOOLSBEE. In—— 

Mr. BOUSTANY. I can tell you I have operated on patients—— 

Mr. GOOLSBEE. I would like to see—— 

Mr. BOUSTANY [continuing]. Complex open heart surgery, and 

you never saw—— 

Mr. GOOLSBEE [continuing]. Including advanced devices? 

Mr. BOUSTANY. Advanced devices, as well, yes. 


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Mr. GOOLSBEE. Look, this is an area—if there are areas that 

have a negative impact on innovation, we should examine those. 

Now, it had been our data that we first came to the table with, 

the suggestion was that the increased demand for the medical devices would be, in some sense, far in excess of what impact the 

charge on the medical devices would be. But we are open to looking 

at—— 

Mr. BOUSTANY. You really need to look back at that assumption. 

Mr. GOOLSBEE. On R&D tax credit and medical innovation, 

that’s an area the President has put as much or more—dedicated 

as much or more resources to medical research as anyone ever has 

before. 

Chairman CAMP. All right, thank you. Mr. Heller is recognized. 

Mr. HELLER. Thank you, Mr. Chairman. I appreciate holding 

this hearing. I know it’s a little backwards, to actually hold hearings after a bill passed, but at least we will have a hearing on the 

bill. So, thank you. 

Last night—and thank you for being here, Dr. Goolsbee. Last 

night the President said, ‘‘If you have ideas about how to improve 

this law by making care better or more affordable, I’m eager to 

work with you.’’ Do you believe he meant that, when he said it? 

Mr. GOOLSBEE. Yes, I do. 

Mr. HELLER. Well, he said the same thing in 2010, during his 

State of the Union. Do you believe he meant it when he said it 

then? 

Mr. GOOLSBEE. Yes, I do. 

Mr. HELLER. He said it in 2009. Do you believe he meant it 

when he said it then? 

Mr. GOOLSBEE. Yes. And I hope that we will commence working together. 

Mr. HELLER. Well, I’ve got a letter here July 23, 2009. I wrote 

the President, asking him specific questions about the health care 

bill because he wanted input. July 23, 2009. He didn’t reply to the 

letter. Why didn’t he reply to the letter? 

Mr. GOOLSBEE. I don’t know the answer to that. I apologize, 

Congressman. 

Mr. HELLER. In September 8, 2009, because I’d received no 

reply from the first letter, I wrote him another letter. And I think 

it was pretty reasonable. And I’d like to quote some parts from it. 

It says, ‘‘I introduced the Step Towards Access and Reform, the 

STAR Act, in late July. While this legislation will not be a silver 

bullet solution to all the problems facing our health care system, 

my bill addresses medical liability reform, improves access to 

breast and lung cancer screenings, takes other important steps towards reform that I think most Americans would support.’’ 

I never received a response from this letter. Why didn’t I receive 

a response from this letter? 

Mr. GOOLSBEE. Congressman, I don’t know the answer to that. 

But I will offer to read and respond to the letter, or find anyone 

that would. I mean the—if your ideas address medical liability reform, other forms of screening or preventative care, that sounds 

like exactly the kind of thing that we want to always be on the 

lookout for, good ideas. 


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Mr. HELLER. I guess my point is, would a reasonable person believe that the President had no interest in what the minority party 

at the time had to say on this piece of legislation? 

Mr. GOOLSBEE. I don’t think a reasonable person would believe 

that. But I can see that it would be frustrating if he did not reply 

to the letter you sent him. 

Mr. HELLER. Would a reasonable person believe what he said 

last night, again? 

Mr. GOOLSBEE. Yes, I think they would, and I think they did. 

And I am here to say that we are open to the ideas. And I would 

be both open and appreciate to see that or other letters. 

Mr. HELLER. Do you think the President—he mentioned TORT 

reform. Do you think he is serious about TORT reform? 

Mr. GOOLSBEE. Yes, he mentioned the medical malpractice reform in general. There is some significant pilot projects, and working through the states in the bill now, and the President is open 

to looking beyond that. 

Mr. HELLER. Let me ask you a couple of other questions. Do 

you agree with the President and CBO’s assessment that the 

health care bill signed into law last year will reduce unemployment? 

Mr. GOOLSBEE. Yes. I believe that it has the potential to be a 

job creator because of these cost-saving measures that I outlined in 

my testimony. 

Mr. HELLER. When? 

Mr. GOOLSBEE. Over the next 10 years and over the next 20 

years—— 

Mr. HELLER. Well, maybe in 2014—— 

Mr. GOOLSBEE [continuing]. The small business part would 

be—— 

Mr. HELLER. You keep throwing out 2014. Maybe in 2014 we 

will reduce unemployment through this bill? 

Mr. GOOLSBEE. No, I think it’s—the small business credits can 

have, and have had, an important impact right away, and there are 

other parts that come in in 2014. 

Mr. HELLER. Okay. So you’re saying that we should at least 

have seen some impact on unemployment with the passage of this 

bill last year? 

Mr. GOOLSBEE. Over what it would otherwise be. That’s the— 

that’s not just my conclusion, that’s the conclusion of many outside 

experts. 

Mr. HELLER. Why is Nevada’s unemployment level at 15 percent? And what impact does that have on the unemployment in Nevada? 

Mr. GOOLSBEE. Well, I believe that the reason Nevada’s unemployment rate is high, like the unemployment rate in the rest of 

the nation, is because we have gone through the worst financial crisis since the Great Depression that has had a devastating impact 

on the economy, and we are trying to work our way out of that. 

Mr. HELLER. So you don’t think—— 

Mr. GOOLSBEE. I think the Affordable Care Act is not the—— 

Mr. HELLER. Okay. 

Mr. GOOLSBEE [continuing]. Cause of—— 


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Mr. HELLER. So you don’t think higher taxes, bigger government, and unreasonable regulations would have anything to do 

with the unemployment rate in Nevada? 

Mr. GOOLSBEE. The taxes have actually been lower. The President cut taxes for 95 percent of workers, and has not raised taxes 

in that sense. 

Mr. HELLER. Thank you, Mr. Chairman. 

Chairman CAMP. All right, thank you. And because of our time 

limitations, the next questioner will be the last questioner for this 

panel. And Mr. Blumenauer is recognized for five minutes. 

Mr. BLUMENAUER. Thank you very much, Mr. Chairman. Dr. 

Goolsbee, I would like to go back just where you left off a moment 

ago, because this litany of somehow higher taxes and more regulation—if I understand it correctly in your testimony, you pointed out 

that we have had a million private-sector jobs added in the course 

of the last year. Is that correct? 

Mr. GOOLSBEE. Yes, 1.3 million, actually. 

Mr. BLUMENAUER. And, if memory serves, that’s more than 

the net job creation of the entire Bush White House years in eight 

years. 

Mr. GOOLSBEE. I believe that is true. 

Mr. BLUMENAUER. And in terms of taxation for the—over the 

course of the last year-and-a-half, isn’t it true that taxes were actually lower than they were prior to the President taking office, because of the 40-some percent of the Recovery Act that was tax reduction? 

Mr. GOOLSBEE. Yes, that’s certainly true, and it’s certainly true 

in the aggregate, as well, that the tax collections as a share of income are down. 

Mr. BLUMENAUER. So, to somehow have the speculative bubble 

that burst in Nevada, which is probably worse than any state, perhaps with the exception of what happened in Florida and parts of 

Arizona, to try and blame that on the Administration’s high taxes 

and health care, isn’t that kind of turning the facts on their head? 

Mr. GOOLSBEE. Well, I’m not—— 

Mr. BLUMENAUER. Don’t mean to put words in your mouth, 

but—— 

Mr. GOOLSBEE. I’ve been to Nevada many times and enjoy it 

there. I’m not trying to get anybody mad at anybody else. I will say 

the President did not raise taxes; cut taxes, did everything he could 

to prevent a depression. And we avoided a depression. 

And now we are to a phase, as the President outlined last night, 

that we need to grow and innovate and compete, and he is open 

to ideas from both sides of the aisle of how to improve the health 

care act, as well as other ways to innovate. 

Mr. BLUMENAUER. Terrific. Could you comment for a moment 

on the trend line we were on, in terms of affordability of employerprovided health care, in terms—before we gave the tax credits that 

people—actually made it easier, and the health care plan actually 

gives an alternative to people if employers jettison them—under 

the reform act we have here, people have an alternative. 

But what was the trend line we are on, if the health care act is 

repealed? 


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Mr. GOOLSBEE. I would say before the health care act, I would 

summarize the trend line as bad. And so, if we repeal it and go 

back to that, I think it would return to bad. 

So, I guess what I would say is that the act is attempting to address a series of cost drivers. It’s trying to help small business. 

There are things like the 1099 aspect of the bill. There are other 

things that may need improvement. 

But I fail to see how the correct answer to some flaw is to get 

rid of tax credits for four million small businesses, to allow discrimination against pre-existing conditions, to reinstate the uncompensated care hidden tax on employers, a number of things in the 

bill that are really good, I don’t see why we should get rid of those, 

rather than just fix the things that need to be fixed. 

Mr. BLUMENAUER. And, of course, for the record, our committee passed, and the House approved, legislation to fix the 1099. 

So that’s something that, last congress, we were on. 

I want to just conclude on the notion of what impacts there are 

for small business. Currently, small business pays more—our committee has heard—pays more than large business. They are doing 

it without the—up until the Affordable Care Act—without the tax 

credits. How is small business going to be affected if some of my 

friends have their way, and somehow this bill is repealed? 

Mr. GOOLSBEE. If you repeal the bill, I believe it would have 

a significantly detrimental impact on small business, that while 

you can try to find an individual small business that fits in some 

place and say, ‘‘That person would be harmed,’’ we know, overall, 

four million small businesses qualify for a health care credit that 

they never had before and that they have wanted for decades. 

And we know that to set up exchanges that allow the pooling of 

risk will allow small businesses to get health care coverage and insurance at prices that are significantly lower than they are now, 

because right now they have to pay significantly more than large 

businesses do, and it’s a major competitive disadvantage. 

Mr. BLUMENAUER. And you said this last year health care 

costs went up at a lower rate than ever before recorded. 

Mr. GOOLSBEE. It was overall spending. 

Chairman CAMP. All right, thank you. 

Mr. BLUMENAUER. I’m sorry. 

Chairman CAMP. All time has expired. I want to thank you, Mr. 

Goolsbee, for appearing before the Ways and Means Committee. I 

appreciate your testimony. And since all Members have not had a 

chance to question, I would ask you to allow Members to submit 

questions in writing, which will then become part of the written 

record of this hearing. Again, thank you for being here. 

Mr. GOOLSBEE. Thank you, Mr. Chairman, for giving me that 

opportunity, and I would be happy to accept any questions, letters, 

or anything else from Members of the Committee. 

Chairman CAMP. Thank you. Thank you very much. Panel one 

is concluded, and we will now move to panel two. 

While our panel gets seated, I did want to introduce our panel 

to the Committee. We have three witnesses on panel two. 

Mr. Douglas Holtz-Eakin is currently president of the American 

Action Forum, and is a commissioner on the congressionally-chartered financial crisis inquiry commission. During 2001 and 2002 he 


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was the chief economist of President’s Council of Economic Advisers. He previously served as the sixth director of the non-partisan 

Congressional Budget Office. 

Mr. Olivo is the president and co-owner of Perfect Printing, located in Moorestown, New Jersey. It was established in 1979. He 

has been president of the second-generation firm since 1988. It was 

originally established as a traditional retail copy center, and he has 

grown the business from 10 employees to 45 employees. He co-owns 

the company along with his wife, mother, and two brothers. 

Mr. Scott Womack is a franchisee. And during his time as an 

IHOP franchisee has received numerous sales growth and performance awards, and was named Midwest franchisee of the year in 

1993 and 2005, and regional franchisee of the year in 2008 of the 

northern region. 

I want to welcome our witnesses to the Ways and Means Committee. I thank you very much for taking time out of what I know 

are busy schedules to be here, and help enlighten the committee 

on the health care law’s impact on jobs, employers, and the economy. 

Each of you will have five minutes to give your testimony. There 

is a green light, and then there will be a yellow light, which gives 

you one minute to sum up, and then the red light is to conclude 

your testimony. And obviously, with all the people who want to 

have a chance to ask you questions, we’re going to try to stick pretty closely to that schedule. 

So, why don’t I begin with Mr. Douglas Holtz-Eakin? Welcome to 

the Committee, and you have five minutes. 

STATEMENT OF DOUGLAS HOLTZ-EAKIN, PH.D., PRESIDENT, 

AMERICAN ACTION FORUM, WASHINGTON, D.C. 

Mr. HOLTZ-EAKIN. Well, thank you, Mr. Chairman, Ranking 

Member Levin, and Members of the Committee. It’s a great pleasure to be here today. I appreciate the opportunity to appear. 

In my written testimony I sought to make four points that I will 

briefly summarize here. The first is that the mandates and assorted taxes in the Affordable Care Act are an impediment to jobs 

and growth in the United States, particularly at this moment, that 

on balance, the Affordable Care Act will raise the cost of insurance—this will crowd out scarce resources for hiring and for increasing pay, and directly hurt consumers—that the Affordable 

Care Act has strong incentives for employers to drop their employer-sponsored insurance. To the extent that they do so more 

than the CBO anticipates, we will not only have strong disruption 

in labor market contractual relationships, we will also have much 

large budgetary costs associated with the act than were anticipated. 

And then, finally, even if that doesn’t come to pass, the Affordable Care Act is, indeed, a budgetary danger at a very, very important moment in the U.S. fiscal history, and is a strong step in the 

wrong direction. 

Let me begin by elaborating on the latter only briefly. I think my 

views on the Affordable Care Act’s budgetary implications are, by 

now, well known. We are in a situation where the fiscal outlook is 

a direct threat to the U.S. prosperity and freedom, that to underVerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00042 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870

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take this act, which has a wide array of budgetary gimmicks, relies 

on unsustainable assumptions for cuts in Medicare that doublecounts particular receipts, whether they be the class act premiums, 

receipts into the Medicare Health Insurance Fund under various 

taxes, or Social Security premiums, and to otherwise omit costs 

from the legislation itself, gives a very misleading picture of the 

budgetary impact, and that any fair reading of it is that it increases the deficit dramatically by as much as $500 billion over the 

first 10 years. 

More generally, at the common sense level, we cannot set up too 

open-end entitlement programs that grow at eight percent a year 

as far as the eye can see, faster than the economy will grow, faster 

than revenues will grow, and not fix Medicare and Medicaid, and 

expect to improve the budget outlook. And this act did not. 

Turning to the labor market implications, there are many mandates and taxes, and these will compete for resources for hiring, 

and they produce a bias against labor. If you look at the employer 

mandate, the best outcome for employers who have more than 50 

employees is that it’s a non-event. The best thing that could happen is nothing; the worst thing that could happen is they will be 

subject to penalties and fines, and lead to drops in coverage. 

For those with fewer than 50 employees, this is a barrier to 

growth. Adding the 50th employee is a severe tax, and any small 

business is going to recognize this. There is in the act, as has been 

widely advertised this morning, a small business tax credit. It’s important to recognize that it is temporary, so there is no permanent 

fix to this problem. It is very complicated. And even if someone 

winds their way into it, it has negative economic incentives for 

growth. If you add employees or pay better, you lose credits. It’s 

a tax on your success, and should be perceived as such. 

There are 700 billion other dollars worth of taxes in the act. 

There are taxes, for example, a surtax on payrolls labeled a Medicare payroll surtax of 9/10ths percent. There is a 3.8 percent investment—net investment tax. These have nothing to do with 

health care reform. These are pure taxes. They’re exactly on the 

same group of small businesses and entrepreneurs that were at the 

focus of the recent discussion about the desirability of raising taxes 

in a recession. This bill replicates exactly the mistake that the previous congress avoided, and they will hurt jobs and growth in the 

United States. 

There are hundreds of billions of dollars of fees, whether they be 

on pharmaceutical companies, medical device manufacturers, or the 

health insurers themselves. As I lay out in my testimony, these can 

only be perceived as taxes. They will only show up as higher premiums in insurance. And they have a dramatic impact, because 

they are not deductible. So they are, almost two-for-one, more expensive than they appear. 

The upshot is that these $700 billion of taxes and fees will hurt 

the economy at a time when it can’t afford it. The impact as well 

is to raise insurance premiums at a time when the economy can’t 

afford it, and we have seen that on top of the additional benefits 

that the act mandates. If you have to cover more benefits, you have 

to raise premiums. There is no way around it. This is a bill that 

is going to raise premiums. 


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And since it doesn’t control health care costs, there is no offset 

on the basic underlying problem. We have seen that from CBO and 

the CMS actuary. 

The upshot is we are going to see continued pressure upward on 

health care cost, on insurance premiums. The taxes will contribute 

to that. And employers may drop coverage. And if you’re a worker 

who has their coverage dropped, you’ve disrupted your labor market bargain. That’s a bad thing for the labor market at a weak 

time. So, on top of the growth in jobs incentives, we have the disruption for those lucky enough to have a job. 

So, I would be happy to answer your questions. I am pleased to 

be here today. But I think, on balance, it is a fair reading of this 

law that it is bad for jobs and growth at a time when we need both. 

[The prepared statement of Douglas Holtz-Eakin, Ph.D. follows:] 


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Chairman CAMP. Thank you very much. 

Mr. Womack, you are recognized for five minutes. And your written statement will be made a permanent part of the record. 

STATEMENT OF SCOTT WOMACK, PRESIDENT, WOMACK 

RESTAURANTS, TERRE HAUTE, INDIANA 

Mr. WOMACK. Thank you, Chairman Camp, Ranking Member 

Levin, members of the Ways and Means Committee. Thank you for 

this invitation to testify today. My name is Scott Womack, owner 

and president of Womack Restaurants, a 12-unit IHOP franchisee 

in Indiana and Ohio. I am pleased to be here today to testify on 

behalf of the U.S. Chamber of Commerce. I also come before you 

today on behalf of my company, my industry, and small businesses 

and entrepreneurs. 

My first jobs were as a busboy and a cook. After college I joined 

the grocery industry. After five years I got fired, and found myself 

starting over. I was lucky to land a job at IHOP, as a manager. 

And soon, with a $15,000 loan from my parents, I bought my first 

IHOP franchise. After 10 years I began building IHOP restaurants. 

In 2006 I purchased a development agreement to expand into Ohio. 

Now, this would mean jobs in Ohio, not just in my restaurants, but 

also in construction, real estate, and also manufacturing. But 

thanks to this new law, those are not going to happen. 

The restaurant industry serves an important role in our economy, employing 12.7 million people. I like to say it’s an industry 

of first opportunities and second chances. First jobs, first careers, 

the first shot at small business ownership, and also second chances 

for people starting over, maybe from a forced career change or reentering society from incarceration, or a second job for those people 

digging out of a financial hole. Stories like mine are born every day 

in the restaurant industry. 

The restaurant business is built on a small business model, with 

profit margins of five to seven percent. We’re the most labor-intensive of any industry, ranking dead last in revenue per employee, 

at $58,000 per employee. This compares to retail at $170,000, 

banks at over $400,000, and other industries that actually bring in 

millions of dollars per employee in revenue. 

Now, for restaurants, this new requirement to provide health 

coverage is not just a marginal cost increase. This is a huge new 

expense. And at $7,000 annually per employee, it is beyond our 

ability to pay. So, let me just be real clear about that. 

Now, I estimate this to be 50 percent greater than my earnings. 

So please understand me. That is more than I can actually pay for 

the coverage. Our only alternative is to pay the penalties. Those 

penalties are not tax deductible. So that puts my company at risk, 

and many companies simply will not be able to pay those penalties, 

and will not survive. 

Restaurants are already facing many challenges, including rising 

commodity, fuel and energy prices, rising state and local taxes, and 

higher unemployment taxes. Restaurants are unable to raise prices 

in this economy. We don’t have a way to replace the lost income. 

Our only alternative is to cut costs. Cutting costs means cutting 

staff. It means reducing hours. It means pushing people into parttime status. 


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It also means that we will have to cut outside services, further 

hurting small businesses that serve my company. We will be forced 

to stop building restaurants and forfeit our investment. This future 

development would have amounted to about $22 million in construction and development spending, and 260 full-time jobs. 

Another casualty of this is the restaurant equipment industry, 

which is a uniquely American industry. That industry has already 

been devastated by this recession. 

Furthermore, our lenders require us to maintain certain levels of 

profitability. Our mortgages, leases, and franchise agreements are 

commonly 15 to 20 years long. They do not go away in 2014. Those 

are obligations we cannot walk away from. 

Other parts of the law are also causing harm. I may not be able 

to continue to offer the coverage that I currently offer to my management staff, due to the compensation non-discrimination rules in 

the law. 

Obviously, there are other examples of issues that have been 

raised today, issues with the HSA plans, taxes on investments, tax 

on the health insurance, and of course, the Cadillac tax, which will 

eventually hit everyone. 

To that end, we are asking that Congress repeal this health care 

law. If that cannot be achieved, we urge you to address some of the 

major problems with the law. This bill is a ticking time bomb that 

will devastate our industry. A change of course now could end this 

uncertainty. Therefore, I am asking you to introduce and pass legislation that would repeal the employer mandate. The members of 

the U.S. Chamber of Commerce will work tirelessly to help you 

pass it. 

I thank the members of this committee for the opportunity to testify today, and I look forward to working with you in the future to 

fix the problems created by this law, and implement real marketdriven solutions. Thank you. 

[The prepared statement of Scott Womack, follows:] 


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Chairman CAMP. Thank you very much, Mr. Womack. 

Mr. Olivo, you are also recognized for five minutes. And, likewise, your written statement will be part of the permanent record. 


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STATEMENT OF JOE OLIVO, OWNER/CEO, PERFECT PRINTING, 

MOORESTOWN, NEW JERSEY 

Mr. OLIVO. Thank you, Chairman Camp, and thank you to the 

Committee for not just the opportunity, but the honor to provide 

my testimony today. My name is Joe Olivo, I am a small business 

owner. And I appreciate being able to relate to you the concerns 

that I have with the health care legislation, how it has already 

begun affecting my company, and some of the problems I see as the 

plan becomes fully implemented. 

I am the president and co-owner of Perfect Printing in 

Moorestown, New Jersey. I own the company, along with my wife, 

my two brothers, and my mother. It was started in 1979, as a literal Mom and Pop copy center. I have run the business for the past 

23 years. We have been very fortunate we have been able to grow 

it to a high of 54 employees prior to the economic downturn, and 

we currently have 45 employees. 

An area which is of great concern to me that’s been spoken about 

today is the 1099 compliance requirements. Simply put, I do not 

have the resources in place to implement this law, to—the resources that I will have to put in place, as far as software programs 

and calculating and managing receipts are just much more than I 

have the resources to do. 

And I think it’s important, when you think of the burdens that 

these—the legislation places on a small business, is thinking in the 

context of businesses like mine. In a good year, our profit is $.03 

on every dollar we earn. Every time there is a new regulation 

that’s put in place such as this, it typically comes out of that profit 

margin. It leaves me less resources in which I can grow my business, give my employee wage increases, and contribute to their 

benefits. 

A key issue for any employer is how and when to grow the business. My company is currently on the cusp of the 50-employee 

mark, which—we were just there 2 years ago. And at that point I 

would be legally bound to offer my employees insurance, or face a 

penalty for not doing so. Besides being ridiculously complex, it’s my 

understanding that even at the—once I go over the 50-employee 

mark, I can face penalties if one of my employees is eligible for the 

government-subsidized plan, even if I am providing insurance. 

I’m still in the process of trying to compute the exact ramifications of this part of the law, but based on my current premium 

rates, the penalty is actually less expensive than the premium 

rates. So I find it ironic that the part of the law that is—mandates 

me to provide insurance to my employees is really an incentive not 

to provide insurance to them at all. 

And this takes me to the issue of what we currently offer our employees. I am able to pay 100 percent of the premium cost for my 

individual employees. I pay 56 percent of the family portion. I am 

able to do this because we’re able to use a high-deductible health 

savings account that we instituted six years ago. Now, this is important, because during the debate prior to the passage of this legislation we heard time and time again that my employees would be 

able to keep their existing coverage. Within 30 days of the law’s 

passage, I received a notification from my insurer that my plan 

would no longer be offered. 


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So, my understanding is, because of the preventative care requirements and how it was treated under a high deductible plan, 

it was no longer in compliance with the law. So, after 20-plus years 

of myself voluntarily providing insurance for my employees, and 

paying most of it at my own cost, I am now told that this is no 

longer acceptable to the government. 

Another area of concern to me is the tax credits that have been 

mentioned today that were promised to small business owners to 

help us pay for insurance. This point was made over and over, and 

even persuaded some in the small business community to support 

this plan, because they felt it would be a net positive for them. 

I can say now that I have checked the tax credits for my company of 45 employees, and we are not eligible for a single dollar 

in tax credits. I have learned from fellow small business owners. 

I spoke to a woman that owns a bridal salon with three employees, 

and she had spoke to her accountant. She, too, is not eligible for 

a single dollar in tax credits. So, these are the issues that I know 

have already begun affecting my business. 

But it’s the unknown that causes me as much or greater concern. 

You have to understand. When I grow my business, when I take 

financing to buy a new press or increase the investment in my 

business, I put my personal assets on the line. I put my home on 

the line as collateral, my family’s home on the line as collateral. 

When you have this much unknown, and unknown cost certainty 

in a law—and I challenge anyone on this committee to tell me what 

my health care cost will be two years from now—it creates much 

less of an incentive for me to take the necessary risk. 

So, I will leave you with this, as I hand over the microphone. My 

story is personal, but it is by no means unique. There are hundreds 

of thousands, if not millions, of small business owners across this 

country facing the same issues. And how can we ask those businesses to help the economy prosper, yet put a drag on one of the 

main engines of economic growth? 

Chairman CAMP. All right. 

Mr. OLIVO. Thank you. 

[The prepared statement of Joe Olivo follows:] 


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Chairman CAMP. Thank you all for your testimony. We will now 

go to the questioning period. And as I indicated, we will pick up 

where we left off. And so, Mr. Roskam is recognized for five minutes. 

Mr. ROSKAM. Thank you, Mr. Chairman. I just want the record 

to reflect that I respond promptly to emails and letters from Dean 

Heller, and even shoves in the elbow. 

Mr. Holtz-Eakin, I’m sure you watched the speech last night that 

the President gave. And one of the things that struck me was his 

presentation of, really, a straw man argument, and that is the assertion—we even heard that asserted today from Mr. Goolsbee— 

that we don’t want to go back to the days of, you know, folks being 

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There is really nobody that’s proposing that. House Republicans, 

Chairman Camp authored, I think, a very thoughtful piece of legislation that dealt with that through high-risk pools. Could you comment sort of generally on this whole notion of two different visions? 

Dr. Boustany mentioned this in responding to Mr. Neal when he 

said, ‘‘Look, the underlying premise of this new law is to expand 

coverage by putting people on Medicaid.’’ You alluded to this in 

your brief opening statement about entitlements outpacing the 

economy in general. Could you just give us a couple more thoughts 

on that? 

Mr. HOLTZ-EAKIN. Well, certainly, thank you. And with all due 

respect to the President, I think it is a straw man argument. If you 

roll the clock back to the beginning of the debate over health care 

reform, there was a bipartisan agreement that it would be desirable to control the growth of health care spending in the United 

States, and to cover more Americans with affordable options. That’s 

a bipartisan objective. 

The difficulty is that this law doesn’t control costs. And unless 

that is done, you will never be able to control insurance costs. And 

thus, even someone who has insurance will find it unaffordable. 

The second thing I would say is that there are severe problems 

in using Medicaid as a source of coverage expansions. Having a 

piece of paper that says, ‘‘I’m a Medicare beneficiary’’ does you no 

good if you can’t see a provider. And Medicaid beneficiaries are denied providers, you know, at much higher rates than Medicare or 

private insurers. About half of them can’t find primary care physicians. So they end up in emergency rooms at twice the rate of even 

the uninsured. That’s not a solution to a coverage problem. 

The third thing I would say is there is a competing vision. The 

other vision is genuinely controlled health care costs. Give people 

control of their money, use those resources wisely, allow them to 

choose insurance that fits their family circumstances, their lifestyle, and make insurers compete, whether it be across state lines, 

or more vigorously within states, so that you get decent insurance 

options and underlying control of the costs. That’s another route to 

the same two goals. But it’s a shared goal, and it always has been. 

Mr. ROSKAM. Thank you. Mr. Olivo, the previous witness, Mr. 

Goolsbee, said that there is a great deal of confusion about the 

health care law. And I was kind of thinking about that, and I was 

listening as he asserted that. 

And, in one element, I would agree with that. There is confusion. 

There is a great deal of ambiguity, for example, about who gets exemptions from the Administration. There is about 200 businesses 

or unions or other groups that have been exempted. Apparently it’s 

an exemption program that’s only based on their initiative. In other 

words, you have to ask for it, it’s not a blanket exemption. And it’s 

not a permanent exemption, it’s a one-time exemption. So there is 

a great deal of ambiguity and uncertainty, and you alluded to that. 

But at another level, there is a real sense of clarity about the 

health care law. For example, you figured out that the cost pressures on you are making a dynamic such that it might make more 

economic sense to your bottom line not to offer coverage, and to 

have folks go into the pool. You figured out that you’re knocking 


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on the door with 45 employees. Once you hit a 50-employee trigger, 

then your world changes on a whole host of things. 

Could you reflect on how it is that the health care law, and that 

sense of clarity that I have articulated, how is that driving the 

business decisions for you and your family, as you’re trying to move 

this company forward? 

Mr. OLIVO. Thank you for your question. Yes. I mean the health 

care—the problem with the health care, the expenses have increased so much, especially against any other expense within my 

business. And you have to understand, like I had pointed out, is 

when we invested and put our personal assets up for collateral, I 

don’t have the luxury of being wrong in my assumptions. 

So, when there are these costs, and I feel that there is costs that 

are unknown in addition to that, I have no choice but to be reflexively—take much less risk—maybe not buy another press or hire 

that extra employee until it’s absolutely—I absolutely have to have 

them. So it really forces me to be much more conservative in how 

I invest in the business. 

Chairman CAMP. Thank you. Mr. Buchanan is recognized. 

Mr. BUCHANAN. Thank you, Mr. Chairman. Mr. Eakin, I wanted to ask you a question, because I get asked this a lot back home. 

And I think the ranking member had mentioned it. 

How in the world can you add 32 to 52 million people, where you 

give either free or highly subsidized health care, and think, even 

though there is a third party out there that says that the deficit— 

we’ll reduce the deficit, where are they coming up with this information, other than in Washington? 

Mr. HOLTZ-EAKIN. Well, on the substance, I believe I’ve been 

very clear. I do not believe that this reduces health care costs. And 

if you add that many uninsured people to the pool, they will use 

more health care services. And all the evidence is health care costs 

will go up. 

With regard to the CBO’s estimate of the budgetary impacts of 

the bill, my gripe is not with the CBO, which does its job under 

the rules that the Budget Act imposed. My gripe is with the drafters of the law, who used the Budget Act rules to make sure that 

CBO came up with exactly the answer they wanted, even though 

it was in defiance of economic common sense. 

Mr. BUCHANAN. Yes, and I just want to say I was chairman of 

the Florida Chamber, and chairman of our little Chamber, and we 

had about 2,500 businesses, locally. This has been, by far, the biggest issue in the last 10, 20 years. This isn’t something that’s happened the last couple of years. Everybody is challenged. I get hundreds of stories, but everybody is challenged. 

And that’s why I don’t understand, if people really get out and 

talk to businesses in their community or not. Being in business 30 

years myself, and not a career politician, I can tell you this is 

drowning a lot of businesses. 

I was in a business this week, one of the largest private employers in our region. His health care cost, he told me, went up a million-and-a-half dollars. Now, maybe he has 400 employees or 300 

employees. If that’s not job killing—that’s his point to me; I know 

they don’t like that term—but when your premiums are going up, 

the CBO, I think—no, the CEO roundtable mentioned that health 


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care costs for a family of 4 are about $10,000 in corporate America. 

They say in the next 10 years, with this health care bill being considered, it’s going to go from $10,000 to $30,000. 

I was at another small business—I wasn’t there to talk to them 

about—they wanted to talk to me about private pharmacy. And he 

said, ‘‘By the way, Mr. Congressman,’’ on the way going out, he 

said, ‘‘I want to show you this,’’ and he brought out his bill. Just 

got his increase a couple of weeks ago. Another 23 percent increase. 

So, everybody is going up 23, 30 percent a year. 

My experience is you get a bill and it’s 28 percent, and you say, 

‘‘Oh, my God, and you start working towards trying to get it down 

to 18. You cut some benefits, you have the employees pay a portion 

of it. 

So, again, I don’t see—and I think the ranking member mentioned our expenses are going to go up there—I don’t see the offsets 

anywhere. I think this is a $1 trillion large entitlement going forward, and it does little or nothing for small businesses in the country. 

And I think it is—however you want to look at it, personnel expense used to be 20 percent of the payroll, or whatever, benefits 

20 percent of what you paid someone. Today there is a general feeling out there, ‘‘Do you want the salary, or do you want the benefits, 

but you can’t have both.’’ And that’s what is driving, I think, a lot 

of things up here. 

Let me mention—you had mentioned about being in the printing 

business, and I was in the printing business for a lot of years. How 

much has your cost gone up, say, in the last five years and then 

the last year, this year and then next year? Do you see a general 

trend, or a percentage increase over, let’s say, 6, 10 years? Pick a 

number. 

Mr. OLIVO. I would say the last 10 years the renewal for our 

existing policy has never been less than 12 percent, and has been 

as high as 49 percent. So every year we are faced with, as you described, the task of re-evaluating what type of new policy are we 

going to have to implement in order to provide coverage, to the 

point that we’re still able to provide a plan that we pay 100 percent 

of the premium cost for our employees. 

Mr. BUCHANAN. And then let me—Mr. Eakin, one other thing 

I touched on earlier today—I had to step out. But we have people 

that have talked to us about this medical tax. And I think one of 

our surgeons mentioned something about that. Many of them are 

telling me that they’re going to pay more in tax than they will even 

make in profit, this 2.3 percent tax. 

The fact of the matter is there is—the medical device industry 

has about 400,000 employees in the country, and another—indirectly, about 2.5 million people—2 million jobs that’s being created. 

And they said if this tax goes into effect, it’s going to really impede 

their ability to grow their companies. Do you have a thought on 

that? 

Mr. HOLTZ-EAKIN. Well, as I laid out in the testimony, there 

are only a couple of possible outcomes. Number one, they eat the 

tax, but they don’t have the financial resources to do it, so they will 

probably go out of business. Number two, they take it out of employee costs. That means lower wages, fewer jobs, bad for strugVerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00081 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870

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gling labor market. Or, number three, you pass it on to consumers 

in the form of higher prices. If medical devices are more expensive, 

insurance is going to be more expensive, and the problems of employers get multiplied. 

And, as I mentioned, there is a perverse aspect of these taxes in 

the bill, which is that they’re not deductible. So, to just break even, 

if you have $1 of tax, you have to have $1.54 in additional revenues. So you have to raise prices a lot, and that’s a big pressure 

upward on premiums in this law. 

Chairman CAMP. Thank you. The gentleman’s time has expired. 

Mr. Pascrell is recognized. 

Mr. PASCRELL. Thank you, Mr. Chairman. I want to just respond first to Mr. Buchanan’s remarks. What you have described 

is unsustainable, the exact situations which you have described. 

Between 2007 and the passage of health reform, I had many 

small businesses—I have a small business advisory committee. And 

the increase in their health cost was between, on average, 28 to 40 

percent a year. Health care reform, or as some on the other side 

would like to refer to it, Obamacare—and they say it with such 

love and charity—you can’t sustain those numbers. I don’t mean 

you, personally. We can’t. 

And those businesses, 60 percent of them, are no longer doing 

any business. They’re done. The primary cause of those businesses 

closing their doors—the primary cause; there are other causes—is 

what they have paid in their premiums. 

And I want to talk to you, Mr. Olivo, fellow Jersey guy. What’s 

interesting, I read a little bit about what you said, because I came 

in a few minutes late. But I want you to think about this. Ninetyfive percent of businesses are exempt from employer responsibility 

requirements. I just wanted to start with that. 

Now, I think there is a possibility—I’m not saying this is guaranteed or for sure—that it sounds like your carrier might have pulled 

a fast one on you, and I will tell you why. When they raised your 

rates and lowered your benefits last year—by the way, that’s not 

unfamiliar to any of us—and we were a good scapegoat. Obamacare 

was the perfect scapegoat before it even went into effect. ‘‘We’ll 

blame this bill, which will become an act, on whatever we do this 

year.’’ You saw what happened in California. It’s a scapegoat. And 

we expect that. We’re all big people, we understand what happens 

in a political debate. 

You stated that your insurance carrier informed you that they 

would be—not be renewing your high-deductible coverage due to 

the preventative health benefits in the new law. Are you aware of 

the fact that the new preventative benefits don’t apply to plans 

such as yours that are grandfathered? I would ask you—I ask that 

rhetorically. I just want you to think about that. 

And are you aware that the new—the IRS rules, not the new IRS 

rules—permitted high-deductible plans to waive the deductible for 

preventative services, even before reform was enacted? 

You know, I get a charge—I get a big charge—out of listening to 

folks tear this thing apart. Someone on the panel made this statement in a magazine that, ‘‘The elimination of denial of coverage for 

pre-existing conditions, and the elimination of the lifetime limit, 


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those things drive up costs. Premiums are going to go up in the 

short run if we don’t take into consideration pre-conditions.’’ 

This is a battle. There is no question about it. We battle civilly 

here between what the insurance companies want out of this and 

what the patient really needs, so we can really drive down the cost. 

We agree over the last 10 years premiums have skyrocketed. You 

and I both agree with that, two Jersey guys here. Families face 

bankruptcy due to medical bills. We agree. 

Mr. OLIVO. Certainly. 

Mr. PASCRELL. Okay. And competition decreased—I go through 

each state—in the insurance industry. In fact, you know, the average state, there are two or three people, companies, writing insurance. That’s a good situation. Not for us, but for somebody else. 

I haven’t heard any response about those kinds of things. And 

why should you? You’ve got a script. Let’s follow the script. The 

number of uninsured individuals grew that now, 1 in 5 young 

Americans under the age of 65 are uninsured. Those are the numbers from the Kaiser Foundation. These conditions are not ideal. 

Nine months after health care reform, I am proud to say that 

change is already underway. And I would conclude my remarks 

that if health care reform is bad for business, why have over 120 

businesses in my state, New Jersey, received grants to support 

groundbreaking biomedical research on pancreatic cancer, brain injury, Alzheimer’s, and more? This money supports jobs. 

Well, I have 150 employers in my state enrolled in the early retiree reinsurance program. Cities like Newark, Paterson, Clifton, 

all enrolled. And even big businesses, such as Johnson & Johnson, 

Mercedes Benz are enrolled in the program. 

Chairman CAMP. The gentleman’s time has expired. 

Mr. PASCRELL. They see the benefits. 

Chairman CAMP. Thank you for concluding. 

Mr. PASCRELL. And I thank you, the panel, for telling us—— 

Chairman CAMP. Mr. Smith is recognized for five minutes. 

Mr. PASCRELL [continuing]. What you did. 

Mr. SMITH. Thank you, Mr. Chairman, and thank you to the 

panel for sharing your expertise and insight. Mr. Holtz-Eakin, if 

you could reflect a little bit on uncompensated care, is it conceivable that even Medicaid would fall into a category that a hospital 

would perceive to be uncompensated care? 

Mr. HOLTZ-EAKIN. Yes, there are two large forms of cost-shifting in the insurance industry. One is from uncompensated care, the 

traditional someone walks into an emergency room uninsured, gets 

care, and has to be covered somewhere, and the second is the shifting from government programs, where Medicare pays about $.70 on 

the dollar, relative to private insurers, and Medicaid pays even 

less, roughly $.50 to $.55 on the dollar, depending on where you 

are. And those gaps have to be made up elsewhere, as well. So, 

those are shifted under private health care costs. 

Mr. SMITH. And, I mean, is it your assertion as well that the 

health care bill does immensely grow the Medicaid rolls? 

Mr. HOLTZ-EAKIN. Half of the coverage expansions come 

through Medicaid expansions. Sixteen million Americans will be 

put into a system that involves considerable cost shifting on to private insurance, and which, at present, they are twice as likely to 


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go to E/R’s, instead of having that care on a regular setting, and 

where they can’t find a—particularly a primary care provider at 

anywhere near the rates other people can. 

Mr. SMITH. Would it be conceivable that any federally initiated 

medical liability reforms, that they might pre-empt some state 

medical liability laws? 

Mr. HOLTZ-EAKIN. There is the option always for federal preemption. And so it would depend on how the law was written. But 

we do know that state-level experience has shown that a variety 

of different malpractice reforms have been effective at controlling 

some of the costs, and that if you had a strong federal pre-emption 

that applied universally, you would have a much bigger impact. 

Mr. SMITH. I say that because I am a little bit nervous that Nebraska might lose its rather optimal scenario, given its medical liability—— 

Mr. HOLTZ-EAKIN. Draft carefully, sir. 

Mr. SMITH. Duly noted. And I appreciate the business perspective shared here this morning, as well, certainly reflective of many 

of my constituents, some of whom have said they have held off hiring new employees, simply because of the unknowns contained in 

the health care bill. 

So, with that, in the interest of time, I will yield back. Thank 

you. 

Chairman CAMP. Thank you very much. Mr. Schock is recognized. 

Mr. SCHOCK. Thank you, Mr. Chairman. I too will be brief. I 

have questions for the business owners. 

You know, last year the President said his major focus in 2010 

would be jobs. In 2011, last night in the State of the Union, he said 

his major focus will be jobs. So, as two employers, I’m kind of curious, specifically with regards to how the health care bill is going 

to affect jobs, particularly those opportunities for the young people 

in America who rely on part-time employment through their high 

school and college years to supplement their income to pay for education, which the President talked about last night being so important to America’s competitiveness in getting long-term gainful employment for their futures. 

Scott Womack, you mentioned that you have 800 employees. And 

I’m wondering if you have studied this bill—which it sounds like 

you have—the effect on what this will mean for your ability to hire 

part-time employees, considering the bill really, from what I’m 

hearing from my employers in my district, almost incentivizes 

doing away with part-time employment, and really consolidation of 

the number of employees you have. 

Is that what you’ve found? Or how do you see, if this bill is implemented as it stands now, will affect the employment opportunities you can provide? 

Mr. WOMACK. Well, thanks for the question. Actually, it 

incentivizes moving people from full-time status to part-time status. That part-time and hourly job market right now is absolutely 

saturated with people, people who are not working. 

So, the reality is that we will be looking to get people under that 

30-hour threshold, wherever we can. So I don’t see it helping at all. 


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Mr. SCHOCK. And of the 45 employees who are full time that 

you offer health insurance to, how many of those 45 take your 

health insurance? 

Mr. OLIVO. That would be my company. Currently, out of those 

45, I believe it’s approximately 30 take the coverage. 

Mr. SCHOCK. And do you know the other 15, do they not take 

it because their spouse or someone else offers—— 

Mr. OLIVO. That is correct. No one in my company is uninsured. 

Mr. SCHOCK. So it’s not too bad that 30 out of your 45 seem 

to think your health care is a preference, and using the term in the 

bill, is ‘‘adequate’’ coverage. 

Mr. OLIVO. Yes. Their biggest complaint would be—is the cost 

of the premiums on the family side. But, yes, the coverage is great. 

They feel it’s very fair. 

Mr. SCHOCK. Do you know if your health care coverage that you 

offer now is going to meet the minimum standard in the new law 

for adequate health care coverage? 

Mr. OLIVO. The coverage that we offered in 2010 will not. We 

have already been notified of that, because of how preventative 

care is treated. 

Mr. SCHOCK. And how much do your agents or your third-party 

administrators suggest—how much will your insurance premiums 

increase to meet the new standard? 

Mr. OLIVO. We just got our premium increases in the other day. 

It’s a 12 percent increase in premium, but also a significant increase in how emergency room visits are treated. It’s much more 

costly to go to the emergency room, significantly more. 

Mr. SCHOCK. And so, what will the cost per premium, on the 

average, be for you? 

Mr. OLIVO. For an individual, the cost per premium in the com- ing year will be approximately $280 per month per individual. 

Mr. SCHOCK. Have they looked at what the—when the bill is 

fully implemented in four years, what it will cost for you to be able 

to provide that minimum adequate health care coverage, as specified by the law? 

Mr. OLIVO. I have no way of computing that at this point. 

Mr. SCHOCK. Oh. I would ask your third-party administrator to 

do that, because I’m sure they’re doing that. 

So, thank you very much for your comments here today. 

Chairman CAMP. Thank you. Mr. Kind is recognized. 

Mr. KIND. Thank you, Mr. Chairman. I want to thank our panelists for their testimony here today. 

Mr. Chairman, from my perspective, I think today’s discussion is 

very healthy, and I would encourage you to hold more hearings in 

regards to the Affordable Care Act, because there is some belief out 

there that with the passage of the Affordable Care Act, that somehow the discussion ends, and it doesn’t, that somehow the work 

ends, and it shouldn’t. I think we will be judged, ultimately, in this 

congress and future congresses, by working hard to find out what’s 

working in the health care system and what isn’t, and making adjustments along the way. 

So, getting testimony like this, and feedback in regards to the 

shortfalls which all of us are trying to accomplish, I think it’s going 

to be helpful. 


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But there has been a lot of discussion in regards to job creation, 

and what the Affordable Care Act means in that regard. Now, let’s 

just recall. We’ve had 11 consecutive months of private sector job 

growth in this economy, since the passage of the Affordable Care 

Act. We have had 1.1 million new private sector jobs that have 

been created. Over 207,000 of that is in the health care industry, 

alone. 

And I don’t know how many of you saw a recent Forbes article 

that was printed in the Forbes magazine, but a recent article in 

Forbes highlights how small business tax credits in the reform law 

are already helping small employers deliver health care coverage to 

their employees. According to Forbes—we’ll just look at the facts, 

here—insurance companies are reporting a significant increase in 

small businesses offering health care benefits to their employees. 

For example, United Health Group, the nation’s largest health 

insurer, added 75,000 new customers working in businesses with 

fewer than 50 employees within the last year. Coventry Healthcare, 

a large provider of health insurance to small businesses, added 

115,000 new workers in 2010, representing an 8 percent increase. 

Blue Cross Blue Shield of Kansas City, the largest health insurer 

in the Kansas City area, reports an astounding 58 percent increase 

in the number of small businesses purchasing coverage in their 

area since April of 2010. 

Repeal of the Affordable Care Act, as my colleagues last week 

voted for, would entail the largest tax increase on small businesses 

in our nation’s history—16,000 small businesses in western Wisconsin alone will see their taxes go up, who are today benefitting 

from these tax credits under the Affordable Care Act. Over four 

million small businesses nationwide are taking advantage of the 

tax credits, so they can better afford health care coverage for their 

employees. 

And what’s ironic—and, Mr. Olivo, I appreciate your testimony 

here today—but the health insurance exchange that we’re setting 

up for small businesses and for family and individuals was based 

on the ‘‘shop act’’ that I, in a bipartisan fashion, had introduced in 

previous years that NFIB endorsed. The creation of an exchange, 

so small businesses finally have a chance to go and shop with complete transparency, so you know what the costs are and what the 

benefits would be, coupled with tax credits, which we did in the Affordable Care Act, is something that small businesses have been 

calling for for years. And it’s part of this bill right now. 

But I think, ultimately, we are going to be judged on whether 

this works or not, depending on whether we have the ability to 

bring costs down. 

And here is another bipartisan idea that’s in the bill. We have 

to change the way we pay for health care in this country. It’s as 

simple as that. The current fee for service system under Medicare 

is all based on volume payments, regardless of results. This is 

crazy. 

And right now we have an Institute of Medicine study, two-year 

study as part of the reform bill, that calls on them to change the 

fee-for-service system to a fee-for-value reimbursement system. 

They will present an actionable plan to the Administration, the 

IPAB Commission, to implement. And this is something that Newt 


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Gingrich has been talking about for years, that Dr. Frist is still 

talking about today. Tommy Thompson at HHS told me that if we 

do one thing with health care reform, change the way we pay for 

it, starting with Medicare. Because whatever we do in Medicare is 

going to drive the private health insurance market. 

But it goes even beyond that. Health insurance companies from 

East Coast to West Coast have been calling for payment reform for 

years. Large providers, which are models of health care delivery 

systems, highly integrated, coordinated, patient-focused, from 

Innermountain to Mayo to Geisinger to Cleveland Clinic to 

Gundersen to Marshfield have been calling for this very thing that 

we finally have the tools in health care reform to accomplish. We 

start with accountable care organizations in the innovation center, 

telling providers, ‘‘We want you to be creative, we want you to innovate, we want you to deliver high-quality care at a better cost.’’ 

This is where we need to drive the health care system. 

But ultimately, if we stick with the fee-for-service system under 

Medicare, we will bankrupt our nation, because we will never be 

able to keep up with the cost, all based on volume payments, regardless of quality, regardless of outcome. And this is crazy. We finally have the ability now to do something about it, if we play it 

through. You don’t change the way you pay for one-fifth of the U.S. 

economy overnight. It’s not going to happen. It’s going to have to 

be transitioned. And we instituted that in the reform bill, as well. 

So, I would hope that we will have a chance to come together in 

a bipartisan fashion again, talk about the payment reform, which 

can really lead to cost reduction for everyone, so that health care 

is something that will be affordable to businesses large and small, 

and to individuals throughout this country. 

Chairman CAMP. Thank you. 

Mr. KIND. Thank you, Mr.—— 

Chairman CAMP. Thank you. Mr. Lee is recognized. 

Mr. LEVIN. We have to vote, don’t we? 

Chairman CAMP. Yes. 

Mr. LEE. Thank you, Mr. Chairman, and I want to thank our 

panelists for being here. I can’t help but be a little skeptical, after 

hearing the President’s State of the Union Address, as well as the 

first panelist, Mr. Goolsbee’s testimony, when it comes to the reality of this health care bill that we’re dealing with. 

If you remember last night, the President talked about in his 

speech with the dysfunctionality of our government when he used 

the example of the Interior Department is in charge of salmon 

when it’s in fresh water, but when it’s in salt water it’s the Commerce Department, and if it’s smoked, God knows where. 

Ironically—and I would ask this to Mr. Holtz-Eakin—isn’t it true 

that this new health care bill will, in fact, create upwards of 160 

new agencies, bureaus, and commissions? So, in effect, he is actually adding to the problem, rather than fixing it? 

Mr. HOLTZ-EAKIN. The exact number has always been hard to 

figure out, but that’s a safe guess. 

Mr. LEE. I agree completely. The other point, too, as you brought 

up now, the issue of the 1099. It is very apparent, in my eyes, that 

this was more or less a cash grab. This was put into the bill—if 

you’re a small business owner and you do not have an accurate tax 


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ID number, you’re on the hook, and have to withhold 28 percent, 

as the small business owner. 

Again, these are huge costs on someone who is trying to get by 

day in and day out. And I am learning from both Mr. Womack and 

Olivo, that, in your mind, this health care bill, is it more likely or 

less likely for you to go out and hire people at this point? 

Mr. WOMACK. Well, without a doubt, it’s created a tremendous 

amount of uncertainty. And it’s frozen credit markets, as far as restaurants go. Those are just now starting to loosen up. But as we 

get closer to this, and the implications become more clear, credit 

markets are going to freeze up, it’s going to be harder to borrow 

money to build new restaurants. 

The other thing is that, as I stated earlier, the only way to pay 

for this in our business is to cut costs. And we are a lean, mean 

industry now. We don’t have a lot of fat. And the things that we 

can control are payroll, and to minimize the impact of these penalties. So that means cutting jobs. It doesn’t mean adding jobs. 

Mr. LEE. We’re getting to the tipping point where risk reward 

no longer makes sense for someone to go out, as a small business 

owner, and take his dream and go out and start a business. 

The other—maybe I can bring this back to Mr. Holtz-Eakin, with 

regards to Medicaid, I have the luxury of living in New York State, 

which has, far and away, the highest Medicaid expenses. I think 

if you compare it next to equivalent states like Florida and Texas, 

where their economies are doing relatively better, the same number 

of citizens living in that state, but literally twice the Medicaid expenses. 

With the passage of this bill, ultimately, is it going to increase 

or decrease the Medicaid costs that we’re seeing in New York 

State? 

Mr. HOLTZ-EAKIN. I think the states are at great risk. They 

are obligated to honor the expansions under the Affordable Care 

Act. They may get additional payments from the Federal Government for that, but they have to pay full freight on any current eligibles who now show up and take up benefits. And I think the real 

risk is that, in advertising the Affordable Care Act, we’re going to 

draw out of the woodwork a lot of existing eligibles, and New York 

State will have to pick up their full share of their cost. 

Mr. LEE. At a time where to start a small business in New York 

State, it is a huge obstacle. And, again, I—as someone who has run 

a small business, I just see this as a further death knell for the 

creative side of what made this country great. 

And I would say the same thing deals with the medical device 

tax. When we are trying to—I come from manufacturing. When 

we’re—the President spoke again, the contradiction of talking 

about in helping businesses thrive, we’re going to go now and add 

a tax onto a business. 

Again, Mr. Holtz-Eakin, in your view, is this going to help our 

manufacturers in the health-related device industry compete? Is it 

going to help or hurt them? 

Mr. HOLTZ-EAKIN. This is an additional cost for our device 

manufacturers on the international market. It’s going to hurt their 

competitiveness. 


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It’s also one of many taxes that, if you just look at pure macro 

economics, the evidence is that discretionary tax increases—of exactly this type, things that have nothing to do with the business 

cycle, you just do it for other purposes—the evidence of Christie 

Romer, the former chairman of the Council of Economic Advisors, 

is that they are three times more detrimental to the economy than 

equivalent spending changes. 

So, if you look at this act as a whole from that perspective, the 

tax increases’ negative impacts far outweigh any possible benefits 

of the spending. 

Mr. LEE. Thank you. 

Mr. HERGER. [Presiding.] The gentleman’s time has expired. 

The gentlelady from Tennessee, Ms. Black, will inquire for five 

minutes. 

Mrs. BLACK. Thank you. Thank you again, panel, for being here. 

It looks like I’m the last one here, but the audience will still hear 

this question. And all of you can answer this question, but I think, 

Mr. Womack, you particularly talked about health care savings accounts. 

And continuously, the Administration has claimed that the 

health care law is giving Americans more freedom in their health 

care choices. And, in reality, this law is really going to force many 

Americans to buy a product which is a government defined health 

care product. In addition to that, he, President Obama, also promised that the American people, if they liked their current health 

care insurance, they would be able to keep it. 

But as we see in the law, it will limit the use of health care savings accounts. And being in the medical field for a number of 

years—40 years now—I think that one of the things that we have 

seen that has driven the cost of health care up is that we have 

taken the consumer out of the driver’s seat, and they are not making choices. 

And I was very excited about maybe expanding this product, because it would give an opportunity to put somebody back in the 

seat that wants to be in the seat, and it would also give more opportunities for different vehicles, rather than a set type of insurance that most employers do have and offer to their employees. 

Mr. Womack, I think you’re the one that mentioned about health 

care savings accounts, and all of you certainly can respond about 

where you feel that this might help companies, if they were given 

that choice, to use those as compared to being forced into a certain 

product or a certain type of care. 

Mr. WOMACK. Thank you. And I am a Knoxvillian, believe it or 

not. 

Mrs. BLACK. Oh, great. 

Mr. WOMACK. Yes, nice to see you. We were faced with huge 

premium increases last year. And I can’t remember the number, 

because we were bidding and we saw so many different numbers, 

but it was in the neighborhood of 30 percent. And so, we decided 

to go ahead and look at an HSA, and we did begin to offer an HSA 

as an option to our managers. 

And I have my own HSA story. My wife had an MRI ordered recently by the hospital, at a cost of $1,100. And someone said, ‘‘You 

need to shop that around.’’ And so we went out and into a diagVerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00089 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870

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nostic facility, literally just down the road, and got the same procedure for $350. Truthfully, I don’t know that we would have even 

thought about that, had we not been using an HSA, where we were 

spending the money out of our account, ourselves. 

So, it’s that type of story that gets told over and over and over 

in HSAs. They’re just a huge benefit. When you put the individual 

more in touch with their own spending, they will find ways to control it. And they get to keep that money in the account and roll it 

forward. And it’s just—it’s a beautiful plan that should not be impeded. We shouldn’t do anything to hamper HSAs. Thanks for the 

question. 

Mr. OLIVO. I would say, very quickly, I have a similar story. We 

put the health savings accounts in six years ago, and the first year 

the employees resisted it, did not like it. But, over time, they have 

grown to appreciate. Those that take care of themselves have seen 

their savings accounts grow. 

And I, too, have seen instances where employees had exams or 

scanning type of tests to be done, and were able to go online and 

literally save a couple thousand dollars because they were able to 

research it themselves, and there was an incentive there to do so. 

Mrs. BLACK. Yes, Mr. Holtz-Eakin. 

Mr. HOLTZ-EAKIN. Yes? 

Mrs. BLACK. Do you have a comment? 

Mr. HOLTZ-EAKIN. Oh. Well I don’t have the business experience of these gentlemen. But certainly in the alternative reforms 

that were envisioned in the debate leading up to the Affordable 

Care Act, one version is to put consumers at the centerpiece of this 

one-fifth of the economy, in the same way that they have driven 

the other four-fifths, to be the largest, strongest, economy on the 

planet. And then, you know, require insurers and providers to compete in price and quality. And that’s a very different vision than 

what we see in this law. 

Mrs. BLACK. Thank you. I yield back my time. 

Mr. HERGER. The gentlelady yields back. The gentleman from 

New York, Mr. Rangel, is recognized for five minutes. 

Mr. RANGEL. Thank you, Mr. Chairman. And let me thank this 

panel for sharing with us the problems that you’re having with this 

legislation, especially those of you who work every day in dealing 

with employees. 

Tell me. Both of you, and certainly the Chamber, advocate repeal 

of the law that the President signed. Is that correct? 

Mr. WOMACK. Yes, it is. 

Mr. RANGEL. And you don’t have a plan that you’re recommending. Do you—strike that. 

You think that we’re better off without any changes in the law, 

than to enforce or to amend the existing law? 

Mr. OLIVO. I could say from my vantage point, as a small business owner, that for—I look at it as action/reaction. For Congress— 

what Congress has passed, I’m seeing far more significant reactions 

to any positive that this will bring to my employees. 

Mr. RANGEL. I can understand that. But my question—and I 

don’t have any experience at all in hiring employees—is that, as a 

business man—and I know you can’t speak really on this issue, Mr. 

Womack, for the Chamber—but for yourself, with your businesses, 


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you would rather see the government just stay out of it, rather 

than to amend or try to correct the existing law. Is that your position? 

Mr. WOMACK. Oh, I guess I’ve gotten used to the government 

being in the middle of things, and I don’t say that sarcastically. We 

anticipate some sort of change—— 

Mr. RANGEL. Do you have—I’m concerned what happens if we 

just stop this, and—are all of your employees, one way or the other, 

covered by some type of health insurance? 

Mr. WOMACK. I don’t believe so. And—— 

Mr. RANGEL. So you do have employees that are uninsured that 

you would want to see insured, as anybody would, just—right? 

Mr. WOMACK. Absolutely. But the problem is—— 

Mr. RANGEL. Do you have any idea as to how you would want 

to insure these people that are uninsured, other than what has 

been recommended and passed by the Congress? 

Mr. WOMACK. No. And the reason is very simple. We’re talking 

about more money than is available. We don’t have the money. 

Mr. RANGEL. And so—listen. The problem we’re facing—there is 

sharp differences of opinion here. The National Business Group on 

Health indicates that they don’t think they can get a better solution to the problem I mentioned during their lifetime, during our 

lifetime. If they get repeal, or gut it, we will have to start all over 

again, and we’ll be worse off. 

And so, I think, generally speaking, every nation truly believes 

that access to health care is important for the strength and security of the country, and that our workforces should be better educated and be exposed to preventative care and health care. You 

want that. You’re just saying that you can’t afford it. 

Mr. WOMACK. Absolutely. 

Mr. RANGEL. Well, our job is to say that, one way or the other, 

the government is going to make certain that it is affordable. We 

consider that as a national obligation and goal. All industrialized 

countries do it, not because of compassion, but even in the question 

of competition we do believe that an educated workforce and a 

healthy workforce is more productive. 

I can understand how you cannot afford to do what basically you 

would like to do. But you just can’t leave those people out there 

hanging that have no insurance at all. When we find out that personal lives and families are shattered, bankruptcies, not because of 

you, and not because of the employee that faces serious illness. So, 

if you wanted to help them—and I truly believe you do—it doesn’t 

help the family to say, ‘‘Hey, my boss is great, he just can’t afford 

to help me out in this crisis.’’ No. 

I believe, and a lot of people disagree, but I truly believe we have 

an obligation to at least give access to health care, one way or the 

other. And if you don’t like this way, I really believe you have some 

type of an obligation as business people that have the experience 

that we don’t have, generally speaking, not just to leave these people out there, hanging. 

And to say that no insurance is better than what we have, I don’t 

really think that’s a legitimate—I don’t think it’s fair to us to say 

all the things we’ve done wrong, and not have any positive suggesVerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00091 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870

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tions that we can take care of those employees that you want to 

take care of. 

Mr. WOMACK. Well, Mr. Rangel—and this is a dilemma that’s 

been discussed for years. And so, you know, I don’t take any offense to your comments. The problem—— 

Mr. HERGER. The gentleman’s time has expired. If we could 

sum up very quickly. 

Mr. WOMACK. Okay. The problem is that, in a nutshell, the 

only solution—if you ask the employers in our industry—and I will 

just speak for my industry—if you ask for employers from my industry to pick up that burden now, it’s a crushing, complete disruption of our industry, and we can’t turn on a dime. 

Mr. HERGER. The gentleman’s time has expired. 

Mr. WOMACK. Thank you. 

Mr. HERGER. I want to thank Mr. Holtz-Eakin for testifying. I 

understand you have a previous engagement you need to leave for. 

Mr. HOLTZ-EAKIN. That’s correct, Mr. Chairman. 

Mr. HERGER. And if any of our members have any further questions for him, they could submit that in writing, and—— 

Mr. HOLTZ-EAKIN. I would be delighted, and apologize for having to excuse myself. 

Mr. LEVIN. Mr. Chairman. 

Mr. HERGER. Yes? The gentleman is recognized. 

Mr. LEVIN. Before you go, Dr. Holtz-Eakin, I am going to send 

to you some inquiries about the forum. And I would like very much 

if you could respond. 

Mr. HOLTZ-EAKIN. I would be happy. 

Mr. LEVIN. You’re a sister organization, as I understand it, of 

the American Action Network. 

Mr. HOLTZ-EAKIN. That is correct. 

Mr. LEVIN. Let me just finish. I want to tell him what I’m sending him. I was told he was going to be here until noon. 

And so, as I said, I think your website and that of the network 

says you’re sister organizations. 

Mr. HOLTZ-EAKIN. Yes. 

Mr. LEVIN. And we know the action of the network. 

Mr. HERGER. If the gentleman could conclude—— 

Mr. LEVIN. I will conclude very quickly. 

Mr. HERGER [continuing]. Dr. Holtz-Eakin has indicated that he 

will respond by letter, so—— 

Mr. LEVIN. I want to let him know in advance. 

Mr. HERGER [continuing]. The gentleman from Michigan will 

have his inquiry answered. So—— 

Mr. LEVIN. Okay. So I just want you to know, so it doesn’t take 

you by surprise. I am going to ask you if you will reveal the sources 

of the income of the forum. Will you do that? 

Mr. HOLTZ-EAKIN. I will comply with the bylaws with the 

forum and with the U.S. tax laws. And I—— 

Mr. LEVIN. I 

Mr. HOLTZ-EAKIN [continuing]. And I will get your questions, 

look at them, and do—— 

Mr. HERGER. The gentleman will respond—— 

Mr. LEVIN. Will you disclose—— 


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Mr. HERGER. The gentleman’s time has expired. The gentleman 

from Georgia—— 

Mr. LEVIN. Why don’t you let him finish? 

Mr. HERGER [continuing]. Mr. Price, will inquire for five minutes. 

Mr. PRICE. Thank you, Mr. Chairman. 

Mr. RANGEL. Wow. 

Mr. PRICE. And I apologize for not being here earlier. And I am 

sorry that Mr. Holtz-Eakin has to leave, but I wanted to just make 

a comment about some of the taxes in the provision that are stifling the innovation. 

The medical device tax, as we all know, when you tax something 

you get less of it. And the medical device tax, I believe, and many 

believe, that that increase in taxation there will significantly decrease innovation and affect remarkably high-paying jobs that have 

wonderful benefits to our society. And I think that that’s a direction that we ought to look at. The estimates are that a 2.3 percent 

increase will be passed on to the consumers, either directly or indirectly, also. 

So—but I appreciate Mr. Olivo, Mr. Womack being here, and I 

want to talk a little bit about the consequences. Maybe, Mr. Olivo, 

if you want to just talk about your business itself, this bill has all 

sorts of requirements and stipulations and mandates that every 

single business in this country, employer in this country, has to 

look at. 

What have you—how much time have you spent in trying to 

make certain that you are going to be able to comply? What kind 

of costs have you expended to try to make certain that you will be 

able to comply? And what incentives are—is the bill providing you 

that might not be necessarily beneficial to your business, itself? 

Mr. OLIVO. I have personally spent hours of time that I could 

better spend managing my business reading the health care bill. I 

haven’t read it in its entirety, but interpreting it and using the resources I have with the business organizations like NFIB, in trying 

to interpret how it’s going to affect me. 

Your question was as far as exactly what the—— 

Mr. PRICE. And what have you determined? How is it going to 

affect you? 

Mr. OLIVO. Just at every level. Just my concern about hiring a 

new employee, the cost that goes into hiring a new employee is not 

just his wage. The health care costs are such an integral component of what it costs me. And when that’s unknown, and when 

there is all this legislation hanging out there, it really makes me 

more conservative and say, ‘‘Maybe I don’t need that employee at 

this point in time.’’ 

Mr. PRICE. So the continued uncertainty, and the potential rules 

and regulations that will be passed on, leave you less able to expand your business or to hire new employees. Is that an accurate 

statement? 

Mr. OLIVO. Without a doubt. 

Mr. PRICE. Great. Mr. Womack, I know that my sense has always been that there are some perverse incentives within the bill 

itself that make it so that employers look at the situation and they 

say, ‘‘It’s going to cost me more to provide health coverage for my 


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employees. Why should I do that? Shouldn’t I just let them fall into 

the exchange?’’ 

Are you hearing that from your members? And I wonder if you 

might expand on whether or not that is an accurate—— 

Mr. WOMACK. Oh, absolutely. And, of course, again, we can’t afford the coverage. So we are absolutely going to have to look at the 

penalties. We have a real concern that our insurance companies 

that we’ve talked to are not going to allow us to continue to offer 

the coverage to our salaried staff, based on rules very similar to 

401(k) rules regarding highly-compensated employees. 

So, that means that, really, through a whole other avenue, we either offer insurance to everyone, or drop it. We have 50 families 

on health insurance now in our company, and it’s an important 

part of what we offer as a benefit package. 

Mr. PRICE. So the statement that we heard throughout this 

whole discussion, ‘‘If you like what you have you can keep it,’’ may 

not necessarily be true in your business. Is that accurate? 

Mr. WOMACK. Sure, absolutely. 

Mr. PRICE. Would you expand, or do you have any thoughts on 

the incentives for other businesses, small businesses, to move individuals, their employees from the coverage that they currently 

have to the exchange? 

Mr. WOMACK. Well, I measure that penalty, really, at $2,800, 

because $2,000 is not tax deductible. You have to account for the 

taxes you pay on the income to pay the penalty. So it’s really more 

like $2,800. I cannot imagine that in the board rooms across the 

U.S., that people are looking at, you know, a $15,000 premium for 

an employee, or $2,800. 

You know, very quickly you do the math, and you’re going to opt 

to drop that coverage. And it may not be just that simple math, it 

may be some sort of an event where, you have an issue with an 

insurance company, or you have a 40 percent rate increase, and finally—enough is enough. 

Mr. PRICE. In fact, aren’t you almost, in the real world, obliged 

to drop that coverage, because your competitors will do so and then 

you’re at a competitive disadvantage? Is that an accurate statement? 

Mr. WOMACK. I would say that offering insurance is a significant benefit that helps make us more competitive. So we always 

want to offer the insurance, and we just can’t afford it. 

Mr. PRICE. Thank you. 

Mr. HERGER. The gentleman’s time has expired. The gentlelady 

from Kansas, Ms. Jenkins, is recognized for five minutes. 

Ms. JENKINS. Thank you, Mr. Chairman. Thank you both for 

being here. 

On a panel before you we had the chairman of the Council of 

Economic Advisors, Dr. Goolsbee, testify. And during his testimony, 

I noted that he said this. ‘‘The Affordable Care Act has already 

begun to help small business become more competitive by making 

health insurance more accessible and more affordable.’’ 

Mr. Olivo, you’re a small-businessman. Could you give me an example of how the act has helped you—has already begun to help 

you become more competitive? 


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Mr. OLIVO. Unfortunately, I could not give you an example. All 

I can tell you is that our existing insurance, which the employees 

liked the coverage, is no longer available. And our insurance premiums have continued to rise in a double-digit percentage for the 

coming year. 

Ms. JENKINS. Okay. If they haven’t, in fact, already begun to, 

can you give me an example of how you will see them—how you 

expect them, in the future, to cause you to have a more competitive 

health insurance and an accessible and affordable plan? 

Mr. OLIVO. I don’t see how it’s going to be—help us offer a plan 

that’s more competitive. My concern with the exchange is that 

they’re not true exchanges in the form of competition. They’re still 

heavily mandated types of policies. So there is not real, true competition. 

Living and residing and working in New Jersey, we have the— 

I believe it’s the third highest insurance rates in the nation. We 

have had guaranteed access, a community-rated plan since 1993. 

And I can tell you from that point, when that law was instituted— 

I’ve been running the company since 1988—I have seen a direct 

correlation with our health care cost beginning to rise from when 

that guaranteed access was put into place. 

So, I just don’t see anything that’s going to make the premiums 

less expensive. 

Ms. JENKINS. Okay. Also in Dr. Goolsbee’s testimony he said 

this. ‘‘The Affordable Care Act can be a significant benefit to the 

job market, by easing the burden of health care costs on small businesses.’’ 

So, once again, as a small-business man, I was hoping you could 

tell us approximately how many jobs that you will be able to create, thanks to the savings that you will incur. 

Mr. OLIVO. And I can say, for my company specifically, at 45 

employees, we are not eligible for any sort of tax credit which I believe he was referring to. 

Ms. JENKINS. Okay, thank you. Mr. Womack, I was home in my 

district last week, and visited several major employers who have 

over 50 employees. And there was a consistent message that I was 

receiving this day, that they were frustrated with the regulations 

coming about, due to this bill. 

And one in particular that they mentioned was that they were 

being required to provide lactation rooms if they employed more 

than 50 employees. And several of them were concerned, they had 

multiple locations, one location only had three men working at it— 

if they were required to provide a lactation room for those three 

men, because, overall, their employees had totaled more than 50. 

I just wondered if you had any concerns about this particular 

regulation, or others within this bill. 

Mr. WOMACK. Well, I do now. Thank you for informing me of 

that regulation. I wasn’t aware of that. And, of course, no surprise. 

There are so many things buried in the law that, you know, we 

don’t seem to be aware of. I don’t know how to react to that one 

in particular. 

But, this layering on of all these little things, I mean, they just 

go on and on. It creates a tremendous amount of uncertainty and, 


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you know, quite frankly, depression amongst the business community, just wondering how we’re going to keep up with it all. 

Ms. JENKINS. Is there any estimated cost for your business to 

meet all of these? I guess you probably can’t—if you didn’t even 

know about this one, you probably don’t know about others to really adequately estimate—— 

Mr. WOMACK. You know, we’re looking at that big bill, and 

we’re not counting the small ones right now. The big bill is frightening enough. 

Ms. JENKINS. Okay. If the Affordable Act isn’t getting it done 

for you, the Republicans had an alternative bill, and we had TORT 

reform, expanded FSAs, HSAs, purchasing across state lines, access pools. What other ideas do you have for us? 

Mr. HERGER. The gentlelady’s time has expired. 

Ms. JENKINS. Thank you, Mr. Chairman. I yield back. 

Mr. HERGER. I recognize the ranking member, Mr. Levin, for 

five minutes. 

Mr. LEVIN. Thank you very much. And we really appreciate 

your coming. I regret that Dr. Holtz-Eakin had to leave, and I am 

sending him a letter today. And since this was a public hearing, 

I will make that letter public. And I expect him to give us an expeditious response. 

But again, I very much respect your different views. Everybody 

brings different experiences, and we need to tap into them. So, let 

me ask you, Mr. Womack, how many employees do you have? 

Mr. WOMACK. Approximately 900. 

Mr. LEVIN. And how many of them have insurance? 

Mr. WOMACK. About 50. 

Mr. LEVIN. And all of the 50, are they in a certain category or 

two of work? 

Mr. WOMACK. They are either salaried management people or 

office staff. 

Mr. LEVIN. So, none of your employees who aren’t in management or in office staff have health insurance through their work? 

Mr. WOMACK. That’s correct. 

Mr. LEVIN. You would be required to provide health insurance 

under this new law? 

Mr. WOMACK. Correct, or pay the penalty. 

Mr. LEVIN. Or pay the penalty. So your 800 or so are part of 

the 50 million who have no health insurance in this country? 

Mr. WOMACK. That’s correct. 

Mr. LEVIN. Have you inquired into what the cost would be to 

insure them? 

Mr. WOMACK. Yes, I have run those numbers many times. 

Mr. LEVIN. And you find it too expensive? 

Mr. WOMACK. It’s much more than we earn. 

Mr. LEVIN. And so, therefore, trying to get control of health care 

costs would be potentially helpful to you, in terms of having your 

employees covered? 

Mr. WOMACK. Absolutely. The problem is the number has 

grown to a size where, even if you cut it in half, which is not going 

to happen, but even if you cut that number in half, it’s beyond our 

ability to pay. 


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Mr. LEVIN. How many of them, do you know, are covered by 

some kind of a public program? 

Mr. WOMACK. I have no idea. 

Mr. LEVIN. You know what percentage are women? 

Mr. WOMACK. Not off the top of my head, no, sir. 

Mr. LEVIN. Just roughly? 

Mr. WOMACK. I’m going to guess roughly half. 

Mr. LEVIN. Do you know what happens when they get ill? 

Mr. WOMACK. They go seek treatment, and you know, at a local 

provider, and they get treatment. 

Mr. LEVIN. How do you know they get treatment? 

Mr. WOMACK. Well, we hear the stories. 

Mr. LEVIN. You don’t have any systematic way of knowing? 

Mr. WOMACK. No. 

Mr. LEVIN. They go to emergency rooms? 

Mr. WOMACK. Probably, or their local doctor. 

Mr. LEVIN. And they go to a local doctor who doesn’t charge 

them anything? 

Mr. WOMACK. No, they go to a local doctor that does charge 

them something. 

Mr. LEVIN. What’s the average wage of your non-salaried, nonoffice employees? Mr. WOMACK. It’s approximately $9 an hour. 

Mr. LEVIN. Okay. Mr. Olivo, you have a high-deductible plan? 

Mr. OLIVO. That is correct. 

Mr. LEVIN. What’s the deductible? 

Mr. OLIVO. Well, it varies. I mean—well, I—roughly, within $100 I would say. The current deductible for an individual is 

$1,500, and for a family it’s $3,000. Mr. LEVIN. So they pay the first $1,500—— 

Mr. OLIVO. The first—— 

Mr. LEVIN [continuing]. Or the first—— 

Mr. OLIVO. That’s—— 

Mr. LEVIN. $3,000? 

Mr. OLIVO. Correct. 

Mr. LEVIN. I have no further questions. 

Mr. HERGER. The gentleman yields back. I now recognize for 

five minutes the gentleman from Minnesota, Mr. Paulsen. 

Mr. PAULSEN. Thank you, Mr. Chairman. And, first of all, let 

me just thank both of you for taking the time to come in here and 

share your small business background and experiences, and go 

through a pretty lengthy hearing. 

I just want to touch on something, because I know Mr. HoltzEakin had to leave, but you know, last night the President said 

that we do need to be a nation of innovators and a nation of leaders. And during this speech he reminded us of what it takes to 

compete for jobs and for industries. And, as entrepreneurs, I’m sure 

you can appreciate that especially. 

But he did say, and I agree, we need to out-innovate, out-educate, and out-build the rest of the world. We have to make America 

the best place on earth to do business. And there is one American 

industry I have to mention, because it’s a Minnesota success story 

as well, and that’s the engine of innovation and growth in the 

health care field. It’s medical devices. 


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And we heard from some other Members earlier about that, and 

the medical technology industry. And that’s an industry that employs about half-a-million individuals, and routinely revolutionizes 

patient care. And, unfortunately, the health care law does include 

a new $20 billion tax on this innovative industry. 

I am going to call out one company in particular, because it’s a 

larger company. Boston Scientific, which employs more than 5,000 

individuals in my home state of Minnesota, has estimated that that 

tax is going to cost the company an additional $100 million a year, 

and up to 2,000 jobs. It’s also going to cause a substantial cut-back 

in Boston Scientific’s research and development budget, which is 

the origin of where all this innovation comes from that the President talked about in his speech last night. 

And, you know, knowing that 62 percent of the medical technology industry is small businesses, small businesses like yourselves, for instance, you took an idea, you took the risk, you started 

it out, I’m just really worried that we’re killing an industry that 

it’s going to be very difficult to jump-start and bring back here. 

And we can’t afford to lose it. 

And so, just knowing we have to keep that innovation here, I had 

to make that comment, because Mr. Goolsbee had mentioned earlier that one of the benefits of that tax, as a part of the legislation, 

was going to basically allow about millions of patients now to access these device procedures that would not normally have had 

that market before. And I think the reality is that we look at it 

now in Massachusetts, which was the model upon which the legislation was built—there was no increase in device utilization at all, 

as was, I think, suggested. 

But I want to follow up real quick with both of you, since you’re 

small business people, and the health care savings account and the 

flexible savings account portion, and that’s because, you know, we 

know the health care law instituted new caps on popular flexible 

spending accounts, FSAs, that individuals use for their health care 

expenses, and they also prohibited the use of FSAs and health care 

savings accounts for purchases of over-the-counter medications 

without a doctor’s prescription. 

And you mentioned a little earlier about, as an employer, what 

some of those results would be, or some of the detriments of the 

changes in the law would mean. And knowing that there are 10 

million Americans that use FSAs, and 35 million Americans using 

FSAs—HSAs and FSAs—would you explain just—I mean, give the 

patient perspective. I mean your employees. As a small business 

that wants to have an additional option, I mean from a patient perspective, what does that—offer some ideas for your employees, 

rather than just the employer. 

Mr. OLIVO. Well, as I had said before, we have had the health 

savings account, the high deductible plan, for six years. And I have 

witnessed how it has improved my employees’ incentive to better 

manage not only their health, but how they choose to go about obtaining health care. 

And as I had said before also, the first year was very rough, in 

the sense that it was an HMO—these people were raised on HMOs, 

and they did not like having to pay $150 initially to go to a doctor, 

when before it was $15 at the time. But over time, as they see their 


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health savings accounts start to build up, and they see, ‘‘If I take 

better care of myself, I could get off this medication and now I save 

money,’’ it has certainly improved how they go about purchasing 

the health care. 

Mr. PAULSEN. Mr. Womack, you want to comment, as well? 

Mr. WOMACK. Well, I think that any time that you allow people 

to accumulate money in an account like an HSA for the purpose 

of spending on their expenses, it becomes a huge incentive for them 

to really manage all those little costs. And sometimes those little 

hidden costs can be significant. You know that when you have the 

money in your account and you get to keep it, you have a very big 

incentive to manage your costs. 

Mr. PAULSEN. Well, and Mr. Chairman—and thank you for the 

testimony—I just want to comment. I have talked to numerous 

small businesses and their employees that feel like they have had 

the rug pulled out from under them now, as they have gone 

through this adjustment, to take care of their own health care. And 

they are going to have to make a huge adjustment now, as the law 

has been changed. 

And I would rather see us move into the expansion of FSAs and 

HSAs, to allow more flexibility and control costs. So I yield back, 

Mr. Chairman. 

Mr. HERGER. I thank the gentleman. At this point, everyone 

has—at least in the Committee—has gone through inquiring once. 

As long as we have other Members who would like to inquire who 

haven’t inquired of this panel, we will leave that open. Mr.—— 

Mr. THOMPSON. I have not inquired of this panel. Neither has 

Mr.—— 

Mr. HERGER. Yes, I am aware. And the gentleman from California will be recognized after I inquire. 

Mr. Olivo, you currently indicated you had 45 employees. And 

prior to the recession you had 54 employees. And I assume, like 

most businesses, that you would like to grow your business. But 

under the Democrats’ health care law, if you have less than 50 employees, you are not subject to the employer mandate tax. 

Will that have an impact on your decision to hire more workers? 

Mr. OLIVO. Without a doubt, it will. And it will put me in the 

position that—not only questioning whether I should expand or 

slow down the rate at which I expand, and make me seriously consider, but it also puts me in the position that once I reach that 50 

employee mark, and I either need to provide health care or pay a 

penalty, as I had mentioned previously, the penalty currently is 

less than my premiums. And, unfortunately, that is a scenario that 

I will have to look at. 

Mr. HERGER. And I might mention I was talking to an employer 

in my own district, in Redding, California, who is in the same situation, that he had about 45 employees, and just knowing that made 

a difference of whether he was going to grow or not. 

But you also mentioned in your testimony that you currently provide health benefits to your employees, and that you pay 100 percent of the premium for employees who choose high deductible 

plans. You also contribute to these employees’ health savings accounts. Could you elaborate further on the benefits of pairing a 

high deductible plan with a health savings account? 


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And what would be the impact on you and your employees if this 

kind of coverage is no longer available under Obamacare? 

Mr. OLIVO. Well, yes. That is something—with the savings that 

we have been able to gain with the reduced premiums from the 

health savings account, we have been able to contribute in certain 

years to our employees’ accounts, which really helps them going towards paying that deductible. So there are some years, in effect, 

that not only are we picking up the cost of the premium, but we 

are picking up approximately two-thirds of the cost towards their 

deductible. 

So, for all intents and purposes, their first $1,000 is covered 

under the plan. I would just say the health savings account has 

just been a huge benefit to us towards managing the escalating 

premium cost. I wouldn’t sit here and say that it’s the sole answer. 

But, without a doubt, if we did not have the ability to offer a health 

savings account for the past six years, I would not be able to pay 

anywhere close to 100 percent of my employees’ premiums. 

Mr. HERGER. I thank the gentleman. I now recognize the gentleman from California, Mr. Thompson, for five minutes to inquire. 

Mr. THOMPSON. Thank you, Mr. Chairman. I just want to point 

out a $9 employee, under best case scenario, is making around 

$15,000 a year. And I don’t care where you go for your health care 

on $15,000 a year, chances are you fall into that category of uncompensated care. So it’s not being paid for out of pocket, it’s not being 

provided for free. It’s factored in to what’s driving up the cost for 

your salaried employees, for everyone else who buys a policy, or everyone else who pays out of pocket. 

Mr. Chairman, I would like to submit for the record a letter that 

I have that’s—I just got a copy of it. It’s from 275 economists from 

all over the country, including 3 Nobel Laureates, 4 Council of Economic Advisors, a former CBO chief, and 2 John Bates Clark prize 

winners. And the letter states that—— 

Mr. HERGER. Without objection, the letter will be admitted. 

Mr. THOMPSON. Thank you. 

[The information follows: Mr. Thompson, Economists Letter:] 


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Mr. THOMPSON. The letter states—I just want it for the folks 

to know—it says that, ‘‘We write to convey our strong conclusion 

that leaving in place the Patient Protection and Affordable Care 

Act of 2010 will significantly strengthen our nation’s economy over 

the long haul, and promote more rapid economic recovery in the 

immediate years ahead. 

Also, Mr. Chairman, I would like to point out a letter that the 

Secretary of Health received from an entity that you’re very familiar with, and I believe actually get some benefits from this, the 

CalPERS organization in our home state of California, which is the 

nation’s largest non-Federal Government purchaser of health care. 

And in the letter they say that they believe that ‘‘key elements of 

the national health care reform represent a fundamental and positive shift in the way health care will be purchased and delivered 

in the United States. Together, they will dramatically shape the future of health care in our country, and ultimately benefit everyone.’’ 

They say that, more specifically, that the provisions regarding retired folks—in 2011, that they will save approximately $200 million, based on the reimbursement rate to more than 115,000 early 

retirees, their spouses, and their surviving spouses and their dependents. 

They have also submitted written testimony, as well, in which 

they discuss that this year they will spend $6.7 billion on health 

care benefits for 1.3 million active and retired state and local government employees and their families. 

They further testify that the overall structure of the law, which 

focuses on constraining the skyrocketing cost of health care in our 

country, while providing quality and ensuring health coverage for 

tens of millions of uninsured, some of those, those $9-an-hour employees who can’t buy health care, who fall into the uncompensated 

health care cost that the rest of us all pay for, is the right policy 

prescriptions for this group, the largest non-Federal Government 

purchaser of health care in the country, its members, and our country at large. 

I would also ask unanimous consent to submit a copy of this letter for the record, Mr. Chairman. 

Mr. HERGER. Without objection. 

Mr. THOMPSON. Thank you. And I yield back the balance of my 

time. 

Mr. HERGER. The gentleman yields back. The gentleman from 

Ohio, Mr. Tiberi, is recognized for five minutes. 


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Mr. TIBERI. Thank you, Mr. Chairman. And thank you both for 

taking time away from your families and your businesses to come 

here and provide us with perspective from where you sit. 

And your testimony, your verbal testimony earlier, reminded me 

of some discussions I had with local constituents, both small businesses and restaurant owners and retailers. In fact, a restaurant 

owner operator said to me, perplexed, ‘‘Where did 30 hours come 

from? In federal law, full-time is always 40 hours, and suddenly it’s 

30 hours.’’ 

Mr. Womack, you have 900 employees. I hope that you will reconsider and come to Ohio, if we can change this piece of legislation. I’m from central Ohio. My first job was at McDonald’s, so I 

understand a perspective of the restaurant business. When I was 

working at McDonald’s, a number of the people that I worked with 

were under the age of 21, were on their parents’ policy. I was, as 

a 16-year-old. And a number of the adults were women who had 

coverage through their spouse. 

So, my question to you is—and I have two—is how many employees now do you have that will be impacted by this new regulatory 

framework of 30 hours as full-time? If you could, answer that. 

And how many—and I’m sure it’s a guess at this point, since you 

don’t have the figures in front of you—employees do you have are 

teenagers at your restaurant, or college-aged students, who have 

coverage through their parents, or maybe a spouse who has coverage through another spouse? 

Mr. WOMACK. I think my best guess—and this is purely a 

guess, as we’ve not run the numbers—but my best guess is about 

20, 25 percent of our staff are under the age of 20 or 21, and a substantial number of our employees are people who are second earners, bringing a second income into the family. And we know, just 

anecdotally, especially a lot of our service staff, they’re the second 

earner, and their spouse has coverage elsewhere. 

Mr. TIBERI. So—and correct me if I’m wrong—so you have a 

number of people who are already covered, whether they be teenagers working their first job, or a spouse with insurance, and there 

is a second earner. These costs, additional cost onto your business, 

will create a situation where at some point in time you’re going to 

have to choose whether or not a person gets a raise, whether or not 

they get other benefits, or whether or not you hire somebody? 

Mr. WOMACK. Sure, absolutely. 

Mr. TIBERI. How many people could you hire in Ohio if this law 

hadn’t been passed? What was the projection that you had before 

this law became—this bill became a law? 

Mr. WOMACK. Well, our plan from here is to open 12, 13 more 

restaurants in Ohio, in central Ohio. 

Mr. TIBERI. In central Ohio. 

Mr. WOMACK. And—— 

Mr. TIBERI. Thanks for the good news. 

Mr. WOMACK. Yes. And we think that, if we have to cease development, if there are no changes and we have to stop development, you’re looking at 260 to 300 full-time jobs, and hundreds of 

part-time jobs. And then there is also, construction and all the 

other things outside of our company. 


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Mr. TIBERI. Mr. Olivo, your testimony brought home a call I got 

right after the election from a constituent. He was on his cell phone 

screaming at me regarding a meeting that he just came out of with 

his tax lawyer and his tax accountant. He had 51 employees, and 

they were giving him a briefing on the new health care law and 

some other regulations. 

And the gist of the meeting was, ‘‘If you can, figure out over the 

next year how to get under 50 to not have to comply with this new 

regulation, or our recommendation is to put all your employees, if 

you are still over 50, into the government exchange, rather than 

continue to provide the health care you provide today,’’ which, obviously, goes against the premise of the debate, which, if you like 

what you have, you can keep it. Or, that this isn’t a bill that 

disincentivizes entrepreneurs from creating more jobs. 

And why he was yelling at me was, with Ohio’s unemployment 

above 10 percent, he is getting advice from his legal professional 

that he should not hire more people, but figure out how to hire less 

people. Or, the alternative is to put people into the government exchange, which he didn’t want to do. 

But from a competitiveness perspective, and cost of doing business, and trying to survive his business—I know you’ve talked 

about it already, but can you share with us, as an entrepreneur, 

how frustrating it is for you, whether it’s a state regulation or a 

federal regulation, inhibits your ability to project long-term growth, 

and how to grow your business, rather than figuring out how to 

abide by all these new rules, what that does to your spirit, as an 

entrepreneur? 

Mr. OLIVO. Well, not just spirit. I mean, just to give you an 

idea, we purchase a new piece of equipment, they are fixed payments. I don’t have the luxury of going back to my bank and saying, ‘‘Well, geez, my expenses are a little more, my health care 

costs were more than expected.’’ I have to make those payments. 

So I have to leave myself a margin in which that—my calculations 

may not be exact. 

When there is this much unknown regarding the health care law, 

it really causes me to be much more conservative. And it’s affecting 

how much I am willing to invest into the company and grow it—— 

Mr. TIBERI. All right. 

Mr. OLIVO [continuing]. Until I get a better understanding of 

what’s happening. 

Mr. TIBERI. Thank you—— 

Chairman CAMP. Thank you very much—— 

Mr. TIBERI. Mr. Chairman, I would like to submit for the 

record, if I may—— 

Chairman CAMP. Yes. 

Mr. TIBERI [continuing]. A letter dated January 18, 2011 from 

239 economists. And they write, just one sentence, ‘‘We believe the 

Patient Protection and Affordable Care Act is a threat to U.S. businesses, and will place a crushing debt burden on future generations 

of Americans.’’ 

Chairman CAMP. All right. Without objection. 

[The information follows: Mr. Tiberi, Economist Letter:] 


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Economist 

January 18, 2011 

The Honorable John Boehner The Honorable Harry Reid 

Speaker of the House Senate Majority Leader 

Washington, DC 20515 Washington, DC 20515 

The Honorable Nancy Pelosi The Honorable Mitch McConnell 

House Minority Leader Senate Minority Leader 

Washington, DC 20515 Washington, DC 20515 

Dear Speaker Boehner, Minority Leader Pelosi, Majority Leader Reid, and Minority 

Leader McConnell: 

To promote job growth and help to restore the Federal Government to fiscal balance, we, the undersigned, feel that it would be beneficial to repeal and replace the 

Patient Protection and Affordable Care Act (P.L. 111–148). Too many Americans remain unemployed and the United States faces a daunting budgetary outlook. We believe the Patient Protection and Affordable Care Act is a threat to U.S. businesses 

and will place a crushing debt burden on future generations of Americans. 

A Barrier to Job Growth: The Patient Protection and Affordable Care Act contains 

expensive mandates and penalties that create major barriers to stronger job growth. 

The mandates will compete for the scarce business resources used for hiring and 

firm expansion. The law also levies roughly $500 billion in new taxes that will enter 

the supply chain for medical services, raising the cost of medical services. At the 

same time that businesses juggle the potential for higher interest rates or higher 

taxes, these medical costs will translate to higher insurance premiums, further increasing the cost of operating a business in the United States. 

A Massive Spending Increase and a Crushing Debt Burden: The Patient Protection and Affordable Care Act is fiscally dangerous at a moment when the United 

States is already facing a sea of red ink. It creates a massive new entitlement at 

a time when the budget is already buckling under the weight of existing entitlements. At a minimum, it will add $1 trillion to government spending over the next 

decade. Assertions that these costs are paid for are based on omitted costs, budgetary gimmicks, shifted premiums from other entitlements, and unsustainable 

spending cuts and revenue increases. A more comprehensive and realistic projection 

suggests that the Affordable Care Act could potentially raise the federal budget deficit by more than $500 billion during the first ten years and by nearly $1.5 trillion 

in the following decade. 

The Patient Protection and Affordable Care Act does not constitute real health 

care reform. The first step is to remove barriers to stronger job growth and to help 

restore fiscal balance to the nation’s budget by protecting taxpayers, American business, seniors, families, workers, and health care consumers from the damage that 

the Patient Protection and Affordable Care Act will cause. 

Congress should start with a clean sheet of paper and adopt initiatives that would 

encourage providers to offer higher-quality care at lower costs; reduce the cost pressures that threaten to bankrupt Medicare and Medicaid; and give every American 

access to more options for quality insurance. 

Respectfully, 

[Affiliations shown for purposes of identification and do not constitute institutional 

endorsement.] 

Douglas Holtz-Eakin 

President, American Action Forum 

Former Director, Congressional Budget Office (CBO) 

June O’Neill 

Professor of Economics, Baruch College 

Former Director, Congressional Budget Office (CBO) 

First Chair, Board of Scientific Counselors, National Center for Health Statistics 

Joseph Antos 

Wilson H. Taylor Scholar in Health Care and Retirement Policy American Enterprise Institute 

Former Assistant Director, Congressional Budget Office (CBO) 

Arlene Holen 

Senior Fellow, Technology Policy Institute Former Associate Director Congressional 

Budget Office (CBO) 


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Former Associate Director White House Office of Management and Budget (OMB) 

Brian S. Wesbury 

Chief Economist, First Trust Portfolios LP 

Former Chief Economist, Joint Economic Committee of the U.S. Congress 

Arthur B. Laffer 

Chairman, Laffer Associates 

First Chief Economist, Office of Management and Budget (OMB) 

Former Member, Economic Policy Advisory Board 

Jim Capretta 

Fellow, Ethics and Public Policy Center 

Former Associate Director, White House Office of Management and Budget (OMB) 

James D. Mietus, Ph.D. 

Independent Economist and Policy Adviser 

Former Economist, Office of Management and Budget (OMB) 

Michael Boskin 

Professor of Economics, Stanford University 

Former Chairman, White House Council of Economic Advisers (CEA) 

William Niskanen 

Former Action Chairman and Member, White House Council of Economic Advisers 

(CEA) 

Chairman Emeritus, Cato Institute 

Earl L. Grinols 

Distinguished Professor of Economics, Baylor University Former Senior Economist, 

White House Council of Economic Advisers (CEA) 

Mark H. Showalter 

Professor of Economics, Brigham Young University 

Former Senior Economist, White House Council of Economic Advisers (CEA) 

Scott Baier 

Associate Professor of Economics, Clemson University 

Former Senior Economist, White House Council of Economic Advisers (CEA) 

Larry Lindsey 

President, The Lindsey Group 

Former Director, National Economic Council (NEC) 

Todd G. Buchholz 

Managing Director, Two Oceans Management 

Former Senior Economic Adviser, The White House Fellow, Cambridge University 

Edward C. Prescott 

W.P. Carey Chaired Professor of Economics, Arizona State University 

Economist, Federal Reserve Bank of Minneapolis 

Nobel Laureate in Economics 

William Poole 

Distinguished Scholar in Residence, University of Delaware 

Senior Fellow, Cato Institute 

Former President, Federal Reserve Bank of St. Louis 

Kevin Hassett 

Director, Economic Policy Studies, American Enterprise Institute (AEI) 

Former Economist, Federal Reserve Board of Governors 

Mario J. Crucini, Ph.D. 

Research Associate, National Bureau of Economic Research (NBER) 

Senior Fellow, Globalization and Monetary Policy Institute, Federal Reserve Bank 

of Dallas 

Stephen J. Entin President and Executive Director Institute for Research on the Economics of Taxation Former Deputy Assistant Secretary for Economic Policy, Department of the Treasury 

Kathleen B. Cooper, Ph.D. 

Senior Fellow at the Tower Center for Political Studies, Southern Methodist University 

Former Undersecretary for Economic Affairs, Commerce Department 


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Diana Furchtgott-Roth 

Director, Center for Employment Policy 

Senior Fellow, Hudson Institute Former Chief Economist, U.S. Department of Labor 

Carl J. Dahlman 

Senior Economist, RAND Corporation 

Former Deputy Assistant Secretary, Department of Defense 

Former Deputy Assistant Secretary, Department of Health and Human Services 

David Malpass 

President, Encima Global 

Former Deputy Assistant Secretary, Treasury Department 

Former Deputy Assistant Secretary, State Department 

Thomas R. Saving 

Jeff Montgomery Professor of Economics, Texas A&M University 

Senior Fellow, National Center for Policy Analysis 

Former Public Trustee, Social Security and Medicare Trust Funds 

Timothy Perri 

Professor of Economics Appalachian State University 

Allan DeSerpa 

Professor of Economics 

Arizona State University 

Nancy Roberts 

Professor of Economics 

Arizona State University 

Clarence R. Deitsch 

Professor of Economics and Labor Relations 

Ball State University 

Courtenay C. Stone 

Professor of Economics 

Ball State University 

John Bethune, Ph.D. 

Kennedy Chair of Business 

Barton College 

E.S. Savas, Ph.D. Presidential Professor School of Public Affairs Baruch College/ 

CUNY 

David VanHoose 

Professor of Economics 

Baylor University 

Kenneth V. Greene 

Distinguished Professor of Economics 

Binghamton University 

E.F. Stephenson 

Professor of Economics 

Chair, Department of Economics 

Berry College 

David E. Spencer 

Professor of Economics 

Brigham Young University 

Michael L. Marlow 

Professor of Economics 

Cal Poly 

Donald J. Oswald 

Professor of Economics (Retired) 

California State University, Bakersfield 

Cathleen J. Coolidge 

Associate Professor of Economics 

California State University, Chico 

Charles W. Baird Ph.D. Professor of Economics, Emeritus California State University, East Bay 


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Alan Rufus Waters, Ph.D Professor Emeritus of International Business California 

State University, Fresno 

G. Michael Phillips, Ph.D. Professor of Finance, Real Estate, and Insurance California State University, Northridge 

Allan Meltzer 

Professor of Political Economy 

Carnegie Mellon University 

Yuri N. Maltsev, PhD Professor of Economics Carthage College 

Jason E. Taylor 

Professor of Economics 

Central Michigan University 

Dr. Lawrence Brunner 

Associate Professor, Economics 

Central Michigan University 

Arthur T. Denzau 

Professor of Economics 

Claremont Graduate University 

Marc D. Weidenmier 

William F. Podlich Associate Professor of Economics 

Research Associate, National Bureau of Economic Research (NBER) 

Claremont McKenna College 

Robert Tamura 

Professor of Economics 

Clemson University 

Phoebus J. Dhrymes Edwin W. Rickert Professor of Economics Columbia University 

Charles W. Calomiris 

Henry Kaufman Professor of Financial Institutions, Columbia Business School 

Columbia University 

Richard V. Burkhauser 

Sarah Gibson Blanding Professor of Policy Analysis 

Cornell University 

Antony Davies 

Associate Professor of Economics 

Duquesne University 

Richard E. Ericson 

Professor and Chair of Economics 

East Carolina University 

Minh Q. Dao 

Professor of Economics 

Eastern Illinois University 

Paul H. Rubin Samuel Candler Dobbs Professor of Economics Emory University 

Richard F. Muth 

Fuller E. Callaway Professor of Economics, Emeritus 

Emory University 

Ronnie Davis 

Graduate Faculty—Economics 

Florida Institute of Technology and Averett University 

Henry G. Manne 

Dean Emeritus George Mason University School of Law 

Dr. Anthony B. Sanders Distinguished Professor of Finance George Mason University 

James Burnham 

Distinguished Service Professor 

Duquesne University 

Former Staff Director, President’s Council of Economic Advisers 

Douglas, C. Frechtling 

Professor of Tourism Studies 


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George Washington University 

Richard J. Sweeney 

Professor of International Finance 

McDonough School of Business 

Georgetown University 

W. Ken Farr 

Chair & Professor of Economics, Department of Economics & Finance 

Georgia College & State University 

Christine Ries 

Professor of Economics 

Georgia Institute of Technology 

Gerald Gay 

Professor of Finance 

Georgia State University 

Former Chief Economist, Commodity Futures Trading Commission 

Christopher R. Inama 

Senior Adjunct Professor 

Golden Gate University 

Charles N. Steele, Ph.D. 

Associate Professor 

Hillsdale College 

Gary Wolfram 

Professor of Economics 

Hillsdale College 

Ivan Pongracic, Jr. 

Associate Professor 

Hillsdale College 

Nikolai G. Wenzel, Ph.D. 

Assistant Professor of Economics 

Hillsdale College 

John Lunn 

Robert W. Haack Professor of Economics 

Hope College 

John A. Tatom 

Director of Research, Networks Financial Institute 

Scott College of Business, Indiana State University 

Tom Lehman 

Professor of Economics 

Indiana Wesleyan University 

Richard J. Cebula 

Davis College of Business 

Walker/Wells Fargo Endowed Chair in Finance 

Jacksonville University 

Timothy Mathews 

Assistant Professor of Economics 

Kennesaw State University 

W. Mark Crain 

William E. Simon Professor of Political Economy 

Lafayette College 

Nicole V. Crain 

Professor of Economics 

Lafayette College 

James L. Huffman 

Erskine Wood Sr. Professor of Law 

Lewis & Clark Law School 

Richard J. Grant, Ph.D. Professor of Finance & Economics, College of Business, 

Lipscomb University 


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Don M. Chance 

James C. Flores Endowed Chair of MBA Studies and Professor of Finance 

Louisiana State University 

W. Douglas McMillin 

Mack Hornbeak Endowed Professor in Economics 

Louisiana State University 

Otis W. Gilley Distinguished Professor of Economics Louisiana Tech University 

Frank Spreng, Ph.D. Professor of Economics and Director of the MBA Program 

McKendree University 

John P. Cochran 

Dean, School of Business 

Professor of Economics 

Metropolitan State College of Denver 

William R. Hart 

Professor of Economics 

Miami University (Oxford, OH) 

F. Owen Irvine 

Professor of Economics 

Michigan State University 

Michael C. Davis 

Associate Professor of Economics 

Missouri University of Science and Technology 

Richard E. La Near, Ph.D. 

Professor of Economics and Finance 

Emeritus J.R. Kuhn Professor of Finance 

Missouri Southern State University 

Stephen A. Tolbert, Jr. Lecturer, Economics Montgomery County Community College 

Micha Gisser 

Professor Emeritus of Economics 

University of New Mexico 

James B. Ramsey 

Professor, Department of Economics 

New York University 

R. Morris Coats 

Professor of Economics 

Nicholls State University 

Barry K. Goodwin 

William Neal Reynolds Distinguished Professor Economics 

North Carolina State University 

John Seater Professor of Economics 

North Carolina State University 

Michael Wohlgenant William Neal Reynolds Distinguished Professor North Carolina 

State University 

Gerald R. Jensen, PhD, CFA Professor of Finance Northern Illinois University 

Joseph M. Jadlow, Ph.D. 

Professor of Economics 

Oklahoma State University 

Douglas K. Adie Professor of Economics Ohio University 

Richard Vedder Distinguished Professor of Economics, Ohio University Adjunct 

Scholar, American Enterprise Institute 

Paul Evans 

Professor of Economics 

Ohio State University 

Frank Wykoff 

Eldon Smith Professor of Economics, Emeritus 

Pomona College 


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David A. Brat 

Professor and Chair, Department of Economics and Business 

Randolph-Macon College 

Fred E. Foldvary 

Director, Civil Society Institute 

Santa Clara University 

David R. Henderson 

Research Fellow, Hoover Institution 

Stanford University 

Dino Falaschetti 

Gleed Endowed Chair, Seattle University 

Associate Professor of Law and Economics, Florida State University 

Norman Lefton, PhD Adjunct Associate Professor at the School of Business Southern Illinois University, Edwardsville 

Lawrence J. Belcher, Ph.D. 

Professor of Finance 

Stetson University 

David G. Tuerck 

Professor of Economics 

Suffolk University 

Edgar K. Browning 

Professor of Economics 

Texas A&M University 

Frank Egan 

Associate Professor of Economics 

Trinity College 

Dorla A. Evans, Ph.D. 

Professor of Finance, Department of Accounting and Finance 

University of Alabama in Huntsville 

Larry L. Ross 

Professor of Economics 

University of Alaska Anchorage 

Lawrence Southwick 

University Research Scholar, Finance and Managerial Economics Department 

University at Buffalo 

Leon Wegge 

Professor of Economics Emeritus 

University of California, Davis 

Avanidhar Subrahmanyam 

Goldyne and Irwin Hearsh Chair in Finance, Anderson School of Management 

University of California, Los Angeles (UCLA) 

Lee E. Ohanian 

Professor of Economics 

University of California, Los Angeles (UCLA) 

Richard Roll 

Professor of Finance, Anderson School of Management 

University of California, Los Angeles (UCLA) 

Professor Richard L. Smith 

Philip L. Boyd Chair and Professor of Finance 

University of California, Riverside 

A. Edward Day, Ph.D. Associate Professor of Economics (retired) University of Central Florida 

Steven N. Kaplan 

Neubauer Family Professor of Entrepreneurship and Finance, Booth School of Business 

University of Chicago 


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Eugen F. Fama 

Robert R. McCormick Distinguished Service Professor of Finance, Booth School of 

Business 

University of Chicago 

Robert E. Lucas, Jr. 

John Dewey Distinguished Service Professor of Economics, Department of Economics 

University of Chicago 

Barry W. Poulson 

Professor of Economics (retired) 

University of Colorado at Boulder 

Jane H. Lillydahl 

Professor Emerita, Department of Economics 

University of Colorado at Boulder 

Sanjai Bhagat 

Professor of Finance 

University of Colorado at Boulder 

Michael Cosgrove Professor, University of Dallas Principle, Econoclast 

Eleanor D. Craig 

Associate Chair & Professor of Economics 

University of Delaware 

Richard Agnello 

Associate Professor of Economics 

University of Delaware 

Stacie E. Beck 

Associate Professor of Economics 

University of Delaware 

James B. O’Neill 

Professor of Economics 

Director, Center for Economic Education and Entrepreneurship 

University of Delaware 

C. Thomas Howard, Ph.D. 

Professor, Reiman School of Finance 

University of Denver 

Ronald W. Ward 

Emeritus Professor 

University of Florida 

Jeffrey H. Dorfman 

Professor, Department of Agricultural and Applied Economics 

The University of Georgia 

James Moncur Professor Emeritus of Economics 

University of Hawaii at Manoa 

Paul R. Gregory 

Cullen Professor of Economics 

University of Houston 

Roy J. Ruffin 

M.D. Anderson Professor of Economics 

University of Houston 

R. Ashley Lyman 

Professor Emeritus of Economics and Statistics 

University of Idaho 

Peter F. Colwell Professor Emeritus, Department of Finance 

University of Illinois at Urbana-Champaign 

William P. Albrecht Professor of Economics 

University of Iowa 

Michael R. Montgomery 

Associate Professor of Economics 

University of Maine 


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Jon Reisman 

Associate Professor of Economics and Public Policy 

University of Maine at Machias 

Richard E. Just Distinguished University Professor University of Maryland—College 

Park 

Ronald. L. Promboin, Ph.D. Adjunct Professor University of Maryland—University 

College Coldwell Daniel, III 

Professor Emeritus 

University of Memphis 

Michael Connolly 

Professor of Economics, University of Miami 

Professor of Finance, Hunan University 

Christopher Douglas, Ph.D. 

Assistant Professor of Economics 

University of Michigan-Flint 

Mark J. Perry, Ph.D. 

Visiting Scholar at the American Enterprise Institute (AEI) 

Professor of Finance and Business Economics 

University of Michigan-Flint 

Stephen Parente, Ph.D. 

Minnesota Insurance Industry Professor of Healthcare Finance 

Director, Medical Industry Leadership Institute (MILI) 

University of Minnesota 

William F. Shughart II 

F.A.P. Barnard Distinguished Professor of Economics 

The University of Mississippi 

Joseph Haslag 

Professor and Kenneth Lay Chair in Economics 

University of Missouri-Columbia 

Susan Feigenbaum 

Professor of Economics 

University of Missouri at St. Louis 

Arthur M. Diamond, Jr. Professor of Economics University of Nebraska at Omaha 

Robert E. Chatfield Professor of Finance University of Nevada—Las Vegas (UNLV) 

Evangelos Otto Simos 

Professor of Economics, University of New Hampshire 

Editor, Journal of Business Forecasting 

Chief Economist, e-forecasting.com 

Jim F. Couch 

Professor of Economics 

University of North Alabama 

Alan C. Shapiro 

Ivadelle and Theodore Johnson Professor of Banking and Finance Emeritus 

Marshall School of Business 

University of Southern California 

Joel W. Hay, PhD Professor, Schaeffer Center for Health Policy and Economics University of Southern California 

John G. Matsusaka 

Professor of Finance and Business Economics 

Charles F. Sexton Chair in American Enterprise 

University of Southern California 

Joseph Zoric 

Associate Professor of Economics and MBA Director 

Franciscan University of Steubenville 

Roger Meiners 

Professor of Economics 

University of Texas at Arlington 


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Barry J. Seldon, Ph.D. 

Professor of Economics and Political Economy 

University of Texas at Dallas 

Nathan J. Ashby 

Assistant Professor of Economics 

University of Texas at El Paso 

Timothy P. Roth, PhD 

A.B. Templeton Professor and Chairman, Department of Economics and Finance 

University of Texas at El Paso 

Robert Collinge Professor of Economics University of Texas at San Antonio 

John E. Murray Professor, Department of Economics University of Toledo 

Author, Origins of American Health Insurance 

Richard T. Selden 

Carter Glass Professor of Economics Emeritus 

The University of Virginia 

David L. Kendall, Ph.D. 

Professor of Economics and Finance 

Chair, Department of Business and Economics 

University of Virginia’s College at Wise 

Luke M. Froeb 

Associate Professor of Entrepreneurship and Free Enterprise 

Vanderbilt University 

Larry Van Horn 

Associate Professor of Healthcare Management 

Executive Director of Health Affairs, Owen Graduate School of Management 

Vanderbilt University 

Floyd H. Duncan, Ph.D. Roberts Professor of Free Enterprise Economics Chairman, 

Department of Economics and Business Virginia Military Institute 

Robert J. Rossana 

Professor of Economics 

Wayne State University 

Glenn MacDonald 

Distinguished Professor of Economics and Strategy 

Senior Associate Dean, Olin School of Business 

Washington University in St. Louis 

William N. Trumbull, Ph.D. 

Professor of Economics West Virginia University 

Robert D. Seeley 

Associate Professor of Economics 

Wilkes University 

Dr. Jim Clark Associate Dean Associate Professor of Economics Wichita State University 

John McArthur 

Professor and Chair of Economics 

Wofford College 

Lawrence W. Lovik, Ph.D. 

Senior Fellow 

Alabama Policy Institute 

Michael Ramlet 

Coordinator—Operation Healthcare Choice 

American Action Forum 

Aparna Mathur 

Resident Scholar 

American Enterprise Institute 

Philip I. Levy 

Resident Scholar 

American Enterprise Institute 


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Judy Shelton 

Senior Fellow and Co-Director of the Sound Money Project 

Atlas Economic Research Foundation 

Warren Coats 

Monetary Policy Advisory, Central Banks of Afghanistan, Iraq, Kazakhstan, Kenya, 

and Zimbabwe 

Currency Director, Cayman Island Monetary Authority 

Grace-Marie Turner 

President 

Galen Institute 

Richard W. Rahn, 

Chairman 

Institute for Global Economic Growth 

Merrill Matthews 

Resident Scholar 

Institute for Policy Innovation 

John W. Diamond 

Edward A. and Hermena Hancock Kelly Fellow in Public Finance 

James A. Baker III Institute for Public Policy 

Chief Executive Officer, Tax Policy Advisors, LLC 

Mike Schuyler Senior Economist Institute for Research on the Economics of Taxation (IRET) 

Paul Howard, Ph.D 

Senior Scholar 

Manhattan Institute 

Daniel R. Feenberg 

Research Associate 

National Bureau of Economic Research (NBER) 

John C. Goodman 

President, CEO and Kellye Wright Fellow 

National Center for Policy Analysis 

Benjamin Zycher Senior Fellow 

Pacific Research Institute 

John R. Graham, 

Director, Health Care Studies 

Pacific Research Institute 

Carlos Bonilla 

Partner, Airline Forecasts 

Former Special Assistant for Economic Policy, President George W. Bush 

Robert Genetski 

President 

classicalprinciples.com 

James F. Smith 

Chief Economist 

EconForecaster.com 

Dorsey D. Farr, Ph.D., CFA 

Co-Founder French Wolf & Farr 

R. David Ranson 

President and Director of Research H. C. Wainwright & Co. Economics Inc. 

Donald L. Luskin 

Chief Investment Officer 

TrendMacro 

Robert D. Niehaus 

President and Principal Economist 

Robert D. Niehaus, Inc. 


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Chairman CAMP. I just want to ask a simple question of both 

of you. We have heard a lot of testimony today. There has been, 

some of it, very technical. 

Just on balance, does this health care legislation help you create 

jobs and help you grow your businesses, or does it make it harder 

for you to grow jobs and expand your businesses? 

Mr. OLIVO. From my point of view, what my concern is, is that 

I know many on this committee want to provide health care coverage for everybody, and would say, ‘‘How would I explain to somebody that I would not provide health care coverage for them?’’ 

My fear, as an employer, is going to an employee saying, ‘‘I have 

to eliminate your position, because not only can I not afford your 

health care, I can’t afford your position any more.’’ And that’s what 

my concern is. 

Chairman CAMP. All right. Mr. Womack. 

Mr. WOMACK. Well, the reality is that this just scares business 

people to death. And any time you have this level of fear and uncertainty, we quit growing, we tighten up. We have to have a reserve. We can’t go out to the edge financially, and then suddenly 

have $5 gasoline or commodity prices go through the roof and have 

no margin, no cushion to survive. So it just makes us more and 

more conservative, and that means trimming, pure and simple. 

Chairman CAMP. All right. Thank you. Thank you both. I think 

at this time all Members present have had a chance to inquire of 

this panel. And I want to thank you both very much for your 

thoughtful testimony, and for the efforts you put in to providing 

livelihoods and prosperity of the employees that you have. And I 

know the difficult responsibility that is that you carry around every 

day. 

So, I want to thank you for taking the time away from those endeavors to be here, and help enlighten this committee. And with 

that, this hearing is adjourned. 

[Whereupon, at 12:10 p.m., the committee was adjourned.] 

[Submissions for the Record follow:] 

Rep. Jim McDermott 

Statement for the House Ways and Means Committee Hearing on the 

‘‘Effect of Health Reform on Jobs and the Economy’’ 

January 25, 2011 

Mr. Chairman, this hearing is really just a press event for the Republicans to 

twist the facts of the health care law and attempt to further scare and polarize the 

American public. It won’t work, but we’re still going to waste time with this political 

theater. 

I am very sorry to see Doug Holtz-Eakin, the former Director of the Congressional 

Budget Office, testifying before our committee today. He’s here to beat up on his 

former agency whose conclusions he no longer likes. Railing against the very institution he formerly directed, one that is so essential to our work, does a disservice to 

the Budget Office, the whole Congress and the American people. 

Republicans, like Mr. Holtz-Eakin, have taken to dismissing any non-partisan assessments they don’t like. These days, in the eyes of Republicans, CBO is only right 

when they release reports that validate Republican political rhetoric. 

As for the other witnesses who are testifying, I am sorry you believe the new 

health care law is bad for your businesses. However, there are countless other 

small, medium and large businesses that like the health care law and believe repealing it is an awful idea. 

You don’t have to take my word for it. The National Business Group on Health, 

a collection of nearly 500 big employers, opposes repeal. Helen Darling, the group’s 

President and a former Republican Senate Staffer, has said the following about the 


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health care law: ‘‘I don’t think we’ll get a better solution in the U.S. in our lifetime. 

If it gets repealed or gutted, we’ll have to start over and we’ll be worse off.’’ 

As for the impact on small businesses, PolitiFact looked into a U.S. Chamber of 

Commerce campaign ad that said the health care law was bad for small businesses 

and said the claims were ‘‘perplexing because small businesses can actually qualify 

for tax credits under the new health care law.’’ 

PolitiFact went on to say: 

‘‘A vast majority of U.S. firms are smaller than 50 employees and are exempt 

from the health insurance requirements. The chamber’s ad is sweeping, and 

doesn’t account for any of the positive provisions that don’t ‘crush’ small business but actually help them.’’ 

It is my hope that we can move beyond Republicans’ political theatrics and focus 

on getting the economy back on track. 

f 


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Campaign to End Obesity Action Fund 

The Campaign to End Obesity Action Fund is dedicated to reversing one of America’s costliest diseases. Today, two-thirds of U.S. adults and nearly one in three children struggle with overweight or obesity. Taxpayers, governments and businesses 

spend billions on obesity-related conditions, including an estimated $168 billion in 

medical costs every year. The trends for obesity—and the costs associated with it— 

are ominous: as recently as 1990 not a single state had an obesity rate greater than 

15 percent; today 49 states have obesity rates greater than 20 percent, with 9 of 

those topping 30 percent. 

Ending the epidemic requires change—in individuals, institutions and communities. The Campaign convenes leaders from industry, academia, public health and 

associations to speak with one voice for federal policies to reverse the obesity epidemic and promote healthy weight in children and adults. From changes to nutrition policy, education policy, health policy, to environment and transportation policy, 

the Campaign promotes measures that support and facilitate obesity prevention and 

treatment for all Americans. 

Spending on Obesity and Chronic Diseases Linked to Obesity is Unsustainable 

From a purely economic standpoint, the cost of addressing the obesity epidemic 

is staggering and will only become worse unless quick, aggressive action is taken 

to address obesity. The fact is obesity is one of America’s costliest diseases: nearly 

one of every five dollars spent on healthcare in the United States will be attributable to obesity and obesity-related conditions within the next decade. 

Without serious efforts to reverse this epidemic, American taxpayers will incur 

ever-increasing costs as obesity is linked to a number of chronic diseases, including diabetes, heart disease, hypertension and others that require expensive treatments. Currently, Medicare pays out approximately $45 billion for Medicare patients suffering from diabetes and its complications. However, given the dramatic 

projected growth in diabetes, Medicare’s spending on diabetes-related treatments 

is projected to skyrocket to $75 billion by 2019 and $170 billion by 2034 

(www.nmqf.org/presentations/10HuangEJCP3.pdf). 

According to the Centers for Disease Control and Prevention, ‘‘the cost of cardiovascular diseases in the United States, including health care expenditures and lost 

productivity . . . is estimated to be more than $503 billion in 2010’’ (http:// 

www.cdc.gov/chronicdisease/resources/publications/AAG/dhdsp.htm). Medicare spending in 2006 totaled $24 billion; Medicaid figures for that year were only slightly 

lower, and the projections for Medicare and Medicaid spending on heart disease are 

also expected to rise dramatically. 

These two examples illustrate that trends in spending for chronic conditions related to obesity are unsustainable. Taxpayers have a real stake in addressing— 

and combating—these chronic diseases before they occur. 

The Obesity Epidemic Threatens our Economic Prosperity 

Congress is rightly focused on the economy and jobs. One of the most effective 

ways to increase the productivity of Americans and lower costs to U.S. businesses— 

both of which would contribute to job growth—would be to reverse the devastating 

economic impact obesity has on the nation’s economy. Simply put, healthy workers 

are more productive workers and American workers are increasingly unhealthy. The 

Centers for Disease Control estimates that medical expenses for obese employees 

are 42 percent higher than for a person with a healthy weight. 

In 2005, the cost of the obesity epidemic was estimated to have cost American private sector businesses an estimated $142 billion, including $76 billion in medical 

costs and another $66 billion in lost productivity. By way of comparison, in 1994, 

private sector medical costs associated with obesity were only $13 billion. 

Every year, American workers lose more and more time on the job due to obesity 

and related conditions: Obesity is associated with 39 million lost work days, 239 

million restricted activity days, 90 million bed days and 63 million physical visits. 

This dramatic level of lost productivity is a serious drag on the economy and negatively impacts America’s ability to compete in a highly competitive global marketplace. It is vital to America’s economy that the obesity epidemic is reserved; our Nation’s future economic well-being is at stake. 

The Obesity Epidemic Threatens our Children’s Future and Military Readiness 

For the first time in our nation’s history, the current generation of children faces 

the likelihood of living shorter life spans than their parents, due in significant part 

to the complications they face from overweight and obesity. 


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The obesity epidemic has brought other tolls for our children who suffer from a 

growing list of emotional disorders associated with obesity, such as depression, social stigmatization and poor academic performance. We must work to curtail this 

troubling trend. Among minority and underserved populations, the data is even 

more dire: 23.4 percent of Hispanic children and 23.8 percent of black children have 

obesity, compared with 12.9 percent of Caucasian children. (Child and Adolescent 

Health Measurement Initiative. 2007 National Survey of Children’s Health, Data 

Resource Center for Child and Adolescent Health website. Retrieved 12–14–09 from 

www.nschdata.org) 

The nation’s overweight and obesity epidemic even threatens our military readiness—a 2010 report noted that nearly nine million potential recruits are too heavy 

to serve; becoming overweight is one of the leading causes of medical discharges of 

active duty personnel. (http://www.missionreadiness.org) 

Health Care Reform Marked a Beginning 

The Campaign to End Obesity supported enactment of the Patient Protection and 

Affordable Care Act, which made important strides in bolstering the array of available obesity prevention and treatment options for adults and children. Broadly 

speaking, the Affordable Care Act created the first statutory imperative for measuring and tracking ‘‘body mass index’’ (BMI) as a way to prevent obesity. More specifically, some of the most important anti-obesity provisions of the Affordable Care 

Act are: 

• Section 2713—Coverage of Preventive Health Services. 

• Section 4004—Education and Outreach Campaign Regarding Preventive Benefits. 

• Section 4103—Medicare Coverage of Annual Wellness Visit Providing 

a Personalized Prevention Plan, including BMI Screening. 

• Section 4106—Improving Access to Preventive Services, including 

BMI Screening, for Eligible Adults in Medicaid. 

• Section 4306—Funding for Childhood Obesity Demonstration Project 

More is Needed 

Given the alarming trends in taxpayer-provided funding of obesity related chronic 

diseases and in order to optimize the benefits of the new policies of the Affordable 

Care Act, the Campaign urges Members of the Committee to advance a number of 

additional policy changes, including: 

1. Recognize Obesity as a Disease 

One of the most important steps that federal policymakers—both in Congress 

and at the Centers for Medicare and Medicaid Services (‘‘CMS’’)—can take is 

to recognize obesity as the disease that it is. Doing so will facilitate needed prevention and treatment options for children and adults with obesity or at risk 

of having obesity. Not only is obesity a disease, but it is in fact one of America’s 

costliest medical condition. Until our policies reflect this fact, clinicians will be 

discouraged from diagnosing cases in children and adults that must be recognized in the doctor/patient/family dialogue before the disease prompts the onset 

of other, dangerous conditions. In fact, today there is a perverse disincentive 

for doctors to address obesity with their patients since there is no reimbursement for such services/treatment. Thus, many doctors wait until their patients 

become very sick—often with devastating and costly diseases like diabetes, 

heart disease, etc.—because there is no reimbursement for treating a major contributing factor: the patients’ obesity. 

2. Expand Medicaid’s EPSDT to Cover BMI Screening for Children 

As noted above, the Campaign is pleased by the inclusion of BMI screening 

in Medicare Annual Wellness visits and for eligible adults under Medicaid. Coupled with Section 4004’s language, that should provide improvement in one vital 

area: education about being overweight or obese. The fact is most Americans do 

not know whether they or their children are at a healthy weight, and thus 

many do little or nothing to fight the disease they have or may soon have. The 

more information parents and children have early on, the better their chances 

of making improvements. That is why every opportunity to conduct a simple 

BMI screening should be supported by federal programs. As noted, minority 

children are most at risk when it comes to being overweight or obese. Thus, the 

Campaign would encourage Medicaid to also cover BMI screenings for children 

because the tragic fact is obese children typically grow into obese adults. This 

could be done by adding a BMI screening to the Early Periodic Screening, Diagnosis and Treatment guidelines issued by HHS. 


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3. Expand Coverage for Treatment Options 

While the Affordable Care Act made solid progress in authorizing new obesity 

education, prevention and treatment options, the Campaign would urge coverage for a greater number of treatment options. Obesity is a complex disease 

that is caused by many different factors. Given that, there is no ‘‘one-size-fitsall’’ treatment solution for obesity. The Campaign urges Congress to direct 

Medicare and Medicaid to cover a broad range of accepted treatment options. 

Specifically, upon a diagnosis of a BMI level of 30 (obese) or a level of 25 (overweight), when accompanied by other chronic conditions, coverage would be triggered for treatment benefits. Treatment would include services in medical nutrition therapy services, physical therapy or exercise training, behavioral health 

counseling as determined by a National Coverage Determination Process and 

CMS-deemed appropriate medical interventions, including both pharmacological 

and surgical options. 

4. Improve CMS Communication to States Concerning Obesity Prevention and Treatment Options 

Currently, CMS issues guidelines to States to inform them of the existing opportunities for covering child obesity prevention and treatment services under 

the Early Periodic Screening, Diagnosis, and Treatment (EPSDT) guidelines 

and offering them model guidance to State providers. As noted above, the Campaign believes adding a BMI screening for all children under the EPSDT would 

be beneficial. CMS has, up to now, insufficiently communicated to States that 

the screening and treatment services proposed in the standard benefit package 

can already be provided and reimbursed under EPSDT services. There is wide 

variation between States as to the degree to which they have offered specific 

guidance to providers on the coverage and how to bill for these services. The 

most successful States have issued provider guidance specifically on pediatric 

obesity services. 

The Campaign strongly recommends that CMS issue national guidance clarifying 

that obesity prevention and treatment services are currently covered for pediatric 

populations under Medicaid. CMS should also issue model guidelines that State 

Medicaid programs can issue to providers. Finally within two years of issuance of 

the CMS national guidance, CMS should release a list of those States that have and 

have not issued their own guidelines to practitioners. These critical actions can be 

achieved by CMS without any legislative action by Congress. 

5. Fully Fund Anti-Obesity Initiatives Included in the Affordable Care Act 

While Congress is under pressure to cut spending and reduce costs in the coming 

months, there is no denying that the cost of America’s obesity epidemic is extremely 

high and some predict that it will become much worse. Just a year ago, a comprehensive the UnitedHealth Foundation, the American Public Health Association 

and the Partnership for Prevention (‘‘America’s Healthy Rankings’’) predicted that 

if current trends continue, the nation will spend an estimated $344 billion in obesity-related health care costs by 2018. More needs to be done in the area of obesity 

education, prevention and treatment if this alarming figure is to be rolled back in 

any meaningful way. Thus, the Campaign strongly urges Congress to fully fund the 

key obesity related programs included in the Affordable Care Act. 

The Campaign to End Obesity Action Fund stands ready to work with the Committee and Congress to advance these and similar efforts that are designed to help 

more Americans achieve and remain at a healthy weight, but also to help reduce 

the enormous economic, social and physical toll obesity currently takes on our nation and our communities. We appreciate the opportunity to share our views and 

welcome the opportunity to engage further on this important subject. 

f 

James T. Lette 

It appears that the 500 billion taken from medicare to fund Medicaid is wrong 

and to take away our paid for benefits is wrong. 

Please exempt medicare from Obamacare and repeal it and start all over 

Thanks 

JAMES T. LETTE 

f 


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LumaCorp 

February 2, 2011 

Dear Congressman Johnson; 

You have invited employers within your district to ‘‘weigh in’’ on the new 

healthcare law and I am writing in response to your invitation. The focus of the reform should be on the development of strategies to allow for coverage to affordable 

for employers while at the same time allowing for quality of care. We all agree the 

cost of the care is too high and each year it continues to increase. 

While employers struggle to stay competitive in their respective markets, 

healthcare costs make up a very large portion of their overall cost of doing business. 

Healthcare costs have a direct bearing on the local, state and national economies. 

At the same time in our very own district the quality of medical care can vary widely by provider. Unfortunately, because our current system is designed to serve the 

health care system rather than the end user (the consumer paying for the service), 

the system is based on volume versus outcome. We have an epidemic of lifestyle related chronic diseases being treated by quantity, not quality. 

My consultant often speaks of an example in her enrollment meetings of how employees purchase their cars. Consumers have access to plenty of data on the quality 

and reputation of autos they might purchase. No one goes out to spend $20,000 to 

$40,000 without ‘‘shopping around’’ and having done their homework up front. Yet 

when it comes to our own healthcare, how many of our employees ask how much 

a surgical procedure or an office visit is going to cost before the procedure is performed? This lack of information results in very little competition in the medical 

profession based on cost or quality. This is no surprise when the end consumer is 

typically so poorly informed. 

One of the other issues that we have to face is recognizing that we have been our 

own worst enemies as a result of creating ‘‘first dollar benefits’’. Under the 

healthcare reform package, in order to be ‘‘grandfathered’’ an employer plan cannot 

have a significant change in its current benefits or it will lose its ‘‘grandfathered’’ 

status. If an employer currently has doctor office co-pay or an RX co-pay, and he 

needs to remove that feature from the plan in order for the plan to survive economically, he is unable to do so. The new law going forward will not allow employers’ 

plans to have higher than a $2,000 deductible in the year beginning 2014! If we had 

all been better stewards of our healthcare plans and had not bent to competition, 

we would have kept our employees involved in their health care costs by having 

them share in smaller medical expenses. This could have been done through employee participation in ‘‘up front’’ deductibles. If properly incented, employees would 

make it their business to know exactly what doctors were charging for doctor office 

visits and what pharmacies charges for prescription drugs. We would have a better 

educated consumer and they would be more involved in the decision making process. 

As it stands now we have to make decisions based on whether or not to stay ‘‘grandfathered’’ versus putting our employees in a position to be better stewards of their 

benefit dollars. If an employer makes the decision to remove the upfront doctor office co-pay, the largest deductible that he can have moving forward beyond 2014 is 

$2,000. Who will be able to afford a $2,000 deductible in the year 2014 when we 

will have to pay for all of the preventative benefits slated to take effect if we are 

not grandfathered at 100% with no co-pay? 

The combination of increasing obesity and sedentary lifestyle cause much of the 

chronic disease in our country, and it is reaching epidemic proportions. It is one of 

the factors driving our costs, and of course the employees understandable want to 

have everything covered at little or no cost to them. When we combine that with 

the way we have our system structured we have a perfect storm or escalating costs. 

Our doctors and hospitals have to treat based on a defensive medicine mentality. 

It is clear this results in unnecessary care and higher costs. At the same time, it 

does not guarantee high quality, just more procedures. It just shields the provider 

from fiscal responsibility and increases demand and results in higher delivery of 

medical care and continued cost escalation. 

What we really need is the flexibility to design our own plans, suited to our own 

needs, the needs of each and every group of employees. It is not relevant what the 

government thinks is best for us, but rather what we can afford as employers. Let 

the free market system work. Allow us to provide services in the marketplace to our 

employees such as patient advocates—services where by the employee can glean 

critical information about the cost of a procedure beforehand and actually have incentives to do so through plan design. Let us give the empowerment back to the 

consumer. Put the competition back where it belongs, and make medical providers 

compete for patients based on cost and quality like any other efficient good or servVerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00174 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870

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ice. For a true transformation to really happen, consumers have to have information 

about the services being offered to them. They have to know how much procedures 

cost and know the quality of the care being given to them. There are programs 

available that deliver just that (knowledge up front). Using them will create better 

health care consumers while promoting cost reductions and improved quality. 

Let us truly use the word transparency in our medical plans and make information available for the employees to use. The only way to get them involved is to 

allow for redesigning benefit plans to remove doctor office co-pays without being penalized. Let us truly have what was promised. Allow us to have OUR health care 

plans, not ones run by the government. All of the health reform legislation you can 

throw at us will not work at obtaining better outcomes in the long run if you do 

not recognize the actual impediments to those better outcomes. We have to shift our 

benefits to reward good outcomes, and to truly do that we must give individuals the 

tools to better manage their health and their care, and make them responsible for 

each. 

Thank you, 

Sherry Jordan 

Regional Supervisor 

sjordan@lumacorp.com f 

Main Street Alliance 

Statement for the Record 

J. Kelly Conklin & David Borris 

On behalf of the Main Street Alliance 

House Committee on Ways & Means 

Hearing on Health Law’s Impacts on Jobs, Employers, and the Economy 

January 26, 2011 

Statement for the Record, Committee on Ways & Means Hearing on Health Law 

Impacts 

J. Kelly Conklin and David Borris, Main Street Alliance Executive Committee 

January 26, 2011 

Chairman CAMP. and Members of the Committee, 

We appreciate this opportunity to provide written testimony on behalf of the business owners in the Main Street Alliance network for the January 26 hearing on the 

health care law’s impact on jobs and the economy. 

The Main Street Alliance is a national network of small businesses dedicated to 

ensuring that small business owners have the opportunity to speak for themselves 

on issues that impact their businesses, their employees, and their local economies. 

In 2009, we both had the opportunity to testify before the Committee on Ways & 

Means on the topic of health care, sharing our personal stories and speaking about 

the urgency of reforming health care to make it work for small businesses. 

The January 26 hearing was called to explore the impact of the new health care 

law on economic growth and job creation. From our perspective, this impact is clear 

and positive: from the new small business tax credits to new protections like rate 

review and a value for premiums requirement, the health law is already throwing 

a lifeline to small businesses and creating opportunities for businesses to offer 

health coverage, save money on premiums, and plow those savings back into business investment and job creation. 

While some may raise concerns about the employer responsibility requirement for 

businesses with more than 50 workers, the fact remains that 95 percent of our nation’s businesses have less than 50 workers (and so would not be subject to this requirement), and 95 percent of businesses with more than 50 workers already offer 

health coverage. Indeed, this provision only reinforces what the vast majority of 

larger employers already do, and ensures that responsible employers who offer goodpaying jobs with health benefits aren’t undercut by competitors who shun these responsibilities. 

A much bigger issue—indeed, a true threat to small businesses and our ability 

to create jobs—is runaway health insurance rates. For example, in early 2010 (before the health care law was passed), one of us received a letter from our insurer 

offering to renew our current coverage at an increase of 124 percent. The escalation 

of health insurance rate increases is simply not sustainable for small businesses. 

Thankfully, the health care law includes a series of provisions that will begin to rein 


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in these increases and cut costs for small businesses like ours. These provisions include: 

Small Employer Health Premium Tax Credits 

Business owners in our network from Portland, Maine to Portland, Oregon 

are already benefiting from the new tax credits effective for tax year 2010. Jim 

Houser, owner of Hawthorne Auto Clinic in Portland, Oregon with 15 employees, expects to receive a credit of over $10,000 on his health insurance bill. 

That’s serious savings for a small business. Jim has described the tax credit as 

a ‘‘time machine,’’ turning the clock back on his insurance rates. 

Premium Rate Review 

After years of enduring double-digit rate increases with no recourse, small 

businesses like ours are encouraged that our states have new tools and new resources to review insurance rates and require insurers to provide justification 

for unreasonable rate increases. This is one of the most direct ways to protect 

small businesses and help us do our part to create jobs and grow the economy. 

There is a high level of market concentration in the health insurance industry 

and true competition—competition based on consumer value rather than competition based on cherry-picking risk pools—is largely absent. That is why we 

need robust rate review—to ensure that we’re getting a fair shake. 

Medical Loss Ratio Requirements 

As small business people, we understand that the most important thing about 

a business is the value you provide to your customers. Yet the insurance industry has lost sight of that. The new minimum medical loss ratio requirements 

will restore a focus on providing us with value for our premium dollars. And 

if insurers fail to meet this basic standard, insurance customers like us will receive cash rebates starting next year—potentially to the tune of hundreds of 

millions of dollars. 

State Insurance Exchanges 

The state insurance exchanges due to come online in 2014 will level the playing field for small businesses. By creating a mechanism whereby we can band 

together and shop for coverage in one large pool, the exchanges will give us bargaining power, risk pooling, and greater choice. 

The repeal of the health law or the undermining of its core provisions would cause 

serious harm to small businesses (see attached fact sheet). Certainly, there are improvements that can and must be made to the law. For example, the 1099 reporting 

provisions and the paperwork burden they would create demand immediate attention. We were heartened that a majority of House members voted to fix this problem 

last summer (HR 5982, 7/30/2010), and we are confident that the current Congress 

will get this problem fixed with appropriate speed. We are also confident these types 

of improvements can be made without undermining the core cost containment provisions and other protections contained in the Affordable Care Act. 

The year 2010 saw a dramatic uptick in the percentage of small businesses offering health coverage: among businesses with 3–199 employees, the offer rate increased by 9 percentage points; among those with 3–9 employees, the offer rate increased 13 points, from 46 percent to 59 percent. This is a promising trend, and we 

need to keep forging ahead, not return to the flawed health care system of the past. 

With proper implementation of the health care law, we can truly level the playing 

field for small businesses like ours. The law promises to benefit small businesses 

and the American economy by stabilizing our health insurance costs and allowing 

us to focus on what we do best: creating jobs and providing important goods and 

services to communities across America. 

Thank you, 

J. Kelly Conklin David Borris 

Owner, Foley-Waite Associates, Inc. Owner, Hel’s Kitchen Catering 

Bloomfield, NJ Northbrook, IL 


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Bad for the Bottom Line: How Rolling Back the Affordable Care Act Would Harm 

Small Businesses 

Small Businesses are Moving Forward on Health Care 

The percentage of small businesses offering health coverage to their employees 

rose significantly in 2010. For businesses with 3–199 employees, the health insurance offer rate increased 9 percentage points. This increase was driven by an even 

greater spike among the smallest businesses: the offer rate among businesses with 

3–9 workers rose 13 percentage points, from 46 percent to 59 percent. 

Repeal of the Affordable Care Act Would Harm America’s Small Businesses 

Attempts to cast repeal of the Affordable Care Act (ACA) as ‘‘good for small businesses’’ obscure what repeal would actually do. Here are the facts: 

Repeal would raise taxes for small businesses that qualify for the new premium 

tax credits. 

Starting for tax year 2010, small businesses may be eligible for health premium tax credits valued at $38 billion over a ten year period. As many as 4 million businesses may qualify for a credit, and about 1.2 million businesses could qualify for 

the maximum credit of 35 percent of their insurance contributions (increasing to 50 

percent in 2014). 

Up to 16.6 million people are employees of small businesses that will be eligible 

for the credit between 2010–2013. 

Repeal would leave small businesses vulnerable to continuing price gouging by in- surers. The ACA gives states new tools and resources to require insurers to justify their 

rate increases. 

Without robust rate review, insurers will continue to raise rates at their whim. 

The most recent example: Blue Shield of California, which recently announced combined rate hikes of up to 59 percent, and then thumbed its nose at the state’s insurance commissioner when he attempted to delay the hikes. 

Repeal would eliminate the guarantee of a basic standard of value for premium 

dollars. 

Under the ACA, if insurers fail to meet new minimum medical loss ratios (MLR), 

they’ll owe a rebate to customers. Projections for the small group market give a mid range estimate of $226 million in rebates, or about $312 per person receiving a rebate, for 2011. Individual market 

estimates add another $521 million. 

Repeal would gut consumer protections for small business owners, employees, and 

their families. 

The ACA puts in place important consumer protections: for example, a ban on 

pre-existing condition exclusions, new limits on insurance caps, and the ability to 

keep children covered up to age 26. These protections directly benefit health insurance customers in the small group and individual markets where small businesses 

get coverage. 

Repeal would renege on the promise of choice, bargaining power, and risk pooling 

in insurance exchanges. 

Starting in 2014, small businesses with up to 50 employees (100 in some states) 

and self-employed people will be able to band together to shop for coverage in state 

insurance exchanges, gaining bargaining power and leveling the playing field with 

insurers. An estimated 29 million people will get coverage through the exchanges 

by 2019 (5 million in small businesses that buy in as a group, and 24 million more 

buying in on their own). 

Repeal would be bad for our national bottom line. 

The Congressional Budget Office estimated the repeal bill would add $230 billion 

to the federal deficit over 10 years, and much more over the following decade. 

The final word on health care repeal: It’s bad business for small business. 

Contact Information 

J. Kelly Conklin 

Foley-Waite Associates, Inc. 

225 Belleville Avenue 

Bloomfield, NJ 07003–3666 

(973) 743–0700 

David Borris 

Hel’s Kitchen Catering 

3027 Commercial Avenue 

Northbrook, IL 60062 

(847) 205–5125 


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1 2010 Milliman Medical Index. Available at: http://publications.milliman.com/periodicals/mmi/ 

pdfs/milliman-medical-index-2010.pdf. 2Mercer. Health benefit cost growth accelerates to 6.9% in 2010. November 17, 2010. 

Available at: http://www.mercer.com/print.htm?indContentType=100&idContent=1400235&indBo 

dyType=D&reference=. 3 Ibid. 

The Main Street Alliance 

3518 S. Edmunds St. 

Seattle, WA 98118 

(603) 831–1835 

f 

The National Business Group on Health 

Chairman Camp, Ranking Member Levin and Members of the Committee, thank 

you for the opportunity to submit testimony for the record on the large employers’ 

perspective on the impact that the Patient Protection and Affordable Care Act (Affordable Care Act) will have on the U.S. economy and employers’ ability to hire new 

workers and retain existing employees. 

The National Business Group on Health (Business Group) is a member organization representing 314 mostly large employers—including 65 of the Fortune 100— 

that provide coverage to more than 55 million U.S. workers, retirees and their families. The Business Group is the nation’s only non-profit organization devoted exclusively to finding innovative and forward-thinking solutions to large employers’ most 

important health care and related benefits issues. 

Employers are Currently Implementing the Employer Provisions of the Affordable Care Act 

Employers are currently implementing provisions of the Affordable Care Act that 

take effect now and planning for future provisions as much as they can given the 

uncertainty. They have already implemented a number of the early provisions required under the health care law, including accounting for retiree drug subsidy 

(RDS) taxes; deciding whether or not plans should maintain their grandfathered status; eliminating lifetime limits; applying for the early retiree reinsurance program; 

adding adult dependent coverage; implementing health account changes for overthe-counter drugs; and providing break times and accommodations for nursing 

mothers. The Federal Government has also begun to implement a number of the 

health care payment and delivery reforms. The health care law’s big changes—the 

employer mandate, the employee vouchers, the exchanges, tax credits, and the ‘‘Cadillac’’ tax—don’t come on line for several years. Nevertheless, employers are reviewing the comprehensiveness and affordability of their benefits, but also assuring that 

benefits are not too rich so they do not trigger the 40% excise tax on amounts above 

specified thresholds in 2018. 

More immediately, employers are preparing for a number of upcoming requirements, including reporting the aggregate value of health benefits on all employees’ 

W–2 forms, the automatic enrollment of new full-time employees in health plans, 

and the new plan summary and benefits requirements. 

Employers Health Care Costs Continue to Increase 

U.S. employers continue to face the challenge of the rising cost of health care for 

their employees. 

• National average health care spending for a family of four in 2010 was 

$18,074—up 7.8% from 2009.1

• Overall employers’ health care costs grew an estimated 6.9% in 2010. Large 

employers, those with 500 or more employees, experienced a sharper cost increase than smaller employers, growing at 8.5%. Self-insured employers experienced higher growth in costs because of increased utilization and actual 

costs that exceeded predicted costs. Employers attributed roughly 2% of this 

increase due the recent changes mandated by the Accountable Care Act in 

2010 and 2011.2

• Employers expect high cost increases again in 2011. With no changes to their 

plans and benefits, employers expected costs to increase 10%. They plan to 

hold their actual cost increases to 6.4% by making changes to plan design or 

changing plan vendors.3


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4 Ibid. 

5Towers Watson, Health Care Reform: Looming fears mask unprecedented employer opportunities to mitigate costs, risks and reset total rewards, 2010. 6 National Business Group on Health, Large Employers’ 2011 Health Plan Design Changes, 

August 2010. 7Towers Watson, Health Care Reform: Looming fears mask unprecedented employer opportunities to mitigate costs, risks and reset total rewards, 2010. 8 Ibid. 

Employers Made a Variety of Changes in Plans and Benefits to Reduce 

Costs in 2010 

Employers continued to shift away from more traditional plan offerings to consumer-directed health plans (CHDPs)—increasingly fully replacing traditional plans 

with CDHPs. Employers also reduced retiree medical plan offerings. More employers 

also provided financial incentives to employees to take better care of their health. 

Most common among these were incentives for taking health risk assessments (offered by 69% of large employers), enrolling in disease management programs (73%), 

and participating in lifestyle modification programs (50%).4

Responding to the uncertainty of the impact of the Affordable Care Act, employers 

stated a recent Towers Watson survey that if the health care law increases plan 

costs: 

• 88% would pass on the increase to employees; 

• 74% would reduce health benefits and programs; 

• 33% would absorb cost into their business; 

• 20% would pass on the increase to consumers; 

• 12% would eliminate or reduce wellness/health promotion programs; 

• 12% would reduce employment; 

• 11% would reduce employer contributions to retirement plans; and 

• 7% would reduce salaries/direct compensations.5

Smaller employers are more likely than larger employers to reduce employment 

positions or shift employees to part-time positions if the Affordable Care Act increases their costs because they have fewer options and less leeway among the options listed. 

In our own National Business Group on Health survey of members, 53% of respondents continued making planned changes to reduce health care costs and provide effective, affordable coverage to their employees despite the loss of grandfathered plan status.6

In the Towers Watson survey, 88% of employers expected to continue to offer 

health care coverage when the free rider assessment takes effect in 2014 while only 

3% are planning to pay the new penalty.7 43% (18% very likely, 25% somewhat likely) of plans believe they will be subject to the ‘‘Cadillac’’ tax in 2018, which could 

force them to make additional changes to their plans and further delay hiring of 

additional employees.8

Clearer ‘‘Rules of the Road’’ for Employer Provisions in the Affordable Care 

Act Will Reassure Employers Who Want to Resume Hiring 

Uncertainty or the lack of clarification regarding ‘‘the rules of the road’’ and the 

true total costs to implement the law has led many employers to hold off on hiring 

new employees and to reduce the amount of full-time positions. One of the key 

sources of confusion is the fact that many of the provisions were designed for the 

individual and small group health insurance market, but the law applies them to 

large employer and self-funded health plans as well. For example, the law’s rescissions provision created confusion and conflicted with employer requirements under 

COBRA. In some cases where COBRA requires retroactive termination of plan participants who are no longer eligible for employer coverage, employers were confused 

about whether or not they could adhere to COBRA rules without running afoul of 

the Affordable Care Act’s new prohibition on rescissions of coverage. Fortunately, 

the Department of Labor (DoL) later issued clarifications that plans should follow 

COBRA rules and the DoL would not consider plans’ retroactive termination of coverage as rescissions. We are encouraged and pleased that in recent months, the Administration and the Departments have reached out to employer plans and sought 

to address some of the unintended consequences and clarify rules. For example, we 

have provided recommendations on the upcoming requirements to auto-enroll new 

hires into health plans and to report the value of health benefits on employees’ W– 

2 forms. 


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9Towers Watson, Health Care Reform: Looming fears mask unprecedented employer opportunities to mitigate costs, risks and reset total rewards, 2010. 

Employers are Concerned the Affordable Care Act Does Not Address Their 

Chief Concerns 

Going into the health care reform debate and for many years earlier, employers 

emphasized the need for us as a nation to radically change the way we pay for and 

deliver care. Without fundamentally changing these, expansion of access will be illusory as we cannot long sustain the increases in overall costs for care that is often 

ineffective and provided inefficiently. A survey by Towers Watson of 650 mid- to 

senior-level benefit professionals provides an early snapshot of how employers think 

the Affordable Care Act will achieve the goals that are most important to them. 

Specifically: 

• Only 14% of respondents think health care reform will help contain health 

care costs; 

• Only 25% think health care reform will encourage healthier lifestyles; and 

• Only 20% believe health care reform will improve the quality of care.9

The Federal Government Should Aggressively Adopt Fundamental Changes 

in the Way We Pay for and Deliver Health Care 

In addition to clarifying regulations going forward, employers believe that it is vitally important for the long-term health of the economy that the Federal Government aggressively adopt changes in the way it pays for and delivers health care in 

Medicare, Medicaid, and other government programs in ways that do not merely 

shift costs to the private sector, but rather take costs out of the system. Reforms 

should reward improvements in primary and preventive care, the effectiveness and 

quality of care, efficiency of care delivery, and appropriate utilization. Congress and 

the Department of Health and Human Services (HHS) need to build off of the positive developments in the Affordable Care Act to achieve these goals, including: 

• Creating effective Accountable Care Organizations (ACOs) that significantly 

improve quality and efficiency and employ payment reforms based on performance, not volume, without creating undue market power; 

• Enabling providers, patients and plans to effectively incorporate the findings 

of the Patient Centered Outcomes Research Institute in their decisions to assure that care reflects the latest medical evidence, 

• Determining an ‘‘essential health benefits’’ package for the exchange, individual, and small group markets that not only provides comprehensive coverage, but also promotes evidence-based, effective care and the triple financial 

goals of assuring people affordable coverage, protecting them from catastrophic financial losses when faced with serious illness and helping them to 

avoid unnecessary costs; and 

• Establishing efficient state health insurance exchanges that adopt national 

standards and uniform processes wherever state-by-state variation would add 

costs and complexity without adding significant incremental value in order to 

offer affordable health choices to employers and employees. 

Employer Recommendations as the Government Embarks on a Significant 

Expansion of Access to Coverage in Medicaid and Subsidized Exchange 

Plans 

Aggressive cost management, consumerist strategies and attention to health improvement have had the most successful impact on employers’ bottom line. Health 

care, unlike most other industries, is too often driven by perverse financial incentives in which consumers and physicians decide what health care might be needed 

or wanted and totally separate party—the employer, insurer or government agency—pays for that care after the fact. The health care reform debate has distracted 

us from remembering that costs rise because Americans are using more and more 

services at ever rising prices. 

Unfortunately in the U.S., health care consumers believe that: 

• More health care is better than less care; 

• The more expensive, the better it must be; 

• There are no trade-offs in health care; 

• Consumers only pay 20% and don’t care that other payers have to pay 80%; 

• Nor do they understand that all benefits are foregone wages or other benefits; 

and 

• Tax costs are ‘‘hidden’’. 


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10PricewaterhouseCoopers, 2010 

There is also substantial evidence over many years that somewhere around 20– 

30%, of care, conservatively, is either not clinically appropriate, not effective, and 

may even be downright harmful for over $1.2 trillion in identified waste, including 

behavioral (obesity/overweight, smoking non-adherence, alcohol abuse), clinical (defensive medicine, preventable hospital admissions, poorly managed diabetes, medical errors, unnecessary emergency room visits, treatment variations, hospital acquired infections, over-prescribed antibiotics) and operational (claims processing, ineffective use of IT, staffing turnover, paper prescriptions).10 As a nation, we have 

to have a constant process of evidence generation, and feedback to care management 

and benefit design to be sure that all patients are protected from wasteful and some 

downright harmful practices. A properly structured learning health care system will 

enable such continuous assessment of actual effects on patients. 

The Federal Government and employers have to use all of the tools and resources 

available to us to help consumers understand, ‘‘It’s all about what’s in it for them.’’ 

To improve quality and control costs, we must work to ensure that Medicare and 

the Affordable Care Act’s Medicaid expansion and exchange plans change the health 

care delivery system by ensuring: 

• A culture of quality and patient safety throughout health care system; • Payment systems that reward outcomes not just utilization; • Payment systems that support primary care and care coordination; • Transparency of health care costs and quality information; • Comparative effectiveness research of health care interventions (including information garnered from the new Patient Centered Outcomes Research Institute); • Evidence-based medicine whenever possible, and patients who make informed 

decisions with help of their doctors; • A secure, nationwide electronic health information network; • Portable, personal health records for all; • Systems that support evidence-based preventive care; • Capital spending only where truly needed; • Personal responsibility for health and engagement in care decisions; and • Comprehensive reform of the health care legal system. 

Conclusion 

Thank you again for this opportunity to share the National Business Group on 

Health’s views for the record on the employers’ perspective on the impact the Affordable Care Act will have on the U.S. economy and employers’ ability to hire new 

workers and retain existing employees. 

Employers look forward to continuing to working with Congress to clarify the Affordable Care Act’s provisions to reduce the administrative burdens on American 

employers and aid them as they look expand their businesses and potentially hire 

new employees. Our economic future and prosperity depends upon Congress’ focusing on real health care payment and delivery reforms that take costs out of the system for all people and all payers and significantly improvement the quality and effectiveness of care. f 

National Partnership for Women & Families 

Supportive Workplace Policies Are Critical for Nursing Mothers 

Written Statement of 

Debra L. Ness, President 

National Partnership for Women & Families 

and 

Robin W. Stanton, Chair 

United States Breastfeeding Committee 

for ‘‘Hearing on Health Care Law’s Impact on Jobs, Employers, and the Economy’’ 

Committee on Ways and Means 

U.S. House of Representatives 

January 26, 2011 

The Affordable Care Act (ACA) gives millions of nursing moms the support and 

protection they need. The law is an important step in making sure the nation’s 

workplaces meet the needs of working women and their families. The National PartVerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00181 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870

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nership for Women & Families and the United States Breastfeeding Committee 

would like to clarify the scope of this important new provision in the law and address some misconceptions expressed during the Ways and Means Committee hearing. 

Every year roughly four million women give birth in the United States, and more 

than 75 percent of them choose to breastfeed. Study after study has shown that 

breastfeeding has tremendous value in protecting both mothers and children from 

a number of acute and chronic diseases and conditions. And research shows that 

employer support—which could include breastfeeding education, counseling, private 

lactation rooms, and breast pumps—makes a tremendous difference in a woman’s 

ability to breastfeed. According to one study, such supports helped as many as 98 

percent of working mothers start breastfeeding, and 58 percent continued for six 

months or longer. There is no question that these policies work. 

Unfortunately, a lack of supportive workplace policies and laws has forced too 

many nursing mothers to quit breastfeeding (or never start). Some new mothers 

have found their employers to be outright hostile, while others simply face work environments that offer nowhere private or sanitary to express breast milk. 

Congress and the Obama administration have taken a key first step to improve 

workplace laws for nursing mothers. For the first time, federal law now explicitly 

protects nursing mothers in the workplace. Section 4207 of the Patient Protection 

and Affordable Care Act gives covered female employees the right to reasonable 

break times and a private location, other than a bathroom, to express milk at work. 

This means that employers must provide nursing mothers a reasonable amount of 

break time and functional space to express milk. This provision applies to employers 

of all sizes but, in certain limited instances, those with fewer than 50 total employees may not have to comply with the law if they face undue hardship in meeting 

these basic requirements. The Department of Labor (DOL) is in the process of developing guidance on this issue and has published a Request for Information. 

Although we cannot know the exact contours of the requirements set by this provision of the law until that guidance is completed, we believe that the overwhelming 

majority of employers will have absolutely no difficulty complying. Indeed, the provision simply builds on the laws that several states have already established—laws 

that are familiar to employers. Fourteen states and the District of Columbia already 

require private employers to provide nursing employees with reasonable break time 

and/or a place other than a bathroom to express milk at work. In addition, employers with FLSA-covered employees should already have policies in place regarding 

break times. 

Unfortunately, there is a substantial amount of misinformation about the scope 

and application of the provision. For example, at the Ways and Means Committee 

hearing, Representative Lynn Jenkins expressed concern that an employer would 

have to provide a lactation room if it had only three male employees at a worksite 

and no nursing mother. The DOL has already clearly indicated that it does not intend to impose this requirement on employers. In fact, in the Frequently Asked 

Questions the DOL has provided to the public about the law, it specifically addresses this issue: 

Do employers have to provide a lactation space even if they don’t have any 

nursing mother employees? 

ANSWER: No. The statute requires employers to provide a space for a nursing employee ‘‘each time such employee has need to express the milk.’’ If there 

is no employee with a need to express breast milk, then the employer would 

not have an obligation to provide a space. 

The National Partnership for Women & Families and the United States 

Breastfeeding Committee strongly support workplace policies that allow women to 

continue breastfeeding, and we applaud Congress and the President for adopting 

language in the ACA to promote breastfeeding. Workplace breastfeeding support is 

a ‘‘win-win-win’’ for employers, mothers and babies. Employers that support nursing 

mothers not only help their employees transition back to work, but also reduce turnover, absenteeism and health care costs, and increase employee satisfaction, loyalty 

and productivity. 

When new mothers’ needs are met, they are better able to meet the dual demands 

of work and motherhood. Those who choose to breastfeed need break time and a private space to express milk when they return to work. For the thousands of working 

mothers who have had to rush to their cars during a lunch break, hide in a bathroom stall or closet, or negotiate for break time with an unsympathetic employer, 

the new protections are life-changing and long overdue. We hope that Representative Jenkins and all members of the Ways and Means Committee will stand up for 


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new mothers who choose to breastfeed and voice their support for this new provision 

and all protections like it that make it easier for mothers to be both good caregivers 

and family breadwinners. 

Contact Information 

Debra L. Ness 

National Partnership for Women & Families 

1875 Connecticut Avenue, NW Suite 650 

Washington, DC 20009 

Phone: 202.986.2600 

Email: rlyons@nationalpartnership.org 

Robin Stanton 

United States Breastfeeding Committee (USBC) 

2025 M Street, NW, Suite 800 

Washington, DC 20036–3309 

Phone: (202) 367–1132 

Email: mrenner@usbreastfeeding.org 

f 

National Private Duty Association 

Statement of the National Private Duty Association 

in connection with Hearing on 

Health Care Law’s Impact on Jobs, Employers and the Economy 

January 26, 2011 

Committee on Ways & Means 

U.S. House of Representatives 

Washington, DC 

Submitted By 

Sheila McMackin 

President 

National Private Duty Association 

941 East 86th Street, Suite 270 

Indianapolis, IN 46240 

317 663 3637 

sheila@homecarechicago.com 

The National Private Duty Association, a trade association representing over 

1,200 companies with 250,000+ employees throughout the United States, thanks the 

U.S. House Ways & Means Committee for holding a hearing on the impact of the 

Patient Protection and Affordable Care Act (PPACA) on jobs, employers and the 

economy. The PPACA will impose a substantial new cost burden on employers in 

low-margin, labor-intensive industries such as private duty home care. It will likely 

force NPDA member companies to shift to part-time employees, raise our clients’ 

costs, and/or, in some cases, cease operation altogether. 

This in turn will give many clients—primarily elderly and/or people with disabilities—no alternative but to give up their struggles to remain independent in their 

own homes for as long as possible. Instead, they will have to move into institutionalized and far more expensive care. 

Private duty home care may be medical or non-medical care. When providing nonmedical care, caregivers keep their clients company, take them to doctors’ appointments, run errands such as grocery shopping or pick-up of prescriptions, assist with 

light housekeeping, prepare and serve meals, help with personal tasks such as 

dressing or bathing, and generally make sure that a senior individual can age in 

place, at home, in dignity and comfort. This is crucial to the emotional and often 

physical well-being of our older citizens. It is also considerably more cost-effective 

than the alternative—institutionalized care often paid for through Medicaid or some 

other government program. 

NPDA members are companies who employ these caregivers. NPDA members pay 

wages, usually above but always at least at the federal minimum wage level. Our 

member companies absorb the cost of employment—they withhold and pay income 

taxes, pay workers compensation, and pay FICA taxes for their workers. Often there 

are benefits such as vacation and/or sick time. While many home care agencies provide ‘‘mini-med’’ plans for their employees, the PPACA’s benefits package mandates 


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and discrimination rules will invalidate many of these existing employer-provided 

health insurance plans. 

Our member companies work hard to establish and maintain important industry 

standards. NPDA identifies and disseminates information on ‘‘best practices’’ within 

the home care industry. It develops core training and education programs for caregivers, resulting in caregivers who are professional, caring and knowledgeable about 

the specialized needs of those who are aging or disabled. NPDA also educates the 

public about the benefits to seniors who seek in home companion care about receiving that care through caregivers who are trained as well as compassionate, and 

whose work lives are protected by employment laws. 

Whether these in-home services are paid for by the seniors themselves or by their 

families, the service recipients are the beneficiaries of a company that can and will 

provide substitute quality care when a primary caregiver gets sick or takes vacation. 

This is very important because, as you know, a senior citizen’s need for help with 

the tasks of daily living do not stop when the person who is assisting the senior 

needs to take time off. 

Private duty home care is a labor-intensive, low-margin industry. The expense of 

a companion caregiver is almost always borne in its entirety by the service recipient 

and/or his or her family. While there is no such thing as a ‘‘typical’’ rate charged 

to service recipients—it varies geographically as well as by whether any live-in or 

sleep-over time is required, an illustrative charge for a senior seeking regular but 

not full-time assistance is $20/hour, for a three or four hour minimum service block, 

plus the cost of traveling to the service recipient’s home. Accordingly, even a minimum service contract can and often does run into $1000 or more every month. And 

for many of our clients, the costs are even higher because the senior citizen in need 

of care requires more than the minimum time block, or needs it on a daily or more 

frequent basis. Many of our member companies provide their clients with competent, caring, professional caregivers who are on premises 24 hours each day. This 

is a huge expense for the senior. Most simply cannot afford a significant increase 

in the cost. The result will be having to give up hours of help and relying on family 

members, friends and neighbors—or worse, sitting alone without the assistance they 

need. The alternative—which is anathema to many aging Americans—is being 

forced into institutionalized care. 

Of course, institutional care may take less from an individual senior’s limited 

pocketbook, but its cost to society and the U.S. government is significantly higher. 

Even without taking into account the crucially important emotional health and dignity that comes from finding a way to let a senior citizen age in place in his or her 

own home, the cost to society to forcing institutionalization as the only alternative 

is very high. Medicaid and other government programs absorb the bulk of these 

costs. At these times of State and federal budgets stretched to and beyond their 

outer limits, this is a result that is not good for anyone. 

The PPACA, while laudable in its goal—we all support the notion of affordable 

health care coverage for all Americans—it will have a seriously adverse impact on 

jobs in the private duty sector, and on the very people—the caregivers themselves— 

whom it is crafted to help. The additional cost to either providing health insurance 

or paying fines for failure to do so will cripple the industry. It will result in jobs 

downsizing to part-time status, and/or jobs lost due to clients no longer able to afford the services NPDA companies offer. 

NPDA does not have empirical data on this, but we do have anecdotal evidence 

of the deleterious impact of the PPACA. Our companies—from Michigan, California, 

Illinois and other states—tell us uniformly that they will be forced to raise prices, 

reduce their employees’ hours to part-time status, and in some cases they project 

having to go out of business altogether. 

NPDA companies are usually not ‘‘small’’ as defined by most ‘‘small business’’ 

measures. Therefore the small business tax credit and other small business special 

rules in the PPACA do not mitigate the situation for them. Most of our companies 

have revenue in the millions, with employee rosters of 100 or more. Typically their 

profits are less than $50,000 in any given year. Our member companies are projecting—with inadequate cost data currently available—that the cost of compliance 

with the PPACA will be 10 percent or greater. This of course translates into the 

potential for an increase of 10 percent or more in what they charge their clients. 

As clients find they cannot afford these additional costs, they will cease doing business with NPDA member companies, thus accelerating the job loss that will come 

as a result of lost business, and threatening the existence of these low-margin high 

labor cost businesses. 

There are very specific and difficult problems arising from the PPACA, as well 

as the more general concerns described above. Under the employer responsibility 

rules of the health reform law, by 2014 employers will have to choose between offerVerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00184 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870

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ing a mandated package of health insurance benefits or paying a fine. Employers 

cannot calculate either the cost of the fines—they are based on whether a worker 

qualifies for a federal subsidy, or ‘‘affordability.’’ Both the subsidy and ‘‘affordability’’ 

are calculated by measuring an as yet known cost of insurance (and employer contribution to that cost) against an individual’s household income. The employer has 

no way of knowing an individual’s household income—which includes spouse’s and 

children’s income. This is something no employer can know with respect to any individual employee. And thus no employer can ever know, in advance, whether it will 

be liable for fines or whether its contribution to the cost of employer-provided health 

care will be enough for the insurance to be ‘‘affordable’’ as defined under the 

PPACA. 

Likewise, at this stage the cost of the mandated package of health insurance benefits is not only unknown, it is also at this point unknowable. Insurers are adjusting 

prices to reflect the cost of new mandatory benefits and compliance responsibilities. 

The actual package of benefits is still under development by relevant federal agencies. Therefore the actual benefits package—and its consequent cost—cannot be calculated. As a result, no employer can make plans to meet the cost of insurance, or 

is potential liability for assessments for not offering health insurance at all, or for 

not offering it on what the government decides is an ‘‘affordable’’ basis. 

Given the historical cost of health insurance, it is likely many employers will simply choose to pay fines. An employer can calculate its maximum potential exposure 

to fines, but not its actual exposure, since it will have no way of knowing whether 

one of its employees will qualify for a federal subsidy—the trigger for fine liability. 

One resulting option open to an employer that has little to no profit margin to spare 

will be to reduce its workforce to minimize the potential for liability for fines. 

Of course, reducing a work force means reducing the ability to provide services, 

and that means losing business. This will drive a private duty company out of business even faster than the significantly large new cost of health insurance or fines. 

Accordingly, many companies will instead shift to hiring employees who will not 

trigger assessments. This can be done by restricting an employees work hours to 

no more than 29 hours per week (30 hours per week is the hours worked measure 

that triggers fine liability). Although ‘‘part time equivalence’’ will assure that companies with part-time workers are subject to the employer responsibility rules, fines 

are assessed only on full-time workers (assuming at least one is eligible for a federal 

subsidy for purchasing individual health insurance through an exchange). This acts 

as a powerful incentive to companies facing a huge new cost that its slim profit margins simply cannot absorb to hire employees to work fewer than 30 hours per week. 

This will drive up a company’s administrative costs, and it will diminish the jobs 

available in the industry. But the cost of using full-time employees will, in many 

instances, simply be prohibitive. This loss of full-time jobs with benefits will hurt 

caregivers as well as the service recipients we serve. 

Another no doubt unintended consequence of the PPACA’s employer responsibility 

rules is the fact that they will encourage a shift away from home care provided by 

trained, professional caregivers who are employees of a private duty company to a 

system of referrals of individuals who are working on their own—without benefit of 

training, supervision or back-up. These ‘‘independent contractors’’ frequently have 

no idea about how to pay their taxes and they have no protection from workers compensation, unemployment insurance or paid sick or vacation time. The seniors and 

their families who hire them also have no idea of their responsibilities as employers 

of these caregivers. The result is an anticompetitive underground business that ultimately hurts the U.S. economy as well as the workers and the service recipients 

they serve. This could not possibly be a result that is tolerable to those who crafted 

the PPACA. 

In summary, early indications from NPDA members (and other employers in other 

industries) suggest that many employers are exploring whether to drop or decline 

to offer health insurance when the employer responsibility rules take effect in 2014. 

This is because of the interaction of two primary factors: (1) individual workers will 

have access (often subsidized by the government) to health insurance through the 

new law’s exchanges, thus relieving employers of their sense of responsibility for 

providing coverage to their workers; and (2) the cost of assessments for not providing coverage may be significantly lower than the cost of providing health insurance, and will certainly be more predictable. Predictability of expense is a serious 

issue for private sector companies. An equally serious problem unique to industries 

like private-pay non-medical in-home companion care is the fact that the employer 

responsibility rules may prove to be an incentive to companies to use a workforce 

comprised of independent contractors rather than employees. This will be adverse 

to the interests of both workers and the companies that hire them—and potentially 


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also to the seniors and people with disabilities who are served by private-pay nonmedical in-home companion care companies. 

NPDA seeks Congressional help in crafting a solution to the serious economic and 

policy-based problems posed by the current employer responsibility rules. We want 

to work together with lawmakers to develop alternative approaches that will result 

in expanded coverage, without driving up the cost of in-home companion care to a 

level that is unaffordable for our clients, and that threatens our continued ability 

to stay in business. An alternative approach is crucial to prevent severe limitation 

on jobs growth and possibly even the continued viability of the private duty industry 

In short, the PPACA’s employer responsibility rules are likely to cause significant 

job loss in the private duty industry. This in turn will force many service recipients 

into more costly (and less emotionally healthy) institutional care. It will cause a 

shift to use of part-time employers. It will encourage a caregiver to look at self-employment, without knowledge of the legal responsibilities such a choice brings both 

to the caregiver and to the person who hires that caregiver. It could drive some private duty companies out of business. 

NPDA encourages Congress to revisit the PPACA’s employer responsibility rules. 

Repeal of those rules, or modification of them to accommodate low-margin, laborintensive industries such as ours is imperative to avoid yet more jobs loss (or jobs 

diminishment) along with loss of an important option for aging in place, in dignity 

and comfort. 

NPDA extends our thanks to the Ways & Means Committee for its willingness 

to explore this difficult issue. We are happy to provide any expertise the committee 

may seek as it works through this problem. 

Æ 


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