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EXAMINING OBAMACARE’S HIDDEN MARRIAGE

PENALTY AND ITS IMPACT ON THE DEFICIT

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF

COLUMBIA, CENSUS AND THE NATIONAL ARCHIVES

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

OCTOBER 27, 2011

Serial No. 112–86

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform
(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF COLUMBIA, CENSUS AND THE

NATIONAL ARCHIVES

TREY GOWDY, South Carolina, Chairman

PAUL A. GOSAR, Arizona, Vice Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

PATRICK T. MCHENRY, North Carolina

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

DANNY K. DAVIS, Illinois, Ranking Minority

Member

ELEANOR HOLMES NORTON, District of

Columbia

WM. LACY CLAY, Missouri

CHRISTOPHER S. MURPHY, Connecticut
(III)

C O N T E N T S

Page

Hearing held on October 27, 2011 .......................................................................... 1

Statement of:

Holtz-Eakin, Douglas, Ph.D., president, American Action Forum, former

CBO Director; Diana Furchtgott-Roth, senior fellow, Manhattan Institute for Policy Research; Richard V. Burkhauser, Ph.D., professor of

economics, Cornell University; and Sara R. Collins, Ph.D., vice president, Affordable Health Insurance, the Commonwealth Fund ................. 35

Burkhauser, Richard V., Ph.D. ................................................................ 60

Collins, Sara R., Ph.D. .............................................................................. 76

Furchtgott-Roth, Diana ............................................................................. 54

Holtz-Eakin, Douglas, Ph.D. ..................................................................... 35

Letters, statements, etc., submitted for the record by:

Burkhauser, Richard V., Ph.D., professor of economics, Cornell University, prepared statement of .......................................................................... 62

Collins, Sara R., Ph.D., vice president, Affordable Health Insurance, the

Commonwealth Fund, prepared statement of ............................................ 78

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 5

Furchtgott-Roth, Diana, senior fellow, Manhattan Institute for Policy Research, prepared statement of ..................................................................... 56

Gowdy, Hon. Trey, a Representative in Congress from the State of South

Carolina, staff report .................................................................................... 13

Holtz-Eakin, Douglas, Ph.D., president, American Action Forum, former

CBO Director, prepared statement of ......................................................... 38

(1)

EXAMINING OBAMACARE’S HIDDEN MARRIAGE PENALTY AND ITS IMPACT ON THE

DEFICIT

THURSDAY, OCTOBER 27, 2011

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF

COLUMBIA, CENSUS AND THE NATIONAL ARCHIVES,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 9:34 a.m., in room

2154, Rayburn House Office Building, Hon. Trey Gowdy (chairman

of the subcommittee) presiding.

Present: Representatives Gowdy, Gosar, Burton, DesJarlais,

Davis, and Cummings.

Staff present: Alexia Ardolina, staff assistant; Brian Blase, professional staff member; Robert Borden, general counsel; Molly Boyl,

parliamentarian; Gwen D’Luzansky, assistant clerk; Linda Good,

chief clerk; Christopher Hixon, deputy chief counsel, oversight;

Sery E. Kim and Christine Martin, counsels; Mark D. Marin, director of oversight; Laura L. Rush, deputy chief clerk; Jaron Bourke,

minority director of administration; Yvette Cravins, minority counsel; Ashley Etienne, minority director of communications; Devon

Hill, minority staff assistant; Carla Hultberg, minority chief clerk;

Paul Kincaid, minority press secretary; and Lucinda Lessley, minority policy director.

Mr. GOWDY. The committee will come to order.

This is a hearing entitled ‘‘Examining Obamacare’s Hidden Marriage Penalty and Its Impact on the Deficit.’’

I will recognize myself for an opening statement and then the

gentleman from Illinois, Mr. Davis.

Over the past several months, this committee has heard from job

creators regarding the negative impact the President’s health-care

law is having and will continue to have on hiring and job growth.

In addition to the impact on job creators, the new law will also

negatively impact individuals. The Affordable Care Act contains refundable tax subsidies to assist certain people in purchasing health

insurance. The Congressional Budget Office estimates these tax

subsidies are the most expensive component of the law. The tax

subsidies begin in 2014, and by 2017 CBO projects the tax subsidies will add $100 billion to the national debt each year, with an

escalating cost into the future. The CBO estimates three-quarters

of this cost will be new government spending.
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These tax subsidies are available to individuals who do not receive health insurance through their place of work. Instead of only

being available for individuals not receiving employer-sponsored

health care, any individual within a certain income range—it

would be more effective if the Tax Code did not care whether people receive their health insurance at work or purchase it in a private market.

Two households with the same number of children, same number

of wage-earners, and same combined levels of income are otherwise

the same except for the source of health insurance. These two

households should not have tax bills that differ by thousands of

dollars because of their choice of health care. With so many families struggling throughout the country, and especially in my home

State of South Carolina, we should be working toward ensuring

families have the tools to invest in their health.

The Joint Committee on Tax has estimated that less than 20 percent of the beneficiaries of the tax subsidy will be married couples

and their families. This is partly due to a recent HHS rule that

prevents families from accessing the tax subsidy if either parent

has an offer of coverage at work. In other words, if a husband is

offered health insurance at work for just himself, and his wife and

children must go purchase health insurance in the open market,

the cost of covering the wife and children would not be eligible for

a subsidy.

This rule was meant to minimize the cost of the subsidy, but the

collateral damage will be that the Affordable Care Act will exacerbate the marriage penalty already in the Tax Code. Over time, this

act will force couples to choose not to get married because of the

sizable tax benefit that will only be available if they stay unmarried.

In addition to the penalty against marriage in the act, several of

the witnesses before us today have conducted research that demonstrates the cost of the health-care law will likely be much higher

than the Congressional Budget Office originally projected. From

underestimating the cost of the long-term-care program, demonstrated by the administration’s decision to eliminate the program, to the law’s likely unsustainable Medicare cuts, the tax subsidies in the law will be the biggest reason the law will exceed the

projected cost. Because this biased tax credit will encourage employers to discontinue health insurance and employees to decline

employer-sponsored coverage, the cost of the health-care law will

continue to increase.

In contrast to CBO’s prediction, several surveys predict the number of employers who cease to offer health insurance to their employees will be much higher than it is now. Just last week, it was

reported the Nation’s largest private employer, Wal-Mart, will no

longer offer health care to new employees working less than 24

hours per week. Additionally, employees working 24 to 34 hours

per week will not be offered insurance for their spouses. This is an

example of how government mandates and regulations are significantly increasing the price of health insurance, and companies

must make adjustments to compete globally.

As more and more companies cut back on health insurance coverage, the cost of the Affordable Care Act will increase. It is essen-
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tial we explore the unintended costs associated with the new

health-care law. We need laws that are transparent and uniform

in their impact on families. As the health-care law is implemented,

we must examine how we are using taxpayer dollars and if government is being a good steward of those dollars.

One of the President’s fiscal commission guiding values was to

reduce inefficiencies, loopholes, and the complexity in the Tax Code

in order to lower rates, simplify the Tax Code, and bring down the

deficit. As demonstrated with problems with the tax credits, the Affordable Care Act moves in precisely the opposite direction. The act

introduces another major inequity into the Tax Code, effectively encouraging employers and workers to drop employer-sponsored insurance and pass these costs to taxpayers. Additionally, the law

adds a large marriage tax penalty and discourages job growth.

I look forward to hearing from today’s witnesses about what they

have learned about the health-care law and whether I am right to

be skeptical about how the law will play out.

At this point, I would recognize the ranking member of the subcommittee, the distinguished gentleman from Illinois, Mr. Davis.

Mr. DAVIS. Thank you very much, Mr. Chairman. And let me

thank you for calling this hearing.

I want to thank our witnesses for coming to participate.

For many years, I have been an avid supporter and advocate of

a national health plan. And I have been that because I have always

believed, since I learned about health, that health care ought to be

a right and not a privilege. Nor do I believe that it can be left to

chance, because it is obviously too precious. When you think about

it, without good health care, students cannot concentrate at school,

families cannot pursue work and other activities that are needed

to develop and sustain what we call a good life.

So when the opportunity came to vote on the Patient Protection

and Affordable Care Act, I was delighted. And I was delighted because it has provided various pathways to accessible health care for

the masses.

One such path establishes State-based health-care exchanges

that can be utilized by individuals if they cannot find coverage

through their large employer. Small businesses are the Medicaid

expansion. The subsidies vary with income and are based upon the

Federal poverty level, a similar eligibility threshold for numerous

government programs. In addition, further tax credits will be available to those eligible for employer coverage and public assistance

coverage but only in narrow circumstances.

The ACA will benefit families and reduce the Federal deficit.

First of all, the families and individuals impacted by crippling medical debt—that is a significant causation of personal bankruptcies—

will become a thing of the past because preventative care and early

detection are no longer cost-prohibitive. Second, the nonpartisan

Congressional Budget Office found the health-care legislation will

reduce deficits by $143 billion, further benefiting our Nation’s finances.

As I have previously said, the ACA is progress. And while each

individual will face unique circumstances and challenges under

ACA, generally there are significant benefits that result in good

health for the American public. Every time I think of the fact that
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more than 32 million additional people will have the opportunity

to purchase, maintain, and make use of health insurance, I say

that is good for me and I believe that that is good for America.

So I thank our witnesses for coming.

Again, Mr. Chairman, I thank you for holding the hearing. I

yield back.

Mr. GOWDY. I thank the gentleman from Illinois.

Members may have 7 days to submit opening statements and extraneous materials for the record.

[The prepared statement of Hon. Elijah E. Cummings follows:]
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Mr. GOWDY. I would now ask unanimous consent that the staff

report entitled, ‘‘Uncovering the True Impact of the Obamacare Tax

Credits’’ be included in the record.

Mr. DAVIS. Mr. Chairman, I have no objection, but I also would

like to make sure that the report is reflected as a partisan staff report and has not been marked up. So, as long as we make sure that

that depiction is shown, I would have no objection.

Mr. GOWDY. The distinguished gentleman from Illinois’ comments are obviously part of the record and can be read in conjunction with the report. And, with that——

Mr. CUMMINGS. Chairman.

Mr. GOWDY. Yes, sir.

Mr. CUMMINGS. I just want to be clear. The staff, we got the report about 10 minutes ago. And I wondered, is that a report of the

committee, or is that a report of the Republican side of the committee, since we had no input? And I think that is what Ranking

Member Davis was trying to get to. I mean, we haven’t even read

it.

Mr. GOWDY. The gentleman from Maryland is correct. It is a report of the Republican staff. It is not the committee as a whole.

The gentleman is correct.

Mr. CUMMINGS. Thank you, Mr. Chairman.

Mr. GOWDY. Without objection, so ordered, with the comments of

the gentleman from Illinois and the gentleman from Maryland.

[The information referred to follows:]
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Mr. GOWDY. We will now welcome our first panel of witnesses.

On behalf of all of us, thank you for coming, and welcome.

I will introduce you from my left to right, your right to left. And

that will be the order in which we would like you to give your opening remarks.

Douglas Holtz-Eakin is president of the American Action Forum

and former director of the Congressional Budget Office. Diana

Furchtgott-Roth is a senior fellow at the Manhattan Institute for

Policy Research. Richard Burkhauser is a professor of economics at

Cornell University. Sara Collins is vice president for affordable

health insurance at The Commonwealth Fund.

Pursuant to committee rules, all witnesses will be sworn before

they testify. So I would ask if you would please rise and lift your

right hands.

[Witnesses sworn.]

Mr. GOWDY. May the record reflect all witnesses answered in the

affirmative.

You may be seated.

The lights—and I know many of you have testified before and

you are more familiar with the process than I am. So the lights

mean what they traditionally mean in life: green, go; yellow, speed

up, try to get under the red light before it changes; and red, kind

of see if you can start bringing it to a conclusion.

And, with that, we will recognize Mr. Holtz-Eakin.

STATEMENTS OF DOUGLAS HOLTZ-EAKIN, PH.D., PRESIDENT,

AMERICAN ACTION FORUM, FORMER CBO DIRECTOR; DIANA

FURCHTGOTT-ROTH, SENIOR FELLOW, MANHATTAN INSTITUTE FOR POLICY RESEARCH; RICHARD V. BURKHAUSER,

PH.D., PROFESSOR OF ECONOMICS, CORNELL UNIVERSITY;

AND SARA R. COLLINS, PH.D., VICE PRESIDENT, AFFORDABLE HEALTH INSURANCE, THE COMMONWEALTH FUND

STATEMENT OF DOUGLAS HOLTZ-EAKIN, PH.D.

Mr. HOLTZ-EAKIN. Thank you, Mr. Chairman, Ranking Member

Davis, and members of the committee. It is a privilege to be able

to be here today to discuss this important topic.

There are many perspectives on the Affordable Care Act. In

mine, I want to focus on some of the economic consequences of this

legislation.

Viewed from the perspective of economic policy, I believe this is

an unwise legislation at this point in our Nation’s history. And let

me spell out a couple of reasons why.

First and foremost, as the committee is well aware, the United

States faces a daunting fiscal future in which projected debt relative to the economy is, under current law, to spiral ever upward

and invite a sovereign debt crisis of the type that we are watching

unfold in Europe at this very moment. In such circumstances, the

laws, budgetary consequences are of extreme importance, and it is

my belief that it will exacerbate, not improve, the fiscal outlook

and, for that reason, is a dramatic step in the wrong direction.

We knew at the time of its passage that the law contained many

budget gimmicks which disguise its true impact on future deficits.

We have already seen the unwinding of one of those, the so-called
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CLASS Act, which was used in the first 10 years to provide $80

billion worth of revenue and hid all the spending past the budget

window.

But there are others, as well. As the chairman mentioned in his

opening remarks, there are billions of dollars of cuts to Medicare

which will not be sustainable in the future. The business model for

Medicare has not changed in a way that will allow those cuts to

be implemented. A future Congress will be faced with the choice

between denying seniors access to care or restoring those cuts. My

expectation is those cuts will be restored. The cost of the program

will become larger and larger.

And, as one of my fellow witnesses, Dr. Burkhauser, has done extensive research on, the serious upside risk of the insurance subsidies off of the exchanges being far more expensive than the Congressional Budget Office originally estimated, there is simply too

much subsidy money on the table for employers and employees not

to take advantage of it. And we will see a reworking of many employment contracts so that employers no longer offer coverage and

the workers go get their insurance subsidies.

So I think, budgetarily, this is very dangerous.

The second perspective is, from what we know about those countries that have huge deficit problems and poor economic growth—

and the United States is in that position—the playbook for success

is one which keeps taxes low and reforms them to be simpler and

more pro-growth and then cut spending. In particular, government

employment—not a big deal in the United States—and transfer

programs.

This legislation goes exactly in the wrong direction, from the les- sons of economic history. It has, you know, $500 billion to $700 billion worth of tax increases, depending on how you count it. It

makes the Tax Code, as the chairman mentioned, far more complex, not simpler and more pro-growth, and so, from a tax perspective, goes exactly in the wrong direction.

And this is additional transfer spending in the United States.

And expansions of Medicaid, probably our least successful entitlement program, the invention of a new entitlement in the insurance

subsidies—both of those are steps in the wrong direction, given the

needs that face the United States.

So I think that it is broadly a step that is dangerous to our future budgetarily and from a growth perspective.

And, finally, if you look inside the law at some of the incentives,

they have perverse anti-growth implications. The tax credits available to small businesses, for example, penalize those small businesses that actually grow and add employees or increase their compensation. The insurance subsidies themselves get phased out as

people’s income rises. That is an implicit tax on the success of our

low-income workers and at odds with our desire to allow them get

ahead.

And, last, I think the labor market consequences of the higher

insurance market premiums that the law will inevitably produce by

demanding more benefits get covered and applying taxes to all

parts of the health supply chain, plus the cost of the employer

mandate itself, are going to hurt low-wage workers in particular,

harm the ability of all workers at this point in time to get jobs.
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And so, taken as a whole, from the top-level macroeconomics to

the labor market incentives, I think this is dramatically bad economic policy and will, in the end, be something that the United

States regrets.

I thank you.

[The prepared statement of Mr. Holtz-Eakin follows:]
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Mr. GOWDY. Thank you, Dr. Holtz-Eakin.

Dr. Furchtgott-Roth.

STATEMENT OF DIANA FURCHTGOTT-ROTH

Ms. FURCHTGOTT-ROTH. Thank you for inviting me to testify here

today.

I am a senior fellow at the Manhattan Institute, and I am the

author of ‘‘Women’s Figures: An Illustrated Guide to the Economic

Progress of Women in America’’ that looks at how women have

moved increasingly into the work force over the past half-century.

I fully agree that everybody should have access to health care,

but the way this bill is structured, there are disincentives for

women to marry and disincentives for women to work. And for a

bill that is supposed to make Americans healthier, these disincentives are truly startling. Beginning in 2014 when the bill takes effect, Americans will find it more advantageous to stay single than

to marry, even more so than under the current Tax Code.

Marriage penalties from taxes in general and from the new

health-care law in particular fall into two categories: disincentives

to marry and disincentives to work. And the way the new healthcare law is structured, health insurance premium credits in the

new law are linked not directly to income but to the poverty line,

resulting in a particularly steep marriage penalty for low-income

Americans. And this arises because with $10,890 as the poverty

line for one person and an additional $3,820 for a spouse, marriage

means less government help with health insurance when a couple

gets married.

Since the new qualified benefit plans offered in the health insurance exchanges are going to be generous and expensive, with no

lifetime maximums, no co-payments for preventive services, no exclusions for pre-existing conditions, and the requirement to accept

all applicants, it is going to be especially important for low-income

individuals to have help with their health insurance premiums.

So here is how the system will work when it is implemented in

2014: The new health-care bill will offer refundable, advance premium credits to singles and families with incomes of between 133

percent and 400 percent of the poverty line. The credits can only

be used to buy health insurance through the exchanges. So if you

earn up to 133 percent of the poverty line, your premium can only

be 2 percent of your income; it cannot be more than 2 percent of

your income. Moving up, if you earn between 150 percent and 200

percent of the poverty line, your premium can be 4 percent to 6.3

percent of your income. Up to 400 percent of the poverty line, it can

only be 9 percent. So the more you move up, the higher premium

you have to pay.

So two singles would be able to earn $43,000 and have help from

the Federal Government with their premiums. But if they got married and combined their earnings to $86,000, they would be far

above the limit because they would be above 400 percent of the

poverty line. As a married couple, the most they could earn and

still get government help with health insurance premiums would

be $58,000, which is a difference of almost $30,000 or 32 percent.

And this is a substantial disincentive to get married.
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Such marriage penalties exist even for couples below the poverty

line when they are married. So if we look at the example of June

and Jake, for example, living alone, each one earns, say, $21,780,

putting them at 200 percent of the poverty line. Unmarried, their

premium would be about 6.3 percent of their income or $2,744 in

total. But let’s say June and Jake were to marry. Their combined

income would be $43,560, about 300 percent of the poverty line for

a family of two. That would push their premium close to 9.5 percent of the bracket or $4,138 out of their combined income. That

is a marriage penalty equal to about $1,200, which is a substantial

disincentive to getting married.

The penalty also exists for single mothers. Say Sally is a single mother earning $44,130, putting her and her baby at the 300 percent of the poverty line. They would be eligible for the health insurance premium assistance credit. But what if she were to marry

Sam, the father of her child, who earns $43,560 and who is at 400

percent of the poverty line? Their total earnings at $87,000 would

exceed the 400 percent poverty line for a family of three. Married,

they would no longer get help with their premiums from the government; unmarried, they would.

So I would argue that even though health care is something that

every American should have, the way we have structured the program provides a disincentive to marry, and when couples are married, a disincentive for the woman to work. And this needs to be

addressed.

Thank you very much.

[The prepared statement of Ms. Furchtgott-Roth follows:]
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Mr. GOWDY. Thank you, Ms. Furchtgott-Roth.

Dr. Burkhauser.

STATEMENT OF RICHARD V. BURKHAUSER, PH.D.

Mr. BURKHAUSER. Thank you for the opportunity to submit a

summary of my research with Sean Lyons and Kosali Simon on the

Affordable Care Act.

In a series of proposed rules, the Obama administration confirmed what the ACA’s supporters have feared: The law’s requirement that employers must make health insurance coverage affordable only applies to single coverage, not family coverage.

Those familiar with all the law’s moving parts know exactly what

this means. Because any offer of single employer coverage, if it is

considered affordable, blocks access to generous subsidies via tax

credits in the insurance exchanges, millions of families will be

stuck in a no man’s land without affordable coverage through either their employers or the exchanges.

The law’s advocates are pushing the administration to change

this by requiring employers to make coverage affordable for employees and their families. But our new research demonstrates why

this decision isn’t so cut and dried. Using this broader ACA definition of ‘‘affordable’’ could incent millions of employees to willingly

shift from an employee plan to a government-subsidized insurance

exchange at significant cost to the taxpayers, even if their employers continue to offer coverage.

How the ACA’s provisions will actually impact the insurance

market depends on the answers to two questions: First, does affordable coverage refer to coverage just for employees alone or for the

employees and their families? We suspect the administration’s proposed answer to the first question came as a surprise to the average Congressperson, who believed, as we did at the start of our research, that the law levies a fine if a large employer doesn’t provide

affordable coverage to employees and their families. But a close

reading of the bill shows that the employer fine is only triggered

when coverage isn’t affordable for the employee, not the employee

and their family.

That brings us to the second question, which interacts in important ways with the administration’s answer to the first: Will employers keep their current insurance plans but adjust them to allow

lower- or moderate-income families, up to $89,000 for a family of

four, to qualify for entry into the subsidized exchanges? The CBO

assumed not. Yet for income-eligible employees, subsidy dollars will

make exchanges coverage more affordable than their current employer plan, even when purchased with after-tax dollars. It is also

attractive for employers, who would pay less in per-employee fines

than by providing affordable insurance in the first place. By increasing pre-tax health insurance premiums, making coverage

unaffordable for some, employers will free their lower- to moderateincome employees to actually obtain subsidized exchange coverage

and still maintain their plan for higher-income workers.

We use Census Bureau data to model the impact of the healthcare law on the sources of insurance coverage among private-sector

workers. Assuming the three main insurance provisions of the ACA

take effect and the administration’s definition of ‘‘affordable’’ sticks
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and people act as the government assumes they will, we find that

employer-sponsored coverage will rise slightly from its current levels to about 75 percent and, in response to the ACA mandates, by

another 11 percent via the previously uninsured workers taking advantage of the exchanges.

However, when we alter our model by allowing employees and

employers to work together to take advantage of exchange subsidies, the picture changes. Employer-sponsored coverage falls to 70

percent; the number of employees insured in the exchanges rises by

about 4 million to 16 percent. This all occurs despite our very optimistic assumption that all large firms actually offer coverage and

no small firms drop coverage.

But if we allow the broader interpretation in the employee mandate—that is, where employers must make coverage affordable to

workers and their families—the changes are even more dramatic.

Employer-sponsored coverage drops to 63 percent, with nearly onequarter of all workers, over 14.7 million or 23 percent, receiving

their insurance through the exchanges.

We offer no unique insight on whether the administration’s proposed single coverage rule will hold, but we do know that this unpopular definition and its possible revisions hold significant implications for everyone impacted by the law’s provisions. Either millions of dependents of employees with affordable single coverage

will be stuck without an offer of affordable coverage—we estimate

between 7 million and 16 million—or taxpayers will be stuck with

as much as $50 billion more per year in gross subsidy costs than

originally projected.

This is a Sophie’s choice embedded in the ACA as a consequence

of the pile of open-ended taxpayer money it leaves on the table in

the form of exchange subsidies intended for the minority 20 percent

of workers without affordable coverage that will inevitably tempt

a significant number of the vast majority of employees with affordable coverage to gain access to it.

Thank you for the opportunity to speak before you today.

[The prepared statement of Mr. Burkhauser follows:]
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Mr. GOWDY. Thank you, Dr. Burkhauser.

Dr. Collins.

STATEMENT OF SARA R. COLLINS, PH.D.

Ms. COLLINS. Thank you, Mr. Chairman, for this invitation to

testify on the premium tax credits that are available to families

under the Affordable Care Act.

Recent trends in the numbers of people who are uninsured or

underinsured demonstrate how critical these premium tax credits

and the law’s related insurance affordability programs and reforms

will be to ensure both the health and financial security of working

families.

The number of people without health insurance climbed to nearly

50 million people in 2010, over 13 million more than were uninsured a decade ago. Among people who do have health insurance,

The Commonwealth Fund estimates that, in 2010, 29 million working-age adults had such high out-of-pocket costs relative to their income that they were underinsured. This is an increase from 16 million in 2003.

Both these trends have had serious financial and health consequences for families. An estimated 75 million adults under age

65, both with and without health insurance, reported a time in

2010 when they did not get needed health care because of the cost.

And 73 million adults said that they had difficulty paying medical

bills or were paying off debt over time.

With its array of affordable health insurance programs and new

consumer protections, the Affordable Care Act will substantially reverse these trends, ensuring that all Americans will have access to

affordable and comprehensive health insurance coverage.

Indeed, the law’s new provision that allows children up to age 26

to stay on or join their parents’ insurance policies reversed a decade-long increase in uninsured rates of young adults, providing coverage to nearly 800,000 19 to 25-year-olds in the past year.

The law’s most significant coverage provisions will begin in 2014

with a substantial expansion in Medicaid eligibility for adults earning up to 133 percent of poverty, or about $29,700 for a family of

four, as well as subsidized coverage available—private coverage

available through new State insurance exchanges for families earning up to 400 percent of poverty, or $89,400 for a family of four.

The State insurance exchanges will create a new marketplace

that will serve as a central portal through which people can get

coverage if they do not have an affordable employer-based health

plan. People will fill out one application for all insurance affordability programs, including Medicaid, the Children’s Health Insurance Program, the Basic Health Program, or premium tax credits

for private plans, which are known as qualified health plans, sold

in the exchanges.

Taxpayers eligible for premium credits will make contributions to

their premiums as a share of their income, from 2 percent to 9.5

percent. Those eligible for tax credits will have a choice of private

plans that will offer an essential benefit package. Insurers will

offer these plans at four levels of cost-sharing: bronze plans, covering an average of 60 percent of someone’s annual medical costs;
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silver, 70 percent of costs; gold, 80 percent of costs; and platinum,

90 percent of costs.

The average cost covered by the silver plan will be increased for

low- and moderate-income families. As an example, a family of four

with an income of $35,000 would make a premium contribution of

4 percent of their income, or $1,400. If the policyholder’s age is 40,

this family’s premium for a benchmark plan, which would be the

second-lowest-cost silver plan offered in the family’s region of the

country, would be about $12,130 in 2014. Their tax credit would

thus be equal to the benchmark premium minus their required contribution, or $10,700.

About 90 percent of legal residents who are currently uninsured

in the United States right now would gain premium tax credits or

Medicaid. In addition, if the reforms were implemented today,

there would be 21 million fewer underinsured adults in the United

States.

The Congressional Budget Office estimates that the Affordable Care Act will reduce the Federal deficit by $124 billion over the period 2012 to 2021. Cutler, Davis, and Stremikis estimate even

greater savings than the Congressional Budget Office from the

law’s health-care delivery system reforms. They project an additional $406 billion in savings by 2019 and, consequently, a much

greater net decrease in the deficit of about $400 billion.

In 2009, as health reform was being debated, total national health expenditures were projected to reach $4.9 trillion in 2020.

Expenditures are now projected to reach $4.6 trillion in 2020, 5

percent below original estimates. If scorekeepers were to redo the

original estimates based on these new projections, the deficit reduction generated by health reform would be even greater.

The trends in uninsured and underinsured Americans over the

last decade really do underscore the need for Federal and State policymakers to continue their work implementing the Affordable

Care Act. When the law is fully implemented, U.S. families will

have new affordable and comprehensive insurance options, both in

good economic times and in bad.

In addition, while much of the recent debate has focused on lowering the costs of Medicare and reducing the Federal deficit, the

same forces that are driving up public program costs are also increasing costs for working families. With this extensive set of delivery system and insurance market reforms, the Affordable Care Act

focuses on improving quality and affordability throughout the entire health-care system.

For the 50 million adults and children who were without coverage in 2010 and the additional 29 million adults who are underinsured, the 2014 reforms cannot come soon enough.

Thank you.

[The prepared statement of Ms. Collins follows:]
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Mr. GOWDY. Thank you, Dr. Collins.

Dr. Holtz-Eakin, recently I was privileged to be on the committee

where you spoke or testified more globally about the state of our

fiscal health as a Nation. Can you go back into that with specific

reference to health-care costs and how the cost of health care will

impact our fiscal state in the near and long-term future?

Mr. HOLTZ-EAKIN. Well, certainly, if you go back to the beginning

of this year and look, for example, at the administration’s budget,

it showed we are running a deficit this year of about $1.3 trillion.

And that is, in and of itself, troubling. And our current gross debt

relative to GDP is over 90 percent. And that is the region in which

the evidence suggests you pay a growth penalty of 1 percent per

year, roughly, and have a much higher probability of encountering

international sovereign debt problems. So, that is where we are.

If you roll the clock forward 10 years in that budget, assume that

we are not fighting any overseas military operations, the financial

crisis is in distant memory, we are back to full employment, we are

growing nicely, the deficit is still $1.2 trillion in that budget projection, and $900 billion of it is interest on previous borrowings.

We are spiraling out of control. This is true despite the fact that

revenues are up to 19.5 percent of GDP, above the historic norm.

The administration raises all the taxes they want in that budget.

And that tells you that we have a spending problem. And if you

look inside that spending problem, it is driven by Medicare, Medicaid, and, soon, the Affordable Care Act. And that has to be the

focus in controlling our future debt increase and the threats that

it faces the United States with.

Nothing that has happened since that budget really changes that

picture. The Budget Control Act in August puts discretionary

spending caps on. They will be as effective as future Congresses

are effective with living with them. We haven’t touched any of the

mandatory spending programs, which are at the heart of that problem. And so I view it as inescapable that this committee and the

Congress as a whole will be back to look at that whole array of

Federal health programs again and again.

Mr. GOWDY. Dr. Holtz-Eakin, I know you are going to be reluctant to do what I ask you to do because it will make you assume

that you are a Member of Congress and our public approval rating

is such——

Mr. HOLTZ-EAKIN. I must respectfully decline, sir.

Mr. GOWDY [continuing]. That you will probably not accept my

invitation. But what should the tax treatment be for health care?

How would you reform it if you were king for a day?

Mr. HOLTZ-EAKIN. Well, I have been on record for years as removing the exclusion from tax of employer-sponsored health insurance. It is a perverse subsidy that, number one, diminishes the

awareness of consumers of health insurance to its real cost. Number two, the subsidy is bigger for higher-income individuals, so it

is at odds with the conventional American notions of equity. And

I would eliminate that.

And instead, to the extent that we wanted to support the purchase of private health insurance in the United States, I would provide low-income support in a fixed credit that didn’t vary by income

and which didn’t have this open-ended subsidy aspect.
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Mr. GOWDY. Ms. Furchtgott-Roth, I was struck, as I am sure all

of us up here were unless they had heard it before, about the systemic penalty for marriage that is, I am sure, inadvertently, unwittingly built into this law, but, nonetheless, it is there.

Were there other examples you could give? I was just struck by

June and Jack, I believe it was, that their decision to get married

is going to have a deleterious impact on their bottom line. That fact

alone is going to cause their health-care costs to go up.

Are there other examples that you would have given had you had

more than 5 minutes, or were those the most probative?

Mr. FURCHTGOTT-ROTH. Those are the most salient examples.

But what I was going to say is that it also gives an incentive, if

the couple gets married, for one of them not to work. And usually

it is the woman who decides not to go back into the labor market.

About 80 percent of women have children at some point in their

lives; they tend to go in and out of the labor market. And if there

is this big penalty on their earnings—in other words, if the family

says, ‘‘Okay, June, you go back to work, but then we are going to

lose government help with our health insurance,’’ then the big incentive, on top of the extra tax penalty, is for the woman to drop

out of the labor force and not work.

And with the higher taxes in Europe, we have seen that there

are lower levels of female labor force participation. Here in the

United States, we have some of the highest levels of female labor

force participation. Women have invested in their education, they

plan to have many years with productive jobs, and this marriage

penalty would basically throw them for a loop.

Mr. GOWDY. I want to follow the same admonitions I gave everyone else, and my time is up. So I would recognize the distinguished

gentleman from Illinois, the ranking member of the subcommittee,

Mr. Davis.

Mr. DAVIS. Thank you very much Mr. Chairman. You know, I always say, you can’t lead where you don’t go. And so I appreciate

very much your approach to the timing.

Dr. Holtz-Eakin, I was somewhat fascinated by your testimony.

And I was wondering, as I listened to you, if people are living

longer, using emergency rooms less frequent, using tertiary care,

which is very expensive, because the state of their health has gotten to the point where they need this kind of care, I was trying to

figure out how those factors would be detrimental to our economy

and how those would be negatives as opposed to positives.

Could you respond to that?

Mr. HOLTZ-EAKIN. Well, as in any policy issue, there are benefits

and costs to the legislation and in the health-care issue in general.

It is certainly the case that we want a high-quality health-care

system and Americans living in better health and longer. No one

disagreed with that at the outset of the debate. I think the issue

is, does this legislation meet the objectives we want in terms of delivery system reforms? My judgment would be, no, that it will not,

in fact, solve some of the problems we see in the delivery of American medicine that leads us to have a very low-value system. We

spend a lot of money with very substandard results. We can have

a longer discussion about why I think that.
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And then the second question is the financing. And in the process

of financing that consumption of health care, do we do it in an efficient fashion that allows us to meet other objectives for economic

growth and other policy objectives? And, again, my judgment is,

this approach, which essentially wrote, you know, a trillion dollars’

worth of checks and raised $500 billion of taxes and pretended to

cut $500 billion out of Medicare isn’t going to meet that objective.

And so I think there was, at the beginning of 2009, a shared understanding of the need for health-care reform, a shared understanding that the objectives should be higher-quality care at lower

cost and an efficient insurance system. I just don’t think we met

those objectives.

Mr. DAVIS. Thank you.

Ms. Furchtgott-Roth, have you ever known anyone to not get

married because they were concerned about the cost of health care

or how it would impact them and, as a result, they would decide,

‘‘Well, you know, I am not going to get married because this is

going to have a negative impact on my being?’’ Have you ever

known anyone to——

Mr. FURCHTGOTT-ROTH. Well, the provisions—the answer to your

question is no. But the provisions of this health-care act have not

yet kicked in. Now, say two young people who—first of all, they

don’t have the mandate to have health insurance, they are people

who are uninsured for short periods of time between jobs, you can

buy a low-cost health insurance program right now with a high deductible and a health savings account and catastrophic health care.

So this hasn’t arisen right now, but it will if the government

mandates expensive health insurance, requires people to have it,

and gives people subsidies depending on where they are in the poverty line. Because the poverty line for one person is $10,890, but

for two people it is $14,710.

Mr. DAVIS. Well, let me ask you, are the marriage rates going up

or down?

Mr. FURCHTGOTT-ROTH. I would have to check those data and get

back to you. And I would be happy to do that.

Mr. DAVIS. Let me ask you, Dr. Collins, why do you think overwhelmingly people feel a need to reform our approach to health

care and what we have been doing?

Ms. COLLINS. I think the major motivation for the Affordable

Care Act was to cover the 50 million people who are without coverage. That number has been growing over time. And we also know

that rising health-care costs are making it increasingly difficult for

employers to offer coverage, so more employers have dropped coverage, particularly small employers have dropped coverage over the

last few years.

In this recession, we know that high employment rates are related to people losing their coverage through their jobs. About 57

percent of people who lost a job with health benefits became uninsured.

And the other major piece of this is also addressing the underlying cost growth in the health-care system. Half of the law is really directed at significant delivery system reforms that will achieve

the kinds of cost savings that Mr. Holtz-Eakin mentioned that are

necessary to bring our deficit under control. And, in fact, if you see
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the Congressional Budget Office estimates, it, in fact, over 10

years, does reduce our deficit, in large part because of those reforms.

Mr. DAVIS. Thank you very much, Mr. Chairman.

Mr. GOWDY. I thank the gentleman from Illinois.

The chair would now recognize the gentleman from Tennessee,

Dr. DesJarlais.

Mr. DESJARLAIS. Thank you, Mr. Chairman.

And thank you, panel, for your testimony today.

I guess, after listening to the testimony here and prior to coming

to Congress in January being a practicing primary-care physician

for 20 years, I will maybe start with Dr. Collins and say, what

makes the Affordable Health Care Act affordable?

Ms. COLLINS. There are several insurance coverage expansions

that will make coverage far more affordable for people than is the

case today.

Most people who try to buy on their own, as was mentioned earlier, don’t actually end up buying a health plan through the individual market because they are underwritten on the basis of their

health and they actually face the full premium, their health-care

conditions can be excluded from their coverage. So the new Medicaid expansion will dramatically increase coverage for people, as

well as the premium tax credits increasing coverage for people up

to 400 percent of the poverty line.

Jonathan Gruber did an analysis that he published in May that

looked at whether health care will become more affordable for people. And the majority of people in the United States would find premiums and their out-of-pocket costs affordable under the Affordable

Care Act.

Mr. DESJARLAIS. Who is going to eat the cost? I mean, it isn’t

free to provide health care. You said 50 million uninsured, 70 million uninsured. I think the President talked about 30 million uninsured when this came into effect, so I guess it has grown by 20 million in the last year and a half.

Who is going to pay for that? Where is that money going to come

from? Who are they going to take it from?

Ms. COLLINS. Well, there are several offsetting provisions in the

law that do pay for the expansion completely and, in fact, save

money over time.

Mr. DESJARLAIS. So the taxpayer then? I mean, the government

doesn’t have any revenue other than tax. So the taxpayers are

going to pay for it?

Ms. COLLINS. The provisions in the law require changes to the

delivery system, changes to Medicare Advantage plans, bringing

them more in line with regular Medicare——

Mr. DESJARLAIS. Do you think health care is going to improve,

or is the quality of care going to go down?

Ms. COLLINS. The quality of care, under the provisions of the

law, are absolutely expected—is absolutely expected to increase.

The delivery system——

Mr. DESJARLAIS. How so?

Ms. COLLINS. The delivery system reforms are actually directed

not only toward saving money but also improving the way in which

people receive their care, making the system more patient-centered,
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focusing on coordinating people’s care over their lifetime and over

a disease experience. So, bringing much more rationality to the system than is the case today.

Mr. DESJARLAIS. Uh-huh.

Dr. Holtz-Eakin, I think you said Medicare is maybe one of the

worst examples of the management of an entitlement program.

Mr. HOLTZ-EAKIN. I certainly think it is a clear fiscal problem;

we know that. I mean, right now the gap between premiums and

payroll taxes coming in and spending going out is $280 billion a

year. It is going to get worse, not better.

It also promotes a lot of bad medicine. We have a Part A for hospitals, a Part B for doctors, a Part C for insurance companies, a

Part D for pharmaceuticals. It is not integrated in any way. It is

not coordinated around a beneficiary. You know, hospitals are paid

a fixed amount for a diagnosis; doctors are paid for volume. Doctors

practice in hospitals. The conflicting incentives are enormous.

So I think reforming Medicare should have been the top priority,

not something that was left behind.

Mr. DESJARLAIS. Yeah. And right now, as Medicare patients will

tell you, it is getting harder and harder to find primary-care doctors. And so I guess you are disagreeing with Dr. Collins where she

says, we can add more and more people to Medicaid and yet we are

going to maintain a quality of care and somehow we are going to

reduce costs.

Mr. HOLTZ-EAKIN. The Medicaid expansion is the most problematic, in my view. Medicaid beneficiaries are in ERs for normal care

at far higher rates than are the uninsured. And they have great

difficulty finding primary-care physicians. And to expand that program, rather than fix it, I think was an enormous mistake.

And I just want to say, on the affordability issue, there is a fundamental problem with a country that spends nearly 20 percent of

its national income on health care and defines care to be affordable

when it is under 10 percent. That can’t add up.

Mr. DESJARLAIS. And, you know, I don’t think people in general

want to look at it like a Better Homes and Gardens, good, better,

best health care. I mean, everybody wants the best, but the best

costs money. And we are saying, this is an affordable health care

act, but yet we are trying to increase the number of participants

and we are trying to decrease the cost. Someone is going to have

to pay for it. Ultimately it is going to be taxpayers who will bear

the burden.

You know, physicians, we have an SGR problem right now for

physicians, where they are trying to cut another 29 percent from

physician pay. As a primary-care physician, I don’t set my own

fees. That was set by Medicare over a decade ago. We have not had

an increase in 10 years, and they are proposing a 10-year freeze.

I don’t know what the incentive is going to be to other physicians

to go into medicine to help expand this improved quality of care

that Dr. Collins spoke of.

But my time has expired, and I thank you for your input.

Mr. GOWDY. I thank the gentleman from Tennessee.

The chair would now recognize the gentleman from Maryland,

the ranking member of the full committee, Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.
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Dr. Collins, it is not just a question of being affordable; it is also

a question of being available, is that right? I mean, this is what

the affordable care law is trying to make health care available, because there are so many Americans that don’t—even if they could

afford it, it is not available. I have people in my family who could

not even get an insurance policy if they were willing to spend

$50,000 a year because of pre-existing conditions. And we talk

about women and we look at the—I think there was some research

done that showed women having far more pre-existing conditions

than men.

And then we also found that if a woman has a woman-owned

firm, she is going to spend a lot more money on women in that firm

than, say, if a firm were, say, 50/50 male/female, is that right?

Ms. COLLINS. That is absolutely correct. And right now, if a

woman goes to the individual insurance market to buy a health

plan, as was mentioned, if they lose their job or if they are between

jobs, those plans generally do not come with maternity benefits. So

insurers will not cover maternity because it is a cost to them. So,

under the Affordable Care Act, insurance plans will be required to

offer maternity coverage.

For small businesses, the law is very much geared toward making it much easier for small businesses to offer coverage. The requirement on the penalties that was mentioned earlier only applies

to companies with more than 50 employees. Employers can come

into the exchanges, have a much broader array of health plans to

offer their employees at likely lower cost.

So these are very much geared toward both improving women

who are buying individual coverage on their own and women who

own small businesses and are trying to do the best thing for their

employees.

Mr. CUMMINGS. In my district, in the real world, about 40 miles

away from here, we often see people very sick ending up in the

emergency rooms, Mr. Holtz-Eakin. And I think one of the aims of

the Affordable Care Act was to try to zero in on wellness as opposed to treating people after they are sick. We need a new normal

in this country. See, some people think that the only time you go

to a doctor is when you are sick—or when you should go to a doctor

is when you are sick. Sometimes you need to go so that you can

stay well.

And I think one of the major aims of all of this is to try to keep

people well. Is that right, Dr. Collins?

Ms. COLLINS. Absolutely. And you see that in the provisions of

the law, one of which went into effect last year. Insurers have to

cover preventive care with no cost-sharing. Very little increase in

premiums as a result of this provision, but will affect millions of

people who get coverage right now. We want people to go to the

hospital when they are sick or we want people to get primary care

before they get sick, so the law is absolutely directed toward encouraging that.

It is very, very troubling that, over the recession, people who

have lost their jobs have gone without insurance coverage. Seventy

percent, more than 70 percent, have said they didn’t get needed

health care because of cost, including filling a prescription because
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of cost. So we really want to change those incentives in the system,

making it much more available to people.

Mr. CUMMINGS. Thank you.

Now, Dr. Holtz-Eakin, your written testimony characterizes

CBO’s conclusion that the PPACA will result in budget savings as,

‘‘misleading’’—that is page 5—and, ‘‘dubious,’’ page 4.

You were once the director of the CBO. You oversaw scoring on

many bills. Is it your testimony today that CBO did something

wrong or violated any of the principles of budgetary scoring in coming to this conclusion, that the PPACA would generate a budget

savings? Is that what you are saying?

Mr. HOLTZ-EAKIN. Absolutely not.

Mr. CUMMINGS. Okay. Well, isn’t it true that you would have

likely concluded a budgetary savings given the same facts and

same bill language had you been CBO director when the PPACA

was scored?

Mr. HOLTZ-EAKIN. Had Congress directed me the way they directed the currency bill, I would have received the same bottom

line.

Mr. CUMMINGS. Dr. Collins, whether we like it or not, we have

to live by the rules. And the rules of budgetary scoring led the CBO

to conclude that PPACA would generate budget savings.

Have you heard anything today to cast doubt on the validity of

the CBO’s conclusion that PPACA would result in significant budgetary savings?

Ms. COLLINS. I have not. And, if anything, Congressional Budget

Office is very conservative in their estimates. Other estimates have

actually shown much greater cost-savings as a result of delivery

system reforms that we talked about earlier. David Cutler and colleagues have found an additional $400 billion in savings as a result

of the delivery system reforms. So, if anything, the Congressional

Budget Office estimates are conservative.

Mr. CUMMINGS. I see my time has expired. Thank you, Mr.

Chairman.

Mr. GOWDY. I thank the gentleman from Maryland.

The chair would now recognize the distinguished gentleman from

Arizona, the vice chairman of the subcommittee, Dr. Gosar.

Mr. GOSAR. Dr. Holtz-Eakin, what is the current state of Medicaid, the Medicaid program? And can it handle an additional 20

million new individuals coming on to these programs?

Mr. HOLTZ-EAKIN. At the moment, you could think of Medicaid

as essentially all deficit-financed at the Federal level, and the

States are struggling to meet their current obligations in Medicaid,

given their budgets. And to expand it I think the Governors have

said quite clearly is something they do not want to have to do.

Mr. GOSAR. So, really, when we are talking about this healthcare system, the biggest problem was the Federal Government.

Now, I mean, I was a practicing dentist out in a very poor area of

this country—actually, one of the poorest districts in the country.

And to the ranking member, I do know people that will get a divorce to stay together to make the rules work. I do know that. And

it is all too often. I mean, we are rewarding a bad behavior. And

I want to address that in a minute.
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But part of the problem is the Federal Government. Because I

see my colleague over here, who is—all fees and all insurance rates

were based off of insurance reimbursements by the Federal Government. They were part of the problem.

And I keep bringing up, the group of people that have been on

government health care the longest are the ones that are rebelling

the most. It happens to be our Native American friends. They can’t

stand it; they want off. Because what we have done is we have institutionalized, away from what Dr. Collins said is—and she made

reference that when you are sick you go to the emergency room.

Because what we did is we didn’t reimburse the primary-care physicians. We distorted these numbers.

Dr. Burkhauser, I think you hit the nail on the head, that this

plan is based on unplausible applications. It doesn’t fit the normal

dynamics of the way life on Main Street America actually works.

Commonsense applications were thrown at the wall. We have a lot

of cost-shifting going on that Dr. Holtz-Eakin was talking about.

Do you believe that the government takeover of health care will

result in millions of additional workers who don’t prefer ESI and

will ask their employer to either drop their ESI or make their personal contributions unaffordable?

Mr. BURKHAUSER. Yes, that is exactly what will happen. What

we have is an opportunity for workers who currently have ESI to

get much cheaper coverage on the exchanges. So this bill really is

going to dramatically change the way health-care insurance is provided in the United States.

You are going to get some very weird outcomes. Because the affordability is based on single coverage, people who are employed by

firms who were providing them with affordable single coverage are

going to beg their employers to increase the cost of their single coverage so that they can get their families onto the exchange. Because, right now, if you have affordable single coverage but

unaffordable family coverage, you are in a no man’s land. You neither have affordable coverage from your ESI, and you are barred

from the exchanges.

So this is an effort by a bunch of economists, like myself, in a

little room trying to figure out the way the world works and trying

to square the circle. They are trying to provide affordable care to

people who don’t have ESI coverage, which is about 20 percent of

workers, and not affect everybody else. That can’t be done. And we

are going to see dramatic changes in the way health insurance is

provided because of the perverse rules that we have in the system.

Mr. GOSAR. And that would have something to do with the recent

decision—we see these dynamics playing out with the Wal-Mart decision, wouldn’t you say that?

Mr. BURKHAUSER. Yes, I think the Wal-Mart decision is the beginning of a re-evaluation by all large employers on exactly how

they are going to respond to the new incentives that are set into

the ACA. So Wal-Mart now realizes that there is no reason to provide affordable health care to their part-time workers. Part-time

workers can go and get large subsidies on the exchanges.

They will probably change their system for all workers and actually increase the percentage of the Wal-Mart health care that is

provided by their workers so that those workers will also, there-
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fore, not have affordable coverage and can go to the exchange,

while at the same time allowing their higher-income workers to

maintain Wal-Mart health-care insurance.

Mr. GOSAR. Thank you.

Real quick, Dr. Furchtgott-Roth, there is a ripple effect in broken

homes and single families, the dysfunctional family. And what we

are trying to create is the benefit of a broken family. There is higher costs associated with dysfunctional families.

Do you think the Tax Code should punish marriage, be neutral

toward marriage, or encourage marriage?

Ms. FURCHTGOTT-ROTH. I think the Tax Code should encourage

marriage. And the marriage rate over the past decade has actually

gone down, from 8.2 per thousand in 2000 to 6.8 per thousand in

2009, the latest data available.

So, with marriage going down, according to the Centers for Disease Control, it is even more important to support and encourage

marriage. That makes healthier families, makes smarter children,

because it is easier for two parents to manage children than one

parent to manage children.

Mr. GOSAR. Thank you.

My time is you up.

Mr. GOWDY. I thank the gentleman from Arizona.

The temptation for a second round of questioning is enormous,

given the talents and acumen of our panelists. However, we want

to be good stewards of your time, and votes are imminent, and we

are not going to make you wait on us to vote.

So, with that, on behalf of all of us, thank you for your

collegiality toward one another, your perspective, your expertise.

And, with that, the committee is adjourned.

[Whereupon, at 10:34 a.m., the subcommittee was adjourned.]

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