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67-287 PDF 2011

PPACA AND PENNSYLVANIA: ONE YEAR OF 

BROKEN PROMISES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 23, 2011 

Serial No. 112–25 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chair 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

MICHAEL F. DOYLE, Pennsylvania 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

EDOLPHUS TOWNS, New York 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Glenn Thompson, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 4 

WITNESSES

Gary Alexander, Secretary, Pennsylvania Department of Public Welfare ......... 4 

Prepared statement .......................................................................................... 7 

Michael Consedine, Acting Insurance Commissioner, Pennsylvania Insurance 

Department ........................................................................................................... 10 

Prepared statement .......................................................................................... 13 

Patricia Vance, Senate Public Health and Welfare Committee, Pennsylvania 

State Senate ......................................................................................................... 34 

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

Matthew Baker, Chair, Pennsylvania House Health Committee ........................ 38 

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

Gene Barr, Vice President, Government and Public Affairs, Pennsylvania 

Chamber of Business and Industry .................................................................... 50 

Prepared statement .......................................................................................... 53 

Ken Shivers, Pennsylvania Director, National Federation of Independent 

Business ................................................................................................................ 58 

Prepared statement .......................................................................................... 60 

Ann Daane, Vice President, North America Human Resources, Case New 

Holland .................................................................................................................. 62 

Prepared statement .......................................................................................... 64 

(1) 

PPACA AND PENNSYLVANIA: ONE YEAR OF 

BROKEN PROMISES 

WEDNESDAY, MARCH 23, 2011 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:15 a.m., in the 

Senate Majority Caucus Room, Pennsylvania State Capitol, Hon. 

Joe Pitts (chairman of the subcommittee) presiding. 

Member present: Representative Pitts. 

Also present: Representative Glenn Thompson. 

Staff present: Heidi Stirrup, Health Policy Coordinator; Ryan 

Long, Chief Counsel, Health; Paul Edattel, Professional Staff Member, Health; Debbee Keller, Press Secretary; Katie Novaria, Legislative Clerk; and Stacia Cardille, Democratic Counsel. 

Mr. PITTS. The subcommittee will come to order. 

I have with me seated at the dais Congressman G.T. Thompson. 

He is a Member from the 5th Congressional district of Pennsylvania and served as a hospital administrator for 28 years, so he 

has some expertise in the area of health care. He serves on the 

Education and Workforce Committee, which has co-jurisdiction 

with Energy and Commerce Committee, and one other committee, 

I guess it is, Ways and Means, on health care, primarily employer 

health plans, I believe. The chair will recognize himself for an 

opening statement for 5 minutes. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

First of all, let me say it is good to be back in Harrisburg. I spent 

more than 20 years here as a State representative, and I still have 

many fond memories and good friends from my time here. 

On the 1-year anniversary of the Patient Protection and Affordable Care Act being signed into law, we are here today to examine 

the effects of the law, the effects it has already had and which it 

will have on the States, and we will hear how various provisions 

in the law are burdening businesses and employers, precisely at a 

time when we need them to be hiring new employees and creating 

jobs. 

What we affectionately call Obamacare, its heaviest burden on 

the States is the Medicaid expansion. A May 2010 Kaiser Family 

Foundation report found that by the year 2019, Pennsylvania’s 

Medicaid rolls may grow by an additional 682,880 people and may 

2 

cost the State an additional $2.041 billion over the 2014–2019 time 

period. Where is Pennsylvania supposed to come up with that $2 billion? 

How much spending for education, transportation, and other priorities will have to be cut to come up with this money? Which taxes 

will need to be raised to pay for this expansion? 

And, in the private sector, Obamacare levels taxes on virtually 

every sector of our economy. For businesses, the law raises the 

Medicare payroll tax by a total of $210.2 billion. Employers will 

also be penalized for hiring new workers. They will pay a fine of 

$2,000 for every full-time employee for whom they do not provide 

acceptable coverage, as defined by the government. Many employers will be forced to dump their employees into the exchanges, just 

to remain competitive. Employers will have to comply with thousands and thousands of pages of burdensome regulations. There is 

something like 6,500 already and many thousand more coming out 

in future years that will impose new mandates and responsibilities 

and new compliance costs on businesses, while driving up health 

insurance premiums and discouraging hiring. 

So today, we will hear from representatives of the State and the 

private sector to get their perspective on what Obamacare means 

for them. I would again like to thank Governor Tom Corbett for 

kindly agreeing to share some opening remarks. 

At this time I would like to welcome our distinguished witnesses, 

Secretary of Public Welfare Gary Alexander and State Insurance 

Commissioner Michael Consedine, on panel one. On panel two, we 

will have State Senator Pat Vance, chair of the Senate Public 

Health and Welfare Committee, and State Representative Matt 

Baker, chairman of the House Health Committee. And on panel 

three, we will hear from Gene Barr, Vice President of Government 

and Public Affairs for the Pennsylvania Chamber of Business and 

Industry, Kevin Shivers, Pennsylvania State Director with the 

NFIB, and Ann Daane, Vice President of North America Human 

Resources at Case New Holland. 

And finally, I would like to thank Governor Corbett’s office, both 

Senator Scarnati’s and Dominic Pileggi’s offices and Representative 

Matt Baker’s office for their help with accommodations and making 

this hearing possible today. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

It’s good to be back in Harrisburg. I spent more than 20 years here as a state 

representative, and I still have many fond memories and good friends from my time 

here. 

On the one-year anniversary of the Patient Protection and Affordable Care Act 

being signed into law, we are here to examine the effects that the law will have, 

and is already having, on states. 

And, we will hear how various provisions in the law are burdening businesses and 

employers, precisely at a time when we need them to be hiring new employees and 

creating jobs. 

Obamacare’s heaviest burden on states is the Medicaid expansion. 

A May 2010 Kaiser Family Foundation report found that by 2019, Pennsylvania’s 

Medicaid rolls may grow by an additional 682,880 people and may cost the state 

an additional $2.041 billion over the 2014–2019 time period. 

Where is Pennsylvania supposed to come up with $2 billion? How much spending 

for education, transportation, and other priorities will have to be cut to come up 

with this money? Which taxes will need to be raised to pay for this expansion? 

3 

And, in the private sector, Obamacare levels destructive taxes on virtually every 

sector of our economy. 

For businesses, the law raises the Medicare payroll tax by a total of $210.2 billion. 

Employers will also be penalized for hiring new workers. They will pay a fine of 

$2,000 for every full-time employee for whom they do not provide ‘‘acceptable’’ coverage—as defined by the government. 

Many employers will be forced to dump their employees into the exchanges, just 

to remain competitive. 

Employers will have to comply with thousands and thousands of pages of burdensome regulations—which will be coming out for years—that will impose new mandates and responsibilities and new compliance costs on businesses, while driving up 

health insurance premiums and discouraging hiring. 

So, today, we will hear from representatives of the state and the private sector 

to get their perspective on what Obamacare means for them. 

I would again like to thank Governor Tom Corbett for kindly agreeing to share 

some opening remarks with us before our hearing got underway. Thank you, Governor. 

I would also like to welcome our distinguished witnesses, Secretary of Public Welfare Gary Alexander, and State Insurance Commissioner Michael Consedine, on 

panel one. 

On panel two, we will have State Senator Pat Vance, chair of the Senate Public 

Health and Welfare Committee, and State Representative Matt Baker, chairman of 

the House Health Committee. 

And on panel three we will hear from Gene Barr, Vice President of Government 

and Public Affairs for the Pennsylvania Chamber of Business and Industry, Kevin 

Shivers, PA State Director with the NFIB, and Ann Daane (Day-nee), Vice President of North America Human Resources at Case New Holland. 

Finally, I would like to thank Gov. Corbett’s office, Sen. Dominic Pileggi’s office, 

and Rep. Matt Baker’s office for their help with accommodations and making this 

hearing possible. 

Mr. PITTS. So at this time we have our first panel seated. Each 

witness has prepared a written opening statement that will be 

placed in the record. Our first witness is Acting Secretary of Public 

Welfare Gary Alexander. Secretary Alexander oversees a department that provides services and support to more than 2.1 million 

low-income, elderly and disabled Pennsylvanians. Prior to being 

nominated as DPW Secretary earlier this year, Secretary Alexander served as the Rhode Island Secretary of Health and Human 

Services. He is widely recognized as a health care and program innovator, welfare reformer and management specialist. 

Our second witness, Michael Consedine, was appointed by Governor Corbett to serve as Insurance Commissioner for the Pennsylvania Insurance Department pending senate confirmation. From 

1995 to 1999, Commissioner Consedine served as Department 

Counsel for the Pennsylvania Insurance Department. From 1999 to 

January of 2011, he was in private practice where he was partner 

and vice chair of his firm’s insurance practice group. 

Secretary Alexander, you will have 5 minutes to summarize your 

testimony. Before you do that, I would like to recognize Congressman G.T. Thompson for his opening statement. 

Mr. THOMPSON. Thank you, Chairman, and thank you so much 

for not just convening this panel but thanks for the invitation to 

be able to join you and really to be here to address very important 

issues that we have. 

4 

OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

You know, when the President signed the Affordable Care Act 

into last March effectively immediately, States were strictly prohibited from making any changes to their Medicaid programs’ eligibility standards, methodologies and/or procedures. And while I am 

not an official member of the Energy and Commerce Committee, 

my professional background is in health care, and as a member of 

the Education and Workforce Committee and specifically the 

Health Subcommittee, there is a shared jurisdiction with Energy 

and Commerce over many of these issues. This includes any 

changes that would identify and reduce waste, fraud and abuse in 

the system. 

Many States such as Pennsylvania are generous with their Medicaid eligibility and surpass the mandatory federal guidelines, and 

as we know, currently many States are struggling to meet their fiscal obligations. States, unlike the Federal Government, are generally required to balance their budgets. It has become increasingly 

clear that drastic increases in State obligations will force significant tax increases or will result in cuts to vital programs to meet 

these new federally dictated obligations. Estimates suggest that 

Pennsylvania will see up to a 25 percent increase in Medicaid enrollment. During the years of 2014 to 2019, this will cost Pennsylvania alone over $2 billion. Many States will experience similar, if 

not greater, funding burdens. 

The Robert Wood Johnson Foundation estimates that 18.6 million new people will be eligible for Medicaid rolls nationally. Enrollment will be substantially higher in southern and western States. 

Several States will now have more than 10 percent of their population newly eligible and the national Medicaid roll will reach upwards of 80 million people. The bottom line: States simply cannot 

afford this dramatic cost. 

Now, I am glad to have the opportunity to be here and look forward to receiving some further insights and feedback on the effect 

that the Affordable Care Act is having right here in the Commonwealth of Pennsylvania, and thanks again to the chairman for having us and thank you to all of our witnesses for being here today. 

Mr. PITTS. Thank you, Congressman Thompson, for your opening 

statement. 

Mr. Secretary, you are recognized. 

STATEMENTS OF GARY ALEXANDER, SECRETARY, PENNSYLVANIA DEPARTMENT OF PUBLIC WELFARE; AND MICHAEL 

CONSEDINE, ACTING INSURANCE COMMISSIONER, PENNSYLVANIA INSURANCE DEPARTMENT 

STATEMENT OF GARY ALEXANDER 

Mr. ALEXANDER. Thank you very much. Chairman Pitts and 

members of the committee, I thank you for this opportunity to discuss Pennsylvania’s medical assistance program, the challenges 

that we face because of these federal mandates and the issues that 

are arising because of the Affordable Care Act. 

5 

Given your time constraints, I will get straight to the point, two 

points actually. Number one, Pennsylvania’s Medicaid program as 

currently structured is unsustainable, inefficient, bureaucratic and 

not focused on performance and outcomes. Federal mandates are 

largely responsible because Medicaid is a program that pays for 

volume and not value. Number two, the federal health care law will 

make this problem even worse for consumers and taxpayers. Adding more people to a broken system is a terrible idea no matter 

how much money Washington wants to throw at it. 

Pennsylvania’s Medicaid rolls already are heading toward a cliff 

of fiscal instability, and this will clearly plunge us over the edge 

if this law is not stopped. The federal health care law requires 

State Medicaid programs to cover every adult who earns up to 133 

percent of the federal poverty level or 138 percent if we use this 

new code from the IRS. 

The expansion will bring nearly 1 million new additional Pennsylvanians onto the Medicaid rolls. That is in addition to the more 

than 2.2 million on our rolls today. The Pennsylvania Department 

of Public Welfare’s overall Medicaid budget, the amount spent from 

both State and federal dollars is already growing at nearly 12 percent annually and is expected to exceed $18.3 billion in the current 

fiscal year. That is a 97 percent increase from the $9.3 billion 

budget of a decade ago. 

Pennsylvania already spends more of its general fund revenues 

on Medicaid than all but two States in the Nation with about 30 

percent of it going towards Medicaid. If we continue on this path, 

the State will use about 60 percent of its budget on Medicaid alone 

by fiscal 2019, leaving less money for other vital services. If the 

federal health care law is implemented as currently planned, this 

already unsustainable spending pattern will get much worse. Contrary to what some in Washington think, the new law will not be 

entirely financed by the Federal Government. Even with the enhanced funding for certain expansion populations, the law will cost 

the Commonwealth taxpayers more than $11.4 billion over the first 

full decade of implementation. This is totally unsustainable. 

Certainly, a safety net is important for our most vulnerable citizens so if Medicaid is to remain economically viable, where does 

that leave us for options? The most obvious and viable option is to 

give States complete flexibility to design and manage a Medicaid 

program that allows us to improve outcomes and bring more value 

to taxpayers and beneficiaries. We need to make this a health program and not a benefit program. For Pennsylvania, this solution 

would be a boom for innovation, efficiency and, most of all, a 

healthier and more productive citizenry. Our current Medicaid program is an inefficient hodgepodge of command and control topdown processes from afar. Very few of our current programs nationally reward or even encourage prevention, wellness and disease 

management and people in this Nation on the welfare system are 

discouraged from working. 

Administratively, the program is equally broken. Operating multiple waivers across multiple populations is archaic, siloed and prevents integrated health care. Bureaucrats in Baltimore don’t manage and don’t administer programs and certainly don’t have to balance a budget. We do. 

6 

Public welfare reform presents us with a great opportunity to use 

the resources within our Commonwealth to transform the structure 

and operations of the public health system without needless federal 

intervention and with the best interests of Pennsylvanians in mind 

instead of being distracted by the interest of federal bureaucrats. 

Permit me to outline a few of the reforms that Pennsylvania and 

other States can do on their own without the heavy hand of Washington. We can promote improved care management through quality outcomes, wellness and prevention and new provider markets 

that drive nutrition and personal responsibility into the programs. 

We can focus on data-driven consistent management and decisionmaking from measured quality outcomes. We can examine new initiatives such as healthy choice accounts for families structured to 

promote personal responsibility and incentivize preventive care. We 

can provide care coordination and management for all beneficiaries 

through mandatory enrollment in a primary care coordination 

model, a managed care plan or a healthy choice option. We can implement smart purchasing techniques and strategies and fair share 

initiatives which empower Medicaid recipients to make cost-conscious decisions about their medical care and competitive and selective contracting to ensure purchases are made at the best competitive prices. 

Mr. Chairman, as we Americans have given trillions of dollars to 

government entitlements with the poorest of outcomes, we ask that 

Washington get off of our backs. It is time that State governors, 

State legislators and others have their chance. Washington has already had theirs. We have firsthand experience managing our own 

programs; Washington does not. We know how to balance budgets; 

Washington does not. Pennsylvania is ready and able to bring innovative policy solutions to actively address Medicaid’s unsustainable 

growth. The States can and should be the originators of policies 

and best benefits their own diverse populations and demographic 

realities. It is time we realize the ‘‘Washington knows best’’ mentality is counterproductive to innovation within States. 

Thank you for allowing me to speak today. 

[The prepared statement of Mr. Alexander follows:] 

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Mr. PITTS. Thank you, Mr. Secretary. 

Mr. Commissioner, you are recognized for your opening statement at this time. 

STATEMENT OF MICHAEL CONSEDINE 

Mr. CONSEDINE. Good morning, Chairman Pitts and distinguished members of the committee. My name is Michael Consedine 

and I am Pennsylvania’s Acting Insurance Commissioner. 

As you know, this is the first anniversary of the federal Affordable Care Act. As Pennsylvania’s chief regulator of the insurance 

industry, I appreciate the opportunity to share with you our efforts 

over the last year to navigate this new law, our view on its impact 

on consumers, both individual and business, and on our State and 

the challenges we face as we move forward. But first, because as 

Chairman Pitts knows, Pennsylvania is unlike many other States, 

please allow me to provide a brief snapshot of Pennsylvania’s 

health care marketplace. 

While there are more than 100 carriers licensed to write health 

insurance in our State, the marketplace is in fact dominated by 

nine carriers with two groups sharing over 50 percent of the market. Moreover, Pennsylvania’s population is diverse. We have both 

urban and rural areas. We are often considered a State with large 

businesses due in part to our urban concentrations but much of our 

population is employed by small businesses. It is in this unique 

and in many respects challenging marketplace that we are dealing 

with the implementation of the Affordable Care Act. 

If the Act was designed to serve as a roadmap to affordable and 

accessible health insurance for Pennsylvanians, I will tell you that 

thus far it has been a path marked by lack of clear direction and 

troubling indications for the road ahead. I recognize that some 

journeys do start out that way and still one proceeds undaunted by 

the twists and turns ahead. 

One of the first requirements we dealt with under the act was 

the creation of the so-called high-risk plan designed to act as a 

stopgap measure for uninsured Americans until the act takes full 

effect in 2014. It was a significant undertaking to create a new program in a very short timeframe but we made it to this first mile 

marker. As of March 1, 2011, we have 2,684 enrollees receiving 

coverage and care. Ironically, this makes Pennsylvania one of the 

more successful programs in the country in terms of its participation. 

Several provisions of the Affordable Care Act have become effective and several additional provisions will become effective in 2011. 

These requirements primarily deal with policy design and required 

coverages. Compliance with these provisions required Pennsylvania 

to develop new systems and procedures, all within associated cost 

to the State to ensure compliance, and it was at this point in our 

journey that we first saw troubling signs for the road ahead. 

While from a consumer perspective there are additional benefits 

as a result of these forms, these federally mandated coverage 

changes resulted in premium increases of up to 9 percent, this on 

top of already significant premium increases being seen by Pennsylvania businesses and consumers. Therefore, it is important to 

11 

stress that the initial reforms have caused an increase in premiums, not a decrease. 

The Affordable Care Act also provided for several grants from the 

Federal Government to the States as a way to help States navigate 

the path to health care implementation. The first, already mentioned, was PA Fair Care. We next intend to utilize the consumer 

assistance grant in making health insurance understandable to 

consumers. I am not sure any of us here or even in Washington 

truly understand the act, in part because it is still evolving and 

changing. So educating everyday Pennsylvanians about the new 

law is a challenge. To use the journey analogy, how can a State effectively give directions to consumers when the destination itself is 

still moving? 

There is also an exchange planning grant. The formation of a 

health insurance exchange market in each State by 2014, really 

2013, is one of the act’s landmark provisions. If the States does not 

set up an exchange, the State’s exchange will be run at the federal 

level. Implementation of an exchange is no small endeavor. In some 

respects, it represents the point of no return in the implementation 

of the act because of the time and resources that States will need 

to expend in creating this new enterprise. Also, the Affordable Care 

Act sets various aggressive timeline for exchange implementation. 

As with other areas of the law, here we are also awaiting clear direction from HHS on key components of the exchange including the 

design of the essential benefit package. 

Governor Corbett has tasked the Insurance Department as the 

lead agency in the Commonwealth to study implementation of the 

health care exchange. We intend to look very carefully at what type 

of an exchange, if any, Pennsylvania should implement before taking that very significant step. 

Overall, Mr. Chairman, we are concerned that the road to implementation of the act is a toll road. As noted earlier, the immediate 

insurance reforms imposed by the Affordable Care Act added to the 

cost of coverage by mandating required benefits or expanded coverage. Additionally, the act imposes a toll on the insurance regulators’ already strained resources. There is no money in the act to 

help fund the increased workload associated with reviewing the act 

nor is there any money to fund the enforcement efforts that States 

will need to undertake to ensure industry compliance. Again, this 

is a toll that States are expected to pay out of already strained 

budgets. 

As Governor Corbett noted in his remarks, the act does not go 

far enough in addressing the cost drivers of health insurance. If the 

ultimate objective of our journey of reform is affordable care, we 

question whether the Affordable Care Act is a clear roadmap or 

still an uncharted course. 

So Pennsylvania, like many States, stands here today 1 year 

after the Affordable Care Act enactment at a crossroads. We could 

proceed down one path towards full implementation of the law, expending substantial time and limited State resources and funds in 

doing so, possibly only to find that the path is closed by virtue of 

legal or legislative challenges to the current version of the act. We 

could also choose a path to full resistance of the act. However, we 

risk that our journey ends in federal regulation of Pennsylvania’s 

12 

health insurance market. We continue to hope that with your hope, 

Mr. Chairman, members of the committee and Governor Corbett, 

that we might be able to forge another path, one that results in a 

clear roadmap that delivers us to the destination we all seek: 

health care reform that truly addresses the issues of affordability 

and accessibility in a fiscally sound manner. 

Thank you, and we would be happy to answer any questions that 

you have. 

[The prepared statement of Mr. Consedine follows:] 

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Mr. PITTS. The chair thanks the gentleman. The chair now recognizes himself for questioning. 

Secretary Alexander, can you describe your experience in dealing 

with the CMS bureaucracy in your attempts to be granted Medicaid waivers? Do you find the CMS bureaucracy helpful and cooperative? Do you find their decision-making process timely? Do you 

find the actions of the CMS bureaucracy to be burdensome? Would 

you please elaborate? 

Mr. ALEXANDER. Thank you, Mr. Chairman. Certainly, the citizens that work at CMS are fine people. Many of them have grown 

up in the bureaucratic abyss of Washington or Baltimore. What I 

would say essentially is that the CMS process is heavily bureaucratic, it is not timely, it is very burdensome and archaic. Sometimes approval for just a routine question can take months and 

reams of paperwork from the State. The federal establishment 

keeps adding more and more employees. We here at the State level 

keep decreasing our employees. We cannot continue to mirror our 

operations here like the federal establishment. 

I will just give you an example of something recent. South Carolina is trying to amend one of their home and community-based 

waivers, and because they made a mistake and added one or two 

sentences that shouldn’t have been in the application, the application then got put to the bottom of the pile again and they are going 

to have to wait another few months. Now, when States are trying 

to balance their budgets, this is extremely troublesome. Generally 

what happens is, States want to make changes to their programs. 

They petition CMS. It takes months and months. The legislature 

will then pass a bill in June or July and then it takes us months 

and months and months, sometimes 12, 18 months or 2 years to 

get a decision out of Baltimore. This leads us to have deficits in our 

own budgets. All of this can’t continue. We are operating multiple 

waivers across multiple programs. It is very disjointed and disorganized. So I guess the short answer is, it needs to be overhauled. 

Mr. PITTS. Thank you. Mr. Secretary, in what they call reforming 

the Nation’s health care system, the President and the previous 

Congress decided on a plan that significantly expanded the Medicaid program. In fact, the Administration’s Chief Actuary believes 

the plan will expand the Nation’s Medicaid rolls by 20 million people. Do you believe that reforming the Nation’s health care system 

is accomplished by expanding the Medicaid program by nearly 30 

percent? 

Mr. ALEXANDER. The Medicaid program is singularly the most 

broken program in Washington. None of us would sit around and 

create a health care program with outcomes or outcome-based 

measures and created the way the Medicaid program is currently 

structured. It is going to be a disaster for the States to continue 

down this road and to add all of these people to the rolls. 

Mr. PITTS. Mr. Secretary, do you believe that PPACA’s maintenance of effort requirement hinders States from implemented program integrity measures to root out fraud and waste and abuse in 

Medicaid? 

Mr. ALEXANDER. It does. It also inhibits States from saving 

money when we are on a financial cliff, and for our hands to be 

tied like that under the current structure where we have no flexiVerDate Nov 24 2008 08:37 Aug 17, 2011 Jkt 037690 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 F:\112-025 PPACA AND PA (FIELD)\112-25 PPACA AND PA. WORKING WAYNE
27 

bility in the program at all is disastrous. We cannot tailor benefits. 

We cannot structure benefit packages for certain populations. It is 

a one-size-fits-all program, and that type of a program invites 

fraud, waste and abuse. 

Mr. PITTS. Finally, Mr. Secretary, the CHIP program, the expansion of the State Children’s Health Insurance program, signed into 

law in 2009, provided bonus payments to States for adopting administrative changes such as eliminating asset tests and in-person 

interviews to verify Medicaid eligibility. Do you believe this bonus 

payment system promotes fraud and abuse? 

Mr. ALEXANDER. It certainly does because any time we are inviting things like express-lane eligibility or presumptive eligibility in 

trying to have recipients access these programs in an expedited 

manner, we here on the State level have a lack of staff to begin 

with so all of those items would invite fraud, waste and abuse in 

the system. 

Mr. PITTS. Thank you. 

Commissioner, in your testimony you described the uncertainty 

facing States as they decide whether to create an exchange. Can 

you explain in further detail how PPACA imposes both a financial 

and administrative hardship on States that choose to set up an exchange? 

Mr. CONSEDINE. I would be happy to, Mr. Chairman. The system 

in terms of what an exchange looks like, how it operates is still dependent on significant guidance from the Federal Government, 

even on such things as simple matters of the technology involved, 

the computer language that the State system is going to use to 

communicate with the federal system. You know, while the law 

provides for grants to help studies for implementation of the act 

and does provide more substantial grants to other States for early 

innovator approaches, it really still doesn’t address the long-term 

maintenance costs associated with setting up and running an exchange long term, and again, there is still so much that needs to 

be decided in terms of how these exchanges operate and what is 

going to be acceptable to the Federal Government and what is not 

going to be acceptable, and that is, as I mentioned in my remarks, 

sort of the atmosphere of uncertainty that the States and businesses and everybody are dealing with is how do you set up an exchange or how do you build something, and essentially what we are 

doing with an exchange is building something, but we don’t have 

any blueprints to use at this point so we are just—you can’t build 

effectively a sound structure when you don’t have blueprints, and 

we are waiting for that, and until we have those, it is a loss of 

money and time and resources for States and all of those are very 

precious resources at this point. 

Mr. PITTS. Thank you. Commissioner, in your testimony you cite 

defensive medicine resulting from frivolous lawsuits as one of the 

drivers of health care costs. Do you believe PPACA credibly addressed the issue of medical liability reform? 

Mr. CONSEDINE. I do not. I am quite clear that I believe that is 

one of the major failings with the Affordable Care Act is it really 

does not address the cost drivers of health insurance. I mean, one 

of the things we really want as part of reform is affordability, and 

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ability and certainly the defensive medicine is a significant factor 

that really is not addressed to any great degree as part of the reform. 

Mr. PITTS. Thank you. The chair recognizes the gentleman, Congressman Thompson, for questioning. 

Mr. THOMPSON. Thank you, Chairman. 

Thank you, Mr. Secretary, Mr. Commissioner, for participating in 

the panel and for your leadership here in the Keystone State. We 

very much appreciate it. 

Mr. Secretary, in my opening statement I mentioned the maintenance of effort provisions that prohibit States from altering their 

Medicaid programs, the way their Medicaid programs are administered, and this includes cleaning up waste, fraud and abuse in the 

system. 

Mr. THOMPSON. My question is, has Pennsylvania identified 

areas in the system that could be improved but are being held back 

because of the maintenance of effort provisions? 

Mr. ALEXANDER. Well, certainly the biggest problem we have 

with the maintenance of effort provisions is really, we have to 

maintain all of the eligibility levels that we have as of a certain 

date, which was about a year ago. The other part of this step I 

think we all seem to forget and it is sort of in the details, always 

the devil is in the details, is that if somebody—if we try to change 

a benefit, not an eligibility category but a benefit and it results in 

anybody losing eligibility, the State will be penalized. So the reason 

why that is detrimental, of course, is of a State tries to innovate 

and create benefit packages that are tailored and targeted to certain populations so that they don’t have to give those benefits 

across all of the populations, which we really can’t do anyway, but 

if we tinker with the benefit and it results in the loss of eligibility, 

the States will be penalized and in fact if we turn the clock back 

to when the stimulus was first given to the States, that was a huge 

problem because certain States already had some innovation in the 

pipeline, and when the new Administration came in, that all came 

to a halt. 

Now, of course, when you have to—any time you are administering a program this large, this fast with all of these onerous 

rules and regulations, it is going to be very difficult to root out all 

of the waste, fraud and abuse, and certainly those MOE requirements would keep us down the same path so that we certainly 

couldn’t clean up as much as we should. 

Mr. THOMPSON. Certainly I am of the belief that States are laboratories of innovation, and certainly based on your testimony from 

both you gentlemen, you talked about very innovative ways to meet 

needs, and this is a question, just follow-up. If the maintenance of 

effort provision were obviously repealed or at least delayed for a 

certain period of time, could there be some savings realized? 

Mr. ALEXANDER. Absolutely because it would give the States the 

flexibility to eliminate some higher-end populations, and if you are 

looking at States that are more lucrative in their Medicaid benefit, 

then obviously those are the types of States that would be able to 

eliminate certain eligibility categories. Certainly that is not the 

goal, but when you are in dire straits and you have to balance a 

budget and your State is on a cliff, you better do everything huVerDate Nov 24 2008 08:37 Aug 17, 2011 Jkt 037690 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 F:\112-025 PPACA AND PA (FIELD)\112-25 PPACA AND PA. WORKING WAYNE
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manly possible, and for governors, it is a huge burden to have 

those MOE requirements. Those MOE requirements should have 

never been put in even with the federal stimulus. They were detrimental because it is obviously a cliff. We got all that federal stimulus money and now it is ending and we never made the hard 

choices and the difficult choices, and now we have to make those. 

Mr. THOMPSON. Mr. Secretary, the new law creates a trillion-dollar entitlement program, expands Medicaid, imposes new taxes and 

regulatory burdens on American employers and workers. In your 

view, does the new law control and reduce the trend of increasing 

public health expenditures in Pennsylvania? 

Mr. ALEXANDER. Absolutely not. Have we ever seen anywhere the 

costs in Medicaid ever come down, ever? The biggest part of this 

law is the expansion in Medicaid, and that is going to be to the detriment of the States. Expanding Medicaid is no way to give universal health care. 

Mr. THOMPSON. Mr. Commissioner, supporters of the health care 

law claim that new insurance exchanges will give small employers 

the same leverage as large employers. Will the new exchanges 

work or are there too many unresolved questions regarding their 

structure and are there any problems you anticipate? 

Mr. CONSEDINE. We just don’t know. At this point we really don’t 

have any other models that we can look at and say one way or the 

other they work well or they don’t work well. I mean, we have seen 

Massachusetts as an example of an existing health care exchange 

and certainly in that case it hasn’t lived up to its promises in terms 

of certainly affordability. Access may have been improved but not 

significantly, and the affordability issue continues. 

There are a lot of questions that are still unresolved. For example, what is going to constitute sort of the essential benefits package that is going to be required under the exchange? You know, 

what is going to be covered under that and what is not? I mean, 

there are a lot of what we call sort of additional mandated benefits 

that are provided under most health insurance policies. Autism is 

a good example. If that is not part of the essential benefits package 

that is yet to be developed at the federal level and the States want 

to provide that as part of our essential benefits package here, we 

can do that but that is going to substantially add to the cost and 

that is a cost that is in that case borne by the State, and again, 

that is one of those big issues that we don’t know yet what direction they are going. Hopefully sometime this summer we will have 

a better sense but there are still a lot more questions that need to 

be answered before we can give any sound guidance on how this 

is going to work and if it is going to work well. 

Mr. THOMPSON. I mean, there are ideas that we had worked on, 

a bill specifically, Putting Patients First Act, that was introduced 

in July 2009 and it had some parts of it that were totally ignored 

with the President’s health care bill that was signed, so I want to 

share some of those and get your opinions on them. Would ideas 

like cross-State purchasing and permitting employers to pool their 

resources to increase bargaining power with insurance companies 

help begin the process of controlling and lowering health care costs 

here in the Commonwealth? 

30 

Mr. CONSEDINE. Well, certainly that type of buying power on a 

pooled basis has been shown to be an effective way to lower premium costs, and again, that is not something you see in this act. 

You know, I think there are a lot of great ideas that were out there 

but did not find their way into the reform law that we are dealing 

with, and that is one of the issues we have is we are sort of stuck 

with what we have and there is still a great deal of questions on 

what we are going to do with it and how it is going to work with 

the States but we would certainly like the opportunity to go back 

to the drawing board and come up with something that works for 

the country and especially works for Pennsylvania. 

Mr. THOMPSON. Great. Thank you. 

Mr. PITTS. The chair thanks the gentleman. 

Mr. Secretary, what do the words ‘‘independence’’ and ‘‘self-sufficiency’’ mean to you? The Medicaid Act says that we are to furnish 

services to families and individuals to gain independence and selfsufficiency, and that doesn’t sound like a lifetime of benefits to me. 

Do you think the current regulations give States the ability to operate a program that instills self-sufficiency and independence? 

Mr. ALEXANDER. Absolutely not. We promote in this program and 

all of the other programs dependency and not self-sufficiency and 

self-reliance. Clearly, the Medicaid Act spells it out and it tells us 

that we are to furnish services so that individuals and families can 

gain or retain independence and self-sufficiency. Obviously we 

know we have very vulnerable citizens that may need care for a 

lifetime, and that is why we are here. But the vast majority of our 

beneficiaries or recipients could be moved more quickly off of the 

program and the current system does not allow us to do that. 

Mr. PITTS. If we eliminate the maintenance of effort requirement, 

then would you have the flexibility to achieve that purpose? 

Mr. ALEXANDER. Well, if we remove the maintenance of effort requirement, all that would enable us to do is to eliminate eligibility 

categories. If we are truly going to focus on work and employment, 

then we need to retool all of the federal entitlement programs to 

focus on that. Even the disabled population will tell you that they 

would like to go to work. There are many barriers in the federal 

entitlement programs, especially the Social Security program. This 

is why it is so disorganized. We are dealing with multiple programs, multiple federal agencies, multiple bureaucrats and it is not 

integrated. If we were to eliminate barriers in some of these programs, it would make it much easier for even our disabled population to go to work. We should be here to empower them and give 

them the tools to do this, not put barriers in front of them. So what 

I would say to you is, the federal programs do not promote self-sufficiency and reliance and independence; they promote dependency. 

Mr. PITTS. Thank you. 

Commissioner, cost shifting occurs when hospitals and doctors 

receive reimbursement rates from Medicare and Medicaid that are 

lower than the cost of providing care. In order to break even, providers, hospitals and physicians compensate for these unpaid costs 

by increasing how much they charge other patients, especially 

those that are privately insured or paid out of pocket. You cite cost 

shifting in your testimony as a driver of health care costs. I am 

concerned that this effect is going to get worse under Obamacare, 

31 

which forces nearly 20 million people into a Medicaid program that 

typically providers even less than Medicare. Obamacare increases 

medical costs for private payers by expanding the government programs and reducing payment rates. In addition, because 

Obamacare did not properly handle the issue of provider reimbursement under Medicare, doctors are faced with the added pressure of finding revenue elsewhere. Do you believe the expansions 

of Medicaid in your State will shift costs to private payers and ultimately increase premiums for privately insured individuals? If so, 

why? 

Mr. CONSEDINE. I absolutely do, and I would be interested to 

hear Secretary Alexander’s views on this as well. We are certainly 

concerned about the cost shifting on the Medicaid side. We are also 

concerned about it on the exchange side. Again, what we have seen 

in the Massachusetts example is that costs went up and in fact 

that is due in large part because of the cost-shifting issues that you 

cite as well as adverse selection. So it continues to be an area that 

we are very concerned about, and again, I think highlights one of 

our main problems with the Affordable Care Act is, it doesn’t really 

address the cost side. 

Mr. PITTS. Mr. Secretary? 

Mr. ALEXANDER. Mr. Chairman, the hospitals in Pennsylvania 

stand to lose hundreds of millions of dollars in disproportionate 

share payments to hospitals. The premise behind the federal health 

care law is that by providing everybody with insurance that the 

hospitals will need much less in disproportionate share payments. 

If we look at the one example that we have, which is Massachusetts, Massachusetts openly admits that their uncompensated care 

is going sky high. So if the federal health care law is based on the 

Massachusetts model, if that is how we are modeling this, we are 

going to be in serious trouble, and in fact, Pennsylvania’s hospitals 

will be in serious trouble with that reduction in disproportionate 

share payments. All of this is a cost shift, and we are operating a 

system where we have all of these onerous, very onerous federal 

mandates, rules and regulations and we see that we don’t have 

enough money to pay certain providers. We don’t have enough to 

pay doctors adequately and we don’t have enough money to pay 

hospitals adequately. So we keep putting more and more mandates 

on the system and there is no money. The only way out is flexibility. We have to lift a lot of these mandates that actually just 

don’t make any sense, and if we have that ability, we could tailor 

programs here appropriately and use the money more wisely even 

across all of the programs, not just Medicaid. So if we had that 

flexibility, I think it would make it much easier for us. 

Mr. PITTS. Thank you. The chair recognizes Mr. Thompson for 

additional questions. 

Mr. THOMPSON. Thank you, Chairman. 

You talked about hospitals and specifically rural hospitals. That 

is the world I came out of. I spent 28 years there, and I am still 

trying to figure out how I got in Congress, but it was a great learning experience working in health care in a world of regulations and 

looking what mandates and unfunded mandated and regulations, 

the impact that it has on our health care system, and you gentlemen have both referenced in terms of hospitals. Now, in PennsylVerDate Nov 24 2008 08:37 Aug 17, 2011 Jkt 037690 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 F:\112-025 PPACA AND PA (FIELD)\112-25 PPACA AND PA. WORKING WAYNE
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vania we have a lot of hospitals and they are a site of providing 

care. Given the fact that the President’s health care bill expands 

Medicaid’s rolls by about 18 million, I think it what was projected, 

Pennsylvania somewhere under a million more people enrolled in 

medical assistance, and medical assistance paying—and I am not 

sure about specifically—well, my experience in Pennsylvania, medical assistance pays somewhere about 40 to 60 cents on every dollar 

of cost that a hospital or physician has. Based on your professional 

experiences and your leadership roles here, is that good news or 

bad news for the future of specifically rural hospitals and underserved urban hospitals? 

Mr. ALEXANDER. I would say obviously not. I think in Pennsylvania, because of the ruralness of the State, we have to be very 

conscious for access purposes, and currently the reimbursement 

rates because of this perverse system that we are operating between State and Federal Government, does not lend itself to be 

able to even increase rates adequately. We here at the State level 

are operating multiple programs across multiple federal agencies. 

It is very, very disorganized. If States should be left alone to create 

programs that are tailored to their own citizens and if we were able 

to do that, we would even be able to take less money from the Federal Government. Maybe some States would put money into health 

care. Maybe some States would put more money into nutritional 

services. Maybe some States would put more money into employment. The bottom line is, is if we had that flexibility, we could use 

federal money and State money much more wisely so that rural 

hospitals or even in the inner city where they are dying for more 

money would be able to have some relief. 

Mr. CONSEDINE. The only other observation I would make is one 

of our concerns looking down the road is, we see already sort of a 

consolidation trend occurring not only on the insurance side where 

you have either health insurance companies that are either getting 

out of the market altogether or they are consolidating, the view 

being that you almost are going to have to to survive this new environment under the Affordable Care Act. The same thing is going 

to happen on the hospital side too where you have the larger hospital chains potentially acquiring rural hospitals and smaller hospitals, and long term as they look at, you know, what hospitals are 

more profitable, which are not, there is a risk that some of those 

rural hospitals just go away. And again, for a State like ours where 

we have large swaths of the State that are served by one rural hospital, that is a concern to us. 

Mr. THOMPSON. I want to follow up on one point you made in 

terms of what is the likelihood that some rural hospitals may go 

away, may close. I have never been one for health care reform, and 

I have spent my entire professional career in terms of health care 

refinement and improvement, and one of the principles obviously of 

that is access, and given this medical assistance expansion, and I 

am not sure what the portion of the half a trillion dollars of Medicare cuts will hit hospitals here in Pennsylvania but it will be significant, certainly the bureaucracy costs that are layered on, now 

we have over 100 new bureaucracies. I remember the costs when 

HIPAA was implemented, my hospitals and the amount of people 

that had to be hired that really don’t do any direct patient care but 

33 

that was to be in compliance, those compliance costs. Given all 

that, is there a likelihood in Pennsylvania if this bill goes unchecked and all parts of it are implemented that we will see hospitals, some hospitals close in Pennsylvania, and isn’t that completely opposite of expanding access to care? 

Mr. ALEXANDER. I would say yes. Hospitals right now are—we 

have hospitals in this State that are on the brink, and I have seen 

it in other States where they are just barely making it. Any more 

federal top-down heavy-handed rules and regulations and laws 

from Washington are not going to solve the problem, and I like 

what you just said. We should be using refinement rather than reform because that is exactly—we have a lot of hardworking people 

in our hospitals and our nursing homes and our health care providers have been doing an excellent job. It is the government that 

puts roadblocks in the way. So not only does Washington have to 

get off of our backs but we at the State level in some respects have 

to be cognizant of what is going on in the counties and in our local 

hospitals. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. 

The committee received a letter earlier this year from 33 governors and governors-elect asking for the additional flexibility that 

you have talked about. Sort of the theme in this testimony, and the 

committee is committed to provide States with the flexibility they 

need. If you have any suggestions that you have where Congress 

can help lift the mandates to provide this flexibility, we would welcome them. 

This has been excellent testimony. We thank you for your input. 

We look forward to continuing to work with you. This is our first 

field hearing, so you are guinea pigs for us in a way. We thank you 

for your excellent input. At this time the chair will excuse panel 

one and call forward the second panel. 

For our second panel, we will hear from two of Pennsylvania’s 

senior legislators, two former colleagues and good friends. Senator 

Patricia Vance is the only member of the legislature who is a professional nurse. Prior to her election to the Senate, she served 14 

years in the Pennsylvania House. In the Senate, Senator Vance 

chairs the Public Health and Welfare Committee. 

Our second witness, Matt Baker, was recently elected to his 10th 

term in the House of Representative. Representative Baker serves 

as chairman of the House Health Committee for the 2011–12 session. 

Welcome. We have your written testimony in the record. You are 

now recognized for opening statement. Senator Vance, you are recognized for your statement. 

34 

STATEMENTS OF PENNSYLVANIA STATE SENATOR PATRICIA 

VANCE, SENATE PUBLIC HEALTH AND WELFARE COMMITTEE; AND PENNSYLVANIA STATE REPRESENTATIVE MATTHEW BAKER, CHAIR, PENNSYLVANIA HOUSE HEALTH COMMITTEE 

STATEMENT OF PATRICIA VANCE 

Ms. VANCE. Good morning, Chairman Pitts, Congressman 

Thompson. We are delighted to have you here with us today to talk 

about the impact of the Patient Protection and Affordable Care Act. 

As you said, my name is Pat Vance. I am one of the 50 senators 

in the Pennsylvania Senate and chair of the Public Health and 

Welfare Committee. Before serving in the legislature, I was both a 

geriatric and a pediatric nurse, so I hit both ends of life’s spectrum, 

but my health care background really gives me a unique perspective on the medical and legislative impacts of this federal health 

care proposal. 

Now that a year has passed since this legislation was signed into 

law, it is time to evaluate some of the consequences and rethink 

the direction we are headed. 

First, insurance premiums have increased dramatically over the 

past year. Last August, the California Department of Insurance approved an average rate increase of 14 percent for Anthem Blue 

Cross and Blue Shield of California increased its rates in October 

2010, January 2011 and is posed for a third rate hike this spring. 

For some individual policyholders, this cumulative increase could 

be as high as 86 percent. Mennonite Mutual Aid Association in 

Kansas increased its rates 4 percent recently to pay for provisions 

that were required in this federal health care law. 

In Pennsylvania, Blue Cross of Northeastern Pennsylvania increased rates 9.9 to 15 percent as of January 1, 2011. These rate 

increases far outpaced the Consumer Price Index, which as you all 

probably know went up 1.6 percent before seasonal adjustments 

during the year-end January 2011 according to the United States 

Department of Labor. Now does not seem to be the time to further 

burden taxpayers. The economy is still in pretty dire straits. As of 

January 2011, Pennsylvania’s seasonally adjusted unemployment 

rate is 8.2 percent, slightly better than the United States, which 

is 9 percent. Gasoline prices have been surging lately due to all the 

problems in the Middle East and employers have frozen wages during the past few years, and by all indications wages will continue 

to stagnate. Americans are really struggling. We hear from them 

every day in the office. 

The federal health care law will only add to the average resident’s financial stress with excise taxes on high-cost plans, increases on taxes on earned and unearned income, and penalties on 

uninsured individuals. On top of this, the federal health care bill 

will most likely increase the deficit through Medicaid expansion 

and increase subsidy costs as insurance premiums continue to rise. 

The voters have called on government to exercise fiscal restraint 

and it is irresponsible for all of us to leave a legacy of debt on our 

children and our grandchildren. We are really only kicking the can 

down the road and making things tougher for them. 

35 

Finally, employers will struggle with mandates required under 

the federal law, which will ultimately reduce their willingness to 

hire new employees. Under the law, employers have lost their flexibility, and that is a word we need to talk about a lot. We need 

more flexibility in choosing benefits for their employees. In Massachusetts, we have seen employers drop coverage and pay the fines, 

which they have determined to be cheaper. This defeats the goal 

of having more Americans covered by health insurance. Now is the 

time to step back and reexamine the federal health care law, the 

good and the bad. 

In closing, thank you for this opportunity to testify on the impact 

of this law on the citizens of Pennsylvania, and I look forward to 

taking any of your questions. 

[The prepared statement of Ms. Vance follows:] 

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Mr. PITTS. The chair thanks the gentlelady. 

Representative Baker, you are recognized for your opening statement. 

STATEMENT OF MATTHEW BAKER 

Mr. BAKER. Good morning, Mr. Chairman and committee members. Thank you for the opportunity to comment on the impact the 

federal health care law has upon Pennsylvania. 

As the majority chairman of the House Health Committee, I have 

many concerns that the federal law will result in unsustainable 

growth in Medicaid costs, higher taxes, loss of liberty and freedom 

in choosing one’s health insurance, being mandated to buy insurance or face fines or penalties by the IRS that has already been 

deemed unconstitutional and will likely be decided by the United 

States Supreme Court on appeal. 

The federal takeover of health insurance regulation and, indeed, 

one-sixth of our national economy, will have serious and costly impacts to Pennsylvania’s taxpayers, businesses and State budgets 

and constitutes a significant usurpation by the Federal Government of longstanding State authority over health insurance regulations. 

Due to strong public opposition to the federal law, I have introduced House Bill 42 along with 41 other States called the Health 

Care Freedom Act that protects two essential rights: to participate 

or not in any health care system, and prohibits the government 

from imposing fines or penalties in that decision; and two, protects 

the right of individual to purchase, and the right of doctors to provide, lawful medical services without a government fine or penalty. 

According to the American Legislative Exchange Council (ALEC), the federal health care law will cost $1.5 trillion over the next 10 

years, adding billions of dollars to Pennsylvania’s budget shortfall. 

The Heritage Foundation estimates Pennsylvania’s Medicaid costs 

to increase by nearly $1 billion from 2014 to 2020 as a result of 

new Medicaid mandates. Eligibility for Medicaid would increase in 

2014 by half a million people, growing Medicaid enrollment by 18 

percent to over 3 million people in Pennsylvania. In other words, 

in 2014 one in four Pennsylvanians walking around in our great 

Keystone State would be on public welfare at greater taxpayer expense here in Pennsylvania. 

A May 2010 Kaiser Foundation report found that by 2019, Pennsylvania’s Medicaid rolls may grow by nearly 700,000 people and 

may cost our State an additional $2 billion over the 2014–2019 

time frame. Under the new law, Medicaid coverage will extend not 

only to those who are currently uninsured or whose incomes are 

below 133 percent of the federal poverty level but will also sweep 

into the program several million more nationally below that income 

threshold who are currently covered by private employer-sponsored 

coverage or individual coverage. The crowding out or displacement 

of private coverage will most likely occur among people who work 

for businesses with fewer than 50 employees. 

Pennsylvania Medicaid consumes 31 percent of the entire State 

budget. Additional mandates under the federal law are estimated 

to increase exponentially by nearly $1 billion on top of this growth. 

Pennsylvania’s Medicaid budget is growing at nearly 12 percent a 

39 

year while revenues have grown just 3 percent. The unsustainable, 

unaffordable and unavoidable growth will continue as long as inflexible federal rules mandate State policies. I believe Pennsylvania 

should request a waiver of the Medicaid mandates that I believe 

bind States’ controls, particularly given the maintenance of effort 

effects on needed cost control measures in the midst of Pennsylvania’s $4 billion budget deficit. 

According to the Heritage Foundation/Lewin data, there would 

be dire consequences for patients, doctors and hospitals in Pennsylvania. They estimate 51 percent of privately insured Pennsylvania 

residents would transition out of private insurance. Fifty-nine percent of Pennsylvania’s residents with employer-based coverage 

would lose their current insurance. Eighty percent of Pennsylvania’s residents in a health insurance exchange would end up in a 

public plan. Thirty-two percent of the uninsured would still lack 

coverage. 

It is my understanding that the federal law raises taxes by almost $500 billion, or a half a trillion dollars over 10 years. The 

largest portion of tax increases will fall upon small business owners, reducing capital, limiting economic growth and hiring and 

probably loss of jobs and reduction of hours and wages. The employer mandate will impose a tax of $2,000 per employer on employers with more than 50 employees that do not provide health insurance. The federal law will also tax employers that offer health 

coverage unaffordable by the government. These new taxes on employers will reduce employment or be passed on to workers in the 

form of lower wages or reduced hours. New and increased Medicare 

taxes will impact our small businesses. Over time, higher payroll 

taxes will decrease wages for their employees. 

While I believe there may be some good intentions with the federal health care act, in part, to support, I believe the federal health 

care act has to be reformed to better serve Pennsylvania citizens. 

In addition to constricting economic growth and reducing employment, the health care act will dramatically increase spending and 

health care as well as the cost of health coverage. Newer and higher taxes on small businesses and workers will impede job creation 

and economic growth that they can ill afford during a time when 

our economy struggles. With most States faced with deep budgetary deficits, the federal health law adds conservatively over $118 

billion that the federal health law will cost taxpayers through 2023. 

These are taxes that can be avoided and should be avoided if proper changes are made to the federal law. 

In conclusion, it is my hope and the hope of the majority of the 

citizens that Congress will enact a new health care bill that will 

reduce health care costs, spending and taxes as well as the cost of 

health insurance coverage in a way that will do no harm to our 

fragile economy or to our taxpayers already overburdened by taxes, 

credit and debt. Let us work together in a shared vision to find solutions for health care reform that are innovative, private sector, 

market-driven, affordable, accessible and based on patients’ needs 

and choices. 

Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Baker follows:] 

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Mr. PITTS. The chair thanks the gentleman and recognizes himself for questioning. 

Senator Vance, as a health care provider, you do have a unique 

perspective in this debate. Section 1311(h) of the new health care 

law gives the Secretary of HHS the power by regulation to determine which health care providers private insurers are allowed to 

contract with. Do you think it is appropriate for the HHS Secretary 

to have this power? 

Ms. VANCE. I think one of the problems with federal health care 

law is how much power it does give to the Secretary. It is undefined. Even someone who may think this is a wonderful law is unable to ascertain what exactly will be done because there is so 

much uncertainty. There is very little actually written into the law 

and too much power given. So do I think that power should be 

there? No. It has to be—first of all, I am not sure I like the idea 

that they would dictate which health care professionals could be 

hired, number one, but number two, for it to be so nebulous does 

not benefit anyone. 

Mr. PITTS. Senator, would you support federal legislation to repeal the Medicaid maintenance of effort requirement in the new 

health reform law? 

Ms. VANCE. I never liked the maintenance of effort and I am not 

sure that we even need to have a law passed to do that. In fact, 

if the Federal Government was accessible to a waiver from the 

States, I think it could be done without legislation. 

Mr. PITTS. Representative Baker, you mentioned that many individuals that have private insurance now may end up on Medicaid. 

Section 1413 of PPACA actually states that if an individual applies 

to buy a private insurance policy in the exchange and is found eligible for Medicaid, that person must be enrolled into public program and cannot buy a private plan. Do you think most Americans 

know this provision was included in the health care law? Do you 

think that individuals should have the right to buy private coverage if they want rather than be enrolled in Medicaid? 

Mr. BAKER. Very good question, Mr. Chairman. I don’t think the 

average American really understands the full import of this 2,000- 

or 3,000-page document. In fact, the former Speaker of your House 

said you had to pass it in order to understand what it is in it, so 

it seems to me not even many Members of Congress understood the 

federal law and its full import. You are absolutely right in terms 

of the minimal coverage requirements in health insurance, the 

mandates, the migration of millions more Americans going into 

Medicaid, growing Medicaid costs exponentially. I think there is 

sometimes a disconnect that is not government costs, it is taxpayer 

costs, and there are tremendous implications and ramifications in 

moving more people into Medicaid welfare programs instead of encouraging them to get out of Medicaid. Instead of growing Medicaid, we should be reducing Medicaid, helping people. The best 

welfare reform is job creation and people becoming productive and 

having personal accountability and responsibility and providing for 

their families and obtaining the American dream. 

So I just don’t understand the concept out of Washington that we 

need to grow welfare and Medicaid. We need to reduce it. We need 

to shrink it. We need to have a full employment, equal opportunity 

45 

jobs bill rather than this kind of concept. We need to reduce health 

care. The minimal requirement under health care for insurance, I 

find it remarkable that, and the federal judge in Florida mentioned 

it in his court case, that a 20-year-old who wants to just have a 

high-deduction major medical or catastrophic health insurance plan 

is prohibited from doing that under the federal health care bill. The 

Federal Government mandates minimum health insurance requirements. And so that is a very costly requirement. And in fact, if they 

don’t buy that insurance, they get fined or penalized by the Federal 

Government. My goodness, that is the heavy hand of the Federal 

Government and I agree with the federal judge. It is an unconstitutional reach by Congress to imply and implore the commerce clause 

for the first time in 200 years to both an economic activity and an 

economic inactivity. 

Mr. PITTS. Thank you. Representative, you mentioned that Medicaid now consumes 31 percent of Pennsylvania’s budget. You also 

mentioned that the Medicaid budget is growing at 12 percent a 

year. Do you think the Medicaid growth rate will increase as a result of this law, and if the State’s revenue growth is 3 percent, I 

think you said, a year, and the Medicaid growth is 12 percent a 

year, or higher, what impact will that have on the ability of Pennsylvania government to provide other needed services? 

Mr. BAKER. Thank you, Mr. Chairman. That was a great question. I think we are on a track of unsustainability and catastrophic 

budget crisis if we continue down this road of growing the welfare 

budgets, Medicaid budgets. I think it has been mentioned by previous speakers that vital, rare taxpayer funds are being crowded 

out by Medicaid costs that are better utilized for transportation, 

education or other health care needs, and this is definitely on a 

track of unsustainability if the federal court, Supreme Court decision doesn’t strike this federal law down or if Congress does not repeal it. 

Mr. PITTS. Thank you. The chair recognizes the gentleman, Congressman Thompson, for questioning. 

Mr. THOMPSON. Thank you, Chairman. 

Thank you, Senator, Representative. It is great to have you here. 

I appreciate your leadership specific to your areas of jurisdiction 

committee-wise. 

Senator Vance, I just want to follow up the comments that Representative Baker made. The health care law contains a massive 

expansion of the Medicaid program in order to reduce the number 

of uninsured, which obviously we have heard this morning places 

heavy burdens on State budgets. Now, how will Pennsylvania respond to the expansion of the Medicaid program? Obviously it cannot raise taxes during this economic downturn so the tough question is, what is left? 

Ms. VANCE. I don’t think anyone will argue it is totally 

unsustainable. We cannot afford it. I know that the Federal Government takes the burden for a couple years but after that it comes 

back to Pennsylvania and to the taxpayers, and I cannot imagine 

our revenues increasing that dramatically that we would be able to 

cover that. 

Mr. THOMPSON. You mentioned that employers have lost their 

flexibility in choosing benefits for their employees. The proponents 

46 

of the law said that they wanted to make sure that if you liked the 

insurance you had, you could keep it. However, the regulations 

coming from the Secretary of Health and Human Services would 

force as many as 87 million Americans with employer-based health 

care to change their plan. Do you think that we should pass legislation that would ensure that Americans can keep the plan they have 

now if they like it? 

Ms. VANCE. Well, it appeared that the PR that came out about 

the federal health care bill that said if you like your insurance, you 

can keep it was speaking with a forked tongue because in essence 

that is not what happened. So yes, I believe that there should be 

able to have some determination for an employer to choose. And 

also, if it becomes such an important burden on the employer, that 

is why in Massachusetts, as you found out, they were willing to pay 

the penalty rather than because it was cheaper. We should have 

learned a lot of lessons from Massachusetts. Whether we did or not 

is questionable. People had an access card. They thought they had 

insurance but they had no access to real health care. They still 

have a huge increase in their emergency rooms. There are not 

enough basic health care practitioners and we have to put our arms 

around those who deliver basic health care, and just because you 

happen to have an insurance card does not mean you have access. 

Mr. THOMPSON. Very good. I couldn’t agree with you more. This 

should be about access and bringing down cost. 

Representative Baker, always great to be with you. I appreciate 

the fact that we get a chance to work together quite a bit even outside of this area within the Pennsylvania 5th Congressional district. During the debate over the health care reform last Congress, 

there were a lot of promises made, primarily among them that the 

health insurance costs would decrease, and certainly as a part of 

my principles I led my professional life by and it certainly guided 

me in Congress as we refined and improved health care, whatever 

we did should decrease the cost of health care for every American. 

However, according to the nonpartisan Congressional Budget Office 

analysis, individual health insurance premiums were raised by an 

average of $2,100 per family, and this increase comes despite President Obama’s frequent promise that his health care plan would 

lower premiums by $2,500 per year for an average family. What 

are some of the things that you would recommend to lower the cost 

of health care in Pennsylvania? 

Mr. BAKER. It is a good question, and I often hear it, and thank 

you for your opening remarks. It is always good to see you and 

work with you on a number of issues in rural Pennsylvania. I am 

hearing from many constituents that they are not happy with this 

law for a number of reasons, this federal law, and one of them is 

that their health insurance premiums keep going up and so they 

don’t believe the promise of those lowered premiums is really becoming a reality, and my good colleague, Senator Vance, just mentioned in her testimony that the price, the cost of health insurance 

keeps going up dramatically. But some of the ideas I think we 

ought to be pursuing and looking at at the State level, at least, is 

I think we ought to be considering applying for a medical loss ratio 

waiver. Some of the States have looked at those issues—Maine, Nevada, New Hampshire, Kentucky and 10 other States. We have alVerDate Nov 24 2008 08:37 Aug 17, 2011 Jkt 037690 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 F:\112-025 PPACA AND PA (FIELD)\112-25 PPACA AND PA. WORKING WAYNE
47 

ready established a State-run high-risk pool. I think that is helpful 

in this regard. We may want to set up and consider a prescription 

drug donation program that provides for the poor and the uninsured with security of prescription drug coverage, complete a completely voluntary program for the reuse of expensive medications. 

I think to the degree that we can afford it, I think we need to look 

at paying medical school loans for some physicians and nurses as 

a recruitment and retention program here in Pennsylvania, especially encouraging providers to practice in rural and underserved 

areas. We need to look and perhaps allow for alternative health 

care arrangements, health care sharing ministries, for instance, in 

some areas that are providing good paradigms and models. 

I have introduced a bill similar to the House of Representatives’ 

to allow people to purchase health insurance across State lines, 

opening up competition, allowing for market-driven competition to 

lower down insurance premium rates. I think we need to consider 

equalizing the tax treatment of insurance for individuals, and I notice my time is up. I have many other suggestions that I could 

make but I just saw the button flashing here. Do you want me to 

continue? 

Mr. THOMPSON. Go ahead. 

Mr. BAKER. Some of the other concerns I think we need to consider, we need to review sunset costly insurance mandates before 

enactment. We really need to seriously look and have some conversations about these costly mandates and how they actually trigger and reflect a contraindication that we are heading in the wrong 

direction that, you know, mandates may sound good, feel good and 

may help some but it actually is a cost driver increasing health insurance. I think we need to provide perhaps tax breaks for people 

and businesses who buy and sell health savings accounts and we 

need to provide patients with a cost estimate of medical treatments. And lastly, allow the poor to use Medicaid dollars possibly 

to purchase private health insurance. We might want to take a look 

at providing a state income tax credit for purchase of long-term 

care insurance, perhaps offer again to the extent that we can afford 

it, offer premium insurance to Medicaid and SCHIP recipients who 

have access to employer-sponsored health coverage, maybe take a 

look at establishing a cash and counseling program for the disabled, and again, just generally stop costly Medicaid-mandated 

benefits before enactment. 

Mr. THOMPSON. Great. Thank you. Thank you, Chairman. 

Mr. PITTS. The chair thanks the gentleman. I have just a couple 

of more questions if you could take them. 

Senator, Medicaid was initially created to provide care to low-income children. The reimbursement rates for Medicare are usually 

much lower than those of private insurance and even Medicare. 

Some doctors no longer take Medicaid patients because of the reimbursement rates. By expanding eligibility for the program, do you 

believe that we are potentially jeopardizing the quality of care for 

those that program was initially intended for? 

Ms. VANCE. Not only will it jeopardize the children but there are 

many physicians that no longer are willing to take Medicaid patients. I particularly notice this in my area with dental benefits, 

Medicaid dental benefits. It is almost impossible to find a dentist 

48 

who wants to treat Medicaid patients. It is a disaster for people to 

obtain care with these low rates, and let me stress, there is no easy 

answer to all this. What we need is flexibility. Pennsylvania is almost like five States wrapped into one. We need to have the flexibility to treat different areas and know what works. Rural areas 

are not the same as an inner city urban area, and we need to have 

flexibility. I think the best thing that could happen for all of us is 

to have some determination whether this law is in fact going to 

meet the appeals process, this uncertainty, because you are putting 

a lot of time and money into hypothetically thinking maybe you 

will have to do it, maybe you won’t, and this uncertainty, it does 

nothing but drive up cost. 

Mr. PITTS. Excellent point. 

Representative Baker, Pennsylvania is home to a vibrant medical 

technology industry including medical devices and innovative new 

pharmaceuticals. The new health care law includes new taxes on 

these industries. The Chief Actuary of CMS has stated that these 

taxes would be passed on to patients. Others believe that these 

new taxes might lead to less innovation and further job loss. If either scenario is the outcome, do you believe this is good public policy? 

Mr. BAKER. Absolutely not. I do not subscribe to the attitude that 

more taxes are better and that that empowers anyone. I think it 

is just the opposite, that it discourages innovation. It discourages 

entrepreneurship. It discourages people to be able to decide for 

themselves what to do with what little money they have left after 

taxes are taken out of their paychecks. And with the cost of everything going up every year, it just exacerbates an already difficult 

situation. We are still struggling to come out of the deepest recession that we have experienced and the longest recession that we 

have experienced since the Great Depression. It just seems to me 

that to impose a tax, one of them that you suggested on disabled 

people, for instance, a tax on prosthetic limbs and the like on certain medical devices, my goodness, how does that help anyone? I 

don’t understand that. So no, I think less taxes are better. 

Mr. PITTS. Thank you. Do you have any other questions? 

Mr. THOMPSON. Sure. 

Mr. PITTS. The chair yields to Congressman Thompson. 

Mr. THOMPSON. Thank you, Chairman. 

Representative Baker, thanks for your thoughts in that area. I 

mean, this is a country—in Pennsylvania, in particular, we have 

been a place of innovation when it comes to health care. We are 

blessed, when you look around the world in terms of quality and 

innovation in this country, and, you know, any time you tax something you repress it. Why would we want to end that legacy of 

being a place of innovation and quality? 

A question for both of you. Roughly 21 percent of the total State 

spending, Medicare is already the single largest item in the State 

budget according to the National Association of State Budget Officers, and 31 percent based on your testimony here in the Keystone 

State. Realizing that Washington is in worst financial shape than 

most States, and we are working to make budget cuts of our own 

at the federal level, what can Congress do that would allow you to 

49 

reduce health care costs in Pennsylvania? Senator Vance will start 

and then we will check in with Representative Baker. 

Ms. VANCE. I would repeat again, give us flexibility to make our 

own decisions. Hopefully those of us who work on the ground in 

Pennsylvania know what is needed in Pennsylvania. I don’t have 

the vaguest idea what may work in another State. So if you want 

to help us, we need flexibility to be able to make informed decisions 

about the patients and the consumers that we hope to be able to 

help. 

Mr. THOMPSON. Thank you. 

Mr. BAKER. I agree entirely. We need more flexibility. We don’t 

need more rigidity, more mandates. We need less mandates. We 

need to be able to use the power and the imagination and the freedom and the entrepreneurship of the States to be able to do more 

with less. That is what we are faced with, these deep deficits that 

all the States are experiencing, and it just seems to me that the 

more mandates that we get from Washington, the worse it becomes 

for us to try to make ends meet, and it crowds out other budget 

areas that are in desperate need of funding. So the cost implications of this federal health bill are just astronomical, and obviously 

the costs will grow exponentially unless we have waivers, unless 

we have mandate relief and unless we have additional flexibility. 

Mr. THOMPSON. Thank you both for your leadership and testimony. Thank you, Chairman. 

Mr. PITTS. The chair thanks the gentleman, and again, thanks 

to the panel for your excellent testimony, for taking time to testimony, for taking time to answer our questions. We look forward to 

working with you as we seek to modify, repeal or replace portions 

of this, parts of this new law, and I would like to thank you for 

the use of your facilities. This is beautiful. 

So at this time the third panel will please come to the table. We 

will take a 5-minute recess before we continue. 

[Recess] 

Mr. PITTS. The subcommittee will reconvene for panel three. Our 

first witness of our third panel is Mr. Gene Barr. Mr. Barr is Vice 

President of Government and Public Affairs for the Pennsylvania 

Chamber. His responsibilities include directing all legislative and 

regulatory activity, marketing, membership and external communications. Our second witness, Kevin Shivers, has been the State 

Director of NFIB for the last 10 years. Mr. Shivers serves as 

NFIB’s chief Pennsylvania lobbyist and leads the organization’s 

grassroots and political activities. Our final witness is Ann Daane, 

is it? Ms. Daane joined Case New Holland in March 2008 as Vice 

President of Human Resources for North America. We look forward 

to hearing from each of you. 

Mr. Barr, you have 5 minutes for your opening summary. 

50 

STATEMENTS OF GENE BARR, VICE PRESIDENT, GOVERNMENT AND PUBLIC AFFAIRS, PENNSYLVANIA CHAMBER OF 

BUSINESS AND INDUSTRY; KEVIN SHIVERS, PENNSYLVANIA 

DIRECTOR, NATIONAL FEDERATION OF INDEPENDENT BUSINESS; AND ANN DAANE, VICE PRESIDENT, NORTH AMERICA 

HUMAN RESOURCES, CASE NEW HOLLAND 

STATEMENT OF GENE BARR 

Mr. BARR. Mr. Chairman, thank you very much. Thanks to you 

and Congressman Thompson for the opportunity to be here. The 

chamber is the largest broad-based business advocacy group in 

Pennsylvania, and on behalf of our thousands of members across 

the Commonwealth, we thank you for this opportunity to discuss 

this law. 

Interestingly, and you will hear it now, you will hear it outside, 

you will hear it wherever you go, there are others who talk about 

the benefits of the law. Yes, there are some benefits. Unfortunately, 

from the perspective of job creators in Pennsylvania and across the 

country, the huge negatives attached to this law greatly outweigh, 

in our view, the benefits attached to it. You heard much of that 

earlier. I am going to just briefly summarize the comments we have 

already submitted, and the reality is, what you heard from the governor, from the secretaries, from our elected officials today are exactly right. This is a major problem for Pennsylvania, for the Nation, for job creators. 

From our perspective, what we need at this time, at this economic time here, is an increased focus on jobs. Obviously this is a 

balancing act between trying to take care of the most vulnerable 

in our society with trying to create those economic opportunities for 

everyone across the board. Unfortunately, this act works very deliberately and very strongly, in our view, against job creation. 

For example, the application of the law applies when you have 

50 or more employees. At this time when we are desperately seeking across this Nation to create jobs, and if you are an employer 

with 45, you are going to think twice before you add those five individuals as employees. We do not need to give employers at any 

time, particularly this time in this recession, reasons not to hire, 

and unfortunately, this law makes them think more than twice 

about that. We have had struggles with employers over the last 

year with a number of different issues coming out of Washington, 

health care being one, issues like card check being other things, 

which have actively sought to discourage our members from adding 

our citizens to the work rolls simply because it becomes too difficult 

and too expensive to make those kinds of hires. 

The bill, the law, has, as you have heard, a number of tax increases relative to it. I am not going to get into all of those. You 

have heard them already and that is certainly true. The concern 

over debt is a real one. It is substantial, and this bill, despite what 

some of the proponents said, when you look at, for example, the remarks of the Chief Actuary, who is responsible for Medicare and 

Medicaid services, it is abundantly clear that the only way you can 

make this appear to positively address the deficit is through smoke 

and mirrors, double counting and so forth, and that has been done 

on a fairly large scale there. The other way, to be honest, the only 

51 

way you can make it happen is by the cuts in reimbursement they 

have proposed to doctors and hospitals that if they happen will severely impact the ability, as Senator Vance mentioned, for accessibility to health care, and if they don’t happen, those cuts, then 

what we will have happen is obviously an increase in the debt. 

The other thing that you heard and certainly we are hearing it 

from our members is the pieces of the legislation that actively discourage, someone would maybe say cynically that was what the bill 

was intended to do, private employer-sponsored health care because as you run the numbers, as any employer must do, run the 

numbers in terms of profitability, expenses and so forth, when you 

come down to it, many times the penalty is going to be much easier 

to pay than continuing the cost of a mandated, standardized, topdown health care plan that many employers may not even quality 

for with what they offer out there now. 

This individual mandate to buy, in addition, we believe Governor 

Corbett is exactly right in questioning along with others the constitutionality of this. You heard other comments about what has 

happened. We have already seen similar types of operations in 

place. We have seen Massachusetts take this, as was mentioned 

earlier. We have seen, sure, more people are insured but the problem is accessibility to health care. We have seen from everything 

we have seen higher ER visits for Massachusetts. Interestingly 

enough, I saw a study about a year or so ago in which the highest 

percent users disproportionate users of emergency room services 

are Medicare and Medicaid so current federal insurance is already 

not helping the ER side but is actually accelerating that. 

You heard earlier as well the importance of flexibility for employers. The only way that employers can be successful is to be flexible 

and nimble and agile to deal with the day-to-day changes that 

occur in the marketplace and occur in their operations. This reduces significantly the flexibility that is available to employers in 

terms of health care, reduces their operations, and clearly will have 

an adverse impact on employers as we move forward. 

There are a couple of things and again, you know, there was 

much made of the previous Speaker of the House comment about 

having to pass this bill so we could see what was in it. There was 

another comment that she made in speaking to a group of, I believe 

it was musicians and artists. She said well, we wanted to pass this 

bill so that you could all have health care coverage, and this is kind 

of a quote, go off and make music or create pictures or whatever 

you want to do. I do not believe the American people believe that 

that is the role of Federal Government, State government or any 

government to abdicate that kind of responsibility. 

The other thing that we have heard quite a bit during this debate has been well, business hasn’t come forward with any options. 

That is absolutely incorrect. A number of them were articulated 

today. I am not going to go through those. But the premise from 

the business perspective is, health care reform needs to be more 

than figuring out who gets stuck with an inflated bill. As was mentioned earlier, this bill does little to nothing to address the health 

care cost issue. That has to be addressed, and one of the ways, and 

particularly for us here in Pennsylvania that is a major problem as 

has been mentioned is legal reform. Former Vermont Governor 

52 

Howard Dean explicitly stated that they didn’t touch that because 

they didn’t want to offend the trial bar. Here in Pennsylvania, 

Philadelphia was recently named by a national group as the number one judicial hellhole in the United States. United States needs 

legal reform on a broad basis. Pennsylvania severely needs legal reform on a broad basis and it is something we are attempting to address here, and again, we are happy to hear Governor Corbett 

make that comment again. 

There are a number of other things clearly that we would advance including allowing minors to be kept on the plan for some 

period of time beyond. All those things we are happy to talk about. 

Unfortunately, while there are a couple of good things, as I mentioned in the plan, the overwhelming majority of it is going to drive 

costs higher, reduce flexibility for employers, severely impact job 

creation in this country and in this Commonwealth, which is where 

we are here immediately concerned. 

And finally, let me close with this. Chairman Pitts, I know that 

from our experience in the past you are a keen student of history, 

and a couple of months ago I ran across what I believe is a very 

interesting quote, and it came from Thomas Jefferson in 1802, and 

he said, ‘‘If we can but prevent the government from wasting the 

labors of the people under the pretense of taking care of them, they 

must become happy.’’ That is a tremendous piece of foresight from 

over 200 years ago. Thank you. 

[The prepared statement of Mr. Barr follows:] 

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Mr. PITTS. The chair thanks the gentleman and recognizes the 

gentleman, Mr. Shivers, for 5 minutes for an opening statement. 

STATEMENT OF KEVIN SHIVERS 

Mr. SHIVERS. Thank you, Mr. Chairman and members of the 

committee. I am the State Director for the National Federation of 

Independent Business and I want to thank you for the opportunity 

to talk with you about the Patient Protection and Affordable Care 

Act and its impact on small business owners and workers. As I 

begin my statement today, I want to say for full disclosure reasons, 

NFIB is one of the groups I joined with the many States in filing 

a lawsuit against the Federal Government, and we are hopeful that 

this will reach an expedited conclusion. We hope it will, because 

this is such an impactful law and particularly on small business. 

For small businesspeople, health care is a pocketbook issue. 

Nearly 81 percent of small business owners report that finding affordable health insurance for themselves and their employees is a 

challenge, and those small businesses that do have health insurance pay on average 18 percent more for the same health insurance 

benefits as large companies do. When the federal health law was 

signed, its proponents promised that the costs would decrease for 

small businesses. Not only have costs gone up the year after it has 

passed but the new law has added new compliance and paperwork 

burdens, making a flawed system even worse. 

Across the Nation, it has been reported that insurance premiums 

in the small group market have risen 40 to 60 percent. We have 

heard the same here in Pennsylvania. Many small businesses fortunate enough to afford health insurance have had their plans canceled because the federal health law’s new and restrictive rules 

have rendered them noncompliant. Others who are told that their 

health plans will be protected or grandfathered under the new law 

under the new law have learned their plans now are noncompliant. 

About 60 percent of businesses last year made small adjustments 

to their plans in order to manage rising costs. By making small 

changes or adjustments, these plans no longer comply with the 

grandfathering provisions under the Obama health care law, exposing businesses to more regulations and cost increases in the future. 

It is estimated that as many as 80 percent of small businesses 

will be forced to give up their current coverage within the next 2 

years. In an already uncompetitive market, more canceled plans 

and more regulations mean that small businesses have fewer 

choices than they had before the law was passed, making higher 

costs inevitable. 

The new law also imposed myriad tax and paperwork headaches 

for small businesses. Compliance costs from the 1099 provisions 

alone will place an enormous burden on small businesses. The cost 

associated with tax preparation paperwork is the most expensive 

paperwork burden that the federal government imposes on small 

business owners. It costs as much as $74 an hour. New taxes on 

various products, services and payroll are especially harmful to 

small business. And a new insurance company tax that will be paid 

almost exclusively by small businesses is expected to cost as much 

as $5,000 per household. 

59 

The new federal law also has taken away one of the few consumer-directed pieces that currently exists in the health care marketplace today. The new law prohibits individuals from using pretax dollars, like those from a flexible spending account or a health 

savings account, to purchase over-the-counter items. Now individuals must make an appointment with their health care provider in 

order to obtain a prescription to purchase things like basic remedies to alleviate the discomfort of the common cold. This mandate 

further taxes an already over-utilized system and it forces doctors 

to take time away from patients who really need that medical care. 

Another provision of the Obama health care law which has failed 

to live up to its promise to reduce health insurance costs is the 

small business tax credit we all have heard about. While proponents of the new federal law told us that tax credits would help 

small business to purchase health insurance, in reality, the tax 

credits are limited. The full value of the tax credit applies to only 

a small number of small businesses under very specific circumstances, and it is temporary, so the costs will rise again once 

the credits expire. 

For more than two decades, small business owners have cited the 

rise in health care costs as their primary concern. Since 1999, premiums have increased nearly 100 percent in the small group market. Unfortunately, the new Obama federal health care law only 

perpetuates the problem. One year after its passage, small business 

owners are bracing for higher costs, more rules and regulations, 

fewer choices and less flexibility. 

I want to thank you for considering the views small business and 

we stand ready to assist you in finding an alternative to this current federal problem. Thank you. 

[The prepared statement of Mr. Shivers follows:] 

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Mr. PITTS. The chair thanks the gentleman and recognizes Ms. 

Daane for 5 minutes for an opening statement. 

STATEMENT OF ANN DAANE 

Ms. DAANE. Thank you, Mr. Chairman and other members of the 

committee. Thank you for the introduction. I am Ann Daane, Vice 

President of Human Resources at Case New Holland, and I thank 

you again for the opportunity to testify today. 

Chairman Pitts, we are proud that New Holland began here in 

Pennsylvania and that New Holland remains the North American 

brand headquarters. We have large facilities, and we are very 

proud of our many employees who build, develop and design equipment. We have more than 1,600 employees here in Pennsylvania. 

Today I am going to speak about the health benefits that we as 

employees receive from Case New Holland. For all of us, our health 

care benefits are important, and for our company, we want to make 

certain that we receive the highest quality health care at an affordable price. We believe that Congress has not done enough to reduce 

the cost of health care. 

In the United States, all full-time and part-time Case New Holland employees are eligible for coverage. Almost 90 percent of our 

active workers elect coverage for themselves and for their families. 

We cover 17,200 active employees and their families at a cost of 

$76 million annually. We also provide coverage to 11,800 retirees 

and their families at an additional cost of $72 million. We offer a 

choice of consumer-driven health care plan options and these plans 

have account-based incentives that let enrollees make their own decisions about their health care needs. We also have wellness and 

chronic care management programs, and almost nine out of ten of 

our employees participate in at least one wellness activity every 

year. That has resulted in a significant decrease in the health risk 

factors for those who participate. 

We believe that the health reform law needs to be changed. The 

rising cost of health care is affecting job growth, and is hurting all 

American companies who must compete in the global market. Rising costs are also affecting every American worker. The new law 

does not control health care spending. We believe it adds additional 

costs for our employees, and for Case New Holland, we expect to 

spend $126 million over the next 10 years just to comply with the 

new provisions. 

We are most concerned about the following three items in the 

health reform law. Number one, the new taxes that are imposed on 

prescription drug manufacturers, medical device manufacturers 

and insurance products. These new taxes will be passed on to us 

as purchasers in the form of higher costs. Secondly, the new law 

makes reductions to Medicare payments. Providers will shift costs 

to private purchasers, which will increase our costs. And thirdly, 

the new law requires employers to make plan and benefit 

changes—adult child coverage to age 26, new prevention and 

wellness coverage, new appeals and grievance processes. 

There are more than 130 million Americans who receive health 

care coverage through their work. At a time when many employers 

are struggling merely to offer coverage, these new plan and benefit 

requirements will add more cost. We do want to see changes in the 

63 

health care system to reduce overall costs. We have five suggestions on what should be changed. 

Number one, support consumer-directed health care plans. These 

innovative options empower our workers to make decisions about 

their own health care needs. Employers should have flexibility in 

their plan design so they can be innovative for their employees. 

Secondly, medical liability reform must be enacted. The Congressional Budget Office estimates that medical liability reforms would 

save $52 billion over 10 years just in public programs alone. It 

would save even more systemwide. Number three, adoption of 

health information technology. We need adoption of health information technology to create a more efficient health care marketplace. 

Number four, change Medicare payments to reward value, not the 

volume of service. And lastly, repeal those provisions of the new 

health care reform law that increase costs on employer-sponsored 

coverage. 

We must work together to find solutions to our health care cost 

crisis. For Case New Holland, we will continue to offer our employees coverage. It is important that they are healthy and productive. 

But we need greater competition and consumer engagement in a 

more efficient health care system. Our country needs this because 

Americans are paying more and more for health care and getting 

less and less value. Americans are fearful of losing their jobs and 

their health insurance coverage at the same time, and America is 

in an economic situation where we cannot afford the rising costs of 

health care. 

In conclusion, Case New Holland believes Congress must fix 

what isn’t working, then move forward to create solutions that address the underlying health care crisis: the costs. 

Thank you again, Chairman and the committee, for allowing me 

the opportunity to speak to you today. 

[The prepared statement of Ms. Daane follows:] 

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Mr. PITTS. The chair thanks the panel for their opening statements, and I will begin with questioning. I recognize myself for 5 

minutes. 

Mr. Barr, in your testimony, you state that PPACA limits the 

flexibility of consumer-driven plans like health savings accounts, 

flexible savings accounts. Shouldn’t Congress promote rather than 

restrict consumer involvement in health care decisions? Would you 

elaborate? 

Mr. BARR. Mr. Chairman, I could not agree more. Over the years, 

many of our employers here in Pennsylvania and across the country have moved more and more to these health savings accounts. 

Oftentimes it works well with many other benefits or options, 

which is why we talked about the flexibility. Sometimes employees 

would rather have these HSA versus another plan, have more on 

another piece of the benefits side. This virtually eliminates that by 

making a standardized top-down this is what you are going to have 

to cover. HSAs also have a very positive benefit in that they have 

retirement options as well. There are retirement benefits, and we 

constantly hear that Americans don’t save enough for retirement. 

This is a vehicle that allowed them to do that while also making 

participation, making them cognizant about what their health care 

costs are. Here in Pennsylvania, you heard Governor Corbett mention about the Health Care Cost Containment Council. The chamber is a member of that. We believe that by driving out more information to employees they are going to be able to make these kinds 

of informed decisions. 

And finally, someone passed on to me a little while ago a very 

interesting piece of information, and that is, out of all the medical 

procedures, there are only two that have gone down in cost in recent years. Those two are plastic surgery and Lasik surgery, which 

interestingly enough are typically ones that aren’t covered by insurance and ones that people go out and shop for. I think it shows 

the market works. We have to continue to drive people into the 

market, have consumers make informed decisions, not create a 

plan that must be applied to everybody to the detriment of individuals, to the detriment of employers. Thank you. 

Mr. PITTS. Thank you. Again, Mr. Barr, this is a simple question. 

Will the new health care law cost our economy jobs, in your opinion? 

Mr. BARR. Mr. Chairman, absolutely we believe it will. First off, 

as I mentioned, there are detriments to jobs creation here that 

cause employers to think twice about whether or not they want to 

add those jobs. There are enough issues out there on other public 

policy sides that clearly make it more difficult for employers to add 

jobs already, and I mentioned some of the things that we have seen 

that have been discussed in Washington and we have been fortunate they have been held off, things like card check. The other 

problem becomes the debt side, and one of the things that Kevin 

had mentioned was the 1099, which fortunately Congress has 

passed and I guess is sitting awaiting the President’s signature. 

What it demonstrates, yes, this 1099 provision which required employers to report everything about $600 needed to be done away 

with. The problem is from a financial and a debt perspective, what 

was built into the law was well, great, everyone is not going to be 

74 

able to comply with this, it is going to make us $17 billion, therefore this works again on that house of cards upon which, in my 

view, this entire law is built, this financial house of cards, once you 

start pulling pieces out of it, none of it holds together. From the 

individual mandate to the other financial pieces, once you begin 

picking at the real problems in this, it falls apart. 

Mr. PITTS. Thank you. 

Mr. Shivers, the Obama Administration has touted the availability of a small business tax credit created by PPACA. However, 

I see the credit as creating an incentive to depress wage increases 

and too limited to help many small businesses. Do your members 

generally believe this credit will significantly help small businesses 

provide coverage to their employees? 

Mr. SHIVERS. No, we don’t. I mean, we have encouraged our 

members, you know, if—we actually have a tax calculator and 

there are links to the Internal Revenue Service site where you can 

actually as a business owner, you know, plug in your information 

and learn if you are eligible for that credit. We advise our members 

if you are eligible for the credit, take advantage of it. The problem 

that we are finding, I think it was the Congressional Budget Office 

reported recently that the average credit that a small business receives is only going to cover about half of the cost increase in premiums. So if premiums have gone up 40 percent and, you know, 

the credit is only going to cover 20 percent of an increase, I am still 

left with a 20 percent increase in my health care costs. 

Mr. PITTS. If Congress, Mr. Shivers, would have passed legislation allowing for small business health plans, I think we used to 

call them association health plans, rather than PPACA, would that 

have done more to help job creators provide health insurance? 

Would you expound on that? 

Mr. SHIVERS. Absolutely. Small business health plans, the idea 

that a flower shop could partner with a tool-and-dye maker that 

could partner with a barbershop and be able to get that economies 

of scale and be able to purchase their health insurance at a substantially lower cost and also have enough people within their pool 

to manage that risk, it provides a couple of things. Again, it lowers 

costs but it also gives employers greater flexibility. We had heard 

that there were some, you know, businesses and insurance companies that were even debating the idea of providing a consumer-directed health care option, a health savings account as part of this 

small business health plan to even drive savings even further. Unfortunately, it was one of those plans that never even made it into 

the drafting room, I guess. 

Mr. PITTS. Thank you. 

Ms. Daane, what plans are you putting in place to prepare for 

the requirement that you provide health insurance to your employees or face a penalty? Would you ever consider dropping coverage 

or paying the penalty if it would be less costly? 

Ms. DAANE. Our employees are our most important asset, and 

right now we have not even considered dropping coverage for our 

employees. Certainly the plans that we put in place are an important way for us to control spending. Our wellness plan is an important way for us to control spending. But should the costs continue 

to increase, we will need to make difficult decisions about how 

75 

what we are going to do. That could impact the number of jobs that 

we have. We may need to move labor to lower-cost regions. 

Mr. PITTS. What has been your experience with your wellness 

program? How has it been structured and what kind of success 

have you seen? Has it resulted in lower costs? 

Ms. DAANE. It has. Our wellness program has been very successful, and the employees who participate have seen their health care 

risk factors drop by as much as 18 percent. We have 88 percent of 

our employees participate in at least one of our wellness activities 

over the last year. We include things like annual health assessment, biometric screenings, lifestyle improvement programs like 

smoking cessation, walking programs. We give them access to personal coaches to develop individual plans for health goals. We 

make a 24/7 nurse line available to them. A conservative estimate 

for the amount of savings that we have seen from these plans is 

about $1.6 million net return annually. 

Mr. PITTS. Thank you. The chair recognizes the gentleman, Mr. 

Thompson, for questioning. 

Mr. THOMPSON. Thank you, Chairman. Thanks to the panel for 

being here and being part of this important issue we are talking 

about. 

Mr. Barr, I want to follow up, I thought you did a great job of 

describing in terms of the 1099 reporting mandate, how that really 

is a taxing scheme in terms of dipping into the pockets of small 

businesses more than anyone else and going after revenue. I wanted to look at that from the standpoint, you know, we have worked 

hard to try to repeal that section. I know we voted on it, I think 

a number of times, and we are waiting for the Senate to do the 

right thing and the President also to do the right thing, but if that 

is unsuccessful and that reporting mandate is allowed to go forward, what would that mean for your member companies? 

Mr. BARR. Well, obviously it creates a whole new paperwork burden for everyone across the board and obviously smaller businesses 

would be much more at risk for that than others. However, there 

is one positive from the 1099 requirement in terms of job creation. 

My understanding is the IRS is standing ready to hire many hundreds of people in order to take care of 1099 requirements. I guess 

that is the only caveat to the lack of job creation. 

Mr. THOMPSON. I think they have to get funding through the 

House first, and I don’t think that is going to happen. 

Mr. BARR. Congressman, it is a great question. It is a severe 

problem, and again, you point out, you are exactly right. It is a tax. 

The IRS knows it. Not every business, particularly small to medium size, will have the wherewithal to fully comply, and we all 

know, compliance with federal tax regulations is burdensome, cumbersome and very difficult, and they know that, and again, they 

built the $17 billion into their finance calculations. 

Mr. THOMPSON. Have any, not just that mandate but any of the 

new mandates within the health care bill impacted the cost of coverage for your member companies at this point? 

Mr. BARR. Clear, when you look at mandates, here in Pennsylvania we dealt with mandates over the years. We have one of the 

highest number of mandates that is required coverage for insurance here in Pennsylvania. We know that that drives up the cost 

76 

as we look at more mandates coming down. Obviously those that 

we have not done here in Pennsylvania will lead to that as well, 

and clearly, when you have a prescribed, standardized, minimal, 

our employers are going to have to look at it. Employers who believe they have a good plan now may not have a plan that meets 

the guidelines when that comes down and will have to make those 

modifications quite obviously at a higher cost. 

Mr. THOMPSON. Thank you. 

Ms. Daane, one promise we continually heard during the health 

care debate was that if you like your health care plan, you could 

keep your health care plan. Do you foresee your employees being 

able to keep their current plans? 

Ms. DAANE. I think we will work very, very hard to be able to 

let them keep their current plan. Part of the issue for us is that 

right now the law is so unknown and so nebulous that it is hard 

for us to know whether our current plans will be in compliance 

with the legislation. So it is very hard for us to be able to say 

whether or not they will be able to keep their plan. I think as challenging for us is that unknown, that uncertainty costs us money as 

we work with consultants, as we work to try to understand whether or not our plans are compliant. We need some clarity on the bill. 

Mr. THOMPSON. In terms of the plans, do you have a cost estimate for an increase in 2011 to comply with several new provisions 

of the law, specifically the adult child coverage and expanded benefits and administrative requirements? 

Ms. DAANE. We think for 2011, just for the small amount of compliance that we are going to need to do with this bill, it is going 

to cost us $1.2 million. Even with all the unknowns in the bill, we 

do know that the costs kick in more aggressively in 2013 and 2014. 

So it is $1.2 million for 2011. It is about $126 million over the next 

10 years. Those are frightening numbers. 

Mr. THOMPSON. They are. And how many employees—because 

you talked about you do full time and part time so that $1.2 million 

is spread over how many employees? 

Ms. DAANE. Ten thousand, approximately. 

Mr. THOMPSON. Mr. Shivers, good to see you. Thanks for being 

part of the panel. My question for you is, even with the exemption 

for companies with 50 or fewer employees, do you see the employer 

mandate harming the growth potential of smaller or mid-sized 

firms, especially those with low margins? In other words, the employer mandate is simply a tax on jobs. 

Mr. SHIVERS. Yes, I do see it as a problem. President Obama 

when he was lobbying for the law visited Pennsylvania, actually 

visited one of our members who told him that this was going to be 

a burden on her business. She ran a bakery up in Allentown. And 

the President said but you have fewer than 50 employees, and she 

said but I won’t grow. You know, where is the incentive for me to 

expand my business because I am always going to worry about 

what are the mandates and provisions under that law. 

The other issue is, even though those small businesses may be 

exempted, they are still responsible for following many of the reporting requirements and other provisions under the law. You 

know, that 1099 provision is going to be extraordinarily high 

threshold for a small business to meet. Of course, it varies from inVerDate Nov 24 2008 08:37 Aug 17, 2011 Jkt 037690 PO 00000 Frm 00080 Fmt 6633 Sfmt 6633 F:\112-025 PPACA AND PA (FIELD)\112-25 PPACA AND PA. WORKING WAYNE
77 

dustry to industry but, I mean, we have heard of one small company who may have filed, like, 25 forms last year, under the new 

rules would be required to file as many as 300. There was a small 

business in Lancaster that reported to the newspaper that this 

would require them now to file as many as 3,000 forms. So you can 

imagine just the cost of paperwork. And all of it is intended to trip 

a business up because if I don’t file a form, I file that form incorrectly, now I am subject to audits and, you know, now I am going 

to be, you know, dealing with all kinds of other costs and other 

issues that are associated with just trying to protect my business. 

Mr. THOMPSON. Thank you. 

You know, we have heard the Democrats speak a lot about the 

incentives in the new law for small businesses to continue to provide coverage, and they often refer to the small business health 

care tax credit. Is this tax credit of any value to your member companies? 

Mr. SHIVERS. Again, what we are finding is that, you know, the 

credits that are offered are very small, very modest. You know, if 

you are looking at a business of 25 employees at an average wage 

of $50,000, they might quality for a partial credit. But, you know, 

that partial credit is going to be tricky. You know, a business with 

19 employees at an average wage of $35,000 would receive no credit because of the way, the formula that is used to calculate that 

credit. So, you know, businesses that are eligible for it, we tell 

them take advantage of it but at the end of the day it is not going 

to mitigate the cost increases that they are seeing in their premiums right now. 

Mr. THOMPSON. Thank you. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and we will start a 

second round. 

Ms. Daane, you said that your compliance costs are $126 million 

to comply with the new law over the next 10 years. How does this 

affect your ability to hire new employees, new workers when so 

many Pennsylvanians are desperately seeking a paycheck today? 

Ms. DAANE. We cannot sustain any kind of a system where 

health care costs grow faster than the rest of the economy. The 

costs take us in the wrong direction, and it is going to have a significant impact on our labor cost. We compete in a global economy, 

and as labor costs increase, it has a devastating impact on our ability to be able to maintain employees in the United States. To adapt 

to the cost pressures, we are going to make some difficult decisions. 

We are going to be forced to move jobs to other regions where labor 

costs are lower. We are going to have to eliminate some jobs altogether or certainly we are going to have to think about how much 

expansion we can tolerate. We may have to reduce benefit levels, 

and that could include both medical benefits, retiree contributions, 

those kinds of coverages. We would have to make some very, very 

difficult decisions. 

Mr. PITTS. Thank you. 

Mr. Barr, much of the focus regarding the impact of this new 

health care law on employers centered on the employer mandate. 

However, I believe an overlooked factor has been the compliance 

costs associated with the new law. Forms will be required for employers from numerous federal departments and agencies, be it DeVerDate Nov 24 2008 08:37 Aug 17, 2011 Jkt 037690 PO 00000 Frm 00081 Fmt 6633 Sfmt 6633 F:\112-025 PPACA AND PA (FIELD)\112-25 PPACA AND PA. WORKING WAYNE
78 

partment of Labor or HHS or the IRS, in order to enforce new federal mandates. You briefly mentioned in your statement compliance costs. Can you expand further on the onerous compliance 

costs that will burden businesses with reams of paperwork, audits, 

whatever? 

Mr. BARR. Certainly, Mr. Chairman. Part of it we talked about 

a little bit already, which has been this 1099 requirement. In addition, given that there is going to be a standardized—some of this 

is still evolving quite certainly but given that we have a standardized plan with the minimums you are going to have meet, you are 

going to have to document to the Federal Government that your 

plan meets those. You are going to have to continue to make all 

of the requirements and all of the reporting this is calling for so 

that the Federal Government can ensure that you as an employer 

are, one, sending in your 1099. My understanding is this was done 

so as not to deliberately undercount employees. You are going to 

have to continue to maintain that your coverages meet minimum 

standards for the Federal Government and all of those other things 

that surround that. We all know the paperwork continues to burden businesses, small, medium and large. This simply adds to that 

burden in many ways. And again, we really do hope the 1099 requirement goes away. It is probably the most burdensome piece of 

this. 

Mr. PITTS. And Mr. Shivers, on the grandfather provision, do you 

think it is fair that if a small business could find an insurance company that would provide a less-expensive policy than their current 

plan that they would lose their grandfathered status? 

Mr. SHIVERS. That is very unfair, sir. You know, the President 

promised that, you know, if you like your health plan you will be 

able to keep it under my law, and what we are finding is that is 

not the case. In fact, 80 percent of businesses are expected to drop 

their coverage within the next 2 years and, you know, many small 

employers are doing their level best to keep the coverage that they 

have, you know, to use it to attract good, quality workers, and, you 

know, with the cost drivers when you are facing a 40 to 60 percent 

premium, you have got to make some tough choices in terms of how 

you pay for that coverage. And just making a slight change in that 

plan to address the proliferation in cost, you are ineligible. That 

just simply isn’t fair. 

Mr. PITTS. Thank you. The chair recognizes the gentleman, Mr. 

Thompson, for additional questions. 

Mr. THOMPSON. Thank you, Chairman. 

Mr. Shivers, can you explain how impending regulations authorized by Obamacare such as the essential benefits package jeopardize the availability of coverage options already offered by small 

businesses? 

Mr. SHIVERS. Not specifically understand that particular regulation, Congressman. I can tell you one of the challenges that our 

member are concerned about is, you know, my plan that exists 

today may not quality once the regulations are, you know, actually 

published and, you know, that creates the predictability and instability in a system that makes it really hard for a small 

businessperson or any businessperson to be able to plan and run 

their company. 

79 

Mr. THOMPSON. Is it fair to say that obviously individual businesses are all unique in terms of their characteristics, the average 

age of their workforce, you know, when businesses get to know 

their employees and the demographics, characteristics, and the fact 

is that they might wind up having to pay for some type of mandated coverage which may not even apply. There may no need for 

that health care service among the characteristics and the demographics of their workforce. 

Mr. SHIVERS. That is correct, sir. You know, for many—you 

know, there is a competition issue, and, you know, for small businesses, you know, it is not just a competition for consumers, it is 

a competition for good workers, and, you know, for years, small 

businesses have been frustrated because they haven’t been able to 

offer to good prospective workers the same kind of benefit packages 

that larger companies could do at a lower cost, and, you know, this 

system does nothing to, you know, raise the bar for that business 

to give them additional tools with which they can go out and attract good, quality people to their workforce. You know, we have 

come up with a one-size-fits-all cookie-cutter approach and you are 

absolutely right. You know, my workforce and the people that I am 

attracted to work in my company may be very different and then 

another company and that lack of flexibility is a very big problem 

under this law. 

Mr. THOMPSON. Well, Washington has been famous for one-sizefits-all cookie-cutter approaches, whether it is health care or energy 

policy or education, and it always fails. Always fails the individual 

citizens in the end. 

Ms. Daane, you mentioned that the Medicare and Medicaid reimbursement system shifts more costs onto private insurance. That is 

certainly something I saw in my responsibilities as a manager 

within a rural hospital. Medicare and Medicaid never paid more, 

they always paid less. And so when you determine your rates and 

you determine your rates based on the cost of the service to provide, you really have to take into account what we call payer mix, 

and as government paid less, in my professional opinion, let alone 

my life experiences, that is why commercial insurance gets more 

expensive, which was absolutely ignored within this process of 

looking at the health care bill. 

In your view, will that problem be exacerbated if 20 million more 

people are enrolled in the Medicare programs, some of whom used 

to have private insurance? 

Ms. DAANE. Without a doubt. You know, cost shifting is something that we already see as a certain percent of the cost of coverage for our employees. You add their people to the Medicare, to 

the Medicaid system, there is going to be more cost shifting. Our 

cost as a private employer is going to go up without a doubt. I 

think then you marry that to the method of reimbursement, which 

is you are reimbursed on volume, not on value, that then, you 

know, kind of exponentially increases the damage that that does. 

We are a company that makes products that are used by rural consumers, and we have employees in rural areas. Chairman Pitts has 

been to our plant. Mr. Thompson, I would invite you to come. We 

make the best round bailer in the world and we are very proud of 

that. Our customer, our employees in the rural part of many of the 

80 

States where we do business, we need to have a system that ensures that those rural providers continue to exist, that there is, you 

know, kind of the continued vitality of rural providers, both hospitals and service providers. The bill as it stands does not do that. 

In fact, it is very detrimental to that. 

Mr. THOMPSON. And my final question to Mr. Barr, what are 

your thoughts as to whether employers in general will drop health 

insurance coverage and pay a $2,000-per-employee penalty? 

Mr. BARR. Well, Congressman, that is going to come down to an 

individual decision. Ann mentioned the fact that they are probably 

not going to do it. They have to attract a certain kind of individual. 

Certain large companies may be better situated. The reality is, 

someone is going to sit down and look at what the cost of family 

coverage and single coverage is going to be for them to provide as 

a mandate, particularly now that it becomes standardized to all 

their employees if they have a 7,500-person operation, and they are 

going to have to weigh those. They are going to have to look at the 

cost of providing health care versus $2,000 a person, as I mentioned. A cynical person might say for those who really wanted a 

government-run plan, this is certainly one way this is going to accelerate that, and clearly, individual companies, individual employers are going to be making those decisions, sometimes purely for 

survival. In order to keep going, they are going to have to do that. 

The other thing that I will just say in summary, and I guess one 

of the things that we have seen from the employer base is that we 

have got to learn to trust the free market and entrepreneurs more. 

We continue to get this, well, we are going to prescribe, you are 

going to give this set of benefits and this set of benefits, and you 

have heard, you know that doesn’t work. You know from your experience that doesn’t work. Every situation is different. Geographic 

areas are different. And what works in a given area doesn’t work 

in another. Certain employees value certain benefits more than 

others. And to the extent that we take that flexibility—you have 

heard that word a lot—to the extent that we put those mandates 

on, we make it so much more difficult to have a competitive jobs 

environment here. 

Mr. THOMPSON. Thank you. Thank you to each one of you. 

Mr. PITTS. And again, thank you for taking time to present testimony and answer questions. This has been a tremendous panel as 

you share your expertise. 

One of the jobs we have is to educate the public as to the requirements and the costs of PPACA, and there is no one better than the 

employer community to do that, and as we do that and as we look 

to modify, repeal and replace PPACA with real reform, we look forward to working with you in that regard and we hope that we will 

have much better news for you on the second anniversary of 

Obamacare before it is fully implemented as we meet again. Again, 

thank you very much. 

In conclusion, I would like to thank Governor Corbett, all of the 

witnesses, the members that participated in today’s hearing. I remind members that they have 10 business days to submit questions for the record, and I ask the witnesses to please respond 

promptly to these questions. 

The subcommittee is now adjourned. 

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[Whereupon, at 12:30 p.m., the subcommittee was adjourned.] 

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