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94–992 PDF 2004

S. HRG. 108–608

HEALTH SAVINGS ACCOUNTS AND THE NEW

MEDICARE LAW: THE FACE OF HEALTH CARE’S

FUTURE?

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC

MAY 19, 2004

Serial No. 108–36

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING 

LARRY CRAIG, Idaho, Chairman 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

MIKE ENZI, Wyoming 

GORDON SMITH, Oregon 

JAMES M. TALENT, Missouri 

PETER G. FITZGERALD, Illinois 

ORRIN G. HATCH, Utah 

ELIZABETH DOLE, North Carolina 

TED STEVENS, Alaska 

RICK SANTORUM, Pennsylvania 

JOHN B. BREAUX, Louisiana, Ranking 

Member 

HARRY REID, Nevada 

HERB KOHL, Wisconsin 

JAMES M. JEFFORDS, Vermont 

RUSSELL D. FEINGOLD, Wisconsin 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

DEBBIE STABENOW, Michigan 

LUPE WISSEL, Staff Director 

MICHELLE EASTON, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

Opening Statement of Senator Larry Craig .......................................................... 1

Opening Statement of Senator John Breaux ......................................................... 2

Statement of Senator Elizabeth Dole ..................................................................... 3

PANEL I 

Hon. John W. Snow, Secretary, U.S. Department of Treasury, Washington, 

DC .......................................................................................................................... 4

PANEL II 

John C. Goodman, Ph.D., president, National Center for Policy Analysis, 

Dallas, TX ............................................................................................................. 12

Ronald A. Williams, president, Aetna, Hartford, CT ............................................ 27

Robert Greenstein, executive director, Center on Budget and Policy Priorities, 

Washington, DC ................................................................................................... 41

Kate Sullivan, executive director, Health Care Policy, U.S. Chamber of Commerce, Washington, DC ....................................................................................... 57

Edward L. Langston, M.D., trustee, American Medical Association, Lafayette, 

IN ........................................................................................................................... 71

APPENDIX 

Statement submitted by America’s Health Insurance Plans ............................... 91

Letter and facts submitted by The Coalition for Affordable Health Coverage ... 98

(III) 

(1)

HEALTH SAVINGS ACCOUNTS AND THE NEW 

MEDICARE LAW: THE FACE OF HEALTH 

CARE’S FUTURE? 

WEDNESDAY, MAY 19, 2004 

U.S. SENATE, 

SPECIAL COMMITTEE ON AGING, 

Washington, DC. 

The committee met, pursuant to notice, at 2:34 p.m., in room 

SD–628, Dirksen Senate Office Building, Hon. Larry E. Craig 

(chairman of the committee) presiding. 

Present: Senators Craig, Breaux and Dole. 

OPENING STATEMENT OF SENATOR LARRY E. CRAIG, 

CHAIRMAN 

The CHAIRMAN. Good afternoon, everyone. The Special Committee on Aging of the U.S. Senate is convened. 

Rarely do I convene one of these hearings with such pleasure. I 

say that because last fall, as part of the comprehensive new Medicare legislation, Congress enacted into law what I believe to be one 

of the most innovative reforms to American health care in at least 

a generation. I am speaking, of course, of health savings accounts. 

Consumer choice in health care is a cause I have been working on 

nearly all of my years in the U.S. Congress, and it is deeply gratifying to see it come to fruition in such a dramatic way. 

To a greater degree than ever before, the new health savings accounts will permit individuals to build significant tax-free health 

care savings for use in meeting their family’s health care needs, including long-term care. Together with high deductible insurance for 

very high expenses, the new HSAs help put control of health care 

where it belongs, in the hands of the individual citizen. As we will 

hear this afternoon, the marketplace is greeting the new health 

savings accounts with substantial enthusiasm. Sales of individual 

and small group health savings accounts has been quite brisk, with 

some companies reporting sales of more than 1,000 health savings 

accounts in the first week of offering alone, and that is not even 

counting roll-out of health savings accounts in the ever bigger large 

group markets, which is expected to get under way this summer. 

Meanwhile, nearly three-quarters of the employers now say they 

are likely to offer HSAs for their employees by 2006. 

In the midst of all of this, the Department of the Treasury, led 

by Secretary John Snow, has been moving aggressively to smooth 

the way toward full health savings account implementation as soon 

as possible. The Secretary, who we are honored to have with us 

2

today, deserves great credit for wielding his regulatory authority 

with such speed and effectiveness. Health savings accounts offer a 

meaningful opportunity to give greater control of health care to 

consumers themselves and to begin to move away from the increasingly bureaucratic nature of health care today. 

Putting people in charge of their own money and their own 

health care promises to realign incentives to better promote both 

cost savings and quality. The arrival of health savings accounts 

also offers needed relief to struggling small employers. Many such 

employers today face the agonizing choice of paying for traditional 

insurance they can no longer afford, and dropping health care coverage altogether. HSAs offer a promising lifeline to these companies and their workers. 

Finally, HSAs, in my opinion, hold special advantages for older 

workers and retirees, many of whom face growing health care coverage needs as they approach Medicare age. For example, the HSA 

law especially permits older workers above 55 to make supplemental catch-up contributions into their HSAs as they approach retirement. Health savings accounts have real promise as a tool to 

transform the way America relates to health care. Much work lies 

ahead, but I believe we are off to a very good start, and I look forward to the testimony of our panelists this afternoon. 

Before we move to their testimony and the testimony of Secretary Snow, let me turn to the ranking member of this committee, 

Senator John Breaux of Louisiana. John. 

STATEMENT OF SENATOR JOHN BREAUX, RANKING MEMBER 

Senator BREAUX. Thank you very much, Mr. Chairman. 

I thank Secretary Snow, who I have a great deal of admiration 

for, a good personal friend of long standing, and always enjoy his 

presence before our committee, does a great job as our Secretary 

of the Treasury. 

But on the issue before the panel this afternoon, Mr. Chairman, 

health savings accounts, as they are currently designed, are a terrible idea, whose time has not yet come, and I doubt whether the 

time will ever come with anybody’s life expectancy in this room 

that it will somehow become a good idea. That is a very strong 

statement. I opposed it when they did it in the Medicare bill because it does not have anything to do with Medicare. But I oppose 

it today for two principal reasons: 

First, it is totally unprecedented tax policy, folks. If you are looking at 401(k)s or Roth IRAs, we always had a concept in this country that if you are going to have a savings account you can either 

have it with the contribution to that account deductible up front, 

and you pay for the buildup when you take it out, or vice versa. 

This is unprecedented policy that says you are going to be able to 

deduct it when you put it in and you are going to be able to not 

have to count as income, the buildup, when you take it out. We 

have never done that before in any permanent tax savings policy 

that we have ever had in this country. It is unprecedented. Second, 

they say, ‘‘Well, it is going to be important because if you use it 

for health care you should not have to pay for the buildup or you 

should be able to deduct a contribution.’’

3

But the type of health policy that it is being used for, Mr. Chairman, is not good public policy, because it is good if you are young, 

and it is good if you are not going to be sick. But if you are old 

and happen to be sick every now and then, it is bad policy. The 

reason I say that I think is quite simple, because the policy, the 

law says that you have to buy a high-deductible policy. What person that is old and sick and not wealthy is going to buy a high deductible policy? No. 1, they cannot afford a $2,000 deductible. That 

is why they are trying to buy insurance. No. 2, they cannot afford 

to pay for the cost if they are poor. 

So I do not want to belabor the point. Obviously, my position is 

very clear. I think it is terrible tax policy and I think it is even 

worse health policy. Other than that, I love John Snow. [Laughter.] 

The CHAIRMAN. John Breaux and I will not debate the issue here 

today, but I do believe the American people will prove him wrong. 

With that, let me turn to Senator Dole. 

STATEMENT OF SENATOR ELIZABETH DOLE 

Senator DOLE. Thank you, Mr. Chairman, for providing a forum 

where we can appropriately discuss the future of our Nation’s 

health care system. 

To all of our witnesses today, thank you very much for coming. 

I realize you made a sacrifice in your busy schedules to be a part 

of this afternoon’s hearing, and your efforts are indeed appreciated. 

I want to offer a special thanks to Secretary Snow, who is also 

my good friend and with whom I have worked on many transportation issues in the past in my years at the Department of Transportation. Thank you for giving us the benefit of your insight today 

of the most cost effective measures to apply to our health care system. 

Sorry, Senator Breaux, another friend of long standing, but I 

have to disagree with you. There is no question that the Medicare 

Bill passed by Congress last year created an important new vehicle 

to help consumers and businesses obtain some relief from soaring 

health insurance costs. 

Millions of Americans, including those who are not even considered seniors, will get help with their out-of-pocket medical expenses 

through health savings accounts. The benefits of such savings are 

far reaching indeed. Businesses and individuals who take advantage of these accounts will save substantial amounts on health insurance premiums. Additionally, they will have more control over 

health care expenditures. These tax-free and convenient accounts 

will help families pay their medical expenses. They also serve a 

proactive purpose in that families will have the ability to save for 

future health care needs. This opportunity to spend less on premiums and save money for the future will greatly aid lower-income 

individuals and families. Employees and employers can contribute 

to the HSA, and those funds may be invested in certificates of deposit, money market mutual funds, and other investment vehicles. 

The bottom line is that HSAs will improve health care access for 

all Americans. Americans will be able to better control their health 

care choices and protect themselves from devastating health care 

costs. 

4

I believe the future of health care looks much stronger thanks to 

health savings accounts and what they can mean to millions of 

Americans needing medical care. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator, thank you very much. 

Let us turn to our first panelist, Secretary of the Treasury, John 

Snow. Secretary Snow is a former long-serving chairman and CEO 

of CSX Corporation, as well as a former administrator of the National Highway Traffic Safety Administration. He brings a wealth 

of experience both in and out of government, and the country is fortunate to have him serving in this post at this time. 

The Treasury Department is charged with the important task of 

implementing the new health savings account law, and by all accounts, it is handling that task with considerable skill and responsiveness. 

Mr. Secretary, we are pleased you are before the committee this 

afternoon. Please proceed. 

STATEMENT OF HON. JOHN W. SNOW, SECRETARY, U.S. 

DEPARTMENT OF THE TREASURY, WASHINGTON, DC 

Secretary SNOW. Mr. Chairman, thank you very much. Senator 

Breaux, Senator Dole, it is a great pleasure to be here with you to 

talk about this important new idea in the world of health care. 

It is a bold new concept and an awfully important one because 

it is one of the best single ideas I have seen to deal with one of 

the most pressing issues America faces, and that is rising health 

care costs. 

I take a particular interest in that subject as Treasury Secretary, 

because if you look at the budget of the United States what is driving the out-year fiscal situation that the United States will confront is health care costs. There are few things more important for 

our fiscal future and for the financial soundness of this country in 

the years ahead. There are a few things as important, maybe nothing as important, as getting our arms around rising health care 

costs. If we can slow the growth of health care costs from the projected levels of GDP plus 1 percent or GDP plus 2 percent for Medicare, and bring it down by 1 percentage point to GDP level or GDP 

plus 1, we have an extraordinarily much more benign fiscal future 

for this country. So we are here dealing with one of the drivers of 

the financial condition of the country, and probably nothing is more 

important than this. 

Then the question is, how do the HSAs relate to driving down 

health care costs? As you think about that, it is important to have 

in mind the American consumer. The American consumer shops. 

The American consumer knows a bargain. The American consumer 

weighs alternatives. They go on the Internet. They talk to their 

neighbors. They carefully consider quality and price in the tradeoffs between higher prices and whether you are getting your money’s worth. We are good shoppers. We are good shoppers in virtually everything we buy in this country except one thing, health 

care. 

Why are we not good shoppers for health care? Because the consumer is not empowered. Somebody else is making those decisions 

for the consumer, and the consumer does not see how their own 

5

money is at stake in the decisions they make. It is no mystery, in 

a situation where consumers are not making tradeoffs, that costs 

rise. There is no mystery why additional tests are accepted without 

question when the consumer does not perceive any cost to him of 

those tests, and when the decisions about those extra tests and 

extra procedures are being dictated by somebody else. 

I think HSAs are a breakthrough idea because it will empower 

the American health care recipient to make choices, and to shop 

and search and look for better options, and will give them the ability to do so with those funds that accumulate in the HSA account. 

The HSA account is tax advantaged. That is the point of it. The 

whole point is to create in effect a super-charged IRA for health 

care, tied to a high deductible. Why do you want a high deductible? 

I think you know why you want a high deductible. You want a high 

deductible so that people get a lower premium for their insurance. 

More people can afford high deductible insurance than insurance 

that is not high deductible, so you encourage more people to get 

into the use of these beneficial insurance plans. But when you 

think about insurance, your house insurance does not include the 

coverage of, say, a washer going out on the sink. It covers the catastrophic expense. It covers the heavy cost. Your auto insurance 

does not cover the muffler going out. It covers significant incident 

to the automobile itself. It seems to me we need to be moving 

health care in that same direction so that consumers are empowered, they get lower cost and real insurance, and they are empowered to make decisions. The result of all that, I am confident, will 

be broader health care coverage and lower long-term health costs. 

I thank you very much. 

The CHAIRMAN. Mr. Secretary, thank you. There is no question 

that what we are doing is innovative. It is different, and obviously, 

my friend and colleague Senator Breaux is reacting to that, probably because it is new and yet to be determined. At the same time, 

it appears that the market is ripe for this. So let me ask a couple 

of questions of you in light of what some of the critics are saying. 

Critics of HSAs are fond of predicting that they might promote 

adverse selection, for example, by attracting predominantly 

healthier and wealthier enrollees. Yet the actual claims based data 

that is available suggests really quite the opposite, namely, that 

consumer choice approaches, like HSAs, actually show virtually no 

evidence of adverse selection. What is the Treasury’s assessment of 

this issue? 

Secretary SNOW. Mr. Chairman, we have looked at that contention that the HSAs would lead to adverse selection, and have found 

no evidence to suggest that that is the case or would be the case. 

The Federal Employees Health Benefit Program (FEHBP) has 

available to it, as you know, a high deductible plan. A High deductible plan option has been made available. This is a test case of 

whether or not adverse selection would occur, and whether just the 

young and the healthy would opt for it. That has not been the case 

in the FEHBP. 

I think the HSA with the high deductible is a new option that 

will be used by people in all income classes, and people of diverse 

health status. 

6

The CHAIRMAN. Many say that HSAs offer a real lifeline to employers struggling to continue providing insurance to their employees, as well as to the currently uninsured who are looking for affordable coverage. What do you believe will be the effect of the new 

HSAs on both the employer health market and on the number of 

the uninsured that many of us are concerned about in our States? 

Secretary SNOW. I think it is going to reduce the number of uninsured, and I think it will help small business employers continue 

coverage or extend coverage. When the President was out in Minnesota a month or so again on the HSAs, he met with Dan 

Schmidt, who is owner of the Mercury office Supply Company in 

Minnesota, a company that had 12 or 13 employees. It is a small 

office supply retailer. Their premiums in 2004 were due to increase 

to $36,000. Mr. Schmidt became aware of the opportunities for the 

HSAs, and he looked into it. He was confronted with the possibility, the real possibility of dropping his health care coverage because he could not afford the $36,000. By opting for the HSA—and 

this is a real life story—the premiums came down to $24,000. He 

saved that roughly $12,000, and he used it to fund the employees’

HSA with a no co-pay plan. So there is a real life story of how 

HSAs coupled with the high deductibles can help a small business 

person reduce the cost of health care and take the savings on the 

premiums and fund the HSA accounts themselves. I think that is 

a story that we are going to see told over and over and over again 

in the months ahead. 

The CHAIRMAN. I thank you. 

Let me turn to my colleague, John Breaux. John. 

Senator BREAUX. Thank you, Mr. Chairman. 

Thank you, Mr. Secretary, for being with us. 

I agree with the first part of your statement that it is a bold and 

new idea. I would just add that it is a bold, new and bad idea. If 

you are healthy and you are wealthy, it is a great idea, but if you 

are low income and likely to get sick, for anyone to say, I am going 

to go out and buy a $2,000 deductible policy is not a good idea. It 

may be new, but it is not good. 

My point is, you talked about good shoppers, Mr. Secretary. If 

this is such a good deal from a shopper’s perspective, why is it necessary for us to spend $16 billion of tax dollars, which is what the 

Treasury Department says it is going to cost the Government to institute HSAs? If it is such a good idea, why do people not just go 

out and buy it? Why do we have to subsidize it to the tune of $16 

billion to make it such a good idea to probably get people to buy 

it? 

Secretary SNOW. In order to encourage people to have these accounts, and the accounts then buildup and become the vehicle for 

people making their own health care choices, and——

Senator BREAUX. I agree with that. But why do we have to spend 

$16 billion to encourage it if it is already a good idea? Will it not 

fly on its own, that we have to spend $16 billion subsidizing it? 

Secretary SNOW. Senator, we want to encourage——

Senator BREAUX. That is a lot of encouragement. 

Secretary SNOW [continuing]. This sort of behavior. But the other 

end of that encouragement is the potential to sharply reduce longVerDate 0ct 09 2002 13:55 Sep 21, 2004 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\94992.TXT SAGING1 PsN: JOYCE
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term health care costs which is a multiple of whatever the tax cost 

would be I would submit. 

Senator BREAUX. You pointed out that a high deductible—like if 

I am young, if I am my son, who is very healthy and very young, 

and making a very good income, more than his dad, I mean this 

is a great idea. I am going to take a high deductible because I have 

not been to the doctor, I do not get sick, and boy, I am going to 

save a lot of money and it is a great idea. But if I have a low income and I am a poor person who has chronic illnesses, this would 

be a very terrible idea, and it seems to me that given the choice, 

if you take young people who are not sick, and they all run to the 

HSAs, and they leave comprehensive regular insurance, who is 

left? People who are going to be left under the comprehensive policy are going to be people that are older with chronic conditions 

and who are low income, who cannot afford high deductible policies. That is where the adverse risk is, that is the history of insurance, and that is how adverse risk selection occurs. 

I just cannot—you talk about, well, the high deductible is normal 

because home policies does not cover washing machines and mufflers. But you can live without a muffler, and you can live without 

a washing machine, but you cannot live without health care, and 

that is what we are talking about. That is why it is such a bad 

idea. You can comment on that. 

Secretary SNOW. Senator, we believe there will be more people 

covered, more people covered, not fewer, with health insurance as 

a result of the HSA being in place, and there will be many Dan 

Schmidts of the world, who are small owners and managers of 

small businesses, who will be able to sustain health care insurance 

for their employees, or expand it, because of the savings that are 

implicit here in their being able to move to the high deductible 

plans, take the savings and put them in to the fund the HSAs. 

Senator BREAUX. It is all right if Ann Smith wants to do it on 

her own, but is it such a bad idea that we have to subsidize it with 

$16 billion to get Ann Smith to do it? I mean if it is that good of 

an idea, the Ann Smiths of the world ought to do it on their own. 

You talk about studies from Treasury. There are studies from the 

RAND Corporation, the Urban Institute, the American Academy of 

Actuaries, that found that premiums for comprehensive insurance 

could more than double, could more than double if the whole concept that we are talking about here becomes widespread and everybody flocks to these new type of policies. That is my concern. 

Secretary SNOW. Senator, let me just conclude here where I 

started, and that is an issue you know well, better than I, better 

than most people, and that is the critical need to find some way 

to deal with this huge fiscal obligation in the years ahead that 

grow out of the unfunded promises of which the biggest is health 

care. If we are going to keep our commitments, and if we are going 

to do it in a way that is fiscally sound, we have to find ways to 

lower the growth rate of health care cost. 

This is a proposal that many experts feel will help achieve that 

objective. 

Senator BREAUX. I would just argue that this has absolutely 

nothing to do with slowing the cost of health care. It just moves 

a lot of healthier and wealthier people into one type of insurance. 

8

It would not be a bad idea if we make that available to them, 

which it already is available, but that the Government does not 

have to subsidize it. 

You are doing a fine job with a bad idea. 

Thank you. 

Secretary SNOW. Thank you, Senator. 

The CHAIRMAN. Obviously, the other point of view has been clearly heard, and John is well spoken on this issue. I would comment 

that it is interesting that we make the assumption that—and John 

used the example of his son. I have a son also who is struggling 

at this moment with his wife to have adequate health care coverage. One of their employers just changed their policy because of 

the cost, and costed them out of the market and so one of them got 

dropped from that policy, and they are in the market now searching for something they can afford. 

They are both working. They both have excellent jobs. But their 

employer tipped them upside down on insurance because the employer can no longer afford to offer what they had been offering. 

Whether HSAs will be an option for them or not, it certainly is an 

opportunity, and I have walked them through it as an example. 

Once these vehicles become available, they are going to take a look 

at it, see whether it fits them or not. 

Let me ask you this, John. Although it is not a focus of today’s 

hearing and it is a separate issue from an HSA in general, I am 

interested in the administration’s current proposal to go a step further to create tax deductibility for premiums, the premiums consumers pay on high deductible plans purchase in conjunction with 

an HSA. In what way do you believe this proposal will benefit 

health care consumers and improve health care access? 

Secretary SNOW. Anything that encourages the use of the high 

deductible health plans is a move in the right direction. A larger 

market, an expanded market for high deductible health plans will 

bring more people under health care coverage, under insurance coverage, and it will create the right incentives for people to think 

hard about the choices they confront in purchasing health care 

services. 

What we really need to do I think here, Senator, Mr. Chairman, 

is to empower the American health care recipients to be good consumers, and the more we do that, I am confident we will see the 

health care system responding with higher quality and lower cost, 

and that is the objective. They get better quality and lower cost, 

a more efficient health care delivery system, and I think it is perfectly appropriate, in fact, it is something to be encouraged here, 

and that is precisely what the deductibility provision that the 

President sent to the Congress in this year’s budget would do. It 

would lower the cost by having an above-the-line deduction on the 

premium for the high deductible health plan which is something 

very much to be encouraged. 

The CHAIRMAN. Mr. Secretary, again, we thank you very much 

for your presence here today and the work that is going on in 

Treasury right now to move this concept to the marketplace, and 

then both John and I will watch it I am sure very, very closely over 

the coming months and years to see where it takes us in health 

care, and whether it offers what some of us believe it can. 

9

Again we thank you. 

Secretary SNOW. Thank you very much. 

[The prepared statement of Secretary Snow follows:]


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The CHAIRMAN. Let me invite our second panel to the table. I 

think this group will represent a range of different perspectives 

and constituencies on health care savings accounts. 

Our first witness on the second panel today will be John Goodman, president of the National Center for Policy Analysis. Perhaps 

more than any other individual, Dr. Goodman has devoted much of 

his professional life to pursuing consumer choice in health care. I 

think it is no surprise that many have called him the father of 

medical savings accounts. We are pleased you are able to be with 

us today. 

Our second panelist is Ron Williams, the president of Aetna. 

Aetna has been a market leader in consumer-directed health care, 

both as an insurer offering consumer choice products and as an employer offering such products to its own employees. 

Next we have Kate Sullivan, executive director of Health Policy 

at the U.S. Chamber of Commerce. She is a recognized expert on 

consumer choice on health care and has been among the leaders 

guiding the Chamber’s strong support for health savings accounts. 

Next we have Edward Langston he is a trustee of the American 

Medical Association with a longstanding service to that organization, and is also a practicing family physician in Lafayette, IN. 

Robert Greenstein is the founder and executive director of the 

Center on Budget and Policy Priorities. He has been invited today 

at the invitation of our Minority, and will bring I think a critical 

voice to the health savings account issue. 

We are pleased all of you can be with us today. Dr. Goodman, 

we will start with you. 

STATEMENT OF JOHN C. GOODMAN, PH.D., PRESIDENT, 

NATIONAL CENTER FOR POLICY ANALYSIS, DALLAS, TX 

Mr. GOODMAN. Thank you, Mr. Chairman, Senator Breaux. 

Prior to this year the tax law generously subsidized employer 

payments for third-party health insurance, but it severely penalized any type of self insurance so that individuals could pay their 

own medical bills from a savings account. Every dollar of premiums 

that an employer paid to, say, Blue Cross/Blue Shield, avoided income and payroll taxes, and for a middle income family, that 

means the Government was effectively paying for half the cost of 

the insurance. Yet if the employer tried to take that same dollar 

and put it in a savings account so that the employee could pay his 

medical bills directly, the Government taxed the dollar before it got 

into the account. For a middle income employee, this means the 

Government was taking half the money before it went into the account. This is exactly what happened to us at the National Center 

for Policy Analysis. 

In effect, what the tax law was doing was encouraging us to give 

all our health care dollars to a third-party payer and let that thirdparty payer determine how the money is spent, instead of allowing 

patients and their doctors to make these decisions. 

The new law, and I think this is the answer to Senator Breaux’s 

question, the new law creates a level playing field, treating thirdparty health insurance and self insurance in exactly the same way. 

I will say parenthetically that this is not the only way to do it. I 

have proposed other ways of doing it. But what is important is that 

13

however we treat third-party insurance we need to treat self insurance exactly the same way. The new law will allow individuals to 

manage some of their own health care dollars in accounts that they 

own and control, and decisions about which bills are going to be 

paid indirectly by patients and which bills would be paid by insurers will be determined by individual choice in the marketplace, and 

not by the tax writing committees of the Congress. 

This new opportunity will revolutionize the medical marketplace 

in my opinion. We are about to unleash a vast army of people who 

understand or will understand that when they spend a dollar in 

the medical marketplace, it is their dollar and not someone else’s 

dollar. These are people who when they spend a dollar are going 

to insist on a dollar’s worth of value. We are about to have millions 

of savvy consumers who fully understand that when they spend a 

dollar on health care, that is a dollar not available for something 

else, and who, acting in their own interest, will make their own 

choices between health care and other uses of money. 

We are about to give thousands of doctors the freedom to act as 

agents of their patients, rather than acting as agents for thirdparty payers. We are about to create opportunities for thousands 

of entrepreneurs who will discover myriad ways to profit by delivering health care more efficiently. We are about to take a very 

small step in the direction of a very important social goal, and that 

is making employee benefits personal and affordable. 

The critics of all of this have been remarkably consistent over the 

past 15 years. Many of them quote each other. They cite each 

other. They repeat each other as though they were in some sort of 

echo chamber. Many of the critics are good honest people who I 

have talked to, but nonetheless admit that they have never had a 

health savings account of their own, they have never seen one, they 

do not know anyone who has one. If you scan the footnotes of Mr. 

Greenstein’s testimony today what you will find are a lot of references to simulation and speculation, but there is not one reference to a study of the behavior of real people. It turns out that 

such studies really do exist and more information is becoming 

available every day. 

We now have a decade of experience with medical savings accounts in South Africa, where two-thirds of the people with private 

health insurance there now have medical savings account plans. 

We have 7 years of experience with the medical savings account 

pilot program in this country, and we have 2 years of experience 

where the health reimbursement arrangements are HRAs. What is 

evident from all of this experience is that the evidence is strong 

and consistent and coming from many different sources. 

First, savings accounts change behavior. When it is their own 

money, people see physicians less often, they buy fewer drugs, they 

substitute generics for brand names. They save money. Second, 

they manage to do it in a way that is not harmful to their health. 

Third, the health savings accounts, contrary to all the claims of all 

the critics, do not just appeal to the young and the healthy and the 

rich. In fact, if anything, it tends to be slightly in the other direction—the health savings account population tends to be a little bit 

older, a little bit less healthy, a little bit less rich. Fourth, the 

health savings account holders do not skimp on preventive mediVerDate 0ct 09 2002 13:55 Sep 21, 2004 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 C:\DOCS\94992.TXT SAGING1 PsN: JOYCE
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cine. In fact, under some of the most popular plans in the United 

States and in South Africa, people tend to get a little bit more preventive medicine when they are managing their own money than 

when they are in a conventional plan. 

Finally, I do not know of any evidence of employers using the 

medical savings account or health savings account opportunity to 

cut back on benefits. To the contrary, these plans are proving to 

be uniformly popular with employees. When employers have asked 

employees to vote on this, they uniformly, by a large majority, say 

that they want to keep their health savings account plan. They do 

not want to go back to some conventional plan. 

I will conclude, Mr. Chairman. The idea is, good for the pocket, 

good for our health, and good for the country. 

[The prepared statement of Mr. Goodman follows:]

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The CHAIRMAN. Thank you very much, Dr. Goodman. 

Let me turn to Ron Williams, who is the president of Aetna. Welcome to the committee, Ron. 

STATEMENT OF RONALD A. WILLIAMS, PRESIDENT, AETNA, 

HARTFORD, CT 

Mr. WILLIAMS. Thank you, Chairman Craig and Senator Breaux. 

I am here to discuss Aetna’s experience with consumer-directed 

health plans, including health reimbursement accounts and health 

savings accounts. 

Aetna is one of the largest health insurers. We insure 13 million 

members, and we serve the very largest employers in America, as 

well as some of the smallest employers in America. We provide 

fully insured coverage and self insured. We provide coverage one 

million employer sponsored retirees and participate in the Medicare Advantage Program, serving over 100,000 retirees. 

There are three major points I would like to make today. The 

first is that HRAs and HSAs are getting a very positive response 

from the marketplace. The second is Aetna has been committed to 

studying the impact on the consumer, and the data that we are 

seeing suggest that we are able to lower costs without compromising quality. The third point I will make will be some recommendations on the basis of feedback we are receiving from the 

marketplace. 

This is a category that Aetna made a commitment to in July 

2001 to launch health reimbursement accounts on the basis of 

early interpretations of Treasury Department guidance. I would 

say this is a product I have had personal experience with since I 

and my family have been enrolled in this plan since January 2002. 

It is something that Aetna has been deeply committed to and we 

have expanded our family of products, including stand-alone dental 

funds, pharmacy funds, and permitting consumers to take long 

term premium reimbursement as part of their health reimbursement account. 

A few days ago we announced a new retiree reimbursement accounts designed to help employers contribute to employee accounts 

for qualified health expenses. The reason that we have committed 

to this is really listening to the voice of the market. When we have 

talked to employers, the cost of health care is something that they 

are very concerned about, and also as we talk to consumers, they 

have a strong desire to exercise much greater control over the 

health decisions and benefit dollars. Consumers want information 

on quality and cost. They want Web-based tools, and also they are 

interested in better understanding the value that their employers 

are providing in the form of health care. We believe the consumerdirected health plans encourage consumerism, and the market response reflects this. 

Since September 2001 when we began to discuss our product, we 

have sold this product to over 190 employers, representing 180,000 

members. Aetna’s own employees are in this product, and our enrollment grew from less than 1 percent the first year we introduced 

it to over 75 percent 2 years later. We see employer adoption and 

early quote activity for the newly approved health savings accounts 

unfolding at a very rapid pace. 

28

Since January 1, 2004, with the health savings account being approved, we have talked to more than 600 brokers and over 86 of 

our largest plan sponsor clients. So far we have actually sold 130 

small employers into high deductible health plans that support 

HRAs, and we actually have sold four mid to large employers in 

HSAs, with one employer going so far as to reopen their open enrollment period to give the employees the option of participating in 

the health savings account. 

We have conducted a study of 14,000 members on the basis of 

9 months of data. This data is preliminary and we will be updating 

it shortly. We found that on the basis of looking at these 14,000 

members in comparison to a matched cohort, who had been fully 

enrolled with Aetna for over 2 years, we saw a 1.5 percent increase 

in medical claims costs compared to double digit increases in a 

comparable population. 

We had one employer who had an integrated Rx deductible and 

saw a significant decrease in Rx claim costs and increases in generic utilization. We also saw preventive visits increased. The age, 

the salary and the family status of people enrolled in the health 

reimbursement account was similar to the general population. We 

saw an increase in Web tools. Consumers were twice as likely, 9 

out of 10 enrollees were satisfied or very satisfied with the product, 

and more satisfied based on the length of enrollment, and more 

than 50 percent carried balances forward. 

Consumerism has had a very positive impact on health status 

and quality. All of the consumer-directed plans at Aetna sales provide first dollar coverage for routine physicals, well-baby visits, annual gynecological exams, and immunizations. We also provide 

health risk assessments to help the consumer be more aware. 

In conclusion, Mr. Chairman, I believe there are important opportunities for improvement, and these would come in the areas of 

permitting consumers to make additional contributions for catchup. The average retiree is likely to have to spend $80,000 in excess 

of health care costs that Medicare would cover, and therefore the 

ability for catch-up would be important. We believe that increasing 

that amount that can be contributed at an earlier age would help, 

that pre-retirees would also be encouraged and permitted to participate to the extent that they continue working in the workforce 

and may still be eligible for Medicare. We believe that encouraging 

the Medicare program to look at consumer-driven health care arrangements would also be something we would be very interested 

in participating in. 

Thank you for the opportunity to share our point of view. 

[The prepared statement of Mr. Williams follows:]

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The CHAIRMAN. Mr. Williams, thank you very much. 

Now let us turn to Robert Greenstein, as I said earlier, founder 

and executive director of the Center on Budget and Policy Priorities. Mr. Greenstein, welcome to the committee. 

STATEMENT OF ROBERT GREENSTEIN, EXECUTIVE 

DIRECTOR, CENTER ON BUDGET AND POLICY PRIORITIES, 

WASHINGTON, DC 

Mr. GREENSTEIN. Thank you, Mr. Chairman. 

Today most employer based coverage is not high deductible coverage. In 2003 the average in-network deductible for employer 

based PPO plans was $275 per individual. But with the advent of 

HSAs, this is very likely to change. 

Workers in excellent health who do not expect to have high 

health care costs are likely to find HSAs very attractive, and this 

is particularly true of healthier workers who are affluent, since the 

value of the HSA tax breaks is worth the most to people in the 

highest tax brackets. Indeed, the HSA tax breaks have no income 

limit and therefore actually provide a way around the income limits that now apply to IRAs. Indeed, the tax shelter benefits are unprecedented anywhere in the tax code. Nowhere else in the tax 

code do you get a tax deduction for a deposit in an account, and 

then be able to make tax-free withdrawals from the same account. 

But for less healthy individuals the story is quite different. If you 

are less healthy and you have lower moderate income, you often 

would be unable to afford the greater out-of-pocket costs associated 

with the high deductible plans. You would get little or no benefit 

from the tax breaks with HSAs because you are in a lower tax 

bracket, and you often would lack the resources or the income to 

make substantial contributions to the HSAs in the first place. 

So the problem is one of adverse selection. The problem is that 

if healthy, affluent workers move to high deductible plans with 

HSAs and in substantial numbers, then less healthy, lower-income 

workers who want to remain in the comprehensive coverage are 

necessarily going to face rising premiums. As Senator Breaux rightly noted, three major studies from very distinguished institutions 

in the 1990’s concluded that with these kinds of accounts, the risks 

of adverse selection were very high, and that if use of these accounts became widespread that premiums could more than double. 

Now, some, such as Mr. Goodman, say these concerns are unfounded and that evidence shows that, but the evidence does not 

show that at all. He cited health reimbursement accounts that 

some employers have set up in the last few years. Those experiences are not directly applicable to HSAs because HRAs are fundamentally different than HSAs. Under the HRAs there were no 

tax deductible employee contributions allowed and no withdrawal 

for non-health expenses in retirement allowed. Take away those 

features and the calculus changes. 

Similarly, the South Africa experience is wholly inapplicable for 

three reasons that I do not have time to go into in my 5 minutes 

now, but I will happy to discuss in the questions and answers. 

The only real significant evidence we have from the MSA demonstration project is a GAO survey that found some evidence that 

adverse selection was occurring. 

42

The concern too is that if employers begin to offer both comprehensive and HSA type high deductible plans and the healthier 

workers move into the high deductible plans, the premiums could 

rise so high for the more traditional comprehensive low deductible 

plans, that employers stop offering them. The Commonwealth Fund 

Study found that individuals aged 50 to 64 who purchased high deductible policies in the individual market similar to the plans required under HSAs were twice as likely as comparable individuals 

with low deductible employer based coverage to fail to see a doctor 

when a medical problem develops or to skip medical tests or followup treatment. 

As Linda Blumberg of the Urban Institute recently warned, 

quote, ‘‘The practical effect of HSAs is that the most vulnerable 

populations are left bearing a greater burden of their health expenses.’’ I would also like to comment for a minute on the proposal 

Secretary Snow talked about to add on top of the unprecedented 

tax breaks that already accompany HSAs, an additional deduction 

for the purchase of high deductible insurance in the individual 

market by people who have HSAs. Senator Breaux referred to a 

cost of $16 billion. That is just for the HSA provisions in the Medicare law. Both Joint Tax Committee and the administration say 

the new deduction would cost $25 billion over 10 years, bringing 

the total cost to $41 billion over 10 years. That is nearly six times 

the $6.4 billion official cost estimate you operated under for the 

HSA provisions of the Medicare Drug Bill at the time that the legislation was enacted last fall. 

Making matters worse, one of the Nation’s leading health care 

economists, Jonathan Gruber of MIT, recently analyzed the administration’s deduction proposal and concluded that it would likely 

cause the ranks of the uninsured to increase by 350,000. Why 

would it cause the ranks of the uninsured to increase? Because the 

deduction would be of greatest benefit to high income taxpayers in 

the top brackets, and most of them are already insured. For people 

who do not earn enough to pay income tax or are in the 10 or 15 

percent brackets, the deduction does not provide enough of a subsidy to make insurance affordable. Ninety percent of the uninsured 

are in the 0, 10 percent or 15 percent brackets. 

At the same token, for an employer who is able to now say, look, 

my employees can go into the individual market, they can buy a 

high deductible plan and get a deduction for that, they can put 

money in an HSA and get a deduction for that, the likelihood is 

that some employers on the margin do not offer employer based 

coverage. Gruber’s estimate is that the number of new people who 

would become insured as a result of the deduction, as Secretary 

Snow said, would be more than outweighed by the number who 

would lose coverage due to employer dropping. We would spend $25 

billion and increase the ranks of the uninsured. 

The final point I would like to make is about the claim that 

HSAs would substantially lower health care costs. I think this 

claim is significantly overblown. A recent article by Henry Aaron 

of Brookings notes that most medical spending occurs during high 

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yond those limits, there is no greater constraint or incentive under 

these approaches. 

Linda Blumberg of Urban Institute made the same point. She 

said because the vast majority of medical spending is attributable 

to a small share of individuals with very high medical expenses, 

the vast majority of medical spending will still occur with the higher deductibles. 

There are two studies I am aware of here. In a RAND study, 

RAND projected—obviously it is not based on actual data because 

we do not have actual data with widespread use of HSAs yet, but 

RAND projected that under HSAs health spending would decline at 

most by 2 percent. A separate Urban Institute study projected that 

if the entire employer based system were switched to these kinds 

of accounts, there would be one-time savings only in the vicinity of 

4 to 6 percent. To me that is not enough to justify $41 billion in 

expenditure and the adverse selection that would result with significant injury to sicker and poorer workers. 

Thank you. 

[The prepared statement of Mr. Greenstein follows:]

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The CHAIRMAN. Thank you very much, Mr. Greenstein. 

Now let me turn to Kate Sullivan, who is the executive director 

for Health Policy at the U.S. Chamber of Commerce. Welcome. 

STATEMENT OF KATE SULLIVAN, EXECUTIVE DIRECTOR, 

HEALTH CARE POLICY, U.S. CHAMBER OF COMMERCE, 

WASHINGTON, DC 

Ms. SULLIVAN. Thank you, Mr. Chairman, Senator Breaux, for 

the opportunity to testify at today’s hearing. 

Enactment last year of HSAs came at a very critical time for our 

Nation’s employers, working families, and those who buy their own 

health coverage. They all have been facing enormous challenges 

finding those affordable plans. Along with injecting new and much 

needed competition for employers’ premium dollars, HSA’s offer a 

number of advantages for employees. Of primary benefit the account is held by the taxpayer rather than the employer as some of 

the other consumer-directed plans require. Employers and employees may contribute to the HSA, easing concerns that younger or 

less affluent workers may have about funding their deductibles. I 

am happy to report in a moment that employers overwhelmingly 

plan to do just this, make those contributions. 

As with other compensation requirements, employer contributions must be made fairly across the employee base, and HIPAA requirements for pre-existing conditions will require that contributions not be varied based on an employee’s health status. HSAs 

have already jump started the small group insurance market for 

2004, and small businesses desperately needed this market competition for their increasingly huge premium dollar. 

The benefits planning enrollment cycle for larger employers had 

already been completed by the times HSAs were enacted last December, so 2005 is the first time that these employers can even 

think about adding this option. That cycle is now just getting under 

way, and we appreciate very much the Treasury Department’s efforts to recognize these deadlines employers have in getting a series of very important guidances out to the employee benefit planning community. 

As I have said, employers are getting ready to incorporate HSAs 

into their benefit offerings, and a recent Mercer Consulting survey 

found that 2 out of 5 employers are likely to offer this option next 

year, nearly three-quarters will at least offer this an option by 

2006. Nineteen percent of employers said that they already offer 

such a plan. They have already had a deductible of that level, predominantly very small businesses and very large entities. Because 

of the transition rules that Treasury has put in place for 2005 and 

this year, informed and motivated employees can go ahead and set 

up these HSA savings vehicles in the absence of formal sponsorship 

by their employers. 

While some employers had already adopted high deductibles in 

recent years due to these rising costs in premiums, many employers in the survey reported that they intend to contribute at least 

in part to these accounts, deflating some critics’ arguments that 

HSAs will simply shift more cost to employees. Most employers intend to adopt only the minimum $1,000 deductible. A quarter said 

they would contribute $500 to the saving accounts, 17 percent had 

58

said they would contribute 1,000 above and beyond what they already paid for the premiums, and a number are going to contribute 

the maximum $2,600, so really the employee would not even feel 

a deductible. The average contribution would be over $1,000, 

$1,089. Three out of four employers would contribute an amount 

lower than the deductible amount to make sure that there is still 

some kind of deductible consistency policy with what they are 

doing now, while another 13 percent said they would contribute 

fully to that deductible. 

We have been waiting for these guidances from Treasury, and 

the most recent guidance dealt with two important issues, how employees may continue to use their flexible spending accounts for 

things that are not covered by the health plan, which they made 

clear they can continue to do, along with existing health reimbursement arrangements so long as these do not cover the deductible. 

However, employees must budget carefully because any unspent 

money, as employees are all too familiar with, will prompt a quick 

run to the optical store to make sure you stock up on contact lenses 

for the next year. I see lots of heads nodding around the room. So 

this is something we are familiar with. We hope the Senate will follow the lead of the House last week, and allow employees to roll 

over at least $500 of these funds. 

We do have a barrier though that deals with how prescription 

drugs are treated under the deductible. The HSA law does not follow what is very well established practice in employee benefits 

management, which is to keep prescription drugs separate from 

overall medical spending. We are very concerned that after 2005, 

through which Treasury has provided transitional relief, that subjecting prescription drugs to this deductible will trigger medical 

plan spending much more quickly. That will drive up the health 

plan cost, and employers will be forced to raise that premium, and 

the deductible much higher. 

There are advantages in the law for older workers, something I 

know this committee is very concerned with, and provides an opportunity to restore retiree health benefits planning. In fact, more 

than a third of small businesses who do not now offer retiree benefits said they view HSAs as a way to help their employees with 

those very significant expenses for even after you attain Medicare 

age. 

Finally, I would just like to note that putting more in tax incentives toward individuals does not mean employers are going to drop 

coverage. There is a lot that has to happen in the individual market in order to make sure that employees have a place to go. Employers are not going to drop coverage if they do not think all of 

their employees can safely get into a plan. 

The real enemy of what is happening with these policies is cost. 

If they get too expensive and we do not bring down costs, we are 

going to have a huge problem with people having no coverage in 

this country. 

Thank you very much. 

[The prepared statement of Ms. Sullivan follows:]

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The CHAIRMAN. Kate, thank you very much. 

Now let us turn to Dr. Ed Langston, who is a trustee of the 

American Medical Association, longstanding service to the organization as a practicing family physician from Lafayette, IN. 

Dr. Langston, welcome to the committee. 

STATEMENT OF EDWARD L. LANGSTON, M.D., TRUSTEE, 

AMERICAN MEDICAL ASSOCIATION, LAFAYETTE, IN 

Dr. LANGSTON. Thank you, Mr. Chairman, Senator Breaux. It is 

a pleasure to be here. I am Dr. Edward Langston, a practicing family physician, as noted, in Lafayette, IN. On behalf of the Association’s members, thank you for the opportunity to share our views 

regarding the newly created Health Savings Accounts. 

AMA has long been a champion of this consumer-driven health 

care option because Health Savings Accounts provide, (1), greater 

patient control and choice over the use of health services; (2), incentives to utilize health care in a cost-conscious manner; (3), support for the patient-physician relationship; and (4), affordable protection against medical costs. 

The establishment of the Health Savings Accounts is just part of 

an overall trend toward consumer-directed health. Consumer-directed health care provides patients with greater control over 

health care decisionmaking. It also provides patients with a clearer 

understanding of health care costs. 

We anticipate that Health Savings Accounts will enhance the patient-physician relationship because high-deductible health insurance reduces outside interference with treatment decisions while 

providing patients and physicians an incentive to avoid wasteful 

spending. When patients spend money from their Health Savings 

Account, there is a strong incentive, to balance the costs of medical 

procedures and care against the potential favorable impact on their 

health. This is true both for patients and for physicians. 

These cost incentives reduce the need for managed care rules 

that limit availability of care. This provides individuals with greater flexibility in choosing the care that they require and desire, and 

we hope this will reduce managed care interference in treatment 

decisions. 

A Health Savings Account will assist the uninsured. For workers 

whose employers do not offer health insurance, a group that accounts for the majority of the uninsured, Health Savings Accounts 

are an attractive opportunity. 

Health Savings Accounts also have the potential to expand coverage by funding premium payments for the recently unemployed 

under COBRA or the individual market. 

Furthermore, due to their tax-advantaged status, Health Savings 

Accounts allow consumers to maximize their health care dollars, 

i.e., building savings for future health care needs, as we heard earlier. 

We know that high-deductible insurance has lower premiums 

than other insurance plans. Therefore, it makes health insurance 

affordable for some who previously were priced out of the market. 

Health Savings Accounts may be more affordable than conventional 

coverage for patients with higher expenses for two additional reasons. One, the out-of-pocket limit serves as a powerful protection 

72

against catastrophic expenses, and second, out-of-pocket expenses 

funded by a Health Savings Account are paid for by untaxed dollars. In fact, some patients will find a Health Savings Account less 

expensive than other health insurance plans regardless of their 

medical expenses. 

In closing, we suggest additional measures which could make 

Health Savings Accounts even more attractive. First, we urge Congress to explore allowing early retirees and the unemployed who 

are not receiving unemployment compensation to use their Health 

Savings Account funds to pay for health patient premiums without 

tax or penalty. We see this as a way to assist those in financial 

need to purchase the health insurance they do need. 

Second, we support tax-free rollovers for unspent Flexible Savings Account funds to go into the Health Savings Account, thus 

promoting more prudent health care spending by curtailing the 

‘‘use it or lose it’’ mentality which is promoted by our current laws. 

Finally, we support a new option for Health Savings Accounts 

that would allow a more flexible deductible for families, that is, 

lower per-person deductibles for individual family members. I 

would be happy to elaborate on that during the question and answers if you so choose. 

But I want to thank you for exploring the issue of consumer-driven health care and in particular Health Savings Accounts. I especially thank the committee for holding this hearing and continue 

to focus attention on the nation’s health, particularly the health of 

older and/or retired Americans. Thank you, Mr. Chairman. 

The CHAIRMAN. Doctor, thank you very much. 

[The prepared statement of Dr. Langston follows:]

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The CHAIRMAN. Obviously, one of the concerns expressed by critics of this is the concept of adverse selection and the attracting of 

only the healthier and the wealthier. Yet, the actual claims-based 

data indicates that consumer choice options like HSAs actually 

show no evidence yet of meaningful adverse selection. 

What is each of your assessments of that particular question? Of 

course, we will allow you to join in on that, Mr. Greenstein. Mr. 

Goodman? 

Mr. GOODMAN. Well, let me just briefly describe what we did for our own employees. We created a $1,500 deductible and we put 

$1,000 in a Medical Savings Account for each employee and their 

families. So the person who is healthy and never has a single medical expense at the end of the year had $1,000 in his account. Since 

this was previously taxed, they got to take the money home at 

Christmas time. So yes, the healthy person gets his $1,000. 

But the person who is really sick and has lots of medical ex- penses goes through the $1,000, pays $500 out of pocket, and then 

hits the deductible and the plan pays for everything above that. 

But before we had the Medical Savings Account plan, we had a 

conventional plan with a $500 deductible and 20 percent copayment, and when the sick person was under that plan—it was a 

woman in this case—she was out $1,500. So the sick person saved $1,000 on medical expenses because the exposure was limited 

under our plan. 

There is nothing unusual about our plan. This is the way over 

the last 7 years that most Medical Savings Account plans were 

structured. They really do benefit the high-cost employee because 

they limit out-of-pocket exposure even though they don’t buildup 

anything in the account. 

The CHAIRMAN. Mr. Williams. 

Mr. WILLIAMS. Yes. I would say that our experience is in working 

with very large employers who really often self-insure and therefore assume the insurance risks themselves, who are interested in 

having a productive and effective workforce and who see this as 

one way to get the workforce thinking about the cost of health care 

and discussing different options with their physicians for more 

cost-effective health care treatment. 

I would say our experience is that we do not see adverse selection. We think that consumers make choices for different products 

based on lots of considerations. Their health status may be one, but 

there are lots of others. We don’t see any data today that would 

suggest an adverse selection. 

We think that there is a larger percentage of health care costs 

that is discretionary than many individuals believe. This is not the 

individual who has a cardiac event or who has a significant health 

episode. We are talking about the person who has a fairly minor 

situation and can have a choice in do they go to their physician and 

get the care they need, do they go to an urgent care center and get 

the care they need, or do they go to an emergency room and get 

the care they need. In those circumstances, there are very different 

cost structures and implications for the underlying increase in 

health care costs and, therefore, for the efficiency of American business. 

The CHAIRMAN. Mr. Greenstein. 

80

Mr. GREENSTEIN. In fact, there really are virtually no claimsbased data on widespread use of something like HSAs. There are 

some limited data from HRAs. But the differences are so significant 

that I don’t think you can simply apply the HRA data. 

As I noted, because the HRAs do not allow tax-deductible deposits by the employee into them and do not provide a way to buildup 

retirement savings that can then be withdrawn in retirement for 

non-health care costs with tax advantages, the tax sheltering aspect of HRAs pale in comparison to HSAs and it is in significant 

part this very generous tax shelter and the incentive it provides for 

healthier, more affluent people to go into HSAs that drives the adverse selection concerns. 

Now, in 1996, Congress set up an MSA demonstration project 

and part of the purpose, a central part of the purpose was to determine whether there are or there are not these adverse selection aspects that result from these kinds of accounts. Unfortunately, what 

happened was that the use of MSAs was so limited under that 

demonstration that the GAO concluded that one couldn’t tell. 

The only evidence—and I will readily acknowledge this is very 

limited—the only thing we have is that under a survey of insurers 

that the GAO contracted for, the insurers said that they expected 

enrollees to be healthier and wealthier and were targeting their 

promotions accordingly. But the bottom line is, we didn’t get much 

out of—we didn’t get anything significant. 

The CHAIRMAN. Well, we did get one thing, didn’t we? 

Mr. GREENSTEIN. Let me just quickly——

The CHAIRMAN. Go ahead. 

Mr. GREENSTEIN. The bottom line is, what we really should have 

done last fall, in my view, is we should have said, ‘‘What are the 

problems with that demonstration project that led to so few people 

enrolling that we didn’t get enough observations to determine what 

effect on adverse selection these accounts would have had, and we 

should have done a demonstration project that would have had 

larger enrollment and given us the answer. Instead, we charged 

ahead and went whole hog.’’

I think it is worthy of note that while we do not have significant 

claims-based data to tell us which side of this debate is right, that 

the leading studies I am aware of, the leading projection studies I 

am aware of were run by institutions that have no ideological ax 

to grind and pretty much come down on the side that the risks of 

adverse selection are high. 

The CHAIRMAN. I was only going to make the observation that is 

not true that in that demonstration period, the largest group that 

acquired them were the uninsured? 

Mr. GREENSTEIN. We don’t even——

The CHAIRMAN. They were predominately the acquirers of Medical Savings Accounts? 

Mr. GREENSTEIN. We don’t even know that. If we look——

The CHAIRMAN. Some insurance companies tell us that. I don’t 

know whether they are accurate or not. 

Mr. GREENSTEIN. There is IRS data on this and it is inconsistent. 

In one year, if you use those data, 28 percent of the enrollees were 

previously uninsured. In another year, 40 percent. In another year, 

81

73 percent. The differences were so substantial that those data 

have to be regarded as unreliable. We really don’t know. 

The CHAIRMAN. All right. We will leave it at that and we will go 

to you, Kate, to respond to the similar question of adverse selection. 

Ms. SULLIVAN. I would just note that, I mean, already, we have 

a fifth of employers reporting that they already offer a plan that 

meets at this deductible threshold and they are not doing this as 

an HMO. It is often an HMO alternative. Perhaps if it is a small 

business, it might be the only plan they can find and afford. 

But those higher deductibles come with a much greater flexibility. You are not restricted to a particular network of physicians 

with no coverage outside, and that has a lot of appeal to employees 

who have a medical condition, perhaps a chronic condition. They 

want that flexibility without getting referrals, perhaps maintaining 

a relationship with a physician they have had for many years. So 

we know that that has a lot of appeal to people who are sick, as 

well. 

I would encourage, as we go down this road and look—here we 

are, supposing, based on one projection or another—let us look and 

see who has really been electing these plans all along. They tend 

to be high-utilizers as well as people who like the additional savings, like yes, I have to pay more out of my own pocket toward the 

deductible, but I don’t have to pay as much per paycheck to be in 

that plan to start with. 

The CHAIRMAN. Thank you. Doctor, do you wish to comment on 

this before I turn to Senator Breaux? 

Dr. LANGSTON. Just briefly, an observation, because I see patients in the office every day and my experience has been, frankly, 

that they are cost sensitive but they are also very health care sensitive and they make their choices based on their needs and the situation in which they find themselves. We have seen the data from 

the IRS and it does range from 28 percent to a high of 70 percent, 

and so we would say that is a significant amount of the uninsured 

who then did purchase some accounts with an MSA, and with this 

more favorable approach, as you know, in public policy we have 

used tax incentives to encourage people to address issues. 

Any way from a practicing physician’s perspective that we can 

engage people into our system to provide the health care they need 

and do that from a preventative perspective, we would certainly 

support. We think this is a step in the right direction and so we 

encourage that you explore this and consider the expansion of it, 

Mr. Chair. 

The CHAIRMAN. Thank you. Senator Breaux? 

Senator BREAUX. I thank all the members of the panel for being 

with us. I am not sure that it is so much consumer driven as it 

is tax driven. It seems to me, and I would like to ask anybody to 

comment on this, if it was such a great idea, why do we have to 

spend $16 billion subsidizing it? Why wouldn’t everybody just say, 

man, this is a great idea. I am going to buy a high-deductible policy. If it is that great of an idea, why can’t it just stand on its own? 

Mr. GOODMAN. Well, the answer——

82

Senator BREAUX. Suppose you don’t have a substitute for it. Are 

you telling me that it is not good enough for people to buy it because the government helps pay for it? 

Mr. GOODMAN. No. The answer is that we generously subsidize 

third-party health insurance and we penalize saving to pay medical 

bills directly. What we should have is a level playing field. Congress doesn’t have to spend a lot of money to create the level playing field, it just has to treat the third-party insurance and self-insurance the same way and—— Senator BREAUX. Sixteen billion dollars is a lot of money. What 

do you mean, we don’t have to spend a lot? We are spending $16 

billion on this. 

Mr. GOODMAN. There are other things you could have done. You 

could, for example, cap the total amount of exclusion that employees get and not spend the $16 billion. The important thing is that 

when people choose between how much to put in savings and how 

much to give to an insurer, they should make that choice on a level 

playing field. 

Senator BREAUX. OK. Well, I think it is a level playing field 

when the employers already can deduct 100 percent of the premiums they pay for their employees and employees don’t count it 

as income. That is a huge deduction already. 

Mr. GOODMAN. That is right. 

Senator BREAUX. Why do we have to increase it by $16 billion 

to encourage people to buy a policy that I think is going to result 

in some severe adverse risk selection, not according to John Breaux 

but according to the American Academy of Actuaries. These are the 

people with the green eyeshades that do this for a living. They are 

not Democrats. They are not Republicans. They are actuaries, and 

actuaries tell us that this is going to cause adverse risk selection 

because it is going to be a lot more attractive to a young healthy 

person than it is to an older person who is poor and sick. 

Mr. Williams, what is the profile of the people in your company that have bought $2,000 deductible policies? Do you have that? 

Mr. WILLIAMS. Yes. I would say, Senator, that when we look at 

the profile of individuals who have enrolled in our Health Reimbursement Accounts, which are modeled very similar to the Health 

Savings in terms of a high deductible for preventive care and then 

an out-of-pocket maximum where the underlying health plan kicks 

in, when we look at each case, the average age is approximately 

the same for those individuals who select this plan in a choicebased setting to those individuals who don’t select the plan. 

Senator BREAUX. But what is the age and health? 

Mr. WILLIAMS. It depends on the—if we are talking about a company with an average age of, say, 35 in the workforce, the age 

might be 35 in the Health Reimbursement Account and approximately 35 for the profile those companies——

Senator BREAUX. Most of these are, as you have said, are Aetna 

policies sold to large employers? 

Mr. WILLIAMS. These would be typically Aetna policies sold to 

large national account clients. 

Senator BREAUX. People who have pretty good jobs. 

Mr. WILLIAMS. People who have jobs where the average income 

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ice jobs, it may be manufacturing. They are employed in all job titles and all job families. 

Senator BREAUX. Mr. Greenstein. 

Mr. GREENSTEIN. There was a Health Affairs article a couple of 

years ago on survey results from the first employer that used this 

Aetna product and it did find that differences in earnings, higher 

earnings were a major predictor of more enrollment. Now, earnings 

tend to be higher for people who are older, although people who are 

older also tend to be in less good health. It could be that the earnings effect swamps the age effect. But there definitely was an earnings effect, at least in that study. 

The other point, though, I would make is Mr. Goodman said, ‘‘Well, you need to have a tax treatment to equalize the treatment 

of this approach with the treatment of other employer-based approaches.’’ I think that argument may well hold when applied to 

the Health Reimbursement Accounts that Aetna has established. 

But under those accounts, we didn’t go one step further and provide these big tax deductions for employee contributions and then 

allow the whole thing to be turned into a retirement tax shelter, 

getting around the IRA income limit, where you can withdraw the 

money for non-health purposes in retirement. 

So if you want to make the argument that some equalization was 

needed with the treatment of more traditional kind of insurance, 

that argument in no way means you have to go all the way to 

HSAs. I think it stops at HRAs, not HSAs, and there is a big difference. 

Senator BREAUX. I mean, I would like to have free health insurance for everybody, but obviously that is something the government 

can’t afford and taxpayers can’t afford. I am concerned that when 

you use the tax code in a way that encourages certain type of behavior that is not equal across the board, that that is not a fair use 

of the tax code, because I think this encourages certain types of activity among wealthier and healthier individuals and leaves those 

who cannot afford to pay that $1,500 or $2,000 deductible up front, 

and that is my concern. 

Mr. GREENSTEIN. I would agree, and it is the additional features 

of HSAs that both make the adverse selection risk greater and that 

added the $16 billion in costs that you referred to, which I agree 

was $16 billion in costs we did not need to incur. 

Senator BREAUX. Ms. Sullivan, I would like to ask you this question about the employers because somebody has made the point 

that, well, let us read it in the study that was before the committee 

by Mr. Gruber who said, and I would ask you to comment on it because I am just not sure where he was headed. He said that the 

proposed tax deduction would induce some currently uninsured individuals to purchase insurance, obviously, but would also encourage some employers to drop health insurance or to reduce the 

amount that they contribute toward their employees’ health insurance costs. Why? He says, because since employers would know 

that their workers could get a tax deduction if they purchase it on 

their own. 

Employers across the board are limiting health insurance. They 

are dropping it for retirees or they are greatly restricting it for retirees and many companies are having an incredibly difficult time 

84

providing it to the same degree they used to provide it to their employees. 

If I am an employer and all of a sudden I see that, look, I can 

get out of this business and employees can get a tax deduction for 

buying it on their own, why in the heck wouldn’t I answer to my 

board and do exactly that? 

Ms. SULLIVAN. Because it may not be available or may not be an 

option for every single employee to get it on their own. You would 

have to know the individual market and put out some very 

thoughtful proposals—— Senator BREAUX. These people aren’t being thrown into the individual market. They can still buy it in group purchasing agreements. 

Ms. SULLIVAN. If employers are no longer sponsoring, if they are 

getting out and saying, OK, you have to go and buy this on your 

own, I mean, you are right. I guess an employer could say, ‘‘I will 

arrange it but make zero contribution.’’ I don’t think that is something they would continue to do, particularly if it is a small employer. They don’t have time to go and keep up with this arrangement. 

Senator BREAUX. Are people—the point she is making—are they 

going to be thrown into an individual market, Mr. Williams? 

Mr. WILLIAMS. Well, I would say I am not sure—— Senator BREAUX. That is a heck of a good argument against 

HSAs if they are going to say, you are going to get a Health Savings Account but you are going to be at the mercy of the market 

in buying in the individual market, not in group purchasing arrangements? 

Mr. WILLIAMS. I think my experience, Senator, is that most employers are looking for ways to provide health insurance to maintain a healthy workforce. Whether they are a small employer or in 

the mid-size, they are looking for opportunities to try to make it 

work and—— Senator BREAUX. I understand that. Individual market or group 

purchasing? Your point was that they may be in the individual 

marketplace and be at the mercy of the marketplace. Is that right 

on HSAs? 

Ms. SULLIVAN. No. Actually, you were asking about the Gruber 

study, which is about the individual tax deduction proposal—— Senator BREAUX. The Gruber study said employers may drop it 

because employees can get a tax deduction if they buy it. 

Ms. SULLIVAN. If employers drop it, that means—if this is the 

proposal that Treasury made, to allow individuals who do buy their 

own insurance, who buy a high-deductible health plan to be able 

to deduct those premiums if they do not have employer coverage, 

the Gruber study says or makes an estimate as to how many employers would then drop their group plan. You would only get that 

tax deduction if you had an individual plan. 

We don’t believe HSAs at all are going to throw people into the 

individual insurance market. In fact, I think HSAs will help maintain employer coverage, which is for some employers barely hanging on. 

I would disagree with the Gruber analysis about what the effect 

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tives for individuals. Employers are not going to drop their coverage unless they know their employees have a place to go, and 

they know not all employees pay taxes. Some of them don’t have 

enough income. That is where you start looking at tax credits for 

that income population, to help them also be able to afford that 

coverage. 

Senator BREAUX. Thank you. My time has expired. I thank the 

panel. 

The CHAIRMAN. Thank you, John. 

I want to state an important fact for the record, because my colleague here has suggested that these kinds of tax deductions are 

extraordinary and somewhat unique. 

Senator BREAUX. Unprecedented. 

The CHAIRMAN. Well, let me then suggest this. The Joint Tax 

Committee on Taxation estimates that in fiscal year 2003, the Federal revenue loss attributed to the exclusion for employer contributions to health insurance, which we have been doing since World 

War II, cost the U.S. Treasury $75 billion. So what we have been 

doing, Mr. Goodman speaks to it, we have been doing it for a long 

time. We have just been doing it one way instead of this way. 

Now we are doing it for everybody, the small employer, the large 

employer. I find that not unique. I find that equal. That is a different perspective than that reflected by John. But let us face the 

fact. There are $75 billion worth of taxes out there that aren’t 

being collected right now. Why? Because we believe it is good for 

the employer to provide for employee health insurance, and we 

have done that as a norm since World War II. 

So different perspectives, different points of view. But Kate, I 

think the thing that concerns me, and John spoke to it a bit, is the 

commitment of the employer. My frustration in watching escalating 

health care costs over the years, and seeing employers agonize because of the affordability of it and the cutting back and the reshaping of the plan and ejecting the spouse out or ejecting the spouse 

and the family out of it. Or an employee, for example, suggesting 

that they would really like to move into a new opportunity and a 

new job but they can’t afford to because the health care there is 

less than the one they have, and so they are locked into a health 

care environment or locked into a job because of the health care environment as a benefit. 

I think all of us recognize the phenomenal value of health care 

through the employer to the employee as a tremendous benefit and 

an incentive. You and others on the panel argue strongly that 

HSAs offer significant help to the employers struggling to continue 

providing insurance to their employees as well as to the currently 

uninsured. What exactly do you believe will be the effect of the new 

HSA on the employer health market and on the number of the uninsured as we look at this? 

Ms. SULLIVAN. In the marketplace, and we have already seen 

this this year for small businesses, is you have new carriers coming 

into States where they have not been because they are carriers 

that specialize in these types of plans. There has been a lot of consolidation and a lot of regulation by the States. So they pretty 

much have been down to one or two dominant insurance carriers 

in any given market. 

86

Now there is a new guy coming in and saying, we specialize in 

this product. Take a look at it. Then, guess what happens. Their 

long-time carrier has a more traditional PPO or HMO and says—

such as there has been one such company—hey, we can make this 

available to you also. Then all of a sudden you have got some competition for dollars. We have not seen that in years. 

Those health plans also come with lower premium dollars, at 

lower cost, and some employers are finding that the savings is so 

much that they can then help fund that deductible, encouraging 

those younger employers who—employees who may not have the 

money to get into it and providing an incentive for older employees 

who have health conditions to also make this option because it offers more flexibility. 

I think that competition is very welcome and these larger employers, as they begin planning for 2005 and 2006, are recognizing 

also, let us also look at some of the data on what happens with consumer behavior in terms of helping make this more affordable longrun. 

The CHAIRMAN. Doctor, I think our frustration over time has 

been that with the third-party payment presence, that somehow 

the patient is kind of taken out of the picture in part. I am interested in your reaction to how doctors will look at this and the treatment of choices in relation to the patient, if that patient is there 

with an HSA, for example, and they are actually spending their 

dollars. 

Dr. LANGSTON. I think one of the things that we are going to see 

is for instance, when patients are engaged in some of the traditional plans we have with regard to either deductibles or costs of 

their medications. They are much more knowledgeable and I think 

they ask the question, for instance, is there an alternative that will 

do as adequate a job at a certain price because I have a contract 

that would support that. 

So as a clinician on a daily basis, I certainly try to accommodate 

the patient in making those decisions, if there are alternatives that 

make sense based on their contract. I am a pharmacist as well as 

a physician and I use a lot of generic medication in my practice. 

I obviously use a lot of the pioneer drugs, but that is just one area 

where the patient, when informed, participates in the decisionmaking. 

The other issue is that I see patients in my office on a daily basis 

that decisions are made on are there some things that we can address because I am a small businessman and I have to have a very 

high deductible to make this work. I bought catastrophic insurance. 

How can I address what my needs are? 

My experience over 25 years has been that every time my patient, and some would call them consumers, but my patient has 

been more informed about therapies and about cost, they are more 

engaged in their care and, I think, help make those decisions, it 

puts more stress on me as a physician. But quite frankly, it has 

made me a better doctor over the years. I now carry a PDA in one 

pocket and formulas in the other pocket so that if a patient has a 

specific request based on their contract, I can say, all right, here 

is the way I can make this work for you and for the medication. 

87

I teach in the School of Pharmacy at Purdue and have pharmD residents who rotate with me on a monthly basis, six to 8 

months a year, and so the young people have frankly brought me 

into that environment and I use it on a daily basis. If I leave my 

PDA at home, for instance, I am without a very efficient opportunity to see what I can do, because I can put costs in the PDA, 

I can put other choices in the PDA, but I also have the paper models in my other pocket. 

So the patients are more informed. They participate. Anything 

we can do to make that happen, frankly, I think the physicians of 

America would be supportive. It creates change, but frankly, we 

have changed in the past. We will change in the future. 

The CHAIRMAN. My last question, pertains long-term care. We 

know that in this proposal, the new HSA program provides that 

funds in the HSA can be used not just for regular medical expenses, but also for long-term care. That is something that we believe—I certainly believe, and I don’t think my colleague disagrees 

with me—the more older Americans we can get onto that system, 

the better they are going to be, and the less impact they will have 

on their government as they age. 

To what extent do you believe this feature may help families ease 

the burden of the long-term care costs? Reaction by anyone here? 

Doctor? 

Dr. LANGSTON. If I may speak to that briefly, engaging the patient in whatever model is chosen, and this is the first step in this 

direction, to be involved in health care decisions is terribly important. We have a mentality, I think, in the United States of if I can 

take a pill or do something like that, I can certainly correct whatever my problem is. 

Well, one of the interesting things when you start making decisions and spending some of your health care dollars, we might, in 

fact, take a hard look at some of our lifestyle issues. Let us take 

cardiovascular disease, the biggest killer in the United States. The 

five major variables there are weight, diabetes, hypertension, 

smoking, and cholesterol, all modifiable kinds of issues that we 

don’t have to spend extra money on. If we can engage our patients 

into making that choice, and many of us believe that finding a 

model that has them involved in spending their own money will do 

that, in the long run, we are going to be better off. We think this 

is a step in that direction and are supportive of that. Those are big 

issues for us. 

Mr. WILLIAMS. Senator, in response to long-term care, I think it 

is a very important issue. Most Americans do not have sufficient 

long-term care coverage. 

Senator BREAUX. Or any. 

Mr. WILLIAMS. Most Americans are uninformed about the nature 

of how their long-term needs will be met. Many are confused about 

the nature of government programs for this. I think it is a significant accomplishment to have long-term premiums included in this 

and we would really advocate direct inclusion of qualified long-term 

care as a permitted benefit in cafeteria plans. 

I think this is a huge issue and I believe that this notion of letting retirees catch up their contributions into the Health Savings 

Account funds would also be an important addition. There are some 

88

acceleration features, but if you take someone today who is retiring 

by 2009, 2010, and you think about the $80,000 of care that may 

be unfunded as a result of their inability to have thought about 

and provide for this earlier, there is a huge opportunity to think 

about giving retirees the opportunity to catch up. 

We also see many people who are over 65 who are actively at 

work and who no longer would be able to contribute to the Health 

Savings Account. What we are seeing in our work is that about 50 

percent of people in these type plans are rolling over funds from 

year to year and this is the really big idea. Consumers don’t really 

differentiate as much between HRAs and HSAs as one might do 

from tax policy, particularly those people who see that as their 

money and think about managing it in a prudent way consistent 

with their health care needs, but really thinking about their longterm needs, as well. 

The CHAIRMAN. Yes, Mr. Greenstein? 

Mr. GREENSTEIN. Long-term care is clearly a very important 

issue and an unmet need. But if we try to do it through HSAs, the 

people who are most likely over the course of time to buildup large 

balances in their HSAs as they head toward their retirement years 

are going to be higher-income people who can afford to put a lot 

of money in the HSAs and to let it buildup and to not dip into it 

that much for other kinds of health care costs. But they are not the 

people who are most in need of help in affording long-term care or 

long-term care insurance. 

I wouldn’t rule out a tax-based approach to helping people afford 

long-term care insurance, although we would also need to deal with 

the fact that most employers don’t offer long-term care insurance 

and policies are basically available in the unregulated individual 

market and there is a lot of cherry-picking and variation based on 

people’s health status. 

But if we wanted to do a tax-based approach, it would be much 

better to look at a refundable tax credit tied to long-term care than 

to try to do it through these kinds of accounts. 

The CHAIRMAN. Does anyone else wish to comment on that? 

John, any other questions? 

Senator BREAUX. Just a couple. I want to make clear that I am 

a big believer in insurance, particularly in the health care area. I 

would like to have an individual mandate that everybody has to 

purchase health insurance and have the government help pay for 

the premium for those who can’t afford it. You bring in a lot of 

healthier people into the insurance pool if you mandate it across 

the board. We could establish State purchasing pools so that nobody has to go into the individual market to buy their insurance. 

Everybody in America would have health insurance, not because 

you fit into some box like we currently have, that you get health 

care if you are old under Medicare, if you are poor under Medicaid, 

if you are a veteran under the VA benefit, and still have 43 million 

Americans with no insurance at all. So I am a big believer in everybody having health insurance. 

I am also a big believer in copays. I mean, I don’t care if it is 

a dollar. They ought to have some connection with the cost of 

health care, whether it is buying a prescription at a drug store. 

89

There should be some connection with the purchase of health care 

and the fact that it costs something. 

My concern with HSAs and the high deductible is that for some people that are low income, $1,500 is a significant deductible that 

they are going to have a very difficult time coming up with. The 

argument that, well, there is a connection to the cost, there is certainly no connection after you meet the deductible because everything after that, if it is $100,000 or $200,000 a year, is completely 

covered by health insurance as an incentive to go ahead and use 

more. 

So anyway, my concern is using the tax code in an unprecedented manner. Tax-free going in, tax-free coming out—we have 

never done that. To create a health care plan which I think is biased toward healthier and younger people is not, I think, a fair use 

of the tax code. There may be some ways to get this done. I don’t 

think this is it. I also recognize that it is the law and we are going 

to watch it very carefully. 

I thank the panel for their comments. 

The CHAIRMAN. John, thank you, and we do thank the panelists 

for being with us today. It is something we will watch very closely. 

I don’t dispute what my colleague has said. It is an unprecedented 

move in the market and it will be a significant move if it goes as 

many of us believe it will, toward changing the dynamics of health 

care in our country. If not, John, you can come back and tell me, 

‘‘I told you so.’’ How is that? [Laughter.] 

Kate, gentlemen, thank you very much for being with us today 

and adding to the record as this very important issue develops. 

The committee will stand adjourned. 

[Whereupon, at 4:11 p.m., the committee was adjourned.] 

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