U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

66–714 PDF 2011

THE RECENT HEALTH CARE LAW: CONSEQUENCES 

FOR INDIANA FAMILIES AND WORKERS 

FIELD HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH, 

EMPLOYMENT, LABOR AND PENSIONS 

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD IN EVANSVILLE, IN, JUNE 7, 2011 

Serial No. 112–27 

Printed for the use of the Committee on Education and the Workforce 

( 

Available via the World Wide Web: 

www.gpo.gov/fdsys/browse/committee.action?chamber=house&committee=education 

or 

Committee address: http://edworkforce.house.gov 
(II) 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN KLINE, Minnesota, Chairman 

Thomas E. Petri, Wisconsin 

Howard P. ‘‘Buck’’ McKeon, California 

Judy Biggert, Illinois 

Todd Russell Platts, Pennsylvania 

Joe Wilson, South Carolina 

Virginia Foxx, North Carolina 

Bob Goodlatte, Virginia 

Duncan Hunter, California 

David P. Roe, Tennessee 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Scott DesJarlais, Tennessee 

Richard L. Hanna, New York 

Todd Rokita, Indiana 

Larry Bucshon, Indiana 

Trey Gowdy, South Carolina 

Lou Barletta, Pennsylvania 

Kristi L. Noem, South Dakota 

Martha Roby, Alabama 

Joseph J. Heck, Nevada 

Dennis A. Ross, Florida 

Mike Kelly, Pennsylvania 

George Miller, California, 

Senior Democratic Member 

Dale E. Kildee, Michigan 

Donald M. Payne, New Jersey 

Robert E. Andrews, New Jersey 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Lynn C. Woolsey, California 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

Dennis J. Kucinich, Ohio 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Susan A. Davis, California 

Rau ́l M. Grijalva, Arizona 

Timothy H. Bishop, New York 

David Loebsack, Iowa 

Mazie K. Hirono, Hawaii 

Barrett Karr, Staff Director 

Jody Calemine, Minority Staff Director 

SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS 

DAVID P. ROE, Tennessee, Chairman 

Joe Wilson, South Carolina 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Scott DesJarlais, Tennessee 

Richard L. Hanna, New York 

Todd Rokita, Indiana 

Larry Bucshon, Indiana 

Lou Barletta, Pennsylvania 

Kristi L. Noem, South Dakota 

Martha Roby, Alabama 

Joseph J. Heck, Nevada 

Dennis A. Ross, Florida 

Robert E. Andrews, New Jersey 

Ranking Minority Member 

Dennis J. Kucinich, Ohio 

David Loebsack, Iowa 

Dale E. Kildee, Michigan 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Robert C. ‘‘Bobby’’ Scott, Virginia 
(III) 

C O N T E N T S 

Page 

Hearing held on June 7, 2011 ................................................................................. 1 

Statement of Members: 

Andrews, Hon. Robert E., ranking minority member, Subcommittee on 

Health, Employment, Labor and Pensions, prepared statement of .......... 6 

Bucshon, Hon. Larry, a Representative in Congress from the State of 

Indiana ........................................................................................................... 5 

Roe, Hon. David P., Chairman, Subcommittee on Health, Employment, 

Labor and Pensions ...................................................................................... 1 

Prepared statement of ............................................................................... 4 

Statement of Witnesses: 

Carlson, David, M.D., Evansville Surgical Associates ................................... 16 

Prepared statement of ............................................................................... 17 

Crosson, Robyn S., chief deputy commissioner, company compliance, Indiana Department of Insurance ...................................................................... 8 

Prepared statement of ............................................................................... 11 

Graber, Glen S., Graber Post Buildings ......................................................... 41 

Prepared statement of ............................................................................... 42 

Hoy, Rev. George Philip, ordained minister, United Church of Christ ........ 34 

Prepared statement of ............................................................................... 36 

Johnson, Denis, vice president, operations, Boston Scientific ...................... 37 

Prepared statement of ............................................................................... 40 

Lang, Sherry, Womack Restaurants ............................................................... 21 

Prepared statement of ............................................................................... 23 

Messmer, Hon. Mark, member, Indiana House of Representatives; vice 

president, Messmer Mechanical, Inc. .......................................................... 31 

Prepared statement of ............................................................................... 33 

Wilson, Elizabeth, Franklin, IN ...................................................................... 18 

Prepared statement of ............................................................................... 20 

Additional Submissions: 

Mr. Andrews: 

Blankenship, Elmer, president, Indiana Alliance for Retired Americans, prepared statement of .................................................................. 51 

Ms. Crosson: 

Letter, dated May 13, 2011, to Hon. Kathleen Sebelius, Secretary, 

U.S. Department of Health and Human Services, from Stephen 

W. Robertson, commissioner, Indiana Department of Insurance ...... 53 

Letter, dated April 15, 2011, to Verlon Johnson, Associate Regional 

Administrator, Division of Medicaid and Children’s Health, from 

Michael A. Gargano, secretary, Indiana Family & Social Services 

Administration ....................................................................................... 67 

Letter, dated January 14, 2011, to Secretary Sebelius, from Hon. 

Mitchell E. Daniels, Jr., Governor, State of Indiana .......................... 68 

State of Indiana Executive Order 11-01 .................................................. 70 

Letter, dated April 30, 2010, to Secretary Sebelius, from Gov. Daniels ........................................................................................................... 72 

(1) 

THE RECENT HEALTH CARE LAW: 

CONSEQUENCES FOR INDIANA 

FAMILIES AND WORKERS 

Tuesday, June 7, 2011 

U.S. House of Representatives 

Subcommittee on Health, Employment, Labor and Pensions 

Committee on Education and the Workforce 

Washington, DC 

The subcommittee met, pursuant to call, at 9:00 a.m., in room 

301, Vanderburgh County Civic Center, 1 Martin Luther King, Jr. 

Boulevard, Evansville, Indiana, Hon. Phil Roe [chairman of the 

subcommittee] presiding. 

Present: Representatives Roe and Bucshon. 

Staff Present: Casey Buboltz, Coalitions and Member Services 

Coordinator; Benjamin Hoog, Legislative Assistant; Brian Newell, 

Deputy Communications Director; Ken Serafin, Workforce Policy 

Counsel; and Megan O’Reilly, Minority General Counsel. 

Chairman ROE [presiding]. The committee rule 7(c), all committee members will be permitted to submit written statements to 

be included in the permanent hearing record. 

Without objection, the hearing record will remain open for 14 

days to allow statements, questions for the record, and other extraneous material referenced during the hearing to be submitted in 

the official hearing record. 

And good morning everyone and thank you all for being here. 

And I want to thank our witnesses for being with us today. We recognize that you all have busy schedules and we appreciate the opportunity to hear your thoughts and experiences on the very important issues of health care. 

And second, I would like to thank all you all in the audience in 

Evansville for your hospitality, for hosting the first field hearing of 

the Subcommittee on Health, Employment, Labor, and Pensions. 

And before we go on, I am just going to tell you a little bit about 

who I am. My name is Phil Roe. I am a physician. I practiced obgyn in Johnson City, Tennessee for 31 years and 2 years ago was 

elected to the Congress. And I found out that when you deliver 

your own voters, it worked out pretty well for me, having delivered 

almost 5,000 babies. [Laughter.] 

So it worked out pretty well. And every time a junior high 

class—I am really nice to them because that is another voter that 

may be coming along. 
2 

But I wanted to tell you a little bit about myself. I grew up really 

not that far from here near Clarksville, Tennessee, about a 2-hour 

drive, and I am very familiar with your Evansville Purple Aces who 

routinely beat my Austin Peay Governors in basketball, so I am 

very familiar with this area. 

When I looked and went to Washington, D.C., I went there. I am 

a veteran and I was mayor of our local community and still practiced medicine. And I saw in my patients that health care was getting more and more and more expensive. It was too expensive to 

come to the doctor, and it was too expensive to go to the hospital. 

And secondly, we had a group of people in our community, at 

least where I live in rural east Tennessee in Appalachia where I 

live, that didn’t have access to affordable health coverage. What I 

meant by that is let’s say you were a carpenter and you didn’t have 

full-time employment, but you worked and made $20,000, $25,000, 

$30,000 in a year, and maybe your wife worked at a local diner. 

And together, you got along okay, but you couldn’t afford $1,000 a 

month for health insurance coverage. So we had that group of people who didn’t have coverage. 

And thirdly, we have a liability crisis in this country. When you 

have a liability crisis which is causing costs to go up with unnecessary testing and so on, that is an issue. The health care plan ahead 

of us today that we are going to talk about today I think did nothing to help control the costs, and it does nothing for liability. It 

does expand coverage through Medicaid and some other ways to do 

it which we will talk about, but it doesn’t take care of the major 

problem which is it costs too much money. 

As our first field hearing, there are few topics more relevant to 

our economy and challenges facing our families and small businesses than health care. Each year the cost of care goes up, placing 

even greater strains on budgets already stretched thin by a very 

difficult economy. Some patients refuse care simply because they 

can’t afford it. Employers often choose between ending coverage or 

hiring new workers, and the burden imposed on taxpayers becomes 

even greater as Government programs expand and health care 

services grow more expensive and more unsustainable. 

We know there are a number of factors forcing health care costs 

to rise such as an aging population, more advanced treatments, 

and greater use of health care services, coupled with fewer providers. 

However, as is often the case, too much intervention by the Federal Government can make an already problematic situation worse. 

Instead of allowing choice and competition to encourage innovation 

and lower costs, a Washington knows best mentality can often discourage processes and lead to a one-size-fits-all approach that simply cannot work for a country as vast and diverse as ours. 

That is why I, along with a strong majority of the American people, reject the Government takeover of health care that was imposed on the Nation last year. Any effort to reduce costs for America’s workers and job creators was abandoned along the road of reform by Democratic leaders who favored a massive expansion of the 

Federal Government’s role in health care. 

For the first time in our Nation’s history, private individuals will 

be required to buy health care or pay a penalty, the so-called man-
3 

date. And the case will be heard tomorrow in the Court of Appeals 

in Atlanta, Georgia, the Eleventh Court of Appeals, on the individual mandate. It has been ruled on. And 26 States are enjoined 

in this lawsuit. 

In a few short years, businesses with more than 50 employees 

will be mandated by law to provide Government-approved health 

care for workers or pay a fine, regardless of the difficulties these 

businesses may be facing just to keep their doors open. Proponents 

of the law say it includes relief for small businesses. Well, unfortunately, that relief is not only limited and temporary, but according 

to one analysis, it actually penalizes certain businesses for raising 

wages or hiring new workers. Can anyone seriously argue this is 

a good thing for an economy that has been plagued with high unemployment for nearly 3 years? Will this help the more than 13 

million unemployed Americans who are searching for work? 

A number of the law’s provisions will not take effect until 2014, 

but already we are hearing from business leaders troubled by the 

uncertainty the law has created. This is unacceptable, especially at 

a time when certainty is needed to restore confidence and foster 

economic growth. 

A 2,700-page health care law, which I have read in its entirety— 

and I can probably say not that many in Congress have. I don’t 

know what it says about my intelligence, but I read the entire 

2,700 pages. And it has led to more than 6,600 pages of new Federal rules and regulations, and that is just what the administration 

has accomplished in the first 14 months since the bill was signed 

into law. That is a difficult maze of bureaucratic red tape for businesses to navigate at a time when they should be focused on expanding their operations and creating new jobs. 

As a doctor and a former mayor and a lawmaker, addressing 

these challenges remains at the forefront of my efforts serving the 

people of the 1st District of Tennessee, and as the chairman of the 

House Subcommittee on Health, Employment, Labor, and Pensions, 

it is clear the status quo is failing our families, workers, and job 

creators. 

We appreciate the work of our witnesses who are helping us to 

chart a better course, one that will harness the creativity of the 

American people to lower the costs of health care for the Nation. 

I want to note that another Indiana colleague of mine and subcommittee member, Todd Rokita, could not be here because of a 

previous commitment, but I know he too is committed to creating 

affordable health care for American businesses and repealing the 

onerous mandates created by the Affordable Care Act. 

Three things I like about southern Indiana. 

One is Central Standard Time. You guys got it here. I like that. 

Number two, basketball. I love that. 

And number three, I appreciate that you elected someone as competent as Dr. Larry Bucshon. He has really hit the ground running. 

There was essentially no learning curve for him. I know when I 

first got there, the first thing I was interested in was trying to find 

out where the bathrooms were. I mean, they don’t tell you any of 

the important things when you get there. But Dr. Bucshon has gotten there, hit the ground running, and has been a tremendous 
4 

asset to our Committee on Education and the Workforce and on the 

subcommittee that I serve on. 

So without objection, I now yield to my friend, Dr. Bucshon, a fellow physician, for any opening remarks he may wish to make. 

[The statement of Chairman Roe follows:] 

Prepared Statement of Hon. David P. Roe, Chairman, 

Subcommittee on Health, Employment, Labor and Pensions 

Good morning everyone. First, allow me to take a moment to thank our witnesses 

for being with us today. We recognize you all have busy schedules, and we appreciate the opportunity to hear your thoughts and experiences on the very important 

issue of health care. Second, I would like to thank the people of Evansville, Indiana 

for their hospitality and for hosting the first field hearing of the Subcommittee on 

Health, Employment, Labor, and Pensions. 

As our first field hearing, there are few topics more relevant to our economy and 

the challenges facings our families and small businesses than health care. Each 

year the cost of care goes up, placing even greater strain on budgets already 

stretched thin by a difficult economy. Some patients refuse care simply because they 

cannot afford it. Employers often choose between ending coverage and hiring new 

workers. And the burden imposed on taxpayers becomes even greater as government 

programs expand and health care services grow more expensive and more 

unsustainable. 

We know there are a number of factors forcing health care costs to rise, such as 

an aging population, more advanced treatments, and greater use of health care services coupled with fewer providers. However, as is often the case, too much intervention by the federal government can make an already problematic situation worse. 

Instead of allowing choice and competition to encourage innovation and lower costs, 

a Washington-knows-best mentality can often discourage progress and lead to a onesize-fits-all approach that simply cannot work for a country as vast and diverse as 

ours. That is why I, along with a strong majority of the American people, rejected the 

government takeover of health care that was imposed on the nation last year. Any 

effort to reduce costs for America’s workers and job creators was abandoned along 

the road to reform by Democrat leaders who favored a massive expansion of the federal government’s role in health care. 

For the first time in our nation’s history, private individuals will be required to 

buy health care or pay a penalty. In a few short years, businesses with more than 

50 employees will be mandated by law to provide government-approved health care 

to workers or pay a fine, regardless of the difficulties these businesses may be facing 

just to keep their doors open. Proponents of the law say it includes relief for small 

businesses. Well, unfortunately, that relief is not only limited and temporary, but 

according to one analysis it actually penalizes certain businesses for raising wages 

or hiring new workers. 

Can anyone seriously argue this is a good thing for an economy that has been 

plagued with high unemployment for nearly three years? Will this help the more 

than 13 million unemployed Americans who are searching for work? 

A number of the law’s provisions will not take effect until 2014, but already we 

are hearing from business leaders troubled by the uncertainty the law is creating. 

This is unacceptable, especially at a time when certainty is needed to restore confidence and foster economic growth. A 2,700 page health care law has led to more 

than 6,600 pages of new federal rules and regulations—and that is just what the 

administration has accomplished in the first 14 months since the bill was signed 

into law. That is a difficult maze of bureaucratic red-tape for businesses to navigate 

at a time when they should be focused on expanding their operations and creating 

new jobs. 

As a doctor and a lawmaker, addressing these challenges remains at the forefront 

of my efforts serving the people of the first district in Tennessee, and as chairman 

of the House Subcommittee of Health, Employment, Labor, and Pensions. It is clear 

the status quo is failing our families, workers, and job creators. We appreciate the 

work of our witnesses who are helping us to chart a better course, one that will harness the creativity of the American people to lower the cost of health care for the 

nation. 

I want to note that another Indiana colleague and subcommittee member, Todd 

Rokita, could not be here today because of a previous commitment, but I know he 

too is committed to creating affordable health care for American businesses and repealing the onerous mandates created by the Affordable Care Act. 
5 

I will now recognize Dr. Larry Bucshon, a friend, colleague, and fellow physician 

for any remarks he wishes to make. 

Mr. BUCSHON. Thank you, Chairman Roe, for that gracious introduction. 

On behalf of the people of Evansville, please allow me to extend 

a warm welcome and offer our sincere appreciation for convening 

this hearing today. I think that, Chairman Roe, you will discover 

that people in Indiana have a profound love for their country and 

a lot of good ideas about how we can move this Nation forward. 

That is ultimately a goal we all share and one that we are really 

committed to. 

These last few years have been a difficult time and promise for 

our great State because of what has happened in Washington, D.C. 

A tough economy has levied many hard choices on our families, 

workers, businesses, and State leaders. We have tried to meet 

these challenges head on through hard work and sacrifice. We have 

made progress but realize more work lies ahead. We must ensure 

the progress that has been made is not undone by bad policies out 

of Washington, D.C., which brings us to the reason for the hearing 

today. 

At a time when businesses continue to struggle, millions of workers remain on the hunt for a job, and families are experiencing 

greater pain at the pump, our country now faces the consequences 

of the policies that are in place in Washington, D.C., including last 

year’s Government takeover of our health care system with passage 

of the Affordable Care Act. 

I was not in public office at the time when the health care legislation passed through the Congress. However, a strong majority of 

Americans joined the public debate in opposition to the Affordable 

Care Act, and in fact, the opposition to the Affordable Care Act has 

only increased since its passage. That is one of the few times that 

has ever happened with a policy that has been passed in Washington, D.C. 

Last year, I had the great privilege of traveling around the district listening to local business owners, family farmers, and others 

expressing their concerns about the direction Washington, D.C. is 

taking our country. It is deeply unfortunate that the majority of 

people out there voices were being ignored at the time by the leaders in Washington in our Nation’s capital. 

This law includes thousands of pages of new mandates, some of 

which fall on job creators. It includes numerous tax increases, including a $20 billion tax on businesses that develop medical devices, and this is very important to Indiana since we have a very 

large medical device business in our State, as many as 20,000 employees. Those businesses employ, like I said, 20,000 or so Hoosiers, and they take a direct hit with a new tax based on the Affordable Care Act. 

The administration has proposed more than 6,600 pages of regulations over the last year in an effort to implement and enforce the 

law. At a time when our economy and workforce needs certainty 

about the future, the regulatory environment simply creates confusion and anxiety and our workers and families are paying the 

price. Not only is the law piling additional burdens on job creators, 
6 

many of whom are struggling to meet their payroll, it is placing a 

greater strain on the taxpayers. Despite raising taxes by more than 

$500 billion and costing an estimated $1.4 trillion, the price tag for 

taxpayers continues to go up. 

Here in Indiana, new insurance mandates will drive up health 

care costs for employers and workers. Also, our Governor estimates 

the expansion of the Medicaid program may cost the State upwards 

of $3 billion a year, a cost on the backs of Indiana taxpayers. 

Speaking as a fellow Hoosier, this is a Government takeover our 

State simply cannot afford. 

It is clear we need a better approach to health care, one that reflects our national values of personal responsibility, a limited Government, an approach that encourages innovation and job creation. 

We cannot assume the best answers come from Washington, D.C. 

I am confident, with the help of our witnesses, we can identify real 

solutions that will lower the cost of health care and protect and 

create the jobs our Nation’s workers desperately need. 

Again, I would like to thank Chairman Phil Roe for coming to 

Evansville and for his leadership as the chairman of this subcommittee and for holding this important hearing today to hear 

what the people of Indiana have to say. 

So with that, thank you, Chairman Roe. 

Chairman ROE. I thank the gentleman. 

And I would like to include in the record the senior Democratic 

leader on the Subcommittee on Health, Employment, Labor, and 

Pensions who could not be here, Rob Andrews. Without objection, 

I will include his statement for the record. 

[The statement of Mr. Andrews follows:] 

Prepared Statement of Hon. Robert E. Andrews, Ranking Minority Member, 

Subcommittee on Health, Employment, Labor and Pensions 

Last week’s unemployment report reinforces the urgent need for the Congress to 

have a laser-like focus on jobs. Unfortunately, the committee has not taken up a 

single piece oof jobs legislation this year. Instead, today’s hearing continues fighting 

the battles of thee past, with the fourth hearing this year attacking the Affordable 

Care Act. 

This health care reform law gives American families new protections against the 

worst abuses of the insurance industry. In the coming years, it will extend access 

to affordable, quality health care to those without it. And it contains critical measures to keep rising health care costs under control, without rationing care. Getting 

a handle on out-of-control health care costs is one of the keys to our long-term economic ggrowth. 

The Affordable Care Act became law over a year ago. While it takes multiple 

years to implement, it has already begun to deliver positive results for Indiana families, children, and small and large employers. 

Because of the Affordable Care Act, nearly 90,000 Hoosier seniors who hit the 

Medicare prescription drug donut hole paid less for their medications last year. 

Each received a $250 rebate check for a total savings of $22.4 million dollars. This 

year seniors who hit the donut hole are saving an average of $800. 

One million seniors in Indiana may receive free preventive services and an 

annuaal wellness visit. 

More than 80,000 small employers in Indiana may pay lower health care costs as 

a result of the law’s small business tax credit. 

Nearly four million Indiana residents are now protected against lifetime limit 

caps on their coverage and 3.5 million are protected against restrictive annual limit 

caps. 

Nearly 300,000 Hoosiers are now protected against having their insurance company drop their health coverage when they need it the most. 

More than 20,000 young adults in the state may now have coverage through their 

parent’s health plan. 
7 

More than 200 employers and their employees are paying less for retiree health 

care by joining the Early Retiree Reinsurance Program. 

The law has also been good for Indiana’s economy by infusing millions of dollars 

in grant money to help the state strengthen its health care system. Indiana has received funding to develop a health insurance exchange, strengthen and potentially 

construct new community health centers, support prevention and health programs 

and invest in groundbreaking biomedical research. 

Specifically, the state has received: 

• More than $7 million toward the state’s development of the health insurance 

exchange. The health insurance exchanges are a cornerstone of the Affordable Care 

Act that will allow consumers to shop for quality affordable health care of their 

choice. • More than $550,000 for community and clinical prevention activities. • Nearly $1 million for primary care training to expand the state’s primary care 

workforce. • More than $10 million to support 46 projects in the state that show potential 

in producing new and cost-saving therapies. These grants and tax credit also support good jobs and increase U.S. competitiveness. 

Repeal of the Affordable Care Act would repeal all of these protections for individuals, families, and employers. It would repeal economic benefits for Indiana. And 

it would return inordinate power over our health care to the health insurance companies. 

My Republican colleagues have not just proposed repeal of these benefits. They 

have an additional proposal these days: ending Medicare. The Republican plan will 

force seniors to pay more for health care coverage and prescription medications and 

jeopardize their right to long-term care benefits. 

Under the Republican plan to end Medicare, an Indiana senior would be forced to pay more than $6,000 in higher annual health care costs in 2022 and $12,000 

more by 2032, as well as an additional $9,800 in prescription drug costs over the 

next decade. For seniors and those with disabilities in Indiana’s 8th congressional 

district, the Republican plan could increase preventive care costs by $293 million 

over the next decade. In addition, the more than 3,000 residents in nursing homes 

whose expenses are paid by Medicaid would be left without the care they need. 

The Republican plan will have a devastating impact not only on seniors but also 

on young people right now who will no longer be able to depend on Medicare or a 

dignified retirement. 

To cover the additional health care costs under the Republican plan, a 54-yearold today will need to save more than $180,000 by the time she retires. That is over 

and above what she should already be trying to save for a normal retirement. 

And for those who are younger, the costs are even higher. A 25-year old will need 

more than half a million dollars in additional retirement savings to pay for their 

health care under the Republican plan. 

The Affordable Care Act has now been debated for nearly three years. Re-litigating past fights will not move this country forward. The middle class has been 

under a decades-long squeeze. The last thing working families need right now is to 

have hard-won health care rights, like the guarantee of Medicare or the protections 

of the Affordable Care Act, taken from them. 

There are better ways to spend our time in Congress, such as working together 

to grow and strengthen, rather than weaken, the middle class. Our focus should be 

on creating good jobs here in America. 

Chairman ROE. Thank you. 

And we have two distinguished panels today, and I would like to 

recognize Dr. Bucshon to introduce our first panel. I yield to Mr. 

Bucshon. 

Mr. BUCSHON. Thank you, Mr. Chairman. It is a pleasure to introduce our first panel. 

First of all, Robyn Crosson serves as Deputy Commissioner for 

Company Compliance Services with the Indiana Department of Insurance in Indianapolis. In that capacity, she reviews insurance 

policies and premiums to ensure compliance with Federal and 

State laws. She also serves on the Governor’s Health Care Reform 

Team. Prior to her service in State government, she was an attorney in private practice. 
8 

Dr. David Carlson is a general surgeon with Evansville Surgical 

Associates which provides state-of-the-art general laparoscopic, thoracic, and peripheral vascular surgery services to patients in the 

tri-State area. Dr. Carlson joined the practice in 1997 and is certified by the American Board of Surgery and a fellow of the American College of Surgeons. He also serves on the active staff in the 

Department of Surgery at Deaconess Hospital and St. Mary’s Medical Center both here in Evansville. Also, I would like to say Dr. 

Carlson has served his country in the Army Reserve Medical Corps 

and spent 3 months in Iraq serving his country in the recent conflict. 

Elizabeth Wilson joins us today from Franklin, Indiana. She currently is employed at the retail store, Elder-Beerman, as she saves 

for graduate school, and also provides voice lessons and is a nursery attendant for the First Presbyterian Church in Franklin. Ms. 

Wilson graduated from Butler University in December 2010 with 

a bachelor of arts degree in applied music. She is with us today to 

share her personal story about the impact that the Affordable Care 

Act has had on her and her family. 

Finally, Sherry Lang joins us today from Terre Haute, Indiana. 

Ms. Lang is a human resources director for Womack Restaurants, 

a member of the IHOP restaurant chain. Womack operates restaurants in Indiana and Ohio, employing nearly 1,000 full-time and 

part-time workers in 12 IHOP restaurants. Ms. Lang has a master’s degree in human resource development and serves at the executive management level at Womack Restaurants. Since joining 

Womack in 2005, she has helped to grow the company from 3 to 

12 restaurants. 

So, welcome, panelists. 

Chairman ROE. Thank you all. 

Before we get started, I want to go over this lighting system that 

we have. It is there mainly to make sure that the Congressmen 

don’t talk too long. But the way this works is you have 5 minutes 

to give your statements, and we will have 5 minutes to question. 

There may be a second round of questioning if we don’t get 

through. The green light will come on. The amber light will mean 

you have a minute left, and the red light means that you need to 

start wrapping up your comments. We are not going to cut you off 

in mid-sentence. You can continue your thought, but just try to be 

cognizant of the lights. 

So if you would, Ms. Crosson, you are first. 

STATEMENT OF ROBYN CROSSON, CHIEF DEPUTY COMMISSIONER, COMPANY COMPLIANCE, INDIANA DEPARTMENT OF 

INSURANCE 

Ms. CROSSON. Thank you, Mr. Chairman, and thank you, Representative Bucshon. It is a pleasure to be here, members of the 

committee. 

My name is Robyn Crosson, and I am the Chief Deputy Commissioner at the Department of Insurance. 

And before I go on, I just wanted to kind of explain a little bit 

of what the Department of Insurance does. A lot of people didn’t 

even know Indiana had a Department of Insurance. Actually all 
9 

States and territories in the U.S. have departments of insurance or 

some sort of commission. 

The primary thing we do is protect consumers. We have a consumer services division that answers all complaints brought by citizens and also by providers when they have issues. We regulate insurance companies. We don’t regulate providers. And we also review all of the rates and contract language. That puts a heavy burden on us, particularly in company compliance for implementing 

the Affordable Care Act in addition to any State laws and regulations that we have. 

By statutory authority, our legislature has deemed and ordered 

us to review all rates, premium costs before they are implemented 

and contracts before the State of Indiana or all health insurance, 

long-term care, Medicare, any sort of health pact policy. It also includes—all, in some way, shape, or form have been affected by the 

Affordable Care Act. 

We are required to make sure that the premiums are reasonable 

in relation to the benefits that are provided and we do have actuarial reviews that perform those functions. 

Currently in Indiana, we have approximately in each market— 

and when I say ‘‘market,’’ I mean individual market where you can 

go out and buy a policy on your own—or a small group market, 

which is companies that have less than 50 employees, 2 to 50 in 

Indiana, and then the large group market is over 50, 51 and over. 

In three markets, we have approximately at any given time about 

60 carriers that are actively marketing, although I will tell you 

that this number is dwindling. Currently we have experienced approximately 10 percent of the market has withdrawn, meaning either they have pulled out completely and will no longer do any 

business in Indiana or they will not do business with particular 

segments. Particularly the individual market and in some cases the 

small group market are being most severely affected, or they are 

just saying we are not going to currently going to actively market. 

We are going to see if we can stay alive until 2014, and then if we 

can, we will try to come back in on the exchanges if we can do that. 

Particularly we are seeing this in smaller companies. The problem is these are smaller domestic Indiana companies. In a lot of 

cases, these are provider-owned in some cases insurance companies 

that serve niche markets within the State, have very good consumer services. We don’t get a lot of complaints on them. They control their costs and they have good wellness programs. We have a 

lot of insurance companies throughout this State that operate that 

way, and really right now we are seeing them really rethink 

whether they can do business at all. So that is just kind of to give 

you a picture. 

We have a healthy domestic insurance industry here in Indiana, 

and insurance employs a lot of Hoosiers. Just to give you an example, the top five insurance carriers—we just did a quick count—employ 5,600 people, just the carrier themselves. We have 44,944 resident agents licensed to sell accident and health. These are your 

neighbors. These are small business owners. We have 4,152 resident agencies that play a large role in the community, and we have 

grave concerns about what is going to happen to those people. 
10 

To give you an idea and a picture of who is impacted by this, the 

Affordable Care Act affects not only fully insured but also affects 

self-insure. You see self-insure in large corporations or large, usually over 100-150 people, where they bear all the costs and risk and 

just pay someone who administer their claims. But this affects both 

in most cases. 

And to give you a picture of who we are talking about, the full 

insured market—the estimate—comprises about 30 percent of the 

State. So in the individual market, that is 192,376 people. The 

small group market is 288,461 people, and the large group market, 

456,867 individuals. And then for the self-funded, the other 70 percent that are affected by this—and I am not talking about Medicaid. I am not talking about Medicare—there are another 2.1 million Hoosiers approximately affected by this, not to mention employers and everything else in the State. These are just the people 

who are covered by this insurance. 

I have two main themes and main side effects that we are seeing 

right now actively in trying to deal with and combat. The first one 

is that premiums are going up. The second one is the market is in 

chaos. Neither one benefits employers or consumers. 

The first one—just what we are seeing in the department and as 

the Congressman indicated, $3.1 billion was the high estimate 

right now for what we are seeing. We are not done with the regulations that are coming out. There are always more that could be 

coming out, and those add oftentimes additional costs and burdens 

upon the State taxpayers, upon the companies, upon individuals, 

and upon employers. There are increased reporting responsibilities 

and we don’t know what the exchanges are going to look like either. All these things are unknown. This is what we are estimating 

with now, $2.6 billion to $3.1 billion is what the Governor’s current 

estimates are. 

Effective on September 23rd of 2010, there were a series of market reforms, including expanding the dependent age to age 26, a 

prohibition on preexisting conditions for children under 19, among 

others, removing the lifetime limits on policies, and limiting the annual limit and phasing out annual limits completely over the next 

3 years or 4 years, I guess, till 2014. 

As a result, the early estimates we saw from carriers before 

these even took effect was that premiums were going to go up between 2 and 4 percent. But in some cases and in plans especially 

in the small employer arena and the individual market where people have limited drug benefits—maybe they were limited to 

$100,000 and $50,000 and $350,000—we saw increases as high as 

35 percent where they were requesting these rates and getting all 

reviewed. I am not saying that they were definitely approved. But 

we are requesting these because of the removal of the limits in 

drug utilization, especially in the market. And so removing these 

limits has prohibited insurance companies and employers from capping costs. 

There is discouragement on consumerism in the $2,000 deductible limit. 

And then basically I just want to say the market is in total flux. 

There are so many things out there. The agents are not sure 

whether they are going to have jobs. Employers are cutting bene-
11 

1http://republicans.energycommerce.house.gov/Media/file/Hearings/Oversight/040111/ 

OImemo.pdf 2http://www.healthcare.gov/news/factsheets/pcip05062011a.html (posted May 6, 2011). 3https://www.pcip.gov/Eligibility.html 

fits. In general, there is not a lot of incentive to—there is no incentive to control costs and there is no ability for employers to predict 

what their medical costs are going to be, especially with the removal of a lot of these limits in going forward. The medical loss 

ratio carriers are laying people off, cutting their costs, reducing 

compensation across the board to try, again, to survive until 2014, 

which is frankly unknown. 

Thank you. 

[The statement of Ms. Crosson follows:] 

Prepared Statement of Robyn S. Crosson, Chief Deputy Commissioner, 

Company Compliance, Indiana Department of Insurance 

Chairman Roe, Representative Bucshon, Members of the Committee, it is an 

honor to appear before you today to offer guidance on our nation’s recent health care 

reforms. 

On March 23, 2010, President Obama signed into law the Patient Protection and 

Affordable Care Act (ACA). This legislation institutes numerous modifications to the 

regulation of private health insurance companies and the structure of health insurance policies. 

The Indiana Department of Insurance (IDOI) supports Indiana Attorney General 

Zoeller’s effort to overturn or repeal ACA on the grounds that it is unconstitutional 

to mandate citizens to purchase health insurance or pay a penalty. However, this 

litigation is presently pending, and will likely remain pending for quite some time. 

In the interim, IDOI diligently prepares for the onslaught of ACA’s new requirements. First and foremost, IDOI continually examines the law in an effort to minimize adverse effects to the nearly 1 million Hoosiers with fully insured coverage. 

As of July 1, 2010, Governor Daniels formed an interagency task force to analyze 

the various components of ACA. The task force includes representatives from the 

Governor’s Office, the Indiana Family and Social Services Administration 

(FSSA),IDOI, and the Indiana State Department of Health and State Personnel. Indiana continually attends meetings with the U.S. Department of Health and Human 

Services (HHS), the National Association of Insurance Commissioners (NAIC), consumer representatives, industry representatives, other regulators and insurers. Indiana carefully reviews each newly promulgated regulation that implements ACA’s 

provisions and provides policy feedback to the government and other interested parties regarding how the provisions should operate or to warn of the consequences. 

In addition, Indiana has been awarded federal grants to assist with the implementation of health care reform. The State has conducted a financial analysis of the ACA’s 

impact to the State budget and estimates indicate Indiana will have to pay between 

$2.6 and $3.1 billion over the next ten years to support the ACA. 

The following is a summarized timeline of some of the more significant changes 

with a focus on the effect on Indiana families and workers. 

High Risk Pools 

Within 90 days of ACA’s March 2010 enactment, states were required to establish 

a high risk health insurance program, or instead defer to the federal government’s 

Pre-existing Condition Insurance Plan (PCIP). On April 22, 2010, the Chief Actuary 

of the Centers for Medicare and Medicaid Services (CMS) reported that an estimated 375,000 individuals across the U.S. would enroll in the PCIP by the end of 

2010.1 So far that has not been the case. As of March 31, 2011, the number of Hoosiers enrolled in PCIP was 177, and the total across all states was 18,313.2

The strict eligibility requirements are one reason for the low enrollment. According to PCIP’s own website, ‘‘You must have been without health coverage for at least 

the last 6 months. Please note that if you currently have insurance coverage that 

doesn’t cover your medical condition or are enrolled in a state high risk pool, you 

are not eligible for the Pre-Existing Condition Insurance Plan.’’ 3 Since Indiana’s 

high risk pool, ICHIA, does not require a waiting period, most Hoosiers are forced 

to enroll in this program instead. Although a small portion of costs are funded 

through premiums, the bulk of the cost is covered through assessments and taxes. 

Insurers are assessed for 25% of the costs, while Hoosier tax payers fund the re-
12 

maining 75%. Approximately 7,000 people are enrolled in this program that incurred approximately $110 million in claims during the 2009 calendar year. The establishment of PCIP may be intended to assist the uninsured and high risk, but the 

six month requirement stunts PCIP’s potential to be of great assistance. 

Changes to Annual and Lifetime Limits 

Several of ACA’s changes became effective September 23, 2010, including new 

rules controlling how health insurance companies can use annual and lifetime limits. ACA generally prohibits these limits, or in some cases restricts the amounts as 

part of a transitional period leading into 2014 when limits become fully prohibited. 

Limits enable insurers to properly estimate future costs, which facilitates appropriate pricing. Limits help ensure that companies remain solvent. Similarly, employers who are self-funded are less able to predict their annual medical costs because 

they are also subject to the annual and lifetime limits prohibition. Generally, health 

insurance costs are the second largest budget item for employers. Less certainty and 

fewer ways to control costs creates an incentive to discontinue offering health insurance. Insurance companies have reacted to this legislation by increasing premiums. 

Mandatory Preventive Health Services Coverage and Essential Benefits 

Effective September 23, 2010 under ACA, health insurance companies generally 

must cover preventive health services as defined by the federal government. The 

justification for this change in the law is that more Americans will visit providers 

earlier to use such services, decreasing the chance they will incur a costly illness 

later, thereby decreasing costs to insurers and therefore decreasing premium. However, the practical reality is different. Having additional preventive services paid for 

by insurance has generally not been enough to incentivize Americans to become 

healthier or get checked out for health problems more often. Instead, the legislation 

has merely caused insurance companies to change their accounting and increase 

premiums to cover the new costs of the mandated services. In addition, beginning 

January 1, 2014, plans offered by small group and individual insurers must include 

essential health benefits package characteristics, including cost sharing limitations 

as eligible. In cases where existing insurance plans do not cover an essential benefit, 

those plans must adjust by adding the benefit and likely will increase the premium 

to cover its costs. At this time we do not know what these benefits are. This adds 

additional uncertainty to the market and limits our ability to assess the impact of 

ACA. 

Dependent Age Increased to 26 

Effective September 23, 2010, insurers are generally required to continue coverage 

of a dependent up to the age of 26. This change was designed to reduce the number 

of younger dependents getting kicked off their parents’ plan and foregoing coverage. 

While the intent was positive, it has led to a situation where certain employers, who 

budgeted for covering dependents for a lesser amount of time, now have to react to 

the change. Insurers and employers with self-funded insurance have generally reacted by increasing premiums to cover the extra years of cost. 

Indiana previously required dependent coverage for children up to age 24. For 

policies effective after September 23, 2010 or at renewal subsequent to that date, 

coverage must be extended to children under age 26. Notice to parents of dependents who were previously removed must be provided and children must be added 

at the next open enrollment if they aged off. Although a child may be underwritten 

when he or she is reenrolled, the child cannot be required to pay more for coverage 

than similarly situated individuals who did not lose coverage by reason of cessation 

of dependent status. Dependent coverage is extended to age 26 for individual and 

group products with an exception for grandfathered group products. For this purpose, any difference in benefits or cost-sharing requirements constitutes a different 

benefit package when it falls outside a federally established threshold. Prior to January 1, 2014, if a young adult has the option of coverage through their employer, 

the parent’s employer, if the plan is grandfathered, does not have to cover the young 

adult as a dependent on the parent’s plan. Employers have suggested that extension 

of coverage will increase costs and have concerns about adverse selective tendencies 

since young adults can choose to stay on their parents’ plans rather than take their 

employer plan, especially after January 1, 2014. This requirement imposes additional previously unanticipated risk upon employers who offer dependent coverage 

through their plans. Depending on the level of adverse selection, the result of this 

legislation may be that employers stop offering dependent coverage. Currently, there 

is a movement by employers to penalize employees whose spouses are covered as 

dependents on employer A’s plan instead of receiving coverage through their own 

employer B. Usually, the penalty is an increased premium percentage or no employer contribution for the spouse’s coverage. 
13 

Guaranteed Issue, Coverage, and Renewability 

Effective September 23, 2010, insurers can no longer exclude benefits or limit coverage based on a preexisting condition for an individual under the age of 19. For 

plan years following January 1, 2014, this restriction applies to everyone. Also, beginning 2014 insurers selling new insurance can no longer discriminate on the basis 

of health status, medical history or claims experience. Moreover, beginning 2014, insurers must accept everyone that applies for coverage during open enrollment, the 

limited time period during each year determined by insurers when someone can sign 

up to an insurance plan. For plan years beginning January 1, 2014, all non-grandfathered, fully-insured plans must renew coverage or continue it in force at the option of the insured. 

Currently, and within statutory limits, Indiana insurance carriers are permitted 

to exclude coverage temporarily for preexisting conditions. This enables carriers to 

insure for fortuitous rather than planned or known medical costs. ACA prohibits 

this practice for children under 19 currently and for all others in 2014. Indiana’s 

small group market has had guaranteed issue for several years and will not be significantly affected by this, but the individual market will experience significant increases. Some carriers have suggested increases in the 50% range. We are currently 

evaluating the inclusion of the high risk pool members into the individual market 

and the increase associated with such inclusion. One of the consequences experienced in Indiana as a result of this legislation was that carriers stopped writing 

child-only policies. Carriers claimed that the law led to adverse selection, a fiscal 

situation that arises when a given pool of insured individuals is skewed, in that 

there is not an economically stable proportion of sick to healthy individuals in the 

pool, because healthy individuals leave, causing premiums to rapidly escalate for 

those remaining sick people. In an effort to curb this practice the government tried 

to limit plan-switching by restricting the time to switch, or the time in which to enroll, to only open enrollment periods, thereby preventing young individuals from 

waiting until they got sick to enroll. Indiana drafted Bulletin 181, requiring carriers 

wishing to sell child-only policies to do the following: 1. Hold an open enrollment 

period that must last at least 30 continuous days; 2. Designate that enrollment period; 3. Notify IDOI no later than December 1, 2010 of when the open enrollment 

period will occur so that IDOI may post on its website; 4. Post the open enrollment 

period on the insurer’s website; and 5. Effect coverage within a reasonable period 

of time from enrollment. Despite IDOI’s efforts, IDOI is aware of only one company 

offering child-only policies in Indiana. Generally, children under 19 are left with the 

option of CHIP, PCIP and ICHIA to the extent they qualify. IDOI is currently exploring options to continue to encourage carriers to re-enter the market. However, 

the consequence of the law thus far is that consumer choice has narrowed and premiums have increased. 

Grandfathering 

ACA allows for plans in effect on March 23, 2010 to be considered grandfathered. 

This affects the application of some of the September 23, 2010 market reforms. For 

example, the following do not apply to grandfathered health plans: mandated coverage for preventative services, mandated patient protections (i.e., OBGYN referral 

prohibition, in-network pediatrician considered child’s primary care provider (PCP) 

and emergency services costs are the same for in-network vs. out-of-network), guaranteed availability and renewability of coverage, mandated cost-sharing limits, no 

discrimination based on health status and mandated coverage for clinical trials. Additionally, grandfathered plans will not be subject to the 2014 pricing restrictions. 

This means that the actuarial review process for insurance premiums at renewal 

will be split between grandfathered and non-grandfathered plans. In addition to increased and tiered actuarial duties, it has been suggested that IDOI will be the first 

arbiter of the grandfathering determination. This means increased reporting for carriers and additional rate and form review responsibilities for Compliance. Several 

insurers have reacted by requiring employers to provide coverage that is consistent 

with the new ACA reforms, rather than allowing employers to choose. Instead of increasing employer choices, which the law touted, employers’ options are constrained. 

International Statistical Classification of Diseases and Related Health Problems 

(ICD-10) 

ICD-10 provides codes to classify diseases and a wide variety of signs, symptoms, 

abnormal findings, complaints, social circumstances and external causes of injury or 

disease. Under ICD-10, every health condition can be assigned to a unique category 

and given a code. On August 21, 2008, HHS proposed new code sets to be used for 

reporting diagnoses and procedures on health care transactions. Under the proposal, 
14 

the ICD-9-CM code sets would be replaced with the ICD-10 code sets, effective October 1, 2013. 

Although this may lead to improved health data tracking and positive healthcare 

outcomes, it carries a significant price tag for insurers. ICD-10 is sufficiently detailed to describe complex medical procedures, which becomes increasingly important when assessing and tracking the quality of medical processes and outcomes. 

The goal of such tracking is to improve patient outcome and quality of care. IDOI 

recognized this significant conversion cost in a letter submitted to the National Association of Insurance Commissioners (NAIC). This is the organization that was 

tasked by HHS with defining the medical loss ratio rebate calculation. In that letter, 

IDOI stated in pertinent part: ‘‘Such conversion costs, although significant, will be 

short-lived and therefore, affect the medical loss ratio calculation for a brief period, 

but leave lasting quality improvement potential. Given the benefits to patient care, 

ICD-10 conversion costs should be included as a health care improvement cost and 

included in the claims numerator.’’ The final model adopted by the NAIC did not 

allow the inclusion of ICD-10 costs in the medical loss ratio (MLR) numerator as 

part of Quality Improvement Costs. Therefore, carriers must bear the cost of this 

conversion as part of their 15-20% administrative costs. Smaller carriers will likely 

be more significantly affected, since larger carriers can spread the cost over multiple 

companies. 

Changes to the External Review Process 

As of 2010, states must have internal and external review standards. The federal 

law requires strict compliance with certain provisions published in an HHS regulation, 42 USC § 300gg-19(b), that largely comported with the NAIC Model Act on External Review. Indiana’s own external review statutes are highly analogous to the 

federal requirements, but it was determined through correspondence that Indiana 

was not in exact compliance. The State was able to get Senate Bill 461 passed and 

successfully amend Indiana’s external review laws to be in compliance with the federal requirements. However, even with these changes, HHS has not yet confirmed 

that Indiana is in compliance. This is leading to uncertainty in the insurance market because insurers cannot determine their own compliance with Indiana Code. 

Sadly, this type of back and forth with HHS has been typical of the health care reform process thus far; chaotic, frenetic and rushed implementations. All of these 

issues combine together to create an uncertain insurance market, causing insurers 

to hesitate before participating or continuing to participate in Indiana’s insurance 

market, reducing consumer choice of insurance. 

Other Changes with Lesser or Unclear Impact 

• September 23, 2010: plans that provide for emergency services cannot require 

prior authorization. Any cost-sharing requirement for emergency services provided 

out of network cannot exceed cost sharing requirements for in network emergency 

services. • Beginning in 2014, insurers may not discriminate against providers operating 

within the scope of their practice. • Annual HSA contributions are limited and there are deductible limits on small 

employer plans that may limit participation in popular high deductible health plans. • States must track trends in increasing premiums and report this information 

to HHS. Such tracking and reporting may be funded initially in the form of grants, 

but long term the costs will be passed to the states. • Waiting periods cannot be greater than 90 days. • Carriers requesting a rate increase greater than 10% must file with both the 

state regulator as well as the federal government. Some insurers in certain states 

may be subject to a dual review process unless a state has an adequate review process. IDOI has requested that HHS recognize that it has an effective rate review 

process to avoid this dual review. 

ACA provisions related to insurance increase the coverage requirements, mandate 

previously uncovered costs of individuals and dramatically increase reporting and 

administrative requirements. All result in increased costs that will likely be passed 

to consumers in the form of premium increases. 

Exchanges 

ACA mandates that over the course of the next few years, states must implement 

a health care exchange or the federal government will create one for each state. On 

January 14, 2011, Governor Daniels issued an Executive Order directing FSSA to 

work with IDOI and other applicable state agencies to conditionally establish and 

operate a health benefit Exchange, as a not-for-profit entity. The Order provides 

that a State-based exchange protects Hoosiers from undue federal regulation, maintains the existing free market and ensures that Hoosiers retain coverage choices. 
15 

The Executive Order stops short of committing to the Exchange, as there is little 

guidance at this point in time from the federal government regarding how the Exchange should operate. Nor do we have any information on how the federal Exchange will operate. The Order does allow the State to move forward in its planning 

and allows the State to prepare for the Exchange should we decide that it is in Hoosiers’ best interests to commit. Indiana has received a federal exchange planning 

grant and a Level 1 establishment grant. We are using those funds to study the Exchange, which includes an information technology gap assessment, a study of the 

uninsured in Indiana and potential users of the Exchange, Exchange design options, 

and actuarial modeling. Our more recent funding will be used to identify the high 

and detailed level requirements, the information technology needs and design of an 

Exchange, and to identify the operating costs of an Exchange. In addition, on September 15, 2010, Indiana released The Affordable Care Act Stakeholder Questionnaire and collected responses through September 30. 478 responses were received 

and 409 responses were used in the analysis. All respondents indicated they were 

concerned about the cost of the legislation to their respective industries and businesses, and 80% indicated they were concerned about the health care system’s ability to cope with the pent-up demand. Additionally, there was very little stakeholder 

support for a federally administered Exchange. Insurers preferred a State administered Exchange and businesses preferred a not-for-profit administered Exchange. 

The State released a questionnaire on Exchange design issues in March 2011where 

2,600 responses were received. The survey mainly covered technical issues and market regulations, however, the write-in comments received from all respondents 

showed dissatisfaction with the Exchange. Respondents desired the guarantee of 

greater transparency and personal responsibility in the health care market place 

and they felt the ACA did not provide for these needs. In terms of design and Exchange goals, over half of the respondents supported making the Exchange a competitive environment for insurers—ensuring that the Exchange drives quality improvement and cost containment—and creating an Exchange that increases the 

portability and continuity of health care coverage. Finally, 95 employers responded 

to the question of whether they would continue to offer health insurance, of which 

66% said they would maintain coverage, 3% would drop coverage, and 31% were undecided. 

Medical Loss Ratio Limitations and Rebates 

Under the law, no later than January 1, 2011, insurers of group health plans 

must report to the United States Department of Health and Human Services (HHS) 

regarding medical loss ratios (MLR) and must offer a premium rebate to participants if the loss ratio is below 85%. The federal government is redesigning MLR, 

a longstanding equation for determining whether an insurance company is properly 

paying out a sufficient amount in claims in relation to its revenue from premiums. 

Generally, a loss ratio is the amount of claims paid divided by premium collected, 

although the equation is significantly more complex under the law and considers 

several other criteria. What the law is saying here, essentially, is that certain insurers have to pay out 85% of their revenue from selling insurance. If the insurers do 

not end up paying out that much, then at the end of the year, they have to issue 

rebates, which are like refunds, to insured individuals. Furthermore, there are several situations where insurers operating in various states enjoy significantly different MLR thresholds, or use a different calculus in determining MLR. Indiana has 

historically followed the MLR model published by the National Association of Insurance Commissioners that established a baseline MLR of 55% with higher amounts 

for certain insurance. With this new law, insurers have to plan to pay more in 

claims either to initially meet the threshold or pay a rebate for not meeting it. Consequently, insurance companies are busy recalculating profit margins and using this 

new law to justify increasing premiums. ACA requires that individual and small 

group insurers have an annual medical loss ratio of 80% and 85% for large group 

insurers. The annual medical loss ratio involves a more complicated calculation than 

the traditional lifetime loss ratios utilized for the purposes of rate review. The simplest example of the annual medical loss ratio for the purposes of rebate calculation 

is the equation below: 

Claims + Health Quality Expenses / Premium ¥ Taxes (except for taxes on investment income/capital gains) 

Although it has not been indicated through regulation, it appears that the intention is to place the burden for reviewing the rebate calculation on IDOI, similar to 

the rebate calculation for Medicare supplemental products that IDOI’s actuary currently reviews. This new responsibility is in addition to the increased rate filing requirements for small and large group products. Currently, IDOI is reviewing whether applying the 80%/85% will disrupt the market if applied to all insurers in 2011. 
16 

In particular, smaller domestic insurance companies may be at an increased risk for 

insolvency and insurers that offer high deductible/HSA plans may have difficulty 

meeting this as well, which could affect the consumer-driven product market. Thus 

far, nearly 10% of the insurers operating in Indiana’s individual market have withdrawn, and many others are threatening withdrawal in the near future. The private 

market’s reaction to even these early requirements is ominous. 2014 is steadfastly 

approaching. Consumer choice is dwindling. Health insurance premiums are rising. 

In an effort to promote consumer choice and protect the insurance market, Indiana 

has applied for a waiver from the federal MLR requirements. This way Indiana can 

continue to apply its own criteria when reviewing rates for compliance, as IDOI and 

other regulators have the best knowledge of the market and will do what is best 

for Hoosiers. Obtaining the waiver will allow IDOI to have more autonomous control 

over its insurance market so that it can continue pursuing its top priority of protecting Hoosiers’ interests and health care options in the face of ACA’s churning sea 

of legislative amendments and its resulting economic fallout. 

Chairman ROE. Thank you. 

Dr. Carlson? 

STATEMENT OF DAVID CARLSON, M.D., GENERAL SURGEON, 

EVANSVILLE SURGICAL ASSOCIATES 

Dr. CARLSON. Mr. Chairman, Representative Bucshon, thank you 

very much for the opportunity to testify before the Subcommittee 

on Health, Employment, Labor, and Pensions. 

I am President of Evansville Surgical Associates and have been 

practicing general surgery in Evansville for over 30 years. 

I am not a health care policy expert, and I am definitely not an 

expert on this law. I am a health care provider. My limited time 

this morning permits me to comment on only a few aspects of this 

bill. My comments are derived from personal experience, from discussions with many of my colleagues over the last year since passage of the Affordable Care Act, from attempts at reading and trying to understand portions of this bill, and unlike Representative 

Roe, I have not read the entire bill. And I have also studied commentaries made by experts on all sides of the political spectrum. 

I think very few of us would find fault with the intent of the new 

health care law, which is to provide health care coverage for those 

Americans presently uninsured and, among other things, to prohibit insurance companies from canceling policies without due 

cause, and to eliminate preexisting conditions as a basis for exclusion from insurance coverage, while at the same time reducing 

health care costs. 

This bill is very complex and it is full of many new regulations, 

huge new bureaucratic entities, and what I think are many disincentives to small businesses to begin or continue providing health 

care for their employees. Despite the predictions by the administration that health care costs will be controlled and reduced, no one 

who has practiced medicine in the era of Medicare, which is heading toward insolvency, and Medicaid, which is straining the budgets of most States, should and can seriously believe that this massive new Government program can possibly control the cost of 

health care without rationing care or adding significant new taxes 

to the American public. 

The point has already been made that the expansion of Medicaid 

is estimated to cost $3 billion to $4 billion over the next decade for 

the State of Indiana. Indiana is one of the few States in relatively 

stable financial condition, but it simply cannot afford this price tag 
17 

without a significant increase in taxes or reduction in services, 

which will obviously affect every Hoosier worker and employer in 

a negative way. 

Indiana has been a leader in medical tort reform, and malpractice rates for physicians in this State are considered reasonable 

by most. The health care law is completely silent on medical liability tort reform. Logical and reasonable nationwide tort reform is 

certain to help lower medical costs. Unless protected by real tort 

reform, Indiana physicians and physicians throughout the country 

will have no choice but to continue protecting themselves from 

medical liability by ordering unnecessary tests, thereby fueling skyrocketing health care costs. 

The employer mandate requires most small businesses to provide 

insurance to their employees or pay penalties or both. My surgical 

practice, which is a small business, has about 70 full-time employees and we provide them with excellent comprehensive health care 

insurance. Under the law, most of our employees would be eligible 

for Government subsidies for the purchase of health insurance because their household income is less than $88,000 for a family of 

four, which is 400 percent of the Federal poverty line. My company, 

therefore, faces a penalty equal to the lesser of $3,000 per subsidized employee, those eligible for the subsidy, which would total 

about $200,000 or $2,000 per employee if we don’t offer health care 

insurance. So basically whichever we choose, this law is going to 

cost my company an additional $120,000 a year if we continue to 

provide our current health care insurance to our employees. Many 

small businesses, when faced with this type situation, are simply 

going to drop employee coverage, absorb the penalty, and let the 

Government provide Medicaid-style health care for their employees. 

Finally, let me say a few words about access to health care. I 

cannot speak for all physicians. Evansville Surgical Associates accepts all patients regardless of insurance or lack thereof because of 

the nature of the services we provide, which is often acute care and 

emergency surgery. I know from discussions with my primary care 

colleagues that a sudden increase in the number of Medicaid patients seeking medical attention simply would overwhelm them and 

the system. There are not enough physicians to see these patients 

and most practices cannot survive on Medicaid reimbursement. As 

presently designed, this new law, while providing health coverage, 

does not offer a tenable solution to the problem of access to the 

health care system. 

This concludes my remarks. Again, let me express my appreciation for the privilege of testifying before the committee. 

[The statement of Dr. Carlson follows:] 

Prepared Statement of David Carlson, M.D., Evansville Surgical Associates 

Thank you for the opportunity to testify before the Sub Committee on Health, 

Employment, Labor, and Pensions. 

I am President of Evansville Surgical Associates and have been practicing general 

surgery in Evansville for over 30 years. My group includes 17 surgeons and we employ over 70 individuals. We are by definition a small business. 

I am not a healthcare policy expert and I definitely am not an expert on this law. 

I am a healthcare provider. My limited time this morning permits me to comment 

on only a few aspects of this bill. My comments are derived from personal experience, from discussions with many of my colleagues over the last year since passage 

of the Patient Protection and Affordable Care Act, from attempts at reading and try-
18 

ing to understand portions of this bill, and from commentaries made by experts on 

all sides of the political spectrum. 

Very few of us would find fault with the intent of the new healthcare law, which 

is to provide health care coverage for those Americans presently uninsured and, 

among other things, to prohibit insurance companies from canceling policies without 

due cause, and to eliminate pre-existing conditions as a basis for exclusion from insurance coverage, while at the same time reducing healthcare costs. 

This bill is very complex and full of new regulations, huge new bureaucratic entities, and many disincentives to small businesses to begin or continue providing 

health care for their employees. Despite the predictions by the administration that 

healthcare costs will be controlled and reduced, no one who has practiced medicine 

in the era of Medicare, which is heading toward insolvency in the future, and Medicaid, which is straining the budgets of most states, can seriously believe that this 

massive new government program can possibly control the cost of healthcare without rationing care or adding significant new taxes to the American public. 

The expansion of Medicaid will cover one in four Hoosiers, and is estimated to 

cost the state between $3.1 billion to $3.9 billion over the next decade, according 

to an actuarial analysis by Milliman, Inc. of Indianapolis. Indiana is one of the few 

states in stable financial condition, but it simply can’t afford this price tag without 

a significant increase in state taxes or a reduction in state provided services, which 

will affect every Hoosier worker and employer in a negative way. 

Indiana has been a leader in medical tort reform and malpractice rates for physicians are considered reasonable by most. The new healthcare law is completely silent on medical liability tort reform. Logical and reasonable nationwide tort reform 

is certain to help lower medical costs. Unless protected by real tort reform, Indiana 

physicians will have no choice but to continue protecting themselves from medical 

liability by ordering unnecessary tests, thereby fueling skyrocketing healthcare 

costs. 

The Employer Mandate requires most small businesses to provide insurance to 

their employees, or pay penalties, or both. My surgical practice, which in essence 

is a small business, has about 70 full-time employees and we provide them with excellent comprehensive healthcare insurance. Under the new law, most of our employees would be eligible for government subsidies for the purchase of health insurance because their household income is less than $88,000 for a family of four, which 

is 400% of the federal poverty line. My company therefore faces a penalty equal to 

the lesser of $3000 per subsidized employee, which totals $210,000, or $2000 per 

employee, which totals $120,000. So this law would cost Evansville Surgical Associates an additional $120,000 per year to continue providing our current health coverage to our employees. Many small businesses, when faced with this situation, will 

simply drop employee coverage, absorb the financial penalty, and let the government provide Medicaid style health care for their employees. 

Finally, let me say a few words about access to health care. I cannot speak for 

all physicians. Evansville Surgical Associates accepts all patients regardless of insurance or lack thereof because of the nature of the services we provide, which is 

often acute care and emergency surgery. I know from discussions with my primary 

care colleagues that a sudden increase in the number of Medicaid patients seeking 

medical attention simply would overwhelm them and the system. There are not 

enough physicians to see these patients and most practices could not survive on 

Medicaid reimbursement. As presently designed, this new law, while providing 

health coverage, does not offer a tenable solution to the problem of access to the 

health care system. 

This concludes my remarks. Again let me express my appreciation for the privilege of testifying before this Committee. 

Chairman ROE. Thank you, Dr. Carlson. 

Ms. Wilson? 

STATEMENT OF ELIZABETH WILSON, FRANKLIN, IN 

Ms. WILSON. Chairman Roe, Representative Bucshon, and members of the subcommittee, thank you so much for the opportunity 

to testify today on this important topic. I am honored to appear before you. 
19 

I would also like to thank Ranking Member Andrews and Young 

Invincibles for helping to give me the opportunity to share my 

story. 

My name is Elizabeth Wilson and I live in Franklin, Indiana, 

just south of Indianapolis. I am a prime example of how the Affordable Care Act has benefitted young people and their families in Indiana. Starting the year I turned 21, my health deteriorated for 

reasons that are still not completely clear. Coping with this sickness forced me to leave school for what should have been my senior 

year of college at Butler University. In the past 3 years, I have had 

four surgeries, a lot of tests and procedures, and I have had two 

hospitalizations for complications from chronic pancreatitis. 

On my 23rd birthday, while I was in the hospital for acute pancreatitis, I aged out of my mother’s insurance. Luckily, my family 

had access to COBRA and my mother was allowed to maintain coverage for me for a brief period at my family’s expense. As you 

might expect, the high premium put a heavy financial burden on 

my family and me. Without the Federal dependent coverage extension and considering the long string of health challenges I faced 

over the past few years, I could have seen dire financial and health 

outcomes. 

I could not have continued to pay the mounting health care bills 

to the hospital, my primary care physician, or the various specialists that I had seen for the past few years if I were not able to reenroll on my mother’s health plan in January of 2011 because of 

the Affordable Care Act. Now that young adults can stay on their 

parents’ insurance until the age of 26, I have good coverage to help 

pay for ongoing doctors’ visits and medical issues that I face. I can’t 

tell you how good it feels to be insured when, for a while, I thought 

that I wouldn’t be at this point, saving for grad school while working, and trying to put my best foot forward and deal with my ongoing condition. 

I wish I could tell you that my health problems were resolved, 

but unfortunately they are not. I finally did get a diagnosis of sorts 

this past year. It is a condition called undifferentiated connective 

tissue disease. It is an autoimmune disorder and that means I will 

probably be dependent on drugs, doctors’ visits, testing, and therapies for the rest of my life to manage my symptoms and obtain a 

quality of life that all young Americans hope for. Well, a diagnosis 

of undifferentiated connective tissue disease doesn’t necessarily 

give a patient a lot of guidelines to expect from what will happen. 

My doctors in my case are concerned that my symptoms signal the 

start of a more serious disease like Lupus, and so I do have to have 

ongoing testing to confirm that I do not have Lupus or that I do, 

which is difficult to do with that disease. 

Luckily, I do know that any insurance that I have can’t put a 

lifetime cap on what they will cover for my condition and can’t kick 

me off just for being sick, even if my condition worsens. So this 

knowledge brings me some peace of mind. 

My litany of health problems also means that I will have the 

dreaded preexisting condition, but just after I age off my mom’s 

plan, discrimination based on preexisting conditions will be prohibited and insurance companies won’t be able to discriminate against 

me anymore for something beyond my control. It is difficult enough 
20 

to start out as a recent graduate and try to make it these days. To 

do that with the extra burden of severe health problems, plus the 

full financial burden of treating them, is just too much. 

I am certainly not alone in my struggles with health care or coverage. In fact, both my younger brother and my best friend went 

without coverage for more than a year. My best friend had some 

routine health screens that came back abnormal during that time 

and was unable to seek out specialist care to deal with them. And 

my family friend is now in a nursing home because she could not 

afford the newer drugs for multiple sclerosis which potentially 

could have slowed the progress of her condition. She is less than 

45. She had to leave her two young children in the care of an 18- 

year-old relative. 

Over the next few years, reform will help to address much of the 

circumstances for these problems, along with expanded affordable 

insurance options and access to preventive care. Those are the consequences of the recent health care law for Indiana workers and 

families. 

I am now 24 years old, and I have finally graduated from college. 

After spending another year out of school to deal with my medical 

problems, I will be starting at grad school within the next academic 

year. Fingers crossed. I have to get accepted first. My health care 

problems have caused me to start 2 years later than I had originally planned, but thanks to the health care I have received and 

will continue to receive because of the Affordable Care Act, I will 

at least have the opportunity to start at all. 

I have learned that we are all vulnerable to unexpected illness 

and injury regardless of our age. And my story could have ended 

more tragically for both me and for my family. That more tragic 

tale was prevented by the recent health care law. 

[The statement of Ms. Wilson follows:] 

Prepared Statement of Elizabeth Wilson, Franklin, IN 

Chairman Roe, Ranking Member Andrews, and members of the subcommittee. 

Thank you for the opportunity to testify today on this important topic. I am honored 

to appear before you today. I would also like to thank Young Invincibles for helping 

to give me the opportunity to share my story. 

My name is Elizabeth Wilson, and I live in Franklin, Indiana. I am a prime example of how the Affordable Care Act has benefited young people and their families 

in Indiana. Since the year I turned 21, my health deteriorated for no known reason. 

Coping with this sickness forced me to leave school for what should have been my 

senior year of college at Butler University. 

On my 23rd birthday, while I was in the hospital for acute pancreatitis, I aged 

out of my mother’s insurance. Luckily, my family had access to COBRA, and my 

mother was allowed to maintain coverage for me for a brief period, at my family’s 

expense. As you might expect, the high premium put a heavy financial burden on 

my family and me. Without the federal dependent coverage extension, and considering the long string of health challenges that I’ve faced over the past few years, 

I could have seen dire financial and health outcomes. 

I could not have continued to pay the mounting healthcare bills to the hospital, 

my primary care physician, or the various specialists that I had been seeing for the 

past few years if I were not able to reenroll in my mother’s health plan in January 

2011 because of the Affordable Care Act. Now that young adults can stay on their 

parent’s insurance until the age of 26, I have good coverage to help pay for the ongoing doctors’ visits and medical issues that I face. I can’t tell you how good it feels 

to be insured, saving for grad school, and trying to put my best foot forward and 

deal with my condition. 

I wish that I could tell you that my health problems were solved, but unfortunately, they’re not. I finally got a diagnosis this past year, with a condition called 
21 

Undifferentiated Connective Tissue Disease. It is an autoimmune disorder, and that 

means I will be dependent upon on drugs, doctors’ visits, testing, and therapies for 

the rest of my life to manage my symptoms and obtain a quality of life that all 

young Americans hope for. What is more worrisome is my doctors’ concern that my 

condition is caused by the early stages of a more serious disease like Lupus or rheumatoid arthritis. Luckily, I know that any insurance that I have can’t put a lifetime 

cap on what they will cover for my condition. They also can’t kick me off just for 

being sick, even if my condition worsens. This knowledge brings me some peace of 

mind. 

My litany of health problems also means that I’ll have the dreaded ‘‘pre-existing 

condition.’’ But just after I age off my mom’s plan, discrimination based on pre-existing conditions will be prohibited, and insurance companies won’t be able to discriminate against me anymore for something that I can’t control. It’s difficult enough to 

start out as a recent graduate and try to make it these days. To do that with the 

extra burden of severe health problems, plus the full financial burden of treating 

them, is just too much. 

I’m certainly not alone in my struggles with health care or coverage. In fact, both 

my younger brother and my best friend went without coverage for more than a year, 

and a family friend is now in a nursing home because she had no access drugs that 

could have slowed the progress of her multiple sclerosis, forcing her leaving her two 

children with an 18-year old relative. Over the next few years, reform will help address all of that, with expanded affordable insurance options, and access to preventive care: those are the consequences of the recent health care law for Indiana workers and families. 

I am now 24 years old. I have finally graduated from college. After spending another year out of school to deal with my medical problems, I will be starting at graduate school within the next academic year. Because of my health problems, I will 

be starting two years later than I’d originally planned. But thanks to the health 

care I have received and will continue to receive because of the Affordable Care Act, 

I will at least have the opportunity to start at all. 

We are all vulnerable to unexpected illness or injury, regardless of our age. My 

story is far too common a reality that could have ended in a more tragic tale. That 

tale was prevented by the recent health care law. 

Chairman ROE. Thank you, Ms. Wilson. 

Ms. Lang? 

STATEMENT OF SHERRY LANG, H.R. DIRECTOR, 

WOMACK RESTAURANTS 

Ms. LANG. My name is Sherry Lang, and I am the Director of 

Human Resources for Womack Restaurants. We are a 12-unit 

IHOP franchisee based in Indiana with restaurants in Ohio. I am 

here today to represent my company and the restaurant industry 

and small business. 

I have a master’s degree in human resource development and 

over 17 years’ experience in corporate HR. I spent the last 12 years 

at the executive level, and so I have been involved in all areas of 

business management. 

I started with Womack Restaurants in 2005 and helped grow this 

company from 3 IHOP restaurants to the current 12. We currently 

have an expansion plan in place to build an additional 13 IHOP’s. 

I guess I am here today to share my experience and my understanding of how this health care law will affect our company and 

similar companies in Indiana. 

The restaurant business is unique. It is really built on a small 

business model and profit margins are commonly only 5 to 7 percent. We are the most labor-intensive of any industry. We rank 

dead last in revenue per employee at $58,000. If you compare this 

to the next closest industries, hotels are about $107,000 in revenue 

per employee, retail at $170,000, banks at $443,000, and oil refin-
22 

eries whose revenue is about $4 million per employee. Again, restaurants are $58,000. 

The cost to employers of this health care law is completely, 100 

percent dependent on how many employees you have, regardless of 

your revenue and regardless of your ability to pay. We conservatively estimate with our company the cost of buying health care 

insurance will be over 50 percent more than our company’s earnings. And our company is very profitable. 

It is a one-size-fits-all law for employers and this industry 

doesn’t fit. Though some restaurant companies currently offer coverage now, most of those are mini-med plans. They are very limited 

coverage plans and they are designed specifically for employers like 

retail and restaurants. Even those plans will not qualify to meet 

the definitions of mandates in 2014. 

The only viable alternative for our industry is to pay the $2,000 

per employee penalty, and that is not tax deductible. That means, 

first, we have to earn that $2,000, and then we have to pay taxes 

on it. And so the true cost of that is about $2,800 per employee. 

A quick study of public restaurant companies shows that many 

didn’t earn enough in 2010 to pay the penalties, and they simply 

will not survive. These penalties equal 60 percent of our earnings, 

and gain, by restaurant industry standards, we are a very profitable company. 

Restaurants are also facing many, many challenges. We have rising commodity prices, State and local taxes, unemployment taxes, 

energy prices, and so on. And yet, restaurants—we cannot raise 

prices in this economy. Our only alternative is to cut costs. Cutting 

costs means cutting staff, reducing hours, making a lot more people 

part-time. It is going to be trimming services that are provided by 

other small business that are directly supported by the restaurant 

industry such as food suppliers and equipment suppliers. 

In addition, we have considered stopping our new restaurant development and may even forfeit the agreement we are already invested in. And that agreement was about $360,000. This future development would equal about $22 million in construction and development spending, and at least 260 full-time jobs. I would also like 

to point out that the restaurant equipment industry is one of the 

uniquely American manufacturing industries, and it has already 

been devastated in this economy. 

The restaurant industry has such an important role in this economy. We employ 12.7 million people. Restaurants are often a first 

opportunity for young or unskilled workers and a place where they 

can actually turn that part-time job into a career. 50 percent of the 

managers in our company were promoted from within and started 

out with us as hourly staff. My first job was in a restaurant. The 

owner of my company started in a restaurant. It is also a unique 

industry in that it offers a lot of second chances for people starting 

over. It is an opportunity for those reentering society after incarceration. It is a second job for those digging out of a financial hole. 

We need this industry, but it cannot support this health care mandate and continue to thrive. 

Furthermore, our lenders, as required by regulators, require us 

to maintain certain levels of profitability via our loan covenants. 

Our mortgages, our leases, our franchise agreements—these things 
23 

1 CNN/Money’s Fortune 500 Report, 2009 

are often 15 to 20 years long. We have major obligations that we 

cannot walk away from in 2014. Profit equals development. If there 

is little or no profit, there will be no development. 

On a related note, I am really seriously concerned that we are 

not going to be able to continue offering the health care plan that 

we offer now to our management and our office staff, based on the 

changes in who we must provide coverage for, as well as the compensation rules. 

In summary, the goal of providing health insurance to everyone 

is noble and good. In theory, we support it, but this industry cannot afford to pay this bill. It comes down to basic math. At $58,000 

in revenue per employee, $3,000 of that is profit. The cost of health 

care per employee is about $10,000. That leaves a $7,000 debt. Our 

only option is to pay the penalties. But even that, simply paying 

the penalties is going to be devastating for most of us in this industry. 

Thank you. 

[The statement of Ms. Lang follows:] 

Prepared Statement of Sherry Lang, Womack Restaurants 

My name is Sherry Lang. I am the Director of Human Resources for Womack Restaurants, a 12 unit IHOP Franchisee in Indiana and Ohio. I am here today to represent my company, the restaurant industry and small businesses. I have a Master’s 

degree in Human Resource Development and over 17 years’ experience. I have spent 

the last the last 12 years at the executive management level where I have been involved in all areas of business and business decisions. I started with Womack Restaurants in 2005 and have helped grow this company from 3 restaurants to the current 12 restaurants. We have an expansion plan to build 13 more IHOPS. I am here 

to share my experience and understanding of how the new healthcare law will affect 

our company and impact our future expansion. 

The restaurant business is built on a small business model, with profit margins 

commonly of only 5 to 7%. We are the most labor intensive of any industry, ranking 

dead last in revenue per employee at $58,000 per employee.1 Compare this to the 

next closest industries, Hotels, at $107,000 per employee, Retail at $170,000, Banks 

at $443,000, and Oil Refineries at over $4 million per employee. The cost to employers of new healthcare law is completely dependent on the number of employees, regardless of ability to pay. We conservatively estimate the cost of purchasing health 

insurance to be over 50% greater than our company’s earnings. And our company 

is very profitable by industry standards. 

The law is one-size-fits-all for employers, and our industry doesn’t fit. Though 

some restaurant companies offer coverage now, many are ‘‘mini-med’’ plans which 

are limited coverage plans for employers like retail and restaurants. Many will not 

meet the mandates by 2014. The only viable alternative for our industry is to pay 

the $2000 per employee penalty, which is not tax deductible. We have to earn that 

$2000 dollars first and then pay taxes on it, bringing the actual cost of the penalty 

to about $2800 for each employee. A quick study of public restaurant companies 

shows that many did not earn enough in 2010 to pay the penalties and will not survive. For my company, these penalties amount to 60% of our earnings, and again, 

our company is very profitable by industry standards. 

Restaurants are already facing many challenges, rising commodity prices, rising 

state and local taxes and unemployment taxes, rising energy prices and so on. Restaurants are unable to raise prices in this economy. Our only alternative is to cut 

costs. Cutting costs means cutting staff and reducing hours worked, putting more 

employees into part time status, and trimming services provided by other small 

businesses that are supported directly by this industry such as food suppliers and 

equipment suppliers. 

Additionally, we will be forced to cease new restaurant development and may forfeit the development agreement we invested in. That agreement cost $360,000. This 

future development would amount to $22,000,000 in construction and development 

spending, and at least 260 full time restaurant jobs. I would like to also point out 
24 

2 National Restaurant Association 

that the restaurant equipment industry is a uniquely American manufacturing industry. That industry has already been devastated by the economy. 

The restaurant industry serves an important role in our economy, employing 12.7 

million people.2 It is a source of 1st opportunities for young or unskilled workers 

who can turn a part-time job into a career. 50% of our Managers were promoted 

from hourly staff. My first job was in a restaurant. The owner of my Company started in restaurants as well. It’s an industry of 2nd chances for people starting over: 

re-entering society after incarceration, or a 2nd job for those digging out of a financial hole. We need this industry but it cannot support this healthcare mandate and 

continue to thrive. 

Furthermore, our lenders, as required by regulators, require us to maintain certainly levels of profitability via loan covenants. Our mortgages, leases, and franchise 

agreements are commonly 15 to 20 years long. We have major obligations that we 

cannot walk away from in 2014. Profits equal development and if there is little to 

no profit, there will be no development and growth. 

On a related note, I have serious concerns that we will not be able to continue 

to offer the coverage we currently offer to my management and office staff, based 

on changes in who we must provide coverage for as well as the compensation rules. 

In summary, the goal of providing health insurance to everyone is noble and good, 

in theory we support it, but the restaurant industry can’t afford to pay the bill. In 

comes down to basic mathematics. At 58k in revenue per employee, we average 

$3000 in profit. The estimated cost of healthcare will be $10,000 leaving a $7000 

per employee gap. Our only option is to pay the penalties. Simply paying the penalties will be devastating for most of us in this industry. 

Chairman ROE. I thank all of the panelists. 

I am going to start with making a statement, and then I will ask 

some questions. 

First, Ms. Wilson to you, you cannot write a 2,700-page bill and 

not have some good things in there. I personally liked the 26-yearold—it is going to cost money and you understand that all the testing you have required costs a lot of money and somebody has to 

pay for that. So that is going to run the costs up. But that part 

of the bill I actually like. I like it. 

I had three kids. When they got out of college, none of them had 

health insurance coverage. I had to buy them an individual policy 

on the individual market, which is not tax deductible. 

And one of the things we could do very simply—the year I ran 

for Congress to make my health insurance cheaper was to treat me 

like a large corporation. I got no tax break. I had to go out on the 

individual market and buy that insurance which made it much 

more. If I had worked for a big company, it would have been tax 

deductible and made it much cheaper for me. So that part I like. 

A couple or three things that were mentioned by the panel that 

we need to discuss work on—there was no question about preexisting conditions. I dealt with it in my patients who had breast 

cancer, which I saw most frequently, and other problems. Rescission by the insurance companies. That is a situation that needs to 

be dealt with. So there is no question there are some good things 

in here. 

The problem with this is is anytime you have a massive, almost 

incomprehensible bill—and I have this. If any of you all would like 

to have it—I have a four-page summary—we will be glad to email 

it to any of you. It is a little simpler language. You can see when 

these things come into play. And I will be glad to make those available. We get your email. We will make sure the staff emails this 

to you. 
25 

When we start looking at costs, let me give you a little history 

lesson. We will start with Medicare. The Congressional Budget Office first said this bill was budget neutral. Well, how they got to 

budget neutrality was taking $500 billion out of an underfunded 

Medicare program. Right now it is underfunded, and right now 

under current estimates in 11 years, it is broke. I mean, in 13 

years it is broke, 2024. So we took $500 billion out of that. We took 

money out of a class act. We use student loans to pay for this. We 

use taxes on business to pay for this bill. 

If you go back and look at Medicare when it came into play in 

1965 and started in 1966, it was a $3 billion program. The Government estimators—there was no Congressional Budget Office—estimated this would be a $15 billion program in 25 years. The actual 

number was over $100 billion. They missed it by seven times. 

Our experience in the State of Tennessee. We started with a program called TennCare to help control health care costs, exactly the 

things we were talking about in 1993: access and affordability. 

That is what we are talking about. That is what you were talking 

about, Ms. Wilson, is access you would lose if you didn’t have your 

health insurance coverage. We reformed Medicaid in our State. It 

was a $2.6 billion program. In 2004, 10 budget years later, it was 

an $8.5 billion program. It took up every new dollar that the State 

of Tennessee took in. 

And what we were finding was less and less and less physicians 

were accepting it. And why is that? Dr. Carlson mentioned this. 

In our State—I don’t know about Indiana, but in our State 

TennCare or Medicaid there pays about 60 percent of the cost of 

actually providing the care. Medicare pays about 90 percent of the 

costs. So how are those costs made up? Well, they are shifted to 

the private insurers. I mean, the hospitals have to pay their personnel and buy the new equipment that we use. So that cost-shifting also forced the costs up, not only this bill did with its requirements. 

And also remember that you as a person no longer get to pick 

which insurance. The Government will decide what an essential 

benefits package is, not you as an individual. And when that happens, then the costs will go up when someone else other than you 

decides. 

Health care decisions in my opinion should be made between 

physicians and their patients, not insurance companies and certainly not the Federal Government. 

And there are a lot of onerous things we may not have time to 

go into about the current bill. 

I want to know from the standpoint—and something that you all 

ought to read is some testimony we had in front of the Lockton 

Group about a month or so ago. I mean, we are business, and the 

restaurant/entertainment business—this particular bill is devastating for your business. Could you go into that, Ms. Lang, in a 

little more detail? 

Ms. LANG. Well, you know, one of the common things in the restaurant industry—and this plays into a little bit—is that turnover 

averages about 125 percent in casual dining. We are very good. We 

are about 84 percent. But if you think about that, 84 out of every 

100 employees turns over within a 1-year time. That is just one 
26 

other piece beside the fact that at a very profitable level a company 

in this industry averages about $3,000 in profit. So we either have 

a $7,000 gap if we are going to provide coverage. Well, that is impossible. Now we are out of business. Or we give up two-thirds of 

our profit. The penalty is $2,000. We are averaging $3,000 in profit. 

Nobody is going to stay in this industry and continue to develop 

restaurants. Why would you? They are literally going to take twothirds of our profit. 

The administrative burden of the constant turnover and how 

would we do that. I mean, it would simply be impossible. We would 

not offer coverage. It is not an option. 

And many restaurants, especially large restaurant groups that 

have numerous restaurants, have separate groups of employees. 

And so for our professional staff, our managers and our administrative staff, we offer coverage, full-blown health package, 401(k), you 

know, the whole deal. We will probably have to eliminate that coverage. So I think the default, the accidental impact of this is that 

they are going to take away coverage for people that already have 

it. 

Chairman ROE. Let me just finish and I will yield to Mr. 

Bucshon. 

In this HR report, one of the things that also is brought out is 

that in the exchange, this Federal exchange that is yet to be determined—by the way, we are spending $14 billion—that is with a 

B—to set up these exchanges around the country, not to provide 

care for patients or if I write a prescription to care for that patient 

to get a prescription, but set up some more bureaucracy. Let’s say 

you drop your coverage. And we provided health insurance coverage for our employees since 1968 in our practice. If they go into 

the exchange, the subsidy the Government gives them won’t be as 

much as the subsidy I am paying right now for them. 

And secondly, that subsidy—what they have to pay extra is not 

tax deductible to them. So their coverage is actually going to go up 

if they are forced into the exchange, and you are going to be forced 

to drop coverage because you can’t afford it. And therefore, it forces 

the cost even higher. I think that is the unintended consequences 

that nobody figured out before they passed this bill. 

Ms. LANG. Absolutely. I think the unintended consequences is 

that and that you are going to have all these people in the exchange. They will probably have lesser coverage. A lot of it is going 

to be politically defined rather than defined by people who know 

and understand health care. 

Chairman ROE. Dr. Bucshon? 

Mr. BUCSHON. Ms. Crosson, I want to ask you the first question. 

In regards to the exchanges, what are some of the issues and concerns about establishing the exchanges and how the State of Indiana is going to be able to manage the exchange? And do you have 

any idea from what you are seeing now how many more people 

may be on the exchanges higher than the estimate that the Federal 

Government has said will go onto the exchange? In my view, that 

is going to be a serious problem for the State. 

Ms. CROSSON. Thank you. That is a very good question. 

The first answer—I end up saying this a lot whenever I talk 

about health care reform—is I don’t know, which is very frus-
27 

trating. The biggest concern I have is you don’t know. We don’t 

know essential benefits. We don’t know what it is going to look 

like, and when we ask, when we are trying to compare whether 

and decide whether to run a State exchange or whether the Federal Government would, one thing you would want to know is what 

I am comparing. What is the Federal Government version going to 

look like versus the State? The Federal Government tells us we 

don’t know. We will be flexible. Then I get a phone call and they 

said—it is going to be unique to each State is what you need. And 

then I get a phone call from someone in the Budget Office for HHS 

referring to the Federal exchange meaning across multi-State, 

meaning one-size-fits-all. So I don’t know the answer. 

I do know that they are estimating about 500,000 new Medicaid 

participants. The challenges and concerns are why as a small business would you go to into and offer insurance at all, especially if 

you have a narrow profit margin. Who is going to pay for it? How 

is it going to be sustainable? We are spending billions of dollars to 

set these up, but they have to be sustainable if you set it up on 

the State being at least a year of setting up. So somebody will have 

to pay for the administration, the reviews, the reporting requirements, the technology, and we don’t know what any of that is going 

to look like. 

And finally, we don’t know who is going to be around to participate on what insurance carriers. What about our small dental carriers? That is going to be—we heard for the essential benefits. So 

are vision carriers going to be able to participate on the exchange? 

Are they just going to go out of business because of major health 

insurance is going to take over that as part of their coverage? Are 

they going to partner up? 

Those are just a few. The big one is we just don’t know. We don’t 

have the regs. We don’t have the information. 

Mr. BUCSHON. So overall, with all the new mandates on the insurance industry, in aggregate do you think these mandates are 

going to raise the cost of insurance in the State of Indiana? 

Ms. CROSSON. Absolutely. Our insurers have been telling us in 

the individual market a minimum of 50 percent by 2014. We are 

hearing estimates ranging from 50 to 90 percent, and that is in the 

individual market. This is where your family or you—you purchase 

for your child. And then in the small group, at least 10 to 30. And 

again, we still don’t have all the regs out. We have only got 6,600 

pages. 

Mr. BUCSHON. Chairman Roe? 

Chairman ROE. One of the things—we are going to have a second 

round if it is okay—of questions and just briefly. And let talk a little bit or ask again a little, Ms. Crosson, about the individual mandate, how you see that affecting costs in the State. Then I will give 

you a personal example of how I think it would affect me. 

Ms. CROSSON. The individual mandate—I had the privilege to 

speak with the Governor about it and talk with his task force about 

it and really the average citizen. And the best way I can explain 

it is this. Even if it is upheld, which Indiana is part of the 26-State 

litigation and the Governor’s office in the State of Indiana and the 

Department of Insurance is—but even if it is upheld, it is ineffec-
28 

tive. It is a great thing to get more people into the pool. It spreads 

the risk and that is a fundamental, basic concept of insurance. 

But here is the problem. It is fear money. You have a choice between paying—especially for 19- to 25-year-olds, their premiums 

are going to go for maybe $100-$120 a month to probably $400 to 

$500 because they had only paid a third of the price of the highest 

charge. So now you are faced with $400-something a month when 

you were paying $128, or you wait until you get sick, you purchase 

coverage when you need it, and then you pay a $95 penalty that 

is prorated by the number of months you are covered. You are 19 

to 25. What are your priorities and you are healthy? It is nothing. 

And you have a choice. $400-something is rent or a tuition payment or, or. And that is what you are looking at. 

And even though the costs go up year after year, and when you 

are prorating and you just go in when you need it, as far as premium costs, what is going to happen is you don’t have those young 

folks you want in to spread the risk who are healthy and don’t 

need to utilize the services as often. If you are healthy, people are 

going to choose to stay out anyway until they really need it, and 

that is going to drive costs to skyrocket. 

Chairman ROE. Here is another issue that many people are not 

aware of is that since 1986, there is a law that is called MTALA. 

For instance, if I am on call at the emergency room, it is illegal for 

me not to see someone regardless of whether they are legally in 

this country or whether they can pay or not. If I am a doctor in 

the emergency room and somebody needs care, I am going to see 

you. So that is the law of the land now. 

And what has happened in Massachusetts where they have an 

individual mandate and where they have no preexisting conditions 

and no deniability—and you are exactly right. What has happened 

there is—we thought that the emergency room visits would go 

down because everybody had a primary care doctor. That is not 

what happened. What happened was the Massachusetts care actually pays about what Medicaid or less does, so less doctors are 

seen. The emergency room visits have not gone down. I just read 

an article in either JAMA or the New England Journal of Medicine 

the other day about that. 

And secondly, people wait until they get sick, and then they can’t 

be denied. So they buy the insurance coverage. Harvard Pilgrim 

Health Care Plan had that experience, and their experience was 

about six times per month cost for those people because they waited until they got sick, couldn’t be denied, bought the insurance, 

when they got well, dropped it and paid the penalty because it is 

a lot less. 

Now, I mean, I wouldn’t do that. I would go ahead and buy the 

insurance because I think you ought to be covered. But that is happening right now in Massachusetts. Indeed, they hold costs down. 

But again, back to the first premise that we have had. Have 

costs been held down? And the answer is no. They have the highest 

insurance costs in America. 

Dr. Carlson, one of the things that I am concerned about—and 

I wanted to hear your take on it—is the biggest concern I have 

when I would have a Medicare patient or a TennCare patient, was 

finding a primary care doctor for them. And I would operate on 
29 

them, and then I would go try to find someone. I am extremely 

worried about this in access because if you can’t get access to the 

physicians, the quality of your care goes down. 

Have you noticed that here where Medicare patients are having 

a harder time finding a primary care doctor? 

Dr. CARLSON. We have noticed that. A number of primary care 

physicians are not accepting any new patients and some who are 

accepting patients will definitely limit the number of Medicare patients they see. So our office is tasked many times with trying to 

assist the patient in finding a primary care physician, and it is 

tough. We have a list of physicians, and there are not many that 

we rely on to take these patients. 

So access is a problem, and the reason is—several reasons. One 

is just the number of patients the individual doctor can see, and 

number two is the rate of reimbursement. You have to run your 

practice. You have to make a profit to pay your employees, and you 

can’t do that if you see a great deal of Medicare or Medicaid patients. It is very difficult to do that. 

Chairman ROE. Dr. Bucshon? 

Mr. BUCSHON. Yes. Dr. Carlson, I also wanted to comment on 

how defensive medicine—how you see it affecting the overall cost 

of the health care system. There is some debate on that in Washington, D.C., and some say that that is not actually a significant 

percentage of the health care cost. But can you comment on your 

experience? 

Dr. CARLSON. I don’t know exactly what the figures are, but it 

definitely contributes to health care costs. I will just give you an 

example. We cover the trauma programs in Evansville. We see lots 

of patients come to the emergency room with trauma, some major 

trauma, some minor trauma, but once a patient is designated a 

trauma patient, regardless of how minor the injury seems to be on 

a quick examination, virtually all those patients get CT scans of 

the head, the neck, the chest, the abdomen, and the pelvis, thousands of dollars worth of tests. They are not medically necessary 

many times, but you certainly don’t want to be caught missing 

something. And so everybody gets this. That is just one example of 

the cost that is unnecessary but physicians order it. They don’t 

want to get trapped. 

Chairman ROE. Will the gentleman yield? 

Mr. BUCSHON. I will yield. 

Chairman ROE. I use the example of when I was in residency, 

we didn’t make much money. I mean, I made $280 a month, probably about what you made. Both of us may have been overpaid, but 

anyway that is about how much money I made. And I remember 

I moonlighted in some of the emergency rooms. If you would go to 

the emergency room and a patient would come in and they had 

some right lower quadrant pain, you would press—press on them, 

you would get a blood count, which is $15-$20, whatever it was 

then. And you would say I don’t think have—your temperature is 

99, white count is 10,000, probably not anything. You are probably 

okay. Once you go home, if it gets worse, why don’t you come back 

and we will take a peak at you. And if you vomit, you know, just 

come on back if the symptoms get worse. That is how we did it 30 

years ago. 
30 

Today—you are absolutely right—you are going to glow in the 

dark when you leave the emergency room. [Laughter.] 

And the reason you are is because that has now become the 

standard of care, unfortunately. It is not the standard of care. 

And so those are the kinds of things I think that suddenly add 

to the cost that is out there that you can’t calculate what it is, but 

I know it and you know it. You can examine a patient’s abdomen. 

I can guarantee you a skilled surgeon as you are and not needing 

a lot of the testing that is done, but you may get that test to protect yourself in case the 1 in 1,000, 1 in 100, whatever it may be, 

because if you do, you just get your pen out and start writing zeroes and commas and the check. 

So it does add to the cost and doesn’t add to the quality. And I 

think that is one of the things we have to address and we are not 

addressing it Washington. And quite frankly, I don’t know what we 

wouldn’t mess it up in Washington. It may best be left to the State 

level where you can do that. 

I think I finished my questioning of this panel. I really appreciate your being here and taking your time to come and prepare 

your testimony. It has been very helpful, and I think we need to 

do more of this around the country and less of it in Washington. 

Thanks very much for being here. 

We now would like to have our second panel come in. 

Thank you all. [Applause.] 

Thank you all for your attention, and I would like to take this 

opportunity to welcome our second panel. Dr. Bucshon, I will now 

yield to you for introduction of our second distinguished panel. 

Mr. BUCSHON. Thank you, Chairman Roe. 

Again, it is a pleasure to introduce this panel, and thank you all 

for coming and being willing to testify. 

First is Representative Mark Messmer who serves the people of 

the 63rd district in the Indiana House of Representatives. Mr. 

Messmer is also a mechanical engineer and co-owns Messmer Mechanical, a plumbing and heating contracting business founded by 

his mother and father. Messmer Mechanical is based in Jasper, Indiana, and has 47 employees. 

The Reverend George Philip Hoy formerly represented the 77th 

district in the Indiana House of Representatives. He is a resident 

of Evansville and a retired ordained minister of the United Church 

of Christ. He is now serving as the interim pastor of Zion United 

Church of Christ in Henderson, Kentucky. He serves as the religious co-chair of Tri-State Jobs with Justice and chaplain of the 

Central Labor Council and is testifying today on their behalf. 

Denis Johnson serves as the Vice President of Operations for 

Boston Scientific’s Spencer, Indiana plant. Boston Scientific has 

about 15,000 employees in the United States and about 1,000 of 

those employees are located in Spencer, Indiana, which is in the 

8th congressional district, where they produce 2.2 million less 

invasive medical devices every year. 

Mr. Glen Graber is the President of Graber Post Buildings in 

Odon, Indiana which manufactures and distributes materials for 

post frame structure and metal roofing projects. Graber Post employs approximately 210 workers. 

Thank you all for being here. 
31 

Chairman ROE. Thank you all, and let me explain the lights 

again for you all that weren’t here. It is 5 minutes per testimony, 

and the red light will go on at the end of the 5 minutes. The amber 

light in the middle means you have 1 more minute to complete 

your testimony. If you are in the middle of a thought, please go 

ahead and finish it. We are not going to cut the sound off. 

So with that, Mr. Messmer, you may begin. 

STATEMENT OF HON. MARK MESSMER, INDIANA HOUSE OF 

REPRESENTATIVES; MESSMER MECHANICAL 

Mr. MESSMER. Hello, my name is Mark Messmer, and I am the 

Vice President and co-owner of Messmer Mechanical. We are a 

family-owned contracting business with 47 employees. There are 32 

of those that are members of the Local 136 plumbers and pipefitters. 12 are full-time non-union employees, and 3 part-time employees. 

We pay 100 percent of the health insurance costs for our employees. The union members’ insurance costs our company $5.95 per 

hour. If the nonunion employees need family coverage, they pay the 

difference between the cost of the employee coverage and the family plan. 

Our health insurance premiums have paced well beyond the rate 

of inflation for a long time. In 2009, our rates went up 28 percent; 

in 2010, another 26 percent; and in 2011, after implementation of 

the Patient Protection and Affordable Care Act, otherwise known 

as Obamacare, they went up a whopping 44 percent. So much for 

affordable. 

Rising medical insurance costs have made it impossible for us to 

provide any raises during the 2009-2010 recession, and it made it 

extremely difficult to reinvest in our business. 

We have exhausted all the easy fixes to our rising medical insurance costs. We raised the deductible in 2009 from $500 to $1,000 

per person, and in 2011, we had to raise the maximum out of pocket from $3,000 to $4,000 per individual and $8,000 per family. The 

employees that are buying family plans in 2011 were allowed to 

raise their deductible to $3,500 per person or $10,500 per family 

just to hold their costs to the 14 percent increase. These changes 

are only shifting the cost of medical procedures to the patient, not 

cost containment. 

We bid out our insurance every year to various insurance carriers around the area, and a 44 percent rate increase was the lowest we could get. Our rate increases are not due to history of our 

group. I confirmed from our agent that the major factor driving our 

rates through the roof is the impact of Obamacare on the medical 

insurance industry, and our small group pool—he said about half 

of the underwriters have dropped out of providing coverage in Indiana. Less competition means higher rates. 

The temporary small business tax credit is very counterproductive to the very idea of growing your business. Businesses 

that grow will be penalized for that success. How stupid is that? 

When the institutional attitude of Congress is one that looks to 

punish businesses for being successful, our American economy and 

our individual liberty are in great danger. 
32 

I see nothing in Obamacare that will help in lowering the cost 

of providing insurance for my employees. We were told that cost 

containment was the goal of the new law. The problem with our 

current system is I pay in premiums to an insurance carrier who 

pays for procedures to doctors and hospitals to services provided to 

a third party person. It is a vicious cycle with the end consumer 

of the service having no connection to the cost. They have no skin 

in the game. The system is forcing me to the point of dumping my 

coverage and just saying the heck with it. Let the Government take 

it over, but we are all in trouble when that happens. 

Looking ahead, I see nothing but more trouble ahead for businesses of all sizes. The taxing on private insurers, which is going 

to happen in 2014, will only be passed on through to the small 

businesses who purchase those plans like myself. The $100 billion 

they are projected to generate will punish the small businesses 

that Congress was supposedly protecting with the small business 

tax credit. What a joke. Congress tells you they are going to help 

you with one hand and nail you with the other. 

Plus, the requirement for those over 50 employees to insure parttime workers, jobs creation is going to be almost impossible. We are 

at 47 employees now. Do you think we are going to let our company 

grow to 50 without repercussions? When insurance is required for 

part-time employees, I will have to fire my part-time workers. I 

cannot afford to keep them. It will be almost impossible for an entrepreneur to get a new business started. 

The individual and company penalties for not providing or buying insurance are obviously set artificially low now to encourage me 

as a business owner to drop my coverage. When I compare a $2,000 

fine versus the $10,000 to $15,000 that these plans are headed toward, it will be much easier just to pay the fine. It is blatantly obvious to me that as soon as the Government sees the millions of 

new uninsured people that these low fines are encouraging, those 

fines will escalate dramatically. They will come down like a hammer on small and large employers alike and be another crushing 

blow to jobs creation in this country. 

Where in any of this debate has there been an attempt to promote programs like HSA’s that put the consumer directly into the 

decision-making process of their health care dollars? Why was 

there no attempt to implement malpractice reform like the State of 

Indiana has adopted? Why not change the rules that would allow 

me to buy insurance across State lines to bring more competition 

and more carriers into our markets? 

If cost containment was the goal, then why was everything that 

has been implemented under Obamacare destined to raise the overall health care cost and, in turn, my insurance costs? 

If Obamacare is so great, why has the Health and Human Services Secretary written 1,372 waivers so far? Putting it bluntly, that 

is a bunch of crap. If it is good enough for me and my business, 

it is good enough for you and it is good enough for every other employer in this country. 

Thank you. 

[The statement of Mr. Messmer follows:] 
33 

Prepared Statement of Hon. Mark Messmer, Member, Indiana House of 

Representatives; Vice President, Messmer Mechanical, Inc. 

Hello, my name is Mark Messmer. I would like to thank Congressman Bucshon 

for inviting me to be here today. I am Vice President and co-owner of Messmer Mechanical, Inc in Jasper, IN. We are a family owned plumbing and heating contracting business that was founded by my father and mother, Gerald and Linda 

Messmer, in 1970. We are long time members of the National Federation of Independent Businesses. We have 47 employees. There are 32 that are union members 

of Local 136 plumbers and pipefitters, 12 full time nonunion and 3 part time employees. Of our union employees 9 are building trade journeyman, 18 are residential 

journeyman and 5 are apprentices. 

We pay 100% of the health insurance costs for our employees. The union members’ insurance costs our company $5.95 per hour. The building trade members have 

that insurance fee paid to the local 136 medical insurance fund. The residential 

journeyman and apprentices receive that amount in cash, which they can use to go 

out and buy a private insurance plan on their own, or buy the same insurance that 

we provide to the nonunion employees. If our nonunion employees need family coverage, they pay the difference between the cost of the employee coverage and the 

cost of the family plan. 

Our health insurance premiums have historically increased well beyond the rate 

of inflation, which is typical for most small employers trying to provide insurance 

for their employees. In 2009 alone our rates went up 28%, in 2010 another 26%, 

and in 2011, after the implementation of the Patient Protection and Affordable Care 

Act, they went up a whopping 44%. The new law ignores the rising cost of health 

insurance. In fact, the mandates, coverage requirements and taxes exacerbate the 

affordability problem. The out of control cost of our employee medical insurance is 

quickly becoming a prohibitive expense for our small business and other small businesses throughout the country. 

The recession we are still dealing with has compounded the problem. During 2009 

and 2010 when our company struggled to break even due to the recession’s impact 

on the construction industry, it became very difficult to justify continuing to cover 

medical insurance benefits for our employees. Rising medical insurance costs made 

it impossible to provide any raises during that time frame, and made it extremely 

difficult to reinvest in our business. 

We have exhausted all the ‘‘easy’’ fixes to our rising medical insurance. We raised 

the deductible from $500 to $1,000 in 2009 to hold the increase at 28%. In 2011 

we had to raise the maximum out of pocket from $3,000 to $4,000 per individual 

and $8,000 per family to hold the increase to 44%. The employees that were buying 

family plans were allowed to raise their deductible to $3,500 per person and $10,500 

per family to limit the increase in those plans to 14%. These changes are only shifting the cost of the medical procedures to our employees, not cost containment. Further cost shifting is inevitable if the law is enacted as written, increasing costs for 

individuals, employers and the federal government. 

We bid out our insurance every year and did again this year and the 44% increase 

was the lowest rate we could get. We have been with SIHO for 4 years and were 

with Anthem for 3-4 years before that. I confirmed with our insurance agent that 

our rate increases were not due to the medical history of our group. We have a relatively young pool and have had almost no change in the amount of claims in our 

group for several years and have no high risk cases in our group. I also confirmed 

from our agent that the one major factor driving our rates through the roof is the 

impact of the new law on the medical insurance industry. He confirmed over the 

last year that the rate increase is largely due to raising the dependant coverage age 

to 26, no pre-existing condition exclusions for children, no lifetime benefit limits, no 

rescissions, and no cost sharing for preventative services have all impacted our 

rates. He also said one of the biggest causes for the increased costs is the fact that 

about half of the underwriters have dropped out of providing medical insurance in 

Indiana, and with less competition means higher prices. While these early provisions are popular, they all have only one impact on costs and that is to drive them 

higher. 

The supposed small business tax credit is very counterproductive to the very idea 

of growing your business. The tax credit is temporary and so targeted that very few 

small businesses will be able to take advantage of it. Businesses that are successful 

and should be encouraged to continue to provide coverage are penalized for that success because they are ineligible for the credit. The same can be said of the insurance 

companies that are successful. Instead of being looked at as good businesses that 

provided great customer satisfaction, they have been demonized and targeted. 
34 

I see nothing in the new law that will help in lowering my cost of providing or 

health insurance to my employees, only policy that will move the costs upward in 

the wrong direction. We were told that cost containment was the goal of the new 

law. The whole idea of public buy-in on $10 prescription co-pays and $25 office copays have no connection with what those things actually cost. The problem with our 

current system is that I pay a premium to an insurance carrier, who pays hospitals 

and doctors for services used by a third person. It is a vicious cycle with the end 

consumer of the service having NO connection to the cost. The consumer of the service has no skin in the game. As the consumer is further removed from the interaction, as mandated by the new law, they are encouraged to utilize more medical 

services. The cost pressures in the current system will force me to the point of 

dumping my coverage instead of promoting flexibility and encouraging me to keep 

coverage. I fear that day for all of us. 

Looking ahead I see nothing but more trouble for businesses of all size. The taxing on private insurers in 2014 will only be passed through to all purchasers of insurance. Those purchasers are me, the small business owner. This is an $8 billion 

tax in 2014, growing to over $14 billion in 2018. The $100 billion it is proposed to 

‘‘generate’’ over the next ten years will be born on the backs of the small business 

owner and vastly outweigh any savings from the small business tax credit. Advocates for the law tell you they are helping you in one hand but this tax will nail 

you with the other. This small business health insurance tax, or HIT, will once 

again punish the 2 million small business owners and their employees, effecting 26 

million people covered under these plans. Additional coverage mandates, removal of 

all annual and lifetime limits, guaranteed issue and renewal, and restrictions in underwriting factors will continue to drive up my costs. The requirement for employers 

with over 50 employees to insure part time and seasonal workers provides strong 

disincentives toward job creation. When insurance is required for part time employees, I will be unable hire another part time worker. It will be almost impossible for 

an entrepreneur to start a new business and hire. 

The fines and penalties on individuals and companies for not buying or providing 

government-approved insurance are set so artificially low that the incentives encourage me as a business owner to drop coverage. When I compare a $2,000 fine 

verse the $10,000-$15,000 that these policies are headed toward, it won’t take much 

longer for me to be forced to pay the fine. The low individual penalty along with 

the elimination of pre-existing condition exclusions encourages individuals to wait 

until they get sick to buy a policy. It is blatantly obvious to me that as soon as the 

government sees millions of new uninsured people in this country that the low penalties are encouraging, those penalties will escalate dramatically, by five or ten fold. 

The new law cannot be paid for as shown by the current projections. The inevitable 

increase in the penalty and fine costs will come down like a hammer on small and 

large employers alike, kill job creation, and be another crushing blow to our individual freedom and liberty. 

Where in any of this debate has there been any attempt to promote affordable 

options like HSA’s that put the consumer directly into the decision making mode 

of how their health care dollars get spent? Why was there no attempt to implement 

malpractice reform like the State of Indiana has adopted? Why not change rules 

that would allow me to buy health insurance across state lines to bring more competition and more carriers into our markets? By removing lifetime limits from insurance policies, do you not think that hospitals will be encouraged to charge more for 

services they provide and raise overall costs? I think that seems obvious. If cost containment is the goal, then why was everything that was implemented in the law 

destined to raise overall costs, and thereby, my insurance costs? 

I would like to thank you once again for the invitation to be here today and would 

be happy to answer any of your questions. 

Chairman ROE. Thank you, Mr. Messmer. 

Rev. Hoy? 

STATEMENT OF REV. GEORGE PHILIP HOY, RET., 

UNITED CHURCH OF CHRIST 

Rev. Hoy. My name is George Philip Hoy. I have been an ordained minister in the United Church of Christ for more than 50 

years. I am now retired and serving as interim pastor of Zion 

United Church of Christ in Henderson, Kentucky. However, I am 
35 

a lifelong Indiana resident and have lived in my current home in 

downtown Evansville for 29 years. 

I am also Religion Co-Chair of Tri-State Jobs with Justice and 

Chaplain of the Central Labor Council. I have also been an elected 

official. I served on the Vanderburgh County Council for 12 years 

and in the Indiana House of Representatives for 4 years. 

I speak in support of the Affordable Health Care Act. Why? I am 

a firm believer in a single payer health care system. The legislation 

that is now law offers numerous benefits to the State of Indiana 

and its citizens. 

There are 28 definable benefits achieved in 2010, 19 definable 

benefits in 2011. From personal and professional experience, I wish 

to address a few of those benefits. 

During the past few years, I have had open heart surgery and 

my wife has been treated for breast cancer. Yet, we count ourselves 

among the more fortunate citizens of the United States. If not for 

Medicare and the insurance we have through my denomination’s 

pension board, we would be facing bankruptcy. 

Last Sunday, Paul, a member of our church who is now undergoing chemotherapy, said he couldn’t wait until his last chemotherapy session in December. After his final treatment, he will 

have to file for bankruptcy. His medical debt, as of Sunday, was 

$300,000. He has a job but no health insurance. When he asked the 

hospital for help, he was offered a 10 percent discount. 

The Affordable Health Care Act has a number of provisions for 

the less fortunate. It gives immediate access to affordable health 

care for uninsured individuals with preexisting conditions. We have 

17, soon to be 19 grandchildren. Four of our grandchildren have 

preexisting health conditions. I am grateful that our grandchildren 

will be assured of coverage because of the Health Care Act. 

Extending dependent coverage is also important to our family. 

One of our grandsons, an honors college graduate, is still awaiting 

an opening as a school teacher. He is single, living at home, and 

working as a substitute teacher. Thank God, he is covered by his 

parents’ insurance due to the provisions of the Health Care Act. 

Closing the so-called ‘‘donut hole’’ for those on Medicare is another important provision of this act. Fortunately, my denomination offers my wife and me the excellent prescription coverage. 

However, I have watched less fortunate retirees forced to visit food 

pantries because they could not afford both groceries and medicine. 

Or worse, I have seen cases of people cutting back on needed medicines without consulting their physicians because they couldn’t pay 

their bills. 

Mandating the coverage of preventive screenings and immunizations is, in popular parlance, a ‘‘no-brainer.’’ Just think about the 

cost and, more importantly, the prevention of suffering that flu 

shots alone ensure. 

In Indiana, the increased funding for community health centers 

will nearly double the number of patients seen over the next 5 

years. For those whose main interest is in dollars and cents, these 

increased health services can only contribute to a stronger economy 

in the form of a healthier workforce. 

The act provides for more doctors where people need them, especially in low population rural areas. It provides funding for the Na-
36 

tional Health Service Corps for scholarships and loan repayments 

for doctors, nurses, and other health care providers. In Indiana, 

this will help the 8 percent of our population who live in an underserved area of our State. 

Some 84,400 small businesses can be helped by the new small 

business tax credit that will make it easier to provide coverage to 

their workers. 

The act will give consumers some protections from negative policies of the insurance industry. Lifetime limits will not be placed on 

the coverage individuals receive. Insurance companies will no 

longer be able to drop people from coverage when they get sick. An 

appeals process will be required. Patient’s choice of physicians will 

be protected. 

In my opinion as a Christian pastor, adequate health care in the 

richest country in the world is a human right and a moral necessity. The Affordable Health Care Act moves us closer to achieving 

something very important as it relates to a term not used often 

enough in our political discussions. That term is ‘‘the common 

good.’’ 

The nations of what is called the developed world have all embraced national health care plans. The time is way past for us to 

catch up with them. The Affordable Health Care Act is not perfect, 

but it is a good giant step forward. 

Tweaking the Affordable Health Care Act to make it better is one 

thing. Repealing it would be an unconscionable act by an unfeeling 

legislature. Repealing it in my estimation would be immoral. 

Thank you for holding this hearing and thank you for allowing 

me this opportunity to testify. 

[The statement of Rev. Hoy follows:] 

Prepared Statement of Rev. George Philip Hoy, Ordained Minister, 

United Church of Christ 

My name is George Philip Hoy. I have been an ordained minister in the United 

Church of Christ for more than 50 years. I am now retired and serving as Interim 

Pastor of Zion United Church of Christ in Henderson, KY. However, I am a lifelong 

Indiana resident and have lived at my current home in downtown Evansville for 29 

years. 

I am Religion Co-Chair of Tri-State Jobs With Justice and Chaplain of the Central 

Labor Council. I also have been an elected official. I served on the Vanderburgh 

County Council for 12 years and in the Indiana House of Representatives for four 

years. 

I speak in support of the Affordable Health Care Act. While I am a firm believer 

in a single payer health care system, the legislation that is now law offers numerous 

benefits to the State of Indiana and its citizens. 

There are 28 definable benefits achieved in 2010 and 19 definable benefits in 

2011. From personal and professional experience I wish to address a few of those 

benefits. 

During the past few years, I have had open heart surgery, and my wife has been 

treated for breast cancer. Yet we count ourselves among the more fortunate citizens 

of the United States. If not for Medicare and the insurance we have through my 

denomination’s pension board, we would be facing bankruptcy. 

On Sunday, Paul, a member of our church who is now undergoing chemotherapy, 

said he couldn’t wait until his last chemotherapy session in December. He added 

that immediately after his final treatment he will file for bankruptcy. He has a job 

but no health insurance. His medical debt, as of Sunday, was $300,000. When he 

asked the hospital for help, he was offered a 10 percent discount. 

The Affordable Health Care Act has a number of provisions for the less fortunate. 

It gives immediate access to affordable health care for uninsured individuals with 

pre-existing conditions. It also eliminates pre-existing conditions that exclude covering children. We have 17, soon to be 19 grandchildren. Four of our grandchildren 
37 

have pre-existing health conditions. I am grateful that our grandchildren will be assured of coverage because of the Affordable Health Care Act. 

Extending Dependent Coverage is also important to our family. One of our 

grandsons, an honors college graduate and one of the four grandchildren with a preexisting health condition, is still awaiting an opening as a school teacher. He is single, living at home, and working as a substitute teacher. Thank God he is covered 

by his parents’ insurance due to the provisions of the Affordable Health Care Act. 

We also have several nieces and nephews who benefit from the extended coverage 

for young adults. 

Closing the so-called ‘‘donut hole’’ for those on Medicare is another important provision of the Affordable Health Care Act. Fortunately, my denomination offers my 

wife and me excellent prescription coverage. However, I have watched less fortunate 

retirees forced to visit food pantries because they could not afford both groceries and 

medicine. Or worse, I have seen cases of people cutting back on needed medicines 

without consulting their physicians because they couldn’t pay their bills. Now, in addition to the $250 payment they received and the new provisions of the law, they 

will not have to choose between buying groceries, paying utility bills, and paying 

for the medicines that they need. 

Mandating the coverage of preventive screenings and immunizations is, in popular parlance, a ‘‘no-brainer.’’ Just think about the cost and, more importantly, the 

prevention of suffering that flu shots alone ensure. 

In Indiana, the increased funding for Community Health Centers will nearly double the number of patients seen over the next five years. For those whose main interest is in dollars and cents, these increased health services can only contribute 

to a stronger economy in the form of a healthier workforce. 

The Act provides for more doctors where people need them, especially in low population rural areas. It provides funding for the National Health Service Corps for 

scholarships and loan repayments for doctors, nurses, and other health care providers. In Indiana this will help the eight percent of our population who live in an 

underserved area of our state. 

Some 84,400 small businesses can be helped by the new small business tax credit 

that will make it easier to provide coverage to their workers. 

The Act will give consumers some protections from negative policies of the insurance industry. Lifetime limits will not be placed on the coverage individuals receive. 

Insurance companies will no longer be able to drop people from coverage when they 

get sick. As mentioned before, children with pre-existing conditions cannot be excluded. An appeals process will be required. Patient’s choice of physicians will be 

protected. 

Some 28 reforms took place in 2010 and another 19 reforms are taking place this 

year. In subsequent years other reforms and benefits will accrue. It will take some 

time to live into all of the benefits. 

In my opinion as a Christian pastor, adequate health care in the richest country 

in the world is a human right and a moral necessity. The Affordable Health Care 

Act moves us closer to achieving something very important as it relates to a term 

not used often enough in our political discussions. That term is ‘‘the common good.’’ 

The nations of what is called the developed world have all embraced national 

health plans. The time is way past for us to catch up with them. The Affordable 

Health Care Act is not perfect, but it is a good giant step forward. 

Tweaking the Affordable Health Care Act to make it better is one thing. Repealing it would be an unconscionable act by an unfeeling legislature. Repealing it 

would be immoral. 

Thank you for holding this hearing and thank you for allowing me this opportunity to testify. 

Chairman ROE. Thank you, Rev. Hoy. 

Mr. Johnson? 

STATEMENT OF DENIS JOHNSON, VICE PRESIDENT OF 

OPERATIONS, BOSTON SCIENTIFIC 

Mr. JOHNSON. Chairman Roe, Dr. Bucshon, thank you very much 

for inviting me today to testify on the impact of the Patient Protection and Affordable Care Act on Indiana’s medical device industry. 
38 

My name is Denis Johnson and I am the Vice President of Operations at Boston Scientific manufacturing facility in Spencer, Indiana. 

Boston Scientific is one of the world’s largest medical device companies dedicated to less-invasive medicine. Our company’s mission 

is to improve the quality of patient care and the productivity of 

health care delivery through the development and advocacy of lessinvasive medical devices and procedures. We accomplish this by 

continually refining our existing products and developing new technologies that are designed to reduce risk, trauma, cost, and procedure time. 

Boston Scientific has 15,000 employees in the U.S. and invests 

$1 billion each year in research and development to develop new 

products. 

In Spencer, we have over 1,000 employees who produce 2.2 million less-invasive medical devices every year. Their average salary 

and benefits package is significantly higher than the State average. 

Nearly half of our employees live right in Owen County, so our impact on this rural part of the State is significant and growing. We 

are good community partners as well. Boston Scientific contributes 

nearly $150,000 a year to local charities and hundreds of volunteer 

hours for worthy causes such as Christmas for Kids, Hoosiers Outrun Cancer, local schools, and various other health-related events. 

Because of our significant impact in America’s heartland, Spencer 

was highlighted in a recent ad campaign that showed the impact 

and opportunity companies like ours have for our workers, their 

families, and the community. 

The medical device industry is a uniquely American success 

story, both for patients and for our economy. The United States is 

the world leader in manufacturing lifesaving and life-enhancing 

treatments for patients. At the same time, the medical technology 

industry has become an important engine for economic growth, especially in Indiana. 

Our industry employs more than 400,000 workers nationwide. In 

Indiana alone, there are nearly 20,000 Hoosiers working at more 

than 300 FDA-registered medical device manufacturers, with an 

annual payroll of $1.1 billion. The industry has grown by nearly 30 

percent in recent years and provides high-quality jobs that pay 40 

percent more than the average wage in Indiana. 

Nationwide, the industry is fueled by small businesses and entrepreneurs providing high-quality jobs: 62 percent of the firms have 

less than 20 employees and only 2 percent more than 500. Additionally, the medical device industry is a net exporter, totaling 

more than $33 billion annually and has consistently enjoyed a favorable balance of trade. With the aging of U.S. and foreign populations and the accelerating pace of biomedical discovery, the 

growth potential for this industry is strong. 

Boston Scientific strongly supported health care reforms that improve quality by advancing the cause of the evidence-based medicine as part of the debate on the Affordable Care Act. We strongly 

advocated for the creation of a comparative effectiveness research 

institute to help clinicians and patients better understand the benefits of alternative treatments. This research could pave the way 
39 

for more personalized medicine and better care by learning what 

works best for different populations. 

We advocated for the reforms to encourage greater coordination 

among health providers and called for greater emphasis on individual patient responsibility, prevention and wellness. We also 

highlighted the potential of remote monitoring technologies to improve care by better tracking and managing patients with costly 

chronic diseases. 

While we are very proud of the progress we have made in improving patient care and see immense future opportunities to provide jobs and contribute to long-term economic growth in the 

United States, we are very concerned about the burden of the medical device tax on the industry. The new health law imposes a 2.3 

percent excise tax on most types of medical devices. The excise tax 

is based on revenue, not profit, and begins in 2013. This harmful 

new tax is expected to collectively increase Federal taxes on medical device companies by $20 billion through 2019 and will cost 

Boston Scientific alone more than $100 million a year in additional 

taxes. Such a severe increase in tax liability will undoubtedly force 

us to cut critical R&D funding and inhibit job creation and retention. 

Contrary to the stated goals of the President’s reform efforts, the 

medical device tax will actually increase health care costs and undermine another of the White House’s important objectives: promoting innovation. The U.S. Congress should embrace the value of 

the medical technology industry to our economy and our health 

care system by repealing this onerous tax. It will stifle innovation, 

destroy jobs, and thwart patient access to breakthrough technologies that have saved and enhanced millions of lives. 

The medical device tax should be repealed for three important 

reasons. 

First, this tax will stifle innovation and cost thousands of highpaying jobs. It will dramatically increase the effective tax rate for 

medical technology companies, severely reducing financial resources that should be used for R&D, clinical trials, and investments in manufacturing. This impact will be especially hard on 

smaller companies. 

Second, this new tax will increase health care costs, not contain 

them, as much of the 2.3 percent increase will be passed on to consumers either directly or indirectly. 

Third, there is no device industry windfall for the health care reform. Unlike other industries that may benefit from expanded coverage, that has not been seen in Massachusetts where health care 

reform law became law and the basis for the new Federal law. 

There was no device windfall. 

Conclusion. The bottom line is the regressive tax would undermine America’s and Indiana’s global leadership position in product 

innovation, clinical research, and patient care. In this challenging 

economic environment, this tax will most assuredly hinder the development of the next generation of breakthrough treatments. 

Again, thank you for inviting me to testify on the Affordable 

Care Act impact on the medical device industry. I look forward to 

answering your questions. 

[The statement of Mr. Johnson follows:] 
40 

Prepared Statement of Denis Johnson, Vice President, Operations, 

Boston Scientific 

Thank you for inviting me to testify today on the impact of the Patient Protection 

and Affordable Care Act (PPACA) on Indiana’s medical device industry. 

Boston Scientific is one of the world’s largest medical device companies dedicated 

to less-invasive medicine. The company’s mission is to improve the quality of patient 

care and the productivity of health care delivery through the development and advocacy of less-invasive medical devices and procedures. We accomplish this by continually refining our existing products and developing new technologies that are designed to reduce risk, trauma, cost, and procedure time. Boston Scientific has 15,000 

employees in the U.S. and invests $1 billion each year in research and development. 

In Spencer we have nearly 1,000 employees who produce 2.2 million less-invasive 

medical devices every year. Their average salary and benefits package is significantly higher than the state average. Nearly half of our employees live right in 

Owen County, so our impact on this rural part of the state is significant, and growing. We are good community partners as well. Boston Scientific contributes nearly 

$150,000 a year to local charities and hundreds of volunteer hours for worthy causes 

such as Christmas for Kids, Hoosiers Outrun Cancer, local schools and various other 

health related events. Because of our significant impact in America’s heartland, 

Spencer was highlighted in a recent ad campaign that showed the impact and opportunity companies like ours have for our workers, their families and our community. 

The US and Indiana Medical Technology Industry 

The medical device industry is a uniquely American success story—both for patients and for our economy. The United States is the world leader in manufacturing 

life-saving and life-enhancing treatments for patients. At the same time, the medical 

technology industry has become an important engine for economic growth, especially 

in Indiana. 

Our industry employs more than 400,000 workers nationwide. In Indiana alone, 

there are nearly 20,000 Hoosiers working at more than 300 FDA registered medical 

device manufacturers, with an annual payroll of $1.1 billion. The industry has 

grown by nearly 30% in recent years and provides high-quality jobs that pay 40 percent more than the average wage in Indiana. 

Nationwide, the industry is fueled by small businesses and entrepreneurs providing high-quality jobs: 62% of firms have less than 20 employees and only 2% 

have more than 500. Additionally, the medical device industry is a net exporter, totaling more than $33B annually, and has consistently enjoyed a favorable balance 

of trade. With the aging of US and foreign populations and the accelerating pace 

of biomedical discovery, the growth potential for this industry strong. 

Impact of the Patient Protection and Affordable Care Act (PPACA) on Indiana’s Medical Device Industry 

Boston Scientific strongly supported health care reforms that improve quality by 

advancing the cause of evidence-based medicine. As part of the debate on PPACA, 

we help clinicians and patients better understand the benefits of alternative treatments. This research can pave for the way for more personalized medicine and better care by learning what works best for different populations. 

We advocated for reforms to encourage greater coordination among health providers and called for greater emphasis on individual patient responsibility, prevention and wellness. We also highlighted the potential of remote monitoring technologies to improve care by better tracking and managing patients with costly 

chronic diseases. 

Medical Device Tax Will Impede Innovation and Patient Access to Medical Technology 

While we are very proud of the progress we have made in improving patient care 

and see immense future opportunities to provide jobs and contribute to long-term 

economic growth in the United States, we are very concerned about the burden of 

the medical device tax on the industry. The new health law imposed a 2.3% excise 

tax on most types of medical devices. The excise tax is based on revenue, not profit, 

and begins in 2013. This harmful new tax is expected to collectively increase federal 

taxes on medical device companies by $20 billion through 2019, and will cost Boston 

Scientific alone more than $100M a year in additional taxes. Such a severe increase 

in tax liability will undoubtedly force us to cut critical R&D funding and inhibit job 

creation and retention. 

Contrary to the stated goals of the president’s reform efforts, the medical device 

tax will actually increase health care costs and undermine another of the White 
41 

House’s important objectives—promoting innovation. The US Congress should embrace the value of the medical technology industry to our economy and to our health 

care system by repealing this onerous tax. It will inevitably stifle innovation, destroy jobs, and thwart patient access to breakthrough technologies that have saved 

and enhanced millions of lives. 

The Medical Device Tax Should be Repealed for Three Important Reasons: 

First, this tax will stifle innovation and cost thousands of high-paying jobs. It will 

dramatically increase the effective tax rate for medical technology companies—severely reducing financial resources that should be used for R&D, clinical trials and 

investments in manufacturing. The impact will be especially hard on smaller companies whose innovations are not immediately profitable. 

Second, this new tax will increase health care costs, not contain them, as much 

of the 2.3% increase will be passed on to consumers either directly or indirectly. 

Third, there is no device industry ‘‘windfall’’ from healthcare reform. Unlike other 

industries that may benefit from expanded coverage, a majority of device-intensive 

medical procedures are performed on patients that are older and already have private insurance or Medicare coverage. In Massachusetts, which passed a healthcare 

reform law which became the basis for the new federal law, there has been no device ‘‘windfall’’ despite the addition of 400,000 covered lives. The lack of a windfall 

is Conclusion The bottom line is this regressive tax would undermine America’s, and 

Indiana’s global leadership position in product innovation, clinical research and patient care. In this challenging economic environment, this tax will most assuredly 

hinder the development of the next generation of breakthrough treatments. Again, 

thank you for inviting me to testify on the impact of PPACA on the medical device 

industry. I look forward to answering your questions. 

Chairman ROE. Thank you, Mr. Johnson. 

Mr. Graber? 

STATEMENT OF GLEN GRABER, PRESIDENT, 

GRABER POST BUILDINGS 

Mr. GRABER. Hi. My name is Glen Graber and thanks for inviting us to come up. 

I started the company in 1973 with three men in the Odon, Indiana area. We build post frame buildings which you used to call 

them pole barns because they use round posts for them. But anyway, we manufacture wood roof trusses up to a 100-foot clear span 

and roll form our own metal and build buildings all over four or 

five States and have wholesale customers in provinces in Canada 

and probably about 25 States in the U.S. 

But our company has 210 employees. We have 180 employees in 

Odon, Indiana, and then the other 30 are over in Versailles, Missouri at a sister company. 

But we started doing health care, I think, in ’01, somewhere 

thereabouts, and it cost about 50 cents an hour back then. Now I 

think we’re up to about $2.25 an hour thereabouts, just under $1 

million for a year’s worth of health care for everybody. And it just 

keeps increasing. 

I didn’t tell you about my education. I went to school 8 years in 

grade school, and my dad taught me most of what I know. He 

taught me to work. He made me work and he almost made me like 

it. [Laughter.] 

Anyway, this health care thing. It’s just going to keep going up 

and keep getting more expensive. I think our health care went up 

about 30 percent last year or I guess you would say this year. I 

think they quoted a year ahead. But I can’t see it doing anything 

but just keep going up. 
42 

And most of the technical things that they all talked about, there 

is really no reason for me to reiterate on that. But we just can’t 

afford it. There is just no way. I can see it doubling in the next 

2 or 3 years for Graber Post. Right now, it is about 1 percent of 

our total gross sales is what it is costing us. But profit margins just 

keep getting smaller and smaller also in the industry. 

We just got to get more business people in Washington, D.C. and 

let a few of the lawyers go home. [Applause.] 

This country is worth saving and we got to work on it. 

Thank you for having me. 

[The statement of Mr. Graber follows:] 

Prepared Statement of Glen S. Graber, Graber Post Buildings 

My name is Glen Graber and I am the President of Graber Post Building and 

Martin Metals. I started Graber Post in 1973 as a 3-man Amish building crew that 

built post frame buildings. In 1987, I invested in a computerized roll former, which 

allowed Graber Post to purchase truckloads of steel coils and then roll our own steel 

siding panels according to its customers’ specification. Over the past few years, our 

company has grown and we’ve added a new $1 million state of the art facility in 

2007 to house the company’s office, showroom and Hardware store. 

We employ a total of 210 employees and currently offer a group health insurance 

plan to every employee. When we began offering health care to our employees in 

2001, our total cost was $.50 per hour per employee, based on 2000 hours of work. 

Currently, our cost per hour per employee is $2.25; a $1.75 per hour per employee 

increase over a ten year period including a 30% increase from 2010 to 2011. Our 

current total cost is $945,000, and if the increase from this last year is any indication, I believe it will only continue to rise. 

The rising cost of medical care and health insurance is impacting the livelihood 

of many Americans. The inability to pay for necessary medical care not longer affects only the uninsured, but is increasingly becoming a problem for those with 

health insurance. Over the past several years, the premiums that we have paid 

have more than doubled, as I previously indicated. As an employer, the more my 

costs for insurance goes up, the less money is available to invest in the company— 

expanding a customer base, upgrading technology or even increasing wages. The recent healthcare law has forced us to re-evaluate our plan benefits and shift some 

of the healthcare costs to the employees by raising deductibles and co-pays in order 

to sustain our healthcare plan. 

The new mandated changes to health insurance—no lifetime benefit limits and restricted annual limits, no cost sharing for specific preventive services, no pre-existing condition exclusions for children, dependents covered through age 26—are good 

for employees. As an employer, I have to wonder how much premiums will be affected by the mandated increase of plan benefits. The average annual premium increase is currently about 10% to 12%. However, our company is experiencing increases well above that average. Our company is working with our insurance agent 

to come up with creative ideas that allow us to keep our current plan design and 

to control the costs passed onto the employees. We want to be engaged in promoting 

the health of our employees and their dependents while at the same time protecting 

our bottom line. 

Chairman ROE. Mr. Graber, a couple of comments. One, it was 

the burley tobacco patch that convinced me chemistry wasn’t that 

hard. That is where I grew up. It was in a tobacco patch in Tennessee. It convinced me if I studied chemistry, I wouldn’t have to 

raise tobacco. 

And secondly, we have 15 doctors in the Congress and about 240 

lawyers, and we finally have them outnumbered. [Laughter.] 

You all have opened a tremendous number of questions and 

issues with your testimony. Let me go back. It is an extremely complicated—the American health care system started out as a mom 

and pop business for one doctor, and it expanded. I can think back 

to my medical career. In 1970, when I graduated from the Univer-
43 

sity of Tennessee College of Medicine, we had five 

antihypertensives, five high blood pressure medicines. There probably are 50 or 100 now. 

Mr. Johnson, I have used much of the Boston Scientific new technology to help make things better for my patients. I don’t want to 

see that stop. Our cancer survival rates are going up and up and 

up. 

And I remember at St. Jude’s Children’s Hospital, when I was 

medical student there, 80 percent of the children died. Today 80 

percent of the children live. We have seen incredible advances. We 

do not want to see that stop. 

The challenge how do we make this more affordable. That is 

what I think I heard this panel talking about was how do we expand access. 

I am going to tell you a story of a person that Dr. Bucshon and 

I had a conversation with a week ago tomorrow. And this particular person said that he sort of understood consumer-driven 

health care where the consumers were responsible for the first dollar of coverage. He sort of got that. He said he had a rash on his 

back and he went to his dermatologist and they gave him some 

medicine. His co-pay was $10. And he was out on the campaign 

trail and he forgot his medicine and his prescription card. So he 

had to go buy it and it was $400. And he said, well, you know, I 

am not itching that bad. [Laughter.] 

So he made a consumer decision based on that. But he said, you 

know, you can’t make consumer-driven choices in health care because my daughter was 3 months old and she got meningitis and 

had to go into the hospital. And he was absolutely right. You can’t 

make a consumer-driven choice when your family has that kind of 

issue. 

That person was the President of the United States. That is who 

we had the conversation with last Wednesday morning, and that 

is exactly what he said. 

And to hold the cost down—after this is over, I want to meet 

with some of you all because I have some ideas. Let me give you 

an example of how some companies—a health savings account. I 

have one. This is a debit card right here. I had to go to the hospital 

and get some biopsies myself. And one of my friends I went to medical school was doing the surgery. I didn’t call the insurance company. My doctor said I needed to have it done. That was a doctorpatient decision. He said, Phil, you need to have this done. 

I went down to the outpatient clinic and I said, look, I don’t want 

your most expensive thing. You are going to get your money in a 

millisecond. So they gave me a 35 percent discount. Rev. Hoy, if we 

can’t get a 50 percent discount for that person, I will be shocked. 

They gave me a 35 percent discount. They then said now 45 percent is what they will give you for a cash customer. I go in. I get 

my biopsy. I go home. I have had it done. 

John Deere corporation uses a health savings account, consumerdriven health care. They have had no or minimal health care premium increase in 5 years. 

We also have to do disease management. 75 percent of all the 

money we spend on health care today is chronic disease management. It is high blood pressure, diabetes, smoking cessation. In this 
44 

country, unfortunately, obesity has become a real problem and type 

2 diabetes. 

One company, AFG, which is a company at home—Holston Munitions—everything that boils up, just about, in a war we make it in 

east Tennessee. And they have a program there of wellness. For instance, if you come in and you have high blood pressure, diabetes, 

hypertension, smoking, you are a train wreck waiting to happen. 

They pay you to correct those things. They pay for good incentives, 

not bad ones, not pay you to be sick, pay you to be well. And they 

have had a minimum health increase in 5 years. We could do that 

for the country without this incredibly complicated system that we 

have devised. 

And, Rev. Hoy, you bring up some good issues. There are people 

out there who are uninsured. Those folks are tough. And what I 

would recommend we do for someone like him is a high risk pool 

that the taxpayers subsidize in the State. So he could have insurance affordable like anyone else. I think that is a group that have 

these preexisting conditions that maybe are uninsurable. You absolutely can do that. 

So I want to hear Mr. Messmer again. I think you made some 

great points in your business of 47 people about why you are not 

going to go to 50. Why would that be? 

Mr. MESSMER. Well, the price of mandated part-time coverage— 

in the summer, we like to employ a lot of the college kids or people 

who are retired who want part-time work. And at 50, the mandated 

provisions that are going to kick in—to me that is going to be an 

impediment to growing my business past 50. At that point, we are 

going to mandate additional coverages and mandate more provisions on those companies. And so anybody who is at that growth 

point in their business, we are going to say at 49 you are a good 

company and we are going to give you some breaks on the 50 or 

51. And all of a sudden, you are just going to expose your company 

millions of dollars more cost. So it is going to be prohibitive for any 

company to want to make that growth step. 

Chairman ROE. Dr. Bucshon? 

Mr. BUCSHON. Thank you, Chairman Roe. 

Mr. Johnson, a lot of attention has been focused on this medical 

device tax and it is onerous for Indiana’s, like you said, 20,000 employees. How is your company going to handle that tax? What do 

you think that is going to mean for the consumers of health care? 

Mr. JOHNSON. It is causing consternation within the company 

and it is under consideration currently. Having recently walked 

into Indiana University Hospital up in Indianapolis and seen an 

improved device kit used, my theory is that it will stifle innovation 

because some of that money will have to come from R&D. 

When we talk about preexisting conditions, we talk about the 

standard of care and we talk about procedures that everybody 

wants access to, many of which weren’t available 5, 10, 20 years 

ago. And I think it is real important for our kids and for our families that we continue to develop those technologies so there will be 

better treatment for them in the future. 

Mr. BUCSHON. The other question is in regards to regulation in 

our country. I mean, the FDA is, obviously, important to you. 
45 

Where does Boston Scientific stand on FDA reform and streamlining the approval process? 

Mr. JOHNSON. Well, innovation is critical and we see many companies starting to focus their development and launching new products 2, 3, or more years ahead of U.S. in Europe and other countries. And so procedures and treatments are available overseas that 

are not available right now because of the timeline it takes to get 

a product approved. 

Mr. BUCSHON. And I want to comment on that as far as regulation goes. The FDA is one of the organizations right now that is 

in my view stifling innovation, and it is true that around the world, 

based on what the European Union and others are doing, people 

are getting ahead of us here in the United States because of what 

the Federal Government is doing to businesses like yours and 

small businesses around this country. So we are taking a serious 

look at reform in Washington, D.C. as it regards regulation, and 

that is not only through the FDA, but that is through all the other 

regulatory agencies which we really haven’t touched on too much 

today about what is happening right now with job creation in our 

country. 

But I do have serious concerns going forward. Since I was a 

heart surgeon and being in medicine, I understand that if we want 

to stay at least equal with or ahead of other countries, as far as 

research and development goes and innovation, this type of taxing 

on American employers and American businesses has to stop because other countries are getting ahead of us. 

So thank you for your testimony. I yield back. 

Chairman ROE. Just to tag team right quickly, a friend of mine 

is a hospital administrator on regulations. OSHA came in to examine where a handicap rail was in the handicap bathroom. So they 

said, no, it is in the wrong place. It needs to be up here. So he 

moves it and puts up there. The TOSHA, the Tennessee State Occupational Safety Administration, came in and said that rail is in 

the wrong place. It needs to be down here. I told him there is a 

simple solution. Just put bracket and when TOSHA comes, put it 

one place, when OSHA comes, put it in another. [Laughter.] 

The problem with that is it is expensive. It costs. It is funny. 

Who pays for that? We do when we go to the hospital. It is very 

frustrating to see these kinds of regulations that one agency does 

just the opposite of another, and they both think they are following 

the rules. 

We had Secretary Sebelius, as you all are, in front of our committee the other day. She is the Secretary of Health and Human 

Services which oversees Medicare and Medicaid. And I asked Secretary Sebelius, how many people do you think the Affordable Care 

Act is going to increase coverage to? And she around 30 million 

people. 

I said, well, we have 2,700 pages. You have read it and I have 

read it. Let me explain how I can do almost all of that in two paragraphs. And she said, how is that? And I said, well, your own actuary at the Centers for Medicaid and Medicare Services said we are 

going to expand Medicaid by 24.7 million people. If you do that, 

that is almost 25 million of them. About 6 million, as you heard 

me say a minute ago—I like the 26 and under provision of the 
46 

plan. Those two things cover almost 30 million people. 10 million 

people that are uninsured in this country are illegally in the country. We have 15 million people who are eligible who haven’t signed 

up currently for Medicaid. So you have programs available already. 

And, Mr. Messmer, in your comment, one of the things that disturbed me—for a low-income worker, the most important thing is 

to make more money, to have a higher income. If you are required, 

when that requirement comes to buy insurance, as their salary 

goes up, their subsidy goes down. It is exactly the opposite of what 

you should be doing because they can’t afford it now. 

So I think we got to step back and take a look at the single biggest issue in America today is to get our people back to work. If 

you have a job, a lot of these problems go away. My father worked 

in a factory making shoe heels. He was a union member and 

worked in a factory and lost his job to Mexico when I was in the 

Army in Korea near the DMZ in 1973 and 1974. I know something 

about that. And that is by far and away the most important thing 

because if you have got money and a job, you can afford to buy 

some things. 

So I mention that simply out of frustration because they have 

made this bill—well-intended. I don’t mean that the intention is 

bad—incredibly expensive and complex. 

And we have invited the President to meet with the physicians, 

the Doctors Caucus. 

And another frustration I have, there were nine of us M.D.s just 

practicing doctors out there with decades of experience. Not one of 

us was asked a thing about this Affordable Care Act. Not one about 

this. Now, why would you have that expertise available to you and 

never ask a question to them? Dr. Roe, what do you think about 

this? And I would have had some suggestions through the 20 years’ 

experience almost I have had with TennCare and certainly with 

taking care of patients and so forth, just as you have, Mr. 

Messmer, and you, Mr. Graber, in your business that you have. 

So if I sound frustrated, I am. And it is something I hope that 

works, but I hope that we can overturn it and start over. And how 

do you make it more affordable? How do you do that? Well, you 

allow your business to get in business with him and share those 

costs. You put thousands of small businesses together. You go and 

partner up with some folks in Tennessee and maybe instead of 47 

people you are insuring, you got 47,000 you are insuring. Why we 

don’t do that is beyond me. Why we don’t go across State lines and 

allow your businesses to get together. 

We have two hospital systems in my district. Mountain States 

Health Alliance with all their hospitals have 9,000 employees. 

Welmont has 6,000. They can’t get together and have 15,000 people 

as one group. They are not allowed to by law now. And so unless 

we start doing some smart business things, as you point out, Mr. 

Graber, get some people up there like myself that have run a small 

business for 30 years or helped run one for 30 years, we can help 

lower these costs. 

Before we have our final closing comments, I want to yield to Dr. 

Bucshon for any further questions. 

Mr. BUCSHON. Thank you, Chairman Roe. 
47 

Mr. Graber, first of all, you are the American dream. That is why 

this country is the greatest country on earth. And it is commendable what you have done with your business. I hope that we don’t 

get in your way in Washington, D.C. That is as a first comment. 

What actions do you think you are going to have to take in your 

business as far as your employees go as it relates to the Affordable 

Care Act? What are you talking about with your board and with 

the other members that run your company? 

Mr. GRABER. Well, the big thing is I am the same as everybody 

else here. We have no clue what the real total bottom line rules are 

going to be. It is just a big confusion mess. We don’t know if it is 

going to double in the next 2 years—the cost. At some point, it is 

not going to be affordable, but I don’t know what the penalties are. 

I heard different penalty figures here if you don’t comply. But we 

have never laid anybody off at our company. We work full-time 

even if it is in the wintertime. We cut back hours, but we work a 

lot of overtime in the summer. And we have been able to provide 

this health care and take care of our employees. They are the best 

asset we have. 

Mr. BUCSHON. Thank you, Chairman Roe. I don’t have any further comments as far as questions go. 

Chairman ROE. Let me finish up and just give you a couple of 

examples, Mr. Graber. We started our practice with four doctors 

and 12 employees. We have been very blessed and we were able to 

grow that. I think we have 84 doctors now and 350 employees. And 

we have provided health insurance since 1968, retirement benefits, 

and we want to continue to do that. 

We have about 300 people who get insurance through our practice right now. And it is about $6,000 per insured person. If one 

person goes to the exchange, we can drop all of our employees into 

the exchange and pay a $2,000 fine. And you multiply $2,000, or 

even with the taxes $2,800, times 300, you get a number. It is 

$600,000-$700,000. if you take the $4,000 we save and multiply it 

times 300, you get $1.2 million we could put to our bottom line. I 

have talked to a business in west Tennessee that said we are 

happy with our insurance as it is. We like the way our insurance 

is. If we have this essential benefits package, it will cost our business $40 million. If they drop them to the exchange, it will save 

that business $40 million. And as the testimony we had the other 

day from Lockton Group, is that we are not going to be the first 

to drop our health insurance in the exchange. We are not going to 

be third either because it is going to put you at a disadvantage as 

a company. So that is why people are looking at this because they 

can see—and especially the restaurant industry and the entertainment industry. They have such thin margins that they have to. 

I want to say one other thing about Medicare. You have heard 

a lot about it in the last couple weeks. If you haven’t been on Twitter—that is a joke. [Laughter.] 

I am old enough not to know how to Twitter, so I keep out of 

trouble. [Laughter.] 

If you look at Medicare, Rev. Hoy, right now my mother is 88 

years old and lives on a Social Security check. We live in the same 

house we lived in for 50 years and a small pension and what I help 
48 

her with. She pays the same essentially that Warren Buffet does 

who is a billionaire. So I think there is a little imbalance there. 

If you look at what has been recommended, one of the things 

that has been recommended in Congress is if you are 55 years and 

older, nothing changes in your health care. If you are 54 and 

younger, you will be offered exactly the same health insurance plan 

that a Congressman has, exactly what I would have until last year 

when I turned 65. I have Medicare Part A now myself. I would 

have rather stayed on what I had, but I can’t. I am on Medicare. 

So at 54, you have that. 

You are offered premium support, and what does that mean? 

That means when you turn 65, that your premium will be negotiated by the Federal Government just like they do now for the 12 

or so plans that I have an option to pick from, that Dr. Bucshon 

has an option to pick from. They negotiate with the insurance companies the best price, spreading this risk over lots of people. The 

voucher is where we send you a piece of paper and you go have to 

do that. This is not a voucher system. 

Also, a higher income senior like myself will have to pay more 

for their insurance when they are 65 because they will be indexed 

because of your amount of money that you make. If you are a 

lower-income senior or like your friend who has a preexisting condition, they will pay less. And I think this is a way that you can 

balance it as opposed to the way Medicare is today, which my 

mother, who has a $1,100 Social Security check per month, plus a 

small pension, plus what I give her, pays the same as Warren Buffet. We can fix that. 

And the reason we are even talking about it is because, as every 

business person has said here, the current system is unsustainable 

as it is. Not making a decision is not a choice. We have to do that. 

We have to do that to save these programs for future generations. 

The Hoy family is much more prolific than the Roe family. I only 

have two grandchildren, but I want to make sure that my grandchildren have the opportunity to have the same kind of life that I 

had. 

The witnesses have been terrific. You all are amazing to sit out 

there for 2 hours and listen to politicians talk. I thank you for that, 

and we will be around afterwards if you would like to talk. I will 

make sure that any of this information that I have—you are certainly welcome to it. 

This has been very helpful to me and I want to continue to go. 

I live in northeast Tennessee in Johnson City, which is up in the 

mountains of east Tennessee. Maybe many of you know where the 

Bristol Motor Speedway is. That is where my home is. A very similar area, agricultural area, rural area, biggest town in my district, 

60,000 people. So we are not in a big urban area in other words. 

But we rely on small businesses like Mr. Graber’s and like Mr. 

Messmer’s, and we rely on big companies like Mr. Johnson’s to provide the technology I used in the operating room. I think we can 

do better. 

The other thing that I want to bring up before we leave, which 

is very disturbing to me—and actually this is an article in the New 

England Journal of Medicine. I know probably most of you all don’t 

go to sleep reading that. I still do. But it is an article about a plan 
49 

that is current law right now I want explain to you all before we 

leave here. It is very important because I will be testifying next 

Tuesday in front of the Energy and Commerce Committee about 

this. We have 125 cosponsors, including Democrats right now. 

The Independent Payment Advisory Board is a bureaucratically 

appointed board by the administration. And I don’t care if it is a 

Republican or a Democrat. I don’t want either one of them doing 

it. And I’ve never understood for the life of me why health care is 

a Republican or a Democratic issue. I have never seen a Republican or Democrat heart attack in my life, and I have never operated on a Republican or a Democrat cancer. They are just cancers 

and just heart attacks. I guarantee you Dr. Bucshon has never 

done a bypass operation on a Republican or a Democrat. We may 

have delivered a few Republican babies in my area. I will say that. 

[Laughter.] 

Where I am going with this is IPAB is a 15-person board that 

will make decisions for Medicare based on strictly costs. We are 

spending $550 billion this year on Medicare. If we spent $600 billion—the Congress has given up its, I think, constitutional authority to decide how those dollars are spent. That bill says you have 

to cut that spending. The CMS, the Centers for Medicaid and Medicare Services, says you have to cut that spending. 

Well, here is the news flash. $500 billion less in Medicare and 

we are adding, me being one of them, 3 million new seniors per 

year when the boomers hit. So we are going to have in the next 

10 years 35 million more people seeking care. And that is one of 

the ways the President wants to hold it down. And what you will 

have is if you have more services chasing fewer dollars, you are 

going to create weights. And if you do that, you create quality 

issues and you create cost issues. And this is on the back of our 

senior citizens. 

I am going to do the best I can. I know some of you all out there 

are on Medicare. I am going to go down swinging for you to get rid 

of this. And this is Republicans and Democrats. 

And to let you know that this was not in the House version of 

the bill. When it didn’t pass, it got stuck in the Senate version of 

the bill. And I have a letter right here in my package signed by 

some really conservative people, Barney Frank, Henry Waxman, 

and others who oppose this also. [Laughter.] 

And Congressman Neal actually penned this back last year. 

So this is going to come up. And if you would do me a favor, if 

you don’t want your care rationed—and I am not going to use the 

term ‘‘death panels’’ and all that. It is just going to be rationing 

of care. You are going to have more services chasing fewer dollars. 

And I believe that Congress—that is me that is beholding to you 

who elect me—ought to be the one to make those decisions, not a 

bunch of bureaucrats, half of whom can’t be health care people that 

are going to be making those decisions. 

So I am very passionate about that because I can see that as a 

way to ration care for our senior citizens. And that is on the books 

now. Follow the bill that I have out there, and I am going to try 

to remove that if I possibly can. 
50 

So these two panels have been absolutely fantastic. I have had 

a wonderful time here in Indianapolis, and I want to do this more 

and get among you all. 

Mr. BUCSHON. Evansville. 

Chairman ROE. Evansville. Sorry. [Laughter.] 

I was thinking about Butler in the final four. I got to see them 

play. I watched them play in Indianapolis. I was there. 

But thank you all, the panel. You were terrific. Thank you for 

the audience. You all have been terrific. And we will hang around. 

Dr. Bucshon and I will hang around if you have got questions. 

Do you have any closing comments? 

Mr. BUCSHON. I am just going to make a few comments and say 

thank you, Mr. Chairman, for coming to Evansville because Phil 

Roe, when it comes to health care issues is a really hard act to follow. He understands the issues very in-depth. He practiced himself 

for over 30 years. He embodies the same thing that I think all of 

us try to do in health care, that the bottom line is it is about the 

patient. And everything that we do and try to do in Congress is 

about taking care of people, making sure that American citizens 

have access to quality medical care for all Americans at a cost that 

we can all afford going forward. 

In my view, the Affordable Care Act doesn’t make that happen. 

It is big Government really I think at its worst. It places mandates 

on individuals to buy health insurance which I think is unconstitutional. It expands the Medicaid program in the States which is an 

unfunded mandate which will cause all of Hoosiers’ taxes to go up. 

It creates a subsidized exchange which no one knows how to set up, 

and ultimately the default is that the Department of Health and 

Human Services in Washington, D.C. will tell us in Indiana how 

to establish our exchanges. We don’t want that. We want to maintain our individuality here as a State and not have a one-size-fitsall exchange program. 

The other thing is I think from what you have heard today from 

small business and large business owners is that ultimately in my 

view most people are eventually going to be forced onto a Government health care program in the future based on the Affordable 

Care Act. 

Businesses, large and small, as you heard today, have a very difficult time complying with the law because, first of all, the law is 

very complicated, and you don’t necessarily know what you have to 

do. 

Secondly, it is just onerous on employers, and it is much cheaper 

in the long run for people just to jettison their private health insurance for their employees, and that will force people onto exchanges 

or Medicaid. 

In my estimation, the Affordable Care Act underestimates the 

number of people that that will happen to. And I think when we 

see the bottom line results, we are going to see that the Federal 

Government’s budget as it relates to subsidizing health exchanges 

and Medicaid is going to go through the roof in a time right now 

when we are already in a critical budgetary crisis in Washington, 

D.C. because of what Washington, D.C. has been doing with our 

money really for decades. 
51 

And Chairman Roe and myself are there right now also trying 

to deal with the larger issue of what do we do—— 

[Audio Disruption.] 

Mr. BUCSHON [continuing]. Price that all of us can afford. 

So, again, Chairman Roe, thank you for coming to Evansville. 

You have become a great friend. I know you know this inside and 

out and are a wealth of information. 

I look forward to meeting with the President, with you, and the 

Doctors Caucus. We have extended that invitation and President 

Obama told Chairman Roe and myself directly last Wednesday face 

to face that he would do that and talk about these issues and I 

take him at his word. So I look forward to that, and I look forward 

to moving forward again with a goal of providing quality health 

care at a reasonable cost for all Americans and that is what my 

concern is. 

Thank you. 

Chairman ROE. Thank you. 

Before we close the hearing out, I serve on the Veterans Affairs 

Committee, and being a veteran, if you are a veteran out there, I 

want you to just hold your hand up so I can thank you personally 

for your service to our Nation. [Applause.] 

If I can ever be of any service to you. I know Dr. Bucshon feels 

the same way. We would not be a free Nation without these veterans sitting in this room. We have got a lot of young people. I 

have been to Afghanistan. I am going back in the near future and 

hopefully Dr. Bucshon will be going with us to visit and put boots 

on the ground. These are brave young men and women. They make 

me proud. 

And I had one of the greatest compliments I have ever had in 

my life, and it probably won’t be what you think it is, but it was 

a young man that I met the other day that I delivered and then 

got to nominate him to the Naval Academy. That was a true honor 

to do that. He served his first year there, and I look at these great 

young men and women that are serving our Nation now. I just 

thank you so much for the service to our country. 

We will keep this record open for 14 days for comments. 

[An additional submission of Mr. Andrews follows:] 

Prepared Statement of Elmer Blankenship, President, 

Indiana Alliance for Retired Americans 

My name is Elmer Blankenship, President of the Indiana Alliance for Retired 

Americans. Our members wish to thank Chairman Phil Roe and Ranking Member 

Robert Andrews for the opportunity to send a statement on this important concern 

for Hoosiers. Thanks also to Indiana’s 8th District Congressman Larry Bucshon for 

securing space for the hearing. 

The Affordable Care Act became law last year and already millions of Americans 

are benefitting from its provisions. Seniors are saving money on prescription drugs 

and receiving free preventive care through Medicare. Insurance companies are no 

longer allowed to discriminate against children and others who are sick. Small businesses are receiving billions of dollars in tax credits to provide health care for their 

employees. 

The Affordable Care Law reduces our nation’s debt by eliminating waste, fraud 

and abuse in the health care system, reducing the growth of health care costs, and 

preventing excessive profit-taking by private insurers. According to the Congressional Budget Office, this will reduce the deficit by over $200 billion over the next 

ten years and by more than a trillion dollars in the decade after that. 

There are important consequences for Indiana families and workers. The Affordable Care Law affects families, workers and seniors in the 8th District of Indiana 
52 

which includes Evansville. This year the Affordable Care Law provides a 50% discount for prescription drugs for Medicare beneficiaries who enter the Medicare Part 

D ‘‘donut hole’’ and lose coverage for their drug expenses. The discount increases 

each year until 2020, when the donut hole is eliminated. There are 10,000 Medicare 

beneficiaries in the 8th District who are expected to save money and be better able 

to afford needed prescriptions with the elimination of the donut hole. Medicare is 

also improved for the 117,000 beneficiaries in the 8th District by providing free preventive and wellness care, improving primary and coordinated care, and enhancing 

nursing home care. The new law strengthens the Medicare trust fund, extending its 

solvency from 2017 to 2029. 

Insurance companies’ can no longer deny coverage to children with pre-existing 

conditions and will be banned from discriminating against adults with pre-existing 

conditions in 2014 under the Affordable Care Law. There are 117,000 to 297,000 

residents in the 8th district with pre-existing conditions like diabetes, heart disease, 

or cancer, including 8,000 to 36,000 children. The 19,000 to 48,000 individuals in 

the district who currently lack insurance coverage will be able to purchase individual policies under the new law. 

Affordable Care Law allows young adults to remain on their parents’ insurance 

policies up to age 26. In Rep. Bucshon’s district, 2,300 young adults have or are expected to take advantage of this benefit. 

The ban on annual and lifetime limits. The health reform law prohibits insurance 

companies from imposing annual and lifetime limits on health insurance coverage. 

This provision protects the rights of 416,000 individuals in the district who receive 

coverage from their employer or through the market for private insurance. 

More Americans will be covered. When fully implemented; the health reform laws 

will extend coverage to 94% of all Americans. If this level of coverage is reached 

in the district, 46,000 residents who currently do not have health insurance will receive coverage. 

The Affordable Care Law protects individuals from soaring insurance costs by requiring reviews of proposed rate increases and limiting the amount insurance companies can spend on administrative expenses, profits, and other overhead. 

Hoosiers living in Indiana’s 8th District and millions of other Americans are benefitting from the Affordable Care Law. It needs to be protected, supported and expanded. 

Respectively submitted, 

ELMER BLANKENSHIP. 

This information is based upon the following sources: the U.S. Census (data on insurance coverage rates and types of coverage, small businesses, early retirees, income, and district populations); the Centers for Medicare and Medicaid Services (data on Medicare enrollment and the 

Part D donut hole); the Department of Health and Human Services (data on uncompensated care, 

Early Retiree Reinsurance Program participation, and preexisting conditions); and the Congressional Budget Office (data on health insurance coverage and deficit reduction under the Affordable Care Act). 

[Additional submissions of Ms. Crosson follow:] 
53 
54 
55 
56 
57 
58 
59 
60 
61 
62 
63 
64 
65 
66 
67 
68 
69 
70 
71 
72 
73 

Chairman ROE. Being no further business, the committee stands 

adjourned. 

[Whereupon, at 10:53 a.m., the subcommittee was adjourned.] 

Æ