HEALTH REFORM IN THE 21ST CENTURY: 

PROPOSALS TO REFORM THE HEALTH SYSTEM 


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HEALTH REFORM IN THE 21ST CENTURY: 

PROPOSALS TO REFORM THE HEALTH SYSTEM 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JUNE 24, 2009 

Serial No. 111–26 

Printed for the use of the Committee on Ways and Means 

( 


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62–998 2011

HEALTH REFORM IN THE 21ST CENTURY: 

PROPOSALS TO REFORM THE HEALTH SYSTEM 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JUNE 24, 2009 

Serial No. 111–26 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK B. MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

DANNY K. DAVIS, Illinois 

BOB ETHERIDGE, North Carolina 

LINDA T. SA ́ NCHEZ, California 

BRIAN HIGGINS, New York 

JOHN A. YARMUTH, Kentucky 

DAVE CAMP, Michigan 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GINNY BROWN-WAITE, Florida 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

DEAN HELLER, Nevada 

PETER J. ROSKAM, Illinois 

Janice Mays, Chief Counsel and Staff Director 

Jon Traub, Minority Staff Director 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of June 24, 2009, announcing the hearing ............................................. 2 

WITNESSES 

Karen Pollitz, Policy Director, Health Policy Institute, Georgetown Public 

Policy Institute, Georgetown University ............................................................ 8 

John F. Holahan, Ph.D., Director, The Health Policy Research Center, The 

Urban Institute .................................................................................................... 22 

Quentin Young, M.D., MACP, National Coordinator, Physicians for a National 

Health Program, Chicago, Illinois ...................................................................... 33 

David Gratzer, M.D., Senior Fellow, Manhattan Institute for Policy Research, 

New York, New York ........................................................................................... 39 

Richard Kirsch, National Campaign Manager, Health Care for America 

NOW! ..................................................................................................................... 98 

Mike Draper, Owner, SMASH, Des Moines, Iowa ................................................ 102 

Peter Lee, Executive Director for National Health Policy, Pacific Business 

Group on Health, San Francisco, California ...................................................... 107 

Gerald M. Shea, Special Assistant to the President, AFL–CIO .......................... 116 

Jennie Chin Hansen, President, AARP ................................................................. 127 

Randel K. Johnson, Senior Vice President, Labor, Immigration and Employee 

Benefits, U.S. Chamber of Commerce ................................................................ 141 

Daniel Baxter, M.D., Medical Director, William F. Ryan Community Health 

Network, New York, New York ........................................................................... 209 

Ted Epperly, M.D., President, American Academy of Family Physicians .......... 216 

Donna Policastro, Executive Director, Rhode Island State Nurses Association, 

on behalf of the American Nurses Association, Silver Spring, Maryland ....... 227 

Charles N. Kahn III, President, Federation of American Hospitals ................... 235 

William L. Minnix, Jr., President and CEO, American Association of Homes 

and Services for the Aging .................................................................................. 248 

Ronald A. Williams, Chairman and CEO, Aetna, Inc., Hartford, Connecticut ... 203 

Richard B. Warner, M.D., Member, Kansas Medical Society House of Delegates, AMA Alternate Delegate, Past President, Kansas Medical Society ...... 258 

SUBMISSIONS FOR THE RECORD 

Nancy G. Brinker, statement .................................................................................. 275 

Albert B. (Al) Baca, statement ............................................................................... 280 

Association of Professors of Medicine, Association of Program Directors in 

Internal Medicine, Association of Specialty Professors, Clerkship Directors 

in Internal Medicine, and Administrators of Internal Medicine, statement ... 283 

American Academy of Physician Assistants, statement ....................................... 290 

American Association of Colleges of Pharmacy, letter ......................................... 294 

American Farm Bureau Federation, statement .................................................... 297 

American Society for Clinical Pathology, statement ............................................. 299 

Paul Crist, statement .............................................................................................. 304 

Association of Ambulatory Behavioral Healthcare, letter .................................... 311 

Becton, Dickinson and Co., statement ................................................................... 313 

Breyer Foundation, statement ................................................................................ 315 

Budd N. Shenkin, M.D., statement ........................................................................ 320 

Friends Committee on National Legislation, statement ...................................... 323 

Richard Kirsch, letter .............................................................................................. 325 

Kenneth L. Sperling, Hewitt Associates LLC, statement .................................... 341 

Jaci Mairs, R.N., J.D., letter ................................................................................... 348 


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Max Heirich, statement ........................................................................................... 350 

Medicaid and Medicare Advantage Programs Association of Puerto Rico, 

letter ...................................................................................................................... 355 

Medical Banking Project, Legislative Committee, statement .............................. 357 

Mark H. Ayers, National Coordinating Committee for Multiemployer Plans, 

letter ...................................................................................................................... 359 

National Yogurt Association, statement ................................................................ 365 

Nurse Practitioner Roundtable, letter ................................................................... 367 

Steve Slagle, Promotional Products Association International, statement ......... 370 

RNG Consulting, Inc., statement ........................................................................... 371 

Rochelle J. Ascher, Executive Intelligence Review, statement ............................ 373 

Ron Manderscheid, letter ........................................................................................ 377 

Nancy Schwab, Wendy Warner, Bill Berlinghof, Catherine Borowiec, Mark 

Schmid, Connie Guldin, and Mike Fritz, letter ................................................. 377 

The Alliance for Academic Internal Medicine, statement .................................... 378 

Cori E. Uccello, American Academy of Actuaries, statement .............................. 379 

ERISA Industry Committee, statement ................................................................. 384 

The Senior Citizens League, statement ................................................................. 387 

Larry S. Gage, National Association of Public Hospitals and Health Systems, 

statement .............................................................................................................. 391 


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HEALTH REFORM IN THE 21ST CENTURY: 

PROPOSALS TO REFORM THE HEALTH SYSTEM 

WEDNESDAY, JUNE 24, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC. 

The Committee met, pursuant to notice, at 9:09 a.m., in room 

1100, Longworth House Office Building, Hon. Charles B. Rangel 

(Chairman of the Committee), presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3625 

June 24, 2009 

Chairman Rangel Announces a Hearing on 

Health Reform in the 21st Century: 

Proposals To Reform the Health System 

House Ways and Means Chairman Charles B. Rangel (D–NY) announced today 

that the Committee will hold a hearing to examine proposals to reform the health 

system. This is the sixth hearing in the series on health reform in the 111th Congress. The hearing will take place at 9:00 a.m. on Wednesday, June 24, 2009, 

in the main Committee hearing room, 1100 Longworth House Office Building. 

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

hearing will be from the invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for 

consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

Rising health costs threaten access for the 250 million people with insurance and 

undermine the competitiveness of American companies. In addition, nearly 46 million people lack coverage today and millions more have coverage that fails to meet 

their needs. A reformed health system must build on what works in our current system to expand access, while minimizing disruption for people who have coverage 

and helping to slow the rise in health costs. Recent studies have indicated that half 

of all bankruptcies are the result of serious illness and medical debt, and many of 

these families have coverage. 

The Committee has held five health reform hearings this year to examine the current state of various parts of the health system. These hearings build upon hearings 

and legislation that the Committee has undertaken in previous Congresses. Among 

other topics, these hearings have highlighted the need to improve the way care is 

delivered and the problems with the current insurance market. The hearings also 

stressed the importance of the employer-based system of health insurance and the 

need to improve and strengthen current programs like Medicare and Medicaid. 

The Committee has worked with the Committee on Energy and Commerce and 

the Committee on Education and Labor to develop a proposal that reflects President 

Obama’s health reform principles and will begin to rein in rising health care costs, 

protect current coverage, preserve choice of doctors, hospitals and health plans and 

ensure affordable, quality health care for all. 

In the coming days, this discussion draft health reform proposal will be released. 

This hearing will focus on that proposal as well as other proposals to reform the 

health system. 

‘‘We have an historic opportunity to reform our Nation’s health care system, building on what works and fixing what is broken to reduce health 

care costs, protect current coverage and preserve choice for patients to 

guarantee affordable, quality care for all,’’ said Chairman Charles B. Rangel. 

‘‘Health reform is critical to America’s economic recovery and I look forward to feedback from Members and witnesses so we can continue working 

to make this goal a reality.’’ 


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FOCUS OF THE HEARING: 

The focus of the hearing will be on the forthcoming proposal developed by the 

Committees on Ways and Means, Energy and Commerce and Education and Labor 

and other proposals to reform the health system. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

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

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

http://democrats.waysandmeans.house.gov, select ‘‘Committee Hearings.’’ Select the 

hearing for which you would like to submit, and click on the link entitled, ‘‘Click 

here to provide a submission for the record.’’ Once you have followed the online instructions, complete all informational forms and click ‘‘submit’’ on the final page. 

ATTACH your submission as a Word or WordPerfect document, in compliance with 

the formatting requirements listed below, by close of business Wednesday, July 8, 

2009. Finally, please note that due to the change in House mail policy, the U.S. 

Capitol Police will refuse sealed-package deliveries to all House Office Buildings. 

For questions, or if you encounter technical problems, please call (202) 225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

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

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

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

hearing record. 

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

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

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

by the Committee. 

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

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

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

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

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

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

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

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

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

f 

Chairman RANGEL. The Committee on Ways and Means will 

come to order as we begin, I guess, our ninth hearing on health reform. I want to thank the staffs, minority and majority, for bringing us to this point in our Nation’s history where we do see light 

at the end of the tunnel for one of the most serious domestic problems our great Nation has faced. 

It is abundantly clear that we have a serious financial problem 

as the cost of health care escalates far beyond our imagination, and 

continues in this upward spiral. We have a moral obligation in 


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terms of the number of people who have lost their homes, gone into 

bankruptcy as a result of the costs of providing health care. And 

of course, we have a crisis in terms of the waste and inefficiency 

and the misuse of our resources by health providers that find us 

in need of changing the entire system. 

We hope at the end of the day that we are able to say that those 

people who find that their insurance meets their needs, that they 

should rest assured that we have enough problems without interfering with the relationship they have with private health insurers. 

They will have to be able to understand, however, that in their 

search for profit, there has to be basic sound principles that health 

care providers would have to be involved and support. One thing 

for certain: The whole idea that insurance companies can pick and 

choose the healthiest of their clients is wrong, and it will be corrected as we make certain that those people that have preconditions will be acceptable. 

We know that there are so many employers that want to provide 

health care for their employees because it is the right thing to do, 

and they just can’t afford to do it. We have to give them assistance. 

We know that there is nobody in the United States that is an 

adult and understands the problems we face that hasn’t got a horror story, with or without insurance, as to what has happened to 

their families and, indeed, communities because the system is broken. 

We also know that we just don’t have enough primary care doctors and nurses and support system. And we have to encourage 

these people in order for us to be healthy and competitive with foreign countries to be out there, not just looking for profits but looking to fulfill their life’s work in terms of taking care of our sick; 

and, more importantly or just as important, to make certain that 

we avoid these serious and expensive illnesses. 

We have the support of the President of the United States. We 

sincerely wish that this could be a bipartisan effort. The book is not 

closed. We have before us a discussion draft, and we have had 

more discussion than we had thought we would have, which I think 

is healthy; so that at the end of the day, when we pass this, more 

and more Americans would understand that we have done the 

right thing. 

And certainly the polls, for what it is worth, overwhelmingly believe that what we are doing in terms of having a competitive public option so that people can go to exchange and pick and choose, 

with a variety of private options just as we in the Congress have, 

and also a public option, we think at the end of the day it is going 

to be the American citizens that will be the beneficiary. The industry will be improved. America will be stronger and more competitive. And we all are privileged to be able to be participants in this 

effort. 

Peter Stark is one of the—probably, with me, is historically the 

longest-serving Member of this great Committee that was cited in 

the Constitution, and the only one cited. And he has dedicated his 

entire legislative career to trying to get a handle on the ever-increasing problems that health care has caused our Nation to face. 

I know that this era is one of the most proudest that he has enjoyed, and the Committee is grateful for the investment that he has 


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made in time and dedication to reach this point that during his 

stay here, he would be able to say, we finally have improved the 

system. 

Pete, we are indebted to you, and I would like at this point in 

time to yield to you. 

Mr. STARK. Thank you, Mr. Chairman. You and my colleagues 

and the President are committed to health reform, and I think we 

all understand this is the time to act. We have worked with our 

colleagues on the Energy and Commerce and the Education and 

Labor Committees to write a draft proposal that provides affordable, quality health care for all, expands choice, and slows the rate 

of growth in health care spending. 

Some will be unhappy that we still don’t have CBO numbers for 

provisions. We put this bill out last Friday in draft form so that 

all Members of Congress, the American public, and interested parties can read the discussion draft and provide us with input. 

Today’s hearing, we hope, will be long, and we will hear from 

three panels. The first will be our panel of policy experts with their 

thoughts; second, a panel consisting of those impacted by health reform—consumers, seniors, businesses both large and small, labor; 

third, we will hear from health care providers who will share with 

us their thoughts on our draft legislation. 

As I said, it is in draft form. Today’s hearing will give us guidance for meetings over the next couple of weeks as we work to convert this draft into a final bill. 

So I want to thank all of our witnesses in advance for their testimony. They have had a lot to analyze in a short time, and we appreciate their willingness to enlighten us today. Thank you very 

much. 

Chairman RANGEL. Thank you, Mr. Chairman. 

Most of you know, and certainly the Committee Members know, 

that David Camp and I have tried with the most that we can to 

see whether or not we could work together in a bipartisan way. 

Many times this is impossible because of the differences, not of he 

and I, but certainly of the political direction in which the parties 

would want to go. 

We know that this is not a Democratic problem. It is not a Republican problem. And the Nation is going to look at this as a problem that we hope that we can come together and work together and 

bring up a bipartisan bill. 

As Peter Stark has indicated, this is a discussion draft bill that 

will help us to try to perfect our ideas. And I yield to my friend 

David Camp for whatever purposes he would want to state. 

Mr. CAMP. Well, thank you, Mr. Chairman. And thank you for 

holding this hearing. And I want to thank all of the witnesses and 

the panels that have taken time out to be here today. 

Mr. Chairman, I am not sure quite what to focus on this morning, all we know about the bill or all that we don’t know about the 

bill. But in either sense, it is very disturbing. And let me begin 

with what we don’t know. 

We don’t know how much CBO says it will cost or how it will 

be paid for. And hopefully everybody can see page 162 of the bill 

on the TV screens. Now, I know a picture is worth a thousand 


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words, but I think that picture may be worth well over a trillion 

dollars. 

The bill says other revenue raisers are to be provided. When will 

these tax increases be provided? When will the American public get 

to know how much this trip to the doctor will cost them? Those details aren’t unimportant. 

If you are shopping for a car, even I have to admit that a Ferrari 

looks pretty good next to a Ford until you see the pricetag. A sixbedroom mansion on the waterfront looks pretty good next to a 

modest three-bedroom ranch until you see the pricetag. We need to 

know the pricetag of this bill if we are to do our jobs properly, and 

that is to write a bill our country can afford that will guarantee 

every American has access to affordable quality health care. 

Just this morning I received an independent, nonpartisan analysis of the bill. I know I said this picture was well over a trillion 

dollars, but this report makes it clear that I really don’t have much 

future in appraising because this bill is actually worth $3.5 trillion. 

And let me repeat that for everyone here, especially the Members 

who have not been given any information on the cost. An independent, nonpartisan analysis says this bill costs $3.5 trillion. And 

I ask that a copy of this report by HIS Network be included in the 

record. 

Now, that is a staggering figure, even in Washington. Equally 

staggering are some of the ideas we have heard floating around 

about how to pay for this bill, such as new taxes on employer-sponsored health benefits, new taxes on sugared soft drinks, additional 

taxes on alcohol that will turn Joe Sixpack into Joe Fourpack, a 

new national sales tax, new taxes on American businesses competing worldwide, and higher Medicare taxes. 

Those are pretty darned scary in and of themselves. But what 

has me in shock is the fact that those taxes won’t even come close 

to covering $3.5 trillion in new Federal Government spending. And 

it is clear that if we move forward with this $3.5 trillion bill and 

with any of those taxes, whatever hope remained that the President would keep his word not to tax families earning less than 

$250,000 will be quickly erased. 

The President has also promised repeatedly that Americans who 

have and like their insurance will be able to keep it. Now, I know 

he is getting pressured to back off that statement. I would hope 

both Republicans and Democrats on this Committee would help 

him keep that pledge. 

But the analysis we received this morning says this bill would 

cause 64 million Americans to lose their coverage. Sixty-four million. That means one out of every three Americans under the age 

of 65 would lose their current private health coverage. We need to 

strengthen and improve our health care system, not destroy it. 

No matter what comes out of this hearing, unanswered will be 

several critical questions. How much will you tax and who pays 

those ‘‘other revenues’’? What will be the impact on family budgets? 

What will be the impact on employees and employers and on those 

looking for work? What about the economy as a whole? I am disappointed that this information isn’t before us since it is impossible 

to make a thorough evaluation of the bill without it. 


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Now to what we do know. It creates a government-run plan that 

reimburses at Medicare rates, which will force millions of Americans to lose their current health care plan. There are absolutely no 

prohibitions on new government-run plan or government programs 

like Medicare or Medicaid from using cost-effectiveness research to 

impose delays or denials of access to life-saving treatments for patients. And just the new taxes and penalties on employers that we 

have already seen will force 4.7 million Americans to lose their job. 

Now, those aren’t my numbers or my analysis. That is what you 

get when you plus the taxes associated with an employer mandate 

into the economic models developed by Dr. Christina Romer, the 

Chair of the President’s Council of Economic Advisers, and Jared 

Bernstein, who is in the Office of the Vice President. 

What does this leave us with? In short, a bill in which the solution costs more than the problem, and health care reform in which 

millions of Americans lose their insurance, lose access to treatment, and maybe even their job. 

This is what happens when legislation of this nature is written 

in secret by a few behind closed doors without the input of Members on both sides of the aisle, not to mention the families and 

businesses it will affect. I have heard even Members of this Committee have raised their concerns about the way this bill was written. So have Blue Dogs in a written letter, and so have House Republicans. 

This painfully reminds me of the stimulus bill. But as important 

as it was, we were just talking about money then. This time we are 

talking about people’s health, about their lives. We cannot get it 

wrong again. 

The President was right when he said health care reform should 

not be a Democrat issue or a Republican issue, but an American 

issue. And as you know, last week Republicans outlined a summary 

of what we believe successful health care reform should focus on— 

affordability, accessibility, and availability of quality health care 

for all Americans. 

There are a number of areas where we could reach bipartisan 

agreement. I and the Republican Members of this Committee stand 

ready to meet and work with you to get this bill right, and I hope 

we can do that soon. 

And with that, I yield back the balance of my time. 

Chairman RANGEL. Thank you. I ask you to share with me at 

some point in time the firm that did the analysis for you that estimated the $3.5 trillion cost because it may be helpful for us to be 

able to make up numbers since Republicans and Democrats are 

stuck with the Congressional Budget Office. And as you know, they 

have not been very friendly in their estimates in terms of costs. 

But if someone can create just $3.5 trillion, I can share with you 

that I will walk away from any bill that has this type of cost. 

The whole idea of cost, however, should not be an issue because 

we are going to pay for this not by raising taxes, but even in this 

walk-through that we have. Five hundred billion dollars is reform 

in the system that we have. 

And whatever we do to raise the other revenue, at the end of the 

day we will be able to say that the bill is a reform bill and will 

not be additional cost. So we have to try to read from the same 


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page. And I know you won’t object to reading from the pages given 

to both of us by the Congressional Budget Office. 

And yes, we all would want Ferraris. I was settling for a Cadillac 

since it is made in the United States. But after we look at the cost 

of the options that are there, then we will know what we can afford. And so it really doesn’t make that much difference as to what 

we hope for. We will only do what we can afford and what will be 

acceptable to the American people. 

I am glad to hear you say that your minds are open. At any point 

during the testimony of your witnesses or ours that you believe we 

can sit down and work together, we will go into recess, go into the 

library, take advantage of that, and then move forward. 

So let today be the beginning of a new start. And as Chairman 

Stark has said, we have an extraordinary panel here. The first 

panel we have is Karen Pollitz, who is the Policy Director of the 

Health Policy Institute from Georgetown Public Policy Institute, 

Georgetown University; John Holahan, Dr. Holahan, who is the Director of the Health Policy Research Center in The Urban Institute; 

Quentin Young, Dr. Quentin Young, National Coordinator for Physicians for a National Health Program, from Chicago; and David 

Gratzer, Dr. David Gratzer, a Fellow, Manhattan Institute for Policy Research, from my hometown and my city, New York, New 

York. 

We thank you for taking the time to come here to share your 

views with us so that we can make a more perfect piece of legislation. We have—by unanimous consent, all of the documents that 

you have will be submitted in our record. 

Restrict it this morning to 5 minutes for each witness, which is 

indicated by the red light coming on. And the Republicans and 

Democrats welcome your appearance here before the Congress and 

the Committee. 

So we will start off with Dr. Karen Pollitz. 

STATEMENT OF KAREN POLLITZ, POLICY DIRECTOR, HEALTH 

POLICY INSTITUTE, GEORGETOWN PUBLIC POLICY INSTITUTE, GEORGETOWN UNIVERSITY 

Ms. POLLITZ. Thank you. I am not a doctor. Just call me Karen. 

Chairman RANGEL. Thank you, Karen. 

Ms. POLLITZ. And good morning, Mr. Chairman, Members of 

the Committee. I want to congratulate you on the tri-committee 

draft proposal for health care reform. It contains the key elements 

needed to achieve universal coverage and introduce cost discipline 

into our health care system. It reflects both wisdom and practicality. And this time I believe you will get the job done. 

The tri-committee proposal defines a minimum health benefit 

standard. It requires all Americans to have at least that minimum 

coverage, with shared financing responsibility by employers. It creates tax credits for small businesses, expands the Medicaid safety 

net, and creates new premium and cost-sharing subsidies for private health insurance coverage to help other Americans of modest 

means. 

The proposal also establishes a set of strong new market reforms 

for private health insurance, with important consumer protections. 

It creates a new health insurance exchange, an organized health 


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insurance market, with greater consumer protections and support 

than individuals and small employers have today. 

It will provide competitive information on plan choices, help with 

enrollment, appeals, application for subsidies. It will have a health 

insurance ombudsman to help individuals and small businesses 

navigate the coverage system and make good choices. And on their 

behalf, the exchange will negotiate with insurers over premiums in 

order to get the best possible bargain. And importantly, consumers 

and employers who buy coverage in the exchange will also have the 

choice of a new public plan option. 

A recent national poll indicates Americans strongly favor the establishment of a public plan option to compete with private health 

insurers. Such an option can address failures of competitive health 

insurance markets today. 

First, it offers consumers an alternative to private plans that for 

years have competed on the basis of discriminating against people 

when they are sick. Just last week your colleagues on the Energy 

and Commerce Committee held a hearing on health insurance rescissions. 

There, a woman battling breast cancer testified that her health 

insurance was revoked for failure to disclose a visit to a dermatologist for acne. When consumers are required to buy coverage, having 

a public option that doesn’t have a track record of behaving that 

way will give many peace of mind. 

Second, a public plan option will promote cost containment. Research shows that health insurance markets today do not compete 

to hold down costs. Rather, insurers and providers negotiate to 

pass costs through to policyholders while maintaining and growing 

profits. 

For the first few years, the public plan option will be allowed to 

base its payment to doctors and hospitals and most other providers 

on the Medicare fee schedule—actually, increases above those fee 

levels—but over time it will develop innovative payment methodologies that hold down costs and promote quality. 

Mr. Chairman, clearly, as this bill moves through the legislative 

process, there will be opportunities to improve and modify it. And 

in my written statement, I offer several recommendations in this 

regard, and would briefly describe just three of those for you now. 

First, with respect to the essential benefits package, I think 

there are opportunities to strengthen the package and add specificity. The essential benefits package in particular does not include 

a limit on cost-sharing for care received by non-network-plan physicians. That is an important protection to add. And the essential 

benefits package doesn’t have a specific reference to a benchmark 

plan, the Blue Cross Blue Shield standard option plan that so 

many Members of Congress have, and that has been discussed as 

a reasonable benchmark for coverage adequacy. 

It is not clear whether the essential benefits package outlined in 

the draft proposal meets that standard, but it should. And if it 

doesn’t, then the standard should be improved. And if that requires 

adding more money to the bill, then you should add it. 

Second, with regard to rules governing health insurance, new 

rules won’t be meaningful unless there are resources for oversight 

and enforcement. The Department of Health and Human Services 


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today has four employees who work part-time on private health insurance oversight. At the Department of Labor, there has been testimony indicating that there are resources to review each employersponsored health plan under that Department’s jurisdiction once 

every 300 years. And State insurance departments are also 

strapped for resources. 

Your colleague on the Appropriations Committee, Congresswoman DeLauro, has introduced legislation to provide resources for 

health insurance oversight and enforcement, and I hope you will 

work with her. 

And finally, with regard to subsidies, the bill, the draft bill, creates sliding scale assistance so that middle-income Americans with 

incomes up to 400 percent of the poverty level would not have to 

pay more than 10 percent of income toward their premiums. 

But after that level, the subsidies stop, and as the charts in my 

written statement indicate, some consumers, including self-employed individuals, who have incomes above that level might still 

face significant affordability problems. That is essentially likely for 

people who buy family coverage and for baby boomers who would 

face much higher premiums under the age rating adjustments that 

are provided for under the bill. 

So I hope the Committee will consider making additional adjustments to your subsidy to protect all Americans so that they don’t 

have to spend more than 10 percent of their income on health insurance. 

Thank you very much. 

[The prepared statement of Ms. Pollitz follows:] 


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Chairman RANGEL. Thank you so much. 

We will now entertain the statement from Dr. John Holahan, director of the Health Policy Research Center. Thank you for coming. 

STATEMENT OF JOHN F. HOLAHAN, PH.D., DIRECTOR, THE 

HEALTH POLICY RESEARCH CENTER, THE URBAN INSTITUTE 

Mr. HOLAHAN. Thank you. Mr. Chairman and distinguished 

Members of the Committee, thank you for inviting me to share my 

views on the discussion draft. The views I express are mine alone 

and should not be attributed to The Urban Institute, its trustees, 

or its funders. 

I believe this plan has many excellent features, and I commend 

the Committee for its efforts. The plan builds upon the successful 

health reform enacted in the State of Massachusetts, provides for 

Medicaid expansion, a set of income-related subsidies up to 400 

percent of the Federal poverty line, a national health exchange, 

and extensive insurance market reforms. 

It contains an individual mandate which is essential to providing 

for universal coverage. It provides a cap on total out-of-pocket 

spending for individuals, and higher payment rates for primary 

care doctors. 

I want to spend a few minutes on the public insurance option. 

A public plan competing with private plans will provide more 

choice and place substantial cost-containment pressure on the 

health care system. The argument is often made that competition 

between public and private plans could never be fair and that it 

will lead to a single payer system. 

This argument ignores the fact that many health insurance markets, as well as provider markets, are simply not competitive and 

efficient. An extraordinary amount of concentration in the insurance and hospital industries has taken place over the last several 

years, and this concentration has been a significant contributor to 

health care cost growth. 

No one can be in favor of controlling health care costs and ignore 

this reality. Several studies have documented the increase in concentration and the effect on insurer profitability and hospital revenues. For example, a number of studies have shown that hospital 

rates are higher in more highly concentrated markets by as much 

as 40 percent. 

The public plan can help with the problem of cost containment. 

First, it is likely to have somewhat lower administrative costs. Second, the public plan can also establish and negotiate provider payment rates at lower levels than private payers are able or willing 

to negotiate today. 

Today commercial payment rates are 35 percent above Medicare 

for hospitals and 23 percent for physicians. The plan will likely 

need to pay higher rates than Medicare does today to assure access 

to a sufficient number of providers. Where these rates are set is 

critically important. I think there should be a key role for MedPAC 

in advising the Congress on this. 

There are a number of aspects of the public plan that are important to assure fair competition. The public plan should be legally 

and administratively separate from exchanges. It should abide by 

the same insurance market rules that private plans do. It should 


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offer the same benefit packages, have the same levels of cost-sharing, and the same caps on out-of-pocket liabilities. The income-related subsidies should apply in the same way to all plans. The 

plans should be required to maintain adequate reserves. 

On the other hand, the public plan may well get a disproportionate share of high-risk enrollees. A level playing field also 

means that a public plan should be compensated if it does end up 

with a less healthy population. 

The public plan can reduce the costs of reform significantly. In 

a paper being released this week by The Urban Institute, we estimate that subsidy costs would be lower by $200 to $400 billion relative to a plan with only private insurance options. 

We also believe that the public plan will not destroy the private 

insurance market, in part because the private market will respond 

to competition from the public plan, and in itself become more efficient. 

In the same paper, we have estimated that the net loss in private 

coverage will be relatively small. While a large number of those 

currently in the non-group and small group market will purchase 

coverage through the exchange and many will choose to join the 

public plan, there are close to 50 million uninsured who will now 

obtain coverage. Some will enroll in Medicaid or the public plan, 

but many will end up in private plans. 

On balance, we estimate that the number of people with private 

coverage will fall from about 177 million to 161 million. In the end, 

the number with private insurance will not be too different than 

it is today, and the savings to the government in lower subsidy 

costs will be substantial. 

I would like to close by saying that while there is not a cost estimate for this bill, the CBO estimates for one of the Senate bills last 

week was $1.6 trillion over 10 years. This may seem an alarming 

number, but it should be viewed in context. 

Over the 10-year period, 2010 to 2019, the amount of gross do- mestic product projected for the U.S. economy will be $187 trillion. 

Even a number as high as 1.6 trillion is less than 1 percent of the 

amount of GDP being produced over this period. The Nation will 

also spend $33 trillion in health care over this period, even without 

reform. 

We clearly need to gain control over this spending, and there are 

many proposals for doing this. But these proposals will require difficult choices. It is important that a good plan be passed and be 

fully paid for, but the design should not be driven by a budget goal, 

whether it is $1.6 or $1.2 or $1.0. There are many other key design 

features, and this is affordable, and there are plenty of ways to pay 

for it. 

Thank you. 

[The prepared statement of Mr. Holahan follows:] 


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Chairman RANGEL. Thank you, Doctor. 

The Committee would now invite Dr. Young, the National Coordinator for Physicians for a National Health Program, from Chicago. 

STATEMENT OF QUENTIN YOUNG, M.D., MACP, NATIONAL COORDINATOR, PHYSICIANS FOR A NATIONAL HEALTH PROGRAM, CHICAGO, ILLINOIS 

Dr. YOUNG. Mr. Chairman, Members of the Committee, I thank 

you for giving me the opportunity to comment on the proposal that 

has emerged from the three key House Committees, and to articulate the single payer alternative. Thank you. 

I am the National Coordinator of Physicians for a National 

Health Program, an organization of some 16,000 American physicians who support single payer national health insurance. Our organization represents the views of the majority of the U.S. physicians now, 59 percent of whom support national health insurance 

in a recent survey. I wish to make two points to the Members of 

this Committee. 

The first is that the best health policy, science, literature, and 

experience indicate that the tri-committee proposal will fail miserably in its purported goal of providing comprehensive, sustainable 

health coverage to all Americans. And it will fail whether or not 

it includes the so-called public option health plan. 

The second point I wish to make is that the single payer national 

health insurance is not just the only path to universal coverage, it 

is the most politically feasible to health care for all because it pays 

for itself, requiring no new sources of revenue. 

The difference between single payer and the tri-committee proposal could not be more stark. Single payor has at its core the 

elimination of U.S.-style private insurance, using huge administrative savings and inherent cost control mechanisms to provide comprehensive, sustainable, universal coverage. 

The tri-committee discussion draft preserves all of the systemic 

defects inherent in relying on a patchwork of private insurance 

companies to finance health care, a system which has been a terrible failure both in providing health coverage and controlling costs 

heretofore. 

Elimination of the U.S.-style private insurance has been a prerequisite to the achievement of universal health care in every other 

industrialized country in the world. In contrast, public program expansions, coupled with mandates like those in the tri-committee 

proposal, have failed everywhere they have been tried, both domestically and internationally. 

First, because the discussion draft is built around the retention 

of private insurance companies, it is unable, in contrast to single 

payer, to recapture the 400 billion in administrative waste that private insurers currently generate in their drive to fight claims, issue 

denials, and screen out the sick. A single payer system would redirect these huge savings back into the system, requiring no net increase in health spending, and covering those uncovered today. 

Second, because the discussion draft fails to contain the cost control mechanisms inherent in single payer, such as global budgeting, 

bulk purchasing, negotiated fees, and planned capital expenditures, 


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any gains in coverage will quickly be erased as costs skyrocket and 

government is forced to choose between raising revenue and cutting 

benefits, something we face today. 

Third, because of this inability to control costs or realize administrative savings, the coverage and benefits that can be offered under 

the discussion draft will be of the same type currently offered by 

private carriers, which cause millions of insured Americans to go 

without needed care due to the cost and have led to an epidemic 

of medical bankruptcies, 1 million annually presently. 

Virtually all of the reforms contained in the discussion draft have 

been tried, and have failed repeatedly. Plans that combined mandates to purchase coverage with Medicaid expansions fell apart in 

Massachusetts in 1988, Oregon in 1992, and Washington State in 

1993. The latest iteration, Massachusetts 2006, is already stumbling with uninsured rates again rising and costs soaring. Tennessee’s experiment with a massive Medicaid expansion and a public plan option worked for 1 year, until rising costs sank it. 

The inclusion of a so-called public option cannot salvage this 

structurally defective reform package. A public plan option does not 

lead toward the single payer but toward the segregation of patients, with profitable ones in private plans and unprofitable ones 

in the public plan. 

A quarter-century experience with public/private competition in 

the Medicare program demonstrates that the private plans will not 

allow a level playing field. Despite strict regulation, private insurers have successfully cherry-picked healthier seniors and have exploited regional health spending differences to their advantage. 

They have progressively undermined the public plan, which 

started as a single payer system for seniors but now has become 

a funding mechanism for private HMOs and a place to dump the 

unprofitable ill. The potential $1 trillion pricetag on the tri-committee proposal 

already threatens to capsize our new President’s flagship initiative. 

In contrast, single payer avoids these hazardous political waters 

entirely because it requires no new sources of funding. 

In tumultuous economic times, single payer is the only fiscally 

responsible option. Two-thirds of the American people support it. 

The majority of physicians are in favor of it, as are the U.S. Conference of Mayors, 39 State labor federations, and hundreds of local 

unions across the country. Millions of Americans are mobilized to 

struggle for single payer, but your leadership is crucial. I hope this 

Committee will see fit to provide it. 

[The prepared statement of Dr. Young follows:] 


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Chairman RANGEL. Dr. Young, the Chair has been advised that 

one of our most distinguished Members in the House and the 

Chairman of the Judiciary Committee has arrived and is here with 

us, and that is Chairman John Conyers. If he is here, I want to 

pause and recognize the fight that he has had over the decades in 

support of the single payer. 

And I want you to understand, Dr. Young, that our President has 

decided that he wants to make every effort to have a bipartisan 

bill. And I think there are over 83 Members of Congress that have 

supported the single payer. But I don’t think too many of them belong to the other party. 

And so in an effort to launch this in a way that we could accommodate each other, we have the public program that we hope would 

compete with the private sector. But having said that, Members 

will have questions later. And I hope that if Chairman Conyers is 

in the audience, he would stand so that we would recognize the 

service he has provided over the years. 

John Conyers, we thank you. 

[Applause] 

Chairman RANGEL. We thank you for your great contribution, 

and we would not be where we are today had it not been for your 

great efforts here. 

The Chair would like to call on Dr. David Gratzer. He is from 

Manhattan Institute for Policy Research from the great town of 

New York, New York. 

Thank you. 

STATEMENT OF DAVID GRATZER, M.D., SENIOR FELLOW, MANHATTAN INSTITUTE FOR POLICY RESEARCH, NEW YORK, 

NEW YORK 

Dr. GRATZER. Thank you, Mr. Chairman. Thank you, Members 

of the Committee. 

Mr. Chairman, as you gave me that warm introduction, I was reminded of a comment a colleague of mine had said a few years ago 

when he suggested that on paper, I seemed like a remarkable individual. 

Chairman RANGEL. Let’s hope so at the end of your testimony. 

Dr. GRATZER. Mr. Chairman, I made a similar comment when 

I testified a couple of weeks ago before a Subcommittee of the Committee on Education and Labor. People also laughed then, and I am 

not sure why. Pause for a moment just to soak this up. 

I am a kid from the prairie, and it is an enormously humbling 

experience to speak before this august body. And I appreciate the 

work that you are doing. And we may agree to disagree on some 

things, but I am honored to be able to testify today. 

I am going to speak in a few moments about the draft legislation 

before us. But I want to pause for a moment and talk about some 

personal experiences. You know, health care is ultimately very personal. And it is important as we discuss policy details, as we discuss statistics and figures, not to leave out the human aspects of 

this. 

A few years ago my wife hurt her back. We had gone on a ski 

trip in the Rockies. Actually, I had been invited out to a conference, 


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and they had generously even agreed to pay for my wife’s plane 

ticket. All I had to do was buy the lift tickets, and off we went. 

My wife is no athlete. She is an emergency doctor, and she hurt 

her back. I want to emphasize for the sake of our marriage that 

she tells the story a little bit differently than I do. Her version of 

events involves gale-like winds of 60 miles an hour or so, a tall 

mountain rivaling, perhaps, Everest, and a small mammal that 

had crossed her path that needed to be saved. My version of events 

is a little less august, involving a small ski slope, the bunny hill, 

and a lot of falls on her rear. 

But whether or not you accept her version of events or mine, at 

the end of the day she ended up seriously hurting her back. And 

my wife, who likes to log long hours in the emergency department, 

ended up lying on her couch in pain, numbness in her foot, largely 

unable to work. 

We were uninsured at the time, and interested in getting her 

some help. Forty years ago there would have been no help to be 

had. She just would have lived her life like that. Twenty-five years 

ago there would have been a surgical procedure to help her out 

that would have had a long convalescence, a risky procedure that 

may not have worked. 

My wife ended up getting a procedure that lasted less than 28 

minutes, involved a scar that she wears on her back that is less 

than a half-inch long, and within a few weeks, she was able to rise 

up from that couch and go back to life. 

It was in its own ways something of a miracle, something we see 

every day in American health care. I would emphasize that there 

are so many problems with American health care—and we are 

going to talk about that today, in the coming days and the coming 

weeks. But we should not forget what is good about this system, 

that American medicine is second to none. 

I have talked about my wife’s back, but certainly we could cite 

other examples. Death by cardiovascular disease has dropped by 

two-thirds in the last 60 years. Polio is confined to the history 

books. Childhood leukemia, once a death sentence, is eminently 

treatable for people under the age of 11. 

You know, in my other life I am a doctor, and I have seen miracles there, too. I had a patient who came in covered in his own 

urine who was completely psychotic. We gave him an anti-psychotic, a new one, developed right here in the United States, and 

he went back to being a college student and living out his life. Let 

us not forget the successes when we talk about the failures. 

Of course, there are problems. It was difficult to find a neurosurgeon for my wife because quality is so uneven and they are such 

a black box. We actually Yahoo’ed ‘‘Neurosurgery, west New York,’’ 

and got a bunch of porn sites. Costs are uneven and at times inexplicable. We got a bill that lasted about 31⁄2 feet and was unanswerable. 

People look at these problems and they say, it is time now for 

Washington to take a larger role, a more robust role. And I see that 

Members of the Committee are entertaining that. I understand 

that temptation. 

I understand the belief that government expansion will be compassionate and will increase quality. I understand that because I 


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used to believe it. I was born and raised in Canada. I, too, believed 

in some level of socialized medicine. Then I got mugged by reality, 

and I have seen the waiting lists and the queues for care and how 

unsatisfying it is. 

You have a choice to make, and down one path is the government 

temptation. But there is also, my friends, the low road less traveled 

of individual choice and true competition. And that is why I think 

we need policy reform and regulatory reform and tax reform to 

build on what is good with this system, and not to end up with a 

system far worse like you see in Canada or Britain or right across 

the western world. 

Thank you, Mr. Chairman. 

[The prepared statement of Dr. Gratzer follows:] 

Prepared Statement of David Gratzer, M.D., Senior Fellow, 

Manhattan Institute for Policy Research, New York, New York 

Thank you for this opportunity to testify at this important time. My testimony 

is drawn from personal experience—as a physician born and trained in Canada, as 

the author of two books (and the editor of a third) on comparative health care policy, 

and as a senior fellow at the Manhattan Institute. (For the record, the views I 

present are my own and do not necessarily represent those of the Manhattan Institute.) 

The choices Congress will make on this issue are critical both for the United 

States and for patients around the world who benefit from American advances in 

diagnostic technology, pharmaceuticals, biotechnology, surgical techniques, and 

medical device design. 

It is not a coincidence that the United States is so productive in medical science. 

America’s health care system is unique in its capacity to mobilize private investment. Many critics of the system look at its rising share of GDP and see only cost. 

But we must remember in these discussions that American medicine is second to 

none. The achievements of the last 60 years have been amazing: Polio is confined 

to the history books; death by cardiovascular disease has fallen by two-thirds; childhood leukemia, once a death sentence, is now treatable. 

The U.S. system needs reform, yes. Costs continue to rise. Quality is uneven. Too 

many lack insurance. But in our effort to make a system with better coverage and 

access, we must not lose what is right and what is good. 

1. BUILDING ON WHAT WORKS 

U.S. lawmakers should be cautious about borrowing reforms from other countries; 

Congress must reform the health care system with made-in-America solutions. 

Congressional leaders would be wise to focus on simple, practical reforms that 

build on what works in this system. 

• We must recognize the forgotten role of health in health care (policy reform); 

• We should foster insurance competition in a larger marketplace (regulatory reform); and 

• We must level the tax playing field for individuals seeking insurance outside 

the workplace (tax reform). 

Supporters of a single payer model repeatedly point to America’s lower life expectancy as evidence of a systemic failure. As a physician, let me assure you that life 

expectancy is about much more than what happens in the doctor’s office. Indeed, 

some of the biggest problems we face are due to choices and not (health) care. Americans live unhealthily—smoking, drinking, and eating more than their neighbors to 

the north, or their Western European cousins. Consider that the percentage of obese 

Americans has doubled in the last quarter century. 

The failure to prevent common illnesses like diabetes and lung cancer carries significant financial consequences for the health care system. Both Democrats and Republicans can agree with this point. Significant government and private actions are 

needed—we must do more to promote wellness, provide incentives for prevention, 

and encourage Americans to take greater responsibility for their own health. 

Market competition can contain the high cost of insurance—if Congress and the 

States would only allow it to take place. Efforts at creating equity and fairness in 

the health insurance market—done with the best of intentions—have created dramatic differences in price across the country. For example, a health-insurance plan 


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1The latest CIHI reports on provincially-reported wait times are available at www.cihi.ca. 

2The 2009 Report is available, as are previous years’ reports, at www.waittimealliance.ca. 

3The Chaoulli decision is online at http://csc.lexum.umontreal.ca/en/2005/2005scc35/ 

2005scc35.html. 

for a family of four in New York can cost more than $12,000 a year, but a similar 

is about $3,000 in Wisconsin. 

The Federal Government can promote regulatory strategies that will increase 

interstate insurance competition. Proposals to create a true national market for 

health insurance is on the right track, but Congress must go farther to level the 

tax and regulatory playing field for non-group insurance. Once the marketplace of 

individuals can compete fairly with employer-provided plans, they can serve as an 

ideal vehicle for broadening coverage to the uninsured. 

2. THE SOCIAL RISKS OF GOVERNMENT–MANAGED CARE 

Single payer advocates and their allies insist that only government health insurance can solve America’s problems. For example, when it comes to wellness, some 

claim—without evidence—that preventive care will be strengthened in a single 

payer system. 

In reality, preventive care has suffered in many single payer systems because it 

is not urgent care. Governments in single payer systems have tended to see ‘‘elective’’ and preventative care as a safer target for rationing, in much the same way 

that governments worldwide habitually underbudget for infrastructure maintenance. 

For example, it’s a common mantra that Canadians can choose their own family 

doctor in Canada’s socialized health system. But as many as one-sixth of Canadians 

cannot find a family doctor. Canada has two-thirds as many doctors as the OECD 

average, with severe shortages in several areas of specialty (for example, 

gynaecology). When there are no doctors to choose from, the ‘‘freedom to choose’’ is 

a limited benefit. The doctor shortage is a direct result of government rationing, 

since provinces intervened to restrict class sizes in major Canadian medical schools 

in the 1990s. 

To further inform Congress about the challenges of government-managed care, I 

cite Canadian-sourced data. 

(1) CIHI Reports on Provincial Wait-Times ‘‘Progress’’ 

The Canadian Institute for Health Information (CIHI), a government-funded body, 

is the designated agency responsible for collecting provincial wait-times data. Their 

reports 1 paint a disturbing picture. Advocates for the Canadian system often cherry-pick broad averages or median wait time figures, but CIHI’s most recent (2008) 

data gives a fuller picture of what service is like at the ‘‘back of the line.’’ Consider 

just a few examples: 

• In Alberta, Canada’s wealthiest province, 50% of outpatients waited 41 days or 

more for an MRI scan. Ten percent of those patients waited 41⁄2 months or 

longer. 

• In Saskatchewan, 10% of knee replacement patients waited 616 days or more 

for surgery. 

• In Nova Scotia, 25% of patients waited 199 days or more for cataract removal. 

All of these and other figures reflect wait times after referral by a general practitioner. As noted earlier, millions of Canadians do not have access to a family doctor. 

(2) Canadian Wait Times Alliance: Annual Reports, 2004–2009 

Canada’s Wait Times Alliance offers a counterpoint to CIHI’s reports. The Alliance 

consists exclusively of Canadian medical professional associations like the Canadian 

Medical Association. Their 2009 report, Unfinished Business, opens with the observation that ‘‘Canadians are used to waiting.’’ The report 2 notes that provincial 

‘‘progress’’ toward wait times targets often represents progress toward ‘‘minimum 

wait-times standards, rather than desired wait-times standards.’’ 

(3) Chaoulli v. Quebec (Attorney General), 2005 SCC 35 

This recent decision 3 by the Supreme Court of Canada serves as a wake-up call 

to those who see the Canadian system as a utopian mix of public funding and private choice. The case centred on a patient who chose to sue for the right to use his 

own money to secure timely medical treatment, a right that was denied Canadians 

until the Chaoulli decision. 

Writing for the majority, Justice Marie Deschamps concluded that: 


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4The full report is online in English at http://www.financementsante.gouv.qc.ca/en/rapport/ 

index.asp. 

‘‘[T]he evidence in this case shows that delays in the public health care 

system are widespread, and that, in some serious cases, patients die as a 

result of waiting lists for public health care. The evidence also demonstrates that the prohibition against private health insurance and its consequence of denying people vital health care result in physical and psychological suffering that meets a threshold test of seriousness.’’ 

Chaoulli v. Quebec (Attorney-General) 2005 

(4) [Quebec] Taskforce on the Funding of the Health System, 2008 

Finally, consider the most recent report from Quebec, a comprehensive review of 

a government-managed system in peril. The government-appointed Chair of the 

Taskforce was M. Claude Castonguay, widely considered ‘‘the father of Quebec medicare,’’ as he co-authored a report in the late 1960s that created Quebec’s earliest 

single payer model. Almost 40 years later, this report 4 concluded that ‘‘there is no 

ideal system,’’ called for an increase in private sector involvement and cited crippling cost inflation and poorly rationed care as major flaws in Quebec’s single payer 

model. 

3. THE FISCAL RISKS OF GOVERNMENT–MANAGED CARE 

These challenges are not unique to Canada. Around the world, the more public 

the system, the greater the challenge in managing it. For example, the United Kingdom recently increased the annual budget of the National Health Service (NHS) by 

tens of billions of pounds in an effort to bring wait times below their own targets. 

The effort succeeded, but only if you believe that the NHS guarantee of care no later 

than 18 weeks after a referral represents timely service. Recessionary budget reductions are likely to limit further progress as the Brown government has ordered the 

NHS to prepare for increases below core inflation (1.6%) in fiscal year 2010–2011. 

The White House is alarmed by private-sector health inflation, but it must also 

acknowledge the same trend in government-managed systems. Even with pharmaceutical price controls, technology rationing, and limited capital investments, almost 

all Canadian provinces carry substantial debts fuelled mostly by persistent health 

care inflation. Ontario’s health budget is projected to grow by 7% for each of the 

next 3 years. The 2008 Taskforce calculated Quebec’s annual health inflation rate 

at almost 6%. In Britain, the NHS admits to a 60 year average increase of 3% over 

inflation. Ireland’s single payer system has experienced constant price turbulence. 

Despite 3.5% deflation this May, Irish health costs still grew at an annualized rate 

of 4.5%. 

What causes inflation in public health insurance programs? As government’s role 

as the primary funder grows, the greater the political contradiction between demands for fiscal restraint and demand for service. The pattern is consistent across 

national boundaries: If governments provide the insurance, benefits come cheap and 

easy in the early years. When the cost of treating older citizens, serving new patients or providing new treatments climbs, policymakers face a devil’s choice between rationed care or tax-funded cost inflation. Most often, they try to balance the 

two bad options, restraining inflation slightly below U.S. levels with ever-more painful restraints on capital investment, human resources, technology, and drug access. 

Waiting lists for treatment are the inevitable consequence. 

4. A PUBLIC PLAN OPTION IS GOVERNMENT–MANAGED CARE 

The Administration insists that support for a ‘‘public plan option’’ is not intended 

to serve as a ‘‘Trojan horse’’ for a single payer health care system. I can only reply 

with the time-honoured scientific observation that ‘‘if it walks like a duck, if it 

quacks like a duck . . .’’ 

The historic reality is that even if the Administration sincerely does not want 

public insurance to serve as a Trojan horse for a single payer system, the public 

plan option is certain to deliver exactly that result, just as more limited public insurance schemes in Canada, Britain, and other countries, came to dominate their 

own health sectors: 

• As a government program rather than a state-regulated insurance plan, the 

public plan option has competitive advantages; 

• If those advantages are removed, then there is no point in introducing the public plan when the proposed ‘‘Health Insurance Exchange’’ will increase competition anyhow; 


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• If the advantages are left intact, the United States will undermine its privatesector health care, as have other western countries. 

The Administration believes a public option is needed to, in the President’s words, 

‘‘keep the insurance industry honest.’’ If this argument is carried to its logical conclusion, the public plan must also be ‘‘honest.’’ 

Will the public plan be financed on a pay-as-you-go basis as many entitlement 

programs have been, or will it be properly financed to future insurance costs? 

Will the public option pay market costs for capital, just as private insurers must? 

Will the public plan comply with costly State mandates just as private insurers 

do, or will the Federal Government override them? 

If the public plan has any built-in government advantages, it will build market 

share—not because it is necessarily better insurance, but because it is subsidized 

and legally privileged. As the plan grows in size, Federal taxpayers will foot an 

ever-larger share of the system’s increasing costs, and governments will be under 

ever-more pressure to ration care to contain them. 

Further, if the goal of public competition is to reduce the impact of public health 

care costs on the U.S. Treasury, then the best policy choices are those which extend 

coverage and improve affordability without significant damage to the U.S. tax base. 

Will the public plan pay taxes to simulate the tax costs of a private insurer? If not, 

then every dollar attracted to the public plan is a dollar taken from the taxable private sector, reducing the economy’s ability to carry the costs of public health programs in future. 

Let’s be clear: American health care is in need of reform. But as any good doctor 

knows, it’s not enough to get the diagnosis right, we need a treatment that makes 

sense. A massive expansion of Washington’s role is not that treatment. Rather, Congress should look to alternatives: 

Prioritize regulatory reforms that will open up true competition between existing, 

fully-funded insurers. 

Target direct government aid to individuals who really need it, with incentives for 

individuals to become a powerful competitive force in the insurance marketplace. 

Promote rapid improvement in the personal health of Americans to reduce demand on the system’s most costly health care services. 

These ideas would bring greater choice to American health care; they would also 

help instill in the system the oldest of American virtues: Personal responsibility. 

While they may not be as catchy as promising Medicare for those who want it, these 

ideas have the benefit of pushing the system toward a sustainable future, not a government bureaucracy. 

f 

Chairman RANGEL. Thank you so much for your testimony. I 

can see why our Republican friends have selected you. You are very 

persuasive. And I want to make it abundantly clear: Anybody supporting this concept certainly cannot disregard the great advancements that have been made in American medicine, and the great 

contributions that the private sector have and continue to give. 

And I only wish that you can help us to understand that we cannot find acceptable 48 million people without health care. And I 

know you agree with that. Over half of that amount are underinsured. And the whole idea that this genius of the private sector 

cannot compete with a government operator, or better than that, 

that the American people will not seek out the best that they can 

find, certainly is a far cry from what you describe as socialized 

medicine or whatever derogatory term that you want to call it. 

We are not competing for a French plan or a Canadian plan or 

a foreign plan. This is an American problem, and it has to be an 

American solution to it. 

And so I just ask you, Doctor, if indeed we are talking about competition, don’t you believe that the government can learn from the 

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ernment? We as Americans, and certainly the medical profession, 

have never run away from the challenge of competition. Why won’t 

you give us a chance? 

Dr. GRATZER. Mr. Chairman, let me agree with you that there 

are significant problems here. And certainly I don’t wish to walk— 

or don’t wish for you to walk away from my testimony today thinking that I am glossing over these problems. There are too many uninsured Americans. 

I am not quite sure that we should be so concerned with that 

large number, but within them there is a core group, maybe 8 or 

9 million, who really do fall through the cracks. And it is up to this 

body in these deliberations to find a way of reaching out. 

But be careful. Be careful what we end up doing because as any 

good doctor knows, it is not enough to come up with the right diagnosis. You have to come up with the right treatment. And sometimes when you don’t do that, the patient gets worse. 

As you know, I am pretty libertarian in my thinking. Milton 

Friedman wrote the foreword to my last book. He was a mentor for 

me. 

Chairman RANGEL. What was the name of your book? We 

might as well get that in now. 

Dr. GRATZER. Well, Mr. Chairman, ‘‘The Cure: How Capitalization Can Save American Health Care,’’ available on Amazon.com at 

a very reasonable price, Mr. Chairman. 

[Laughter.] 

Dr. GRATZER. But today, I will offer you a book at no charge. 

But Mr. Chairman, I think one should be very careful about the 

language we use. Yes, you and I believe in competition. Yes, you 

and I believe in individual choice. But a public plan option as is 

being discussed is not true competition, and it is not true choice. 

As you know, the discussions underway are to have Medicare 

pricing. In other words, we would build a public plan option basically modeled after Medicare. Medicare is not really an insurance. 

I know you and I throw that term out. And when you have public 

plans in other countries, we talk about social insurance, but they 

are not true insurance. 

Medicare is a Federal program. Medicare is a Federal program 

with price controls, one that is opted out of State regulations, that 

doesn’t require any of the capitalization required of private insurances, that doesn’t account as private insurances do. 

So yes, I believe in competition. But it has to be fair competition. 

I think a better—— 

Chairman RANGEL. Pause there. Tell me, please, what is unfair 

about the option? Because I have more respect for the ingenuity of 

the private sector. Why would anyone that enjoys the genius of the 

private sector walk away from that to a crumbling, failing, government, irresponsible program? 

Dr. GRATZER. Can I quote you on that? 

Chairman RANGEL. Well, this is your language. And I am saying that why would anyone walk away from what you are describing? The key word that separates you and I is that you already 

said the program, the public option program, is unfair. 

Well, hell, I am sorry, but if I was losing a lot of money to a competitor, I would try to find that word, saying, this competitor is 


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coming in, reducing my profits. I am in business to make money. 

That is what my job would be in the private sector. 

And if anyone came in with any idea about just providing health 

care, I wouldn’t call that unfair. Tell me what is unfair about the 

system since we are searching to give confidence that we want an 

even playing field? 

What could we possibly do to provide that competition, which I 

am certain you are not afraid of, as long as it is, what, fair? Tell 

me what we could do to perfect this so you can say, well, at least 

that is fair, and we can match you patient for patient, and in your 

case, dollar for dollar. 

Dr. GRATZER. Sure. Three words: Scrap price controls. 

Chairman RANGEL. Where would the price control be? 

Dr. GRATZER. Well, Medicare price controls. As you know, there 

is a committee of—— 

Chairman RANGEL. We are paying for the private sector with 

Medicare. That is how they make their money. It is government 

money that goes into these programs. The doctors are reimbursed 

with Federal dollars. 

Dr. GRATZER. But they are being reimbursed at a fraction of 

what they would make in the private sector. And as you know, 

there is good evidence that there is cost-shifting going on whereby 

private plans end up picking up the weight, the dropped weight, 

from the public system. 

Chairman RANGEL. Doctor, we have so many programs that the 

patients and the clients are supported by Federal dollars and Medicare where they are doing so well and making profits, if you will, 

by cutting a lot of procedures that are truly found to be unnecessary. 

And I might say that a lot of doctors would share with you the 

lack of satisfaction that they get with the payment system, which 

forces them in many cases to find services that are not necessary 

to be funded by the government because they don’t believe that the 

reimbursement is adequate. We are trying to take care of that. I 

don’t think we—— 

Dr. GRATZER. Hold on, Mr. Chairman. I think you have persuaded me that Medicare is in need of reform. I am not sure you 

have persuaded me—— 

Chairman RANGEL. You bet your sweet life it is. 

Dr. GRATZER. But you have not persuaded me that—— 

Chairman RANGEL. The whole system is broken. 

Dr. GRATZER. The whole system is—— 

Chairman RANGEL. But we don’t expect the private sector to 

come forward and fix it. We need a partnership. We need a fair relationship. And the only difference that separates you and I is that 

I think you are suggesting that you are not afraid of fair competition. 

Dr. GRATZER. Then let’s agree on what fair competition might 

be for this public option. 

Chairman RANGEL. Exactly. 

Dr. GRATZER. No price controls. Reimbursement set by the private sector. Capitalization required. 

Chairman RANGEL. Reimbursement set by the private sector, 

did you say? 


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Dr. GRATZER. Yes. Doctors ought to make a fair wage, don’t you 

think? 

Chairman RANGEL. A fair wage? Okay. Okay. All right. 

Dr. GRATZER. I believe in competition. But we are not talking 

about competition between insurances. 

Chairman RANGEL. Let’s talk in New York. 

Dr. GRATZER. We are talking about competition between—— 

Chairman RANGEL. It is all a question of what is fair. And I 

would like to yield to the Ranking Member because we have reduced our differences to price. 

Mr. CAMP. Well, thank you, Mr. Chairman. We have had a number of hearings either in the Committee or Subcommittee—I think 

six this year—on various aspects of health reform, seven if you look 

at the Income Security Subcommittee’s hearing on a new entitlement program that was incorporated into this draft, and really 

nearly two dozen in the last Congress. 

So I really want to focus on the specific aspects of this legislation 

before us, not necessarily in general what health reform—what 

might be right and wrong in the health reform system. 

And so Dr. Gratzer, you mentioned the difference often between 

the public and private plans. And I believe in section 1401(b) of the 

bill, there is a new tax on all non-government health insurance 

policies, which would be another way that competition isn’t really 

fair between the public plan and the private plans. It would be a 

$370 million tax to fund the competitive effectiveness research 

trust fund. 

Would this tax, in your opinion, fall on people at all income levels? Is it based only on who has a non-government health insurance policy or private health insurance? 

Dr. GRATZER. I thank you for the question. I will be honest 

with you: I am not as up on perhaps the specifics of the bill as I 

should be. It is an 825-page bill, and I have only had since Friday 

to review it. 

But my suspicion is besides the structural differences between a 

Federal program and insurance, you have hit the nail on the head 

that even this bill will exaggerate these differences from a tax 

point of view. 

Again, I believe in competition, but it ought to be fair competition. And if really what we are going to do is take this public plan 

option and make it just like every other insurance except it is not 

for profit, we already have the blues, sir. 

Mr. CAMP. All right. Thank you. 

And Ms. Pollitz, I am a little confused about whether insurance 

policies offered through the exchange would have to adhere to 

State benefit mandates. I believe in section 203, which starts on 

page 55 of the bill, that the new health choices commissioner could 

override State mandates with their authority. Is that your read of 

the bill? 

Ms. POLLITZ. I don’t remember. I am sorry. 

Mr. CAMP. Okay. I believe on page 59 you would find that is the 

case. 

I also have a question for Dr. Holahan. It appears that there will 

be, for an employer who does not offer health insurance, an 8 percent tax on total wages. Is that your understanding? 


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Mr. HOLAHAN. Yes. 

Mr. CAMP. And if there was an employee who had a spouse who 

had an insurance plan with another company, and that employee 

decided to go on their spouse’s insurance for some reason—it may 

have better benefits; it may be cheaper for their family—and that 

policy was in the exchange, would the employer still have to pay 

the 8 percent tax on that employee who was not covered by insurance? 

Mr. HOLAHAN. So you are saying the employee is covered, the 

spouse is not? 

Mr. CAMP. The spouse is covered by another plan that is in an 

exchange. This employee decides, I will go on my spouse’s plan. I 

am not going to use my employer’s plan. Because it might be 

cheaper. It might have different benefit levels. 

Mr. HOLAHAN. There are a lot of difficult design issues in—— 

Mr. CAMP. My view—— 

Mr. HOLAHAN. I don’t know how they dealt with that, to be 

honest. I didn’t see that. 

Mr. CAMP. My read of the bill is that that employer would still have to pay an 8 percent tax. So if the employee made $100,000, 

the employer would still be on the hook for $8,000—— 

Ms. POLLITZ. Mr. Camp. 

Mr. CAMP [continuing]. Even though that employee was covered. 

Ms. POLLITZ. I believe there was a general provision in the bill 

that allowed for a delegated authority to the Secretary to arrange 

for accounting rules to take care of problems like that. I don’t know 

that it is specified in the bill, but it is acknowledged that there 

would need to be accounting rules about how families are covered 

when there is more than one source of coverage, and that those will 

need to be addressed. 

Mr. CAMP. Yes. The bill, as written now, would indicate that 

that tax by the employer has to be paid. It wouldn’t necessarily 

change anything. The family doesn’t pay that; it is the employer’s 

payment. 

I also have a question, Dr. Holahan. The health choices commissioner who would run the exchange, what protections are there in 

the bill to ensure that there is the necessary independence from 

the President and the Health and Human Services Secretary, given 

that this person would be running the health care—the government plan? What protections in the bill are to ensure that that is 

an independent position? 

Mr. HOLAHAN. I don’t think I can answer that. I didn’t read 

that part of it. 

Mr. CAMP. Okay. It is my understanding there aren’t any such 

protections in the bill, and I think that is one of the concerns that 

we would have. 

Mr. HOLAHAN. As I said in my opening remarks, I would agree 

with that. There has to be separation. 

Mr. CAMP. Thank you. 

I see my time is expired, Mr. Chairman. Thank you very much. 

Chairman RANGEL. Well, I have talked with staff. And as we 

told you yesterday, we think the bill is clear that an employer that 

offers insurance will not be penalized merely because one of the 

employees would want to enjoy the benefits under another plan. 


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But in an effort to show the direction in which we want to go, 

we are prepared to accept Republican language to make it abundantly clear that if he is offering the insurance, it doesn’t mean 

that the employee has to accept it. So there is no penalty involved. 

I would like to yield to the Chairman of the Health Committee. 

Mr. STARK. Thank you, Mr. Chairman. And thank my colleagues for their patience. I think it is important to note that in 

this draft proposal, there are still many issues that are undecided. 

But I did feel that it is important to note that the—well, there 

has been a good bit of discussion about a Canadian system, which 

the public plan, I would suggest, is not. There is basically nothing 

in the public option that would create a Canadian-style system. Dr. 

Gratzer indicates that it would be important to have preventive 

health. I believe that we have eliminated copays for preventive procedures, which should increase preventive health. 

Canadians don’t get their health care via their employer. Private 

insurers do not exist in Canada offering comprehensive health benefits. There are province-wide caps on spending in Canada. And 

these are four major elements of the Canadian system that are not 

at least in this discussion draft. 

So that I would just like to make crystal clear that this is an attempt to save money, as they say, bend the curve, and also a question to make sure that everybody contributes. Beneficiaries will 

contribute. Employers will contribute. Taxpayers will probably end 

up contributing. And providers certainly will. 

Dr. Gratzer has suggested that physicians ought to set their own 

prices. They are currently the highest-paid group of people in 

America, averaging substantially over $250,000 a year, many making $6 or $700,000 a year. And I have repeatedly said I fail to extend much sympathy to the $600,000-plus physicians who are back 

here looking for more, particularly in this time when so many 

Americans are just looking for a job. 

So that I think we have to move ahead. One of the things that was in this—whoever wrote this silly $3 trillion analysis managed 

to miss 500 pages of the text, and I wonder what else they missed, 

because they didn’t talk about the savings in the bill. 

And also, I must say, in the analysis they said that in contrast 

to the Senate version, our version is more fiscally prudent and effective. Now, given that CBO has scored the Senate version at 

around 1 to 1.6, this certainly indicates that we are doing a lot better. 

So I hope we can continue to analyze the bill, and try and keep 

our analysis of it somewhat close to reality, and come up with a 

bill that will end up having more than 95 percent of the American 

public with an affordable quality access to medical care. 

Thank you, Mr. Chairman. 

Chairman RANGEL. Thank you, Chairman Stark. 

I would like to recognize Mr. Herger, who has spent quite a bit 

of his legislative career working on health reform. 

Mr. HERGER. Thank you, Mr. Chairman. 

Dr. Gratzer, advocates of a government-run care program often 

point to Canada as a model for the U.S. to follow. However, your 

experience shows that many Canadians can’t find a family physician, and those that do often face long waits if they need followup 


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care. In fact, some patients even die while waiting to receive treatment. 

Could you please elaborate? 

Dr. GRATZER. I thank the Member for the question. There is 

such a severe physician shortage in Canada that there are small 

towns where if you win the local lottery, you don’t get money to pay 

off your mortgage. You don’t get a boat. You don’t get a new house. 

You get a trip to the family doctor. 

One in six Canadians, according to the government’s own statistics, are actively looking for a family doctor and can’t find one, the 

shortage is so severe. 

Even the Supreme Court of Canada—arguably, by the way, one 

of the most liberal supreme courts in the western world—wrote in 

a decision, writing for the majority, according to the chief justice, 

that access to wait lists is not access to health care. 

The Canadian system rations. The British system rations. The 

Swedish system rations. Right across the board, you see the same 

thing—not according to my statistics or right-wing think tank statistics; according to even their government statistics. 

Now, the question is, is any of this relevant today? And Mr. 

Stark has suggested that it is irrelevant because we are just talking about a public plan. But a public plan would inevitably lead to 

a government plan, and inevitably lead to a further skewing of the 

field, 120 million Americans taking up public insurance, and ultimately you are well on your way to a Canadian-style system. That 

is the danger. 

Look north of the 49th parallel, and you don’t find a compassionate system. You find people waiting, and to use your words, in 

some cases dying. 

Mr. HERGER. Thank you. On a different issue, competitive effectiveness research, if done right, can be an important source of 

trustworthy information for patients and doctors. I am concerned, 

however, that if it is done wrong, it could take us down the path 

of countries like the U.K., where government agencies get in the 

middle of the doctor-patient relationship and decide whether or not 

to cover a medical treatment based solely on its cost. 

I have introduced bipartisan legislation that would prohibit the 

Federal Government from using competitive effectiveness research 

to make cost-based coverage determinations, while also ensuring 

that research is conducted transparently and with adequate opportunity for public comment. 

Dr. Gratzer, do you believe it is important for health reform legislation to include these kinds of safeguards to protect the doctorpatient relationship? 

Dr. GRATZER. Absolutely. I am a huge believer in studying 

what is effective and what isn’t. You know, in my other life I am 

a practicing physician. As a psychiatrist, I tap the CATIE study 

funded by the NIMH all the time. It was a direct head-to-head 

comparison of different anti-psychotics. It literally influences my 

practice every day. That is funding that worked and helped people. 

On the other hand, one must be enormously careful not to follow 

the examples of countries like Britain, where you have a committee 

of really smart, well-meaning people who end up making decisions 

that they ought not to. There is a right way of doing this and a 


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wrong way of doing this. I fear in the stimulus bill we took the 

wrong tack. But I applaud your efforts and the bipartisanship it 

has enjoyed. That is the right way we ought to do it. 

Health care is a black box. We are power consumers. No matter 

whether you agree with a single payer system or a government-run 

system or, as you and I do, a more private system, we need to inform individuals more correctly—not through government rationing 

committees, but through better information to consumers. 

Mr. HERGER. Dr. Gratzer, again, thank you very much. I believe we all agree—Republican, Democrat, whoever we are—that 

the system needs to be fixed. But it needs to be repaired and fixed 

in a way that is going to make it better, not make it worse. So 

thank you very much for your testimony. 

Thank you, Mr. Chairman. 

Chairman RANGEL. I would like to recognize a senior Member 

of our Committee, Sandy Levin. 

Mr. LEVIN. Well, we are having, I guess, a grand debate. So let’s 

continue it. 

Dr. Gratzer, in your testimony you say—I think you mean it humorously—the honored scientific observation that if it walks like a 

duck and it quacks like a duck, it is a duck. We are not talking 

about a duck. It is a straw man. 

I live next to Windsor. We are not proposing a Canadian system, 

and there is no way we are going to allow the opponents of reform 

to mischaracterize what we are proposing. 

You talk about the rationing of health care in Canada or in Britain. One of the problems is, and we have a strong health care system in some respects, but the present American system rations 

health care. There is a horrible difference in the availability of 

health care for Americans in this country. And we have a system 

that needs reform. 

I think you said you are a libertarian. You say it straight. Essentially, you talk about the American system. That includes Medicare. You essentially would dismantle Medicare. I think you would. 

You talk about price controls. We instituted some control of reimbursement costs for hospitals in Medicare. You would turn that 

over to, essentially, competition without any government role. At 

least that alternative is said essentially straight. But America has 

essentially rejected it. They don’t think Medicare is a Canadian 

system of health care. 

So if there is any hope for a bipartisan approach, and I hope 

there is, to reform our health care system, it will not be possible 

if the main effort of those who oppose what we are proposing is 

caricature. This is not a duck. That is a straw man. 

And I want to say to Mr. Camp, it is true we do not at this point 

indicate how we will pay for it. And you bring out a study—I don’t 

know, really, its origin—about 31⁄2 trillion. We will see what CBO 

says. But I don’t think that kind of a study should scare us into 

inaction. 

And you also mentioned the problem of where both the couples, 

both work. You know, from Michigan, we should be sensitive to 

that because we have had a system where both people work. Essentially, one employer is paying all the costs for both people. And in 

1993–1994, a plan that did not succeed attempted to address that. 


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And I think it is important that we face up to the issue, but without caricaturing what it is all about. 

So Dr. Gratzer, you say that there can’t be fair competition with 

government involvement. We will see. The reason that we have 

proposed focusing on reform and then focusing on how we pay for 

it is because the system needs to be revised. 

The reimbursement structure today that we have in Medicare 

and beyond for physicians is totally unworkable. It is totally unworkable. And what our proposal does is attempt to begin to address an unworkable system and an unfair system of physician reimbursement. 

And those of us on the majority side want us to examine how we 

go even further. And I think to say that a public plan is socialism 

or is Canadian misses the point. We want a public plan in part so 

that there will be more competition to address issues of reform. 

That is one of the strengths of a proposal that includes an option 

for a public plan. 

Mr. CAMP. Mr. Levin, would you yield briefly? You used the 

words characterizing your plan. I am just trying to find out what 

it says. 

Mr. LEVIN. I said caricature. 

Mr. CAMP. Caricature. On page 115, it says, ‘‘The employer shall 

make a timely contribution to the health insurance exchange if an 

employee declines such offer but obtains coverage in an exchange.’’ 

So my read of the plain language of the bill is that an employer 

will be required to make that 8 percent. We can debate whether 

that is the right thing to do. I think at this hearing we are just 

trying to find out what does the bill do. 

Mr. LEVIN. Okay. Let me take back my time. Let’s talk about 

that issue without caricaturing the plan. 

It is a problem where both work, and one employer is paying insurance for both. That is a problem. Let’s discuss this on a bipartisan basis, whether the present proposal adequately addresses it 

or not. But don’t caricature that provision or any other provision. 

For you to come here and essentially say what we are proposing 

is a Canadian system is dead wrong. 

Chairman RANGEL. The Chair would like to recognize a continuous service hero, Sam Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Ms. Pollitz, you state in your testimony, ‘‘Defining a national 

standard for health insurance is crucial,’’ and that, ‘‘an essential 

benefit package is necessary.’’ 

I was wondering if you think the benefit package should include 

acupuncture like they do in California? 

Ms. POLLITZ. No. I think we could get by without that. 

Mr. JOHNSON. No? Should it be required to cover the cost of 

prosthetic devices, as it is in New Jersey and California? 

Ms. POLLITZ. Yes. I think prosthetic devices are very important 

for people with disabilities and would be needed. 

Mr. JOHNSON. How about covering in vitro fertilization costs? 

Ms. POLLITZ. I am not sure I have an opinion on that. 

Mr. JOHNSON. Well, you know, a health insurance policy in 

New Jersey costs significantly more than a policy in the Midwest 

mainly because of excessive mandates. And I am concerned that 


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our government bureaucrats in D.C., who in this bill are tasked 

with making decisions on what to include in an essential benefits 

package, will include too many mandates. 

Dr. Gratzer, isn’t it likely, by giving all this power to one individual, they will succumb to the same pressures that landed New 

Jersey into their high cost health coverage situation? 

Dr. GRATZER. Or New York or so many States. You know, I 

walk out of the think tank in New York City, and if I wanted to 

buy a policy out of the individual market, I would pay three times 

more for a policy, as you know, than I would if I took the Metro 

north 45 minutes to Connecticut. Three times more for a policy 

that covers basically the same stuff for me. 

So absolutely, these mandates, built with the best of intentions, 

drive up costs. And we see them right across the United States. 

And the danger with a health insurance exchange with some czar 

of regulation is that we just keep adding and adding and adding 

until we get to the point, like New York State, where you have the 

most fair and equitable policy available. Just no one can afford it. 

Mr. JOHNSON. Yes. You are right. But, you know, we could 

have a health czar that could solve all those problems. Right? 

Ms. POLLITZ. Mr. Johnson. 

Mr. JOHNSON. Yes. 

Ms. POLLITZ. I just wanted to correct one thing for the record. 

Health insurance in New York and New Jersey is more expensive 

than in most other States because those two States require health 

insurance companies to sell coverage to people and to leave coverage with people when they are sick. And in all other States in 

the individual market, that is not the case. The pool excludes people who are sick. 

I live in the State of Maryland, which is recognized as being the 

champion State of health insurance mandates. I believe we have 

more in Maryland than any other State. And yet individual policies 

are much cheaper in Maryland than they are in New Jersey, again 

for that very same reason—— 

Mr. JOHNSON. Private insurance. 

Ms. POLLITZ [continuing]. That sick people can’t buy the coverage. 

Mr. JOHNSON. Private insurance, though. 

Ms. POLLITZ. Yes. Private insurance. 

Mr. JOHNSON. Oh, okay. But we are about to overturn that, are 

we not? 

Ms. POLLITZ. Yes. I hope you are. 

Mr. JOHNSON. Dr. Gratzer, your experience in the Canadian 

health care system seems to suggest reform that focuses on guaranteeing coverage. And it won’t necessarily produce a quality health 

care delivery system. And your testimony also speaks to the fact 

that Canadians can’t find a family physician, and those that do 

often face long waits if they need followup care. And I am told also 

that in Canada, some lottery winner accesses a physician. 

You know, I am not sure that this type of system, and I think 

we are having trouble in this country, too, finding primary care 

physicians. Would you comment? 

Dr. GRATZER. Well, undoubtedly there are problems with primary care access in the United States. Emergency room care also 


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is problematic in terms of overcrowding. But in our efforts to 

achieve better reform, we should be careful not to end up worsening the system. 

There is no plan right now put forward by Congress for single 

payer option before this Committee. And yet when you are going 

to suck up 120 million people out of private plans and put them 

into a government system, I fear that is the road we are going 

down. 

I know that your colleague is very concerned that I would take 

apart Medicare were I to be elected President. And for the record, 

because of constitutional limitations, I will not be running in 2012. 

But it doesn’t matter what I am going to do because who cares 

what I really want to do? The question is what you guys are going 

to do because you are in this important, august Committee and before Congress. 

And what you should be careful of is looking at this temptation 

of government and expanding Washington’s reach because inevitably, you get to systems like you see in Canada or Britain or 

across western Europe. 

Canada, incidentally, didn’t start with a single payer system. 

Canada started with hospital construction grants in the 1950s, and 

then hospital insurance in the 1960s, built, by the way, to compete 

against private plans; and then physician reimbursement in the 

1970s. And then finally, in 1984 because costs kept rising and so 

many people were in the public system anyway, they just went out 

and banned private coverage altogether. 

That is the path that I fear Congress is starting to walk down 

with this draft legislation, sir. 

Mr. JOHNSON. I agree with you. 

Thank you, Mr. Chairman. 

Chairman RANGEL. It is amazing how the language in opposition to this bill is basically the same language that was heard with 

Medicaid and Medicare: Keep government out of it. And now it has 

proven to be one of the most efficient delivery of services. 

No one understands this problem better in the Congress than Dr. 

Jim McDermott. And I thank him for the great contribution he has 

made over the years, and I know he is thankful that the moment 

has come to change the inequities. Dr. McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

The President has said that cost is the real problem here. Access 

is much easier to deal with than controlling costs. And I want to 

talk to you, Dr. Quentin Young, who I have known for not the 

whole 61 years you have practiced medicine in Chicago, but certainly a whole lot of them. 

And one of the things you said was that you thought that this 

plan that we have before us would put the sick people in the government option and leave the healthy ones for the private insurance industry. 

Now, we built in guaranteed access so anybody can get into both 

a private plan or the public option. We said there can be no exclusion for preexisting conditions in either the public plan or the private plan. 

How do you think the insurance companies will push the sick 

ones, as they do presently—how are they going to get around this 


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bill and push the sick ones into the government plan and leave the 

healthy ones who pay premiums but don’t get any benefits? 

Dr. YOUNG. Well, the recent history, I mean, the last 20 or 

30—— 

Mr. MCDERMOTT. Hit your button. 

Dr. YOUNG. Thank you very much. The recent history of our national experience with private insurance is the answer to your 

question. Private insurance has legendary skills in turning any system to their selective advantage. Speaking of Medicare, a superb 

achievement and still the brightest star on the insurance horizon 

in this country, nevertheless it has been compromised by the insurance skill, sometimes aided with congressional bills. 

They have such things as Medicare Advantage. As you are probably aware, the President has said he wants to end that scam, 

which briefly creates a separate pool with a 12 percent subsidy per 

capita. And the insurance companies have dramatically been able 

to attract people who are under the Medicare average as incoming 

patients, and people when they leave the plan remarkably are 

much higher than average and they go to the public side. 

I would describe Medicare Part D, the so-called drug benefit, 

which is a catastrophe for people who need to buy a lot of drugs, 

as an example of the big PhRMA creating its tentacles around a 

much-needed program. It was tragic that Medicare enacted in 1965 

was a spectacular breakthrough, but remarkably it had no drug 

benefit. And I think that was an industry that was able to influence the legislation at the time. 

So my answer, Congressman, is that they are good at that and 

they will continue to do it. And I want to expand a little bit in answer to your question. The problem in this country is not government medicine. It is private insurance. And private insurance isn’t 

health. It is a business. And it is remarkably skilled. Everybody 

knows we are talking about one-sixth of the whole gross domestic 

product. 

And let me give another figure that doesn’t seem to be coming 

up here. We are spending twice per capita, something in the neighborhood of 8,000 per person in this country, for our health system, 

despite the fact that we have, as we all know, 45 going on 50 million uninsured. 

And I hasten to add, before somebody adds for me, that that 

doesn’t mean they don’t get any care. Indeed, they frequently get 

very expensive care in the ER. But the point is they are not covered. And 50 million more are underinsured. 

And we have—the other nations of the world, which I am not 

their representative but I have to defend them, the achievements 

of everyone in the countries that have been revolved for government medicine are spectacular and much more popular with their 

nation. 

The Canadians, for example, when polled, 96 percent prefer their 

system to the American system, which they know. The border is 

very porous. As Congressman Levin would point out, they know 

what they have and they know what we have, and they like theirs 

96 to 4. People have pointed out 4 percent is the same percentage 

of Canadians who think Elvis Presley is alive, but that is not—— 

Mr. MCDERMOTT. Can I get you to focus on one other issue? 


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Dr. YOUNG. Please. 

Mr. MCDERMOTT. And that is how does a single payer system 

control costs? Dr. Gratzer says that the Canadian system ultimately was—the costs were getting out of control, and so ultimately they passed the umbrella law in Canada to control costs. 

Dr. YOUNG. Well, I think single payer is the only arrangement 

for payment that allows you to control costs. As is well known, 

there are great variations in activities of doctors, good faith and 

not in good faith—too many operations, not enough operations, depending on the incentive. 

The single payer system, because everything is paid for through 

a single payer, identifies doctors’ practice patterns. And that is 

used as a guide to best practices, not Big Brother standing over you 

repeatedly saying, you can or cannot do this. Usually that is ascribed to the British system, erroneously or dishonestly. 

But when you have control of all the transactions, which is by 

definition what a single payer system does, you can see abnormalities. And there are, Congressman, huge variations in this country 

that can’t be explained rationally by the various public health 

areas of this country. I think there are 11 of them. 

There are variations in, for example, hysterectomy, as three is to 

one. Now, some may be doing too many; some may be doing too little. But best medical practice has to be sought. The single payer 

system allows you to identify these patterns. 

And the great tradition of medicine, going all the way back, of 

using experience to define behavior can be implemented because 

you have the knowledge. In a multi-payer system with the variety 

of inhibitions and other distortions of utilizations, you don’t know. 

And as a result, we American people don’t—despite the fact that 

yes, ours is the best in the world when you can get it, there are 

tens of millions of people that can’t get near that best. And that 

is why we are here and you are here. 

But I want to, if I may, as an extension of my answer, end the 

myth that private is good and public is bad. It ill behooves the Congress, who enacted it, to neglect the superiority of the NIH, for example, the best system in the world for stimulating research, and 

is the reason for America’s primacy in biomedicine. 

And indeed, the VA system, which now sets the standards for 

quality for the whole world, and I would add military medicine, 

with its mission defined, it is fantastic the achievements they have 

been able—these are all government medicine. For the naysayers, 

I would like them to find whether they want to abolish VA and 

Medicare. 

And so my experience, those 61 years you were talking about, by 

and large the private control of finances is bad. I can’t name a single improvement that is a result of putting health insurance in the 

hands of the private sector. 

So I would plead that this Committee have an orientation that 

seeks to bring health care to all the American people at the best 

price, and even if it means bucking against right-wing criticism of 

government medicine. Thank you. 

Mr. MCDERMOTT. The Chairman is being more than generous. 

Dr. YOUNG. I know. And I have been generous, but I have been 

outnumbered. 


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Chairman RANGEL. Thank you. Thank you so much for your 

contribution. 

The Chair would like to recognize Mr. Ryan, who has authored 

a bill to attempt to deal with this problem. 

Mr. RYAN. Thank you, Chairman. 

A couple of points I think we ought to dig into in this Committee. 

And hopefully we can have some more hearings on this because 

this is obviously probably the most important subject we are going 

to tackle here this year. 

The one point is, we oversee Medicare in this Committee, and the trustees have just told us that Medicare right now has a $38 trillion unfunded liability. So we can talk about how efficient that system is. The system is going broke in just a few short years. And 

if we want it to be there for the generations alive today, we would 

have to literally set aside $38 trillion invested at Treasury rates in 

order to pay the bills for Medicare. 

And the question we ought to be asking ourselves is: Are we creating a new program, a new entitlement program, that will rival 

the size and liabilities of Medicare? And what is unfortunate about 

this debate is we are not going to get scores outside of the 10-year 

window. 

Yes, we will probably in a number of days get scores from CBO 

and Joint Tax showing us what this thing will cost in 10 years. But 

they are not going to give us—and we have already been asking for 

them—they are not going to give us scores of what it will cost in 

the out years. 

So I think it is just a point worth making because we ought to 

know what kind of liabilities we are creating here and what kind 

of new entitlement this will be in its size. 

The second point, and I would like to get into something with 

you, Dr. Gratzer, is I will take my colleagues at their word that 

their goal here is not to create a Canadian-style or a British-style 

system. Unfortunately, just looking at this bill from an actuarial 

standpoint, from a mathematical standpoint, I believe it is impossible to conclude that this does not create such a system. And here 

is why we believe this point. 

No. 1, a public plan as designed in this bill has such a stacked 

deck, has such a huge competitive advantage over the private sector, it is impossible to conclude that the private sector won’t buckle 

under this kind of a confrontation. 

What are the advantages? Well, the public plan doesn’t have to 

pay taxes. The private sector does. The public plan gets to dictate 

the prices it pays to providers. We are going to cut Medicare by, 

I don’t know, $4 or $500 billion, and then pay 5 percent above that 

for 5 years, and then Medicare after that. The private sector 

doesn’t get to dictate its prices it pays to providers. 

And the other issue is the private sector does have to have capital reserves set aside. The public plan doesn’t have to do that. The 

private sector does have to pay for and account for its employees 

and their benefit and wage costs. The public plan does not have to 

do that. 

So there are enormous, enormous advantages. It is kind of like 

my 7-year-old daughter’s lemonade stand competing against 

McDonald’s. It is an impossible stacked deck whereby actuarial 


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firm after actuarial firm, expert after expert, are telling us what 

is going to end up happening here is the private sector will not be 

able to compete with the public plan. 

And remember, the people who decide for the most part who gets 

health insurance in this country are the employers. Individuals 

don’t choose this. Employers choose this. And most people in this 

country like their employer-sponsored care. Most people would like 

to keep what they have. 

But the talking point, that if you like what you have, you can 

keep it, just doesn’t add up when all these actuaries are telling us, 

an employer faced in a situation of ever-higher-growing prices for 

their private insurance, because of the overwhelming advantage of 

the public plan, will be faced with. 

Pay the 8 percent payroll tax that is indexed at inflation, which 

is predictable—they can budget for that—or pay this unpredictable, 

ever-higher-growing private health cost. And what are all the employers telling us? They are going to dump their people on the public plan. And that is what the actuaries are telling us. All of the 

actuaries are telling us this. 

So it is not a number. It is not a measure of whether it is going 

to be 120 million people or 64 million people or 23 million people. 

What it is is people are going to get dumped onto the public plan, 

and we will have a new program which will rival the size and liabilities of Medicare. 

And my question, Dr. Gratzer, is this: If the intention of this 

thing is not to have Canadian-style health care today, the clear trajectory of this plan is that it will be Canadian-style health care tomorrow. And the authors of this claim that this is better to get our 

hands on health care costs. 

So in the out years, we are worried. Medicaid, Medicare, and 

then this new entitlement which I don’t think we have a name for 

this yet, will be so expensive we are going to have to contain costs 

in order to, you know, make sure that the next generation doesn’t 

get swallowed up in debt and high taxes. 

And my question is this: Under those models, do they contain the 

costs? I mean, we know rationing is the method of containing costs. 

But even with all of this rationing, even with all of these waiting 

lines, do they actually achieve the cost containment that these 

goals are intended to achieve? 

Dr. GRATZER. Congressman Ryan, you ask a great question. 

Undoubtedly we are concerned about cost inflation of the private 

system in the United States, but also the public system in the 

United States. 

I would point out, though, when you look across western Europe 

and you look across Canada and their experiences with public 

health care, one finds cost containment isn’t as great as one would 

assume. I will throw out some numbers, and you will find them 

also in my written statement. 

Ontario’s health budget is growing by 7 percent over the next 3 

years, Quebec 6 percent. In Britain, I will say 60 years of data 

where health inflation has outstripped real inflation by 3 percent, 

on average, every year. In Ireland, my last statistic, one finds that 

they actually had de-inflation this May of—they had 3.5 percent 


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de-inflation this May, and yet health costs are growing at an 

annualized rate of 4.5 percent. 

My friend Shakira Delmia has done 30 years’ worth of analysis, 

and suggested at best a mixed picture on public containment of 

costs. But you still have the rationing, the waiting lists, and the 

lack of availability of modern care. 

Mr. RYAN. Medicare is at 61⁄2, Medicaid is at 71⁄2. Thank you. 

Chairman RANGEL. Well, I think all of you have done a pretty 

good job of trashing the health care system in Canada and in Ireland and in Europe generally. But by unanimous consent, I would 

like, Mr. Ryan, to introduce a solution for the record because one 

of the things that we need is to find out, if not this bill, what? 

I would like to recognize Mr. Neal. But before I do, I want to 

make it clear that we have a vote on the floor, and the Ranking 

Member and I agreed that to the best we can, we will keep the 

Committee going and rotate. And since this is a single vote, those 

who want to go and come back, this would be the right time to do 

it. 

And Mr. Ryan, would you like to start your testimony or vote or 

whatever? 

Mr. NEAL. We share a similar background, Mr. Chairman, but— 

Mr. Neal and Mr. Ryan. You called me Mr. Ryan. 

Chairman RANGEL. I am so sorry. 

Mr. NEAL. I was just about to give him a bad time, and he left. 

[Laughter.] 

Mr. NEAL. Thanks, Mr. Chairman. I find it ironic that our 

friends on the other side all of a sudden profess this newfound interest in adding to the deficit. Their Medicare legislation in 2003 

added $500 billion to the deficit. Two point three trillion dollars of 

their tax breaks for wealthy people were added to the deficit. 

The war in Iraq is headed toward a trillion dollars added to the 

deficit, much of it borrowed money. And for them to complain today 

all of a sudden with this newfound conscience of debt spending I 

think falls by the wayside under the magnifying glass of critical 

analysis. 

Let me, if I can—because a couple of you have mentioned Massachusetts—let me give you the framework, as an architect might. 

The Massachusetts plan was proposed by a Republican Governor 

who launched a campaign for President in some measure based 

upon that plan; a legislature that is—I think there are four or five 

Republicans in the State Senate. There are 19 in the House of Representatives out of 160. But the Governor did it with a Democratic 

legislature. 

The plan was blessed by Senator Kennedy, whose credentials on 

that I think are unrivaled in the Congress. And there have been 

some bumps. I don’t think anybody would argue with that notion. 

However, it has been well met by business, labor, and advocates 

across the State. And in fact, the argument might be made, I think 

with accuracy, that the uninsured part of the population has decreased dramatically, the suggestion being that there is some skin 

in the game for everybody. 

So with that, Ms. Pollitz, could you perhaps give us some 

thoughts about that plan based on your knowledge? 


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Ms. POLLITZ. Well, John and his colleagues have studied it far 

more closely than I. 

Mr. NEAL. Let me go back to Dr. Holahan, then. 

Ms. POLLITZ. But it is a terrific success, what has been accomplished in Massachusetts. It is 3 years in the making. There are 

certainly still some growing pains. Not every problem has been 

worked out, but the State has achieved a coverage rate now of 98 

percent. 

Employer-sponsored coverage has increased. Individual responsibility, individual purchase of coverage, has increased. They have 

expanded public programs and created new subsidies for private 

coverage similar to what is in the draft bill today. People are overwhelmingly supportive of the program and are willing to do their 

part, and have really kind of stepped up to make it work as well 

as it has, which is most impressive. 

Mr. NEAL. About 97 percent of the people of Massachusetts are 

covered right now. 

Dr. Holahan, would you comment, please? 

Mr. HOLAHAN. I think Karen covered the most important 

things. I think there is a set of surveys that have been done annually that have tracked what has happened, and they continue to 

show reductions in out-of-pocket costs and burdens that families 

are facing and improvements in access on almost all measures. 

And so I think in addition to gaining coverage, I think on other 

things that you care about in terms of measuring the success of a 

program, Massachusetts has done quite well. 

In the early years, there was a jump in costs that was alarming 

to a lot of people. But a lot of that was explained by the fact that 

sicker-than-average people were the first to join; that the people 

who were fully subsidized as opposed to partially subsidized were 

the first to join; and they miscounted the number of uninsured lowincome people they are dealing with because of survey issues. 

But I think that has generally slowed down. I think the State 

does face long-run cost issues that they are going to have to wrestle 

with. But, you know, on balance it has been a big, big success. 

Mr. NEAL. Thank you. 

Dr. Gratzer, would you list Medicare as one of the maybe top 20 

legislative accomplishments in American history? 

Dr. GRATZER. I think Medicare did an enormous amount to 

help elderly Americans. 

Mr. NEAL. Would you say that it was successful? 

Dr. GRATZER. I would say that aspects of it have been enormously successful, though there are cost problems today and there 

are cost problems around reimbursement and other aspects. 

Mr. NEAL. During your medical training, did you receive any reimbursement under graduate medical education from Medicare? 

Dr. GRATZER. I actually did my training in another country, sir, 

so the answer would be no. But many of my colleagues did, absolutely. 

Mr. NEAL. Would most of your colleagues professionally have received some benefit under Medicare under GME? 

Dr. GRATZER. I would suspect all of them did. 

Mr. NEAL. I didn’t say that. I said would most of them. 

Dr. GRATZER. I suspect all of them, yes. I agree. 


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Mr. NEAL. Okay. How would you handle the GME portion of 

Medicare now? 

Dr. GRATZER. I think that is a topic for another day. And I am, 

to be blunt, not a Medicare expert. But I would suggest that both 

in the public system and the private system, we have enormous difficulties. 

We see costs rise in both systems, costs that are unsustainable. 

Mr. NEAL. I acknowledge that. My point is that Medicare has 

been transformative. It has changed the way tens of millions of 

people have lived their lives. 

Dr. GRATZER. Absolutely. 

Mr. NEAL. Overwhelmingly for the better, I think you might acknowledge. 

Dr. GRATZER. Absolutely. 

Mr. NEAL. Thank you, Mr. Chairman. 

Chairman RANGEL. I would like to leave on that positive note, 

but Doctor, you have made it clear that we haven’t impressed you 

with our health reform plan. Has there been any Republican plan 

offered to you to study that you would think could do a better job? 

Dr. GRATZER. I think there are a few proposals out there that 

I like. And I don’t think that there is one plan that necessarily excites me. I think plans, particularly bipartisan plans, that look at 

prevention and wellness excite me. 

Chairman RANGEL. Could you tell me the author? Is the Republican leadership supporting any one of these plans that you find to 

your liking? 

Mr. NEAL. There are aspects of different plans I like. I mean, 

Congressman Ryan’s plan about a tax credit I think has some 

worth in it. I think on the Senate side, Senators Bennett and 

Wyden have some exciting ideas that they are conveying. 

Chairman RANGEL. Well, with all due respect to the Senate, I 

really was trying to think of the House of Representatives because 

right now we don’t have much competing in terms of a health program before us, even though we are getting more than our share 

of criticism. 

So since you and I are from New York, if in the course of your 

thinking that you think there is something that we could improve 

upon, I look forward to meeting with you in New York and see 

what we could do. 

Dr. GRATZER. I would be excited to draft something with you. 

But as I suggested before, I think we need some policy reform 

around health, not just health care. I think we need some regulatory reform to increase competition on insurance companies. And 

I also think we need some tax reform that doesn’t—a system that 

won’t discriminate against the self-employed and the unemployed. 

Chairman RANGEL. That goes unchallenged. The thing is, how 

do we get together and do it? 

Mr. Linder, thank you so much for your patience, and I welcome 

the opportunity to allow you to ask questions. 

Mr. LINDER. Thank you, Mr. Chairman. 

Ms. Pollitz, you referred to the Massachusetts model being quite 

a success. Still have some problems to be worked out. The States’ 

overall costs on health programs have increased 42 percent since 


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2006. For an individual earning $31,213, the cheapest plan in Massachusetts can be $9,800 in premiums and out-of-pocket costs. 

The longest wait times in Boston to see a physician, almost 50 

days. Double the costs of—double the time of Philadelphia. The 

government-run Medicaid plan, MassHealth, denied the highest 

share of medical claims in the State, four times more than the private plans denied. 

It has not reduced the rate of adults seeking non-emergency care 

in an emergency room. Both before and after reform, 15 percent of 

adults and 23 percent of low-income adults sought care in an emergency department. 

Is that a success story? 

Ms. POLLITZ. I think, Congressman, Massachusetts has been a 

success story and they clearly have not solved all the problems. 

Massachusetts is unique, I think, from most other States. They 

have always had, even prior to reform, very, very high costs. 

They have always had a particular shortage, I think, of primary 

care physicians. Many of the best medical schools in the country 

are located in Massachusetts, in Boston, and many of the best medical schools around the country don’t even have a department of 

family medicine. They are just kind of too good to train primary 

care physicians. 

So there have been some structural problems that are throughout the Nation that have been particularly intense in the State of 

Massachusetts for a long time, even leading up to reform. And they 

still have not all been addressed. 

I was on a panel yesterday with someone from the Commonwealth Connector, who talked about how tackling the cost problem 

is particularly difficult in that State, that the Boston area in particular is one where there has been not only a high concentration 

of insurers but also a very high concentration of providers. 

And the competition between, you know, concentrated providers 

and insurers you would think would be kind of, you know, King 

Kong vs. Godzilla and someone would be lying on the ground at the 

end, but that is not the case. 

Instead, the high prices are demanded by the providers and just 

passed through by the insurers. And they haven’t yet been able to 

get a handle on that. And what she testified yield was that if there 

were a public plan option that were available in addition to the mix 

of private plan options that they have made available, that that 

might begin to change. 

Mr. LINDER. Let me comment just briefly. But first of all, Dr. 

Gratzer, do you have a comment on that? 

Dr. GRATZER. I just want to add, you know, if you are suggesting that costs haven’t been contained in Massachusetts, even 

she has acknowledged that. I will just throw out a few figures in 

terms of the rise in health insurance premiums between 2007 and 

2009. 

In Massachusetts, 7.4 percent, 2007; 8 to 12 percent, 2008; and 

9 percent is forecasted for this year. Outside of Massachusetts, 6.1 

percent, 4.7 percent, 6.4 percent for those same years. 

I would point out for a family of four in Massachusetts, a health 

insurance plan now costs almost $17,000. Nationally, it is closer to 


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$12,500. Massachusetts has in no way, shape, or form contained 

costs. 

There are successes there, particularly, I think, for the self-employed and those in the small business coverage pool. But yes, costs 

have just continued to rise. 

Mr. LINDER. Thank you. I want to comment on the public plans. 

We have had testimony before this Committee in the past that the 

typical small business spends about 12 percent of their payroll on 

health care costs. Some of the bigger companies with Cadillac plans 

spend as much as 14 to 18 percent of their payroll. 

We hear a lot of talk about choice, options. And the President 

says, if you like your program today, you know you will have to 

give it up. But we don’t have—our citizens don’t make these 

choices. Their employers do. And if the employer can pay 8 percent 

instead of 14 percent, my guess is he is going to put the people 

on—in fact, that is what they tell us. They will move their people 

to the public plan, and there will be no choices left at all. 

I don’t know why this is considered such a good option. Dr. 

Gratzer. 

Dr. GRATZER. I agree. 

Mr. LINDER. Thank you all. Thank you, Mr. Chairman. 

Chairman RANGEL. Thank you. 

The Chair recognizes Mr. Becerra for 5 minutes. 

Mr. BECERRA. Thank you, Mr. Chairman. And I don’t know if 

these charts are ready or not, Mr. Chairman, so I think I will just 

quickly run through them. 

But in something Dr. Gratzer said earlier, I wanted to just give 

him some food for thought. I am sure he is aware of this already 

because he mentioned Canada and Great Britain. 

I am looking at a chart of the infant mortality rates of the leading industrialized countries of the world. And as I look at this 

chart—I don’t know if we have it available, but this, CRS–54, if it 

could be put up if we happen to have it; I don’t know if we do— 

the industrialized country with the highest infant mortality rate of 

those industrialized rates, Turkey. 

After Turkey, Mexico. After Mexico and Turkey is the United 

States. Well above Canada, well above the United Kingdom in 

terms of the rates of infant mortality, in other words, children, babies, who die early. So our infant mortality rate is still very high 

compared to the two countries you rail against, Canada and Great 

Britain. 

When you take a look at the deaths from medical errors per 

100,000 people in the country, the countries with the worst record 

of having people die from medical errors are Greece, Australia, and 

in third place, the United States, well above, once again, the 

United Kingdom and Canada. 

And so once again, we seem to be doing worse than Canada and 

Great Britain when it comes to the deaths that occur in this country simply as a result of medical errors. 

When you take a look at mortality rates, how long do people in 

our countries, respective countries, live, once again comparing 

these industrialized countries, you take a look at the worst mortality rate—or, excuse me, life expectancy rate of people. 


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Turkey is least, has the lowest rate. So their average life expectancy at birth is 71 years. There you see the United States at 771⁄2

years. Guess what? Once again, the United Kingdom does better in 

letting people live longer than we do. And guess what? So does 

Canada. And so—way up here. Canada is way up here. The U.S. 

is way down here. And so perhaps there are reasons to rail against 

what Canada and Great Britain do. 

But I have to tell you, if you want to live longer, you want to 

have a better chance of living when you first are born, or you want 

to make sure you don’t die from some basic medical error, you may 

be better off living in some of these other countries. 

That is why, rather than come with a Canadian model or a Great 

Britain model for American health care, we are coming up with a 

uniquely American solution to that, which offers choice. 

To the issue of choice, I guess it is in the terms of the private 

for-profit health insurance companies because you seem to be saying it is good to have competition so long as it is only on the terms 

that the private insurance companies wish to have, but not to have 

it on an equal basis business. 

Because we talk about the fact that there are price controls. 

Medicare, you said, Dr. Gratzer, is price control. I would tell you 

that anybody who has a private health insurance company insurance policy cannot go in and negotiate with that insurance company on what they wish to pay for a doctor or hospital. There are 

controls that are put in place by those insurance companies that 

doctors have to accept, hospitals have to accept, and certainly the 

consumers who asked to have those insurance policies. 

So I guess it is all in the definition, as I think the Chairman 

tried to say with regard to the definition of what is fair. I think 

most of us are going to try to make it so that it is not you. It is 

not me. It is certainly not a private health insurance company that 

is there for profit. And it shouldn’t be the government who determines your choice as a consumer. It should be the consumer’s 

choice. 

So if you have a lot of different options where the consumer 

chooses which plan to select, then it makes no difference. If you 

have an overly burdensome government plan, as you would like to 

describe it, or if you have a very abusive private health insurance 

plan, consumers won’t have to go in that direction. They can go 

anywhere they want. 

And so no one need fear being dumped, as some would say, into 

any particular plan because it is not anyone’s choice where to send 

that consumer but the consumer’s. That is hopefully what this 

unique American solution to health care will provide us. 

But Dr. Holahan, I wanted to see if I could ask you one question. 

With regard to this choice, can you have real choice when you have 

a private sector insurance system where in most geographical areas 

of the country there is very little choice for consumers because 

most areas of the country only have one or two health insurance 

providers to begin with that offer coverage to Americans. 

And can you really have choice if you shackle, as I think Dr. 

Gratzer would do to the public health insurance plan, the opportunity to compete on a level basis, no advantage to the public 

health insurance option? 


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Mr. HOLAHAN. I think that is a good point. In many parts of 

this country, there really is only one choice. 

Chairman RANGEL. Doctor, I hope you might be able to submit 

your answer in writing to the Committee. The gentleman from 

California’s time has expired, and we have a very long, long day 

ahead of us. 

The Chair would like to recognize Ms. Brown-Waite from Florida 

for 5 minutes. 

Ms. BROWN-WAITE. Thank you very much, Mr. Chairman, and 

I thank the panelists for being here. 

When we look at the Ways and Means Committee, you would 

think that we would be looking at ways and means to pay for this, 

but when subtitle D says, ‘‘to be provided,’’ I just wanted to list 

some of the suggestions thus far and get your reaction to them, if 

anyone on the panel wants to jump in. One is tax your employer 

for providing health insurance; two, tax your employer for not providing health insurance, tax you for owning health insurance, tax 

you for not owning health insurance, tax you for spending your 

money on health, tax you for saving your money for future healthrelated expenditures, tax you for drinking soda and other sweetened beverages, tax you for having an alcoholic beverage, tax you 

for making charitable contributions, tax mortgage interest payments, increase personal income taxes, energy, pollution tax as a 

part of the cap and trade taxes, increase taxes on American companies doing business overseas, increase taxes on domestic oil and 

gas production, raise taxes on oil or natural gas obtained from the 

Gulf of Mexico, raise taxes on domestic oil refineries, raise taxes on 

drilling equipment, raise taxes on prescription drugs, increase 

taxes on dividend income, and just last night I put—I have about 

eight more. I will not go through them, but I can just tell you that 

Americans right now in this economy are very concerned. Businesses in most of our districts are having their lines of credit 

called, and when you are talking about this kind of additional tax 

to cover this kind of health care when estimates are that if this bill 

is passed, about 120 million Americans will lose their health care, 

I do not see where this is a win/win situation. 

I would ask—and I apologize, I do not—Ms. Pollitz, I will just go 

from one end of the panel to the other end because I obviously will 

run out of time, I would like to have your reaction to this? 

Ms. POLLITZ. Actually, if you would not mind, Congresswoman, 

I would defer to Dr. Holahan. I know they are doing some research 

on options for funding health care. 

Ms. BROWN-WAITE. Okay. 

Mr. HOLAHAN. Well, that was a pretty amazing list. I think 

some of those things have to be on the table. I think that what we 

call sin taxes, I think a cap probably starting at least at a high 

level on the employer exclusion and some of the other things that 

you mentioned. And certainly we should exploit all the possibilities 

for savings that we can, including trying to reform the way we deal 

with chronic illness. 

I just want to make a point because the issue of the cost of reform has come up several times. There is a huge cost if you do 

nothing. We published a paper about a month ago called, ‘‘Health 

Reform: The Cost of Failure.’’ If there is nothing—no reform, the 


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number of uninsured could go up into the mid-60’s, 65 million 

roughly in the worst case. The employer-sponsored coverage will 

drop quite a bit. The number of people going on Medicaid will expand, that is a cost to government. The number of uninsured will 

mean more uncompensated care that will have to be financed. 

Ms. BROWN-WAITE. Sir, did you miss the part about 120 million will lose their coverage under the proposed plan? 

Mr. HOLAHAN. No, that is not possibly right. That is ridiculous. 

Ms. BROWN-WAITE. That is not possibly right? 

Mr. HOLAHAN. No, it is ridiculous. 

Ms. BROWN-WAITE. You think it is ridiculous? Well, sir, I really think that employers will be dropping their plan because the 8 

percent may be—— 

Mr. HOLAHAN. But they offer it now and they pay no penalty, 

right? 

Ms. BROWN-WAITE. If they offer it now, there is still a question 

about if someone is covered by the spouse’s plan and also the percent that they cover of the employee’s plan. So I think we need to 

be very careful where we go with this. 

Dr. Gratzer, I would like to hear your comments? 

Dr. GRATZER. With the 120 million figure, by the way, that you 

just quoted is not something, as you know, out of a right-wing 

think tank or plucked out of thin air but was a Lewin Group analysis. 

I would also point out that Professor Jacob Hacker, who really 

came up with this idea of a public plan auction, he called it Medicare Plus, as you will recall, in fact had worked with the Lewin 

Group about 10 years or so ago as he designed this specifically to 

pluck more than 100 million people out of the private insurance 

market. So to suggest that that estimate is wrong, it is designed 

to compete with and overshadow eventually the private system. 

Now, as for your list of taxes, I would simply say that we are all 

concerned about health costs. It is curious how much more we need 

to spend and how much more we need to tax to get those costs 

under control. Needless to say, I share your bias, we need a more 

focused plan, a plan that directly helps the uninsured who need 

help, and a more innovative plan, for instance with uncompensated 

care, trying to get over to the States to let them innovate. But certainly spending so much money that even Paul Klugman says, 

‘‘Well, it is not as much money as the Bush tax cuts,’’ is hardly a 

great plan for us to endorse. 

Ms. BROWN-WAITE. Thank you. I see my time has elapsed. 

With that, I yield back my time. 

Chairman RANGEL. The Chair recognizes Lloyd Doggett of 

Texas to inquire. 

Mr. DOGGETT. Thank you, Mr. Chairman. Just picking up right 

there, we are spending over $2 trillion on a health care system now 

that leaves many Americans out, and we are proposing to add, in 

order to ensure more Americans are covered, another $100 billion 

a year to that system and to finance much of that by squeezing 

some of the inefficiencies out of the existing system. That is hardly 

spending gone wild. 

The notion that compassion is a distinguishing characteristic of 

the American health care system is a fantasy. For those people who 


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lack insurance, they do not find much compassion in our current 

system. There is an estimate that 22,000 people died in America 

last year because they did not have health insurance. The notion 

that delay would be a feature of our system because of the changes 

we propose in this legislation ignores the fact that delay is a major 

characteristic of the current system. 

The American Cancer Society has estimated that an individual 

who has cancer and no insurance has a 60 percent greater chance 

of dying in America today because of the ‘‘compassion’’ that is in 

the American health care system. 

And, of course, one of the hopes that we have with a public plan 

is to squeeze some of the inefficiency out of that system, which has 

more people in the American health care system today who are not 

providing health care themselves directly than those who are providing health care and a significant number of people who spend 

every waking hour of their day trying to find a way to deny health 

care to someone else. 

Recently, we had testimony here in Congress that three major insurance companies continue to engage in the practice of recision, 

a practice where people who are paying their health insurance premiums incur substantial bills and find out that their insurance 

company has dropped them. That is ‘‘compassion’’ in the American 

system. 

As far as independence is concerned, I am reminded of a conversation I had out in south Austin with my constituent, Laura 

Stager, who said, ‘‘My husband is entrepreneurial and wants to 

own a business, but he tells me it would be irresponsible for him 

to form his own company because we would lose our health insurance.’’ That is the independence of forcing people to stay where 

they have insurance even though that may not be the most productive use of their resources and their talents. 

I had another constituent, Mark Seefgan, talk to me about what 

is happening to his small business and the difficulty of dealing 

with a huge bureaucracy within the insurance industry that seems 

to be bigger than anyone could imagine in Canada or anywhere 

else in terms of the challenges to a small business and how it is 

hard to explain to his employees that they just got a $200 increase 

in their pay but Blue Cross took all of it in increased health insurance premiums. 

Are these problems, Ms. Pollitz, that my constituents face in 

Austin, Texas and in other parts, do you find the same kind of 

problems in other parts of the country? 

Ms. POLLITZ. Yes, sir, and that is how the private insurance 

market competes. That is not compassion, that is competition in 

the private insurance market. I was at that hearing on rescission 

last week, and just yesterday, the Governor of Connecticut vetoed 

a bill that was passed in her State legislature to limit the rescission practice. And the reason she vetoed it was she said that would 

raise premiums, and so we need to let that practice continue because that is what keeps health insurance cheap. 

Clearly, we cannot continue to let health insurance compete in 

that way. There has been a lot of talk about a level playing field, 

we do not want to be on that playing field anymore. In that playing 

field, the house wins every time. And we need to compete on the 


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basis of compassion. We need to put a plan in place that is oriented 

toward patients and not profits and stimulate the market to compete in that direction. 

Mr. DOGGETT. Dr. Holahan, if we just pour more money into 

the system that we have now, that permits rescission and this kind 

of activity, and do not have an effective, meaningful public plan, 

will we really have any reform of our health care system at all? 

Mr. HOLAHAN. I think you could have some but the kind of insurance reforms that this bill calls for, it would improve things a 

great deal. I think the bigger problem is what I talk about in my 

testimony, the lack of true competition. And if you go back to the 

Massachusetts problem, the costs are growing at levels that they 

are not going to be able to sustain but it is because of a very dominant hospital system, a very dominant insurer, and the way they 

negotiate with each other. And that problem exists around this 

country. 

Mr. DOGGETT. Well, what is it with all these people who are 

always here telling us in the rhetoric, ‘‘Government cannot do anything efficiently, government is broken,’’ that they fear something 

like a Medicare plan that does not pay Medicare rates as one alternative to compete with these private insurance companies? 

Mr. HOLAHAN. I think it fails typically to recognize what really 

goes on in the market. And the idea that we should not have price 

controls because the private system can negotiate all this, that is 

what we have today. If you are in one market and you are a strong 

insurer, and there are a lot of hospitals with very little leverage, 

you get one outcome from those negotiations. If the opposite is true, 

that you have a strong hospital and many insurers or an insurer 

without enough leverage, you get a very different outcome. Negotiations simply are not working unfortunately. As an economist, I 

would prefer to have the market work. No one can say that these 

markets meet the conditions that you expect to get, the efficiency 

that you would expect to get out of competitive markets. It just 

does not exist. 

Mr. DOGGETT. Thank you. 

Chairman RANGEL. Thank you. The Chair recognizes Mr. Davis 

of Kentucky. 

Mr. DAVIS OF KENTUCKY. Thank you, Mr. Chairman. Just 

one comment that Dr. Young made before going on with the questions, he made the statement that the only way to control cost is 

a single payer system, well, the mathematics simply do not work 

on that. We have proven that in defense contracting here in the 

United States, that the single contractor will ultimately drive costs 

and overhead and likewise the former—our former opponents of the 

Cold War learned that single State systems did not tend to deliver 

quality, they ended up limiting capacity. 

I am very concerned, and what I think many of us are really 

struggling with here today is that we do not have the facts on this 

bill, and we have been told this will be likely our only hearing. And 

we are talking about entirely changing the framework of health 

care in America with no debate of any substance other than we 

think this is great. 

This appears to be reform in name only because the actual delivery cost drivers are not being touched at all. We are not going to 


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reform the CMS process and dramatically compress it, which we 

could do to improve quality. We are not touching true insurance reform on the process for how pooling is controlled. And liability is 

not on the table at all, which drives a huge portion of costs. 

Do any of you have any idea how much this could cost, even an 

approximate number, a range? Ultimately, we have to pay for this, 

nothing is free, and since you are not going to actually tamper with 

the system because you are convinced that the CMS is to make 

Medicare basically the dominant market player here, how are we 

going to control costs? We are mandating increases in taxes, and 

we are mandating reduction in payment to providers without dealing with the core engine. How much will it cost? 

Mr. HOLAHAN. Are you asking us to make a cost prediction? 

Mr. DAVIS OF KENTUCKY. Yes, just as a group. You all have 

advocated this, I am just kind of curious how you actually pay for 

it? I think the talk of compassion also has to be done with realism. 

In Greek it means to ‘‘suffer with.’’ And I think that if we are going 

to suffer with and come alongside the thousands of people, who 

many of us help in our offices, we have to get down to a legitimate 

understanding of the nature of the cost. 

Dr. YOUNG. Well, I will take a percent at that. Presently, we 

have about a 38 to 40 percent add-on by the bureaucratic practices 

of the private insurance that add nothing to the health care of the 

people, and indeed I think aggravates their problem. Recovering 

that money in the single payer system would be a giant step forward for cutting costs. 

I would like to add to the list the Congressmen and women have 

made, that we have two big increases in health care needs and 

costs in the form of aging of the population and increasing bio-technical skills, which are costly. 

Mr. DAVIS OF KENTUCKY. Okay, I would like to reclaim my 

time, Doctor, just because it is limited today. Still nobody has actually answered the question with a number, and I believe the reason 

we cannot answer the question with a number is there are no true 

metrics that are framed. All of this at core has been wrapped 

around the existing government system. Do any of you know how 

many more Americans will be covered under this bill when you actually factor in the millions estimated to lose employer-sponsored 

coverage? Are there any numbers there? 

Ms. POLLITZ. Mr. Davis, I am sorry, I am not a budget estimator and I cannot answer those questions, but I would suggest 

that there are very specific metrics in this bill and that those 

should be—when the CBO finishes its work, they should be able to 

give you—— 

Mr. DAVIS OF KENTUCKY. The initial CBO scoring on a sister 

piece of legislation was well over $1 trillion for about the first quarter of the bill. I am just concerned that you all were propounding 

the benefits of this without laying out a true cost before the American people. And I know many in my district that would either lose 

coverage or not be covered in the language that this is written. 

Without the basic facts, how can you come here today to support 

a bill and tell us it is going to lower costs and increase access when 

those fundamental answers are not there? That would be unacceptable in a business system. It would be unacceptable from any type 


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of appropriation from a contracting standpoint too because of the 

precision that is required in those areas. 

Dr. Gratzer, do you have any thoughts on this? 

Dr. GRATZER. Well, if you are advocating a CBO scoring before 

you vote on it, I am on your side. I think we have to be very cautious about this. I think that we can all agree there are problems 

with American health care. On the other hand, (a) I have significant issues with the way they are going about reforming it. It is 

not just that the government plan would be price controlled, but I 

do not see government’s role as providing competition in general to 

the private sector. I don’t particularly like my cell phone, but I do 

not think that the goal then should be or the proposal should be 

that the Federal Government create a new cell phone company to 

compete with existing providers. 

But, second, I think cost is a huge factor. And if you look at some 

of the preliminary scoring, we are talking about well over $1 trillion and still we would have uninsured and still Medicare and 

Medicaid remain fundamentally the same. 

Mr. DAVIS OF KENTUCKY. My fear, Mr. Chairman, is that this 

legislation is actually going to hurt the most those who it is designed to help based on the economic realities of this. And with 

that, I yield back my time. 

Chairman RANGEL. Thank you. But I would just like to make 

it clear, and I think everyone is in accord, you cannot say how 

much it is going to take to pay for it until we have the Congressional Budget Office give us the numbers. And then we will have 

to determine how we are going to pay for it, and we are not prepared to do it for now. We are not going to ask you to vote for a 

bill unless it is fully paid for. 

Mr. DAVIS OF KENTUCKY. Mr. Chairman, may I respond? 

Chairman RANGEL. Yes. 

Mr. DAVIS OF KENTUCKY. Just respectfully I do not understand how we can do a capital plan for the country without actually 

understanding the magnitude of the capital required before we 

begin to set priorities by effectively approving legislation and then 

determining how to pay for it afterwards. 

Chairman RANGEL. Your questions are right on point, but there 

is no bill before us to mark up. And we will have answers for you 

when we ask for your vote. Right now, we are just trying to make 

certain that we perfect this. We would not dare ask you to support 

something without knowing how we are going to pay for it but this 

is not the forum. 

The Chair recognizes the gentlemen from Dakota, Earl Pomeroy—North Dakota. 

Mr. POMEROY. Thank you, Mr. Chairman. The difficulty of conducting even this hearing in the middle of all these delayed votes 

I think is reflective of the fact that the minority participation in 

trying to build a health reform package is more focused on delay 

and disruption rather than making some meaningful contribution. 

I am still frustrated that our meeting last week was canceled, the 

joint bipartisan meeting to discuss the architecture of the plan, because we were on the floor with procedural votes. 

Mr. BOUSTANY. Will the gentleman yield? 


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Mr. POMEROY. No, I will not yield. I have 5 minutes, and I 

have all kinds of votes going on, I have to run and vote, so I have 

to get my question in. 

I think there is a contribution, I would say this to the good doctor who was just seeking time, we want to make this thing work. 

And we believe that the status quo has gotten out of control cost 

inflation that is wrecking our health care system and threatening 

our Federal budget. So especially I would be interested in ideas, 

referenced for example by my friend, Congressman Davis, in his 

questions, he alluded briefly to CMS payment reform. So if you 

have ideas about cost containment you want to put on the table, 

whether or not you are for the final bill, I think these are legitimate ideas we need to study carefully and include where they have 

merit. And that would be a much better way to proceed than simply throwing the usual lines of attack that this is on the one hand 

going to cost too much, on the other hand, it is going to do too little, and we are going to have rationing somewhere in between. This 

is not helpful. Let’s work together and build a good deal, and let’s 

focus, among other things, on system reform that contains costs. I 

believe that that is absolutely critical. 

Now, another thing my friend Mr. Davis said was he thinks this 

bill is going to do too little to help those who need the help the 

worst. On this one, I believe that he is completely mistaken. The 

strength of the bill is going to be getting coverage to those who do 

not have coverage, 45 million there, and assisting at least as many, 

and maybe even more, that are struggling mightily to keep their 

present coverage in place in the face of rapidly rising costs. 

One of the strategies by which premiums have been paid is to 

shrink basically the coverage you are buying. And so it is interesting that recent bankruptcy statistics show the high number of 

bankruptcies caused by medical costs and the high number of people in that bankrupt situation that had insurance but the co-pays, 

the deductibles, the out-of-pockets in the end proved too much to 

handle. 

And so as a former insurance commissioner myself, I have seen 

you paying more and more for less and less, more and more for less 

and less and the health security of everybody, those with insurance 

and without insurance, has been placed squarely at risk. 

Now, one of the things I believe Congress has done when talking 

about health reform over the years is we focus on the intermediary, 

the insurance layer, and we do not get right down to cost drivers. 

And I believe we need to spend a lot of time dealing with cost drivers. 

Dr. Holahan, if I understand your testimony, it is that the public 

plan option is a new competitive element in the marketplace, not 

just to offer another insurance alternative, but maybe they will be 

able to try some things that more effectively give value to the consumers than the conventional options. I think those that are opposing a public plan option have to explain to taxpayers why we are 

going to put a major investment into the system, a system that has 

out-of-control cost inflation, and essentially not do anything relative to trying to structurally add some opportunities for innovation. 

Would you respond on that point? 


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Mr. HOLAHAN. Well, I think I could not say it any better than 

you did, I totally agree with that. I think it is an opportunity not 

only to gain control over the costs of care, but to innovate, through 

a lot of payment and delivery system reform, the development of 

medical homes. 

Mr. POMEROY. There is a final point I want to get in before my 

time elapses. I will ask Ms. Pollitz this one. There has been some 

discussion about the level of delegation between Congress and the 

executive branch relative to running, for example, a Medicare program relative to payment reforms. So when my friend on the other 

side of the aisle talks about CMS payment reforms, possibly he is 

contemplating the idea that there ought to be delegation of authority to the executive branch, to CMS, relative to being able to initiate payment reforms. What are your thoughts on that one? 

Ms. POLLITZ. I’m sorry, sir, I cannot really comment on that. 

Mr. POMEROY. You are a long-term health expert with experience in the executive branch yourself. I am surprised that you cannot comment. 

Ms. POLLITZ. I know there is interest in trying to remove from 

the political process some of these important decisions so that they 

are made on a more scientific basis, and I think there may be some 

value in trying to accomplish that. 

Mr. POMEROY. Thank you. 

Chairman RANGEL. Mr. Boustany. 

Mr. BOUSTANY. Thank you, Mr. Chairman. Dr. Gratzer, I am 

a cardiac-thoracic surgeon who has 20 years experience, clinical experience dealing with patients before coming to Congress, and I appreciate your comments earlier about quality and innovation, 

which have been really unique in medical history worldwide. What 

we have seen in this country has been tremendous development. 

The question is how do we most efficiently use all that. 

I think there are a couple of things missing in this debate. First 

of all, the basic things we ought to be talking about are access to 

a physician, a doctor/patient relationship that is actually meaningful, that focuses on prevention and screening built on trust. And, 

second, the cost issue. But what has been missing in this debate 

are the real drivers of cost, and it is at the level of the doctor/patient relationship because you have physician behavior and you 

have patient behavior. And this bill does not do much at all to address either one of those. And, in fact, I would submit that the bill, 

there are elements of this bill that will make that worse. 

Would you like to comment? 

Dr. GRATZER. So you were a surgeon? 

Mr. BOUSTANY. Yes. 

Dr. GRATZER. I am a psychiatrist. We have nothing in common. 

Look, I could not agree more with you. 

Mr. BOUSTANY. Compassion. 

Dr. GRATZER. Look, there are certain things we can agree on 

no matter whether you are a Republican or Democrat or what your 

political affiliation. One is that the doctor/patient relationship 

should always be preserved, that it is the building block of the 

modern health care system and should always be preserved within 

any reform package. But I also think you would agree that we 

spend in America and do not always get results. 


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Again, I am not arguing that some of the medical technology has 

not been extraordinary. You mention cardiac-thoracic, as you know, 

death by cardiovascular disease has plummeted by two-thirds in 

the last 60 years. And we have seen innovation time and time and 

time again. But just because you go to a doctor and there are new 

drugs do not necessarily mean that they are better drugs. Just because you get a procedure does not mean you needed it or it was 

well done. I think that goes back to some of the things that Peter 

Orszag and others in the White House are talking about that I 

agree with, that we need better value. There is a smart way of 

doing that and a bad way of doing it. 

Mr. BOUSTANY. I agree and that is what is missing in the debate. 

Dr. GRATZER. Absolutely. 

Mr. BOUSTANY. Because I think we are still at the 30,000 foot 

level. If I can reclaim my time for a moment, I was listening to the 

testimony very carefully and, Ms. Pollitz, you talked about a government controlling costs. Does Medicare control cost? 

Ms. POLLITZ. To some extent, yes. 

Mr. BOUSTANY. It does not do a very good job, does it? 

Ms. POLLITZ. Well, I think Medicare cost growth in most years 

has been at or below that of the growth of private insurance. 

Mr. BOUSTANY. As my colleague from Wisconsin, Mr. Ryan, 

pointed out, the looming insolvency of the Medicare Trust Fund. 

We have serious Medicare problems that we need to address. And 

so I think to pose a government option at a time when we are dealing with existing government programs is at the very least problematic. 

A question, let’s see, for Dr. Holahan. You mentioned Medicare 

rates in the government plan. Do you believe that the Medicare 

rate structure has caused distortions in the entire reimbursement 

structure given that Medicare rates most of the time do not cover 

cost of basic goods and services? And do you advocate price controls 

extending beyond the provider side to the suppliers of medical technology and devices? 

Mr. HOLAHAN. Well, that is what we do today and the government sets them, but by and large there—— 

Mr. BOUSTANY. So you do agree with price controls and you 

want to see it extended into the—— 

Mr. HOLAHAN. Yes, I do not think you really have much alternative in the current market so it will be some—— 

Mr. BOUSTANY. Thank you. 

Mr. HOLAHAN. But if you had—— 

Mr. BOUSTANY. I appreciate your answer, thank you. Thank 

you, sir. I have a question now for Dr. Young. Dr. Young, you 

talked about a single payer using ‘‘inherent cost control measures.’’ 

Dr. YOUNG. Yes. 

Mr. BOUSTANY. Explain what that means? 

Dr. YOUNG. Well, I tried to dialogue on that when I described 

the single payer giving you a complete record of the pattern of behavior of doctors. 

Mr. BOUSTANY. So, in other words, you are having a bureaucrat make a medical decision and in fact rationing care? 


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Dr. YOUNG. I don’t think that is what I said. I described the 

fact that you have the data that allow you to see patterns of excess 

or under service, and that we certainly need oversight. That is the 

great tradition of medicine. 

Mr. BOUSTANY. Has Medicare done a very good job of that because we have Medicare data? 

Dr. YOUNG. I think it has done a terrific job. I think it is the 

far best of the insurers in this country. 

Mr. BOUSTANY. Could you comment on the use of the Society 

of Thoracic Surgeon’s database in cardiovascular disease? 

Dr. YOUNG. I cannot help you, I am not acquainted with that. 

Mr. BOUSTANY. I would think as someone who is interested in 

data and using best practices, this database has been outstanding. 

It was developed in 1989 and has gone a long way toward the improvement in care in cardiovascular disease. I suggest you look at 

it. 

I see that my time is up. I thank the Chairman. 

Mr. STARK [Presiding]. Mr. Thompson, would you like to inquire? 

Mr. THOMPSON. Thank you, Mr. Chairman. And thanks for 

holding today’s hearing and for your effort to make sure that this 

process has been open, and that we are able to work through this 

to address all these issues. I just hope that the ongoing procedural 

votes that we are taking do not further disrupt our efforts here. 

I want to first point out there has been a lot of talk about this 

independent, nonpartisan study that associates some pretty high 

prices with doing what most Americans believe we need to do, and 

that is reform health care. And I think it is important to note for 

the record that this HSI Network that is supposed to be nonpartisan and independent is actually a group that is—one of the 

participants is the modeler for Senator McCain’s health care and 

his work. And it has been pointed out in the press that some of 

what they said had not always been based in fact. There was one 

quote that I found interesting, ‘‘Every candidate should say that 

these numbers were produced by my experts, and they are my best 

estimates but they are not exact.’’ 

And if you look at what this same group, this HSI, did in regard 

to modeling the health bill over in the Senate. They were four 

times higher than what the CBO came in with. So I think we need 

to know where these numbers are coming from. 

And as they relate to our tri-committee effort, I think it is important also to note that they said that the analysis has no offsets, 

their analysis, there are no offsets in this discussion draft. And 

that is just patently false. We know that to be the case. And so if 

they miss that, it is hard telling what else they missed. 

Mr. CAMP. Would the gentleman yield for just a moment? 

Mr. THOMPSON. On a positive note—— 

Mr. CAMP. Would the gentleman yield for just 30 seconds? 

Mr. THOMPSON. I want to finish my thought here, then I will 

get back to my other issues there. On a positive note, they did say 

one thing that was interesting, and I will quote. They said, ‘‘In contrast to the Senate version of this bill, the House version is more 

fiscally prudent and effective.’’ Yes, for 30—for 15 seconds. 


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Mr. CAMP. Just to say that CBO did not score the full Kennedy bill, so the $1 trillion is really not the final number. I just wanted 

to clarify the record on that. We are not comparing apples to apples 

here. 

Mr. THOMPSON. Reclaiming my time, and the numbers that we 

are being told are nonpartisan and independent are not real numbers at all, so it is a very, very biased study. 

I want to get some policy changes that I believe will lead us to 

better health care and at the same time drive down prices. I would 

like to get the experts’ opinion on this. I am one who believes that 

an expansion of technology can really be beneficial in all this and 

think that there is a lot more in the area of telehealth that we 

could be doing that would provide better outcomes and drive down 

the cost. And there are a couple of examples that I have seen in 

my district alone. UC–Davis does a virtual tumor board, and they 

have just example after example of cases where they have helped 

people and driven down the cost. They talk about one where they 

were able to confer with a local team and diagnose a patient and 

a treatment plan for a patient who was in an underserved area, 

doing this through telemedicine. And they were able to treat it in 

a non-invasive way at a much lower cost. And, ironically, that work 

is not reimburseable under the Medicare provisions that we have 

now. 

I have another case, I could just go on and on and on with examples of this, but I think it is an area where we can really pick up 

some costs and do better health care. And I would like to hear your 

impression of that and if you think that we should really expand 

the provisions for telehealth in this bill? We can start with Ms. 

Pollitz. 

Ms. POLLITZ. I am not an expert on this area, but I don’t believe a lot of private insurance health insurance would pay for that 

either. And this kind of consulting between physicians, whether it 

is face to face or on the phone or telehealth, I think is very important in patient coordination of care. And that we do need to find 

ways to support that and reimburse it. 

Mr. THOMPSON. Anyone else care to? 

Mr. HOLAHAN. It seems to me that it is a very good idea, but 

you really—you need payment reforms that bundle payments that 

can include that kind of contact. 

Mr. THOMPSON. Well, these are not even included in many, 

many cases. And in underserved areas, there is some expansion in 

rural but urban underserved areas do not get the attention. And 

underserved is underserved, it does not matter where they are. 

And these are people who are going without health care or were 

provided at a much higher price. 

Mr. HOLAHAN. I agree with you. 

Dr. GRATZER. Look, there is a role for other things as well. I 

do not think necessarily everyone needs to see a doctor. There is 

a greater role for nurses and nurse practitioners. I really think in 

the United States we have done ourselves an enormous disservice 

by not tapping more in terms of information technology. 

You know, in Denmark—Denmark, everyone’s health record who 

wants it is put online. You can look up your own cholesterol and 

track it over time. I think if that is good enough for the Danes, it 


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ought to be good enough for the Americans. I think it also would 

address to a small extent Mr. Becerra’s comment about the high 

level of medical errors we have in the United States. So much technology if you go to Wal-Mart and you buy your kid a plastic lawnmower but so little technology in terms of your health records. You 

can see your doctor right across the street from a hospital, and go 

to the hospital because you are feeling worse, the ER, and no one 

would know any blood test that had been done. It is just absurd. 

So I agree with your point. 

Mr. THOMPSON. Thank you. 

Mr. STARK. Mr. Nunes, would you like to inquire? 

Mr. NUNES. Yes, thank you, Mr. Chairman. I want to thank the 

panel for being here today. Ms. Pollitz, Dr. Holahan and Dr. Young, 

the three of you support the underlying bill, right, even though—— 

Dr. YOUNG. No. 

Mr. NUNES. Oh, you do not? Dr. Young, you do not support the 

bill? 

Dr. YOUNG. That is right. 

Mr. NUNES. Okay, but the first two of you, you do support the 

bill? 

Ms. POLLITZ. I think it is a very good bill and it could use some 

additional improvements. 

Mr. NUNES. Okay, like finishing the bill, you guys have seen 

this, one of the parts not finished yet? I am wondering if that is— 

is that the strategy is to get 50 votes in the Senate and then let 

the Administration fill in the bill, do you guys know? 

Ms. POLLITZ. I cannot comment on that. 

Mr. NUNES. Well, for the two of you that support the underlying 

bill or the basics of the bill, I do not think there is any argument 

that under this bill more people would be eligible for Medicaid and 

more people would be pushed on to Medicaid, do you agree with 

that? 

Ms. POLLITZ. More people would definitely be made eligible for 

Medicaid, which is a very important reform, but the bill also provides that people who are in Medicaid can have the choice of enrolling in a private plan through the exchange. 

Mr. NUNES. Can you—go ahead. 

Mr. HOLAHAN. I think the answer is basically yes, but I think 

there are people that are above the level, the income level that 

they talk about who might eventually move off of Medicaid into the 

exchanges. So there will be some moving around. 

Mr. NUNES. I have trouble understanding, maybe the two of you 

can help me understand, why would we want to put more American citizens on to Medicaid? I have a lot of people on Medicaid in 

my district, and for the life of me, I cannot understand why we 

would want to make more people eligible for Medicaid and why we 

would want to shove more people on to Medicaid, can you guys answer that question, why that is a good idea? 

Mr. HOLAHAN. It is a program that is big, it has a lot of history, a lot of law and regulation around it. And we are taking on 

a lot in reform in terms of putting even more people potentially 

into these exchanges and potentially into the public plan. I think 

it would make the job harder if you did not build on to some extent 

on what we already have. And I think down the road, you might 


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want to revisit whether Medicaid should stay distinct or how it 

gets incorporated within the exchange, but I think that for the moment that would make the whole job harder. 

Mr. NUNES. Right, unless you are on Medicaid right now. I do 

not have anyone that I know of, and maybe you guys could help 

me dig some folks up, that like being on Medicaid and that want 

to be on Medicaid. 

Ms. POLLITZ. I do. 

Mr. NUNES. You know people who like Medicaid? 

Ms. POLLITZ. Yes. 

Mr. NUNES. Well, I would love to meet these people. 

Ms. POLLITZ. I would be happy to introduce you. 

Mr. NUNES. Because I have a whole bunch of people on Medicaid in my district, and the doctors do not want to see them, the 

people that I know are embarrassed to even admit that they are 

on Medicaid. They do not want to be on Medicaid. If that is the 

case, why don’t we just make—why do we need this big plan, why 

don’t we just put everybody on Medicaid? 

Ms. POLLITZ. Congressman, I think there is no question that 

the Medicaid program has suffered from underfunding over the 

years and that there has been a stigma attached to a poverty program, but the Medicaid program has incredibly important protections that it offers people, very comprehensive coverage, no cost 

sharing, coverage for all kinds of additional services that are important and that people with limited means need in order to get 

the health care, transportation care services. 

Mr. NUNES. But you know someone, you said that you know 

people that are on Medicaid that like it? 

Ms. POLLITZ. Yes. 

Mr. NUNES. And they would prefer to stay on Medicaid? 

Ms. POLLITZ. I have a friend—yes, her—a friend of my daughter, a 14-year-old young lady, her mother just passed away, she 

had been on private insurance. 

Mr. NUNES. She likes Medicaid better than private insurance? 

Ms. POLLITZ. It was a pretty good plan but it has a $500 deductible and 20 percent call insurance, and she had to go to the 

emergency room earlier this year because she was very sick and 

her aunt took her and a great big bill generated. My husband and 

I ended up paying it for them. 

Mr. NUNES. So if the hypothesis is—— 

Ms. POLLITZ. She just got on Medicaid and now—— 

Mr. NUNES. The hypothesis is though, your hypothesis that 

Medicaid is insurance from what I just heard? 

Ms. POLLITZ. No, I am just saying that Medicaid has a lot of 

advantages and offers a lot of extra protections for people and it 

is important. 

Mr. STARK. Would the gentleman yield? 

Mr. NUNES. Well, my time is running out. My time is running 

out, Mr. Chairman. 

Mr. STARK. I will extend it. Just if I could suggest—— 

Mr. NUNES. Just for 10 seconds here because I do not want to 

lose my time. 

Mr. STARK. After 5 years, people could choose in the exchange. 

Mr. NUNES. The public option? 


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Mr. STARK. They could choose private or public and not take 

Medicaid if they did not want to. In other words, after the first 5 

years with the exchanges that are running, the bill, the draft would 

suggest that at that point people would not have to go into Medicaid, they could choose an exchange. And we would welcome other 

options, but once the bill—it is not the intent of this draft to force 

people into Medicaid. That is all I am saying. 

Mr. NUNES. But I think there is no question though that it 

would make—it would put people into Medicaid, which I have—Mr. 

Chairman, I have a fundamental problem with. I think Medicaid 

is broke now, it has a $20 trillion unfunded mandate, and the more 

people we throw on to them, how are we going to pay for this? 

Mr. STARK. In California, you have a real problem. 

Mr. NUNES. That is our problem I guess to deal with too, Mr. 

Chairman. 

But in finishing up, I would just say that I really do not understand a plan that we would put out there that would put more people into Medicaid even in the short term. I think if we are going 

to revamp health care, we ought to look at Medicaid and try to get 

as many people off of Medicaid as possible today, not tomorrow. 

And I will yield back. Thanks, Mr. Chairman. 

Mr. HOLAHAN. One point to make is that one of the things that 

I think that you were concerned about is access to primary care 

physicians, and there is a provision in this bill that would increase 

those rates. 

Mr. STARK. I thank the gentleman. Mr. Blumenauer, would you 

like to inquire? 

Mr. BLUMENAUER. Thank you, Mr. Chairman. I appreciate the 

opportunity for us to start focusing in on some of these items. And 

I appreciate in particular Dr. Holahan talking about the cost of 

doing nothing. And I think that is one of the things that is so critical that gets lost. If we float along for another year or two or three 

or four, we are going to find more uninsured. We are going to find 

fewer people who are insured by their employers. And those that 

are, are going to be facing higher costs and less comprehensive coverage. 

I hope that we as a Committee will be able as we go forward to 

look at getting more value out of the existing system. There is 

some in the draft that I like. There are things that I have in terms 

of end of life transitional benefits. There are a whole series of 

things that I am excited about, some of which are in the draft. We 

can do more. I do not think we have gone far enough in terms of 

dealing with radical disparities of Medicare reimbursement around 

the country. I am particularly concerned that what is in the bill for 

Medicare Advantage will hurt efficient areas and will have virtually no effect on very high cost States. But this is a process that 

I hope we can work on together. 

The notion of how we are going to pay for this is part of the cost 

containment. We have 3 or 4 years before this kicks in, so we will 

have a chance to refine the getting more value out. And I do not 

think any of us feel that when the other areas where there will be 

some costs associated, and the polls show the American public is 

in favor of paying a little bit more if they get security and 50 million, more or less, get health insurance, they think that is a good 


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deal. But it is not going to kick in this year or next year. We will 

have a chance for the economy to regain its footing. 

I am a little concerned about the language here about somehow 

forcing people on to the public plan because people will go into the 

exchange where the public plan is one of their choices, and that 

sort of gets lost in the discussion. 

And I want to pose my question because, Dr. Holahan, you referenced it in your testimony, but as I read it, it is a little esoteric, 

with all due respect, about where the Department of Justice thinks 

it is noncompetitive and there might be antitrust. My reading of 

the data is that there are 25 States where one insurance company 

has 50 percent or more of the market. If you could perhaps discuss 

a little bit in practical terms about the lack of competition that 

most Americans face now with meaningful choices of health insurance. And my read of this is that the insurance companies themselves are going to be advantaged because we are going to streamline some of this process and squeeze out some of the goofy stuff 

that goes on. Right now, trying to deny people coverage, we are not 

going to have preexisting conditions, that is going to be a level 

playing field that is going to make I assume a very big difference. 

And if you want to also comment for a second about the sound 

bite that you got trapped into saying about cost controls and then 

cut off, if time permits to elaborate. But I would like you to talk 

for a moment about meaningful competition that we are going to 

be providing under the framework that has been offered. 

Mr. HOLAHAN. Yes, a few months back, we had some executives 

from a big Blue Cross plan in the Midwest visit us to get advice 

on how they could control costs. And the first thing I asked was 

how well do you pay relative to Medicare. And the answer was they 

paid 79 percent above Medicare rates to hospitals and 68 percent 

above Medicare to physicians. And so like why are you here? They 

did this because they can. They have no competition. And they can 

pass on, to the extent this means higher premiums, they are able 

to pass that on. And I think that is a role that this public plan 

would have to—I think could help with, help in those markets and 

help in others where there are more insurers but one that is really 

dominant and still not able to deal with dominant hospital systems 

or single specialty groups that essentially bargain as monopolists. 

Mr. BLUMENAUER. Thank you. I appreciate that. I would just 

close by noting it would be interesting to take a test of the people 

on this Committee who have health insurance, I assume most of us 

probably do, and find out how many of us made the decision based 

on what was the cheapest plan? It would be interesting to find out 

if we could figure out what was the cheapest plan. I get my insurance through my wife’s company because I think she has greater 

contact with their Department of Human Resources to try and decipher stuff that I cannot, but I think the record is rather clear that 

there are lots of people, including in the Federal system, and I will 

bet people on this Committee, who make lots of choices that are not 

the cheapest as it appears on that chart. And so I think the fear 

somehow that all competition would stampede to a public plan if 

it appeared a little more affordable is at least near-fetched. 

Thank you. 

Mr. STARK. Thank you. Mr. Roskam, would you like to inquire? 


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Mr. ROSKAM. Thank you, Mr. Chairman. First of all, thanks for 

your time and your attention today. I think all of us have been enlightened by the nature of your comments. And you have been fairly transparent, when you have not known what is in the bill, I appreciate someone saying, ‘‘I have no idea what is in the bill.’’ I do 

think this time, this season that we are in is absolutely incredible. 

There is momentum here, right, and there is an opportunity I 

think transformational, but it has struck me as strange that here 

we started this hearing at 9 o’clock, I was out for a couple of minutes for some of the procedural stuff that is happening on the floor 

but we are well into this hearing, and we have not had much of 

a conversation about Medicare fraud, about fraud within the system and abuse within the system. 

I have been briefed by experts, and I do not think these are folks 

that are pulling punches one way or the other in terms of donkeys 

and elephants, but have come to the conclusion that as much as 13 

percent of current Medicare outlays are fraudulent. I have a quote 

from the chief counsel to the Health and Human Services Inspector 

General who said, ‘‘Building a Medicare fraud scam is far safer 

than dealing in crack or dealing in stolen cars and it is far more 

lucrative.’’ And here we are on the verge of something that is absolutely enormous in terms of costs. Frankly, when costs come up, 

the Majority kind of loses high contact and gets a little bit defensive, with all due respect, about, well, who is putting these estimates out and so forth. But as we are sitting here today, no real 

number in terms of a cost estimate. 

And, yet, here we have this opportunity to recast resources and 

put it in the proper direction that I think ultimately can have a 

huge impact. So I would like to shift the conversation a little bit. 

Dr. Holahan, something that you said concerned me, and I want to 

give you a chance to clean it up. But when you were having a conversation I think it was with Mr. Nunes a minute ago, in sort of 

defense of Medicaid, you said, and I jotted it down because it really 

got my attention, and ‘‘these were attributes that I interpreted as 

positive attributes,’’ right? You said that, ‘‘It is big, it has a history 

and it has lots of law and regulation around it,’’ meaning sort of 

this case law around it. And I would suggest that I think that is 

one of the real weaknesses of the current system, that it has become hidebound, an inability to recognize fraud within the system 

and an inability to recognize abuse within the system, an inability 

to recognize overutilization and so forth. And I just wanted to first 

of all give you an opportunity to—surely those three adjectives of 

big, rich history and lots of law and regulation is not an attribute, 

those are not characteristics that you are lauding, are they? 

Mr. HOLAHAN. Well, what I meant was—to be more specific, I 

think this is a really big deal to reform our health system. To the 

extent you have something that you can build upon that works reasonably well, despite some problems, I think that is a good thing 

when we are taking on so much. 

A few years back, I did a study with a colleague of mine to look 

at whether Medicaid is really high cost relative to private insurers, 

so we compared Medicaid to people with private coverage, all lowincome people, and looked at whether medical benefits, when you 

controlled for health status and income and education and other 


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characteristics, controlled statistically for that, and Medicaid it 

turns out is less costly. And that is not to say there is not fraud 

in Medicaid and Medicare, but despite that, it is less expensive 

than private insurance by some margin. And we certainly should 

go after fraud wherever we can. I guess the thing I would be curious about is whether the same study that you were referring to 

had anything to say about fraud in Aetna or Blue Cross plans or 

anything like that. I do not know whether it did or not, but I can’t 

believe it is totally absent. 

Mr. ROSKAM. There is no question about it, but I think here we 

are 3 hours into a hearing that by the proponents’ own adjective 

is going to transform the system and yet we really have not had 

much of a conversation as it relates to driving, just rampant abuse 

out of the system. 

Thank you for being transparent about that. The people that I 

have interacted with as it relates to Medicaid feel underserved by 

it, feel discouraged by it, and it has taken the joy of the medical 

practice from physicians. 

My time has expired, and I yield back. 

Mr. STARK. Thank you. Mr. Kind, would you like to inquire? 

Mr. KIND. Thank you, Mr. Chairman. I too want to thank our 

witnesses today for your patience and also the task of trying to absorb an 840-page piece of legislation in a short period of time, and 

I think you have been doing a good job today. 

But I think my friend, the gentleman from Illinois, Mr. Roskam, 

raises a very important issue and that is what is contained in this 

health care reform that can really help crack down on fraud within 

the Medicare system? And with that, I would just reference Title 

6 of the legislation and go through those specific provisions. 

We are trying to not only enhance resources to the agencies in 

charge of detecting fraud and bringing greater accountability but 

also enhancing the penalties when it is ultimately—and that whole 

section is devoted to cracking down on fraud and the waste that 

exists in the system today. And if the gentleman or others have 

more ideas on what we can do to beef this up, we are all ears. 

But I think the sweet spot we have to hit here is the ability to 

distinguish between unintentional error and intentional fraud, and 

I think that does concern a lot of the providers out there, especially 

in submitting their billing claims, that if something was inputted 

wrong, are they going to be subject to the full weight of investigation and fraudulent penalties due to a harmless human error in the 

system. 

But, listen, I want to take my time to direct your attention to 

Title 4 of the draft discussion piece. That is titled, ‘‘Quality,’’ and 

I think this is the key to how successful we are at the end of the 

day, of whether or not we can enhance the quality of care and finding cost savings at the same time. That section is devoted entirely 

to the comparative effectiveness research. And that is what I want 

to get your response on, if you had a chance to review that provision. 

Let me preface my question by saying I come from western Wisconsin, which has been recognized as a high-quality, low-cost area. 

We have Mayo in there, Marshville Clinic, Gundersen, even the 

President has recognized that the health care models that have 


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been developed in our region, as examples of what we need to 

incent in reform in order to achieve the type of cost savings without jeopardizing quality at the end of the day. This is coordinated, 

integrated care practices, more emphasis on primary, prevent, 

wellness programs, things that have proven very effective in helping drive down cost while enhancing care. And I think that is the 

key to doing comparative effectiveness research the right way and 

not the wrong way and establishing the center in the legislation for 

comparative effectiveness research, establishing an independent 

commission comprised of independent, both public and private 

stakeholders as part of the commission, to review the research, the 

data, making recommendations to the center. And then I think this 

is the key distinction, empowering our doctors and patients with 

the information so they know what works and what does not work. 

And we are placing a huge bet on that, that with doctors and patients armed with this information, that they are going to make the 

right decisions which is going to not only improve patient care but 

help drive down costs. And it is tough to ignore a study of a reputable organization like McKenzie Institute that claims based on 

their research that $650 billion of health care spending every year 

goes to care and treatment that does not improve the quality of results at the end of the day. And that is going to be the key I think 

to comparative effectiveness. 

I see Mr. Herger has joined us because he raised a very important issue when it came time for him to question the panel, and 

that is how the information is ultimately going to be used. And I 

would reference, and he is involved in a conversation, but on page 

446 of the discussion draft, lines three through six, the construction 

on the use of comparative effectiveness. And let me just read that 

real quick. This is an important point. It states that, ‘‘Nothing in 

this section shall be construed to permit the Commission or the 

Center on Comparative Effectiveness Research to mandate coverage, reimbursement or other policies for any public or private 

player.’’ And I think that is a hugely important provision in this 

legislation, basically saying we are not going to ration, we are not 

going to be making those type of cost decisions based on CER research. And I think that is going to be important that we recognize 

that as we move forward. 

So, Ms. Pollitz, let me first give you a chance to respond as far 

as the role you see CER research playing and how important or 

vital that is going to be for the health care reform that we are trying to offer here today? 

Ms. POLLITZ. I think it is very important, Congressman. I had 

the pleasure of attending a conference a couple of weeks ago where 

the director of the agency in Australia that heads this up was just 

talking about how this research gets brought to bear in decisions 

in that country and people were left breathless, like why don’t we 

do that here? So I think it is a very important investment, and I 

commend you for including that. 

Mr. KIND. It is interesting a lot of providers are doing that. In 

fact, Cleveland Clinic has been doing this for a long time, and the 

CEO of Cleveland Clinic just indicated they had 70 countries contact them to find out what they are doing and how well it has 

worked, 70 countries. So even countries outside of the United 


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States are recognizing the type of model of care that is being provided and the cost savings that comes with it. 

Dr. GRATZER. I note as well that there are some private sector 

innovations that are also useful. Think about Safeway, which has 

actually brought health inflation to a stalemate in the last 3 years. 

Some of the information is its comparative effectiveness, it is transparency of prices. If you are in certain regions in the country and 

you are a Safeway employee, they will actually list out your options 

for say CAT scan and the prices and soon they are hoping to put 

quality on board. So it is not just a role for government, I think. 

I am a little bit more hesitant on comparative effectiveness perhaps 

than you are, but there is a role for government undoubtedly, but 

I think there is also a role for the private sector as well and ultimately culturally as people demand more and should be required 

to shop around and gain more information, just as they do for 

much mundaneness things like food, clothing and shelter. 

Mr. KIND. Thank you, Mr. Chairman. I see my time has expired. 

Mr. STARK. Thank you. Mr. Pascrell, would you like to inquire? 

Mr. PASCRELL. Thank you, Mr. Chairman. Chairman, I want to 

clear up some things that were mentioned before about New Jersey. 

[Laughter.] 

Mr. PASCRELL. New Jersey is more expensive because insurance companies are required to cover all comers. Without an individual mandate, healthier people drop coverage, leaving behind the 

sickest people. That drives up the cost, doesn’t it, Ms. Pollitz? 

Ms. POLLITZ. Yes, it does. 

Mr. PASCRELL. If anything New Jersey is a case study in why 

we need universal coverage, just the opposite of our proponents— 

or opponents, whichever you decide, are talking about. State mandates are designed to protect people. And I would argue that if everyone were in the pool, folks in New Jersey would be better off 

because they would be guaranteed access to the services they need, 

like childhood immunizations. Let’s not mandate that. What is the 

consequences of not mandating that? Aren’t we talking about preventing diseases and in that way lowering costs? 

How about my favorite chronic diseases, diabetes care. When we 

look at the cost of health care, who is seeking aid later in life because of situations that occurred much earlier, which they were not 

able to get hold of? How about prostrate cancer screening, do you 

want to mandate that? Do you want to bring down the cost of 

health care? Let’s mandate it. Would anyone on the other side say, 

‘‘No, we should not mandate that’’? How about mammograms? We 

thought we had that battle a few years ago, but that continues to 

come up. Maternity care, treatment for alcoholism? Now, why in 

the world should we mandate that? Look, the patient is the center 

of what we are talking about here, not insurance companies, not 

Congressmen, the patient therefore is the main priority of putting 

a system together built around that patient. And that is what I 

have on my mind. 

Now, Mr. Gratzer, in your testimony you said that, ‘‘We must reform our health care system with ‘made in America’ solutions.’’ 

Well, that goes with a lot of other rhetoric I have heard. I could 

not agree more. The discussion draft that we are considering is a 


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‘‘made in America’’ solution. It builds on lessons that we have 

learned right here in the United States. It brings competition and 

choice and a system of checks and balances, we do not have checks 

and balances now. We do not even have checks and balances with 

regard to ferreting out those who abuse the system, who actually 

purvey fraud on the system. In fact, we slap them on the wrist and 

say, ‘‘Sin no more,’’ but we do not prosecute them. 

I take issue with your focus on a single payer system, which despite your arguments is not the issue at hand. Even Dr. Young has 

told us that our plan is not a path to single payer. Unfortunately, 

you make fundamentally different underlying assumptions about a 

public health insurance option that most of the individuals on the 

panel, and many of the questions you pose about a level playing 

field can be answered with a resounding yes. In fact, we have gone 

to great pains to make sure that this public health insurance option is indeed on a level field with its private competitors. 

And I would like you to comment on some of the arguments 

made by Dr. Holahan. Specifically, in the absence of a public health 

option, how would you propose bringing real competition to health 

insurance markets that currently have none? 

Dr. GRATZER. I think we have regulated ourselves into a situation where in many States, too many States, you—— 

Mr. KIND. Who is ‘‘we,’’ who is ‘‘we’’ regulated? 

Dr. GRATZER. It is between Congress and State legislatures. 

Mr. KIND. What have we done, what regulations have we put 

forth that have resulted in the consequences which you say exist? 

What is the regulation. Tell me one regulation, two regulations, 

three? 

Dr. GRATZER. Well, in some States community rating. 

Mr. KIND. ‘‘We,’’ we said the Federal Government, you said the 

Congress, do not go back to the States. What did the Congress do? 

Dr. GRATZER. Right, I said both, sir. And I would emphasize 

that it is a collective problem, and I think that these mandates end 

up driving out insurance companies and reducing choice. But, look, 

I agree with you, there is not enough competition in some States. 

In some States, in the small group market, you are down to literally one option or two options, but I think the way around that 

is through deregulation and allowing more competition amongst insurance companies rather than the Federal Government creating 

an insurance company, which by the way, as you know, would not 

be covered by those regulations, would not pay the tax, would 

not—— 

Mr. KIND. Dr. Gratzer, what would you deregulate right now? 

Dr. GRATZER. Why would I deregulate? 

Mr. KIND. Yes. 

Dr. GRATZER. I would allow people to purchase insurance plans 

across State lines. 

Mr. KIND. That is your deregulation moment? 

Dr. GRATZER. Well, that would be one of the things I would do 

for sure. And then for the people who, as you point out, are chronically ill, I would—— 

Mr. KIND. I’m sorry, go ahead. 

Dr. GRATZER [continuing]. Put them in high-risk pools and the 

like. I am not going to argue today that some people cannot afford 


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a private insurance plan, of course, but I think we have to be focused on our aid. 

Mr. KIND. What do you do with those people? What do you do 

with those people, Dr. Gratzer, the people that cannot afford—— 

Mr. STARK. We will have to come back to this later, Mr. 

Pascrell, and let Mr. Reichert find out what Dr. Gratzer wants. 

Mr. REICHERT. Well, thank you, Mr. Chairman. I want to at 

least first of all make a statement on I think Mr. Pascrell is absolutely correct, the patient really is the focus here, and I think all 

of us here today who have had a chance and opportunity to question and hear some of the answers to the questions are all in agreement that we are trying to do the best thing for the people of 

America, for those people who, all of us at some time or another, 

who need health care. And so that is why we are here today. 

To fight over one system over another is counterproductive because I think we all can agree that the patient is the center of our 

attention and should be, that there are not enough checks and balances, I agree with that. There is a lot of fraud, waste and abuse, 

I agree with that. We are not doing anything with that. And we 

all agree that we would like Americans today to have better access 

to health care, better quality health care. We would like this health 

care to be cost-effective. We would like people to have a free choice. 

And I think that people, I know myself personally, would like to 

have some control over the treatment and the medication that is 

prescribed to me for my health care. Those things we all agree on. 

The question, I think the major overarching question is how do 

we really overcome this fear of a lot of the American people today 

regarding this discussion we are having today about a government 

takeover of the health care plan, especially when you throw in the 

considerations that Mr. Ryan has expressed today and one other 

Member here, and the trillions of dollars of unfunded mandates. 

And so the fear of the cost and the fear of the lack of control and 

the reduction of your access to health care and the reduction of the 

quality of health care. 

Dr. Gratzer, I would ask you first maybe to respond to that? 

Dr. GRATZER. I want my colleagues to answer first. 

Mr. REICHERT. Okay, anyone else, anyone on the panel? 

Ms. POLLITZ. Congressman, I think public opinion polls show 

that the public overwhelmingly favor having the choice of a public 

plan. I think it is also true, and it was in The Washington Post this 

morning, that people are always nervous about change. I was here 

in this room, sitting in that row 15 years ago, the last time health 

reform care was considered and the Harry and Louise ads were all 

over the airwaves, and I think there is no question that the greatest vulnerability of the reform effort this time is to frighten people 

into thinking that they will be worse off. 

Mr. REICHERT. I am just going to interrupt you for a second. 

I stepped out in the hallway and met with some representatives of 

a union who said we want a public health plan, we want to make 

sure that those people who are not insured get health care, we all 

want that. But the other thing they said to me was we do not want 

our health plan to go away and on top of that, I do not want my 

health plan taxed. So we have a problem here. How do you address 

those concerns, people who—and I am one of them, and I think as 


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I said most people here, we all want people without health care to 

get health care, but I like the plan that I am in. Others in this 

room I am sure do, 75 percent of Americans it said do like their 

health care plan. They do not want to be taxed on it. So the question here again goes back to cost. How much is this going to cost 

us and how are we going to pay for it? 

And one of the issues around this is the waste, fraud and abuse. 

Some estimates place Medicare fraud at $13 billion per year. The 

GAO found that Medicare has paid at least $92 million to Part B 

for providers who are deceased. How can we reduce the staggering 

amount of fraud in the Medicare system? And what is to prevent 

this fraud, waste and abuse from happening in the government 

takeover of other parts of this system? Anyone want to respond? 

Mr. HOLAHAN. I just was talking to the question about choice. 

I think that the way I understand this plan, there would be more 

choices. And I think sometimes the way—— 

Mr. REICHERT. What about the fear though that the private 

sector will not be able to compete with—— 

Mr. HOLAHAN. Well, I do not agree with that. I think there are 

some insurers—— 

Mr. REICHERT. But some people do—— 

Mr. HOLAHAN. I understand. 

Mr. REICHERT [continuing]. How do you explain that? 

Mr. HOLAHAN. I think the best insurance companies in this 

country are very, very good. They will be able to compete with the 

public plan. The weaker ones that have competed by just going 

after good risks and not being effective managers of care delivery 

could be at risk, but I think it will, at the end of the day, be an 

effective and healthy competition between the public plan and good 

insurers. 

Mr. REICHERT. I appreciate your answer. Thank you, Mr. 

Chairman. 

Mr. STARK. Ms. Berkley, would you like to inquire? 

Ms. BERKLEY. Yes, thank you very much, Chairman Stark. And 

thank you all for being here and sharing your expertise with us. 

I am strongly in support of passing comprehensive health reform 

legislation this year. A third of the people I represent, and I represent the urban core of Las Vegas, have no health insurance. So 

it is imperative for the people that I represent, that they have some 

access to health care through insurance. 

It is not as if people that do not have health insurance do not 

get sick. They get sick, and the additional cost is borne by the rest 

of us. I would say statistically speaking, $1,000 for each of us that 

is insured, there is an extra $1,000 attached to the cost of our 

health insurance in order to subsidize others. 

In an effort to give full disclosure, my husband is a nephrologist, 

my stepdaughter is a primary care physician, we need more doctors, and we need to incentivize the opportunity for people to go to 

medical school, which is not only multiple years of their lives but 

also a great deal of expense. When my stepdaughter graduated— 

not graduated, but when she graduated, she had $190,000 debt. I 

am a tremendous advocate of loan forgiveness and also an advocate 

of increase GMEs. I think it is very important, and they need to 


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be spread out around the country a little bit more proportionately 

than they are now. 

I do not think—look, this is a work in progress. I am not willing 

to sign off on the legislation. A draft proposal that was dropped on 

Friday is the beginning of an important and comprehensive discussion among all the stakeholders and those of us that are going to 

be voting for it. That is why your being here is so important today. 

Hopefully, this will be the first of many hearings in order to improve our expertise and knowledge so we can do the right thing 

and fine tune this. 

Cost is definitely a factor. There is no doubt about it. But right 

now we have the most costly health care system on the planet. We 

are not getting a bang for our buck. Doctors do not like the system. 

The hospitals do not. The patients do not. And we need to change 

the paradigm so that we are investing our money wisely and having a far better outcome than we have now. 

One of the things I am a great advocate of is preventative medicine, and I am the original sponsor of the DXA bill. Medicare cuts 

payments to people that need bone density by 60 percent, which 

means that the doctors are not administering them anymore. Nineteen billion dollars it costs this country in order to pay bone-related 

osteoporosis fractures every year. Let us take that money and put 

in the front end. It is going to cost us less. We are going to have 

a whole lot less bone fractures and statistically speaking, if you are 

over 70 and you break your hip, you are going to be dead within 

10 months. It seems that we will improve the quality of life, we 

will enhance life, and we are going to save billions of taxpayers’ 

dollars by using our dollars wisely in the front end of the process 

rather than in end of life care. 

And if any of you care to discuss any of those, I would love to 

hear your point of view. 

Ms. Pollitz. 

Ms. POLLITZ. That was a lot and all excellent. I think just on 

the prevention, an important feature in the required essential 

health benefits package is that preventative services would be covered without any cost sharing so that people can have access to 

those services and not face those barriers. That is an important 

component. 

Ms. BERKLEY. May I say one thing, and it just gets my goat, 

I am not the defender of every doctor on the planet, and I know 

we have a lot of real stinkers, but I will tell you something the doctors I know work like dogs and this fraud and abuse thing as if 

every doctor is out to scam the system is highly offensive to me as 

a spouse. I just want to get that on the record. 

Dr. GRATZER. I would add, it is not just about prevention, 

though I fully agree with your comments on this. There is also 

some element of people taking more responsibility for their actions. 

Ms. BERKLEY. What do you do with a patient, doctor, and I 

know you are a psychiatrist, but my husband does all the dialysis 

in Las Vegas, so that we know that smoking, obesity, lack of exercise—— 

Dr. GRATZER. Sure, incredible. 

Ms. BERKLEY [continuing]. So patients are on the machine for 

3 hours. They get up, they light up a smoke and they go grab 


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McDonald’s. Now, how responsible should that doctor be because 

the patient is being irresponsible? 

Dr. GRATZER. Well, it is a heartbreaker certainly in your husband’s field of work but so many health costs are in some ways 

avoidable. Again, we have to be very clear. There are people who 

are genetically endowed to develop certain diseases, there are people who are just unlucky. On the other hand, smoking is 100 percent avoidable. We are seeing in America an obesity crisis, doubling 

of obesity rates over 25 years. And the best evidence, it seems to 

me, it is just we are taking in too many calories. I think part of 

that is a government solution in terms of like school lunch programs, funding better school lunches. I think part of that comes 

from the corporate community. I am excited with Safeway and 

what they have managed to do to better people’s health. But part 

of it is also culturally people have to take more responsibility. It 

should not be societally acceptable to smoke and yet in a lot of 

ways, it still remains somewhat glamorous. 

Dr. YOUNG. I would like to compliment your summary. I am in 

complete accord with several points you made, but to make the 

point from our purpose being here, I think your goals would be 

much more readily achieved in a single payer system with improved access and for that reason, I commend you to consider that 

option. 

Ms. BERKLEY. Thank you. 

Mr. STARK. Thank you. Ms. Schwartz, would you like to inquire? 

Ms. SCHWARTZ. Yes, thank you. Thank you, Mr. Chairman, 

and thank you panelists for your patience and your willingness to 

be here for a number of hours. 

I think we have covered some ground here but on some of the 

things—we get lost a little bit in some of the various specific details we have been discussing and forget our larger goals and how 

we are going to accomplish them. We are really very committed, as 

the President has asked us, to contain the rate of growth costs in 

health coverage and in health care, both through the government 

and for businesses and for families. And we know we can do that 

by some of the delivery system reforms we have, some of the payment reforms we are intending to—will be created in this way. 

And we are also really clear about the fact that we want to deal 

with access to health coverage. I do not know that you would all 

agree that all Americans ought to have health insurance. I think 

at least three of you would. I think one of you would say, ‘‘Well, 

they are on their own, good luck. We will give you some tax credits 

and go and see what you can find.’’ 

But one of the things that this draft bill does do very, very clearly is to say that we are going to create a way to help all Americans 

purchase affordable, meaningful health insurance coverage. And 

there can be disputes about how we are going to do that, but the 

idea here is that there are numbers of Americans who have insurance that is not very meaningful. I think, Ms. Pollitz, I would want 

you to speak about this. We find particularly for small groups and 

for individuals buying meaningful health insurance that is affordable, if you have a preexisting condition now, if you are a small 

group that buys insurance and I just talked to one businessowner 


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who said their rates just went up 40 percent from one year to the 

next. We have all in this country seen our insurance premiums 

double in the last 9 years. That is unsustainable for families. It is 

unsustainable for businesses. And it is unsustainable for government. So we believe we have to take action. 

Now, one of the things we are going to do, in spite of what the 

Republicans say, is to put a whole lot more Americans, almost 50 

million of them, out there purchasing health insurance, private 

health insurance by and large. So I think that insurers should step 

up to the plate and offer some meaningful coverage. But we are 

going to change some of the market rules because if we are going 

to help Americans buy private health insurance, and we are, then 

we want to make sure that they meet some rules. 

And I would like you, Ms. Pollitz, if you would start with some 

of the rules that we are going to change, preexisting condition exclusions, you cannot do that anymore. You cannot rate people 

based on gender. You cannot rate them based on their health status. We will make some changes in age. We are going to make it 

more affordable but also mean something. Now, you had mentioned 

in your testimony initially, way back when, earlier this morning, 

that one of the ways that you think we could strengthen the legislation, even though there is language in there now, is to make sure 

that a consumer, individual or small business or bigger business, 

knows what they are buying. When they are buying insurance, 

they know what they are buying. And right now, that is also very, 

very difficult. 

There was a report recently about a woman who thought cancer 

care was covered. It turns out that the cancer care she was getting 

was outpatient and what was covered was inpatient. Now, there 

was no way of her knowing that when she read the policy. So, unfortunately, she got cancer, she had health insurance and it did not 

cover her care in the least expensive way possible. 

I will just give you one statistic, 61 percent of the 72 million 

working age adults who had problems paying medical bills or paying off medical debt in 2007 were insured at the time the care was 

provided. That is again unsustainable. We know 50 percent of 

bankruptcies are due to medical debt. 

So we are going to help people to be able to buy private insurance. Could you start by telling me what else you think we ought 

to be doing? I do have a bill with Congresswoman DeLauro that we 

are advocating putting some of that language in this bill that 

would make Americans feel more secure that when they are buying 

private insurance or public insurance, that they actually know 

what they are buying, they get what they are paying for, and that 

we reduce the cost of administration of private insurance companies now, just spending literally millions and tens of millions of 

dollars to screen records to make sure that they do not pay coverage. So could you just—I know I went on probably more than my 

allowed but if you would answer that and give us some information 

about what else you are doing, how important you think it might 

be to be doing this? 

Ms. POLLITZ. I am happy to, and I will talk very fast. I think 

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whelmingly how their coverage works and that most would prefer 

to do anything, including work on their income taxes, rather than 

try to read the insurance policy and figure it out. 

I think you can make health insurance more predictable and 

more understandable for people by making it more standardized. If 

there is coverage for hospitalization, it should cover the whole hospital stay, not leave out the first 2 days. If there is a deductible, 

that should mean a deductible. If there is an out-of-pocket limit, 

that should actually limit your out-of-pocket costs. You could have 

more standardization of terms. 

Also, we have suggested a new kind of labeling system for health 

insurance that I believe is included in the bill that you referenced. 

Ms. SCHWARTZ. It is a little bit like the way when you buy a 

food product? 

Ms. POLLITZ. Exactly. 

Ms. SCHWARTZ. It is consistent. 

Ms. POLLITZ. A coverage fact label, we would suggest that, our 

methodology was to simulate what it costs and what the claims are 

to have different illnesses and then have insurance companies process those claims and show you exactly what would be covered and 

what you would have to pay for the whole episode of illness so that 

people could synthesize and see that. 

Ms. SCHWARTZ. We will continue to work together. I thank the 

Chairman for his indulgence. 

Mr. TANNER [Presiding]. Thank you. 

Mr. Davis. 

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

Listening to some of my colleagues would lead us to believe that 

the only relevant part of this discussion is not to have a public option included with our private system. I have heard a great deal 

this morning about costs. I have not heard much about service or 

quality of care. I have not heard much about accountability, responsibility or the need for access for the millions of individuals in 

our country who have no insurance at all. And in many instances 

no place to go if they get sick. 

Dr. Young, I want to commend you and my colleague, Congressman Conyers, for your many years of long struggle and sometimes 

suffering to try and push our country toward understanding of 

what a single payer system would do. Sometimes, I did not know 

whether you were pushing or leading, but either way, you helped 

to get us where we are. 

You have already told us that we have fallen short of the goal 

with this tri-committee draft that I think has been a tremendous 

effort led by our Chairman, Representative Rangel. Given that we 

have this document that we have put together, and I know that 

you are good at dual diagnoses and things like that, what would 

you say were the part that you like best or might be its strongest 

features? 

Dr. YOUNG. Okay. 

Mr. DAVIS OF ILLINOIS. And what would you say might be its 

weakest features? 

Dr. YOUNG. Well, I naturally am pleased with those parts of the 

bill that extend coverage to people now not getting it, that is truism. The part I do not like is that it finds it necessary to retain 


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the private insurance system, which is the heart of our present dilemma. I am well aware of the awesome, real power the industry 

has, and I think I understand the legislative process. But having 

said that, my criticism or opposition to these other forms is not the 

purist point of view, I do not have that. I have had too many life 

experiences to have that view. It is that it will not work. And that 

I feel that all of—both sides of the aisle with their criticisms and 

suggestions have the same goal, but what is emerging is not a 

practical arrangement. And it has already been said, and I will 

echo it, the cost will sink not only the health economy but the national economy. 

And I am happy, you suggested and I will emphasize, that the 

American people are increasingly aware of the desirability of a national health insurance, treating health care as a human right by 

society, emulate the achievements of other countries with much 

lower costs. I mean not a little lower, starting the highest competitor for cost, France, Switzerland and Germany, spend one half per 

capita. So with all that money and our American ingenuity and 

eliminating the unnecessary waste associated with the private insurance system, we could have a fabulous system and the country’s 

mood, solidarity, confidence in government would go up tremendously. 

Mr. DAVIS OF ILLINOIS. Thank you very much. Ms. Pollitz, let 

me ask you if I could, in some of our districts, 400 percent of the 

Federal poverty level seems like pretty high income. Yet, you propose that subsidies be set at an even higher level. Why would Congress need to subsidize health care for a family earning $88,000 a 

year? 

Ms. POLLITZ. Well, if the cost of that coverage is $12,000 or 

$13,000 a year, that takes a big bite out of the paycheck of that 

family. And if the family head is my age, in their 50’s, the cost will 

be much higher than that because age rating is provided for in this 

bill. So I think when you watch and set your policy about affordability, you need to step away a little bit from the optics that associate with this measure of the poverty level. It is in many ways an 

artificial measure and way too low for measuring the needs of families to pay for anything. And really look at what is the cost of good 

health care coverage and how much do you want families to have 

to pay out-of-pocket for that if they do not have other subsidies? 

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

I see that my time has expired but with your indulgence, could I 

just ask Dr. Gratzer, when we talk about costs, do you have any 

idea of how much of that cost is plowed back into the economy? 

Let’s say if we spend a dollar for health care, how much of that 

goes back into the economy? 

Dr. GRATZER. Well, you have asked a physician whether or not 

he likes health spending, you are going to get a pretty predictable 

response. And I think what you are hitting on is the right question, 

which we cannot just look at costs, we have to look at effect on 

lives. My wife’s life has infinitely improved by a procedure. People 

suffering from cancer are infinitely improved by the technology we 

have available. It is also true that to some extent it is good for an 

economy. One must be careful though that we probably do waste 


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money within the system, and that is I think we would all agree 

getting better value for our dollar is worthwhile. 

But to turn around and say we spend 16 percent, we would be 

economically better off spending 12 percent, I think is just very 

simplistic and unfortunately too many economists seem to fall in 

that trap. 

Mr. DAVIS OF ILLINOIS. Thank you very much. Thank you, 

Mr. Chairman. 

Mr. TANNER. Mr. Heller, you are recognized. 

Mr. HELLER. Thank you, Mr. Chairman. And I want to thank 

the panel for your patience. Running back and forth between the 

forth, at least I get some exercise. Anyway, thank you very much 

for being here, and I appreciate your comments. 

One of the things that intrigues me as we go through this conversation and one of the things that I would like to raise is a question that I am constantly asked by my constituency back in Nevada 

and that is what would happen if Members of Congress had to live 

with the same health care system that everybody else has to live 

by? 

And I will assure you there is a great divide on this side here, 

of us sitting in front of you and everybody else out here in this 

room. There are people here in this room and in this audience that 

do not have the health care options that Members of Congress, 

whether it is the House or the Senate, have, and I believe that if 

we are going to go forward with this exercise, regardless of what 

plan ends up at the end of the day, that we ought to, if we are intellectually honest, ought to require Congress to live by those same 

provisions. Is there anybody on this panel that disagrees with this? 

[No response.] 

Mr. HELLER. Having said that, and again I think that is critical 

as we move forward in this debate is to make sure that Members 

of Congress, as they move forward on this, understand what their 

constituents have to live with. 

Now, I want to go to you, Dr. Gratzer. In fact, I had a question 

for Secretary Sebelius, who was sitting right where you were a 

month or so ago, and I was talking about my district. And this 

could be rural America as much as rural Nevada, I have a very 

large district and talked about access to health care and the cost, 

and my question to her is would a public health care plan solve access and cost? Her response to it was, ‘‘I do not think anyone is 

talking about a government-run program.’’ She also went on to say 

that, ‘‘I think the goal with this legislation is to have most Americans without health coverage in a health insurance exchange run 

by the private market to stabilize the current private market.’’ 

So, doctor, based on the draft we have in front of us today, I am 

pretty sure someone in Washington has a government-run health 

care in mind. Do you think this bill reflects a respect for the power 

of the private market as Secretary Sebelius envisioned? 

Dr. GRATZER. No. Would you like me to elaborate? 

Mr. HELLER. Would you, please? 

Dr. GRATZER. I was going to rest on the eloquence of my response. 

[Laughter.] 


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Dr. GRATZER. Again, I believe in competition, and I think that 

we should be very mindful of the fact that the system works well 

when we do have competition. The Federal Employee’s Health Benefit Plan has actually kept costs relative to other types of health 

insurance down. I think most Members of Congress are very 

pleased with the literally hundreds of options they have available. 

I belong to a think tank in New York, we have a choice of exactly 

one plan. So I think there are things to learn from that approach, 

but I also think we must be very cautious about this concept of enhancing competition with a government plan. The government plan 

is in fact price controlled. It will offer substantially lower premiums 

than anyone else can offer because it is paying a fraction of the 

amount, as Medicare presently does. 

Mr. HELLER. Sure, similar to what we have in Congress now as 

Members? 

Dr. GRATZER. And I think it will suck away from the private 

sector. So I think one must be very cautious about a public plan 

option. But I do think one can learn from what Members of Congress have, that you have many options available and that is useful, and the question is how do you get that to Americans who are 

too often available—have available just one choice of plans? 

Mr. HELLER. Doctor, I know that you have looked at health care 

systems around the world, could you touch on survival rates, point 

out some of the statistics that might help this Committee, survival 

rates of patients in America and other nations? 

Dr. GRATZER. Sure, look, comparing one system to another is 

enormously challenging and crude. Mr. Becerra, your colleague for 

instance, infant mortality rates. Unfortunately, as you know, a lot 

of health has to do with things other than health care. Infant mortality statistics would be a wonderful example of that. It turns out 

that in America the group with the best health infant mortality 

rates are Hispanic Americans. They also have the least access to 

health insurance and in fact are most likely to birth outside of a 

hospital. I am not advocating births outside of hospitals. What I 

am advocating and suggesting is that one must be cautious. Other 

factors, drug use, family structure, and so on has enormous weight. 

So what are better ways of comparing systems than just saying 

infant mortality statistics? I would suggest looking at how people 

fair with different diseases, like cancer survival rates. Lancet Oncology as an example, compared American survival rates to European survival rates. Sixty-six percent versus 44 percent survival 

rates over 5 years. American medicine is second to none. We have 

problems here but do not lose the good. 

Mr. HELLER. Thank you very much. I know my time has run 

out, but I just want to reiterate that I think it is critically important that we make sure Members of Congress live by whatever 

plan comes out of here. And I would challenge the leadership on 

this Committee to see fit that the necessary provisions are put into 

this bill so that Members of Congress and our constituents live 

with the same health care programs across this country. 

Thank you, Mr. Chairman. I yield back. 

Mr. STARK [Presiding]. Thank you. Mr. Etheridge, would you 

like to inquire? 


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Mr. ETHERIDGE. Thank you, Mr. Chairman. Let me join the 

others in thanking you for being willing to stay this long and stay 

in your seats. I know it has been tough, so we appreciate it. 

There has been talk here about all the issues that we have to 

deal with, and it is a complicated issue. Whether people want to 

call it waste, fraud and abuse, whatever you want to call it, it is 

savings within the system, and we have to get it out because that 

will provide for more care, more quality care. I cannot imagine any 

person sitting on this panel, or hopefully not any Member of Congress, would be opposed to doing that. So I hope this bill is a start 

in that direction. 

It is a draft, it is not perfect. It probably will not be perfect after 

it gets through the House and through the Senate, but I happen 

to remember something that Confucius said, he said, ‘‘The longest 

journey starts with the first step,’’ and if you are always fussing 

about where you can go, you will never get anywhere, so you have 

to get started. And so at least the process has started and the dialogue is in place. 

And I think the President is right saying that this is the time 

to talk about it. He said that if you like the plan you got, you keep 

it, you choose your own doctor, you do that and that the timing is 

right. I think the quality of care is a critical issue and you only 

worry about that if you get sick. If you are not sick, you do not 

need a hospital, do not need an insurance plan and that is why 

young people a lot of times do not get one. They choose not to. And 

the quality care, access to care and certain affordability, and these 

are some of the issues we are talking about. 

Let me just tell you a quick little situation I bumped into Saturday with a friend. I went up to pick up some posts, I was doing 

some work on the farm, and this guy was selling them. And I 

looked at him and I said—he said, ‘‘Well, I don’t feel well.’’ And I 

said, ‘‘What is your problem?’’ He said, ‘‘I really need to go and 

have some medical attention. Number one, I don’t have insurance.’’ 

He owned his farm, but he did not make enough money to afford 

health insurance, he could not afford to have the kind of care he 

needed. So as any other Member of Congress would do, he happened to be in my district, we called, we tried to find care, and 

tried to link him up with people who do it, but a lot of that happens. The point is that ought not be the way people have to get 

care. So my question is that if you have care in a lot of cases, and 

in some places depending on where you are, if you live in a rural 

area, you are less likely to have access as you have already heard 

because primary care is very difficult, people have figured out the 

way we reimburse, and we have to change that, and I hope we do 

it in this legislation. 

But let me ask a question to you, Ms. Pollitz, because, as you 

know, insurers, and you mentioned this earlier in your testimony 

or in answer to a question, rescinding health insurance policies if 

the policyholder has lied or concealed information from his or her— 

on his or her application. Okay, we understand that, that makes 

sense. But in a number of cases, in testimony even before this— 

not before this Committee but before other Committees, on June 

17th, it was reported that three major insurance groups went before a Committee and admitted and said they were going to keep 


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doing it for people because they were sick. It reminds me if I have 

fire insurance and my house burns down, I expect the insurance 

company to pay it unless I set it on fire myself. And what they are 

saying is if you have a fire, you can pay your fire insurance as long 

as you do not have a fire. But if you have a fire, you are out of 

luck because we are going to cancel your plan or you are going to 

court. Well, we are saying the same thing with insurance, aren’t 

we? Isn’t that the same kind of thing we are talking about, if you 

get sick and you are really in bad shape, you have a policy, where 

you have a condition that stretches out, you have cancer, you have 

liver disease, you have a number of things, that bothers me. I don’t 

know if we can fix it all but certainly—if you are going to be in 

the business of insuring, if you only choose people that are healthy, 

you are going to make money and you are not going to pay much 

out. 

I would be interested in—I know these people are smart, I want 

them to make money, but at the same time I don’t want them to 

discriminate against sick people, especially if they are people I represent. 

Ms. POLLITZ. You are absolutely right, Congressman, and I was 

at the hearing, at the table with the executives when they said 

they would not cease to practice. And Mr. Barton, the Republican 

leader, said to them, ‘‘You do not have a friend in this room.’’ One 

of the witnesses was a constituent of his who was a nurse, she had 

purchased a policy, she had paid her premiums, she was diagnosed 

with cancer, and at one point investigated, re-investigated—everything that they had investigated previously when she applied, they 

investigated again with a fine-tooth comb and they found that she 

had failed to disclose a visit to a dermatologist for what turned out 

to be acne and on that basis they took her policy away. And Mr. 

Barton fought them until they put it back. And there were other 

witnesses with similar stories and it is a common practice. 

The executives testified that they maintain lists of as many as 

1,000 to 2,000 different conditions and as soon as a claim comes in 

on one of those conditions for a new policyholder, that will trigger 

the post-claims underwriting process. 

And I think it is important that the draft legislation makes extra 

clear, I think it is already illegal under current legal, but makes 

extra clear that policy rescission would not be permitted any 

longer. 

Mr. ETHERIDGE. Thank you. Thank you, Mr. Chairman. I yield 

back. 

Mr. STARK. Mr. Yarmuth. 

Mr. YARMUTH. Thank you, Mr. Chairman. I hate to spend any 

of my time on this subject but we now have had four votes since 

we convened this hearing this morning. All four were motions by 

the Minority to adjourn the House in a dilatory effort to just gum 

up the works so that we cannot accomplish what we are trying to 

do for the American people. I was not here when we were in the 

Minority, maybe my party did the same thing, but I consider it, 

and I know many of my colleagues and the Republicans consider 

it disrespectful to the American people. So I hope who is watching 

would take the opportunity to call their Representative and urge 


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the Republican leadership to let us get about the business of the 

American people. 

Now, with that being said, Dr. Gratzer, how many countries are 

there in the world? 

Dr. GRATZER. Oh, if you looked at my geography marks back 

in high school, you would know I am not—— 

Mr. YARMUTH. About 190, give or take one or two. How many 

of those countries have some kind of a health plan, do you know? 

They said you studied these. 

Dr. GRATZER. Well, I have studied Western Europe and the 

United States and Canada, I could not comment on Africa and 

Asia. 

Mr. YARMUTH. Okay, well, let’s just limit our discussion to the 

industrialized nations. How many of the industrialized nations in 

the world have some form of government single payer health care? 

Dr. GRATZER. Many. 

Mr. YARMUTH. Most, if not all but this country, is that correct? 

Are you aware of any that do not? 

Dr. GRATZER. Well, it depends on what you mean by single 

payer. I mean if you think if you take it more broadly to include 

social insurance, all except the United States. 

Mr. YARMUTH. Thank you, that was the answer I was looking 

for. 

Dr. GRATZER. There you go. 

Mr. YARMUTH. Are there instances in which government single 

payer health care co-exists with private insurance? 

Dr. GRATZER. Yes, in most countries. Canada would be exceptional. 

Mr. YARMUTH. Canada is the exception, so what you and other 

opponents of the public option have chose to do is single out Canada as the one example, even though it is an outlier of the supposed plans that we are trying to model. Is there anything else that 

we have modeled other than hockey that we have tried to take 

from the Canadians? 

Dr. GRATZER. I would point out that while you have tried to 

model hockey—— 

Mr. YARMUTH. We have tried to model hockey. 

Dr. GRATZER [continuing]. Canadians still have the advantage. 

Mr. YARMUTH. I concede that. 

Dr. GRATZER. Well, I was going to—— 

Mr. YARMUTH. No—— 

Dr. GRATZER [continuing]. But hold on a second, sir. I think it 

is important to draw lessons, and I see your point that Canada is 

a bit of an outlier. I would point out though if you look at countries 

like Britain or Sweden, while they have the option of private insurance, those markets remain incredibly small because they got 

crowded out and the problems—— 

Mr. YARMUTH. What about Germany? 

Dr. GRATZER. Germany has a social insurance policy that is 

tightly regulated by the government. As you know, France has a 

similar one. 

Mr. YARMUTH. But there is also a private insurance market, 

health insurance market in Germany, isn’t there? 


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Dr. GRATZER. And in Canada, I should point out, you can opt 

out as well. You cannot buy private insurance but you can opt out 

and buy private service. 

Mr. YARMUTH. So the point is we have the opportunity to follow any number of models, to do none of them, to create something 

that is distinctly and uniquely American, don’t we? 

Dr. GRATZER. I think that that would be a good thing, but I 

would be cautious about—— 

Mr. YARMUTH. I am glad you—— 

Dr. GRATZER [continuing]. In Washington given the way government expansion has gone in other countries. 

Mr. YARMUTH. I am glad you applaud our effort. Now, I want 

to get to this issue of 120 million people who would move from a 

private plan to a public option supposedly, the Lewin Report. Was 

the Lewin Report based on an analysis of the discussion draft that 

we have before us now? Does anybody want to comment, Dr. 

Holahan? 

Mr. HOLAHAN. Yes, I would. No, it was done before this draft 

came out obviously, but there were a lot of assumptions in there 

that got them that high a number. There were no exchanges. They 

made a big assumption about the difference in administrative 

costs. They assumed that the plan would pay Medicare rates as opposed to Medicare plus something. 

And there were some other issues that I cannot recall, but it 

was—oh, one of the things that I think was very important is that 

they assumed the private system would not respond at all to competition from the public. 

Mr. YARMUTH. Right, so it is fair to say that that analysis and 

that projection has nothing to do with the document that is before 

us? 

Mr. HOLAHAN. It does not. 

Mr. YARMUTH. When the representative from the Lewin Group 

was here, he mentioned the same thing, he said 70 something percent of the American people are happy with their insurance, and 

they prefer to get it from their employer. And yet he also said that 

120 million people would move. And I asked the question of him, 

‘‘Well, if they love their plans so much, why would they move?’’ And 

he said, ‘‘Because it would be cheaper.’’ Is that your assessment, 

Dr. Gratzer, that that is why they would move because it would be 

cheaper? 

Dr. GRATZER. That is the way it was designed. That is Jacob 

Hacker’s original analysis, sure. 

Mr. YARMUTH. Is it your contention or is the implication of that 

that all insurance companies do is compete on the basis of cost, this 

was a point that was actually made by Mr. Blumenauer and others? 

Dr. GRATZER. Of course not. 

Mr. YARMUTH. Of course not? 

Dr. GRATZER. Of course, there are also quality issues for sure. 

Mr. YARMUTH. Right. And if it were just a matter of cost, then 

the implication would be that the insurance companies are basically overcharging. If the government could create a plan that 

would provide the same service for less money, then the implication 


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would have to be the inference that the insurance companies were 

overcharging. 

Dr. GRATZER. No, the implication is that the Federal Government does not play fair in price controls. 

Mr. YARMUTH. How would the government be able to price control? There is nothing in this bill that forces a doctor to participate, 

is there? 

Dr. GRATZER. As with Medicare, one sees that price controls 

can have an enormous impact and you can provide cheaper insurance. Be careful what you wish for. 

Mr. YARMUTH. My time is up, Mr. Chairman. Thank you. 

Mr. STARK. I know the panel does not believe this, but I think 

we have concluded. And I cannot thank you enough for your patience and discomfort of sitting so long as we have leaned on you 

for help and information and it is helpful. I know that many people, so I can excuse the panel. 

I just would summarize that there will be lots of changes between now and the middle of July when we start to mark up and 

know more about the costs than we do now, but I appreciate your 

indulgence and your help. 

And if the second panel has not escaped, I would ask them to 

come forward if they are still here. Mr. Kirsch, who is the National 

Campaign Manager of Health Care for America NOW; Mr. Mike 

Draper, who is the owner of SMASH from Des Moines, Iowa; Peter 

Lee, the Executive Director for National Health Policy, Pacific 

Business Group on Health from San Francisco; Mr. Gerald Shea, 

who is the Special Assistant to the President of the AFL–CIO; Ms. 

Jennie Chin Hansen, who is President of AARP; and Mr. Randel 

K. Johnson, who is the Senior Vice President for Labor, Immigration and Employee Benefits for the U.S. Chamber of Commerce. 

Get a nice soft seat. I would also as you are getting settled suggest that we may have interruptions from time to time for votes, 

but I know that all of the Members have received your prepared 

testimony, and I know that they have prepared questions from 

that. And while they will be interested in hearing a summary of 

that, it is obvious that many of them are not here. I hope you will 

forgive our formalized procedures. We will ask you to summarize 

your testimony, and we will get through that. We will start to give 

the Members a chance to inquire, which will I think elicit a lot of 

information that will help us as we move ahead with this proposal. 

I am looking to say with us and so we are missing Mr. Shea. He 

will be back, okay. Mr. Kirsch, would you like to proceed since you 

are first on the list? 

STATEMENT OF RICHARD KIRSCH, NATIONAL CAMPAIGN 

MANAGER, HEALTH CARE FOR AMERICA NOW! 

Mr. KIRSCH. Yes, I would. Thank you very much, Chairman 

Stark and Members of the Committee for your patience this morning as well as ours. 

My name is Richard Kirsch. I am the National Campaign Manager of Health Care for America NOW, which is a coalition of more 

than 1,000 organizations in 46 States that are committed to specific principles to provide a guarantee of quality, affordable health 

care for all. Those principles have been endorsed in writing by the 


dkrause on GSDDPC29PROD with HEARING
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President of the United States and 196 Members of Congress, including 176 Members of the House of Representatives from both 

parties. 

I am so pleased to join you this morning because the legislation 

you have drafted meets those principles; it would deliver on the 

promise of quality, affordable health care for all in a health care 

system that is retooled to deliver better quality at lower cost. You 

have done so in this unique, tri-committee process that recognizes 

the urgency and historic imperative of this issue. 

Our current health care system is a huge stumbling block to the 

American dream. No matter how hard we work, or make responsible choices for ourselves and our families, our health care system 

often gets in the way. For too many families, one serious illness 

can mean financial disaster, as medical costs contributed to more 

than three out of five personal bankruptcies, and most of those 

were people with insurance. And even those with good insurance 

have limited choices and dreams deferred in our system because if 

you want to look for a new job, start that new business, retire at 

59, you are trapped because you will not be able to get affordable 

coverage—if you can get coverage at all. 

And of course, so many working families cannot get coverage at 

all. Neither can many small businesses—that other engine of the 

American dream—who want to do the right thing for their employees, but cannot as health care premiums skyrocket every year. 

The good news is that we can fix what is wrong with the system 

with a uniquely American solution. For those who say we cannot 

do this, it is too complicated, it is too much to take on, it’s too much 

at once, your legislation is proof positive that yes we can. 

As Americans begin to pay attention to the health care debate, 

they are asking what does this mean to me? Here is how I would 

explain to people how this works and how your legislation will 

make their lives better. 

First, if you have good health coverage at work, you can keep it. 

But there will be two important changes. Under your legislation, 

you will no longer have to worry about your coverage at work getting skimpier every year, or your employer taking a bigger chunk 

each year out of your paycheck. Your employer coverage will not 

be barebones. It will cover most of your health care. It will not stop 

paying if you get seriously ill. Your job will pay for a good share 

of coverage for you and your family. One more thing, whatever job 

you take, you will have good health care. That is because all employers will either provide coverage or help pay for it. 

Now, if you do not get health coverage at work, you work several 

part-time jobs, you are self-employed, an early retiree, or simply 

out of work, you will now be able to get good, affordable coverage. 

You will not be turned down because of a preexisting condition or 

charged more because you have been sick or you are a woman of 

childbearing age. You can still be charged more if you are older, 

but only so much. 

And how much will it cost you? That will depend on your earnings, the size of your family, the assistance for low-, moderate-, and 

middle-income families. 

You will go to get insurance in a new marketplace, called an exchange. In the exchange, all plans will have a decent level of beneVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00107 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

dkrause on GSDDPC29PROD with HEARING
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fits and play by the same rules. And no matter which plan you 

choose, your out-of-pocket costs will be limited; no more catastrophic medical bills. 

You will have a choice of the new public health insurance plan 

too, so you will not be limited to the same private insurance companies that have a record of denying and delaying care while they 

raise premiums three or four or five times as much as wages. 

As the President says, there are two reasons for the choice of a 

public health insurance plan. The first is to lower costs from a plan 

that does not pay the average CEO $12 million a year, or have skyhigh administrative costs. The mission of the public health insurance plan will deliver the kind of delivery system changes we need 

to innovate, provide better value and invest in our communities 

and make real progress in eliminating the barriers and disparities 

and access to services we experience today. 

The second reason the President says we need a public option is 

to keep the insurance companies honest. The 93 percent of Americans who do not trust private insurance companies know that no 

matter how much we regulate them, their first order of business, 

actually their legal fiduciary responsibility to the shareholders is to 

make a buck. When they pay for someone’s costly care, their profits 

go down. 

This legislation also answers the crying needs of small businesses for affordable coverage. By offering tax credits and allowing 

small businesses to enter the exchange, it gives them the advantage of a large pool and lower costs. 

Your legislation does a great deal more for the poorest through 

Medicaid and for seniors on Medicare to address the lack of primary care providers and disparities in access to health care. 

Are there ways we would improve on this draft? There are, although not a great number. And we will detail them in our written 

testimony and I can suggest some today if you would like. 

I would like to conclude by asking you to keep in mind one question over the coming weeks, as you hear from a myriad of interest 

groups complaining about this and that. It’s the question your constituents will ask at the end of the day: Will I have a guarantee 

of good coverage that I can afford? 

The draft legislation you have presented answers with a resounding yes. And if the answer remains yes, next fall when you send 

a bill to the President for his signature, you will have done your 

jobs. And in doing so, made history. 

Thank you. 

[The prepared statement of Mr. Kirsch follows:] 

Prepared Statement of Richard Kirsch, 

National Campaign Manager, Health Care for America NOW! 

Good morning, Chairman Rangel, Chairman Stark and Members of the Committee. My name is Richard Kirsch. I’m the National Campaign Manager of Health 

Care for America NOW, a coalition of more than 1,000 organizations in 46 States 

that are committed to specific principles to provide a guarantee of quality, affordable health care for all. Those principles have been endorsed in writing by the President of the United States and 196 Members of Congress, including 176 Members 

of the House of Representatives from both parties. 

I am so pleased to join you this morning because the legislation you have drafted 

meets those principles; it would deliver on the promise of quality, affordable health 

care for all in a health care system that is retooled to deliver better quality at lower 


dkrause on GSDDPC29PROD with HEARING
101 

cost. You have done so in this unique, tri-committee process that recognizes the urgency and historic imperative of this issue. 

Our current health care system is a huge stumbling block to the American dream. 

No matter how hard we work, or make responsible choices for ourselves and our 

families, our health care system often gets in the way. For too many families, one 

serious illness can mean financial disaster, as medical costs contributed to more 

than three out of five personal bankruptcies, and the great majority of those are 

people who are insured. Even having good insurance limits choices and defers 

dreams. Want to look for a new job, start that new business, retire at 59? Trapped 

because you won’t be able to get affordable coverage—if you can get coverage at all. 

And of course, so many working families can’t afford coverage at all. 

Neither can many small businesses—that other engine of the American dream— 

who want to do the right thing for their employees, but can’t as health care premiums skyrocket every year. 

The good news is that we can fix what is wrong with the system with a uniquely 

American solution. For those who say we can’t do this, it’s too complicated, it’s too 

much to take on, it’s too much at once, your legislation is proof positive that yes 

we can. 

As Americans begin to pay attention to the health care debate they are asking 

what does this mean to me? Here’s how I would explain to people how this works 

and why it will make their lives better. 

If you have good health coverage at work you can keep it. But there will be two 

important changes. Under your legislation, you will no longer have to worry about 

your coverage at work getting skimpier every year, or your employer taking a bigger 

chunk each year out of your paycheck. Your employer coverage will not be 

barebones. It will cover most of your health care. It won’t stop paying if you get seriously ill. Your job will pay for a good share of coverage for you and your family. 

One more thing, whatever job you take, you’ll have good health care. That’s because all employers will either provide coverage or help pay for it. 

If you don’t get health coverage at work, you work several part-time jobs, are selfemployed, an early retiree, or simply out of work—you’ll now be able to get good, 

affordable coverage. You won’t be turned down because of a preexisting condition 

or charged more because you’ve been sick or you’re a woman of childbearing age. 

You can still be charged more if you are older, but only so much. 

How much will it cost? The amount you pay will be based on your earnings and 

the size of your family, with assistance for low-, moderate- and middle-income families. 

To get insurance you’ll go to a new marketplace, called an exchange, one-stop 

shopping for health coverage. All plans will have a decent level of benefits and play 

by the same rules. No matter which plan you choose, your out-of-pocket costs will 

be limited; no more catastrophic medical bills. 

You’ll have a choice of a new public health insurance plan too, so you won’t be 

limited to the same private insurance companies that have a record of denying and 

delaying care while they raise premiums three or four or five times more than 

wages. 

As the President says, there are two reasons for offering the choice of a public 

health insurance plan. The first is to lower costs from a plan that doesn’t pay the 

average CEO $12 million a year, or have sky-high administrative costs. The mission 

of the public health insurance plan will be to drive the kind of delivery system 

changes we need to innovate, provide better value and invest in our communities’ 

health. A plan that will inject competition into the 94% of markets in this country 

that are anti-competitive under Department of Justice standards. 

The second reason the President says we need a public option is to keep insurance 

companies honest. The 93% of Americans who don’t trust private insurance companies know that no matter how much we regulate them their first order of business— 

actually their legal, fiduciary responsibility to their shareholders—is to make a 

buck; when they pay for someone’s costly care, their profits go down. 

An additional reason for the public health insurance plan is to ensure that we 

make real progress in eliminating the barriers and disparities in access to needed 

services that are too often experienced today. 

Poll after poll shows strong support for the choice of a public health insurance 

plan. This Sunday the New York Times/CBS poll found that 72% of those polled 

support ‘‘offering everyone the choice of a government-administered health insurance plan—somewhat like the Medicare coverage that people 65 and older get—that 

would compete with private health insurance plans,’’ including half of the Republicans, three-fourths of the independents and nine out of ten Democrats. 


dkrause on GSDDPC29PROD with HEARING
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This legislation also answers the crying needs of small business for affordable coverage. By offering tax credits and allowing small businesses to enter the exchange, 

it gives them the advantage of a large pool and lower costs. 

To the question of how we will pay for this, you have said with shared responsibility: Individuals responsible for what they can afford, employers responsible for 

paying for more affordable coverage. Government will fulfill its responsibility by 

achieving savings in the system and by raising new revenues that you will soon detail. In doing so, we would urge you to raise revenues from those who can most afford it and by closing Wall Street and corporate loopholes. Not by taxing the health 

care benefits of those who still are fortunate enough to have good insurance. 

Your legislation does a great deal more, for the poor through Medicaid, for seniors 

on Medicare, to address the lack of primary care providers and the disparities in 

access to health care. 

Are there ways we would improve on this draft? There are, although not a great 

number. We will detail them in our written testimony and I’d be glad to discuss 

some suggestions during the question period. 

I’d like to conclude by asking you to keep in mind one question over the coming 

weeks, as you hear from a myriad of interest groups complaining about this and 

that. It’s the question that your constituents will ask at the end of the day: Will 

I have a guarantee of good coverage I can afford? 

The draft legislation you’ve presented answers with a resounding yes. And if the 

answer remains yes next fall when you send a bill to the President for his signature, 

you’ll have done your jobs. And in doing so, made history. Thank you. 

f 

Mr. STARK. Thank you. And, Mike Draper, the owner of SMASH 

from Des Moines, would you like to proceed? Is your microphone 

on? 

Mr. DRAPER. Yes. 

Mr. STARK. Okay. 

STATEMENT OF MIKE DRAPER, OWNER, SMASH, 

DES MOINES, IOWA 

Mr. DRAPER. I may be a little nervous. This is my first time 

speaking to so many empty leather chairs. 

[Laughter.] 

Mr. DRAPER. As I look through this list, I am probably the only 

person who is not recognizable with the organization I am from, 

and so I thought maybe I would start with explaining exactly who 

I am and how I got to be here. 

I own a store called SMASH. I am 26 and SMASH is a clothing 

store and screen printing shop located in beautiful downtown Des 

Moines. So essentially I am the token Main Street guy, the ‘‘Mike 

Six Pack,’’ if you will. 

I grew up in a small town in Iowa, studied history at the University of Pennsylvania, then moved to the United Kingdom where I 

married a girl from London, who was more than surprised when 

I decided to move back to Iowa and start a screen printing retail 

store, not just for the fact that she had to move from London to 

Des Moines but for the fact that I had no experience in retail, design or screen printing. And the closest I had come at Penn to a 

formal business education was a macroeconomics class, which I 

dropped after getting 42 percent on the supply and demand test. 

I started the company at the bottom, printing shirts and selling 

them out of a bag on the street or on college campuses. While I was 

selling shirts on the street in Union Square with other vendors, I 

thought to myself, ‘‘Well, it is true. You really cannot do anything 

with a history degree.’’ But I worked constantly and set up a 


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website in 2004 and then opened SMASH in 2005 as an 1,100 

square foot retail store by myself and grossed $90,000 the first 

year. Now, 4 years later, the store has 4,200 square feet, 12 employees, and we will gross over $1 million this year, having been 

featured in the New York Times twice, NPR twice and several 

other national publications. 

Along the way, I got the business education I needed. I have had 

to figure out business strategy, management, bookkeeping but 

health care has proved probably the most frustrating. In 2007, 

after 2 years of being uninsured, I bought an individual policy and 

felt like I was one of the ‘‘chosen few.’’ And my insurance epiphany 

probably came when I had a minor surgery and weeks later was 

sent a bill for $347 for miscellaneous hospital charges. I started to 

wonder what would happen if I started sending out customers $347 

miscellaneous T-shirt charge bills after I got done. But that is kind 

of the introduction of the system does not work on a market and 

it did not make sense. 

And you guys probably know most of the problems as well as I 

do but the solution is a lot trickier. I think the bill that everyone 

has come up with here is a pretty good start. I think the exchange 

addresses a lot of those problems with general regulation, better 

pricing, transparency and coverage rules. But in my opinion competition is always more effective than just regulation and the public option is the only option strong enough to compete with the private sector. 

Now, when I hear ‘‘public option,’’ I do not hear ‘‘free option.’’ I 

am not here asking for free health care, a government handout. I 

am asking for rational health care. As a businessowner, I would 

gladly pay 8 percent of my payroll into a public option since that 

would give me two things: One, peace of mind that my employees 

would be covered by something backed by the government; and, 

two, more importantly, an ability to accurately budget per year my 

company’s health care expenses. Right now, my premiums and bills 

will fluctuate between 6 percent and 22 percent of payroll in any 

given year. An expense that large and unpredictable is what drives 

companies out of business, not a tax that they know they have to 

pay at the beginning of the year. 

Now, it may sound strange that I would be willing to pay a new 

tax but rest assured I am not a socialist. I am not here trying to 

undermine capitalism. Rather, the small mountain of money I send 

to you guys several times a year does not make me clamor for more 

government, but the unsustainable cost of my current health cost, 

the one thing that could probably ruin the company, makes me 

clamor for an actual option. 

The public option is less intrusive to me since I would have the 

option. I could take the public plan or I could take the private plan. 

With simply doing the exchange or by simply regulating the market, it seems like bigger government. You could have new rules, 

possibly required health care, some subsidized by the government, 

meaning that my tax money would go to subsidize some people’s 

money going to the private insurance industry. On the other hand, 

my private money has to go to that same private insurance industry. Now, even somebody who has dropped out of macroeconomics 

says that that is a kind of frustrating thing to deal with. 


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I understand that the issues are complex. Insurance blends technical problems with ideological differences and many of the details 

of the plan really can only emerge when it is functioning, making 

these details impossible to know now, such as how many people 

will take the public plan, if rates will actually go down. 

But not knowing every detail of the future should not stop us in 

the present from working for a better one. And something needs to 

be done for the future of small business health care. We should not 

lose sight of the fact that this is one of the few countries where 

somebody like me can start a business with no business knowledge 

and succeed. And while you guys cannot legislate entrepreneurial 

spirit, you can help to take down some of the hurdles impeding entrepreneurs from starting companies. Right now, health care is one 

of the biggest hurdles to either entrepreneurs trying to start companies or existing companies staying in business. And I think the 

public option is our best option for taking care of that. 

Thank you. 

[The prepared statement of Mr. Draper follows:] 

Prepared Statement of Mike Draper, Owner, SMASH, Des Moines, Iowa 

Chairman Rangel, Ranking Member Camp and Members of the Committee, thank 

you for inviting me to be here today and to testify on behalf of my business and 

small businesses across Iowa. 

My name is Mike Draper. I am 26 and own and operate SMASH, a clothing store 

and screen printing/design shop in beautiful downtown Des Moines, Iowa. 

Although I grew up in a small town outside of Des Moines, even the 21-year-old 

me never would have guessed that the 26-year-old me would be back in Iowa living 

and working. I left the State for the east coast at 17 to study history at UPenn in 

Philadelphia, I spent a year and a half living in the UK and Germany, and in the 

UK I met a girl from London who I would convince to marry me. 

And let’s just say that of all the people who were surprised I was moving back 

to Iowa, she and her parents were definitely in the top 5. 

More surprising was that I wanted to run a clothing store and screen printing 

shop. I had no experience in design, in printing, or in retail clothing, but I always 

say that if I had ever actually stopped to analyze my situation, I never would have 

started the business I started. 

After I graduated, I lived with friends while I traveled around selling shirts out 

of a bag on college campuses and busy street corners. One day selling shirts in 

Union Square I began to worry that what I had heard from so many people was 

true: You really can’t do much with a history degree. 

But I worked constantly. I built a website to sell shirts. I bought screen printing 

equipment. And I realized that my home State of Iowa offered the affordable space 

and the niche market I needed to succeed. 

So in 2005 I moved back and opened a 1,100 square foot retail and printing space 

by myself and I grossed about $90,000 in sales. Now, 4 years later, SMASH has 

4,200 square feet, a dozen employees, and will gross over $1 million in sales this 

year. 

Like many businessowners, I have realized that business is often less about the 

idea, and more about finding solutions to the constant problems that come from 

dealing with other humans. The closest I ever came to a formal business education 

was a macroeconomics class that I dropped after getting a 42% on my first test that 

only covered supply and demand. But even without business training I have successfully maneuvered my way through small business taxes, building codes, trademark law, even immigration issues for a web designer from Denmark who went to 

college in Des Moines and now works at SMASH. 

But health care has always confounded me. 

SMASH and the Challenges of Health Care 

Right after college, while I traveled and sold t-shirts, I went without health insurance. When I bought an individual policy in 2007, after 2 years of being uninsured, 

I thought I had become part of the chosen few, the insured. But my ‘‘insurance 

epiphany,’’ when I realized how odd our system is, came weeks after a minor surgery, when I got an unannounced $347 bill for ‘‘miscellaneous hospital charges.’’ 


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I laughed when I opened it, imagining what would happen if I started mailing 

out bills that said, ‘‘miscellaneous t-shirt charges’’ to customers weeks later. 

It dawned on me how little my individual policy covered: High deductible, high 

drug costs, no free doctor’s exams. But there was nothing else I could afford. 

As SMASH added more employees, there were now more people inheriting my situation. As young moderns, none of us want to be tied to a corporate policy—we 

would rather have a flexible plan we can travel with. And so all of the employees 

at SMASH have individual policies that the company pays for. 

This most basic coverage makes up 8% of our gross payroll. 

What alarms me is that this is the most elementary coverage offered by our provider, Wellmark, and is really only intended to provide the most basic coverage in 

case of catastrophic accidents. 

If SMASH were to try and provide our employees with full family coverage, our 

costs would balloon to about 22% of our gross payroll, and still we would have plans 

inferior to those plans of larger companies. 

I can’t run away from the cost of health care, either for myself, my family, or my 

employees. The way we do things now, where responsible employers offer coverage 

and others don’t, creates an incredibly uneven playing field. I’d much rather be part 

of a system where all employers are contributing a fair share, instead of this game 

of shifting costs that we’re playing today. Small businessowners like me are willing 

to contribute—73% said so in the Taking the Pulse of Main Street survey conducted 

by the Main Street Alliance last year. 

Once my wife took a job as a nurse, I moved my insurance to her family plan, 

but with our family growing, it becomes more likely that my family plan will soon 

go through SMASH. And as the SMASH employees age and add families, the 22% 

cost becomes more and more likely. 

I have seen being uninsured, being underinsured, now being ‘‘fully’’ insured under 

my wife’s plan, and I’ve spent over a year living under the UK’s national health. 

I’m as aware of the problems in each as everyone here is. 

Big Steps in the Right Direction 

The solution is much trickier, but I think the draft bill released by this Committee 

last week is a great start. The ‘‘Exchange’’ seems to address the need for basic regulation, transparent pricing, and coverage rules. It points out the major holes in our 

current system and gets to the heart of the matter: That we need competition. The 

Exchange will provide a more competitive, transparent marketplace that will offer 

real choices for individuals and small businesses. In the Exchange, we will actually 

be able to compare the insurance plans being offered because the benefit packages 

will be standardized and the differences in the plans will be disclosed. 

I’m also happy to see the provisions in the draft legislation to reform insurance 

practices to prohibit discriminatory coverage and rating policies. These changes are 

long overdue—I wish it wasn’t necessary for the Federal Government to step in and 

pass laws to get insurers to stop these unfair practices, but if that’s what it takes 

then I support you taking action as quickly as you can to put them in place. Reforms that prohibit exclusions based on preexisting conditions and discrimination in 

benefits, require plans to meet minimum medical loss ratios, do away with annual 

and lifetime limits on coverage and cost-sharing for preventive care, limit unfair rating practices, provide for guaranteed issuance and renewal of policies, and assure 

the adequacy of provider networks will go a very long way to creating a sane marketplace where policies are worth their premiums and where individuals and small 

businesses can be smart shoppers for the health care coverage they need. 

By creating a Health Insurance Exchange, the bill makes it possible for small 

businesses to have the affordable option necessary for employers and individuals to 

share the responsibility of providing quality health care coverage. I like the idea of 

the ‘‘Exchange,’’ but in my opinion, real competition is always more effective than 

regulation alone. The public option set forth in the bill will do more than anything 

to ensure competition, and is therefore the most important component to me. Having a public plan that will compete toe-to-toe on a fair basis with private plans will 

guarantee that even in local insurance markets dominated by one or two private insurers, we’ll have real choices and the leverage that comes from being able to vote 

with your feet and take your business elsewhere if you can’t get the insurance coverage you need. 

I’m convinced that by encouraging real competition and restoring vitality to the 

market, a public health insurance option will really drive broad-based positive 

change in the private sector health insurance industry. According to the Commonwealth Fund, health reform that includes a public option has been estimated to save 

employers $231 billion over 2010–2020, and $3 trillion for the Nation. Without the 

public plan option, those savings shrink from $3 trillion to less than $800 billion: 


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We lose three-quarters of the savings. I don’t know much about budget scorekeeping 

in Congress, but it seems to me like these are savings we can’t afford to pass up. 

A public plan is also essential to encourage innovation in coverage and affordability in a competitive market. Our business has to be constantly looking for ways 

to serve customers better, more efficiently, at lower prices, and we are definitely 

driven by competition from other businesses. As a purchaser of health insurance 

coverage, I want my insurer to have to compete for my business the same way that 

I have to compete for my customers. 

I understand that the insurance issue is not only technically complicated, but also 

invites ideological differences on government involvement. But it seems to me that 

some of those differences are obscuring the real agreement on the need for a public 

health insurance plan. A number of recent polls suggest that somewhere around 

70% of the public supports the creation of a public health insurance option and from 

what I’ve seen most of the small businessowners I know agree. In the survey I mentioned earlier conducted by the Main Street Alliance, 70% of the responding businesses said they believe government should play a stronger role in guaranteeing access to quality, affordable health care. When asked to choose between a reform proposal with a public insurance option and one with expanded private market options, 

59% of the responding businesses chose the plan with a public option, compared to 

26% that preferred a proposal with more private market options. 

The bill also includes a phase-in of eligibility for small employers to secure coverage through the Exchange and to gain access to the public health insurance option, with firms employing 10 or fewer workers eligible in year one and firms up 

to 20 employees eligible in year two. I realize that this phase-in is intended to be 

cautious and not create unintended consequences by moving too quickly. But from 

my viewpoint, we can’t make access to the public plan option and the other private 

plan options available too soon. I would encourage the Committee to consider accelerating the phase-in for employers to gain access to the Exchange. 

Now I don’t read ‘‘public option’’ as ‘‘free option.’’ I’m not here asking for free 

health care, all I’m asking for is rational health care. 

I and other small businesses in my neighborhood are not tired of health care premiums. We’re tired of health care premiums going to companies whose sole goal is 

to turn a profit, with little or no regard for the impact of their policies and practices 

on small businesses like ours. With SMASH’s insurer, Wellmark, I know that I am 

a minute number on a long balance sheet that can be dropped or dragged through 

court. 

With a public health insurance plan option offered through the Federal Government, I would have an independent Federal agency accountable to Congress—you 

all—on my side, and a system whose goal is not to maximize profits at all costs, 

but to actually provide real health coverage that meets the needs of my business. 

Which means at this point, apples to apples, if I had to choose between paying my 

premiums to the Federal Government or Wellmark, I’d rather send my premiums 

to the government. 

It may sound strange to hear a small businessowner like me say I’d rather send 

my premium dollars to the Federal Government than to a private insurer. When it 

comes to economic issues, the pile of money I send to Washington, DC makes me 

fairly conservative. But it is this conservative streak in me that wants the competition that a public option will bring. 

First of all, I understand that there may be additional taxes involved, but I don’t 

mind paying taxes that are well spent. Right now, however, I see my tax money 

going to pay for high-cost health care that county hospital ERs are forced to provide 

for the uninsured, while 8% of my payroll already goes toward providing only the 

most basic, catastrophic coverage for a group of employees who are all single and 

in their 20s. 

That means I’m paying for two separate yet equally inefficient systems, and even 

someone who dropped macroeconomics can see that isn’t rational. 

Second, I support the idea of shared responsibilities in the bill that require individuals and employers to play their part in assuring that everyone has health care 

coverage. I agree with the approach of giving employers an option of providing coverage for their workers or contributing funds on our worker’s behalf. In my own 

case, I think paying 8% of my payroll to provide health insurance for my employees 

is fair, and the benefits package is likely to actually cover our health care costs with 

no preexisting condition exclusions. 

For a business, taxes are easy to take into account because they are a fairly static 

expense. What are not static are health care bills that cannot be budgeted each 

year. I have never met a business that went under because of their tax burden, but 

I meet small businesses and entrepreneurs all the time that can’t make it because 

of their health insurance burden. If extra taxes will help to stabilize the insurance 


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market and make it something I can actually depend on for care and realistically 

budget for, I am in full support. 

While 8% would not be any issue for SMASH, I’m glad to see provisions in the 

bill to establish a tax credit to help small employers bear the cost of providing coverage for their workers. A 50% credit will give a big boost to businesses with 10 

or fewer employees with average compensation of $20,000. This, too, offers a great 

deal of help in improving the health insurance options currently available to small 

businesses. 

I also understand that requiring employers to provide health insurance puts another responsibility on me, but it’s nothing new for small business. I already take 

care of withholding tax and unemployment tax for employees. If one of you came 

in to shop, I’d make sure the government got the sales tax you owed. These are the 

responsibilities that come with being at the top of the ladder. Right now, I have the 

unpleasant responsibility of knowing that the only health coverage we have is insufficient coverage, that one catastrophic illness could not only ruin one of my employees, but could put the entire company in serious trouble. When compared to that, 

I would gladly accept the responsibility of providing insurance coverage that I 

wouldn’t have to worry about. 

Representatives of the Main Street Alliance look forward to continuing to work 

with you to assess the interaction of the various small business related provisions 

in the bill to ensure there is affordability across the range of small businesses, 

whether they directly provide coverage for their workers or contribute to helping 

workers buy their own coverage through an Exchange. 

An American Solution 

I understand this is a complicated issue, but I think the U.S. is in a unique situation. We could now create a public-private hybrid that could work better than any 

system in the world, one that blends the stability of a government-backed system 

with the self-regulation of a market system. 

As we step back, we shouldn’t lose sight of the fact that this is one of the few 

nations where people like me can jump into business and succeed with hard work. 

We should recognize that it is not just a free market that makes this possible, it 

is also our country’s ability to provide things like affordable public education to give 

people the tools they need to succeed in business. 

Health care is currently a huge hurdle that is often too high for would-be entrepreneurs to surmount, and this creates a serious drag on a major part of our economic engine. 

While you can’t legislate the entrepreneurial spirit, it is possible for you, Congress, to tackle the hurdles holding back many small businesses and the economy 

at large. This model of creating choice and competition is an opportunity to do just 

that. 

Adding a public option to health care would not only ensure care for the uninsured, it would provide a much needed injection of energy at the front lines of our 

market economy, making it easier for young people like me to strike out on their 

own and start their own business like millions of Americans before them and keep 

our country leading and prospering in the century to come. 

Thank you. 

f 

Mr. STARK. Thank you, Mike Draper. Next, Mr. Peter Lee, who 

is the Executive Director for National Health Policy of the Pacific 

Business Group on Health from San Francisco, California. Welcome 

and please proceed as you would like. 

STATEMENT OF PETER LEE, EXECUTIVE DIRECTOR FOR NATIONAL HEALTH POLICY, PACIFIC BUSINESS GROUP ON 

HEALTH, SAN FRANCISCO, CALIFORNIA 

Mr. LEE. Chairman Stark, Ranking Member Camp, Members of 

the Committee, thank you very much for having me here today. I 

represent the Pacific Business Group on Health, which is a nonprofit coalition of some of America’s largest employers that buy 

health care. 


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America’s employers recognize that we need to dramatically overhaul the health care system. The recognition comes from the fact 

that they face challenges on a daily basis providing coverage to 

over 160 million Americans. 

We appreciate what this Committee is wrestling with, what Congress is wrestling with, and what the Administration is seeking to 

do to craft reform that will change health care and make it more 

affordable. 

There is not a single employer perspective on health reform, no 

more than there is a single American perspective on health reform. 

There are, however, some core beliefs that employers share in common. And I have detailed those in more detail in my written testimony, but I want to go through some of those beliefs and highlight 

how they relate to the discussion draft that we are discussing 

today. 

First, employers believe that we must ensure that all Americans 

have health insurance, and we should do that by building on the 

current employer-sponsored individual and public program system. 

In many ways, the discussion draft does recognize the important 

role the employer-sponsored coverage plays in America and builds 

on that system. Having coverage for individuals for small businesses through exchanges across the country is going to be an important tool. With expanded coverage, employers are hopeful that 

the cost shift from the uninsured will be greatly reduced. 

Employers believe that we must address health care costs, which 

are driving individual Americans to bankruptcy, making our companies less competitive internationally, creating long-term structural deficits that our children will have to bear. 

The discussion draft supports many of the delivery system reforms that we believe are essential to reign in out of control health 

care cost while fostering quality. Among the proposals that we 

think are important are building and supporting national rules for 

a more competitive, affordable insurance marketplace for individuals and small business, developing better performance measurements for providers, changing payment and outlining incentives for 

higher quality, and expanding investments for wellness and prevention. 

In particular, the discussion draft clearly recognizes the critical 

role that payment reform must play in creating better value for 

Americans. I applaud in the inclusion of the draft a range of payment reforms, including bolstering payments for primary care and 

changing the way we pay for care to move from volume to value. 

Part of changing payment though should include changing how 

payment decisions are made. Current payment policies for Medicare are too inflexible and quite honestly susceptible to focused interest of the recipients of payment. Congress should consider creation of a new entity with independent authority to implement 

broad direction that Congress provides. 

The discussion draft also recognizes that measuring the performance of health care is the foundation for quality improvement, giving consumers better tools and payment reform. Employers are 

part of a broad coalition called Stand for Quality, which makes a 

number of recommendations, many of which are in the discussion 

draft. We encourage the Committee to consider building those recVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00116 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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ommendations to make sure there is enough resources to develop 

new measures and to support consultative processes so when measures are put into use, consumers, purchasers and others are at the 

table. 

Employers strongly support the discussion draft proposals to expand our national commitment to comparative effectiveness research. Patients and consumers need better information to make 

decisions about what is right for the patient. 

The discussion draft also recognizes the need to promote wellness 

and prevention. Few issues are as close to the heart of the employer community; we support those significantly. 

I would note that nationally there is a lot of discussion about the 

10-year bill for expending coverage of being $1 trillion or $1.5 trillion. I would point out that those are big numbers and big issues, 

but over the next 10 years, we will spend $45 trillion on health 

care. The President is right that the real number we need to look 

at is how do we reduce health care costs across the board by $2 

to $3 trillion. Your proposal includes many building blocks to put 

us on a path for reigning in costs, but we need to have mechanisms 

to measure our progress and hold both the public and private sectors accountable for reducing costs. We truly are on an 

unsustainable track in terms of health care costs. 

Part of reducing costs and promoting efficiency is aligning public 

and private programs. When we looked at the proposal to have a 

public plan, many employers were deeply concerned that that public plan would shift cost to the private sector. What we need to 

have is options that align payment models across public and private purchasers to ensure that providers are rewarded consistently 

but do not shift costs from one sector to the other. 

Health reform must be about making high-quality health care affordable for patients, employers and government. We look forward 

to working with this Committee and so many other Americans who 

share that goal. 

Thank you very much. 

[The prepared statement of Mr. Lee follows:] 

Prepared Statement of Peter Lee, Executive Director for National Health 

Policy, Pacific Business Group on Health, San Francisco, California 

Chairman Rangel and Members of the Committee, thank you for the opportunity 

to be with you today. America’s employers recognize the need to dramatically overhaul our Nations’ health care system. That recognition comes from the challenges 

we face on a daily basis providing health care coverage to over 160 million Americans. We greatly appreciate that this Committee, Congress and the Administration 

are seeking to craft reforms that will change how health care is delivered and make 

it more affordable. 

The Pacific Business Group on Health makes these comments as a nonprofit association of many of the Nation’s largest purchasers of health care, based in California. PBGH represents both public and private purchasers who cover over 3 million Americans, seeking to improve the quality of health care while moderating 

costs. The Pacific Business Group on Health represents large and small employers 

in efforts to improve the value of health care. We help our large purchaser members 

‘‘buy smarter,’’ and for many years we operated one of the largest small employer 

purchasing pools in the Nation. 

There is no more a single ‘‘employer perspective’’ on health reform than there is 

a single ‘‘American perspective’’ on reform. Employers hold a variety of positions on 

the big issues of financing and payment, as well as on issues such as the ‘‘public 

plan’’ and the role of government. There are, however, some core beliefs about 

health reform shared by virtually all businesses that we believe should guide the 


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1 A recent survey of senior health benefits executives for large companies identified strong 

support for government playing a role in making insurance products available for individuals 

and small businesses (with over 55% supporting this role). At the same time, those surveyed 

held a range of views, but with more than two times as many having a negative view of the 

‘‘play or pay’’ requirement for employers (38% strongly negative; 19% strongly positive) and establishing a ‘‘public plan’’ (40% strongly negative; 21% strongly positive). Corporate Health Care 

Policy Forecast Survey, Miller & Chevalier/American Benefits Council, June 2009. 

Committee on Ways and Means and reform discussions in general. Those core beliefs include: 

• We must ensure that all Americans have health insurance by building on the 

current system of employer-sponsored, individual and public programs; 

• We must address health care costs which are driving individual Americans to 

bankruptcy, making our companies less competitive internationally, creating 

long-term structural deficits that are breaking the banks of States across the 

country, and imposing unacceptable liabilities on our children; 

• We must address the persistent differences between how public and private systems measure performance and pay for care. These differences lead to confusion 

for consumers and providers, create unacceptable price pressures on employers 

and engender disconnected incentives between public and private payers; 

• Health care reform must support and encourage clinicians and hospitals in delivering better quality, more ‘‘patient-centered’’ care—which will entail doing a 

better job measuring what works, changing how we pay for health care and 

making better use of information technologies; • We need to promote wellness and prevention, instead of focusing only on intervening after the fact; and 

• All Americans—as engaged patients, caregivers and consumers—need to be 

given better tools and incentives to participate in getting the right care at the 

right time. 

Americans believe in value—we seek to get the best quality possible for our 

money. Yet, no one is getting good value for their health care dollar. Our health 

care system is broken. Quality of care varies dramatically between doctors and hospitals, but those differences are invisible to patients. Payments reward quantity 

over quality and fixing problems over prevention. Lack of standardized performance 

measures makes it impossible to know which providers are doing a good job, and 

which are not. Consumers lack information to make the choices that are right for 

them. Health reform must address these underlying issues and we are heartened 

that the proposals in the Discussion Draft recognize and address many of these 

problems. 

Core Employer Belief: We must ensure that all Americans have health insurance by building on the current system of employer-sponsored, individual and public programs. 

The vast majority of employers continue to believe that reform should build on 

the employer-based system that works for millions of Americans. Employers see 

health benefits as a crucial tool that fosters a more productive workforce. The Discussion Draft affirms the role of employer-sponsored coverage by building on the existing system and seeking to expand coverage through small business in Exchanges 

across the country. Employers that offer coverage believe that the costs of insurance 

for their employees is substantially higher than it should be because of cost-shifting 

from hospitals and doctors seeking to recoup costs of caring for the uninsured and 

receiving underpayment by public programs (both Medicare and Medicaid). With expanded coverage, employers are hopeful that the cost-shift from the uninsured will 

be greatly reduced. 

Particular elements of reform—especially the possibility of employer mandates— 

will have support or opposition from the employer community in direct relation to 

whether the broader package of reforms promote meaningful improvements in the 

cost and quality of care.1 As well articulated in the Position of the HR Policy Association Regarding Reform of the U.S. Health Care System (April 2009), large employers support the voluntary nature of the Nation’s employer-based system and would 

consider the potential employer play-or-pay mandate only insofar as it is well-crafted, part of a wide array of other reforms and fully considers ‘‘the interplay of all 

elements of the package necessary for reform.’’ 

Core Employer Belief: We must address health care costs—which are driving individual Americans to bankruptcy, making our companies less competitive internationally, creating long-term structural deficits that are 


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2 Committee for a Responsible Federal Budget, June 1, 2009. The concept of a budget mechanism was also recently supported by Health CEOs for Health Reform, a group of leaders representing providers and payers who made a series of proposals in ‘‘Realigning U.S. Health Care 

Incentives to Better Serve Patients and Taxpayers’’ and in ‘‘Crossing Our Lines: Working Together to Reform the U.S. Health System,’’ by Senators Baker, Daschle and Dole. 

breaking the banks of States across the country, and imposing unacceptable liabilities on our children. 

There is broad recognition that we must slow the rise of health care costs. In the 

Discussion Draft, several proposals have the potential of reining in out of control 

health care costs while simultaneously fostering higher quality care. Among the reforms proposed that are essential to reining in costs and fostering quality and access 

are those that support national rules to create a more competitive and affordable 

insurance marketplace for individuals and small businesses; developing better performance measurement; changing payment and aligning incentives for higher quality; and expanding investments in wellness and prevention. 

President Obama has repeatedly underscored that health reform that does not 

control costs is not health reform. Similarly, Peter Orszag has been eloquent in articulating that ‘‘health care costs are the key to our fiscal future.’’ There is much 

discussion in Washington today about whether the 10-year ‘‘bill’’ for reform is $1 

trillion or $1.5 trillion. These are indeed big numbers. But these costs need to be 

considered in the context of the projected national health expenditures for the next 

10 years are expected to total $45.2 trillion which will be borne by taxpayers, employers, and individual patients. 

America’s business community is looking at the scoring done by the Congressional 

Budget Office and shares the concern that we have not yet achieved the bottom-line 

savings needed. As I have noted, the Discussion Draft has in it many elements that 

can reform the delivery of care and make it more affordable. We believe costs are 

driven by inadequate prevention, poor chronic care coordination, and overuse of supply-sensitive care. To achieve sustainable cost control, the health system needs to 

overhaul how care is delivered and the incentives that today reward more not better 

care. Also, compared to many other countries one of the key reasons for our higher 

costs is that in America we pay more for the same services. While addressing many 

of these elements are part of the reform proposals, employers share the concern evidenced by the CBO’s scoring that not only are we coming up short on paying for 

expanded coverage, we are not seeing how the reforms will achieve the $2 trillion 

to $3 trillion in savings from trend that are needed to create a sustainable health 

care system. 

We need to be serious about reducing costs while recognizing that we cannot restructure almost one-fifth of the Nation’s economy overnight. As we put in place the 

reforms that will change how we deliver care, to be credible not just to the Congressional Budget Office but to the American people, we need to chart out the steps we 

will take in the coming years if—through private and public sector actions—we fail 

to bend the cost curve. As the Committee for a Responsible Federal Budget recently 

said, ‘‘we believe that given the emphasis on crafting a plan designed to generate 

longer-term health care savings, the final bill should include a commitment to a certain level of longer-term health care savings with an enforceable budget mechanism 

to ensure the savings are realized. Such a mechanism could include automatic reductions in Medicare and/or new taxes if projected savings are not realized. A similar 

type of Medicare trigger has been ignored in the past, and a new budget mechanism 

would have to include real teeth and have the support of Congress to be effective.’’ 2

Any budget mechanism, however, needs to consider not ‘‘just’’ Federal spending, but 

the total health care expenditures of the Nation. Congress must recognize that its 

actions to reduce costs cannot merely shift costs to the private sector. If we cannot 

reduce current cost trends, the Nation must be ready to discuss solutions such as 

all-payer pricing or global budgeting. 

Core Employer Belief: We must address the persistent differences between 

how public and private systems measure performance and pay for care. 

These differences lead to confusion for consumers and providers, create 

unacceptable price pressures on employers and engender disconnected incentives between public and private payers. 

There is a need to align public and private programs on multiple fronts. The same 

measures of health care performance should be used to send consistent signals to 

providers and consumers to guide improvement, assist consumer decisionmaking 

and incent high quality and efficient care. The Discussion Draft recognizes the need 

to align public and private programs in a range of ways, including the efforts to 


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align Medicare’s measurement and payment practices with those of the plans in the 

Exchange. 

Public payers such as Medicare and Medicaid tend to pay significantly less for 

health care services than do private payers. Sometimes referred to as ‘‘cost-shifting,’’ 

the actual dynamics are more complicated, as evidenced by innovative research undertaken by MedPAC. From the perspective of many employers and purchasers of 

health care, they face bargaining situations with hospitals and doctors that are 

stacked against them: Medicare and Medicaid, with their below-market fixed prices, 

result in providers seeking additional above-market prices from private purchasers. 

In addition, the payment models used by Medicare have, historically, incented volume over value. Private purchasers then face the dual challenge of managing not 

only the value of the services they pay for, but also need to overcome the deeplyembedded incentives offered by public programs’ use of the fee-for-service system 

and lack of volume controls. 

Over time, we must redress this imbalance of payment models and payment levels. Our physicians and hospitals face a bewildering array of conflicting quality incentives, payment strategies, and oversight mechanisms. As large employers evaluate proposals for a ‘‘public plan,’’ they are deeply concerned that such a plan could 

lead to cost-shifting or increased misalignment between public and private payments to providers. While policy options are complex and fraught with hazards in 

this space, our priority should be to align the payment models across public and private purchasers to ensure that providers are rewarded consistently for safe, high 

quality, and efficient care. 

Core Employer Belief: Health care reform must support and encourage clinicians and hospitals in delivering better quality care—which will entail 

doing a better job measuring what works, changing how we pay for health 

care and making better use of information technologies. 

As noted earlier, the Discussion Draft includes an array of proposals to improve 

the delivery system such as better performance measurement; changing payment 

and aligning incentives for higher quality; and expanding investments in wellness 

and prevention. Employers view these as essential building blocks of reforming our 

health care system. 

Promoting Measurement and Quality Improvement 

In the past months there have been many collaborative proposals developed to reform health care. Two groups, in particular, have come together to advocate for concrete ways that quality and value can be built into reform efforts. 

First, over 200 groups under the name ‘‘Stand for Quality’’—representing an array 

of consumers, employers, clinicians and other providers, hospitals, health plans and 

more—have come together to call for dramatically increased Federal leadership in 

aligning priorities, developing performance measures to fill gaps, and engaging 

stakeholders in how those measures are used by the public sector (see 

www.standforquality.org). These recommendations call for the development of robust, independent systems for collecting and reporting performance results on patients’ outcomes, cost and patients’ views of care, and whether the right processes 

of care are being delivered by doctors, medical groups, hospitals, nursing homes, and 

other providers. 

Improving quality requires sharing information about what is happening inside 

our health care system with everyone who gets, gives or pays for care. There are 

a range of concrete policy options that can foster better measurement—which is the 

foundation for all efforts to improve the value of our health care system. I want to 

acknowledge and note my appreciation for the fact that the Discussion Draft embraces many of the Stand for Quality recommendations, including developing processes for setting national health care priorities, supporting the development of performance measures and funding quality improvement efforts at the point of care. 

I would encourage the Committee to build on its initial proposals by looking at 

the agreement reached by this diverse range of stakeholders. Additional actions 

should include increasing the level of support for developing measures in key areas 

such as functional status and resource use; promoting the use of standardized measures; and supporting consultative processes that assure that consumers, employers 

and providers can provide meaningful input to CMS in how measures are used for 

public reporting and payment. 

Beyond the common support for expanded measurement, employers strongly support the Discussion Draft’s proposal to expand our national commitment to comparative effectiveness research so that patients can have better information to use with 

their doctors when deciding which treatment is right for them. We need an ongoing, 


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3The Myth of Prevention, Dr. Abraham Verghese, Wall Street Journal, June 20, 2009, W1. 

independent and robust comparative effectiveness process that will assure that decisions about care are driven by the evidence and what is in the patient’s interest. 

Your Discussion Draft also recognizes the importance of releasing Medicare 

data—referring to the new Assistant Secretary for Health Information being 

charged with making available Medicare datasets. Beyond that action, CMS should 

be directed to routinely make available the Medicare claims database to qualified 

‘‘Quality Reporting Organizations’’ via HIPAA-compliant agreements. This would enable employer-sponsored and individually-sponsored health benefits plans to use aggregated public and private claims data to generate provider-specific health care 

performance results which will ultimately lead to lower premiums and higher quality of care. 

Reforming Payment 

Our health care system pays providers for the number of treatments and procedures they provide and pays more for using expensive technology or surgical interventions. It does not reward better quality, care coordination or prevention nor encourage patients to get the right care at the right time. As Dr. Abraham Verghese 

said so well in a recent Wall Street Journal article, we have ‘‘a skewed reimbursement scheme set up by Medicare, . . . that pays generously when you do something 

to a patient, but is stingy when you do something for a patient.’’ 3 A second broad 

collaborative—the Center for Payment Reform (www.CenterforPaymentReform.org)— 

has identified six core principles that should guide both public and private payment 

policies: 

1. Reward the delivery of quality, cost-effective and affordable care. 

2. Encourage and reward patient-centered care that coordinates services across 

the spectrum of health care providers and care settings. 

3. Foster alignment between public and private health care sectors. 

4. Make decisions about payment using independent processes. 

5. Reduce expenditures on administrative and other processes. 

6. Balance urgency to implement changes against the need to have realistic goals 

and timelines. 

Your Discussion Draft clearly recognizes the critical role that payment reform 

must play in creating better value for Americans and reflects many of these principles. In particular, I applaud the inclusion in the Discussion Draft of an array of 

payment reforms, many of which seek to bridge Medicare and Medicaid and promote 

alignment with private plans. These include: 

• Increasing payments for primary care in a range of ways. Fee-for-service payments do indeed need to be modified to promote primary care, better coordination and more efficient care. We need to rebalance the payment equation to better compensate providers engaged in preventive care, time spent coaching patients and coordinating care for those with chronic conditions; and relatively decrease payments for procedures and testing. 

• Extending the Physician Quality Reporting Initiative and calling on that program to better integrate clinical reporting of performance through electronic 

health records; 

• Establishing a robust set of pilot programs for accountable care organizations; 

• Establishing a program to reduce payments for avoidable hospital readmissions; 

• Moving away from today’s quality-blind fee-for-service and ‘‘pay for quantity’’ 

approach toward support for accountable care organizations, bundled payments 

for post-acute care and medical homes. 

As these models are implemented, however, I urge you to build in accountability 

mechanisms to provide a check against providers’ potential financial incentives to 

either seek to serve only healthier individuals (‘‘cherry-picking’’) or skimp on care, 

particularly for the most vulnerable, at-risk beneficiaries. It is critical that we build 

in the means to assess whether these models are enabling us to achieve better quality, more efficient, and more patient-centered care. 

Revaluing Services—Considering Patient and Societal Value 

The Discussion Draft recognizes that CMS should be directed to assess and fix 

how payments may be misvalued. Getting valuation of services right is important 

for Medicare and because these values are often applied by private health insurance 

plans. The current relative undervaluing of primary care and care coordination functions bodes ill for the aging population that will need more support. 


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4While this phenomenon is present in all payment systems, it is most apparent in the area 

of CMS’ annual efforts to update the Physician Fee Schedule and resource-based relative value 

scale (RBRVS). The relative values of the services are determined by CMS using its rulemaking 

authority. In practice, CMS relies heavily on recommendations (provided through the notice and 

comment rulemaking process) by an outside committee housed by the American Medical Association (AMA): the Relative Value Scale Update Committee or the RUC. The RUC is made up 

of physicians that represent nearly every specialty. Many of the RUC’s recommendations are 

based on expert panels and qualitative, subjective assessments of the physician work and practice expense components of the RVU value. In response to CMS’ request for comments, the RUC 

offers its recommendations on values for new services, and recommends adjustments to values 

for existing services on a periodic basis. 

Given the cost of analyzing and proposing new or revised RVU values, great weight is given 

to the RUC’s recommendations. (In March 2006, the Medicare Payment Advisory Commission 

(MedPAC) noted that CMS’ 5-year review ‘‘does not do a good job of identifying services that 

may be overvalued.’’ They further stated, ‘‘CMS has relied too heavily on physician specialty societies to identify services that are mis-valued.’’ Five-year reviews have led to ‘‘substantially 

more increases in RVUs than decreases, even though many services are likely to become overvalued over time.’’ (MedPAC, Medicare Physician Payment, March 2006.) All too often the perspectives of other health care stakeholders are notably absent and the broadly dispersed ‘‘public 

good’’ of assuring valuation for physician services that meets patient-centeredness and affordability goals is not a business priority for any one interest group. 

Beyond the assessment called for in the Discussion Draft, CMS should be directed 

to establish a mechanism to develop and implement a multi-year, multi-sectoral 

payment policy review and approval process. This mechanism would be charged 

with developing an integrated approach to updating existing and emerging payment 

models to assure aligned incentives across providers, and in the context of any 

State-driven and/or private sector-driven trends and initiatives. 

This new mechanism should solicit input from external stakeholders through a 

formal multi-stakeholder advisory process that addresses all provider segments, including post-acute providers, through an annual notice and comment process. Under 

the current CMS processes, the overwhelming majority of comments are submitted 

by affected providers. While patients and their advocates and third-party payers can 

and do comment, the highly technical nature of the rules and policies, coupled with 

the limited impact of payment policies on any single patient or payer has inadvertently resulted in an unlevel playing field. As a result, CMS staff, in reviewing comments, often lack meaningful input from stakeholders outside of the provider community.4

A means to ensure meaningful input from other stakeholders is urgently needed. 

As a discrete complement to CMS’ regulatory decisionmaking process, we recommend establishing a federally chartered body that includes patients, third-party 

payers and provider representatives to inform CMS’ annual update processes. A 

standing Consumer and Health Care Purchaser and Provider Update Committee 

(CHUC) would be charged with providing independent input to CMS in its decisionmaking role with respect to Medicare payment levels, across all provider sectors. 

The new advisory group should include patients, purchasers, providers and payers— 

with majority representation by those who receive and pay for care—and serve as 

a forum for broader multi-stakeholder input, as well as collection and analysis of 

relevant information. This new group would be advisory only, but it could provide 

a needed and fresh perspective for CMS and for Congress. 

Changing Payment Decisionmaking 

Current payment policies—beyond the regulatory process are also too inflexible 

and susceptible to the focused interests of the recipients of payment. Congress 

should consider creation of a new entity with independent authority to implement 

broad direction provided by Congress. Regardless of the specific structure adopted, 

new processes need to be put in place to assure that flexibility, transparency, and 

meaningful stakeholder input are in place to assure that changes to payment policies are considered in the context of their impact on patients, providers, and health 

care purchasers. 

• Congress should set the broad goals and targets for Federal health care payments, but the specific decisions about payment should be made through independent processes that are guided by what serves the patient and helps society 

as a whole. The decisionmaking body should be structurally independent, with 

mechanisms in place to insulate it as much as possible from political influence 

in order to ensure evidence-based decisions and to engender stakeholder trust. • Payment decisions should be guided by evidence and should balance the perspectives of consumers, purchasers, payers and physicians and other health care 

providers—but the perspective of those who receive and pay for care should 

have majority control instead of those who receive payments. 


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• Processes and rules for making payment decisions should be simple, standardized and align value (to the extent possible) across physician, hospital and other 

types of health care payments. 

• Payment decisions should promote consistency across private and public payers. 

Assuring Competition While Promoting Payment Reform 

While employers support payment reforms that encourage coordinated and integrated care delivery, we also recognize the need for policies that assure there are 

functioning markets—where informed patients and purchasers can fairly negotiate 

terms with independent providers. Health reform needs to assure there is an appropriate balance between coordination and competition. 

Aligning incentives across providers and sites of care is essential to the appropriate focus on ‘‘end-to-end’’ quality, affordable care. In many markets, providers 

have formed multi-provider organizations, ostensibly to advance their clinical and 

financial goals, forming multi-hospital systems, multi-physician organizations, and 

combined hospital-physician entities. In some cases, these collaborations have resulted in higher quality and lower costs for payers and patients by focusing on generating clinical and financial efficiencies. In some instances, however, these new organizations have leveraged their market power in ways that may increase costs to 

patients, payers, employers and other health plan sponsors, with ambiguous impacts 

on quality. 

Because of the concerns about potentially anti-competitive impacts of some forms 

of integration and coordination, there are a broad array of laws and regulations governing competition, anti-kickback, self-referral, and related issues. Some argue that 

portions of existing law and regulations need to be ‘‘loosened,’’ as they inhibit providers’ ability to coordinate care effectively. However, many others suggest that loosening existing laws and regulations is unnecessary to deliver more efficient care and 

could result in both higher costs and reduced choice for consumers. 

Given the complex interrelationship between competition and coordination, we 

support the recommendation of the Center for Payment Reform that there be established a framework that will assure that both goals are promoted. The Secretary of 

Health and Human Services should be directed to produce or commission a report 

to Congress that shall examine how policies and payment can best balance the need 

to both promote coordination and competition. In doing so, the Secretary should engage representatives of the Attorney General, the Federal Trade Commission, the 

Comptroller General, CMS’ Office of Inspector General and the Agency for 

Healthcare Research and Quality as well as representatives of consumers, private 

purchasers and providers. The report should be provided within 12 months and 

should address, at a minimum, the following: 

• Are new laws or regulations needed to guard against the provider-based entities 

having or exercising market power to the detriment of consumers’ interest in 

higher quality, less costly health care? 

• Do existing anti-trust laws and pro-competitive regulations need to be revised 

or amended? 

• Are there existing State or Federal laws that have the affect of creating inappropriate barriers to healthy competition that need to be examined? 

• What is the empirical research on health care markets and market competition 

that should inform policy development? 

• What is the role of promoting transparency with respect to quality and price 

in fostering better market functioning? 

• How can the regulatory and legal oversight promoting competition best be 

structured? 

Core Employer Belief: We need to move to promoting wellness and prevention, instead of focusing only on intervening after the fact. 

There are few areas around which there is as much agreement in the employer 

community as in the importance of investing in wellness and prevention. The majority of America’s employers are making these investments, with over 90% of large 

employers supporting wellness and chronic care programs. The importance of moving from a sick-care system to one that promotes wellness and prevention is clearly 

articulated in the Discussion Draft, which includes proposals for a Public Health Investment Fund and for the Secretary to develop a National Plan for Prevention. As 

a Nation, we need to get beyond the fragmentation that results in separate planning 

and strategies for health care delivery, public health, community prevention and 

planning, worksite wellness and other programs. As we move beyond this fragmentation, employers and consumers need to be at the table as priorities are shaped 

and strategies developed. 


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Core Employer Belief: All Americans—as engaged patients, caregivers and 

consumers—need to be given better tools and incentives to participate in 

making sure that they get the right care at the right time. 

Health care consumers must be able to compare the quality or efficiency of care 

offered by medical practitioners, clinics and hospitals or the various treatment options available to them to make good choices. Americans need tools and incentives 

to help them make good health care decisions. Some of the routes that your Discussion Draft supports in this area includes bolstering the Federal role of making sure 

that there is valid information consumers can use to compare quality and cost-efficiency of medical treatments and providers. Creating that information should allow 

for any users—public and private—to build on that information as long as patient 

privacy is protected. 

The Discussion Draft recognizes the importance of considering the role consumer 

incentives play by proposing that Medicare remove cost-sharing provisions for Medicare beneficiaries. Medicare should join the private sector in going further. For example, Medicare should provide information and incentives for wellness and the selection of higher value providers. Private health plans are increasingly offering not 

just tools, but incentives for their enrollees to improve their health and make better 

choices among providers. Medicare should follow the same path, perhaps by requiring that restructuring the standard Medicare Supplement plans offer information 

and tools to facilitate patient choice. 

Similarly, Medicare should learn from the cutting-edge work of providers and private sector groups that are making sure that patients can fully participate in their 

own health care. One way that we can be sure that care is indeed patient-centered 

is for Medicare to support shared decisionmaking processes. This support can take 

the form of providing incentives to patients to get coaching and/or reducing payments to providers in cases where preference sensitive care (i.e., care for which 

there is more than one medically reasonable choice, with choices that differ in risks 

and benefits—such as treating chest pain from coronary artery disease or earlystage prostate cancer) was delivered in the absence of patient participation in decisionmaking. 

Conclusion 

Health reform must be about making high quality care more affordable. The employer community will work with you to develop a coherent package of reforms that 

foster cost control, and improves health through health promotion, prevention of illness, and effective treatment of disease and injury. We look forward to working with 

this Committee and with so many other Americans who share this goal. 

f 

Mr. STARK. Thank you, Mr. Lee. And next we have Mr. Gerald 

Shea, who is Special Assistant to the President, AFL–CIO. Proceed. 

STATEMENT OF GERALD M. SHEA, 

SPECIAL ASSISTANT TO THE PRESIDENT, AFL–CIO 

Mr. SHEA. Good afternoon, Mr. Chairman and Members of the 

Committee. We appreciate this invitation to talk to you about the 

experience of the AFL–CIO unions in bargaining health care. And 

I am going to restrict my remarks to the interplay between employment-based coverage, which, as you know, is the backbone of both 

coverage and financing for health care in this country, and the reform proposal before you because you have chosen a proposal that 

continues that role for employer-sponsored insurance. 

And my main message to you today is that going down this road 

I believe requires that you first and foremost look at how you stabilize employment-based coverage. Employment-based coverage has 

been remarkably resilient despite enormous cost pressures and it 

is testimony to how much employers want to provide benefits and 

how much employees value those benefits. But, frankly, it is in a 

pretty fragile situation. We have lost 5 points percentage of people 

18 to 64 who have health care. We have lost 5 percentage points 


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from 2000 and 2007. The number of underinsured people in a 4- 

year span from 2003 to 2007 went up from 16 percent to 25 percent. This is a system that has done very well in providing health 

coverage but today, frankly, is eroding pretty rapidly. And so we 

judge the proposals in terms of how well they support and 

strengthen the employment-based coverage if we are going to continue that. 

And I want to congratulate you and your colleagues and other 

Committees of the House for having produced this bill. We think 

it is an excellent start. And, frankly, we think it really responds 

to the desires and the interests of the American people. And so we 

give you our hats off for that. 

In order to stabilize employment-based coverage, we need to do 

three things in our opinion. First and foremost, control costs. If we 

do not do that, we are not going to do anything else. Second, we 

think everybody needs to be included in coverage, included in financing responsibilities, and included in health status responsibilities. And, third, we think it is essential that we reform the health 

delivery system so that we really make it a more efficient—much 

more efficient structure than it is today. 

On the point of full participation, you have a proposal that has 

both an individual requirement and an employer requirement, we 

think that is appropriate. We think both are appropriate. And I 

want to make just a couple of comments on the employer requirement because I know that is controversial. 

I think there are a number of advantages to doing this, to requiring employers to participate. One is that you reduce the burden on 

the Federal Treasury for providing coverage. If you are going to get 

universal coverage, the more employer coverage that is available, 

the less you will have to fund in terms of support for the currently 

uninsured. 

Firms that opt to pay instead of play, using the common parlance 

here, will be putting money into the fund to pay for coverage and 

so you get money that way too. We think this is an important financing area. And, of course, it would also level the playing field 

among businesses because it would eliminate the free riders. 

A corollary to this requirement is that we think you should look, 

as you have looked at, providing some relief for those employers 

who in the midst of great industrial change have tried to do the 

right thing by their workers and maintain retiree benefits for those 

who are pre-Medicare. We think that is extremely important, and 

we appreciate the fact that it is included. 

In terms of the cost issue, the number one challenge, there is no 

question that the long-term answer to this is to change the delivery 

system and make it more efficient. My panel colleague just talked 

about saving $2 or $3 trillion over the next 10 years. That is a figure that comes from numerous studies as something that is in the 

realm of possibility depending on the design element. 

But those are long-term changes and in the short-term, we believe strongly that you need a public insurance option to introduce 

competition into the marketplace. A lot has been said about that. 

I will not elaborate on it further. 

But going to delivery system reform issues, your draft emphasizes and invests in quality and improvement methodologies. We 


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think this is very important, and we think your draft could be 

strengthened frankly in this area along the lines that Mr. Lee has 

just talked about. 

And we also support the investment you make in the draft in the 

expansion of the health care workforce in primary care, and we 

would suggest that you look at the importance not only of the supply of the health workforce but the quality of the work we are asking them to do. Unfortunately, we have taken some of the great 

care professions like nursing, and we turned them in many places 

into lousy jobs. That can be corrected, and you have a perfect vehicle to do that because you have following examples that already 

exist in the health care system, the opportunity to promote the notion that all health care workers ought to be involved in producing 

quality care and break down some of these silos which make these 

jobs less than totally desirable. 

Finally, I wanted to talk about—more broadly about financing. I 

believe it is true what people say, that we ought to be able to finance health reform out of the money in the health system now. 

There is so much of it. But obviously that is not something we can 

do overnight, and I think that if we set our goal, as some people 

have, of saying we have to restrict our financing to the health system, we get ourselves into trouble very quickly. And the danger of 

this you see in the Senate Finance Committee deliberations today 

where taxing health benefits is being planned. You do not have to 

go any further than the front page of today’s Washington Post to 

get yet more evidence of how strongly people oppose the idea of 

taxing health benefits. They already pay a lot of money in deferred 

wages or outright out of their pocket. They do not want to be taxed 

on top of that. 

But beyond the issue of payments and equity, there are tremendous problems with doing this in a fair fashion because you can 

have, and we have examples of this, similar workforces in similar 

kinds of health plans or health funds with very, very different annual cost based on health status, on geography, on age. Unless you 

can correct for those, you are going to wind up discriminating 

against those people who happen to be in a workforce that has a 

higher claims experience. And so we think it is extremely difficult 

for that. 

Just in conclusion, I will say that we look forward to working 

with you on the discussion draft, and we appreciate the time to 

talk to you this afternoon. 

[The prepared statement of Mr. Shea follows:] 

Prepared Statement of Gerald M. Shea, 

Special Assistant to the President, AFL–CIO 

The AFL–CIO represents 11 million members, including 2.5 million members in 

Working America, our community affiliate, and 56 national and international unions 

that have bargained for health benefits for more than 50 years. Together, unions 

negotiate benefits for some 50 million people in America. 

Our members have a significant stake in health care reform because unions represent the largest block of organized consumers in the Nation. In addition, unions 

also sponsor health plans through funds that are jointly-trusteed with management. 

Many union members work in health care, as well, so they have a dual interest in 

health reform. 

Even as unions continue to negotiate benefits for our members, American labor 

has long advocated for health care for everyone, not just those in unions or with 

stable jobs. For over 100 years, America’s unions have called for universal coverage 


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built on a social insurance model, an approach that has proven effective and efficient across the globe and one we have employed successfully for decades to provide 

income and health security for the elderly. 

The AFL–CIO led the lobbying effort to enact Medicare in 1965, and we have 

backed many legislative efforts since then to expand coverage. We continue to believe that a social insurance model is the simplest and most cost effective way to 

provide benefits for all. 

However, the condition of health care in America is too dire for those of us lucky 

enough to have good coverage to debate endlessly over what the best approach 

would be. It is time—indeed, it is past time—to enact comprehensive health care 

reform. Today our members are ready to stand with President Obama and Congress 

and help pass the President’s plan for comprehensive health care reform. 

AFL–CIO’S VIEWS ON COMPREHENSIVE HEALTH CARE REFORM 

Today I would like to explain the AFL–CIO’s views on what comprehensive health 

care reform should look like, and specifically our views on the historic tri-committee 

discussion draft unveiled in the House of Representatives last week. 

We start from the premise that we can fix our broken health care system by 

building on what works. For most Americans, that means employer-sponsored 

health insurance (ESI), which is the backbone of heath care financing and coverage 

in America. 

The AFL–CIO has advocated a three-point program to guarantee quality affordable health care for all—a program that consists of: (1) lowering costs; (2) improving 

quality; and (3) covering everyone by ensuring full participation of all public and 

private sector employers and making affordable health coverage available to everyone. All three of these objectives must be achieved together; none can be achieved 

in isolation. And we believe the tri-committee discussion draft will in fact help 

achieve all three of these objectives simultaneously. 

We caution, however, that one financing option under consideration in the Senate 

Finance Committee—the taxation of employer-sponsored health benefits—would go 

in the exact opposite direction by destabilizing the employer-based health insurance 

system. 

OUR PRESENT COURSE IS UNSUSTAINABLE 

Whatever one may think about the way health care should be reformed, we can 

all agree that our present course is not sustainable—for workers, for businesses, for 

the Federal budget, or for the economy as a whole. If we continue down the current 

path, health care costs will crush families, business and government at all levels. 

Our members are among the most fortunate workers. Thanks to collective bargaining, they generally have good benefits provided by their employers. Yet even 

well-insured workers are struggling with health care cost increases that are outpacing wage increases. And far too many working families find themselves joining 

the ranks of the uninsured or underinsured as businesses shut down or lay off employees. 

In April and May 2009, the AFL–CIO conducted our 2009 Health Care for America Survey, which showed that people need urgent relief from the pressure of rising 

health care costs that are bankrupting families and endangering their health. 

More than half of respondents said they cannot get the care they need at a price 

they can afford. Three-quarters were dissatisfied with their household’s health care 

costs. 

Ann from Georgia (self-employed with two children) wrote: ‘‘We have that HSA 

plan with supposedly low premiums. However, those ‘low’ premiums only start low. 

Every year they get higher and higher. One year they increased 129 percent in just 

1 year. Our health care costs have exceeded 35 percent of our income for 2 years. 

We are on the verge of canceling health care insurance. We would have already 

done this if we didn’t have two children.’’ 

A third of those with insurance—and three-quarters of those without—reported 

that they forgo basic medical care because of high costs. 

Karen from Florida wrote: ‘‘My insurance deductible equals 4 to 5 months of take 

home pay each year. My insurance bill is split with my employer but equals 2 days 

of pay each month. How am I supposed to go to a doctor?’’ 

Iris from Florida writes: ‘‘I am unemployed because I had to quit my job to care 

for my elderly mother. My children decided to pay [for medical insurance] for me. 

So what is the problem? The deductibles are so high that I cannot go to the doctor. 

And we keep paying $300 monthly just in case I have to go to the hospital. In the 

meantime, I cannot afford to go to the doctor.’’ 


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1Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000–2008. Bureau of Labor 

Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 2000– 

2008; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 2000–2008 (April to April). Accessed: http://ehbs.kff.org/images/abstract/ 

EHBSl08lReleaselAdds.pdf. 2 C. Schoen, S.R. Collins, J.L. Kriss and M.M. Doty, ‘‘How Many Are Underinsured? Trends 

Among U.S. Adults, 2003 and 2007,’’ Health Affairs Web Exclusive, w298–w309. June 10, 2008. 3 Council of Economic Advisors. ‘‘The Economic Case for Health Care Reform.’’ June 2009. 

Accessed: http://www.whitehouse.gov/assets/documents/CEAlHealthlCarelReport.pdf. 4 Council of Economic Advisors. ‘‘The Economic Case for Health Care Reform.’’ June 2009. 

Accessed: http://www.whitehouse.gov/assets/documents/CEAlHealthlCarelReport.pdf. 5 Ibid. 

As economic conditions have gotten worse, workers who lose their jobs have been 

losing their health care. Nearly a quarter of respondents said someone in their 

household lost coverage in the past year due to losing or changing jobs. 

Renee from Ohio wrote: ‘‘It is pretty scary that millions of hard-working retirees 

as well as those working may lose their insurance, and yes I am talking about the 

auto industry. My husband could lose his benefits, which he thinks he will. I don’t 

know how my kids will be able to get their annual checkups. How can anyone get 

ahead in this country? I don’t understand how it came to this. I just don’t want to 

think about the future anymore.’’ 

Once workers lose their health care coverage, it is hard for them to get it back. 

One-quarter of those without health insurance said they were denied coverage in 

the past year due to ‘‘preexisting conditions.’’ 

Kerry from New Mexico wrote: ‘‘I am desperate for our country to finally do something for my family so a health crisis does not kill one of us or leave us completely 

financially devastated.’’ 

The data bear out the stories these workers are telling us. Between 1999 and 

2008, premiums for family coverage increased 119 percent, 31⁄2 times faster than cumulative wage increases over the same time period.1

Workers’ out-of-pocket costs are going up as well, leading to more underinsured 

workers who can no longer count on their health benefits to keep health care affordable or protect them from financial ruin. Between 2003 and 2007, the number of 

non-elderly adults who were underinsured jumped from 15.6 million to 25.2 million.2

Skyrocketing costs are pushing more workers out of insurance altogether. The 

current number of uninsured almost certainly exceeds 50 million. The Council of 

Economic Advisers estimates that number will rise to 72 million by 2040 in the absence of reform.3

Health costs are burdening American businesses, as well as workers. U.S. firms 

that provide adequate health benefits are put at a significant disadvantage when 

they compete in the global marketplace with foreign firms that do not carry health 

care costs on their balance sheets. The same is true for U.S. businesses in domestic 

competition against employers that provide little or no coverage. 

The present course is unsustainable for the economy as a whole, as well. Health 

care expenditures currently amount to about 18 percent of our GDP. The Council 

of Economic Advisers estimates that this percentage will rise to 34 percent by 2040 

in the absence of reform.4 The Congressional Budget Office (CBO) projects that 

health care expenditures will rise to 49 percent of GDP by 2082. 

The present course is likewise unsustainable for the Federal budget. If we fail to 

‘‘bend the cost curve,’’ health care spending will balloon our Federal budget deficit 

and squeeze out funding for essential non-health care priorities. Almost half of current health care spending is covered by Federal, State, and local governments. If 

health care costs continue to grow at historical rates, the Council of Economic Advisers estimates that Medicare and Medicaid spending will rise to nearly 15 percent 

of GDP by 2040.5 As then CBO Director and now OMB Director Peter Orszag has 

noted, health care cost trends are the ‘‘single most important factor determining the 

Nation’s long term fiscal condition.’’ 

To fix our long-term structural budget deficits, we have to fix Medicare and Medicaid, and to fix Medicare and Medicaid, we have to control health care costs in the 

private sector. There is no practical way to control public health care costs without 

addressing private health care costs as well. Private and public health care are delivered largely by the same providers, using the same drugs, the same treatments, 

and the same procedures. 

In short, the health of our family budgets, our Federal budget, and our economy 

depends on the success of health care reform this year. 


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6 Elise Gould. ‘‘The Erosion of Employer-Sponsored Health Insurance.’’ Economic Policy Institute. October 2008. Accessed: http://epi.3cdn.net/d1b4356d96c21c91d1lilm6b5dua.pdf. 

BUILDING ON WHAT WORKS 

The AFL–CIO believes comprehensive reform can build on what works in our current health care system while creating new options for obtaining coverage and lowering costs for families, business, and government at all levels. 

For the majority of Americans, what works in our current health care system is 

employer-based coverage—the backbone of health care coverage and financing in 

America. Over 160 million people under age 65 have health benefits tied to the 

workplace. 

Employer-sponsored coverage has proven remarkably stable in the face of exorbitant health care cost inflation. Its survival is testimony to the strong interest workers have in keeping coverage tied to the workplace—even at the expense of wage 

gains for the past 30 years—and the interest of employers to recruit and retain talented workers through job-based benefits. 

In fact, it is hard to imagine successful health reform that does not include a substantial role for employer-based coverage. Building on the core foundation of employer-provided health coverage will allow working families to keep what they now 

have . . . or choose from a new set of options to maintain coverage. We think building 

on this foundation will also help minimize the disruption that results from the difficult changes that are a necessary part of any reform, and thereby maximize public 

support for reform. 

In order to build on this foundation, we must stabilize the employment-based system, which risks being destabilized by unsustainable cost inflation. We must reverse 

the steady erosion of employer-provided coverage in recent years. The percentage of 

18 to 64-year-olds with ESI dropped 5 percentage points from 2000–2007, and without prompt dramatic action the rate of decline is expected to increase sharply.6

We believe the tri-committee discussion draft will stabilize the employer-based 

health care system through the following specific policy proposals: (1) a requirement 

that employers assume responsibility for contributing to the cost of health care for 

their employees through a ‘‘pay or play’’ system; (2) special assistance for firms that 

maintain coverage for pre-Medicare retirees, which will prevent further deterioration of the employer-based system; (3) a public health insurance option, which will 

inject competition into the health care system and lower costs throughout the system for employers and workers alike; (4) health care delivery reforms to get better 

value from our health care system and contain long-term costs; and (5) insurance 

market reforms, individual subsidies, Medicaid expansion, and improvements to 

Medicare, which will help make affordable coverage available to everyone. 

PAY OR PLAY 

A key reform needed to stabilize the employer-based coverage system is the requirement that public sector and private sector employers assume responsibility for 

contributing toward the cost of health care for their employees. Employers should 

be required either to offer health benefits to their workers directly, or to pay into 

a public fund to finance coverage for uninsured workers—a proposal known as ‘‘pay 

or play.’’ 

The tri-committee discussion draft outlines a reasonable and effective employer 

responsibility requirement that we believe would help shore up employer-based coverage. The proposal would ensure that workers could get affordable coverage either 

through their employer-sponsored plan or through a national exchange with a contribution from their employer. And it would extend, on a pro-rated basis, an employer’s responsibility for part-time workers, to eliminate any incentives for employers 

to move workers to part-time status to avoid the new requirement. 

We believe such a ‘‘pay or play’’ system has many virtues. It would bring in needed revenue from firms that opt to ‘‘pay,’’ which would hold down Federal costs associated with providing subsidized coverage for low-income workers in those firms. 

‘‘Pay or play’’ would likewise hold down Federal costs by keeping employers from 

dumping their low-wage employees into new subsidized plans. In the absence of an 

employer responsibility requirement, publicly subsidized coverage for low-wage 

workers would prompt many employers of low-wage workers to discontinue current 

coverage to take advantage of available subsidies. The resulting increase in Federal 

costs could well doom health care reform. 

‘‘Pay or play’’ would help stabilize the employer-based health care system in several ways. It would level the playing field so that free rider businesses could no 

longer shift their costs to businesses offering good benefits. A recent study found 

more than $1,000 of every family plan premium goes to cover the cost of care for 


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7Families USA. ‘‘Hidden Health Tax: Americans Pay a Premium.’’ May 2009. Accessed: http:// 

www.familiesusa.org/assets/pdfs/hidden-health-tax.pdf. 8 A. Dube, T.W. Lester, M. Reich, ‘‘Minimum Wage Effects Across State Border: Estimates 

Using Contiguous Counties,’’ Institute for Research on Labor and Employment Working Paper 

Series No. iiwps–157–07, August 1, 2007. 9 J. Bernstein, J. Schmitt, ‘‘Making Work Pay: The Impact of the 1996–1997 Minimum Wage 

Increase,’’ Economic Policy Institute (1998); D. Card, A. Krueger, ‘‘Myth and Measurement: The 

New Economics of the Minimum Wage,’’ Princeton University Press, 1995. 10 Council of Economic Advisors. ‘‘The Economic Case for Health Care Reform.’’ June 2009. 

Accessed: http://www.whitehouse.gov/assets/documents/CEAlHealthlCarelReport.pdf. 

the uninsured, most of whom are employed.7 ‘‘Pay or play’’ would encourage employers to offer their own coverage and penalize employers that do not. And it would 

minimize disruption for workers who already have health care coverage and wish 

to keep it. 

‘‘Pay or play’’ would thus go a long way toward extending coverage to the uninsured, since most of the uninsured have at least one full-time worker in their family. And it would be critical in making coverage affordable for workers who do not 

qualify for income-based credits or subsidies, especially if health care reform includes a new requirement that all individuals obtain coverage. 

Arguments Against Pay or Play 

Opponents of an employer responsibility requirement raise the objection that ‘‘pay 

or play’’ would increase payroll costs for businesses. We believe this objection is misplaced. 

First of all, it should be emphasized that the overwhelming majority of businesses 

already provide health benefits that would likely meet the new requirements, so 

they would not see any new costs. In fact, they would see their costs go down as 

health care coverage is expanded—thanks to the elimination of cost shifting—and 

as other health care reforms take hold that drive down costs throughout the health 

care system. 

The only firms that might see an increase in costs are firms that do not currently 

offer health care benefits, or firms that offer benefits that are inadequate to meet 

a reasonable standard. The vast majority of firms that currently do not offer health 

care benefits are small firms, and they are mostly low-wage employers. Comprehensive health care reform generally would give small firms more affordable options for 

providing health benefits for their workers, probably in combination with additional 

subsidies for employers of low-wage employees. 

Opponents of an employer responsibility requirement warn that employers that 

have to pay more for health insurance would be less likely to raise wages in the 

short term. The widely endorsed economic view, however, is that such employers 

would still raise wages over the long term. 

Opponents of ‘‘pay or play’’ next argue that employers required to pay more for 

health insurance might eliminate jobs or hire more slowly as a result. But the same 

dire predictions have been made routinely about proposals to increase the minimum 

wage, with comparable increases in employer costs, and those predictions have not 

been borne out. Recent studies of minimum wage increases have found no measurable impact on employment.8 Economists have observed that employers faced with 

higher payroll costs from a minimum wage increase can offset some of those costs 

through savings associated with higher productivity, decreased turnover and absenteeism, and improved worker morale.9

The same would be true of an employer responsibility requirement. Any increase 

in employer costs would be offset by productivity gains and by a healthier workforce. 

The Council of Economic Advisers notes that the economy as a whole would benefit 

from more rational job mobility and a better match of workers’ skills to jobs when 

health benefits are no longer influencing employment decisions.10 Finally, it should 

be noted that the majority of firms that currently do not offer health benefits compete in markets where their rivals likewise do not provide benefits, so they would 

not be put at a competitive disadvantage. 

Pay or Play and Firm Size 

Health care reform must make coverage affordable for small businesses that have 

difficulty obtaining coverage in the current market. However, the AFL–CIO believes 

the ‘‘pay or play’’ requirement should apply to firms regardless of their size. 

Smaller businesses will be allowed to meet the ‘‘play’’ requirement by buying coverage that meets fair rating rules through the new exchange, which would include 

the option of a public health insurance plan that makes coverage more affordable. 

We do support the inclusion of a small business tax credit, targeted at the smallest 


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11 American Medical Association. ‘‘Competition in Health Insurance: A Comprehensive Study 

of U.S. Markets.’’ 2007. http://www.ama-assn.org/ama1/pub/upload/mm/368/compstudyl52006. 

pdf. 

firms with low-wage workers, precisely because we believe an employer requirement 

should not exempt businesses based solely on size. 

If small businesses are exempted from ‘‘pay or play,’’ the number of employees is 

a particularly poor measure for the exemption because it is a poor predictor of a 

firm’s ability to pay. A doctor’s office or small law firm may have more capacity to 

pay than a larger restaurant or store. A carve-out for small firms with fewer than 

a specified number of employees also creates a potentially costly hurdle for firms 

nearing the threshold to hire additional employees. A better approach would be to 

apply the requirement based on payroll or gross receipts. Finally, we believe special 

treatment for such businesses should be phased out over time to eliminate disparities based on firm size. 

Also, any ‘‘pay or play’’ requirement should take into account how workers in certain segments of our economy, such as airlines and railroads, schedule their hours 

and the classification of workers as full-time or part-time should ensure that these 

workers are not inadvertently excluded from coverage. 

Special Assistance for Companies That Maintain Benefits for Pre-Medicare Retirees 

We look forward to working with the committees to develop greater specificity on 

the proposal for a federally-funded catastrophic reinsurance program for employers 

that provide health benefits to retirees age 55 to 64. Such a reinsurance program 

would help prevent further deterioration of the employer-provided health care system, and is an essential component of any health care reform legislation. 

A reinsurance program is critically necessary to help offset costs for employers 

that contribute to health benefits for pre-Medicare retirees. The pre-Medicare population generally has higher health care costs, and employers offering them coverage 

incur enormous expense. But without that coverage, individuals in this age bracket 

have tremendous difficulty purchasing health insurance in the individual market, 

or they are able to do so only at a very high cost. 

We believe such a reinsurance program must have dedicated funding. In addition, 

in the longer term, we believe firms should be able to purchase coverage for their 

retirees through the exchange. This would help make coverage more affordable for 

firms that provide retiree health benefits. 

PUBLIC HEALTH INSURANCE PLAN OPTION 

The AFL–CIO supports the creation of a strong public health insurance option to 

compete with private health insurance plans. The tri-committee discussion draft includes a strong public plan that would compete on a level playing field with reformed private health plan options in a new national exchange. 

We believe a public health insurance plan is the key to making health care coverage more affordable for working families, businesses, and governments, all of 

which are increasingly burdened by escalating health care costs. A public plan 

would have lower administrative costs than private plans and would not have to 

earn a profit. These features, combined with its ability to establish payment rates, 

would result in lower premiums for the public plan. 

A public health insurance plan would also promote competition and keep private 

plans honest. Consolidation in the private insurance industry has narrowed price 

and quality competition. In fact, in 2005, private insurance markets in 96 percent 

of metropolitan areas were considered highly concentrated and anti-competitive, 

which left consumers with little choice.11 A public health insurance option, coupled 

with a more regulated private insurance market, would break the stranglehold that 

a handful of companies have on the insurance market and would give consumers 

enough choices to vote with their feet and change plans. 

We also believe a public health insurance plan would be critical for driving quality 

improvements and more rational provider payments throughout the health care system. A public health insurance plan can introduce quality advancements and innovation that private insurance companies or private purchasers have proven themselves unable to implement. For example, until Medicare took the lead in reforms 

linking payment to performance on standardized quality measures, private insurers 

and payers were not making appreciable headway toward a value-based health system. Just as Medicare is driving quality improvements that private plans are now 

adopting, a public health insurance plan could lead the way in developing innovative quality improvement methodologies, stronger value-based payment mechanisms, more substantial quality incentives, and more widespread evidence-based 

protocols. 


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12 New York Times/CBS News Poll on Health. Telephone Interviews conducted June 12–16, 

2009. Accessed: http://graphics8.nytimes.com/packages/images/nytint/docs/latest-new-york-timescbs-news-poll-on-health/original.pdf. 13 Council of Economic Advisors. ‘‘The Economic Case for Health Care Reform.’’ June 2009. 

Accessed: http://www.whitehouse.gov/assets/documents/CEAlHealthlCarelReport.pdf. 

Because increased competition and quality reforms would help contain costs 

throughout the health care system, employers that continue to provide benefits directly would benefit from these savings, as would employers that purchase coverage 

for their workers through the exchange. And because premiums would be lower, 

spending on Federal subsidies for individuals who qualify for subsidies would also 

be lower. 

A public health insurance plan would also guarantee that there will be a stable 

and high quality source of continuous coverage available to everyone throughout the 

country. By contrast, private insurance plans can change their benefits, alter costsharing, contract with different providers, move in and out of markets, and change 

benefit or provider networks. A public health insurance plan would be a reliable and 

necessary backstop to a changing private insurance market, and a safe harbor for 

working families that lose their workplace coverage. 

A public health insurance plan available to everyone would also provide rural 

areas with the security of health benefits that are there when rural residents need 

them, just as Medicare has been a constant source of coverage as private Medicare 

Advantage and Part D plans churn in and out of rural areas every year. 

Clearly, the public supports a public health insurance plan option. A recent New 

York Times poll shows that the public health insurance plan is supported by 72 percent of voters.12

DELIVERY SYSTEM REFORM 

Variation in Medicare spending across States suggests that up to 30 percent of 

health care costs could be saved without compromising health care outcomes. Differences in health care expenditures across countries suggest that health care expenditures could be lowered by 5 percent of GDP without compromising outcomes 

by reducing inefficiencies in the current system. 

Experts estimate we waste one-third of our health care spending, or $800 billion, 

every year on health care that is no real value to patients. According to the Council 

of Economic Advisers, the sources of inefficiency in the U.S. health care system include payment systems that reward medical inputs rather than outcomes, high administrative costs, and inadequate focus on disease prevention.13

We must restructure our health care system to achieve better quality and better 

value, and we must transform our delivery system into one that rewards better care, 

not just more care. We can start by doing the following: 

• Measure and report on the quality of care, the comparative effectiveness of 

drugs and procedures, and what medical science shows to be best practices and 

use that information to create quality improvement tools that allow doctors to 

individualize high-quality care for each of their patients; 

• Put technology in place to automate health care data; and 

• Reform the way we pay for care so doctors have the financial incentives to continuously improve care for their patients. 

The February 2009 economic recovery package, with its substantial investment in 

health information technology (HIT) and research on the comparative effectiveness 

of drugs and medical devices, marks a historic first step in the right direction. 

The tri-committee discussion draft builds on the investments of the economic recovery package by encouraging greater emphasis on primary care and prevention, 

and greater emphasis on innovative delivery and payment models, such as accountable care organizations and bundled payments for acute and post-acute care. The 

draft also makes needed investments in our health care workforce—with emphasis 

on primary care—to ensure access to needed care and better reward primary care 

providers. 

The tri-committee discussion draft emphasizes and invests in quality measurement and improvement methodologies. But we believe more can be done to foster 

innovation in health care delivery by building on the significant quality measurement and improvement underway within health care in recent years. The AFL–CIO 

has invested considerable resources and time working on system reform, as part of 

the broad collaboration of consumers, purchasers, physician organizations, hospitals, 

and government agencies at both the State and Federal levels. 

This strong collaboration between payers and providers has created breakthrough 

improvements in health care delivery. The process improvement techniques pioVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00132 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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14Families USA. ‘‘Hidden Health Tax: Americans Pay a Premium.’’ May 2009. Accessed: 

http://www.familiesusa.org/assets/pdfs/hidden-health-tax.pdf. 15 Council of Economic Advisors. ‘‘The Economic Case for Health Care Reform.’’ June 2009. 

Accessed: http://www.whitehouse.gov/assets/documents/CEAlHealthlCarelReport.pdf. 

neered in other U.S. industries—for example, six sigma quality standards and rapidcycle problem analysis, solution development and testing, and widespread diffusion 

in a short time period—have been shown to work and hold enormous promise, but 

Federal leadership in delivery system reform is indispensable. 

We must also put into place a system of broad consultation with consumers, purchasers, physicians, insurers and health care organizations in setting national priorities for health care quality improvement and in implementing standardized measures of quality throughout health care. With quality measurement as a foundation, 

reform can empower those who deliver care, pay for care, and oversee care to work 

with those who receive care to innovate and modernize health service delivery. 

AFFORDABLE COVERAGE FOR EVERYONE 

Today we have a fragmented health care system characterized by cost-shifting 

and price distortions because as many as 50 million people have no coverage. 

According to Families USA, the uninsured received $116 billion worth of care 

from hospitals, doctors, and other providers in 2008, about $42.7 billion of which 

was uncompensated care.14 The costs for uncompensated care are shifted to insurers 

and then passed on to families and businesses in the form of higher premiums. For 

family health coverage, the additional annual premium due to uncompensated care 

was $1,017 in 2008. 

While our members generally have employer-based health coverage, stabilizing 

the employer-based health system will require covering the uninsured to make 

health care more efficient and prevent cost-shifting. We cannot cover everyone without bringing down costs overall, and we cannot control costs without getting everyone in the system. 

The good news is that, according to the Council of Economic Advisers, expanding 

health insurance coverage to the uninsured will increase net U.S. economic wellbeing by roughly $100 billion per year, which is substantially more than the cost 

of insuring the uninsured.15

The most important policy proposal for extending health care coverage to the uninsured is ‘‘pay or play,’’ which I discussed earlier in my testimony. But the tri-committee discussion draft includes several other proposals that would also expand 

health care coverage, including insurance market reforms, the establishment of an 

insurance market exchange, individual subsidies, the expansion of Medicaid, and 

improvements to Medicare. 

Insurance Market Reforms 

Ensuring access to health care coverage will require significant changes to the 

current private insurance market, in which people are now denied coverage or 

charged more because of their health status. Market reforms for everyone who buys 

coverage in the individual and group market will make coverage more fair, transparent, affordable, and secure. 

The AFL–CIO fully supports the prohibition on rating based on health status, 

gender, and class of business; the prohibition on the imposition of preexisting condition exclusions; guaranteed issue and renewal; and greater transparency and limits 

on plans’ non-claims costs. While we would prefer a flat prohibition on rating based 

on age, we believe the proposal to limit age rating to 2 to 1 is a strong alternative. 

Any variation allowed above that limit threatens to make coverage unaffordable for 

older individuals. 

Insurance Market Exchange 

The AFL–CIO also strongly supports the proposal to create a national health insurance exchange to provide individuals and businesses with a place to enroll in 

plans that meet certain criteria on benefits, affordability, quality, and transparency. 

We believe this will be a mechanism for simplifying enrollment and applying uniform standards. 

The tri-committee discussion draft establishes a mechanism that offers consumers 

a way to compare plans based on quality and cost. While the exchange will initially 

be open to individuals and small employers, we believe there should be a commitment to allowing public and private sector employers beyond the small group definition to purchase coverage through the exchange after the first 2 years that the exchange is operational. 


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16Stan Dorn, ‘‘Capping the Tax Exclusion of Employer-Sponsored Health Insurance: Is Equity 

Feasible,’’ Urban Institute. June 2009. Accessed: http://www.urban.org/UploadedPDF/411894 

lcappingthetaxexclusion.pdf. 

Subsidies for Low- and Moderate-Income Workers 

Subsidies will be essential for making coverage affordable for low- and moderateincome individuals and families. We support the proposal to make subsidies relative 

to income, with more substantial subsidies applied to more comprehensive coverage 

for the lowest income enrollees. We also support ensuring that coverage is affordable 

by applying the subsidies to premiums as well as out-of-pocket costs. 

Medicaid Expansion 

We strongly support extension of Medicaid coverage to all under 133 percent of 

poverty, with sufficient resources to States to offset the new costs. 

Medicare Improvements 

In addition to eliminating subsidies that give private Medicare Advantage plans 

a competitive advantage over traditional Medicare and deplete the Trust Fund, the 

tri-committee discussion draft makes needed improvements in benefits for Medicare 

beneficiaries. The draft closes the gap in prescription drug coverage over time, eliminates cost sharing for preventive services, and improves the low-income subsidy program. 

FINANCING HEALTH CARE REFORM 

There are at least three key elements of health care reform that will also affect 

savings and revenues available for reform: A public health insurance option, delivery system reform, and an employer responsibility requirement. Though these policy 

proposals are absolutely necessary to improve the value we get for our health care 

spending, in the short run they will not be sufficient to fund reform. 

The Senate Finance Committee has said that all savings and revenue for health 

reform must come from within the health care budget. However, because health care 

reform is an urgent national priority that will produce benefits across our economy 

and improve our national budget outlook, we agree with the President that we 

should look beyond health care spending to obtain additional revenues. We support 

the major elements of the President’s budget proposal for the Health Reform Reserve Fund, including savings in Medicare and Medicaid, limiting the itemized deductions for households in the top two tax brackets, and other modifications to reduce the tax gap, as well as making the tax system fairer and more progressive. 

One financing option under consideration in the Senate Finance Committee is a 

cap on the current tax exclusion for employer-provided health care benefits so that 

some portion of current health care benefits would be subject to taxes. We believe 

this is an extraordinarily bad idea. 

Taxing Benefits Would Disrupt the Employer-Based System 

Capping the tax exclusion would undermine efforts to stabilize the employer-provided health care system. Employers would likely respond by increasing employee 

cost-sharing to a level at which benefits would become unaffordable for low-wage 

workers, or by eliminating benefits altogether. Capping the exclusion would also encourage workers to seek coverage outside their ESI group when this is economically 

advantageous, thereby complicating the role of employers enormously and giving 

them another incentive to discontinue coverage. 

Congress and the President have assured Americans that they will be able to keep 

the health care coverage they have if they like it. This approach makes enormous 

sense and generates broad public support. A cap on the tax exclusion would violate 

this basic understanding and threaten to disrupt the primary source of health care 

coverage and financing for most Americans. 

Until health care reform has been proven successful in lowering costs and making 

coverage available to uninsured workers through new private and public plan options, we should not make any changes that threaten the source of health care coverage for 160 million Americans. 

Taxing Benefits Would Be Unfair to High Cost Workers 

The Senate Finance Committee is considering capping the tax exclusion for relatively high cost plans. This would be an unfair tax on workers whose benefits cost 

more for reasons beyond their control. 

The exact same plan could cost well under $15,000 in one company and more than 

$20,000 in another depending on factors that have nothing to do with the generosity 

of coverage. According to one study, premiums for the same health benefits can 

more than double when an individual crosses State lines.16


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17 Elise Gould. ‘‘How Capping the Tax Exclusion May Disproportionately Burden Children & 

Families.’’ Economic Policy Institute and First Focus. May 2009. Accessed: http://www.first 

focus.net/Download/GOULD.pdf. 18 Commonwealth Fund. ‘‘Progressive or Regressive: A Second Look at the Tax Exemption 

for Employer-Sponsored Health Insurance Premiums.’’ May 2009. Accessed: http://www. 

commonwealthfund.org/∼/media/Files/Publications/Issue%20Brief/2009/May/Progressive%20or% 

20Regressive%20A%20Second%20Look%20at%20the%20Tax%20Exemption/PDFl1269lSchoen lprogressivelorlregressivelESI.pdf. 

The cost of coverage can be the reflection of many factors: The size of the firm; 

the demographics of the workforce; the health status of the covered workers and 

families; whether the industry is considered by insurers to be ‘‘high risk’’; geographic differences in cost; and whether there are pre-Medicare retirees covered 

through the same plan. 

Studies show that placing a cap on tax-free benefits would have the greatest impact on workers in small firms; firms with older workers and retirees, and workers 

with family plans that cover children. This is because insurance companies regularly charge higher rates for coverage for these workers. 

Under one proposal, over 41 percent of workers at a firm with older workers 

would be taxed on their health care benefits, but only 16 percent of workers at a 

firm with younger workers would be taxed. Almost 30 percent of workers at a smaller firm would be taxed, but only 17 percent of workers at a larger firm. Over 41 

percent of workers with family coverage would be taxed, but less than 20 percent 

of workers with individual coverage.17

If workers have to pay more taxes because some of their co-workers have costly 

medical conditions, health coverage would be transformed from a workplace benefit 

that everyone supports to one that splits workforces between the healthy and the 

sick. 

Some argue that the existing tax exclusion is regressive, because higher income 

workers get a bigger tax advantage. But this is only one part of the story. 

A recent report points out that while households in higher tax brackets get a 

greater benefit from the tax exclusion in absolute dollar amounts, low- and moderate-income workers would be impacted more from capping the exclusion because 

their taxes would increase by a larger share than those of higher-income workers. 

The report found that workers with employer-provided health benefits who make between $40,000 and $50,000 would see their tax liability increase on average 28 percent, while those who make between $50,000 and $75,000 would see their tax liability increase on average 20 percent. By contrast, workers who make more than 

$200,000 would see an average increase in their tax liability of only one-tenth of 

1 percent. In short, capping the tax exclusion would not make it more progressive.18

Taxing health care benefits would not bring down health care costs, either. It 

would just shift more of those costs onto workers. Economists say the tax exclusion 

leads workers to get too much coverage, but capping the tax exclusion would not 

do anything to address a key cost driver: The fact that 20 percent of the population 

consumes 80 percent of our health care spending. Taxing health benefits would not 

change that fact. 

CONCLUSION 

The AFL–CIO applauds the work of the committees in outlining a strong, effective, comprehensive plan for guaranteeing quality affordable health care for all. We 

believe the tri-committee discussion draft would stabilize the employer-based health 

insurance system by simultaneously achieving the goals of lowering costs, covering 

everyone, and improving quality. We stand ready to work with all three committees 

to enact reform that achieves these goals. America’s working families can wait no 

longer. 

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Mr. STARK. Ms. Hansen, the President of the AARP, would you 

like to talk to us about AARP’s positions? 

STATEMENT OF JENNIE CHIN HANSEN, PRESIDENT, AARP 

Ms. HANSEN. Well, thank you, Congressman Stark, for this 

wonderful opportunity to represent AARP. I thank Chairman Rangel and Ranking Member Camp, as well as the rest of the ComVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00135 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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mittee, for the opportunity to address this really vital and critical 

topic at this time. 

Enacting legislation to give all Americans quality, affordable 

health coverage options is actually AARP’s top priority this year. 

The draft tri-committee legislation marks substantial progress toward this goal. 

Today, I am really proud to represent nearly 40 million members 

of AARP, half who are over the age of 65 and therefore in Medicare 

and half under 65. Both age groups face serious problems in today’s 

health care system and AARP really appreciates the tri-committee 

for including critical reforms in its draft that will help AARP members of all ages. 

For our younger members, the draft would get us closer to abolishing discriminatory insurance market practices that use a person’s age to block access to health coverage or to keep prices too 

high to make a difference. To make insurance affordable for Americans age 50 to 64, AARP believes these individuals should be 

charged no more than twice what somebody under 50 is required 

to pay for quality health care. Why is this? Because older may 

mean wiser but it does not always mean richer. In fact, the income 

of uninsured adults, aged 18 to 24, is a little over $28,000 for the 

household and for the 50 to 64, it is $30,000 for the household. 

But if insurance companies are allowed to charge people aged 50 

to 64 more because of their age, and especially if it is more than 

twice what those under 50 pay, those who need it should be eligible 

for a subsidy in order to afford this coverage. There should also be 

strict limits placed on what these individuals are required to pay 

out of their own pockets. 

AARP is also concerned with the so-called ‘‘hardship exemption.’’ 

While this exemption would save those who cannot afford to pay 

for the required insurance policy, it would still leave them without 

affordable quality insurance. So the net result is they still are uncovered. 

The tri-committee draft requires everyone, individuals and employers alike, to participate in health care reform and AARP applauds the tri-committee for recognizing the importance of shared 

responsibility. One of the greatest difficulties faced by our older 

members is the extraordinary out-of-pocket costs for health care. In 

fact, Medicare beneficiaries right now spend about 30 percent of 

their income on health care costs and they face costs that are six 

times the costs faced by those of us who do have employer-sponsored coverage. This is a particularly stark reality for the nearly 

half of Medicare beneficiaries who have incomes of less than 

$22,000 per year. 

Prescription drugs are of course a big piece of Medicare beneficiaries’ out-of-pocket expenses, which is why AARP has made closing the ‘‘donut hole’’ and improving the low-income assistance program’s top priorities in health care reform. The tri-committee has 

led the way on both of these vital issues, including the closure of 

the ‘‘donut hole,’’ as well as the important improvements to Medicare low-income supports in its draft legislation. 

The draft also fixes Medicare’s broken system for paying doctors. 

I think we have heard a lot about that, and we know that this is 

a whole system that has to be addressed. It also puts Medicare on 


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a path to fiscal stability by revising payment systems that Peter 

Lee has mentioned, as well as Mr. Shea, to reward quality rather 

than quantity of care. It includes incentives to reduce costly and 

preventable re-hospitalizations, which will help eliminate some of 

the waste in Medicare that is driving up the cost of health care and 

threatening Medicare’s financial future. 

It strengthens our workforce, and we have just addressed that. 

And we know that it is already quite fragile and its ability to meet 

current needs is quite challenged now, let alone what will happen 

in the future. 

And it takes important steps to address racial and ethnic disparities in care that have been documented in research. Many challenges remain on the road to comprehensive health care reform but 

AARP and many of us who have been here to express those opinions, recognize that the differences that we happen to have cannot 

stop us from finding common ground and enacting comprehensive 

reform this year. We all know and have said that the status quo 

is unsustainable, and we cannot then afford to fail. 

So thank you all for your leadership, and AARP looks to continue 

to work with you all. Thank you. 

[The prepared statement of Ms. Hansen follows:] 


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Chairman RANGEL [Presiding]. Let me thank you for your leadership in helping us to get to at least where we are today. 

And I call on Mr. Johnson, who is the Senior Vice President of 

Labor, Immigration and Employee Benefits for the Chamber of 

Commerce. We need you. 

STATEMENT OF RANDEL K. JOHNSON, SENIOR VICE PRESIDENT, LABOR, IMMIGRATION AND EMPLOYEE BENEFITS, 

U.S. CHAMBER OF COMMERCE 

Mr. RANDEL JOHNSON. Thank you, Mr. Rangel and Ranking 

Member Camp and Members of the Committee. I appreciate this 

opportunity to testify. The Chamber is the world’s largest business 

federation, representing more than 3 million businesses of every 

size and sector across the economy. I think more importantly I 

want to note that half of Americans do receive their health insurance voluntarily provided by their employers. And the Chamber is 

committed to improving the health care system by lowering cost, 

improving quality and expanding coverage. 

There are a couple of issues that I want to bring up in my oral 

statement. I also have a written statement which is a little longer. 

But I want to address process, the employer mandate, and the socalled ‘‘public option,’’ which has already been much debated here. 

As far as process goes, we understand a need for urgency but lets 

put it on the table. Only a few days ago, this bill was released. It 

is 850 pages long. We all enjoyed our weekends trying to get 

through it, but there are many parts that we still do not understand. 

It is clear that the bill is going to be rushed to the floor. Markups currently have already been scheduled for next week and the 

week after, and there will not be adequate time for consideration 

or certainly deliberation by the Chamber’s Employee Benefits Committee or my many members. 

I did work on the House Labor Committee 10 years ago when 

Mrs. Clinton submitted her bill for consideration to the Congress. 

She was much criticized for that process because it came up here 

almost as a fait accompli, but it was the subject of many hearings 

in many, many committees, including this one. And looking back 

on that, I would say it was a bit of a model of transparency as compared to the process we are faced with today. 

So we do hope that the process will be slowed down a bit. We 

know what the White House is saying and the schedule that the 

President has set for the Congress, but we do believe we need more 

time to consider a bill of this length. 

There are many good ideas. We would like to be able to support 

a bill as it goes to the floor, but it is going to take some work. 

With regard to the employer mandate, certainly that is our number one issue, along with the so-called ‘‘public option.’’ We oppose 

the pay or play mandate that is in this bill. I was astounded, frankly, when I read this weekend that it imposes an 8 percent penalty 

on employers, let’s call it what it is, it is a penalty or tax, if they 

don’t participate in the so-called ‘‘play’’ part of the mandate. What 

is 8 percent? Well, that is a lot of money. Quick back of the envelope, 8 percent on someone making $40,000 a year is $3,200. If you 

have 20 employees, that is $60,000. That is a lot of money for a 


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small business to pay in addition of course to the FICA taxes they 

are already paying. 

We realize that is based on the Massachusetts model, which has, 

by the way, been roundly criticized by both the left and the right. 

In the Massachusetts model, however, the penalty was about $300 

per employee, not certainly 8 percent of payroll. 

We think that this sort of imposition on businesses for those who 

cannot afford it, and not all businesses can afford health care or 

pay this kind of penalty, is going to be one more incentive frankly, 

and I will say it, for businesses to move overseas. 

One of the worst aspects of this proposal is a very peculiar provision, which allows employees who are part of the employer plan to 

actually cash out and move to the so-called public option. And apparently, as we read the bill, this provision would say that the employer must in fact pay for that cash out. Obviously, an employer 

cannot plan on that basis, where employees move in and out. 

We are always concerned of course about the minimum coverage 

provisions defined in this bill, which is set by this ubiquitous board 

of all-consuming powers, which many others have talked about. 

The public option, much discussed in the first panel, I will not 

belabor it, I will just say it is called a ‘‘public option’’ for a reason. 

It is because one way or the other, it is going to have government 

support. Let’s face it, if this plan goes bankrupt or does not have 

enough premiums coming in, the government is not going to let it 

go by the wayside and die. The government will step in and save 

it. It is not going to be taxed like private sector insurance companies are. It is a public plan, it is a government-supported plan, and 

that is why we call it a ‘‘public option.’’ 

Many supporters believe that a public plan is necessary. I think 

our position is let’s walk before we run. Let’s see how the insurance 

market reforms work, combined with the gateway, et cetera, and 

other kinds of reforms in this bill and let’s see how they work before we move to this so-called new sort of Medicare-like option applicable to the entire public. 

With regard to paying for reform, I know there are a lot of taxes 

on the table. It is no surprise that the Chamber is not too sympathetic to new taxes on our members. We have gone through a list 

of those in the written statement, and I will not go through those 

in my oral but each one of course is new money from the bottom 

line that employers like to use for hiring new workers, expanding, 

providing benefits voluntarily, which they already do, and creating 

work for American workers. 

Now, that does not mean the Chamber is opposed to health care 

reform. Our members are paying the money for increasing health 

care costs. We want to continue to do that. We want to continue 

to cover our workers, so we support reform. But the public plan, 

the employer mandate, is something we cannot support. Peter mentioned many improvements in the system that we can go along 

with that are in this bill. Other provisions, such as medical liability 

reform, we would like the Committee to look at. We are ready to 

work with this Committee and the other three in the Congress, the 

jurisdiction of the other two, but we would ask the process be delayed a bit. Let’s take our time to get this 850-page bill right. And 


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let’s not do any harm before we move on and pass this legislation 

on to the President. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Randel Johnson follows:] 


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Mr. STARK. I just might comment, Mr. Johnson, the timeline 

when you were here and we did MMA, if you’ll recall, this Committee has had six hearings and several bipartisan meetings, and 

the legislative proposal was released June 19th when we did MMA 

we got the draft on June 13th, that was pulled back, and on June 

16th, we got the draft for a markup on June 17th. We have over 

a month prior to any proposed markup been having, and I say this 

because the Minority staff, unlike in 2003, the Minority staff has 

received information as the Majority staff has. 

So I only say as procedure, we have attempted to bring this out 

weeks and months ahead of markup consideration, and the staffs 

on both sides of the aisle I think have had—everybody’s Father’s 

Day was spoiled reading this thing. So I would just like to suggest 

in consideration for both the Minority and Majority staff who have 

spent untold hours, that the information has been out there a long 

time, and we hope that will help us come up with a better product. 

Without—however you feel about the product, I think the procedures, we’ve tried to be very transparent and get the information 

out as early as we can. 

Mr. RANDEL JOHNSON. Just a quick comment, Mr. Chairman. 

We do have a policy process at the Chamber, the Employee Benefits Committee, and we have a broad membership. It does take us 

a little bit of time to get a bill of this enormity out to our members 

and try and get feedback so we can figure out that we’re in fact 

reflecting our membership’s views. 

Mr. STARK. Thanks. Thanks for your consideration. 

Chairman RANGEL. Let me follow up on that. Not only have we 

had the hearings, but I wish before I get a chance to talk with you, 

we need the Chamber. It’s important to the country, it’s important 

to the Chamber, it’s important to our economy, and I personally 

think it’s important for competition to have a healthy workforce. 

Do you agree with all of that? Do you know the prices are soaring 

for employers as well as for individual employees? Some of the 

things that were laid out there, I would like to clear up. 

What I would want you to do as I go to Mr. Higgins and the Republicans is to make bullets of the things that you’ve said, the 

mandatory, the inability for small businesses and those things, because we’re too close on this thing for you not to be able to get to 

your membership and to recognize that maybe there’s some finetuning to be done. That’s why this is a draft bill. But we have to 

be joined at the hip on this, and I am convinced in talking with 

the Chamber people and businesspeople that we can come together. 

So just bullet these things and we’ll get back to you. What we can’t 

cover today, we’ll cover this afternoon, fair enough? 

Mr. RANDEL JOHNSON. Yes, Mr. Rangel. We have a conference 

call to the Chambers on Thursday, we’ll be running through the 

provisions of the bill, a broad nationwide conference call, and we 

will certainly be—— 

Chairman RANGEL. Terrific. Now, Mr. Higgins through no fault 

of his own did not get a chance to question the last panel. And so 

you may proceed. 

Mr. HIGGINS. Thank you, Mr. Chairman. A lot of the debate is 

centered around the so-called public plan or not-for-profit plan. The 

proponents of the not-for-profit say that it is advanced to drive 


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competition, to improve quality, to contain and lower costs. The opponents of change, the defenders of the status quo, say that a notfor-profit will put private plans at a competitive disadvantage. It 

will lead to a single payer system. It will be like Canada. It will 

be a European style. It will be a massive Federal Government takeover of health care. These are scare tactics that are designed to 

confuse people to a point where they say, well, the system may not 

be perfect now, but we can’t risk changing things. 

What I want to talk about is America. In America today, there 

are 298 million people. One hundred fifty-three million have employer-sponsored coverage. Fifteen million people have individual 

coverage. Eighty-one million in Medicare and Medicaid, and 46.7 

million don’t have insurance. Nine million of them are kids. In 

America, we pay 2.5 trillion dollars a year for health care, 20 percent of the American economy. These costs are expected to grow by 

6.7 percent annually or up to 8 percent. We have a potential liability of another trillion dollars to try to cover those without insurance. 

So as we focus on this public and private plan, if you look at all 

the studies that have been done, the Dartmouth study, contemporary and historical studies in the problems of the health care 

system in America, the Atul Gawande study in the New Yorker. It 

always cites the places that do it well. They cite specifically the 

Cleveland Clinic. They cite the Mayo Clinic. And guess what? 

Those places are delivering highest quality, low-cost care, and they 

just happen to be not-for-profit. The doctors aren’t tenured. They’re 

salaried. They have 1-year contracts. There is peer review. Doctors 

are doing what doctors are supposed to do and not dealing with insurance companies. You know, cardiologists, the national average 

salary for a cardiologist is $370,000 a year. At the Cleveland Clinic, 

the average is $336,000 a year. An oncologist, national average is 

$270,000 a year. At the Cleveland Clinic, it’s $254,000 a year. 

There’s a more generous compensation package for those at the 

Cleveland Clinic, including covering their malpractice insurance 

premiums. 

The point here is, if we’re going to do a not-for-profit plan it 

should be designed to do one thing. It should be a countervailing 

force for a system that everybody agrees is unaffordable, 

unsustainable and unacceptable. Let’s look at what works. Now I 

know from information I got this morning that the President and 

CEO of the Cleveland Clinic is here in Washington. The problem 

is, he’s not here before this panel, and that’s who we should be 

looking to for information about how to structure the fundamental 

piece of health care reform, and that’s a not-for-profit, not for unfair competition, but for fair competition, an American system 

where we pay more per capita than anybody else in the world. And 

our outcomes, our health care outcomes, are unacceptable and getting worse. 

That’s all I have, Mr. Chairman. Thank you. 

Chairman RANGEL. Thank you. The Chair recognizes Mr. 

Camp. 

Mr. CAMP. Thank you, Mr. Chairman. It was clear in talking to 

the last panel that many of them had not had time to read the bill. 

I presume that’s the same with this panel. I don’t know if any of 


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you spent the weekend. It was just released Friday night. Have 

any of you had a chance to read the whole bill in its entirety? Well, 

good for you. Two of you have. Skimmed? All right. Well, I do think 

what we’re trying to get at today is actually how the provisions in 

the bill will affect health care as we know it. 

And one of the things that the draft bill would require is that 

employers offer to pay for health insurance for full-time employees 

and their dependents, and if they don’t do that, there’s an 8 percent payroll tax. And I would say to Mr. Johnson, what impact will 

that have on the 14 million Americans currently unemployed? 

What will the potential of that payroll tax on health care do for the 

unemployed? And also for the prospects of economic recovery in 

general? 

Mr. RANDEL JOHNSON. Well, for better or for worse, there has 

been a lot of studies done on the so-called pay-or-play mandate. 

Now these studies, because they’re not exactly on the legislation 

before us because the studies were done before the legislation was 

introduced on Friday. But invariably—— 

Mr. CAMP. Can you speak into the mic a little bit more? 

Mr. RANDEL JOHNSON. Yes sir. 

Mr. CAMP. Thank you. 

Mr. RANDEL JOHNSON. There’s been many studies done, Congressman, on the impact of the pay-or-play mandate on lower-wage 

workers. Principally the pay part, a civil penalty, has an adverse 

impact on job growth and in fact will result in job losses and lower 

wages. Why is that? Because there’s only so much money that employers have for the bottom line, and when they have to pay a substantial civil penalty, that payment is going to come from somewhere, and that’s going to come from their operating budget, which 

is often taken out in terms of less job growth and adverse impact 

on workers in terms of their wages. 

Now this isn’t the Chamber talking. It’s a variety of studies that 

I have cited in my testimony. What exactly will be the 8 percent, 

the impact of what is in this bill? Well, I think it would be some 

interesting modeling, but it’s certainly not going to be helpful to 

many workers who are going to lose their jobs because of that mandate. Will it result in some additional coverage? Hard to say. I 

mean, these are the—this is the tension that the Committee is 

dealing with, I understand. But they’ve got to look—I ask that the 

Committee look at the true impact of an 8 percent penalty on employers and the fact that this is real money. 

Mr. CAMP. There’s also a new tax on employers in Section 411 

of the bill, who promise to write health insurance that meets certain government-approved levels of benefits. And if employers 

make an unintentional mistake that really doesn’t bring them up 

to the level of coverage required by the government, they’re subject 

to penalties as high as $500,000, even if those mistakes are unintentional. Does that seem like a punitive penalty on small business? 

Mr. RANDEL JOHNSON. Thank you, Mr. Camp, because I was 

not aware of that part of the bill, and I’ll certainly bring it to the 

attention of our Chambers tomorrow. It seems like an awfully high 

penalty for an unintentional violation obviously. It’s certainly in 


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the aspects of employment benefits or on labor law generally, it’s 

far in excess of anything we see in other employment laws. 

Mr. CAMP. Clearly there will be costs associated with this payor-play mandate, and I would ask you, Ms. Hansen, do you feel 

that this cost might cause employers to offset the costs by dropping 

retiree health coverage? Do you see that as a concern? 

Ms. HANSEN. Of course, our concern is continuity of coverage 

for individuals. So I think it depends on how the program eventually is structured as well as our ability to make sure that there’s 

an affordability factor, again, whether it’s the consideration for the 

employer, or then if it gets passed on to the employee, that there 

is some way that that person can still participate in coverage. So, 

the difference will be subsidy. And ultimately it’s coverage that 

we’re still looking for. 

Mr. CAMP. So the possibility of losing retiree coverage is something that would concern you a great deal because it would mean 

that continuity would be broken? 

Ms. HANSEN. Well, we’ve been watching how companies have 

chosen to go this route, so I don’t think it’s just this particular effort. It seems to have been a trend going regardless of this movement. 

Mr. CAMP. Certainly its health care costs have increased, and 

so you—certainly it would follow that if employer costs are increased even more that you might even see that problem exacerbated? 

Ms. HANSEN. Well, I do agree that it’s really about how much 

cost is, whether it’s borne by one party or the other, it’s having it 

affordable. 

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

Chairman RANGEL. Okay. I want to get back to the business of 

the Chamber. It was so good seeing you at the White House as 

stakeholders and agreeing that the system is broken, that employers are doing more than their fair share, that the prices are soaring, that most industrialized nations are competitive. General Motors once said they pay more for health care than they do for steel. 

Employees can’t afford to leave or lose their job for fear of losing 

their health insurance. It’s a better, healthier competitive America 

when they’re educated and when they have health care. 

Hey, this is Chamber type of talk. This is America type of talk. 

Half of your statement was knocking what we’ve done. I want you 

to help us to improve what we have done, because you can’t challenge that we have mutual goals. You can challenge the process, 

but this is draft, D–R–A–F–T, proposal. And to be able to persuade 

you as the small businesspeople are persuaded, because quite 

frankly, from a political point of view, that’s where I get my jobs, 

from the small businesses, they need this. They want to be able to 

afford to do this. 

When we had businesses here at one of our half-dozen hearings, 

they said you do what you want. We’re going to take care of our 

employees. And the employees said that, hey, we got our policy. We 

enjoy it. Just stop the premiums. The whole idea that unions have 

to negotiate instead of for wages, most of those things are going for 

health care. So when we say 8 percent, that was less than what 

they already pay. And I don’t think you challenged the fact that 


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having a competitor when you’re throwing these hundreds of billions of dollars out there with people who could never afford health 

care, heck, your corporations are paying for the health care of the 

uninsured in higher premiums. And now for us to bring those people to the marketplace with the security that they can get insured, 

you know that has to bring down the premiums for your members, 

and for the small businesspeople who hope to be your members one 

day. 

So what it is that we’ve said that you now have bulleted that we 

can talk about but you can think there’s a better way to do it? If 

you don’t like the mandate, that means we’ve got to lead the whole 

for people to—that don’t have the same consents for reform as you 

and I do to get a free ride? No. Everyone, the young and the ambitious and those that hope that they never get sick, has to be there 

in order to broaden the pool and reduce the premiums. So I’m disregarding your negative rhetoric because I have worked so hard 

with the Chamber to recognize that you need an educated workforce. It’s not a local issue. And you’ve worked with me and others. 

You need a healthy workforce and not spend so much time in terms 

of providing paying for health care and spend more time with 

wages and being competitive with the foreigners. So just tick off 

those things, if done differently, you can say that’s what I was talking about. Slow down the train and let’s get on board. 

Mr. RANDEL JOHNSON. Mr. Chairman, first, I can assure you 

that we don’t, as short as the time we had to review the bill, we 

don’t come up here without gauging where our membership is before we testify. The reality of it is, the employer community spends 

$500 billion on health care now voluntarily. I suppose—could they 

be required to spend more? Well, the Congress could make us 

spend more I suppose. We are already doing our fair share. 

Many of our members and the bigger companies—— 

Chairman RANGEL. That goes unchallenged, so we strike that 

off. We want to make certain that you not get increased premiums 

for doing more than your fair share, because you’re paying for people who don’t have health insurance. You know it, I know it. 

Mr. RANDEL JOHNSON. I understand. And we also have many 

members who simply cannot afford to provide health insurance or 

pay an 8 percent penalty because they cannot. 

Chairman RANGEL. They can’t afford to provide health insurance or pay the penalty, we’re there to help them. It’s in the bill. 

We’ll go through that. We’re just saying if you agree not to participate, you’ve got to pay something so that we can help your employees get insurance which 99 percent of large employers will maintain and want to do. I’m spending more time with the small 

businesspeople who need more help. There’s no conflict with the 

CEOs in doing this. They’re going to keep their plan. I want to reduce their premium. 

So mandate—we’ll talk about that. But anybody would tell you, 

you’ve got to get everyone in the pool if you’re going to bring equity 

to everyone else. And I really think the major players are going to 

be helped by doing this, and they don’t have to be told what to do. 

We just want to make certain that no one gets a free ride. 

What were the other things that disturbed you about our behind 

the closet job that we’ve done? 


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Mr. RANDEL JOHNSON. Well, the public plan option, which 

was much discussed at the first panel, is troubling to us, because 

in various reasons that were laid out. One is it does rely on Medicare reimbursement rates, which results in a cost shifting—— 

Chairman RANGEL. What does it do? 

Mr. RANDEL JOHNSON. Relies on Medicare reimbursement 

rates. I believe that’s right. 

Chairman RANGEL. Well, it bumps up the Medicare rates, but 

this is what the doctors are relying on. If they don’t want to participate, they don’t have to participate. 

Mr. RANDEL JOHNSON. I think many doctors feel they have to 

participate in Medicare because that’s where the money is and 

that’s where the patients go. 

Chairman RANGEL. If that’s where the money is, that’s what 

they’re looking for, what do you want us to do, deny them the 

money? Where are they going to get the money if we don’t assist 

50 million people to go out there and to compete? 

Mr. RANDEL JOHNSON. Well, Mr. Chairman—— 

Chairman RANGEL. And not only that, we are including a whole 

lot of physicians, primary care physicians, to come in to help the 

country to provide basic health care. You support that. You have 

to. I’m submitting that we are going to agree to more. It may be 

the process, and you’re entitled not to like it. We can make up for 

it. But I just want you to take off some of the things that happen 

in the dark of nightness that you say that I can’t get on board here, 

because we’ve got to work it out. 

Okay. We’ll pass on and we’ll—you say you’re having a conference call? 

Mr. RANDEL JOHNSON. We do one Thursday, and I guarantee 

there will be a lot of Chambers because a lot of people are starting 

to pay attention. 

Chairman RANGEL. Well, try to get it in an orderly way where 

you can get your questions, your objections so that at least we can 

tell you where we stand. But we’re not going to leave this train 

without you. Okay. Who’s supposed to be recognized? Mr. Herger 

is recognized for 5 minutes. 

Mr. HERGER. Thank you, Mr. Chairman. And I’d just like to 

point out, now we’ve been talking about this for a while now. This 

is the first hearing we’ve had actually since we’ve had a bill that’s 

been presented. That bill was just presented on Friday, 850 pages 

worth. Of our six panelists here, only two have mentioned they had 

an opportunity to read it. So, Mr. Chairman, we do have some concern. We have some major concerns. And I don’t think these concerns should be overlooked or made light of. These are major concerns that it isn’t just the Chamber of Commerce that has concerns, small businesspeople and citizens all over this Nation have 

concerns of how we’re going to pay for it and how we’re going to 

do it. And bringing this up on a Friday right before a weekend, Father’s Day weekend, and then just coming up the next week of panelists who were chosen before, again, I don’t think we should be 

making light of this. 

I also have in front of me, it’s not just the Chamber of Commerce. NFIB, National Federation of Independent Business, came 

out, a quote from them. They say NFIB opposes employer manVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00169 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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dates that threaten the viability of our Nation’s job creators, and 

an 8 percent pay-or-play mandate will inevitably harm job creation. 

Research shows an employer mandate could cost 1.6 million jobs, 

hardly what this country needs in these challenging economic 

times. 

Now, Mr. Johnson, in addition to requiring employers to offer 

and largely pay for health insurance, this draft Democrat bill 

would allow non-elected officials to mandate a minimum benefit 

package. And just as Mr. Draper, a small businessman, mentioned 

in his testimony, or alluded to, is it possible that this minimum 

benefit package would be so expensive that the 8 percent payroll 

tax could be a cheaper and more predictable option for employers? 

And if so, what impact would this have on employer-sponsored 

health insurance that the majority of Americans are accustomed to 

and who currently like? 

Mr. RANDEL JOHNSON. Yes, Congressman. And if you look at 

the bill, and that was one of the areas I did get through, would it 

be cheaper? Unlikely the way they’ve spelled it out, which is this 

board apparently with the minimum benefits package would at 

least have to include hospitalization, outpatient hospital, professional services, prescription drugs, rehabilitation, mental health 

and substance abuse disorders, preventive services, maternity benefits, baby and child care. 

So—and then it says the board can add on to that. We don’t 

know what the board is really going to do, and this is important, 

because it controls both what would be the adequate package for 

the purposes of playing instead of paying, and also who would benefit—what kind of companies could benefit to participate in the 

gateway. The bottom line could very well be that some companies 

will say, I’m not going to bother to figure this out. It’s complicated. 

Or, Congressman, that my type of plan doesn’t fit. I have a generous plan, but it doesn’t fit the definition of this board, and so I’m 

going to walk away from this, and I’ll just do the minimum. I’ll do 

the minimum benefits package, or perhaps I’ll pay the fine, and to 

heck with it, you know, I’ve had it. I’ve tried to do the best I can. 

The government thinks it’s doing its best. It knows best. So, fine. 

I’ll just do the minimum package and skip the hassle. And that will 

result in less coverage overall for some number of Americans. How 

many? It’s hard to say, but that’s one of these uncertainties we 

don’t know because we haven’t had adequate time to sort of vet the 

bill with our membership. 

Mr. HERGER. And of course the big thing we’ve been hearing 

from the President, we’ve heard from a number of my friends in 

the Democratic party have indicated that if you like what you have, 

you can keep it. But the bottom line is, even if Mr. Draper’s employees like what they had—— 

Mr. DRAPER. They don’t. 

Mr. HERGER. And we see these rates—and they don’t—if they 

see these rates, let’s say they did. 

Mr. DRAPER. Okay. 

Mr. HERGER. Because most Americans like what they have. So 

you have some who don’t. But let’s say most of the Americans who 

work for small business who like what they have, Mr. Draper could 

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er than perhaps the 10 or 11 percent or whatever it might be that 

you could be paying now. 

So, therefore, we would not be able to keep what we like. We’d 

be forced into a potentially Canadian-U.K. type system where we’re 

rationalized. Do you see that as a concern? 

Mr. RANDEL JOHNSON. I think it’s the very uncertainty of this 

sort of question that is beginning to alarm the American public 

which accounts for the recent poll in the Washington Post where 

it says most respondents are very concerned that the health care 

reform would lead to higher costs, lower quality, fewer choices, a 

bigger deficit, diminished insurance coverage and more government 

bureaucracy. 

It’s these kinds of uncertainties about the bill and the impact of 

these kind of provisions I think are getting out and are troubling 

people, and that could be the result, Congressman, who knows. But 

it’s an awfully big question to go forward without answering. 

Mr. DRAPER. In Des Moines we only have two choices, so it’s 

hard to get fewer than that. I guess you could. You could get one. 

Mr. HERGER. Thank you, Mr. Chairman. 

Chairman RANGEL. The situation is, we have about seven votes 

on the floor. And so we have to, and we apologize for it, recess until 

3:00 p.m. And for Members, that is 3:00 p.m., or if there happens 

to be another vote after that. So, Mr. Levin, if you would want to 

stay. So we hope all of you can stay with us until three and have 

lunch. We certainly will understand if your schedules cannot permit it, and the Committee stands in recess. 

[Recess.] 

Chairman RANGEL. We can’t apologize enough to our dedicated 

panel for staying here while we probably did less productive work 

than you did during this break, but we certainly want to thank you 

for your dedication helping us out, and we’ll start off, or continue 

rather, with Sandy Levin of Michigan. 

Mr. LEVIN. Thank you. Sir, let me, as we reconvene, try to follow up on what you and Mr. Chairman have raised and to talk at 

least for a minute or two with you, Mr. Johnson. In recent hours, 

much punctuated, we moved from the public plan as the focus to 

a discussion of the employer mandate, and I think in a sense that 

was a useful transition, so we talk about a number of these provisions. 

And in your testimony on page 4, you say that you adamantly 

oppose the pay-or-play proposal. And you call it a sword of Damocles. And then after you say employers are already doing their 

share and more, you say that those who can’t—who don’t cover, 

don’t, because businesses that can afford to offer benefits already. 

And then you say further on, a smarter approach would be to focus 

on bringing down the costs of health insurance. 

Picking up the theme that our Chairman has put forth, I would 

like to encourage the Chamber to participate actively in the discussion, including the issue of an employer mandate. Because I think 

the reality is that there’s going to have to be some requirement of 

coverage with perhaps some exceptions, and we left that open in 

the bill as to what if any exceptions would be made and what kind 

of credits would be given to employers, depending perhaps on size. 

So this is an issue that needs to be addressed. I think there will 


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be a requirement in order to bring more people within insurance, 

but its exact shape remains to be determined. And so when you say 

here that, on page 4, that you adamantly oppose a proposal and it 

doesn’t matter what’s in it, you essentially withdraw your organization from a discussion of what the plan might look like. And I think 

what Mr. Rangel has said to you and others of us believe, that it 

would be better if we could have broader participation. So I don’t 

know if you want to comment on that, but the issue of employer 

participation, look, we’re talking about an employer-based insurance system being maintained, and if that’s true, I think almost 

certainly that will mean that more employers need to cover their 

employees. 

So I would hope that you might in future presentations not talk 

about a sword of Damocles and it doesn’t matter how it’s shaped, 

you oppose it, to saying that you have whatever you want to say. 

Does that make any sense to you? 

Mr. RANDEL JOHNSON. Yeah, it does, Congressman, and I 

will—obviously, I’m going to go back to my policy committee and 

we’ll see where we go. 

Mr. LEVIN. Good. Mr. Shea, do you want to talk quickly about 

the issue of taxation of benefits, of health benefits? 

Mr. SHEA. Thank you, Congressman. I said we think this is a 

very bad policy because not only is it asking people to pay when 

they’re already paying a lot of money, pay more, when they’re already paying a lot of money, it is also inequitable because small 

firms, any size groups with large numbers of older workers, really 

retirees, high-risk industries, there are a lot of factors, or just 

health status, there are a lot of factors. And we’ve looked at plans 

side-by-side. So I got an example from one of the construction 

trades of two Western State plans, same trade, same age, and 

roughly the same demographics otherwise. The difference in cost in 

the two plans for similar benefits was one was 10 thousand and 

something, one was 16 thousand and something. And actually the 

one at 16 thousand had higher copays and deductibles. The difference was claims experience. And what that means, as you know, 

is health status. Well, I don’t see how the Congress is going to be 

able to go to their constituents and say we’re going to do this, and, 

you know, some people are going to get hit—smaller firms are 

going to get hit harder. So that’s a huge issue. 

The other thing is, I just—I started my comments by saying I 

don’t think you can do this without going outside the health care 

system in the short term. In the long term, if we can capture some 

good percentage of that 30 percent of the annual expenditure that 

we waste, according to the Institute of Medicine, then we’ll have 

a lot of money to fund reform. But that’s going to take a few years. 

Mr. LEVIN. My time is up. It gives me 30 seconds, 15 seconds, 

Mr. Johnson. Regarding bringing down cost of health care, and it’s 

on page 7, when you get on that telephone call, talk more, if you 

would, with those on it specifically about what kinds of plans might 

bring down the cost of health care. Because Jerry, Mr. Shea, I hope 

it’s not only a longer term. A number of us think we have to find 

some additional measures to straighten out, for example, physician 

reimbursement in the shorter term, and not only the longer term. 

And we would like your assistance on that, too. 


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Mr. RANDEL JOHNSON. Well, and we’re totally committed to 

doing this right away as soon as possible. I’m just talking about the 

effect. And by the way, while I’m on the subject, Congressman, 

thank you for your legislation on quality and delivery system reform. It’s the kind of proposal which really is moving this whole 

discussion along, so I just wanted to thank you. 

Mr. LEVIN. Thank you, Mr. Chairman. 

Chairman RANGEL. Thank you. Mr. Sam Johnson of Texas. 

Mr. JOHNSON. Thank you, Mr. Chairman. You know, Mr. Johnson, during the first panel, we talked about what would happen if 

the health care choices commissioner loaded up the essential benefits package with a lot of mandates on coverage, my understanding 

of this bill is that the commissioner will have the ability to regulate 

both government-run and employer-sponsored health insurance 

plans. One thing that’s yet to come in the hearing is whether or 

not this health care choices czar could unilaterally decide to cover 

abortion services in this newly formed government-run plan. And 

I think the President said that’s something he wanted to do. 

If that’s the case, that would be an historic reversal of public policy, and if this government-run plan could be designed to cover 

abortion on demand and taxpayer funds are used, I think that the 

cost of health care in this country, if one bureaucrat in Washington 

had the power to decide what kind of health—type of health benefits your companies had to provide to its employees, if, for instance, 

they decided not only abortion but acupuncture and hair transplants and whatever, would employers decide to get out of the 

health care system? 

Mr. RANDEL JOHNSON. Well, without taking a position specifically on—I think you pointed to the broad authority this board has 

to add a long litany of required procedures or treatments, depending on who has the most—who has the ear of which politician on 

Capitol Hill and the board. So, it’s opening a door to an analyst’s 

list. And I think, Mr. Johnson, you agree, we’ve never seen a government program be reduced. It’s always gotten expanded. And so 

at some point, an employer would say I’ll just pay the fine and get 

out of this business instead of trying to figure out how to squeeze 

my plan, which is a very generous plan, into the square peg of this 

new mandated government board, you know, required health care 

benefits package. 

So it’s a real, you know, unknown peg in a hole that we’re concerned about, given how wide open this bill has left it to this mandated program. 

Mr. JOHNSON. No, I agree with you. I think they would get out. 

Mr. Kirsch, you cite the New York Times article as evidence that 

Americans are completely sold on a government-run health care 

plan. However, that same New York Times poll also found 63 percent are concerned their own health care would get worse under a 

government-run system. Sixty-eight percent believe a governmentrun system would limit their access to treatment and quality care, 

and 53 percent are concerned they would have to give up their own 

doctor under a government-run system. Sometimes with polls you 

got to get past the first question to find a real answer, and I wonder if you would comment on that. 


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Mr. KIRSCH. I would love to. In fact, the whole thing about a 

poll is if you’d ask it as a negative question, you’ll get that answer. 

So we actually did a poll back in January to find out what would 

happen in a real debate, and I think you’ll see from the questions 

we asked, we didn’t pull our punches. So let me give you some examples of the questions we asked. The first one was, ‘‘a public 

health insurance plan will force people into lower quality care, including long waiting times and rationing of care,’’ which is the argument that we hear oftentimes from folks on your side of the 

aisle, versus ‘‘a public health insurance plan that would provide 

people the choice of an affordable plan that includes at least the 

same benefits as Members of Congress get, including a wide choice 

of doctors.’’ That argument wins by 38 points. 

Let me go on. We hear this cost shifting argument: ‘‘Like Medicare and Medicaid, the new public health insurance plan will reimburse doctors and hospitals at much lower rates, causing many doctors and hospitals to shift costs to people who buy private insurance.’’ The other argument was: ‘‘A public health insurance plan 

will be able to control overall health care costs for everyone by 

using its purchasing power, like the Veterans Administration does 

now, to drive competition and lower the prices paid for health care 

service and prescription drugs.’’ People favor that argument by 45 

points. 

Let me do one more that we also hear from people who oppose 

the plan make. ‘‘Establishing a government health insurance plan 

will mean that millions of people will lose their private health insurance coverage because employers will drop their private insurance and dump people on the public plan,’’ an argument that Members on your side of the aisle have made oftentimes today, versus 

the argument ‘‘under the current system, millions of people are already losing their health coverage every year, having a choice of 

public or private health insurance plans will make sure that Americans always have an option for quality, affordable health care.’’ 

Americans side with that argument by 47 points. 

So we did this poll to find out in a real debate in which Americans hear both sides of the arguments, where will people come 

down. We thought we might win these by a little, may lose some 

of them. We won every one of them, mostly 30 to 40, almost 50 

points. And so the first question is what Americans want choice 

isn’t complicated. People like a choice of a public or private health 

insurance option, and the choice should not be a Member of Congress’ choice. It should be a choice that each person makes. 

Mr. JOHNSON. Well, I think you got the Member of Congress 

thing backward. We don’t get free health care by any stretch of the 

imagination. 

Mr. KIRSCH. This isn’t free. People have to pay based on what 

they can afford. 

Mr. JOHNSON. Thank you, Mr. Chairman. We’re out of time. I 

yield back. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. Thank you all for 

waiting, because we need to hear from you, the things you’ve got 

to tell us. But particularly Mr. Draper. These other folks are here 

representing organizations and they’re paid for sitting here and so 

forth, but yours doesn’t look like quite that circumstance, and—— 


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Mr. DRAPER. Our lobbying budget is very small. 

Mr. MCDERMOTT. And before I came back to Washington this 

last week, I stopped and talked to two people I know in Seattle 

who run small businesses. One is ‘‘Cupcake Royale,’’ a woman 

named Jody Hall, who was down at the White House testifying on 

behalf of small business, and the other one was Molly Moon, who 

runs an ice cream store. And they have employees about like you, 

10, 12, 14 people. 

And what I’m interested in hearing from you is what is a small 

business? How should we do that? Should it be by volume of people 

that they employ, or should it be on the basis of their income, or 

what would you use? And then second, I see in your testimony you 

say the most basic coverage makes up 8 percent of our gross payroll. So is that too much to ask of a small business? Now I know 

you don’t represent the thousands and thousands of small businesses, but I’d like to hear how you decided that you could spend 

up to 8 percent of your payroll on health care. 

Mr. DRAPER. I mean, we didn’t have much of a choice on spending up to 8 percent of our payroll on health care, because that’s the 

cheapest plans we can get. I think one thing is that somebody 

who’s in their twenties kind of looks at employer-sponsored health 

care as kind of old fashioned and that you’re tied to this company 

for life. You need to stay with them. If you leave, you have to try 

to get COBRA. Once you leave, you have to try to get another company to pick up your health care. 

So it makes it kind of inefficient if you want to move around and 

kind of do your own thing. And so the employees at SMASH didn’t 

want us to even shop for a health care plan through the company. 

Everybody wanted individual plans that then the company subsidizes. So everyone is in their twenties, single, and their individual plan is about $200 a month, which comes out to about 8 percent of payroll. 

Mr. MCDERMOTT. What does that cover? Could you give 

me—— 

Mr. DRAPER. An individual plan through Wellmark under Blue 

Cross and Blue Shield is just really rudimentary. It’s just basic. It’s 

not dental, it’s not vision. It’s pretty high deductible. I think they 

say you get one free doctor’s visit, but it costs $10. And the copays 

kind of depend on what you get done. So, if I go in for sinus surgery which was $12,000, you end up paying about $1,500 of that 

surgery, which is only 10 percent, but when the national savings 

rate is below zero, I don’t think the average person has $1,500 laying around. As a small businessperson, I have just money coming 

out my ears, so it’s not a problem for me. 

One of the things that I look at is the difficult thing and why 

I say it fluctuates between 8 percent and 24 percent is that there 

are the hidden costs, and if you actually use care, you have to pay 

for it. And so even if you’re paying $200 a month, if you have several problems that year, you may pay even more in actual hospital 

bills than you do in premiums. And so our company has agreed to 

pay those bills for our employees. Just because I know that somebody has to pay them. And if one of the employees is in financial 

trouble because of bills, that puts the whole company in trouble. I 


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mean, they’re not easily replaceable, so if one person goes bankrupt 

we can just get rid of them and bring in somebody else. 

I don’t have a problem with the 8 percent if I knew that then 

they could go—if I paid 8 percent, I’d be fine with it if I knew that 

they could get full coverage at an affordable price through the exchange. 

Mr. MCDERMOTT. So you’re saying that if they—since you’re a 

small business and you I think you say you have 12 people—— 

Mr. DRAPER. Yeah. 

Mr. MCDERMOTT. So if we set the limit at 20 and said anybody 

under 20 is a small business, that those people could go into the 

exchange and get their insurance and the subsidies that might go 

with that, and you would pay 8 percent, seems like a reasonable 

deal to you? 

Mr. DRAPER. Yeah. I mean, that would be fine with me just because our costs are set. I wouldn’t be fine with it if, you know, it’s 

about $600 for an individual—for a family policy through the individual market. So if I was paying 8 percent and then they went 

onto the exchange to get a family policy and it was the same price 

as it is now, that would irritate me. So it’s a little tough to see exactly—it’s hard to compare in a hypothetical situation. But if paying 8 percent did lead to a drop in health care prices, I would support that. And I don’t think 8 percent is necessarily too much to 

ask, and I don’t think it’s too much of a responsibility for small 

business just for the fact that I already pay for my employees’ 

withholding tax and unemployment tax. If you guys came in the 

shop, I would pay the sales tax you owed. These are just some of 

the responsibilities you have to deal with when being in a small 

business and being at the top of the ladder. And I don’t mind paying taxes if they’re going to something efficient, I know they have 

a purpose. It’s only the taxes that are unnecessary, like what I pay 

now, which is for private health care, but I’m also paying taxes 

subsidizing people without health care to go to the ER. 

Mr. MCDERMOTT. Could I stop you? I see my time is almost up. 

I want to ask one question. Some people are saying that we should 

not make a small business five people if the five people have incomes of $100,000, a small lobbying firm here in D.C., they 

shouldn’t be eligible for the small business thing, how much do you 

pay—what’s your average salary in your business? 

Mr. DRAPER. It probably comes out to $45,000 a year. It’s a 

base of $38,000 plus bonus, so that’s kind of what it averages out 

to. But then there’s lower paid employees that are just hourly. If 

they’re one of our employees, they would essentially be in the mix. 

So I think you’re pretty much going to have to do something that’s 

a mix of number of employees versus payroll. You don’t want people just starting sham fake businesses so they can get out of getting health care and just pay an 8 percent fee. But I think if you 

do a mix of employees and payroll, it should be pretty simple. 

Mr. MCDERMOTT. Thank you very much. 

Chairman RANGEL. Mr. Ryan. 

Mr. RYAN. Thank you, Mr. Chairman. Ms. Hansen, let me ask 

you—you took Bob Novelli’s job or Bill Novelli’s job, or? 

Ms. HANSEN. No. Actually, I’m a volunteer. The President’s role 

in the organization—— 


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Mr. RYAN. Gotcha. Gotcha. Okay. I was just trying to remember. 

Bill retired, did he not? 

Ms. HANSEN. He went to Georgetown. 

Mr. RYAN. Yeah. Right. Great. He’s a good guy. I want to ask 

you about AARP, your position on these issues, and just sort of 

your sense of the future. I’ve been very impressed with the—I 

think you called it your Divided We Fail campaign with the elephant and the donkey. As you know, the current unfunded liability for Medicare is $38 

trillion. Medicaid, which does affect the over 65 population, it’s a 

tougher number to crunch because of the State involvement and 

Federal—some estimates come in at about $20 trillion of unfunded 

liability. Are you concerned that we’re creating a new entitlement 

here that will rack up a similar unfunded liability? 

Ms. HANSEN. Well, I think framing it as a new entitlement as 

compared to looking at the basis of coverage—— 

Mr. RYAN. You don’t see this as a new entitlement? 

Ms. HANSEN. I think it’s a choice of a health care program that 

would cover people. So I personally, from my role, am not calling 

it an entitlement. I wouldn’t call it that personally. 

Mr. RYAN. Just to say, if you qualify for it and you get it, that’s 

an entitlement. Such as if you’re under 400 percent of poverty, you 

go in the exchange, you get the subsidy. Therefore it is by definition an entitlement. Just for the record. 

Ms. HANSEN. Well, I think there’s—my understanding, and I 

may be wrong, but I think that people are actually going to pay for 

that as well, so it’s not just a free—it’s only if you—— 

Mr. RYAN. Well, people on Medicare pay part of their premiums 

as well, so—and there’s copays in Medicaid. So, yeah, we’re not 

saying it’s 100 percent, but it’s subsidized. So the point I’m trying 

to ask is, is AARP concerned because they had this great impressive campaign that we have pending insolvency of Medicare and 

Social Security, are they not concerned that we’re adding to the list 

of new programs and liabilities? 

Ms. HANSEN. I think AARP is concerned about solvency and 

economic stability for the future, yes, we are concerned about that, 

because besides the fact that our members are 50 and above, our 

members are parents and grandparents and great grandparents. So 

we are very much concerned about economic security for the future 

of this country. 

Mr. RYAN. So every year we delay fixing just Medicare and Social Security, we go about 4 trillion, 3 to 4 trillion in debt to those 

programs, the sooner we act, the more likely we can prevent those 

in and near retirement from having effects to their benefits. Most 

of the plans that some of us on this side of the aisle have put out 

plans to make those programs solvent. They don’t affect people over 

the age of 55. The more delay that occurs, the less likely changes 

will not affect people over the age of 55. So my—let me ask it this 

way. If it is clear that this new benefit creates a new unfunded liability for the Federal Government on top of the already existing 

ones which AARP has put an impressive campaign out there to fix, 

will AARP come out against this and have a problem with this? 

Ms. HANSEN. No. We’re on record for wanting some real change 

in the existing program itself. 


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Mr. RYAN. Are you on record for the public plan? 

Ms. HANSEN. We—the board of directors actually met within 

the past 2 weeks before any document was seen. We came up with 

five core principles, and the principles, I’ll read them—— 

Mr. RYAN. Don’t go through all of them, no offense, because I’ve 

got a 5 minute thing. Does this bill satisfy all of your five principles? 

Ms. HANSEN. As it’s come out right now, the plan that the—— 

Mr. RYAN. The Tri-Comm plan. 

Ms. HANSEN. The Tri-Comm does seem to house the core principles. 

Mr. RYAN. So as far as you know, AARP, this bill satisfies your 

principles? 

Ms. HANSEN. We’re just saying—we’re saying elements of the 

bill certainly are supportive of the issues we care about. 

Mr. RYAN. Mr. Johnson, real quick. If the actuaries are right, 

and when I say the actuaries, Lewin, CBO, HSI, all of them from 

varying degrees show us slippage, meaning private sector dumps 

some people on the public plan, 8 percent payroll tax. That means 

a payroll tax eventually goes to 23 percent, at least for those firms 

that make this decision, as Mr. Draper mentioned he would make. 

What do you think the effects of a 23 percent payroll tax on labor 

in America are going to be to our economy? 

Mr. RANDEL JOHNSON. Well, it’s—it would be devastating. 

We’re already paying of course the tax and we have this 8 percent 

proposal, and 23 percent, I mean, that’s a 23 percent jump on 

wages that you have to pay with no attendant increase in productivity. So that will result in lower job growth or elimination of jobs 

because you’ve got to make up for that loss at the bottom line 

somehow otherwise. I mean, it’s pretty elementary economics I 

think, Congressman. 

Mr. RYAN. Thank you. My time has expired. 

Chairman RANGEL. Mr. Becerra of California. 

Mr. BECERRA. Thank you, Mr. Chairman, and to all the panelists, thank you for your great patience and all of your very important testimony. I’d like to begin by asking a little bit about this 

whole notion about what will happen if we have this new marketplace for options. 

Mr. Draper, you’re a businessman. You have folks who work for 

you. You mentioned how you thought you could live with a plan 

that worked to reduce costs so that you could then as an employer 

feel comfortable making some contributions. Let me ask a question. 

Would it be your intention to dump your employees into any particular plan? 

Mr. DRAPER. What do you mean, like steer them toward one 

particular plan? 

Mr. BECERRA. People continue to use this word ‘‘dump’’ as if 

we’re going to take a flock of American consumers and just drop 

them onto a particular plan in a marketplace where, my understanding is, the choice will be the consumer’s, not the employer’s, 

not the health insurance company’s choice, not even a public insurance plan’s choice, but who it will serve. The choice will be that of 

the consumer, your employee. So let’s say you decide you no longer 

want to offer health insurance, first I would ask if—because it 


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sounded to me like you would be willing to provide some contribution, but if you decided not to, do you think you would want to then 

dump your employees onto any particular plan? 

Mr. DRAPER. I mean, not really. We already have the cheapest 

plan we can get, so I’m not sure what other plan we would dump 

them onto. 

Mr. BECERRA. And the point here is that, one, you’re willing to 

make a contribution, so you’re willing to try to help them get a 

plan. But the way this new program would work is that your contribution would make it possible for your employees then, if you 

were to not offer a plan directly, to take your contribution, use it 

to then be able to go into that marketplace and shop for any number of plans that would be out there, a competitive menu of plans 

that would be provided by private insurers and a public insurance 

option that would be out there. And whether somebody would attempt to dump employees into this new marketplace, ultimately 

the choice wouldn’t be the employer’s about where they would end 

up. 

Mr. DRAPER. Yeah, that’s true. 

Mr. BECERRA. The choice would be the employee’s or the consumer’s about which plan they would select. 

Mr. DRAPER. Yeah. And, I mean, I think it doesn’t—it wouldn’t 

have as much of an impact on us, because we already buy individual policies for the plans. And so we already do what the exchange is doing, and that they get to pick out whatever individual 

plan that they want. I think one of the biggest problems you have 

now is that it’s kind of like when I watch old people at Walgreen’s 

trying to enlarge their own photos, in that it seems easier because, 

well, you have control over it, but they don’t know how to operate 

the machines. It saves Walgreen’s some money because they don’t 

have to do it anymore. But it takes them longer and gets them a 

worse product if they do it themselves. 

I don’t read plans professionally. I mean, it’s not what I sit 

around doing. Most of my time is spent thinking how can I generate more money to send in taxes to the Federal Government. And 

I think that’s probably what you guys want me to be doing rather 

than spending time sifting through plans. 

The problem we have now is that they’re written so complicated 

that it’s hard to understand exactly what your deductibles are. So 

I wouldn’t want, you know, just my employees to be shopping 

through the complicated plans we have now in the same way I 

wouldn’t want the employees investing my money for me. It’s just— 

I don’t have faith that they’ll be able to do it. My dad is an insurance attorney, so he actually reads through our plans for us, but 

not having that kind of crutch makes it really hard. So I think on 

the one hand you need the exchange to really simplify, like people 

were saying earlier, have a standard for how to compare plans one 

to the other, which we don’t have now. 

Mr. BECERRA. Well, the good thing is, it sounds like what you 

do is you give your employees a choice of what plan they want to 

take. 

Mr. DRAPER. Yeah. They can get any plan they want, and we 

just, through my dad’s recommendations, we’ll recommend to them 

this one is a good plan. 


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Mr. BECERRA. And you have goals this health care reform proposal would in essence build on that model that you described—— 

Mr. DRAPER. Yeah. I think it matches up with what I said earlier. Most young people want to be able to buy a plan that’s not 

tied to a company. They want to just buy a plan that they can take 

with them for life. And so it appeals to us more less than if we had 

a huge company plan. It would be more of a shift, but right now 

it’s not that big of a deal for us. 

Mr. BECERRA. Thank you. Mr. Shea, I was wondering if you 

could comment on the last series of comment and answer that was 

given about a job loss that might occur if we were to move toward 

a more cost-effective form of health care. 

Mr. SHEA. Well, the ball game here is cost. And if we don’t figure out a way, with all due respect, if you don’t figure out a way 

with our health control costs, we can’t do any of this stuff. That’s 

really what we’ve got to focus on. But in terms of sort of what people could afford, you know, we have probably 5, 6, 7 million people 

who are in multi-employer plans. These are people who work in the 

culinary area and transportation and janitorial and building and 

all kinds of trades. You know, in the building trades, I looked at 

this. The vast majority of those employers who pay into these funds 

and provide good benefits have under 10 employees. 

Now the problem for those employers is they’re providing good 

wages and good benefits, and they have to compete against people 

who don’t provide benefits. And that’s the economic distortion that 

having everybody pay into would play. But then the other thing is, 

just in terms of I just think you need to simplify this, at least for 

my mind. Most employers now provide coverage. They want—all 

employers want to, I think, most do. Those who don’t are either in 

the lobbying firm that doesn’t want to pay even though they make 

a lot of money, and those people ought to pay. 

And then there’s the people who are probably small, but certainly 

low wage. And in your plan, as I read it, you’re going to provide 

substantial subsidies, tax system subsidies, for those people. So it 

seems like you’ve asked them to do something but you’ve given 

them support in being able to do it. And you eliminate this economic distortion. 

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

Chairman RANGEL. Mr. Nunes for 5 minutes. 

Mr. NUNES. Thank you, Mr. Chairman. I have just a quick 

question by show of hands. Of the six of you that are up there at 

the dais now, how many of you have health care coverage, health 

insurance? You all—all six of you have health insurance. How 

many of you would like to trade your insurance in for Medicaid? 

Anyone? 

Mr. DRAPER. I don’t know the details on Medicaid. So it’s just 

hard for me to say that I would trade for Medicaid, because I don’t 

know how it works. 

Mr. NUNES. I’m pretty sure that you probably wouldn’t have a 

lot of constituents that are on Medicaid. 

Mr. KIRSCH. Actually, in New York, Medicaid coverage is better 

than private coverage. 


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Mr. NUNES. In California it’s not. But for the record, none of 

you—— 

Mr. KIRSCH. But it is in New York. 

Mr. NUNES. For the record, none of you wanted to trade in your 

own health insurance for Medicaid. 

Mr. KIRSCH. I would actually have no problems. Given New 

York, given the excellent benefits and coverage in New York in 

Medicaid would be better, and I actually get coverage now through 

a State employee plan that my wife’s part of. 

Mr. NUNES. So one of you would like to trade in your health insurance for Medicaid. Five of you would not. What was that, Mr. 

Draper? 

Mr. DRAPER. I’d be willing to try. 

Mr. NUNES. You’d be willing to try? You probably wouldn’t have 

to try for very long. 

Mr. DRAPER. Put me down on the record as a maybe. 

Mr. NUNES. Okay. 

[Laughter.] 

Mr. NUNES. We’ll have you down as a maybe. So that leaves 

four of you who don’t want to, of which I think three of the four 

are supporting the plan, which, you know, basically what we’re 

going to do with this plan is we’re going to put more Americans 

onto Medicaid. And as you may or may not know, Medicaid in California is completely imploding, and there are specialists who will 

not see Medicaid patients, and I haven’t found a constituent yet in 

my district that likes being on Medicaid. 

And so I can’t for the life of me figure out why if we’re doing socalled comprehensive reform on health care that we are leaving, 

not only leaving Medicaid alone, which is a $20 trillion unfunded 

mandate, but why we would be expanding Medicaid to put more 

and more Americans onto Medicaid. 

Mr. Draper, you said that you had—your business last year was 

a million dollar business. 

Mr. DRAPER. Yeah. This year it will be a million dollars. Last 

year it was probably $820,000. 

Mr. NUNES. And you had—you said you had 43 employees 

today? 

Mr. DRAPER. No, we have 12. 

Mr. NUNES. Oh, you have 12 employees? Okay. I misunderstood 

you. Okay. So of the 12 employees, how many—do you offer health 

care coverage to all 12? 

Mr. DRAPER. Yes, we do now. 

Mr. NUNES. And of those—and, what, just a private plan? 

Mr. DRAPER. Yeah. They each get an individual plan that they 

can purchase and then the company pays them back for it, and we 

also pay for any bills beyond their insurance. 

Mr. NUNES. So 100 percent, there’s no—they don’t pay anything 

on their own? You pay 100 percent of the health care coverage? 

Mr. DRAPER. Yes. 

Mr. NUNES. Okay. So of that, you know, one of the plans that 

myself and Mr. Ryan have talked about is actually giving refundable upfront tax credit for your employees to have so that they’d 

be able to go out and purchase health care on their own and get 

to the question that you asked about or the comment, you talked 


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about portability. You would like to have portability coverage for 

your employees so that if they left your work, they’d be able to go 

somewhere else. 

Mr. DRAPER. Yeah. 

Mr. NUNES. So, I mean, do you see a problem with the plan that 

some of the Republicans have of giving basically a refundable upfront tax credit to your employees to go out and choose their own 

health care plan? 

Mr. DRAPER. Yeah, I mean, I’ve said before that I don’t see a 

problem with regulation, but I just don’t think that only regulation 

is going to help us. When I talked to Grassley yesterday, and they 

said, what we really want to do is just regulate. A headline in my 

mind said, from the people who brought you bank regulation comes 

health care regulation. And I worry that if it’s only regulation that 

you’ll have the people from the insurance companies regulating 

themselves and things won’t actually get that much better. And it’s 

tricky for me to see how just regulation is going to make rates go 

down. 

Mr. NUNES. But we’re—well, our plan calls for—— 

Mr. DRAPER. I would support a tax break, but I don’t understand if that’s actually going to get them any better health care. 

Mr. NUNES. Well, for a family of four, for example, under our plan, we’d have—they’d get $5,700. And if they were making—I 

don’t know what your employees’ average wage is, but let’s say that 

you had an employee that was making less than $20,000 a year. 

They’d get $11,000 a year to go out and pick their own health plan, 

any health plan they want. And I would imagine that $11,000, is 

that more than the plan that you offer today? 

Mr. DRAPER. Per employee? Just a second. Let me think. 

Mr. NUNES. It probably is. 

Mr. DRAPER. Yeah, it would be more than the average. 

Mr. NUNES. So one of the things that I’d like—— 

Mr. DRAPER. If you were going to get a family plan, though, it would be about $700 a month. 

Mr. NUNES. So—yeah. So less—yeah. Under our plan, we would 

give the person in your company that’s making less than $20,000 

a year, $11,000 to go get their own health plan, which would be 

better than the health plan that you offer. And I appreciate—I 

mean, I think it’s good that you came here to testify, and I appreciate your openness and honesty. But the one thing that we want 

to make sure we do and try to get across to the American people 

is that pushing more people to government-run health care is not 

necessary. We can have universal coverage for all Americans if 

we’re willing just to take time and to come up I think with better 

legislation, Mr. Chairman, than the current legislation that we 

have now. But I thank you for having the hearing. 

Chairman RANGEL. The Chair recognizes Mr. Doggett. And before any of you get in trouble, don’t apply for Medicaid, because it’s 

for the poor. And I’d like to assume that you’ve beaten that barrier, 

so Medicaid won’t be available for any of you, I hope. Let me call 

Mr. Doggett and thank him in advance for the great contributions 

he’s made to the Committee on health care. 

Mr. DOGGETT. Thank you, Mr. Chairman, and thanks to each 

of our witnesses for the insights you’ve offered. Mr. Draper, I had 


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a small businessperson from Austin, Texas contact me and say the 

bureaucracy of the health insurance companies makes the government look efficient. As a small businessman, I want to make it 

clear that I totally disagree with the United States Chamber of 

Commerce. Something has to be done. Health insurance is the biggest expense I have next to payroll. I’ve not been able to give raises 

for several years because the money budgeted for raises was used 

up on higher health insurance premiums. 

I tried to let my staff know that the $200 a month raise that 

they would get was taken by Blue Cross. Is that similar to the experience that you hear about? That was from Mark Siefken in Austin, did you hear that from some of the folks in your area? 

Mr. DRAPER. Yeah. For us it comes out to about a 1 percent 

raise for everybody every year that goes to health insurance. So, 

it’s kind of a good news/bad news situation. The good news, you got 

a raise. The bad news, it goes to Wellmark. And for us, though, the 

only tough spot that we’re in is that everybody we employ is under 

the age of 27 and single. And so right now, even an inefficient system is still pretty affordable for us, because we don’t have much 

demand. 

But within the next 6 years as, you know, everyone starts a family, then our rates will go up from about 8 percent to 26 percent 

if we are shopping in the same market that we’re in, and we’ll have 

to totally redo again to figure out, well, we can’t stay in the individual market. We have to go through somebody else, and you 

spend time looking for that. And so that’s kind of the tough spot 

that we’re in. And companies that do employ people who are older 

with families are the ones that have it a lot worse than we do. 

Mr. DOGGETT. And rather than rely on some State regulatory 

agency that may well be owned by the regulated, you believe in the 

competitive system and that one type of competition that should be 

there is the option for your employees to look at a public plan? 

Mr. DRAPER. Yeah. And, I mean, I look at things a little differently coming from Iowa in that almost everybody in Iowa goes 

to public schools like I did, you know, government runs efficiently. 

When Cedar Rapids flooded, everything’s been more or less cleaned 

up and gotten back to normal. So there isn’t the serious antipathy 

to a government-run plan as there may be on the east coast. And 

so for me, I can’t imagine how would you get a company—anything 

that runs as inefficiently as the health care company, even the government. 

Mr. DOGGETT. It sounds like my constituent in Austin. And it 

is amazing that some of the people that are always up here criticizing how inefficient government is are so fearful of an efficient 

plan of the type we’ve had with Medicare that has inspired confidence with millions of people across this country. 

Ms. Hansen, I know you’re very familiar with, and I appreciate 

the support AARP has offered. You mention it in your testimony, 

for legislation that I have advanced last Congress and again this 

Congress to try to help the poorest of our seniors with their prescription drug bills. Isn’t it correct that we still have several million seniors who are not able to get the full access to prescription 

drugs they need under the Extra Help program? 


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Ms. HANSEN. There are many people, millions of people who 

haven’t taken advantage of it. So it’s an opportunity for us to continue to make sure that people enter the program they are qualified for. 

Mr. DOGGETT. And to the extent we work from the bottom up, 

from helping those most in need with extra help, we actually can 

take steps to close the donut hole in coverage there, because the 

more people we cover through Extra Help, the less they’re exposed 

to that donut hole. 

Ms. HANSEN. Without a doubt. I think it’s a real opportunity 

to help that fragile group. But at the same time, as I mentioned 

earlier, since our membership is everyone, the middle-income population is hurting quite a bit, given the fact that Medicare beneficiaries right now, as you know, pay 30 percent of their revenues, 

and that’s high. 

Mr. DOGGETT. Let me just ask Mr. Shea one question here as 

my time expires. The notion that we ought to tax employer-provided health insurance to pay for the serious shortcomings in our 

system seems to me to be a tax on the type of insurance coverage 

that every American would want. That the policies that would be 

taxed are those that might provide dental coverage or have lower 

copays, that type of thing. Is that the case, that these policies that 

some over in the Senate propose to levy a tax on, are good policies 

that most Americans would want? 

Mr. SHEA. They certainly are. And as I said before, the price of 

those policies varies by the health condition of the group or the age 

of the group or where the group is. And so it’s—how you apply a 

tax across that is unfathomable to me. 

But the other point I would make here is, you know, if you want 

to throw a hand grenade into the discussion in the American public 

about health reform, you know, the figures from some of the Washington Post stuff this morning, you go out and advertise that what 

you’re going to do to solve this problem, this problem is high health 

costs. That’s how people define the health care problem around the 

country. They can’t afford it even if they have insurance. If you go 

out and tell them our solution to the high health cost problem is 

we’re going to tax your benefits, they—I don’t know what they’re 

going to do in the voting booth, but they certainly would look at 

you like you’ve got to be crazy. 

Mr. DOGGETT. I couldn’t agree with you more. Thank you. 

Thank you, Mr. Chairman. 

Chairman RANGEL. The Chair would like to recognize Ms. 

Brown-Waite. 

Ms. BROWN-WAITE. Thank you, Mr. Chair. I would like to address Ms. Hansen for a moment. First of all, my name is Ginny 

Brown-Waite. I often get called Jennie. So when I saw your name, 

I thought now this is a woman I can relate to. 

I just have a couple of questions. I’m concerned that AARP may 

not be doing its homework, and let me tell you why. As you know, 

as you may know, I have the highest number of people on Medicare 

of any Member of Congress. During the stimulus bill, we realized 

that the money that was going for health IT in hospitals was actually coming from the Medicare trust fund Part A. Are you aware 

of that? 


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Ms. HANSEN. No, not directly as to where it’s coming from. I 

thought the stimulus was an add-on. 

Ms. BROWN-WAITE. No. The money for the health—for the 

health IT for hospitals came from the hospital trust fund. I contacted AARP and alerted them to this, and first they denied it. And 

then they called back and acknowledged it. But they said we’re still 

supporting the bill. 

I think that Americans are beginning to wonder about AARP 

when they would support things that obviously raid a trust fund, 

namely Part A, for the hospitals. That is I believe scheduled to be 

paying out more than it takes in before the raid, it was scheduled 

for 2017. When I talk to AARP folks at home, they were appalled 

at this. 

So I have to ask the question, and bear in mind, not only do I 

have those who are 65 on Medicare, but I also have a lot of people 

who are 55 to 64 who fall in that difficult-to-get insurance gap. I 

could understand AARP supporting a bill that helped them that 

didn’t bankrupt the country. 

But I have to ask, why would AARP be interested in making sure 

that, for example, those under 25 are covered and those who may 

be illegal aliens, I just have—I think that the American public is 

starting to question AARP and where they’re going. So I really 

would like to hear from you on that, and then I’d also like to ask 

you about Medicare Advantage. 

Ms. HANSEN. Yes. If I could answer the first question. I think 

we have been on record as supporting health information technology, and then we have actually had the support of all of our colleagues under the Divided We Fail banner. And I think—I’m a 

nurse by background, and so I also have run a program that has 

used IT on behalf of our elders. And one of the things that researchers show that Medicare beneficiaries, about one in five in a 

given year will likely go to a hospital, to your point that hospital 

care is critical. But oftentimes it’s because medications are not well 

used or they come back from a hospital within 30 days. A lot of it 

is about information that was not appropriately recorded or transferred correctly. And so what has been shown, for example, in the 

Veterans Hospital, using IT, that their medication error rate is 

only 1 percent. 

Ms. BROWN-WAITE. Correct. I don’t think we disagree about 

the use of IT. I think we disagree about should AARP have supported something that will cause the trust fund Part A to become 

insolvent even sooner. 

Ms. HANSEN. Right. 

Ms. BROWN-WAITE. I mean, I don’t think anybody questions 

health care IT. 

Ms. HANSEN. Right. But I think my followup point is, when you 

minimize mistakes through IT, they don’t have to go to the hospital, and therefore you save money actually on Part A just because 

the mitigation of unnecessary hospitalization saves money in the 

trust fund. 

Ms. BROWN-WAITE. It may very well, but initially, the cost, the 

total $16 billion, came out of the trust fund. So when I tell seniors 

this at home, they are appalled that AARP would support something such as this. This is a very comprehensive bill, and I think 


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that AARP needs to be very, very cautious what they are supporting. There are many good parts to the proposal, the 800-some 

page proposal. There are some good parts to it, and I think we need 

to work together in a bipartisan manner to make sure that, you 

know, what eventually we will all be voting on is something that 

is going to benefit the uninsured. 

I have a question, a quick question, though, about the Medicare 

Advantage plan. According to CBO proposals, the proposal to cut 

Medicare Advantage payments by $160 billion, as this bill would 

do, would result in about 3 million seniors being forced out of Medicare Advantage plans. I know that AARP even has a Medicare Advantage plan, and there’s a very high satisfaction level. Do you 

have any concerns about how AARP members in various Medicare 

Advantage plans will be affected by this bill, including those who 

may be in your program? 

Chairman RANGEL. Response in mail. 

Ms. HANSEN. I will do that. Thank you. 

Chairman RANGEL. The Chair recognizes Mr. Blumenauer. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. I’m sorry Mr. 

Nunes is not here. I’m mystified by his line of inquiry to people 

asking people with insurance whether they would like to sign up 

for a program designed for poor people without insurance. Now, admittedly, there are some States that—New York—that have a fairly generous program. But it seems to me to be sort of a disingenuous question. Would you like to have the insurance program that 

we have for the poorest people in America, people who couldn’t afford private insurance, people who would have difficulty even in 

the subsidized form that we’re talking about here, and the Republicans offering a tax credit that would not help them at all? It’s bizarre. So it seems to me that we ought to—I’d love to have a further discussion of this Committee about the merits of Medicaid for 

poor people and compare how they would be treated under our program where it would be expanded so they wouldn’t be left out, and 

over time if they were able, they could transition into the exchange. 

But it is a false choice to somehow ask you with private insurance 

if you want to have insurance that was designed for the poorest 

people in the United States who have no other access. But he’s not 

here, so I—— 

Mr. NUNES. Actually, I am here, if you’d like to—— 

Mr. BLUMENAUER. Good. Then I look forward at some 

point—— 

Mr. NUNES. If you’d like to yield. 

Mr. BLUMENAUER [continuing]. Having this debate when you 

have time to yield to me. I wanted to just sort of put that as part 

of the record. 

Mr. NUNES. So you don’t want to yield to me to answer your 

question? 

Mr. BLUMENAUER. I don’t have time now. I didn’t see you 

here, and I didn’t want to interrupt you while you were questioning. I’d like to finish my line of inquiry. But I’ll come back and 

we can debate this. 

Chairman RANGEL. Well, I will give you time to explain why 

you asked them whether or not—— 

Mr. BLUMENAUER. Okay. Thank you. Then I will yield. 


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Chairman RANGEL [continuing]. Program for the poor. 

Mr. BLUMENAUER. Okay. I will yield. Mr. Nunes, do you want 

to ask me a question? 

Chairman RANGEL. Why did you ask them whether or not they 

would want to join a poverty program? 

Mr. NUNES. Because the bill that you guys have introduced, Mr. 

Chairman, expands Medicaid. And in my opinion—— 

Chairman RANGEL. I’m asking, why would you ask these people 

who are not poor? 

Mr. NUNES. Because they are here supporting the underlying 

bill, and they are supporting putting more people to Medicaid. 

Chairman RANGEL. They are. Poor folks. 

Mr. NUNES. And it is my goal in this country, I don’t believe 

that poor folks in this country need to have Medicaid. 

Chairman RANGEL. That’s good. Okay. 

Mr. NUNES. I think that poor people in this country should have 

universal access to coverage. And we have a plan that we’d love to 

share with you that would give them access to that. 

Chairman RANGEL. I understand. And I want you to understand his question was that he does not believe that poor people 

should be entitled to Medicaid. What that has to do with you who 

are not poor, I don’t know, but I hope you got an answer, and this 

answer will not be taken out of your time. You may proceed. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. And I do look 

forward to a spirited debate about how poor people are going to be 

helped with a tax credit, how poor people are going to be helped 

to jump into the private market. In times past, the reason we’ve 

had Medicaid is because the private market couldn’t deal with 

them. It’s not going to be any cheaper. In fact, one of the reasons 

that we restricted a little bit under this plan is that it will be a 

little less expensive over time. But I welcome that debate with my 

Republican friends about their vision of taking away Medicaid and 

giving a tax credit or forcing them into a private market that they 

can’t afford now. I welcome it. 

I do have one question for Ms. Hansen. You didn’t get to it in 

your testimony. We both are very interested in getting more efficiency out of the Medicare system now, and in your testimony you 

talk about a transitional benefit and what that could do. Would you 

care to make a comment about the transitional benefit that you 

didn’t have time to refer to in your testimony? 

Ms. HANSEN. Thank you, Congressman Blumenauer. We thank 

you as well as Congressman Boustany for jointly supporting this, 

the Medicare transition benefit, and that is it actually relates to 

the Congresswoman’s question about hospital care. And so I’d like 

to tie that back together, that the efficiencies of doing things right 

and correctly the first time with giving some support to people 

upon leaving with evidence, there is researched information published in journals showing that there are cost savings to be able to 

be incurred in which case the patient, the elder would not have an 

error happen after a hospitalization because somebody would be 

there. 

Generally we’re speaking about a nurse in this research, that the 

cost savings to help people take their medications safely and know 

what to do, allows them to then perhaps not become a statistic, 


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which is shown in Medicare data that within 30 days one out of 

five people goes back into the hospital. This particular piece of legislation would help address that, and I also would then come back 

to say that this makes such a big difference on both Part A, Part 

B and Part D. Savings would be incurred. 

Mr. BLUMENAUER. Thank you. Mr. Chairman, I appreciate 

your courtesy. I would hope that we would be able to look, one of 

the areas that I hope we can strengthen in our draft is the transitional benefit. We have some legislation that we’ve introduced that 

I personally think we should look at, because we may be able to 

strengthen transitional benefit in the draft. I think it would save 

more money over time and help people that we want to help. 

Thank you. And I yield back. 

Chairman RANGEL. Mr. Thompson. 

Mr. THOMPSON. Thank you, Mr. Chairman. I appreciate the 

opportunity to question the witnesses. I’d like to talk a minute 

about, or ask you some questions about the idea of preventive 

health care. I’m one who believes that this is very, very important 

and that it will go a long way in accomplishing what many refer 

to as bending the cost curve of health care. 

And so, to that end, I’d like to know if you think it’s important 

that we have a minimum benefit standard in order to achieve good 

coverage and should preventive health care be part of any minimum coverage we insist that these plans offer. 

Mr. KIRSCH. Well, certainly, yes. And one of the really good 

things about the benefit package you’ve done, is you have prevention with no out-of-pocket costs. One of the encouraging things, actually, that many large businesses have done, is move to that. Understanding that financial barriers to prevention actually raises 

costs and you want to get folks in the system. 

The other thing that’s really good about the legislation is it includes major investments in developing more primary care practitioners, because we need the folks actually able to deliver that preventive care so—— 

Mr. THOMPSON. As far as it impacts health outcomes, is this 

something that we can expect to see better outcomes and better 

prices? 

Mr. KIRSCH. Absolutely. And, you know, the old adage, an 

ounce of prevention is worth a pound of cure. It’s not just true for 

each person, it’s true for the health care system as a whole. 

Mr. THOMPSON. Anybody disagree? 

Mr. RANDEL JOHNSON. If you are going to mandate a package, I certainly think that wellness programs, preventiveness, 

ought to have first dollar coverage and be part of that. At the 

Chamber we’re very much, our members are very aggressively pursuing wellness programs, Safeway is a very, Steve Burd, the CEO 

of Safeway has a very strong program in that area. Great payoffs, 

it just takes a while to get the payoff until the program runs its 

course. But, sure, I think—— 

Mr. THOMPSON. Through the long-term impacts, but there are 

certainly short-term impacts, cost savings as well, if you catch your 

problem, especially for a child, it’s a lot cheaper to treat that, than 

to treat a child in a hospital. Kids’ hospital costs are more expensive, etc. 


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Mr. RANDEL JOHNSON. And we have a conference coming—— 

Mr. THOMPSON. Even the Chamber agrees. On a roll here. I’d 

like to ask the AARP witness, why is it that AARP believes that 

we should eliminate the cost sharing for preventive care? Why do 

you all think that’s important? 

Ms. HANSEN. Well, there’s evidence in research right now that 

the barrier of that first payment oftentimes precludes people from 

having prevention. And so the ability to minimize this, and that 

they’ve even shown this with certain medications. There are some 

programs that have decided to design their insurance so that they 

will even cover some chronic disease medications. So, it’s a different way to think of prevention. It’s not just, say, the well checkups, or the mammography, but it also is about some areas of first 

dollars that make a difference for people to get over that threshold, 

to use a service and then you do save money on the back end. 

Mr. THOMPSON. So, the more folks you get in on that front end, 

the more you save, the more expensive and this is even for older 

folks, not just youngsters in the front end of the service. 

Ms. HANSEN. That’s true for, yes, for different ages. 

Mr. THOMPSON. And the AARP has been very supportive of remote patient monitoring and telehealth as a means by which to, on 

the threshold on remote monitoring to stay out of hospitals and 

save moneys. Can you elaborate on that a little bit? 

Ms. HANSEN. Certainly. I think oftentimes it’s the rural areas, 

like Davis, that have really shown the effectiveness that this, the 

ability sometimes to deal with even part of the workforce shortage 

right now, the ability to have a large center like UC–Davis, have 

all the specialists there and have a smaller clinic that’s further 

away to be able to use this for both diagnosis and consultation. 

That’s for the providers. But for patients to have their blood pressure numbers checked through the phone system and so that your 

doctor’s office has this information, these are areas that are, that 

we think are up and coming. 

Mr. THOMPSON. Thank you. Mr. Chairman, I asked questions 

of the last panel about the telehealth, as well, and everybody seems 

to be in agreement that it not only helps people, but it saves 

money. And I have a letter here from a coalition of folks that, 

Health IT Now, who are in strong support of the health IT that 

we’ve worked so much on and also on the expansion of telemedicine. 

And they point out that the estimated cost savings to Medicare 

from widespread adoption of telehealth services range between $2 

and $4 billion. And I’d like to submit this for the record and I’d 

even be willing to use these savings to fund some of the telehealth 

ideas that I’ve been pushing to the Committee. 

Chairman RANGEL. Without objection. Mr. Johnson, you should 

feel, for any time you hear these things that people like to just 

wave you in and say, count you in. Let’s see, Mr. Roskam, Illinois. 

Mr. ROSKAM. Thank you, Mr. Chairman. I’d like to yield 1 

minute to Mr. Nunes. 

Mr. NUNES. Thank you, Mr. Roskam. I want to make sure, Mr. 

Chairman, that I reiterate my point that it’s not necessary in this 

country to have people on Medicaid. It’s not necessary. And I 

thought it was rather ironic that the folks that have health care 


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that are testifying today, in fact, all but one, didn’t want to be on 

Medicaid. And you point out that, you know, you’d be poor, you’d 

have to be on Medicaid. 

The point that I’m making and I want to make it perfectly clear 

to this Committee, is that we don’t have to have Medicaid in this 

country. We are spending enough money now to where we could 

give, on the plan that we have, up to $11,000 for that individual 

that’s now on Medicaid, to go choose their own health plan on an 

exchange or wherever it may be. That’s the money we’re spending 

today. We don’t have to add any money to the budget, and I want 

to make sure that I clarified this point because, you know, I think 

that it’s an important point for Republicans to say that we believe 

we have a better plan. We believe that people don’t have to be on 

Medicaid. We think there’s a better option and a better way. And 

I thank Mr. Roskam for yielding his time. 

Chairman RANGEL. Well, he can keep his minute because I 

don’t think that you made your point. You’re on the Federal plan, 

I’m on the Federal plan. Would you want to turn in your Federal 

plan for Medicaid? That’s a stupid question for me to ask you. And 

I just thought your point is well taken, we should eliminate Medicaid, we should follow the Republican guidelines. I just thought 

your question, the way you were trying to make your point was not 

relevant, but you want another minute, I’ll give you another 

minute. 

Mr. NUNES. Well, I thank the gentleman for allowing me to continue to explain this. What the plan that we have, that we put out 

there—— 

Chairman RANGEL. Talk about Medicaid, mister. For the 

minute, talk about why you don’t want Medicaid and how relevant 

it is for them to be against having Medicaid. 

Mr. NUNES. Because I believe that Medicaid is poor quality 

health coverage. And we have to improve it. The doctors in my district do not want to see Medicaid patients. Under the plan that 

we’ve put out, we give $11,000 for anyone that’s on Medicaid, to 

allow them to go pick a plan just like you and I have. That would 

be a minimum plan to what you and I have. I think that we should 

give the plan, similar to what we have, to even people that are on 

Medicaid. And I believe we have the money to do that. 

Chairman RANGEL. Your point’s well taken and the time that 

we’ve taken away from you will be duly restored. 

Mr. ROSKAM. Thank you, Mr. Chairman, for your courtesy. 

Ms. SCHWARTZ. Excuse me, Mr. Chairman, before we move on, 

could I just make a point of, maybe, information? Maybe Mr. 

Nunes didn’t get through all of the 800 pages. Because, in fact, this 

bill says, after 5 years, anyone on Medicaid, which is the program 

you object to, will be able to go into the exchange and choose any 

private or public option. So, in fact, it does address your interest 

and you may want to take a look at those particular provisions because it does, in fact, allow individuals to go into the exchange. 

Mr. NUNES. If the gentlelady—— 

Ms. SCHWARTZ. Just pointing out information, and I yield back. 

Chairman RANGEL. Please. Please. 

Mr. ROSKAM. Thank you. Thanks, Mr. Chairman. Mr. Shea, 

question for you. On page 2 of your testimony, and you’ve made it 


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very clear during your answers, I just want to read a sentence, ‘‘. . . 

we caution, however, that one financing option under consideration 

in the Senate Finance Committee, the taxation of employer-sponsored health benefits, would go in the exact opposite direction by 

destabilizing the employer-based health insurance system.’’ I agree 

with you and I accept that premise. 

It seems like Mr. Johnson is also making that argument in a different context, but it’s the same argument. And what he’s saying 

is, look, if you put this tax burden, or if you put this liability, or 

this mandate on business, there’s going to be a consequence to it. 

You’re arguing, and I’m paraphrasing, if you tax this employerbased system, you’re going to have less of it, let’s not do that, let’s 

build on it. 

Mr. Johnson is saying, if you put this mandate on small business, or big business, or whoever it happens to be, you’re going to 

get less of it. Why can you make the argument and why is he denied the argument? 

Mr. SHEA. Thank you, Congressman. I really think there are 

two different things and I will explain by saying, it’s destabilizing 

because this is an important structural element of how we now put 

together employment-based coverage. 

Mr. ROSKAM. Agreed. 

Mr. SHEA. So, if you take out part of that structure, and you can 

listen to me, but you can listen to lots of employers. I sat at this 

table a month or so. 

Mr. ROSKAM. Agreed. 

Mr. SHEA. Lots of employers would say that. Employees, some 

people, young people might want to go out and get their own thing. 

That’s very different from saying that all employers should pay financially to cover people with health care. 

Mr. ROSKAM. Okay. Then, let me make his argument maybe a 

little bit better than he made it. We’re competing all over the world 

right now. We’ve got worldwide American companies that are competing with nations and so forth. Why are we putting this disproportionate burden, in this sense, on American companies? I 

think that, I’m kind of calling you out. I think you’re arguing in 

the alternative and—— 

Mr. SHEA. Well, I, you know, if somebody wanted to put it on 

the table, the social insurance system, which spreads the risk all 

over the population, gives you much lower costs, as all of our industrialized competition has, we’d be for that. We’ve been for that for 

100 years. We’re saying that what we have here is employmentbased coverage. It does load costs onto the payroll, which puts 

American companies at a disadvantage, but what alternative would 

you offer? 

Mr. ROSKAM. Well, I think there’s a whole host of alternatives 

and in 30 or 40 or 50 more seconds, I’m not going to get through 

them. Let me make one other point, though. And I’m happy to, I’m 

not trying to be clever, but there’s, I represent the western and 

northwestern suburbs of Chicago. A lot of building trades. I am 

hearing from building trades’ members who are very, very concerned about what they’re hearing from this plan. Their attitude is, 

look, got a good plan here, we got a good thing going and we’ve successfully negotiated what some people would characterize as CadVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00191 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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illac plans. The rank and file building trades members that I’m 

hearing from are communicating to me, as their Congressman, be 

very careful that that isn’t in jeopardy. The yellow is on, my time 

is up, and I yield back. 

Mr. SHEA. I’d like to continue the conversation. 

Mr. POMEROY. Thank you, Mr. Chairman. Excellent panel. Mr. 

Draper, I, in particular, want to commend you. Your testimony was 

excellent. You have a silk screen business? 

Mr. DRAPER. Thanks. And, yes. 

Mr. POMEROY. I feel enormous pressure to enact health reform 

in light of knowing that. Are you going to go pick one of these? I 

spent all day in the Ways and Means Committee, and all I got was 

this lousy shirt. We’ve got to give you—— 

Mr. DRAPER. We do have a shirt, though, that says, American, 

Only the Insured Survive. 

Mr. POMEROY. Very good, very good. 

Mr. DRAPER. I did that when I was uninsured. 

Mr. POMEROY. Let me ask you about, we have only 5 minutes, 

so we have to kick this one around pretty quickly. How’s the status 

quo working out for you? 

Mr. DRAPER. I explained it a little earlier, but I think it’s, for 

us right now, it’s okay, because everybody who works in the company is single and below the age of 26. The problem that we get 

into, that a lot of other businesses are in now, is that, as people 

age and we have to try to get family policies, then we either have 

to, if we stay in the same market that we’re in now, it’ll go from 

about $200 a month to about $700, $800 a month, which would 

mean we’d have to try to take time and renegotiate to figure out 

how to do it to get into a plan with somebody else. 

And so, my biggest concern is, for right now, I think what we 

have is inefficient, but it’s not as crushingly inefficient as it will 

be for us in about 6 years. 

Mr. POMEROY. Even with coverage in place, and because of the 

young, single status of your workforce, affordable coverage, coverage you’ve been able to manage in your cost structure, the uncertainty, in fact, well, I said uncertainty, I meant actually, certainty, 

of rapidly rising health care costs, meaning rapidly rising health 

insurance premiums is a great concern to you. 

Mr. DRAPER. Yes. I mean, they go up each year. The bigger concern is, though, that you can’t adequately budget how much it’s 

going to be every year because your cost goes up if people get sick, 

which I’ve always found ironic, that you buy insurance but you still 

pay for health care. And so, that’s the biggest problem. 

And we’ve agreed to pay our employees’ bills, not because I’m the 

nicest guy in the world, but just because I know that somebody is 

going to have to pay them. And it’s easier for the company to pay 

the bills and take the hit than to rely on the individual. Because 

if one of the individual employees has to start paying their own 

medical bills, if they go into personal bankruptcy, then the whole 

company is in trouble. And so, we kind of have to take that burden 

upon ourselves. 

And the tricky thing about that is, you can’t budget for it. I’ve 

never met a business that went out of business because they didn’t 

realize they had to pay income tax. And they said, well, duh, things 


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just went really bad, there’s this thing called income tax, and it 

just hit us like a freight train. But people do go out of business because of insurance. Because insurance costs are unpredictable. And 

anything that’s 6 to 24 percent of your payroll, you do not want to 

be tied to that as an unpredictable indicator. 

Mr. POMEROY. Point very well made. Let’s see if we can find 

some agreement across the spectrum ends of this panel. I’d like Mr. 

Kirsch and Mr. Johnson to give their thoughts on the role cost containment needs to play in this reform bill. The, basically, we spend 

a lot of time talking about the insurance layer, but what about underlying costs drivers and what must this bill do to address some 

of those? Mr. Kirsch, first, and then Mr. Johnson. 

Mr. KIRSCH. Absolutely. As we say, if we’re going to fix the 

economy, we have to fix health care. Which means we have to have 

a system which is retooled to deliver better quality at lower costs. 

And we can do that. As we’ve seen and as Mr. Higgins was talking 

about before, there are so many examples where paying for things 

that work, finding the right kind of incentives for providers, having 

good information out there, can create a health care system that 

provides better value. And one of the reasons we think we need 

structural changes to do this, and the kind of structural changes 

that you’ve put in multiple ways through the legislation is to drive 

a delivery system that focuses on value as opposed to just paying 

for services, oftentimes, that aren’t what we need to pay for. 

Mr. POMEROY. Thank you. I see my yellow light is now on. Mr. 

Johnson, quick response on the same question. 

Mr. RANDEL JOHNSON. Yes, I don’t disagree with any of that. 

I agree with it. 

Mr. POMEROY. I thought I could get you guys to agree. 

Mr. RANDEL JOHNSON. I think the gateway idea, the exchange idea, is, it opens up a kind of a website for people to shop 

around for the best plan possible, is, depending how it’s structured, 

is acceptable to the Chamber and something we’ll want to work 

closely with the Committee on. I think, obviously, comparative effectiveness, quality initiatives, so there’s the cost control, it’s obviously the most difficult part of this entire debate. 

Mr. POMEROY. But it would be irresponsible to put $100 billion 

into the status quo without trying to do something that structurally is addressing these cost drivers. Would that be a fair statement? 

Mr. RANDEL JOHNSON. Yes. 

Mr. POMEROY. Thank you, Mr. Chairman. 

Chairman RANGEL. Mr. Johnson, you keep agreeing. When you 

put in your objections, you make certain right next to it, you put 

in what you support, right? 

Mr. RANDEL JOHNSON. I always do. 

Chairman RANGEL. Okay. That would be great. 

Mr. RANDEL JOHNSON. Thank you. 

Chairman RANGEL. Mr. Pascrell left and he will be returning, 

so it’s my pleasure to ask Ms. Berkley of Nevada to inquire. 

Ms. BERKLEY. Thank you. Thank you, Mr. Chairman. And 

thank you all for staying and helping to educate us on an issue 

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rience with Medicaid in the State is completely different from my 

colleagues. People are most anxious to sign up, but we don’t have 

enough money for it and the reason the doctors aren’t that crazy 

about taking Medicaid patients is because they don’t get reimbursed. And doctors, like anyone else, want to get paid for their 

services. 

So, it’s not a matter of people not wanting to be on Medicaid, so 

many people want to be on Medicaid that it’s constantly a challenge. I know there may be some patients that don’t like Medicaid, 

but most of my Medicaid patients don’t like dying without any 

health care, so I just have a different point of view. 

I’ve learned also, and this came as a big surprise, that our public 

plan is going to be taking care of hair transplants and abortions 

and cosmetic surgeries. I’m sure that’s going to be a boon to the 

plastic surgeons in Las Vegas and they can fully embrace this. 

And as far as AARP is concerned, there have been a number of 

instances where I disagreed with the official position of AARP, but 

your job, as you know, is not to please Members of Congress, but 

your membership, and I think AARP does an outstanding job with 

that. 

Let me ask you a couple of questions. Right now, Las Vegas is 

really suffering. We are having an economic meltdown of monumental proportions. I’m having major layoffs in my major business, 

which is the gaming industry. I’ve got mega-gaming corporations 

that are laying off people by the thousands. They are losing their 

health insurance and they can’t afford COBRA. I also have a large 

number, half of the people that were employed in Las Vegas, before 

this economic meltdown, were employed by small business and the 

number one problem that they had is providing health care for 

their employees. 

I see the public option as a way of helping all of these people and 

I’m just wondering if you have any alternatives to that that you’d 

like to share with me but when it comes to a crisis situation, I’ve 

got it, and I’ve got to provide health care. Right now a third of the 

people I represent have no health care insurance. That’s crisis proportions, as far as I’m concerned and I’ll stop so you can speak and 

if anybody, Mr. Kirsch, would you like to start? 

Mr. KIRSCH. Well, yeah, she reinforces exactly what you’ve said 

and it is a crisis in people’s lives, it’s a crisis in a deeply personal 

way that one health care problem can lead to not only personal suffering for them or a family member, but financial bankruptcy. And 

to have a system like you all have proposed, which makes health 

care affordable, has good benefits and meets people’s needs, doesn’t 

have the false calculation that if we don’t cover something it saves 

money, it just shifts the cost onto the worker, forcing people like 

Mike, who are responsible to pick it up. We need to have health 

care that’s affordable based on incomes and be sure that it does 

that so that you can really afford it, based on your income. And to 

have a new entry in the system called a health insurance option 

that will drive down costs and care about the public’s health first, 

as opposed to a corporate bottom line, is exactly the kind of reforms 

that we think make great sense and are so much welcome here. 

Ms. BERKLEY. Mr. Shea. 


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Mr. SHEA. Thank you, Congresswoman. We still talk about 47 

million uninsured. There’s no question that we’re over 50 million 

as a result of the economic situation. And a lot of the people who 

lost coverage are people who had, with their job, good coverage. 

And so, the pain is just enormous. 

And so, the public plan is just a sensible approach. It gives us, 

while I have the microphone, I’ll mention I was never asked whether I opposed Medicaid. I was asked whether or not I wanted to 

switch to Medicaid. I have no reason to switch to anything, the 

plan that I have. But Medicaid obviously plays a very important 

role for very low income people. 

And this bill would, Medicaid, people with children who are very 

poor have Medicaid. People who are very poor who don’t have children, don’t have Medicaid because they don’t categorically, this bill 

would change that and that’s an important addition in terms of the 

coverage for very poor people. 

Ms. BERKLEY. I appreciate the distinction because I think the 

lumping in, the Medicaid thing, kind of shocked me when that 

came up. I didn’t know how it was fitting in. 

Mr. SHEA. But let me make one other point, which is, I made 

it before, but it’s really the concern that’s my daily experience. And 

that is, to try to get some competition into the insurance market. 

We don’t have any competition in the insurance market based on 

our experience for negotiating benefits every year for 50 million 

Americans. 

There is no competition and when you look at the numbers in 

terms of the monopoly situation, we don’t have organizations that 

are representing people and aggressively fighting for them with 

providers and saying how can we reduce these costs. We have people who make cozy deals with providers in the private, that’s what 

we have. That’s what the private insurance industry does. Everybody makes a lot of money, everybody’s fat and happy. Except the 

people who are paying the bills. That’s the problem we have to 

solve. 

Chairman RANGEL. With health insurance going into the, having the public health option competing with the private sector, lowering the price of the premiums for employers that have been doing 

the right thing all along, hey, that’s a great selling point. We’ll 

have our conference call. You’re going to leave here on this bill, I’m 

telling you. 

Mr. RANDEL JOHNSON. Well, we can take out a few things 

and then start from there. 

Chairman RANGEL. We got to do it. Mr. Tiberi. 

Mr. TIBERI. Thank you, Mr. Chairman. Mr. Shea and Ms. Hansen, I kind of want to direct my questioning toward you. In my district, Ms. Hansen first, a third of the seniors have Medicare Advantage and like it. Obviously, you’re an organization that represents 

seniors. My mom, who’s, my mom and dad are on Medicare. My 

mom has had an issue over the last several years where she’s had 

doctors literally, her doctors, stop covering Medicare patients. Literally. Including her. Where she’s had to go get a new doctor. 

We’ve read about, even in the New York Times, the distinguished 

gentleman’s hometown newspaper, where Medicare, many doctors 

have declined new Medicare patients. 


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And so, what many of us on this side of the aisle are concerned 

about, and I know from a central Ohio perspective, we have doctors 

and hospitals complaining every single day about health care, 

about insurance companies. But even more so, about Medicare feefor-service and more so about Medicaid. And I think that’s where 

some of the concern on this side of the aisle has been, is that, in 

fact, I had a family in my office the other day from Columbus, 

Ohio, complaining about, in Children’s Hospital, the wait to see pediatric specialists is months. Because of the lack of doctors going 

into pediatric specialties. 

And this bill specifically doesn’t deal with pediatric specialties. 

We deal with primary care, but we don’t deal with specialties. And 

the assumption is, all these specialists make a lot of money. Well, 

in Children’s Hospital in Columbus, and in Cleveland and in Cincinnati, they can’t get enough specialists. 

But my point to you, ma’am, Ms. Hansen, and then I’ll have a 

question for you, Mr. Shea. A real life example. But Ms. Hansen, 

as an organization that represents people who are 50 years old and 

older, what do I tell my, the 30 percent of seniors who like what 

they have, and believe under the President’s proposal they’ll be 

able to keep what they have when in actuality, they may not? 

Ms. HANSEN. Right. Well, we too are concerned about this transition that would potentially occur. But I think what we do support 

is that there should be value and quality for what you do get, relative to the Medicare Advantage program. So, I think the fact 

that—— 

Mr. TIBERI. But if the patient’s happy with it, isn’t that a good 

barometer? 

Ms. HANSEN. Well, if they’re happy with it, is one thing that 

is certainly a barometer. But another barometer is the level of 

quality that actually gets delivered. So, we support people getting 

plans, hospitals, providers, getting paid more for a level of high 

quality. 

Mr. TIBERI. Would you be opposed to the Majority’s plan if it 

reimbursed at today’s Medicare rates? 

Ms. HANSEN. I’m sorry. I couldn’t hear. 

Mr. TIBERI. Would you be opposed to the Majority’s plan if the 

public plan reimbursed doctors and hospitals at Medicare rates. 

Ms. HANSEN. I think that my understanding is that that is part 

of the potential proposal. 

Mr. TIBERI. Would you be opposed to that if it reimbursed at 

today’s Medicare rates? 

Chairman RANGEL. I would be. 

Mr. TIBERI. Okay. 

Chairman RANGEL. Because they can plan increases, Medicare 

rates. 

Ms. HANSEN. Well, I think the other point that you also bring 

up about having physicians being paid appropriately, that’s something that I said in my oral opening statement that there needs to 

be a re-anchoring so that the sustained growth rate issue that 

causes specialists in general doesn’t cover your pediatric specialists 

because it’s not Medicare. But the ability to cover that is important. 


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Mr. TIBERI. Thank you. Mr. Shea, you represent, obviously, a 

perspective. My dad’s a retired union official. I have family members who are steelworker retirees, AFL–CIO, UAW, teachers. I 

have my best friend who is a teacher, a union employee. I have 

heard from them the concern with respect to the public plan that 

ultimately, and my question to you is this. Ultimately, if the public 

plan ends up allowing employers, either through a collective bargaining negotiation or on their own to ultimately change a current 

benefit, meaning, if an employer decides, you know what, I’d rather 

pay this 8 percent penalty and allow my employees to go into a 

public option, or the other view that the lack of competition will ultimately force private health care to disappear and all that will be 

left is a public option. 

As somebody who represents union members throughout America, many of whom collectively bargained for their health care benefit, is that something that if that happens, you all would be concerned about? 

Mr. SHEA. Well, we’d be concerned about any major disruption 

in the market, but job number one, as I’ve said repeatedly, is controlling costs. And we see the function of a public plan as being 

controlling costs. Our experience in sponsoring health funds, which 

we do, and our experience in dealing with employers is, we see no 

sentiment for wanting to dump or put people into a public plan. 

It probably would be advantageous for some people, but all the 

employers, there’s a very strong connection, be it a good idea or a 

bad policy, there’s a very strong connection between people who 

work, and getting health care at work, it is local, it’s there for 

them. They have a problem, they have a human resources group 

to go to, or a union business agent to go to, to say, can you help 

me out with this kind of problem. They like that local connection. 

So, there is really a strong, even if there were a cheaper plan, 

there’s a strong reason why people would want to maintain—— 

Mr. TIBERI. And most of your members enjoy their plan? 

Mr. SHEA. Yes. And most of the people who are on the plans 

would tell you, you know, we’re going out of business as a result 

of the cost. That’s the problem. 

Chairman RANGEL. Mr. Pascrell, welcome back. 

Mr. PASCRELL. Mr. Johnson, thank you for your good faith testimony today. Some things I do agree with you. And some things 

I have questions about, so. You said that businesses are already 

doing their fair share and more. I would not disagree with that. 

This package that’s in front of us, which is, maybe it’ll be different 

in a week from now. Who knows? But this package takes steps to 

make it more affordable for businesses to continue doing their fair 

share. And you know quite well that in the last 8 years, insurance 

costs for small firms has increased 130 percent. In just 8 years. 

We achieved the affordability in the package that’s before us 

right now by providing businesses with more choice through a public insurance option and by eliminating the cost shifting associated 

with the uninsured by insuring universal coverage through shared 

responsibility. And that’s what many of the questions have been focused on, first panel, second panel. That’s what we’re looking for. 

The second point is that you stated that the Massachusetts payor-play requirement failed to produce revenue. I believe that’s what 


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you said. Did you say that? In your written statement, yes, I’m 

sorry. Put on your mic, please. 

Mr. RANDEL JOHNSON. Much less than expected. 

Mr. PASCRELL. Yeah. And I would agree with that, by the way. 

But that was not the goal of the Massachusetts plan. The goal of 

the Massachusetts plan was to shore up employer provided insurance in Massachusetts. That’s what the legislation said. And in 

that respect, it’s been an overwhelming success, wouldn’t you say? 

In that respect. 

Mr. RANDEL JOHNSON. Perhaps in that, you know, the Massachusetts plan has come under so much attack from both the left 

and the right, perhaps in that individual area, I can’t disagree with 

you because I can’t really respond to it. 

Mr. PASCRELL. Okay. Third, you commented on one-size-fits-all. 

One-size-fits-all plan designed, if it was designed that way, implying that employers currently have the ability to work with their 

employees and their insurance companies to choose among endless 

insurance options. I would encourage you to ask Mr. Draper or any 

small employer in this country, several of them were here today 

but did not testify, and they will tell you that the only choice they 

have is between the cheapest plan offered to them, you mentioned 

it, Mr. Draper, that usually fails to fit their specific needs, or laying off valued employees, or cutting their salaries, whatever a boss 

usually does. 

Now, I’m going to give you a chance to respond. You claim that 

the business community joins most Americans in opposing a public 

plan. That’s what you said. But as you’ve heard from many panelists, that doesn’t mean that they’re right, but many of them believe 

that they’ve already spoken, that the public is not on your side on 

this issue. They overwhelmingly support having that choice. 

Now, what are your thoughts about the three things I’ve just 

stated? 

Mr. RANDEL JOHNSON. Well, to get the last first, but I think 

those polls will show, for example, the Kaiser poll asked that question but then, and I think The Washington Post polled it too, but 

once they go on and there’s a qualification or clarification saying, 

however, that public plan option may have the result of driving private sector plans out of the market and therefore leave that public 

option as the last one standing, then the support falls away, markedly. That’s the Kaiser poll. 

Mr. PASCRELL. But how come the response is never, look at the 

savings we’re going to have in the delivery system, we’re going to 

be more efficient, we’re going to attempt to end recidivism, we’re 

going to attempt to look at the procedural process, but you don’t 

disagree with that, do you? 

Mr. RANDEL JOHNSON. Well, I do. 

Mr. PASCRELL. Oh, you do disagree with that? 

Mr. RANDEL JOHNSON. Well, no. If you’re talking about the 

public plan, what follows—— 

Mr. PASCRELL. Well, let’s now forget about the public plan. 

Let’s look at the whole possibility of reducing costs through different practices than you’ve been involved in. I mean, we have anecdotal evidence, people go to the hospital, they’re there 15 to 17 

hours, and their bill is $26,000. They go through the procedures 


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and nothing is wrong with them, that’s legion. In normal hospitals 

across the United States of America, and they never see what their 

bill is. They never get a bill. 

Mr. RANDEL JOHNSON. Right. And then they go back a second 

time and they—— 

Mr. PASCRELL. Yeah. 

Mr. RANDEL JOHNSON. Right, no, I agree, that’s—— 

Mr. PASCRELL. What would just the process of giving everybody 

a bill to see what it cost them in the hospital take? 

Mr. RANDEL JOHNSON. A greater transparency is something 

we certainly would support. 

Mr. PASCRELL. That would bring religion to the whole process 

wouldn’t it? Thank you, Mr. Johnson. 

Chairman RANGEL. Ms. Schwartz, I wanted to take this opportunity to thank you for the great opportunity that you made toward 

this bill. Okay, well, we have to get them on the list. Would you 

yield to Mr. Boustany? Well, we’ll have Mr. Davis here. When I 

passed over him, he was not here. We adjust this to Mr. Davis and 

then we’ll go right back to Ms. Schwartz, okay? Mr. Davis, you’re 

recognized for 5 minutes. 

Mr. DAVIS. Thank you, Mr. Chairman. I’m the picture of flexibility and when I have the opportunity to speak, I appreciate the 

opportunity. I just have been a small businessowner, myself. I 

would comment that small businessowners aren’t forced only into 

the cheapest choice. I ran a company for 12 years and we carried 

a Cadillac plan. It was when the public approach, or semi-public 

approach came to Kentucky, that we had to search for options because costs went through the roof and there was no competition. 

And contrary to the statements, there’s no way to reduce costs 

and delivery systems without reengineering the overall center for 

Medicare services processed to move into insurance reform and 

deal with liability. And I can just say that from a business finance 

consultant going through processes, having seen that. 

But the one thing I’d say, though, is the small business issue, I 

think, is at the crux. I apologize, Mr. Draper, because we have 

some obstacles in the form of human beings between the two of us. 

Like the name of your company. When I was in the Army, there 

was an operation named SMASH that had a probably different 

product than what you’re selling there. I’m sure you’re quite innovative in the technology approach. But I can relate to your situation, very much, dealing with health issues. I learned a lot about 

the mandates, how each new one complicated my processes and increased my costs. 

And frankly, the ability and the flexibility we had in provision 

of care. You said you have 12 employees now? And the way I read 

the tri-committee bill, in subtitle (B) Credit for Small Business Employee Health Coverage Expenses, pages 153 to 155, you and your 

business would not qualify for the small business tax credit. You 

say your average employee’s salary is $45,000. The ceiling in this 

bill is $20,000. And it’s for fewer than 10 employees. 

And did you know these factors would disqualify you for the tax 

credit? 

Mr. DRAPER. Are you saying for the tax credit of $11,000 that 

Nunes was talking about? 


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Mr. DAVIS. The small business tax credit that’s referred to in 

subtitle (B). 

Mr. DRAPER. A tax credit only for people making under $20,000. 

Mr. DAVIS. Right. You would not qualify for the full tax credit. 

Mr. DRAPER. Yeah, I knew that. 

Mr. DAVIS. And yet, you’d still have to comply with either providing qualifying coverage or, the question is, how do you feel 

about that discrepancy, or that inequity, considering you’ve got two 

more employees and your multiplier impact in the community in 

terms of creating further taxpayers by the churn of the income is 

going to be vastly greater than a company with $20,000 average income? 

Mr. DRAPER. Yeah, I mean, from a personal standpoint, I don’t 

think we should give money away, you know, to anybody. So, I 

think it should be everybody for themselves. From a business 

standpoint, I know that the only way our business will succeed is 

if we’re competing in a steady market. You don’t want a lot of ups 

and downs. And that’s why I support the public plan because I 

think it would at least stabilize it. So, you don’t have somebody 

who loses coverage who has to go off of coverage, who goes through 

financial crisis. I think that’s what’s dangerous for the economy. I 

support being required to have health insurance, in the same way 

that in Iowa I’m required to have car insurance. The car insurance 

requirement is easier to get past because it’s a one to one collision. 

And that, when somebody hits you and they don’t have car insurance, you have to pay for it. And you see that directly. 

What people don’t see with health care is that when somebody 

goes to the hospital ER, I still have to pay for it through my tax 

revenue. So, while I don’t like to be required arbitrarily to have 

health insurance, if everyone is required to have health insurance, 

I can get behind that. Because then I’m not paying out of one side 

for the private and out of the other side for the public. And so 

when people talk about numbers and statistics, I’d like to see how 

much government money, even in Iowa or nationally, goes in to 

medicine for people who go into ERs. What percentage of income 

is that? And therefore, what percentage of my taxes are going to 

the ERs? And I think that’s kind of the unknown cost of what we 

have now. 

Mr. DAVIS. Well, do your employees like the coverage that 

you’re able to give them right now? 

Mr. DRAPER. I mean, the coverage that we have to give is fine. 

I didn’t say that we had to get the cheapest option, I just said, we 

have the cheapest option. 

Mr. DAVIS. If they had to take less coverage for you to participate in support of this public plan, would you be willing to do that? 

Mr. DRAPER. If they had to take less coverage? 

Mr. DAVIS. Yeah, to reduce, to basically reduce access to benefits. To be able to comply? 

Mr. DRAPER. I mean, the way that I read it, you don’t have to. 

Mr. DAVIS. How about waiting periods for services they can get 

on 24 to 48 hour notices? Would they support a 6 to 8 week waiting 

period for that equity? 

Mr. DRAPER. I mean, it depends on what the service is for. But 

why do you need the waiting periods? 


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Mr. DAVIS. Well, that’s a good question. But this is the inevitable outcome of the system that we’re talking about. 

Mr. DRAPER. But I don’t think it’s inevitable. I mean, I think 

it’s inevitable if you have a single payer option in a country like 

Canada. But if you are able to blend public and private in the 

United States and come up with your own unique option, you can 

come up with something that’s better than what they have in other 

countries. I mean, we shouldn’t set the bar for ourselves so low. 

Mr. DAVIS. I don’t think we’re setting it low. Actually the question I’m coming back to, we’re both businessmen here. And I appreciate your coming in. But, if the bill were enacted, the reason I was 

asking about how you would choose simply this, is that you deal 

with a capacity issue in your business. If you had limited revenue 

or your revenue was suddenly reduced by 20 percent, there is only 

things that you could do with that in terms of capacity to serve 

your customers. The inventory you could carry and needless to say, 

if you have limits on cash or waiting time, goes out to get product 

to customer or you’re not potentially able to serve them, and that, 

without dealing with these capacity issues, that ultimately is 

what’s in this. 

Mr. DRAPER. Yeah, I mean, I think there’s a lot of unknowns, 

but it’s hard to say that revenue is going to go down by 20 percent 

just arbitrarily because the theory is that everybody has to get 

health insurance. 

Mr. DAVIS. No, no, no. I’m speaking in your business itself. 

Chairman RANGEL. Ms. Schwartz. 

Ms. SCHWARTZ. Thank you, Mr. Chairman. That was sort of a 

spirited discussion. So, I was actually sort of enjoying it. But thank 

you for the opportunity to follow up. I think the, following up on 

the previous questions, I think the real question I have for you, 

and I’ll ask particularly Mr. Kirsch and Mr. Draper, too, to speak 

to this is, would we be better off if we actually make some of the 

changes, the changes that are in this legislation? I think, but the 

particular interests I think that many of us have is that we recognize and it’s been said by a number of the panelists, that we have 

to contain costs. 

That particularly, for something for government, and our ability 

to sustain and our commitment under Medicare, and we plan to, 

and our economic competitiveness for both large and small businesses, we need to both contain costs and improve quality and get 

better outcomes on health care. And that we have to help all Americans get affordable, meaningful coverage. We think that’s a goal 

we can meet, as Americans, and that we should. And I appreciate 

all of you agreeing with that goal. 

Now, there are obviously some disagreements as to exactly how 

we get there, but I think recognizing the reality, I think one of the 

reasons we’ve spent so much time on small businesses, is that, and 

Mr. Draper’s situation in particular, is that the group that has the 

greatest difficulty right now in obtaining coverage are people who, 

as individuals and as small business. Because they don’t have the 

ability large companies have to negotiate rates with insurance companies. Or to maybe do some of the innovative wellness and prevention programs, you can spend extra dollars on that. You may 

even have more dollars to spend on health care coverage and getVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00201 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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ting really good plans and the union shop, they might actually have 

negotiated some very good benefits. 

But the fact is, right now, it is very hard without some of the 

protections and opportunities that are going to be provided in this 

bill to be able to get affordable, meaningful coverage. So, I wanted 

to ask both Mr. Kirsch and Mr. Draper about some of the market 

reforms and protections, making sure that when you buy insurance 

you don’t have to be 27 and healthy to be able to buy an affordable 

policy. That if you have preexisting conditions, if you’re older, if 

you’re a woman, if you’re in a business that actually has some high 

risks, that you will be able to buy affordable coverage. 

The legislation that we’re talking about today does that. It actually says to the insurance industry, large or small employers, in the 

exchange, we’re going to actually comply with these changes. We’re 

going to set new rules. And make it more affordable. We’re not 

pushing anyone into a public option. So, my question for you is, 

would it be helpful to, do you think, to business and to individual 

Americans to be able to buy affordable insurance that’s meaningful? And it is going to take a few dollars to get this up and running, but in the long run, I think we can do some of the quality 

changes that we want to talk about with the next panel, that we 

actually will improve quality and reduce costs for all of us. So, 

that’s kind of the bottom line. But Mr. Kirsch, would you just briefly speak to that? 

I feel like we’ve gotten away from that as we talk about possibilities that no one really thinks is going to happen. 

Mr. KIRSCH. Right. And you’re absolutely right. There will be, 

as I said in my testimony, one question that individuals and employers and basically every American is going to ask, will at the 

end of the day, will I have a guarantee of good, affordable coverage? 

And your legislation does that. It says, you’re not going to have 

to worry about denying preexisting conditions, charging more because you’ve had a health history. We think one thing you could 

do better is you’re still allowing people to be charged more because 

they’re older. There’s no reason to do that because you’re making 

affordability based on income, which is the right way to do it. 

But let’s get everybody in a system, and for small businesses, the 

legislation is incredibly important. Because what you’ve done, 

you’re putting small businesses, which are now subject to incredible vagaries of the market. One employee gets sick, rates go 

through the roof. In an exchange, costs are predictable with benefits for individuals and small businesses. 

Ms. SCHWARTZ. I’ve heard from small businesses in this matter, just to answer your comment, who have seen rates go up 40 

percent from one year to the next. Someone’s gotten sick and 

they’re in a small policy. Talk about unpredictability for small businesses. You have 10 employees or, and suddenly you see increased 

costs, not just of 10 percent but of 40 percent, that’s pretty 

unsustainable and maybe unsustainable from one year to the next, 

let alone over a long term. 

So, as you move forward and you may keep some of your employees for more than just a few years and they may actually get older, 

and even if they’re younger, they may actually, someone finds 


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themselves quite sick, having, understanding that they’re going to 

have a commitment for ongoing care. I think that’s really important. They won’t lose coverage, they won’t be charged more for 

their health status. I assume that would help you be able to grow 

the number of jobs in your business and grow your company. 

Mr. DRAPER. Yeah, I mean, I support the plan, not because I 

work for a group that hired me to support the plan. I support it 

just because I read through it and think that it makes sense. And 

that one thing the exchange does is, the oddest thing about our free 

market insurance is that it’s not a market. You can’t compare 

prices between doctors, between surgeries. You have eliminated the 

only thing that makes a free market, which is price comparison. 

And so, the system we have now is just so backward and inefficient, that I think you need to reform part of the exchange but a 

public option is also necessary because in a place like Iowa, everything is controlled by two companies. There’s no actual competition. 

Ms. SCHWARTZ. There’s no real competition. 

Mr. DRAPER. So, I think everything working together with regulation and competition, it would come out better in the end. 

Ms. SCHWARTZ. And maybe some transparencies, you can actually compare apples to apples in an exchange, for example. 

Mr. DRAPER. Yeah. 

Ms. SCHWARTZ. All right. Well, thank you very much and 

thank you all for your testimonies. 

Chairman RANGEL. Mr. Boustany. 

Mr. BOUSTANY. Thank you, Mr. Chairman. I have a question 

for Mr. Shea and Ms. Hansen, in particular. You know, we’re talking about a government option. But there are a lot of details that 

will go into a government option that have not been fleshed out 

and I have a lot of concerns about. Now we’re going to put the Secretary in charge of creating an insurance product. The Secretary is 

going to have to provide for reserves, which will be taxpayer money 

to back up that insurance product. Of course, it will collect premiums and do all these other things. 

So, you’re basically building an insurance company from scratch. 

You’re going to have to either contract out with insurance expertise 

or build it in-house, a very expensive proposition. You also have to 

build out a provider network. And the question I have for the two 

of you is, what happens if physicians, by and large, choose not to 

participate in the government option? 

I mean, currently, a lot of physicians are backing out of Medicare 

and Medicaid because of low reimbursement. And all the bills being 

proposed, including this one that we’re talking about today, are 

going to utilize Medicare reimbursement or near Medicare reimbursement. So, what if physicians choose not to participate and you 

have no provider network? 

Mr. SHEA. I really think that’s an important issue. Because one 

of my fears is, if we wind up with a public insurance plan that is 

very weak, physicians are simply going to say, I’m not interested. 

There’s no compunction on me, I don’t have to, it’s not like Medicare, I’m not going to tie this to Medicare. We’ve got to have some 

rules that require, I think, require providers to participate in this. 

Mr. BOUSTANY. So, you would have the Secretary require all 

physicians? 


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Mr. SHEA. I’m not saying how it would be done, or all physicians, but you have to have some sort of a structure so that if a 

public plan is going to be at all meaningful, they have to have a 

supply of providers. Of course, they have to pay fewer rates for 

that. And this whole issue of rates which we’ve been discussing is 

really, really important. And we’ve lumped together in a way that 

I don’t think is useful. 

Medicaid rates are largely too low. In Massachusetts, when they 

passed the plan, part of the deal was, to get the physicians on 

board, was to raise the Medicare rates. That improved everything 

for everybody. Medicare is a situation where they do their rates 

based on cost. 

Mr. BOUSTANY. Actually, they’re not really based on cost. 

Mr. SHEA. Well, let me get, it’s their calculation of cost. What 

has happened is that we’ve build such an expensive health care 

system—— 

Mr. BOUSTANY. When you say, you talking about CMS’ calculation? 

Mr. SHEA. Yes. 

Mr. BOUSTANY. Yes. Okay. 

Mr. SHEA. We’ve built such an expensive system, that a calculation of minimum costs doesn’t cover actual experienced costs. So, 

I think you could justify the Medicare rates. I think it would be 

wrong to go Medicare rates because it would be too big a shock to 

the system. 

Mr. BOUSTANY. It would be a problem. I’ve had 20 years clinical experience as a physician and also sat on the board of a community hospital and saw the intense financial pressures because of 

reimbursement rates not covering costs. It’s a serious problem. And 

I would submit that it is a serious problem about physician participation, based on my knowledge of physician behavior. 

And so, for Ms. Hansen, I would say, I know my colleague, Mr. 

Ryan, talked about Medicare. I’m hearing from a lot of my Medicare constituents who are very concerned about the ongoing debate 

and whether this will accelerate the insolvency of the Medicare 

trust fund because it’s going to put more pressure on the government in terms of fiscal outlay to create this government option. 

So, you have to have concerns as a leader at AARP in this, also 

knowing that physicians, many of them across the country, and in 

specialties and in primary care, are backing out of covering Medicare patients. So, we have a stressed Medicare system and we’re 

now talking about creating a new government program, call it an 

entitlement because it’s going to be an open-ended requirement for 

funding at the end of the day. So, I’d like to hear your comments 

on this. 

Ms. HANSEN. Well, I think the ability to make sure that there 

is a good provider network, you’re absolutely right. I think right 

now there are concerns, Medicare or not. I think that even the commercial market is finding some challenges there. So, I think that 

one of the areas that AARP is supportive of is making sure that 

physicians are going to be paid appropriately and we have supported having legislation to fix the SGR. 


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Mr. BOUSTANY. Do you support coercive measures by the Secretary of Health and Human Services to push physicians into providing care for a government program? 

Ms. HANSEN. We have not discussed that. Our principle is making sure that providers are rewarded for quality as well as appropriate reimbursement. 

Mr. BOUSTANY. Thank you. I yield back. 

Chairman THOMPSON. Thank you. Mr. Etheridge. 

Mr. ETHERIDGE. Thank you, Mr. Chairman. And I’ll, I want to 

thank each of you, you’ve been very good for sticking around for a 

long time with the schedule we have today. Let me ask Mr. Draper 

just one quick question of you. I ask it from having been in business for 19 years and had responsibility for helping with human resources and a host of other areas in providing, and at one point, 

responsible for health care so I know the challenges you face, number one, in paying for it and, number two, in making sure you have 

it for your employees as different plans change from year to year 

and costs go up. 

But you mentioned in your testimony that the most basic insurance coverage offered to you is catastrophic coverage. And of 

course, I think that’s one of the issues that most people fear in this 

country is that whatever their plan is, they’ll have a catastrophic 

issue and history has proven that by and large that’s what throws 

people in bankruptcy. They run into a huge medical cost and then 

they tend to lose what they have. So, my question is, is catastrophic coverage enough for you to feel that you and your family 

would be protected from bankruptcy due to the medical costs and 

to feel confident that you would have access to routine medical care 

if you needed it within the plans that you now have? 

Mr. DRAPER. Now, personally, I have a family plan through my 

wife, and so the catastrophic coverage from the employees, I think, 

I mean, it covers catastrophic coverage, you want catastrophic coverage just so you don’t develop a brain tumor when you’re uninsured, then you’ll never get insured. So, you have to have some 

basic insurance. I think the reason why people go into bankruptcy 

is because even if they have the catastrophic coverage, the 

deductibles each year are so high, and the savings rate for people 

is so low that $10,000 is enough to send somebody into bankruptcy. 

A $10,000 bill in a year. It may not make sense for anybody who 

has saved money or has money but for the people right on the edge, 

that’s the problem. So, I don’t think that catastrophic coverage will 

prevent people from going into bankruptcy. 

Mr. ETHERIDGE. Thank you. I’ll get that on the record. Mr. 

Johnson, let me ask you one question because in looking at the testimony that you put in, you indicated support for exchange and inclusion of both nongroup and small group markets, which would 

cover small businesses and others. And in that, I think you said 

you indicated that the Chamber of Commerce supports the concept 

of an exchange as advanced by the President and of course, I think 

you have indicated here that, and many of those views are components of a reform legislation, and now you’ve long advocated that 

position of pooling. 


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So my question is, do you support the concept of an exchange to 

allow for pooling? And would you, and who should be allowed to go 

into that exchange? 

Mr. RANDEL JOHNSON. Well, we do support the concept of an 

exchange. Exactly how it’s constructed and should be, I’m not quite 

sure. We are concerned, this goes to your question, Congressman, 

we are concerned about the Board apparently having a gateway 

power to define who goes into the exchange and who doesn’t and 

we aren’t certain what that level would be. 

It would appear to be that the government would be empowered 

to have, to define, who meets that favored criteria. Since we don’t 

know what that criteria is, that’s an issue to us. But I think that’s 

something we could work on. 

Mr. ETHERIDGE. But your point is that concept makes sense. 

Mr. RANDEL JOHNSON. Yes, it does. And the Senate Health 

Committee, we said the same thing in the Senate Health Committee testimony and I think that’s a key part of all these bills, 

that we can work on together. 

Mr. ETHERIDGE. Okay, thank you. And I yield back, Mr. Chairman. 

Chairman THOMPSON. Thank you. Mr. Davis. 

Mr. DAVIS. Thank you, Mr. Chairman. Let me, if I can, and I’ll 

direct this question, I guess, to Mr. Kirsch, Mr. Shea, or Ms. Hansen. One of the things we’re wrestling with, and I recognize that 

this is a little bit beyond the scope of the hearing, but one of the 

things we’re wrestling with is obviously how we pay for all of this. 

And just to take advantage of your expertise while we’re here, I 

want to spend a minute or so asking you about one option that’s 

the subject of debate. And that’s the plausibility of taxing for some 

individuals, the value of the benefits provided by their employers. 

Does anyone on the panel favor taxation? I suppose, frankly, no 

one’s advocating a full scale taxation, but taxation beyond a certain 

level. Who on the panel favors a partial taxation of employee benefits? Just by a show of hands, so I can see that. Does anyone on 

the panel favor a partial taxation of benefits provided by employers? 

Mr. Kirsch, you’re nodding your head no. And just tell me for the 

record why you don’t favor such an option. 

Mr. KIRSCH. Well, first of all, we don’t think it makes sense to 

have health care be more expensive for people when the big problem is how much health care already costs. So, we don’t think it 

makes sense to tax people who are fortunate to have good benefits, 

which basically means they have things like maybe dental care or 

vision care or a larger network or lower out-of-pocket costs. We 

want everyone to have that. We don’t want to make it more expensive. And then, in addition, if you look at what actually happens, 

when you try to set a value, if you even buy that premise, there 

are huge geographic variations, there are variations based on business size, on age and health status of workforce, so it’s wrong in 

the first place and there’s no way to arrive at a number that’s equitable. 

Mr. DAVIS. So, again, just to make sure I fully understand this, 

some people have argued that well, if you set, say, a reasonably 

high cap. Let’s say you set $16,000 a year and only tax benefits 


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above that. Some have argued that that would have the effect of 

only taxing people with so-called Cadillac plans. You disagree with 

that. 

Mr. KIRSCH. Let me actually put on another hat. That until this 

job, I was a small businessowner. It was a nonprofit small business, but we had employees in several offices in New York and because costs in New York City are so much higher than in Rochester, we are paying, I think $18,000, $19,000 for a family policy 

in New York City that had lower benefits than the same policy in 

Rochester that was like, $12,000. 

If you live in New York City, which has high health care costs, 

it has nothing to do with the benefit level, just happens to be an 

expensive place to live. Why would we tax those people? 

Mr. DAVIS. So, in other words, someone making, someone who 

has a $16,000 benefit, the face and profile of that person might not 

be a CEO but it could be someone who’s making $70,000 or $80,000 

a year, correct? 

Mr. KIRSCH. Well, in New York City, you know, we paid higher 

salaries than upstate but maybe we paid someone $60,000 for what 

we paid $45,000 in Rochester. At $60,000 a year you’re not going 

to be able to afford $18,000 a year, or have to pay taxes on it, it’s 

crazy. 

Mr. DAVIS. And I’m assuming that some people have higher 

value plans because their health situation leads to obtain higher 

value plans. Is that a fair assumption? 

Mr. KIRSCH. Yes. I mean, basically if they’ve been sick or are 

older, their plan is going to cost them more. Not because it’s worth 

more in terms of the benefits, just, it’s going to cost more. 

Mr. DAVIS. Mr. Shea. 

Mr. SHEA. We agree with everything that Richard said and I 

have spoken on this before, but let me add one other thing which 

is that if you look at the companies that have a lot of early retiree 

costs, pre-Medicare retirees, and they are continuing to provide 

them benefits because the industry is changed, they’ve bought the 

people out, they didn’t want to just dump them off because, you 

know, it’s hard to get insurance. Everybody knows that 55 and up. 

The costs, I’ve looked at some of the numbers in the union plans, 

the costs increase because of that retiree, can be enormous. So, 

$20,000 a year? Not because of Cadillac benefits, I mean, they’re 

good benefits, but because there are a lot of retirees in the plan. 

Mr. DAVIS. Let me slip in a question, my final 30 seconds. I 

thought, I didn’t agree with where Mr. Boustany was going but I 

think his question is an appropriate one. What is beyond the extra 

5 percent, beyond Medicare, that goes to doctors participating in 

the public option, or accepting people who are participating in the 

public option? What’s an appropriate incentive for the government 

to offer doctors? Are there some ideas you can throw out? Because 

I think that the concern’s a valid one, that just as some doctors are 

not accepting Medicare and Medicaid, they won’t accept public option patients beyond the extra 5 percent the Medicare recipients 

get, or the doctors covering Medicare recipients get, what are some 

appropriate inducements to offer doctors so they will accept in the 

public option? Ms. Hansen. 


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Ms. HANSEN. You know, when I said the word, quality was 

there, and I think looking at the performance of producing good 

outcomes on behalf of their patients, practicing with the areas that 

show some evidence that this is what should occur, so there should 

be bonuses, perhaps, as one way to reward the effective practice of 

care for people. 

Mr. KIRSCH. And that’s a great answer. One of the things we 

think is very important that the public option can do, is be able to 

do that kind of innovation and payment systems and so our policy 

is that should not be tied to Medicare. Starting with Medicare is 

ok as a basis, as a way to help you get started. We want, though, 

the public option to do the kind of innovative reimbursement systems, the right incentives, that Jenny’s talking about so that we actually can improve care and control costs. And so that doctors want 

to be in a system that provides the right kind of incentives for 

them doing good care. 

Mr. DAVIS. Thank you, Mr. Chairman. 

Chairman RANGEL. The Chair recognizes Mr. Ron Kind. 

Mr. KIND. Thank you, Mr. Chairman. I’m going to be brief. The 

panelists have been above and beyond the call of duty, shall we 

say, with your patience, your testimony today. One of my main focuses with health care reform is trying to address the needs of 

small business and family farmers. Mr. Draper, I’m looking at you 

right now. And in the past, I’ve introduced bipartisan legislation. 

I think very good and reasonable bipartisan legislation, both the 

House and the Senate called the Shop Act, which very simply 

would establish a national exchange or national purchasing pool for 

small businesses to be able to join along with tax credits and incentives to make it more affordable. 

Because a small group market clearly failed. Too many small 

businesses and family farmers, if you’re talking about the 47 million uninsured, most of them are working Americans, either in 

small businesses or on farms that can’t afford coverage because of 

the lack of a good small group market. A lot of that Shop Act proposal, the principles are contained in this draft discussion right 

now. 

The tough decision we have to make is where do we draw the 

line as far as exempting small businesses and family farms from 

the mandate of providing coverage for their employees. What’s the 

reasonable line that can be drawn? What factors should be considered? Mr. Draper, I want to get your thoughts on this. One, there 

are a variety of options we can look at. One is based on gross sales, 

or gross revenue for that business or farm. Another is based on the 

size of the payroll for that small business. The other is based on 

an adjusted gross income, where you back out all the input costs 

and you’re left with basically net profit at the end of the year. 

Mr. Draper, I’d be interested to get your thoughts on where we 

should exempt, what level should we exempt small businesses from 

having to provide health care coverage for their workers? 

Mr. DRAPER. Yeah, I mean, that’s one of the many things that 

makes me glad I don’t have to write this bill. It’s tricky because 

you could set it at a certain amount, say, income that they’d be exempt. And so, for 4 years they’d be paying 8 percent, but then say 

you have a recession like this year. Company’s income goes down, 


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suddenly, 30 percent of the companies that were paying in now 

aren’t paying in, there’s a budget shortfall, so it’s tricky to draw 

the line. I mean, I would, I’m more for requiring everybody to have 

health insurance, no matter how we do it. Just for the reason that 

if you require everybody, the theory is the rates will go down. 

If you require everybody to have health insurance and the rates 

go up, obviously that will be frustrating, but this is one of the 

things that in order to move forward into the future, you’ve got to 

kind of do something and just because you don’t know exactly 

what’s going to happen doesn’t mean you should stop trying to do 

anything. So, I don’t know where it would be to draw the line. You 

may just want to require health care for everybody and not try to 

worry about, you know. 

Mr. KIND. I appreciate that response. But just to be clear, there 

will be shared responsibility, so if the business isn’t required to 

provide coverage, the individual will still be required to obtain 

health coverage and that is how we’re going to try to work with 

them to make it affordable for low-, middle-income families so they 

can go into the market and purchase health care on their own. 

But my question, and Mr. Shea, maybe you want to jump in 

here, is if we are going to exempt small businesses, many of whom 

are really operating on a tight margin and having the requirement 

of providing coverage themselves could put them over the end and 

they wouldn’t be able to stay in business, what should be the calculation that we use? Mr. Shea. Do you have? 

Mr. SHEA. I’m not going to be very helpful to you, Congressman. 

I think, like Mr. Draper, the best approach is to put everybody in 

and then subsidize those people who really are at the low end who 

warrant it. But once you start keeping some people out, you’re 

going to get distortions. You’re going to get gaming. So, I think you 

put everybody in. And the other reason I say that is just something 

that hasn’t been mentioned here. 

Most of the people who don’t provide coverage, who are low margin, small employers, are competing against other low margin, 

small employers. So, if you put all of those people in, it’s not like 

you’re going to give some people a disadvantage, you know, everybody is going to be in the same situation. And if you have enough 

subsidy so that we don’t lose wholesale jobs, and I think that’s just 

something you’ve got to design in, I think it’ll work. 

Mr. KIND. Mr. Kirsch. 

Mr. KIRSCH. Yes. I agree. I think shared responsibility means 

we make it affordable for all small employers and they pay in a 

reasonable way. And I think the analogy here is the minimum 

wage. I mean, we don’t say to some small businesses, you don’t 

have to pay a minimum wage. We say, a basic requirement of being 

in business is to contribute to long-term retirement through Social 

Security, and to pay at least a minimum wage. And so, let’s now 

do the same for health care, but let’s make it affordable. 

The problem right now is, as you know, health care is not affordable to too many small employers. There are a lot of things you’ve 

done in this legislation, numerous things to make it affordable and 

then every employer can pay because you’ve made it affordable, 

even the smallest low-wage employer because you’ve made an affordable option in this legislation. 


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Mr. DRAPER. Yeah, I think you pretty much want to have to try 

to include every business just because trying to exempt some, I 

mean, it’s difficult just because the other side will say, oh, but 

what about the small business? But, looking at the big picture, if 

you guys wanted to help small business, just eliminate income tax 

for small businesspeople and raise capital gains tax. 

But so, it’s hard to argue for it. I think it may be tough for some 

people, but I think people in small business are used to getting it, 

and it’s kind of the only way to do it is to require everybody to have 

it. 

Mr. KIND. Thank you. Thank you, Mr. Chairman. 

Chairman RANGEL. You have been one outstanding panel. And 

one patient panel, I might add. And I only can offer to you, remember this day as you kicked off an historic piece of legislation that 

is long overdue in our great Nation and that you have been a part 

of it. 

In the early 1960s, I walked with Dr. Martin Luther King for 54 

miles. I had no idea what I was doing. But I don’t tell that to my 

grandkids today. I told them I was a part of that great civil rights 

movement. And I want you to really and truly believe that your 

testimony is going to help get this thing started. We’re going to 

have the outstanding businesspeople of our community understanding that their concern with our country, the employees, competition, education, health care, and all of you are going to be very 

proud of the contribution. 

We are collectively thankful and I know that Mr. Camp joins 

with me that we’re going to get this thing done. Thank you so very, 

very much. I yield to Mr. Camp. 

Mr. CAMP. Well, no, I just want to echo. Thank you all for taking the time. It’s been a long day waiting and then a long time at 

the witness table and I certainly appreciate all of your effort today 

to help eliminate what we’re looking at which is a health care proposal that is a significant one. And I just want to thank you for 

your testimony. 

Chairman RANGEL. Thank you. Now, we will call the next 

panel. Dr. Baxter. He’s from my hometown and if we could package, where’s Dr. Baxter? If we could package the enthusiasm that 

the doctors and staff have at William F. Ryan Health Center, it 

would be good for the country. You do a great job and our community appreciates it. 

The American Academy of Family Physicians, the President of 

that group, Dr. Ted Epperly. We hope that you feel very proud of 

this package because we’ve invested a lot of money in expanding 

the number of physicians, especially primary care and we’re going 

to make certain that we give the opportunity to do what doctors 

were trained to do and that is to take care of patients and provide 

health care. 

And our nurses. The Rhode Island State Nurses Association on 

behalf of the American Nurses Association in Silver Spring, Donna 

Policastro. Some believe that the nurses are really the backbone of 

the hospitals and we want to appreciate, not only what you’ve 

done, but to appreciate and encourage and provide incentives in 

terms of pay for the professional work our nurses do. 


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Chip Kahn. Chip. Well, it’s good to have you with us. I remember 

the meetings that we had and I told the hospitals that we’re going 

to pass you by, but what an opportunity to participate, to help us, 

to give us direction and we couldn’t have done it without the professionals. We tried to do the right thing as legislators, but we 

can’t do it without the people on the ground that deal with these 

problems every day helping us so that we can avoid making big 

mistakes. 

And Richard Warner, a doctor from the Kansas Medical Society 

House of Delegates, the AMA Alternate Delegate and past President of the Kansas Medical Society, we welcome you here and I’m 

going to call upon Mr. Larson, John Larson to share with us his 

support for Ronald Williams, who’s the Chairman and CEO of 

Aetna Insurance Company, from Connecticut who, unfortunately is 

with the President, as he has joined with us in sharing his expertise in this field. The Chair would like to yield to the Chairman of 

our Caucus, John Larson. 

Mr. LARSON. I thank the distinguished Chairman and I make 

apologies on behalf of Mr. Williams who was, along with our other 

panelists, waiting patiently to bring testimony but he has, as the 

Chairman has indicated, been called to the White House, where he 

is at a health care event and focusing on prevention. 

I just want to echo what the Chairman has said about Mr. Williams. The Aetna is an outstanding company in the State of Connecticut. And Mr. Williams has been an exemplary Chief Executive. 

He has toured the State with Senator Dodd conducting forums on 

health care. Aetna, as you might suspect, leads the Nation, in fact, 

was the first national insurer to offer consumer directed health 

care plans. It was the Aetna that through information technology 

in bringing new levels of transparency to the health care system, 

has paved the way for innovation and driving them, what the 

President continues to emphasize, is at the heart of bringing reform to this system. And that’s the cost. With health care approaching 20 percent of our GDP, it’s important that we focus on 

this. But also add that with respect to a public plan, Chairman 

Williams has been asked whether he could compete with a public 

plan or not, and he said, all things being equal, yes. And I think 

that’s what these hearings are about to make sure we hear how we 

can make all things equal and move forward on behalf of the American people. Again, I want to thank the Chairman and on behalf 

of Ron Williams from the Aetna indicate the gratitude to be here, 

but as the Chairman understands, he was called away to a meeting 

to a higher authority at the White House. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Williams follows:] 

Prepared Statement of Ronald A. Williams, 

Chairman and CEO, Aetna, Inc., Hartford, Connecticut 

Chairman Rangel, Ranking Member Camp and Members of the Committee, I am 

Ronald A. Williams, Chairman and CEO of Aetna. Thank you for the opportunity 

to speak here today as we approach a critical juncture in the national health care 

reform discussion. Let me start by emphasizing that we share a common goal. We 

want to get everyone covered with adequate health insurance, improve the quality 

of health outcomes, and get better value for each dollar spent on care—with the goal 

of reducing cost and improving affordability for the American people. 


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1The Journal of Health Economics, ‘‘Information Technology and Medical Missteps: Evidence 

From a Randomized Trial,’’ 2008; 585–60. 

Your effort moves us closer to those goals, and I applaud the Committee for trying 

to offer solutions that address the issues of cost, quality and access. Your plan 

would maintain the overall strength of the employer-based system, allow people to 

keep what they have, and provide solutions to improve the individual and small 

group market. While we may not agree on all the specific details of your overall 

plan, our intent is the same. 

For example, I called for reforms that would guarantee that health insurance companies have to issue health insurance regardless of health status and limit medical 

underwriting. We can make these reforms if we also have in place an individual coverage requirement, just like Massachusetts, so that insurance is not just about getting it when you are on the way to the hospital. 

Facts About the Health Insurance Industry 

To fully appreciate that we have common interests, it is important to understand 

the goals and values of insurers today. Unfortunately, many people have made assumptions about our sector that may have been true 20 years ago but are not based 

in marketplace realities today. 

We are not, in fact, one of the key drivers of health care costs. U.S. health care spending topped $2.4 trillion in 2007, while the combined profits of the top 10 

health insurers were approximately $8.3 billion. It is important to understand that 

insurance premiums are directly tied to the cost of underlying services in health 

care, including doctor, hospital and other provider costs. In 2007, the cost of health 

care services grew at an annual rate of 6.4%, resulting in overall premium increases, on average, of 6.1%. 

Aetna today processes 206,000 calls a day and well over 50 million a year—over 

45.5 million calls were answered in an average of 19.3 seconds and 94 percent were 

resolved the first time; we processed 407 million medical, dental and pharmacy 

claims in 2008. Of these, only 0.3%, or 1.2 million, were not processed correctly. Getting all this right takes long-term investment, staying current and complying with 

the changing regulations from more than 50 jurisdictions and a commitment to constant improvement that can be implemented carefully. 

But it would be a mistake to see our business model as a simple claims-paying 

operation. In fact, the competitive nature of our business requires us to generate 

strong value on behalf of the members that we cover. We have become leading 

innovators in chronic disease management, wellness and prevention, performancedriven payment models, quality management, and end-of-life care. 

We also have been leading the health information technology (HIT) movement to 

give consumers and their doctors tools that empower them to make better decisions 

about their care pathway—using their personal health information in real time. 

Since 2005, we’ve invested more than $1.8 billion in HIT, and we’re seeing real 

value for that investment. 

Notably, our unique clinical-decision support technology, CareEngine®, provided 

through ActiveHealth Management, has been used to analyze more than 18 million 

complete patient records against current standards of care to identify gaps in care 

and to alert physicians with ‘‘care considerations’’ that they can act on. These clinical alerts have been reviewed by specialists at Harvard, and as a result we are able 

to say that Harvard approves of the language and how these clinical tools have been 

built. We have also submitted many of these measures that are used to support the 

clinicians to the National Quality Forum, and 33 are being reviewed for endorsement. We feel that we are raising the bar in the measurement of quality by our 

ability to collect diverse data and integrate it into useful decision support for clinicians. 

CareEngine was tested in a randomized clinical trial, with the results published 

in 2005 and again in 2008. The use of the technology and the subsequent physician 

actions prompted by these care alerts produced a reduction in patient hospitalizations of 8% and a savings in charges of more than $8 per member, per month 

(PMPM). In a 2008 followup study,1 the tool’s impact was further validated by findings that showed the use of advanced clinical-decision support with care alerts reduced overall charges by 6%, with charge savings in excess of $21 PMPM. 

We are an essential element of health care today, helping employers and consumers get better care. Much of the innovation in our health care system is fueled 

by private insurers working alongside employers to ensure the health and well-being 

of employees. In fact, many of the payment and quality reforms currently proposed 

for the Medicare program were actually created, tested and proven by employers 

and insurers working hand in hand in the private sector. 


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Our ability, however, to innovate and deliver diverse product offerings across the 

country is very much affected by our complex regulatory environment. We are one 

of the most heavily regulated industries in the Nation. We are regulated uniquely 

by 50 States and by multiple jurisdictions within each State; we are regulated by 

cities, in some cases, and several Federal agencies. Each regulatory body takes a 

different approach to how it handles regulation of the health insurance market and 

enforcement of the rules. These regulations today could fill a small town library. 

The unintended consequences of these regulations are that each has a different 

effect on cost to the consumer and our ability to provide innovative product offerings. It is one of the reasons we see individual health insurance in New Jersey that 

is about 300% more expensive than similar plans offered in neighboring Pennsylvania. Bringing a more common approach to regulating the market—if it is with an 

eye on simplification—could make the market more responsive and increase consumer access to more cost-effective products. If we are going to set national rules, 

they need to preempt other statutes that try to accomplish similar outcomes. 

We are also committed to continually reducing the administrative costs, and have 

made a pledge to the President to simplify our interactions with doctors, hospitals 

and other providers to produce savings and, more importantly, to streamline our 

system so that uniformity throughout reduces costs, improves interaction times, and 

addresses the key ‘‘friction points’’ that the medical community has asked us to address. The industry has committed to the following administrative simplification reforms: 

• Automate and standardize the electronic processes used by health plans to do 

business with providers including: claims submissions, eligibility verification, 

claims status, payment and remittance. 

• Eliminate the variation in how our industry implements administrative standards through the designation of an organization to develop uniform rules that 

would be incorporated in future versions of IT standards enabling providers to 

access consistent insurance information. 

• Implement uniform standards for health plans’ personal health records (PHRs) 

to ensure that patients and their providers have accurate, real-time information 

available 24 hours a day regardless of location. PHRs will help reduce duplicate 

tests, ensure up-to-date medication history, and facilitate better quality care by 

physicians. 

• Adopt uniform quality performance measures that are actionable for physicians, 

hospitals, and other clinicians and issue consumer-friendly reports that assist 

patients in making more informed decisions. 

• Propose that an independent third-party entity is created to: coordinate the collection of information on provider licensure, board certification, and adverse actions; and facilitate credentialing by hospitals and health plans across all private plans and public programs. 

• Propose that a multi-stakeholder national task force is created to develop a 

process similar to the National Correct Coding Initiative (NCCI) to address correct coding for all populations and health care services covered by public programs and private insurers. 

The differences between Medicare and private plan administrative costs are often 

referenced, despite the significant differences in the target populations and services 

provided. Even so, when compared on a per-member, per-month basis, administrative costs are nearly the same for Medicare and private plans. 

Cost and Quality 

Underlying medical trend is rising about 12–15% per year due to the cost and utilization of medical services. Recently, The New Yorker magazine, in a story by Atul 

Gawande, highlighted a worrisome problem in this country that some are now calling the ‘‘McAllen, Texas Problem.’’ McAllen has one of the highest Medicare expenditures per capita in the country, yet its population is no sicker than most other 

places. But because it has high provider capacity, this capacity drives up volume 

and cost. A lesson for our country—we need to align incentives with quality outcomes, not volume. 

The problems we face in health care can be solved. In fact, the industry came 

close in the 1990s, when the medical cost trend dipped from 8.1% in 1992 to 

(¥1.1%) in 1995. Back then, you had a medical home called a primary care physician whom you needed to consult before you could see a specialist; you had limited 

choice of doctors and hospitals from a closed network, a network that agreed to 

tighter payment rates for services; and payments to providers were bundled for 

highly intensive procedures and allowed providers to keep some of the savings. Ultimately, that model did not work as consumers wanted more choice and more control 


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over their options, and providers wanted more control over the options they could 

offer. We don’t advocate it now. We may have achieved many of the right results 

but in the wrong way. 

Consumers’ expectations remain essentially the same today as they were in the 

’90s. Today most experts agree that 30% of health care is unnecessary, and yet the 

majority of Americans believe they don’t get the tests and treatment they need. 

Fifty-five percent of Americans say insurers should pay for what a doctor recommends, even if a treatment has not been proven more effective than a cheaper 

one. If our collective goal is to achieve affordable coverage for all Americans, it is 

essential that we address these issues and make delivery system reform happen. 

A lot of exceptional work is being done to examine the issue of paying for quality 

vs. volume. In cooperation with providers and employers across the country, we continue to experiment with aligning quality incentives and payments to providers 

when they follow the medically recommended care pathways, as determined by the 

various medical professions. As a result, we have seen improving averages in breast 

cancer and colorectal screening, improving back surgery outcomes while reducing 

the use of imaging, improved use of antibiotic management leading to fewer readmissions (in one network alone readmissions went down 19% over a 60-day period), and we have seen similar results in diabetes management, oncology and cardiac care. When we focus on the patient in a holistic manner, we get better quality 

outcomes for patients and overall reduced costs. These are programs that have been 

done in cooperation with groups such as the Leapfrog Group and our own Bridges 

to Excellence program. These programs have reduced cost while improving quality. 

When people get the right care at the right time, the whole health system benefits, 

and we achieve value-based health care for all. 

Making insurance affordable will require us to bend the health care cost curve; 

all of us have a role in this effort. But we must start with a major reform of the 

payment system, as this is the underlying cause of the over expenditure we live 

with today. 

Prevention and Wellness 

Health care reform needs to include strong prevention and wellness initiatives; it 

is the most important investment we can make in our future. Today, our health care 

delivery system is largely oriented toward the treatment of disease, rather than focusing on preventable health conditions. Refocusing our system to prevent disease 

and promote wellness can lead to better health for all Americans and positively impact costs systemwide. 

More than half of Americans are living with at least one chronic disease. Nearly 

one in five 4-year-olds is obese, with significant disparities in prevalence among different racial and ethnic groups. The United States spent $217.6 billion on direct 

costs in treating non-institutionalized Americans for chronic disease in 2003, while 

experiencing an added $905 billion in losses associated with indirect costs. 

We must refocus the health care system on getting and keeping people healthy 

throughout their lives. I believe a number of strategies are critical to refocusing our 

system on wellness and prevention, including: 

• Using consumer engagement and targeted incentives to encourage sustained 

healthy behavior and change unhealthy behaviors; 

• Developing an integrated, holistic approach to care management to allow for 

early intervention and education; and 

• Promoting coverage policies and initiatives that encourage the use of high-value 

health care and address the needs of specific population segments. 

Our own experience, as both an employer and as a leading national health insurer, tells us how effective this approach can be. Our Wellness Works employee programs are engaging employees, helping them get healthier and contributing to lower 

medical costs. The Get Active Aetna program, for example, is a 16-week fitness action campaign through which 55 percent of employees logged 970,000 exercise hours 

in 2008—walking a total of 3,397,524 miles, the equivalent of walking 136 times 

around the Earth. 

Aetna Health Connections Disease Management helps people with chronic conditions get the treatment and preventive care they need by taking a wider view of 

an individual’s health, rather than focusing solely on a single disease. Aetna’s 

nurses and clinicians help members understand and follow their doctor’s treatment 

plan and better manage ongoing conditions with the goal of helping members 

achieve their optimal level of health. Employers who invest in this program have 

seen a 2 to 1 return on their investment. Moreover, through disease management 

programs, we have seen reductions in emergency room visits and inpatient admissions, including a 7 percent reduction in ER visits for asthma, a 13 percent reducVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00214 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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tion in inpatient admissions for coronary artery disease and an 18 percent reduction 

in inpatient admissions for strokes. 

Importantly, the employer-based system provides a critical venue for implementation of wellness and prevention programs, as insurers can help employers target 

interventions to the specific needs of their employees and their families. Congress 

should consider providing tax incentives to employers for offering evidence-based 

wellness programs, while also considering vehicles for pre-tax purchase of wellnesspromoting activities. Grants for community-based wellness and fitness programs 

should also be considered, and wellness and prevention initiatives should be implemented in public programs. 

Insurance Markets 

Keeping what you have: We need to make the health insurance market work 

for everyone, and I believe we can. But as the President has stated: ‘‘If you like 

what you have you should be able to keep it.’’ Choice is always at the center of what 

Americans want to maintain. Whatever we do, we need to ensure we do not implement reforms that adversely affect the ability of the insurance market to offer 

choice. In a New York Times poll reported in Sunday’s newspaper, 77% of Americans, an overwhelming majority, said they are happy with the coverage they have. 

Your bill recognizes that people want the ability to keep what they have, but if the 

rules are too sweeping or strict and the regulatory structure too complex and constraining, you will limit choice and destabilize existing markets. If strict rules tilt 

the playing field too much in favor of exchanges, consumers will slide out of their 

plans into these exchanges and face higher premiums that they will not find acceptable. Tax credits and/or subsidies should be offered inside and outside the proposed 

exchanges. If we fail to do this, it will destabilize risk pools causing an additional 

rise in premiums. 

Large Employers (50+) 

Today, more than 177 million Americans get their insurance through the employer-based system, and the large majority of the 50+ market is self-insured. Employers expect great value for their spend in health care; they want wellness and 

prevention for their employees, chronic disease management, quality outcomes, and 

they want measurable results for each of these areas. This is not a system that 

should be changed, and by an overwhelming majority most employers don’t want to 

see this market touched by reform. 

• More than 95% of employers polled in a recent survey overwhelmingly want to 

continue to provide their employees this type of coverage. 

• It is the employers’ long-term commitment to their employees’ health that has 

driven much of the innovation we have today in terms of services that help improve and sustain employee health. 

But, outside this market, insurance does not work well for everyone, and we need 

to reform these markets if we are gong to achieve full access for all. We do need 

specific reforms for the individual market and those parts of the small group market 

that are not working. We also need to remember that 18 million people are insured 

in the individual market, 30 million in the 2–9 market, and about 38 million in the 

10–50 small group market. We should not expose these policyholders to disruptions 

that include higher rates. Where the market is not adequate we recommend the following: 

Specific Solutions for the Individual and Under-10 Small Group Markets 

The Committee’s reforms would make important progress in addressing the lack 

of coverage in this market. Only about 35% of the people in this market have access 

to insurance because of affordability concerns or preexisting conditions. By reforming the individual market, which should also include small businesses with fewer 

than 10 employees, we can tailor insurance market solutions to effectively address 

the needs of the uninsured without disrupting or even unraveling the entire insurance market. 

We can cover the uninsured if we: 

• Guarantee issue of insurance and align it with a strong individual coverage requirement. 

• Subsidize those that truly need help and possibly those at high risk. 

• Provide affordable coverage options, which improve choice and reduce complexity. 

• Provide modified community rating for age, geographic location and family size, 

but toss out health status and gender. 


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• Design benefit options that meet specific needs of consumers. Most consumers, 

when using their own money, pick a benefit design that is similar to the Massachusetts Bronze plan. The premium for this plan is about 55% lower than the 

premium for FEHBP’s Blue Cross Blue Shield standard plan. 

We think it makes sense for these plans to be offered via an exchange and believe 

it should be national or Statewide, run by the State Insurance Commissioner. If the 

Federal Government decides to set the rules for the exchange, they should preempt 

State rules. Exchanges should be operated under a consistent set of Federal rules. 

Setting rating bands is all about which part of our population subsidizes which 

other part. In making policy decisions, we need to be mindful of how reforms may 

impact different segments of the population. While the very purpose of an insurance 

pool is to spread risk, how much should a 23-year-old with a lower than average 

income pay to lower the rate for a 60-year-old with a higher than average income? 

It’s only when we truly reduce the cost of health care that we will be able to provide 

affordable coverage. The National Association of Insurance Commissioners should be 

asked to provide recommendations on rate bands; once set, they should be reviewed 

periodically to ensure rate bands are not unfairly and adversely affecting different 

segments of the population. These bands should offer a cap but should not be so 

tight as to make insurance unaffordable for too many Americans. 

Small Group 10 to 50 

For small businesses with between 10 and 50 employees, 85% of whom offer their 

employees (about 38 million people) health insurance, we need a package of solutions that makes the current market work better. I believe the intent of the Small 

Business Health Options Program (SHOP) Act is the right approach, as it provides 

a package of solutions intended to address the major issues for these small businesses—rate volatility and affordability of coverage. We support: 

• Allowing groups to keep what they have. 

• Individuals entering the exchange if their employer doesn’t offer coverage. 

• Rating rules that are consistent nationally (and consistent in and outside the 

exchange)—rating rules should not be set in statute. 

• Overall age band of 5 : 1. 

• Subsidies for the costs of high-risk individuals. 

I would call on the Committee to leave some details to regulation, understanding 

that making our new model work will require time and experience. This would allow 

greater flexibility in meeting different consumer needs and expectations. Examples 

on this point include benefit package design, where we need not legislate in a ‘‘onesize-fits-all’’ manner. Rate banding is another example; while moving to a national 

standard is advisable, we need to allow for flexibility in designing rate bands that 

are based on actuarial modeling and reflect our collective intent to expand access 

and increase affordability. This may take some experience with a new system to get 

right. 

The Public Plan 

I’ve been asked whether we could compete with a public plan. All things being 

equal, I would say, yes, we can provide better value, quicker innovation and do a 

better job in areas such as wellness, prevention, and chronic disease management. 

However, everything I have read so far says that a public plan would pay providers Medicare rates or something close to them and would control the delivery of 

care itself. The government would be, in other words, setting prices for services and 

paying below what providers consider to be market rates. There is no competition 

in this scenario. And, the government is missing the point—it is not how much we 

pay that is the problem, it is what we pay for that caused high-volume consumption 

of health care services. If everyone is paid at the same rate, how does that spur 

competition? 

It would be extremely difficult for the government to be both a player and a referee. I cannot support this kind of public plan and see it as a danger to the stability 

of community and rural hospitals and to health care overall. It would lead to continuing to reward episodic care, as opposed to care management. It will be costly 

to implement, taking dollars away from an already burdened health care system. 

And, it could be a plan of last resort, creating a new problem for us to manage. 

Conclusion 

In closing, I want to be clear that we seem to have many more areas of agreement 

than we do areas in dispute. By making insurance coverage a matter of personal 

responsibility, you are laying the groundwork needed to help resolve the problem 

of access for so many of the Nation’s uninsured. And, this requirement would serve 


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as a key building block for other important reforms, such as guaranteed issue regardless of the consumer’s health status and preexisting conditions. 

I also hope you will take away from this discussion how vital the private sector 

is to innovation. Whether we’re talking about health care product designs, quality 

measures or payment system reforms, the private sector has worked with employers 

and consumers to find new ways of delivering innovation and value to an everchanging marketplace. With changes in the regulatory system, that value can be 

compounded many times over. We are an integral part of the health care system 

that will continue to deliver real value and new ideas if allowed to participate on 

a level playing field. 

That is why a public plan option makes such little sense for health care consumers going forward. If we get everyone in the system and implement needed reforms across the individual and small group markets, it serves little purpose to 

weaken the ability of private insurance to deliver the level of service and value that 

so many Americans are happy with today. 

Thank you for the chance to offer our perspectives and recommendations. We look 

forward to working with you to pass meaningful reform that addresses affordability, 

access and quality. I’m confident that, together, we can arrive at a solution that 

America can afford, and we can get it done this year. 

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Chairman RANGEL. I’m going to call on the Chairman of the 

Subcommittee, Mr. Stark, to welcome you, but again, you’re an outstanding panel. I’ve been talking, Mr. Stark would miss the camp 

and we haven’t, and we have thought that in order to get the maximum of the benefit that we know another cluster of votes are 

going to take place on the floor. So, if we ask our witnesses to restrict their comments to 3 minutes and our Members that are here 

to 3 minutes, we might avoid the collision with the people on the 

floor and get the benefit of all of your questions in. So, Mr. Stark, 

would you welcome Dan Baxter. And I’ve already introduced them 

all. 

Mr. STARK. Dr. Baxter, would you like to inform us, in any way 

that you’re comfortable? 

STATEMENT OF DANIEL BAXTER, M.D., MEDICAL DIRECTOR, 

WILLIAM F. RYAN COMMUNITY HEALTH NETWORK 

Dr. BAXTER. Thank you, Chairman Rangel, Ranking Member 

Camp, and distinguished Members of the Committee. 

I am the Chief Medical Officer of the William F. Ryan Community Health Center in New York City, which is named after a beloved, former colleague of yours. The vast majority of Ryan’s 40,000 

patients represent those groups most often left behind in our 

health care system, including the poor, working poor, racial or ethnic minorities, those publicly and privately insured, and those that 

have no insurance at all. 

In fact, in the last year the percentage of patients at the Ryan 

Center with no health insurance rose from 20 percent to 25 percent. In our waiting rooms and in the faces of our patients we are 

privileged to serve, we witness the urgent need for fundamental 

health care reform. From the perspective of the Nation’s health 

centers, current public programs are uniquely qualified to meet the 

needs of our most vulnerable communities. 

Patients can access not just primary care, but the full spectrum 

of services tailored to meet their individual and family needs. Despite chronic funding shortfalls and patients with multiple medical 

conditions, community health centers have demonstrated a record 


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of quality care and cost control unmatched in the health care system. For all of these reasons we applaud the Committee’s inclusion 

of a public plan option as part of health reform. Not only are current public programs the only insurers that cover our low-income 

and medically underserved patients, they are also the only payers 

that recognize the unique role of safety net providers such as community health centers, and also public hospital systems such as 

New York City’s Health And Hospitals Corporation. 

The public programs are the only insurers that pay us adequately. By contrast, private insurers pay health centers less than 

50 cents on the dollar for the care that the health centers provide; 

and, in fact, at the Ryan Center we have been forced to drop certain private insurance plans due to the unsustainable revenue 

losses from treating patients covered by these plans. It is our hope 

that as more and more patients gain coverage, a new public plan 

will follow the example set by current public payers by reimbursing 

health centers and other safety net providers appropriately and 

predictably for the care they provide. 

At the Ryan Center every day we see new patients who present 

with long-term, serious complications of treatable diseases, such as 

high blood pressure and diabetes, because of prior lack of access to 

primary and preventive care. Also, it’s very common for us to see 

uninsured patients who cannot afford medically necessary but very 

costly outpatient investigation such as MRIs or cardiac stress tests. 

A properly regulated and monitored public health care plan will devote precious resources to ensure efficient and cost-effective care 

for such patients without being preoccupied with the need to balance medical care against profits. 

For more than four decades, long before the term became fashionable, community health centers have routinely practiced the 

model of care that has provided a genuine ‘‘medical home’’ for their 

patients. Even though many patients have complex problems, including daunting psychosocial issues, community health centers 

have met the challenges, preserving both cost effectiveness and 

quality of care. 

I want to applaud the house proposal for recognizing the need to 

preserve and expand this system of care by increasing funding for 

the new public health investment fund and for the ‘‘medical home’’ 

demonstration bill. In conclusion, Mr. Chairman and honorable 

Members of the Committee, community health centers across 

America are proven, established, cost-effective models that can 

bring their considerable experience and expertise to solving many 

of the challenges facing our system today. America’s community 

health centers stand ready to provide you support and guidance as 

you negotiate final proposals in the coming weeks and months. 

Thank you for your time and attention. 

[The prepared statement of Dr. Baxter follows:] 


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Mr. STARK. Thank you for your patience and your contribution. 

Dr. Epperly. 

STATEMENT OF TED EPPERLY, M.D., PRESIDENT, 

AMERICAN ACADEMY OF FAMILY PHYSICIANS 

Dr. EPPERLY. Chairman Rangel, Mr. Stark, Ranking Member 

Camp and Members of the Ways and Means Committee, I am Dr. 

Ted Epperly, President of the American Academy of Family Physicians, which represents 94,600 across the United States. 

On behalf of the academy I am pleased to testify today on your 

discussion on draft legislation to reform health care in this country. 

Your draft bill goes a long way toward providing quality, affordable 

health care coverage for everyone in the United States; a change 

AAFP has supported for two decades. We commend your leadership 

and we profoundly appreciate the inclusion of efforts throughout 

the draft to improve primary care. 

Achieving quality, affordable health care coverage for all will require a significant investment in the health care system; however, 

simply paying for more of the same fragmented, uncoordinated procedure-based health care will not make us healthier and we will 

not begin to control health care costs. Because of the cost-effectiveness of primary care services, one of the keys to reforming the 

health care system is to reemphasize the centrality of primary care 

and do so by supporting primary care including the patient-centered medical home, where every patient has a personal physician 

responsible for their care, emphasizing cognitive clinical decisionmaking, rather than procedures, aligning incentives to embrace 

value over volume and ensuring the adequacy of the primary care 

workforce. 

We appreciate your work with SGR. Medicare is a critical component of the U.S. health system and must be stable and predictable 

for patients and providers. Eliminating the past ‘‘scoring debt’’ accumulated by this arcane, inexact, and clinically irrelevant SGR 

formula is critical to restoring stability and predictability. We applaud this and concur with the establishment of separate expenditure targets that place a greater emphasis on the cognitive clinical 

decisionmaking that is a hallmark of primary care. 

We also applaud the Committee for including a medical home 

pilot program in Medicare. The use of the PCMH by Medicare and 

other insurers can achieve savings while simultaneously improving 

quality. We further applaud the inclusion of 5 percent bonus for 

primary care services, and up to 10 percent for those services provided in the health professionals’ shortage area. And, Congress 

should make the primary care bonus permanent. 

The AAFP supports a health insurance exchange, a market 

where Americans can one-stop shop for a health care plan, private 

or public; compare benefits and prices, and choose the option that 

best meets their needs, much like Members of Congress and their 

families do. Patients should have a choice of health plans and a 

public plan should be among them. But the public plan should not 

be Medicare. While for transition purposes, there may be some similarities to the program, we urge Congress to de-link the public 

plan for Medicare by a date certain. 


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Successful and sustainable health reform will require an adequate primary care physician workforce, equivalent to approximately 45 percent of the physician workforce. It also means not allowing unbridled growth of subspecialty training which fosters costly, fragmented care. The training of U.S. physicians is currently 

borne by Medicare to ensure an adequate primary care workforce 

for all Americans. GME funding should be derived from all payers. 

In conclusion the problems associated with primary care medicine are multifaceted and thus require multifaceted solutions. Payment, student scholarships, loan forgiveness and tax policy are all 

parts of the solution. Reforming the health care system is a complex endeavor. The status quo is not working. We urge Congress 

to invest in the health care system we want; not the one we have. 

Thank you very much. 

[The prepared statement of Dr. Epperly follows:] 


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Mr. STARK. Thank you. 

Ms. Policastro. Did I pronounce that correctly? 

Ms. POLICASTRO. You did a very good job. Thank you. 

Mr. STARK. All right. Would you like to proceed? 

Ms. POLICASTRO. Yes. 

STATEMENT OF DONNA POLICASTRO, EXECUTIVE DIRECTOR, 

RHODE ISLAND STATE NURSES ASSOCIATION, ON BEHALF 

OF THE AMERICAN NURSES ASSOCIATION 

Ms. POLICASTRO. Good evening, Chairman Rangel, Ranking 

Member Camp, distinguished Committee Members and congressional staff. Thank you for inviting the American Nurses Association to this timely discussion on health care reform. I am Donna 

Policastro, a certified nurse practitioner for 33 years, and an Executive Director of the Rhode Island State Nurses Association, speaking today on behalf of the American Nurses Association. 

The ANA is the only full service national association representing the interests of the Nation’s 2.9 million registered nurses 

in all education and practice settings, and advances the nursing 

profession by fostering high standards of nursing practice, promoting the rights of nurses in the workplace, and sharing a constructive and realistic view of nursing’s contribution to the health 

of our Nation. The ANA commends the work of the House Ways 

and Means, Energy and Commerce, and Education and Labor Committees. 

The tri-committee draft legislation clearly represents a movement toward much needed, comprehensive and meaningful reform 

for our Nation’s health care system. ANA appreciates the Committees’ recognition that in order to meet our Nation’s health care 

needs we must have an integrated and well resourced national 

health care workforce policy that fully recognizes the vital role of 

nurses and health care providers and allows them to practice to the 

fullest extent of their scope. 

ANA remains committed to the principle that health care is a 

basic human right and all persons are entitled to ready access to 

affordable quality health care services. ANA also believes that a 

health care system that is patient centered, comprehensive, accessible and delivers quality care for all is something that should not 

be partisan or a political issue. ANA supports a restructured health 

care system that ensures universal access to its standard package 

of essential health care services for all individuals and families. 

That is why ANA strongly supports the inclusion of a public health 

insurance plan option as an essential part of comprehensive health 

care reform. 

We believe that inclusion of this public plan option would assure 

that patient choice is a reality and not an empty promise and that 

a high-quality public plan option will above all provide the piece of 

mind that is missing from our current health care environment. It 

will help make health care more affordable for patients, generate 

needed competition in the insurance market and guarantee the 

availability of quality, affordable coverage for individuals and families, no matter what happens. 

There are a wide variety of ideas currently circulating about 

health care reform, but all include discussion of prevention and 


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screening, health education, chronic disease management, coordination of care and provision of community-based primary care. As the 

Committee has clearly recognized in its draft, these are precisely 

the professional services and skills that registered nurses bring to 

patient care. 

As the largest single group of clinical health care professionals 

within the health care system, licensed registered nurses are educated in practice within an holistic framework that views the individual family community as an interconnected system that keep us 

well and help us heal. Registered nurses are fundamental to the 

critical shift needed in health services delivery with the goal of 

transferring the current sick care system into a true health care 

system. 

Our ends are backbones of the health care delivery system. Advanced practice registered nurses, in particular nurse practitioners 

and nurse midwives, are proven providers of high-quality, cost-effective primary care. ANA nurses are strong supporters of community and home-based models of care. We believe that the foundation of a well-based health care system is built in these settings, 

reducing the amount of both money and human suffering that accompany acute care episodes. 

ANA supports the renewed focus on new and existing community-based programs, such as community health centers, nurse 

home visitation programs and school-based clinics. ANA supports 

the use of community-based, multi-disciplinary teams to support 

primary care through the medical home model. This model demonstrates the commitment to quality, coordinated care by all health 

providers, and represents a focus; not just on treating illness, but 

on emphasizing wellness and prevention. ANA is especially pleased 

that under this proposal nurse practitioners have been recognized 

as primary care providers and we’d be authorized to lead medical 

homes. 

In conclusion, I’d like, once again, the American Nurses Association thanks you for the opportunity to testify before this Committee. We appreciate your clear commitment to nursing and your 

understanding of the important role nurses play in the lives of patients and the system at large. Nurses are eager and willing to 

work with you to support and enact meaningful health care reform 

today. 

Thank you very much. 

[The prepared statement of Ms. Policastro follows:] 


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Mr. STARK. Thank you. 

And next we’ll hear from Louise’s husband, who is well-acquainted with this Committee; and, I’m happy to introduce Chip 

Kahn, the President of the Federation of American Hospitals. 

Chip. 

STATEMENT OF CHARLES N. KAHN III, PRESIDENT, 

FEDERATION OF AMERICAN HOSPITALS 

Mr. KAHN. I hope Mr. Rangel, Mr. Stark, Mr. Camp, and others 

on the Committee will forgive me for my checkered past. 

On behalf of the Federation of American Hospitals I appreciate 

the opportunity to offer our views on the House Tri-Committee 

Health Reform draft. FAH is the representative of over 1,000 investor-owned or managed community hospitals and health systems 

from across the country. 

President Obama and the Congress are right to place health reform at the top of the domestic agenda. The House draft provides 

a good starting point for reform. The draft raises the right issues. 

It gives us a roadmap to coverage for all Americans. I would cover 

four or five points about the draft. We’d make other points in the 

written testimony that I’ll commend to the Members and then be 

happy to discuss if you’d like. 

First, after conversations with the Chairman, the members of 

FAH set the same goal as our highest priority—affordable coverage 

for all. 

[Brief power outage.] 

Mr. KAHN. And we demonstrated that through a proposal that 

we prepared, the health coverage passport, which shows that universal health coverage can be achieved by building on our current 

system. The House draft is consistent with the principles upon 

which we based our proposal. It subsidized those Americans who 

lack sufficient, disposable income, to afford coverage. It builds on 

the employer-based system. It includes insurance reform and it requires Americans to obtain coverage. 

However, the draft wavers from our prescription an important 

aspect of its health insurance exchange. The draft includes a public 

option. We understand President Obama and many of you feel 

strongly that there should be an alternative to private insurance 

and HMOs. But, in our view, the public option is not necessary to 

achieve successful reform and will leave clinicians and providers 

alike with insufficient payment to serve our patients. So we respectfully request that you consider a nonprofit or co-op model, if 

you believe eligible consumers should have other choices. 

Second, we understand that Congress is going to call upon hospitals to contribute to the funding of health coverage. We stand 

ready to participate if payment effects are fair; but, we feel strongly that fairness includes reimbursement reductions calibrated to 

take effect only with commensurate increases in coverage. Third, 

we deeply appreciate that the draft recognizes the multiple purposes of the safety net-oriented disproportionate share payment in 

Medicare and Medicaid and appreciate the thoughtful approach the 

Committee’s taken toward that in the draft. 

Fourth, we appreciate the Committee draft taking a position on 

prohibiting physician ownership and referral to hospitals. We think 


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you take a sensible approach on bundling. It needs research and 

it needs development. And, finally, we are very appreciative that 

on readmission policy you focus on those readmissions that are 

most vulnerable and ought to be assessed. 

Finally, the draft recognizes the need to use care measures to enable clinicians and hospitals to improve services for those they 

serve, and to give consumers information that will enable citizens 

and Americans to choose the right caregivers. However, the draft 

falls short in supporting the processes needed to make this quality 

happen. The draft does not sufficiently embrace the initiative developed by Stand For Quality, an organization of 200-plus multistakeholders. It includes patients, consumers, labor, clinicians, hospitals, nurses, employers; everyone involved in the health care system in any way. 

Stand For Quality has proposed new support for the National 

Quality Forum and the Agency for Healthcare Research and Quality, and recommended a closer, more formal communication and 

consultation between the government institutions that establish 

and oversee the Nation’s quality agenda and the universe of groups 

outside government whose shared mission is to make quality happen. We hope you will review the recommendations of Stand For 

Quality and that they may be included in the mark that you will 

take up in the next few days. 

Finally, we deeply appreciate the invitation today and look forward to working with the Committee as the draft develops toward 

enactment. 

Thank you. 

[The prepared statement of Mr. Kahn follows:] 


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Mr. STARK. Chip, thank you very much for your contribution. 

Mr. Minnix, would you like to enlighten us, please? 

STATEMENT OF WILLIAM L. MINNIX, JR., PRESIDENT AND 

CEO, AMERICAN ASSOCIATION OF HOMES AND SERVICES 

FOR THE AGING 

Mr. MINNIX. Thank you, Mr. Chairman, and distinguished public servants. 

I am Larry Minnix. I represent the American Association of 

Homes and Services for the Aging, 5,600 mission-driven organizations in everyone’s community; everything from small, adult-based 

centers to very large and comprehensive retirement communities. 

I represent the issue nobody wants to talk about in health care 

reform, but everybody will face sooner or later if we live long 

enough, so it’s time to confront it. And we believe that long-term 

services and supports can be a contributor to health care reform, 

not a detraction from it and a burden that many feel we cannot 

bear. So I want to talk about how we can finance long-term care 

through a public option as we look to the future, and some things 

that need to be done to improve the Medicare program. 

We certainly agree with the direction that you all are taking in 

health care reform and support the principles. From our standpoint, you are moving in the right direction as a matter of helping 

iron out the details. You may not realize it. While 40-something 

million Americans don’t have health insurance, 250 million Americans are uninsured for long-term care. Ten million, 65 and older, 

on any given day are in need of long-term service and support, over 

65. It’s almost that many under 65, younger adults, with disabilities. 

There are 44 million caregivers, and they spend an average of 35 

hours a week doing that job. It costs employers $2,000 a year for 

lost time, work, and stress-related illnesses. They spent out-ofpocket caregiving, $5,531 a year; $9,000 a year if they are a longdistance caregiver. The single biggest payer source is certainly 

Medicaid, and we have overburdened the Medicaid system with 

long-term care costs at $100 billion this year and growing. But 

families spend two and a half times that out of their own pockets. 

So we already have a huge problem. Now, what’s the solution? 

We believe that the HELP Committee bill, the Class Act, if you 

will, that Congressman Pallone introduced to this body previously, 

and now is embodied in the HELP Committee bill, is a solution. We 

all, when we begin work, put into a national insurance pool; and 

any of us at any age get daily cash benefits to help the caregiving 

stay at home. 

For younger, disabled populations, it may be the difference between being able to work and not being able to work. Had a plan 

like this been in place today when the Pepper Commission recommended some kind of insurance model a generation ago, Medicaid expenditures for long-term care would be 50 percent of what 

they are today. So, if you think of what you could do with $50 billion to help us address the rest of the health care system, we also 

have some recommendations around improvement of the current 

Medicare program. 


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You’ve heard some things about care management, transitions 

care, culture change in nursing homes. You look at some of the 

quality improvement things going on in nursing homes, especially 

around the advancing excellence campaign. Nursing home care can 

get better. We need to stabilize the financing, overhaul the public 

oversight to make it more modern and more accountable and transparent. All of those are fixable problems. None of it is going to 

work long-term though without a different approach to financing 

aging and disability-type services in what we believe is a public option. 

Private, long-term care insurance cannot do it. It has its place 

but it cannot do it, and Medicaid is the fallback for everybody and 

you all know what government-imposed poverty and asset transfer 

does. So we believe there’s a solution, and let’s wrap it into health 

care reform. 

[The prepared statement of Mr. Minnix follows:] 


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Mr. STARK. Thank you. Thank you very much. 

Dr. Warner will now click his heels three times and give us the 

Kansas solution to our problems. 

Welcome to the Committee, doctor. 

STATEMENT OF RICHARD B. WARNER, M.D., MEMBER, KANSAS 

MEDICAL SOCIETY HOUSE OF DELEGATES, AMA ALTERNATE 

DELEGATE, PAST PRESIDENT, KANSAS MEDICAL SOCIETY 

Dr. WARNER. Thank you, Mr. Stark, and Chairman Rangel, 

Ranking Member Camp and Members of the Committee. 

I am Richard B. Warner, M.D., from Overland Park, Kansas, and 

I appreciate the opportunity to talk with you about the reform of 

health insurance and its market. My perspective is that of a psychiatric physician in private practice. I am a recent past President 

of the Kansas Medical Society and a member of the Kansas delegation to the American Medical Association. 

I also serve on the Board of Directors of the Kansas Health Insurance Association, which administers the high-risk pool for the 

State of Kansas. In 2004 the Kansas Medical Society adopted a set 

of principles of health care reform to guide its staff and leadership 

in responding to proposals for health care reform, and these were 

updated in 2008. They form the underpinning of my remarks. 

The first point to understand about health insurance is that 

while it is a resource that helps people to be able to pay for medical 

care, it also aggravates the inflation of prices in the medical market. With third-party payers covering the largest part of medical 

expenses, people are insulated from the financial consequences of 

their health care purchasing decisions. The effect of that is profoundly inflationary, and we have a spiral in which a person needs 

health insurance to be able to afford care, but the insurance contributes to the higher and higher prices that we all see. 

We then see a variety of measures put in place to attempt to restrain prices in spending. 

The first KMS principle calls for a pluralistic, competitive delivery system, with choice of physician, facility and health plans; not 

only in private health plans, but to the extent practical, in publicly 

financed public health care programs as well. It suggests that the 

system should harness the power of choice, individual responsibility and market forces as a superior approach to a governmentcontrolled system. 

Applied to the idea of a public option health insurance plan, it 

would raise a caution because of the risk that a government-designed, marketed, and funded health plan would eventually undermine the markets both for health insurance and health services. 

The likely price controls of such a plan would eventually bring 

about a shortage of services, as is starting to be seen in Medicare. 

A likely cost shifting as is now seen with Medicare and Medicaid 

and SCHIP programs would distort pricing in the private market 

and result in the crowding out of private plans. 

The second of the KMS principles calls for public policies which 

encourage the development of affordable, portable health insurance 

products, including those which emphasize greater consumer financial responsibility for their health care purchasing decisions, such 

as through the use of percentage-based co-insurance and health 


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savings accounts, combined with higher deductible insurance policies. These approaches would have patients participating in both 

the first and the last dollars of their transactions, which would 

offer a natural restraint to both utilization and price inflation. 

While asserting that all Kansans should have health insurance, 

the KMS principles state that mandating universal coverage by law 

is neither desirable nor likely. That would apply to both individual 

and employer mandates. To Federally mandate that individuals 

purchase health insurance would likely make it easier for States or 

the Federal Government to also insist on various mandated benefits, which would drive up the price of the insurance. To mandate 

employer purchase would lock more people into plans with very 

small risk pools and it would defeat the goal of individually owned 

and portable insurance. 

Finally, I would like to say a few words about the importance of 

the patient-physician relationship, which is based on the Hippocratic ideal of placing the patient’s best interest ahead of one’s own 

interest or that of any group. That relationship forms the moral 

bedrock upon which medical care rests; and, it is what allows patients to reveal whatever is necessary to properly diagnose and 

treat whatever may ail them. 

Financial and clinical systems should have as their mission to 

support what the patient and the physician undertake. Competitive 

markets in which no insurance plan, private or governmental, develops monopsony-like control will provide the best support. Allowing patients and physicians to privately contract for care also is a 

step toward them being able to shape care decisions in the best interest of the patient. 

Thank you for the opportunity and I look forward to discussing 

these ideas further. 

[The prepared statement of Dr. Warner follows:] 

Prepared Statement of Richard B. Warner, M.D., 

Member, Kansas Medical Society House of Delegates, 

AMA Alternate Delegate, Past President, Kansas Medical Society 

Chairman Rangel, Ranking Member Camp, and Members of the Committee, I am 

Richard B. Warner, M.D. from Overland Park, Kansas, and I appreciate the opportunity to talk with you about the reform of health insurance and its market. My 

perspective is that of a psychiatric physician in private practice. I am a recent past 

President of the Kansas Medical Society and a member of the Kansas delegation to 

the American Medical Association. I also serve on the Board of Directors of the Kansas Health Insurance Association, which administers the high-risk pool for the State 

of Kansas. 

In 2004 the Kansas Medical Society (KMS) adopted a set of Principles of Health 

Care Reform to guide its staff and leadership in responding to proposals for health 

care reform, and these were updated in 2008. They form the underpinning of my 

remarks today. 

The first point to understand about health insurance is that while it is a resource 

that helps people to be able to pay for medical care, it also aggravates the inflation 

of prices in the medical market. With third-party payers covering the largest part 

of medical expenses, people are insulated from the financial consequences of their 

health care purchasing decisions. The effect of that is profoundly inflationary, and 

we have a spiral in which a person needs health insurance to be able to afford care, 

but the insurance contributes to the higher and higher prices that we all see. We 

then see a variety of measures put in place to attempt to restrain prices and spending. 

The first of the KMS Principles calls for a pluralistic, competitive delivery system 

with choice of physician, facility, and health plans, not only in private health plans, 

but to the extent practical, in publicly financed health care programs as well. It sugVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00267 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

dkrause on GSDDPC29PROD with HEARING
260 

gests that the system should harness the power of choice, individual responsibility, 

and market forces as a superior approach to a government-controlled system. Applied to the idea of a ‘‘public option’’ health insurance plan, it would raise a caution 

because of the risk that a government-designed, marketed, and funded health plan 

would eventually undermine the markets both for health insurance and health services. The likely price controls of such a plan would eventually bring about a shortage of services, as is starting to be seen in Medicare. The likely cost-shifting, as is 

now seen with Medicare, Medicaid, and SCHIP programs, would distort pricing in 

the private market and result in the crowding out of private plans. 

The second of the KMS Principles calls for public policies that encourage the development of affordable, portable health insurance products, including those which 

emphasize greater consumer financial responsibility for their health care purchasing 

decisions, such as through the use of percentage-based co-insurance and Health Savings Accounts combined with higher deductible insurance policies. These approaches 

would have patients participating in both the first and the last dollars of their 

transactions, which would offer a natural restraint to both utilization and price inflation. 

While asserting that all Kansans should have health insurance, the KMS Principles state that mandating universal coverage by law is neither desirable nor likely. 

That would apply to both individual and employer mandates. To federally mandate 

that individuals purchase health insurance would likely make it easier for States 

or the Federal Government to also insist on various mandated benefits, which would 

drive up the price of the insurance. To mandate employer purchase would lock more 

people into plans with very small risk pools, and it would defeat the goal of individually owned and portable insurance. 

Finally, I would like to say a few words about the importance of the patient-physician relationship, which is based on the Hippocratic ideal of placing the patient’s 

best interest ahead of one’s own interest or that of any group. That relationship 

forms the moral bedrock upon which medical care rests, and it is what allows patients to reveal whatever is necessary to properly diagnose and treat whatever may 

ail them. Financial and clinical systems should have as their mission to support 

what the patient and the physician undertake. Competitive markets in which no insurance plan, private or governmental, develops monopsony-like control will provide 

the best support. Allowing patients and physicians to privately contract for care also 

is a step toward their being able to shape care decisions in the best interests of the 

patient. 

Thank you for the opportunity of sharing these brief remarks. I look forward to 

discussing them further with you. 

Sincerely, 

f 

Richard B. Warner, M.D. 

Mr. STARK. Mr. Chairman. 

Chairman RANGEL. I’ll be brief. I just want to thank this panel. 

I want you to know the diversity of the interest in this subject matter and the fact that we are dealing with a discussion draft allows 

us to try to perfect some of the things we have. And as far as the 

Ryan Community Health Center and health centers around this 

country, whatever you do, I wish we could page it. 

But, one of the things is that we recognize that doctors and 

nurses have to spend so much for their education and sometimes 

they can’t do what their hearts and minds want done. They can’t 

afford to practice the medicine; and so we are providing that in a 

larger group to let doctors do what doctors want to do. And, certainly we hope at the end of the day everybody can be on board. 

Chip Kahn, you may remember when we met a couple of years 

ago, we knew it wasn’t going to be easy. We knew it was going to 

be compromise and we still are working on that. And I heard your 

concerns about the public health options. This is what I don’t understand. It appears to me that doctors have people coming in, dish 


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notwithstanding, that just can’t afford the services that you provide. 

It seems to me, even though it may be risky to say that if you 

can’t get it, that’s in that inveterate no-insurance, you’ve got to get 

some money; that some way or other somebody’s got to pay for 

their care. It just doesn’t go away. And so however it is, it would 

seem to me if I was running hospitals, I would say, is it true that 

the Congress is going to give insurance to 50 million people? Is it 

true that half of that number that under insurance will get decent 

policies? 

Is it true that we can dedicate ourselves to health care and not 

check and see how much each and every patient has and how we 

have to spread this to people who are already paying high premiums? How does that opportunity to do what hospitals want to do 

without having been concerned with their budget? What has that 

got to do with the public health option people who would be uninsured that may end up in your hospital and they come in with an 

insurance policy in their hip pocket and say doctor, whatever you 

have to do we’re prepared to pay? 

Mr. KAHN. Let me say two things about that, Mr. Chairman. 

On the one hand—and the bill does include insurance reform for 

the individual, individual market, and for those in some level of 

small group—you are going to create the health insurance exchanges. And you are going to call for in the health insurance exchanges a radical, which we support, change in the regulation of 

insurance. You are going to have guarantee issues. You are going 

to have guarantee renewability. You are going to have very limited 

preex. You are going to have whatever rate bands you have that 

are very narrow, and you are going to be watching those guys like 

a hawk. And it’s going to change how insurance is offered to individuals, particularly. So we think that’s a good thing. 

Chairman RANGEL. Isn’t that good? Isn’t that terrific? 

Mr. KAHN. We think it’s a good thing, and what we want to do 

is see how that works. And from our standpoint, the public option 

we think on top of that would make it sort of too difficult. And let 

me make one other point which is we understand, and we can 

argue about what kind of crowd-out there’s going to be. But at least 

in the individual market there are 15 million people that have coverage today that are individuals; and a lot of those people are going 

to come into the exchange, because they are going to be able to do 

it. 

And, right now, they have coverage, probably have 2,500, 5,000 

deductible; pay a lot for that. They’re going to pay less in the exchange, but also, quite frankly the policies they have now pay hospitals a heck of a lot more than the private insurers are going to 

pay hospitals inside the exchange before you even add Medicare. 

And with all due respect, in the bill, all the public option would pay 

hospitals is Medicare. And, frankly, with the expansion of Medicaid, which we support but which would affect about 50 percent 

of the uninsured, you combine that with a public option that could 

be sizeable that adds more Medicare payment and does crowd-out 

some private business that we now get better payment for, it could 

cause us a problem. 


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So we would rather see the reforms take place in the insurance 

market; and, then, if it doesn’t work, if you need to have this public 

option, you can always do it. Congress can always come in and do 

it in the future, but we think from the get-go it’s something that 

ought to be avoided and that’s why I took the position I did. But 

we want to be supportive and helpful of you as you develop the legislation and figure out a way to make it work. 

Chairman RANGEL. Well, you came in on the ground floor. You 

gave your support and you gave your opposition; and that’s what 

we’re encouraging everyone to do. Give this historic opportunity a 

chance, and I just want to thank you, because you came in early 

on. You are pre-Obama. 

Mr. KAHN. Thank you, Mr. Chairman. 

Mr. CAMP. Well, thank you, Mr. Chairman. 

Mr. Kahn, obviously, if hospitals get Medicare-rate payments 

that’s going to be a problem. And the Lewin Group estimates that 

would be a $36 billion cut to hospitals. Is that in line with what 

you estimate? 

Mr. KAHN. I’ve seen the Lewin numbers and I know there’s a 

debate as to whether those, and I haven’t seen the CBO numbers. 

Mr. CAMP. Look. Look, let’s not talk about numbers. Do you 

think your member hospitals could continue to provide the best 

quality care to their patients if they got paid Medicare rates? 

Mr. KAHN. I believe that if we got paid Medicare rates only that 

would be a big problem for hospitals. I know we can get into a debate about MedPACs. 

Mr. CAMP. But they couldn’t provide the quality of care they are 

providing now. Is that your answer? 

Mr. KAHN. I think if it was only a Medicare payment, but the 

problem is in the model in the bill, there’s a big expansion of Medicaid, which is useful for the indigents who’ll be covered, particularly the individual adults. But when they come to the hospital, we 

are going to get Medicaid rates. So we’re not even talking about 

necessarily the Medicare side. We are expanding the Medicaid load. 

Mr. CAMP. But both of them cause a problem in the ability to 

provide quality care. Let’s talk about care instead of numbers. 

Mr. KAHN. Yes, sir. And that’s why I said we prefer to have a 

system in which at least from the get-go there’s private insurance 

offered through the exchanges. That’s our preference. 

Mr. CAMP. And I thought I heard from your testimony that you 

feel the bill as drafted would undermine employer-provided insurance, because you mentioned about people moving into the public 

plan and the pressures that would put on providers. 

Mr. KAHN. Now, what I said in my testimony regarding employers is. 

Mr. CAMP. It was in answer to a question. It wasn’t in your 

written testimony. 

Mr. KAHN. Yes, at the end, I guess 4 or 5 years from now when 

all the employers could potentially become eligible for the exchange, we are concerned that the public option could grow. Obviously, that would be up to the individuals that were sent into the 

exchange by the employers, but we are concerned about that. Yes, 

I think there could be on the price. 

Mr. CAMP. Okay. Thank you. 


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Dr. Warner, look. Medicare pays physicians less than commercial 

rates; Medicaid even less than that. You know, a government-run 

plan paying Medicare rates would draw people from a private plan 

into the government plan. And what impact would that have on 

doctors? We’ve heard about the impact on hospitals, but what 

would that do on physicians and their ability to practice and give 

patients access? 

Dr. WARNER. I think it would have a deleterious effect, quite 

frankly. We know with Medicare today 97 percent of doctors ‘‘participate with Medicare,’’ but what that really means is that 97 percent of doctors have signed an agreement of participation. It 

doesn’t really tell you how many doctors are welcoming patients 

into their offices. And, I know, certainly anecdotally, I am hearing 

from patients the difficulty they are having getting appointments 

with doctors. Particularly if they haven’t been established with a 

doctor, to be a brand new patient, is getting harder and harder. 

If you spread that over a larger portion of the population, I don’t 

even think it’s a matter of whether you pay Medicare or Medicare 

plus 5 percent. The fact of the matter is you have a price-controlled 

arrangement, and price controls always, ultimately, lead to shortages. It has taken a long time to come to that with Medicare, but 

it has finally arrived, and it would arrive I believe with another 

similarly constructed program. That’s why I suggest at the end of 

my comments the idea of allowing private contracting, which would 

allow a patient to use whatever benefit is available from the insurance. But also, contract with the physician for maybe nothing 

above that or something above it that is worked out by the patient 

and the physician and allows everybody much more freedom, and 

will probably result in many more doctors participating. 

Mr. CAMP. All right. Thank you. 

Mr. STARK. Thank you. 

Dr. Warner, as I read your testimony I would be better off, if I 

had a high deductible plan or a health savings account, I would 

perhaps be more careful how I spent my medical care dollars if I 

did that. Is that your position? 

Dr. WARNER. Yes, and I think you can generalize that from 

across the country. 

Mr. STARK. Let me ask you this, then. In the Overland Park 

area, what does an echocardiogram cost? 

Dr. WARNER. I couldn’t tell you. I’m a psychiatrist. 

Mr. STARK. All right. How about knee surgery? What’s the average cost? 

Dr. WARNER. It’s expensive. 

Mr. STARK. You don’t know. Okay. How about just an E&M, 15- 

minute visit? Do you know what that costs in the Overland Park 

area? 

Dr. WARNER. I couldn’t tell you Congressman. I know my own 

fees. 

Mr. STARK. Doctor, you just made the case. You are the expert 

and you don’t know what this stuff costs. How in the hell would 

I know what it costs as a pedestrian if a physician practicing in the 

community has no concept of what these things cost? How do you 

expect the poor patient to be able to negotiate this without knowing 

the cost? It’s just ridiculous. 


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It’s a wonderful thing to suggest that I should be able to keep 

track of my own costs, but if a doctor doesn’t know, how do you expect a patient who can’t spell most of these things to know? It just 

doesn’t make any sense. What you want to do is just kick these 

guys out and not let them get the services they need. I think that 

is just the most ridiculous thing. The health savings accounts and 

the rest of these things are tax avoidance schemes that do nothing 

to deliver medical care. 

Chip. 

Dr. WARNER. Do I get to answer that, Mr. Stark? 

Mr. STARK. Well, you did answer it. You don’t know what these 

things cost. How do you expect me to know? 

Dr. WARNER. I did not get a chance to answer your comment. 

Mr. STARK. Go ahead. How do you expect me to know if you 

don’t know? 

Dr. WARNER. You will know, if you live in a world in which patients actually are paying the price of medical. 

Mr. STARK. Yeah, if they could get the price. But when the doctor doesn’t know the price, how am I supposed to find it out, on 

the Internet? 

Dr. WARNER. Well, we have certain antitrust rules that prevent 

knowing other doctors’ charges for things. So, if I know it, I know 

it anecdotally. 

Mr. STARK. You made your own case. You don’t know the price 

of medical care and you expect your patients to know it. 

Dr. WARNER. I expect under a condition in which patients are 

actually participating in the price, they would know it. 

Mr. STARK. You don’t actively participate in what you charge 

your patients? Come on! 

Dr. WARNER. When patients call me, I tell them right up front. 

Do you want to know what you’re getting into? I tell them my fee 

and I tell them the arrangements. 

Mr. STARK. Doctor, you made your own case. 

Chip, just one issue. On the historical perspective, people have 

been suggesting that we have a BRAC-type Medicare Payment Advisory Commission that would basically set prices; and, we would 

just have to react yes or no, which would leave us pretty much out 

of the loop in establishing these things. Do you have a concern 

about that? 

Mr. KAHN. Well, I actually was working here on the staff when 

MedPAC was originally formed that’s been discussed as the kind 

of entity that would have this kind of power. And I think MedPAC 

does great work in analysis in providing you advice and guidance, 

but I would be really reticent to sort of hand over to them something as important as setting payment rates. I’d say 60 or 70 percent of their ideas are great. But 30 or 40 percent of their ideas 

aren’t. And they really need to be adjudicated both either in the 

Department through a Secretary going through the regulatory process or, I think, the Congress ought to be on top of this. And I think 

Congress has done a good job. 

And, you know, I know a lot of people say well, gee, Congress can 

never act. But if you look over time, over the last 30 years of Medicare, whether it’s DRGs, RBRVS, the Medicare Advantage program, there are plenty of times when Congress wanted to change 


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things that could come in and do it. So I feel that things ought to 

stick with the regular order in the old fashioned way, and you’re 

obviously going to make a lot of changes in this bill. Obviously, 

there will be new secretarial powers through this bill, but I would 

be very reticent to hand off to some kind of health board or super 

MedPAC your responsibilities, frankly. 

Mr. STARK. Thank you. 

Sam, Mr. Johnson, would you like to inquire? 

Mr. JOHNSON. Thank you, Mr. Stark. 

I’d like to tell you that the specialists know what the costs of 

medicine are, and docs are quite private about their cost estimates. 

And they can tell you in a New York minute what the cost is, if 

you go to the right guy. 

I think that was a bad line of questioning, frankly. 

You know, it’s unfortunate that the Democrat bill contains a provision which would gut doc-owned hospitals, and prevent these facilities from adding hospital beds or additional operating rooms, et 

cetera, and force hundreds of hospitals in this country that are currently under construction to close their doors. 

Dr. Warner, as a physician, have you had any experience with 

physician-owned hospitals, and any thoughts about Federal regulation forcing them to shut their doors? 

Dr. WARNER. Well, I think it’s unfortunate if Federal regulation 

results in the shutting of the doors of such facilities. I think they’ve 

become an integral part of many communities. 

Because of the investment of physicians in the facilities, you 

have extra care, I think, in the development of the standards and 

the programs of the hospitals. I can tell you that in the State of 

Kansas and in Wichita, the Sedgwick County, and Topeka, Shawnee County and the Metropolitan Kansas City area, of Wyandotte 

and Johnson Counties, we have programs in which specialists and 

facilities offer charitable care on referral from safety net clinics, 

and those facilities are operating fully in those programs, in some 

cases more than others, more than the community. 

And so I think they’re certainly shouldering their burden of charitable care as well as providing excellent care and competition. 

Mr. JOHNSON. Thank you. They are in Dallas for sure. 

You know, the White House has published a list of options that 

include more than $100 billion in cuts from hospitals, pushing physicians out of the program. I think the Chairman said that he anticipates $500 billion to come from providers. 

So I’m guessing that the rest will come from new taxes of sorts. 

Soda maybe; cigarettes, you know, are taxed 61 cents to pay for 

children’s health care. 

And we need about 22 million new people to start smoking to pay 

for that expanded program. Makes me wonder how many Cokes 

Americans would have to start drinking to pay for trillions of dollars in health reform. 

Dr. Warner, if Americans are drinking more soda and smoking 

more cigarettes, what’s that going to do to the cost of health care 

in this country? 

Dr. WARNER. Well, I mean, you’re describing a spiral. But let 

me also say it’s a reservation I’ve had. Whether we’ve talked about 

it in the State of Kansas or we talk about it at a Federal level of 


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using particularly cigarette taxes to support insurance payments, 

because we’re looking to reduce the number of smoking at the same 

time that we’re trying to draw revenue from that. 

And what you do is you set up a situation in which you can’t possibly raise the revenues that you intend to use to pay for your program; and therefore you have to start looking for other ways to 

raise that. And some of those, I think, will probably not be too 

pleasant. 

Mr. JOHNSON. Thank you. Mr. Kahn, I think you would agree. 

I’m out of time, so I can’t let you respond. 

Thank you, Mr. Chairman. 

Mr. STARK. Thank you. 

I’m sorry, Mr. Levin, would you like to inquire? 

Mr. LEVIN. Thank you. 

I was going to ask Dr. Warner a question. So let me start with 

you, Chip, welcome. It’s nice to see you again. 

So you basically represent hospitals, right? 

Mr. KAHN. Yes, sir. 

Mr. LEVIN. You know, and I think the spirit with which you 

come is important and is constructive. And I think our questions 

relate to how you implement that spirit. 

And by the way, I’m sorry Dr. Warner had to leave. 

I just want to say that, maybe for the record—I’m sorry he had 

to leave—with third parties covering the largest part of medical expenses, people are insulated from the financial consequences of 

their health care purchasing decisions. And then it goes on to say 

it’s profoundly inflationary. 

I just urge everybody to talk to a family that has had illness in 

the family, of any extensive nature, and ask them what it means 

to say that the prices paid should be a matter of discussion and 

bargaining between the patient and the provider. 

I think for a rather minor procedure, maybe that works. But for 

a chronic illness—even I mean, say knee surgery, we’re going to 

have patients negotiating with providers about the cost of the knee 

surgery? It’s hard enough to explain to patients what knee surgery 

is all about. 

And I’ve met a number of people who have had knee surgery and 

they have trouble explaining the wonders that the physician performed. 

So I find that so unrealistic, and Mr. Stark tried to get at that, 

and I just think it’s worth repeating. 

All right. So you represent hospitals. And you say in terms of the 

public, in terms of an option, ‘‘it does not disagree that an alternative could be beneficial,’’ but then you kind of shy away from a 

public option, and you want some kind of a co-op, which I don’t 

think most of us quite understand. 

And then you talk about the price setting. For the hospitals you 

represent, who sets the payment that’s received? 

Mr. KAHN. Well, in terms of Medicare, it’s set by regulation. 

Medicaid is a State-by-State basis, but it’s basically set—— 

Mr. LEVIN. So the government—— 

Mr. KAHN. And then the private sector payment is negotiated 

in almost all cases. 


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Mr. LEVIN. And so for Medicare and Medicaid, we know it’s government. 

Mr. KAHN. Mm-hmm. 

Mr. LEVIN. And my time’s up. Except to ask you, tell us some 

day when you come to our offices about the negotiations that go on 

between hospitals and insurance carriers and how much true collective bargaining there is between the hospital and the instructed 

carrier as to the fee you receive. 

Mr. KAHN. I actually can say that, I mean, most of my companies probably have, you know, 1,300 or 1,500 contracts per hospital. And I can say that there’s a lot of give and take between the 

Blue Cross plans, between the large carriers, and the PPOs and the 

hospitals. I think if—— 

Mr. LEVIN. That’s—— 

Mr. KAHN. If Bev Wallace was here, who works for one of the 

companies, she could, you know, make your hair stand on end in 

terms of the contentiousness of those deliberations. 

Mr. LEVIN. Okay. We’ll talk about that soon, but my time is up. 

Mr. KAHN. Okay. 

Mr. STARK. Mr. McDermott, would you like to inquire? 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

Dr. Epperly, welcome. University of Washington is well represented here today. 

Dr. EPPERLY. Thank you. 

Mr. MCDERMOTT. You are a perfect example for us to get a response to a question I’ve had. Washington, Alaska, Montana, 

Idaho, and Wyoming are all covered by the University of Washington Medical School. They put students all over 27 percent of the 

United States land mass. 

Those young people go out there and are trained in rural areas; 

but at the end of their training, not very many of them go back out 

to those places in Idaho and Montana and Wyoming. And I think 

it’s largely because of debt. 

So I made a recommendation that we would have a tuition-free 

at State medical schools in exchange for 4 years of service in primary care. 

Now you’ve also had to do with the Uniformed Services, so you 

know you go to medical school, you have a requirement when you 

come out. What percentage of the University of Washington students would sign up for that kind of a tuition-free education and 

guarantee that they would serve 4 years in a designated area 

where they were underserved? 

Dr. EPPERLY. Excellent question, Mr. McDermott. 

I would say to you that hard to know for sure, but more than 

are now. Maybe 20–25 percent. You’re exactly right. I chose the 

United States Army to pay for my medical school. Once I got accepted to the University of Washington, I served for 4 years, then 

it became a 21-year career for me. 

I would have happily served back in my home State of Idaho if 

that had been offered to me as a scholarship. 

So I very much support your thought in terms of if we can look 

at scholarships or loan repayment to try to create a workforce of 

primary care physicians, I think there’s a lot of merit in that, and 

I think you’d have a lot of takers in that. 


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A lot of these kids from those areas are looking for something to 

help them, so that they don’t end up choosing a sub-specialty as a 

default to their financial loans. 

Mr. MCDERMOTT. Let me give you another element to that. 

One of the programs we have is the Health Service Corps. People 

go through medical school, accumulate $200,000 worth of debt, and 

say ‘‘Oh, my God, what can I do about it?’’ And they jump into the 

Health Service Corps. 

I contend that you would be better off to get them up front, 

agreeing that that’s what they were going to do, so that they would 

train to be a general practitioner, or whatever you want to call it, 

primary care servicer, and that it would also change the teaching 

in the medical school. 

Dr. EPPERLY. Mm-hmm. 

Mr. MCDERMOTT. That it would be directed at making them 

prepare to go out. 

You’ve been involved in training programs and everything else, 

and I went to medical school like you did, where you were trained 

by specialists, who trained you in their little area. And I never saw 

any of that stuff when I got out. 

So I’m looking at the ability—of better to have them up front 

make the commitment than at the end, when they’re suddenly facing a huge debt. 

Dr. EPPERLY. Excellent question. Totally agree with you. Scholarships on the front end will align the workforce better than a loan 

repayment on the back end. 

If you can have people desire primary care on the front end and 

make that decision, it will hold them in place to do that. 

On the back end, with loan repayment, they can drift off into all 

sorts of areas. You may not capture the workforce you’re trying to 

create. 

Mr. MCDERMOTT. What number of people stay in primary care, 

once they’re trained? 

Dr. EPPERLY. Once they’re trained, meaning after residency? Or 

after medical school? 

Mr. MCDERMOTT. Yes. After their residency, they go out into 

primary care. How many of them stay? 

Dr. EPPERLY. In Family Medicine, almost all of them, 98–99 

percent. And in Internal Medicine, however, 98 percent will subspecialize. And in Pediatrics, 85 percent will sub-specialize into 

sub-specialty areas. 

That’s why we’re facing such a crisis with primary care. We’re 

not getting them to stay in General Medicine or General Pediatrics. 

Family Medicine, family physicians are staying in that area. 

Mr. MCDERMOTT. And if we did those same scholarships for 

nurses and PA’s? 

Dr. EPPERLY. I think it’s a great idea. 

Mr. MCDERMOTT. Thank you. 

Mr. STARK. Thank you. 

Mr. Thompson, would you like to inquire? 

Mr. THOMPSON. Yes, I would. Thank you, Mr. Chairman. 

I want to just follow up on what Dr. McDermott had to say. It’s 

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resent one of those areas. And in addition to recruiting and retaining them, we have an aging problem. 

So 48 percent of the docs in my district are over 50 years old, 

30 percent are over 60 years old. So it’s a problem that’s not getting better. And we need to be able to figure out how to solve that, 

or all of our efforts on health care reform are going to be for 

nought. 

Dr. Baxter, you’re from New York, and I don’t know if you were 

here earlier, but my questions to all the panels have dealt with it 

in part: Telehealth. And telemedicine is something that’s generally 

talked about in regard to rural health care. 

But there’s a lot of underserved areas in urban parts of the country, as well. And in your area, in your home State, would an expansion of telemedicine be helpful and help provide better care and 

bring the cost down? 

Dr. BAXTER. Absolutely, Congressman. And in fact, the Ryan 

Center has a form of telemedicine, in terms of having x-rays done 

onsite at Ryan, such as ultrasounds, chest x-rays being read immediately, with our referral hospital, St. Luke’s Roosevelt Hospital. 

And well, of course, as you know, New York’s a big State, and 

there are medically underserved areas, not only within New York 

City itself, but elsewhere. 

So I think that this is definitely an area that needs development, 

and as much as it’s practical in a large urban setting, we’re also 

trying to do that. 

In fact, we also for emergency preparedness have a relationship 

with specialty hospitals, say involving burns, so that if there were, 

God forbid, a major accident—— 

Mr. THOMPSON. Excellent point. They use it in my area for 

treatment of prisoners too, so you don’t have to spend a lot of 

money with guards bringing prisoners—— 

Dr. BAXTER. Exactly—— 

Mr. THOMPSON. So a lot of different applications—— 

Dr. BAXTER. So for all sorts of applications, yes. 

Mr. THOMPSON. Thank you. 

Dr. Epperly, you’re from Idaho, and certainly a State that falls 

into the rural category; but a big percentage of your health care is 

performed in metropolitan areas, so, sir, you would agree is underserved? 

Dr. EPPERLY. Yes. 

Mr. THOMPSON. Thank you. 

Dr. EPPERLY. And in fact we’ve used tele—— 

Mr. THOMPSON. Just a yes was good. I’ve got just a little bit 

of time. 

Dr. EPPERLY. Yes. 

Mr. THOMPSON. I apologize. 

Ms. Policastro, I want you to mention, I want to hear from you 

on the idea of dealing with the scope of practice laws. Because I 

don’t think we cracked this nut of fixing the primary care problems, unless we change how we deliver health care. And if we can’t 

somehow figure out how to make sure advanced-degree nurses and 

physicians’ assistants factor into this somehow—and you referenced it in your opening testimony—we’re never going to get 

there. 


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And any comment that you have I would appreciate. 

Ms. POLICASTRO. All right. I agree with you. You know, our 

scope of practice is defined within our own State’s nurse practice 

act. So every State has a different nurse practice act, which is regulated by the board of nursing. For nurse midwives, many nurse 

midwives in some States fall under the board of medicine. 

So there’s inconsistencies within the definitions and regulations 

of scope and practice per State. So we really need to put all those 

scopes back into alignment. 

Scope of practice generally means that I do not practice as a 

nurse practitioner beyond what I’m qualified to do. And that’s 

when I would collaborate with other health care professionals to assist my patient in treating and assessing their problem. 

Mr. THOMPSON. Thank you very much. 

Thank you, Mr. Chairman, for your indulgence. 

Mr. STARK. Mr. Pascrell, would you like to inquire? 

Mr. PASCRELL. Thank you, Mr. Chairman. 

It’s been a long day, Mr. Chairman, for all of us, and you would 

think our health system was in good shape, listening to the opponents of a public health plan. But when you look through all the 

data and statistics, I’m sure most of our panelists are a great 

panel—the person read that famous New Yorker article, chapter 

and verse, specifically the system that costs more, that doesn’t necessarily translate into better care. 

We ought to take—that should be like 101. And that is what has 

led to the work at Mayo Clinic and Cleveland clinics and other 

places throughout the United States. Thinking outside of the box 

I think is very, very, very important. 

I think the system is upside down. What’s up should be down 

and what’s down should be up. And what we want to do is raise 

quality and reduce cost. 

Mr. Kahn, I think there’s some merit in what you suggest, that 

perhaps we’re moving too quickly in trying to do all of this together, rather than maybe concentrating on the savings, the 

changes in procedure that were recommending efficiency in the system of delivery; and then making judgments about what we need 

to pay for and how we’re going to pay for it later on, with this experience. 

And the draft—the legislation doesn’t go into effect, as you know, 

until 2013. 

So I might agree to some degree on those things; but I definitely 

disagree with you on some of the points. I just had a point and a 

question to ask you, if you will. 

You say it is non-negotiable, as you know, that the effort must 

be fully paid for, whatever we do here. We made that commitment, 

the President’s made that commitment. I would hope all of us 

would be on the same page about fully funding for what we do, unlike what happened for the last 8 years, when we paid for nothing. 

Really. 

Mr. KAHN. Mm-hmm. 

Mr. PASCRELL. So we cannot make claims of addressing the impact that health care has on our economy by passing legislation 

that is fiscally irresponsible. I think we are committed to that, all 

of us. 


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Some on the panels have pointed out that any pricetag should be 

considered in the context of the whole economy in overall health 

care spending, since they’re so integrally connected. I think the 

President has done a fantastic job in relating the cost of health 

care to the overall economy. Pretty soon, one-fifth of every dollar 

will be health care. 

I agree with that approach. But unfortunately that means that 

we have to make some very tough decisions to pay for this package, 

whatever it winds up to be. And some folks are going to feel some 

initial pain. 

Several of the panel members have throughout the day understandably voiced concern about payment policies that affect their 

respective industry. And I can understand that. I can appreciate 

that. 

But in the absence of the savings options that you have expressed some concern about—I’m almost finished with the question—I invite you to present to the Committee what specific alternative Medicare savings options that the CBO will score as savings. What are your alternatives to present to us that the CBO 

would score as a savings that we could put into that column? 

Mr. Kahn. 

Mr. KAHN. Let me say first that the hospital community—not 

just the ones I represent—understand that there has to be a great 

deal of delivery reform, and we’re very supportive of that. The delivery reforms in the short run are not going to pay for this bill, 

and we understand the bill has to be paid for. 

And we understand that the Medicare payment is one potential 

area for coming up with some funding for this bill, frankly. And 

with all due respect, I understand that, we’re ready to work with 

the Committee, and obviously we need a fair situation. 

But I’ll just be blunt with you. I can’t sit here and negotiate with 

myself. I think it’s really up to the Committee, as you did in the 

draft, to offer some Medicare policy and then hopefully offer us an 

opportunity to work with you. 

And what I said in my testimony was, what we asked for, one, 

is sort of fairness in terms of how these requests are made; and 

two, that you at least consider that if there are reductions made 

in payment, that those be calibrated over time with the increases 

in coverage, because hopefully as more and more Americans are 

covered, hopefully most of them won’t go to the hospital, but some 

will, and we’re ready to provide services for them. And that will increase revenues to hospitals. 

Mr. PASCRELL. With all due respect—— 

Mr. KAHN. So I’m looking for a balancing in terms of that—— 

Mr. PASCRELL. I understand that. And what you say makes 

sense. But the Chairman has gone out of his way since we started 

this process many weeks ago to make sure nothing is off the table 

when we get to that part of the legislation. We are not—as far as 

I know, nothing’s been taken off the table. 

So I don’t think we should exclude anything or be afraid to include anything at this particular time. And I think he’s made it 

very, very clear. I support that situation, and it’s not written in 

stone. 

Mr. STARK. Thank you. 


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Mr. PASCRELL. Thank you, Mr. Chairman. 

Mr. STARK. You bet. 

Mr. Blumenauer, would you like to inquire? 

Mr. BLUMENAUER. Thank you, Mr. Chairman. 

Ms. Policastro, I appreciate your support and focus, your testimony and the need for a public option. But I wondered if you would 

be willing from the perspective of your experience or that of your 

organization, to elaborate on the potential problems of some of the 

compromises that are being floated about co-ops or public options 

that might be sort of a locally based public insurance plan, as opposed to a national uniform option, as envisioned in this legislation? 

Ms. POLICASTRO. Yes. The American Nurses Association is not 

in favor of co-ops. We are in favor of—for a better phrase—pure 

public option to deliver health care. 

We believe that co-ops equal volume versus quality. We have 

seen historically that some co-ops, because of the way they’re governed, are governed by the community in which they serve and the 

patients which they serve, but there have been barriers in the governance issues between the physicians who deliver the services and 

the patients who are members of those co-ops. 

So historically, I can tell you in Rhode Island, for example, many 

years ago, there was a group called the Rhode Island Health Association that is no longer in the State because it just didn’t work. 

And the American Nurses Association believes purely in the public option. We believe wholeheartedly, we believe that the public 

plan will bring needed competition to the market, and that comparative effective research helps doctors and nurses make decisions 

about treatment in medical homes who encourage primary care. 

So we stand tall that we’re against the co-op model. 

Mr. BLUMENAUER. Thank you. I missed the exchange. I had 

a previous speaking engagement. But I would like to, Mr. Chairman, enter into the record an article about Oregon’s experience 

with it’s last physician-owned hospital calling 911 for assistance before it closed, if you wouldn’t mind. 

Mr. STARK. Without objection. 

Mr. BLUMENAUER. Thank you. 

I would conclude on one last point. One of the areas that we’ve 

been working on, that there is bipartisan support, deals with endof-life treatment. 

It’s appalling that Medicare will pay for all sorts of procedures, 

test tubes, and needles; but we haven’t figured out a way to reimburse a physician to sit down with a patient and the family at the 

most difficult time. 

A physician, it could be a nurse practitioner. But somebody in 

the medical arena to help people understand their choices, what 

they’re facing, give them a sense of working through what the path 

is. We’ve got language, and I appreciate the Chairman and the 

staff working with us to incorporate some of what we’ve got in legislation. 

But I wondered if any of you have some thoughts about that advisability and the long-term consequences of meeting the needs of 

families in this condition? 

Dr. EPPERLY. Yes, sir. I would speak to that. 


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It’s such a valuable and important time in a person’s life. As a 

family doctor, I deliver babies, I take care of people at the end of 

life. And both of those are incredibly important moments. And I 

would say to you the value of primary care in the patient-centered 

medical home is having that relationship with that individual and 

his or her family, so that you can make appropriate choices that 

meet the family’s and the patient’s need where they’re at. 

There can be a lot of dignity and quality in those moments. 

There can be a ton of costs savings in those moments. I think that’s 

all about the relationship with the patient, through that patientcentered medical home, to make those kind of decisions. That’s 

what a return to primary care can do to the health care system. 

That’s why it’s important and it’s foundational. 

Mr. BLUMENAUER. Thank you. 

Mr. STARK. Thank you. 

Mr. BLUMENAUER. I would just—may I ask one question that 

they submit later? 

Mr. STARK. Sure. 

Mr. BLUMENAUER. I won’t ask for an answer, Mr. Chairman, 

now, but we have been working on legislation for a transitional 

benefit. There’s a lot of talk about readmissions and there may be 

penalties here or something there. 

We think one of the ways to do that would be to provide a transitional benefit to be able to work with the patient. We would ask 

you to look at—there’s a little bit in the language of the bill I think 

that needs to be strengthened. And any of you that have some reflections on that would be deeply appreciated in the days ahead, so 

that we’re doing the right thing there. 

Thank you very much for your patience. 

Mr. STARK. Mr. Meek, would you like to inquire? 

Mr. MEEK. Yes, sir. Thank you, Mr. Chairman. 

Mr. STARK. Thank you. 

Mr. MEEK. I’d like to thank the panel for your testimony today. 

And you know, being from a State like Florida, we have just under 

19 million people, some 4 million of those individuals are uninsured. 

We also have a population, 18 percent of Medicare beneficiaries 

that are duly ineligible, that would usually be ineligible for Medicaid or Medicare. 

And we know that there will be some folks falling through the 

cracks, even with the proposal that we have on the table now. I 

know that a lot of folks have been—and I’ve been listening to your 

testimony and also I’ve read some of your testimony—very concerned about what we’re doing in light of reform. 

In a State like Florida that—talking about the 4 million citizens 

that are uninsured, and that’s 9 percent of the Nation’s uninsured 

population—I want to try to address especially States like mine 

that have a number of undocumented individuals that are there, 

that are running up costs as relates to our emergency rooms and 

other critical care facilities, not only around in our State, but 

throughout the country. How do you think we can best address 

these issues of the uninsured and the ineligible? How do we bring 

them under this tent that we’re trying to put them under? 

Mr. KAHN. Mr. Meek, I’d like to say two things. 


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One, I think that the tri-committee draft does preserve the disproportionate share payments under Medicare and Medicaid with 

a study to see what the interaction will be between that and reform. And clearly the undocumented aliens are going to fall 

through the cracks here. I assume they’re not going to be involved 

in whatever reform is done. 

So that’s particularly important for hospitals, because generally 

they end up at the hospital if they need health care, and most of 

that payment goes to hospitals. So that’s critically important. 

Second, I think matched with the individual responsibility mandate that you have in the bill, and the subsidies and the expansions in Medicaid, it is really critical for hospitals that there be 

automatic enrollment, that when someone comes into the emergency room or enters into the hospital, and in the new world, once 

the reform goes into effect, and is not covered, that we have the 

ability to very seamlessly sign them up and get them covered there, 

so that one, if they have to pay something, they may have to meet 

their responsibilities for the coverage; but at least then they’ve got 

the coverage and they can carry that coverage forward, and we can 

provide the services in a way that always goes better when people 

have coverage. 

Mr. MEEK. Would it be fair to say even when you—and just real 

quickly to your question, and I appreciate it—would it be fair to 

say in some of these areas where we have the small and large 

counties, especially agricultural counties—in the State of Florida 

we have a tourism industry—we will have some individuals that 

will walk into the emergency room for care, that are going to be 

in the middle of—maybe be the wrench within the machinery—— 

Mr. KAHN. Right—— 

Mr. MEEK. To allow us to have this smooth transition that we 

would like to deal with. I didn’t know if there were any add-ons 

or concerns. I know we want to study it. But I think there’s a lot 

of documentation out there as it relates to that population, cost 

that hospitals cannot do anything there—— 

Mr. KAHN. I—— 

Mr. MEEK. Yes, sir—— 

Mr. KAHN. I think if you reduce the uncompensated care, which 

you will through all the new people that are covered—— 

Mr. MEEK. Mm-hmm—— 

Mr. KAHN. And you maintain the level of the disproportionate 

share payments, or maintain them at a high level, I think you’ll 

solve that problem. I think then there will be a buffer for the hospitals, for these people that fall through the cracks, and at the 

same time, there will be many more people in the hospital now who 

are insured, either through Medicaid because of new eligibility 

rules, or hopefully most of them through coverage through the bill. 

Mr. MEEK. I’m sorry, can Dr. Baxter, just very quickly, Mr. 

Chairman? 

Mr. STARK. Go ahead. 

Mr. MEEK. I’m sorry—— 

Mr. STARK. Dr. Baxter. 

Dr. BAXTER. Yes. I think the goal, of course, is to keep undocumented immigrants from having to come to the hospital for very 

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tive care had been provided. And that’s one area where community 

health centers, I think excel. 

We, of course, do not at the Ryan Center ask for any proof of citizenship. But it would be disingenuous of me to say that I really 

don’t know whether or not we have undocumented immigrants. 

And I think part of the goal is to have a friendly, welcoming, safe 

place that mothers can bring their children in for vaccinations, people can come in for treatment of their diabetes. 

And so again, I think of course the role of my colleagues in the 

hospital system is important. But I’m sure that the Committee 

agrees that let’s try to head them off at the pass, so to speak, before they really require hospital care. 

Mr. MEEK. Okay. Thank you. I’m over my time. I’m sorry. 

Thank you, Mr. Chairman. 

Mr. STARK. Thank you. And I would like to again thank the 

panel for their patience, their indulgence, and their guidance. We’ll 

be talking to you, I’m sure, as we proceed the next week or two. 

And the Committee is adjourned. 

[Whereupon at 7:08 p.m. the hearing was adjourned.] 

[Submissions for the Record follow:] 

Statement of Nancy G. Brinker 

Testimony Highlights 

• The Susan G. Komen for the Cure Advocacy Alliance appreciates the Committee’s focus on prevention, early detection and chronic disease management, as 

well as the goal of access to affordable, high-quality health coverage for all, including those with preexisting conditions. 

• There are two key access issues we recommend adding to the draft legislation: 

extending access to patient navigation services to help guide patients through 

the complex health care system, and ensuring access to clinical trials. 

• As the House of Representatives finalizes legislation to reform the Nation’s 

health care system, Members are asked to consider the unique needs of persons 

who are fighting or who have faced a disease like cancer, because they encounter the most challenging obstacles in the current U.S. health care system. 

Introduction 

Mr. Chairman, Ranking Member and Members of the Committee, the Susan G. 

Komen for the Cure® Advocacy Alliance appreciates your attention to prevention, 

early detection and chronic disease management in the health care reform draft proposal released earlier this month. We support your goal of ensuring access to affordable, high-quality health care for all Americans, including people who are currently 

deemed uninsurable because they have a preexisting condition like cancer. 

Komen Advocacy Alliance’s Principles for Health Reform 

The Komen Advocacy Alliance is the nonpartisan voice for more than 2.5 million 

breast cancer survivors and the people who love them. Our mission is to translate 

the Komen promise to end breast cancer forever into action at all levels of government to discover and deliver the cures. Cancer patients and survivors have some 

of the most challenging experiences with the health care system at a time in their 

lives when they are most vulnerable. Thus, the Susan G. Komen for the Cure® Advocacy Alliance believes that health reform must: 

• Increase investment in Federal and State programs for underserved patients. 

• Protect cancer patients from excessive out-of-pocket costs. 

• Ensure access to affordable, high-quality insurance for all, including those with 

preexisting conditions. 

• Enhance quality and value by focusing on prevention, wellness, and chronic disease management. 

• Address the shortage of cancer care specialists. 


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Additional Issues to be Considered 

The health care reform draft proposal addresses many of these priorities. However, there are two additional issues that should be included in the bill: Extending 

access to patient navigation services to help guide patients through the complex 

health care system, and ensuring access to clinical trials. 

Patient Navigation Services: We recommend that the Committee reauthorize and 

fully fund the Patient Navigator Outreach and Chronic Disease Prevention Act of 

2005 (P.L. 109–18) for 5 years, FY2011 through FY2015. Current authorization expires at the end of FY2010. Komen recommends enhancement of the original Act 

by adding minimum core proficiency standards for patient navigators. 

• Navigating the complex health care system can be an insurmountable task for 

patients facing a complicated or chronic disease, especially if they are underserved, have a lower level of medical literacy, or do not speak or read English 

well. Patient navigators are trained to serve as personal guides and help people 

overcome obstacles to receiving timely cancer treatment and care. This includes 

obtaining financial resources, tracking appointments and coordinating transportation. 

• Patient navigation is a proven concept that is cost-effective, promotes prevention, saves lives, and addresses health disparities. 

• Minimum core proficiency standards are vital because effective patient navigators should be culturally competent, good communicators, compassionate, and 

experts at navigating the health care system. 

• The program should be fully funded; between FY2006 and the current FY2009, 

the Patient Navigator Act received only about $2.4 million (in FY2008) of the 

$25 million that was originally authorized. 

• There is significant support for the Patient Navigator program in the cancer 

community, and it is widely applicable to other chronic diseases. 

Access to Clinical Trials: Part of ensuring access to cancer care includes access 

to clinical trials. Barriers to clinical trials must be removed for all patients—including cancer patients—without regard to the type of health insurance plan or health 

status. This can be accomplished by (1) a codification in law of Medicare’s current 

reimbursement policy for routine expenses for patients in approved clinical trials, 

and (2) making needed changes to ERISA, the Public Health Service Act and the 

Internal Revenue Code to accomplish the same policy for private insurance plans. 

• Each year, thousands of people gain access to the highest-quality cancer care 

and receive new treatments before they are widely available by participating in 

a clinical trial. Millions more benefit from the findings. Yet, while more than 

1.4 million Americans are diagnosed with cancer each year, fewer than 5 percent will participate in an approved clinical trial. 

• Some health insurance companies do not cover routine medical care expenses 

for patients enrolled in approved clinical trials, or refuse to cover complications 

that sometimes occur during the course of an approved clinical trial. Failure to 

cover these items may mean otherwise eligible people are turned away, or are 

exposed to high out-of-pocket costs when they encounter complications. 

• These issues could be addressed by including language from the ‘‘Access to Cancer Clinical Trials Act’’ (S. 488) by Senator Sherrod Brown (D–OH). 

Attached to this testimony are more detailed comments on the health reform draft 

proposal, including the importance of patient navigation and clinical trials, as well 

as the need for a continued focus on prevention, wellness, chronic disease management and access to care for underserved populations. 

Susan G. Komen for the Cure Advocacy Alliance 

Comments on the Health Reform Draft Proposal 

Committee on Ways and Means, U.S. House of Representatives 

As your Committee continues deliberations on reforms to the Nation’s health care 

system, we urge you to consider the unique needs and challenges of people with preexisting conditions like cancer. Cancer patients and survivors have some of the most 

challenging experiences with the health care system at a time in their lives when 

they are most vulnerable. Thus, the Susan G. Komen for the Cure® Advocacy Alliance calls on your Committee to: 

• Increase the investment in Federal and State programs that provide cancer 

screening, treatment and patient navigation services for underserved populations. 

• Protect cancer patients who have health insurance from excessive out-of-pocket 

costs that may lead to severe financial hardship and even bankruptcy. 


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1 U.S. Census Bureau, ‘‘Income, Poverty, and Health Insurance Coverage in the United States: 

2007,’’ August 2008. Available online: http://www.census.gov/prod/2008pubs/p60-235.pdf. 2Todd Gilmer and Richard Kronick, ‘‘Hard Times And Health Insurance: How Many Americans Will Be Uninsured by 2010?,’’ Health Affairs, Web Exclusive, w573–577, May 28, 2009. 3 Elizabeth Ward, et al., ‘‘Association of Insurance with Cancer Care Utilization and Outcomes,’’ CA: A Cancer Journal for Clinicians, Vol. 58, No. 1, January/February 2008, p. 9–31. 4 American Cancer Society, ‘‘Cancer Facts & Figures 2009.’’ 

5See the Center for Disease Control’s website for the National Breast and Cervical Cancer 

Early Detection Program. Available online at: http://www.cdc.gov/cancer/NBCCEDP/. 6Tally of States based on M&R Strategic Services, ‘‘Treatment Act Survey: Final Report,’’ February 16, 2007, updated based on the experience of Susan G. Komen for the Cure Advocacy Alliance. The Treatment Act is the subject of a forthcoming report by the Government Accountability Office, which Komen helped initiate. 

• Ensure access to affordable, high-quality health insurance for all, including people with ‘‘preexisting’’ conditions like cancer—so everyone can continue to have 

health insurance, even if they lose or change jobs. • Enhance the quality and value of health care by focusing on prevention, 

wellness and chronic disease management. • Address the chronic shortage of cancer care specialists, particularly in underserved areas. 

1. Increase the investment in Federal and State programs that provide 

cancer screening, treatment and patient navigation services for underserved populations. 

PROBLEM: Almost 46 million Americans lack health insurance.1 Without reforms, the number is projected to climb another 7 million or more by 2010, due in 

part to rising health costs and high unemployment.2 Lack of adequate health insurance has a decidedly negative effect on cancer screening rates, as well as the stage 

at diagnosis and a person’s chances of survival: 3

• Patients with private insurance are more likely to be diagnosed at earlier 

stages, and are more likely to survive at all stages of diagnosis than the uninsured. • Cancer patients who are uninsured—and those who were Medicaid-insured at 

time of diagnosis—are 60 percent more likely to die in 5 years than those with 

private insurance. • In addition, disparities in cancer incidence and mortality rates must be addressed. For example, those with lower socio-economic status and people in underserved areas are more likely to be diagnosed and are more likely to die from 

cancer.4

As the ranks of the uninsured swell, demand grows for public health programs, 

including programs that provide cancer screening and cancer care services. Unfortunately, Federal and State safety net programs are dramatically underfunded, leaving huge gaps for the neediest Americans. For example: 

• The National Breast and Cervical Cancer Early Detection Program (NBCCEDP) 

provides potentially life-saving cancer outreach, case management, and screening to low-income, uninsured and underinsured women. Yet, the program is so 

underfunded it is only able to reach less than one in five eligible women.5 The 

program is increasingly forced to turn women away or establish waiting lists 

for these vital services. • All States allow underserved women to access Medicaid for breast or cervical 

cancer treatment if they are uninsured, need treatment for breast and cervical 

cancer, and meet other eligibility criteria. However, 20 States only allow this 

access to Medicaid if the woman’s screening is funded by the State or tribal 

screening program—a large concern given the dramatic underfunding of those 

programs.6

• Navigating the complex health care system can be an insurmountable task for 

many patients facing a complicated or chronic disease, especially when they are 

underserved, have a lower level of medical literacy, or do not speak or read 

English well. To address this, Congress passed the Patient Navigation Act, a 

pilot grant program to provide patient navigation services to those in need. Unfortunately, the Patient Navigation Act has received only a small portion of the 

$25 million that was originally authorized. 

SOLUTIONS: As Congress overhauls the health care system, it must close the 

gaps plaguing Federal and State safety net programs that provide vital cancer 

screening, treatment and patient navigation services for our Nation’s underserved 

populations. 


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7 John Gabel, et al., ‘‘Trends In Underinsurance And The Affordability of Employer Coverage, 

2004–2007, Health Affairs Web Exclusive, w595, June 2, 2009. 8 Himmelstein, et al., ‘‘Illness and Injury as Contributors to Bankruptcy,’’ Health Affairs Web 

Exclusive, w563, Febrary 2, 2005. 9Lake Research Partners and American Viewport conducted the survey, which was sponsored 

by the American Cancer Society Cancer Action Network, May 1 through 11, 2009, among a national sample of 1,057 adults age 18 and older, in households with cancer or a history of cancer. 

Available online: http://www.acscan.org/pdf/healthcare/reports/poll-05202009.pdf. 10Karen Schwartz, et al., ‘‘Spending to Survive: Cancer Patients Confront Holes in the Health 

Insurance System,’’ Kaiser Family Foundation and the American Cancer Society, February 2009. 

Also see the Lake Research Partners and American Viewport survey. 11 American Cancer Society. 

2. Protect cancer patients who have health insurance from excessive outof-pocket costs that may lead to severe financial hardship and even 

bankruptcy. 

PROBLEM: Having health insurance does not necessarily protect a person from 

financial harm in the event of a health event like a cancer diagnosis: 

• A recent survey of employer-sponsored health insurance plans shows employees’ 

out-of-pocket spending grew more than a third between 2004 and 2007, while 

wages remained stagnant.7

• The exposure to high costs can be disastrous. A recent study by Harvard University found that half of all bankruptcy filings were partly the result of medical expenses, and 68 percent of those who filed for bankruptcy had health insurance.8

• A national survey commissioned by the American Cancer Society Cancer Action 

Network shows one in five cancer patients has significantly or completely depleted their savings because of medical costs—one in seven has incurred thousands of dollars in medical debt.9

Many health insurance policies have annual and lifetime caps on benefits or other 

limitations and exclusions. Patients may be exposed to large out-of-pocket expenditures because cancer treatments can be very expensive—some therapies run hundreds of thousands of dollars a year and may require extensive and long-term monitoring and followup. 

SOLUTIONS: Congress should protect patients from high out-of-pocket costs by 

reducing or eliminating annual or lifetime limits on the benefits, and possibly by 

establishing an annual maximum limit on out-of-pocket medical expenditures. 

3. Ensure access to affordable, high-quality health insurance for all, including people with ‘‘preexisting’’ conditions like cancer—so everyone 

can continue to have health insurance, even if they lose or change jobs. 

PROBLEMS: For the 161 million Americans with employer-provided health insurance, a change in employment also likely means a new health insurance company 

with different benefits and network providers. But persons with preexisting conditions like cancer may run into challenges: 10

• Cancer patients and survivors with employer-provided health insurance may 

lose jobs, change jobs, or have to cut back hours or leave a job during treatment—and lose their group health insurance. 

• As a result, cancer patients or survivors may experience ‘‘job lock,’’ in which 

they cannot leave their current job for fear of losing their health insurance. This 

runs counter to the trend of today’s mobile workforce, in which people frequently move from job to job in pursuit of new opportunities. 

• Even cancer survivors who have been in remission for years with a good longterm prognosis have trouble finding coverage in the individual market because 

of medical underwriting and the existence of their preexisting condition. 

Clinical Trials: Part of ensuring access to cancer care includes access to clinical 

trials. 

• Each year, thousands of people gain access to the highest-quality cancer care 

and receive new treatments before they are widely available by participating in 

a clinical trial. Millions more benefit from the findings. Yet, while more than 

1.4 million Americans are diagnosed with cancer each year, fewer than 5 percent will participate in an approved clinical trial.11

• Some health insurance companies do not cover routine medical care expenses 

for patients enrolled in approved clinical trials—or refuse to cover extra scans, 

doctor visits and drugs to address complications that occur during the course 

of an approved clinical trial. 


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12 American Cancer Society. 13 American Cancer Society, Breast Cancer Facts & Figures 2007–2008, Atlanta: American 

Cancer Society, Inc. (Available online at http://www. cancer.org/downloads/STT/BCFF-Final.pdf). 14Sheila Rustgi, et al., ‘‘Women at Risk: Why Many Women are Forgoing Needed Health 

Care,’’ The Commonwealth Fund, Issue Brief, May 2009. (Available online: http:// 

www.commonwealthfund.org/content/publications/issue-briefs/2009/may/women-at-risk.aspx.) 15 Amal N. Trivedi, et al., ‘‘Effect of Cost Sharing on Screening Mammography in Medicare 

Health Plans,’’ The New England Journal of Medicine, Vol. 358, January 24, 2008, pp. 375–383. 

(Available online: http://content.nejm.org/cgi/content/full/358/4/375). The study examined 174 

Medicare managed-care plans from 2001 through 2004, which included 550,082 individual-level 

observations for 366,475 women between the ages of 65 and 69 years. 

SOLUTIONS: Congress should require health insurance companies to provide coverage to all, with no preexisting condition limitations. In addition, barriers to clinical trials must be removed for all patients—including cancer patients—without regard to the type of health insurance plan. This can be accomplished by (1) a codification in law of Medicare’s current reimbursement policy for routine expenses for patients in approved clinical trials, and (2) making needed changes to ERISA, the Public Health Service Act and the Internal Revenue Code to accomplish the same policy 

for private insurance plans. The issues related to clinical trials could be addressed 

by including language from the ‘‘Access to Cancer Clinical Trials Act’’ (S. 488) by 

Senator Sherrod Brown (D–OH). 

4. Enhance the quality and value of health care by focusing on prevention, 

wellness and chronic disease management. 

PROBLEM: The U.S. health care system often focuses too much attention on 

treating people once they become sick, and not enough attention on keeping people 

healthy or detecting chronic diseases like cancer early, when there are more treatment options and the chances of survival are often greater. 

Prevention, Early Detection & Wellness: Prevention saves lives. Applying proven 

tobacco control strategies could eliminate a third of all cancer deaths.12 Cancers related to obesity, physical inactivity and poor nutrition could also be prevented. And 

many of the more than 1 million skin cancers that are expected to be diagnosed in 

2009 could be prevented by protection from the sun’s rays and avoiding indoor tanning. 

For other cancers, early detection is the key to survival. Regular screenings can 

detect cancers of the cervix, colon and rectum by detecting precancerous growths 

that can be removed, and can detect breast, colon, rectum, cervix, prostate, oral and 

skin cancers at early stages when they are most treatable. 

• For breast cancer, the 5-year relative survival rate is 98 percent when breast 

cancer is detected at an early stage, 84 percent for regional disease and 27 percent for distant-stage disease.13

• Yet, for women who are uninsured and underinsured, cost is a significant barrier to getting preventative care—only 67 percent of underinsured women over 

the age of 50 received a mammogram in the past 2 years, compared with 85 

percent of adequately insured women.14

• For women with health insurance or Medicare, even a relatively small copayment can significantly reduce mammography rates, particularly for underserved 

populations.15

Clinical Effectiveness: Komen supports the use of clinical effectiveness research 

(CER), which will arm patients and their doctors with the best available information 

on effectiveness and safety of drugs, devices and diagnostic tests. To that end, a 

comprehensive national comparative effectiveness research program should better 

identify the most effective health care options, and ensure information gained 

through CER is incorporated into clinical practice to better inform decisions made 

among patients, their health care providers and payers. A CER program should also 

link data from public and private entities to build upon existing data collection and 

research capabilities and support the development of ‘‘personalized’’ or stratified 

medicine. 

Coordination of Care and Survivorship Care Planning: A key aspect of chronic 

disease management is the coordination of care. To that end, cancer patients should 

have a coordinated plan for treatment and followup from the time they are diagnosed through the years of their survivorship. With a written cancer plan and the 

opportunity to review it in person with their doctor, cancer patients will better understand the process ahead, monitor their health, and participate in decisions about 

their care. And a written plan will help coordinate care among a patient’s many doctors and providers, reduce medical errors, and ultimately improve patient care. 


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16 Congress could consider building on the NCI’s Community Cancer Centers Program, which 

is a pilot program to provide private medical surgical and radiation oncologists with close links 

to NCI research and the network of 63 NCI-designated Cancer Centers principally based at 

large universities. http://ncccp.cancer.gov/. 

SOLUTIONS: Congress should reduce or eliminate copayments or deductibles for 

preventative services like diagnostic imaging and screening, and should provide incentives for providers to focus on prevention, wellness and chronic disease management. 

5. Address the chronic shortage of cancer care specialists, particularly in 

underserved areas. 

PROBLEM: There is a shortage of cancer care specialists, particularly in underserved areas. This shortage will only intensify as the population ages, which will 

bring along with it a significant increase in the number of cancer cases each year. 

Congress clearly recognizes this is an issue. The economic stimulus package passed 

earlier this year included billions for community health centers, training for the 

health care workforce and an investment in health information technology. 

The promotion of a robust health information technology network could also help 

alleviate the shortage of cancer care experts, particularly in rural areas. Electronic 

medical records will ultimately improve health care quality for cancer patients by 

improving coordination of care. And it also allows for second opinions and reviews 

of patient records from anywhere in the world. 

SOLUTIONS: Congress should include provisions to strengthen the health care 

workforce by forgiving student loans, providing grants to increase faculty in nursing 

programs, providing financial incentives to encourage health care professionals to 

practice in underserved areas, and investing in health information technology. Congress should also encourage partnerships between community hospitals and large 

cancer centers.16

f 

Statement of Albert B. (Al) Baca 

The intent of this paper is to explain why our Nation needs a ‘‘Single Payer’’ system to pay for medical care. It is my hope that Sen. Brown will see fit to discuss 

the points documented in this paper with people whom he talks with. 

I would also deeply appreciate it if Sen. Brown’s staffers in Washington can speak 

to the Senate Finance Committee staffers about the contents of this paper. Since 

the Obama Administration desires to push health care reform in this Congress, such 

a discussion with Senate Finance Committee staffers would be timely and pertinent. 

This medical horror story is about my 44-year-old daughter, Vivian A. (Vandy) 

Baca, who is almost completely disabled, cannot walk nor stand, draws SSDI, has 

Medicare and lives at home under the auspices of the State of Ohio Medicaid Home 

Health Care Waiver Program. 

Let me tell you about myself. I am a retired civilian employee of the Air Force. 

The past 4 years have been very hard on me because of the way that medical care 

is done in this country. To quote from two radio programs I used to listen to when 

I was a young kid: ‘‘Taint funny McGee’’ and ‘‘What a revolting development this 

is.’’ 

For people outside of the Dayton, OH area who may not know, in 2005, there was 

a gigantic squabble between Anthem Blue Cross and Blue Shield (BC/BS) and Premier Health Partners—i.e. Miami Valley Hospital, Good Samaritan Hospital, and 

the doctor groups directly associated with each hospital—concerning Anthem BC/BS 

payment of fees to Premier Health Partners for services rendered. 

The bickering lasted for all except 1 week of 2005. During that time many people 

in the Dayton, OH area suffered. One of those who suffered was my daughter, 

Vandy. The unfortunate thing is that Vandy is still suffering and she will continue 

to suffer for a long, long time. She may never quit suffering and return to normal. 

There is no doubt in my mind that the year-long squabble between Anthem BC/ 

BS and Premier Health Partners was the direct cause of the medical horror story 

I am going to tell you. The story is not for the squeamish. 

Before I begin my story, I would like to state that because my wife and I are senior citizens, we both have Medicare as our primary medical coverage. I am a retired 

Federal employee and have BC/BS as my FEHBP insurance which is secondary to 

Medicare. Therefore, the Premier Health Partner and Anthem BC/BS squabble did 

not impact us because our FEHBP BC/BS was secondary. My wife and I were lucky. 

Vandy wasn’t. 


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For those people who are not from the Dayton, OH area, I found something on 

the Internet that summarizes the Premier Health Partners and Anthem BC/BS 

squabble for you in a very few words: 

Source: Redorbit.com 

Posted: Wednesday, 4 January 2006 

Title: Premier, Anthem Fight Hurt: 

• Premier Health Partners and Anthem Blue Cross and Blue Shield had 

to settle at some point. They need each other too much. • Three days before Christmas, the area’s largest hospital group and the 

popular insurer decided that it was time, that a year was long enough 

to shoot at each other and even at their own feet. 

Apparently, each side insisted on shooting itself in the foot for a solid year to 

prove a point. Was that ridiculous? Yes. Would that have happened under ‘‘Single 

Payer’’? No. 

Back to the story. In April 2005, Vandy had pneumonia and anemia which required her to be hospitalized. Because of the Premier Health Partners and Anthem 

BC/BS squabble, Vandy had to go to a hospital other than Good Samaritan Hospital 

which is close to her doctor’s office and which has always been her hospital of 

choice. While a patient in the other hospital, Vandy contracted a staphylococcal infection (MRSA) which developed into encephalopathy or inflammation of the brain. 

Vandy spent several weeks in intensive care at the other hospital before being 

transferred to a nursing home where she was a resident for almost 2 years. 

When Vandy arrived at the nursing home, she was in such terrible shape that 

the other residents and the staff thought she would never survive. But Vandy is a 

fighter and she did survive. She made progress, too. I would go to the nursing home 

every day to play memory games such as ‘‘name the capitals of the States’’ with her. 

Luckily, her mental faculties did come all the way back. However, she didn’t get to 

walk out of the nursing home as she desperately wanted to do. In fact, she still can 

not walk. Nor can she stand. 

If Vandy would not have had to go to the other hospital because of the squabble 

between Anthem BC/BS and Premier Health Partners, she would not have caught 

the particular MRSA infection which disabled her. However, I will concede that 

Vandy might also have caught a staph infection at Good Sam. After all, a hospital 

is not the best place to be when you are sick. 

Wait. There is much, much more to this horror story and why I am so thoroughly 

disgusted with the way that we, the American people, have let the big insurance 

companies dictate medical care to us. And as you will see in a few moments, I am 

equally as disgusted with the way that the U.S. Government, especially the Social 

Security Administration, has let them. 

I have fought bureaucratic battle after bureaucratic battle with the Social Security Administration on behalf of my daughter. Because of that I have become somewhat of an expert on Social Security and Medicare. If I had the energy that I had 

25 or 30 years ago, I would offer free advice to people on how to fight Social Security. 

I will now delve into the silliness regarding what Vandy has to pay for her prescription medications. I will begin by telling you that Vandy is dual eligible for the 

Medicare and Medicaid low-income subsidies. Please remember her dual eligibilities 

as you read the rest of the story. 

Vandy’s husband, Stanley Styles, has worked at Wright State University as a 

floor custodian for many years. Stan has carried a BC/BS ‘‘FAMILY’’ plan as his 

group health insurance during all that time. (Please note that the word ‘‘FAMILY’’ 

is emphasized.) He also carries the WSU group dental plan and the WSU group vision plan. 

In November 2008, Vandy was notified by the Social Security Administration that 

Stan’s BC/BS group health plan’s copays rather than her Medicare Part D carrier’s 

copays would have to apply when she ordered her prescription medications. The law 

is explicit that because her husband’s employer, Wright State University, has more 

than 100 employees, the WSU BC/BS group health plan copays have to apply rather 

than the Medicare Part D copays. 

My question to that is why can’t the law be changed? The answer to that is that 

would be too easy and would make too much sense. Further, why does the law have 

to assume that larger employers have better health plans for their employees than 

smaller employers? That is not always the case; which is sad but true. 

While Vandy was in the nursing home, I was able to get her qualified for Social 

Security Disability Insurance (SSDI). She was still living in the nursing home when 

she began receiving her SSDI payments and became entitled to Medicare. As required by law, the nursing home kept most of Vandy’s SSDI payment to apply 


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against her nursing home expenses. The remaining nursing home expenses were 

paid by the State of Ohio Medicaid Program. In other words, either Medicare or 

Medicaid paid for all of Vandy’s nursing home expenses, including all of her medications. She certainly didn’t have to pay any BC/BS copays for prescriptions. 

Back to the story: As stated, in early November 2008, Vandy was notified that 

the BC/BS copays rather than the Medicare Part D copays would have to apply to 

her prescription medications. The BC/BS copays are $8.00 for generic drugs, $25.00 

for brand-name drugs on formulary and $40.00 for brand-name drugs not on formulary. Since Vandy is required to take about 30 prescriptions a month, her BC/ 

BS copays would have been hefty at the generic rate and out of sight at the brandname rate. 

A pharmacy technician managed to accomplish a ‘‘workaround’’ whereby Vandy’s 

Medicare Part D carrier covered her prescriptions through the months of November 

and December 2008. I am grateful to the pharmacy technician for doing that. 

During November and December, I called people all over the country about 

Vandy’s prescription dilemma. The people I called were at 1–800–Medicare, the SSA 

national 800 number, the local Social Security office, the SSA Coordination of Benefits office, three SSA Advanced Resolution specialists, several SSA CMS specialists 

in Chicago, the Ohio Job and Family Services Medicaid Hotline, the Ohio Senior 

Health Insurance Information Program office, (SHIIP Ohio) and Congressman 

Boehner’s office. 

Most everybody that I spoke with advised me that the easiest solution to Vandy’s 

dilemma would be to have her dropped from Stan’s BC/BS coverage at work and 

to let Medicare and Medicaid cover all of her medical expenses. However, I was hesitant to recommend that to her because, if Stan dropped her from his BC/BS group 

‘‘FAMILY’’ health plan at work, Vandy would also drop automatically from the WSU 

group dental and group vision plans. 

SHIIP Ohio advised me to inquire: ‘‘Since Vandy is bedridden and dual eligible 

to receive the Medicare and Medicaid low-income subsidies, how come her dual eligibility for low-income subsidies doesn’t trump the higher BC/BS copays?’’ I got absolutely nowhere with that one. 

The WSU Benefits Unit told me that my daughter could be dropped from her husband’s group health policy at any time. SHIIP Ohio told me the same thing. 

Because my daughter’s family is strapped financially, there is absolutely no way 

that they could afford the more expensive BC/BS copays for her prescriptions. So 

Vandy and Stan decided it would be best to drop Vandy from the WSU BC/BS group 

‘‘FAMILY’’ medical plan which also automatically dropped her from the WSU group 

vision and dental plans. This was done only to avoid paying the much higher BC/ 

BS copays for her prescription medications. PLEASE, note that Vandy and Stan felt 

that they did not have any other alternative because they simply could not afford 

to pay the higher BC/BS copays. 

Vandy dropped from her husband’s BC/BS coverage at work effective 1 January 

2009. On that date, Medicare assigned her to a new Medicare Part D carrier which 

is now covering her prescriptions. Please note that BC/BS does not pay a single 

DIME on Vandy’s prescriptions, even though Stan has a BC/BS FAMILY plan at 

work which is supposed to cover a good part of his family’s prescription costs. Instead the American taxpayer is paying for Vandy’s prescriptions. Wouldn’t you say 

that the American taxpayer is getting the shaft? I would. 

I am a firm believer that government is at its best when it is guided by common 

sense. I hope that Vandy dropping herself from Stan’s BC/BS coverage at work was 

the right decision. I am not sure that it was. Let me tell you why: 

Vandy recently had to pay $151.00 for a prescription that was not on her Medicare Part D carrier’s formulary. The cost of paying for that one expensive prescription ‘‘out-of-pocket’’ wiped out a good chunk of whatever prescription ‘‘savings’’ 

Vandy and Stan had achieved by dropping her from his BC/BS coverage at work. 

Next I want to explain that Vandy recently had to have bariatric surgery to try 

to lose some weight. The reason for the bariatric surgery is that her doctor and her 

therapists have told her that unless she loses some weight, she will never have a 

chance of walking again. 

I point out that the bariatric surgery was performed by a ‘‘preferred’’ doctor at 

a ‘‘preferred’’ hospital. 

NOW FOR THE CLINCHER: The American taxpayer had to pick up the entire 

tab for that bariatric surgery even though Stan has a BC/BS group FAMILY policy 

at work. IS THAT BRILLIANT?—OR—IS IT JUST PLAIN STUPID? 

It makes me sick to think that the poor American taxpayer is getting the shaft 

while the big insurance company is paying nothing, especially when Stan has a 

BC/BS group FAMILY policy at work. And the U.S. Government lets them. Is that 

fair to the American taxpayer? You know my answer. 


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That must be why the insurance companies ‘‘lobby’’ Congress so hard. 

If I sound disgusted, it is because I am. 

If, after reading this medical horror story you are a bit uneasy, get busy contacting your congressional delegation to tell them you don’t like the way the Nation 

does its health care business and that you want it changed. Together, we can make 

a difference. 

I thank you for reading Vandy’s medical horror story. If you want to contact me 

to discuss additional aspects to Vandy’s medical horror story, please do so. Believe 

me, I have only skimmed the surface. 

f 

Statement of the Association of Professors of Medicine, 

Association of Program Directors in Internal Medicine, 

Association of Specialty Professors, Clerkship Directors 

in Internal Medicine, and Administrators of Internal Medicine 

Abstract 

In response to a projected physician workforce shortage, the Alliance for Academic 

Internal Medicine (AAIM) recommends: 

• Strategically increasing the number of Medicare-funded positions for primary 

care specialties to adequately meet the Nation’s health care needs. For these 

new positions, Medicare should support the entire duration of training, which 

is typically 3 years but is 4 years for combined programs such as internal medicine-pediatrics. In addition, AAIM believes new primary care slots should be 

added in geographic areas of demonstrated need. Ultimately, all health care insurers should have a role in explicitly contributing to GME funding. • Enhancing the attractiveness of primary care careers by altering the physician 

reimbursement system, increasing job satisfaction for current and future primary care practitioners, providing incentives for geographic distribution of primary care physicians to areas of greatest need, and applying innovations to 

educational models. • Increasing efficiency in the health care delivery system by broadening the use 

of electronic health records (EHRs) and other advances in health information 

technology and capitalizing on the use of physician extenders. Additional options for improving health care delivery should be considered. 

While the evidence that the Nation faces a shortfall of physicians is compelling 

and difficult to refute, increasing GME positions without respect to specialty or 

practice region would be imprudent. Steps must be taken to ensure access to primary care physicians, better methods for coordinating care, a physician reimbursement system that values the work of the primary care physician, incentive programs 

for physicians to train and practice in rural areas, adequate financial support for 

GME, and steps taken to improve the efficiency of health care delivery. 

Introduction 

After two decades of consistent predictions that the United States will face a physician surplus, leading professional organizations and advisory boards have now altered their calculations and projected that the Nation may soon face physician 

shortages (1–5). These organizations are calling for teaching hospitals, medical 

schools, and the Federal Government to respond to predicted shortages (6–8). 

The primary determinant of the number of practicing physicians in the United 

States is the number of graduate medical education (GME) positions or training 

slots. These positions represent the only pathway to licensure for medical practice 

in the United States. Since the Balanced Budget Act of 1997 capped the number 

of federally funded positions in each residency program at the 1996 level, increases 

to the flow of new physicians into the workforce have been limited despite evidence 

of growing demand. The shortage of physicians is particularly significant in primary 

care specialties. 

AAIM’s recommendations to allow strategic growth in positions in primary care 

specialties and geographic areas of need would prevent an unregulated increase in 

positions for highly specialized training programs, which might raise health care 

costs without adding primary care physicians to address health care needs. However, increasing the number of primary care positions will not result in an increase 

of physicians practicing primary care unless steps are taken to enhance the 

attractiveness of primary care careers. 

This position paper was created by the AAIM Advocacy Committee, with representation of its five member organizations: the Association of Professors of Medicine, 

Association of Program Directors in Internal Medicine, Association of Specialty ProVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00291 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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fessors, Clerkship Directors in Internal Medicine, and Administrators of Internal 

Medicine. The committee solicited feedback from the alliance membership before 

writing the statement. After vetting by the leadership of each organization, the consensus statement was finalized and approved as the alliance position on how to address the projected shortage in the physician workforce. This paper reviews the data 

that support the conclusion that the United States faces the prospect of a shortfall 

of physicians, describes certain aspects of these data particularly as they relate to 

the supply of primary care physicians, addresses the mechanisms necessary for expanding the pool of practicing physicians through increasing Medicare funded GME 

slots, discusses the expansion of programs that distribute physicians to geographic 

areas of need, and comments on steps that can be taken to improve the efficiency 

of physician work. 

Physician Supply 

COGME issued Physician Workforce Policy Guidelines for the United States 2000– 

2020 in January 2005 (9). COGME noted that although the absolute number of physicians would increase by 24% between 2000 and 2020, the population growth would 

exceed the rate of growth of physicians, resulting in a decrease in the ratio of fulltime equivalent (FTE) physicians per 100,000 Americans. COGME also postulated 

that the demand for physician services will grow as the elderly population increases 

as a proportion of the total population. The council concluded that U.S. medical 

school enrollment needed to increase by 15% by 2012 to meet demand. 

In June 2006, the Association of American Medical Colleges (AAMC) issued the 

AAMC Statement on the Physician Workforce, which claimed there was ‘‘sufficient 

evidence’’ to recommend increasing by 30% the number of entry-level positions in 

Liaison Committee on Medical Education accredited medical schools by 2012 (7). 

AAMC stated the 30% increase could be accomplished by increasing enrollment at 

existing schools as well as creating new medical schools. According to the statement, 

increased funding for GME positions should occur simultaneously to ensure graduating medical students could receive appropriate postgraduate training. 

In December 2008, AAMC released updated projections indicating that a shortage 

of 124,000 FTE physicians will occur by 2025 (10). According to their estimates, 37% 

of the shortage will be in primary care, 33% in surgery, 6% in medical specialties, 

and 23% in other specialties. The shortage of 124,000 physicians is based on the assumption that current supply, use, and demand patterns will remain the same for 

the next 16 years. Since it is unlikely these patterns will remain stable, AAMC also 

created an alternative scenario assuming a continued increase in utilization rates, 

changes in work schedules, a moderate expansion in GME capacity, and improvements in productivity, which projects a shortage of 159,300 FTE physicians by 2025. 

While academic institutions have responded to the calls from COGME and AAMC 

with an increase in allopathic medical school class size and the creation of several 

new medical schools, new Federal funding for additional U.S. GME slots has not 

been forthcoming, except in a limited way from the Department of Veterans Affairs 

(VA). Increases to positions funded by other sources, while they exist, have also 

been minimal (11). 

Beyond increasing support to expand GME positions, interest in primary care careers among medical school graduates must also increase to positively affect the 

supply of primary care physicians. Extensive data support the observation that decreased numbers of U.S. medical school graduates are pursuing careers in primary 

care. For example, 3,884 U.S. medical students matched into internal medicine residency positions in 1985 compared to 2,660 in 2008 (12). In a recent study by Hauer 

et al., only 24 (2%) of the 1,177 students in the 11 medical schools participating 

planned to pursue a career in general internal medicine (13). Conversely, while interest of U.S. seniors in general internal medicine has declined, the proportion of 

residents choosing specialty fellowships has increased from 50% in 1988 to 80% in 

2006 (14). According to Hauer’s study, today’s medical students prioritize lifestyle 

issues in career selection and perceive general internal medicine as a low-satisfaction, low-income, and uncontrollable career (13). The potential consequence of declining interest in general internal medicine careers is a decrease in the delivery 

of preventive measures and appropriate treatment of chronic diseases that often 

lead to disability and premature death. This consequence has direct implications for 

the growing number of the elderly in the United States who require coordination 

of treatments for multiple complex, chronic conditions. 

The geographic maldistribution of physicians in the United States also has negative implications for ensuring an adequate supply of physicians. Several studies 

indicate a shortage most pronounced in rural areas and certain urban neighborhoods (15, 16). A study of 20-year trends in geographic variation of physician distribution shows that an increase in practicing physicians by 51% did not translate into 


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regional variation of practice location. Despite long-standing public policies, physicians continued to locate in areas of adequate-to-high physician-to-population ratios, 

further compounding issues for health professional shortage areas (HPSAs) (17). 

Physician Supply 

Assessing the country’s future needs for physicians is a challenging and complex 

estimation of supply and demand. The supply side involves the output from multiple 

training pathways for initial medical degrees as graduates enter the final common 

pathway of residency training. Supply is also a product of physician effort and varies in relation to age, gender, and generational or lifestyle preferences. 

The largest source of physicians entering the ‘‘funnel’’ of GME is provided by U.S. 

allopathic medical schools. In 2005, 15,760 graduates of U.S. allopathic schools and 

2,800 graduates of U.S. osteopathic medical schools were eligible to enter GME programs (18, 19). A total of 24,269 first-year GME positions in training programs 

approved by the Accreditation Council for Graduate Medical Education (ACGME) 

and the American Osteopathic Association were available for these new graduates (12, 20). The gap between the number of available positions and the total graduates of U.S. programs was filled by approximately 6,000 graduates from medical 

schools in other countries. 

Based on 2007 enrollment and class size increases, first-year enrollment into U.S. 

medical degree programs is projected to increase from 16,488 in 2002 to nearly 

19,909 in the 2012 academic year (AY). Similarly, substantial growth in first-year 

enrollment of osteopathic schools is expected, from 2,148 in AY 2002 to 5,227 in AY 

2012 (a 70% increase) (21). As a result, unless the number of first-year positions 

in GME training increases, not enough positions will exist to accommodate all U.S. 

medical graduates by the year 2012 (Figure 1). 

Figure 1: Funnel of Graduate Medical Education 


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It is estimated that international medical graduates (IMGs) now account for 24% 

of the total U.S. physician workforce (22). Although concerns about depletion of the 

physician supply in IMG home countries also exist, the current demand for physicians in the United States can only be met by the continued training and retention 

of IMGs. If more residency positions are not funded, increasing the number of U.S. 

medical school graduates will be a zero-sum game in terms of the number of practicing physicians in the United States (19). Currently, more than a quarter of the 

Nation’s primary care physicians are IMGs. 

The supply of physicians is also influenced by the rate at which physicians leave 

practice. Just as the total U.S. population has aged, the population of practicing 

physicians has also aged. It was estimated that there would be 99,000 U.S. physicians over the age of 65 in 2008 (19). Furthermore, changing demographics and 

emerging expectations about professional life by both male and female physicians will lead to increasing numbers of practicing physicians with reduced work 

hours (23, 24). 

Projections from 2007 suggest that the number of practicing physicians in the 

United States will increase from 733,852 in 2000 to 906,278 in 2010, and will rise 

further to 988,100 in 2020 (25). However, in spite of the increase in numbers of physicians, the projected increase in the U.S. population will mean that the ratio of active physicians to population (per 100,000) will increase only modestly from 278.5 

in 2000 to 293.4 in 2010, and it will remain essentially unchanged for the next decade at 294.2 in 2020. These statistics do not account for the anticipated functional 

reduction in work capacity anticipated as a result of changing work habits and patterns of practice. Assessing the need or demand of the population for physician services is a complex and controversial topic. However, it is clear that the physician supply must increase to accommodate the growing and aging population as well as the 

growing number of medical students entering the pipeline. 

Responding to Physician Workforce Projections 

Recommendation 1: AAIM recommends strategically increasing the number 

of Medicare-funded residency positions in primary care specialties to adequately meet the Nation’s health care needs as defined by COGME. In addition, AAIM believes GME slots should be added in geographic areas of demonstrated need. 

According to COGME, meeting the Nation’s future physician workforce demand 

and need will require increasing to 27,000 the number of physicians entering residency training each year by 2015, which would represent an increase of approximately 3,000 positions annually. Based on its recent projections, AAMC has advocated for an increase of 5,000 positions annually over an average of 4 years of training to respond to its recommended 30% increase in medical school class size. A global, unregulated increase in GME positions is unlikely to meet regional or specialtyspecific shortages. A deliberate and strategic increase should be considered to justify 

the creation of new GME slots. AAIM’s recommendation for Medicare to fund new 

positions in primary care includes a call for support for an average of 4 years per 

position. While training in internal medicine, pediatrics, and family medicine is 3 

years, training in combined programs such as internal medicine-pediatrics takes 4 

years. 

Current data suggest as many as one-half of physicians trained in a specific locale 

will stay there for their practice careers (17). To allow residents to train in areas 

of demonstrated need, Medicare GME funding regulations must change to permit 

resident time spent outside of the academic health care setting to count for purposes 

of GME funding. Currently, the use of non-hospital training sites is restricted by 

Centers for Medicare and Medicaid Services (CMS) regulations that require a training program to incur 90% of all costs for a resident or fellow rotating outside of the 

teaching hospital, which disallows private practitioners and other community faculty from volunteering their time and presents a barrier to increasing training in 

venues outside of the teaching hospital. Without funding, hospitals stop sending 

residents to non-hospital settings or use precious limited resources for this training 

at the cost of other programs. Removing current restrictions and breaking down barriers for reimbursement would increase residents’ opportunities to practice in a variety of settings, including rural, inner city, and other underserved locations. Aside 

from providing experiences in areas where a resident may ultimately care for patients, allowing residents to practice outside of teaching hospitals can also serve as 

a successful recruitment mechanism for communities in need. While ultimate practice locations of physicians can not be controlled, increases in GME should be made 

with geographic factors in mind. 


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The Medicare program provides approximately 40% of total GME funding. The remainder is supported by other sources that vary by institution and State and are 

often subject to the annual appropriations process (26). An increase in PGY–1 slots 

to respond to health care needs is only possible with increased funding. AAIM understands the restrictions of State, institutional, and Federal budgets to increase 

funding for medical education. As a result, AAIM supports a system in which all 

insurers contribute to GME costs. 

As long as Medicare funding is provided for GME positions, the per-resident 

amounts paid to hospitals must be reassessed. Per-resident amounts for Medicare 

direct GME payments were originally set in 1984. While adjustments have been 

made, the per-resident amount has not been altered to account for changes in training. Mandated competency-based education and evaluation as well as duty hour restrictions require significant resources as do health care simulation, centralized 

oversight of regulatory compliance, and faculty development. These changes and 

many others that require additional resources and resident time have not been considered in the current GME financing system. 

In 2005, CMS redistributed 3,000 unused GME slots to hospitals that demonstrated greatest need. While this redistribution helped more than 350 hospitals 

mostly in rural areas, it also proved disadvantageous because Congress lowered the 

percentage of indirect graduate medical education (IME) payments associated with 

the positions. AAIM recommends any increase in GME positions must include IME 

payments equal to those provided to existing positions. 

For hospitals and institutions with the capacity for additional training positions, 

funding should remain earmarked for primary care specialty positions and must not 

be redirected to other specialty slots. In addition, institutions and hospitals must 

make a commitment to keep current levels of primary care positions to receive funding for additional positions. Any move to decrease current primary care slots and 

use the funding for other specialty positions or fellowship training will not positively 

affect the total output of physicians entering primary care. Also, institutions must 

document their means and ability to add positions with respect to teaching resources. 

Enhancing the Attractiveness of Primary Care Careers 

Recommendation 2: AAIM recommends enhancing the attractiveness of primary care careers by altering the physician reimbursement system, increasing job satisfaction for current and future primary care practitioners, 

providing incentives for geographic distribution of primary care physicians in areas of greatest need, and applying innovations to educational 

models. 

If the capacity for GME in internal medicine is enhanced by providing more funding for residency slots, simply increasing the number of graduates from U.S. medical 

schools without improving the attractiveness of general internal medicine will not 

produce the desired effect. Without providing incentives for selecting a career as a 

general internist, larger class sizes will likely increase the number of specialists in 

a variety of attractive practice disciplines. Education, training, and reimbursement 

should be restructured to ensure positive exposure to general internal medicine for 

physicians-in-training and job satisfaction for individuals who choose a career in 

general internal medicine. 

Studies of student career choice highlight lifestyle issues as a high priority in the 

decisionmaking process. Internal medicine has been identified as a specialty with 

uncontrollable lifestyle regarding work hours and patient care duties. In 2008, a 

study noted that clerkship students choosing a career in internal medicine and those 

choosing careers in other specialties perceive internal medicine residents as less satisfied than residents in other specialties (13). Exposure of medical students and residents to faculty who feel overwhelmed and devalued will inhibit new physicians entering the field of primary care. 

Aside from training, a major challenge primary care faces in becoming a successful career option is the current physician reimbursement system. Today’s system 

proves lucrative for procedure-based specialties while primary care and cognitive 

specialties are inadequately reimbursed for time spent delivering comprehensive patient care. Reviewing the process for determining the current value of physician 

services should be the first step in ensuring the work of primary care physicians 

is not devalued. The Medicare Payment Advisory Commission has made this recommendation to Congress along with recommendations to increase Medicare payments for primary care services and establishing a ‘‘medical home’’ pilot project 

through Medicare (27). The ultimate enhancement of adequate reimbursement by 

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mendous incentive for physicians to seriously consider primary care as a career of 

choice. 

Understanding job satisfaction for the general internist requires more than examining physician income. Outpatient schedules with inadequate time to carefully 

evaluate the patient results in less than optimal care and increased frustration for 

physicians. 

Job satisfaction has the potential to increase with adequate professional support. 

As the number of primary care physicians decline, fewer colleagues will share the 

clinical load. Increasing use of physician extenders may help to ease the burden of 

care; however, the prestige of the generalist must also be considered. While physician extenders can help ease the amount of work for primary providers, it is important to note that they are not replacements for physicians who are uniquely situated 

to identify and treat multisystem issues and complex diagnoses. 

Successful distribution of physicians to locations where primary care physicians 

are most needed will require additional incentives. Financial incentives for loan repayment may be successful in attracting primary care physicians to locations of 

most need. In addition, focus should be placed on recruiting and providing incentives to potential trainees from underserved areas. Studies show that medical school 

matriculants from underserved areas or with career plans to serve in such areas are 

more likely to serve as rural primary care providers than their peers. Programs developed to increase the supply of rural primary care physicians have proven successful (28, 29). While political and other forces that would be needed to make these 

adjustments will require considerable strategy, these changes would improve the 

overall health of the Nation if the best graduates were encouraged to consider primary care. Potential strategies at the national level for increasing the number of 

physicians in HPSAs include enhancing the National Health Service Corps (NHSC) 

and health professions education programs, passing legislation such as the Rural 

Training Act to remove regulatory barriers to having residents train in nonhospital 

and rural settings, and increasing the number of waivers through the J–1 visa waiver program to previous levels. Steps can also be taken at the State level. 

The understanding that the primary care physician is essential to access and optimal health outcomes underscores the need to address explanations underlying the 

current deficiency in the number of these essential providers. Understanding how 

best to integrate these physicians with other professional colleagues such as nurse 

practitioners and physician assistants rather than promoting their displacement by 

these individuals will ultimately lead to the optimal team approach. Focusing on the 

needs of the future health care workforce is critically important, and national strategies are urgently required to avoid a shortage of primary care physicians. The challenge of appropriate funding will require redistribution of financial resources and 

reimbursement to reflect the fair cost of delivering high-quality care to the U.S. population. 

Improve Health Care Delivery 

Recommendation 3: AAIM recommends increasing efficiency in the health 

care delivery system by broadening the use of EHRs and other advances 

in health information technology and capitalizing on the use of physician 

extenders. Additional options for improving health care delivery should be 

considered. 

The projected physician shortage could be mitigated by maximizing the efficiency 

of physicians. In the future, optimizing efficiency may actually reduce the number 

of physicians required to provide optimal care. AAIM proposes improving the health 

care delivery system by promoting widespread use of EHRs, capitalizing on the use 

of physician extenders, and considering other options for increasing efficiency such 

as improving access to health care screening. 

A study conducted at community health centers concluded that EHRs present a 

clear value to patients and stakeholders. Patients received better care and payers 

were likely to reap EHR-related downstream benefits in avoided specialist, emergency room, and hospital spending (30). EHRs help physicians and staff members 

view, chart, and interact with patients’ health information in a timely and accurate 

manner. While computerized physician order entry systems may prove cost-prohibitive for some institutions, the use of order sets or clinical practice guidelines could 

also serve to increase efficiency in patient care. 

Utilizing physician extenders can also increase efficiency by freeing up the primary physician’s time and providing greater continuity of care. In primary care 

practices, nurse practitioners and physician assistants can improve productivity by 

providing some direct and indirect patient care, including routine examination and 

review of medical histories, telephone triage, patient education, counseling, and 


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health awareness. Physician satisfaction with the use of the physician extender 

model to increase efficiency is very high (31). 

Additional options for increasing efficiency in the health care delivery system 

should be explored. For example, consideration should be given to regionalizing expensive treatments and applying the certificate of need system globally; improving 

access to health care screening to reduce the need for future hospitalization; and 

other innovative measures to enhance efficiency. AAIM believes addressing the physician shortage successfully will take both an increase in the number of physicians 

and improvements to the health care delivery system. 

Conclusion 

The Nation is facing a physician shortage that is likely to adversely affect public 

health. AAIM recommends increasing the supply of Medicare-funded positions in 

primary care specialties, including internal medicine and internal medicine-pediatrics. National numerical targets should coincide with the physician-to-population 

ratio adequate to meet the Nation’s health care needs as defined by COGME. 

The evidence that the Nation faces a shortfall of physicians is compelling and impossible to ignore. At the same time, an unbridled increase in GME positions without respect to specialty or practice region would be imprudent. AAIM believes that 

selective increases in GME slots can and should occur in primary care. Allowing 

local communities and their legislators to demonstrate the need for primary care 

providers could provide a mechanism to address the geographic maldistribution of 

physicians. In addition, steps must be taken to increase efficiency in the current 

health care delivery system and enhance the attractiveness of generalist careers, including internal medicine and combined programs such as internal medicine-pediatrics. 

AAIM has already begun such efforts with its statement, Redesigning Residency 

Training in Internal Medicine: The Consensus Report of the Alliance for Academic 

Internal Medicine Education Redesign Task Force. While the Nation seeks to increase the physician supply, it also must examine and implement measures that will 

improve physician efficiency and effectiveness. Ignoring the imminent shortage of 

physicians puts the Nation’s health and well-being at risk. 

References 

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14. Bodenheimer T. Primary care—will it survive? New Engl J Med. 2006; 

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/research/AccesslDenied42407.pdf. Accessed August 1, 2008. 

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schoolgrads0207.htm. Accessed September 20, 2008. 

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for academic health centers and policy makers. Acad Med. 2006; 81(19):782–787. 

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28. Rabinowitz HK, Diamond JJ, Markham FW, Paynter, NP. Critical factors for 

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f 

Statement of American Academy of Physician Assistants 

Physician assistants (PAs) are one of three health care professions providing primary medical care in the United States today, and are an integral 

part of health care reform. 

• In 2008, over 257 million patient visits were made to physician assistants, and 

approximately 332 million prescriptions were written by PAs. 

• PAs practice in virtually every area of medicine. Between 35%–40% of all PAs 

practice in primary care. PA education is based on the primary care model of 

care, providing greater flexibility for PA practice upon graduation. 

• By design, PAs always work with physicians. However, PAs make autonomous 

medical decisions. The physician is always available for consult, but the physician may not be onsite, in the same county, or in the case of the State Department, in the same country or hemisphere. Reimbursement for medical care provided by PAs is separate than reimbursement provided to physicians. 

• PAs serve as medical directors in rural health clinics, community health centers, and other federally qualified health centers. In rural and other medically 

underserved communities, a physician assistant may be the only health care 

professional available. 


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• PAs provide first contact, continuous, and comprehensive care for patients 

throughout the United States. PAs currently manage care for patients in primary care, chronic care, and other areas of medicine. 

• Studies show that in a primary care setting, PAs can execute at least 80 percent 

of the responsibilities of a physician with no diminution of quality and equivalent patient care satisfaction. 

• By virtue of PA education in primary care and the ability of PAs to work in 

all medical and surgical specialties, PAs expand access to care in medically underserved rural and urban communities. 

• By design, the physician assistant profession extends the reach of medicine and 

the promise of health to the most remote and in-need communities of our Nation. 

In addition to the need to produce more primary care physicians, it is critical that Congress support expansion of PA programs as they develop strategies for addressing health care workforce challenges. 

• Funds should be made available to PA educational programs to increase the PA 

workforce, which in turn, will extend physicians’ ability to provide. 

• The Title VII, Public Health Service Act’s Health Professions Program is successful in training health care professionals for practice in medically underserved communities. Funding for PA educational programs is woefully underfunded and must be increased. 

• The single largest barrier to PA educational programs educating more PAs is 

a lack of clinical training sites. Attention must be directed to investing in the 

number of these sites, including loan repayment for preceptors in primary care 

medical practices and/or the increased use of VA facilities as clinical training 

sites for PA educational programs. 

• Funds must be made available to increase the number of faculty at PA educational programs. Eligible PA students are being turned away because of the 

lack of faculty and clinical sites. 

• Faculty loan repayment, including funding to attract faculty from diverse backgrounds, is also critical for PA educational programs. 

• Federally supported student loans and increased opportunities through the National Health Service Corps are key to attracting PA students and clinicians to 

primary care. 

• Graduate medical education funding should be used to support the educational 

preparation of physician assistants in hospitals and outpatient, communitybased settings. 

Physician assistants are key to health care reform. However, to be fully utilized, current barriers to care that exist in Federal law must be addressed. 

• The Medicare statute must be amended to allow PAs to order home health, hospice, and skilled nursing facility care, as well as to provide hospice care for 

Medicare beneficiaries. (A 2009 report by the Lewin Group estimates an overall 

cost savings through implementation of the four PA Medicare provisions.) 

• Medicaid should be updated to require States to reimburse all covered services 

provided by PAs under the fee-for-service plan. Additionally, Medicaid should 

recognize PAs as primary care case managers through managed care plans. 

• The Federal Employee Compensation Act needs to be updated to allow PAs to 

diagnose and treat Federal employees who are injured on the job. 

• Physician assistants must be fully integrated into new models of care, including 

the primary care medical home and chronic care coordination. 

In brief, AAPA recommends the following changes to the House Health Care 

Reform Discussion Draft— 

• Explicitly recognize physician assistants as primary health care providers 

throughout the bill. 

• Incorporate the Senate HELP Committee language on reauthorization of the 

Public Health Service Act’s Title VII Program, including a 15% carve for PA 

educational programs in Title VII training on primary care medicine, an updated definition of PA educational programs, and faculty loan repayment for PA 

education programs. 

• Revise Medicare to allow PAs to order home health, hospice and skilled nursing 

facility care, as well as to provide hospice care for Medicare beneficiaries. (A 

2009 report by the Lewin Group estimates an overall cost savings through implementation of the four PA Medicare provisions.) 


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On behalf of the nearly 75,000 clinically practicing physician assistants (PAs) represented by the American Academy of Physician Assistants (AAPA), thank you for 

the opportunity to submit written testimony for the hearing record of the House 

Committees on Education and Labor, Energy and Commerce, and Ways and Means. 

AAPA Principles for Health Care Reform 

AAPA has a longstanding history of support for universal health care coverage. 

Among the Academy’s key principles for health care reform— 

• The AAPA believes the primary goal of a comprehensive health care system reform is to ensure access to quality, affordable, and cost efficient health care for 

all residents of the United States. 

• The AAPA supports a health care system that will provide basic services to all 

residents. 

• The AAPA supports health care that is delivered by qualified providers in physician-directed teams. 

• The AAPA supports reform that confronts the limits of care and resources. 

• The AAPA believes that fair and comprehensive reform of the medical liability 

insurance system is needed. 

• The AAPA endorses system reform that enhances the relationship between the 

patient and the clinician. 

Physician Assistants 

Physician assistants are licensed health professionals, or in the case of those employed by the Federal Government, credentialed health professionals, who— 

• Practice medicine as a team with their supervising physicians. 

• Exercise autonomy in medical decisionmaking. 

• Provide a comprehensive range of diagnostic and therapeutic services, including 

performing physical exams, taking patient histories, ordering and interpreting 

laboratory tests, diagnosing and treating illnesses, assisting in surgery, writing 

prescriptions, and providing patient education and counseling. 

• May also work in educational, research, and administrative settings. 

PAs always work with physicians. However, this does not mean that the physician 

is necessarily on site, nor does it suggest that PAs do not make autonomous medical 

decisions. PAs employed by the State Department, for example, may work with a 

physician who is a continent away and available for consultation by telecommunication. 

PAs are located in almost all health care settings and in every medical and surgical specialty. Nineteen percent of all PAs practice in nonmetropolitan areas where 

they may be the only full-time providers of care (State laws stipulate the conditions 

for remote supervision by a physician). Approximately 41 percent of PAs work in 

urban and inner-city areas. Approximately 44 percent of PAs are in primary care. 

Nearly one-quarter of clinically practicing PAs practice in surgical specialties. 

Roughly 80 percent of PAs practice in outpatient settings. 

PAs are covered providers within Medicare, Medicaid, Tri-Care, and most private 

insurance plans. Additionally, PAs are employed by the Federal Government to provide medical care, including the Department of Defense, the Department of Veterans Affairs, the Public and Indian Health Services, the State Department, and the 

Peace Corps. 

AAPA estimates that in 2008, over 257 million patient visits were made to PAs 

and approximately 332 million medications were written by PAs. 

Overview of Physician Assistant Education 

Physician assistant programs provide students with a primary care education that 

prepares them to practice medicine with physician supervision. PA programs are located at schools of medicine or health sciences, universities, teaching hospitals, and 

the Armed Services. All PA educational programs are accredited by the Accreditation Review Commission on Education for the Physician Assistant, an organization 

composed of representatives from national physician groups and PAs. 

The average PA program is 26 months and is characterized by a rigorous, competency-based curriculum with both didactic and clinical components. The first 

phase of the program consists of intensive classroom and laboratory study, providing 

students with an in-depth understanding of the medical sciences. More than 400 

hours in classroom and laboratory instruction are devoted to the basic sciences, with 

over 70 hours in pharmacology, more than 149 hours in behavioral sciences, and 

more than 535 hours of clinical medicine. 


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The second year of PA education consists of clinical rotations. On average, students devote more than 2,000 hours or 50–55 weeks to clinical education, divided 

between primary care medicine and various specialties, including family medicine, 

internal medicine, pediatrics, obstetrics and gynecology, surgery and surgical specialties, internal medicine subspecialties, emergency medicine, and psychiatry. During clinical rotations, PA students work directly under the supervision of physician 

preceptors, participating in the full range of patient care activities, including patient 

assessment and diagnosis, development of treatment plans, patient education, and 

counseling. 

After graduation from an accredited PA program, the physician assistant must 

pass a national certifying examination jointly developed by the National Board of 

Medical Examiners and the independent National Commission on Certification of 

Physician Assistants. To maintain certification, PAs must log 100 continuing medical education credits over a 2-year cycle and reregister every 2 years. Also to maintain certification, PAs must take a recertification exam every 6 years. 

The majority of PA educational programs offer master’s degrees, and the overwhelming majority of recent graduates hold a master’s degree. 

Title VII Support of PA Education Programs 

The Title VII support for PA educational programs is the only Federal funding 

available, on a competitive application basis, to PA programs. Unfortunately, the 

level of support has eroded from the highest level of $7.5 million in FY 2005 to $2.6 

million in FY 2007. 

Targeted Federal support for PA educational programs is authorized through section 747 of the Public Health Service Act. The funds are used to encourage PA students, upon graduation, to practice in underserved communities. These goals are accomplished by funding PA education programs that have a demonstrated track 

record of: placing PA students in health professional shortage areas; exposing PA 

students to medically underserved communities during the clinical rotation portion 

of their training; and recruiting and retaining students who are indigenous to communities with unmet health care needs. 

The Title VII program works. 

• A review of PA graduates from 1990–2006 demonstrates that PAs who have 

graduated from PA educational programs supported by Title VII are 59% more 

likely to be from underrepresented minority populations and 46% more likely 

to work in a rural health clinic than graduates of programs that were not supported by Title VII. • A study by the UCSF Center for California Health Workforce Studies found a 

strong association between physician assistants exposed to Title VII during 

their PA educational preparation and those who ever reported working in a federally qualified health center or other community health center. 

The PA programs’ success in recruiting underrepresented minority and disadvantaged students is linked to their ability to creatively use Title VII funds to enhance 

existing educational programs. Without Title VII funding, many special PA training 

initiatives would be eliminated. Institutional budgets and student tuition fees are 

not sufficient to meet the special, unmet needs of medically underserved areas or 

disadvantaged students. The need is very real, and Title VII is critical in leveraging 

innovations in PA training. 

Need for Increased Targeted Support for PA Education 

Federal support must be directed to PA educational programs to stimulate growth 

in the PA profession to meet the needs of universal health care coverage. Targeted 

funding should be directed to— 

• The use of Title VII funds for recruitment and loan repayment for faculty in 

PA educational programs. • Incentives to increase clinical training sites for PA education. • Federally backed loans and loan repayment programs for PA students. 

Eliminating Barriers to Care in Federal Law 

Eliminating current barriers to medical care provided by PAs that exist in the 

Medicare, Medicaid, and the Federal Employees Compensation Act (FECA) laws 

would do much to expand access to needed medical care, particularly for patients 

living in rural and other medically underserved areas. 

• AAPA believes that the intent of the 1997 Balanced Budget Act was to cover 

all physician services provided by PAs at a uniform rate. However, PAs are still 

not allowed to order home health, hospice, skilled nursing facility care, or provide the hospice benefit for Medicare beneficiaries. At best, this creates a misVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00301 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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use of the patient’s physician’s and PA’s time to find a physician signature for 

an order or form. At worst, it causes delayed access to care and inappropriate 

more costly utilization of care, such as longer stays in hospitals. For patients 

at end-of-life, it creates an unconscionable disruption of care. (A 2009 report by 

the Lewin Group estimates an overall cost savings through implementation of the 

four PA Medicare provisions.) • Although most States recognize services provided by PAs in their Medicaid programs, it is not required by law. Consequently, some State Medicaid Directors 

pick and choose which services provided by PAs they will cover. Others impose 

coverage limitations not required by State law, such as direct supervision by a 

physician. • Although nearly all State workers’ compensation programs recognize the ability 

of PAs to diagnose and treat State employees who are injured on the job, the 

Federal program does not. As a result, Federal workers who are injured on the 

job may be rerouted to emergency rooms for workers’ compensation-related care, 

rather than to go to a practice where the PA is the only available health care 

professional. 

The Medicare, Medicaid, and FECA statutes create Federal barriers to care that 

do not exist in State law. The barriers need to be eliminated to promote increased 

access to the quality, affordable medical care provided by PAs. 

Integrate PAs into New Models of Care 

AAPA is concerned that health care reform could create new, unintended barriers 

to care provided by PAs unless special attention is devoted to ensuring that PAs are 

fully integrated into the medical home and chronic care coordination models of care. 

PAs always work with physicians, but in many rural and other underserved 

areas, the PA is the face of health care. The PA is the medical professional who develops the care plan and coordinates the care. PAs also own and/or provide care in 

rural health clinics and other settings that may serve as the patient’s primary medical home. It is critical that the medical home and chronic care management models 

of care recognize the ability of PAs to develop and manage medical care plans, without unnecessary limitations. And, it is important that PA-run clinics and practices 

be eligible for reimbursement from the new models of care. 

Medicare Physician Payment Reform 

It is critically important that health care reform legislation contains a long-term 

solution to Medicare’s physician payment system. The current system is simply not 

sustainable, nor is it fair to the health care professionals who provide medical care 

for Medicare beneficiaries. 

f 

American Association of Colleges of Pharmacy 

Dear Chairmen Miller, Waxman, and Rangel: 

The American Association of Colleges of Pharmacy (AACP) is pleased with the 

overall intent of the legislative discussion draft released by your three Committees 

last week. Your combined commitment to increasing all Americans’ access to highquality health care is certainly commendable. The legislation’s focus on opportunities for preventing unnecessary illness and keeping our citizens well is an approach 

that has been too long in coming. Our intent is to work with you and the Committees to make sure this opportunity becomes a reality. 

The issue of how we will pay for reorganizing our health care delivery system is 

certainly important, but it is beyond the scope of our organization’s mission. We are 

fully prepared to assist you in creating a reorganized system that makes the best 

use of the research, teaching, and service mission of pharmacy faculty. Pharmacy 

faculty can be of particular assistance, especially in the areas of quality improvement and measurement, wellness and prevention, workforce preparation, and the 

necessary research that establishes the evidence-base to improve the quality of care 

patients receive. 

Affordable Health Care Choices 

We encourage you, in both public and private plans, to make any and all 

efforts to ensure that patients have access to team-based, patient-centered 

care as discussed in the 2003 report of the Institute of Medicine, ‘‘Health 

Professions Education: A Bridge to Quality.’’ Quality improvement is predicated on the needs of the patient to be addressed by a community of care. This approach to care delivery also reflects another IOM report from 1994 on primary care 


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that was authored due to the growing complexity of and interdependencies within 

health care delivery. 

How care delivery is organized is just as important as what care is included in 

an essential benefits package, whether in a public or private plan. 

Therefore, we strongly encourage you to create opportunities for care to 

be delivered in a collaborative manner, making best use of the knowledge 

and skills of all health professionals (acting within their individual scopes 

of practice) focused on the needs of the patient, not the payment expectations of the providers. 

This approach will go a long way toward increasing access to the primary type 

of care, including medication therapy management, that all patients need, especially 

the chronically ill and elderly. This team-based approach has been successfully employed in several State Medicaid programs including Community Care of North 

Carolina and integrated health care systems such as InterMountain Health in Colorado and Geisinger Health in Pennsylvania. 

Academic pharmacy is actively engaged with the types of delivery system examples above, as well as a host of others including those within family physician offices, ambulatory clinics associated with academic health centers, and increasingly 

with federally qualified health centers through a patient safety collaborative administered by the Health Resources and Services Administration. The research of pharmacy faculty forms a significant evidence-base supporting collaborative, team-based 

approaches to care as the standard of care. This evidence-base readily leads to the 

development of quality measures for plan and provider incentive strategies, important elements in moving toward a reorganization of care systems. 

Medicare and Medicaid Improvements 

Medicare beneficiaries and Medicaid eligibles form a significant population that 

benefits from strong care coordination. Regardless of whether the difficulties of accessing care are due to frailty or ability to pay, efficient and effective management 

of both clinical and community-based services is essential to help improve outcomes 

and reduce overall costs. 

We strongly support provisions within the discussion draft that direct 

care to be delivered in a much more comprehensive and coordinated fashion. 

We ask that these provisions more stridently state the need for care coordination, especially at transitions of care and for the chronically ill taking multiple medications, to include medication therapy management services. 

With medications contributing a significant cost to any health plan, including 

Medicare and Medicaid, the integration of clinical pharmacy services, including 

medication therapy management, across the continuum of care is integral to improving medication-associated outcomes and controlling costs. 

We recommend that your proposed medical home pilot be expanded to be 

the standard of care for both Medicare and Medicaid patients. 

This coordinated, team-based approach has the ability to focus care on the needs 

of a disease-specific patient population as well as a general community/service area. 

This is due to the recognition that including the appropriate community-of-care providers focused on the needs of the patient population being served improves health 

outcomes and can reduce costs associated with care delivery. Academic pharmacy 

is actively engaged with these policy concepts. Faculty are currently working with 

hospitals to reduce readmissions due to medication-related problems that should 

have been addressed at discharge. Pharmacy faculty work with family physicians, 

their patients, and their patients’ caregivers to improve the management of prescribed medications, which improves medication-related outcomes and prevents 

medication-related problems that may lead to emergency room visits or hospital admissions. 

This team-delivered care can be accomplished within a variety of contexts including those that utilize telehealth which makes your interest in 

increasing the access to telehealth all the more important to remain in 

final legislation. 

Elderly and chronically ill populations account for a significant cost to any health 

plan or delivery system and assistance with the management of their medication 

use has been shown to improve health outcomes, reduce unnecessary care across the 

continuum of care, and reduce the overall cost of care delivery. 

AACP supports the establishment of a Center for Comparative Effectiveness. We recommend that the national research agenda include the comparison of practice patterns. 


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This is important in developing the evidence-base associated with support for 

team-based, patient-centered approaches to care delivery. For example, team-based, 

patient-centered care is important in improving the management of the chronically 

ill and patients at transitions of care. The results of this type of research are much 

more amenable to the development of quality measures to assist providers in the 

delivery of evidence-based care. 

We ask you to clearly state that the results of comparative effectiveness 

research should not necessarily be focused on payment issues that have the 

potential to reduce provider participation in research networks required 

for this type of work. 

Inclusion of all the stakeholders in the development of this national research agenda will be important. Therefore, legislative language should 

clearly state that all health professionals, not just physicians, are expected 

to have a seat on the Commission. 

We strongly support the expansion of prevention and wellness programs 

and services into the Medicare and Medicaid programs. 

The Committees should stress the importance of increasing access to all public 

health interventions across a wide range of health professionals, including pharmacists. Expanded access to prevention and wellness programs and services through 

a wide range of health professionals increases the chances that a patient will make 

the behavioral change necessary to become more responsible for their individual 

health and that of their community. 

Public Health and Workforce Development 

Increasing access to high-quality care at an affordable price will require a substantial reorganization of our health care delivery system. As we know, the United 

States spends more and receives less compared to other industrialized nations when 

it comes to many common population health measures. The final division of the discussion draft does little to support the reorganization of health professions education toward the creation of professionals prepared to collaborate and provide culturally competent, team-based, patient-centered care, supported by informatics. 

The Committees could do much more toward this end by reauthorizing 

the Public Health Service Act Title VII health professions programs and requiring all the programs to be interprofessional in nature to the extent possible. 

Until the Federal financial support for health professions education is focused on 

meeting the IOM recommendations stated in its 2003 report, ‘‘Health Professions 

Education: A Bridge to Quality,’’ efforts to move toward an interprofessional health 

professions education model will languish since Federal policy may give the impression that it is not of high importance. 

The Institute of Medicine defined primary care back in 1978, revised the definition in 1984 and again in 1994. The rationale for the 1994 revision was to create 

a definition ‘‘that recognizes two important trends: the greater complexity of health 

care delivery and the greater interdependence of health professionals.’’ http://www. 

nap.edu/openbook.php?recordlid=9153&page=5. 

The 1994 IOM definition reflects primary care as a concept incorporating the 

‘‘main, chief, or principle’’ aspects of health care delivery and moves beyond the 

‘‘first-contact’’ concept that suggests an initial interaction and then triage to the appropriate level of care. http://www.nap.edu/openbook.php?recordlid=9153&page=9. 

‘‘Primary care is the provision of integrated, accessible health care services by clinicians who are accountable for addressing a large majority of personal health care 

needs, developing a sustained partnership with patients, and practicing in the context of family and community.’’ IOM 1994 http://www.nap.edu/openbook.php?record 

lid=9153&page=15#p20003779ddd0000023. 

Over several decades, the United States Congress, recognizing the benefit to both 

individuals and communities of increased access to primary care, passed key legislation that authorized programs intended to increase access to primary care. The need 

to provide rural and underserved communities access to primary care was the rationale for establishing the National Health Service Corps. Increasing the supply of 

primary care providers created programs authorized under Title VII of the Public 

Health Service Act. Both of these Federal programs are focused on who is eligible 

to provide primary care. The legislative language makes primary care the responsibility of certain health care professionals. Both of these programs were established 

prior to the widespread appreciation, supported by IOM primary care definition revisions, of the multidimensional aspect of primary care. 

The effectiveness of these programs is further questioned in light of the 2003 IOM 

report that indicates that health care professionals competent in team-based, patient-centered practice may be one opportunity to close the quality chasm. The NaVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00304 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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tional Health Service Corps program, with its placement of those health care professionals deemed primary care providers through statute, makes no attempt to recognize the multidimensional aspect of primary care. It focuses solely on a health care 

professional. The negative aspects of this focus can and frequently does leave the 

designated provider isolated both from providers of his or her own profession, but 

more importantly, from those providers with whom he or she might establish a 

team-based, patient-centered approach to primary care delivery in keeping with the 

IOM’s current definition of primary care. 

There are Title VII programs that, at least legislatively, recognize that the complexity of our health care system creates significant need for health care professionals to be educated through interprofessional approaches that establish teambased care as an acceptable and appropriate expectation upon graduation. 

The area health education centers (AHEC), geriatric education center (GEC), and 

HIV education center programs all address an area of national significance—primary, geriatric and HIV care, respectively—the quality of which is improved by increasing the competence of health professions students to practice as teams focused 

on the needs of the patients for which they provide care. What is of concern is that 

the currently operating programs that Congress established to address past issues 

of national significance are not being readily considered as opportunities, through 

reauthorization and recommitment, for addressing new (or incompletely addressed) 

issues that impact the ability or willingness of our Nation’s health professionals to 

provide recommended care more than 50% of the time that is evidence-based, culturally appropriate, and that recognizes both individual and community determinants of the patients health status. 

Therefore, the Committees should first consider how existing health professions education programs, such as those authorized within Title VII, 

could, through reauthorization and recommitment, more readily address 

the development of team-based approaches to care, as well as test the assumptions of the benefits of this approach to quality, cost, and access. 

One recommendation would be for all Title VII programs, to the extent 

possible, support interprofessional education of health professionals that is 

focused on team-based, patient-centered approaches to care. 

The focus of that care could easily address health care issues that remain important to the Nation as a whole, such as primary, geriatric, and HIV care, as well as 

addressing new issues such as chronic illness, medication therapy management, and 

wellness and prevention. Such an approach would reduce the opportunity for duplication of programmatic intent, increase buy-in to change from existing stakeholders, 

and build a team-based approach to policy development between current program 

and new proposal stakeholders. 

Academic pharmacy is a rich resource that has provided much of the medicationrelated evidence-base used to support many of the provisions within the proposals 

offered by your Committees, as well as those in the Affordable Health Choices Act. 

Pharmacy faculty remain committed to working with your Committees to ensure 

that new evidence is readily transmitted to policymakers and health care professionals so that our Nation’s health care system continues to meet the needs of the 

patients it serves. Please do not hesitate to contact me to discuss how AACP and 

its members can be of assistance. 

Sincerely, 

William G. Lang IV, MPH 

VP Policy and Advocacy 

f 

American Association of Colleges of Pharmacy 

Statement of the American Farm Bureau Federation 

The Ways and Means Committee, Energy and Commerce Committee and Education and Labor Committee recently released a health care reform discussion draft. 

The draft document suggests bold new programs such as a health insurance exchange, a public health insurance option, a personal responsibility coverage requirement and an employer requirement to provide coverage. Many items in the discussion draft are of interest to our Nation’s farmers and ranchers. 

Farm Bureau supports health care reform that improves and builds on our current health care delivery system. We believe that health care is primarily the responsibility of individuals and support efforts to provide all Americans with access 

to quality and affordable health care. We support the promotion of personal 

wellness, fitness and preventive care as basic health goals. We oppose compulsory 


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national health insurance and any national health plan and favor instead tax incentives and market reforms that will expand health care coverage. Farm Bureau supports direct government financial assistance for those unable to pay for their own 

health care. 

Rural Health Care 

Farm Bureau believes that any health care reform must address the disparities 

that exist between rural and nonrural communities. There continues to be a critical 

shortage of health care facilities and qualified health care professionals in rural 

areas. According to the Department of Health and Human Services, 20 percent of 

Americans live in rural areas while only 9 percent of physicians in America practice 

in those settings. In addition, many rural residents depend on small rural hospitals 

that face unique health care delivery challenges due to their size and case-mix. 

Transportation needs are also pronounced among rural residents, who face longer 

distances to reach health care. As a result, data shows rural residents are less likely 

to receive recommended preventive services and report, on average, fewer visits to 

health care providers. 

Farm Bureau supports equitable Medicare payment rates to rural hospitals and 

physicians as one way to preserve and expand health care services in rural areas 

and supports rural access protection provisions contained in the discussion draft. 

Prior to 2003, Medicare reimbursements for rural providers were lower than those 

for urban and suburban providers disadvantaging those who live in nonmetropolitan 

areas. Since then, the inequity has been corrected through a series of temporary legislative fixes that need to be made permanent. This is especially critical if Medicare 

reimbursement rates become the basis for establishing payments for other service 

providers and health care professionals as proposed. 

Farm Bureau believes that Health Information Technology (HIT) has the capacity 

to transform our Nation’s health care delivery system into a higher-quality more efficient system. The discussion draft contains an important new initiative to expand 

and enhance Medicare beneficiary access to telehealth services. Such programs will 

aid the many rural Americans who are unlikely to enjoy the benefits of HIT due 

to the current lack of access to advanced telecommunications services in their communities. We caution against provisions that would penalize rural areas that are 

technically unable to rapidly employ health Internet technology. 

Farm Bureau supports government programs and incentives that encourage 

health care professionals to practice in areas without adequate medical care, many 

of which are in rural America. We support provisions contained in the draft proposal 

that would increase scholarships and loans to students who agree to provide health 

care services in medically underserved areas after graduation. 

Individual Requirements 

Health care reform must not only address access but also cost. Farming and 

ranching businesses operate on tight profit margins and are cyclical, with unprofitable years nearly as common as profitable ones. Health insurance costs are an ongoing and significant expense for farmers and ranchers and for this reason we oppose 

compulsory health insurance in the form of an individual coverage mandate. 

A high proportion of farmers and ranchers are self-employed individuals, and as 

such purchase their own health insurance. We are concerned that prescribing national minimum benefit requirements will increase the price of insurance. When 

coverage is out of reach because of cost, imposing a 2 percent tax on adjusted gross 

income will only create greater financial hardship for our Nation’s farms and 

ranches and the families they support. The discussion draft allows individuals and 

their dependents to keep current coverage and indefinitely continue their health insurance policies allowing them the option to continue coverage that they can currently afford. 

Farm Bureau supports tax incentives that help individuals pay for health care 

and afford health insurance for their families. We recommend continuation of the 

tax deduction for health insurance premiums paid by the self-employed and, because 

many farmers and ranchers pay as much or more in self-employment taxes as they 

do in income taxes, we recommend that a deduction also be allowed against the 15.3 

percent self-employment tax. We support eliminating the 7.5 percent adjusted gross 

income threshold so that all medical expenses are deductible and expanding tax incentives for health savings accounts (HSAs). We are opposed to proposals to limit 

the deductions for HSAs and out-of-pocket medical expenses. 

Employer Requirements 

Any health care reform passed by Congress must not unduly burden farm and 

ranch businesses who employ others or impose costs that they cannot afford. As 

stated before, farming and ranching businesses operate on tight profit margins and 


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are cyclical. Requiring employers to provide insurance coverage or pay a tax equal 

to 8 percent of payroll will put added financial strain on already struggling farm 

and ranch businesses. Any new tax is troubling because, like insurance premiums, 

payment will be due whether or not a farm or ranch business turns a profit. For 

this reason, we do not support an employer mandate to ‘‘play or pay.’’ 

Farm Bureau supports tax credits to help farmers and ranchers who struggle to 

provide insurance for their employees. The discussion draft proposes an important 

employer exemption for certain yet-to-be-defined small businesses and would create 

tax credits for small employers to help with insurance costs. It also contains an important 5-year grace period for current group health plans. Farm Bureau supports 

both a small employer exemption and tax credits and asks that small farm and 

ranch employers not be disqualified from eligibility because they hire seasonal or 

temporary workers. 

Many farms are small businesses with large labor needs for only a very short period of time. For example, a small farmer with 50 acres of cherries might have no 

full-time employees other than family members and yet hire 60 or 70 workers for 

2 or 3 weeks per year. It will be counterproductive to the goal of expanded coverage 

to deny tax credits to small businesses that temporarily exceed employment thresholds. For small farm and ranch businesses, the administrative and financial burden 

of providing a health care program for temporary or seasonal workers would be 

truly overwhelming. 

There is also uncertainty about whether or not affordable short-term coverage will 

be available for temporary or seasonal agriculture workers, some of whom may be 

employed on multiple farms or ranches for just a few days each. In cases where a 

seasonal or temporary worker has multiple employers, there are questions about 

who would be responsible to purchase health insurance and how coverage would be 

coordinated to avoid duplication and unnecessary expense. Farm Bureau believes 

seasonal and temporary workers should be exempt from employer provided health 

coverage requirements. 

Market Reforms 

The discussion draft proposes the creation of a health insurance ‘‘exchange’’ to 

make it easier for individuals and employers to compare and purchase insurance 

products. Farm Bureau believes that an exchange will increase the availability, 

quality and affordability of health care without the creation of a public insurance 

option. Farm Bureau supports efforts to foster health care competition but believes 

that such an exchange should not preempt State regulation or the authority of 

States to determine coverage requirements. 

Another market reform supported by Farm Bureau is the creation of voluntary 

regional insurance purchasing cooperatives to expand the availability of insurance 

coverage. Pooling arrangements would allow business owners to join together to purchase health insurance at lower rates, expand health care options and lower administrative costs. It is important to Farm Bureau that such cooperatives remain subject to State regulation. 

Sugar-sweetened Beverage Tax 

Farm Bureau is concerned about the proposal to use a sugar-sweetened beverage 

excise tax to fund health care reform. We oppose taxes on any agricultural commodity to fund health care programs. The obesity problem in this country is rooted 

in many factors, including a lack of exercise and poor nutrition education. Taxing 

sugar-sweetened beverages is an oversimplified attempt to address a health issue 

that goes far beyond consumption. 

f 

Statement of the American Society for Clinical Pathology 

On behalf of the American Society for Clinical Pathology (ASCP), we commend 

you and the Committee for its leadership and efforts to reform health care delivery 

in America. ASCP concurs with you about the need and urgency to reform the way 

health care is provided in the United States. Moreover, it is imperative that efforts 

to reform health care address many of the long standing inefficiencies and inequities 

that have plagued our health system for years. 

The ASCP is a 501(c)(3) nonprofit medical specialty society representing 130,000 

members nationwide. Our members are board certified pathologists, other physicians, clinical scientists, certified medical technologists and technicians, cytotechnologists, and educators. ASCP is one of our Nation’s largest medical specialty societies 

and is the world’s largest organizations representing the field of laboratory medicine 

and pathology. As the leading provider of continuing education for pathologists and 


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medical laboratory personnel, ASCP enhances the quality of the profession through 

comprehensive educational programs, publications, and self-assessment materials. 

ASCP would like to begin by offering some comments on self-referral, an issue 

that has received some attention in discussions regarding what should be involved 

in health care reform but not with the breadth and scope we believe is necessary. 

Following these comments, we offer ASCP’s views on a number of the policies options that have been brought up in congressional discussions surrounding health 

care reform. 

Self-Referral 

ASCP firmly believes that health care reform discussions to date have not adequately explored the impact of self-referral on the increasing utilization of medical 

and health care services and the need for Stark law reform, specifically as it relates 

to the exclusions contained within the law’s in-office ancillary services exception 

(IOASE). ASCP is very concerned about the proliferation of a number of arrangements designed to enable referring providers to profit from their referrals. Over the 

last few years, a number of physician group practices have increasingly sought to 

exploit ‘‘so-called’’ loopholes in the IOASE to capture the reimbursement for anatomic pathology services. 

Last year, CMS inadvertently opened the door for additional self-referral billing 

abuses. We have seen over the last few years a significant increase (41 percent between 2002 and 2007) in charges for and utilization of anatomic pathology services 

(CPT code 88305). We believe much of this increase is caused by self-referral. In 

fact, it was CMS’ concern about abusive billing practices for anatomic pathology 

services that prompted a recent multi-year effort to revise the agency’s anti-markup 

rule. 

As CMS noted in its proposed rules implementing the Stark I law, self-referral, 

markups and certain abusive contractual arrangements can distort rational medical 

decisions, lead to the overutilization of health care services and higher medical costs 

for patients and third-party payers, and ‘‘cause unfair competition by freezing out 

competitors’’ unwilling to engage in such practices. These arrangements can also adversely affect patient welfare as well as undermine patient trust in the medical profession. Patients most likely to be affected by these inappropriate practices are often 

uninsured and those covered by private payers that have not adopted safeguards 

similar to those designed to protect the Medicare program from abusive billing practices. 

In 2007, the Department of Health and Human Services Office of the Inspector 

General (OIG) launched an investigation into anatomic pathology-related self-referral. OIG published three audits of physician group practices to examine their utilization of anatomic pathology services after entering into business arrangements to 

capture pathology reimbursements. These arrangements typically utilized a ‘‘pod 

lab’’ or other contractual joint venture arrangement to obtain the revenues intended 

for the performance of the technical and professional components of anatomic pathology services. 

The OIG audits reveal an alarming increase in the utilization of anatomic pathology services once these group practices were able to capture the pathology-related 

revenues. In the year after the three urology practices entered into arrangements 

allowing them to profit from their referrals, their utilization of pathology services 

increased 699%, 230%, and 26%, respectively. One urology group practice increased 

its per patient utilization of pathology services from one unit of service to almost 

9 units of service. With Medicare reimbursing the examination of a biopsy specimen at about $110 per specimen this represents a cost increase of almost $900 per 

patient. 

In addition, the OIG audits reveal that all of the audited physician groups billed 

significantly more biopsies than the area Medicare carrier paid on average to other 

providers—124%, 65%, and 58%, respectively. It is difficult to justify such significant increases in utilization over a 2-year period on changes in ‘‘clinical practice,’’ 

considering the comparison with the billing practices of other area providers. 

When CMS first started to examine these billing abuses, much of its efforts were 

focused on ‘‘pod labs.’’ These arrangements were described in a 2005 Wall Street 

Journal article. Since then, and due in part to CMS’ initial efforts to curtail these 

abusive arrangements, new arrangements known as in-office histology laboratories 

have been established by a number of physicians ordering anatomic pathology services to enable them to exploit the IOASE under the guise of ‘‘enhanced patient care.’’ 

The IOASE was intended to allow referring physicians to bill for services that are 

provided during a patient visit. Anatomic pathology services, however, are not ancillary services in that the proper processing of biopsied tissues is time consuming and 

cannot be performed during the patient visit. As anatomic pathology is not truly an 


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ancillary service, ASCP strongly encourages the Committee to remove anatomic pathology from the Stark Law’s IOASE. 

Physician Quality Reporting Initiative: 

Allowing Participation in a Maintenance of Certification Program 

ASCP strongly supports amending the Physicians Quality Reporting Initiative 

(PQRI) to allow physicians participating in maintenance of certification (MOC) program to receive PQRI incentive payments. As a certification agency for nonphysician 

clinical laboratory professionals we can attest to the important role that such programs can have on quality. Another reason we believe that allowing for participation in a MOC program is warranted is the concern that inter-specialty payment 

differentials could steer the next cadre of physicians away from specialties that lack 

approved quality measures, raising the prospect of shortages within these specialties. Given the difficulty of developing quality measures for all physician specialties 

and subspecialties, we believe allowing for participation in a MOC program is appropriate. 

ASCP supports incentive payments for physicians participating in initiatives to 

improve quality, such as the PRQI. While we have concerns about what we believe 

are design flaws with the program, we believe that patient care is best enhanced 

by the extension of the PQRI incentive payments. One of our concerns with the 

PQRI relates to those physician specialties or subspecialties that are not served by 

an approved quality measure, such as molecular pathology. Consequently the payment structure of PQRI can adversely affect the reimbursement prospects of certain 

physicians through no fault of their own. We do not believe that this is fair, especially since options under consideration by Congress for the incentive program call 

for cutting physician reimbursement in 2013–2014 for those physicians that do not 

participate in the program. Allowing physicians to participate in MOC programs removes this problem with the PRQI. 

Transparency and Evidence-Based Decisionmaking for Imaging Services: 

Transparency in Self-Referrals 

ASCP is concerned about the limited scope of proposals to require physician disclosure of financial interest in certain imaging services provided to patients through 

the IOASE. ASCP believes that it is clear that abuse of the IOASE is occurring. 

While Congress’ interest on this issue seems to be focused largely on self-referral 

related to imaging and physician-owned hospitals, self-referral, especially as it relates to abuse of the IOASE, is a growing problem for a number of physician services. 

If Congress truly wishes to rein in utilization increases resulting from self-referral, it must act to amend the in-office ancillary services exception to remove those 

services from the list that are not truly ancillary services, such as anatomic pathology. 

Promotion of Adherence to Appropriateness Criteria for Imaging Services: 

Transparency in Self-Referrals 

ASCP appreciates congressional interest and efforts to curb abusive billing practices, such as abuse of the IOASE. While we appreciate the intent of this proposal 

to address self-referral of imaging services by providing lower differential payments 

to ordering providers, this proposal will ultimately fail to stop billing abuse, overutilization, and its accompanying increases in health care costs. 

So as long as the differential payment still provides the ability for a referring provider to profit from his or her referrals, self-referral will likely continue. We believe 

that it would be more effective to reexamine the Stark law’s IOASE or to reexamine 

certification of need requirements. Some of the services that are currently listed in 

the in-office ancillary services exception, such as pathology, are not truly ancillary 

services—services that can be performed on the patient during a patient visit. For 

example, anatomic pathology services require extensive and time-consuming processing that prevents the analysis of biopsied tissue during a patient visit. We 

strongly recommend removing anatomic pathology from the IOASE. 

Chronic Care Management Innovation Center 

With regard to proposals to establish a Chronic Care Management Innovation 

Center at CMS, ASCP is concerned about proposals to utilize a ‘‘standard process 

that would be developed to evaluate the design and performance of payment models 

under consideration for broad-scale testing.’’ Our concern here is that the criteria 

that may be most appropriate to evaluate one demonstration project, may not be appropriate for other projects. We are particularly concerned about the criteria that 

may be adopted to assess quality during a demonstration. For example, during one 


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recent demonstration project, CMS relied on a measure akin to accreditation status, 

which fails to allow for a quantitative assessment of the facilities performance during the course of a demonstration project. 

The Sustainable Growth Rate 

ASCP believes that the Sustainable Growth Rate (SGR) should be repealed this 

year and replaced with an updated system that reflects increases in physicians’ and 

other health professionals’ practice costs. A realistic budget baseline for future 

Medicare payment updates that accurately reflects the anticipated costs of providing 

physicians with positive updates under a new update system in lieu of SGR-related 

cuts should be incorporated into the Federal budget. 

Should Congress and the Administration decline to repeal the SGR this year, it 

should adopt a transitional approach that does the following: 

• Establish by law a roadmap for complete replacement of the SGR by 2015. 

• Provide stability and predictability with positive, funded updates from 2010– 

2015 set by statute and linked to the Medicare Economic Index (MEI) for each 

year until a replacement takes effect. 

• Establish a realistic baseline for Medicare spending on physician services that 

eliminate the assumption that SGR-driven cuts will be implemented, thereby 

greatly reducing the score assigned to legislation to repeal the SGR. 

• Use regulatory authority to remove physician-administered drugs from the SGR 

from 1996 on to help reduce the cost of repeal. 

• Use regulatory authority to adjust the Medicare Economic Index to include all 

the costs of a current medical practice and use realistic productivity assumptions. 

Encouraging Health IT Use and Adoption in Support of Delivery System 

Reform Goals 

Laboratory medicine and pathology is responsible for 60–70 percent of all patient 

diagnoses and treatments, and yet it is responsible for less than 2 percent of overall 

Medicare spending. Pathology and laboratory medicine’s contributions are regularly 

overlooked. Pathology and laboratory medicine, along with pharmacy and imaging, 

is one of the areas of health care best positioned to contribute to Health Information 

Technology systems and Electronic Health Records (EHRs). Much, if not most, of the 

data that will likely be contained in patient EHRs will be pathology and laboratory 

test data. 

We suspect that much of the EHR records submitted by hospitals to qualify for 

Medicare EHR incentive payments will come from the hospital clinical laboratory, 

possibly even when the hospital has contracted out for much of its laboratory services. Moreover, since an independent clinical laboratory owned and operated by a 

pathologist appears to be eligible for the Medicare EHR incentives, it seems odd, 

and unfair, that other independent clinical laboratories would not be able to qualify 

for the incentive program. We believe that this could slow the adoption of HIT/EHR. 

As a result, ASCP encourages the Committee to allow all independent clinical laboratories to qualify for EHR incentive payments. 

Physician Payment Sunshine 

ASCP supports transparency in the relationship between providers and manufacturers; however we do not believe that this proposal has sufficient breadth. ASCP 

believes that physician self-referral is a major issue and one that is responsible for 

a large share of the increases in health care costs, particularly with respect to increased utilization of health care services per patient. As a result, ASCP believes 

that provider submission of payment and ownership information should be extended 

to physicians ordering medical services through other physicians, providers, or entities with or in which they have an ownership or financial interest. 

One of our concerns has been the increasing utilization of anatomic pathology 

services by physicians in a position to profit from (markup) their referrals. We suggest that as part of the reform process, CMS be required to revise its Medicare 

claims forms to better capture information that would reveal when providers or entities, such as independent clinical laboratories, are billing for services by a provider 

or group practice that has an ownership or other financial interest in that laboratory or entity. We believe that this latter proposal will help shed more light on the 

problems that can be caused by pod labs and in-office histology (technical component) laboratories, both of which can facilitate physician self-referral. Moreover, 

these entities may be responsible for the significant increases in charges and utilization of anatomic pathology services (CPT 88305). 


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Developing a National Workforce Strategy 

ASCP believes there is an urgent need to develop a national workforce strategy. 

ASCP shares the concerns expressed by the American Association of Medical Colleges (AAMC) that physician shortages could impede our Nation’s health care reform efforts. Recent findings from AAMC’s Center for Workforce Studies project that 

an enrollment increase of 6,000 in medical and osteopathic schools between 2002 

and 2013 would not be enough to ameliorate the estimated shortage of as many as 

100,000 physicians or more in the coming years. Furthermore, medical school enrollment increases will not lead to net increases in the physician supply without a corresponding increase in residency training positions. 

In addition, ASCP does not believe sufficient attention or funding is being provided for documented allied health professions shortages, such as for clinical laboratory professionals. A recent report on allied health personnel shortages (including 

nursing) in California was conducted by Health Workforce Solutions for the Campaign for College Opportunity. The report concluded that the profession experiencing the greatest need was technologist-level laboratory practitioners. Unfortunately, over the last few years many of the accredited clinical laboratory programs 

training our next cadre of laboratory professionals have closed, further eroding our 

Nation’s ability to address staffing shortages. With laboratory professionals responsible for performing the laboratory tests that account for 60–70 percent of medical 

diagnoses and treatments, increased government attention to this shortage is in the 

Nation’s best interests. 

Health Insurance Benefit Options 

We urge Congress to make sure that when legislating the benefits required for 

insurance plans, that the list of covered services includes clinical laboratory diagnostic testing and screening. It is necessary to include laboratory services to ensure 

that all insurance plans provide coverage for these services. Laboratory services are 

essential for prompt and effective patient diagnoses and treatments. Further, clinical laboratory testing is a key component of preventive medicine and failure to specifically cover these services could undermine the Committee’s previously stated 

goals to emphasize prevention and wellness. 

Promotion of Prevention and Wellness in Medicine 

Given the importance of laboratory testing to early, more affordable diagnoses and 

treatments, we believe it is necessary to specifically add the performance of appropriate clinical laboratory testing as a central component of a Medicare comprehensive health risk assessment and personal prevention plan. 

Incentives to Utilize Preventive Services and Engage in Healthy Behaviors 

Regarding congressional proposals to remove or limit cost-sharing (copayment, deductible or both) for preventive services covered under Medicare and rated ‘‘A’’ or 

‘‘B’’ by the U.S. Preventive Services Task Force (USPSTF), we do not believe that 

USPSTF should solely be tasked with such determinations. Other groups such as 

the Advisory Committee on Immunizations Practices, Institutes of Medicine, the 

Centers for Disease Control and Prevention, National Institutes of Health, medical 

specialty associations, patient care groups, scientific societies and the Clinical Laboratory Improvement Advisory Committee should be added. 

We note that the USPSTF’s recommendations do not call for annual screening of 

individuals 30 and older who are at risk for having or developing type 2 diabetes 

mellitus or screening all patients with diabetes mellitus for chronic kidney disease 

annually, both of which is recommended by the American Association of Clinical 

Endocrinologists. We believe that such screening is justifiable not only from a proper patient care perspective but also on cost benefit grounds. 

Moreover, we believe that it would be beneficial for recommendations from the 

USPSTF and the aforementioned groups to be reviewed and approved by the National Quality Forum consensus standards process for inclusion in CMS’ pay-for-performance incentive program. 

ASCP also believes that patient care would be enhanced by broadening the current composition of the USPSTF, which is comprised solely of primary care physicians, to include other specialties and public health professionals. 

Adjusting Reimbursement for High-Growth, Over-Valued Physician Services 

ASCP believes that physician and other health care services, such as clinical laboratory tests, should be rationally and adequately valued. While the proposal to adjust reimbursement may have merit, we have concerns about several congressional 

proposals that have received attention. Unless reform clearly allows for readjusting 

reimbursement for those services that are currently undervalued, these reforms will 


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1 International Education and Research Center. Preliminary Report #1. U.S. Expatriates Residing in Mexico. Mexico DF, 2008. 2Dr. David C. Warner. Medicare in Mexico: Innovating for Fairness and Cost Savings. University of Texas, LBJ School of Public Policy, Austin, TX. 2007. 

lack rationale and have the potential to adversely affect access to important health 

care services. An effort that focuses solely on those services that are overreimbursed 

could limit access to essential services as providers may elect not to provide those 

services that are underreimbursed. 

Modifying Beneficiary Contributions: 

Making Beneficiary Contributions More Predictable 

ASCP is concerned about the discussions to apply a 20 percent copay to all Part 

B Medicare services, such as clinical laboratory services. We believe applying a 

copay to clinical laboratory services is ill-advised for several reasons. First, because 

laboratory services are ordered by the patient’s physician and not the patient, a 

copay on laboratory services would not likely result in sufficient savings, which is 

part of the rationale for a copay. Additionally, laboratory services are a key component of preventive medicine and applying a copay to these services could undermine 

the Committee’s previously stated goals to emphasize prevention and wellness. It 

would shift an entirely new cost burden, approximately $24 billion, to Medicare 

beneficiaries. 

We note that the Institute of Medicine (IOM) considered this issue as part of its 

2000 report Medical Laboratory Payment Policy and noted that ‘‘cost sharing could 

create a barrier to appropriate use of laboratory services for chronically ill and financially disadvantaged beneficiaries, which could ultimately lead to greater program costs if deferred testing delays diagnosis and leads to more costly treatment.’’ 

IOM recommended against imposing a copay on clinical laboratory services, concluding that because of the administrative costs and burdens . . . , cost sharing for 

laboratory services is inconsistent with its goals for a laboratory payment system 

that ensures beneficiary access and maintains administrative simplicity.’’ 

ASCP appreciates this opportunity to provide comments on the Committee’s efforts toward health care reform. If you have any questions about our comments, 

please do not hesitate to contact Matthew Schulze, ASCP’s Senior Manager for Federal and State Affairs, at (202) 347–4450 or by email at matthew.schulze@ascp.org. 

f 

Statement of Paul Crist 

Americans for Medicare in Mexico, A.C. is an organization formed in Mexico by American citizens living either full-time or part-year in Mexico, who 

support and promote a Medicare Demonstration Project in Mexico. These 

individuals continue to vote and participate in other civic activities as U.S. 

citizens, as allowed under State and Federal elections laws. 

The need to cap spending and to find innovative reforms that reduce Medicare 

program costs is well documented. Actuarial data predicting a looming deficit and 

eventual insolvency of the Medicare Trust Fund make it ever more urgent to find 

savings as the percentage of seniors in the U.S. population increases and health 

care costs continue to climb. 

Based on data from a number of sources, a strong argument can be made 

that providing Medicare benefits to eligible beneficiaries in Mexico would 

result in substantial savings to the Medicare Trust Fund. 

Mexico is home to at least 800,000 American citizens (and many estimates exceed 

1 million). Based on recent demographic studies, over 200,000 of these people are 

60+ years old, and thus at or near eligibility for Medicare benefits. In addition to 

these full-time, year-round seniors living in Mexico, an estimated 40% to 60% more 

live in Mexico for part of the year (under tourist visas).1

Besides a moderate climate and warm and welcoming Mexican people, the cost 

of living is attracting thousands of retirees south of the U.S. border every year. In 

most of the well-known, popular, and safe American communities in Mexico, such 

as San Miguel de Allende, Lake Chapala, and Puerto Vallarta, retirees can live comfortably on a modest income. Even a U.S. Social Security check is enough to get by 

on. According to one survey of expatriate seniors, the median household income for 

this group is only US$35,000.2


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3Tricia Neuman, Juliet Cubanski, and Anthony Damico. Medicare: Revisiting ‘‘Skin in the 

Game’’ Among Medicare Beneficiaries; an updated analysis of the increasing financial burden of 

health care spending from 1997 to 2005. Henry J. Kaiser Family Foundation. February 2009. 

Lack of access to the Medicare benefits for which they’ve paid is the top 

concern for seniors living in Mexico or considering retiring there. For seniors 

who have paid into the Medicare Trust Fund during their entire working lives, it 

is unfair to shut them out from coverage based on where they live. Many choose 

Mexico because they find it increasingly difficult to manage on a fixed retirement 

income in the United States, so the decision to retire to Mexico is frequently an economic one. 

Further, obtaining private insurance in Mexico is extremely difficult for anyone 

with a preexisting condition (which describes most seniors). Even high cholesterol 

or blood pressure can shut the door on insurance coverage. And for those over 75, 

private insurance is essentially unavailable in Mexico. 

This testimony will show why providing Medicare to eligible seniors in 

Mexico is a win-win proposal. 

Health care costs in Mexico are a fraction of those in the United States, while 

large majorities of seniors report high satisfaction with the quality of care. Lowercost health care services provided in Mexico means Medicare wins by saving money. 

Seniors in Mexico win, because they’ll have access, where they live, to the high-quality services they’ve paid for during their working years. 

Medicare Program Cost-Savings Analysis for a Demonstration Project Providing Medicare Benefits to Eligible Beneficiaries Residing in Mexico 

Based on data from a number of sources, a strong argument can be made 

that providing Medicare benefits to eligible beneficiaries in Mexico would 

result in substantial savings to the Medicare Trust Fund. 

According to a report by the Kaiser Family Foundation, Medicare spent on average $6,255 per beneficiary on health items and services in 2005.3 The following 

chart from that study, based on the CMS Medicare Current Beneficiary Survey, details the changes in Medicare spending between 1997 and 2005. It highlights 

unsustainable cost increases for Medicare (53.2% increase), for beneficiaries (53.0%), 

and for third-party payers (73.4%) during the period. 

Cost increases for all payers (Medicare, third-party, and beneficiaries) are 

at an unsustainable level. Medicare must look to every available innovation 

for cost savings for all three payer groups. 

For the approximately 200,000 seniors living in Mexico, the provision of Medicare 

benefits would result in substantial savings to the Medicare Trust Fund, to beneficiaries, and to any third-party payers providing Medicare Supplementary Policies 


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4Dr. Rodrigo Garcı ́a Verdu ́. Resultados de la Encuesta de Percepcio ́n entre Ciudadanos 

Estadounidenses y Canadienses Residentes en Me ́xico. Secretaria de Hacienda y Cre ́dito Pu ́blico; 

Unidad de Seguros, Pensiones, y Seguridad Social. September 2008. 

to this group. It would also resolve a serious issue of access and utilization of health 

care services by this group of seniors, thus improving health outcomes. 

In September 2008, the Mexican government published the results of a survey of 

expatriate U.S. and Canadian residents in Mexico.4 In that survey, which sought 

to identify the major obstacles faced by immigrating foreigners into Mexico, 80% of 

respondents were U.S. citizens. Nearly half (48.8%) of respondents were 61 years 

of age or older, and 76.5% were retired. Over two-thirds (71.3%) were year-round 

residents and 28.8% were part-year residents in Mexico. 

Over half of the respondents (56.8%) indicated some difficulty with obtaining medical coverage in Mexico, with 17.0% indicating extreme difficulty. And 66.1% had 

paid some amount in medical expenses out-of-pocket, despite having coverage in the 

United States, while 9% claimed never to have visited a doctor in Mexico. 

Nearly eighty-five percent (84.8%) felt that health care costs were lower or much 

lower than in the United States, while 67.3% felt that service was as good as or 

better than that available in the United States. And 82.5% believed that if Medicare 

benefits were available in Mexico, more Americans would retire there. 

Thus, the overwhelming consensus of expatriate seniors living in Mexico 

is that: 

• Obtaining health care coverage in Mexico is difficult for non-Mexican 

citizens, particularly seniors. 

• Health care costs are substantially lower in Mexico than they are in the 

United States. 

• Quality of care is as good as that available in the United States. 

The perception of seniors responding to this survey, regarding costs, is supported 

by solid evidence. Based on our investigations of health care costs for specific, common medical services and procedures, the cost of health care in Mexico does not exceed 35% of that in the United States, and is probably even lower. Obtaining average costs for medical services is difficult, as prices vary widely both in the United 

States and in Mexico, but the following findings make a powerful case that costs 

are much lower in Mexico (see charts, below and next page). 


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5Prices for these procedures and services are compiled from a variety of sources, including 

various online sources and information provided by individual Mexican and U.S. health care providers. In the case of major procedures described in the first chart, prices include estimated 

post-operative hospital stay. Part of the large difference is the very high cost of hospitalization 

in the U.S. relative to Mexico. 

As the preceding charts show with regards to the cost of medical services, it is 

not just the perceptions of expatriate residents that confirm lower costs in Mexico. 

Costs range from 70% to 80% lower in Mexico for common procedures.5 And on averVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00315 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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6Dr. David C. Warner. Medicare in Mexico: Innovating for Fairness and Cost Savings. University of Texas, LBJ School of Public Policy. Austin Texas. 2007. 

age for a broad ‘‘basket’’ of treatments and procedures, Mexican health care costs 

certainly do not exceed 35% of U.S. costs. 

Without doubt, the requirements of additional medical and financial recordkeeping, certification to international standards and improved administration will 

add some costs to Mexican health care providers, and place some upward pressure 

on medical services pricing in the market. However, both the Mexican government 

and the health care industry are already pursuing these innovations. Modest cost 

increases associated with improved administrative capacity are already a fact in 

most urban markets in Mexico. 

Even in the unlikely scenario that Mexican prices climbed to 50% of U.S. prices, 

the potential for Medicare savings would still be large. 

Consider the following: 

1. Assume only 20,000 enrollees in a Medicare Demonstration Project in Mexico. 

2. Assume the worst case scenario that Mexican health care costs climb to 50% 

of U.S. costs. 

3. Using the 2005 Medicare per-beneficiary spending, as shown in the Kaiser report previously cited. 

4. Assume that currently, 64% of Mexico’s expatriate seniors are traveling back 

to the U.S. for major medical care, but would remain in Mexico for care if it 

were covered there.6

Thus, these calculations show a worst case scenario, in which: 

• Health care costs in Mexico increased to 50% of U.S. costs; and 

• Medicare utilization rates in Mexico are 100% of enrollees, compared to an estimated 64% now using Medicare by traveling back to the United States. 

Saves $17,524,000 per year, or a 21.9% cost savings to Medicare! 

However, the savings are likely to be larger. If enrollees in the Mexico Demonstration have a greater tendency to seek early diagnosis, preventive care, and 

wellness management, a portion of the high-cost inpatient care they are now obtaining in the United States could be eliminated. Because seniors in Mexico are currently paying for outpatient services out-of-pocket, it is almost certain they are now 

foregoing early care that would mitigate later inpatient treatments and procedures. 

With a Medicare Part B option available in Mexico, more seniors will seek early 

interventions, reducing costs and resulting in improved health outcomes. When hospitalization is required, Medicare Part A coverage in Mexico will provide the highquality care that seniors deserve and Medicare requires, while saving substantial 

cost. 

What is a ‘‘Medicare Demonstration Project?’’ 

Short Answer: A Demonstration Project is the legal name for a Medicare pilot 

project, or experiment, in a Medicare program innovation. Since Medicare has never 

operated outside the United States, a Demonstration Project is required to prove 

that it can be done. The experiment seeks to prove that it is administratively feasible; that it will be budget neutral or cost saving; that it will result in improved 

health outcomes for participating beneficiaries, etc. 

We are seeking congressional authorization for a Demonstration Project because 

the current legislation does not allow for CMS to implement Demonstration Projects 

outside of the United States. 

More Detail 

Historically, Federal policymakers have understood the need to test new ideas in 

the complex Medicare and Medicaid programs. Research and demonstrations 

projects whether initiated by States, health services researchers, providers, health 

plans, CMS, or Congress often lead to models or reforms available or mandated nationwide. 


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7Medicare in Mexico: Innovating for Fairness and Cost Savings, a study led by Dr. David 

Warner of the University of Texas, LBJ School of Public Policy; 2007. Also, Resultados de la 

Encuesta de Percepcio ́n entre Ciudadanos Estadounidenses y Canadienses Residentes en Mexico, a survey for the Mexican government, undertaken by Dr. Rodrigo Garcı ́a Verdu ́, an economist with the Ministry of Finance. 

Therefore, Federal law permits the Secretary of Health and Human Services to 

waive certain provisions of the Social Security Act and associated regulations as 

needed to conduct demonstration projects in Medicare, Medicaid, or both Medicare 

and Medicaid. Waivers are purely discretionary unless congressional legislation 

mandates a specific project. 

Medicare Waivers Under Sections 402/222 

Under Sections 402/222, the HHS Secretary may waive Medicare statutes and 

rules to demonstrate new approaches to provider reimbursement, including tests of 

alternative payment methodologies, demonstrations of new delivery systems, and 

coverage of additional services to improve the overall efficiency of Medicare or to improve health outcomes for beneficiaries. (Sections 402/222 refer to section 402[a] of 

the Social Security Amendments of 1967, as amended by section 222[a] of the Social 

Security Amendments of 1972.) 

Any organization or individual may propose a Medicare waiver project. This includes providers, health plans, State Medicaid agencies, and health services researchers. CMS maintains an open invitation for outside parties to propose Medicare demonstration projects and the necessary waivers. However, the bulk of Medicare waiver-based demo projects are congressionally mandated in legislation or initiated administratively by CMS. CMS-initiated Medicare demonstration projects are 

often developed at the behest of the HHS Secretary, the White House Office of Management and Budget (OMB), the Medicare Payment Advisory Commission 

(MedPAC), or the Office of the Inspector General. 

Unlike many Medicaid waiver-based projects, most Medicare waiver projects tend 

to be genuine demonstrations projects with a careful research design and evaluation 

methodology. 

Once approved, Medicare waiver projects are administered by CMS either directly, through contractors (e.g., Medicare administrative contractors, Medicare Advantage plans), or (rarely) through States. Except for operational waivers, CMS 

evaluates each demonstration project. Major Medicare demonstrations, including 

congressionally mandated projects, are evaluated by independent health services researchers hired by CMS. 

Every proposed Medicare waiver program must be budget neutral to the Federal 

Government. That is, Medicare under the requested waivers must be projected to 

cost the Federal program no more than expected spending without the waivers. 

There is no set methodology—economic or actuarial—for determining Federal budget neutrality. 

Authority to issue waivers under §§ 402/222 rests with the HHS Secretary. However, all Medicare waivers, regardless of size and scope, require the prior review and 

approval of the White House Office of Management and Budget (OMB). OMB may 

require changes, additional terms and conditions, or reject the proposed waivers. 

Medicare waiver projects initiated by CMS are typically operated for 3 or 5 years, 

depending on how much time is needed to test the policy change. Congressionally 

mandated waivers vary in length, with most 3 to 5 years in length and some indefinite. 

A Brief Look at Health Quality Indices in the United States and Mexico 

In two separate surveys, overwhelming majorities of seniors living in Mexico report high levels of satisfaction with the quality of care available in Mexico.7 But is 

that an adequate measure to determine the quality of available health care in Mexico? 

Another way to assess quality of care may be a comparison of some common indices used to compare health care systems and quality among countries. These comparisons also have certain limitations, however. For example: 

• Differences in health care spending per capita can result in substantial variation in indices of infant mortality, life expectancy, and other measures. In 

wealthy countries, a larger portion of the population may have access to services than in poorer countries, which can skew per capita spending statistics. 

Further, higher spending is not always a guarantee of better health outcomes. 

Thus, per-capita spending statistics must be considered in the context of differences in wealth; differences in income distribution; and cultural differences. 


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• Differences in first-year infant mortality are affected by the percentage of births 

in hospitals or attended by trained health personnel. In a poorer country, more 

births occur in the home or unattended by health professionals, skewing the 

statistics. As a consequence, infant mortality differences between countries may 

not necessarily reflect differences in quality of care when health professionals 

are involved. 

• Similarly, differences in life expectancy may be reflective of wealth and income 

disparity, with associated access and utilization of health care services, rather 

than real differences in the quality of care available in the formal health care 

system. 

Nonetheless, commonly used indices can be helpful guidelines in assessing differences in quality of health care available between countries, with the proviso that 

indices are a snapshot that does not take into account differences in wealth, income, 

income distribution, educational levels, and culture. Given the significant differences 

that exist between the United States and Mexico on these factors, the indices reported by the World Health Organization for Mexico compare favorably with the indices for the United States. 

Data from the World Health Organization Statistical Information System 

Interactive Database of Core Health Statistics for 193 Member Countries 

Per Capita 

Total 

Expenditure 

on Health 

(Purchasing 

Power Parity 

in U.S. $) 

2006 data 

Physician 

Density 

per 10,000 

population 

2006 data 

Healthy Life 

Expectancy 

2003 data 

Life 

Expectancy 

(for persons 

born between 

2005–2010) 

2006 data 

Infant 

Mortality 

(deaths during 

the first year/ 

1000 live 

births) 

2006 data 

U.S.A. $6,714 26.0 69.0 79.0 7 

Mexico $756 20.0 65.0 74.0 29 

The above data reveal some interesting things: 

• A huge difference in per capita total expenditure on health care has only a 

small effect on either healthy life expectancy or life expectancy for those of the 

current generation being born. 

• Differences in physician density per 10,000 population are not large. 

• Infant mortality rates are much higher in Mexico. However, certain infant mortality statistics for Mexico are not readily available: 

• Rates for attended or hospital births for Mexico are known to be much lower 

in Mexico than in the United States. This can be expected to result in higher 

infant mortality in Mexico. 

• Infant mortality rates among the highest wealth and education quintiles in 

Mexico are not available. Attended and hospital births among these groups 

would be substantially higher than the national average, and this would likely be reflected in much lower infant mortality for births among these population sectors. 

• Infant mortality in Mexico has been reduced dramatically. In 1990, the rate 

was 42/1,000 live births. Government programs increasing prenatal care and 

education, expanding access to health services for expectant mothers, and economic growth have expanded access to health care services generally. 

In sum: 

• World Health Organization indices appear to show that Mexico is 

achieving reasonably good health outcomes at very low cost. 

• Expatriate Americans’ perceptions about the quality and cost of health 

care in Mexico are very favorable. 

• Cost comparisons show that health care services cost less than 35% of 

those in the United States. 

• CMS could achieve substantial savings, improve health outcomes, and 

increase beneficiary satisfaction by providing eligible beneficiaries access to high-quality care in Mexico via a Medicare Demonstration Project. 

Submitted by Paul D. Crist, President, 

f 

Americans for Medicare in Mexico, A.C. 


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Association of Ambulatory Behavioral Healthcare 

Dear Mr. Rangel and Committee Members: 

The Association of Ambulatory Behavioral Healthcare (AABH) is providing Public 

Comment by way of this letter on issues related to the Health Reform in the 21st 

Century: Proposals to Reform the Health System. We thank you for the opportunity to comment on this issue. 

The AABH is a national membership organization of Partial Hospital Programs 

(PHP) and Intensive Outpatient Programs (IOP), outpatient hospital treatment providers, free standing treatment providers, administrators, doctors, psychologists, 

nurses, program directors, and front line therapist and support staff who serve as 

educators, case managers, political advocates, and treatment providers of individuals with mental illness and substance use (M/SU). 

The AABH feels that the use of Partial Hospital Programs (PHP) and Intensive 

Outpatient Programs (IOP) to treat mental illness and substance use (M/SU) conditions are proven methods of care and money saving options to inpatient and emergency care for these individuals and should be considered as the primary option to 

manage these conditions effectively and economically. 

The AABH supports the PHP and IOP treatment programs concept within the M/ 

SU continuum of care, flanked by outpatient/assessment services and inpatient/ 

acute services. Medical necessity guidelines determine eligibility for PHP and IOP 

treatment and reflect an acuity level only slightly less severe than inpatient treatment. 

In general, PHP and IOP treatment is effective when deemed medically necessary 

by the treating physician to avert inpatient hospital treatment. The patient must 

be experiencing noticeable impairment in self-care and must be unable to fulfill expected life functions. Patients may also be referred to PHP or IOP as a step-down 

from more expensive inpatient treatment to facilitate base-line functioning. PHP 

and IOP services are known for their ease of accessibility, and low cost treatment 

for individuals with acute and chronic mental illness. 

PHP and the less intensive IOP treatment, engages the patient in diagnostic assessments, symptom management and coping skills education, crisis intervention 

and relapse prevention, and relies on best practices and performance benchmarking 

to provide information as to the efficacy of the treatment programs. 

The continuance of PHP and IOP services within the continuum of care 

is vital, as it allows for patients to be treated in the less restrictive and a 

considerably less costly level of care, to be treated in the community in 

which they live, and takes steps to prevent decompensation of symptoms 

establishing a more positive quality of life. 

The AABH supports reform efforts that assist and establishes integration of the 

best knowledge and expertise available for M/SU treatment and prevention services 

into the health care reform planning process. 

The AABH fully supports utilizing the already proven and effective interventions 

provided through outpatient programs such as PHP and IOP for treating M/SU conditions while new and innovative interventions are being sought. M/SU treatment 

benefits already well exceed costs—for every dollar spent on M/SU treatment, we 

estimate that $7 in future health care spending can be saved. PHP and IOP care 

will save money. 

Partial Hospital Programs (PHP) and Intensive Outpatient programs (IOP) 

Since as early as 1968, PHPs have been providing mental health and substance 

abuse treatment for the Nation’s chronic and disabled mentally ill. Although not 

widely used until the mid 1990s, the PHP was developed as a less costly and more 

accessible treatment option to in-patient hospital care. As the M/SU patient is treated in the environment in which he lives, he is able to live in a stable environment 

and receive outpatient treatment close to his home. The savings are significant 

when the efficacy and cost of a long-term PHP care is set against the efficacy and 

cost of short-term hospital or emergency care. 

Partial Hospital Programs (PHP), and the less structured Intensive Outpatient 

Programs (IOP), are ambulatory, active and time-limited M/SU treatment programs 

that offer therapeutically intensive coordinated and structured clinical services within a stable therapeutic milieu. ‘‘Partial Hospital and Intensive Outpatient’’ implies 

psychosocial milieu treatment with group therapy as the primary treatment modality. While specific program variables often differ, all PHPs and IOPs pursue the 

general goals of stabilizing clinical conditions, reducing symptoms and impairments, 

averting inpatient hospitalization, reducing the length of a hospital stay, and providing medically necessary treatment for individuals who cannot be effectively treated in a less intensive, strictly outpatient level of care. 


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All PHPs and IOPs attempt to employ an integrated, comprehensive and complementary array of evidence-based treatment approaches. Programs are designed 

to serve individuals with severe symptoms and functional impairments resulting 

from M/SU disorders. They are also intended to have a positive clinical impact on 

the individual patient’s support system and therefore the individual’s recovery environment. Treatment services may be provided during the day time, evening time 

and on some occasions, on the weekends. 

PHPs and IOPs may be free-standing, part of a mental health organization, or a 

department within a medical health care system. One of the unique strengths of a 

PHP or IOP is its applicability to a diverse array of circumstances such as clinical 

conditions, patient populations, treatment durations, treatment settings, etc. 

PARTIAL HOSPITAL PROGRAMS and Intensive Outpatient Programs ARE 

INTENDED TO BE COST EFFECTIVE AND: 

• Provide the M/SU patient a way of managing their illness in an environment 

that allows them to remain in their homes and communities; • Provides Continuum of Care options, as these patients require psychiatric care 

of some type for their entire lives; • Provide options, other than inpatient hospitalizations, which are far more restrictive, far more costly, and far less effective; • Provide a cost savings, as untreated mentally ill patients will eventually end 

up in hospital emergency departments, jails, prisons, or become part of the 

growing homeless population. 

The concept of PHP and IOP is to maintain patients with chronic behavioral disorders in a controlled environment, providing psychotherapeutic and pharmacologic 

support on a daily basis, without requiring an inpatient hospitalization. Patients admitted to a PHP or IOP must be under the care of a physician; patients must provide written informed consent for treatment; must require comprehensive treatment 

due to a M/SU disorder which severely interferes with multiple areas of daily life, 

including social, vocational and educational functioning. 

Patients appropriate for the PHP or IOP level of care comprise the following: 

• Discharged from an inpatient hospital treatment program; • In lieu of continued inpatient treatment; or • Patients who, in the absence of partial hospitalization, would require inpatient 

hospitalization. 

Patients admitted to a PHP or IOP are provided comprehensive treatment and 

utilize the same services as inpatient psychiatric care at a greatly reduced cost; the 

treatment directly addresses the presenting symptoms and problems and consists of 

clinically recognized therapeutic interventions including individual, group, and family therapies and activities pertinent to the patient’s illness. Medical and psychiatric 

evaluations and medication management are integral to treatment. 

Admission Criteria to a PHP and IOP 

M/SU patients should be treated in the least intensive and restrictive setting that 

meets the needs of their M/SU illness. If patients do not require a 24-hour per day 

level of care, as provided in an inpatient setting, the PHP outpatient level of care 

is the perfect setting to prevent inpatient hospitalization. The M/SU patients being 

treated in a PHP or IOP receive active treatment through a combination of services 

such as psychotherapy, occupational, activity therapy and medical interventions as 

necessary. 

Patients admitted to a PHP or IOP must have an acute onset or decompensation 

of a covered Axis I mental disorder which severely interferes with multiple areas 

of their daily life and will have a degree of impairment that is severe enough to 

require a structured program. 

Services Provided in a PHP or IOP 

• Medically necessary diagnostic services related to M/SU. • Individual or group therapy; Occupational therapy. • Drugs and biologicals that cannot be self-administered. • Individualized activity therapies that are essential for progress toward treatment goals. • Treatment plans noting how each therapy fits into the treatment of the patients 

illness. • Family counseling to assist the family members in helping the patient. 

• Patient education where activities are related to the care and treatment of the 

patient. 

• Diagnostic services for the purpose of identifying problem areas. 


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M/SU conditions are tied to physical health and can be addressed like other 

chronic and acute conditions in order to provide efficacious health care. Ignoring one 

is likely to compound the other. However, for people that need M/SU treatment 

services the services vary widely. An effective health care delivery system must provide: 

• Providers who are paid for providing services with desired outcomes; 

• A comprehensive range of services; 

• The full continuum of care, including PHP and IOP services; 

• Service to those with both acute and chronic condition; 

• Service to a wide and varied population—some will present themselves, some 

will be delivered into the system, and some the system will need to seek out 

and serve. 

Summary: PHP and IOP Included in Health Care Reform 

PHPs and IOPs have evolved over the years until their current status as an instrumental part of the behavioral health continuum. Clients are referred both as an 

alternative to inpatient hospital care as well as a step-down from inpatient hospital 

care. PHPs and IOPs are particularly successful with first episode of care patients 

and utilize an educational format combined with group therapy, medication management, and specialized therapies to assist people in understanding their diagnosis 

and initiating a path toward recovery. Most programs are managed and adhere to 

strict medical necessity guidelines which determine individual eligibility for care. 

While reform must successfully deal with the medical needs of the many healthy 

individuals, the greater challenge is to ensure that a reformed system better serves 

the medical and M/SU chronic care and prevention needs of a small fraction of the 

population that consumes a disproportionate number of services. 

The AABH supports reform that goes beyond the current standards and practices 

of the meeting patient’s needs and is looking to be involved in assisting in the 

crafting of new and innovative methods of care that are not only less costly but also 

more effective. Currently providers are paid for providing services rather than producing desired outcomes. There are significant disparities in health and health outcomes as they exist across sectors of society. Individuals, health practitioners, and 

policymakers make decisions based on a limited evidence base regarding which 

practices work effectively for which groups or individuals. In addition, the current 

system focuses heavily on expensive acute care for physical and M/SU illnesses to 

the detriment of an approach that can prevent and/or stabilize disease well before 

acute care is ever needed. 

In conclusion, we want to make sure that health care reform includes the provisions of PHP and IOP services for M/SU in health care plans, as they maintain a 

fundamental alternative to inpatient care for the seriously ill M/SU patient in acute 

crisis, while providing a supportive community-based setting that maintains the 

continuation of family and community support. This gives the patient the opportunity to maximize treatment gains through completion of homework assignments, 

reconnect with community services, seek out employment options, and be involved 

in activities that develop strengths and enhance resiliency and recovery. 

Again, we would again like to thank you for this opportunity to share our comments. The AABH continues to work with other organizations and governmental 

agencies towards an integrated health care system where the M/SU patient will be 

able to receive a multitude of services including treatment in a PHP and IOP economically. 

Sincerely, Larry Meikel—President of the Board 

JoAnne Mandel—Co-Chairperson; Public Policy Committee 

AABH Board of Directors 

f 

Public Policy Committee 

Statement of Becton, Dickinson and Company 

BD is a leading global medical technology company that develops, manufactures 

and sells medical devices, instrument systems and reagents. The Company is dedicated to improving people’s health throughout the world. BD is focused on improving drug delivery, enhancing the quality and speed of diagnosing infectious diseases 

and cancers, and advancing research, discovery and production of new drugs and 

vaccines. BD’s capabilities are instrumental in combating many of the world’s most 

pressing diseases. Founded in 1897 and headquartered in Franklin Lakes, New Jersey, BD employs approximately 28,000 people in roughly 50 countries throughout 


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the world. The Company serves health care institutions, life science researchers, 

clinical laboratories, the pharmaceutical industry and the general public. 

BD appreciates this opportunity to provide input on landmark health care reform 

legislation. One of our highest priorities is to provide incentives within the 

Medicare payment system that would reward hospitals for preventing health 

care-associated infections (‘‘HAIs’’). 

Policy Request. Include specific HAI prevention interventions as quality 

measures under value-based purchasing authorization in health reform legislation. 

The Department of Health and Human Services (‘‘HHS’’) recently finalized its 

HHS Action Plan to Prevent Health Care-Associated Infections (‘‘Action Plan’’), which 

provides a roadmap for a 5-year, national HAI prevention strategy. BD supports this 

comprehensive prevention effort as part of health care reform and quality of care 

improvements by the Obama Administration. Specifically, BD supports efforts to 

achieve the Action Plan targets for HAI prevention, including reducing invasive 

methicillin-resistant Staphylococcus aureus (MRSA) infections by 50% by 2014 and 

reducing Clostridium difficile (C. diff.) infections by 30% by 2014, as measured by 

case rate per patient days. 

Many health care and Medicare payment reform proposals have included the establishment of a Medicare hospital value-based purchasing (‘‘VBP’’) program. According to recent proposals from Senators Baucus and Grassley as well as the Centers for Medicare and Medicaid Services (‘‘CMS’’), a VBP program would increase 

or decrease hospitals’ DRG payments depending on their success at achieving, or improving upon, certain quality performance measures. To ensure that the HHS-established HAI prevention targets are achieved, the Action Plan’s targets and 

process and outcomes metrics should be incorporated into any Medicare 

VBP framework as quality performance measures. VBP payments to hospitals 

then would be conditioned, in part, on hospitals making annual progress toward 

their HAI prevention goals, creating a strong incentive for every hospital to take 

steps to reduce HAIs. 

Background. VBP Creates Incentives to Reduce High Rates of Preventable HAIs 

According to the Centers for Disease Control and Prevention, HAIs caused by 

MRSA, C. diff., vancomycin-resistant enterococcus (VRE) and other infectious pathogens are one of the top 10 leading causes of death in the United States, accounting 

for approximately 99,000 deaths annually. Furthermore, in addition to thousands of 

lost lives, HAIs cost the U.S. health care system an estimated $20 billion each year. 

Yet many of these infections are easily preventable. 

We must strengthen HAI prevention efforts. Prevention of HAIs would improve 

the quality of patient hospital care, save thousands of lives, and at the same time 

lead to billions of dollars in savings. The Action Plan signals a renewed national 

commitment to reducing HAIs. However, successful implementation of the Action 

Plan depends on an enforcement mechanism to ensure that hospitals implement infection control policies and take other precautions to prevent HAIs. Without specific 

incentives, such as VBP, hospitals may not achieve the Action Plan prevention targets, and HAIs will continue to be a major cause of death and a significant driver 

of health care system costs. 

In a recent announcement, the American Hospital Association, the Federation of 

American Hospitals and the Catholic Health Association embraced VBP in the context of health care reform. As Congress considers developing the framework of this 

program, it is important that HAIs be included as one of the conditions or clinical 

performances areas considered in determining hospital payments. According to a recent survey by the Association for Professionals in Infection Control and Epidemiology, more than 40% of hospital infection control programs have experienced budget cuts over the last 18 months. Incorporating HAIs into the VBP framework would 

establish a platform for providing hospitals with the resources they need to support 

efforts to prevent infections. 

VBP has been considered in health care and Medicare payment reform proposals 

on numerous occasions. Most recently, the Senate Committee on Finance, in a 

health care reform Policy Options paper released in April, proposed establishing a 

hospital VBP program that would build on the success of the current Reporting Hospital Quality Data for Annual Payment Update (‘‘RHQDAPU’’) program and ‘‘move 

beyond paying for reporting on quality measures and activities, to paying for hospitals’ actual performance on these measures.’’ This proposal follows a 2007 VBP 

white paper from CMS proposing that a portion of the hospitals’ DRG payments (2– 

5%) be contingent on meeting certain quality goals. 


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Furthermore, in the Medicare hospital inpatient proposed rule for FY2010, CMS 

acknowledged the ‘‘growing concern regarding hospital acquired infections’’ and discussed the possibility of adopting new quality measures for potential future use in 

the RHQDAPU program, which could include HAIs. 

Attached to this statement is a proposed amendment to the most recent available 

congressional discussion draft of a value-based purchasing bill. We hope that this 

draft amendment will provide the Committee with a concrete example of the type 

of legislative language that we are proposing. 

FOR FURTHER INFORMATION, PLEASE CONTACT: 

Paul Seltman 

Director, Public Policy and Government Relations 

BD 

Proposed Amendment to 2008 Value-Based Purchasing Discussion Draft 

Include Health Care-Associated Infections in Value-Based Purchasing Authorization 

The Senate Finance Committee released a discussion draft of a value-based purchasing proposal in 2008. We recommend the following changes (in bold) to section 

2 of the proposal to include prevention of health care-associated infections as a quality measure under the value-based purchasing authority. 

SEC. 2. HOSPITAL VALUE–BASED PURCHASING PROGRAM. 

(a) Program.— 

(1) In general.—Section 1886 of the Social Security Act (42 U.S.C. 1395ww) is 

amended by adding at the end the following new subsection: 

‘‘(n) Hospital value-based purchasing program.— 

‘‘(1) Establishment.— 

‘‘(2) Measures.— 

‘‘(A) In general.—The Secretary shall select measures for purposes of the Program. 

Such measures shall be selected from the measures specified under subsection 

(b)(3)(B)(viii). 

‘‘(B) Requirement for fiscal year 2012.—For value-based incentive payments made 

with respect to discharges occurring during fiscal year 2012, the Secretary shall ensure the following: 

‘‘(i) Conditions or clinical performance areas.—Measures are selected under subparagraph (A) that cover at least the following four five specific conditions or procedures: 

‘‘(I) Acute myocardial infarction (AMI). 

‘‘(II) Heart failure. 

‘‘(III) Pneumonia. 

‘‘(IV) Surgeries, as measured by the Surgical Care Improvement Project (formerly 

referred to as ‘Surgical Infection Prevention’ for discharges occurring before July 

2006). 

‘‘(V) Health care-associated infection prevention metrics and targets, as 

established in the Department of Health and Human Services’ HHS Action 

Plan to Prevent Health Care-Associated Infections or any successor plan. 

‘‘(ii) HCAHPS.—Measures selected under subparagraph (A) shall be related to the 

Hospital Consumer Assessment of Health Care Providers and Systems Survey 

(HCAHPS).’’ 

f 

Statement of the Breyer Foundation 

America’s health care system is fueled with innovation and pioneering discoveries 

leading to the cure, treatment and intervention of the most challenging diseases in 

the history of man. The unique economic structure of this country weaves the interconnection of the different factors that feeds and sustains the economic growth and 

promotes the discoveries of new ideas that changed the history of science and medicine. With this advancement comes the compassion and the struggle of every physician, health care provider and educator to reach out to all the people in disseminating new knowledge and cure. Since America is still considered quite a young 

country in comparison to the rest of the world, such efforts remained to be perfected 

and polished to reach the optimum potential that this system and country can 

achieve. Our ultimate goal is to be free of the burden of health care cost and provide 

the best quality health care for all the people in this country. Such goal can be 

achieved through some of the following key features: 


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• Improvement of the quality of life through an effective preventive care program, 

free preventive care coverage for all; • Empowerment of the people through knowledge, access and control of their own 

health care portfolio; • Effective communication and efficient dissemination of new discoveries, best 

clinical practices and treatments, and other information that promotes the improvement of the quality of life of the patients and growth of the system as a 

whole; • Economically sustainable health care system powered by the inherent strength 

of the different stakeholders, and the alignment of their mutual interests that 

promotes synergistic growth—a win-win for all; 

• Preserve the best of the current system—flexible option; 

• Health saving system that builds foundation toward financial independence of 

health care cost; 

• Provides solution to the financial problem of Medicare; 

• An equitable, timely and quality health care system that addresses the needs 

of all Americans, including the 47 million uninsured; 

• Effective and efficient Central Network System (CNS) design that eliminates 

unnecessary bureaucracy; 

• Promotes innovation, collaboration and economic growth; 

• Offers incentives such as tax exemptions or credits instead of tax increase; 

• Promotes personalized medicine and depositories of effective treatment protocols 

and guideline; 

• Works effectively in rural and urban areas of America; 

• Provides real solution in eliminating health disparities representing all racial 

groups in America; 

• Empowers each individual with the right to choose and the right to life; 

• Eliminates barrier for the health insurance access of people with preexisting 

conditions. 

Basic Implementation Principles 

Sustainable Health Care System Model: The fundamental and basic structure 

of the health care system is based on the alignment of the interest of the different 

stakeholders that promotes synergistic growth. A system based on a delicate combination and balance between the negative and positive rights of an individual and 

his/her responsibilities to the welfare of other stakeholders engaged in the system. 

The system is based on understanding the fundamental factors that will provide incentives to the different stakeholders to perform their optimum task and contribution in the system with minimum enforcement and barriers. 

Emphasis on Preventive Care (Benefits to ALL): Insurance for all will not be 

able to resolve the health care needs of the poor. As most of the current 47 million 

uninsured are eligible to a basic Medicaid system but cannot and/or will not access 

this system until absolutely necessary through our Emergency facilities. An annual 

preventive care visit to a physician could dramatically decrease the need of Emergency visits for all Americans. 

A free annual preventive care visit to a physician should be a major component 

of all standard insurance benefits for Americans. Although it is quite understandable that difficulties exist for the poor and underserved groups from factors such 

as transportation, time and lost wages, it is, however, essential to note that their 

well-being and health is their responsibility and their actions impact the rest of the 

Nation. Thus with the rights comes the responsibility for the underserved groups 

to take advantage of the free preventive care visit available for them in this program. The program subsidizes the insurance cost of the people below a certain poverty level. The subsidy is renewable every year and initiated through their first annual free preventive care visit to a physician. A decrease in the cost and number 

of major catastrophic care would eventually decrease the burden in the insurance 

companies and our entire health care system, thus providing the people a better leverage in reducing insurance premium. 

A portable medical electronic record for the system will keep track of the enrollment and medical history of individual participants. This will address the need of 

people who have no permanent residence and relocate more often than average 

Americans. Repetitive tests due to lack of health record history for the uninsured 

and homeless is one of the major contributions for high health care cost. Security 

in the access of these records will be ensured in order to protect the rights and privacy of the patients. All access to these health records by a third party (physicians, 

nurses, etc.) will be based on patient’s consent (or authorized family members in 

cases of patient’s incapacity to make a decision). These records will be maintained 


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in the Central Network System (CNS), a fully independent agency, using a system 

with a defined security structure to prevent access of unauthorized individuals to 

sensitive information. Insurance companies and employers will not have access to 

health results and risk assessments of the individuals. The Central Network System 

will facilitate the communication of benefits and service between the patient-physician and insurance companies. Access to insurance provider and enrollment to the 

CNS program could be accomplished in the physician’s office through automated, online and national standardized forms. 

Equitable and Affordable Insurance with Variable Options to Meet Participant’s Needs (Financing, Benefits to Patients) (One size does not fit 

ALL!): Standard features such as free annual preventive care (including dental, 

vision, mental health, health education credit and assessment, etc.) visit and a component of a catastrophic care to cover the needs of an individual over the span of 

his/her lifetime. These standard features will be included in the minimum standard 

benefit reflecting the needs of the majority of Americans, as evaluated over a period 

of time, with additional options available, tailored to individual’s need. Entry to the 

program is independent of preexisting condition. CNS, the Federal and State government will leverage the cost of these premiums for the people in order to optimize 

the cost savings of the system. 

Small business owners and their employees, self-employed individuals, employees of large corporations and Federal Government, and the current uninsured 

can choose between the different providers and options in the insurance exchange. 

The overall base premium (for all options) should reflect additional 20–30% of a cumulative individual health savings account (IHSA) components that would provide 

the participants with additional reward savings in meeting and maintaining his/her 

annual health and wellness goals. The IHSA account will be maintained and managed for the individual (in similar manner as the retirement account) and the program by an independent Central Network System. Interest from the trust fund 

(with sufficient funds) could be used to pay future insurance premium for the individual. Individuals could transfer the benefits/trust funds to their heir after their 

death. 

Eighty percent of uninsured individuals in the United States live in households with an employed individual. Breyer’s plan will extend the tax exemptions 

and coverage to secondary families such as parents and children in student status. 

Tax exempt and credit structure will be set up and optimized to provide incentives 

for an individual (and their employers as an optional partner) to sponsor and buy 

in affordable insurance to uninsured secondary family members living in the same 

household. Children will be covered by the parent’s insurance while in student status and 1 year grace period after school (while finding an employer-sponsor). Such 

option would provide not only affordable insurance to approximately 20%–34% of 

our uninsured but will also provide enrollment of these individuals in the individual 

health savings account (IHSA) and additional tax credit to sponsors. 

Breyer’s plan does not require mandatory health insurance. Uninsured who 

are in high income brackets (20%–25% of uninsured) who choose not to buy insurance through the program will have to provide a set savings bond of at least 

$20,000–$50,000 to cover a future catastrophic incident. Since a portion of the individual health savings account in Breyer’s model goes as donation to the underserved 

and uninsured, this approach will ensure a fair system where the individual donation will go to help the poor and uninsured and not the rich who skip paying insurance and later on will get the benefit from other people’s sacrifice and efforts. 

A defined and clear guideline will be established consistent with taxable income 

and tax payment/credit structure to provide subsidy to insurance coverage for 

individuals who are below the 400% poverty line. Unemployed individuals will 

be covered in this subsidized insurance program. Financing will be provided through 

a portion of the individual savings (20 cents for every dollar saved) acquired through 

leverage with insurance companies (lower premium) and pharmaceutical industries (lower drug cost). A small copayment (between $20–$50) will be established depending on the poverty level above 200%. The program will not require any 

out-of-pocket expenses from individuals, such as increase in taxes, but will provide 

tax exemptions and credit on the IHSA and donated funds to the uninsured. (Please 

see the Breyer’s Model). 

Veterans and their families who are not eligible for veteran hospital benefits (since VA health benefits are limited to war related injuries) will be able to enroll in the private insurance program and, with the consent and support of the Department of Veterans Affairs, can access the state-of-the-art facility of the VA MedVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00325 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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ical Centers or go to other hospitals of their choice. A Federal program will be available for Federal employees through choice of different private insurance and options. 

Culturally appropriate financial and infrastructure support will be provided 

to the Native American Indian Health System. 

Benefits to Participating Hospitals, local clinics and other health care institutions: All private and public hospitals, local clinics and other health care institutions who participated in the various programs of Breyer’s plan (preventive, cost 

reduction through effective, efficient and quality health care) will receive subsidy for 

their uninsured enrolled in the program. 

Individual Mandate: Insurance is not mandatory to everyone. However, to prevent high-income individuals from skipping the insurance premium cost and taking 

advantage of the system’s benefit in times of need, individual savings bond (at a 

minimum of $20,000), to cover catastrophic incident, would be required for high-income individuals (based on taxable income adjusted to the cost of living for a given 

State) who selected not to buy insurance in the program. 

Employer Requirements: Employer will be provided a tax exemption for employee-sponsored benefits and additional tax credit for extending sponsorship to secondary family members. Employers will receive the savings proportional to their 

contribution in the employees’ overall insurance premium. A similar formula as 

specified in the Breyer’s model will be applied in their contribution to the uninsured 

and in their corresponding tax credit. 

Expansion of Public Program (Solution to Medicare Bankruptcy): A portion of the current stimulus fund of $630 billion and leftover Medicare funds for 7 years 

(Medicare funds left until 2017) could be used to subsidize individuals above 65 

years of age who are currently in Medicare while the rest of the population can 

slowly transition their Medicare contribution to their IHSA for their own individual 

health care benefits. Thus providing a solution to the unsustainable structure of 

Medicare and a path for independence of future health care cost for the individual. 

(A more detailed and optimized system (amount and timing) could be acquired and 

simulated with a given software resources/program). 

Premium Subsidies to (Benefits to) Employers: Tax exemption and credit will 

be available to employers for employee’s benefits. No tax increase but additional 

savings that can be used to enhance employee’s benefits. Small businesses and selfemployed individuals would be able to access an affordable insurance premium that 

is currently just available to large corporations and Federal programs. CNS programs would be available to employees to improve health and work performance. 

Benefit Design: An annual preventive care (includes services that the American 

Medical Association and/or other medical associations considered essential in early 

prevention of diseases, i.e. vision, dental, mental health, podiatry, mammogram, lab 

tests, pre-natal care if applicable, etc.) is free for ALL. A minimum standard benefit 

of equivalent or greater value from the benefits currently enjoyed by a majority of 

Americans (such as the Blue Cross/Blue Shield Standard Plan and the Standard 

Federal Employees Health Benefit Program, FEHBP). Additional options are available for long-term disability and types of long-term care services. An additional component of the standard plan would be an optional tax credit and/or benefit for (preventive) health and wellness education program and assessment. 

Benefits to Private Insurance: A guaranteed insurance of close to 330 million 

Americans every year. National support through CNS and all stakeholders for preventive care and efficient, effective and quality health care improving the health 

and quality of life for all. Support from CNS, Federal and State agencies, scientist 

and health professionals through depositories of effective clinical practices, more 

standardized cost of medication and services, innovative approach and effective 

treatment will be available resources to all. Additional public support programs for 

nutrition and wellness classes for the poor through existing programs, e.g. USDA 

food stamps and nutrition programs. CNS will coordinate programs with CDC, VA, 

NIH and other national health associations to expedite the dissemination of programs that will enhance risk assessment, prevention and treatment of various disorders. Together with various public and private organizations CNS will provide an 

efficient bridge in the translation of new discoveries and best practices from a bench 

to clinics and hospitals. These programs will drastically reduce administrative and 

catastrophic health care cost for insurance companies. 

Benefits to Pharmaceutical Companies: Twenty-five percent of the cost for 

pharmaceutical company’s drug discovery and development is focused on marketing 

and dissemination of information. CNS will facilitate the dissemination of new disVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00326 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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coveries in new drugs and technologies through its participating hospitals, physicians and health professionals, remarkably reducing the cost of marketing and dissemination for the company. Such activities will be done in coordination with the 

participating public agencies such as FDA, NIH, CDC, etc. 

CNS will also provide a national depository or listing of clinical trials for new 

drugs and technologies so as to provide options for individual participants to access 

innovative approach, medication and studies throughout the Nation. It would be the 

individual’s choice to participate in any of the listed clinical trials based on the 

health benefits that study would provide. This connection will be facilitated by CNS 

through close communication with the Food and Drug Administration and other collaborating agencies (CDC, NIH and other public and private agencies) that would 

provide accurate and reliable information to everyone regarding the risk and health 

benefits of the discoveries. This would reduce the inefficiencies in the recruitment 

and retention of participants in evaluating the effectiveness of treatments and other 

intervention procedures. Reduction in the administrative, evaluation and dissemination cost for the development of drugs will help pharmaceutical companies in reducing the cost of medication in this program. 

Benefits to Physicians and Health Professionals: CNS will work with NIH, 

CDC and other public and private agencies to provide resources, medical information and technical support for physicians in urban and rural areas regarding new 

and effective treatments and discoveries. Telemedicine and ready access to specialists will be provided through this network. CNS will also help facilitate the transition of technology and approach to personalized medicine. Inter-individual biological 

differences exist and thus there will be no mandatory protocol. Best clinical practice 

protocols and results of effective treatment studies would be available in CNS depositories in order to guide physicians in making informed decisions. Breyer’s plan 

promotes an integrated approach on health care through collaboration and communication between physicians and health care professionals beyond geographical barriers, all within the goal of providing the optimum care the patient deserves. Physician’s decision based on well-founded and supported knowledge, and readily available support from other experts in similar and complementary fields will reduce the 

uncertainty and risk involved in malpractice lawsuits. 

An efficient communication infrastructure between the different health institutions and professionals will also provide further support for CDC and NIH in promoting and implementing studies that would resolve some of the problems in the 

health of the American people. Breyer’s plan of a centralized network will provide 

efficient infrastructure and further support on CDC’s and NIH’s initiatives for more 

comprehensive NHANES and Framingham studies that would provide more information on the prevalence, risk and effective treatment of different diseases in various ethnic groups in the Nation. Understanding of the risk and prevalence of the 

different disorders such as cancer, diabetes and other diseases would enable health 

care professionals to better implement preventive care and treatment. 

Physicians in remote areas do not have ready access to the state-of-the-art discoveries in medical treatment and technology. CNS’ depository will be the means to 

bring this innovation to the rural and remote areas through training, support to 

physicians and other health professionals, while utilizing as much of the existing 

resource and infrastructure. 

State Benefits and Function: Since each State has different demographics, resources and infrastructure, CNS will work with local State health agencies to design 

and implement programs depending on the States’ resources and infrastructure. The 

dynamic changes and flux in the different resources and needs of each State will 

be closely monitored by State agencies. Corresponding adjustment in the national 

CNS system will be performed based on the State quality assessment-feedback and 

national process optimization approach. Progress and effective health care reform 

from each State will be evaluated based on their starting baseline. Private insurance and service options may differ between States but the same guidelines (in overall cost and benefits) will be observed. 

Cost Containment: CNS will leverage the reduced cost of insurance premiums 

and drugs for 330 million Americans. A minimum standard insurance premium will 

be established equivalent or higher in benefits to the current standard Blue Cross/ 

Blue Shield or Federal Employee Benefit Plan (with free annual preventive care). 

Several payment plan variations and options of this standard plan would be available to address the financial needs of the people. Additional savings will be maintained by CNS and will be placed in individual accounts through participation and 

accomplishments in the preventive care programs. Participating hospitals that report an effective, efficient and quality health outcome for their patients get the corVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00327 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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responding savings through subsidy to their uninsured. Results and outcome for cost 

effective and quality care for patients can be evaluated through multiple followup 

and efficient recording of health results of patients. Thus electronic medical data 

and history will guide not only the physicians in prevention and diagnosis but also 

provides the patient a portable medical record and control of their own health. Information summaries and results of available studies in the service cost, effectiveness 

of existing treatment and medication will be available to patients, physicians and 

other health professionals for their review and evaluation. Strict penalties will be 

placed on fraud and corruption in the system. The CNS in collaboration with agencies in State, Federal, and private institutions will set up guidelines, routine audit 

checks and oversights of each participating group in this system. 

Health Disparities: CNS will work with the U.S. Census, CDC and NIH towards 

programs such as NHANES and Framingham studies to evaluate the risk, prevalence and effective interventions for various diseases for all the groups (African 

Americans, Asian Americans, Caucasians, Latinos, Native American Indians, Pacific 

Islanders) represented in the American population. Oversampling of groups will be 

implemented in order to provide statistically valid health information, especially for 

small underrepresented ethnic groups. 

Central Network System: The Central Network is independent of any entity 

(Government, insurance and health care providers) and provides not only insurance 

leverage but also effective communication (personalized medicine), treatment, clinical, scientific guidelines and services in coordination with other private and public 

agencies—an integrated approach necessary to run a complex system. CNS’ structure will consist of an oversight board consisting of representatives from all stakeholders and external advisers. 

f 

Statement of Budd N. Shenkin, M.D. 

The Obama Health Insurance Reform in Perspective 

I’m glad to see that the first step of the Obama Health Plan (OHP) will rest on 

creation of a health insurance ‘‘exchange,’’ where consumers are presented each year 

with a menu of alternative plans at predetermined standardized levels of benefits, 

offered by various companies. Since there will be government subsidies to make at 

least the basic plan affordable to everyone, insurance will probably become nearly 

universal, and job mobility should improve. It seems that, after all this time, the 

problem of the availability of health insurance to individuals will be largely solved. 

This will mark a good and important first step, tactically very smart to take, in fixing health care and making insurance available. 

But it is only a first step. As everyone knows, the whole system needs revision, 

to make it relatively efficient, fair, less costly, higher quality, and progressively 

gaining ground in all these aspects instead of losing ground. The basic problems lie 

in the nature of the insurance system, the cost and organization of hospitals, pharmaceuticals and medical devices, and reliance on specialists instead of primary care. 

So, while the OHP’s first step is a great one, it needs to lead to bigger changes in 

the way the system functions as a whole. Which I think it will. 

The key to understanding the current insurance system is this: How do the companies make their money? Competition in and of itself is not a good thing if the 

way they compete doesn’t redound to the benefit of the public. To simply celebrate 

the existence of competition qua competition is to celebrate ideology rather than 

what competition is supposed to deliver. 

I wish I knew more about insurance companies so I could write with a deeper factual background, but here is the way it seems to me. First of all, they compete by 

underwriting. In the individual market they assess health and age status; in the 

group market they assess utilization history and probabilities; in both cases they 

then price their products accordingly, and deny applications, raise premiums, or restrict coverage. (This is called experience-rating; if a company would give the same 

price to all comers, this would be called community-rating). The companies that underwrite most artfully make the most money. In addition, since benefits are not 

standardized, the companies that can write their plans most cleverly also win. Unfortunately, the underwriting enterprise winds up making coverage either unobtainable or exorbitant to many people who thus become uninsured. 

Insurance companies also strive for profits in other ways. In the large company 

sphere they provide administrative services; if they can do this most efficiently, they 

win. They negotiate with care providers, especially physicians and hospitals, to variable effect, bending to the pressure of hospitals with a lot of market power, making 


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others bend to them when the insurance company is more powerful. Market power 

is more influential than straight cost-accounting. What a company loses in one market they gain in another. If they lose to hospitals, they make it up by short-changing 

the atomized physicians. 

Insurance companies can also profit by the way they pay providers, or don’t. If 

they declare some services ‘‘included’’ with other services, they can avoid paying for 

both, although both might have perfectly valid CPT (service descriptor) codes. They 

can deny claims on obscure bases. Some insurance companies have been convicted 

of setting ‘‘payment denial’’ objectives for their staff. They can delay payments and 

make money on the float. 

Unfortunately, what they have not been able to do to a significant extent is to 

assert control over utilization, nor to improve quality, because they are too far away 

from the functioning of the system, and too far away from their own expertise, to 

do so. Overall, the culture of the health insurance companies has been such that 

none have been described as particularly good citizens, looking out for the health 

of the Nation, coming up with schemes that would advance the health care industry 

and do better for people. In fact, quite the reverse. 

It is clear, then, that when it comes to health insurance, the OHP has more to 

reform than accessibility to a policy. The first step will be to establish the ‘‘exchange.’’ The second will be to eliminate the ability of the companies to reject applicants, and establish community-rating premiums with governmental subsidies to 

avert adverse selection. (Hal Luft of the Palo Alto Medical Foundation Research Institute has suggested that establishing a Major Risk Pool is a way of achieving this.) 

While these changes will save insurance companies the overhead costs of underwriting, they will also mean that a major modus operandi of the health insurance 

industry will be altered. They can still make money by establishing contracts with 

providers that rest on their market power; they can still make money by denying 

claims; they can still make money by being efficient in administrative operations. 

But they will have to stop making money by experience-rating individuals and 

groups, and by cleverly designing plans to their own advantage. 

The OHP will of necessity solve the insurance accessibility problem. What it then 

needs to do is to influence the insurance companies to focus their profit motive to 

add to the public good by making their own internal operations more efficient, and 

inventing ways that make the system as a whole better. The issue is, would inclusion of the public option make that objective more possible? 

The Question of the Public Option 

Given that there will be a health insurance exchange, and given that there will 

be community-rating, the biggest controversy right now is: should there be a socalled public plan on the menu? A public plan would be one sponsored by government—proponents want it to be the Federal Government, others would like it to 

be States, or even other entities such as ‘‘cooperatives.’’ I have called this option the 

BGP, the Big Government Plan. (Which it wouldn’t be if it were to be the ill-advised 

cooperatives.) All agree that there would need to be a level playing field so that competition between public and private plans would be fair, and there are many suggestions on how to do this. This is the question I pose and answer today. I think we 

can only answer the question by reflecting on the nature of the health insurance 

industry, which is why I started this post as I did. 

Let’s first look at what is being said. The May 28, 2009 issue of the New England 

Journal of Medicine contains three invited articles on the subject. One is by Jacob 

Hacker, a liberal strongly for the BGP; one by Mark Pauly, a free-marketeer from 

the Wharton School who accepts a BGP to make reform politically viable; and the 

third by the canny veteran health economist Victor Fuchs, who thinks the BGP 

would be irrelevant. Two weeks later in the June 11 issue of the Wall Street Journal, Karl Rove stated the hard Right’s objections to the BGP as the pathway to socialism, and the next day in the WSJ Stephen Burd, CEO of Safeway, didn’t address 

the BGP at all, but gave the preventive medicine approach to fixing America’s 

health care problem. These are our texts for today. 

Hacker strongly supports a BGP, while acknowledging that public entities are 

generally rigid, and private ones are ‘‘more flexible and more capable of building integrated provider networks.’’ He looks to the BGP ‘‘to provide: stability, wide pooling 

of risks, transparency, affordable premiums, broad provider access, and the capacity 

to collect and use patient information on a large scale to improve care.’’ He also 

thinks the BGP would have lower administrative costs (the government more efficient than private business?); will be able to receive better volume discounts (this 

would violate the level playing field provision, and just who would these discounts 

come from, and for what?); and would be nonprofit (OK, but what would the incentive be, then? Virtue?). 


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Pauly, the free-marketeer, thinks that a very wide array of choices on the menu 

would bring public support, and many provisions to allay the advantages of size and 

the possible political domination of the BGP, would make the OHP politically viable. 

Interestingly, he puts forward the idea of having two distinct government plans in 

each area! I think this is a great idea—it gives a sense of where the incentive to 

the public plans would come from. We have experience with this format in California Medicaid, where in our counties, for instance, patients can choose either the 

local initiative (county health department) plan or the private Medicaid plan, and 

so can providers. 

Pauly also brings up the old issue of Any Willing Provider—could the BGP(s) 

choose not to let a duly licensed physician, say, join the plan? How could a governmental entity do this? Yet, if the BGP had to admit providers and the private plans 

didn’t, wouldn’t that give an advantage to the private plans? Likewise, if care were 

to be delivered in networks that contracted with the BGP, how could the BGP 

choose to contract with one group but not another? I think the answer here would 

have to be that each provider would have to have access to at least one plan, with 

the BGP as the contractor of last resort. More could be proposed here, but let’s go 

on. Fuchs says that the three biggest challenges of health care are the uninsured, 

cost, and quality, and he doesn’t see how a BGP would impact any of them. Insuring 

everyone will require a subsidy and compulsion, and a BGP is not needed for either. 

Neither cost nor quality have been positively affected by either Medicare or Medicaid, so why should another BGP have any effect? 

Moreover, says Fuchs, who would join a BGP? Medicare and Medicaid are already 

set for the elderly and the poor. Thirty percent of the populace are covered by large 

companies who self-insure, the administration of their plans contracted out to the 

health insurance companies for provider network supply and payments. The BGP 

would have nothing to offer these companies. Twenty-five percent of the populace 

are covered by smaller employers that contract with private health insurance companies. Again he argues, what would a BGP have to offer them? Since these contracts for care are generally experience rated rather than community rated (that is, 

one price for all despite historical medical care utilization), only the high utilizers 

would want to go to the BGP, thus giving the BGP adverse selection, and taking 

the bloom off their rose. (I think community-rating is in the works, given the nature 

of an exchange.) Currently 5.9% are individually insured, and these would go to the 

BGP. Fifteen percent of the populace are uninsured, of which three-quarters, or 

12%, are too sick or too poor to buy policies, and the remaining 3% choose not to. 

Fuchs doesn’t see the value of a BGP for these people either. 

I don’t agree with Fuchs here. First of all, I think we have to get to communityrating for everyone, with risk adjustments made as Hacker suggests. Secondly, even 

by Fuchs’ analysis tens of millions of people would sign up with the BGP. 

Rove asserts that we don’t need a BGP because we already have enough competition. This is a purely ideological argument (surprise!) that doesn’t look at the quality 

of the companies, nor at the results. Private insurance companies have a terrible 

history. Their innovations are generally pseudo-innovations, and the ways they 

choose to make money are not productive to the Nation as a whole—underwriting, 

refusing care, reneging on coverage, gaming providers who submit bills, etc. 

His second argument is that the public option will pay providers less than private 

companies will (not clear this is so), and thus cause other providers and patients 

to subsidize the BGP, the old transfer game that hospitals play. 

His third argument is ‘‘crowd out,’’ that in contrast to Fuchs who thinks hardly 

anyone will choose the BGP, Rove avers that so many will choose it that private 

companies will be stifled. As both Hacker and Pauly assert, however, if the playing 

field is indeed made fair, this will probably not be the case. And if it turns out to 

be as Rove fears, would that not be a testament to the underlying vapidity of the 

current private companies and their practices? If they can’t beat the government 

that’s a pretty low bar. 

Rove’s fourth argument is also Fuchs’, that Medicare and Medicaid are too expensive and do not lead to efficiencies, so the BGP would do the same. It’s true that 

government is not good at innovation and cost control. 

Fifth and finally, Rove asserts that a governmental monopoly will be unresponsive 

and a bad, socialistic option. This is the Trojan Horse or Slippery Slope argument— 

BGP today, National Health Service tomorrow. Well, the point is then to make the 

playing field level, and as Pauly suggests, let there be competing governmental entities. 

Burd, finally, makes a non-BGP point, an argument that reminds me of the ‘‘Legalize Marijuana’’ solution to the California State budget crisis in its indirect approach. Burd says that Safeway has kept medical costs stable for the last 4 years 


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by giving their employees incentives to avoid tobacco, reduce obesity, and keep blood 

pressure and cholesterol in normal bounds. The better health of the group has led 

to lower costs. It strikes me that only smaller, private insurance groups could handle this kind of innovative approach, and thus beat the BGP in competition. 

Conclusion 

So, given that the OHP can make health insurance accessible by simply establishing the exchange, but that it needs to do more to ‘‘fix’’ health care, does there 

have to be a BGP option? The answer is clearly yes. In fact, Pauly’s suggestion of 

having two BGP’s available on the menu would make the most sense—perhaps one 

a Federal and one a State program. 

If a BGP is on the menu, everyone agrees that the playing field needs to be made 

level. Community-rating and risk-adjustment could be accomplished by the Luft 

Major Risk Pool plan. The NEJM articles have cogent suggestions on other leveling 

procedures. More specifically for part of the means to this, the BGP needs not to 

undercut rates. I would suggest that the BGP start out with 130% of Medicare rates 

for primary care, 100% of Medicare for selected specialists (some, such as general 

surgery, would need to be higher; some, such as imaging could be lower). 

The temptation for health insurance companies would be to continue their operations as they have practiced them in the past. The more the OHP can deny them 

profit from old, nonproductive practices, the more they will have to find new means 

to make profit. Denied profit possibilities from underwriting and clever plan design, 

they would be tempted to continue to deny payments and care, and to assert market 

power where possible to glean profit. The presence of the BGP would blunt their 

ability to force poor contracts on relatively weaker providers. If properly designed, 

the BGP would force the private plans to compete for the allegiance of providers by 

ceasing those practices. 

What would be left for the insurance plans to do? They would benefit if they were 

truly efficient in administration, practiced prevention as Burd suggests, aligned 

with groups that were themselves innovative in the way they delivered care, etc. 

We would look for innovation from the private sector as we always have. They 

would have the advantage over the BGP by not having to contract with all providers; if the insurance company and providers shared their profits, both would have 

incentives. 

In addition, the presence of the BGP would act as a safety net. Everyone in every 

part of the country would have insurance available in a traditional way. If a private 

company tried to innovate and failed, the BGP would be there to pick up the pieces 

for the enrollees with that failed company. Also in addition, if small or large companies chose the BGP over private companies, so be it. And with several BGP entities 

available, they would themselves have a competitive incentive and measuring stick 

to work against. 

Some say that a BGP is necessary to ‘‘keep the insurance companies honest.’’ 

Clearly, left to itself, the industry has not been trustworthy. I hope that I have 

shown to some extent how the BGP would function in keeping the private plans 

honest. 

Finally, it is important to note that the point of the BGP would not be to be innovative—that’s not something the government is good at, at least not for a long time. 

(See the OEO experience from the 60’s, for instance, on how innovation can begin 

and then be stifled.) It should be solid even if stolid, the safety net for everyone; 

honest, straightforward, maybe unimaginative, but present. The BGP should also be 

a lowest common denominator, in the sense that if the BGP can do something, then 

there is no reason other plans can’t do it, too. 

f 

Statement of the Friends Committee on National Legislation 

Chairman Rangel and Members of the Committee: 

Thank you for your combined work and expertise to produce the tri-committee discussion draft. We believe that this plan sets up a structure that could succeed in 

making high-quality comprehensive health care available and affordable for everyone in the United States. We offer a few comments and recommendations here to 

strengthen the plan and to further ensure that no one is excluded from health care 

coverage for lack of ability to pay or other reasons. 

The Friends Committee on National Legislation is a Quaker lobby in the public 

interest. Working in Washington since 1943, the Friends Committee promotes a vision of a society that lives well with itself and others. We share a Quaker belief 


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in the essential integrity and decency of human beings, and support public policies 

that elicit and build on these strengths. 

In these comments, we lift up four critical elements of the tri-committee draft: 

The public plan, subsidies, preventive care, and regulation of the private health insurance market. 

A Successful Launch for a Public Health Insurance Plan 

The House tri-committee draft describes a public insurance plan that would meet 

or exceed the requirements of all plans in the Health Care Exchange, which would 

be available, initially, to uninsured individuals and employees of very small employers. 

We strongly support a public insurance plan, because of its potential availability 

to all health care consumers, and because of its eventual effect on the private market. A comprehensive standard public plan will set the bar for the private insurance 

market to meet. However, in order to have these desired effects, it is important 

that the public plan be launched to a broad demographic of potential participants. Large employers and currently insured individuals should be free to offer 

or opt for the public plan, along with those who may have been excluded from 

health insurance by prior existing conditions or high premiums relative to income. 

A robust launch accomplishes several intended goals, by: 

• Offering real competition in the marketplace, at a level and of a nature that 

will affect the business decisions of private companies that also hope to attract 

large employer buyers; 

• Including participants who represent a wide range of health care needs, not be 

weighted toward those with greater needs and fewer resources; 

• Lowering the cost of administration per participant, relative to a plan that includes only individuals and small employers; 

• Providing health care providers with a built-in incentive to participate in the 

public plan; and 

• Alowing the plan to begin operating with a strong financial base. 

We are concerned that launching the plan to a relatively limited population that 

has not been well served by the current health insurance system will hamper the 

chances for the public plan’s success. We urge the three Committees to make the 

plan available both within and outside of the Exchange, to currently insured and 

uninsured individuals and groups. 

Subsidies to Make Health Care Affordable to All 

We strongly support income-based subsidies, delivered through the tax system or 

in other ways, to make health care affordable for non-elderly people who have incomes above the (expanded) Medicaid eligibility level. The tri-committee draft proposal sets tiers of subsidies between 133 percent and 400 percent of the poverty 

level, ending with a standard that an individual or family should spend no more 

than 10 percent of income on health care. The draft essentially defines ‘‘affordable’’ 

as 10 percent of income, which we accept. 

However, at 401 percent of the poverty level, a family could easily be required 

to spend a much higher percentage of income—perhaps 18 percent or more—on 

health care premiums alone (ignoring, for the moment, out-of-pocket expenses). We 

unite with the comments of your first witness in the June 24 hearing, Professor 

Karen Pollitz of the Georgetown Health Policy Institute, who suggested that the 10- 

percent-of-income standard be applied without regard to an income cap. 

The anomalies that might occur with relatively high-income families receiving subsidies could be addressed by specifying that the subsidies apply only to standard 

plans that offer what the public plan offers. Applying the 10-percent-of-income rule 

uniformly above 400 percent of poverty would eliminate the ‘‘cliff’’ that would almost 

inevitably occur just above any cap on subsidies. As a result, the Committees could 

better achieve the goal of making health care affordable to all consumers. 

Preventive Care Prevents Costly Intervention 

We appreciate the inclusion and recognition of preventive care as a valuable component of the health care system. Besides its intrinsic value in contributing to the 

overall health of the U.S. population, preventive care and wellness programs will 

save money for the government and for individuals. 

We are aware of the CBO’s critique of the cost-effectiveness of prevention programs. This critique, and indeed, that of a few of our respected colleagues, misses 

the point of investments in preventive and wellness programs. These analyses incorporate two errors: 


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(1) They look for a payoff in 10 years. While many prevention and wellness programs produce profound improvements in health status within a few years 

(weight loss, blood pressure decrease, cholesterol control, etc.), the dramatic 

cost savings (lack of a need for expensive medicines or surgical interventions) 

do not occur until later in life and are, indeed, difficult to catalog and calculate. Numerous long-range studies have shown the effectiveness of nutrition 

and behavioral changes; cost accounting that reaches beyond 10 years should 

be able to recognize and incorporate these savings. 

(2) These analyses are based on an inaccurate understanding of preventive care 

and wellness programs. Prescribing drugs to control high blood pressure, cholesterol, and other diseases is a type of treatment, not prevention. These drugs 

are prescribed only for individuals who already suffer from common chronic 

diseases, and they tend, if successful, to minimize the need for further intervention. 

According to the Milliken Institute, the combined cost of the top seven modifiable 

chronic diseases (cancer, diabetes, hypertension, stroke, heart disease, pulmonary 

conditions and mental disorders) exceeds $270 billion per year in direct care costs. 

A modest focus on prevention, early intervention and behavior changes can save 

about 80 percent of that cost annually. Preventive care and wellness programs address underlying conditions of obesity and physical inactivity and can and should 

be promoted broadly on a cost-effective basis to the public. 

Fair Play: Regulating the Private Health Insurance Market 

The private health insurance industry has benefited greatly from tax exemptions 

provided to both the employer and the employee for employer-provided health benefits. The Federal Government has every right to insist that, to qualify for this benefit, health care plans must meet certain criteria. 

To qualify for tax advantages offered in the employment context, any such plan 

should be required to meet certain standards, including a defined comprehensive 

package of medical, mental health and prescription services with no exclusions for 

prior existing conditions, age, or gender; no termination of individual insurance for 

expenditures by the insurance plan; no lifetime caps; and a maximum yearly outof-pocket cost for participants. 

Rates for the standard package should be the same for all participants, with adjustments permitted for family coverage and for broad geographic areas (i.e. States 

or regions, not redlined neighborhoods). Discounts for health predictors such as nonsmoking or healthy weight could be permitted. But rate adjustments for age and 

other uncontrollable conditions should be minimized. Even the 2 to 1 ratio for age 

permitted in the House plan would result in unrealistically high premiums for older, 

but not Medicare eligible, individuals and heads of households. An unrealistically 

high premium means the exclusion of certain demographic groups. 

ERISA-qualified private plans—the standard private plans that qualify as an employee benefit—should also be required to be made available to the individual market, at the same rates. 

The Tri-Committee Plan has two real options to catalyze change in the health 

care marketplace. One is by competition from a strong, widely available public plan. 

The other is by allowing a tax advantage only from employer-sponsored plans that 

meet the same criteria as the public plan, including breadth and depth of coverage, 

and rules governing guaranteed issue, renewability and rates. The Tri-Committee 

Plan is almost there. We believe that this plan, with some strengthening, can make 

an historic difference in health care availability and indeed in the health of this Nation. 

Thank you for the work that you and your staff have devoted to this important 

undertaking and for the opportunity to share our reflections and recommendations. 

f 

Letter by Richard Kirsch 

Dear Chairman Rangel and Chairman Stark: 

Health Care for America Now (HCAN) appreciates the opportunity to comment on 

the draft House tri-committee health care reform legislation that is designed to address the critical health care issues that have plagued the American health care system for far too long. HCAN is a national grassroots movement powered by 30 million people and more than 1,000 organizations working to win a guarantee of quality, affordable health care we all can count on. The draft legislation put forward by 


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your Committees shows that we can achieve the President’s goal of quality, affordable health care for all this year. 

Your draft bill is an excellent example of what can be accomplished when Members of Congress work together to do what is best for the people they represent. It 

provides quality, affordable coverage for all, requires shared responsibility by individuals, employers and government, and expands health insurance coverage choices, 

including being able to retain one’s coverage, have additional private plan options, 

and a public health insurance option designed to lower costs and keep insurance 

companies honest. 

HCAN strongly supports the provisions in the draft bill that make health insurance and health care services more affordable. In particular, premium assistance, 

reduced cost-sharing, and application of an out-of-pocket cap are central to making 

health care accessible to low-income individuals and families. Also, we commend you 

for your leadership in extending assistance in purchasing health insurance to working families who have seen health costs increase four times faster than wages. 

Given the significant range in the cost of living across the country as well as the 

variance in the cost of health insurance coverage, these provisions are vital to ensuring that persons in all corners of our country are able to afford health insurance. 

Establishing true affordability is particularly important given that the draft bill requires individuals to obtain health insurance coverage. 

While the draft bill establishes a framework for achieving quality affordable 

health care for all, HCAN believes it should be strengthened in several critical 

areas: 

• In order for the public health insurance plan option to be effective, it must be 

truly robust with a strong national network of providers from the start. 

• The employer responsibility requirements should match the average contribution large employers currently pay. 

• Health insurance must be affordable in terms of premium and cost-sharing and 

protect Americans from medical debt and bankruptcy. 

• Individuals should not be required to have coverage that is unaffordable and 

inaccessible; coverage for all must mean coverage for everyone. 

• Medicaid and CHIP need to be strengthened and new protections need to be put 

in place to ensure the benefits and cost-sharing protections of these programs 

are maintained. 

Public Health Insurance Plan Option 

HCAN commends the Committees for including in the draft a national public 

health insurance option, which is critical to reforming our health care system. So 

long as the playing field is not tilted against it, a public health insurance plan option will promote competition and efficiency, provide stability and advance innovation. More broadly, the public health insurance plan option will foster payment and 

delivery system reforms, remedy disparities in access to care, and guarantee that 

quality, affordable coverage will be there for individuals and families no matter 

what happens to their jobs or their health. 

HCAN, however, is concerned that the public plan as proposed may not be large 

enough to compete on a level playing field with large national insurers, which have 

many built in advantages and considerable experience in State and regional markets. The American Medical Association reports that 94 percent of insurance markets in the United States are now highly concentrated. In many State markets, one 

insurer already controls more than half and often more than two-thirds of the market. Two companies alone control more than one-third of the private health insurance market—WellPoint with 35 million insured and United Health Group with 18 

million insured. The Health Insurance Exchange will include these well-established 

plans and other major players, which will make it very challenging for a new entrant such as a public plan to enter the market. Therefore, we believe several improvements are needed to the draft bill to ensure the public health insurance option 

can compete on a level playing field with private insurers. 

Recommendations 

• Ensure broad provider participation. Private insurers have had decades to 

build their provider networks. To ensure broad participation in a public plan 

start-up, the Committees should ensure that all providers (hospitals, institutional providers, physicians and other practitioners) that currently participate 

in public programs also participate in the public health insurance plan. However, physicians and other health practitioners should retain the ability to opt 

out after a sufficient period that allows the plan to get established. 


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• All employers must be allowed to join the exchange. HCAN is concerned 

that the Exchange, and through it the public health insurance option, is restricted to employers with 10 or fewer employees in the first year and 20 or 

fewer employees in the second year. Allowing larger small businesses to join the 

Exchange in the first 2 years—for instance up to 100 employees—would give 

them access to more affordable health care options and create a much larger 

market that would increase the number of people insured both with private and 

public plans. While it may be necessary to give the Commissioner the authority 

to determine the schedule for phasing-in medium and large employers, the bill 

should specify that all employers eventually will be able to access the Exchange 

and the public plan. With more enrollees a public plan would be more viable 

in a very competitive insurance environment. 

Employer Responsibility 

HCAN believes that employers (including public employers) should be required to 

fund a meaningful portion of their employees’ and dependents’ health care costs. 

Employer responsibility is a necessary prerequisite for individual responsibility requirements. Ensuring continued employer involvement in our health care system is 

also critical to the affordability of the package as a whole. 

We commend the Committees for recognizing the importance of a strong employer 

responsibility requirement. The draft bill also requires proportionate contributions 

for those employees who work less than a full-time schedule. HCAN offers the following recommendations to strengthen the employer responsibility provisions in the 

draft bill. 

Recommendations 

• Employer responsibility should match average contribution requirements made by employers today. HCAN believes large employers should be 

responsible for funding at least 80% of the cost of individual coverage and 75% 

of family coverage for the defined benefit, which are the current average employer premium contribution levels for employer-based health insurance. The 

employer contribution under the draft falls short of this goal—72.5% for individual coverage and 65% for families. • The contribution amount should be applied to plans employers are currently offering. The contribution percentages in the draft apply not to the benefit plan offered by the employer but to the ‘‘lowest cost plan that meets the 

essential benefits package.’’ Instead, we believe the contribution amount should 

be applied to plans employers are currently offering, or else the minimum required employer contribution may be significantly less than it would otherwise 

be if the coverage actually offered was the basis for the requirement. • Contribution requirements should be based on a sliding scale. The Committees should also scale the contribution requirements for small and medium 

employers based on wage levels, part-time and full-time employment and number of employees. It is important that the contribution for part-time employees 

be scaled so that employers do not have an incentive to create part-time employment and thus avoid the employer’s share of the responsibility. • Accountability measures need to be in place to ensure compliance. 

There should also be an accountability mechanism in place for employers who 

alter employee status, such as by hiring people as ‘‘independent contractors’’ instead of employees, for the purpose of evading insurance obligations. • Employers should be responsible for covering their own workers. The 

legislation should ensure that employers who cover the employee of another employer as a dependent should receive reimbursement equal to the noncovering 

employer’s contribution. Dependent children of working parents should be assigned to the paying employer as they are now. • Definitions of family should be expanded to include gay, lesbian, bisexual and transgender families. For the purposes of determining access to 

health insurance coverage, subsidies and related Federal tax treatment of 

health care benefits, definitions related to ‘‘family’’ should be extended to ensure 

inclusion of lesbian, gay, bisexual and transgender families, families headed by 

domestic partners, and recognize multiple family structures and diverse kinship 

networks. • Establishment of a reinsurance program that encourages employers to 

continue to provide coverage to pre-Medicare retirees. A requirement 

that individuals purchase coverage could result in employers dropping coverage 

for pre-Medicare retirees since reform does not require them to continue such 

coverage. This is similar to the challenge Congress faced with respect to ensuring that employers continued prescription drug coverage when the Medicare 

Modernization Act (MMA) was adopted in 2003. We appreciate the proposal to 


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establish such a reinsurance program to help ensure that coverage provided by 

employers and VEBAs to pre-Medicare retirees will be affordable (Section 501). 

This provision represents a positive step in addressing the health care needs 

of a vulnerable population. However, we recommend that the Committees make 

it a permanent program with sufficient funding. • All workers should have access to coverage. Employers who pay into the 

system should be assured that their workers have access to coverage, helping 

to ensure that their workforce remains productive. As written the bill would exclude certain immigrants from affordable credits even where the employer is 

‘‘paying.’’ The House should explore mechanisms to ensure that all workers of 

employers who are ‘‘paying’’ can benefit from that contribution and can have access to affordable coverage; in such cases it can be structured so that it is the 

employer’s payment, and not a Federal payment, that is being used to make the 

coverage affordable. 

Affordability/Individual Responsibility 

HCAN commends the Committees for the affordability and shared responsibility 

provisions of the draft bill that place the burden on the health of our Nation with 

individuals, employers and the government. We are pleased with the affordability 

credits that recognize that low- and moderate-income families need protection from 

both high premiums and high out-of-pocket costs. A sliding scale that phases out 

at 400% of the Federal poverty level is the minimum level necessary to assure consumers that coverage will be affordable. Similarly, HCAN strongly supports the 

study, by the Commissioner, of geographic variation in the application of the FPL. 

HCAN believes this report should be completed 12 months prior to year one. This 

information is necessary to establishing regionally-adjusted FPL limits that would 

more efficiently target subsidies to families that need them the most. 

HCAN, however, is concerned that the public plan as proposed may not be large 

enough to compete on a level playing field with large national insurers, which have 

many built in advantages and considerable experience in State and regional markets. The American Medical Association reports that 94 percent of State insurance 

markets in the United States are now highly concentrated based on U.S. Department of Justice criteria. In many State markets, one insurer already controls more 

than half and often more than two-thirds of the market. Two companies alone control more than one-third of the private health insurance market—WellPoint with 35 

million insured and United Health Group with 18 million insured. The Health Insurance Exchange will include these well-established plans and other major players, 

which will make it very challenging for a new market entrant such as a public plan. 

Therefore, we believe several improvements are needed to the draft bill to ensure 

the public health insurance option can compete on a level playing field with private 

insurers. 

Recommendations 

• Provide cost-sharing credits to individuals and families with qualified 

employer coverage and allow individuals to apply their cost-sharing 

credits to their employer-sponsored coverage. Some individuals and families will face high costs relative to their income because their employer satisfies 

the ‘‘play’’ requirement or their income is above 400% FPL. These individuals 

and families should receive cost-sharing credits in the year following any year 

during which they reach their out-of-pocket maximums in an effort to protect 

families from the risk of financial ruin and bankruptcy. Additionally, credit-eligible full-time (and part-time) workers who are likely to decline the employer 

offer should be allowed to apply their credit to the employer offer rather than 

enroll in the exchange. • The individual mandate should not apply to everyone unless everyone 

has access to affordable coverage. While HCAN supports provisions of the 

bill that incentivize individuals to obtain coverage, there is a lack of congruence 

between the exceptions from the tax and the guarantee of affordability, threatening to leave millions of individuals in the double bind of being penalized even 

though they lack access to affordable coverage. Health care should be provided 

to all people who pay taxes and contribute to the system and everyone should 

be required to pay their fair share. • Oppose expensive verification and documentation procedures. HCAN is 

concerned that the positive impact of several reform proposals on the table may 

be undermined by additional measures that would severely restrict access to 

health coverage by mandating new, expensive verification and documentation 

procedures. The best way to reduce costs in our health care system is to ensure 

that people do not have to follow a long paper trail to get to the doctor and that 

everyone shares the costs of a new system. 


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Medicaid and CHIP 

HCAN believes the Medicaid protections and standards given to people below the 

Federal poverty level should be extended to those with incomes up to 200% FPL, 

including no premium contribution requirements and only nominal cost-sharing requirements. Additionally, HCAN believes that individuals who are in groups currently with cost-sharing exemptions or caps should maintain this protection. The 

Committees’ bill makes substantial improvements in coverage and access to low-income persons. For instance, the Committees’ commitment to ensure that every newborn and infant born in the United States have health coverage is a significant step 

toward improving child health. 

Recommendations 

• Increase Medicaid protections to 200% FPL. HCAN supports the House tricommittee bill’s increasing the across-the-board Medicaid eligibility to 133% 

FPL with full Federal funding. However, we urge that this limit be increased 

to as close to 200% as possible. • Cover legal immigrants. We are very disappointed that the draft does not 

support coverage for legal immigrants in Medicaid. In particular, HCAN supports requiring States to cover otherwise eligible legal immigrants in Medicaid 

at the same levels as citizens, without waiting periods. We urge similar coverage for legal immigrants, without a waiting period, in Medicare. • Increase access to primary care. We strongly support the provision to increase Medicaid provider rates in primary care to Medicare payment levels by 

2012 and believe this will improve access to important health services. We also 

encourage consideration of increasing Medicaid outpatient provider rates for 

specialty services in a similar manner. • Preserve cost-sharing protections for children. HCAN appreciates a number of positive provisions regarding children’s health, including coverage of wellbaby, well-child, dental and vision services. However, it is important to continue 

the cost-sharing exemptions or caps currently provided for children in CHIP. If 

those affordability protections are discontinued after 2013, children could be 

worse off. • Preserve EPSDT for CHIP children. Children enrolled in CHIP in 13 States 

and the District of Columbia are currently guaranteed EPSDT benefits through 

their Medicaid expansion CHIP programs. Those children will lose access to 

these vital protections if moved into the Exchange, unless benefits in the Exchange can be made comparable. • Cover all children and pregnant women. Low-income immigrant children 

and pregnant women should be eligible for Medicaid and CHIP regardless of 

their citizenship or immigration status. • Streamline enrollment procedures. HCAN believes the enrollment process 

must be simplified across Medicaid and other insurance options. For example, 

the Committees should consider applying the 12-month continuous coverage 

provision currently proposed for the credit to Medicaid as well. 

• Increase protections to ensure seamless delivery of services covered by 

Medicaid and not covered by other insurance options through the exchange. HCAN has serious concerns regarding the provisions that after 5 years 

would give States the option to provide access to the exchange for people eligible for Medicaid. These concerns include, among others, that stronger protections need to be established concerning the seamless delivery of services covered 

by Medicaid, the affordability of insurance on the exchange (even with subsidies) and procedural protections available to Medicaid participants that may 

or may not be available to those insured through the exchange. We look forward 

to working with the Committees to resolve these issues and make this proposal 

work for all stakeholders. 

Addressing Health Disparities Under Health Care Reform 

This draft demonstrates the strong commitment of the three Committees to 

achieving health equity for communities across the country. Health disparities populations—including racial and ethnic minorities, immigrants, women, the lesbian, 

gay, bisexual, and transgender (LGBT) population, people living in rural and tribal 

areas, and others—have historically experienced differences in disease incidence, 

health outcomes, and access to health care, and these differences continue to persist 

in the Nation’s health care system under the status quo. The proposals included in 

the draft legislation make substantial, meaningful investments in achieving equitable health outcomes for all people living in the United States and its territories. 

Please see the attached analyses, which provide section-by-section recommendations to achieve the greatest impact for health disparities populations. The first 


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(‘‘Attachment A’’) includes recommendations for health disparities populations 

broadly, while the second (‘‘Attachment B’’) details recommendations with respect to 

immigrant populations. 

Recommendations 

Coverage 

• Family-based approach should apply to administration of affordability 

credits. The bill generally takes a family-based approach to application and enrollment in health coverage, which helps reduce paperwork and which ensures 

that individuals and their dependents can get the coverage they need. A similar 

approach should be employed in administering the affordability credit. An affordable credit eligible individual should be able to include any dependents 

seeking coverage on the application for an affordable credit, without subjecting 

those dependents to the same individual eligibility determinations. Additionally, 

affordability credits for families should be set at levels that reflect the true cost 

of obtaining family coverage, which is on average 2.7 times more expensive than 

individual coverage. • Eliminate blanket exclusion for all persons with ‘‘non-immigrant visas.’’ 

The blanket exclusion of all persons with ‘‘non-immigrant’’ visas would deny access to affordable coverage to a broad range of individuals who are authorized 

by law to live, work, and remain in the United States, such as survivors of trafficking, domestic violence and other serious crimes who are cooperating in prosecuting these crimes (T and U visa holders), persons with fiance ́ petitions (K 

visa holders), citizens of ‘‘compact of free association states’’ (Micronesia, Palau, 

Marshall Islands) and others. • Reform must be consistent with and responsive to the Federal Government’s trust responsibilities to American Indians and Alaska Natives. • Government findings that impact the health of a community should be 

publicly released. Finally, in order to foster a more transparent policymaking 

process, HCAN encourages government decisions that impact the health of a 

community to be evaluated, and the findings publicly released, on the potential 

positive and negative health effects of these decisions. 

Public Health Infrastructure 

• Increase support for community health centers. A robust public health 

system, at a minimum, invests in health planning, undertakes prevention strategies, conducts disease surveillance and management, increases health literacy, 

and fosters a health care safety net through community health care workers 

and clinics. HCAN strongly supports increased investments in the community 

health center network. Community health centers will continue to serve as critical access points for many people living in underserved communities. 

Prevention and Wellness 

• Best practices must be ‘‘evidence-informed’’ rather than ‘‘evidencebased.’’ We applaud the Committees’ focus on community-based research and 

stakeholder input to develop and disseminate best practices, and recommend 

that the standard for these practices be ‘‘evidence-informed’’ rather than ‘‘evidence-based’’ unless and until sufficient new research on health disparities has 

been conducted. 

Data Collection 

• Data collection must be based on uniform categories. HCAN strongly supports the establishment of uniform categories for the collection of race and ethnicity as specified by OMB Directive 15, including the five racial categories and 

dichotomous question of Hispanic ethnicity, as well as the development of 

standards for collecting primary language data. Congress should require health 

plans and other entities to collect disaggregated data on ethnic subpopulation 

and tribal affiliation whenever possible. To ensure transparency, HCAN urges 

the Committees to authorize and fund regular analyses of this data in order to 

track the Nation’s progress in narrowing gaps in health care access and quality 

and health outcomes, with a special emphasis on historically marginalized populations. 

• Standardized data must be collected across the entire health care system. Standardized, disaggregated health care data must be systematically collected and reported across the entire health care system in order to measure, 

track, and hold accountable our system’s progress toward eliminating racial and 

ethnic health disparities in health coverage, health care, and health outcomes. 

While HCAN staunchly supports the proposed requirement that plans particiVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00338 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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pating in the Exchange report data to the Commissioner for the purpose of 

identifying and remedying disparities, we urge the Committees to broaden the 

scope of this proposal by requiring all health plans—public and private—to collect this data from enrollees and report to a centralized system. 

Language Access and Cultural Competency 

• Health plans should provide culturally and linguistically competent 

health care services based on CLAS standards. All health plans, public 

and private, operating inside and outside of the Exchange should be required 

to provide health care services that are culturally competent and linguistically 

appropriate. Additionally, plans should be required to apply the culturally and 

linguistically appropriate services (CLAS) standards within all aspects of health 

services. 

• Language access services should be an essential benefit and reimbursed under all public coverage. HCAN urges the Committee to include 

language access services—such as qualified medical interpretation and translation—as an essential benefit. Additionally, these services should be reimbursed under all public coverage programs, including both Medicare and Medicaid, at adequate reimbursement rates—with a minimum of FMAP of 75%. 

• Codify Executive Order 13166. HCAN urges the Committees to codify Executive Order 13166 to reinforce the prohibition of discrimination in health care 

settings based upon patients’ national origin. 

• ‘‘Individuals with limited English proficiency’’ should be specified as a 

vulnerable population to whom exchange-participating health benefits 

plans should be targeted. 

• Include adequate funding for workforce diversity initiatives. HCAN supports the Committees’ efforts to increase the number of health care professionals from underserved communities, and hopes that Congress will make adequate investments in these programs in order to achieve the greatest impact on 

the workforce. 

The National Health Insurance Exchange 

HCAN commends the Committees for including provisions that require the Exchange to solicit and negotiate bids and contracts for coverage through the Exchange from qualified health benefit plans. HCAN offers the following recommendations to strengthen the exchange provisions in the draft bill. 

Recommendations 

• State exchanges should have the ability to negotiate with qualified 

health benefits plans. 

• Ensure notice of exchange and affordability credits. The provisions on 

outreach and enrollment by the Exchange would be improved if existing 

COBRA/HIPAA requirements were amended to require notice of the availability 

of the Exchange, including the availability of affordability credits. For those 

who have lost employment-based coverage through loss of a job or loss of a 

spouse, the availability of the Exchange and affordability credits can help those 

individuals to meet their individual responsibility for coverage in an affordable 

way despite the loss of a job or a spouse to death or divorce. 

• Privacy protections. HCAN urges the Committees to include provisions protecting the privacy of those covered by the Exchange so that information collected by the Exchange cannot be shared with other government agencies and 

used for other purposes. The Social Security Administration has strong privacy 

protections that assure that information provided to the Social Security Administration is not shared with other government agencies. 

Comprehensive Benefits 

HCAN commends the Committees for including an ‘‘essential services’’ benefits 

package and creating the Health Benefits and Advisory Committee (HBAC) to recommend benefits beyond those listed in the draft bill. HCAN offers the following 

recommendations to strengthen the essential benefits package and the HBAC. 

Recommendations 

• Terms for members of the Health Benefits and Advisory Committee 

(HBAC) should be specified and staggered to protect its independence. 

HCAN supports the Committees’ establishment of an independent Health Benefits Advisory Committee (HBAC) to recommend an essential benefit package beyond the broad direction provided by the legislation. Decisions about the specific 

services and items that must be covered should be made by health experts who 


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are charged with shaping a benefit package grounded in science and guided by 

established standards of medical care. HCAN urges the Committees to establish 

terms of service for HBAC members and to stagger the terms so that all of the 

positions do not come open at a single time. This will guard against the possibility that the appointment process might in the future be used to impose a political agenda, which would undermine the medical judgment, expertise and 

independence of the HBAC. 

• Comprehensive dental coverage must be an essential benefit. Comprehensive dental care is an essential part of health care throughout the lifespan, and such services may be especially important to the well-being of people 

who have been subjected to domestic violence that includes battering resulting 

in broken bones in the jaw or damage to teeth. 

Insurance Regulation 

HCAN commends the Committees for including new insurance regulations that 

will prohibit insurers from excluding coverage based on preexisting conditions, refusing to renew plans, and prohibit them from being able to charge people different 

premiums based on their gender, health status, or occupation; while limiting the 

percent difference insurers can charge based on age. HCAN offers the following recommendations to strengthen the insurance regulations provisions of the draft bill. 

Recommendations 

• Identify a decisionmaking body charged with setting standards to determine ‘‘clinical appropriateness.’’ While the Discussion Draft would prohibit a qualified health benefit plan from imposing ‘‘limits unrelated to clinical 

appropriateness,’’ without further clarification, insurance companies would ultimately have the unfettered discretion to determine what ‘‘clinical appropriateness’’ would allow them to impose service limits. 

HCAN recommends a minor modification to Division A, Title I, Subtitle C, Section 

123(c) (p. 23) to require the Health Choices Commissioner, the Health Benefits Advisory Council or some other independent entity (other than insurance companies) 

to issue objective standards to guide the use of a clinical appropriateness standard 

to impose any coverage limits. 

• Structure cost-sharing limitations to protect against particularly onerous deductibles. We strongly support the inclusion of significant cost-sharing 

protections. HCAN is concerned, however, that the bill fails to address 

deductibles, which likewise impose significant barriers to care when deductibles 

are too high, and are especially burdensome for low-income individuals. HCAN 

recommends modification of the language regarding cost-sharing in Division A, 

Title I, Subtitle C, Section 122(c)(2)(C) (p. 26) [‘‘In establishing cost-sharing levels for basic, enhanced, and premium plans under this subsection, the Commissioner shall, to the maximum extent possible, use only copayments and not coinsurance.’’]. We encourage you to discourage the use of deductibles in addition 

to coinsurance, and to make clear that, to the extent any deductibles are part 

of any cost-sharing scheme, they should be set at sufficiently low levels to ensure that they do not impose cost-related barriers to accessing health care services. 

• Add key notice and reporting requirements to prevent insurers from 

inappropriately limiting enrollment under the capacity exemption. We 

commend the Committees for including many important insurance market regulations for Exchange participating plans. HCAN, however, is concerned that 

without further clarification, insurance providers may inappropriately use a ‘‘capacity limitation’’ exception to limit enrollment if they find that a plan is attracting higher-cost enrollees. To avoid the inappropriate use of exceptions to 

enrollment requirements, we recommend language modification to Division A, 

Title II, Subtitle A, Section 204(b)(4) (p. 61) to clarify that: 

Contracts with Exchange participating issuers would expressly indicate and quantify any capacity limitations; for those contracts that do 

address capacity limitations, the Commissioner should ensure that adequate alternative insurance plan options would be available under each 

benefit tier through the Exchange in the event that such capacity limitations are reached; a reporting requirement ‘‘trigger’’ for insurance 

issuers to notify the Commissioner in advance of reaching capacity limitations that would allow enrollment limitations. 


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Delivery System Reform 

We applaud the Committees for considering innovative new health care delivery 

system structures, and support the premise that these new payment models are an 

opportunity to redesign care delivery to encourage better care coordination, greater 

efficiency, and more patient-centered care. HCAN, however, has several concerns 

with the current provisions in the bill and offers the following recommendations to 

improve these provisions. 

Recommendations 

Accountable Care Organization Pilot Program 

Without appropriate safeguards models such as the ACO model could result in 

perverse incentives for providers to under-deliver care for patients. We are particularly concerned that the underlying focus of the ACO pilot is the achievement of 

savings in Medicare, with too little emphasis on improving care for patients and 

holding ACOs accountable for delivering patient-centered care. 

• Change ACO incentive payments to reflect quality. While we are pleased 

that the bill calls for ACOs to report on quality measures and ‘‘utilize patientcentered processes of care, including those that emphasize patient and caregiver 

involvement in planning and monitoring of ongoing care management plan,’’ we 

are concerned about the basis of the ACOs’ incentive payments. The bill indicates these payments will be made to ACOs only if the expenditures are less 

than a target spending level or a target rate of growth. There is no language 

linking incentives to the delivery of high-quality, patient-centered care. We urge 

you to build accountability mechanisms into the new payment models to provide 

a check against providers’ potential financial incentives to skimp on patient 

care. 

• HHS should be charged with identifying and endorsing patient-centered measures. The Secretary of HHS should be charged with identifying and 

endorsing patient-centered measures for the services and activities performed 

by ACOs, that ACOs be required to report on such measures, and that the reporting be independently validated. 

Medical Home Pilot Program 

• The pilot program should focus on improving health outcomes for vulnerable populations and delivering appropriate care and should be expanded nationally as quickly as proven successful. We urge you to improve this section by incorporating into the pilot program an ongoing and continuous process for assessing the performance of medical home practices on 

measures of patient-centered care. For example, in addition to being required 

to meet patient-centered standards to be recognized as a medical home, practices should demonstrate on an ongoing basis that they are delivering patientcentered care. 

Post Acute Care Services Payment Reform Plan 

We support your efforts to encourage better coordinated, integrated and accountable care by addressing avoidable and preventable hospital readmissions. Patients 

who are rehospitalized after a recent discharge experience greater-than-expected 

clinical complications, incur higher-than-expected costs, and are less satisfied with 

their health care. We recognize, however, that a bundled payment for expected services puts hospitals more at risk for costs that exceed the payment. 

• Ensure patient protections are included to eliminate incentives for hospitals to reduce needed care for patients or disregard patient preferences about kinds and sources of post-acute care. We recommend that 

the Secretary of HHS be charged with identifying and endorsing patient-centered measures for the services and activities intended to be captured by the 

bundled payment policy, that any hospital participating in the bundled payment 

be required to report on such measures, and that the reporting be independently validated. 

• Expand demonstration projects that bundle payments. HCAN recommends that the introduced bill should expand these demonstration projects 

into a nationwide pilot program to bundle hospital and physician payments for 

inpatient care and provide for the development, testing and, if prudent, expansion of shared savings programs within Medicare. 


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Establishment of National Priorities and Performance Measures for Quality 

Improvement 

We strongly support establishment of a process to identify priorities for performance measures and quality improvement. Without the right measures and measurement, we can’t transition to quality-based payment (as opposed to volume-based), 

we can’t assess and eliminate disparities, and we can’t tell whether such new payment models as ACOs, medical homes, or bundled payments are actually resulting 

in better care for patients. 

• National priorities and performance measure should include broad 

stakeholder involvement. The Secretary of HHS should draw upon a multistakeholder process to inform and make recommendations. Such a process allows consumers and patients to have a meaningful role in shaping and advancing quality measurement. 

• The Committees should include a process for testing and implementation of new purchasing initiatives. This process should evaluate the use of 

pay for quality and value-based purchasing initiatives, similar to the approaches contained in the ‘‘Affordable Health Choices Act’’ and the Senate Finance Committee’s Delivery Reform options paper. 

Prevention and Wellness 

HCAN believes the draft bill represents an impressive policy mix aimed at shifting our health care system from disease care to true preventive health care, which 

reflects HCAN’s commitment to quality, cost savings, and equity. HCAN offers the 

following recommendations to strengthen the quality, prevention and wellness provisions in the draft bill. 

Recommendations 

• Increase funding for the Prevention Trust Fund and build on Medicare’s pay for reporting initiative. HCAN believes the Committees should 

increase funding for the Prevention Trust Fund in the draft bill to the level in 

the Senate’s ‘‘Affordable Health Choices Act.’’ 

HCAN commends you for your leadership in fashioning this legislation. As the 

legislative process moves forward, HCAN is eager to work with the Committees to 

ensure that this excellent draft and the needed improvements reach enactment. We 

look forward to working with you to address the remaining issues and to move this 

critical bill through the legislative process. Thank you again for your consideration 

of these comments. 

Sincerely, 

Richard Kirsch 

National Campaign Manager 

Health Care for America Now 

ATTACHMENT A 

Section-by-Section Review of Disparities Provisions in the Tri-Committee 

Health Care Reform Bill 

I. Affordable Health Care for All 

Sec. 123. Health Benefits Advisory Committee 

HCAN is pleased that the membership of the Health Benefits Advisory Committee 

must include experts on health disparities within racial and ethnic minority and 

disability communities as well as specialists on children’s health. HCAN urges the 

Committee to ensure that the perspectives of other underserved communities—such 

as women, the LGBT population, and people living in rural and tribal areas—are 

also represented by the Advisory Committee. 

Sec. 143. Consultation and Coordination 

HCAN supports the inclusion of Indian Tribes and Tribal governments in the consultation and coordination provisions. The government-to-government relationship 

between Indian tribes and the Federal Government is a necessary for the health 

and independence of Indian communities. HCAN encourages the Committees to include language to encourage conferring—not consulting, which infers a governmentto-government relationship—with Urban Indian health programs to ensure that that 

the Federal Government and States fulfill in the trust responsibility to all Indian 

people. 


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Sec. 152. Prohibiting Discrimination in Health Care 

We strongly support the Committees’ commitment to preventing discrimination 

based on personal characteristics in all aspects of health care delivery and health 

coverage plans. The Committees recognize that health reform legislation should include broad protections and adequate remedies, including the right to sue, with sufficient resources for enforcement to ensure that each actor in a reformed health care 

system is held accountable for adhering to nondiscrimination protections. 

These regulations promulgated by the Secretary must be rigorously enforced. The 

enforcement of anti-discrimination laws in health care is indispensable and must include directing sufficient resources to monitor, prosecute, and ensure active compliance with all civil rights laws, and must integrate and prioritize the health issues 

of communities of color in all relevant agencies of the Federal Government. 

Sec. 202(b)(7) Essential Community Providers 

While HCAN strongly supports this provision and applauds the Committees for 

including community providers, we believe that Indian health providers must be 

specifically included as an essential community provider in order to protect the integrity of the Indian Health Service. Often private insurance plans, and even States, 

refuse to contract or otherwise work with Indian health providers because Indian 

patients are poorer and sicker than the general population, thus presenting a high 

risk. By specifically stating that Indian health providers are designated essential 

community providers which must be included in any PPO or other reimbursement 

scheme. Merely allowing an entity to designate Indian health programs as essential 

providers is not adequate. Tribes have enormous experience, across the country, 

with the variety of ways they can be excluded as providers by insurance plans. This 

is why Medicaid protections were included in ARRA Section 5006(d) which simply 

requires plans to pay Indian programs as in network providers. This type of provision should apply to all plans participating in an Exchange. 

Sec. 242. Affordable Credit Eligible Individual 

The bill generally takes a family-based approach to application and enrollment in 

health coverage, which helps reduce paperwork and which ensures that individuals 

and their dependents can get the coverage they need. HCAN strongly urges the 

Committees to employ a similar approach in administering the affordability credit. 

An affordable credit eligible individual should be able to include any dependents 

seeking coverage on the application for an affordable credit, without subjecting those 

dependents to the same individual eligibility determinations. 

In addition, the blanket exclusion of all persons with ‘‘non-immigrant’’ visas is 

troublesome, since it would deny access to affordable coverage to a broad range of 

individuals who are authorized by law to live work, and remain in the United 

States, such as survivors of trafficking, domestic violence and other serious crimes 

who are cooperating in prosecuting these crimes (T and U visa holders), persons 

with fiance ́ petitions (K visa holders), citizens of ‘‘compact of free association states’’ 

(Micronesia, Palau, Marshall Islands) and others. 

Sec. 59B. Tax on Individuals Without Acceptable Health Care Coverage 

The array of health coverage options from which individuals and families may 

choose must be available to all people living in the United States and its territories. 

It would be unacceptable if any individual who lacked access to affordable coverage 

were then penalized for their failure to enroll, yet the exemptions from the tax are 

not congruent with the guarantee of affordable coverage. For example, many immigrants ineligible for an affordable credit are, due to their ‘‘substantial presence’’ in 

the United States, defined as ‘‘resident aliens’’ under the Tax Code and are therefore 

not subject to the exemption for ‘‘nonresident aliens’’ however, rather than expanding the exemptions, HCAN urges the Committees to take as their first priority ensuring that the broadest range of individuals do have access to affordability mechanisms that make it possible to obtain health insurance coverage. 

Sec. 1302. Medical Home Pilot Program 

We strongly support the creation of a pilot program for community-based medical 

homes which integrate nonphysician practitioners and community health workers 

into chronic disease management and public health education. However, HCAN recommends that the Committees adopt an ‘‘evidence-informed’’ standard for medical 

home guidelines rather than an ‘‘evidence-based’’ standard. Clinical research and 

evaluation is sorely lacking for many vulnerable populations, such as racial and ethnic minorities, women, and the LGBT community, making an ‘‘evidence-informed’’ 

standard more appropriate. 


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Sec. 1401. Comparative Effectiveness Research 

Best practices in treatment, services, and medications must be grounded in evidence that is based on the actual populations involved. To ensure that comparative 

effectiveness research will truly promote improvements in quality care, the Committees should ensure fair representation of all groups in health research that have 

been historically excluded from health research including women of all ages, races, 

and ethnic groups, lesbian, gay, bisexual, and transgender individuals, and children. 

Although the Committees do call for research to include these populations and account for any differences ‘‘as feasible and appropriate,’’ HCAN believes that more 

robust requirements and incentives to conduct research inclusive of these populations are necessary. 

Sec. 1801. Medicaid Eligibility for Individuals With Income Below 133 Percent of Poverty Level 

HCAN supports efforts to expand Medicaid eligibility to 133% of the Federal poverty level and to nontraditional Medicaid-eligible populations. In addition, we urge 

the Committees to repeal the 5-year waiting period and sponsor-related barriers for 

legal immigrants in Medicaid and CHIP by mandating that States cover legal immigrants on the same basis as citizens in these programs as well as Medicare. 

Sec. 1802. Requirements and Special Rules for Certain Medicaid Enrollees 

and for Medicaid Eligible Individuals Enrolled in a Non-Medicaid 

Exchange-Participating Health Benefits Plan 

With respect to the proposed incentive for reducing State matching percentages, 

the Committees should be cognizant of the fact the way in which States’ reduction 

in uninsured populations will be measured—by the Current Population Survey conducted by the U.S. Census Bureau—does not include data for U.S. territories. 

Sec. 1201. Increased Funding [for Community Health Centers] 

A robust public health system, at a minimum, invests in health planning, undertakes prevention strategies, conducts disease surveillance and management, increases health literacy, and fosters a health care safety net through community 

health care workers and clinics. Community health centers will continue to serve 

as critical access points for many people living in underserved communities. HCAN 

strongly supports increased investments in the community health center network 

under health care reform. 

Sec. 2301. Prevention and Wellness 

HCAN applauds the Committees for developing proposals that recognize the 

needs, language, culture, infrastructure and practices of the local population and 

build local capacity to address the health care deficiencies in the community. 

We support establishing and funding Health Empowerment Zones which integrate 

community-based strategies in health care delivery in order to reduce disparate 

health outcomes in underserved communities. 

We also strongly support the Committees’ robust investments prevention and 

wellness programs with a strong commitment to health equity. The creation of the 

Task Force on Community Preventive Services demonstrate the Committees’ commitment to eradicating disparities in health care and health outcomes for historically underserved populations. We applaud the Committees’ focus on communitybased research and stakeholder input to develop and disseminate best practices, and 

recommend that the standard for these practices be ‘‘evidence-informed’’ rather than 

‘‘evidence-based’’ unless and until sufficient new research on health disparities has 

been conducted. 

HCAN agrees with the Committees’ definition of health disparities populations, 

which recognizes populations that have been historically marginalized from the 

health care system—including racial and ethnic minorities as well as geographically 

isolated individuals—and also appropriately allows for the further delineation of 

subpopulations. 

II. Data Collection and Reporting 

Sec. 142. Duties and Authority of Commissioner 

Sec. 204. Contracts for the Offering of Exchange-Participating Health 

Benefits Plans 

Section 221. Establishment and Administration of a Public Health Insurance 

Option as an Exchange-Qualified Health Benefits Plan 

One of the primary functions of the Health Choices Commissioner will be data collection within the Exchange for the purposes of promoting quality and reducing 


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health disparities. We support the data collection and reporting requirements to 

which private health plans in the Exchange are subject in order to realize these objectives. HCAN urges the Committee to clarify that this data should include demographic information about plan enrollees, including race, ethnicity, primary language, ethnic subpopulation, socioeconomic position, sexual orientation, gender identity, gender, and age. Additionally, health plans should report data on key health 

plan performance indicators (e.g., nonpatient specific claims and outcomes data; consumer satisfaction and disenrollment rates; provider satisfaction; initial and postresubmission claims denial rates) stratified by demographic characteristics. 

Sec. 1709. Assistant Secretary for Health Information 

The statistics on key health indicators as determined by the Assistant Secretary 

should be stratified by race, ethnicity, primary language, gender, age, and other key 

demographic information. HCAN strongly supports the establishment of uniform 

categories for the collection of race and ethnicity as specified by OMB Directive 15, 

including the five racial categories and dichotomous question of Hispanic ethnicity, 

as well as the development of standards for collecting primary language data. In addition, Congress should require health plans and other entities to collect 

disaggregated data on ethnic subpopulation and tribal affiliation whenever possible. 

Because standardized data collection is a prerequisite to comparing data across 

plans, HCAN urges Congress to mandate that standardized categories for the collection of race and ethnicity data, as well as other key subpopulation information, for 

all health plan data collection and reporting. HCAN supports providing States with 

funding to upgrade data collection systems in order to comply with these standards 

for data collection and reporting. 

III. Language Access and Cultural Competence 

Sec. 122. Essential Benefits Package Defined 

In addition to the broad categories of services outlined in this section as essential 

benefits, HCAN urges the Committee to include language access services—such as 

qualified medical interpretation and translation—as an essential benefit. 

Sec. 133. Requiring Information Transparency and Plan Disclosure 

HCAN is pleased that health plans must provide timely disclosure of plan documents and any plan changes in plain language, and urges the Committees to require health plans to make these materials available in multiple languages in order 

to best serve individuals whose English proficiency is limited. 

Sec. 204. Contracts for the Offering of Exchange-Participating Health 

Benefits 

HCAN strongly supports the requirement for Exchange-participating health plans 

to provide for health care services that are culturally competent and linguistically 

appropriate. We urge the Committees to expand this requirement to all health 

plans, public and private, operating outside of the Exchange. 

Sec. 204. Outreach and Enrollment of Exchange-Eligible Individuals and 

Employers in Exchange-Participating Health Benefits Plan 

HCAN applauds efforts to provide culturally and linguistically competent education and outreach about the Health Insurance Exchange to vulnerable communities by the Commissioner or other appropriate entities. Allowing the Commissioner to partner with community-based organizations and leaders will substantially 

increase awareness and enrollment. 

In addition to the populations identified by the Committees as critical outreach 

populations—children as well as individuals with disabilities, mental illnesses, or 

other cognitive impairments—HCAN recommends the inclusion of historically underserved communities, such as racial and ethnic minorities, women, LGBT individuals, and residents of rural and tribal areas. 

Sec. 1222. Demonstration to Promote Access for Medicare Beneficiaries 

With Limited English Proficiency by Providing Reimbursement for 

Culturally and Linguistically Appropriate Services 

Sec. 1223. IOM Report on Impact of Language Access Services 

HCAN applauds the Committees’ intention to improve Medicare recipients’ access 

to culturally and linguistically appropriate services through a demonstration project 

as well as provide for an evaluation on the impact of this project. However, there 

is an existing wealth of research which demonstrates the benefits of culturally and 

linguistically appropriate care. In addition, Federal public programs such as Medicaid already provide reimbursement for language services on the basis of such eviVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00345 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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dence. Accordingly, HCAN suggests that the Committees should broaden the scope 

of this effort and provide reimbursement of these services to the entire Medicare 

program. 

Additionally, ensuring reimbursement for the provision of language services under 

public coverage programs at adequate reimbursement rates—with a minimum of 

FMAP of 75%—will give providers some new tools to meet their obligations to take 

reasonable steps to provide language services to limited-English-proficient patients. 

Sec. 2241. Cultural and Linguistic Competence Training for Health Care 

Professionals 

HCAN supports efforts to increase effective cultural and linguistic competency 

training for health care professionals. We recommend that these education and 

training programs raise awareness and address the role of gender, social and cultural biases in clinical decisionmaking to prevent nonclinical or nonbiological judgments based on sex, race, ethnicity, sexuality, gender and gender identity, which inappropriately affect the amount and kind of treatment received. 

In addition to these programs, HCAN recommends improving funding for the 

training of interpreters and translators who are qualified to assist limited-Englishproficient patients. 

IV. Health Care Workforce Diversification 

Sec. 2241. Centers of Excellence 

Sec. 2242. Scholarships for Disadvantaged Students, Loan Repayments and 

Fellowships Regarding Faculty Positions, and Educational Assistance 

in the Health Professions Regarding Individuals From Disadvantaged 

Backgrounds 

Sec. 2243. Nursing Workforce Diversity Grants 

Sec. 2244. Coordination of Diversity and Cultural Competency Programs 

HCAN applauds the Committees’ efforts to increase the number of health care 

professionals from underserved communities, and hopes that Congress will make 

adequate investments in these programs in order to achieve the greatest impact on 

the workforce. 

Sec. 2261. Health Workforce Evaluation and Assessment 

National Center for Health Workforce Analysis 

We support the establishment of these national centers to establish and measure 

benchmarks for the health care workforce, including Federal programs. We applaud 

the Committees’ requirement for members of the Advisory Committee to include 

representatives from underserved and underrepresented communities. These benchmarks should reflect the national priority of achieving a diverse workforce with adequate representation of racial and ethnic minorities and other critical populations. 

ATTACHMENT B 

Summary of Immigration Recommendations to the House Tri-Committee 

Health Reform Bill 

Proposed by the National Immigration Law Center 

June 29, 2009 

Last week the National Immigration Law Center recently offered several recommendations aimed to improving immigrant inclusion in health care reform. Below 

is a summary, presented in order of the sections as they appear in the bill. 

Expanding Examples of ‘‘Vulnerable Individuals’’ (p. 67) 

In the section on ‘‘Outreach and Enrollment of Exchange-Eligible Individuals and 

Employers in Exchange-Participating Health Benefits Plan,’’ adding ‘‘individuals 

with limited English proficiency’’ to the list of ‘‘vulnerable individuals’’ to whom outreach should be targeted would help insure the likelihood of participation in health 

coverage by those who are limited-English proficient (as well as hearing-impaired), 

as follows: 

‘‘(1) Outreach.— 

Such outreach shall include outreach specific to vulnerable populations, such as 

children, individuals with disabilities, individuals with mental illness, individuals 

with other cognitive impairments, and linguistically isolated individuals.’’ 


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Definition of Affordable Credit Eligible Individual (p. 103) 

The draft bill makes affordable credits only to ‘‘an individual who is lawfully 

present in a State in the United States (other than as a non-immigrant described 

in 101(a)(15) of the INA).’’ The blanket exclusion of ‘‘non-immigrants’’ leaves out 

several categories of persons who are authorized by law to live and to remain in 

the United States, such as survivors of trafficking, domestic violence and other serious crimes who are cooperating in prosecuting these crimes (T and U visa holders), 

persons with fiance ́ petitions (K visa holders), citizens of ‘‘compact of free association 

states’’ (Micronesia, Palau, Marshall Islands) and several other categories of ‘‘nonimmigrants’’ who are permitted to live and work here permanently or are on a pathway to lawful permanent residence. 

To ensure that lawfully present individuals who are also residing in the United 

States are eligible: 

Sec. 242(a)(1) should be revised to read: 

‘‘(1) In General.—For purposes of this division, the term ‘‘affordable credit eligible 

individual’’ means, subject to subsection (b), an individual who is lawfully residing 

in the United States.’’ 

‘‘Lawfully residing in the United States’’ is precisely the language used to define 

which immigrant children and pregnant women are eligible for federally funded 

health coverage under the recently enacted section 214 of the Children’s Health Insurance Program Reauthorization Act of 2009 (‘‘CHIPRA,’’ H.R. 2). The terminology 

has been vetted and battle-tested. 

Streamlining Coverage for Families (p. 104) 

The bill generally takes a family-based approach to application and enrollment in 

health coverage, which helps reduce paperwork and which ensures that individuals 

and their dependents can get the coverage they need. A similar approach should be 

employed in administering the affordability credit. 

Sec. 242(a)(2) should be revised to read: 

‘‘(2) TREATMENT OF FAMILY.—Notwithstanding any other provision in this 

Title and except as the Commissioner may otherwise provide, an affordable credit 

eligible individual may apply for a credit under this subtitle for the purpose of securing family coverage. Individuals seeking family coverage shall include any dependents seeking coverage on the application.’’ 

Tax on Individuals Without Acceptable Health Coverage (p. 136) 

The political viability of the government enacting an individual mandate imposing 

a financial penalty on uninsured persons hinges on a question of fairness. If individuals and families subject to a penalty have access to affordable coverage, the public 

will view it as fair to expect them to fulfill a responsibility to enroll. Unlike the Senate HELP bill, which expressly exempts from penalty ‘‘any person for whom affordable health care coverage is not available,’’ the House bill exempts a small number 

of enumerated groups. 

Included among these groups are ‘‘nonresident aliens’’ (p. 138). However, there is 

no parallel between ‘‘nonresident aliens’’ and the various categories of immigrants 

lacking access to affordable coverage because under the discussion draft they are ineligible for both Medicaid and an affordable credit. The term ‘‘nonresident alien’’ is 

not what it implies. It is a term of art in the Tax Code that essentially means a 

noncitizen who is neither a lawful permanent resident nor a person who has had 

a ‘‘substantial presence’’ in the United States during the year, a test that gets to 

physical presence and is unrelated to immigration status. Even undocumented immigrants are considered ‘‘resident aliens’’ for tax purposes so long as they meet the 

substantial presence test. For more information, see: http://www.irs.gov/taxtopics/ 

tc851.html. 

Therefore, under the House bill, millions of immigrants would have no access to 

affordable coverage and yet would appear vulnerable to being penalized for failing 

to obtain acceptable health care for themselves or their families. Although the bill 

does signal that future regulations may enable individuals in this circumstance to 

apply for a hardship waiver (see p. 142), this does not offer protection sufficient to 

assuage concerns or controversy over the disjuncture. Immigrant parents with citizen children could be penalized for their own lack of coverage even if they enrolled 

the eligible children in coverage. 

As a practical matter, subjecting low-income immigrants to a tax penalty for failure to secure health coverage that they cannot afford will discourage tax compliance 

and collection. Approximately 1 million tax returns are filed with Individual Taxpayer Identification Numbers, most of which are assumed to belong to undocuVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00347 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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mented immigrants taking the extraordinary step of filing personal income tax returns despite their status. The prospect of having a penalty levied could change the 

equation for many of these individuals. 

This problem highlights the need to broaden pathways by which individuals and 

families are able to secure affordable coverage (and therefore be fairly subject to a 

penalty if they fail to do so) including: 

• Enabling affordable credit individuals to secure family coverage; 

• Enabling all low-income children to secure Medicaid and CHIP; 

• Exploring mechanisms to ensure that all workers of employers who are ‘‘paying’’ 

can benefit from that contribution and can have access to affordable coverage; 

in such cases it can be structured so that it is the employer’s payment, and not 

a Federal payment, that is being used to assist any immigrant worker who is 

not otherwise affordable credit eligible. 

Medicaid and CHIP (Title VIII) 

Public opinion overwhelmingly supports access to coverage and care for legal immigrants on the same basis as citizens. Concerns regarding potential push-back 

from States due to increased expenditures ring hollow given the larger expansions 

of Medicaid for citizens proposed in the discussion draft, and the fact that almost 

half the States, including most of the States with the largest immigrant populations, 

have been providing coverage for immigrants with no Federal match during many 

of the years following enactment of welfare reform. Restoration of eligibility would 

provide them welcome fiscal relief. This is the time to provide access to health care 

for low-income immigrants. 

To remove the discriminatory barriers to health coverage for legal immigrants imposed by the 1996 welfare law, including the 5-year waiting period, the restrictive 

and outdated list of ‘‘qualified’’ immigrants, and sponsor-related barriers, and to ensure timely and effective care for all children and pregnant women, the following 

sections should be inserted in Title VIII: 

‘‘Medicaid’’ 

Section 1903(v) of the Social Security Act (42 U.S.C. 1396b(v)) is amended— 

(1) by striking paragraph (4) and inserting the following new paragraph: 

‘‘(4)(A) Notwithstanding sections 401(a), 402(b), 403, and 421 of Public Law 104– 

193, payment shall be made under this section for care and services that are furnished to individuals, if they otherwise meet the eligibility requirements for medical 

assistance under the State plan approved under this subchapter other than the requirement of the receipt of aid or assistance under subchapter IV of this chapter, 

supplemental security income benefits under subchapter XVI of this chapter, or a 

State supplementary payment), and are: 

(i) lawfully residing in the United States, or 

(ii) children under age 21, including optional targeted low-income children described in section 1905(u)(2)(B), or 

(iii) pregnant women during pregnancy (and during the 60-day period beginning 

on the last day of the pregnancy).’’ 

(B) No debt shall accrue under an affidavit of support against any sponsor of such 

individual on the basis of provision of medical assistance and the cost of such assistance shall not be considered as an unreimbursed cost. 

‘‘Chip’’ 

Section 2107(e)(1) of the Social Security Act (42 U.S.C. 1397gg(e)(1)) is amended 

by striking subparagraph (H) and inserting the following new subparagraph: 

‘‘(H) Paragraph (4) of section 1903(v) (relating to individuals who, but for sections 

401(a), 403, and 421 of Public Law 104–193 would be eligible for medical assistance 

under Title XXI.’’ 

Conforming Amendment: 

42 U.S.C. 1320b–7(f) is amended as follows: 

(f) Medical assistance to aliens for treatment of emergency conditions and for 

medical assistance provided to children and pregnant women. 

Subsections (a)(1) and (d) shall not apply with respect to aliens seeking medical 

assistance for the treatment of an emergency medical condition under section 

1903(v)(2) [42 U.S.C. § 1396b(v)(2)] or to children and pregnant women seeking medical assistance under section 1903(v)(4).’’ 


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1 2008 Kaiser/HRET Employer Health Benefits Survey. 

Medicare 

Similarly, Medicare should be made available to all lawfully present individuals 

who are otherwise eligible for the program. The language below on Medicare should 

be included in the section on Medicare. 

42 U.S.C. 1395i–2(a)(3) is amended by striking subparagraph (B) and inserting: 

‘‘(B) an individual who is lawfully present in the United States.’’ 

f 

Statement of Kenneth L. Sperling, Hewitt Associates LLC 

Mr. Chairman and Members of the Committee: Thank you for the opportunity to 

submit our response to the Discussion Draft of the House Tri-Committee Health Reform Proposal, addressing the reform of America’s health care system and expansion 

of health care coverage. Hewitt Associates is a global human resources outsourcing 

and consulting company, providing services to major employers in more than 30 

countries and employing 23,000 associates worldwide. Headquartered in Lincolnshire, Illinois, we serve more than 2,000 U.S. employers from offices in 18 States 

plus the District of Columbia. 

As the Nation pursues a path leading to universal coverage, we can learn a great 

deal from the experience of large employers. Employers are the single largest provider of coverage for working Americans and their families, and the system is highly 

valued by both employers and employees. Nationwide, employer-sponsored health 

care plans provide health care coverage to 160 million participants. The latest data 

from the Kaiser Family Foundation from 2008 shows that 99 percent of employers 

with 200 or more employees offered health benefits in 2008.1 As we look to expand 

coverage and improve the health of all Americans, we believe the most important 

consideration is how to accomplish this worthy goal in a way that preserves, 

strengthens, and stabilizes existing employer-based coverage. 

Hewitt commends the Committee for putting forward a Discussion Draft to enable 

the collection of further input as the legislative process advances. Our statement focuses on four key provisions in the Discussion Draft, with recommendations on how 

to avoid disrupting existing employer provided health insurance: 

I. Insurance Market Reform 

II. Public Health Insurance Option 

III. Shared Responsibility 

IV. ERISA 

Our statement draws from Hewitt’s proprietary data and the experience of Hewitt’s consultants and actuaries who have extensive knowledge of—and direct experience with—the employer-sponsored health care system. Health care reform is clearly 

needed and welcomed by large employers if it achieves the objectives of expanding 

access to high-quality, affordable health care to all Americans. We are pleased to 

continue to make available our comprehensive data and extensive knowledge of the 

large employer marketplace, coverage, and cost drivers. 

I. Insurance Market Reform 

We commend the Committee for developing an extensive reform proposal for the 

individual and group health insurance markets. We believe that the rating requirements and guarantees of availability and renewability of coverage in the Discussion 

Draft will broaden access to health care coverage within a framework that generally 

seeks to continue to support employer-based coverage. Additionally, we strongly support the requirement that all Americans have an individual responsibility to secure 

acceptable health care coverage when it is both available and affordable. 

The employer-sponsored model works well because it allows the pooling of risks 

and because large-scale group purchasing lowers costs, enabling those who are less 

healthy to secure affordable coverage for themselves and their families. As proposed, 

the Exchanges would extend these advantages that employees of large employers 

currently enjoy to individuals and small groups. Employer-based plans offer coverage that is guaranteed and renewable, typically waives preexisting condition exclusions, and does not increase premiums or limit coverage based on health status. 

Incorporating an individual coverage requirement into the broader insurance market will level the playing field between large-employer plans and other forms of coverage. It will also provide more coverage choices to Americans. 

Proposed Requirements of Health Insurance Plans 

Insurance market reforms are indispensable for creating a viable Exchange and 

a balanced health insurance marketplace. However, Hewitt believes that these reVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00349 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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2Massachusetts Health Care Reform: Two Years Later, Kaiser Commission on Medicaid and 

the Uninsured, May 2008. Others note that at the same time, the costs of the Massachusetts 

program have risen as well, requiring subsequent and likely ongoing adjustments. 

forms should not apply to large employers providing coverage outside the Exchange. 

Hewitt recommends the Committees consider the following refinements to the proposed reform requirements: 

• Permit rating variations based on tobacco use and adherence to programs promoting wellness and disease prevention. Large employers have 

experimented with both of these approaches in an effort to influence employee 

behavior and reduce the health risk in their populations. We believe employers 

would support other health insurance programs following similar rating approaches. • Reconsider the rebate requirement for insurers whose medical loss ratios exceed the allowable limits. While insurers should be expected to provide coverage commensurate to the premium payments they receive, the rebate 

requirement is likely to unintentionally increase costs to all participants. Managing the rebate payments will increase insurers’ administrative costs, and insurers may increase their risk charges to build extra reserves to fund the rebate 

payments. 

At a minimum, employer-sponsored group health plans that are self-insured 

should not be subject to this requirement because the goal of the rebate mechanism—to preserve affordable coverage to employees and their dependents—is already in practice in the self-insured marketplace. The provisions of ERISA prohibit any excess contributions to be used for any purpose other than benefits 

for employees and their dependents. Our experience has been that when actual 

claim costs prove to be lower than expected in a self-insured group health plan, 

employers reflect the benefit of this favorable experience by not increasing payroll contributions and/or cost-sharing provisions in the following year. To impose 

onerous rebate requirements on these plans would simply add administrative 

cost with no substantive benefit. Health insurers that are contracted to provide 

administrative services under these plans, similar to the third-party contracts 

in place for the Medicare program, do not receive any additional benefit from 

favorable self-insured loss ratios. • Preserve flexibility for ERISA group health plans outside the Exchange. Employers are in the best position to determine their employees’ 

health care needs. We recognize and support the idea of an actuarially determined minimum benefit for plans provided through the Exchanges, but recommend that no specific benefit requirements or designs be imposed on large 

employers outside the Exchange. For this particular group, which already offers 

near universal group health plan coverage for their workforces, we recommend 

that the option of sponsoring such plans continue to be voluntary. Accordingly, 

we suggest that the market reforms not apply to ERISA group health plans. • Improve the application of the Grace Period. Employers will need substantial time to adjust their plans, and it will take time to implement individual 

and small-group market reforms. To avoid disruption of employer group health 

plans and added costs, we suggest that the proposed grace period apply to all 

employer-sponsored plans, including flexible spending accounts (FSAs). We also 

believe any rules in the Discussion Draft should only be applied after the expiration of the grace period. Additionally, we recommend that any individual enrolled in an employer-sponsored group health plan during the grace period 

should be deemed to have satisfied the Individual Responsibility requirement 

in the Discussion Draft. 

Health Insurance Exchanges 

We support the Committee’s suggestion that Exchanges be designed to address access to coverage for small businesses and individuals—precisely the group that could 

most benefit from this concept. 

There is much to be learned from the Massachusetts Connector model, a pioneering Health Insurance Exchange. A May 2008 review of the Massachusetts 

health care reform plan by the Kaiser Family Foundation estimated the number of 

people with insurance in Massachusetts has increased by more than 340,000 since 

late 2006, representing more than half of the estimated 650,000 people who were 

previously uninsured.2

We also strongly support the ability of private entities to facilitate Exchanges because they can best leverage existing processes, technology, and relationships to 

quickly and efficiently deliver the educational, informational, and enrollment assistance to support the participants of the Exchanges. As such, we also support the nonVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00350 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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regulatory role that the proposed Exchanges will assume and suggest that oversight 

and regulation reside at the State or Federal level with independent, nonpartisan 

agencies. 

Benefit Plan Values and Requirements 

Hewitt’s extensive actuarial and consulting experience with large employers may 

assist the Committees in defining minimum coverage that would ensure a broad 

range of medical benefits are provided by the health insurance plans offered in the 

Health Insurance Exchanges. 

We suggest that all health care benefits be subject to a reasonable and objective 

standard of medical necessity to prevent overutilization of services. This is particularly important in the area of diagnostic imaging and screening. As new technologies have become readily accessible, the industry has seen large increases in 

cost and utilization without conclusive evidence of commensurate effectiveness. 

We have identified several concerns with the Committees’ proposed benefit tiers 

and associated actuarial values and make the following recommendations: 

• Combine actuarial value with a benchmark plan design. 

We suggest that any proposed benefit levels in employer-sponsored group health 

plans be determined by combining an overall actuarial value percentage with a 

reference to a published benchmark plan design. While the overall actuarial value 

percentage concept proposed in the Discussion Draft is valid, different actuarial 

models used to determine the percentage of charges paid may vary. This could 

lead to a cliff effect with plans satisfying or failing the requirements depending 

on the actuary valuing the plans. Our approach could mitigate this issue by allowing for a small range of overall actuarial values, e.g., the stipulated percentage 

actuarial value plus or minus 2 percent, combined with referencing a stated actuarial value to a known and public plan design (e.g., the Federal Employees Health 

Benefit Plan Standard option). 

There is precedent for this approach. Both Medicare Part D and Massachusetts 

Health Reform minimize the differences in actuarial variation by using a reference plan approach to define appropriate actuarial values. Combining the absolute percentage requirement with a reference plan ensures that various actuarial 

models are consistent in their measurement. Exhibit 1 provides an illustration of 

this combination and some examples of reference plans. 

Exhibit 1: Illustrative Reference Plans at Different Actuarial Values 

Plan Provision 

HMO Design 

Actuarial Value: 

95% 

PPO Design 

Actuarial Value: 

85% 

PPO Design 

Actuarial Value: 

70% 

Copayment: Primary $15 N/A N/A 

Care Physician 

Copayment: Specialty $25 N/A N/A 

Care Physician 

Copayment: Hospital $200 N/A N/A 

Admission 

Annual Deductible None $300 per 

individual 

$2,000 per 

individual 

Coinsurance (paid by 100% 80% for in-network 80% for in-network 

plan) services services 

Out-of-Pocket N/A $2,000 per $4,000 per 

Maximum individual individual 

Copayment: Generic $2 $5 Subject to 

Drugs deductible 

and coinsurance 

Copayment: $8 $15 Subject to 

Preferred Brand deductible 

Drugs and coinsurance 

Copayment: Non- $16 $30 Subject to 

Preferred Brand deductible 

Drugs and coinsurance 


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3 Chris L. Peterson, ‘‘Setting and Valuing Health Insurance Benefits,’’ Congressional Research 

Service, R40491, April 6, 2009. 4 Actuarial value calculated using an assumption of covered expenses paid by the plan. 

We also suggest that actuarial value determinations specifically exclude out-ofnetwork providers for any health plan that meets standards to ensure network adequacy. The recent Congressional Research Service paper uses only in-network benefits design in its actuarial value calculations.3 Under other circumstances, for any 

plan that does not meet the network adequacy standard and where a significant 

percentage of care is delivered outside the network (e.g., more than 10 percent), it 

may be appropriate to include out-of-network expenses in the determination of the 

plan’s actuarial value. 

It is also important to define the types of services that should be included in the 

actuarial valuation. For example, major service categories such as dental, vision, 

and hearing, and alternative medical services should be specifically identified, as 

should contraceptives and high-cost biotech pharmaceuticals for the prescription 

drug benefit. 

• Implement an additional benefit tier. 

Hewitt has actuarially valued the health care plans of the 325 large employers 

that participate in the Hewitt Health Value Initiative TM (HHVI), a database containing detailed census, cost, and plan design data representing 13.1 million participants and $51 billion in 2009 health care spending. The data in Exhibit 2 

shows that the majority of large employers offer benefit plans that are at least 

as comprehensive as the Committees’ suggested basic plan. Note that less than 

2 percent of employees are enrolled in plans with an actuarial value equal or 

greater to 95 percent, and nearly 4 percent of employees are currently enrolled 

in plans that would fail to meet the 70 percent actuarial value standard in the 

Discussion Draft.4

Exhibit 2: Comparison of Actuarial Value of Large 

Employer Plans to the Proposed Basic Plan 

Plans with an 

Actuarial Value of: 

Percentage of 

Employees Enrolled 

Less than 65% 0.7% 

65–69% 3.0% 

70–74% 9.2% 

75–79% 18.4% 

80–84% 25.4% 

85–89% 28.7% 

90–94% 12.8% 

95% or more 1.8% 

We suggest adding an additional benefit tier using an actuarial value of 65 percent to accommodate those individuals and small employers who prefer to enroll in 

lower-value plans to pay less in monthly premiums. Such a design would provide 

comprehensive insurance protection against catastrophic loss, while providing a 

more affordable monthly premium than higher-valued options. Providing this flexibility would avoid forcing individuals and small businesses to provide coverage that 

they cannot afford and do not feel they need. The Massachusetts health care program includes similar options in their Bronze plans. If a 62 percent tier were adopted, it would permit certain Bronze plan options available through the Massachusetts 

Connector to meet the minimum value requirement. 

Many High-Deductible Health Plans (HDHPs) would fall below this benchmark if 

contributions made to Health Reimbursement Arrangements (HRAs) or Health Savings Accounts (HSAs) are not taken into account when calculating actuarial value. 


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5Generic Drug Utilization in the Medicare Part D Program, Office of the Inspector General, 

Department of Health and Human Services, November 2007. 

We strongly recommend that such contributions be considered in determining actuarial value. IRS rules provide guidance for the maximum deductible and out-of-pocket expenses allowed for HDHPs within an HSA. The 2009 limits are a minimum 

individual deductible of $1,200 ($2,400 family) and a maximum out-of-pocket of 

$5,950 ($11,900 family). A plan with these deductibles and out-of pocket maximums 

would have an actuarial value of 71 percent using Hewitt’s actuarial model. Any 

contribution an employer makes to the HSA should also be considered in the actuarial value calculation and would further raise the value. Every $100 contributed 

to an HSA as part of the plan raises the actuarial value by about 1 percentage 

point, assuming all coverage tiers are given the same contribution. 

• Apply minimum health benefit standards to total actuarial value and revisit cost-sharing provisions. 

For employer-sponsored group health plans, we suggest that the standard be 

based on the total actuarial value of the plan design, not on specific benefit-bybenefit comparisons. The use of total actuarial value should also include certain 

provisions to prevent ‘‘gaming’’ of the values. For example, for health plans offered 

in the open market and through the Exchange, we encourage the Committees to 

take steps to prevent insurers from developing plan designs that meet the total 

benefit percentage requirements but limit some services in order to prevent highrisk individuals from joining. Total actuarial equivalence is currently used for 

Medicare Part D employer health plan comparisons, while plans marketed to individuals are required to perform more detailed comparisons. Massachusetts also 

uses a total actuarial value approach. 

We encourage the Committee to remove the copayment language from the Discussion Draft and allow for both copayment and coinsurance provisions as deemed 

appropriate by the health plan sponsor. The Discussion Draft suggests that the 

Essential Benefits Package should use copayments in lieu of coinsurance whenever possible. While copayments are administratively easier for both the individual and the medical provider, this practice removes all transparency around 

the cost of the service being provided. Employers have successfully used coinsurance designs in prescription drug coverage, for example, to educate employees 

about the cost of brand-name drugs versus lower-cost alternatives. Using coinsurance provisions, the Medicare Part D program experienced an 88 percent generic 

substitution rate in its first 6 months of operation that significantly contributed 

to the favorable cost experience of the program.5

The Discussion Draft allows a variation of up to 10 percent in cost-sharing between basic, enhanced, and premium plans. In our experience with large employers and the options provided to their employees, this range will not be wide 

enough to allow for meaningful premium differences. In general, there should be 

an 8–10 percent difference in actuarial value between each plan level in order to 

offer meaningful choice. Limiting the variation as proposed will not provide this 

degree of actuarial value difference and corresponding premium savings to the individual. 

• Preserve existing employer plan options. 

We suggest the Committees be mindful that a wide range of health care plan 

designs exist today. We recommend that the requirements should be flexible 

enough to allow employees to keep their existing plans if they so choose. We support the Committee’s proposal of a 5-year grace period for group plans. As previously noted, we suggest that the grace period apply for all purposes and to all 

employer plans, including FSAs. Many large employers offer participants a choice 

of health care plans with varying employee premium contributions for greater 

cost-sharing in health care services at point of care. These are often choices of delivery model (HMO or PPO) or choices of plan cost-sharing. This is similar to the 

Federal Employee Health Benefit Plan Basic and Standard options. Typically, 

HMO plans have richer benefits, with lower copayments and no deductibles. PPO 

plans generally have up-front deductibles and coinsurance. Exhibit 3 shows typical plan provisions of HMO and PPO designs, and their associated actuarial values for the network benefit design. 


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6The Cost and Coverage Impacts of a Public Plan: Alternative Design Options, The Lewin 

Group, April 2009. 

Exhibit 3: Typical Plan Provisions for HMO and PPO Plan Designs 

Plan Provision 

HMO Design 

Actuarial Value: 

89% 

PPO Design 

Actuarial Value: 

81% 

Copayment: Primary Care Physician $25 N/A 

Copayment: Specialty Care Physician $30 N/A 

Copayment: Hospital Admission $250 N/A 

Annual Deductible None $500 per individual 

Coinsurance (paid by plan) 100% 90% for in-network 

services 

Out-of-Pocket Maximum N/A $2,500 per individual 

Copayment: Generic Drugs $10 $10 

Copayment: Preferred Brand Drugs $25 $25 

Copayment: Non-Preferred Brand Drugs $40 $40 

Note that the designs shown in Exhibit 3 are representative of typical designs 

today with 50 percent of large employers offering an HMO plan and 85 percent offering a PPO plan. Both of these designs have lower actuarial values than the proposed Premium option in the Discussion Draft. Other popular plan types include 

Health Reimbursement Arrangements (19 percent) and Health Savings Accounts (30 

percent). In addition, IRS rules provide guidance for the maximum deductible and 

out-of-pocket expenses allowed for HDHPs with HSAs. The 2010 limits are a minimum individual deductible of $1,200 ($2,400 family) and a maximum out-of-pocket 

of $5,950 ($11,900 family). Within these limits, a broad range of plan design values 

could apply. The richest HDHP-qualifying plan, for example, would have a $1,200 

deductible and pay 100 percent benefits after that point. The actuarial value for a 

plan such as this would be 84 percent under Hewitt’s actuarial model. Conversely, 

the leanest HDHP-qualifying plan would have a $5,950 deductible and pay 100 percent benefits after that point, and have an actuarial value of 50 percent. An employer contribution to an HSA would raise the actuarial value, assuming this was 

allowed in the methodology. 

II. Public Health Insurance Option 

There has been much debate about the merits of a public health insurance option 

to compete with private insurance plans. While the Committee has proposed options 

for a public plan for both individuals and small businesses through the Exchanges, 

the market dynamics of any public plan will likely extend to large employers outside 

the Exchanges. 

It is well known that private payers are subject to cost-shifting from hospitals and 

doctors to compensate for below-market reimbursements from Medicare and Medicaid. The Lewin Group estimates that Medicare reimburses hospitals 71 percent of 

private-plan payments; for doctors it is 81 percent.6 Structuring a public plan option 

with payments equal to or slightly greater than Medicare rates would only further 

exacerbate current cost-shifting. As private-plan costs continue to rise under this 

pressure, more employers will be squeezed out of the employer health care system 

as coverage becomes unaffordable. Over time, this cost-shifting cycle threatens to 

unravel the entire employer-based system. 

In light of the risks associated with a public plan and the expected availability 

of competitive options through the Exchanges, we recommend the Committees remove the public plan as a feature of health care reform. Alternatives to the public 

plan, such as a trigger mechanism where a public plan is implemented only if targeted goals are not reached within 5 years (e.g., if sufficient competition does not 

exist in a market) may be appropriate if insurance reforms do not fully meet the 

needs of individuals in certain markets. Additionally, any public plan triggered by 


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insufficient competition should be required to play by the same rules as commercial 

health insurance carriers. The Blue Dog Coalition provided a list of minimum conditions that we also support, especially the conditions of free market adherence and 

a level playing field with private plans. 

III. Shared Responsibility 

Large employers have widely differing opinions on a proposed employer mandate 

to provide health insurance coverage. Almost all large employers already offer and 

subsidize comprehensive coverage, (either voluntarily or through collective bargaining agreements) for employees and their dependents. About half of the total cost 

of this coverage benefits spouses and children. Large employers tend to absorb a 

larger proportion of these costs—either because the spouse is not employed, the 

spouse’s employer does not offer coverage, or the large employer’s plans are more 

comprehensive. The 2008 Kaiser/HRET survey shows that 58 percent of employees 

working for larger employers (those with 200 or more workers) enroll dependents, 

compared to 47 percent of employees working for smaller employers (those with less 

than 200 workers). Requiring all employers to provide health coverage would reduce 

some of the costs borne by large companies for dependent coverage, but a mandate 

on large employers—who are already offering coverage—seems unnecessary based 

on the near-universal voluntary participation in this market today. 

Further, requiring employers to extend health care benefits to part-time employees would have a severe impact on certain industries that are struggling to survive 

in the current economy. Employers compete for talent based on their work environments, compensation, benefits, career opportunities, and a host of other factors. The 

decision to offer health care benefits to a part-time workforce must rest with employers. Alternatively, it would be more appropriate to offer individuals who fall into 

this category access to coverage through the Exchanges, as well as subsidies based 

on their income if their employer chooses not to subsidize health insurance benefits. 

We recommend that the Committees remove the ‘‘pay or play’’ employer requirements in the current proposal and consider alternative mechanisms to ensure employers retain their current health care benefits. Under a ‘‘pay or play’’ scenario, 

every employer would have no choice but to carefully analyze its cost to provide coverage with the ‘‘pay’’ alternative—be it a dollar assessment or a percentage of payroll. We believe the result will be a bifurcation of the employer-sponsored system. 

According to Hewitt’s database, large employer health insurance costs are projected 

to be $8,863 per employee (including dependents) in 2009. However, there is a broad 

range around this average, with a low of $5,323 per employee to a high of $13,553 

per employee. Those with costs above the level of assessment would consider eliminating their employer-sponsored plans, creating adverse selection against the plans 

in the Exchange and driving up costs for Exchange participants. 

The Massachusetts health care program is an example of a ‘‘pay or play’’ approach 

where most employers have chosen to ‘‘play’’ even though the assessment was relatively minor at $295 per employee. This was primarily because of the administrative complexity of removing Massachusetts employees from large employers’ national programs. We believe the result of a national ‘‘pay or play’’ requirement 

would be dramatically different, as it would provide incentives for many employers 

to exit health care entirely if the ‘‘pay’’ alternative was sufficiently attractive. 

Due to the concerns outlined above and the potential unintended consequences of 

an employer mandate, we suggest strong consideration of an individual mandate but 

no employer mandate at this time. 

IV. ERISA 

Multi-State employers have been able to build uniform benefits programs for all 

employees regardless of their work location by relying on the uniform Federal regulation offered under ERISA preemption. This allows employers to determine which 

programs are best for their unique workforce and offer the same programs on a uniform basis in all of the States where they do business. The Discussion Draft proposes subjecting ERISA group health plans to the potential for state insurance mandates if States are willing to contribute toward the costs of those mandates. At the 

same time, employers become subject to various State rights of action for not meeting the requirements of those mandates. We strongly urge the Committees to reconsider this provision. Weakening ERISA would create a grave risk that large employers would drop their benefits programs as they become overly burdensome and costly to administer. 

The Discussion Draft creates a three-tiered system of rights and remedies for employer compliance under Federal health care reform. This system creates three problems for employer group health plans: 


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• First, the availability of compensatory and punitive damages against an employer plan will, at best, encourage the payment of questionable claims to avoid 

the costs of litigation. At worst, it will provide an incentive for frivolous litigation. Either outcome will result in increased health care costs. • Second, it is possible that State and Federal courts will issue conflicting decisions and develop differing bodies of law regarding similar coverage determinations made by employer group health plans, making it impossible to administer 

group health plans consistently across State lines and from employee to employee. Even for plans that do not participate in the Exchanges and are not subject to State law remedies, Federal courts may rely on decisions made in State 

courts to reach decisions regarding coverage determinations made by employer 

group health plans. 

• Finally, the public plan option was designed to compete with the private sector 

on merit, not liability. Employer group health plans will be subject to compensatory and punitive damages that will not apply to the public plan option, 

which further tilts the playing field in favor of a public plan option. 

Conclusion 

We applaud the proposals to improve access to affordable health insurance for individuals and small businesses. The creation of Health Insurance Exchanges with 

insurance market reforms and a viable and competitive insurance marketplace will 

go a long way toward achieving universal coverage. 

We strongly encourage the Committees to reconsider provisions that could draw 

individuals out of their employer plans and into the individual market or raise employers’ costs to unsustainable levels. Inadvertently unwinding the employer-based 

system would increase, not decrease, overall health care costs, and the effect this 

would have on a fragile U.S. economy could ultimately turn the public against even 

the most positive reform efforts. 

We hope our observations, data, and suggestions are helpful to the Committees. 

f 

Letter from Jaci Mairs, R.N., J.D. 

I am a 55-year-old woman, a lawyer who became a registered nurse at midlife and 

now I am a student again working on a Masters of Nursing in Women’s Health. Recently I applied for private health insurance with several companies. I consider myself to be healthy, but was very surprised when my applications were declined due 

to preexisting conditions. Luckily I have other options. However, many other women 

are not so fortunate and women in general do not receive adequate coverage by our 

current health care system. 

Women’s health care needs are generally greater than men’s, particularly during 

their reproductive years. However, in curious contrast to that, our current system 

makes it more difficult for women to obtain and afford the health care services they 

need. 

Our health care system is designed to rely heavily on employer-provided health 

care insurance. This works well when the population is gainfully employed with 

large employers who provide insurance, and in positions which qualify for insurance. 

This does not work well overall for women as a gender. Employment statistics tend 

to overlook the rates of full-time employment versus part-time employment which 

frequently does not carry health care benefits. Only approximately 40% of all women 

are employed full-time, whereas more than half, approximately 60% of men are employed full-time. Additionally, many of those women are working full-time work in 

smaller companies which do not provide health insurance to their employees. The 

other 6 out of 10 women—those who are either employed part-time or not employed 

at all—have little access to employer-provided insurance on their own behalf. That 

majority of women must generally rely on private insurance, public programs, or insurance provided by a spouse (in some instances a significant other). 

To make matters worse, private insurance which is available for purchase is likewise biased against women. Many companies charge as much as 11⁄2 times more in 

premiums for women during their reproductive years than for men. (H.R. 2635, currently pending in the U.S. House of Representatives, would rectify this disparity). 

Amazingly, the majority of insurance companies exclude coverage for childbearing, 

and many exclude pap smears and mammograms, major reasons women need 

health care coverage. Over 10 States permit insurance companies to exclude coverage for FDA-approved contraceptives. And, at least 9 States allow insurance companies to deny applications from victims of domestic violence (while numbers vary, 

women are the vast majority of victims of convicted domestic violence offenders). 


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Finally, women overall make less in income than men and therefore cannot afford 

health care to the same extent. Women employed full-time make approximately 80% 

that of men working full-time. More working women work part-time, which is generally paid less than full-time work. And, women as a group work fewer hours than 

men. In a recent survey, more than 50% of all women reported delaying or avoiding 

health care services as opposed to 39% of men. 

I urge this Committee and our U.S. Congress to consider these very significant 

issues and work responsibly together to finalize and adopt legislation which would 

create a health care system that guarantees equal and adequate health care for all. 

Thank you for your consideration. 

Jaci Mairs, R.N., J.D. 

Jaci Mairs is a registered nurse working on the Perinatal Unit at Truman Medical 

Center, Hospital Hill, in Kansas City, Missouri, and is also a student at UMKC 

working on a Masters of Nursing in Women’s Health. She is also a licensed attorney 

and formerly the Court Administrator and Legal Counsel for the Circuit Court of 

Jackson County, Missouri, for over 20 years. Opinions in this essay are solely those 

of the author and have not been reviewed or approved by any of the institutions 

mentioned above. 

WOMEN AND THE HEALTH CARE DEBATE 

• Women’s health care needs are generally greater than men’s, particularly during 

their reproductive years. 

• Our current system makes it more difficult for women to obtain and afford the 

health care services they need. 

• Our health care system is designed to rely heavily on employer-provided health 

care insurance. 

• This does not work well overall for women as a gender. 

• Approximately 40% of all women are employed full-time, whereas 60% of men are 

employed full-time. 

• Many of those women employed full-time work in smaller companies which do not 

provide health insurance to their employees. 

• The remaining 6 out of 10 women—those who are either employed part-time or 

not employed at all—have little access to employer-provided insurance on their 

own behalf. 

• That majority of women (60%) must generally rely on private insurance, public 

programs, or insurance provided by a spouse (in some instances a significant 

other). 

Private insurance which is available for purchase is likewise biased 

against women. 

• Many companies charge as much as 11⁄2 times more in premiums for women during their reproductive years than for men. (H.R. 2635, currently pending in the 

U.S. House of Representatives, would rectify this disparity). 

• The majority of insurance companies exclude coverage for childbearing, and many 

exclude pap smears and mammograms, major reasons women need health care 

coverage. 

• Over 10 States permit insurance companies to exclude coverage for FDA-approved 

contraceptives. 

• At least 9 States allow insurance companies to deny applications from victims of 

domestic violence (while numbers vary, women are the vast majority of victims 

of convicted domestic violence offenders). 

Women overall make less in income than men and therefore cannot afford 

health care to the same extent. 

• Women employed full-time make approximately 80% that of men working 

full-time. 

• More working women work part-time, which is generally paid less than 

full-time work. 

• Women as a group work fewer hours than men. 

• In a recent survey, more than 50% of all women reported delaying or 

avoiding health care services as opposed to 39% of men. 

f 


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Statement of Max Heirich 

The current emphasis within American health care on ever-more-expensive dis- ease care is not getting the job done: It costs too much, it leaves too many people 

out, and it leaves the health status of the American population far behind that of 

other industrialized countries. We need greater emphasis on health-building—keeping people healthy and helping people at risk for chronic disease improve their 

health. An effective health care system must deal with disease while also protecting 

people from environmental health risks (e.g., air pollution, second-hand smoke, toxic 

wastes, etc.) and it should help create a physical and social environment that encourages health-building. Wellness and prevention efforts address a full spectrum 

of human needs—physical safety and physical, mental, emotional, social and spiritual well-being. 

This paper addresses two questions: First, is there evidence that wellness and 

prevention programs actually improve health status and save costs? Second, what 

are critical areas where cost control is needed, and for each, could wellness and prevention projects strengthen person-centered care and provide noncoercive cost control while improving health outcomes? (An appendix lays out seven areas where cost 

control is needed and identifies prevention and wellness projects relevant to each 

problem area.) 

Obama’s proposals for health care reform and bills from the House Tri-Committee 

and the Senate HELP Committee all include an enlarged budget for wellness and 

prevention efforts, as did the economic stimulus package. Advocates argue that programs to keep people healthy and to detect disease early will save money. However 

a recent report from the Congressional Budget Office (CBO) cautions that prevention and wellness proposals will not save money. Moreover, it suggests there is little 

evidence that prevention efforts actually change health status. Who is right? 

CBO is both right and wrong on this one: Much of what passes as ‘‘prevention’’— 

e.g., pharmaceutically-based chronic disease management, screenings to identify 

people with serious health problems such as cancer and diabetes, etc., and preventive care given in doctors’ offices (usually at $75 or more per visit)—is useful, but 

these services are NOT money-savers. 

For years people have tried to deliver ‘‘preventive’’ care in doctors’ offices, providing vaccinations, disease screenings, and management of chronic illness via prescribing drugs (e.g. statins for cholesterol control). Ron Goetzel, a highly respected, 

costs-of-prevention analyst, has argued that for cost-effectiveness you need care delivered by less expensive health personnel than MDs, programs that do not rely primarily on use of pharmaceuticals, and programs that intervene in new ways outside 

medical settings (which have their own built-in costs). Many current prevention efforts are delivered by doctors in medical offices, relying primarily on expensive diagnostic tests and then pharmaceutical interventions or surgery. They may save lives; 

they do not save money. 

More recently, people have tried to implement less-costly chronic disease management via phone or computer, but with limited ongoing success. Low-cost wellness 

programs have also been tried, featuring self-report surveys of personal health risks, 

followed up by educational materials and invitations to use a free phone service for 

more personal health counseling. The impact of these programs also has been limited. The CBO assessment is correct about these kinds of prevention efforts. Most 

do not save money and many have limited effectiveness. But these programs are not 

the whole wellness and prevention picture. Innovators have continued to develop 

new strategies. A growing body of evidence (perhaps not seen by CBO) points to 

promising demonstrations that both improve health and save money. 

The best evidence on the effectiveness of prevention programs comes from the 

worksite health promotion literature. This literature is also suggestive of the types 

of prevention programs that are likely to be most successful. These are programs 

that provide a socially supportive context for lifestyle changes, not simply medical 

interventions. Michael P. O’Donnell, the critically respected editor of the American 

Journal of Health Promotion, reports: (1) ‘‘A systematic scientific review showed 

that the impact of lifestyle changes on all-cause mortality in coronary artery disease 

patients compares favorably with cardio-preventive drug therapies.’’ (2) ‘‘In a large 

clinical trial with a population at high risk for developing type 2 diabetes, lifestyle 

interventions achieved a 58% reduction in onset of diabetes. They were nearly twice 

as effective in preventing diabetes as pharmaceutical treatment with metformin 

(which achieved a 31% reduction).’’ (3) ‘‘A large-scale longitudinal study found that 

people with healthy lifestyles have greater longevity than the general population 

and end-of-life morbidity is compressed for them.’’ [I.e., they have shorter hospital 

stays, with less expensive end-of-life care.] Looking more broadly, (4) ‘‘Comprehensive scientific reviews identified 378 peer-reviewed studies showing that worksite 


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health promotion programs improve health knowledge, health behaviors, and underlying health conditions.’’ (5) ‘‘The most definitive review of financial impact found 

that 18 [of 56] studies found that a program reduced medical costs, and 14 studies 

found they reduced absenteeism costs . . . 13 studies calculated benefit/cost ratios 

and all showed that savings from these programs are much greater than their cost, 

with medical cost savings averaging $3.48 and absenteeism savings averaging $5.82 

per dollar invested in the programs. . . . A systematic review of 60 scientifically valid 

studies showed that a comprehensive wellness program, on average, reduces health 

care expenditures by 26.5%.’’ 

The most effective prevention and wellness programs focus on health improvement through lifestyle change. These successful programs do two things: They reach 

out proactively, encouraging individual changes in health behavior, and they create 

and strengthen a supporting culture of wellness. Targeted populations improve their 

health status, lowering disease care use and thus saving money. More is needed to 

improve Americans’ health than lifestyle change alone, however. The public also 

needs protection from environmental health risks (from air pollution, second-hand 

smoke and the like). Local public and private actions are needed to create and sustain a culture of wellness by providing social support for becoming and remaining 

physically active, managing daily stress, and improving nutrition. 

The 2009 economic stimulus bill included funds for pilot projects addressing 

health protection issues. Upcoming health care reform legislation can build on these 

demonstrations and improve access to primary disease care for currently underserved populations. I am convinced that health-building prevention and wellness 

programs that are evidence-based and cost-beneficial can become part of a realistic 

framework for achieving cost control, helping our health care industry evolve into 

a more effective health care system. (The appendix discusses seven areas where person-centered, noncoercive cost-control is needed, and proposes demonstration 

projects that could be relevant—dealing in new ways with catastrophic-level health 

care costs, chronic diseases, mental health or trauma, acute care in hospitals, the 

need for neonatal intensive care and its costly aftermath among low-income mothers, the high cost of dying, and possible ways to simplify hospital administrative 

costs.) 

The House discussion-draft health care reform bill wisely calls for demonstration 

projects in primary care, prevention, and wellness as a first step. And it welcomes 

nurse-based primary care and prevention efforts, especially for those making services available to now-underserved populations. The bill also has some omissions, 

which could be remedied simply. Here are some proposals for strengthening it: 

1. Include projects using Integrated Medicine (which combines standard care and 

complementary and alternative medicine) for potential demonstrations-evaluations. 

2. Enlarge Task Force mandates to include identification and evaluation of demonstration projects at worksites, and Integrated Medicine projects in hospitals 

and primary care (now under way) for outcomes, cost-benefit, and feasibility for 

wider use. (See appendix.) 

3. Recruit effective leaders of these innovative projects to serve on Task Forces. 

4. Assign coordination of innovation and assessment efforts undertaken by the 

Task Forces, NIH, AHRQ, and other governmental groups to the proposed new 

Assistant Secretary for Health and Human Services. That office would review 

assessment of outcome effectiveness, and cost-benefit, identifying evidencebased best practices. 

5. Give the new Assistant Secretary for Health and Human Services responsibility for developing reimbursement incentives that encourage use of evidencebased best practices. In addition, that office should identify cost-effective practitioners of high quality, who would receive full reimbursement for whatever 

treatment strategy best meets the needs of their individual patients. We want 

to create patient-centered best practices, not one-size-fits-all care. 

Max Heirich, mheirich@umich.edu, professor and research scientist emeritus, U of 

Michigan, NIH research grantee, co-founder of UM Health Policy Forum, a consultant on prevention, wellness, cost-control and integrated medicine to GM, Ford, 

Merck, NIH and the White House Commission on Complementary and Alternative 

Medicine Policy. 


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GETTING PRACTICAL—AN APPENDIX 

Patient-Centered and Noncoercive Cost-Control in Health Care: 

Making Successful Approaches to Wellness, Prevention and Disease Care 

Relevant to American Health Care Reform 

A. Seven Areas where Patient-Centered, Noncoercive Cost Control is needed: 

1. Patients with ‘‘catastrophic costs’’ for care 

2. Chronic Disease Prevention and Management 

3. Mental Health Services and Stress Management 

4. Hospital Operating Expenses 

5. Costs for Neonatal Intensive Care Use and Post Care for Infants of 

Low-income Mothers 

6. The high cost of dying 

7. Hospital Administration Costs 

B. Pilot projects building on promising demonstrations: 

1. Outreach to ‘‘catastrophic-cost’’ patients in a publicly-funded health 

care option: For an 8-year period during the 1980s, when health benefits costs 

were increasing at twice the rate of the general inflation, Federal Express discovered that the economist Pareto’s prediction applied to their workforce, i.e., that 20% 

of any population will generate 80% of costs for service to it. Fed Ex hired Options 

and Choices, a benefits management vendor, to reach out proactively to employees 

they identified each year as their ‘‘Pareto group.’’ Specially trained nurses proactively reached out to them and remained in contact. The nurses helped these employees manage their disease more effectively, provided an impartial sounding board 

as patients thought through the advantages and disadvantages of various treatment 

options being recommended, and motivated these employees to work at actively improving their health, coaching and encouraging them as they attempted to do this. 

This program was well-received by employees. Result: Federal Express kept its 

health benefits budget increases equal to the general rate of inflation, during a period of time when health benefits costs elsewhere were increasing at twice that rate. 

We propose a pilot project targeting a subset of enrollees in a public health insurance plan (i.e., a sample of the 20% of enrollees whose care accounts for 80% of the 

costs of disease-care utilization). If this could be done with the Federal Express 

workforce, which is scattered across the country, a pilot project for those in a public 

health insurance plan should be feasible. Costs for proactive disease-management/ 

wellness outreach services to a ‘‘Pareto group’’ of highest cost users of disease-care 

services would range between $200–$400 per year per targeted high-cost user, depending on location and difficulty of contacting them. Savings could be substantial, 

and per capita costs for the pilot group could be compared with per capita costs of 

the ‘‘pareto’’ catastrophic-cost group of enrollees in the same geographic areas who 

were not in the pilot study group. 

2. Reducing disease-care costs by keeping people healthy: A combined 

disease-management/wellness program that could be scaled up for much wider use 

with an entire workforce or a local community. Holtyn and Associates, a health and 

wellness program vendor, works with a wide range of industries, whose employees 

come from diverse ethnicities and educational levels of the workforce. They have 

worked extensively in Michigan and also across the Nation. Holtyn and Associates 

programs regularly get 75% to 80% or higher participation in health improvement 

efforts and achieve 50% or more reduction in health risks in these populations within 1 to 3 years. Client organizations have found sharply reduced costs for health 

benefits, in contrast to peer organizations in their community. Holtyn was the recipient of a CDC grant to develop community wellness programs, and CDC recently 

sponsored an assessment of another of the Holtyn programs; still other of their programs have won national awards. Currently, in cooperation with Blue Cross/Blue 

Shield, Holtyn and Associates have jointly developed a protocol to integrate diseasemanagement with health promotion and wellness counseling at worksites. Holtyn’s 

client organizations report cost savings from decreased hospital admission rates 

(currently by 11%) as employees improve their health. Holtyn is currently working 

with school system employees in several Michigan communities. As part of a systematic program evaluation by this client, in 2012 data from 12,000 participants 

will be analyzed by the client’s health economists, using state-of-the-art assessment 

tools, analyzing changes in health status, disease-care utilization, and health benefits costs. 


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Key ingredients of the Holtyn programs include proactive outreach for health risk 

assessments; triaged followup for personalized health-improvement by counselors 

skilled in motivational interviewing; organization of activities that create a ‘‘culture 

of wellness’’ in a business, neighborhood, or other setting; use of the Internet as part 

of instruction with clients; and sponsorship of low-cost incentives (e.g., ‘‘health lotteries’’) which motivate participants to participate in ongoing efforts at health improvement in order to qualify for access to incentives. Feasibility for wider use: 

Holtyn’s approach can incorporate a variety of health improvement goals for special 

population groups, and can be scaled up fairly quickly, with due attention to maintaining quality of the programs. Holtyn has worked closely with the Michigan Department of Community Health to design and implement a training and certification 

program for wellness vendors in Michigan. In this program, certified wellness vendors screened, counseled and provided education services to over 10,000 businesses 

and approximately 350,000 employees over a 12-year period. Personnel who developed and supervised this program are still working with the Michigan Department 

of Community Health. In larger demonstration/evaluation projects, State health department employees could train and certify vendors and assess outcomes. If participants in the demonstration were part of the public health insurance plan, Federal 

evaluators could assess cost-savings, as well. 

3. De-medicalizing stress management for special-needs populations: 

Working with low-income populations, communities and others dealing with major 

traumas, including Post Traumatic Stress Disorder (PTSD), the Washington, DC 

Center for Mind-Body Medicine (Dr. James S. Gordon, psychiatrist, founder and director) has developed a comprehensive program for training health and mental 

health professionals, educators and community leaders in simple ways to deal with 

their own stress and psychological trauma and to provide effective programs of self 

care and mutual care for entire communities. In Kosovo, CMBM trained 600 professionals in ways to deal with trauma and stress using such mind-body techniques 

as relaxation, meditation, guided imagery, biofeedback, and yoga as well as self expression in words, drawings and movement in a supportive small group setting. This 

has become central to the entire community mental health system and now serves 

some 2 million people. CMBM has developed similar programs in Israel, Gaza and 

post-Katrina southern Louisiana. 

The Center initially provides training and support to leaders in relevant institutions—administrators, teachers, clinicians—and then works with them to bring the 

approach to troubled children and adults. CMBM reports that this model also has 

been effective and appropriate for use with children and adults who are significantly 

disadvantaged financially and who often are having difficulty holding a job or succeeding in school: That the techniques and approaches taught give many participants a sense of mastery where they have felt hopeless and powerless; that it allows 

them to have successful learning experiences which have usually been unavailable 

to them; and that it provides them with a supportive community which helps them 

to relieve their immediate stress, and to which they can turn in times of crisis. 

We propose one or several pilot programs implementing these techniques with different at-risk populations. One pilot program could work within the VA system targeting military personnel with multiple deployments. Another with long-term unemployed or victims of natural disasters who are enrolled in the public insurance program. Both types of programs would permit evaluation of improvements in health 

outcomes, improvements in broader social outcomes, and cost-effectiveness. 

4. Targeted use of Integrated Medicine in hospitals: Developing optimal 

healing environments can shorten hospital stays with improved outcomes for patients and staff. In the past 10 years hospitals have become much more interested 

in the practice of ‘‘integrated medicine,’’ which combines traditional scientific medicine with complementary and alternative medical approaches to healing. (‘‘Healing 

is the process of recovery, repair, and return to wholeness, as contrasted with cure, 

the eradication of disease.’’—Samueli Institute). By 2005, 26.5% of American hospitals reported that they were using some form of integrated medical practice. Some 

allow alternative practitioners to work directly with patients. Others form collaborative teams of medically-trained staff and alternative practitioners that work jointly with patients and their families. Other hospitals have introduced programs that 

encourage the self-conscious creation of healing intentions among the hospital staff, 

patients, and their families while still other hospitals restructure the hospital experience itself to optimize healing potential. The Samueli Institute has identified hospital Integrated Medicine practices that show promising results: e.g., a 56% reduction in risk-adjusted mortality among cardiac surgery patients in a hospital that has 

developed a collaborative teamwork approach; shortened length of stay, improved 

outcomes, as well as improved staff morale and lessened staff turnover in a hospital 


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that uses mind/body programs to create a healing intention among staff, patients 

and family members; and similarly improved functional health outcomes where complementary and alternative practitioners join the treatment team. We recommend 

pilot projects to evaluate the feasibility of expanding hospital-based Integrated Medicine practices. Pilot projects should implement and evaluate two types of programs: 

(1) those in which alternative practitioners work cooperatively with traditional practitioners, and (2) those in which hospital employees are trained to use and integrate 

a variety of alternative techniques into the traditional hospital practice. 

C. Pilot projects to implement best practices in additional areas where 

improved cost-control and health outcomes are needed: 

1. Expand participation in WIC programs to reduce need for neonatal intensive care and expensive post-care among infants born to low-income 

mothers: Several well-designed public health programs now provide psychosocial 

support, good nutrition, parenting education, and free prenatal medical care for 

young, low-income, first-time mothers. A variety of high-quality Women-Infant-Children (WIC) programs address these issues. Some show measurable impact on infant 

and child mortality among women who are enrolled in the program. All of these programs struggle to increase awareness and participation of at-risk pregnant young 

women. If more expectant mothers participated in these successful, existing programs, there would be significant reduction in health care costs and improved 

health outcomes. Use of intensive care facilities for low birth-weight babies would 

decline: as more low-income mothers have good nutrition and prenatal care, their 

gestation periods are more likely to reach full term. This also would lessen the number of young children with developmental problems, and lower the costs for servicing 

their special needs. Task Force pilot projects could borrow strategies from the four 

examples given above, and other sources, to identify kinds of innovations that could 

increase participation in WIC programs and could encourage creation of demonstration projects that do this. 

For example, the Holtyn model might be introduced at a community level, including a featured health lottery, with the health lottery advertised widely on TV (as 

public service announcements and special reports). Filling out a health risk appraisal would be step one of a two-step process to qualify for participation in the 

lottery; the second step, which could be scheduled immediately, would involve (free) 

biometric measurements of your health status, with a brief, personalized health 

counseling session as it ends, and request for permission to stay in touch, assessing 

the best ways to do so. The health risk appraisal could be available in public libraries, at the public health department or other service centers where staff can help 

people with low literacy levels answer the questions. (The health risk appraisal 

would include two questions for women: ‘‘When did you have your last monthly period?’’ and ‘‘Are you pregnant?’’ to flag women who might be appropriate candidates 

for WIC referral as part of followup counseling.) 

2. De-medicalize end-of-life care costs: 

a. Demonstration projects with geriatric patients and their families: 

Helping clinics and staff develop skills and protocols that encourage patients and their families to assess what is most important to them in maintaining quality of life through its end. These programs would include introduction to living wills, the availability of hospice, and strategies for decisionmaking 

that are appropriate to the patient’s and family’s own values about what matters 

most to them as the end of life approaches. Doing this as part of primary geriatric 

care could lessen later use of heroic interventions at great cost that delay end-oflife only shortly. Hospice use might increase earlier in the dying process. 

b. Demonstration projects with hospital staff who offer end-of-life care, 

strengthening communication skills and encouraging earlier discussion 

with patients and their families about quality-of-life choices available to 

them: A high proportion of Medicare costs are spent trying to delay a dying process 

which nonetheless occurs within a few days or months. Medical staff make heroic 

interventions at great cost in an effort to extend life. Often it is only when all interventions clearly have failed that staff help the patient and family address the question of how they would like to spend the remaining time that the patient will have 

to live. Hospice programs are widely available and are chosen by many patients at 

the very end. But the kind of communication that helps patients and families look 

clearly at a dying process that already is underway and that encourages them to 

decide how they want to use their remaining time often occurs only after heroic 

interventions that will simply delay a dying process a bit have been exhausted and 


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failed. Demonstration projects could be encouraged, developed, and evaluated that 

help staff communicate with end-of-life patients (and their families), to explore what 

is likely to lie ahead and encourage them to make their own choices about how to 

balance quantity and quality of time that remains and how to approach the healing 

aspects of dying as well as living. The Samueli Foundation has identified projects 

in integrated medicine already in use at some hospitals which help staff and patients deepen their own approach to healing intentions in other contexts. Task Force 

Demonstration projects dealing with improving quality at the end of life should be 

evaluated for their effectiveness in providing help and satisfaction to patients and 

families and for their impact on use of costly, heroic end-of-life interventions. The 

proposed new Assistant Secretary for HHS should encourage wider use of those approaches which prove to be most useful. This might well reduce end-of-life medical 

expenditures while improving the quality of life for many dying patients. 

3. Simplifying hospital administration costs: Single-payer plans now used in 

some other countries have strikingly lower costs for hospital administration because 

they use hospital budgets that reimburse on an annual basis, rather than for individual care episodes. In several countries that have multiple payers for disease care, 

hospital budgets are set annually through negotiations between hospitals, physicians, and the set of insurers who pay for their services. Annual budgets can be adjusted for individual hospitals, depending on types of services provided, whether it 

is a teaching hospital, the population mix it serves, and other relevant factors. The 

various payers then divide these costs among themselves, based on their share of 

the patient load, adjusted for demographics and health-risk differences in their client base. 

In the United States, hospital costs now make up 30% of total health care spend- ing (over $600 billion annually), and hospital administrative costs make up 20% to 

30% of the hospital costs, varying from hospital to hospital. In contrast, in Canada, 

which has hospital facilities similar to those in the United States, but which uses 

annual budget hospital reimbursement, administrative costs for hospitals average 9 

to 11% annually. (Canadians seem to be generally pleased with their hospitals: In 

2002, Michigan, New York, and Washington hospitals treated only 154 Canadians 

who came to border-area U.S. hospitals for elective care. Among ‘‘America’s Best 

Hospitals’’ only one reported treating more than 60 Canadians a year. In a survey 

of 18,000 Canadians, only 20 had gone to the United States seeking care in the past 

year.) 

Dramatic cost savings could result from such an innovation. However, I think this 

major a change in reimbursement procedure should be tried in a few States before 

recommending its use or nonuse more widely throughout the American health care 

system. Congress could ask the Assistant Secretary for HHS (proposed in the House 

health care reform bill discussion draft) to encourage a few States to serve as a pilot 

demonstration testing the feasibility of creating annual budgets for hospitals 

through negotiations between all the relevant payers and the relevant care providers, and the HHS office could assist in evaluating the impact of reimbursement 

through annual budgets on hospital administrative costs and total expenditures for 

hospital care. 

Max Heirich, professor and research scientist emeritus, U of Michigan, NIH research grantee, co-founder of the UM Health Policy Forum, author and past consultant on prevention, wellness, cost-control and integrated medicine to Ford, GM, 

Merck, NIH, and the White House Commission on Complementary and Alternative 

Medicine Policy, and author of Rethinking Health Care: Innovation and change in 

America (Westview Press). 

f 

Medicaid and Medicare Advantage Programs Association of Puerto Rico 

Mr. Chairman and Members of the Ways and Means Committee: 

Thank you for the opportunity to provide our comments on the Tri-Committee 

Draft Proposal for Health Care Reform. 

We write as members of the Medicaid and Medicare Advantage Programs Association of Puerto Rico (MMAPA). MMAPA is comprised of the five largest Medicare Advantage (MA) plans in Puerto Rico: Triple-S Salud (SSS), MCS (Medical Card Systems, Inc.), MMM (Medicare y Mucho Maz ́s), American Health Medicare, Humana 

Puerto Rico. Together we account for 88.5% of MA enrollees in Puerto Rico. 

Puerto Rico relies far more on MA to serve the health care needs of its seniors 

than does the United States. Almost 70% of the Medicare beneficiaries in Puerto 

Rico participate in MA, compared to 25% in the States. The population in Puerto 


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Rico is needier, in terms of both economics and health. Per capita income in Puerto 

Rico is $13,468, half the per capita income of the poorest State, Mississippi, with 

a per capita income of $27,702. The Special Needs Plans (SNPs) for dual eligibles 

in Puerto Rico have an enrollment more than four times greater than the national 

average (52% vs. 12%). Approximately 88% of women and nearly 79% of men 60 

years and older in Puerto Rico suffer from at least one chronic illness, and more 

than 50% of Medicare beneficiaries have four or more chronic health conditions. The 

prevalence of diabetes among Medicare beneficiaries is more than 50% higher than 

the national average, and the prevalence of congestive heart failure twice the national average. These facts, and others we will cite, make the sustainability of MA 

in Puerto Rico of great importance. 

MMAPA fully supports the goals of health care reform that you, your colleagues 

in Congress, and the President are pursuing. We are particularly enthusiastic about 

the goal of making the delivery system more effective and efficient, particularly improving access and quality, and about many of the policies you propose to reform 

the system to this end. 

Indeed, we believe that we serve as proof that these reforms will work. The MA 

program in Puerto Rico has provided an opportunity to put to the test the development of efficient coordinated care plans to serve a population that is very poor and 

with significant health care needs. Early results of satisfaction surveys and HEDIS 

indicators reflect that the programs developed by plans are promoting high quality 

health care and the provision of preventive and wellness services. 

MA plans in Puerto Rico provide the following benefits, not available through traditional Fee for Service (FFS) in Puerto Rico: 

1. Enhanced access to physicians and hospitals with waiver of deductible and coinsurance. 

2. Access to a pharmacy benefit. (The MA program is largely responsible for the 

access of Medicare beneficiaries to Part D benefits due to the socio-economic 

status of the beneficiaries in Puerto Rico.) 

3. Dental, Vision and Hearing benefits not covered by FFS Medicare. 

4. Focus on primary care-based networks and clinical management. 

5. Preventive exams not previously covered by FFS Medicare. 

6. A real effort to provide beneficiary orientation about prevention and health 

education, including the management of chronic diseases. 

We have made significant progress toward another of your goals: monitoring and 

reducing waste, fraud, and abuse. MA plans in Puerto Rico have developed administrative programs that have created monitoring tools and processes that the Medicare FFS program does not have, and probably will not be able to develop in the 

near future. Many recommendations for improving the Medicare FFS program today 

are related to establishing such administrative programs with providers. One important example is the provision of DME services, where in the past traditional FFS 

Medicare has encountered critical problems of fraud and abuse. 

Between 2004 and 2008 we have made demonstrable improvements in health care 

delivery and health status for our enrollees. Some examples are: colorectal cancer 

screenings have increased by 70%; breast cancer screenings by 26%. Hypertension 

control has increased 24%. Our flu vaccination programs have reduced flu hospitalizations by 60% and flu-related deaths by 80%. 

It is in this context of great need, and significant improvements in the health status of Puerto Rico’s Medicare population through MA plans, that we say to you that 

we are deeply concerned about your proposal to reduce MA rates to 100% of FFS 

costs. We believe that this policy is likely to have negative consequences in many 

areas of the United States. We know it will have negative consequences in Puerto 

Rico. 

Today, Medicare premiums account for approximately 50% of the total health insurance market in Puerto Rico. A policy change that significantly reduces MA funding will affect the entire health care system of the Island. The proposed reduction 

is equivalent to a reduction of approximately 10.3% of the total estimated health 

care expenditures for Puerto Rico in 2009, compared to the impact of 0.5% that the 

change represents at a national level. 

The impact of this policy on the MA plans in Puerto Rico is potentially devastating, due in large part to the fact that the FFS cost calculation for Puerto Rico 

is seriously flawed and results in a FFS cost figure that is inaccurately and substantially too low. In its June Report to the Congress, the Medicare Payment Advisory 

Commission (MedPAC) alerts the Congress to possible inaccuracies in the Adjusted 

Average Per Capita Cost (AAPCC) calculations, the Part A estimates, and the risk 

scores for Puerto Rico. They identify the major source of these inaccuracies as the 

fact that only 30% of FFS Medicare beneficiaries in Puerto Rico have Part B covVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00364 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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erage (compared with a national average of 97%). We believe that there are several 

other sources as well, including discounted Part A payments, the absence of the 

SSI program in Puerto Rico, and the absence of the Low Income Subsidy (LIS) for 

Part D on the Island. 

Under the current calculation, Puerto Rico’s FFS cost is so much lower than the 

average FFS cost for the Nation as to strain credulity. The MA rate for Puerto Rico 

is already 88% of the national average 100% FFS cost. 

We urgently request that you act on MedPAC’s suggested solution to the anomalously and inaccurately low FFS cost calculation by affirming that the Secretary of 

Health and Human Services has the authority to establish a calculation that addresses the special circumstances mentioned in the MedPAC report and others. This 

would be good policy in any case, but certainly if you propose to reduce Puerto Rico’s 

MA rates to 100% of local FFS, the FFS calculation and resulting cost figure should 

be accurate. If necessary, after the effective date for this policy, until the problems 

in the calculation have been addressed and resolved, we request that Puerto Rico’s 

MA rate be based on 100% of the national average FFS cost. 

The MA program in Puerto Rico is producing positive health care outcomes for 

the almost 70% of Medicare beneficiaries enrolled in MA plans. The MA program 

is allowing for more adequate provider reimbursement, network administration, and 

the development of clinical management programs. We are implementing your objectives of enhancing preventive care, and coordination and efficiency of all care. A reduction in rates such as you propose would seriously impair our ability to provide 

these important services and results. We hope that you will help preserve our ability to continue our work on the Island. 

We stand ready to provide you with any additional information or assistance you 

might require. We look forward to working with you to achieve health care reform 

that will ensure the availability of affordable, effective, and high quality health care 

for all our citizens. 

Sincerely, 

f 

MMAPA 

Statement of the Medical Banking Project, Legislative Committee 

I. BANKS ARE IMPROVING COST, QUALITY AND ACCESS TO HEALTH 

CARE, TOO! 

EMBEDDED WITHIN THE FABRIC OF A $2.5 TRILLION HEALTH CARE 

SYSTEM IS THE BANKING AND FINANCIAL SERVICES COMMUNITY. This 

network of organizations process these health care dollars using the most efficient 

payment system in the world, settling billions of dollars every minute for millions 

of patients and health care groups who value and demand confidentiality, privacy, 

speed and efficiency. 

This national resource, which could be deployed to solve numerous systemic inefficiencies throughout the health care claim and payment process, moves massive volumes of funds and data in between all the health care stakeholders—providers, payers, employers, consumers and others—both within America and around the world. 

Yet in our dialog to move health care into a more electronic environment 

in America, banks and financial services firms are often sitting outside of 

the discussion. Why is that? 

Many people equate the banking health care contribution to HSAs alone, yet the 

reality is that banks currently invest in health care IT so they can move mountains 

of paper out of the health care system. This conversion to electronic processing allows important data to be available much more quickly to the health care providers 

and subsequently to consumers. This important function that banks perform today 

for the health care industry bears repeating: Our banking system does not only 

move money, but it also moves data between all the health care stakeholders. 

II. SUPPORTING GREEN TECHNOLOGY AND CONVERTING NEW VALUE 

TO CHARITY CARE 

A missing ingredient in the national dialog to improve our health care system is 

how banks can harness and enhance highly secure, existing technology to 

ramp health care onto the digital platform of the 21st century. Leveraging 

proven and secure banking systems, we can dramatically reduce the costly paper 


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1MBProject Research Report, 2001. The report calculates that the aggregate annual savings of implementing one model in medical banking (the specialized lockbox) is $35 billion. The data 

are based on the cost to process a payment electronically versus via paper. An earlier study was 

done in 1994 by the Bankers EDI Council that determined the savings to be $11 per remittance. 

This level of savings confirms the MBProject study. 2MBProject asserts that operationalized savings among providers will supplement uncompensated/charity services. In 2005, PNC Bank commissioned an independent survey to study the 

effect of better administrative practices using banks. The target group was 135 national health 

care providers and health care plans (approximately 35 were plans). The respondents indicated 

they would save between $1 million and $10 million annually using a medical banking platform. 

Sixty-seven percent indicated they would use the savings for funding indigent and/or charity 

care. 3 Institute of Medicine, To Err Is Human, 1999. Adverse drug events that result in death of 

the patient could be mitigated using current electronic health care records. 

chase in health care, saving at least $35 billion annually in waste,1 and, those 

annual savings can be used to supplement the cost of treating the uninsured.2

In addition, by moving health care into a real time platform we can save billions 

of dollars in administrative inefficiency and help to make critical information available instantly.3 Use of this technology not only supports a powerful Green Technology platform for America but it delivers exceptional public value as well 

by giving providers cost savings to apply to uninsured families and the expansion 

of health care delivery. 

III. DELIVERING HEALTH CARE RECORDS AND HEALTH CARE INFORMATION FOR THE MASSES 

Today, online banking is one of the most trusted and well used portals, with over 

55 million American households currently online. Americans use online banking 

with confidence everyday, because banks use some of the most sophisticated identity 

and access management engines outside of the defense industry. In addition to online banking, many employers lament that if their employees used their online 

health care portals more, they could learn how to live healthier lives. Linking online 

banking with lifestyle portals offered by employers could create a cultural shift that 

is clearly necessary for helping individuals learn about healthier lifestyle practices. 

This ‘‘Health-Wealth’’ portal of the future opens up enormous possibilities to 

fast forward eHealth for generations to come in America. Through secure online 

banking systems that we routinely use to access our money, online banking customers could access their personal health care records along with other online tools and information that foster better health. The integration of banking and health care is not just about HSAs, although that is a key program; it is 

also about how to engage the consumer to live a healthier lifestyle. Banks 

and financial institutions have spent much time and money designing easy-to-use 

online systems and this base of knowledge can be used to support a major national 

drive to optimize community health care, a key goal of the Obama Administration. 

IV. HOW IS THIS NEW FIELD OF ‘‘MEDICAL BANKING’’ BUILDING OUT? 

THE MEDICAL BANKING PROJECT has pioneered new thinking that links 

banking and health care infrastructure to dramatically impact cost, quality and access to health care. Supported by some 45 corporations, universities and government agencies (CMS, Veterans Healthcare Administration, Department of Defense, Centers for Disease Control) the Project spearheads industry initiatives that 

demonstrate the potential of medical banking. These include: 

The Gold Seal Program for instilling public trust in medical banking programs. 

The emphasis of this program is HIPAA privacy and security practices, as well as 

other critical data protection regulations. 

• The Specialized Payment Platform for moving massive volumes of paper out 

of the system. This platform promotes real time payments at point of service, 

implements key processing standards and enables digital workflows. 

• The Health-Wealth Portal for aggregating financial and health care resources 

into the online banking platform. The portal can offer single sign on advantages 

to the consumer as well as convenience for choosing and financing a person’s 

health care. 

As President Obama noted in a major policy speech, fiscal success is predicated 

upon the health of a community. Healthier communities are more productive 

and dynamic, thus banks have an interest in supporting the health care of 

the communities they serve. Along with serving their communities, banks offer 

the health care industry a large opportunity for cost savings and improved effiVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00366 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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ciencies, and therefore it makes perfect sense to align these two critical industry 

segments to improve American health care. 

We would like to offer our assistance to Members of Congress and others to help 

further understand how the banking community can contribute to the formation of 

solutions that solve the pressing health care policy issues that are currently being 

faced by our Nation. 

MBProject Members In Good Standing 

(as of June 30, 2009) 

ACS EDI Gateway, Inc. 

BancTec, Inc. 

Benchmark Revenue Management, Inc. 

Bank of New York Mellon Treasury Services 

Canopy Financial 

CareMedic Systems, Inc. 

Centers for Disease Control and Prevention (CDC) 

Centers for Medicare & Medicaid Services 

Claimtrust, Inc. 

Conmergence 

Converge Capital 

C Vision, Inc. 

DestinationRx 

DoD/Telemedicine and Advanced Technology Research Center [TATRC] 

Donnell Systems (OCIE) 

Edifecs, Inc. 

HSA Bank 

InstaMed 

Internet Payment Exchange, Inc. (IPAYX) 

MaxSurge Healthcare Solutions, Inc. 

Medical Recovery Services, Inc. 

Metavante Corporation 

Milliman Inc. 

U.S. Dept. Office of Civil Rights 

PFPC 

PNC Bank 

PNC Financial Service Group 

PricewaterhouseCoopers, LLP 

RemitDATA, Inc. 

Revenue Management Solutions, LLC 

Sentry Data Systems 

Starbourne Communications Design 

Sun Microsystems 

Systemware, Inc. 

The SSI Group, Inc. 

Thelma U.S. 

TransUnion 

TransEngen, Inc. 

US Bank 

Veterans Health Administration 

Wachovia, A Wells Fargo Company 

Walt Disney Company 

WAUSAU Financial Systems 

f 

Mark H. Ayers, National Coordinating Committee for Multiemployer Plans 

Greetings: 

On behalf of the approximately 26 million American workers and families who depend on joint labor-management, multiemployer health and welfare trust funds for 

their medical and other health benefits, I am pleased to submit these comments on 

the recent House Tri-Committee Health Reform Discussion Draft to supplement the 

record of your Committee’s June 24, 2009 hearing. 

Let me first congratulate you and the Ways and Means Committee as a whole, 

along with Chairman George Miller’s Education and Labor Committee and Chairman Waxman’s Energy and Commerce Committee, for taking on one of the most important challenges confronting our Nation: The need for a national health care sysVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00367 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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tem that provides universal access to affordable, quality health care, that responsibly controls costs, and that distributes costs fairly, without unnecessarily disrupting established employment-based health plans that are meeting their participants’ needs. National, systemic reform has long been an aspiration. Hopefully it 

will soon become reality beginning with enactment of comprehensive legislation in 

this Congress. 

However, great care must be taken in crafting legislation to avoid harming our 

members’ ‘‘Taft-Hartley’’ multiemployer health and welfare funds. These long-established collectively bargained funds are a large and essential part of the employmentbased health plan system that national health reform is trying to preserve. As you 

know, even the best intended and carefully considered legislation can have unintended, counterproductive consequences. 

We have been heartened by President Obama’s recent public statements that 

health reform should ensure that workers ‘‘who already have health care aren’t suddenly seeing their costs go up to pay for other peoples’ costs going down’’ and that 

reform should be designed so that ‘‘everyone’s costs can go down effectively.’’ The 

President has often said that health reform should only fix what is broken in the 

health care system, not create solutions looking for a problem or that cause more 

problems than they fix. 

Nevertheless, we have grave concerns that provisions of the Discussion Draft, if 

enacted into law without changes, would have the opposite effect for our health and 

welfare funds and the millions of working families who depend on them. It appears 

that the Discussion Draft may result in substantially higher costs for our health and 

welfare funds and the covered workers; yet the ‘‘small employers’’ who compete 

against the responsible employers participating in our funds (over 90% of whom employ fewer than 20 workers and more than half who employ fewer than 10) would 

continue to escape any responsibility and continue to shift the costs of their employees’ health care to our funds and workers. The effect of the Discussion Draft would 

be to discourage participation in our health and welfare funds by employers and individuals to the serious detriment of the covered workers and their families. 

The Importance and Special Nature of Multiemployer Health and Welfare 

Funds 

One of the proudest achievements of collective bargaining over the past 50 years 

is the thousands of labor-management, multiemployer health and welfare trust 

funds that provide to covered, union-represented workers and their dependents various benefit coverages, including medical, hospitalization, preventive and wellness 

care, prescription drugs, dental care, and vision care. These trust funds are often 

referred to as ‘‘Taft-Hartley funds’’ because they are regulated by the Labor Management Relations (‘‘Taft-Hartley’’) Act of 1947, as well as by the Employee Retirement Income Security Act (‘‘ERISA’’) and the Internal Revenue Code (‘‘Code’’). 

These health and welfare trust funds cover workers in industries as diverse as 

airlines, building and construction, transportation, retail, food, clothing, textiles, 

service, mining, entertainment, hotel and restaurant, maritime, longshore, and manufacturing. But for these trust funds, millions more working families would be uninsured and at risk for financial ruin in the event of a serious illness. The transient, 

project-based, mobile and seasonal employment patterns that characterize many of 

these industries would prevent workers from obtaining health coverage absent a 

central, pooled fund through which portable coverage is provided to workers as they 

move from employer to employer. 

Multiemployer funds solve the problem of real portability as workers change jobs; 

they don’t have to ‘‘take their coverage with them’’ because they remain in the same 

health and welfare fund as long as they are employed by contributing employers. 

Further, many funds have reciprocal agreements so that coverage can be continued 

even for employment with an employer obligated to contribute to another fund. 

Without the unifying arrangement provided by a Taft-Hartley fund, frequent 

changes in employment would make coverage by any one employer infeasible, and 

most are small so that employers would not maintain an employee health plan on 

their own, especially for transient workers. 

In assessing the impact of any health reform proposal on Taft-Hartley, multiemployer health and welfare funds and their participants, one must be mindful of the 

special characteristics of, and challenges faced by, these funds, including the following. 

Collectively-Bargained Trust Funds: A Taft-Hartley, multiemployer health 

and welfare fund is established and maintained through collective bargaining between one or more labor unions and more than one employer. As a matter of FedVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00368 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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eral law, a fund must be structured as a trust that is a separate legal entity, distinct from its sponsoring union(s) and contributing employers. The fund must be 

governed by a joint board of trustees on which labor and management are equally 

represented. Generally, the labor trustees are elected union officials and the management trustees are representatives of contributing employers. But, in performing 

their fund-related duties, the trustees have a fiduciary responsibility solely to the 

fund and its participants and beneficiaries, and not to the contributing employers 

or sponsoring union(s). 

Plan Design: Among the board of trustees’ responsibilities is structuring the 

fund, engaging appropriate service providers, and designing the plan of benefits to 

be provided by the fund to covered workers and dependents (‘‘participants and beneficiaries’’). The trustees, of course, rely on professional assistance in performing 

these duties. 

In designing the benefit plan, the trustees take into consideration the fund’s available and projected financial resources as well as the needs and wants of the participants and beneficiaries, among other relevant facts and circumstances. This balancing of interests requires a lot of innovation and flexibility to maximize value and 

adjust to changing circumstances, including the ability to adjust benefits to affordable levels and modify eligibility rules. 

Because a Taft-Hartley, multiemployer health and welfare fund is a legal entity 

unto itself, the fund’s administration is wholly separate and distinct from any individual employer’s operations or human resources functions. For example, a fund has 

no involvement in a contributing employer’s payroll operations including income tax 

withholding or payroll tax payments. The cost of fund administration is paid entirely from the fund’s assets by the trustees, not by any contributing employer. 

Funding: A Taft-Hartley, multiemployer health and welfare fund is financed by 

collectively bargained employer contributions and investment of its pooled reserves. 

Financing methods can vary from industry to industry according to employment patterns, cash flow, and financial structures in an industry. In many industries, like 

building and construction, contributions are required at a set rate for each hour 

worked in employment covered by the collective bargaining agreement and submitted to the fund monthly. While there are industry-based variations (some assess 

contributions based on days, weeks or shifts worked rather than hours, for example) 

contributions are almost always based on the activity levels of each employer’s covered workforce. The contribution rate is generally set in the collective bargaining 

agreement for the term of the agreement (sometimes allowing for re-openers in special situations). 

Even though contributions are calculated based on each participant’s work, the 

contributions made for any particular participant may bear no correlation whatsoever to the actual cost of that participant’s or his family’s coverage by the fund. 

Taft-Hartley funds create multiemployer pools over which costs are spread without 

a determination as to the cost of each contributing employer’s employee group. That 

aggregate cost (plus the costs of fund administration, reasonable reserves, and coverage for nonworking participants) must be covered by total employer contributions 

based on the participants’ covered employment. Typically no distinction is made between employers based on the differing demographics of their respective workforces. 

Typically, in the bargaining process between the union(s) and employers, the 

health and welfare fund contribution rate is just one of multiple ‘‘money issues.’’ In 

essence, once a total amount of compensation per hour is negotiated, that sum has 

to be allocated among wages, health and welfare fund contributions, pension fund 

contributions, and other employee benefits. The reality, not just economic theory, is 

that workers trade off wages for health and welfare fund contributions, recognizing 

that they and their families need the coverage. That is, the workers collectively pay 

for their own health and welfare coverage, although the law treats the contributions 

as employer contributions. Very few, if any, workers want to give up take home pay 

for more health coverage than they need. This process makes workers very sensitive 

to the cost of their and their families’ health care. 

Eligibility Rules: Health and welfare funds necessarily have eligibility rules for 

determining whether a worker and/or dependent is eligible for benefits during any 

given period of time. Funds have developed various industry-specific systems for 

maximizing coverage, taking account of the employment patterns of the industry 

and the funds’ financing needs. Typically, these systems feature eligibility periods 

during which a worker’s covered employment with any contributing employer builds 

credit toward eligibility in a future period (e.g. covered employment in the first calendar quarter earns the worker benefit eligibility for claims incurred in the second 

quarter). Since eligibility is based on the level of covered work in a prior period, 


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sometimes individuals are not actually working in covered employment during their 

period of coverage. This pattern of establishing eligibility after the necessary contributions are received by the fund is essential to the structure of Taft-Hartley 

funds. 

It is common for covered employment to fluctuate and for workers to have temporary periods of underemployment or unemployment in the normal course of an industry’s employment pattern. When no or insufficient covered employment with a 

contributing employer is available for a worker, he and his family may lose eligibility under the fund unless the fund provides means for bridging gaps in employment. Many funds, particularly in the building and construction industry, maintain 

‘‘hours bank’’ arrangements under which some of a worker’s hours of covered employment are ‘‘banked’’ and used to pay for benefit eligibility during periods of unemployment. 

Some funds allow workers to self-contribute to make up a shortage in hours of 

covered employment during an eligibility period. And, of course, the health and welfare funds also offer self-paid COBRA continuation coverage for participants and 

beneficiaries who lose eligibility. 

During times of high unemployment, like now, the funds face a major challenge 

to maintain unemployed workers’ and dependents’ eligibility without current employer contributions to finance the coverage. And too often the worker exhausts a 

fund’s system for bridging gaps in employment before finding new covered employment. When that happens, a fund’s trustees may try to address the situation by 

modifying the continuation of coverage rules; but that is only possible if the fund 

has accumulated and maintained sufficient reserves of assets. 

ERISA Preemption: There are thousands of Taft-Hartley, multiemployer health 

and welfare funds in the United States. Many of them are multi-State in coverage; 

that is, they cover workers employed in two or more States. This is largely attributable to mobile work patterns, expanding union geographical jurisdictions, and 

changes in collective bargaining structures. Some funds provide regional coverage, 

others provide national coverage. The geographical scope of health and welfare 

funds is expected to increase over time as funds merge to increase their purchasing 

power and contain costs. 

Multi-State coverage by health and welfare funds would not be feasible without 

the uniform, Federal regulatory scheme provided by ERISA and related laws and, 

in particular, the protection provided by ERISA preemption against multiple, conflicting and costly State laws. As Congress wisely determined in enacting ERISA, 

dual Federal and State regulation of even intra-State funds would be counterproductive. 

Most Taft-Hartley health and welfare funds are fully or partially self-funded. That 

is, benefits are paid by the fund from its pooled assets, rather than by an insurance 

company. Many of these funds carry‘‘stop loss’’ insurance to spread the risk of catastrophic claims. 

On the other hand, some funds still purchase insurance policies for all or some 

of the benefits. The fund negotiates and pays the group premiums to the insurance 

company for the eligible participants and beneficiaries, and the benefits are paid 

from the insurance company’s assets. 

The proliferation of burdensome State mandated benefit laws, as well as insurers’ 

need for profit and other insurance related costs, drove many funds from the group 

insurance market and into self-funding. State laws became a problem for insured 

funds once the U.S. Supreme Court misinterpreted ERISA’s preemption provisions 

as allowing States to regulate the content of insurance contracts including contracts 

with ERISA-regulated health plans. 

Administration: Some Taft-Hartley, multiemployer health and welfare funds, 

particularly larger funds, are self-administered; that is, they employ an in-house 

staff to perform all of the administrative functions such as collecting contributions, 

determining eligibility, processing and paying benefit claims, handling appeals, recordkeeping, and reporting and disclosure. But, many contract with third-party administration companies, or have ‘‘administrative services only’’ contracts with insurance companies, for all or some of the fund’s administrative functions. Many also 

contract with insurers or other organizations that maintain provider networks or 

group purchasing arrangements. 

Importantly, all of a health and welfare fund’s administrative costs are paid from 

the fund’s pool of assets; the same pool from which benefits are paid. In other words, 

a dollar paid in administrative costs (including regulatory compliance) is one less 

dollar available for paying benefits. 


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Retirees: Taft-Hartley, multiemployer health and welfare funds commonly provide coverage to retirees, particularly for pre-Medicare retirees, although many also 

provide supplemental coverage for Medicare eligibles. Retirees self-contribute to the 

funds for a portion of this coverage normally, but their cost is often subsidized by 

the contributions made for active workers; that is, the retirees contribute less than 

the actual cost of their coverage. 

Retiree coverage is becoming rare in nonunionized private sector employment, and 

many workers are compelled to remain actively employed just for health insurance 

coverage. However, many Taft-Hartley health and welfare funds cover workers in 

industries, like building and construction, who engage in physically demanding 

labor and become unable to continue working in covered employment before the age 

of Medicare eligibility. Pre-Medicare retiree health coverage is very important to 

these workers. But, subsidized retiree coverage is also expensive for the funds and 

active workers; a higher collectively bargained contribution rate for active workers’ 

covered employment is needed to support the retiree coverage. 

Unfair Competition and Cost-Shifting: Taft-Hartley, multiemployer health 

and welfare funds are especially harmed by unfair cost-shifting. First, the funds are 

charged higher prices by providers or otherwise forced to subsidize the uncompensated medical care provided to uninsured workers and their dependents by hospitals 

and other providers. Second, a fund’s contributing employers are commonly competing against nonunion employers that do not maintain employee health plans and 

whose employees are uninsured. These irresponsible, nonunion employers have an 

unfair cost advantage over union employers that contribute for their employees to 

the health and welfare funds. This unfair competition by nonunion employers results in a loss of the covered, union employment that generates contribution income 

for the health and welfare funds and benefit eligibility for the workers and their 

families. This unfairness is exacerbated by the fact that the uninsured, nonunion 

workers and dependents receive uncompensated medical care, the cost of which is 

shifted to employee health plans including health and welfare funds. 

Faced with persistent, systemic health care cost inflation over the past 20 years, 

Taft-Hartley, multiemployer health and welfare funds have endeavored to develop 

innovative means for cost containment including preferred provider arrangements, 

promoting preventive care and wellness, engaging in disease management, and 

forming group purchasing coalitions to maximize bargaining power. 

These serious efforts have made a difference. But, they have not been enough to 

contain costs sufficiently because most of the causes of inflation in health care costs 

are beyond the funds’ control, like unfair cost shifting by irresponsible employers 

and by government programs. As a result, health and welfare funds have been compelled to press the collective bargaining parties—actually, the active workers—to 

shift more wages into health and welfare contributions. 

The fact is that national, systemic reform legislation is needed to deal with 

unsustainable health care cost inflation. And, true universal health insurance coverage is an essential element of that reform. 

Discussion Draft and Multiemployer Health and Welfare Funds 

Costly New Mandates and Restrictions: Application of the benefit and regulatory mandates of Title I to a multiemployer health and welfare fund (a group 

health plan that is a multiemployer plan under section 3(37) of ERISA), especially 

to a self-funded health and welfare fund, would substantially increase the costs of 

the fund’s benefits and administration. Higher costs to the funds for benefits, administration, and legal compliance necessarily translate into a greater portion of the 

workers’ pay package being dedicated to health and welfare fund contributions and 

less in cash wages. There is no other source of revenue to offset higher health plan 

costs than the workers’ pay, as explained above. 

The health and welfare funds are not insurance companies motivated by profit; 

to the contrary, the funds are nonprofit, tax-exempt trusts. The funds are not single 

employer health plans whose terms and conditions are unilaterally set by company 

executives and that can draw on the company’s treasury whenever they need money. 

To the contrary, our health and welfare funds are pools of workers’ money governed 

by a joint labor-management board of trustees who are legally required to operate 

the fund for the sole and exclusive benefit of the participants and beneficiaries. 

Participation by an employer in a health and welfare fund, and its compliance 

with its collectively bargained contribution obligations to the fund, must be deemed 

to satisfy any employer responsibility (‘‘play or pay’’) requirement. And, coverage by 

a health and welfare fund by a participant or beneficiary must be deemed to satisfy 

any individual responsibility mandate. 


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Some multiemployer health and welfare funds might eventually wish to purchase 

coverage for their participants and beneficiaries through the Health Exchange. They 

should be permitted to do so, once the Exchange is opened to large employers. And, 

if any fund does so, it will thereby choose to assume the costs, mandates and responsibilities associated with Exchange participation. 

Health Choices Commissioner: The Discussion Draft would create an expansive new regulatory regime and Federal agencies (e.g. Health Choices Commissioner) on top of the existing, complex regulatory regime of ERISA, multiplying the 

regulatory and administrative costs that a health and welfare fund’s participants 

and beneficiaries would have to bear. The Commissioner, in particular, would be 

granted very broad, discretionary power to regulate the benefit programs and operations of the funds, and impose unlimited additional obligations and costs. 

Opting-Out of Funds: Multiemployer health and welfare funds are very concerned about any legislation that would entitle individual participants to opt-out of 

fund coverage so they can buy coverage through a Health Exchange. We are absolutely opposed to such an opt-out if the participant’s exercise of such a right could 

be construed under the law as relieving an employer of its collectively bargained obligation to contribute to the health and welfare fund or as requiring the employer 

to make a payment to the Health Exchange or government agency in addition to 

paying contributions to the health and welfare fund. 

Such leakage would undermine the financial foundation of health and welfare 

funds, and the fundamental labor law concepts of exclusive bargaining representation and mandatory subjects of bargaining. Younger, healthier, unmarried workers 

would be incentivized by the legislation to opt-out of their health and welfare funds 

and buy cheaper coverage through the Health Exchange. The pool of higher risk covered lives left in the funds would be costlier to cover, of course. 

This draining effect would be exacerbated if individual workers would receive government subsidies to buy coverage through the Health Exchange. 

As noted above, multiemployer health and welfare funds are creatures of collective bargaining. The workers as a group, through their union as the exclusive bargaining representative, negotiate a collective bargaining agreement that requires 

the employer(s) to contribute to the health and welfare fund for the work performed 

by all employees covered by the agreement. An individual employee is not permitted 

to exempt himself from the collective agreement, cut his own deal with the employer, and relieve the employer of its obligation to contribute to the fund for the 

work performed by the employee. 

Moreover, any requirement that the opt-out individual’s employer pay an assessment to the Health Exchange or other entity, in addition to complying with the employer’s obligation to contribute to the health and welfare fund would incentivize 

employers to bargain out of the fund. 

Employer Responsibility—‘‘Small Employer’’ Exemption: We strongly support enactment of Federal legislation that would require all employers to contribute 

significantly to the cost of providing health care coverage for their workers and the 

workers’ families. As noted above, the cost of health care for the workers of irresponsible employers and their dependents is being shifted to health and welfare 

funds and their participants and, through them to the small employers who must 

compete with those firms. Moreover, these free-riding employers enjoy a big, unfair 

competitive advantage over responsible employers that contribute to our health and 

welfare funds. In other words, the workers covered by our funds are being required 

to pay the health care costs of their nonunion competitors by the current system. 

We are pleased to see that the Discussion Draft would require employers to ‘‘play 

or pay.’’ However, we are alarmed to hear that the Committee intends to exempt 

‘‘small employers’’ and extend the exemption to employers who have less than 25 

employees. Such an exemption would allow, indeed encourage, the unfair competition and cost-shifting that led us to support national health care reform. 

As noted above, many, if not most, employers participating in multiemployer 

health and welfare funds are small employers; often with fewer than 10 employees. 

To exempt the business competitors of our employers from any responsibility for 

their employees’ health coverage would be to grant irresponsible employers a great 

competitive advantage over responsible small employers. This would discourage employers from remaining in or joining our health and welfare funds. 

In addition, a ‘‘small employer’’ exemption would provide even more financial incentives for employers to misclassify workers as ‘‘independent contractors’’ and avoid 

any ‘‘play or pay’’ responsibility. 

Government Subsidies: The individual and employer subsidy programs that 

would be created by the legislation should be designed to (a) enable workers and 


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dependents (participants and beneficiaries) to keep their health and welfare fund 

coverage and (b) encourage employers to continue participating in and contributing 

to the funds. 

We read the Discussion Draft as providing for subsidies for employers who obtain 

health plan coverage for their employees outside of the Health Exchange, including 

employers that contribute to multiemployer health and welfare funds. If this is, in 

fact, the drafters’ intent, we applaud it, but ask for an opportunity for input on how 

to make the subsidy program effective in a multiemployer fund context. 

With regard to individual subsidies, we read the Discussion Draft as providing 

such subsidies only for individuals who buy health plan coverage through the 

Health Exchange. We urge that any individual subsidy be extended to participants 

and beneficiaries in multiemployer health and welfare funds that would otherwise 

qualify by virtue of their income level. 

We applaud the Discussion Draft’s commitment to provide for a subsidy program 

for pre-Medicare retirees. A great many of the workers covered by our health and 

welfare funds, particularly in the building and construction industry, are physically 

unable to continue working at their trades until Medicare eligibility age. 

The individual ‘‘COBRA’’ subsidy program under the American Recovery and Reinvestment Act of 2009 is helping to maintain health and welfare fund coverage for 

unemployed workers, and the Medicare Part D subsidy program is helping retirees 

to maintain their prescription drug coverage under our funds. Both of these programs were designed to be workable for our funds and participants. Similar, widely 

available subsidy programs for active workers and pre-Medicare retirees should be 

included in health reform legislation. We would be pleased to discuss with the Committee’s staff how such programs can be designed to be workable in the multiemployer fund context. 

There are other aspects of the Discussion Draft on which we have comments and 

concerns. But, in view of the Committee’s strict guideline for submissions, let me 

conclude by again congratulating you for taking on the daunting task of crafting national, systemic health care reform legislation. We look forward to the Committees, 

the House, and eventually the Congress passing reform legislation that helps multiemployer health and welfare funds and their millions of participants and beneficiaries. We would be pleased to assist you in working out any details of legislation 

as relates to our health and welfare funds. 

If you have any questions concerning this matter, please feel free to contact 

NCCMP Executive Director Randy DeFrehn at (202) 756–4644. 

Respectfully, 

MARK H. AYERS 

f 

Chairman 

Statement of the National Yogurt Association 

Chairman Rangel, Ranking Member Camp and Members of the Committee, thank 

you for the opportunity to offer testimony in opposition to the proposed enactment 

of a sugar-sweetened beverage excise tax to finance comprehensive health care reform. 

As the voice of the yogurt industry, the National Yogurt Association (NYA) is the 

national nonprofit trade organization representing the manufacturers and marketers of live and active culture (LAC) yogurt products as well as suppliers to the yogurt industry. NYA sponsors scientific research regarding the health benefits associated with the consumption of yogurt with LACs, and serves as an information resource to the industry and general public. 

The yogurt industry is committed to improving its customers’ health through the 

unique properties of its products. In addition to containing many essential minerals 

and vitamins, yogurt with LACs offers the additional benefits of assisting digestion 

and boosting the immune system. 

If Congress moves to enact an excise tax on sugar-sweetened beverages to finance 

health care reform, drinkable yogurt (i.e., smoothie-style drinks made with yogurt) 

containing LACs should be excluded due to their many health benefits. 

Yogurt Drinks Are Positive Lifestyle Options 

Obesity is widely acknowledged to be a serious risk to public health, and excessive 

sugar consumption has been linked to rising obesity rates. However, some products 

that contain sugar, including drinkable yogurt with LACs, have public health benefits that outweigh the negatives associated with the added sugar they may contain. 


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1 IOM, ‘‘WIC Food Packages: Time for a Change,’’ at 119 (December 2005), available at http:// 

www.fns.usda.gov/oane/menu/Published/WIC/FILES/Time4AChange(mainrpt).pdf (last accessed 

May 22, 2009). 

NYA members strive to produce food products that deliver the valuable health 

benefits of yogurt with LACs. Drinkable yogurt products are a convenient way for 

adults and children who consume these products to get the minerals, vitamins and 

LACs they need. Flavoring yogurt drinks in ways that appeal to consumers’ taste 

allows more people to benefit from their many beneficial health properties. 

Yogurt Drinks Are Nutrient Dense 

Yogurt drinks are nutrient-dense foods that contain many essential minerals and 

vitamins, including riboflavin (vitamin B2), vitamin B12, phosphorous and potassium. In addition, yogurt drinks are often a good source of protein and calcium, 

which is important to developing and maintaining strong, healthy bones. The 2005 

Dietary Guidelines for Americans notes that studies on milk and other milk products, such as yogurt, showed a positive relationship between the intake of milk and 

milk products and bone mineral content or bone mineral density. 

Benefits Associated With Live and Active Cultures (LACs) 

In addition to the high nutritional value offered by yogurt drinks, research indicates that the LACs in yogurt drinks may offer additional health benefits. Many yogurt drinks are cultured with standard yogurt cultures, Lactobacillus bulgaricus 

and Streptococcus thermophilus. However, many yogurt drinks on the market today 

contain other LACs including Lactobacillus acidophilus, Bifidobacterium bifidus, 

Lactobacillus casei and Lactobacillus GG. These cultures aid in the digestion of food 

and the absorption of nutrients. 

Research also suggests that certain specific strains of these ‘‘probiotic’’ LACs may 

play an active role in preventing gastrointestinal infections, fighting certain types 

of cancer, boosting the body’s immune system and reducing nasal allergies. 

Yogurt Drinks Are a Good Alternative for Those Who Are Lactose Intolerant 

Many yogurt drinks are produced using the same cultures as refrigerated cup yogurt. Research has confirmed that, during the fermentation process carried out in 

producing yogurt from milk, lactase enzyme generated by the LACs breaks down 

lactose in milk and remains present through consumption, thus allowing those who 

are lactose (milk) intolerant to eat yogurt without certain side effects such as bloating and diarrhea. 

Lactose intolerance is relatively common among certain ethnic populations, particularly those of Asian, African and Native American descent. The high rate of lactose intolerance in these populations partly explains the Institute of Medicine (IOM) 

finding that Asians and African Americans are especially at risk for low intakes of 

dietary calcium. The IOM has recognized that individuals with lactose intolerance 

are able to tolerate yogurt better than milk, and noted that in public comments, yogurt, soy milk and tofu were frequently requested as calcium-rich options.1

Conclusion 

Yogurt drinks with LACs provide consumers with a dietary option that delivers 

a unique combination of properties with definite positive health benefits. They are 

a rich source of many necessary vitamins and other key nutrients, and provide individuals who are lactose intolerant an alternative source of these vital nutrients, 

such as calcium. 

NYA recognizes the challenge facing the Committee in finding funding streams 

to pay for health care reform. However, given the many health benefits of yogurt 

drinks with LACs, these products should be excluded from the proposed excise tax 

on sugar-sweetened beverages. Yogurt drinks provide health benefits to consumers, 

and should not be subject to the proposed tax and categorized along with products 

of lesser nutritional value. 

NYA appreciates the opportunity to offer this testimony. 

Respectfully Submitted, 

Kraig R. Naasz, 

President and CEO 

f 

National Yogurt Association 


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Letter From the Nurse Practitioner Roundtable 

Dear Chairmen and Ranking Members of the Tri-Committee: 

The members of the Nurse Practitioner Roundtable (American Academy of Nurse 

Practitioners, American College of Nurse Practitioners, National Association of Pediatric Nurse Practitioners and National Organization of Nurse Practitioner Faculties) 

would like to thank the Members of the Ways and Means Committee, the Energy 

and Commerce Committee and the Education and Labor Committee for their 

thoughtful undertaking of the issues of Health Care Reform in their currently proposed legislative draft which we have reviewed. We wish to express our support of 

the comments submitted by the nursing community under separate cover, and 

would like to take this opportunity to thank you for the improvements included in 

this bill that specifically address issues of importance to nurse practitioners and 

their patients. 

We are particularly appreciative of your recognition of nurse practitioners as primary care providers in many venues, including the medical home. We are also appreciative of your recognition of the worth of nurse-managed centers and schoolbased clinics by providing funding for these clinics that provide a valuable service, 

particularly to the uninsured. 

There are, however, some sections where unchanged language could impair the 

ability of nurse practitioners to provide their full scope of services, thus limiting patient access and incurring increased costs. Below are sections that we would appreciate having adjustments made that would clarify and strengthen our ability to provide health care to the citizens of our Nation. An appendix of suggested language 

adjustments is attached. 

I. Preserving Patients’ Choice 

Many patients elect to see a nurse practitioner for their primary care. Certain sections in this draft retain language that would obstruct patients from making that 

choice by referring to physician offices: 

Division A. Affordable Health Care Choices, Title I, Subtitle C, Section 

122(b)(4) Essential Benefits Package (p 24) 

We would suggest adding ‘‘health care professional’’ to the list of allowable settings in the essential benefits package. This wording is consistent with (b)(3) of this 

section and the beginning of the sentence in (b)(4). 

Division B. Medicare and Medicaid Improvements, Title II, Subtitle B, Section 1221 Ensuring Effective Communication in Medicare (p 333–334) 

Nurse practitioners are major providers for the underserved populations, many of 

whom have language disparities. It is important that they be included in any feasibility studies for support for LEP activities, not just physician offices. We suggest 

adding practitioners (as defined by 1842(b)(18)(c). 

Division B. Medicare and Medicaid Improvements, Title II, Subtitle C, Section 1235 (p 362) 

It is important that nurse practitioners be authorized to sign orders for life sustaining treatment. While the language in this section appears to be inclusive, the 

lack of specificity for who would be authorized to write this order is concerning. If 

the language in this section cannot be changed, we would request that the expectation that nurse practitioners are among those authorized to sign such orders be included in report language. 

Title III, Division B, Section 1308(a)(4)(B) Coverage of Marriage and Family 

Therapist Services and Mental Health Counseling Services (p 414) 

We would suggest substituting the words ‘‘with other health care providers’’ in the 

title and in line 15, adding attending or primary care physician ‘‘or nurse practitioner,’’ since nurse practitioners are often a referring health care provider for marriage and family therapy and would be the attending or primary care provider for 

referred patients. 

Title III, Division B, Section 1308(a)(4)(B) Coverage of Marriage and Family 

Therapist Services and Mental Health Counseling Services (p 419) 

We would suggest substituting the words ‘‘with other health care providers’’ in the 

title and on page 419 in line 1, adding attending or primary care physician ‘‘or nurse 

practitioner,’’ since nurse practitioners are often a referring health care provider for 

mental health counseling and would be the attending or primary care provider for 

referred patients. 


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II. Ensuring That Proposed Programs and Studies Capture the Full Scope 

of Primary Care Services 

New health delivery and quality improvement models and studies of these models 

must include nurse practitioners in order to obtain an accurate picture of health 

care delivery in the United States. We are appreciative of the inclusion of Nurse 

Practitioners in the Medical Home proposals in this legislation, noting that nurse 

practitioners are uniquely equipped to handle the demands of a patient-centered 

care-coordination model. We ask that you incorporate the following additional 

changes in other proposed health care delivery models to include nurse practitioners 

as providers and that data is collected on the quality and efficiency of nurse practitioner care and used to further health care reform: 

Division B, Title III, Section 1301 Accountable Care Organization Pilot 

Program (p 368) 

Advanced Practice Nurses (APRN) need to be included in the piloting of this program. APRNs play a valuable role in cutting costs while providing quality health 

care. Nurse practitioners widely practice as primary care providers, often in underserved and rural areas with outcomes equivalent to their physician colleagues. 

APRNS need to be added to the word physician throughout this section and explicitly referenced in report language for the Secretary. 

Division B, Title IV, Subtitle A, Section 1401 Comparative Effectiveness 

Research (p 429–430) 

Nurses and nurse practitioners are the backbone of the health delivery system, 

yet their representation is not evident in the proposals for comparative effectiveness. We recommend that practicing nurses, including nurse practitioners, be included in membership on the oversight commission described in this section. 

Division B, Title IV, Subsection C. Quality Measurements. Section 1441: Establishment of National Priorities and Performance Measures for Quality 

Improvement (p 553) 

The need for all health care providers, including nurses and nurse practitioners, 

to participate in the development of national priorities and performance measures 

for quality improvement and data reporting is critical. We ask that emphasis be 

placed on that inclusion in the report language for this legislation. 

III. Program Savings 

We are particularly concerned about the section that speaks to a requirement for 

a face to face encounter with a physician in order to be certified eligible for home 

health care. This perfunctory and unnecessary activity is perpetuated by the fact 

that home health agencies cannot accept nurse practitioners’ referrals for home 

health care. Instead nurse practitioners must find a physician to authorize/certify 

their patients eligible for home nursing care, even though they can be the attending 

provider for that patient once the home care is certified. 

Division B. Medicare and Medicaid Improvements. Title VI, Subtitle C, Section 1639 Face to Face Encounter with Patient Required Before Physicians 

May Certify Eligibility for Home Health Services Under Medicare (p 633) 

This provision, as written, adds tremendous and unnecessary cost to the Medicare 

system which could be alleviated by authorizing home health agencies to accept certifications from nurse practitioners and other qualified health care providers. We 

would recommend that in this section, nurse practitioners be authorized to certify 

patient’s eligibility for home care services, thus reducing the need for additional face 

to face encounters with physicians. If such a requirement is still necessary, then 

both physicians and nurse practitioners would be required to have a face to face encounter with any patient they certify for home care services. This revision would reduce costs tremendously, since nurse practitioners could certify patients eligible for 

home care at a lower reimbursement rate without requiring an additional unnecessary encounter with a physician at a higher rate of reimbursement. 

IV. Assuring Access to Quality Health Care Providers 

We appreciate that the Tri-Committee has recognized that health care reform cannot focus solely on health care coverage. It is important that patients of all ages 

receive health care services from the providers of their choice. 

Division B. Medicare and Medicaid Improvements. Title I, Part 3, Subtitle C, 

Section 1152 (p 235) 

Bundling for payment for post acute care services must take into account fair payment for services by a variety of providers. The proposed legislation states that 


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among the details to be considered in a post acute care payment reform is whether 

physician services should be included in the bundle. It is our recommendation that 

nurse practitioners be treated in the same manner as physicians in this payment 

plan. 

Division B, Title VIII, Part 3, Section 1825. Inclusion of Public Health 

Clinics Under the Vaccines for Children Program (p 697) 

The importance of immunizing children cannot be forgotten. Resources for providing vaccines should be all inclusive in order to provide the best coverage possible. 

We therefore recommend that nurse managed clinics and school based clinics be included in this program as well as rural health clinics and public health clinics. 

Division C, Title II, Subtitle A, Chapter 1, Section 2201 National Health 

Service Corps (p 773 et seq) 

We wish to thank you for your support of additional funding for the National 

Health Service Corps (NHSC). The NHSC plays an essential role in bringing primary care services to underserved areas. Many nurse practitioners and the communities they serve have benefited from this program and with enhanced funding 

many more will be able to complete their educational programs and provide needed 

health care services. We would ask that in report language, HRSA be instructed to 

return to its original policy of allowing pediatric nurse practitioners to qualify for 

NHSC scholarships, as well as the loan repayment program. 

Division C, Title II, Chapter 2, Subpart XI, Section 2213 Training in Family 

Medicine, General Internal Medicine, General Pediatrics, Geriatrics and 

Physician Assistantship (p 745) 

Nurse practitioners are missing from this section that provides for the development of primary care training programs for physicians and physician assistants. As 

you know, nurse practitioners have a long and successful track record for serving 

as primary care providers. However, their funding source in Title VIII is often not 

realized and they can be overlooked when funding increases for primary care education are considered. We ask that Title VIII (42 U.S.C) be amended with the same 

language with reference to nurse practitioner preparation. 

Division C, Title XXXI, Subtitle C, Section 3131 Task Force on Clinical 

Preventive Services (p 805) 

The cornerstone of nurse practitioner practice is health promotion and disease 

prevention. Nurse practitioners have been demonstrated to be experts with highly 

successful outcomes in health promotion and disease prevention interventions. It is 

with this in mind that we recommend that nurse practitioners be included on the 

Clinical Preventive Services Task Force and on the Community Preventive Health 

Services Task Force. If language cannot be changed within the bill, then we highly 

recommend and request that this recommendation be made in report language. 

Division B. Medicare and Medicaid Improvements, Title VIII, Part 3, 

Access, NEW SECTION 1826 (end of p 697) 

Since its inception, nurse practitioners have been identified as primary care providers at State’s discretion in the primary care case management program. This has 

led to barriers in recognition which could be resolved by including Section 2(a) of 

the Medicaid Advanced Practice Nurses and Physician Assistant Act of 2009 which 

will be reintroduced by Representative Olver. (See attached). 

We thank you for the opportunity to provide comment on the Tri-Committee Draft 

of the Health Reform Bill. We applaud your efforts and the constructive recommendations being made in this bill to provide access to high quality, cost effective 

care to the citizens of this Nation. Nurse practitioners stand ready to help in this 

effort. We cannot do that, if barriers to practice and access are not removed. We 

thank you for the recommendations you are making and ask that you seriously consider the additional recommendations we are making in this letter and the attached 

Appendix of line changes. 

Sincerely, 

American Academy of Nurse Practitioners 

American College of Nurse Practitioners 

National Association of Pediatric Nurse Practitioners 

National Organization of Nurse Practitioner Facilities 

f 


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Statement of Steve Slagle, Promotional Products Association International 

Chairman Rangel, Ranking Member Camp, and Members of the Committee, 

thank you for holding public hearings on this vitally important topic. 

My name is Steve Slagle, and I am President and CEO of the Promotional Products Association International (hereinafter ‘‘PPAI’’), the international trade association representing an industry comprised of over 22,000 promotional products companies, many of whom are small businesses. 

Our members market logoed items (e.g., ink pens, coffee mugs, legal pad portfolios, USB thumb drives, PC mouse pads, etc.) to manufacturers of prescription 

drugs, as well as medical device and medical supply companies, who in turn, distribute these logoed items to physicians as a form of advertising, not as gifts. Consequently, I write to you in opposition to the Physician Payments Sunshine Provisions in your proposed draft (i.e., Division B, Title III, Subtitle D, pages 560–575.). 

Specifically, PPAI objects to the ‘‘unreasonable’’ $5 de minimis exclusion 

contained in the draft proposal (Id. at 573). Conversely, PPAI supports a 

‘‘reasonable’’ de minimis exclusion (e.g., $25) similar to the one proposed in 

the 110th Congress stand-alone bill (i.e., H.R. 5605). 

As you know, these draft provisions require manufacturers and distributors of 

covered drugs, devices, biologicals, or other medical supplies under Medicare, Medicaid, or CHIP, to report payments or other ‘‘transfer of value’’ to physicians and 

other health care entities. The intent of these provisions is to provide greater transparency of the financial relationships between physicians and drug and/or medical 

device/supply companies as such relationships may influence prescribing practices 

and/or research, which in turn, affects health care costs. 

The draft, as currently written, would require manufacturers of drugs, devices, 

biologicals or medical supplies to physicians to report payments or other transfers 

of value where the aggregate amount transferred exceeds $100 in a calendar year. 

Unfortunately, the draft does not provide a ‘‘reasonable’’ de minimis exclusion (e.g., 

$25) for each transfer of value. As a result, a logoed item valued at $5 or more must 

be tracked by our customers in order to determine when and if the $100 annual aggregate limit has been met, thereby triggering the reporting requirement. 

Although PPAI supports the intent of the proposed draft, our members are deeply 

concerned that this legislation will have the unintended and adverse economic impact on our industry by effectively restricting and prohibiting the distribution of promotional products to health care professionals. To avoid the administrative burdens 

of recordkeeping and reporting in order to comply with the mandate of these provisions, it is highly foreseeable that our customers (e.g., pharmaceutical companies, 

medical device and/or supply companies, etc.) will simply discontinue purchasing 

logoed items and shift their marketing budgets to other advertising mediums (e.g., 

print, radio, television, Internet, etc.). Again, promotional products are a form of advertising and are not compensation, gifts, honoraria, etc. 

Logoed items of relatively nominal value (i.e., $25 or less) do not unduly influence 

professional behavior of health care professionals in the manner that this legislation 

is intended to curb. If so, then the solution to such behavior influences best lies in 

the ethics curriculum and training of medical students, as well as the continuing 

educational requirements of health care professionals. 

Promotional products are tangible forms of advertising that help keep the brand 

name in front of the recipient over time, reinforcing the advertising message with 

each use. Promotional products convey important marketing, advertising and communication messages and are no different from any other element in the advertising 

and marketing mix (e.g., television, radio, print mediums), except for the high message recall they deliver. 

This advertising medium is one of the most, if not the most, cost-effective methods 

for small businesses to market their products and services. Restricting their use results in economic hardship for these small businesses and limits their ability to reinforce personal relationships with their customers, clients and prospects. In this period of economic uncertainty, now is more important than ever for small businesses 

to provide a personal connection with their customers. 

Such a costly and administrative burden on our customers will cause them to discontinue using promotional products as part of their advertising and marketing 

campaigns. This will have a lasting and devastating effect on the promotional products industry. 

Without a reasonable de minimis exception (i.e., $25), this legislation will lead to 

severe job loss in the promotional products industry, as well as substantial business 

closings to companies that rely heavily on a customer base of prescription drug manufacturers, medical supply, and medical device companies. 


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Without including a reasonable de minimis exception (i.e., $25) in this legislation, 

Congress will actually add to the number of uninsured Americans by shrinking if 

not eliminating an industry made up of small businesses who actually provide 

health care to their employees, and who are already struggling to survive in this 

economic downturn. 

For the reasons stated above, PPAI strongly encourages you to amend the draft 

proposal by substituting a ‘‘reasonable’’ de minimis exclusion (i.e., $25) per transfer 

of value. Please note that an ‘‘unreasonable’’ de minimis exclusion (i.e., $5) would 

have an equally profound impact on promotional product companies as if there were 

no de minimis exclusion at all. 

Again, thank you for allowing the public to review and respond to your proposed 

draft. We hope that you will take our viewpoints into consideration as your prepare 

your actual legislation for introduction and legislative activity. 

If we can be of any assistance to you in this regard or otherwise, please do not 

hesitate to contact us. 

f 

Statement of RNG Consulting, Inc. 

‘‘An investment in knowledge always pays the best interest’’—Benjamin Franklin. 

The purpose of this proposal is to introduce an alternative to the existing way in 

which health information is communicated to the patient. It should be emphasized 

that this proposal is meant to compliment doctor/patient interactions and not be 

viewed as an alternative to seeking personal medical treatment. The two areas of 

focus are as follows: 

• Preventative medicine: A focus on maintaining health vs. treating illness. 

• Disease state information: Assisting the patient in dealing with a diagnosis and 

information on avoiding further complications. 

The Internet is used by millions of people as a source of information. Often information dealing with health is not based upon evidence-based medicine. There are 

many sources that are unreliable. There are also many sources that are too technical. Most of the information is in the form of the written word rather than the 

spoken word. This proposal is for RNG Consulting Inc. to develop a governmentsponsored site that will provide patients access to reliable medical information. This 

site will use video format to relay information to patients to compliment doctor visits. These videos will be categorized by therapeutic area and include counselling by 

Medical Specialists. The Specialists will be thought leaders and effective communicators in their area of expertise. Preventative and disease management information will be provided to the patient in a timely manner at a low cost. 

The way in which a family doctor communicates disease state information to a 

patient has many limitations, such as: 

• The doctor’s knowledge of and comfort with the condition. Medical information 

is changing at an increasingly rapid pace and not all doctors take advantage 

of continuing education programs. 

• The doctor’s ability to communicate in a way that educates and motivates the 

patient. The patient should leave the office feeling empowered and confident. 

• There are time limitations in the doctor’s office. A patient needs time and counselling to develop the skills needed to manage their condition. Physicians often 

do not have the time necessary to provide this information. 

• The patient may need several visits to absorb the information being communicated. Emotions play a part when discussing health and often information 

must be repeated. 

The above limitations cost millions in health care dollars. Video-based information 

on the Internet will be cost effective. It will not require more spending. It will be 

smarter spending. Having an alternate, reliable source of information will allow 

physicians to spend more time on diagnosis and patient management. 

By implementing this form of communication, there will be immediate and significant reductions in health care costs. Ways in which savings could be realized are 

as follows: 

• Information communicated to the patient will be evidence-based. The cost of 

pursuing inaccurate, unsubstantiated information will be lessened. 

• Patients could obtain information immediately following diagnosis, thereby 

bridging the time it may take to personally see a Specialist. The patient would 

be better educated by the time they saw the Specialist and therefore be able 


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to have a more productive visit. They would be better prepared with appropriate 

questions. 

• Many patients are limited in their access to Specialists, depending upon where 

they live. High-quality information will be available without the cost of transportation and time spent in travel. Disease could be managed more efficiently 

and effectively. 

• An informed patient will be better equipped to avoid the complications of their 

condition and reduce costs associated with those complications. This supports 

the government priority to create incentives for people with chronic illnesses to 

receive treatment and help get people to focus on their own health. 

• The cost of repeated visits to the family doctor would be reduced. If information 

required by the patient was not recalled the first time it was delivered, the patient could ‘‘revisit’’ the virtual Specialist. 

• Family doctors could also view the videos and increase their knowledge base 

and develop skills for motivating patients to manage their health. 

• Many websites are currently being managed by pharmaceutical companies, associations, health care facilities etc. By streamlining the information, millions 

of dollars could be saved. This shared responsibility will reduce waste and encourage care coordination. This would help save dollars and slow the rise in 

health costs. 

The time is right for this method of communication. We have seen the effectiveness of video presentations on the Health Reform website. When the President is 

speaking to the video camera, the public feels as if he is addressing them personally. 

The same result could be obtained with virtual visits to a Medical Specialist. 

The public is keenly aware of the need for Health Reform and the time is right 

to introduce alternatives to the way health care is currently being delivered. The 

White House paper stated ‘‘we can agree that if we want to bring down skyrocketing 

costs, we’ll need to modernize our system and invest in prevention.’’ Web-based videos support these White House priorities. 

There is an aging population of baby boomers. This population is approaching a 

stage in life when health care needs typically increase. This population is familiar 

with the Internet and is information hungry. Web-based virtual physician visits will 

help contain increasing costs to the medical system. 

The website would be developed with a focus on the therapeutic areas that account for the most visits to the doctor, i.e., blood pressure, arthritis, diabetes, etc. 

Using the example of diabetes, some of the current challenges are as follows: 

• The doctor may not have the time to explain what the diagnosis means and the 

severity of the complications if blood sugars are not controlled. The patient may 

suffer from fear and denial of the diagnosis. They may not understand that 

complications can be avoided if they aggressively manage their disease. They 

have questions that often require additional visits to the doctor. They may use 

the Internet as a source of information but may not visit reputable sites. 

• If a patient is referred to a Specialist, there could be wait times and limitations 

due to the cost and distance of travel. 

The alternatives, using web-based videos are as follows: 

• Immediately following diagnosis, the patient would have the opportunity for a 

virtual visit with the Specialist. 

• A Specialist is experienced in communicating with patients in an effective and 

compassionate manner. They encounter patient resistance on a regular basis 

and know how to overcome it. They are able to create a sense of urgency without scaring the patient. Family doctors would also be able to increase their 

knowledge base and communication skills by emulating the Specialists. 

• There would be links to lifestyle management (diet and exercise), specific information on disease management (proper blood glucose monitoring, appropriate 

use of prescriptions including insulin) and complications (foot care, eye health, 

kidney disease, cardiovascular disease, sexual health). A government-sponsored 

site would provide reliable, evidence-based medical information. 

• The patient is able to revisit the virtual Specialist as many times as necessary 

in order to gain a sound understanding of their disease. An educated patient 

will manage their diabetes more effectively, thereby limiting complications. 

Web-based video supports the following statement from the May 11/09 letter to 

the President from health care stakeholders . . . ‘‘Billions in savings can be achieved 

through a large scale national effort of health promotion and disease prevention to 

reduce the prevalence of chronic disease and poor health status, which ultimately 

leads to unnecessary sickness and higher health costs.’’ 


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In conclusion, our proposal will save millions of health care dollars, provide increased access to health information and disease prevention information and supports the government’s goals for rapid, cost effective change in health care. 

RNG Consulting Inc. was founded in 2009. E. George Donaldson is the Director 

and Ruth A. Donaldson is the V.P. of Business Development. We have more than 

39 years of experience in the health care industry and have expertise in medical 

education, conducting medical advisory boards, patient support systems, sales and 

marketing. We have the experience, knowledge and passion that is necessary to implement this proposal. 

f 

Statement of Rochelle J. Ascher, Executive Intelligence Review 

EIR, the magazine founded by Lyndon H. LaRouche, Jr., has done an extensive 

study of the proposals for health care ‘‘reform’’ being proposed by the Obama Administration. As a result of our research, we have determined that the fundamental 

premises of the program, as represented by OMB Chief Peter Orszag, his health advisor Ezekiel Emanuel, and the President himself, are identical to those which underlay the genocidal program for eliminating the ‘‘unrehabilitable sick’’ in the Hitler 

regime. 

A historical review documenting this analysis immediately follows. 

There can be no compromise with the premises of this program. If it is successful, 

it will lead to genocide, and not only in health care, since OMB Chief Orszag has 

already announced that after health care, he intends to ‘‘reform,’’ (i.e. slash) Social 

Security next. Thus, as the first step to reversing direction, the Obama health plan 

must be totally scrapped. 

Instead, Congress must return to the policy laid out in the Hill-Burton Act of 

1946, which mandated the provision of the necessary logistical foundation—in terms 

of hospital beds and personnel—to ensure adequate medical care for the U.S. population. The Hill-Burton approach was essentially dumped in 1973, when a bipartisan 

grouping in Congress endorsed President Nixon’s legislation beginning the establishment of Health Maintenance Organizations, the for-profit institutions which now 

control the bulk of the health care provision for the American population. Under the 

HMO regime, the physical infrastructure required for the health of the American 

population has been slashed, and the quality of care as well. 

Lyndon LaRouche has repeatedly led the charge against the HMO wreckers, and 

in support of an updated Hill-Burton approach. In 1992, the Democrats for Economic Recovery/LaRouche in ’92 committee issued a 25-page pamphlet, ‘‘Solving the 

Health Care Crisis,’’ against the HMOs. In 1996, LaRouche led a campaign under 

the banner, ‘‘ ‘Managed Health Care’ Is a Crime Against Humanity.’’ In 2000, 

LaRouche’s political action committee issued a national 16-page dossier titled, ‘‘Ban 

the HMOs Now! Before They Get You and Yours,’’ providing draft legislation to revoke the HMO enabling acts. LaRouche has also endorsed the single-payer plan put 

forward by Rep. John Conyers, as coherent with his approach. 

Today, there can be no more delay. The Nazi-like plan of cost-cutting against 

‘‘useless eaters,’’ which the President has put on the table, must be dumped, and 

the Hill-Burton approach adopted, without delay. 

Hitler’s T4 Program Revived in Obama’s Health Care ‘‘Reform’’ 

In July of 1939, a conference of medical professionals was held in Berlin, Germany. Participating were the professors and chairmen of the departments of psychiatry of the leading universities and medical schools of Germany, many of them, the 

most respected professionals in their fields. The subject? What would be the criteria 

for determining what patients would be considered to have ‘‘lives unworthy to be 

lived,’’ and what was the most ‘‘practical and cheap’’ manner of removing them from 

being burdens on the health care system—by death. 

Thus, the bureaucratic machine began to be cranked up for what is known as 

Adolf Hitler’s program of genocide through ‘‘euthanasia,’’ a program which killed 

hundreds of thousands of non-Jewish Germans, and eventually, millions of Jews and 

non-Germans as well. That program, which had already begun years before, against 

concentration camp inmates and handicapped children, was officially put into effect 

in October 1939, when Hitler penned his own personal, and secret, authorization for 

the program, under the title, ‘‘The Destruction of Lives Unworthy of Life’’: 

‘‘Reichsleiter Bouhler and Dr. Brandt are charged with the responsibility 

for expanding the authority of physicians, to be designated by name, to the 

end that patients considered incurable according to the best available 

human judgment of their state of health, can be accorded a mercy death.’’ 


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To carry out this program, Hitler and his fiendish Nazi associates would fully utilize the ‘‘professional’’ apparatus which had been put in place, as well as the popular, British-eugenics-spawned ideology which had been increasingly dominant in 

Germany since Hitler seized power with the aid of powerful British-Wall Street financiers. The killing would proceed with the utmost ‘‘cost-effectiveness’’ and professionalism, in order to save funds for the Nazi state’s preferred projects, and not 

waste them on ‘‘ineffective’’ medical treatments. 

If that sounds familiar, it should. For the proposals which the Obama Administration has currently put on the table, follow them in virtual lockstep: 

First, the ‘‘experts’’ decide what is ‘‘effective’’ care, with ‘‘cost-effectiveness’’ foremost in mind, ruling out ‘‘inappropriate’’ treatments. 

Second, these standards become the law, in terms of what medical care will be 

paid for. 

Third, other experts efficiently implement those decisions, through the existing 

hospital apparatus. 

The result, as in Nazi Germany, is that millions are, with the stroke of a pen, 

consigned to death. 

The T4 Program 

The T4 program, which was established following Hitler’s secret order, took its 

name from its Berlin office address, Tiergarten 4, which address housed the coordinating organization for the program, the Reich Work Group of Sanatoriums and 

Nursing Homes. In charge were Philip Bouhler, Chief of the Chancellory, and Dr. 

Karl Brandt, Hitler’s personal physician and chief medical officer of the land. 

Their first task was to devise the questionnaires which would be used to categorize the targetted institutionalized populations. Four categories were specified: 

1. Patients suffering from specified diseases who are not employable, or are employable only in simple mechanical work. These included schizophrenia, epilepsy, senile diseases, therapy-resistant paralysis, feeble-mindedness, and the 

like. 

2. Patients who have been continually institutionalized for at least 5 years. 

3. Patients who are criminally insane. 

4. Non-German patients. 

While including these categorizations, the questionnaire overall gave the impression of a rather neutral statistical survey, which also delved into the patients’ biographies, their financial situations, and the like. (See {EIR}, June 5, 2009, page 12). 

It was accompanied by a questionnaire for the institution in which the patient was 

housed, which asked about staffing, beds available, and budgetary questions. A significant stress was also put on detailing the patients’ abilities to work. 

The first questionnaires went out in October 1939, the month Hitler signed his 

order, to State hospitals, and other public and private institutions where mental patients, epileptics, the mentally retarded, and other handicapped persons resided. 

The responsibility for filling them out, often in a very short period of time, fell on 

the physicians at those institutions. 

The questionnaires were then sent to panels of three or four psychiatric experts, 

who indicated their opinion about whether the patient (whom they had never seen, 

much less examined, and whose medical history they were unfamiliar with) was to 

live or die. Each ‘‘expert’’ made his or her decision independently, and passed on 

the questionnaire to the next. 

The choice for the experts was effectively only one of two options: A plus sign in 

red, which meant death; or a dash in blue, which meant life. Occasionally, a psychiatrist would put a question mark in the space provided. 

The questionnaires were then sent to a chief expert, who passed the final judgment. At this ‘‘higher’’ level, there was no alternative other than life or death. In 

fact, the ‘‘senior expert’’ was not bound by the recommended decisions. From his 

judgment, there was no appeal. From that point on, it was merely a matter of sending back the decision to the relevant institution, where the final dispensation of the 

patient was carried out, and, if so ordered, sending him or her to one of the designated ‘‘killing centers.’’ 

These centers were supervised by medical personnel, who oversaw the killing, and 

were responsible for devising the fraudulent death certificates which were sent to 

the families of those who had been determined to have lives ‘‘not worthy to be 

lived.’’ 


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Councils of Experts 

Shift now to today, where we are in the first phases of the Nazi euthanasia program (called ‘‘reform’’) being promoted by the Obama Administration and its behavioral psychologist ‘‘experts.’’ It starts with the dictum that there are insufficient resources to provide medical care for all, especially those at the ‘‘end of life,’’ or not 

able to be ‘‘effectively’’ rehabilitated. In other words, the Nazi assumption that there 

are lives ‘‘not worthy to be lived’’ (or, not worth spending our money on, if you will). 

At least according to the priorities for spending which the Administration has set— 

i.e., the banks must be saved first. 

The second step is for the Administration to set up those ‘‘panels of experts’’ who 

will determine the criteria for who will get medical care, and who won’t. Already, 

the so-called Obama stimulus package has created one such panel, the Federal Coordinating Council for Comparative Effectiveness Research. This 15-member council 

is comprised of highly credentialed ‘‘experts,’’ many of them medical doctors, who 

are tasked with ‘‘coordinating research’’ on the relative values of treatments. While 

explicitly claiming that the Council will not directly pronounce judgments on treatments and payments, it is clear that the research that they are supervising is intended to do precisely that. 

Particularly ominous is the fact that one of the Council’s members, Dr. Ezekiel 

Emanuel, is trained in ‘‘bioethics,’’ a discipline dedicated precisely to determining 

criteria for deciding who should live, and who should die. Emanuel has a long history of promoting policies of cutting ‘‘marginal’’ care, as well as promoting living 

wills. 

Crucially significant as well, is that Obama’s head of the Office of Management 

and Budget, Peter Orszag, has already set out his genocidal judgment that around 

30% of current health care services and procedures are unnecessary. 

The model for their work, as reflected in statements by many of the relevant officials, is the British National Institute for Health and Clinical Excellence (NICE), 

the Orwellian-named agency which has central control over what medical care will 

be provided to British subjects within the British National Health Service. NICE’s 

directives have systematically denied Britons quality care, on the basis of its being 

‘‘too expensive,’’ and have singled out, especially, the elderly, for being undeserving 

of intensive medical care. 

The Comparative Effectiveness Council is clearly only the beginning of the genocide—if this Nazi plan is not stopped cold. Let’s look at a number of other proposals. 

One has been made by former Sen. Tom Daschle, the man whom President Obama 

wanted to appoint Secretary of Health and Human Services, and special health czar 

in the White House (his appointment was derailed over tax problems). Daschle’s 

plan, as laid out in his 2008 book {Critical: What We Can Do About the Health Care 

Crisis}, centers around the creation of an all-powerful Federal Health Board, which 

would be able to act {without political interference,} as the Federal Reserve does in 

the monetary system. 

Daschle’s Federal Health Board would have a board of governors (‘‘clinicians, 

health benefit managers, economists, researchers, and other respected experts’’) 

which would command a huge staff of analysts that would come up with policy 

diktats in the areas of health insurance and medical care. The board would determine which treatments are, in its view, ‘‘the most clinically valuable and cost effective.’’ They would promote ‘‘quality,’’ by ‘‘using evidence-based guidelines and cutting down on inappropriate care.’’ In addition, the Board would ‘‘align incentives 

with high-quality care,’’ an obfuscatory term which means paying doctors to keep 

costs down, and withholding payments for unapproved (read: ‘‘expensive’’) procedures. 

Daschle calls the Federal Health Board a ‘‘standard setter,’’ but, in fact, it would 

become the dictator as to who lives, and who dies. 

Paralleling Daschle’s proposal is a piece of legislation which was introduced by 

Sen. Jay Rockefeller (D–W.Va.) on May 20. Rockefeller proposes that the Medicare 

Payment Advisory Commission (MedPAC, created in 1997), move beyond its current 

mandate to advise on rates of payment for the 44 million enrollees in Medicare, to 

set lists of approved treatment standards, and enforce compliance with regulations 

on health care delivery and reimbursement. Rockefeller’s press release states that 

he wants MedPAC to be made up of ‘‘independent experts,’’ as an ‘‘executive agency 

modelled after the Federal Reserve.’’ 

He adds: ‘‘We must take Congress out of its current role. . . . It is inefficient and 

ineffective; we are not health care experts, and being a deliberative body means that 

we cannot keep pace with the rapidly transforming health care marketplace.’’ 

President Obama has personally expressed approval of this proposal, which he 

said would have already saved $200 billion, if the dictatorship had been in place. 


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Knew or Should Have Known 

When the Nazi doctors, and others, were tried for crimes against humanity and 

genocide at the Nuremberg Tribunal after World War II, many claimed that they 

only had the most noble intentions; others, that they were only following orders. In 

fact, they were wittingly serving as ‘‘expert’’ or bureaucratic cogs in a mass-murder 

machine, of whose outcome they were fully aware. 

While there is no doubt that the degeneration of our culture, in terms of the valuation of life, has proceeded quite a distance over the last decades, thus preparing 

our population to accept Nazi euthanasia today, the apparatus parallel to that 

which Hitler set up {can still be stopped}. It must be done now—before the medical 

and economic ‘‘experts’’ carry out genocide again. 

Appendix 

{The following draft legislation was put forward by Lyndon LaRouche’s 

Committee for a New Bretton Woods in May of 2000. 

It still forms the core of what must be done today.} 

The Proposed ‘Right to High Quality Health Care Act’ 

{Declaration of Purpose:} 

The purpose of this legislation is: (a) to affirmatively establish the right of every 

person to the highest quality health care available; (b) to abolish Health Maintenance Organizations, Managed Care Organizations, and the practice of managed 

care by health insurers; and (c) to reassert the principles of the Hill-Burton Act (42 

U.S.C. Section 291 et seq.) as the primary policy governing U.S. health policy. 

This Act is necessitated by the immediate crisis in the health conditions in the 

United States, where millions of citizens are denied access to necessary health care 

services due to the financial practices of Health Maintenance Organizations, Managed Care Organizations, the practice of managed care by health insurers, and the 

lack of adequate medical facilities in many communities in the country. This has 

created a health care emergency in the United States. 

Under the Preamble to the United States Constitution, the Federal Government 

is required to ‘‘promote the General Welfare,’’ thus necessitating immediate action 

by the Federal Government to address this health care emergency. 

The lack of access to adequate health care, and the practices of the Health Maintenance Organizations and Managed Care Organizations, are in violation of Article 

25 of the Universal Declaration of Human Rights of the United Nations, and Article 

12 of the International Covenant on Economic, Social, and Cultural Rights, which 

establish the universal right to adequate health care, and require governments to 

take steps to assure access to quality medical care. The United States is a signatory 

to these declarations and covenants. 

The practice of denying needed medical treatment to certain persons in order to 

cause their death, was prosecuted as a crime against humanity by the United States 

in the post-World War II Nuremberg Tribunals. 

{Section 1} 

A. It is hereby established and affirmed that every person has a right to the highest quality health care available. 

B. Any practices by health insurers, that deny any person the right to the highest 

quality health care available, for financial, or any other reasons, are hereby 

prohibited. 

{Section 2} 

A. 42 U.S.C. Section 300e, et seq., providing for the establishment and operation 

of Health Maintenance Organizations, is hereby repealed. 

B. It shall be unlawful to operate a Health Maintenance Organization, Managed 

Care Organization, or any health insurance program that practices managed 

care, or seeks to control costs by limiting necessary health care services provided to patients. 

{Section 3} 

A. It is hereby reaffirmed that the provisions of the Hill-Burton Act, 42 U.S.C. 

291 et seq., are the governing principles for U.S. health care policy. 

Submitted by: 

Rochelle J. Ascher, 

f 

{Executive Intelligence Review} 


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Letter by Ron Manderscheid 

Universal coverage is a foundational issue for national health reform. Currently, 

about 8 million children (10%) and 38 million adults (about 20% of those under age 

65) are without coverage. Up to another 20 million adults may be added to this 

group as a result of the current fiscal recession, although the American Recovery 

and Reinvestment Act of 2009 will offer this latter group some temporary relief. 

Underinsurance is also being considered. Most Americans have very little insurance coverage for health promotion or disease prevention interventions. Most also 

have very little coverage for substance use conditions. 

Without universal coverage to address the needs of those who are not insured or 

underinsured, large amounts are spent inappropriately each year on hospital emergency room visits. To demonstrate this contrast, a visit to a doctor may cost $100, 

while a visit to an emergency room may cost $1,000. Clearly, an insurance system 

that promotes the former is a better investment. 

Other features of national health reform being considered include creation of a 

medical home that would reduce care fragmentation; incorporation of public health 

measures that will address personal and population health promotion and disease 

prevention; and new financing strategies to pay for reform. 

Over the past several months, I have prepared a series of pieces on national 

health reform for The Manderscheid Report published by Behavioral Healthcare. 

These are identified below. 

I encourage the Committee to take positive action on National Health Reform, including prevention and care for mental and substance use conditions. 

Ron Manderscheid, Ph.D. 

Bloomberg School of Public Health 

Johns Hopkins University 

The Manderscheid Report in Behavioral Healthcare: 

• December 2008: Change is coming! 

We must ensure our agenda is on lawmakers’ radar. 

• January 2009: Aiming for a healthier population by 2020 

Moving our fields toward prevention, early intervention, and population health. 

• Online Exclusive January 2009: Making ‘health’ a noun 

• February 2009: Promoting universal coverage. 

Become an advocate for universal health insurance. 

• March 2009: Focusing on populations’ health. 

Population health insurance would focus on prevention instead of illness. 

• Online Exclusive March 2009: Celebrating 50 years of SRCMHS’ leadership and 

innovation. 

The annual conference always has been ahead of the curve. 

• April 2009: Stepping back from deinstitutionalization? 

The jury is still out, but new data show some disturbing trends. 

• May 2009: Time to stop being one-dimensional. 

We’re focused on disease while neglecting health. 

• Online Exclusive May 2009: A hearth for our health. 

Health promotion can be the ‘hearth’ within a medical home. 

f 

Letter by Nancy Schwab, Wendy Warner, Bill Berlinghof, 

Catherine Borowiec, Mark Schmid, Connie Guldin, and Mike Fritz 

June 13, 2009 

To: Members of Congress 

We, the small business owners listed below, want you, our elected representatives 

in Congress, to know that the Health Savings Account program has been a tremendous value to our firms and our workers. We have been able to significantly lower 

our health care premiums from what was offered by other plans, improve our benefit package and help ourselves, our families and our employees to save for their 

health care needs. Also, our workers are now more involved in making their own 

important decisions about the health care they need for themselves and their families. 

Our agent, Ross Schriftman (who has his own H.S.A.) has informed us of the 

pending changes that are being proposed in the Senate Finance Committee and the 


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House Ways and Means Committee. These changes will restrict and possibly even 

eliminate our ability to offer the kind of health care benefits we have come to enjoy. 

Limiting contributions to the deductible will reduce the amount of money we and 

our staff can put aside to meet our long-range health care needs. This change will 

break the Administration’s pledge that people can continue to keep the same health 

plan they have under the health care reforms taking place. 

The proposed changes may also result in our employees paying taxes on contributions made to their accounts. Why on earth would anyone in Congress want to do 

this to American workers? 

Requiring us to substantiate what our workers use their funds for will put tremendous administrative burdens on our small firm and create an unfavorable relationship with our workers who don’t want us watching over their shoulders concerning their own personal savings accounts. Please don’t put us in such a difficult 

position. 

We can not afford to go back to higher premium plans so we may be forced to 

drop our health plans. This will result in more people having to rely on whatever 

government programs are available for their health care or go without health insurance. We know that this is not the intention of the President or of Congress. 

Please do not change what is working. Allow us to continue to enjoy the health 

benefits that we have. 

Thank you for your consideration. 

Sincerely, 

Nancy Schwab, Owner 

The Artful Framer and Westside Gallery 

Dr. Wendy Warner, OBGYN, Owner 

Medicine in Balance 

Bill Berlinghof, Owner 

Renaissance Ceramic Tile and Marble 

Catherine Borowiec, Secretary/Treasurer 

Neurotech Solutions, Inc. 

Mark Schmid, Owner 

Penn Turf Management 

Connie Guldin 

Guldin Painting 

Mike Fritz, Manager 

A.T. Cigars, Inc. 

P.S. Attached is Ross’ written testimony to the PA House Insurance Committee 

several years ago demonstrating the following of H.S.A. for the average American 

worker and the potential increased revenue that the Federal Budget can realize 

when employers switch to these lower-cost plans. 

f 

Statement of The Alliance for Academic Internal Medicine 

The Alliance for Academic Internal Medicine (AAIM)—the organization that represents program directors, administrative leaders, and faculty and staff responsible 

for the training of over 22,000 residents and almost 10,000 fellows in the specialties 

of internal medicine—would like to thank the House Committee on Ways and 

Means for the opportunity to submit this statement for the record. 

For the past several months, congressional Committees, including the House Committee on Ways and Means, have worked tirelessly to research and evaluate potential solutions to solving the problems behind the Nation’s desperate need for health 

care reform. Achieving affordable, accessible, and high-quality health care is at the 

core of the reform debate. However, in order to fully and effectively implement any 

potential health care reform policy, it is necessary to recognize the severe physician 

shortage the United States currently faces, particularly in primary care. 

According to the Association of American Medical Colleges, by 2025, there will be 

a shortage of at least 124,000 physicians by baseline projections. The physician population in shortest supply is primary care physicians. The shortage will continue to 

worsen as the demand for primary care physicians increases far more rapidly than 

the supply under current standards. 


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1The American Academy of Actuaries is a 16,000-member professional association whose mission is to serve the public on behalf of the U.S. actuarial profession. The Academy assists public 

policymakers on all levels by providing leadership, objective expertise, and actuarial advice on 

risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries in the United States. 

Primary care physicians are critical to the health care delivery system and the 

health and wellness of the Nation. They are the ‘‘first contact’’ physicians responsible for providing comprehensive, coordinated, and continuous care for a patient’s 

health care needs. Services provided by a primary care physician include care for 

all stages of life, acute care, chronic care, preventive service, and end-of-life care. 

In response to a projected physician workforce shortage, AAIM recommends: 

• Strategically increasing the number of Medicare-funded positions for primary 

care specialties to adequately meet the Nation’s health care needs. For these 

new positions, Medicare should support the entire duration of training, which 

is typically 3 years (or 4 years for combined programs such as internal medicine-pediatrics). In addition, AAIM believes new primary care slots should be 

added in geographic areas of demonstrated need. Ultimately, all health care insurers should have a role in explicitly contributing to GME funding. • Enhancing the attractiveness of primary care careers by altering the physician 

reimbursement system, increasing job satisfaction for current and future primary care practitioners, providing incentives for geographic distribution of primary care physicians to areas of greatest need, and applying innovations to 

educational models. • Increasing efficiency in the health care delivery system by broadening the use 

of electronic health records (EHRs) and other advances in health information 

technology and capitalizing on the use of physician extenders. Additional options for improving health care delivery should be considered. • Without a robust and equipped primary care physician workforce, the Nation’s 

health care system will become increasingly fragmented and inefficient. As a result, access to high-quality and affordable health care will not be possible. The 

Nation’s health and pocketbooks cannot afford to suffer any longer. 

f 

Statement by Cori E. Uccello, American Academy of Actuaries 

Chairman Rangel, Ranking Member Camp, and distinguished Members of the 

Committee: 

As Congress examines the details of proposals to reform the health system, the 

American Academy of Actuaries’ 1 Health Practice Council appreciates this opportunity to submit written testimony outlining the key issues that need to be considered when evaluating whether a reform proposal will lead to a viable health insurance system. 

The Academy’s Health Council has identified three key criteria for whether particular reform approaches will lead to a sustainable health care system with increased access to affordable health insurance. In particular: 

• For insurance markets to be viable, they must attract a broad cross section of 

risks; 

• Market competition requires a level playing field; and 

• For long-term sustainability, health spending growth must be reduced. 

This statement provides the considerations underlying each of these key factors 

as well as comments on whether the provisions in the Tri-Committee health reform 

draft proposal conform with these criteria. 

Insurance Markets Must Attract a Broad Cross Section of Risks 

For health insurance markets to be viable, they must attract a broad cross section 

of risks. In other words, they must not enroll only higher-risk individuals; they must 

enroll people who are lower risks as well. If an insurance plan draws only those 

with higher than average expected health care spending, otherwise known as adverse selection, then premiums will be higher than average to reflect this higher 

risk. Adverse selection is a byproduct of a voluntary health insurance market. People can choose whether or not to purchase insurance coverage, depending in part 

on how their expectations for health care needs compare to the insurance premium 

charged. The higher premiums that result from adverse selection, in turn, may lead 

to more lower-risk individuals opting out of coverage, which would result in even 

higher premiums. This process is typically referred to as a premium spiral. Avoiding 


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such spirals requires minimizing adverse selection and instead attracting a broad 

base of lower-risk individuals, over which the costs of higher-risk individuals can 

be spread. Attracting healthier individuals will ultimately help keep premiums more 

affordable and stable. 

How the various rules and regulations that apply to health insurance markets are 

defined can affect the degree of adverse selection. In particular, guaranteed-issue 

provisions, which prohibit insurers from denying coverage based on health status, 

can exacerbate adverse selection concerns by giving individuals the ability and incentive to delay purchasing insurance until they require health care services. Likewise, limiting or prohibiting premium variations by health status or other characteristics correlated with health spending can raise the premiums for younger and 

healthier individuals, relative to what they would pay if health status could be used 

as a rating factor. This could cause younger and healthier individuals to opt out of 

coverage, leaving a higher-risk insured population. 

Increasing overall participation in health insurance plans, especially among lowerrisk individuals, could be an effective way to minimize adverse selection. One way 

to achieve higher participation is to require individuals to have insurance coverage. 

Other types of incentives are also available to increase participation, including: limiting open-enrollment periods with penalties for delayed enrollment, subsidizing premiums, and instituting automatic enrollment (i.e., opt-out rather than opt-in provisions). The Medicare program includes some of these incentives. Nevertheless, an 

effective and enforceable individual mandate would likely achieve higher participation rates than these types of voluntary incentives. To be effective, however, penalties (or incentives) associated with an individual mandate need to be meaningful 

relative to the premium levels. 

Relevant Provisions in the Tri-Committee Health Reform Draft Proposal 

The Tri-Committee health reform draft proposal contains many provisions that 

would impact the extent to which insurance markets would attract a broad cross 

section of risks. The proposal would require guaranteed issue and renewal for all 

health insurance coverage and would also limit premium variations to reflect age, 

geographic area, and family size. Furthermore, any premium variations by age 

would be limited to a 2-to-1 ratio between the highest and lowest premiums. 

Implementing these changes without making other changes to the incentives to 

purchase insurance coverage would exacerbate the extent of adverse selection, especially in the individual health insurance market. Individuals with higher than average health needs would be more likely to purchase coverage, while those with lower 

than average health needs would be more likely to forgo coverage, and the result 

would be higher premiums on average, relative to current premiums. 

However, the draft proposal also contains incentives for lower-risk individuals to 

purchase coverage. In particular, the proposal would require that individuals obtain 

coverage or pay a financial penalty of up to 2 percent of adjusted gross income. Employers would be required to offer and contribute to coverage for their employees 

or pay a fee based on 8 percent of payroll. In addition, premium subsidies would 

be available for low-income individuals and families to purchase coverage as well 

as tax credits to certain small businesses. 

The premium subsidies and coverage mandate would help to mitigate adverse selection arising from more restrictive issue and rating rules. It is important to recognize, however, that the impact of such requirements would vary across States, depending on their current market rules. For instance, in States that allow underwriting and premium variations by health status, the uninsured population may be 

less healthy, on average, than the insured population. Moving to guaranteed issue 

and prohibiting premium variations by health status would result in increased coverage among the less healthy population, potentially raising average premiums. The 

individual mandate would help moderate premium increases by ensuring that the 

healthy maintain (or obtain) coverage in those States. 

In contrast, in States that already prohibit underwriting and limit premium variations by health status or other factors that are correlated with health spending, 

the uninsured population may be healthier, on average, than the insured population. The individual mandate would increase the participation among lower-risk 

individuals, potentially lowering average premiums in those States. 

The effect of reform options, generally, on States with high-risk pools can also be 

complicated by whether the high-risk pool enrollees are incorporated into the individual market or whether the high-risk pools remain in place, even temporarily. According to the National Association of State Comprehensive Health Insurance Plans 

(NASCHIP), as of December 2007, 34 States had high-risk pools enrolling about 

200,000 individuals in the aggregate. These high-risk pools act as the insurer of last 

resort for otherwise uninsurable individuals, and the eligibility rules, covered beneVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00388 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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fits, cost-sharing requirements, plan administration, and funding can vary considerably by State. Premiums for individuals are typically capped at a certain percentage 

above the individual market premium for a similar benefit package, and the remainder of the cost is funded by the State. The Tri-Committee draft proposal indicates 

that individuals in State high-risk pools could potentially qualify as meeting coverage requirements. However, States may choose to discontinue their high-risk pools 

after the implementation of comprehensive national reform. 

The impact of an individual mandate can also vary by when it is implemented, 

compared with other market reforms. The Tri-Committee’s draft proposal does not 

explicitly specify the timing of the implementation of the individual mandate compared with the imposition of guaranteed issue and modified community rating rules. 

To help ensure the enrollment of low-risk individuals, thereby minimizing adverse 

selection, it is important that the individual mandate be imposed in conjunction 

with the move to stricter issue and rating rules, not after. 

With respect to the degree of premium rate compression required in the draft proposal, achieving universal coverage through coverage mandates or other means reduces or eliminates altogether adverse selection in the health system as a whole by 

age, health status, and other characteristics that are correlated with health spending. If universal coverage could be achieved, it would be less necessary, from a plan 

solvency standpoint, to vary premiums by risk characteristics. The question of how 

to distribute the costs across the population would then become an issue of balancing the tradeoffs between individual financial equity and social equity. The draft 

proposal prohibits any premium variations except for those by age, geographic area, 

and family size. Moving to a narrow limit on premium variations by age, such as 

the proposed 2-to-1 limit, could result in dramatic premium changes, compared to 

what individuals are facing currently. In particular, younger individuals in States 

that currently allow underwriting and wider premium variations by age could see 

much higher premiums than they face currently (and may have chosen to forgo). 

The premium may also be high compared to the penalty of 2 percent of adjusted 

gross income, potentially reducing the effectiveness of the individual mandate. A 

broader allowable range in premium variations by age may cause less disruption, 

especially for younger individuals. 

Even if adverse selection is minimized in the health insurance system as a whole, 

some insurance plans could end up with a disproportionate share of high-risk individuals. One way to avoid adverse selection between plans is to ensure that all 

plans competing for the same participants operate under the same rules. An issue 

particularly relevant to this discussion relates to whether large groups would be eligible to purchase coverage through the Health Insurance Exchange. According to 

the draft proposal, initially only individuals and the smallest firms would be allowed 

to purchase through the Exchange. In subsequent years, however, larger firms 

would be allowed to purchase through the Exchange. An adverse selection concern 

arises if eligibility for the Exchange is extended to large firms which would normally 

self-insure. In particular, large firms with higher than average health spending 

could potentially benefit by joining the Exchange, whereas firms with lower than average health spending would continue to self-insure. Such adverse selection would 

increase the average premiums for those in the Exchange. It may be more appropriate to limit eligibility for the Exchange to firms that would not normally self-insure. 

Another issue related to potential adverse selection between plans is that plans 

could be at risk for financial losses if they enroll a disproportionate share of participants with above average health spending, especially when premiums are not allowed to vary by health status or other risk factors. Such threats to a plan’s financial health could provide insurers an incentive to develop strategies to avoid enrolling less healthy individuals. To avoid these incentives and help ensure plans receive 

payments that are adequate relative to the risks they are bearing, the draft proposal includes a risk adjustment mechanism to adjust plan payments to take into 

account the health status and other risk characteristics of plan participants. This 

would help minimize the impact of adverse selection between plans in the Exchange. 

Nevertheless, it is important to recognize that risk adjustment mechanisms cannot 

fully mitigate the impact of adverse selection. In addition, some type of reinsurance 

mechanism could limit insurers’ downside risk by protecting against unexpected 

high-cost claims. 

Market Competition Requires a Level Playing Field 

For health insurance markets to be viable, plans trying to enroll the same participants must operate under the same rules. If one set of plans or insurers operate 

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tageous to them. In other words, the plans that have rules more amenable to higher-risk individuals will suffer from adverse selection. Over time, the premiums for 

these plans will increase to reflect this, leading to more adverse selection and 

threatening the viability of those plans. 

For example, if a regional health exchange or connector is created, and plans are 

offered inside and outside the exchange, the rules governing plans inside and outside of the exchange need to be the same. Otherwise either the plans inside the exchange or outside the exchange could get a disproportionate share of higher-risk individuals, depending on which set of plans is subject to rules that are more advantageous to those in poorer health. Level playing field issues arise not only with respect to health insurance exchanges, but also if insurance is allowed to be purchased 

across State lines or if a public plan option is offered alongside private plans. 

From an actuarial perspective, creating a fair and competitive marketplace requires several elements. 

• All plan options must operate under the same rules. The issue and rating rules 

as well as any benefit package requirements must be the same for all health 

plans. In addition, any premium subsidies must be available for all plan options 

and any default enrollment mechanisms need to allocate eligible participants 

between all participating plans. Adhering to the same rules and regulations will 

help minimize selection between the plans, and will help ensure competition is 

based on efficiencies and quality of care rather than on differences in enrollee 

risk characteristics. 

• Premium rates must be actuarially sound. Premiums must be adequate to cover 

claims incurred, all related operating expenses, cost of capital charges and a 

risk charge. To ensure plan solvency in the event that plan expenditures exceed 

premiums, private plans are required to carry capital/surplus (an excess of assets over liabilities) to cover potential deficits and to fund major investments 

in support of infrastructure. Premiums include a risk charge to absorb minor 

adverse fluctuations in claims and/or expenses from expected, and to accumulate target surplus (that is, a level of surplus appropriate to the risk). The danger of not having such mechanisms is that deficits in any given year would 

cause increases in premiums needed in subsequent years, above those needed 

due to increased health spending. Capital charges reflect the cost of obtaining 

operating capital. 

To ensure that any public plan premiums are self-supporting, and not reliant on 

general tax revenues, deficit spending, or intergenerational transfers, the public 

plan should include both a risk charge and a premium rate stabilization fund. 

Under this approach, public plan premiums would include capital charge and risk 

charge mechanisms to pay for the cost of capital and to fund a stabilization fund. 

A risk charge may look like a profit, but it is actually a cost of doing this business. 

• Provider payments must be comparable for all plans. This is a particular issue 

if a public plan option is available. Setting a public plan’s provider payment 

rates dramatically lower than those for private plans could help control plan 

costs, but could also result in cost shifting to private plans and reduced access 

to providers. Public plan provider payments should be set to balance the tradeoffs between ensuring adequate access to care and controlling plan costs. 

• Any State requirements must apply equally to all participating plans. States 

place a variety of other requirements on private health plans, and these would 

need to also apply to a public plan option for the playing field to remain level. 

For instance, many States assess health plans to fund high-risk mechanisms, 

regulatory activities, and guarantee funds. States also require a variety of other 

nonbenefit requirements on health plans, ranging from consumer protections to 

market conduct examinations and audit and actuarial certification requirements. These requirements would need to apply to all participating plans, 

whether private or public, as appropriate. 

Relevant Provisions in the Tri-Committee Health Reform Draft Proposal 

The Tri-Committee health reform draft proposal would establish a Health Insurance Exchange, and would create a new public plan option to be offered through the 

Exchange. Individuals would be able to purchase qualified coverage through the Exchange, and the ability for employers to purchase coverage through the Exchange 

would be phased in gradually by employer size, beginning with the smallest employers. Except for grandfathered coverage, qualified health insurance coverage would 

no longer be available in the individual market outside of the Health Insurance Exchange. 


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The public plan would need to follow the same market rules and benefit requirements that apply to private plans. Although the stated intention of the public plan 

option is for it to be self-sustaining through premiums, it is unclear whether the 

draft proposal’s provisions would ensure that. The draft reform proposal states that 

the premium rates shall include a contingency margin. But if this margin includes 

only a risk charge and not a capital charge, any ongoing costs of capital will not 

be reflected in the premium. In addition, the creation of a rate stabilization fund 

is not included in the draft proposal. 

The public plan option would also undermine the level playing field requirement 

that provider rates be comparable to the rates used by private plans. The draft proposal specifies that provider payments in the public plan would be set at Medicare 

rates (with 5 percent bonuses for certain providers), at least initially. This would 

create serious concerns regarding cost shifting to private plans as well as access to 

care issues for those enrolling in the public plan if providers refuse to see patients 

at the reduced rates. Even the largest private health insurance plans have commercial provider contracts significantly higher than 5 percent above Medicare rates, in 

almost all geographic markets. 

For Long-Term Sustainability, Health Spending Growth Must Be Reduced 

According to National Health Expenditure data from the Centers for Medicare 

and Medicaid Services, health care spending increased 6.1 percent in 2007. Although this is the lowest growth rate in a decade, it far exceeds the general rate 

of inflation, and exceeds the growth in the overall economy as well. If health spending continues to grow at this pace, as projected, health insurance premiums will 

continue to increase as well. Unless health care costs are controlled, efforts to 

achieve universal coverage could be undermined. Reining in health insurance premiums in the near term will be meaningless if rising health spending returns premiums to their original levels within a few years and continues to rise rapidly thereafter. To have the potential for sustainable success, health reform proposals need 

to include mechanisms that will control the rate of health spending growth. And because there is mounting evidence that the money being spent for health care is not 

providing enough value and that the vast variations in health spending across the 

country aren’t correlated with variations in health care outcomes, spending growth 

should be addressed within the context of quality and value reforms. 

Several factors contribute to the growth in health spending, and there are options 

to address many of them, each offering promising opportunities to improve quality 

while reducing costs. The introduction of new technologies and treatments can increase health care spending by increasing utilization, particularly of higher-intensity services. More comparative effectiveness research should be conducted to better 

ensure that new technologies and treatments truly add value over their added costs. 

Another driver of health spending growth is the misalignment in current provider 

payment systems between provider financial incentives and the goal of maximizing 

the quality and value of the health care provided. Instead, the most common provider payment mechanisms reward more care, and more intense care. Restructuring 

provider payment systems could result in more coordinated, cost-effective, and higher-quality care. 

Comprehensive insurance benefits, by lowering the cost of care to the insured, can 

also result in increased utilization of health care services. Although some utilization 

increases are for necessary care, some are for care that is unnecessary or of limited 

benefit. Plan design features such as cost-sharing requirements can be used to encourage more effective use of health care services. However, any incentives to make 

insureds, particularly those with chronic conditions, more sensitive to benefit costs 

should be balanced so that individuals are not discouraged from seeking needed 

care. Value Based Insurance Design (VBID), a relatively new concept in insurance 

benefit design, attempts to better target cost-sharing requirements so they more effectively encourage needed care, yet discourage unnecessary care. 

Relevant Provisions in the Tri-Committee Health Reform Draft Proposal 

The Tri-Committee health reform proposal includes provisions that would shift 

the health care payment and delivery systems from rewarding quantity of care to 

rewarding quality of care. The proposal includes many cost containment and quality 

improvement strategies focused on the Medicare program and the public plan option, including provider payment and delivery system reforms that provide incentives for coordinated and cost-effective care. A comprehensive and coordinated approach to addressing quality and costs is needed to fundamentally transform the 

health system to ensure its long-term sustainability. 


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Conclusion 

The American Academy of Actuaries’ Health Practice Council has identified three 

key considerations that are vital when determining whether particular reform approaches will lead to a sustainable health system with increased access to affordable 

health insurance. In particular, for insurance markets to be viable they must attract 

a broad cross section of risks; market competition requires a level playing field; and 

for long-term sustainability, health spending growth must be reduced. As Congress 

moves forward on a health reform proposal, it should ensure that its provisions adhere to these criteria. 

f 

Statement of the ERISA Industry Committee 

The ERISA Industry Committee is an association committed to the advancement 

of the employee retirement, health, incentive, and welfare benefit plans of America’s 

largest employers. ERIC’s members provide comprehensive health benefits directly 

to some 25 million active and retired workers and their families. ERIC has a strong 

interest in proposals that affect its members’ ability to continue to deliver high-quality, cost-effective benefits. 

We must change the way we pay for and deliver health care in the United States. 

Reining in health care costs is absolutely essential to this country’s future economic 

success. ERIC strongly supports reforms to the Nation’s health care system that will 

increase its efficiency, reduce costs, and extend health care coverage to those who 

are uninsured or underinsured. 

ERIC has thought deeply about this subject. In 2007, we released A New Benefits 

Platform for Life Security that lays out our vision of a conceptual framework for 

overhauling our national approach to providing health and retirement security. 

Many of the positions we staked out in this Platform have been incorporated into 

proposals currently under consideration in Congress. 

Three basic principles are of fundamental importance to change and must be considered as we move forward. 

1. Do no harm. The current voluntary employment-based system provides health 

coverage to 170 million people, about 61% of the non-Medicare population. This 

system has served both employers and employees well. Employers have the flexibility they need to tailor their plans to the needs of their workforce while also 

aggressively pursuing the innovative changes that have led to substantial advancements in so many arenas, including the fields of wellness and prevention. 

Employees strongly support their employer provided benefits and benefit significantly from this system. They enjoy access to high-quality care with guaranteed 

issue, limited preexisting condition exclusions, a uniform premium structure, and 

the other advantages afforded participants in the large risk pools of group plans. 

Any health care reforms should build on the strengths of this system. 

2. Control costs. The relentless increases in the cost of health care threaten the 

viability of U.S. corporations in a global economy, while the upward spiral in the 

costs of Medicare and Medicaid threatens our national solvency. In addition, a 

substantial portion of the health care we now consume, perhaps as much as 20% 

to 40%, has no value. The centerpiece of health care reform must focus on reducing these costs. Reform that fails to focus on cost control will not only ultimately 

prove ineffective but will undermine health care coverage. 

3. Expand access. Forty-sevem million Americans do not have adequate access to 

health care. Of those, approximately half are unable to afford coverage. History 

will not judge kindly an affluent society that ignores this problem. We must remember, however, that inadequate access is aggravated, if not caused, by the 

high level of cost. Our effectiveness in solving the access problem depends on restraining the growth of health care costs. 

With these foundation principles in mind, we lay out what ERIC can support in 

a responsible health care reform initiative: 

1. ERIC strongly supports a competitive, pluralistic health care system in 

which employers and individuals have choices among several health plans that 

compete on the basis of quality, cost, and effectiveness. There is an urgent need 

to eliminate the significant waste in the current health care delivery system, establish a foundation for responsible cost management in the future, and systematically ensure quality health care for all Americans. Too many reforms pursued 

in the past have made changes at the edges of health care delivery when fundaVerDate Nov 24 2008 08:10 May 12, 2011 Jkt 062998 PO 00000 Frm 00392 Fmt 6633 Sfmt 6621 I:\WAYS\WAYSPS\62998\62998.XXX APPS06 PsN: 62998

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mental structural changes are needed. ERIC believes that a properly designed, 

responsibly regulated pluralistic system will be able to correct the deficiencies in 

the current system and produce significant improvements in costs, quality, and 

access. 

2. ERIC’s New Benefits Platform supports the establishment of an insurance exchange or gateway that provides a fair and equitable method for the distribution of insurance products. If exchanges are established, they should follow uniform national standards. 

3. Employers should be given broad flexibility regarding how they choose 

to provide health benefits to their employees and their families but 

should be protected from systematic adverse selection by the plans in the exchange. Employers should be given the option of choosing to continue in the current system and arrange for and sponsor their own health plan alternatives. At 

the same time, employers should have the flexibility to provide financial resources to their employees to purchase health plans through the insurance exchange from among competing health plans. The employer should not be required 

under any circumstance to provide financial resources to employees to purchase 

insurance through an insurance exchange when the employer has chosen to continue in the current system. To allow this would create systematic adverse selection problems that could ultimately result in the demise of the employer-based 

system. This is inconsistent with the stated objectives of the President to support 

the continuation of the current system. 

4. Incentives in the current financing system must be changed from risk 

avoidance to responsible cost management. The foundation principle of a 

fair and equitable financing system for health care must be that the cost of disease and injury must be distributed across all plans offered through the exchange. In the end it is the expectation that health plans offered through the exchange should be strongly incentivized to differentiate their products and premiums based on efficiencies generated by better administrative practices derived 

from improved payment systems, disease management, utilization management, 

case management, lifestyle management and other innovative initiatives designed to lower cost, increase quality and improve accountability. Large employer 

plans have pursued these goals with notable success. 

5. Transparency and accountability of both providers and health plans 

must be improved. 

• There has been much discussion on the need for better provider transparency 

in terms of both cost and quality. We are fully supportive of these initiatives. 

• There has been less discussion about the need for better health plan transparency and accountability. It is widely recognized that the practices of some 

private health plans create an enormous frustration to both consumers and 

providers of health care. Medicare does provide a good example of more consistent administration of health plans. In a restructured system, it will be important to establish mechanisms where there can be standardization and full 

transparency of administrative practices of health plans that are offered 

through the exchange. This might include disclosure of health expense loadings, the number and cost of denied claims, the efficiency of claims administration and other administrative practices, and consumer assessments of each 

health plan. 

6. ERIC strongly supports payment reform. There is strong evidence that financial incentives must drive the changes that are desired. President Obama’s Budget Director, Peter Orszag, recently stated that, for example, ‘‘nearly 30% of Medicare’s cost could be saved without negatively affecting health outcomes if spending in high and medium cost areas could be reduced to the level in low cost 

areas.’’ In both the private and public sectors, we must stop rewarding providers 

for doing more and instead incentivize them to provide high-quality health care 

that delivers true value to the American consumer. It is irresponsible to perpetuate a system in which between 20% and 40% of the health care delivered has 

no value. Payment reform is essential to this objective. 

7. Every citizen should be required to obtain health care coverage, with standards 

established at the Federal level. Because a significant portion of the population is unable to afford adequate coverage, ERIC would support subsidies to assist financially disadvantaged individuals. 

We must also call attention to the areas in current legislative proposals where the 

‘‘Do no harm’’ principle is most at risk. 


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Taxation of Benefits 

Several proposals have been made to curtail the favorable tax treatment for employees of employer-provided health benefits. One proposal would eliminate the exclusion entirely. Others would impose a cap based on the value of health insurance, 

an individual’s income, or a combination of the two. 

ERIC has serious concerns with limiting the ability of an employee to exclude 

from income the value of employer-provided health insurance. If this exclusion were 

curtailed, many large employers would follow one of two approaches. Some would 

redesign their plans to meet the new cost standard in the legislation, below which 

taxation would not be imposed. This would necessarily mean that their employees 

would be provided with less generous health coverage. 

Other employers would choose to keep their existing plans; if the value of the plan 

exceeded the standard in the legislation, employees would face taxation on the ‘‘excess’’ value. If this were to occur, employment-based insurance would suffer. Young, 

healthy employees would either seek to exit their employers’ plans in search of 

cheaper coverage rather than pay taxes on a more expensive plan or pressure their 

employers to reduce coverage. If younger workers sought cheaper coverage elsewhere, an employer plan that once had a favorable and balanced risk pool would 

now be left with an older, sicker, more costly population whose premiums would 

eventually become unsustainable. Loss of a large, viable risk pool would greatly diminish an employer’s ability to offer efficient and innovative health care coverage 

to its employees. As the cost of providing benefits increased, more employers would 

exit the system. 

There are also equity and administrative issues associated with a tax cap that 

need to be carefully assessed. We are concerned that if a cap is to be imposed, it 

not discriminate against individuals by virtue of higher premium costs due to geography, the demographic composition of the group, or because they happen to work 

for a small firm. 

A Public Plan 

ERIC has several serious concerns with the creation of a public plan that would 

compete with the current private marketplace. Although at present we do not know 

how this new plan would be structured, we have profound reservations with the 

prospect of a public plan modeled after Medicare. Medicare does provide an example 

of an efficient, consistent, and fair claims administrator; there are also examples of 

consistent, fair claims administrators among private health plans. Medicare is not, 

however, a sterling example of what a restructured financing system should look 

like. In fact, Medicare has perpetuated some of the cost problems that we have in 

our current health care system by rewarding those who provide more care, regardless of value. 

Our most fundamental concern with a public plan based on Medicare, however, 

is the potential for even greater cost-shifting than exists today. Right now ERIC 

members subsidize the cost of Medicare. This includes both administrative and 

claim costs. One example of the administrative subsidy relates to the fact that Medicare does not pay anything for transaction fees associated with the electronic movement of claims from providers to Medicare intermediaries. These transaction costs 

are not free. They must be absorbed by other paying customers, including employer 

plans. 

Moreover, according to most providers, Medicare’s reimbursement rates do not 

cover their costs. Contrary to what many people say, these rates are not negotiated, 

they are mandated. Providers argue that in most cases they accept these rates because they want to continue treating patients that have been treated all of their 

lives. Hospitals argue that they have no choice. They believe that they survive only 

because they are able to charge higher rates to private plans and other customers. 

In short, the provider shortfall from Medicare is shifted to the private sector, a practice that is unacceptable in a reformed system. 

At the end of the day, ERIC’s position is that if a public plan could be fairly fashioned, it must not be structured in such a way that employer plans end up bearing 

the burden of additional cost shifts. Health care costs are already rising at an 

unsustainable rate. Increased cost-shifting would trigger the warning light that 

causes employers to rethink whether they can afford to provide high-quality health 

care to their employees. An exodus of employment-based plans from the Nation’s 

health care system would diminish the development of practices to improve the 

quality of health care and the pursuit of innovative strategies to bring health care 

costs under control that are core strengths of the employment-based system. 


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Employee Opt-Outs 

We are also concerned about the adverse selection that would be experienced if 

individual participants in employer-sponsored plans were permitted to opt out of the 

employer plan and into a public plan, especially if the employer were compelled to 

pay for the individual’s participation in the public plan and/or finance any subsidy 

given low-income individuals who opted out. If permitted, an opt-out would undermine the demographic fairness of a large risk pool that is a feature of employer 

plans. Over time, young, healthy employees would seek cheaper coverage outside of 

the employer’s plan, and older, sicker employees would remain in the plan. Eventually, employer plans would become havens for employees with the worst risk profiles, and this would be reflected in ever-higher premium costs. At some point, employers would no longer be able to provide affordable coverage to their workers. 

Employer Mandates 

Employer mandates, especially their manifestation in the ‘‘pay-or-play’’ penalties 

currently under discussion, have the potential to seriously harm employer-sponsored 

plans. ERIC members generally provide high-quality benefits with generous employer contributions; thus, it would appear that a ‘‘pay-or-play’’ requirement would 

have little or no relevance for us. As we have learned from the experience in Massachusetts, however, this is not always the case, and—as is so often true in life—the 

devil is in the details. For instance, if the employer mandate only required that employers offer a set minimum package of benefits to employees that met a specified, 

modest actuarial value, then many—but not all—major employers would meet that 

bar. But if the mandate were to require that all full-time employees were to be covered, and full-time were defined as working 25 hours per week, many other employers would drop below the bar. If the mandate were to further include no cost-sharing for prevention or wellness and full coverage of mental health benefits, others 

would drop out. 

Employer mandates by definition restrict our ability to devise and operate health 

care plans that best meet the needs of our employees. Mandates increase costs and 

limit flexibility. Coupled with punitive regulatory regimes, employer mandates will 

discourage employers from continuing to provide quality, affordable health care to 

their employees. This is not an idle threat; one need look no farther than the Nation’s moribund defined benefit plan system to see the effects of overly complex rules 

and regulations. 

Preemption 

It is absolutely essential that ERISA’s preemption doctrine not be breached. Without the national uniformity made possible by ERISA’s preemption doctrine, large 

multistate employers simply could not offer quality health care coverage to their employees. Its importance was recognized by the original sponsors of ERISA as critical 

to ensuring that employers provided sound and secure benefits. Any future legislation must continue to accord preemption and national uniformity of regulation a 

similar priority. 

Conclusion 

ERIC is committed to the goal of reforming the Nation’s health care system in 

a responsible manner that will extend health care to those without it and that will 

reverse the current fatal escalation in the costs of health care. Equally important 

is that this reform be accomplished without undermining the system that currently 

offers quality health care to 170 million satisfied Americans. 

ERIC intends to continue to play a constructive role in this debate. 

f 

Statement of The Senior Citizens League 

On behalf of the approximately 1 million members of The Senior Citizens League 

(TSCL), a proud affiliate of The Retired Enlisted Association (TREA), thank you for 

the opportunity to submit a statement regarding health care reform. TSCL consists 

of active senior citizens, many of whom are low income, concerned about the protection of their Social Security, Medicare, and veteran or military retiree benefits. 

Our members are very concerned with the rising cost of health care. According 

to a recent survey that TSCL conducted in early 2009, some 41 percent of seniors 

responding said they occasionally cut back on visits to the doctor in the past year 

due to the economy. Another 21% said they ‘‘frequently’’ did so. With skyrocketing 

Medicare premiums and out-of-pocket expenditures, coupled with predictions of no 

cost-of-living adjustment (COLA) for 2010 and 2011, TSCL is highly concerned that 

many seniors, or their caregivers, will be forced to choose between life-saving medications or paying for groceries or other bills. 


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1 ‘‘Progress Made but Challenges Remain in Estimating and Reducing Improper Payments.’’ 

Testimony of Kay L. Daly before the Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security, Committee on Homeland Security and Governmental Affairs, U.S. Senate, April 22, 2009. 2 ‘‘Pharmaceutical Market Access and Drug Safety Act Frequently Asked Questions,’’ 

www.dorgan.senate.gov/issues/families/rx/faqs/. 3 ‘‘CMS Announces Medicare Premiums, Deductibles for 2009,’’ CMS, September 19, 2008. 

4http://www.ssa.gov/pubs/10161.html. March 9, 2009. 

5 ‘‘Medicare Part D 2009 Data Spotlight: The Coverage Gap,’’ Kaiser Family Foundation, November 2008. 

Making health care affordable and accessible for all Americans—young and old— 

is of the utmost importance. However, we realize that there is an enormous pricetag 

associated with this vision. President Obama’s Administration presented a ‘‘downpayment’’ of approximately $634 billion over the next 10 years in its proposed budget for fiscal year 2010. Of this total, an estimated $316 billion is expected to come 

from changes to Medicare payments and reducing fraud. With this in mind, TSCL 

encourages Members of Congress to support including the following items in any 

health care reform package. 

TSCL and its supporters believe that substantial savings to the Medicare program 

could be gained with a few adjustments to current examples of waste, fraud and 

abuse. Many groups, including the Government Accountability Office (GAO) and Inspector General, have reported that the Federal Government is overpaying the 

Medicare Advantage (MA) insurers by about 14% or more. First, payments to Medicare Advantage plans should be reevaluated by Congress. Additionally, the Centers 

for Medicare and Medicaid Services (CMS) should complete drug plan and MA plan 

audits as required by law. Plans should be required to refund overpayments, if any, 

to affected Medicare beneficiaries. 

TSCL also believes that provisions, such as those in Senator Mel Martinez’s (FL) 

Seniors and Taxpayers Obligation Protection (STOP) Act, would prevent the loss of 

billions of dollars from Medicare through prevention of waste, fraud and abuse. For 

example, the GAO estimates that improper payments for Medicare Fee-for-Service 

and Medicare Advantage totaled $17.2 billion in fiscal year 2008.1

TSCL believes that additional savings could result if consumer access to affordable prescription drugs is made possible by Food and Drug Administration 

(FDA) approval of the importation of safe prescription medications from selected countries. During the 110th Congress, the Congressional Budget Office 

(CBO) estimated that, if enacted, Senator Byron Dorgan’s (ND) Pharmaceutical 

Market Access and Drug Safety Act would result in a $5.4 billion reduction in direct 

Federal spending for prescription drugs and a $5.2 billion increase in Federal revenues over 2009–2017. The CBO also estimated that this legislation would reduce 

total drug spending in the United States by $50 billion over 10 years.2

TSCL adamantly opposes means testing and encourages Congress and the Administration to not expand it to Medicare Part D premiums. Monetary funds from a onetime high-income (e.g., property sale, lump sum distribution of a pension account, 

etc.) or retirement savings should not be used to determine higher-income-based 

Medicare premiums for persons who would not normally be required to pay the 

higher fee. Because Part D plan premiums vary tremendously, implementation may 

be extremely difficult. Another challenge that could present itself is protecting beneficiaries’ sensitive tax information from misuse by private health plans. 

In 2009, approximately 2.2 million affected seniors 3 pay at least $38.50 and up 

to $211.90 per month in addition to the standard monthly premium of $96.40.4 This 

is the first year that beneficiaries pay fully phased-in higher premiums. Despite a 

‘break’ in 2009, the standard Medicare Part B premium has increased from $45.50 

per month in 2000 to $96.40—that is 111.8%! This percentage does not take into 

account the increases in premiums due to means testing. TSCL is supportive of legislation that would eliminate the means test applied to Medicare premiums. During 

the 110th Congress, Rep. Nita Lowey (NY) introduced H.R. 4330, which would have 

eliminated means testing for Medicare Part B premiums. 

TSCL also supports legislative action that would either reduce or eliminate the 

coverage gap, often referred to as the ‘doughnut hole.’ For 2009, seniors falling into 

the gap must pay $3,454 in out-of-pocket expenses before Part D coverage begins 

again. When premiums, deductibles, and copays are factored in, in premiums, deductibles, and copays, the beneficiary must spend $4,350 out-of-pocket before catastrophic coverage. Unfortunately, there are few Part D plans that offer gap coverage, and those that do typically cover only generic prescriptions.5 The beneficiary 

that takes a brand-name medicine for which there is no generic or that takes a 


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6Public Law No. 111–5. 

7 ‘‘Cost Effectiveness of Colorectal Cancer Screening With Computed Tomography Colonography,’’ Medicare and American Cancer Society, April 23, 2007. ‘‘Medicare Blow to Virtual Colonoscopies,’’ Andrew Pollack, The New York Times, February 13, 2009, http://www.nytimes.com/ 

2009/02/13/health/policy/13colon.html?lr=1&scp=1&sq=Medicare%20Blow%20to%20Virtual%20 

Colonoscopies&st=cse. 8 ‘‘Rationing Health Care Among the Uninsured: Practice Becomes More Common at U.S. Hospitals,’’ Robert Bazell, Chief Science and Health Correspondent, NBC News, February 24, 2004. 

costly specialty tier drug is often forced to choose between taking their meds and 

paying for other necessities. 

Senator Bill Nelson (FL) introduced the Medicare Prescription Drug Gap Reduction Act of 2009, which, if signed into law, would amend the Medicare portion of 

the Social Security Act to reduce the Part D doughnut hole due to savings resulting 

from negotiated prescription medication prices. The Federal Government would be 

able to do such negotiations under the umbrella of Department of Health and 

Human Services (HHS), with its Secretary acting as a liaison/negotiator. 

Included in the American Recovery and Reinvestment Act of 2009 6 was approximately $1.1 billion for Comparative Effectiveness Research (CER). Although language was included that stated CER should not be used by Medicare and private 

insurers to deny care or leave patients with uncovered costs, TSCL believes that 

this should not be overruled by health care reform legislation. Beneficiaries rely on 

Medicare to cover all medically necessary costs. Changing the ‘‘medically necessary’’ 

policy could prevent seniors from getting certain types of care that impose much 

higher new costs on sick patients. 

Take for example virtual colonoscopies. CMS ruled that virtual colonoscopies will 

not be covered because there was ‘‘insufficient evidence’’ to conclude that virtual 

colonoscopy ‘‘improves outcomes in Medicare beneficiaries.’’ 7 However, the public 

may be interested in receiving more information about available treatment options. 

Some patients may find it less invasive and thus be more willing to undergo the 

treatment. On the other hand some specialists say virtual colonoscopies may expose 

patients to more dangerous levels of radiation than conventional methods. This information, which is of the greatest use to patients, was never even mentioned in 

general media stories on this coverage decision. 

If taxpayer supported research is made public, it holds the potential to save lives 

and some people may prefer safer forms of treatment when possible. However, TSCL 

fears that without proper oversight, CER could be used by Medicare and private insurers, to deny treatment on the basis of cost-effectiveness—despite the fact that patients may not have the same reaction to the same prescribed treatment. As such, 

TSCL recommends that legislators and the Administration ensure that CER is easily accessible by the entire U.S. public, and that it is used to help patients and their 

health care providers make informed decisions regarding medical treatment. 

Another concern that many groups, including TSCL, and some legislators have is 

that CER may lead to age-based health care rationing. Presently, there is nothing 

set in stone that mandates limiting health care to persons on the basis that he/she 

is too old to receive such a treatment and should accept the condition as something 

that comes with age. There are, though, hospitals that have adopted a type of health 

care rationing on the basis of their legal status or whether or not the patient has 

an outstanding payment balance.8 Extending this practice to senior citizens is something that could happen and some argue should happen to help the Federal Government cut costs. TSCL believes that medical treatment should not be denied to anyone on the basis of his or her age. Again, CER managed by a Federal health care 

board should be primarily used to help—not deny—care as doctors, patients, and 

their families make informed decisions about the available treatment for that individual. 

TSCL also strongly opposes changes to Medicare that would increase costs for 

beneficiaries. According to a recent TSCL survey, the overwhelming majority of respondents said they are highly concerned about Medicare reform proposals that 

would increase out-of-pocket costs and at the same time would restrict what Medicare supplements or Medigap plans are allowed to cover. 

Currently, most Medigap plans cover almost all of the deductibles and cost-sharing. Seniors and the disabled purchase the plans precisely because they need protection from the large out-of-pocket costs that Medicare does not currently cover. 

Nevertheless, several budget options to control Federal spending on Medicare, 

cited in testimony in February to the Senate Committee on Finance by the Congressional Budget Office would: 


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9 ‘‘Options for Expanding Health Insurance Coverage and Controlling Costs,’’ Statement of 

Douglas W. Elmendorf, Director, Congressional Budget Office, Before the Senate Committee on 

Finance, February 25, 2009. 10 Budget Options Volume I, Health Care, Congressional Budget Office, December 2008. 11 A Preliminary Analysis of the President’s Budget and an Update of CBO’s Budget and Economic Outlook, Congressional Budget Office, March 2009. 12Medicare Trustees Report, May 12, 2009. 13Medicare Premium Withholding, GAO, July 15, 2009. 14Medicare Trustees Report, May 12, 2009. 

• Impose a new $500 deductible for an estimated three-quarters of Medicare 

beneficiaries.9

• Mandate coinsurance for certain services such as home health care that currently are not subject to cost sharing. 

• Prohibit Medigap plans from covering the new deductible and restrict plans to 

covering only 50% of cost-sharing. 

Beneficiaries could potentially face up to $2,888 in out-of-pocket expenses (not 

counting premiums) in 2011 and the maximum out-of-pocket would increase every 

year after that.10

The Senate Finance Committee recently released a document, Financing Comprehensive Health Care Reform: Proposed Health System Savings and Revenue Options, 

which addressed these same budget proposals to alter Medicare co-insurance coverage. These proposals would prevent seniors from receiving the full supplemental 

coverage for their Medicare co-insurance and cost-sharing that they pay for and rely 

on today. Increasing out-of-pocket costs for supplemental coverage will only exacerbate the financial problems encountered by seniors who are trying to make ends 

meet and could lead to more hospital admissions if seniors avoid necessary visits 

and screenings. Additionally, the media is full of stories about seniors who have 

been forced to file bankruptcy due to uncovered Medicare costs. 

Seniors and the disabled already spend a larger portion of their incomes on health 

care than younger Americans. Thus, TSCL believes it would be poor policy to finance an expansion of health care coverage to younger Americans by shifting higher 

costs to the oldest and sickest family members. 

TSCL also supports extending ‘‘hold harmless’’ protection to beneficiaries who receive Medicare Part D. The CBO is predicting no Social Security Cost of Living Adjustment for 2010 and 2011.11 TSCL is concerned about Medicare drug plan premiums increasing (in addition to Part B for some beneficiaries) in years when there 

is no Social Security COLA. The ‘‘hold harmless’’ provision prevents the vast majority of beneficiaries from receiving smaller Social Security checks in years when 

Medicare Part B premiums exceed the COLA. Currently, ‘‘hold harmless’’ protection 

applies only to Medicare Part B as there is no provision protecting the Social Security benefits of those who receive their coverage through Part D and have premiums 

deducted from their benefits. Assuming most drug plans will increase premiums, 

TSCL estimates that at least 6.3 million beneficiaries enrolled in Part D plans 

would see a reduction in Social Security benefits because of the increases.12,13

TSCL would also support an ‘‘emergency COLA,’’ paid out of Social Security payroll taxes, to Social Security beneficiaries to offset the increase in Medicare premiums. This would help to preserve beneficiaries’ current and future buying power 

and potentially lower overall beneficiary Part B premium costs. To prevent inequities among beneficiaries TSCL supports an ‘‘emergency COLA’’ for all Social Security recipients. 

The ‘‘emergency COLA’’ could be set at a level that would cover the cost of Part 

B premium increases for beneficiaries. This would potentially mitigate a very stiff 

projected jump in Part B premiums. If no action is taken, Medicare Trustees estimate that Part B premiums for beneficiaries not covered by the ‘‘hold harmless’’ provision would increase from $96.40 per month in 2009 to $104.20 per month in 2010, 

and $120.20 per month in 2011.14 Providing an ‘‘emergency COLA’’ eliminates the 

need for the ‘‘hold harmless’’ provision for Part B in 2010 and the beneficiary portion of the cost of premiums could thus be spread over 42.4 million rather than just 

approximately 10 million. 

There are countless additional provisions that will be debated, but one thing remains certain—beneficiaries should be protected and their health should come first. 

Protecting Medicare for current and future retirees is essential, and TSCL respectfully requests that any proposed changes impacting America’s senior citizens be 

carefully considered. 

f 


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Statement of Larry S. Gage, 

National Association of Public Hospitals and Health Systems 

The National Association of Public Hospitals and Health Systems (NAPH) greatly 

appreciates this opportunity to submit a statement for the record in connection with 

your June 24, 2009 hearing on Health Reform in the 21st Century. Specifically, we 

would like to share with you our comments on the Tri-Committee bill under consideration at that hearing, with particular attention to the role of NAPH members and 

other safety net hospitals and health systems in a reformed health care system. 

We would like to begin by extending our support to this Committee, as well as 

to the Congress and the Administration, for their historic efforts to reform our Nation’s health care system. In particular, we support your goal of extending comprehensive health coverage to all Americans. For far too long, tens of millions of vulnerable individuals have been unable to access affordable health care coverage. 

These people not only fail to benefit from the knowledge and care made possible by 

the advances in American medicine, but do not even have ready access to basic preventive and primary medical, dental, and behavioral health care. 

We also would like to acknowledge the many sound substantive policies lying at 

the heart of the Tri-Committee bill. The initiatives you have proposed address many 

weaknesses that underlie the existing delivery system, including fragmented care, 

wide disparities in the type and quality of services available to different populations, 

and workforce training that does not align with our system’s needs. NAPH supports 

Congress’ efforts to promote integration and care coordination, to address disparities 

in care, and to invest in primary care training. 

We also deeply appreciate that the Tri-Committee bill preserves critical support 

for safety net hospitals—and in particular Disproportionate Share Hospital (DSH) 

payments—thereby protecting the vulnerable patients that these hospitals serve 

currently and will continue to serve under a reformed system. Just as there is widespread agreement that health reform should include increased investment in community health centers—an approach that NAPH supports—a similar investment in 

ensuring a viable safety net beyond primary care is equally critical. As coverage expands, many newly-covered patients will have gone long periods of time without 

care. We can anticipate pent-up demand not only for primary care services, but also 

for resulting specialty and acute care services for which patients are going to need 

to be referred. Strong community health centers and safety net hospitals will both 

be required to provide newly-insured and other vulnerable groups with meaningful 

access to health care. 

We would like to focus our testimony on the role of safety net hospitals under 

health reform. Simply stated, America will continue to depend on safety net hospitals and health systems even if we are able to extend health coverage to all. Massachusetts health reform was premised on the belief that the need for safety net 

hospitals would decline once health reform took hold. Policymakers had assumed 

that when previously-uninsured individuals enrolled in the new coverage options, 

they would begin using a broader network of providers and that the new insurance 

payments would encourage competition for these patients. This assumption proved 

false, these patients have continued seeking care at safety net hospitals, and the 

State has scrambled to find new support for these providers before the unforeseen 

losses arising out of health reform completely undermine the State’s health care 

safety net. 

This statement will briefly describe NAPH, and then will address the following 

four topics: 

• The role of safety net hospitals and health systems in health reform, including 

the use of coordinated care networks. 

• The ongoing need for DSH payments under health reform. 

• Graduate medical education. 

• Other Medicare payment issues. 

NAPH 

NAPH members include over 140 of the Nation’s largest metropolitan area safety 

net hospitals and health systems. Located across the county, our members include 

hospitals and systems such as the Alameda County Medical Center, Hurley Medical 

Center, and the New York City Health and Hospitals Corporation. These systems 

have traditionally served as the primary source of care for many low-income populations, including Medicaid recipients, patients unable to access insurance, and individuals who find their health coverage inadequate. On average, roughly 60 percent 

of patients served by NAPH members are enrolled in Medicare and Medicaid, and 


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another 20 percent are uninsured. Although NAPH members account for only 2 percent of hospitals nationwide, they provide 20 percent of the Nation’s uncompensated 

hospital care. The amount of uncompensated care provided by NAPH members has 

increased significantly in the last year due to the economy, underscoring the need 

for comprehensive health reform that provides meaningful coverage and access to 

care to all Americans. In the last quarter of 2008, NAPH members experienced a 

10 percent increase in uncompensated care costs compared to the same quarter of 

2007, an average per-hospital increase of $3 million. 

The Role of Safety Net Systems in Health Reform 

Enacting comprehensive health reform legislation will be only the first step to 

achieving universal coverage. The Tri-Committee bill does not envision full coverage 

initiatives commencing until 2013, and the health reform initiatives of Massachusetts, Maine, Vermont and others confirm that the process of expanding health coverage to all Americans will take several years. During this time, the need for safety 

net hospitals likely will expand, rather than contract. In fact, any coverage expansion’s success will hinge, in part, on using safety net hospitals and health systems 

to engage low-income and other hard-to-reach populations, ensuring that these individuals take advantage of the new, affordable coverage opportunities. 

During the transitional years, safety net hospitals will continue providing highquality services to all those seeking care, regardless of insurance status. Many people likely will remain uninsured during health reform’s initial years, and safety net 

systems likely will continue treating a disproportionate number of these patients. 

Given safety net health systems’ uninsured volumes, they also are uniquely positioned to facilitate enrolling the uninsured into new coverage vehicles. To the extent 

that health reform expands Medicaid eligibility in certain States, those States likely 

will rely on safety net hospitals to identify newly-eligible patients. Safety net hospitals also will serve as entry points for individuals not eligible for public coverage, 

but who can enroll in subsidized and unsubsidized private coverage. Given our 

members’ deep knowledge of their patients’ unique needs, safety net health systems 

will be able to facilitate enrollment in the most suitable plans, whether that be Coordinated Care Networks (described below) or other plans offered by private or nonprofit insurers through the Health Insurance Exchange. 

Coordinated Care Networks (CCNs) have the potential to serve as a vehicle for 

transitioning to a reformed health care system and for ensuring that the newly-insured receive ongoing care that addresses their unique needs. Attached to this statement is NAPH’s proposal to develop CCNs. CCNs would be integrated health care 

delivery systems for low-income populations, voluntarily formed by public and private safety net providers. CCNs would provide support for integrated delivery systems to coordinate the full range of care—primary care to hospital and post-acute 

care—for low-income individuals and families, including Medicaid patients, Medicare beneficiaries (including dual eligibles), the uninsured and those who may be 

newly covered under health reform. CCNs would focus on improving both quality 

and efficiency of care for these vulnerable patient populations, and would ensure 

that their enrollees continue to have a range of necessary ‘‘wrap-around’’ support 

services that may not be needed by the rest of the population. Given the high costs 

associated with treating low-income and other targeted populations, safety net systems, through CCNs, also would be prime testing grounds for incentives to improve 

quality and efficiency. 

As proposed, CCNs would be public or private nonprofit legal entities representing 

consortia of safety net providers, such as public hospitals, federally qualified health 

centers, children’s hospitals and others. They would be eligible to contract directly 

with various payers under health reform to provide integrated care to their respective enrollee populations. CCNs could also, at their option, choose to offer or develop 

health plans built around their network and contract with Medicare, Medicaid, 

CHIP, or the newly-formed Exchange. 

In many ways, CCNs would deliver the services already available through safety 

net systems. Our proposal, however, would provide a needed national framework to 

recognize integrated, multi-provider networks and systems already developed by 

safety net providers in many parts of the country, and to develop and extend their 

‘‘best practices’’ for care coordination to other communities. They would work in concert with many of the other important initiatives included in the Tri-Committee bill, 

such as accountable care organizations and medical homes. Quality can be improved 

and costs reduced by getting patients to the right place, at the right time, with the 

right level of care, with the right provider, with the right outcomes, and the right 

financial incentives. Through CCNs, the Federal Government would have a mechanism through which to encourage this sort of integration and coordination. NAPH 

developed this proposal from successful models implemented by several safety net 


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hospitals, including ones from south Florida to New York City, San Francisco 

to Richmond, Virginia. Based on the success of these models, we urge you to consider incorporating the concepts imbedded in this proposal into your health reform 

efforts. 

Finally, safety net systems will continue their leadership in addressing disparities 

in health, access, and quality often faced by low-income and minority populations. 

NAPH members, including the University of California Davis Health System and 

Nassau County Medical Center in New York, have devoted significant resources to 

create programs that target disparities in care. Denver Health’s experience demonstrates that disparities can be eliminated. Seventy percent of Denver Health’s patients are members of minority groups. Yet a recent study in the Journal of Urban 

Health found that at Denver Health, disparities in care did not exist among racial 

or ethnic groups for the likelihood of receiving various cancer screenings and having 

properly managed chronic conditions. NAPH supports the requirement that all plans 

participating in the Exchange would have to provide culturally and linguistically appropriate services and communications, a first step towards broadly eliminating disparities. We also support your proposal to increase Medicaid funding for translation 

services. 

The Ongoing Need for DSH Payments 

NAPH strongly endorses the DSH policy reflected in the Tri-Committee bill. Both 

Medicare and Medicaid DSH payments will continue at their current levels into the 

foreseeable future, with HHS reporting on both programs by July 1, 2016. 

Federal and State governments have a significant interest in ensuring the ongoing 

viability of safety net hospitals in a reformed health care system. Large numbers 

of low-income and other vulnerable patients will continue relying on safety net hospitals, as will the general population. Many newly-covered patients, as well as lowincome patients already with health coverage such as Medicare, will continue seeking the specialized care that these hospitals provide. Many NAPH members offer 

wraparound services designed to address vulnerable populations’ unique needs, such 

as translation, transportation, and social work services. Similarly, even with a goal 

of coverage for all Americans, many are likely to continue falling through the 

cracks, remaining uninsured and underinsured post-health reform. For example, the 

Congressional Budget Office estimated that upwards of 33 million Americans would 

remain uninsured under the Health, Education, Labor and Pensions (HELP) Committee’s portion of the Senate’s health reform legislation. Even in Massachusetts, 

the uninsured rate continues to hover around 2.6 percent. Some groups, particularly 

undocumented aliens, simply will not be eligible for coverage under health reform, 

and will continue seeking care at safety net systems. For these reasons, safety net 

hospital uncompensated care costs may remain relatively high compared to other 

hospitals’ post-health reform. 

The virtual certainty that many low-income patients will continue seeking care 

at safety net hospitals means that Congress will need to maintain existing levels 

of Medicare DSH support. We appreciate your decision to maintain Medicare DSH 

payments. Congress originally established the Medicare DSH program to offset the 

heightened costs associated with treating large numbers of low-income Medicare patients. Over the years, Congress acknowledged that Medicare DSH also helps ensure 

access to care for vulnerable patients, including low-income Medicare beneficiaries. 

The Tri-Committee bill acknowledges that Medicare DSH has been extended to also 

support hospitals’ uncompensated care burden by requiring a report on the distribution of Medicare DSH as it relates to hospital uncompensated care. In Massachusetts health reform, safety net hospital systems provided more care to low-income 

patients post-reform and were reimbursed significantly below costs for that care (60 

to 70 percent of costs). Including inpatient and outpatient care, NAPH members lose 

money on treating Medicare patients, so we believe that the need for Medicare DSH 

will continue after reform has been implemented. 

NAPH supports your decision to maintain existing Medicaid DSH payments, too. 

Medicaid DSH is critical for safety net hospital’s financial stability, directly reimbursing uncompensated care expenses and any Medicaid shortfalls. Although we 

support your use of Medicaid as a building block to reform, we expect shortfalls associated with this program to worsen unless States improve their payment rates. 

We also urge you to extend the 340B program to the inpatient setting, which should 

further reduce costs associated with treating this population and provide savings to 

safety net hospitals and the Medicaid program. 

In summary, NAPH strongly supports the approach to both Medicare and Medicaid DSH outlined in the Tri-Committee bill—rejecting arbitrary predetermined 

cuts in DSH and establishing a thoughtful process by which the DSH programs can 

be restructured once health reform is fully implemented and only after hospital 


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losses on the low-income and uninsured populations are substantially reduced. 

NAPH thanks the Committee for its ongoing support for DSH and its deep understanding of the important role played by safety net hospitals in securing access to 

care for low-income, vulnerable populations. 

Graduate Medical Education 

NAPH supports the Tri-Committee bill’s multi-pronged approach toward strengthening our health professional workforce, and its clear recognition of workforce development’s prominent role in health reform. Our current graduate medical education 

(GME) infrastructure fails to train an adequate number of primary care physicians. 

We face impending shortages in many other health professions, particularly nursing 

(although the nursing crisis has been delayed by the ongoing recession). Large areas 

of the country remain underserved, and only through gap-filling programs like the 

National Health Service Corps are we able to ensure that residents in these areas 

have access to basic medical care. 

One pressing need is to train more physicians, particularly primary care physicians. Health care reform may aggravate the need for physicians in certain areas, 

as seen in Massachusetts where health reform has demonstrated the need for primary care physicians to serve the newly insured. Eighty-five percent of NAPH members are teaching institutions, and their diverse patient populations ensure that 

physicians training at their facilities learn to deliver culturally competent care and 

to treat the specialized needs of minority and other vulnerable populations early in 

their careers. 

NAPH was pleased to see that the Tri-Committee bill did not propose funding a 

coverage expansion with reductions to Medicare or Medicaid GME payments. Rather, your bill strengthens these programs by enabling increased training in the outpatient setting and codifying Medicaid’s role in funding GME. Funding for GME activities comes almost exclusively from public payors. Medicare makes direct GME 

(DGME) payments for direct training costs, including salaries for residents and supervising physicians, and indirect medical education (IME) payments compensate 

teaching hospitals for the increased cost of providing care in teaching hospitals. 

Many Medicaid programs include either DGME or IME payments or both to pay 

Medicaid’s share. Private insurance rarely makes specific DGME or IME payments. 

With little other support for their teaching mission, Medicare and Medicaid GME 

payments are essential to safety net teaching hospitals. 

NAPH urges the Committee to consider expanding the overall number of physicians trained annually. This country suffers not only from shortages of certain types 

of practitioners, particularly in primary care, but, in many areas, from an overall 

shortage of practicing doctors. Your proposal to redistribute unused GME positions 

to fund new primary care positions is a good first step. However, we urge the Committee to consider more sweeping proposals, such as the one introduced by Representative Schwartz, that would increase the overall number of funded GME positions. 

Other Medicare Payments 

NAPH is pleased that the Tri-Committee bill includes a permanent fix to Medicare physician payments. The current payment system, which requires temporary 

‘patches’ on an annual basis, does injustice to the many physicians who devote their 

time and energy to treating Medicare beneficiaries. 

NAPH urges this Committee to exercise utmost caution prior to making other significant changes to Medicare hospital payments. On average, 23 percent of the inpatient services provided by NAPH members is to Medicare beneficiaries. These patients account for 20 percent of our members’ revenues, a significant amount, albeit 

relatively lower than many other hospitals’. We are concerned that several of the 

provisions in the Tri-Committee bill may result in significant reductions to Medicare 

payments. In particular, we are concerned that the proposed productivity adjustment to the market basket increase may result in extremely low payment updates. 

This adjustment, coupled with CMS’ proposal to further reduce inpatient payments 

over the next 3 fiscal years, may even result in negative payment updates. We also 

are concerned about the scope of the proposed readmissions policy, and urge the 

Committee to work with the industry to refine it. We thank you, however, for providing additional support to high-DSH hospitals to address patient noncompliance 

with discharge instructions. 

NAPH thanks you for your monumental reform effort and looks forward to continuing to work with you to see meaningful health care reform happen this year. 


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Coordinated Care Networks: 

Delivery System Reform for Vulnerable Populations 

Proposal of The National Association of Public Hospitals and Health Systems 

June 3, 2009 

I. OVERVIEW OF PROPOSAL 

The National Association of Public Hospitals and Health Systems (NAPH) 

asks the Congress to include in national health reform legislation a provision extending explicit Federal recognition of Coordinated Care Networks 

(CCNs). 

CCNs would be integrated health care delivery systems voluntarily formed by 

public and private safety net providers. This proposal would provide a needed national framework to recognize integrated, multi-provider networks and systems already developed by safety net providers in many parts of the country, and to develop 

and extend their ‘‘best practices’’ for care coordination to other communities. 

A number of integrated safety net delivery systems have made significant strides 

toward coordinating care for their vulnerable patient populations, including safety 

net networks in communities from south Florida to New York City, San Francisco 

to Richmond, Virginia. 

The goals of the proposed CCN program would be multi-faceted: 

• To provide support for integrated delivery systems to coordinate the full range 

of care—from primary care to hospital and post-acute care—to low-income individuals and families, including those who may be newly covered under health 

reform. • To provide mechanisms for improving both quality and efficiency of care for 

such vulnerable patient populations. • To provide a range of necessary ‘‘wraparound’’ support services for these populations that may not be needed by the rest of the population. • To provide networks of safety net services for those individuals who may continue to fall through the cracks following implementation of health reform, and • To provide ways under health reform to continue to ensure the availability of 

communitywide safety net services, such as emergency and trauma care, needed 

by everyone. 

This proposal should be a companion provision to current delivery system reforms 

under consideration by Congress, such as Accountable Care Organizations. 

II. ELEMENTS OF CCN PROPOSAL 

While it is important to provide sufficient flexibility to enable CCN’s to be 

responsive to the specific needs of their communities, the establishment of 

national guidelines as part of health reform will greatly enhance the ability 

of such systems to meet the goals set out above. 

Networks and CCN Health Plans. Federal law would authorize CCNs to be established (on a voluntary basis) as public or private nonprofit legal entities representing consortia of safety net providers, such as public hospitals, federally qualified health centers, children’s hospitals and other providers. CCNs would be eligible 

to contract directly with various payers under health reform to provide integrated 

care to their respective enrollee populations. CCNs could also, at their option, choose 

to offer or develop health plans built around their Network that could contract with 

Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), and participate in the Exchange. 

Federal Criteria. The Secretary would be authorized to develop a set of criteria 

that a provider network would have to meet in order to be certified as a CCN. 

NAPH’s proposal would link CCN certification to additional support funding (described in the discussion of payment below), providing a significant incentive for existing and new hospital systems to commit to providing a scope of services and incorporating innovations that HHS determines are critical to improving the delivery 

system for vulnerable patients. Examples of such criteria may include: 

Comprehensive Range of Services 

Enhanced Support for Primary Care 

Coordination Between Primary and Specialty Care 

Comprehensive Care Management 

Community-Based, Accessible Care 

Assurance of Emergency Care 

Outreach and Enrollment 


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Prevention and Wellness Care 

Transitional Care 

HIT Requirements 

Accountability Requirements 

Vulnerable Population Focus. The proposed provision would encourage the development of CCNs in communities whose residents include significant numbers of 

low-income individuals and families and other vulnerable patient populations that 

suffer from inadequate access to care and disparities in their health status. Potential target populations include: low-income newly insured, residual uninsured, Medicaid and CHIP enrollees, low-income Medicare beneficiaries and individuals who 

are dually eligible for Medicaid and Medicare. 

Comprehensive Range of Services. To receive a Federal CCN designation, 

CCNs would be required to offer a comprehensive range of primary, specialty and 

acute care services, as well as support services (such as nutritional counseling, 

transportation, language services, and other social services), consistent with broad 

Federal requirements. The precise scope of services would be defined by each CCN 

and approved by the Federal Government, allowing for variation by CCN and by 

community to meet local needs. Specialized CCNs might be developed to provide a 

set of services tailored to meet the needs of specific populations, such as the chronically ill, Medicare-Medicaid dual eligibles, or migrant workers. 

Payments for Services. The proposed provision would authorize a range of ways 

in which payments could be made for services provided by CCNs, which could vary 

by program and by population. Health Exchange plans could negotiate market rate 

reimbursement for CCN services they cover, but to the extent that a CCN’s federally-approved scope of services exceeds the services covered by a plan, the CCN 

would receive Federal wraparound payments to provide these noncovered services 

to Network patients. CCNs would receive case management services payments and 

could develop innovative payment incentive systems, for example to share in costsavings with Exchange plans or public payers. FQHCs participating in CCNs would 

continue to receive FQHC payments from public payers. CCNs also would receive 

Federal payments to provide services to those who remain uninsured. 

Added Value. CCNs would be required to demonstrate their value in a reformed 

system by participating in quality reporting, quality-based incentive payments and 

other quality initiatives. Demonstration programs could test innovative payment 

mechanisms and delivery system designs, with successful demonstrations rapidly 

expanded and unsuccessful ones terminated. 

Start-Up Funding. Direct grants and contracts would be made available for 

start-up and capital (including HIT) necessary to meet the certification requirements to ensure adequate availability of CCNs. 

Creation of a HHS Coordinated Care Network Center. NAPH proposes creation of a Center that would certify CCNs, provide ongoing technical support, share 

CCN best practice models, and evaluate the effectiveness of the CCN model and related demonstrations. 

III. PROJECTED POPULATIONS SERVED 

NAPH projects that a range of important populations would be served 

under this proposal whose needs (and communities) may not otherwise be 

adequately addressed under health reform. 

Those populations could include: 

• Newly insured. CCNs could ensure continuity of care and sufficient support 

services so that coverage translates into actual access by contracting with Exchange plans or creating their own Exchange plans. Exchange Plans that receive premium subsidies for low-income enrollees should be required to contract 

with CCNs operating in their geographic region, unless a CCN declines to participate or places unreasonable conditions upon its participation. 

• Current Uninsured During Transition. CCNs could serve a critical role in assisting their transition into a reformed health care system by beginning to implement delivery system reforms, providing care management and improving care 

for these low-income populations. 

• Medicaid and CHIP. CCNs could serve Medicaid and CHIP populations either 

as providers or by forming CCN health plans and participating as managed care 

plans. If these populations are moved into Exchange plans, Medicaid and CHIP 

programs could also contract with CCNs and CCN health plans for certain 

wraparound services, such as EPSDT services. 


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• Dual Eligibles. CCNs, in particular those with a specialized scope of services 

(such as for treating people with chronic disease or long-term care CCNs) could 

serve as a basis for innovation and experimentation in providing care to the 

chronically ill in this population. 

• Medicare. CCNs could continue to serve Medicare patients as a unique provider 

type and CCN health plans could participate in the Medicare Advantage program. CCNs could also play a role in bringing the uninsured who would qualify 

for any temporary Medicare buy-in into the health care system and providing 

critical care coordination for this population known to suffer from a higher burden of multiple chronic diseases. 

• Remaining Uninsured. CCNs could be a vehicle to provide cost effective, affordable care to the remaining uninsured after reforms are fully implemented and 

to provide continuous care to those who cycle on and off coverage due to administrative obstacles or for other reasons. 

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