DEPARTMENTS OF LABOR, HEALTH AND HUMAN 

SERVICES, EDUCATION, AND RELATED AGENCIES 

APPROPRIATIONS FOR 2009 

HEARINGS 

BEFORE A 

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

SUBCOMMITTEE ON THE DEPARTMENTS OF LABOR, HEALTH AND 

HUMAN SERVICES, EDUCATION, AND RELATED AGENCIES 

DAVID R. OBEY, Wisconsin, Chairman 

NITA M. LOWEY, New York 

ROSA L. DELAURO, Connecticut 

JESSE L. JACKSON, JR., Illinois 

PATRICK J. KENNEDY, Rhode Island 

LUCILLE ROYBAL-ALLARD, California 

BARBARA LEE, California 

TOM UDALL, New Mexico 

MICHAEL HONDA, California 

BETTY MCCOLLUM, Minnesota 

TIM RYAN, Ohio 

JAMES T. WALSH, New York 

RALPH REGULA, Ohio 

JOHN E. PETERSON, Pennsylvania 

DAVE WELDON, Florida 

MICHAEL K. SIMPSON, Idaho 

DENNIS R. REHBERG, Montana 

NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full Committee, and Mr. Lewis, as Ranking 

Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. 

CHERYL SMITH, SUE QUANTIUS, NICOLE KUNKO, 

TERI BERGMAN, CHARMAINE MERCER, and ANDRIA OLIVER, 

Subcommittee Staff 

PART 5 

Page 

Implications of Economic Trends for Workers, Families, and the 

Nation ............................................................................................................... 1 

Opportunities Lost and Costs to Society: The Social and Economic 

Burden of Disease, Injuries, and Disability ............................................ 93 

Opportunities Lost and Costs to Society: The Social and Economic 

Burden of Inadequate Education, Training and Workforce 

Development ................................................................................................... 189 

Expanding Health Care Access ...................................................................... 309 

Implications of a Weakening Economy for Training and 

Employment Services ................................................................................... 403 

Status of the World Trade Center 9/11 Health Monitoring and 

Treatment Program ....................................................................................... 489 

Printed for the use of the Committee on Appropriations 


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Part 5 


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DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, 

AND RELATED AGENCIES APPROPRIATIONS FOR 2009 


jbell on PROD1PC69 with HEARING

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DEPARTMENTS OF LABOR, HEALTH AND HUMAN 

SERVICES, EDUCATION, AND RELATED AGENCIES 

APPROPRIATIONS FOR 2009 

HEARINGS 

BEFORE A 

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

SUBCOMMITTEE ON THE DEPARTMENTS OF LABOR, HEALTH AND 

HUMAN SERVICES, EDUCATION, AND RELATED AGENCIES 

DAVID R. OBEY, Wisconsin, Chairman 

NITA M. LOWEY, New York 

ROSA L. DELAURO, Connecticut 

JESSE L. JACKSON, JR., Illinois 

PATRICK J. KENNEDY, Rhode Island 

LUCILLE ROYBAL-ALLARD, California 

BARBARA LEE, California 

TOM UDALL, New Mexico 

MICHAEL HONDA, California 

BETTY MCCOLLUM, Minnesota 

TIM RYAN, Ohio 

JAMES T. WALSH, New York 

RALPH REGULA, Ohio 

JOHN E. PETERSON, Pennsylvania 

DAVE WELDON, Florida 

MICHAEL K. SIMPSON, Idaho 

DENNIS R. REHBERG, Montana 

NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full Committee, and Mr. Lewis, as Ranking 

Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. 

CHERYL SMITH, SUE QUANTIUS, NICOLE KUNKO, 

TERI BERGMAN, CHARMAINE MERCER, and ANDRIA OLIVER, 

Subcommittee Staff 

PART 5 

Page 

Implications of Economic Trends for Workers, Families, and the 

Nation ............................................................................................................... 1 

Opportunities Lost and Costs to Society: The Social and Economic 

Burden of Disease, Injuries, and Disability ............................................ 93 

Opportunities Lost and Costs to Society: The Social and Economic 

Burden of Inadequate Education, Training and Workforce 

Development ................................................................................................... 189 

Expanding Health Care Access ...................................................................... 309 

Implications of a Weakening Economy for Training and 

Employment Services ................................................................................... 403 

Status of the World Trade Center 9/11 Health Monitoring and 

Treatment Program ....................................................................................... 489 

Printed for the use of the Committee on Appropriations 

U.S. GOVERNMENT PRINTING OFFICE 

43–194 WASHINGTON : 2008 


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COMMITTEE ON APPROPRIATIONS 

DAVID R. OBEY, Wisconsin, Chairman 

JOHN P. MURTHA, Pennsylvania 

NORMAN D. DICKS, Washington 

ALAN B. MOLLOHAN, West Virginia 

MARCY KAPTUR, Ohio 

PETER J. VISCLOSKY, Indiana 

NITA M. LOWEY, New York 

JOSE ́ E. SERRANO, New York 

ROSA L. DELAURO, Connecticut 

JAMES P. MORAN, Virginia 

JOHN W. OLVER, Massachusetts 

ED PASTOR, Arizona 

DAVID E. PRICE, North Carolina 

CHET EDWARDS, Texas 

ROBERT E. ‘‘BUD’’ CRAMER, JR., Alabama 

PATRICK J. KENNEDY, Rhode Island 

MAURICE D. HINCHEY, New York 

LUCILLE ROYBAL-ALLARD, California 

SAM FARR, California 

JESSE L. JACKSON, JR., Illinois 

CAROLYN C. KILPATRICK, Michigan 

ALLEN BOYD, Florida 

CHAKA FATTAH, Pennsylvania 

STEVEN R. ROTHMAN, New Jersey 

SANFORD D. BISHOP, JR., Georgia 

MARION BERRY, Arkansas 

BARBARA LEE, California 

TOM UDALL, New Mexico 

ADAM SCHIFF, California 

MICHAEL HONDA, California 

BETTY MCCOLLUM, Minnesota 

STEVE ISRAEL, New York 

TIM RYAN, Ohio 

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland 

BEN CHANDLER, Kentucky 

DEBBIE WASSERMAN SCHULTZ, Florida 

CIRO RODRIGUEZ, Texas 

JERRY LEWIS, California 

C. W. BILL YOUNG, Florida 

RALPH REGULA, Ohio 

HAROLD ROGERS, Kentucky 

FRANK R. WOLF, Virginia 

JAMES T. WALSH, New York 

DAVID L. HOBSON, Ohio 

JOE KNOLLENBERG, Michigan 

JACK KINGSTON, Georgia 

RODNEY P. FRELINGHUYSEN, New Jersey 

TODD TIAHRT, Kansas 

ZACH WAMP, Tennessee 

TOM LATHAM, Iowa 

ROBERT B. ADERHOLT, Alabama 

JO ANN EMERSON, Missouri 

KAY GRANGER, Texas 

JOHN E. PETERSON, Pennsylvania 

VIRGIL H. GOODE, JR., Virginia 

RAY LAHOOD, Illinois 

DAVE WELDON, Florida 

MICHAEL K. SIMPSON, Idaho 

JOHN ABNEY CULBERSON, Texas 

MARK STEVEN KIRK, Illinois 

ANDER CRENSHAW, Florida 

DENNIS R. REHBERG, Montana 

JOHN R. CARTER, Texas 

RODNEY ALEXANDER, Louisiana 

KEN CALVERT, California 

JO BONNER, Alabama 

ROB NABORS, Clerk and Staff Director 

(II)


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(1) 

DEPARTMENTS OF LABOR, HEALTH AND 

HUMAN SERVICES, EDUCATION, AND RELATED AGENCIES APPROPRIATIONS FOR 

2009 

WEDNESDAY, FEBRUARY 13, 2008. 

OVERVIEW HEARING: IMPLICATIONS OF ECONOMIC 

TRENDS FOR WORKERS, FAMILIES, AND THE NATION 

WITNESSES 

HAROLD MEYERSON, EXECUTIVE EDITOR-AT-LARGE, AMERICAN 

PROSPECT 

JARED BERNSTEIN, PH.D., DIRECTOR, LIVING STANDARDS PROGRAM, 

ECONOMIC POLICY INSTITUTE 

ROBERT GREENSTEIN, EXECUTIVE DIRECTOR, CENTER ON BUDGET 

AND POLICY PRIORITIES 

ALAN D. VIARD, PH.D., RESIDENT SCHOLAR, AMERICAN ENTERPRISE 

INSTITUTE 

Mr. OBEY. Why don’t we begin? 

Let me thank you all for coming this morning. I appreciate your 

willingness to testify, and I appreciate the fact that our minority 

members are here. I don’t know where our majority members are 

but, we are going to have to hold down the fort. 

Let me explain what we are trying to do with the first couple of 

hearings we are having for the Subcommittee this year. Not everybody in life starts out as a winner, and not everybody in life ends 

up as a winner. This Subcommittee has jurisdiction over programs 

that help determine what Government does to help those who start 

out behind the starting line and what Government does to help 

those who, sometime along life’s way, need a helping hand. 

Before Franklin Roosevelt, the Federal Government largely let 

people struggle on their own. When the Great Depression showed 

that cost was unacceptable, FDR and the Congress adopted many 

mechanisms in the New Deal that tried to make life less rocky and 

tried to make opportunity more widely available to more people in 

our society. 

When Dwight Eisenhower led a Republican resurgence, he chose 

largely not to try to repeal those achievements and, in fact, he created the Department of Health, Education and Welfare, which 

along with the Department of Labor and those agencies now as you 

know evolved, those agencies administer many of the programs 

that impact today’s working families in so many ways. 

Before we begin to take testimony on the President’s budget and 

its impact on those programs, I thought it would be useful to simVerDate Aug 31 2005 04:32 Sep 09, 2008 Jkt 043194 PO 00000 Frm 00001 Fmt 6633 Sfmt 6633 E:\HR\OC\A194P2.XXX A194P2

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ply have several hearings to try to help us achieve a clear understanding of the context in which these programs are impacting today’s American families. 

So today’s hearing will focus on the economic and social conditions that are impacting the average American family, families that 

are in turn being impacted by the action that this Committee will 

take today and tomorrow. Before we hear testimony about the cost 

of taking certain actions in the healthcare area, we will be focusing 

on the cost of not taking those actions. 

Today, the Subcommittee will hear from a panel of distinguished 

witnesses who will present testimony to help us understand the 

broad economic and social trends impacting the Country and their 

implications. I have asked our witnesses to address national, economic and budget trends including wage stagnation, growing income inequality, and increasing globalization, competition and immigration. 

What we hear today I hope will help us to better understand how 

these trends impact the standard of living, the economic security 

and the well-being of American workers, families and those in 

need, particularly those at the bottom of the income spectrum, and 

I hope that the testimony will provide a larger economic framework 

and the context within which we will be considering the President’s 

budget for these programs this year. 

Tomorrow and in the coming weeks, we will also hear from a variety of experts in public health, biomedical research, education 

and workforce development to help us understand the price of 

progress and the price of inertia and indifference as well. 

Today’s hearing is the beginning of the process. Our first witness 

will be Mr. Harold Meyerson, the Executive Editor-at-Large of the 

American Prospect. Many of you are familiar with Mr. Meyerson’s 

weekly column in the Washington Post. 

Our second witness is Dr. Jared Bernstein, Director of the Living 

Standards Program at the Economic Policy Institute. His area of 

research includes income inequality and mobility, trends in employment and earnings, low-wage labor markets and poverty, and the 

analysis of Federal and State economic policies. 

Our third witness is Bob Greenstein. Mr. Greenstein is the 

founder and Executive Director of the Center on Budget and Policy 

Priorities, one of the Country’s leading experts on the Federal 

budget and a range of domestic policy issues including low-income 

assistance programs, tax policy and social security. 

Dr. Alan Viard, he has one strike against him. He is from Ohio 

State, and they regularly maul the Badgers in football, but other 

than that he has excellent credentials. [Laughter.] 

Mr. OBEY. He is a scholar at the American Enterprise Institute. 

He was a Senior Economist at the Federal Reserve Bank in Dallas 

and a Senior Economist on the Council on Economic Advisors. 

Gentlemen, I am happy that you are all here, and I will ask for 

your comments as soon as I have asked Mr. Walsh, the Ranking 

Member, for any comments that he might have. 

Mr. WALSH. Thank you, Mr. Chairman. 

I would like to welcome our witnesses and thank all of you for 

coming today. 


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Mr. Chairman, nice job, a multi-talented guy. You can conduct 

hearings and run a Committee and interior decorate at the same 

time which is pretty neat, and I have no objection to the Green Bay 

green carpet on the floor, especially since my Giants finally, the 

first time in my lifetime, defeated the Packers at Lambeau in the 

post-season. So I am a happy camper. 

Mr. OBEY. It won’t happen again for a long time. [Laughter.] 

Mr. WALSH. I won’t even talk about the Patriots, that new team 

from New England. 

I think our discussion today will really get to the heart of the 

philosophical differences between Republicans and Democrats, liberals, conservatives and those of us who fall somewhere in between 

when it comes to issues surrounding the economy. 

I have always felt that we have a responsibility to provide everyone with equal opportunity. Success is up to them. 

There is no question in my mind that everyone in this room 

wants to continue our Country’s historic economic success well into 

the future. While we may be at a little bump in the road today, 

I am confident and optimistic that the American people will overcome this downturn as we always have. 

My view is that one of the very worst things we, the Congress, 

can do is follow economic policies that result in raising taxes on the 

American citizen and businesses. We have enjoyed economic success in the past in large part because of our relatively low tax 

rates. To raise taxes will, in my view, stifle the prospect of economic prosperity in the future. 

We need only to look back into our Country’s recent history. For 

example, in the 1960s, President Kennedy dramatically reduced 

capital gains and other Federal taxes and sparked a dramatic period of economic prosperity and growth. 

President Reagan shook the American economy out of its malaise, ending double-digit inflation, unemployment and interest 

rates by working with Congress to again cut income taxes across 

the board. The commensurate cut in spending, unfortunately, 

didn’t happen. 

We can look across the pond to Ireland with its historically 

sleepy agricultural economy and poverty, beginning with Albert 

Reynolds, then John Bruton and now Bertie Ahern, the Irish 

slashed corporate and personal income taxes and, in doing so, woke 

up the Celtic tiger. In 25 years, Ireland went from one of the poorest countries in Western Europe to now its wealthiest. 

Exemplary public education was also essential. Today, the Irish 

immigrants to the United States are going back to Ireland for opportunity. 

Kennedy, Reagan, Ireland, there seems to be a trend there. 

President Bush picked up on it in 2002, and it worked again. 

With that said, I also believe there are things the Congress can 

do proactively that can help spur the economy in the future. 

I think one of those things is to provide the resources to ensure 

that every child in America receives a high quality education from 

early childhood through college and beyond, whether that child 

lives in an affluent community or a poor community, whether 

rural, urban or suburban, whether the child has a disability or not. 

While this is and should be the responsibility of local communities, 


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we should make sure that any mandates we lay on those school 

districts be fully funded by us. 

I do not think it is unreasonable for the Government, working 

with businesses and employees, to seek ways to reduce workplace 

injuries and thereby promote better health and greater efficiency. 

Making prudent investments in workplace safety provides an economic benefit to both employer and employee. 

Regarding healthcare, the American public, I believe, is now demanding universal healthcare. The Democrats have endorsed and 

embraced that by utilizing a Government-run system. 

I believe the Republican Party is ready to endorse universal 

healthcare soon also but based on a private sector model where 

people continue to have choices, where they maintain the doctorpatient relationship, and Government empowers them by providing 

tax incentives and deductions and makes the proper investment in 

research and then gets out of the way. 

We need to do this to be globally competitive and to maintain our 

quality of life. 

Mr. Chairman, I thank you for holding these hearings, and I look 

very much forward to hearing the testimony. 

Mr. OBEY. Gentleman, why don’t you proceed? 

Your statements will be placed in the record. Why don’t you each 

take roughly 10 minutes and say whatever you have on your 

minds? 

Why don’t we start with Mr. Meyerson? 

Mr. MEYERSON. Thank you, Mr. Chairman, and I thank the 

Ranking Member as well. 

I am honored to be here today, and I am honored to be here particularly before the Chairman of this Subcommittee and Committee 

whom I know to be a tenacious champion of the rights and interests of the ordinary Americans. 

My name is Harold Meyerson. I am Executive Editor of the 

American Prospect which is an avowedly liberal political monthly 

founded 18 years ago by Robert Reich, Bob Kuttner and Paul Starr. 

I am also an op-ed columnist for the Washington Post. My testimony today, like my columns in the Post, clearly expresses my 

opinions only, and any overlap with the editorial positions of the 

Post is coincidental, accidental, very rare. 

Also, I am the odd man out here today. I am not even close to 

being an economist, and I presume I have been asked here to offer 

testimony because much of my writing deals with broad historic 

trends in the social and economic life of the American people. 

So I will endeavor to deal with that today, beginning by noting 

that over the past three decades, not the bottom, but the middle 

has fallen out of the American economy. The great social achievement of the United States in the 30 years following World War II, 

which was the creation of the first majority middle class of a society that offered more economic stability to more people than any 

society ever before in human history, has to a significant degree 

been undone. 

What happened that changed the economic life of the American 

people and why are we seeing polls that show a clear plurality of 

Americans—this is in several polls over the past two years, not 

simply in response to the immediate downturn—showing that 


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Americans say they now believe that their children will have a 

harder economic life than they themselves have had? 

Can this really be the voice of Americans, this most optimistic of 

peoples, believers for centuries in the certitude that their children, 

if they work hard, will have a better life than they themselves had? 

How has a Nation of incorrigible optimists—one of the many 

things you have to love about this Country—become, in many 

ways, a Nation of pessimists? 

What changes in public policy does our Government need to embrace in order to create again that valid sense of optimism? 

I am going to argue that what has fundamentally shifted in 

America today is that jobs, jobs for high school graduates, jobs even 

for quite a number of college graduates, no longer provide the upward level of income that they once did nor do they offer the level 

of benefits nor the assurance of steady, long term employment. 

In many ways, we are no longer a Nation of the kind of good jobs 

that was the case in the America I grew up in. The benefits, the 

pensions, the rising annual income that were a common, but by no 

means universal, experience of American workers a generation ago 

are now a thing increasingly in the past to all but the talented or 

fortunate tenth. That is why Americans now tell pollsters they fear 

that their children are going to have a harder time than they themselves did. 

The key determinants in the decline of the American job, there 

are many. I would say to a certain degree: de-unionization, de-industrialization, globalization, even to a certain extent, automation. 

Each of these trends, moreover, reinforces the others and each is 

a cause and a consequence of the others. 

In the two decades following World War II, close to a third of the 

American nonagricultural workforce was unionized. During those 

years and from 1947 to 1973, median household income rose at the 

exact same rate that productivity rose. During those years, health 

insurance and defined benefit pensions became the norm for most 

major and many minor American employers. 

What has happened since then? Many things. The increased willingness of American employers to resist unionization, exploiting 

weaknesses in the National Labor Relations Act has certainly been 

a factor. 

De-industrialization has certainly been a factor. Manufacturing 

jobs, particularly durable goods manufacturing, have long paid 

more than service sector jobs. But, as the members of this Committee need not have pointed out to them in detail, we have been 

losing manufacturing jobs steady for many years. This doesn’t simply begin with the Bush Administration. This is a long term development. 

The effects of globalization are many and varied and widely debated. Alan Blinder, the economist who served as Vice Chairman 

of the Federal Reserve, has focused, I think rightly, less on jobs 

lost and jobs created and more on the effect on incomes of American workers whose jobs are, in a broad sense, in competition with 

workers in other countries though their jobs may never in fact be 

offshored. 


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That clearly extends now not simply to blue collar workers in 

manufacturing but to even professionals whose work can be 

digitized. It can be done by people in other countries. 

Blinder, as I recall, once said that we may have a decline in the 

number of attorneys whose jobs do not require face to face interaction, but there will still be a need for divorce attorneys in the 

United States and you have to get with your clients and figure that 

out. That is not a bright prospect for the American economy. 

Broadly speaking, I just want to address this last broad thing 

and what it suggests for Government policy. 

We all remember the time when the American economy was the 

marvel of the world because of our productive capacities. Our production along with the strategic competence of our leaders and the 

dedication of soldiers and sailors is what won World War II. It was 

the exports of manufacturing goods, of agriculture that revitalized 

the postwar Europe and Asia and one of the goals of the Marshall 

Plan, in fact, was to ensure that Europe had enough funds to buy 

those products. 

I am afraid that our role in the world economy today has 

changed in ways that nobody really could have prophesied. We 

have become really the consumers of last resort and, for that matter, the consumers of first resort. 

Stephen Roach, an eminent economist with Morgan Stanley, recently said that by his calculations, personal consumption in the 

American economy now amounts to 72 percent of our gross domestic product. 

England, you will recall, in the 19th Century was known as a nation of shopkeepers. America in the 21st Century is a Nation of 

shoppers. This is a problem. Consider what it means that our largest employer in most of the post-war period, General Motors, has 

been supplanted by Wal-Mart. 

GM, following the lead of Henry Ford, worked on the premise 

that if you work at GM you should be able to buy a new Chevy, 

a new GM car. Wal-Mart never had the premise that if you work 

at Wal-Mart you should be able to buy a car, though certainly you 

should be able to shop at Wal-Mart. That makes a difference for 

the dominant employer, shifting from production to retail. 

In the 1980s, there was some debate over industrial policy, and 

a lot of economists said we shouldn’t have an industrial policy. We 

shouldn’t pick winners. We should stay out of this altogether. 

Well, 20 years, we don’t have an industrial policy. We have a diminished industrial base, and what has kept the economy afloat 

isn’t the proceeds of production. It has been asset inflation, the rising value of homes against which Americans have had to borrow 

to purchase things they couldn’t afford had they been dependent on 

their relatively static work-derived incomes. 

This isn’t a sustainable strategy. Increasingly, the macroeconomic policy of the United States has been shop until you drop. 

Okay, we have shopped, and now we have dropped. 

What I would suggest broadly since my time is just about up, in 

reference to Government policy, is that I see a role for the public 

sector where the private sector is no longer willing or even able to 

go. 


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The private sector welfare state—that is employer-provided 

health insurance, retirement funds, retirement health insurance— is crumbling. For the past two decades, American employers have 

been cutting back. In a global economy, they feel this renders them 

uncompetitive. This suggests to me a need for Government to step 

up and provide those things which Americans have counted upon 

as ancillary to their work and no longer is. 

Second, I think we need to foster a public works and industrial 

policy to create decent jobs here in the U.S. as long as most major 

transnational corporations no longer consider this necessarily part 

of their business plan. So I think that is an important element for 

Government to involve itself in. 

The third is to upgrade the jobs of those fifty or sixty million 

Americans who don’t work in offshorable work, who aren’t really in 

the global economy, in healthcare and construction and transportation, in retail sales, education, tourism, security, maintenance, logistics, elder care and child care. 

I see two ways of doing this. One is to upgrade some of these 

works, some of these jobs and credentialing them, making them 

more professional, doing what some European countries do which 

is professionalizing the people who take care of small children and 

seniors. I think that is a necessary strategy that will benefit the 

United States. 

Secondly is for the Government to enact a piece of legislation 

that has been kicking around Capitol Hill for a number of years, 

the Employee Free Choice Act which would enable workers more 

freely to join unions without fear of employer harassment and 

which I think would have a significant effect in these nonoffshorable jobs, though I don’t necessarily think it would in 

offshorable jobs. 

Capitalism creates prosperity, but it is governments that create 

the legal and social environment in which prosperity can be broadly shared. By assuming the responsibility for benefits programs 

that employers no longer offer, by investing in strategic industries, 

offering serious vocational education, creating green jobs and 

human service jobs and amending the labor law, I think the Government can begin the arduous and necessary work for building 

the American middle class and setting the Nation’s economy on 

sounder footing. 

These are fundamental tasks. The preamble to the Constitution 

refers to it as promoting the general welfare, and our Government 

has been AWOL in these duties for a long time. 

Thank you, Mr. Chairman. 

[The information follows:] 


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Mr. OBEY. Dr. Bernstein. 

Mr. BERNSTEIN. Chairman Obey, Ranking Member Walsh and 

members of the Subcommittee, I thank you for this opportunity to 

testify today on the important topic of income trends in the United 

States. 

Mr. Chairman, the biography on your Web site states ‘‘Every 

American who works hard should be able to fully share in the 

bounty of America.’’ This statement is much like that of our mission statement at the 

Economic Policy Institute. To us, this is not nearly common sense. 

It is a fundamental American value and a benchmark against 

which economic progress must be judged. 

If the economy is expanding, if productivity is increasing smartly, 

if unemployment is low, then most families should be benefitting 

from the economy’s overall growth. Yet, as the evidence I will show 

confirms, over the last few decades, broadly shared prosperity has 

been the exception, not the rule. 

The mechanisms which historically could be counted on to ensure 

a fair distribution of the fruits of growth are broken, and those 

crafting economic policy must offer ideas to repair them. As this 

campaign season progresses, polling data suggest that the American electorate is anxious for policy-makers to address these concerns and to do so ambitiously with an agenda that meets the magnitude of the problems. 

Now I again applaud this Committee for its foresight in getting 

in front of this wave. 

Before briefly outlining some policy ideas in this spirit, I present 

a set of facts that motivate these policies. 

Despite the impressive productivity growth that occurred in the 

2000s, the real income of typical middle income families has stagnated. Census Bureau data show that between 2000 and 2006, median family income is actually down by $1,000 or 2 percent after 

adjusting for inflation. If, as many economists believe, the economy 

is or near recession, this may be the first business cycle on record 

wherein the median family fails to regain its prior peak. 

Note also that the Nation’s poverty rate was actually one percentage point higher in 2006 than in 2000. Yet, the American 

workforce has been highly productive over these years with productivity up 19 percent in 2007. 

Now how can it be that productivity has grown quickly yet middle and low incomes have stagnated or fallen? The answer, of 

course, is growth has flowed largely to those at the very top of the 

income scale. By one measure, 22 percent of national income went 

to the top 1 percent in 2005, and this represents the highest level 

of income concentration since 1929. 

The trend towards greater inequality has been ongoing for almost 30 years. Back in 1979, the post-tax income of the top 1 percent was 8 times higher than that of middle income families. By 

2005, that ratio had grown to 21 times, a vast increase in the distance between income classes. 

The pace of income inequality has accelerated alarmingly in recent years. The growth in the share of income going to the richest 

income households was faster in 2003 to 2005 than over any other 

two-year period covered by the CBO data that began in 1979. 


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Over these few years, $400 billion in pre-tax 2005 dollars was 

shifted from the bottom 90 percent of household to those in the top 

5 percent. Had income shares not shifted as they did, the income 

of each of the 109 million households in the bottom 95 percent 

would have been, on average, $3,700 higher in 2005. 

Now some analysts have downplayed these income findings by 

making the following types of counter-arguments: 

Consumption inequality has grown more slowly than that of income inequality. That is true, but the rise in consumption over a 

period of stagnating income growth has meant the accumulation of 

highly problematic levels of debt for many American households. 

As I show in my written testimony, real expenditures actually 

fell about 3 percent, 2000 to 2006, for households in the bottom 40 

percent while rising 7 percent for households in the top fifth. 

A second counter-argument is that real incomes of low and middle class households have grown over the last few decades. Of 

course, they have. The question is how fast relative to prior years 

and to other standard benchmarks like productivity growth. 

Again, as I show in my written work, by these two criteria, income growth has been far less favorable since the mid-1970s. Simply beating zero is not evidence of adequately shared prosperity. 

Finally, some argue that income mobility, the ability of families 

to move up the income scale over their life cycle, offsets the rise 

in inequality that I have emphasized. This is not so. 

Only if the rate of mobility, only if people are more likely to get 

ahead over time can it offset the growing inequality that I have 

documented. The solid consensus among mobility analysts is that 

the rate of mobility has not accelerated and may have slowed. 

Also, the extent of mobility in our economy is often exaggerated. 

According to a recent Treasury study, 79 percent of taxpayers who 

started in the bottom fifth of the income scale in 1996 remained in 

the bottom 40 percent by 2005. 

What policies might legislators consider to reconnect the living 

standards of working families to economic growth? In the interest 

of time, I will focus on two areas: Bargaining power and public investment. 

The ability of most workers to bargain for a greater share of the 

value they are adding to our economy is at the heart of the various 

gaps I have documented. Unions play a key role in precisely this 

area. 

The decline of unions over the past decades is partly a mechanical function of the loss of jobs in unionized industries, but the 

more important explanation is the very unbalanced playing field on 

which unions try to gain a foothold. Polls show that slightly more 

than half of the nonunion workforce would like some type of union 

representation, a finding that is not particularly surprising given 

the wage and income data I have shown above. 

The problem is that the legal and institutional forces that have 

historically balanced the power of anti-union employers and their 

proxies have deteriorated in recent decades. One legislative solution is the Employee Free Choice Act, the bill that helps to restore 

the right to organize in the workplace. EFCA gives members of a 

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thorizations in favor of the union and puts much-needed teeth back 

into labor law. 

Turning to our investment agenda, I do not need to convince the 

members of this panel, this Committee that it is critical to invest 

in the skills of our workforce of both today and tomorrow. Unfortunately, as Bob Greenstein stresses in his testimony, our budgetary 

priorities have been moving in the opposite direction. 

Now one reason this disinvestment is misguided is that recent 

initiatives in worker training have shown considerable promise relative to earlier less effective approaches such as the so-called Work 

First policies that de-emphasize job training and career paths. 

Effective strategies are grounded in extensive knowledge of the 

local labor market focusing on occupations and industries that offer 

the best opportunities for advancement. They help workers access 

education and training at community colleges, community-based 

training programs and union-sponsored programs that work with 

employers to design curricula based on skills that employers actually need. 

Now, in the current economic context with a recession possibly 

underway or soon to be so, there has been considerable discussion 

of investment in public infrastructure as a component of a stimulus 

plan. Though the plan agreed upon by Congress and the White 

House did not include such investment, I strongly believe it is an 

important topic for Congress to consider and not simply in the context of recession. 

Four facts motivate this contention: First, American households 

are highly leveraged and may be poised for a period of enhanced 

savings and diminished consumption. In this context, public investment should be viewed as an important source of labor demand. 

Second, there are deep needs for productivity enhancing investments in public goods that will not be made by any private entities 

who cannot, by definition, capture the returns on such investments. 

Three, climate change heightens the urgency to make these investments with an eye toward reduction of greenhouse gases and 

the conservation of energy resources. 

And, fourth, our job market appears to be weakening considerably. One area of particularly significant job loss has, of course, 

been construction. Jobs in residential building and contracting are 

down 244,000 over the past year. When we include other jobs related to housing such as real estate, we find a decline in almost 

half a million jobs since the peak of April 2006. 

In other words, there exists considerable slack in our labor market that will almost certainly deepen in coming quarters. In this 

regard, infrastructure investment serves a dual role of deepening 

our investments in public capital while creating good jobs for workers that might otherwise be unemployed or underemployed. 

Economists at EPI have carefully documented our public infrastructure needs, and I present these recommendations in my written testimony. They include water and sewage repairs, the maintenance of school buildings, highways, bridges, roads, rails and other 

productivity enhancements in public goods that private sector investments will not make. 

Moreover, it is important to recognize that (a) these are all necessary investments that should be made regardless of the state of 


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the business cycle and (b) recent history suggests it is a mistake 

to think that labor market slack will no longer be a problem when 

the recession officially ends. Now this last point deserves a bit of 

elaboration. 

Much of the current recession and stimulus debate has stressed 

that recent recessions, such as the one in the early nineties or 

2001, were both mild and short lived and perhaps the next recession will follow the same pattern, but such claims are based solely 

on real output growth and not on job market conditions. 

The allegedly mild 2001 recession wherein real GDP barely contracted at all was followed by the longest jobless recovery on 

record. Though real GDP grew, payroll shed another 1.1 million 

jobs. The unemployment rate rose for another 19 months and for 

just under 2 years for African Americans. 

In conclusion, I stress that this agenda is but one set of ideas designed to move our politics and ultimately our economy back towards one where every hardworking family is ‘‘able to fully share 

in the bounty of America.’’ I thank you and look forward to addressing your questions and 

comments. 

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Mr. OBEY. Thank you very much. 

We are going to have to recess for a few minutes. I understand 

that we have a vote on the floor, and we may have a series of votes 

intermittently throughout the day. So it is just another contribution to the orderly consideration of issues in the Congress. 

We will be back as soon as we can. 

[Recess.] 

Mr. OBEY. Well, I am told that we will have another one of these 

protest votes around 11:15. So why don’t we proceed and maybe we 

can get both of your statements in before we have another one of 

these little sidetracking efforts? 

Mr. Greenstein, why don’t you go ahead? 

Mr. GREENSTEIN. Well, thank you, Mr. Chairman. 

As you know, income inequality has widened significantly in recent decades. I just want to take a minute and review a few key 

figures from one of the best data sources we have on this, the Congressional Budget Office data which cover the period from 1979 

through 2005. 

Now the CBO data show that during this period the average annual after tax income of the top 1 percent of Americans, after adjusting for inflation, more than tripled, rising 228 percent. 

By contrast, the average after tax income of the middle fifth of 

the population rose a modest 21 percent, which looks particularly 

modest when you recognize that this is over a 26-year period, and 

the average income of the bottom 20 percent of the population, 

CBO found, was only 6 percent. 

Or, if you put this in dollar terms, the CBO data show that the 

average after tax income of the top 1 percent rose by $745,000 a 

year from $326,000 a year in 1979 to nearly $1.1 million a year in 

2005. 

Mr. OBEY. One point what? 

Mr. GREENSTEIN. $1.07 million in 2005. These figures are all adjusted for inflation and in 2005 dollars. 

Meanwhile, in the middle, the increase was $8,700, and they 

ended up at $50,200 in 2005. For the bottom 20 percent, the increase over this 26-year period was all of $900, and their average 

annual after tax income in 2005 was $15,300. 

Now this long term trend shows no signs of abating. If you look 

at the CBO data for the most recent year for which the data are 

available, 2004 to 2005, you find that real after tax income jumped 

an average of $180,000 per household for the top 1 percent in this 

year while rising $400 for the average middle income household 

and $200 for the average household in the bottom fifth. 

Other research shows that nearly half of the income gain in the 

Nation in 2005 went to the top 1 percent and that the concentration of income at the top of the income scale appears to be greater 

now than at any time since 1929. 

Now this growing inequality has created concern across the political spectrum. Among those who have voiced strong concern about 

it in recent years are former Fed Chair Alan Greenspan and current Fed Chair Ben Bernanke. They and others, such as former 

Treasury Secretary Larry Summers, have also talked about some 

of the connections between inequality and areas where increased 


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investments are needed to improve the competitiveness of the 

workforce and, therefore, the economy. 

I would like to talk just for a minute about this connection between inequality, the workforce and competitiveness, and domestic 

discretionary programs. 

So both Bernanke and Summers have emphasized the need for 

increased investment. 

Summers noted that to boost productivity, we need increased investment in education infrastructure and R&D, and he noted nothing is more important to our prosperity than the quality of the 

labor force. ‘‘A growing body of evidence suggests that preschool 

education has an enormous rate of return, particularly for children 

from a disadvantaged background, and funding for these programs 

should be a high priority.’’ He also talked about transportation and other infrastructure 

areas where investment has been inadequate. 

In Chairman Bernanke’s speech last year, he too called for ‘‘policies that boost our national investment in education and training.’’ Bernanke noted that a substantial body of research demonstrates 

that investments in education and training pay high rates of return 

and that early childhood programs can also pay high returns in 

terms of subsequent educational attainment and lower rates of social problems. 

This is underscored by recent path-breaking research by a team 

of researchers from the University of Chicago, Northwestern and 

Harvard who estimated that eliminating poverty among children 

under five would substantially boost annual work hours and earnings among those children when they grew up. 

As you know, although the children of today are the workers of 

tomorrow, the United States has a higher level of child poverty 

than that of most other western industrialized nations. 

This takes me to some particular issues related to the Appropriations Committee where I think all of these issues come together. 

I will just mention three of these in the interest of time. 

First is early education and childcare initiatives as I just noted. 

Research has shown that quality early education can result in 

marked improvements in school readiness and success in elementary school. Research has also shown that childcare subsidy programs have significant impact on parents’ employment rates and 

earning. 

But despite this evidence, Federal investment here has been falling. Head Start funding in 2008, for example, is 11 percent below 

the 2002 level, adjusting for inflation. Childcare funding 2008 is 17 

percent below the 2002 level, adjusting for inflation. 

A secondary, I will briefly mention, involves housing vouchers 

which enable poor families to move to where there are more job opportunities and better schools. A number of studies have documented positive effects, especially for children, when families use 

vouchers to relocate to lower poverty areas. 

But, for example, the President’s new budget falls $1.3 billion 

short of simply maintaining the current vouchers in use and has 

shortfalls in other low income housing areas as well. 

The third and final area I will make is financial assistance to enable low income students to attend college. This is an area where 


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the Nation is not performing adequately, and the inadequate performance both limits future gains in productivity and growth and 

contributes to inequality. 

A study by the Department of Education that looked at the period 2003 to 2004 found that among students from families below 

$20,000 87 percent of community college students had unmet needs 

that averaged $4,500 per student, 80 percent of students in that income bracket who were in four-year colleges had unmet needs averaging $6,000 a year. Many low income students facing such gaps 

drop out before completing college or are deterred from enrolling in 

the first place. 

Last year’s student aid legislation is not going to make that large 

a dent in this. If you look at it, that legislation increases Pell 

Grants in increments through 2012–2013, but the level the maximum Pell Grant would reach 2012–2013 is only $250 above the 

2003–2004 level that the Department of Education study found left 

such big gaps. 

That is only $250 over it after adjusting for general inflation, and 

it is actually below the 2003–2004 level if you adjust for increasing 

tuition and fee charges which have been rising faster than inflation. 

To me, the growth in the financial aid gap for low income students at a time when inequality is widening due to a variety of 

forces in the private economy is an emblem of how Government 

policies are not responding adequately here either in terms of the 

economy’s need for highly productive workers in future decades or 

in terms of the need to lean against the trend towards greater inequality. 

In recent years, policy-makers have increased financial aid for 

students from affluent families, who would attend college anyway, 

through such means as the creation of 529 plans in the tax code 

but have allowed financial aid for low income students to erode significantly in relation to tuition and fee charges which is increasing 

barriers that the lower income students face in obtaining higher 

education at a time when we should be reducing those barriers. 

Now I understand the concerns about the broader budgetary picture and future deficits, and our center has written frequently 

about the need for tough choices in the areas of healthcare revenues and social security, but domestic discretionary programs have 

not been the cause of the return of deficits and they are not the 

cause of the large projected deficits in the future. 

They have been falling for 30 years as a share of GDP. For nondefense discretionary, it was 5.2 percent of GDP in 1980. It is 3.7 

percent today. Under the CBO baseline, it falls to 2.8 percent by 

2018. 

The bottom line here, I think, is that we need to make some very 

tough choices in the coming years in various parts of the budget, 

but we really cannot afford not to make investments that would 

both keep the United States more competitive in the international 

economy in future decades and boost the opportunities, to use Mr. 

Walsh’s term at the start of the hearing, boost the opportunities for 

lower income children and families to get ahead and to lean 

against this widening income inequality that I believe ultimately 


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poses some dangers both for the economy and for the Nation’s political and social fabric. 

Thank you. 

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Mr. OBEY. Thank you. 

I was evidently misinformed by those who told us that this vote 

wouldn’t come until 11:15. We have nine minutes, so I would suggest we go vote. 

Mr. WALSH. We have a vote right now? 

Mr. OBEY. Yes, another one. 

Mr. SIMPSON. We went through this already. 

Mr. OBEY. I know. 

Mr. SIMPSON. I already voted. [Laughter.] 

Mr. OBEY. Well, I am happy to stay if anybody else wants to 

stay. I don’t think it is in any danger of passing. If members want 

to go vote, please go vote. 

Dr. Viard, why don’t you proceed and we will try to get yours in 

before the next disruption? 

Mr. VIARD. Thank you, Mr. Chairman. 

Chairman Obey, Ranking Member Walsh, members of the Subcommittee, it is an honor to appear before you today to discuss implications of economic trends for workers’ families of the Nation. In 

my written testimony, I make three points which I will discuss 

briefly here now. 

Despite the rise in inequality during the last few decades, a development that no one disputes, real incomes have continued to 

rise in the middle of the income distribution. Real incomes have 

even risen at the bottom of the income distribution although the 

gains have been very small at that place. 

The existing Federal tax system is highly progressive. A large 

portion of the Federal tax burden is currently borne by a very 

small group of high income households. Also, economic mobility can 

make computations of income inequality, that are based on annual 

income, misleading. Households do move between low income and 

high income years to a significant extent. 

On the first point, the rise of real incomes at the middle of the 

income distribution, I will actually be repeating much of what Bob 

Greenstein has just told you. I think that is an indication of the 

fact that there is some agreement on some of the facts as to what 

is happening here. 

Some people have claimed that the middle class is actually failing to keep up with inflation, that the real incomes are actually 

falling, that the middle class is being destroyed and so on. I think 

it is important to realize that even though we are experiencing a 

rise in inequality in the United States, that those claims are simply 

not factual. 

Some people look at particular measures like average hourly 

earnings and point out that measure has not always kept up with 

inflation, but that is an incomplete measure because, at best, it is 

only telling you something about the labor earnings, the cash labor 

earnings that households are receiving. 

To actually see how households are doing, it is important to add 

in their other sources of income such as fringe benefits and Government benefits and then to subtract the taxes that they are paying 

to see what resources they actually have available for themselves 

and their families. 

Like Bob Greenstein, I will actually be using the Congressional 

Budget Office numbers. I agree with him that those are a reliable, 


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high quality data source. They are available from 1979 through 

2005, and I think they paint an interesting picture. 

The middle quintile, the 20 percent who are in the middle of the 

distribution with 40 percent above them and 40 percent below 

them, did experience a real income gain of 21 percent over that 26- 

year period. It is a smaller gain than one would have liked. 

I think that it is more than simply beating zero, to use Jared 

Bernstein’s phrase, and of course it is true that the income gains 

that have occurred in the highest two quintiles and particularly the 

top 1 percent are much more rapid. Nevertheless, I think it is important to point out that even as inequality has risen the tide of 

economic growth has continued to lift the middle income boat. 

The bottom two quintiles have not experienced the same degree 

of growth as the middle quintile. The second quintile, after tax income, grew 16 percent over that period, a bit less than the middle 

quintile. As Bob Greenstein mentioned to you, the bottom quintile 

grew by a very meager 6 percent over this 26-year period. Clearly, 

there is a source of concern with respect to that group of individuals. 

The second point I wanted to briefly discuss is the role that the 

Federal tax system plays in reducing income inequality in the 

United States. It is obviously a value judgment as to how the tax 

burden should be divided among different income groups. Of 

course, that is a responsibility that you have along with the members of the Senate and the President in determining how the tax 

burden should be divided. There are difficult value judgments involved. 

As those value judgments are made, I think it is important to 

have a clear understanding of the point that we are starting from, 

and the point that we are starting from is one in which the Federal 

tax system is highly progressive. Again, I turn to the CBO data for 

this point. 

In 2005, the top 1 percent of the population paid 28 percent of 

the taxes. Now, if you were to look at individual income taxes 

alone, that number would be even more striking, 39 percent in the 

CBO data. 

Of course, we know that individual income taxes do not make up 

the entire Federal tax system. Social insurance taxes, mainly the 

social security/Medicare payroll tax, are also an important part of 

the system, and that tax, of course, is regressive by itself. The top 

1 percent, for example, pays only 4 percent of the social insurance 

taxes in the Country. 

But when CBO adds together those taxes as well as the corporate income tax and excise taxes, nonetheless, the total tax system remains strikingly progressive. The top 1 percent pays 28 percent. The top quintile, the top 20 percent, pays 69 percent of the 

cost of Government. The bottom quintile, which actually has a negative income tax burden, bears 1 percent of the overall Federal tax 

burden. 

So I think that we might have to recognize that we are starting 

from a Federal tax system that is highly progressive, and this does 

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ing a higher share of the tax burden than their before tax incomes 

would indicate. 

For example, the top 1 percent has 18 percent of the before tax 

income in the CBO data, but they do bear 28 percent of the Federal 

tax burden. So, at the top, a higher fraction of income is being paid 

to the Federal Government than at the lower income groups. 

As a third point, I want to discuss the importance of economic 

mobility, and here I will turn to the Treasury mobility study that 

was released in November. This is actually the same study that 

Jared Bernstein referred to in part of his testimony. I think it 

shows that there is a significant degree of mobility in the United 

States and that for some households looking at their annual income 

can provide a misleading picture of their true economic circumstance. 

There are a lot of numbers in that Treasury study. In my written 

statement, I have a chart that presents what I consider some of the 

more striking numbers. 

The Treasury study looked at the bottom quintile, the bottom 20 

percent of taxpayers based on 1996 income, and it looked at what 

happened to their real inflation adjusted income over the next nine 

years, so where did they end up in 2005 compared to where they 

started in 1996. 

For this bottom quintile, 49 percent, nearly half, experienced a 

doubling or more of their real income during that 9-year period. In 

fact, the average income of this group more than doubled during 

that time period. So it is clear that there was a significant number 

of low income households based on their 1996 income who in fact 

experienced very large income gains. 

There are others who experienced more modest gains. Eighty-two 

percent of this low income group experienced some real income 

gain during that nine years compared to 67 percent of the taxpayers in all income groups. 

Of course, there is no denying that, for some households, being 

at a low income level is a longer term or more permanent condition. The Treasury study does show, for example, that of those taxpayers in the bottom quintile, that 18 percent did actually lose income and that roughly 6 or 7 percent actually lost more than half 

of their initial modest income during that 9-year period. 

Clearly, there is a group there with long term difficulties that we 

have to be concerned about, but it is important to realize that looking at annual income can overstate the situation. 

The converse, of course, is that those taxpayers who are at the 

top of the income distribution do not necessarily maintain their incomes over time. The Treasury looked at the top 1 percent in 1996. 

Sixty-five percent of that group lost real income to some extent 

over the next nine years. So a majority are losing income from that 

top point compared to a large majority gaining income at the bottom. 

Sixty percent of that top 1 percent moved out of the top one percent during the nine years of the sample. Thirteen percent of them 

actually moved out of the top quintile or top 20 percent and moved 

somewhere into the bottom 80 over that nine-year interval. 

So while there is certainly no doubt that there is a group of people with long term low incomes, there is also a group with tempoVerDate Aug 31 2005 04:32 Sep 09, 2008 Jkt 043194 PO 00000 Frm 00064 Fmt 6633 Sfmt 6602 E:\HR\OC\A194P2.XXX A194P2

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rarily low incomes, and it is important to distinguish between 

them. 

In summary, Mr. Chairman, there has been a rise in economic 

inequality over the last few decades, an undeniable fact supported 

by all of the data that we have at our disposal. It is nonetheless 

true that middle incomes continued to rise during this period and 

low incomes even to a slight extent, although at an appallingly 

slow rate. 

The current Federal tax system is highly progressive. A small 

group of high income taxpayers pay a significant share of the cost 

of Government, including those programs that aid the less fortunate. 

While it is certainly true that there are some households that are 

at a long term low income position, there are others who move out 

of that position, and it is important to keep that distinction in 

mind. 

Thank you, Mr. Chairman. 

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Mr. OBEY. Thank you. Thank you all. 

Mr. Walsh. 

Mr. WALSH. Thank you, Mr. Chairman. 

It is amazing. All of you, I think, cited the same Treasury study 

and all came up with very different conclusions which doesn’t surprise me, but a lot of it is philosophy and outlook. 

I tend to be an optimist. I guess I wouldn’t be in this business 

all these years if I weren’t. 

But to Mr. Viard’s point, there is mobility. It is not that a certain 

family for generation after generation after generation is stuck in 

this lowest quintile. There is mobility. 

As we talked about, we have a very competitive society. Some 

people don’t compete as well as others. Government has to be there 

for them, but again we are providing people with equal opportunity 

and it is not all about Federal spending. It is about opportunity, 

opportunity within this system that we have. 

Mr. Meyerson suggested that since people are now polling, that 

they can’t do better, that the next generation can’t do better than 

prior generations. Does that reflect reality or does that reflect a 

preponderant message in our media today? People do reflect what 

they see on TV and read in the newspapers to a certain extent. 

In any event, I am not a Pollyanna. We have certainly had problems, but I just don’t believe that this huge disparity that we keep 

hearing about between rich and poor is real. 

The facts are, and I think they are facts that Mr. Viard mentioned, and I would like to maybe have all of you comment on these 

things. First of all, when you measure these things, how you measure them matters too. 

If, for example, the median income universe, if you look at that 

and you look at that median income universe, approximately onethird of those are very young folks who are just out of college or 

those who are retired, living on fixed incomes. If somebody has a 

fixed income, by its very nature, their income is fixed. Everybody 

else is in a more dynamic situation where they have the opportunity to grow their income. 

As we age, as our society ages, you are going to have more and 

more people on fixed incomes and therefore a wider disparity. I am 

not an economist, but it seems somewhat logical. 

If you take those, that third out, and you talk about who is left 

in that middle income, that median income group, the income per 

family goes from $46,000 a year to about $61,000 a year. The median income for married couple households under this scenario is 

$72,000 per year. Two income married couples’ average income is 

$81,000 a year. Those are not poor folks. 

I mean are you all, are three of you convinced that society is becoming the monarchy versus the serfs or are we just talking 

around the margins or do we still have a dynamic society that allows people with equal opportunity to grow through these income 

strata? 

Anybody care to take a whack at that? 

Mr. BERNSTEIN. Well, you have asked a lot of good, provocative 

questions. There is only one thing you said that I flat-out disagree 

with which is that somehow the gap between the highest and the 


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lowest income families is a mirage or what you said was you just 

don’t believe it. 

I think the best data that we have on this and I suspect every 

member on this panel including Alan would agree, in terms of just 

a snapshot of income at a point in time very comprehensively done 

is the CBO. You heard from my and Mr. Greenstein’s testimony 

just how large those gaps are now relative to what they used to be, 

and I believe those are real. 

You do make the point that there is mobility, and you are absolutely right. 

How much mobility is there? Are we a Nation of serfs and kings? 

Of course we are not. 

The problem is that when you measure this, in my view, correctly—and we probably would have to have a whole seminar to debate what correctly is—you find that there is, I think, less mobility 

than Alan suggested in his report. 

The Treasury report that we have been talking about itself disagrees on this point. Its Table 1 is quite different than its Table 

2. I think Table 2 is done correctly, and that controls for a cohort 

effect. 

As cohorts come into a sample and they age, their incomes go up 

by definition. You have to control for that. When you do, you find 

out that more than half, 55 percent, of those families who started 

out in the bottom fifth were in the bottom fifth at the end, 10 years 

later basically. 

Is that a lot? Is that a little mobility? We could argue. Those are 

adjectives that I don’t know bring that much light to the matter. 

But it suggests there is significant immobility. More than half of 

those families start there and stay there. 

Secondly, and I will be brief, unless the rate of income mobility 

is increasing, families are facing a much more unequal income distribution over time. Families do get ahead over time, unquestionably, even when you control for age the way you are supposed to, 

but they are not getting ahead any more quickly. 

Therefore, families who are moving from, say, the bottom fifth to 

the middle fifth have a lot further to go than they used to have. 

The income gaps between these income classes are much larger 

and getting across that distance, I think, is a much harder climb 

particularly when wages are stagnant. 

Mr. GREENSTEIN. A couple of points: I don’t think there can be 

disagreement that there are very substantial income gaps between 

the top, the middle and the bottom. One can disagree as to whether 

that is a problem, but there are really substantial gaps. 

The second, I think we all agree. Alan noted this. We all agree 

that inequality has widened significantly since the CBO data began 

being collected in 1979. 

Mr. WALSH. Is that a function of the unfairness of society or the 

changes in age and fixed income levels and that sort? 

Is this an inherently unfair system that we have? Is that what 

you are saying. 

Mr. GREENSTEIN. One can make judgments as to whether it is 

fair or unfair, but this is not primarily an issue of demographics. 

The population is not a lot older. Now it will become, but it is not 

a lot older now than it was in 1979. 


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There have been—there are many studies on this—very large 

gaps, widening of the gaps between the income and the earnings 

of very highly paid individuals and those of people in the middle 

of the income scale. 

Just to give you a couple figures, in 1979, the average after tax 

income of households in the top 1 percent was 23 times the average 

after tax income of households in the bottom fifth. By 2005, it was 

a 70 times ratio. Well, that was the highest on record. 

You can compare the top 1 percent to the middle fifth. Again, the 

ratio is much wider now than it was. 

Now the key point Jared mentioned is we would all be less concerned about this if the increase in inequality in a given year were 

paralleled by an increase in mobility across income groups. The 

best evidence is that there has not been an increase in mobility. 

Some studies find a decrease; some don’t. 

This is: Is the glass half full or half empty? Some people move 

out; others don’t. 

Of the people that were in the bottom fifth, the Treasury study 

shows in a given year, 10 years later 71 percent of them were either still in the bottom fifth or the next to the bottom fifth. 

Last little fact, last year, OECD issued a study of mobility in 12 

advanced industrialized countries including the United States. The 

United States ranked among the three lowest in the degree of mobility. 

You could draw two conclusions from this. One is one may 

think—probably some of us on the panel do and some don’t—one 

may think that the degree of inequality itself is too large now, but 

whether you agree with that or not, presumably, we would all 

agree that we want to increase mobility. We want a larger share 

of those at the bottom to move up, and I do think that leads to certain kinds of conclusions in various areas such as some of the education and other investments I talked about. 

Mr. OBEY. I think we are going to have to move on. 

Mr. WALSH. Thank you, Mr. Chairman. 

Ms. MCCOLLUM. Thank you, Mr. Chairman. 

Gentlemen, although I was going up and down, I can show you 

the highlighted markings from last night, staying up, reading your 

testimony. So I am familiar with your testimony, and thank you for 

providing it ahead of time to the Committee. 

I am just going to cut right to the chase here. There are two 

issues that I would like to talk to you about and how they are affecting our economy and our competitiveness. 

The first is education, and it was touched on in some of the testimony about early childhood education. It was the Federal Reserve 

Bank in Minnesota that was really involved in releasing and following up on the study. So we have taken it to heart in Minnesota 

with discussions and hearings at a State level. 

But having said that, Congress and States and local property 

taxpayers, because they have felt stressed for a long time, aren’t 

keeping up with the needs of making sure that our schools are 

ready to be globally competitive. That doesn’t mean necessarily 

having all the bells and the whistles, but it means having enough 

textbooks with current and accurate information, teachers that are 

trained in science and technology and know how to teach it in an 


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interesting and stimulating way, and ways in which our rural communities are fully integrated and hooked up to the Internet. 

In reading the testimony, I know it is not a silver bullet, saying, 

geez, if we just bring everybody up to a certain level of education, 

everything is fixed here because there are other pressures and 

squeezes on it. 

But as we watch China invest, as we watch the E.U. even change 

its higher education system, and as we know that our colleges are 

still where people come to get the very best in higher education 

from engineering and that, what should we as a Nation be doing 

from K–12 to higher ed to make sure that we are fully integrating 

our citizens? 

On a very selfish note, unless you have a fairly well educated 

population, you won’t have a vibrant democracy as well. So this 

also goes to the core of our very being as a Nation. 

Then healthcare, the discussions that I hear a lot about 

healthcare are single payer, universal, all those great things, private sector, public sector. I think one of the key pieces that is missing is what does our healthcare system look like? What does it 

cover? What is a basic guarantee to an American for what their 

healthcare will be like? 

In my opinion, if we don’t have that discussion and we allow all 

the other discussions to take place, it is going to be all the stakeholders that either have profits or a direct connection as to how the 

healthcare is delivered that are going to be making the decisions 

to what the healthcare looks like. 

I point out with Association Health Plans, we had votes in the 

last Congress which would have allowed employers to discriminate 

from even carrying basic healthcare coverage for women, obstetric 

and gynecology services. 

So healthcare and education, what should our platform look like 

if we are going to be successful into the future? 

Mr. BERNSTEIN. I just want to make a few comments about education. I will leave the healthcare comments to others. This also 

speaks to some of the issues you raised, Mr. Walsh. 

To answer your question that you posed very directly to us, I 

don’t think that you can explain away the kinds of trends we are 

talking about by citing demographics or aging. 

I think there has been an increase in the lack of fairness in the 

way economic awards are distributed, and one of the places I see 

it is in education. I think there is an intimate connection between 

income inequality and access to higher education. 

The idea is that as incomes become more unequal and the actual 

absolute values, as we have noted, of the lower income families 

grow more slowly in real terms, conversely while those at the high 

end are growing very quickly in real terms, the barriers to accessing our education system become that much steeper. There is solid 

research that shows even gifted children who come from lower income classes are having a more and more difficult time accessing 

our educational system. 

So, in that regard, I think we need to look in terms of a solution 

much more closely at policies that create access to higher education 

for children regardless of their income levels. 


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There is an interesting rule that has been applied in various 

States called the 10 Percent Rule which says if you are performing 

in the top decile of your high school, you should have automatic 

entry into your State university. I also think, as others have mentioned, that entry itself isn’t enough. These folks, these kids also 

need remedial help. 

But it is an interesting policy because it doesn’t say you scored 

high on the SATs or any standardized test. All it says is you have 

done well relative to your cohort. Your cohort may be the most disadvantaged cohort in the Country, but you have shown in a relative sense that you can perform. 

Those kids ought to have automatic admission into public universities, and they are going to need some help in remediation both 

in terms of skills and, I think, income. 

Mr. GREENSTEIN. If I could just briefly note, I would like to come 

back again to Mr. Walsh’s phrase of equal opportunity. We don’t 

have equal opportunity by income group in access to higher education or to adequate quality preschool education, and I think we 

need to address both of those. 

I think in the higher education area, we have particular problems now in the Federal tax code where subsidies for higher education delivered through the tax code are skewed to middle and 

higher income students and lower income students don’t quality for 

them because their families don’t earn enough to owe income tax. 

There is a bill, a bipartisan bill introduced by Congressman 

Emanuel and Congressman Camp to start to address that, to make 

some of the education tax credits partially refundable to help more 

lower income students go to college. I think we ought to take a serious look at that. 

I also think we need to look at—I am not an expert in the area 

but—the kinds of policy improvements and investments we need to 

make so that we don’t have a situation where children from high 

income families are getting high quality preschool education, which 

the evidence increasingly indicates is important, while children 

from lower income, working poor families and lower income working families either have difficulty getting a childcare slot at all or 

are getting more of a maintenance slot that doesn’t have the preschool education components that are important with it. 

Mr. VIARD. I will address the education question as well which 

I think is very important. 

It is certainly the responsibility of Government to ensure that everyone receives an adequate elementary and secondary education. 

I think the preschool also is important. I agree with Bob Greenstein on that and that it is important to give people the basic skills 

they will need in life and in the workforce. 

I also, of course, favor equal opportunity for higher education. 

There may be more that can be done there. 

I do think it is important to realize the tax breaks that we have, 

of course, are one component of how we help people afford college. 

Those, of course, don’t apply as much at the lower end of the scale, 

but obviously we also have public universities and a variety of programs on the spending side that are available at the lower income 

levels. 


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I think that it is important to provide equal opportunity for higher education, and yet at the same time we have to be realistic 

about what can and cannot be accomplished by that. 

On the one hand, the information we have from the labor market 

suggests that college graduates and people with higher degrees are 

being rewarded to a greater extent than in the past, but it is unclear to what extent that is a reward to the education credential 

per se and to what extent it is a reward for particular skills, cognitive skills and others that are more likely to be possessed by 

those who have gone to college. 

To the extent that it is the latter, simply enabling people to go 

to college, while a good thing in and of itself, may not yield as 

many results as we would all like to see in terms of reducing earnings inequality. There, too, I think it is important to ensure that 

the adequate education is provided at the elementary and secondary levels when many of those skills are developed. 

Mr. MEYERSON. Actually, in response to that, let me just say that 

it is still the case that a clear majority of the American people in 

the American workforce do not have BAs or BSes after four years 

of college. 

If you look at issues around income stagnation in the United 

States, I think you want to look as well at the issue of vocational 

education, skill development and more credentialing for people who 

don’t go to college because the sharpest declines in income, if you 

look at the American workforce over the last 50 years, are among 

folks who have high school degrees but no more. It is the work 

lives of those people that have become less remunerative over the 

years. Unless you can posit an America in which everyone is going 

through college, we really need to address those folks in particular. 

Mr. OBEY. Thank you. 

Mr. Regula. 

Mr. REGULA. Thank you, Mr. Chairman. 

Along the lines of what you have just said, should we have policies that will encourage the development of two-year institutions 

that are focused on skills for the marketplace and would that address some of the concerns you have expressed here today? 

Mr. MEYERSON. It sure would, and I am always happy to agree 

with a member of your party because these instances are not always that common, but I think you are absolutely right. I think we 

have fallen down on specific educational programs for people who 

are going to be going into those trades and those crafts. 

If you look at the project that the Bureau of Labor Statistics 

comes out with every year as to what are the jobs of the future, 

what are we going to be creating, it is kind of an alarming highlow list. You can be a cashier at Wal-Mart. You can be a sales clerk 

or you can be an attorney, but it is the middle stratum that we, 

I think in many ways, need to concern ourselves more with. 

And so, I think, Congressman, you are absolutely right. 

Mr. REGULA. Along the same lines, as they develop income statistics, do most of these case studies factor in the value received by 

people in the lower income in housing grants, food stamps, a whole 

series of things? Wouldn’t that have to be considered part of the 

totality of an income in making comparisons? 


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Mr. GREENSTEIN. This is one of the reasons many of us like the 

Congressional Budget Office data series because they do that, yes. 

Mr. REGULA. I know they do that. 

I would like to ask you, Mr. Greenstein, and this is a budget 

question sort of unrelated to this. What do you think of the potential for a two-year budget whereby the second year would be spent 

in oversight? 

It seems to me in my experience here that we don’t do enough 

oversight and, if we could adopt a two-year budget, it would enable 

administrators to plan more efficiently in the operation of a park 

or a program of whatever and, in turn, give us an opportunity to 

do more oversight. I would like your observation on that as a budget expert. 

Mr. GREENSTEIN. Well, I think different budget experts have different views on this. I am not a proponent of the two-year budgeting, and I think my view is probably shaped some by my experience in developing budgets for a Federal agency back in the late 

1970s. 

But what concerns me is if you are in an Executive Branch agency and you are developing a budget, you are delivering your budget 

to the department, your department heads maybe in July. It goes 

to OMB in September. 

If you think of a two-year budget, the lag between when the 

basic planning gets done and the year for which the funding would 

be provided, the gap is so long that my concern is we would end 

up providing some money for things that are no longer needed, we 

wouldn’t meet other things that emerged, and I fear that the number of supplemental appropriations bills the Congress would have 

to do would grow so much that I am not sure you would get that 

much of a benefit in terms of the timing. But my main concern is 

the timeliness question. 

Mr. OBEY. Would the gentleman yield? 

Mr. REGULA. Yes, I yield. 

Mr. OBEY. I simply think one of the things that gives me considerable disquiet is the fact that I think that because of the difference in rules between the House and the Senate, the Senate 

would absolutely have a field day if we went to two-year budgets 

because we would be relying on supplementals all the time and 

they could throw anything but the kitchen sink into a must-pass 

supplemental. 

Thanks for yielding. 

Mr. REGULA. You have discovered that, have you? [Laughter.] 

Mr. REGULA. How much time do I have left? 

Mr. OBEY. One minute. 

Mr. REGULA. Is there any analysis available—well, I guess CBO 

does this—in which they score all the extra benefits in arriving at 

the income disparities? I think you are saying that the CBO budget 

does do that Yes, okay. 

I thank you, Mr. Chairman. 

Mr. OBEY. Thank you. 

Ms. Lee. 

Ms. LEE. Thank you, Mr. Chairman. I want to thank our panelists and thank you for this hearing. 


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Let me say a couple things. First of all, I believe like many believe that budgets really are moral documents and should reflect 

our values and sense of ethics as a Nation. I am really pleased that 

we have Hubert Humphrey’s quote reminding us of that. 

But as I look at this budget, we are out of whack with what I 

think Hubert Humphrey was trying to convey. I think this budget 

shows that, first of all, we are wasting our limited resources on a 

war that did not need to be fought. 

So I want to ask, I guess, Mr. Greenstein, if you have made an 

assessment or an impact as it relates to the war. Has it been a 

drag on the economy? 

We see now unprecedented amounts of money going into our 

military budget. Yes, we all want and believe and know we must 

have a strong national defense. But when you look at some of these 

Cold War era weapon systems, the waste, fraud and abuse that is 

being funded at taxpayers’ expense, and then when you look at this 

terrible budget that cuts the children, the safety net, our senior 

citizens programs, you have to wonder what is going on there. 

Then the second question I have has to do with the impact of this 

budget on people of color in our Country and communities of color 

because when you look at income inequality and when you look at 

the programs that have been proposed in terms of the cuts, it is 

shameful what I see is happening. 

You have the national unemployment rate according to the Bureau of Labor Statistics, in January, it was about 4.9 percent, but 

yet in the African American community it is 9.2 percent, twice 

that. In the Latino community, it is 6.3 percent. 

So how do we move forward as we look at income inequality in 

its total on everyone in our Country and then specifically on communities that are being hit the hardest? 

Mr. GREENSTEIN. I don’t know that one could say that there is 

an adverse economic impact at this point in terms of the defense 

spending, but there has definitely been an impact on the budget if 

one uses CBO data and looks at the swing from surpluses to deficits. 

In other words, you take in 2001, as you will recall, CBO projected surpluses as far as the eye could see, and we have had deficits rather than surpluses. If you look at the years through 2007 

and you compare the forecast at the beginning of the decade of a 

surplus with the deficit that actually occurred, you find that a little 

under a third of the deterioration fiscally was due to economic and 

technical factors largely beyond policy-makers’ concerns but more 

than two-thirds of it was due to legislation that was enacted. 

Then if you say, okay, what was the cost, where did the money 

go for that legislation that was responsible for about 70 percent of 

the budgetary deterioration? About 48 percent of that cost is tax 

cuts. About 36 percent is security-related spending. Now that 

would include Iraq and Afghanistan and Pentagon increases and 

homeland security and the global war on terror. 

What particularly strikes me and I should note that I am not an 

expert on the defense budget, and others who know this better 

than I, I hope will look into this at depth. 

But what strikes me is that under the President’s budget, the 

funding level for defense in 2009 exclusive of Iraq, Afghanistan and 


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the global war on terror, exclusive of all those things, the non-war 

on terror part of the defense budget, would be $150 billion or 40 

percent in real terms higher than it was in 2001. 

The question that I think needs to be asked is: Are we doing 

enough to scrutinize those parts of the defense budget that are unrelated, regardless of one’s view on Iraq and so forth? 

Putting that to the side, for the base part of the defense budget 

that is not related to that, are we giving it the same level of scrutiny that we are giving the domestic side of appropriations? I am 

not sure we have in recent years, and I think we need to. 

Mr. VIARD. I would like to make a few comments on that. I think 

it is important. 

Bob Greenstein mentioned earlier the fact that non-defense discretionary spending had been falling and over a long time period. 

It depends on the time period you look at, but it is right that if 

you look at 1980, we were spending 5.2 percent of GDP on non-defense discretionary and that is down to 3.7 percent as of last year. 

But I think it is interesting to note that defense spending has 

fallen as a share of GDP over exactly that same time period despite 

the fact that we are at war in Iraq and Afghanistan today when 

there was no similar war in 1980. 

We were spending 4.9 percent of GDP on defense at that point, 

and we are now down to 4 percent of GDP even with the spending 

in Iraq and Afghanistan. This is last year’s number, so it includes 

all of the money that was spent in Iraq and Afghanistan, whether 

it was in the supplemental appropriation or in the regular appropriation. 

I think, more generally, neither type of discretionary spending is 

the key to the long term budget trends that we face. Bob and I are 

in complete agreement on that. 

But I do think it is important to realize, of course, every dollar 

spent on defense, every dollar spent on anything else is always an 

opportunity cost. That dollar is not available for other purposes 

that it could be used for, and every dollar needs to be scrutinized. 

But we actually have seen a downward trend in defense spending. 

Mr. BERNSTEIN. Can I make a quick comment on that? 

Mr. OBEY. Just very briefly. 

Mr. BERNSTEIN. Very brief, it picks up on something Alan just 

said. Basic economics reminds us that the opportunity cost of the 

conflict is not simply the hundreds of billions that we have sacrificed so far. 

We also have to consider the cost of foregoing the productive investments we might have made otherwise with those dollars. In my 

testimony, I outline a fairly detailed set of infrastructure investments, human capital investments that I believe would have strong 

offsetting effects to income inequality. 

So it is not simply the economic cost of war. It is the opportunity 

cost of not engaging in what I think are more productive investments. 

Mr. OBEY. Mr. Rehberg. 

Mr. REHBERG. Thank you, Mr. Chairman. 

Mr. Greenstein, I would like to go back. I apologize for coming 

in and out, and I heard part of your testimony. I have looked 

through your testimony. 


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I am trying to make a determination. Have you stated a percentage of gross domestic product that you think that discretionary 

spending ought to achieve? 

Mr. GREENSTEIN. No, I hadn’t in the testimony. 

Do I have a specific? I have not really done that. I could come 

up probably with some various areas that I would be happy to reduce funding on, but the changes regardless of which party was in 

control of actually getting them through would be near zero. 

So the level one need would depend in part on what one could 

do in some of those areas, but in particular what I don’t think I 

would like to see is a further continuing decline in the percentage 

of GDP that goes to domestic discretionary programs. I think they 

are now a little over 3 percent of GDP. 

Mr. REHBERG. Philosophically, would you believe that as GDP increases it ought to be a percentage of that increase like an inflationary increase similar to what we do with most of the budgets or 

is that going too far? 

Mr. GREENSTEIN. If I thought we were adequately meeting current needs in domestic discretionary, then I would recommend that 

they stay even with inflation and population growth which would 

be smaller than staying, lower than staying constant as a share of 

GDP. 

Mr. REHBERG. Objectively, how would you, under this theory 

then, ever in your mind determine that we are spending enough 

money? 

I would assume under your philosophy we are never spending 

enough. 

Mr. GREENSTEIN. I wouldn’t say never. I think there are particular areas—I have talked about some of them here today—that 

I think we are under-funding. I think one has to make some hard 

choices. 

At a minimum, I would keep domestic discretionary constant as 

a share of GDP until we do a better job of meeting some of these 

key needs. Ideally, I would probably go up a little bit. 

But I do want to agree with Alan here and then bring it back 

into this context. If at some point we are able to make tough 

choices that involve, first and foremost, system-wide healthcare reform, this isn’t just Medicare and Medicaid, system-wide reform 

that slows the rate of growth in healthcare costs, we make decisions that close the long term social security shortfall and—you 

and I would probably not agree on this—I think we are going to 

have to raise more revenues. I don’t think you can do it all on the 

spending side. 

If we make the tough choices elsewhere, there would be room in 

the budget to do somewhat more. Is it one percentage more? I am 

not talking about a lot more as a share of GDP on the discretionary 

side. But the big decisions are the ones that have to be made on 

healthcare revenues and, to a lesser degree, Social Security. 

Mr. REHBERG. The problem with the hearing today—and I know 

that you had probably been given very specific not necessarily talking points but ideas to present to the Committee—is your brief discussion of mandatory or entitlement spending and how that is in 

fact going to be the big elephant in the room. 


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I guess, philosophically then, would you agree that we should tie 

discretionary and non-discretionary Health and Human Services 

funding together as a percent of GDP, which according to my calculations is somewhere around 20 percent as opposed to the 3.7 

percent number I have been hearing thrown around? 

Mr. GREENSTEIN. To get to 20 percent, you would have to be including mandatory spending. 

Mr. REHBERG. That is what I am, yes, which you can’t ignore. 

You can ignore for this hearing because probably your charge was 

to discuss that, but we can’t ignore that any more than I would certainly. 

Mr. OBEY. Would the gentleman yield on that? 

Mr. REHBERG. Yes, sir. 

Mr. OBEY. Nobody has any instructions to ignore or include anything. We simply took note of the fact that we have no jurisdiction 

over mandatorys, and so while we may have opinions about it the 

operational question is what we do on the discretionary portion of 

the budget. 

Mr. REHBERG. And I didn’t mean to suggest that the Chairman 

was doing that. It was the topic of the hearing is discretionary 

spending but if we are going to bring in defense spending and inefficiencies, which I happen to agree probably with the Chairman 

and the speakers that I think that defense and homeland security 

ought to be on the table as well for the waste, fraud and abuse. 

So we tend to agree on that. 

But if we are going to have a meaningful discussion about GDP 

and discretionary spending and percentages, while esoterically it is 

kind of fun to talk from an economic standpoint, but it is not very 

practical because it takes the human aspect of the Appropriations 

Committee out when we make a determination. 

I don’t like it any better when members of my party say, well, 

we need to set defense spending at 4 percent of GDP and that is 

what our spending is going to be. I don’t find that to be any more 

relevant to human needs and how we are going to spend our Federal dollars. 

Let me ask for a point of discussion of the four gentlemen if I 

still have the time. 

Mr. OBEY. Thirty seconds. 

Mr. REHBERG. Then I will wait for another round 

Mr. OBEY. Go ahead and ask. You have 30 seconds. 

Mr. REHBERG. No. It will take too long. I don’t mind if you go 

ahead. I don’t mind waiting. 

Mr. OBEY. Mr. Kennedy. 

Mr. KENNEDY. Thank you, Mr. Chairman. 

Could you all comment on the real impact of what you see the 

sub-prime lending crisis having on the economy and in the ongoing 

years and the underestimation of that in terms of Wall Street even 

today? 

Even after the impact that we already know it has had, how 

much do you think it still has been underestimated and to what 

extent regulatory-wise in Government the processes in terms of 

transfer of wealth? 

We talk a lot about taxes and regulation and what it does to 

stimulate growth. Can you put in the context of the last several 


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years about how people’s primary wealth is in their home and yet 

for the middle class their home values are now, because of this crisis of the fall of real estate, really stagnant and because of this regulatory relaxation that allowed people to speculate so freely and 

widely that we now have the very wealthy be able to have such a 

windfall, and yet the middle class are struggling to keep their 

heads above water, if you could? 

Mr. MEYERSON. Let me address that in a couple of ways, Congressman. 

I think a lot of what is behind the sub-prime housing crisis gets 

us back to one of the larger topics, not that that isn’t a huge topic 

but one of the larger topics of the day which is the relative falling 

behind and relative stagnation of median American incomes. 

Jared, help me out here. You said that since around 1980 the 

middle quintile’s income had increased, what was it, 26 percent? 

Was that the figure? 

Mr. BERNSTEIN. Yes. 

Mr. MEYERSON. Well, let’s compare that to the relative increase 

in housing costs or medical care or college since 1980 which is way 

higher than 26 percent. 

There was actually an op-ed column Monday in the Washington 

Post, and I will merely say one should not believe everything one 

reads on the op-ed page of the Washington Post, speaking as a 

Washington Post op-ed writer, by Michael Hill who is not a columnist but a house builder executive. He is a home builder. 

It pointed out that 40 years ago the median price of a house in 

the United States was about twice the median household annual 

income. Twenty years ago, it was about three times higher. In the 

past 10 years, it is about 4 times higher. In most metropolitan 

areas, the gap is a lot wider than that. 

And so, in a broad sense, Americans have been keeping up by 

going into greater debt and, obviously, we have seen in the case of 

many Americans by taking out mortgages which really weren’t all 

that great an idea to begin with. 

So I think when we talk, as we have earlier today, about median 

incomes of Americans and whether they are rising in compared to 

what. They are not rising compared to some of the fundamental 

costs that Americans need to spend on housing, medicine, higher 

ed, et cetera. 

Then on the regulatory front, I think it is really clear across the 

board that Wall Street as a metaphor and as a reality has created 

all kinds of financial which, as we found out over the last six 

months, they themselves don’t understand the full implications of 

at times, that have created pockets of risk that have gone largely 

undetected. 

From my point of view, and I am sure our economists witnesses 

can get into this in greater detail, but from my point of view, we 

clearly need a financial system that is more transparent to borrowers, to lenders, to some of the banks that created them in order 

to reestablish a confidence in our financial system, which confidence, by the way, is not shared by many members of the financial system because that has been the whole point of pumping liquidity into our banks. Our banks, nobody knows what’s on anyVerDate Aug 31 2005 04:32 Sep 09, 2008 Jkt 043194 PO 00000 Frm 00084 Fmt 6633 Sfmt 6602 E:\HR\OC\A194P2.XXX A194P2

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body else’s balance sheets these days, and they have some questions as to what is on their own balance sheets. 

Mr. KENNEDY. Right, right. 

Mr. MEYERSON. That is a pretty dangerous situation. 

Mr. KENNEDY. Can I ask? 

Mr. OBEY. If you can take 20 seconds because the gentleman’s 

time is expired. 

Mr. KENNEDY. If I could, the mechanisms that you were talking 

about, Dr. Bernstein, about helping to grow the middle class. We 

have the tax system that is all designed to help those with wealth 

save, but it is not designed to help those who need to save, save, 

because they don’t have any wealth to save. So can you comment 

on the mechanisms to help do that? 

The British have the baby bond program where when you are 

born, the Government allows you to have a $500 setaside and then 

it is matched on a sliding scale much like the reverse earned income tax credit. Then it is rolled into, basically, a 401(k). When you 

are 18, you can turn that over for a college education or for a savings account for healthcare and the like. 

Do you think those kinds of programs that are designed and an 

automatic checkoff so that you don’t have voluntary checkoff? 

Could you comment on that? 

Mr. OBEY. Could I ask you to be very, very brief because the gentleman’s time is expired? 

Mr. BERNSTEIN. Okay, I will try to be very, very brief. 

The automatic checkoff is an excellent idea. That would be a simple change that would help increase precisely those kinds of savings. 

The idea of some sort of a demi-grant or a bond for middle class 

or low income people or in the case of a demi-grant for everyone, 

it has been discussed and perhaps could be helpful too. 

But I think the biggest challenge facing middle income families 

trying to save is the fact that the market basket of goods that they 

want to and aspire to consume, what we might sort of think of as 

the American dream package of the middle class, the idea that you 

could buy a reliable, decent home in a safe neighborhood and have 

an income from the labor market that enables you to pay for that 

package while saving for college tuition and paying for healthcare. 

That is where the problem is and that is where I think middle 

income families have been dis-saving and borrowing and becoming 

excessively leveraged and now are facing the costs they are in and 

going through a period of probably great de-leveraging. Probably 

we will see less savings as folks try to pay down their debt. 

Mr. OBEY. Thank you. 

Next is Dr. Weldon, but let me simply say I am somewhat concerned about his medical abilities because there are two people on 

this Subcommittee who seem to have a bug, a retirement bug with 

Dr. Weldon and Mr. Peterson and Mr. Regula, three. My God, four 

in a row. What did we do? 

Mr. PETERSON. We are moving up. [Laughter.] 

Mr. PETERSON. We don’t want to be stuck with him. 

Mr. OBEY. I would think that the good doctor could find a way 

to stop this epidemic. I don’t know what is going on here. 


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Mr. WELDON. Yes, I think one of the things that could quell the 

epidemic is if, well, I don’t want to go there. 

Mr. PETERSON. We are not going to buy. 

Mr. WELDON. Let me just thank the Chairman for this hearing. 

I wish I had been able to stay for all of it. I think this is a very 

interesting topic, and certainly you have a very interesting panel 

here. 

I would have stayed and listened to everybody, but it seems that 

ever since I announced my retirement I am busier than I ever was. 

Hopefully, that will begin to slow down. 

The question I had I was going to direct it to Dr. Viard. You go 

and stay at a hotel. Over the last 10 years, it is common for people 

to say were it not for all the illegal aliens working at this hotel the 

room rate would be higher, and you hear people say that at restaurants. Certainly on a construction site, construction costs would 

be higher. 

One of the most dramatic examples of this phenomenon of illegal 

immigration depressing wages in the lowest strata of our workforce 

I saw in a news report of a Swift’s meat packing plant. I think it 

was somewhere in the Carolinas. Immigration came in and discovered about 80 percent of the employees there were not legal and 

shut the plant down. 

The interesting part of the story is they reopened two weeks 

later, fully staffed up, suggesting that these claims that illegal 

aliens are doing what Americans don’t want to do is not really true. 

But, lo and behold, they have to offer higher wages for the workers 

that were there. 

Interestingly, I think a very high percentage of them were African Americans, suggesting that this illegal immigration issue is 

most acutely affecting, at least in some areas, the African American community in terms of their jobs and their wages. 

Now I know this is a complicated issue because I guess people 

in the second and third and fourth quintile are able to stay in hotels at a lower cost and do an expansion on their property at a 

lower cost, but I don’t think this has been commented on, the impact that illegal immigration has. 

I knew Mr. Meyerson was commenting, and I caught a little of 

your concerns about this gap and how much of this ever widening 

gap in wages is illegal immigration playing a role in this. If we do 

more as a government to try to stem this, is that going to have a 

positive effect on the people that I think we are most concerned 

about in this hearing, the people who are struggling to make ends 

meet and afford benefits and things like that? 

Mr. VIARD. Well, this is certainly an important issue. I am not 

an expert on immigration, but I can try to summarize what I understand from the literature that has looked at the economic effects 

of illegal immigration. 

I think that you are right, Mr. Congressman, to pinpoint the impact at the lower wage levels because the evidence that economists 

have gathered demonstrates, I think, that illegal immigration has 

not had a depressing effect on wages throughout the income distribution but that there probably is some depressing effect at the 

bottom of the income distribution. 


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Economists expect that if there is an increase in the supply of 

labor, whether it is from illegal immigration, legal immigration, 

more people in the United States deciding to work, anything, that 

it will tend to depress the wages of those who are the closest substitutes for those workers but that there are economic gains for 

other people in the economy who could take advantage of those 

services more cheaply. 

Some illegal immigrants probably are performing work that 

would not be done by Americans, and so in some cases there may 

not be a depressing impact on anyone’s wages. But, in other cases, 

I think there is no doubt that wages in certain occupations and 

some of the ones you mentioned, Mr. Congressman, are depressed 

to some extent by the presence of illegal immigrants. 

Obviously, that having been said, it remains an open question exactly what policy should or should not be adopted to address the 

situation of illegal immigration. 

Mr. MEYERSON. If I could just add to that for one moment, you 

are absolutely right that there are particularly small sectors and 

maybe not so small sectors of the American economy where this 

kind of replacement has gone on, but in some of them what determines wage level actually is rate of unionization. 

If you look at what determines, since you used the example of 

hotels, wage levels in hotels, there are, and I can assure you this 

is maybe the one area of economics where I may actually have 

more data than the three distinguished economists on my left. 

Hotel contracts essentially vary from city to city. What the person 

who makes the bed in your room makes depends really on the percentage of hotels that are unionized. 

There are hotel locals in the United States, hotel workforces in 

the United States that are very, very heavily immigrant and, in 

some cases, I bet you fairly highly undocumented immigrants, people who are not here with documentation, where there may be a 

relatively decent level of wage anyway simply because of the rate 

of unionization in that particular city. 

Mr. OBEY. The gentleman’s time is expired. 

Mr. WELDON. Thank you, Mr. Chairman. I thank the witnesses. 

Mr. OBEY. Mr. Simpson. 

Mr. SIMPSON. Thanks, Mr. Chairman. Before you start timing 

me, I want you to know that today it speaks of the two-year budget, Mr. Chairman. 

Mr. Chairman, Mr. Domenici says today we are going to go to a 

two-year budget cycle. I want you to know. He says that this year 

could be different since more members are complaining about the 

increasing difficulty in pushing annual spending bills through both 

chambers. 

Mr. OBEY. I would be more interested in Mr. Domenici’s opinion 

in the appropriations process if, with his long experience on the 

Budget Committee, he had been able to get a budget resolution 

through in two of the last three years. 

Mr. SIMPSON. I agree with you on that. 

Anyway, I appreciate the comments here today in this hearing, 

and I agree with the comments that have been made about education and the focus that has been placed on education and the 

barrier that has to mobility and so forth. 


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I don’t think we have done an adequate job in education in this 

Country over the last 20 years. We need to do a much better job, 

and we fail to invest in that at our own peril, quite frankly. That 

is for all people. There are different ways of doing that, whether 

it is two-year schools, whether it is community colleges, whether it 

is vocational education and other types of things that need to be 

done. 

One thing I have always been interested in is we always seem 

to measure an education system by how many people go to college. 

I don’t know that everybody has to go to college, but we do have 

to be trained for our next job. 

The average, what is it? The average high school graduate today 

is going to be retrained for a completely new job seven times in his 

lifetime. If we don’t have the training available for that, they are 

not going to have the ability to move within this mobility scale that 

we are talking about. They won’t have the mobility to be able to 

move from one quintile to another, to enrich themselves. 

What other factors are there that contribute to the loss of being 

able to move? Certainly, education is an important one, but are 

there other factors? 

Mr. BERNSTEIN. Yes, there are a set of factors that, and each one 

of them explains a small part of the change. Economic research has 

not found a silver bullet that explains 51 percent. 

But the other factors have to do with the loss of higher paying 

jobs for non-college-educated workers particularly in the manufacturing sector. That has contributed probably 15 to 20 percent of the 

increase in wage inequality. 

Mr. SIMPSON. Have those been replaced with high tech jobs? 

Mr. BERNSTEIN. To the extent that those have been replaced with 

high tech jobs, those haven’t gone to the non-college-educated workers who have been displaced from manufacturing. In that sense, 

technology itself is implicated in higher levels of inequality. I am 

not saying it is a bad thing. In fact, if anything, it speaks to your 

point that we need to train workers for the types of jobs we are 

creating. 

But it is important to recognize something that was mentioned 

earlier, that the quality of jobs that we are creating is high at the 

top and pretty low at the middle and the bottom. If you actually 

look at the types of jobs that we are projected to create over the 

next decade or so, you will see home health aides. You will see security. 

These are of the 10 occupations adding the most jobs over the 

next 10 years. About six or seven are demonstrably low skill jobs. 

They are home health aides. They are security guards. They are 

cashiers, folks in retail. It is the quality of those jobs that is hurting. 

When a worker is displaced from a high value-added, unionized 

manufacturing job and ends up in the lower end of the service sector, they take a big hit and that is part of the inequality problem. 

Mr. SIMPSON. Then if you talk about inequality in incomes, you 

assume that income is related to productivity somehow. You assume that there is some relationship. 

Mr. BERNSTEIN. Not as much as we should. 


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Mr. SIMPSON. Is there a productivity disparity that is growing 

within the Country? 

Mr. BERNSTEIN. A huge disparity, it is a real focus of my written 

testimony. I have a table in there that shows for about 25 years 

the median income—you could look at the wage of the typical worker as well—was rising in step with productivity. They both grew at 

around close to 3 percent per year. They doubled between the mid1940s and the mid-1970s. 

Since then, productivity has accelerated. By the way, over the 

last 10 years, it has accelerated again. Yet, the typical earnings 

and the median family income have been flat. 

Since 2000, productivity is up 19 percent. That is a real success 

story about the American economy. But the median wage is flat, 

and the median family income is flat, and the income of working 

age families is down about 4 percent. So there is a big productivity 

gap, and it is one of the reasons why inequality is so problematic 

right now. 

Mr. SIMPSON. You know this goes back to one of the other things 

that Harold mentioned. You said in your testimony that Americans 

now believe their children will have a tougher time than they had. 

I hear that all the time, and I think that is probably true. 

But I think there is another factor that contributes to that. One 

is that 30 or 40 years ago when my parents were in the workforce 

and so forth, jobs existed such that you graduated from high school 

and you went to work at a factory and you could pretty much be 

assured you were going to retire from that factory if you wanted 

to. 

Those jobs aren’t there anymore, and we are animals that like 

security. We like to know the sun is going to come up tomorrow 

like it did today. Those types of jobs aren’t there anymore. 

I think there is a great deal of insecurity in the world where people are going to have to be retrained for completely new jobs. Seven 

times in their lifetime is what I hear, and that creates uncertainty 

that is going to put enormous strains on all of our institutions. 

Governmental, religious, social institutions are going to be strained 

by this, I think. 

Mr. MEYERSON. And, it is also a regional concern. When there is 

a dominant manufacturing industry in a particular place such as 

the State of Michigan, it doesn’t follow that the new jobs for which 

people need to be retrained are going to be popping up in the State 

of Michigan. 

So, in addition to the economic instability, there is really a kind 

of the economy moves out on you. It moves out on you sometimes 

geographically as well as in your budget, and that is a big problem 

as well. 

Mr. SIMPSON. That is what trade does, quite frankly. We may get 

more jobs from trade, but they are not going to be jobs that we lost 

to trade. They are going to be in other areas. 

Mr. BERNSTEIN. Well, that is why many of us argue that it would 

be very useful to take the benefits from our expanded trading regime from globalization and plow them into improving the quality 

of precisely the types of jobs we are creating. These jobs lack pension coverage. They lack health coverage. They often lack the kind 

of career training you are suggesting. 


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I have suggested in my arguments for offsetting these inequality 

trends, investing in precisely those areas of these jobs. 

Mr. KENNEDY [presiding]. Mr. Peterson. 

Mr. PETERSON. Thank you very much. 

I am going to try to be brief here, but I wanted to lay out my 

thought processes. 

I have been in government 39 years: 8 at the local, 19 at the 

State and my 12th year here. When I first got in government, it 

was an urban-driven government at the State level, but the urban 

areas were declining. The wealth was starting to move out. The 

successful wanted to live in the suburbs. 

As I have been in government, we have had another shift. The 

merging of banks, the merging of corporations, the merging of utilities have moved the wealth to the suburbs and taken it out of the 

rural. 

So opportunity in the rural continues to decline. Farming is on 

the decline. Rural was sort of a fertile bed for reasonably priced 

manufacturing, lots of manufacturing plants out there. 

So I see us developing two different economies in America, and 

the rural economy doesn’t really have any swing. They don’t have 

much to say. At the same time, we have the globalization of the 

economy, and that is over. That has happened. 

Now, in the beginning, we were trading pretty well. We had more 

winners than losers. Now I think we have more losers than winners, and you sort of all stated that. 

But, currently, what is driving the jobs out of this Country is the 

inability of American manufacturing, processing, whatever they are 

doing. In a global economy, energy costs are number one. We have 

the highest energy costs in the world. 

This Congress isn’t going to deal with that. We have ignored it. 

It never was a problem until the last eight years, but I can guarantee you this Congress is not going to deal with available, affordable energy for America, so that cost driver. We are putting $181 billion into the economy that energy took 

out. That is why Americans don’t have money to spend. To heat 

your home, to drive your car takes a bigger part of your income, 

so you don’t have any money to spend. I was a retailer all my life, 

so I understand people spending money. 

So we are going to give $181 billion to Americans so they can 

spend it, and that will help, but it won’t solve any problems because if we don’t deal with the cost factor. 

This Country has always been the big dog. For the first time in 

the history of this Country, we are not the only big dog anymore. 

We are just one of the dogs, and we are going to have a lot of countries nipping at our heels. I mean there are developing nations everywhere, not just China, India, South America, Malaysia. Developing countries are going to compete with us. 

If we don’t have a competitive model for people to process, manufacture and do things, we won’t have jobs for working people. That 

is my view. We have to learn to compete in the world marketplace 

we are in. 

I would like you to respond to that. Do you agree with that or 

disagree with that? 

Mr. BERNSTEIN. I agree with a lot of what you said. 


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I guess you probably know better than I. I am maybe less skeptical than you in that this body won’t address the energy challenges we face, but you are sitting there and I am sitting here. 

That is discouraging to hear because it is obviously a critical point. 

I think that the issue of America’s competitiveness, bringing it 

down to the level that we are talking about today because you are 

raising many big global issues, should be discussed in the current 

context in the following way: We are facing a downturn, and I 

agree with you that a stimulus package that is appropriately crafted can and should help. The package that we discussed, by pumping a percent or so of GDP in the economy will help, but it won’t 

solve the fundamental problems. 

Now one of the problems that we have, that I articulate in great 

detail, in some detail in my written testimony, basing it off the 

work of economists who have looked into this quite carefully, is 

that in order for our Nation to compete there are investments that 

the private sector won’t make, public sector investments in infrastructure that really do make a big difference in the Nation’s productivity. 

This has to do with our infrastructure in transportation, roads, 

bridges, water, sewage systems, ideas that his Committee has 

talked about and are fundamental. 

Mr. PETERSON. Because we don’t fund those. 

Mr. BERNSTEIN. No, no, but I know that the Chairman has raised 

interest in these issues. 

I am speaking broadly. For the Congress to investigate the productivity-enhancing effects of a new program that invests in productive infrastructure of the type that I have discussed, I think 

would help a great deal in offsetting the letter D grade that the 

American Society of Civil Engineers has given this infrastructure. 

We have the capacity to compete globally, but that capacity is diminished if our own public infrastructure is in deficit, and so I 

would argue that that is part of the answer as well as the human 

capital investments that we have spoken of here. I think we all 

agree that the quality of our workforce is a critical component to 

solving the problems you raise. 

Mr. PETERSON. Your question of the energy issue——

Mr. OBEY. [presiding.] Your time was expired. 

Mr. PETERSON. Whew, that was quick. 

Mr. KENNEDY. I would like to give you a little bit more, but we 

really have to stick to the clock. 

Mr. PETERSON. Oh, I didn’t realize. I will be real quick. 

On the energy issue, less than two decades ago, we were self-sufficient. We are now 66 percent dependent on foreign oil, and that 

is increasing 2 percent a year every year I have been there. There 

is nothing on the horizon being considered by this body or the Senate that is going to change that. 

Renewables are wonderful. I am for them all, but their growth 

is minuscule. Until we have real energy to bring prices down, until 

the renewables play a bigger role, we are turning our back on 

them. 

The one last issue I wanted to share with you is the other thing 

that I have seen. 


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Mr. OBEY. I am going to have to ask you to take 20 seconds because we have to get to vote, and I haven’t had any questions yet. 

Mr. PETERSON. Oh, I am sorry. 

Technical training, it was mentioned by Mr. Regula. We exceed 

in academic training that trains the people who run the companies. 

They are running companies that are doing business all over the 

world. But to train workers in this America, I think we fail abysmally, and my State is even worse than the Country, Pennsylvania. 

We don’t even have a community college system available to most 

Pennsylvanians. 

Mr. BERNSTEIN. Agreed. 

Mr. OBEY. I am sorry we have to bring this to a close. I am told 

we are probably going to have, what—four or five votes—four votes, 

which means if we do that we would keep you waiting here until 

1:30. I don’t want to do that. So I am going to forego my questions 

and simply thank all four of you for appearing. 

We can debate what the extent of the gap is but, Mr. Bernstein, 

you said that we had seen about $400 billion transferred up the income scale from the bottom 90 percent to the top 10 percent over 

what period of time? 

Mr. BERNSTEIN. It is only over 2003 to 2005. 

Mr. OBEY. I would like to have that race car if I could. 

It just seems to me that also, Mr. Viard, that when I look at your 

chart on Figure 1, it certainly does show that the lowest, the second lowest and middle quintile have edged up somewhat in terms 

of income gain. But if you complete the picture with the top brackets, that line goes off the graph. The top 1 percent at 228 percent 

as opposed to less than 1 percent a year for the middle. 

The only reason I emphasize that is to make the point that we 

will be making decisions on appropriations that will, in very modest degrees, impact the families who are experiencing this very, 

very, very slow growth in their own incomes. It would be kind of 

nice if we focused our efforts on those elements of the bill before 

us that actually focus on folks who need the help the most. 

Thanks very much for coming. I appreciate it. 


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THURSDAY, FEBRUARY 14, 2008. 

OPPORTUNITIES LOST AND COSTS TO SOCIETY: THE SOCIAL AND ECONOMIC BURDEN OF DISEASE, INJURIES, 

AND DISABILITY 

WITNESSES 

KENNETH E. THORPE, PH.D., ROBERT W. WOODRUFF PROFESSOR, 

CHAIR OF THE DEPARTMENT OF HEALTH POLICY & MANAGEMENT, 

ROLLINS SCHOOL OF PUBLIC HEALTH OF EMORY UNIVERSITY, EXECUTIVE DIRECTOR OF THE PARTNERSHIP TO FIGHT CHRONIC DISEASE 

JAMES N. WEINSTEIN, M.D., CHAIRMAN, DEPARTMENT OF 

ORTHOPAEDIC SURGERY, DARTMOUTH-HITCHCOCK MEDICAL CENTER, AND DIRECTOR OF DARTMOUTH INSTITUTE FOR HEALTH POLICY AND CLINICAL PRACTICE 

J. PAUL LEIGH, PH.D., PROFESSOR OF HEALTH ECONOMICS, CENTER 

FOR HEALTHCARE POLICY AND RESEARCH, DEPARTMENT OF PUBLIC HEALTH, UNIVERSITY OF CALIFORNIA, DAVIS, MEDICAL 

SCHOOL 

Mr. OBEY. Well, good morning, or good afternoon, or whatever it 

is. Let me apologize ahead of time. We have a mini-filibuster going 

on on the Floor, one that is so tasteless that they even called a roll 

call in the middle of a memorial service for Congressman Lantos. 

Outside of that, the House has covered itself with grace today. 

But let me simply explain why we are here. Yesterday we had 

a hearing in which we discussed the economic context in which the 

choices that this Subcommittee makes on the various programs 

under our jurisdiction will be made, and we talked about who is 

getting what in the economy and we talked primarily, I guess, 

about the gap between the most well-off and others in our society. 

Today we are going to be focusing on health care. 

It has been my experience through the years that whenever we 

discuss Federal budgets, whenever we discuss appropriations, that 

people are very good at describing the cost of doing something, but 

they are not very good at describing the cost of doing nothing. Virtually every program with which we deal in this Subcommittee has 

a purpose. The purpose is to attack some problem. For instance, if we spend $43,000,000 on Lou Gehrig’s Disease 

research around the Country, even though we do not specifically 

appropriate disease by disease, but if the effect of what happens is 

we spend about $43,000,000 on Lou Gehrig’s Disease, that is a visible number to everybody. But we do not get a chance to compare 

it to the cost to this society of that disease itself, of the hospitalization cost, the lost income cost, all the other costs, not to mention 

the human cost. 

So today I would simply like to have our witnesses describe essentially what the costs are of problems that we are trying to atVerDate Aug 31 2005 04:32 Sep 09, 2008 Jkt 043194 PO 00000 Frm 00093 Fmt 6601 Sfmt 6601 E:\HR\OC\A194P2.XXX A194P2

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tack through the health care budget, at least the portion of the 

health care budget that is appropriated and comes through this 

Subcommittee. So we have three witnesses who will present testimony on trends and health status of the U.S. population, the economic costs created by those trends, the health benefits and economic value of Federal investments in research and public health 

measures to help counter those trends. 

Our first witness is Dr. Kenneth Thorpe, Professor at the Rollins 

School of Public Health at Emory. He is Executive Director of the 

Partnership to Fight Chronic Disease. He has written broadly on 

health care financing and chronic disease issues. Dr. Thorpe previously served as the Deputy Secretary for Health Policy at HHS. 

Our second witness is Dr. James Weinstein, Chairman of the Department of Orthopaedic Surgery at Dartmouth-Hitchcock Medical 

Center and Director of the Institute for Health Policy and Clinical 

Practice. In addition to being a spine surgeon, Dr. Weinstein is also 

a highly regarded researcher and leader in comparative medical 

studies. 

My staff says that I should try to gavel down any witness who 

tries to get some free medical advice from you today. 

Our third witness is Dr. J. Paul Leigh, Professor of Health Economics at the University of California, Davis, Medical School. I 

want to take particular notice of the fact that he received a PhD 

in economics from a little known university called Wisconsin. He 

is primary author of over 140 science papers, as well as two books, 

including ‘‘Costs of Occupational Injuries and Illnesses,’’ and will 

address the issue of cost to society of workplace injuries and illnesses. 

Before I call on the witnesses, let me simply call on Mr. Walsh 

to make whatever comments he has. 

Mr. WALSH. Thank you, Mr. Chairman. 

Mr. OBEY. And then we will see how much we can get done before the bells ring. 

Mr. WALSH. Thank you, Mr. Chairman. 

I would like to welcome our witnesses also. Thank you for coming 

today. I know you are all busy. This will be helpful to us. 

I said yesterday, at our hearing about the economy, that I believe 

that not only is it critical to our economic well-being to safeguard 

the health of Americans, but also it is the right thing to do. I know 

there are philosophical differences with respect to the details on 

this issue, at least with respect to health insurance. I hope, however, that there is widespread agreement on the need to prevent 

disease. 

I firmly believe in the adage that an ounce of prevention is worth 

a pound of cure; that it is critical to extend productive years as 

long as possible. To the extent we cannot prevent disease, we must 

continue to find new treatments. I think a large part of successful 

prevention programs relies on personal responsibility, making 

smart choices throughout one’s life. Clearly, the medical community and government can and do play a role in making sure that 

people have the information they need to make those smart 

choices. But, at the end of the day, choosing behaviors that reduce 

the burden of disease is up to the individual. 


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Of course, there are diseases that cannot be prevented, or circumstances where sickness will occur despite a healthy lifestyle. In 

these cases, clearly, we must rely on modern medicine and the incredible advances we have made through research conducted in the 

private sector, as well as supported by the government. I would 

like to get into that a little more in my questions, particularly as 

it relates to translating basic research into therapies that are widely unavailable. 

Unfortunately, I am going to have to step out briefly due to a 

commitment. I am going to address a conference on autism in the 

Canon Building, and I will be right back, if the votes do not intervene. Otherwise, I will be back right after the votes. 

Thank you all. 

Mr. OBEY. All right. 

Thank you, gentlemen. Why do not you each go ahead for about 

10 minutes or so, summarize your remarks. We will put the full 

text of you remarks in the record. Why do not we begin with you, 

Dr. Thorpe? 

Mr. THORPE. Thank you, Mr. Chairman, Mr. Walsh, members of 

the Subcommittee. Thanks for the opportunity to testify today on 

the economic and social consequences of what I believe are underinvestments in public health programs, particularly those targeting 

chronic disease. 

Among the many serious challenges our Nation faces, few have 

more grave long-term consequences than under-investment in population-based prevention and clinical management, including research and evaluation into the effectiveness of health care, largely 

because the programs—as the Chair just mentioned—that you deal 

with in this Committee have broader implications for the health 

care system than just the CDC or AHRQ or some of the other organizations and agencies that you look at; they directly affect rates 

of morbidity, mortality, productivity in the United States economy, 

and overall health care spending. 

I wanted to make just a couple of key points along those lines. 

First is that we know that chronic illnesses account for most of the 

mortality in this Country. Nearly 70 percent of deaths are linked 

directly to chronic illness. Two, we know we have an obesity issue. 

Over the last 25 years, the rate of obesity has doubled in this 

Country. Now, over 34 percent of adults are clinically obese, and 

we know that obesity is directly linked with a variety of chronic 

health care conditions. 

Chronic diseases overall account for nearly 75 percent of what we 

spend on health care, so virtually the entire book of business in the 

health care system is linked in one way or another to patients that 

have one or more chronic health care conditions. I think, most importantly, if you look at the Medicare program, over 95 percent of 

spending in Medicare is linked to chronically ill patients. They own 

that population. The same is true with Medicaid, that has a very 

high share of its overall spending linked to chronic disease. 

If you look at the growth in spending, about two-thirds of the 

growth in spending in the United States over the last 20 years is 

linked to rising rates of treated prevalence of disease, largely 

chronic illnesses. 


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Another statistic that I think is important as well, I mentioned 

that the rate of obesity in this Country had doubled since 1985. 

That doubling of obesity by itself accounts for nearly 30 percent of 

the growth in health care spending, both due to a rise in the incidence of disease, like diabetes, but also due to the fact that we are 

more intensively treating obese patients and obese adults today, 

something that we probably need to look at a little bit more clearly 

in terms of are they cost-effective in terms of the interventions. 

Chronic disease and its impact on health care goes beyond just 

medical care costs; it has an impact on productivity as well. Studies 

done by the Milken Institute out in California have shown that for 

every dollar we spend on the medical side linked to chronic illness, 

that we spend another $3.50 in lost productivity to our American 

companies. So we can see this overarching issue of chronic disease 

and obesity has a major impact on spending trends, the affordability of health care in the Medicare program and in the private 

insurance programs in this Country. 

The data also shows that we are spending, obviously, a lot of 

money, but we are not really spending it very wisely. We have a 

sick care illness still in this Country, not really a health care system. A health care system would do a better job of integrating prevention, self-management, workplace health promotion programs, 

along with more traditional health insurance in ways that we do 

not very effectively do today. 

The good news is that there is a lot of room for improvement. We 

know from data the Centers for Disease Control and Prevention 

have pulled together that about 80 percent of heart disease, 

strokes, diabetes, and about 40 percent of incident cases of cancer 

are potentially preventable if we just did three simple things— some of them are not easy to do: stop smoking, have a better diet, 

and get in shape. And, as I will talk in a minute, it basically does 

come down to individual responsibility, but we have a whole host 

of settings and programs that I think could be effective in working 

with patients and individuals—in the community, in the schools, in 

the workplace—that would help facilitate moving in this direction 

of stopping smoking and getting in better health. 

But to make these changes—and I think this is the point probably most germane to your consideration—is that we need to know 

what works and what does not. The best health and health policy 

decisions I think are based on data and scientific evidence. Health 

services research, the field that I work in, provides the data and 

evidence needed to make decisions and develop policies that optimize health care financing, the access to the delivery system and 

health care outcomes. I think it provides practitioners and policymakers the tools and information to make health care in this Country more affordable, more efficient, safer, more effective, more equitable, more accessible, and more patient-centered. 

I think the Federal Government needs to be a leader in this endeavor. That does not mean they do it by themselves; the private 

sector makes a substantial investment through their own research 

in trying to figure these problems out. But if you take a quick look 

at recent year budgets, I think it shows that we clearly are underinvesting in some of these public health and health services research activities. If you go back a couple of years ago, 2006, and 


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look at what was spent through the CDC on chronic disease prevention and control, they spent $6.27 for each one of the 

133,000,000 Americans that have one or more chronic health care 

conditions. That same group of individuals spent an average of over 

$13,000 a year in health care costs. As I mentioned earlier in the 

testimony, collectively, this group of chronically ill patients accounts for 75 percent—— Mr. OBEY. Would you state those numbers again? 

Mr. THORPE. Sure. If you look at the—— Mr. OBEY. Half the time, people do not hear them the first time. 

Mr. THORPE. There are a lot of numbers, so sorry for the cornucopia of numbers here. 

CDC’s spending on chronic disease prevention and control, they spent $6.27 for each of the 133,000,000 Americans that have one 

or more chronic health care conditions. And if you look at that 

same group of individuals, their average health care spending was 

over $13,000 a year. 

To look at it another way, we have been pulling together data 

with our professional organization, Academy Health, to try to figure out just what do we spend overall on health services research— not just at the CDC, but AHRQ and other places, NIH, and places 

that support health services research at the Federal Government 

level—and our best estimate is we spend about $1,500,000,000 a 

year on these types of investments in health services research to 

try to figure out ways to do a better job of managing chronic disease, preventing the rise in obesity, the real drivers of what is 

going on in our health care system. 

To put it in another perspective, if you look at what Booz Allen 

Hamilton, every year they have an annual report on investment by 

the top 1,000 firms globally, and what they found was that private 

sector health care research and development was nearly 

$100,000,000,000 in 2006, about 65 times as much as we spend federally on funding health services research in the United States. 

I think it is probably safe to say that virtually all of us are affected by common chronic diseases. I usually go into an audience 

and ask how many people they know or do they themselves personally have high blood pressure, diabetes, heart problems, co-morbid 

depression, elevated cholesterol, back problems, pulmonary disease. 

You can go down the list. It affects virtually everybody in the room; 

they either have it themselves or they know somebody that has it. 

My sense and my hope is that, as you look at this portfolio of 

spending initiatives, that we need better information on how to 

prevent the rise in chronic disease; how to prevent this persistent 

rise in obesity in the United States, ranging all the way from kids 

to adults; and how can we get better value in managing where the 

money is spent, which is on those patients with multiple chronic 

health care conditions. 

Today we do not do a good job, I think, in managing those patients. It is the key driver of what is going up in terms of health 

care spending, and my sense is—and this is particularly germane 

to Medicare—that all these entitlements that many of us are worried about, in terms of their overall share of the GDP that is projected 5, 10, 15, 20 years down the road, unless we get a handle 

on the basics in terms of pulling excess clinical dollars, more effecVerDate Aug 31 2005 04:32 Sep 09, 2008 Jkt 043194 PO 00000 Frm 00097 Fmt 6601 Sfmt 6602 E:\HR\OC\A194P2.XXX A194P2

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tive treatment protocols in managing chronically ill patients, preventing some of these things in the first place, it is going to be very 

difficult for us to get a handle on entitlement spending. 

I will leave you with just one more statistic, and I will close. If 

you look at the lifetime health care spending for a senior, 65 or 70 

years old, who is normal weight, no co-morbid conditions—so does 

not have a chronic disease—compared to that same individual who 

is obese and has one disability or one chronic health care condition, 

over the entire lifetime of those patients, of those individuals, the 

normal weight individual would spend about 20 percent to 30 percent less over their lifetime than that same person who is obese 

and has multiple chronic health care conditions. So it does make 

a big difference. We just need the information base, the data, and 

the research in order to figure out how we can do this better. 

With that, I will close. I look forward to answering any questions 

you may have and, again, I would like to offer my thanks once 

again for your invitation in working with you in this Subcommittee’s longstanding commitment to health and public health. 

[The information follows:] 


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Mr. OBEY. Thank you. 

Dr. Weinstein. 

It is a miracle we have not had a vote yet. [Laughter.] 

Dr. WEINSTEIN. Happy Valentine’s Day. 

Thank you for allowing us to be here today to speak to you; it 

is an honor. And thank you for your continued support for research 

to all the entities—NIH, AHRQ, and others. 

As you know, the health care system, by some estimates, has some $400,000,000,000 to $600,000,000,000 in waste. We could certainly do a lot more with that money in research and education of 

ourselves, our infrastructure for training young physicians—going 

to be a dying breed—and what I call a research recession. We, as 

a Nation, are talking about recession, but I worry about how our 

health care dollars and research dollars are spent that we may lose 

the best and the brightest, and the unintended consequences of 

that may be tremendous. 

As you mentioned, I am an orthopaedic surgeon and I have a 

unique career in that I am able to work in many domains in understanding health care delivery. Following in the footsteps of Dr. 

Jack Wennberg and Elliott Fisher and others, who look at variation 

in this Country and the kind of money that we spend in end-of-life 

situations, and the Medicare budget varies by such significant 

amounts that we, as a Country, think that we are spending probably 20 percent too much even in Medicare, which is about a 

$26,000,000,000 of monies that could be spent other ways. 

Knowing the idea that there is variation in being an orthopaedic 

surgeon, I sought to try to find some solutions: Having data to support the treatment that we are offering to patients trying to empower our patients who have been left out of the milieu of the decision-making about how health care is offered. If patients are given 

a choice, they tend to make appropriate decisions. Our study recently funded by the National Institutes of Health, NIOSH, and 

others demonstrates that for a common condition, back surgery— some of you may have back pain today, listening to me. But the 

fact is that 80 percent of our population, at some time in their life, 

experience back pain. If we take that common condition and try to 

dissect all that is being done for it, understanding the lack of evidence for most of the things that are being done and the costs associated with that, why had not we done clinical trials to understand 

the effectiveness of various treatments? To me, that was a call for 

me to try to stand up and do something as a health services researcher and an orthopaedic surgeon who practices spine surgery. 

I was fortunate to receive a $15,000,000 grant to do the first-ever 

randomized trials in this Country about these conditions, again, affecting some 80 percent of our population. Given the results of our 

trial, it appears that patients do have a choice. Surgical intervention is not always the best option. And, for individuals, choice matters. People who now have data can make these kinds of decisions, 

as can breast cancer patients or cardiovascular patients. We know 

from studies in breast cancer that the treatment of lumpectomy 

versus mastectomy for a woman facing breast cancer ought to be 

given to the woman to decide, not because a physician decides that 

one treatment is best for that patient. If the outcomes are the 

same, who should decide? 


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In cardiovascular disease, where we have all kinds of new treatments—whether it is drug-eluting stents, Bear stents, bypass surgery, or just drug therapy—if the treatment options are equal, who 

should make the decision about those choices? We believe in the 

concept of informed decision-making or informed choice. The doctrine of informed consent—which is traditionally what I do when 

I am consenting a patient for a surgery—I believe is out of date, 

arcane, and none of us—that doctrine is about assault—are trying 

to assault our patients. We are trying to help our patients. I would 

like to see the doctrine of informed choice. 

Given the information we have from SPORT, the trial we have 

been doing on back pain, what is the cost of not doing these kinds 

of studies? We know from people that potentially are going to suffer strokes that there was a procedure called ECIC bypass, which 

was done mostly by neurosurgeons. Until that procedure was subjected to a randomized trial, thousands of patients were having 

that procedure done. Once the randomized trial was published in 

the New England Journal, that procedure went away. The thousands of women who face bone marrow transplantation for breast 

cancer, only to find out in randomized trials that that was not an 

effective therapy. That is not the way this Country should move 

forward. As I said in my statement to the group, the enemy of the 

best is the good enough, and I think we have been doing barely 

good enough, and certainly not the best. 

If we make the kind of investments that we have made in 

SPORT, our back pain surgery trial, there is the opportunity to 

save billions of dollars. Imagine patients who have a choice who decide not to have surgery. In our study, that is 30 percent to 38 percent. Imagine if we took the dollars saved from not doing those procedures and applied them to other things that actually worked for 

patients based on best evidence—diabetes, cholesterol-lowering 

drugs, hypertension treatment, routine eye examinations—that 

have the kind of evidence to support the kind of treatments that 

we do not even well enough in this Country, knowing that they 

work. 

Fusion surgery for spine care is one of the major procedures that 

is going up at alarming rates. I do that procedure; I am affecting 

myself by what I am saying here today—but believe we do not have 

the evidence to support that volume of surgical increase that is occurring in this Country and do not currently have the studies to 

support it in the way that it is being done. Patients do not have 

the informed choice about making those decisions today because we 

lack the evidence to inform our physicians who are offering their 

patients that kind of treatment. 

The issue of comparative effectiveness—brought up in the opening statement by the Chairman—is one that Gayle Walinski has 

brought forward as an idea that I think is very powerful. In our 

own studies for people who have faced hip fractures, there are 

many different types of treatment for hip fractures, meaning very 

different types of devices. We know that the change in practice in 

the United States has been almost 100-fold, a crossing over of old 

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tality. Why are we using these new devices and new technologies 

without the data to support them? 

Who is going to make these decisions? I hope it is us, as researchers, working with clinicians like myself, working with you as 

Congress and our patients to get to the information to get to informed patient choice. We need to look at cost-effectiveness and we 

need to be accountable for the things we are doing and the investments we are making. I know that NIH and other agencies are 

under the gun because of the doubling of the budget and where is 

the return on the investment. I suggest that SPORT is an example 

of a tremendous return on investment if we just listen to the results, implement the strategies around informed choice to help patients, change the rates of procedures where patients actually know 

the risk and benefits, and there is more money to be spent. 

Knowledge and evidence versus guesses and the good-enough is 

not good enough. Don Frederickson, who was Director of the NIH 

in 1975 to 1981, almost 30 years ago, said field trials—and I assume he was referring to clinical trials—are indispensable. They 

will continue to be an ordeal, and having done them, they are very 

difficult. You face a lot of criticism and a lot of difficult issues with 

colleagues who want to do what they think is best for their patients, despite not having the data. Trials lack the glamour, they 

strain our resources and patients, and they protract the moment of 

truth to excruciating limits. Still, if, in major medical dilemmas 

like we face in many of the issues in health care today, the alternative is to pay the cost of the perpetual uncertainty, have we really any choice? And I would argue the answer is no. A resounding 

no to continue as we are doing without the evidence to support the 

treatments that we are offering for patients, for your families, for 

my families, for patients around the world. 

SPORT was a practical clinical trial. It shows that things can be 

done in clinical practice with working with physicians, not around 

physicians; working with patients, not around patients; talking to 

patients, not at patients; and we can gain the kind of outcomes and 

cost-effectiveness and a comparative effectiveness data that Gayle 

speaks so highly of. I believe there is a return on investment. I believe there is the opportunity to retain our brightest and best 

young clinicians and scientists that we may lose to other countries 

who are certainly willing to invest more today. 

We need to know the truth about what works and we need to 

share that with our communities. We need to alter the incentives 

that seem perverse in how physicians may be paid for doing more 

than for doing what is right. Right-sizing our system seems appropriate at this time. And as Elias Zerhouni says from NIH, in his 

four Ps—being predictive, personalize, preemptive, and 

participatory—I think for the kind of basic research that we are 

talking about in the translational research area, the kind of research I am talking about today with clinical trials deals with patients who have problems today. The future of genetics, genomics, 

proteomics is tremendous, but we have to have the continuum of 

both of these working together to help our patients today. 

I thank the Committee for your time and look forward to your 

questions. 

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Mr. OBEY. Thank you very much. 

Dr. Leigh. 

Mr. LEIGH. Thank you, Chairman Obey and members of the 

Committee for inviting me. 

Most Americans between the ages of 22 and 65 spend 50 percent 

of their waking time at work. Every year, millions of Americans experience injuries, illnesses, and even deaths in the workplace. The 

cost of occupational injuries and illnesses is nearly as great as the 

cost of cancer, roughly the same as the cost of diabetes, and greater 

than the cost of Alzheimer’s. This large size is sometimes underestimated since Federal Government statistics systematically 

under-count occupational injuries and virtually ignore occupational 

disease. 

Despite these large costs, Federal budgets for research and statistics on occupational safety and health are a fraction of those for 

cancer, diabetes, or Alzheimer’s. In addition, most of these costs are 

not absorbed by the worker’s compensation system; they are passed 

on to other private insurance carriers, to Medicare, to Medicaid, to 

Social Security disability insurance, and to individual injured workers and their families. Finally, a disproportionate number of Hispanic and low-income persons experience these injuries. But what 

is especially tragic about this toll is that so many of these occupational injuries and illnesses could have been prevented. 

The failure to address these costs has a number of broader economic consequences since an ounce of prevention is worth a pound 

of cure. First, greater attention to the prevention of occupational 

injuries would partially restrain the escalating costs of medical 

care, now 16 percent of gross domestic product and rising. Second, 

it would decrease the high cost of worker’s compensation insurance, which now extracts about $88,000,000,000 annually from business 

and government. Third, greater prevention would improve productivity, since there would be fewer workers who become disabled. 

Let me now address some of these points a little more in detail. 

National costs. I use the Cost-of-Illness method that divides costs 

in direct and indirect categories. Direct categories include hospitals 

spending and physician spending; indirect refers to wage losses and 

household production losses. 

Let me first address diseases. 

The greatest contributors to occupational disease are cancer, circulatory disease, respiratory disease, and job-related arthritis. The 

number of yearly job-related disease deaths sums to over 66,000. 

Total costs were $49,000,000,000. Worker’s compensation was not 

likely to cover these fatal diseases since so many of them do not 

manifest themselves until retirement. 

In addition to the fatal diseases, there was job-related arthritis. 

Job-related arthritis most frequently develops after age 55 and can 

be attributed to an on-the-job injury. A typical case would involve 

a worker who seriously injures his or her knee on the job at age 

40 and develops severe osteoarthritis in that knee at age 70. In 

some cases, the knee may have to be replaced, and knee replacement surgery is expensive. Medicare, not worker’s compensation, 

would pay for that surgery. 

Turning now to injuries, I estimate over 5,800 injury deaths that 

cost about $5,000,000,000 annually. I estimate about 8,000,000 


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non-fatal injuries that cost about $110,000,000,000. If we sum 

these two, it comes to $115,000,000,000 each year. 

Combining diseases with injuries, I estimate a total of $163,000,000,000. About 67 percent of this—$109,000,000,000—is 

for indirect costs, lost wages; about $55,000,000,000 is for direct 

costs. 

Now, there are other cost estimates, not just mine. Liberty Mutual is an insurance company, one of the largest worker’s compensation insurance carriers in the Nation. They also estimate 

costs of occupational injuries and illnesses. They put the figure 

anywhere from $155,000,000,000 to $232,000,000,000. 

My estimates, as well as those of Liberty Mutual, indicate a 

higher percentage of indirect costs—that is, lost wages—as a ratio 

to total costs when compared to other diseases, such as heart disease and cancer. The reason for these high indirect costs is that 

over 70 percent of occupational costs are due to injuries, not illnesses; and injuries account for more harm to younger persons 

than they account for by diseases. 

Occupational injury deaths, for example, frequently occur among 

people that are in their twenties or in their thirties, whereas, cancer and heart disease deaths frequently occur among people in 

their seventies and eighties. 

Now, all deaths are losses, but deaths among younger persons result in many more years of economically productive life loss than 

deaths among older persons. Moreover, deaths among parents with 

young children are especially tragic. Neither my estimates nor 

those from Liberty Mutual attempt to account for the emotional 

cost to children of losing a parent. 

These occupational injury and illness costs are large when compared to those for other diseases. My costs were almost as large as 

the estimates for cancer, on a par with the cost for diabetes, and 

greater than Alzheimer’s. The upper range of Liberty Mutual estimates far exceed those for cancer. 

These estimates invite comparisons to Federal Government funding. The National Institute for Occupational Safety and Health 

(NIOSH) has consistently received among the smallest amounts of 

funding of all the institutes. The 2006 budget for NIOSH was 

$254,000,000. This compares to the National Cancer Institute, with 

19 times the NIOSH budget; National Institute for Diabetes, Digestive and Kidney Disorders, 7 times the NIOSH budget. 

I am not arguing for a chance for any money—I think all of them 

should be increased—I am just providing a comparison. 

The Bureau of Labor Statistics under-count and the disease gap. 

A number of studies indicate that the Bureau of Labor Statistics 

may miss from 20 percent to 70 percent of all injuries and illnesses. There are many causes for this omission, but let me mention one: outsourcing to small firms with contingent workers. 

In the past 20 years, the American economy has seen greater reliance on big firms outsourcing to small firms who hire contingent 

workers. We all know that small firms, especially those with contingent workers, are less likely to report injuries to OSHA and 

BLS. But the greatest gap lies with measuring fatal occupational 

disease. Less than 5 percent of occupational disease is recorded in 

Federal statistics. 


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Regarding worker’s compensation. It pays about $55,000,000,000 

in medical care and lost wages per year. A comparison to my estimate suggests that 66 percent of these costs—or about 

$108,000,000,000—is not covered by worker’s comp. Well, who pays 

when worker’s compensation does not pay? The short answer is everybody else. For medical costs, roughly $14,000,000,000 was paid by private insurance; $12,000,000,000 by Medicare; $4,000,000,000 by Medicaid. For indirect costs, that is, lost wages, a significant portion, 

perhaps $20,000,000,000, was paid by the Social Security disability 

insurance. 

There are economic implications for cost shifting. The health of 

workers can be viewed as an economic externality, an unwelcome 

byproduct of production, similar to air pollution. Economic efficiency requires that private costs of production equal social costs. 

If private costs are too low, the firm will produce an inefficient 

amount, that is, too much pollution or, in our case, occupational injuries. 

Aggregate private costs, reflected by worker’s compensation premiums, are too low. If the premiums were higher, the firms would 

have an economically appropriate incentive to reduce injuries. This 

reduction would likely involve prevention strategies. 

I just have a couple concluding remarks. 

Greater investments in preventing occupational injuries and illnesses are needed. Standards to reduce exposures to chemicals and 

ergonomic hazards would help prevent many occupational diseases 

and reduce the incidence of musculoskeletal disorders, which are 

responsible for nearly one-third of all injuries. In addition, an increase in the sizes of OSHA penalties, especially for repeat offenders, would help. For the sake of economic efficiency, employers 

should face a higher price for their neglect. 

Let me offer a low-cost policy suggestion. We should require 

health and safety information be attached to all job application 

forms. We know more about the fat content of potato chips before 

we purchase them before we do about the health and safety content 

of jobs before we take them. I think every job application form 

should carry a page of information on statistics, including death 

rates, particular to the specific occupations and industries relevant 

to the job applicant. This would permit prospective employees to 

turn down dangerous jobs, thus providing a free market incentive 

for employers to improve job safety. 

I hope that one question involves Hispanic workers. I wanted to 

make sure I was under the 10 minute limit. But thank you, Chairman, for inviting me, and I look forward to your questions. 

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Mr. OBEY. Well, thank you. Thank you all very much. Let me 

simply say that we are in the last year of this Administration’s tenure, and I think, as the last year’s appropriation cycle indicated, 

we do not have a whole lot that we agree with in terms of the Administration’s budget policies; and I think that was demonstrated 

by the fact that the President vetoed the bill produced by this Subcommittee last year. 

I do not particularly see any sense in chewing the same cud 

twice, as we say in farm country, and so I really regard this year, 

and our actions during it, as simply being preparatory to the new 

administration, whichever party it is; and I think everyone recognizes that there is a major chance that the next Congress and the 

next president will tackle the issue of universal health coverage. If 

we do, that has profound consequences all throughout the economy. 

It has profound consequences in terms of the way we distribute and 

deliver health care. 

And I view this Committee as having a responsibility to try to 

respond to this question: If we thought that, within two years, Congress will have passed legislation creating universal health care— forget the theological debate about what shape that will be—if we 

do that, where should we be putting money in this Subcommittee 

in order to try to prepare our health care system and our medical 

system for the implications of finally passing that kind of legislation? 

And let me ask each of you to respond. I have got a lot of other 

questions, but, because of time, I will then pass the witnesses down 

to the other members. 

Mr. THORPE. I think, as I started out in my testimony, to me, the 

real critical part of a broader health care proposal, in addition to 

the uninsured, is the issue of affordability. If we do not find ways 

to make health care more affordable in the public and private marketplace, doing a universal insurance proposal may or may not be 

sustainable over the long haul. So we have got to find more effective ways of bending the cost curve on the per capita growth in 

Medicare spending, Medicaid, and private insurance pocket. 

Now, having said that, I think there is a lot of agreement that 

we need to do that in the business community and the labor community, and so on. You have to have a clear understanding of the 

issue. And if you look at the two facts that I raised—one is that 

75 percent of spending is linked to chronically ill patients, where 

the money is; and, two, a very substantial amount of the growth 

in spending is linked to the rising incidence of disease. Diabetes 

itself has gone up 70 percent over the last 20 years. So in terms 

of an investment portfolio, it seems to me that we have got to find 

better ways of managing chronic disease in the system and preventing its rise over time. So I would point to just three or four 

areas in terms of thinking about where to make investments. 

One is that I think we need to change the way that we pay for 

health care. The Medicare benefit model was a great model for patients in the 1950s, what it was based on and designed after. The 

clinical characteristics of patients in the system today, and who are 

driving spending, are very different than they were 40 years ago. 

So we are going to need research into what makes sense in terms 

of restructuring our payment model. 


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What makes sense in terms of restructuring how we deliver services, building into a more proactive delivery model: working with 

patients outside of the traditional physician’s office; providing patients appropriate information on financial incentives to self-manage their condition. 

And prevention. What can we do that is cost-effective to slow the 

rise in obesity and, with it, slow the rise in chronic disease prevalence. 

I think that those are not only important because, you know, to 

me it is the centerpiece of making the whole system sustainable, 

but it is also areas I think, if you think about it, are just common 

sense initiatives. They deal with prevention and more effective clinical management. I think an opportunity, I would hope, in 2009 

that we can build a bipartisan approach for moving forward with 

this as really a cornerstone of how to position the debate. 

Mr. OBEY. Thank you. 

Dr. Weinstein. 

Dr. WEINSTEIN. Thank you. I think there is some evidence out 

there of things that we can do in chronic disease management, as 

well as in end-of-life types of decisions, where we are spending a 

lot of money. I think if we take the chronic disease management 

programs, like Brent James has developed in Intermountain 

Health, and allow the Nation to benefit from those programs with 

what some of the plans are calling for, a new IT strategy. And, of 

course, Dr. Braylor’s attempt at that was not successful, but I 

think that the idea that every hospital system has a different computer system and every patient does not have a transfer of information across this Country seems like an inordinate type of expense that ought to be changed. 

Imagine if we all had the same computer system that our patients were having their records kept on. It seems today that is 

possible. Maybe it is even Google. I am not supporting anybody, I 

do not own stock in it, but maybe there are better ways to do this. 

The idea of practical trials, like SPORT, where we actually get 

good information to empower our patients in making choices. We 

know every time we have done that we have seen changes in the 

rates of procedures, the cost of procedures, the outcomes of procedures, and the utilization of health care more appropriately. 

I agree with the ideas of prevention, but implementing those 

strategies, even back to when John Kennedy was President and we 

actually worked on physical fitness as a major program in our 

school system in the grade schools and high school, maybe we just 

need to go back to just simple things like that and getting back 

into physical education. 

The payment models are all backwards, as I said in my opening 

statement. The incentives for me are to do more. The more surgery 

I do, the more complicated the procedure is, the more I am reimbursed. I do not think that is the appropriate model for our health 

care system. 

The issue of episodes of care, which the NQF and others, NCQA 

and others, are working on—which I have been involved with with 

Dr. Fisher and others—looking at how you take an acute myocardial infarction patient or somebody with back pain and work 

through that episode in a payment mechanism that actually gets 


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the highest quality care, while limiting the payment structure to 

that episode, maybe be an interesting model to pursue. 

I think the opportunities for end-of-life care. Again, do patients 

want to die in an intensive care unit? Certain studies by Joann 

Lynn and others have suggested that patients want to die at home. 

Yet, if you look in the California system, which I know some of you 

are from, especially in the UCLA area, most patients end up dying 

in the hospital. That is an extremely expensive way to die, especially, again, if patients were informed with informed choice and 

didn’t desire to. 

A few ideas. 

Mr. OBEY. Dr. Leigh. 

Mr. LEIGH. Well, I agree with a lot of what has been said, especially with Dr. Thorpe, the emphasis on prevention, and I think 

that improvements or increases in the NIH budget, in the NIOSH 

budget. I am a believer in the economic efficiency in the sense that 

I think that the price of production for an employer ought to reflect 

the true costs associated with that. So if somebody is injured—back 

injury, hip injury—this should be figured into the production of the 

product. So this gives the appropriate incentive to the employer, 

then, to look for prevention strategies; not that one size fits all. 

Let’s have individual employers find where the best prevention 

strategy might be to reduce these back injuries, reduce the hip injuries, again, encouraging prevention. 

It turns out that, with the obesity epidemic, I have a grad student now that we are doing some research on wages and obesity; 

and, as probably most of you know, obesity is much more prevalent 

among lower income people, so it might be a substantial increase 

in the minimum wage would result in fewer people with low income. An increase in the minimum wage would result in higher 

prices for soda pop and, as we have seen with cigarettes, when you 

put a tax on the cigarettes, people do in fact smoke less. So this 

may be a policy way to approach the obesity epidemic. 

But, in general, I agree with all the strategies related to prevention. 

Mr. OBEY. Thank you. 

Mr. Walsh. 

Mr. WALSH. Thank you, Mr. Chairman. 

Sorry I had to leave, but everyone is expected to do lots of things 

at once here. 

I was able to pass a bill here in the Congress that provided for 

hearing testing for all newborns, and it really has an impact, as 

you can imagine, on that child’s ability to learn. And the idea of 

screening I think everyone accepts as a good concept for cancer and 

a host of others that focus on the individual, but there is another 

type of prevention program that I really think gives us a good bang 

for the buck, and that is population-based prevention, which develops and delivers interventions that reach large groups of people. 

I raise this issue in large part because of the explosion in the 

health entitlement programs and the cost of those programs that 

we have seen in the last couple of years. In fiscal year 2007, we 

spent over $600,000,000,000 on mandatory programs at the Department of Health and Human Services—largely Medicare, Medicaid, and S-CHIP. In fiscal year 2009, just two years later, that 


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number is expected to be about $680,000,000,000. That is pretty astonishing, that it would increase that much in a two-year period. 

We have to find ways, I think, to impact on health and cost. You 

do not want to focus on one or the other. So what types of studies 

have been done to evaluate the value of population-based prevention programs as a whole in terms of savings across the entire 

health care spectrum, particularly with respect to Federal entitlement programs? 

Any of you care to respond? 

Dr. WEINSTEIN. I guess I would respond in a way that you might 

not expect. I am not sure that screening is always the right thing. 

Screening—— Mr. WALSH. I was not suggesting that that is the only approach 

to prevention. I was suggesting that that is one, but a larger spectrum of individuals would be gathered in different prevention programs. 

Dr. WEINSTEIN. I understand, I believe. 

Mr. WALSH. Okay. 

Dr. WEINSTEIN. But I think the idea of screening is an important 

one to talk about because, you know, should we have PSA tests for 

men? Should we have colon cancer screening? Should we have 

mammography for women? What are the most cost-effective? What 

is diabetes? You know, imagine if you changed the you know, if 

somebody says your blood sugar is 200, that is diabetic. If they 

change it to 210, we increase the number of people that are diabetics in this Country by maybe two million. I mean, so we have 

to be careful what we call disease versus pseudo-disease. 

So if we screen people for prostate cancer—and I do not know if 

any of the men here have had that screening, but if you have a 

positive PSA test, then you have to consider whether you are going 

to have a biopsy or not. And it is not just a needle stick, it might 

be 20 needle sticks. You might not know that. Probably not too 

comfortable. What if it is positive for cancer cells? Then you have 

a decision about treatment—radiation, chemotherapy, surgery. And 

the outcome of that treatment may be no different than having not 

been screened. 

So the issue is cost, which you are talking about the $600,000,000,000 to $680,000,000,000 change. As we screen more 

and we find more, there are consequences to that. As we do genetic 

testing, how are we going to respond to that, women with the genetic predisposition for breast cancer? Do we offer our daughters, 

at 16, mastectomy? I mean, realize the ramifications of what we 

are talking about. 

I agree with your concept, but I just want to suggest that the 

hearing test was wonderful, and obviously children need to hear to 

learn, and we have all kinds of wonderful medical devices to allow 

people to hear today that could not hear today. Great success in 

medical therapies. The population-based prevention, though, and 

based on screening, I think has some risks to it. That is all I am 

pointing out. So we have to be careful about what we recommend 

in the screening field around prevention. 

Mr. THORPE. Let me just take a little different cut on this. In addition to what I do at Emory, I am also the Executive Director of 

this organization called the Partnership to Fight Chronic Disease. 


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It is a group of nearly 100 organizations ranging from the Chamber 

of Commerce to the labor unions and virtually everybody in between. 

We have been focusing a lot of our time figuring out ways to 

make health care more affordable, focusing on some targeted prevention interventions specifically dealing with people who are overweight—there is this, Dr. Weinstein mentioned, pre-diabetic, prehypertensive patients and so on—to see how we can intervene to 

make sure that they do not switch over into those more extreme 

clinical categories, you know, going from 200 to 600 in terms of 

blood sugar levels. Because, when it happens, you have a big spike 

in spending. 

So if you can find effective interventions targeted right there, we 

know the return on investment can be very substantial. 

We are scouring, with our 100 groups, looking at best practices 

in work site health prevention, school-based programs, communitybased interventions, and what we have found is—I mean, it is 

somewhat frustrating that in the published literature—very little 

in terms of what is out there doing formal evaluations of programs 

that are up and running. We have found some good programs in 

the workplace. I think that those are promising. There are very few 

of them. If you think about it, there are seven million plus business 

establishments; there are probably a handful of big companies that 

really do this effectively. 

But in that data we have got published information that shows 

that we can get a positive return on investment if they are designed appropriately. And that is a lot of what we are trying to understand, is how the design of this really mattered in producing 

outcomes. 

On your Medicare question, I think that having this information 

on best practices is going to be essential for Medicare, because if 

you look at the cohort of 65-year-olds coming into the Medicare program today, they have two characteristics compared to that same 

cohort 15, 20 years ago: they cost a lot more; they have more of an 

elevated chronic disease profile. The only good news is that they 

are less likely to be disabled. So the disability rates have gone 

down a little bit. 

But if you look at the wave of people——

Mr. WALSH. More chronic health issues in that cohort now than 

there were 15 years ago? 

Mr. THORPE. Yes. If you look at Medicare, 75 percent of what we 

spend in Medicare is linked to patients that have five or more 

treated chronic conditions; it is diabetes, it is heart disease, it is 

pulmonary problems, it is co-morbid depression, it is asthma, arthritis, back problems. That is where the money is. So I think that 

there is a real opportunity for us to look more broadly to figure out 

prevention programs at the work site or in the community that we 

could put into place now that would improve the health profile of 

seniors coming into the program. 

I think while you were doing your talk, one of the things that 

I mentioned was that if you look at lifetime health care spending 

for a senior who is age 65, who is normal weight with no chronic 

conditions, compared to a 65-year-old who is overweight, has one 

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tient will spend about 20 percent or so less over the course of their 

lifetime. They live longer, true, but they spend less. So I think 

there is an opportunity, as we think about the entitlement issue, 

to tee it up a little bit differently than the usual way we have been 

dealing with it, which is increasing co-pays, reducing benefits, reducing payment levels, increasing the eligibility age, you know, 

paying around the board but not really fundamentally changing the 

level of spending among that population. 

Mr. WALSH. That is helpful. Thank you. 

Thank you, Mr. Chairman. 

Mr. OBEY. Ms. McCollum. 

Ms. MCCOLLUM. Thank you, Mr. Chair, and thank you, gentlemen for your testimony. I am going to switch to Professor Leigh. 

Your comment focused on government’s failure to address occupational injuries and illness, and I am currently working on legislation that would ban the re-importation of asbestos into the United 

States. The legislation would also require research on the health 

hazards of naturally occurring asbestos and invest research and 

treatment of asbestos-related illnesses. And in the President’s 

budget, he cuts a lot of the research opportunities for occupational 

safety. 

As you may or may not be aware of, mesothelioma is not diagnosed until extraordinarily late. They have seen some successes 

with people being given this diagnosis and now living, a few people, 

years longer, but for the most part it is, as my predecessor found 

out, Congressman Vento, once diagnosed, it is pretty much you 

have X number of months to live. 

So could you talk a little more about the Government’s role, its 

responsibility in regards to finding out more and understanding 

more about asbestos in the workplace, especially seeing as how 

many of us—I am 53—and older have been exposed to it throughout our lifetime? Why would it be important to know about this 

issue as it affects workers in the workplace and why it would be 

important to do the research in order to not only maybe find a 

cure, but to find early diagnosis. 

Mr. LEIGH. Well, a lot of people have been exposed to asbestos 

and may not even know it. I think I was exposed years ago when 

I worked at Manpower Corporation and they had me work with 

mobile homes, and we were moving a lot of equipment around, and 

they had the one job, which was basically moving fiberglass and asbestos, which was in the back part of the lot. Thank goodness for 

the union there, because they would not let me work over three 

days. I was kind of upset because I wanted to keep working; it was 

a decent wage. But I was told, well, the union is not going to allow 

you to work more than three days. At the time, I was kind of upset 

about it, but I am very happy now that the union had that rule, 

because I didn’t know—I was 22 years old—I didn’t know what I 

was being exposed to. 

So I think it is important for us to—and, of course, as you know, 

the cost of asbestos is growing, or asbestosis and mesothelioma, as 

all the pneumoconiosis. So it is important for us to know how to 

treat this, and greater research would help in terms of where the 

asbestos is now and how to reduce it. 


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So it is a large problem, a significant economic problem. I welcome more investments in the research. 

Mr. OBEY. Would the gentlewoman yield? And I promise it will 

not come out of your time. 

Ms. MCCOLLUM. I trust the Chair. 

Mr. OBEY. The very first day I served on this Subcommittee, 

back in the early 1970s, I walked into the room and Dr. Dave Roll 

was testifying for the National Institute of Environmental Health 

Sciences, and as I walked in I heard him explain to the Committee 

what percentage of British shipyard workers who had been exposed 

to asbestos in World War II had died of mesothelioma, and it 

stunned me because, in my father’s business, I had worked with asbestos products. So that got my attention in one whale of a hurry, 

which I think is the principal reason that, in my earliest years on 

this Subcommittee, I focused so much on occupational health and 

safety. 

But I am glad you asked that question. 

Ms. MCCOLLUM. Thank you, Mr. Chair. 

Mr. OBEY. And it will not come out of your time. 

Ms. MCCOLLUM. Thank you, Mr. Chair. 

Another statistic that stood out to me—and you all touched on 

this in your testimony one way or the other about chronic disease 

and how it accounts for 75 percent of our Nation’s health care 

spending. Now, I authored a bill, it was a constitutional amendment—I do not think we are going to amend the constitutional, get 

my language forward, but my intent was, by having a constitutional amendment to provide health care and preventative care for 

Americans, was to have a different discussion than the one that we 

are having. 

The discussion I believe that we should have should be what is 

the bottom basic set of access to health care should Americans expect in an industrialized country. It goes to the question of screening; it goes to the question of treatment; it goes to the question of 

prevention. 

What are you seeing missing from the current debate on health 

care that would address what should an American, in the most 

technologically advanced country in the world, expect their government to come together in the common good to make sure that they 

have access to truly good health care? 

Mr. THORPE. That is a good and tough, difficult question, but I 

will go ahead and take a shot at it anyway. 

My sense is that—and this sort of comes from what I see some 

of the more innovative large, self-funded employers are putting in 

place now—that if we really focused on early detection, early diagnosis, and appropriate evidence-based treatment of care, you know, 

that is a model that I think would be very effective in terms of preventing disease and more effectively managing it when we diagnose 

and detect it. Let me give you an example. 

There are some very good health risk appraisals, very simple 

benchmarks that one could do to get a risk profile of an adult or 

an adolescent or a kid in school. And based on that risk profile, 

whether you are in normal health, good health, fine, you know, 

there are care programs and ways to make sure that you keep in 

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If you are a diagnosed diabetic with some of these multiple 

chronic health care conditions, we want to make sure that we enroll you as quickly as possible into a plan, an evidence-based plan 

to make sure that that disease is appropriately managed; and in 

most cases it is not. We know nationally that chronically ill patients get about 56 percent of the clinically recommended primary 

preventive maintenance services that they should get to manage 

their disease and prevent them from going into the emergency 

room, having amputations, losing a kidney, or going blind. 

So I think if you think about it in terms of not so much insurance benefit design discussions, but more on the primary population health risk appraisal type approach, where we are diagnosing and detecting disease earlier on in the stage of a particular 

problem, and then making sure that they get the right—and it is 

largely primary health care to appropriately manage it, those 

would be a bundle of services that I think most would agree on 

makes sense. It makes clinical sense; it makes good public health 

sense. 

Mr. OBEY. Mr. Kennedy. 

Mr. KENNEDY. Thank you. 

If we are spending so much money—Dr. Thorpe and Dr. 

Weinstein, you have both talked about this—in Medicare, Medicaid 

on all these treatments, but we do not know effectively what is the 

best treatment, wouldn’t you suggest that we spend more of our 

dollars in CMS doing comparative analysis effectiveness in terms 

of before we start—I mean, I know in the mental health field there 

is a variety of different ways of addressing mental illnesses—pharmacologically, behaviorally, and the like—and some are far more 

expensive and, yet, do not show that much more effectiveness in 

terms of a result. 

And, yet, as you said, there has not been the kind of data-mining 

or research and, yet, if there was, for a very little set-aside up 

front, we could be saving ourselves a lot of money on the payment 

side. What do we need to be doing to get to direct? Could you comment on the need for us to get CMS to do more in terms of internally directing some of their internal dollars to that comparative 

analysis effective research within their own budget before they 

start spending all this money just going out the door without knowing whether all of it is the best, most effective money spent? Could 

you comment on that? 

Dr. WEINSTEIN. I would agree. I think there are lots of opportunities there for CMS to do such things. They have, as you know, supported some trials work. I think, for lung reduction surgery, they 

actually paid for the procedures being done to get the answer in a 

trial type way. So I would think this is a tremendous opportunity. 

As you think about what the costs are for what we pay in America 

versus what we might pay in Canada for drug issues and things 

like that, why are not we doing some comparative effectiveness of 

those things in this Country so that our citizens, you and I and our 

families, can get the cheapest drug with the highest quality, best 

outcome? 

You know, there is little incentive for people to test things that— I am for the free market, do not misunderstand me, but we need 

to allow people to understand, when we are doing trials, how you 


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design a trial often can determine the results you are going to get. 

So if you want to test aspirin against drug X that is very expensive, you might find out that aspirin is really good. But if you do 

not want to know that the really cheap aspirin is really good, you 

will not test against aspirin. 

So I think there is an opportunity in CMS to do that kind of 

work. We have the opportunity to sort of do competitive purchasing. Why do we have to buy the most expensive things if there 

is not the data to support those technologies, there is not the increased survival? I mean, I mentioned the breast cancer bone marrow transplant program. Very expensive. 

Mr. KENNEDY. Well, maybe you could give us this in a memo, because maybe we can, as a Committee, figure out a way to do some 

directed language, because there is an awful lot of money in that 

CMS. Obviously, it is obligated entitlement spending, but if they 

could save a lot more in the future, when the debate comes up on 

entitlement spending, in the way they direct it by doing more of 

the initial cost analysis on how it can be best spent, then, boy, we 

could get that entitlement spending to go a lot further than it is 

going. 

Dr. WEINSTEIN. I agree, but I want to also throw out the fact 

that there are many things that we do well. For example, nonwhite males, black males are not getting the rates of total knee replacement—that is an effective treatment—for reasons we do not 

understand. And, yet, many people may be getting rates of those 

kinds of procedures more than they need. So there are lots of opportunities to deal with the whole population through that budget 

and deal with issues of disparity variation in ways that we have 

not thought about. 

Mr. KENNEDY. Can you just explain why the public health 

schools have not intersected with your economic sections of your 

universities to come up with how you refigure these reimbursement 

systems? I mean, how come you guys cannot get together and figure out if we can buy futures in pork bellies, why cannot we buy 

futures in people’s health and get a new economic system that will 

incentivize people’s health and well being and market that? I 

mean, why cannot we redevelop an economic capitalist system to 

incentivize health, as opposed to sickness? 

Mr. THORPE. I think it is an outstanding question, and I think 

some of it goes back to the fact that, really, until about two or 

three years ago, I think, the prevailing view in the economics world 

was that 70 percent, 80 percent, 90 percent of the growth in health 

care spending was all due to new technology; that we were powerless over it, that it was just this flood of new technology coming online; and that these other things that are more controllable, perhaps, in the near-term—demographics, cost-sharing and so on—accounted for very little. 

Work we have been doing over the last five years I think sort of 

debunks a piece of that. Technology is a big part of this puzzle, but 

what we did in our work is introduced economist epidemiologists. 

Epidemiologists have, for years, been looking at rising rates of disease prevalence without figuring out the financial implications of 

it, and in economics the word epidemiology never comes up anywhere in any course, any term. I think I would be banned from the 


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profession if you even talk about it. They just do not think about 

it in that way. 

So some of it is making sure we have the database and the problem appropriately framed, which we now do. And I think we are 

now in the process of saying, well, gee, prevention really is important; and that we really do need to think about more effective payment models. Dr. Weinstein mentioned some of the work they are 

doing on episodes of care. We need more research and work thinking through how we can buy more effective health care services for 

people who have ongoing, established medical conditions that perpetuate throughout the year, at the very least, and we just do not 

have that models as widely known as we should. 

There are good pilots, we know a little bit about them, but the 

fundamental research base in terms of how they work, how they 

change outcomes, how they affect cost, we have some data from, as 

was mentioned, Intermountain Health and from Kaiser and other 

places, but the research base in terms of thinking this through is 

quite limited. 

Mr. OBEY. I am sorry to interrupt, but the gentleman’s time is 

up. We have a vote coming up, so we have got a choice to make. 

We can either go vote and come back—we have the next hearing 

beginning at 2—or we can try to split the time, about two minutes 

apiece, with each of the three remaining questioners. How would 

you prefer it? 

Okay, then the gentlewoman is recognized for two minutes. 

Ms. LEE. Thank you. 

Thank you, panelists, for being here today. 

Dr. Weinstein, very quickly. How do you ensure that minority 

groups are well represented in clinical trials? Just last year we 

talked about—and I spoke with Dr. Griffin Rogers with regard to 

the hemoglobin variant using the A1C test for diabetes with regard 

to some ethnic minorities is just not a valid test in many ways, and 

we didn’t know this until this hearing, and we followed up, and 

thank goodness we were able to get this straight. 

Second question. Informed decision-making is very important, 

but as a person who does a lot of medical research—I am not a 

physician, but I have aging and disabled family members, so I 

know a little bit about it. I had a family member who had to have 

carotid artery surgery. A physician gave me the pros and cons of 

the stent versus the surgery. Very thorough, but I had a hundred 

more questions to ask. At the end of that, he says, so what do you 

want to do? I waited, well, what do you recommend? 

Bottom line is, yes, informed decision is very important, but for 

people who may not have access to the type of information, say, for 

instance, that I had access to, or are less educated and have not 

come up with all these questions, don’t we need go to one step further and allow for the—and, again, in your research, I do not know 

if you did this—but have people feel that, once they have the information, ask the physician for their recommendation? Because I 

could not even figure it out. 

Dr. WEINSTEIN. Well, the first question about enrollment of nonwhite patients in the trials, and I think all ages as well, so gender, 

race, and age are important. In fact, in our trial for back pain, we 

had one of the largest non-white enrollments of any trial done 


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using the informed choice shared decision-making tools, and it was 

remarkable. 

One of the diseases we actually studied, degenerative 

spondylolisthesis—a mouthful—is much more common in females 

and black females. So we actually had a higher enrollment than we 

even anticipated, which is really nice. 

So you are correct that clinical trials need to be looked at very 

carefully when you are saying what this is good for. It is just a clinical study, it is not necessarily about you. 

So then we need to empower you with information—which gets 

to your second question—that allows you to make a decision. And 

as Congresswoman McCollum was talking about what do we need 

to do, you know, we need access. So you needed access for your 

family member who had the carotid disease. You needed a decision 

tool. What would have been helpful for you is getting all this information in some unbiased way. I am a surgeon. What I like to do 

is surgery. If I am a physical therapist, I like to do physical therapy. So that is what I offer. 

I would like to suggest—and our data would suggest it is true— when we use these tools, we see different decision-making processes occur. They are written at a level so that the understanding 

of the person looking at it can be clear, their questions can be answered; they feel that they are knowledgeable, that we understand 

their values about their decision and their preferences. 

Those turn out to be very important variables in a health care 

system that is now drowning in cost, where we need to find simple 

tools that help people make those decisions. Not everybody with carotid stenosis or carotid disease necessarily has to have surgical 

intervention. What are those risks and benefits? What is my risk 

of stroke from that procedure? Memory Loss? What kind of cognitive disability might I have? Which might be more important to 

you than the risk of the actual infection from a surgery or whatnot. 

So those tools can be very helpful. And, in fact, from our trial, we 

are putting those kinds of tools on the Internet free to help people 

make those decisions. 

Mr. OBEY. The gentlewoman’s time has expired. 

Ms. Roybal-Allard. 

Ms. ROYBAL-ALLARD. Professor Leigh, thank you very much for 

your testimony, particularly for highlighting the fact that low-income and Hispanic workers have a significantly higher on-the-job 

injury and mortality rate. You also mentioned during your testimony that much of those injuries and deaths are preventable, and 

that is one reason that I was happy that after seven years, legislation sponsored by myself and Congressman Miller and a lawsuit finally brought OSHA to the point where they did in fact issue the 

rules on personal protective gear, which the employer has to pay 

for. Unfortunately, during that seven-year interim period, there 

were many injuries and deaths. 

During your testimony you mentioned that you wish you had had 

some additional time to highlight the Hispanic population and the 

health and safety measures and on-the-job problems that they face, 

and I would like to give you the opportunity now to do that. 

Mr. LEIGH. Thank you very much. Yes, I would like to mention. 

There was an earlier question about prevention strategies, and 


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there are many that are in the workplace. For example, with nursing aides who are tending to elderly people in nursing homes, a lot 

of people are surprised. It turns out this is one of the most dangerous jobs a woman can take anywhere in the economy, because 

you can have a woman, let’s say, who is 120 pounds trying to lift 

a 200-pound man who has Alzheimer’s from one bed to a gurney, 

and the man can slap her. A lot of violence happens in these nursing homes. 

Anyway, they have now passed legislation in Texas where they 

have lift teams and lift tables, and groups of people who now are 

authorized to lift patients from beds to gurneys that are in nursing 

homes; and this has cut way down on the injuries, and this has 

saved on worker’s compensation. It is just an example of where an 

ounce of prevention is worth a pound of cure. 

Regarding the Hispanic point, there are many studies done by 

the Bureau of Labor Statistics that indicate that Hispanics have a 

higher fatality rate and a higher non-fatality rate compared to all 

other groups. Let’s see, there was one report that from 1992 to 

2005 Hispanics were reporting more injuries. The percentage increase for Hispanic fatal injuries was 73 percent. This trend was 

not evident for any other ethnic or racial group. And the same 

trend occurred for non-fatal injuries. 

Now, it also turns out not just Hispanics, but low-wage workers 

in general are subject to greater incidents for injuries. 

If you look on the BLS Web site, you will find the 10 occupations 

with the greatest number of non-fatal cases, and these occupations 

include laborers, material movers, truck driver, heavy tractor trailer drivers, nursing aides, construction laborers, light truck drivers, 

retail salespersons, janitors and cleaners, carpenters, maintenance 

and repair workers, stock clerks, and order filers. 

Now, it turns out that except for carpenters—— Mr. OBEY. I apologize for interrupting, but we have only got 

about three minutes left if we are going to vote, and I have got two 

more members who need to ask a question. So I am going to ask 

you to supply the rest of that answer for the record or privately. 

Mr. Udall. 

Mr. UDALL. Thank you, Mr. Chairman. 

Dr. Thorpe, I guess my question is directed to you, but I am interested in what the others have to say. You say in your written 

testimony the truth is the vast majority of chronic disease can be 

prevented or better managed, and then you have the statement 

‘‘these diseases could be prevented if Americans would do three 

things: stop smoking, start eating better, and start exercising.’’ These things seem so simple, but people do not seem to be getting the message. I mean, clearly, we are moving in the wrong direction when you look at all these diseases. How do you explain 

this phenomenon. Is the right information getting to people on 

smoking, eating better, and exercise? What is really going on here? 

Mr. THORPE. Excellent question. I will try to make it quick. Just 

to give you a sense, I mentioned diabetes up 70 percent since the 

mid-1980s. Over 90 percent of that growth is due to rising rates of 

obesity, pure and simple. 

I think the challenge is that we almost have to sort of start in 

multiple jurisdictions to find programs that are effective in helping 


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people change behavior. It is not easy to do. I think you have to 

start in schools. There are some great examples of different States. 

Arkansas has perhaps a controversial program, but it is one that 

has taken the rates of childhood obesity in the Arkansas schools 

down, at the same time period when rates of obesity among kids 

are going up dramatically. 

There are good models at the workplace, where we have had a 

substantial impact on the weight distribution of workers and productivity. Unfortunately, we do not have a good dissemination or 

research base to sort of take those results and quickly diffuse them 

into other settings. I know in the other chamber Senator Harkin 

has been looking at this for some time to figure out what are the 

key design features of those programs that work; how can we encourage their diffusion. 

And community-based interventions. We are just starting to 

learn in a very scattered way about what works in the community 

to change behavior. Those are all areas that we should be making 

investments in to find best practices and find places where we can 

replicate good programs. 

Mr. UDALL. Thank you. 

Mr. OBEY. Ms. DeLauro. 

Ms. DELAURO. I will be brief. 

We have the Rudd Center in New Haven, Connecticut, which I 

represent and Kelly Brownell is doing a lot of work there on this 

issue; it is a very important issue. But I noted your testimony, Dr. 

Thorpe, though, you say CDC’s spending on chronic disease prevention and control was $6.27 for each one of the 133 million Americans with one or more chronic conditions. The same group accounted for $13,143 in health care spending that year. 

You probably do know that, with CDC, there is a $475,000,000 

cut in their budget, so we need your help and your support in that 

effort. 

Just quickly, Dr. Leigh, I will not go through the whole issue, but 

where do we get a better picture of direct Federal investment to 

have an accurate picture, if you will, of the costs associated with 

occupational injury and illness—because it is not coming out in the 

data that we are looking at—in terms of bringing down those costs? 

If you cannot answer it now, you can get it back to me for the 

record. 

And I would like to have you look at, if you would, and get back 

to us on the impact of the regulatory inaction we have seen at 

OSHA and tell us what that has caused. 

Okay, we do not have time. We have two minutes, right, Mr. 

Chairman? 

Mr. LEIGH. Well, I would like to mention that the Bureau of 

Labor Statistics has two wonderful data sets: The census of fatal 

occupational injuries and also the annual survey for non-fatal injuries. Now, a lot of people, including myself, have criticized that survey, but it is to say that we can improve upon it, and there are 

many ways that the Bureau of Labor Statistics can improve upon 

those data to have wider—

Ms. DeLauro. We would welcome your help on how to do that, 

because we can help to design their program. 


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Mr. OBEY. Gentlemen, let me apologize for the abbreviated nature of this hearing, but it is a miracle we got it in at all, given 

what is going on on the House Floor. So thank you very much and 

we will see you back. 

We will reconvene at 2:00 with the Secretary. 


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(189) 

TUESDAY, FEBRUARY 26, 2008. 

OPPORTUNITIES LOST AND COSTS TO SOCIETY: THE SOCIAL AND ECONOMIC BURDEN OF INADEQUATE EDUCATION, TRAINING AND WORKFORCE DEVELOPMENT 

WITNESSES 

ROBERT G. LYNCH, EVERETT E. NUTTLE PROFESSOR, DEPARTMENT 

OF ECONOMICS, WASHINGTON COLLEGE 

THOMAS W. RUDIN, SENIOR VICE PRESIDENT FOR ADVOCACY, GOVERNMENT RELATIONS AND DEVELOPMENT, THE COLLEGE BOARD 

HARRY J. HOLZER, PROFESSOR OF PUBLIC POLICY, GEORGETOWN 

PUBLIC POLICY INSTITUTE AND SENIOR FELLOW, THE URBAN INSTITUTE 

WILLIAM E. SPRIGGS, PROFESSOR AND CHAIR, DEPARTMENT OF ECONOMICS, HOWARD UNIVERSITY, WASHINGTON, DC 

Mr. OBEY. If the committee will come to order? 

As members know, this subcommittee has jurisdiction over a 

great many programs that deal with people who often begin life behind life’s starting line, and the purpose of these programs is to try 

to equalize people’s opportunity to make a full and decent life for 

themselves and their families and their loved ones. 

We often hear congressional debate about the cost of making certain appropriations. We don’t often hear much said about the cost 

of not making those appropriations. 

It always bothers me, for instance, when people say that each 

and every American has X thousand dollars share of the national 

debt. That’s true. But what we don’t often see is a description of 

what the value of the assets are which are owned by the United 

States government as a representative of the taxpaying public. 

Example: what is the value to each citizen of Glacier National 

Park, or Yellowstone? They’re often very hard to quantify. But I 

would venture to say that the value of assets owned by the American people are at least equal to the value or to their share of the 

nation’s outstanding debt. 

Another example that I’ve tried to use: Lou Gehrig’s Disease. We 

spend roughly $43,000,000 to try to find a cure for that disease, nationwide. 

This committee does not specifically appropriate to deal with diseases. It shouldn’t. But that is the effective amount that’s spent nationwide to try to discover the causes and the cures of that disease, 

so we know what the cost to us is if we double that funding. 

But we don’t know what the cost of the disease itself is to this 

society when you total up the cost of hospitalization, the cost of 

doctors’ visits, the cost of lost income from the disease, the cost of 

medical services to patients as they progress through the disease. 

So what we are trying to do here today, we heard this morning 

from the Secretary of Education, we’ll hear tomorrow from the SecVerDate Aug 31 2005 04:32 Sep 09, 2008 Jkt 043194 PO 00000 Frm 00189 Fmt 6601 Sfmt 6601 E:\HR\OC\A194P2.XXX A194P2

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retary of HHS, and we’ll hear later on from the Secretary of Labor, 

and we will have tough discussions about what it costs to provide 

increased services for OSHA or increased funding for the National 

Institutes of Health, or increased funding for Pell Grants, but today 

I want the witnesses to deal with the cost of not moving ahead to 

make progress in all of these areas. 

We have with us four distinguished witnesses. 

First is Dr. Robert Lynch, Professor and Chair of the Department 

of Economics at Washington College; Dr. Tom Rudin, Senior Vice 

President for Government Relations and Development at the College Board; and Dr. Harry Holzer, Professor of Public Policy at 

Georgetown Public Policy Institute and a Senior Fellow at the 

Urban Institute, and Dr. William Spriggs, Chair of the Department 

of Economics at Howard University and formerly a senior economist for the Joint Economic Committee of the National Urban 

League. 

Before I call on the witnesses for their testimony, I’d like to ask 

Mr. Walsh for whatever remarks he would care to make. 

Mr. WALSH. Mr. Chairman, I’d just like to thank you for holding 

this hearing. I look forward to hearing from the witnesses. I welcome them here today, and I hope to get a few questions in when 

they complete their testimony. 

Thank you. I yield back. 

Mr. OBEY. Thanks. 

Well, gentlemen, why don’t we proceed first with Dr. Lynch. 

Mr. LYNCH. I want to thank Chairman Obey, Ranking Member 

Walsh, and all the other members of the subcommittee for giving 

me this opportunity to discuss with you my research on early childhood education. 

I will describe for you what we know about the benefits of public 

investment in early education programs, including Head Start, and 

some of my own research on the costs and benefits of extending 

and enhancing Head Start. 

A key message that I want in part is that public investment in 

the education of young children is an outstanding use of the taxpayers’ money. 

Research is increasingly demonstrating that the policy of investing in early childhood education is one of the best ways to improve 

child well-being, increase the educational achievement and productivity of children and adults, and reduce crime. 

Assessments of high quality programs have established that investing in children has a large number of lasting, important benefits for children, their families, and society as a whole, including 

its taxpayers. 

In general, participating children are more successful in school 

and in life after school than children who are not enrolled in such 

programs. 

In particular, children who participate in early education programs tend to have higher scores on math and reading achievement tests, have greater language abilities, require less special 

education, and are less likely to repeat a grade. 

They have lower dropout rates, higher levels of schooling attainment, and graduate from high school and attend college at higher 

rates. 


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These children experience significantly less child abuse and neglect. 

Both as juveniles and as adults, they are less likely to engage in 

criminal activity. 

Once these children enter the labor force, their employment rates 

and their incomes are higher, along with the taxes that they pay 

back to society. 

Parents of children who participate in early education programs 

also benefit. They benefit both directly from the services they receive and indirectly from the subsidized child care provided by publicly funded programs. 

For example, parents are less likely to abuse or neglect their 

children and are more likely to be employed and have higher earnings. 

Careful long-term analyses of three high-quality early childhood 

education programs have found benefit/cost ratios that varied from 

a minimum of 4:1 to a high of more than 17:1, which means that 

every dollar invested in these programs returned between $4 and 

$17 in total benefits. 

In addition to providing benefits to participating children and 

their families, early education programs lead to government budget 

benefits by generating savings in government spending on K–12 

education, on child welfare, and on the criminal justice system, and 

by increasing tax revenues. 

It is noteworthy that while participants and their families get 

part of the total benefits, the benefits to the non-participating public and government are large, and in and of themselves, tend to far 

outweigh the costs of these programs. 

For example, when all the costs are borne by taxpayers, and 

when we take into account only the benefits that generated budget 

savings for government, benefit/cost ratios for early education programs have been calculated to equal about 3:1. 

That is, every tax dollar spent on these programs generated about $3 in budget revenues and budget savings. 

Thus, it is advantageous even for nonparticipating taxpayers to 

help pay for these programs because the costs to government are 

outweighed by the positive budget impacts that these investments 

eventually produce. 

Now, with respect to Head Start specifically, most studies have 

found that the immediate impacts of Head Start, whether measured in terms of achievement test scores or the behavior, motivation, and health outcomes of participating children have been positive. 

There have been only a few studies of the long-term impacts of 

Head Start and these, too, generally show small to moderate positive effects. 

A carefully controlled, large-scale randomized study of the outcomes of Head Start is currently underway, the National Head 

Start Impact Study. It has published its first year findings from a 

study that plans to follow children for four years. 

After just one year of Head Start, there were small to moderate 

statistically significant positive impacts for three- and four-yearolds on several measures of cognitive achievement, social, emotional behavior, access to health care, and health status. 


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In addition, from the parenting programs, we find that there 

were small, statistically significant improvements in the parenting 

practices of parents of children who had attended Head Start. 

In my own research, I analyze the costs, and many, but not all, 

of the benefits of public investment in prospective high quality prekindergarten programs. 

In other words, I look at what would happen if we extended and 

further enhanced Head Start. 

I find that a larger and improved Head Start program would 

generate growing annual benefits that would surpass the cost of 

the program in six years. The annual budgetary, earnings, and 

crime benefits eventually exceed the cost of the program by a ratio 

of more than 12:1. 

The net annual effect on government budgets alone—that is, excluding the crime benefits and the earnings benefits that go to citizens—the net annual budget benefits alone turn positive within 

nine years. 

That is, starting in the ninth year, and every year thereafter, annual government budget benefits due to an enhanced the Head 

Start would outweigh annual government costs of the program, and 

do so by growing margins over time. 

For every tax dollar invested in high quality Head Start, we 

would eventually experience more than $3 in government budget 

benefits. 

And of course, on top of the budget savings, an enhanced Head 

Start program would substantially increase the earnings of workers, grow the economy, and reduce the cost to individuals from 

crime. 

So what research demonstrates is that investment in early education, even when its benefits are not fully accounted for, is an effective public policy strategy for enriching children and enriching 

the nation. 

A nationwide commitment to high quality Head Start would cost 

a significant amount of money up front, but it would have a substantial payoff in the future, as it will reduce costs for remedial 

and special education, for criminal justice and child welfare, and it 

will increase income earned and taxes paid. 

Over time, government budget benefits alone outweigh the costs 

of Head Start. That is, a high quality Head Start would pay for 

itself. 

The consequence of not extending and further improving Head 

Start is more crime and poverty and a weaker, less globally competitive economy with less skilled workers earning lower incomes. 

Thus, we should be investing in high quality early education to 

improve the quality of life of millions of our children, to reduce 

crime, to make the workforce of the future more productive, and to 

strengthen our economy. It is one of the wisest investments our nation can make. 

Thank you very much. 

[The information follows:] 


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Mr. OBEY. Thank you. 

Why don’t we proceed with you for five minutes, and then we’ll 

go vote and come back and hear the others too. 

Mr. RUDIN. Great. Thank you, Mr. Chairman. Appreciate the opportunity to be here, ranking Member Walsh. 

The College Board is the organization I represent, and we’re a 

national non-profit membership organization, and our members are 

schools, colleges, and universities that focus on connecting more 

students to college. 

So we appreciate the opportunity to be part of this conversation. 

Thank you. 

Mr. Chairman, I can summarize my presentation. I would like to 

take the full five minutes, but I can summarize it in three words, 

and that is, higher education pays. 

From lifetime earnings, to increased access to pension and health 

plans, to being a healthier citizen, to overall community vigor, 

higher education yields significant benefits for both individuals and 

for society as a whole. 

Now, I have given you a couple of materials in advance. One is 

this publication, ‘‘Education Pays,’’ and another is a publication 

that summarizes some of the key points from our 2007 Education 

Report, and I’ll just summarize a few key points from that report. 

We know, and I think it’s pretty well understood, that access to 

a college education does lead to higher earnings for individuals, a 

60 percent premium on your earnings if you’ve graduated from college versus just graduating from high school. 

People with a Master’s Degree earn twice as much over their lifetime as people with a high school degree, and people with professional degrees earn almost three times as much over their lifetime 

in terms of earnings. 

Even people who have attended college for some time, not even 

finishing the degree, earn on average 19 percent more than high 

school graduates. 

And access to pension plans and health care is at least twice as 

high for people from college graduate groups than for people who 

have no high school degree or perhaps even dropped out of high 

school. 

So the individual benefits to having a college degree are quite 

significant. 

But what about the question of whether government, foundations, scholarship organizations should invest in education of individuals? What’s the payoff to society for that? 

Well, we think it’s significant, and I’ll cite just a few key pieces 

of data. 

The typical college graduate working full-time for a year pays 

134 percent more in federal taxes than the high school graduate, 

and pays 80 percent more in all taxes—federal, state, and local. 

College graduates are more likely than high school graduates to 

donate blood, to vote. 

And in one interesting chart that is in front of you, it shows that 

college graduates are more likely to value and understand, be willing to accept the opinions of others who have different views than 

them than high school graduates. 


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And perhaps one of the more compelling pieces of information 

that we’ve uncovered and that is in our report is that the benefits 

of higher education extend to those who don’t even have a college 

degree. 

A recent study showed that, for example, people who work in a 

metropolitan area, who do not have a college degree, still benefit 

if those around them, and if an increasing number of those around 

them, have a college degree. 

For example, a 1 percentage point increase in the proportion of 

the local population holding a four-year college degree leads to a 

1.9 percent increase in the wages of a worker without a high school 

diploma and a 1.6 percent increase in the wages of a person with 

a high school diploma. 

So there are significant benefits when the overall community is 

better educated that accrue even to those who haven’t gone to college. 

Now, what about other benefits, to health and parenting? 

Low income Bachelor’s Degree recipients are more likely than 

high school graduates of any income level to report excellent or 

very good health. They have better access to health care and better 

understanding of how to take advantage of it, and more money to 

pay for improved health care. 

Another interesting point that illustrates the societal and social 

impacts of a college degree: 61 percent of four-year graduates ages 

25 to 34 exercise vigorously once a week. That’s twice as much as 

high school graduates. 

And by 2005, the smoking rate in this country had dropped to 

about 20 percent, but among college graduates, that had fallen to 

9 percent. 

And even if you look at the data from 50 or 60 years ago, when 

about 40 to 45 percent of the people in this country smoked, it was 

the same for college graduates and non-college graduates, but once 

the awareness became pretty widespread that smoking was bad for 

you, smoking dropped overall, but among college graduates, it 

dropped quite significantly compared to others. 

So we have data for particular states. The data for Wisconsin 

mirror the data across the country in terms of wages and in terms 

of overall societal benefits. 

I’ll cite one piece of data from Wisconsin: 28 percent of people 

who do not have a high school degree in Wisconsin, Mr. Chairman, 

are Medicaid participants, but only 5 percent of Bachelor’s Degree 

recipients in Wisconsin are Medicaid recipients. 

So the benefits are substantial. 

We believe an investment in education pays great dividends, 

both for individuals and for society in general, and I’d be happy to 

talk with you further about some of the work that’s underway to 

try to close the achievement gap in terms of access to education 

and some of the work that this committee is supporting and that 

we’re helping to implement across the country. 

Thank you. 

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Mr. OBEY. We have a floor action. This first vote, there are eight 

minutes left. Almost nobody has voted yet. Then we have another 

five-minute vote. Then we have 10 minutes of recommit debate. 

Then a 15-minute vote on recommit. And then five for final passage. 

So the floor action is pretty well screwing up this hearing. 

What I’d like to do if I can is to try to squeeze another witness 

in before we go to vote. 

Dr. Holzer. 

Mr. HOLZER. Thank you, Mr. Chairman, Mr. Walsh, and other 

members. 

I want to talk today about the economic costs of inadequate investments in workforce development, not just for individuals, but 

for the whole economy. 

In my statement, I have four points to make, although I’ll focus 

primarily on one of them, because of the reduced time. 

First of all, the very low earnings and employment of millions of 

Americans generate not only high poverty rates but they impose 

huge costs on the U.S. economy overall. 

Secondly, federal investments in workforce training to raise these 

earnings have declined quite dramatically over time. 

Third, the research evidence and the evaluation evidence, while 

somewhat mixed, does show that many of these public investments 

are cost effective at raising the earnings of these workers, and 

many more newer approaches are very promising. 

And fourthly, therefore, the federal government should make 

major new investments in workforce development while also undertaking many new evaluation studies to improve our knowledge of 

exactly what works. 

I want to focus primarily on the first point about the costs of low 

earnings. 

Roughly 10 million Americans, 10 to 15 million Americans live 

in low-income families and have very low wages. Many have poor 

basic skills, no high school diplomas, but very few of them have 

any serious post-secondary education or training. 

Now, what costs do they impose, not only on themselves and 

their families, but also on the overall economy? 

Well, since worker earnings generally reflect their productivity in 

the labor market, low earnings of the poor directly reflect 10s of 

billions of dollars of lost productivity to the U.S. economy. 

These poor workers also generate large budgetary costs to the 

federal government. We spend roughly $600,000,000,000 each year 

in means tested programs for the poor. Now, at least half of that 

is Medicaid alone. But remember, these programs mostly treat the 

symptoms of poverty, not its causes. 

Furthermore, low potential earnings tend to discourage many 

workers and drive many of them out of the labor force altogether, 

and here especially, I’m talking about low-income minority men, 

whose employment rates have been declining over time. 

Young men with low earnings potential are much more likely to 

engage in behaviors that are very costly to society, like participation in crime and fathering children outside of marriage. 

Crime, in particular, imposes enormous costs on the United 

States, estimated by some analysts to be in the value of 


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$1,000,000,000,000 to $2,000,000,000,000 a year in administrative 

costs and lost output and costs to victims. 

The cost of fathering children outside of marriage is also extremely costly to the economy and society, because the children 

who grow up in these families are more likely themselves to have 

very low education, to engage in crime, and to suffer from bad 

health, generating this ongoing cycle of costs across many generations. 

But the costs to the U.S. economy go well beyond the poor themselves and their families. 

For instance, employers often report difficulty filling not only 

their high skilled jobs but jobs in the middle skill categories that 

don’t require a college degree, but certainly require some training 

beyond high school. Sometimes they have those difficulties even 

when they’re paying reasonably high wages. 

Positions remain vacant for significant periods of time, especially 

in tight labor markets. Their recruitment costs rise, their compensation costs rise, and many employers report having to accept 

less qualified and less productive employees than they have in the 

past. 

These difficulties and costs for employers will likely grow when 

the baby boomers begin retiring, and especially in those sectors of 

the economy like health care and elder care, where labor demand 

is likely to grow very substantially. 

And these concerns may ultimately raise the rate at which employers choose to offshore their production or to recruit immigrants 

from abroad to fill the jobs remaining in the United States. 

So this vast range of costs imposed by poor skills and poor earnings is borne not just by the poor, but by employers and the economy overall. 

Now, in my statement I make other points about the dramatic 

declines in investment spending over time. 

Investment spending in workforce training peaked in 1979. It’s 

declined by roughly 70 percent in real terms. It’s declined by about 

85 percent relative to the size of the economy. 

We spend a smaller share of our economy than virtually any 

other industrialized nation on workforce training programs for less 

educated workers. 

One might say, well, if these programs aren’t effective, maybe it’s 

reasonable that we spend less money on them. 

I think the evaluation evidence on these programs is somewhat 

mixed, but there’s many, many examples for rigorous evaluations 

of cost-effective programs, and I could detail those during the question and answer session. 

So finally, what I think all this implies is that we do need to invest more in the most promising new kinds of job training and 

workforce development, the kind that involve partnerships between 

the private sector, community colleges, state and local agencies and 

intermediaries. This involves not only training, but a range of financial supports and services to low-income workers. 

And while we’re making those investments, we certainly need to 

invest also in rigorous evaluation to improve our knowledge over 

time about exactly what’s cost-effective in this realm. 


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But certainly, while we get that information, we need to improve 

the size of those investments, given the costs associated with those 

very low earnings. 

Thank you. 

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Mr. OBEY. Thank you. 

Let me suggest that we go vote. We will have this vote and then 

a five-minute vote. 

And so I would suggest that we cast these next two votes, and 

then if we come back here, we will have a 25-minute window before 

we have to go and vote on the next two items. 

I’m sorry to do this to you, Bill. 

[Recess.] 

Mr. OBEY. Well, as you were about to say before we were rudely 

interrupted, Dr. Spriggs, please proceed. 

Mr. SPRIGGS. I want to thank you, Chairman Obey, and I want 

to thank the ranking member, Mr. Walsh, for inviting me to speak. 

I’m not going to be speaking on investments in people or those 

programs, but actually, investments in making people get connected to the program so that these programs can be effective. 

In particular, I want to talk about the social services block grant 

and the community block grant programs. 

These are programs that give states a great deal of flexibility in 

figuring out how to connect people who need services to the services, and to close the gap for people who need services but aren’t 

connected because they aren’t part of a program, as an example, 

TANF. 

The vast majority of the direct recipients of the social services 

block grants that states use are children; 63 percent of those who 

benefit are children. 

If we were to cut the program in this current environment, it 

would be doing it in the face of a growing need on the part of attaching children to services. 

The number of poor children in this country since 2001 is up 1.1 

million. That’s roughly the population of the state of Rhode Island. 

And these needs are likely to grow, as the economy looks like it is 

slowing down. A cut from $1,700,000 to $1,200,000 would be a cut very close to 

30 percent, and that would mean roughly 2.7 million fewer children 

could be attached to important services like day care, which we just 

heard was an important investment that the government should be 

making. 

These services are provided normally in partnership between 

services directly provided by the state and with community partners. A big part of that takes place through the community block 

grants, agencies that are vital, especially in rural areas. 

In many cities, there are lots of different social service agencies, 

but in many rural areas, there aren’t, so the community partnership in Lewiston, Idaho, for example, is very important for connecting people to getting help on weatherization, on housing counseling, as we know is a very important thing right now. 

It’s very important in Indian Head and Russ County in Wisconsin, for instance. That’s the way that children get their access 

to Head Start and to Fresh Start, Wisconsin Fresh Start. 

So those grants are important devices for connecting people to 

the services that they need to receive and keep the investments 

going. 

I want to talk about a problem that we have with the safety net, 

and that funds to SSBG and the community grant can help with. 


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This last expansion that we had was very unique, because as opposed to having poverty decline since 2001, as I mentioned earlier, 

poverty actually increased. 

Part of this anomaly is that even though low-income workers, 

those who actually were in poor households, saw their wage earnings increase, their sources of income from the safety net actually 

went down, and this was most dramatic when you look at issues 

of access to TANF, access to food stamps, access to unemployment 

insurance, so that those automatic stabilizers which we would have 

anticipated being kicked in to help people through the recession 

and keep their consumption high actually didn’t reach the people 

we thought that they should have reached. 

The block grants were frozen in amounts so that even though 

there was a rising demand for services, states were not given more 

resources to actually help make that connection take place, so 

things like job training and like child services tended not to reach 

the people we would want to reach. 

There is data collected by the Center for Economic Policy Research and the Center for Social Policy Research at the University 

of Massachusetts, Boston that help to highlight this gap between 

needs, those who get service, those who are eligible for service, and 

then those who actually get service. These gaps can be rather huge. 

For instance, if we just look at housing assistance, something 

that we clearly need at the moment, 10.2 percent of folks in Illinois 

are eligible, but only 2.1 percent actually receive housing assistance among those who are eligible. 

Here in Washington, D.C., 19.3 percent of the population is eligible for housing assistance, but only 6.1 percent actually received 

the assistance that they were eligible for. 

And as we look at a downturn in the labor market and think 

about something as fundamental as food stamps, there can be huge 

gaps. In Texas, for instance, almost 23 percent of families in Texas 

are eligible for food stamps, but only 2.7 percent of the families 

who are eligible actually receive the food stamps. 

These grants, these social services block grants, give states the 

flexibility to fashion as they see the needs in their state how to connect people to the needed services, to child care, to foster care, how 

do we get them to job training, and get them the right job training, 

and their partners and the community action agencies and through 

the community block grants add that extra amount for making 

sure that services are provided. 

We should make sure that states have those resources and can 

connect people to the programs that you have actually appropriated 

funds for, to make sure that they are doing the job, the programs 

are doing the job that you want to have done, and that the people 

you want served are being served. 

And it’s very important that, especially in our rural areas, where 

these community block grants are really essential to making sure 

that they’re going to service providers, so that child care takes 

place, so that job training takes place. 


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So these investments you heard are great investments, but they 

have to be connected to the people who need the services. Cutting 

those monies to social service and to community service block 

grants is a way of making those programs less effective. 

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Mr. OBEY. Thank you very much. 

Mr. Walsh. 

Mr. WALSH. Thank you, Mr. Chairman. 

I’d like to direct questions to, first to Dr. Lynch, and then to Dr. 

Holzer. 

Regarding Head Start, you talked about short-term analysis, 

short-term results, positive. I’ve heard that historically. Long-term 

study generally shows small to moderate improvement. 

The point, I guess, is that kids, once they get ahead from Head 

Start, and they get into a not quite so pro-education an environment, let’s say, they start to lose that. 

Is that true? And what do you see causing this, and how do we 

deal with that? 

Mr. LYNCH. Well, there is some accuracy to what you’re saying, 

in that if you have children who go through a Head Start program 

and then subsequently go on to schooling that’s of inferior quality, 

you see some of the initial benefits that they get start to fade. 

On the other hand, if we see those children going into reasonable 

quality schools to good quality schools, we see that those benefits 

last, the cognitive benefits. 

Some of the other benefits seem to last, regardless. For example, 

grade retention and need for special education seem to last, in either case. 

So it is important, therefore——

Mr. WALSH. Grade retention? 

Mr. LYNCH. In other words, the reduction in repetition of grades, 

so kids who were held back, that declines, and that seems to persist, regardless of the kind of quality school they go on to. 

But in general, if you want to maintain the gains that initially 

happen in Head Start, it is important to also invest in the quality 

of the subsequent schooling that children go to. 

Mr. WALSH. You mentioned that, after nine years, savings to the 

government of programs amounted to a 3:1 investment, positive return to the government. 

How do you—how do those savings come? How does that benefit 

accrue? 

Mr. LYNCH. Yes. The savings are in about seven or eight different areas. 

One is, children who go through these programs are less likely 

to need special education, which is very expensive. 

They are less likely to be retained in grade. And every time a 

child is retained in grade, we’re spending an extra $10,000, approximately, per year. 

Third, children who, and parents who go through these programs, they’re much less likely to be involved in child abuse and 

neglect, and we save a lot of money in our child welfare system. 

Fourth, the children, as juveniles, and subsequently as adults, 

they’re much less likely to be involved in criminal activity, saving 

us an enormous amount of money in the criminal justice system. 

Fifth, the parents who go through these programs, who have 

children in these programs, get the subsidized child care, and 

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Sixth, the children who go through the program, they graduate 

from high school at higher rates, they go on to college at higher 

rates, they have higher earnings, and they pay a lot more in revenue to the government, as well. 

So all these different forms, these are enormous savings that we 

get. They don’t all happen in year one, but they happen over time, 

and over the time they grow larger each and every year. 

Mr. WALSH. Thank you. 

Dr. Holzer, regarding workforce development, you said research 

was mixed on raising incomes, and yet you call for major new investment. Why? How do you explain that? 

Mr. HOLZER. Well, very simply, a lot of the research evidence 

today is outdated. 

People still cite, and even in my statement, I still cite a random 

assignment study of JTPA, for instance, that’s roughly two decades 

old. 

The program has likely changed quite dramatically since it 

morphed into WIA, and in fact, the evidence that we have on WIA, 

some of its non-experimental is really quite positive, especially on 

displaced workers and on adult services. 

And on many, many other——

Mr. WALSH. So you anticipate that current programs are much 

more effective than past? 

Mr. HOLZER. That’s my guess. If you look at the whole new generation of programs, many of them focus much more on community 

college training, where there is evidence of effectiveness. 

Mr. WALSH. Right. 

Mr. HOLZER. They engage the private sector more, sectoral programs, career ladder programs. 

So my anticipation is that the evaluation evidence will be more 

positive, but I also emphasize at the same time that we make these 

investments that we also invest heavily in evaluation, rigorous 

evaluation, so we get a better sense over time exactly of what 

works and maybe reallocate resources accordingly. 

Mr. WALSH. Okay. You also made the statement that we spend, 

it was something like, we spend a smaller amount as a percent of 

our federal budget—well, we spend a smaller amount as a percent 

of budget than all other countries, developed countries; was that 

the statement? 

Mr. HOLZER. Virtually all other industrial countries, as a percentage of GDP. 

Mr. WALSH. Now, is that federal budget to federal budget? Or 

does that include BOSEs, community college, vocational high 

school? Does that include all of those things? 

Mr. HOLZER. That includes—the figure comes from a study that 

USGAO did in 2003, and they went across all agencies in the federal government. 

Mr. WALSH. Just federal? 

Mr. HOLZER. Just federal. 

Mr. WALSH. So it doesn’t include state, doesn’t include local, 

doesn’t include community colleges, BOSEs, vocational high 

schools? 


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Mr. HOLZER. No, it does include some of them. It includes the 

portions of those programs that actually fund employment services, 

and as a percentage of GDP. 

Now, I’m quite certain that if you added in those other components, the state components and other things, that number would 

go up a small amount. It might be 2/10ths of a percent of GDP. It 

wouldn’t dramatically change the qualitative result. 

Mr. WALSH. Okay. Thank you, Mr. Chairman. 

Mr. OBEY. Ms. McCollum. 

Ms. MCCOLLUM. Thank you, Mr. Chair. 

To kind of follow up on that, I was with some German parliamentarians this weekend, and we were talking about Transatlantic 

trade and global competition and that. 

And what they were—what I was most surprised to hear, and I 

shouldn’t have been, is that in Germany, they thought their commitment to worker training and retraining was 3:1 to where ours 

was, maybe 2:1 in some other parts of Europe, but a real high emphasis into lifelong learning skills for all workers. 

So if there’s anything that you could follow up more and comment on that, I’d appreciate it. 

Another issue that I’ve been—and it kind of goes back to adults 

and it also goes back to young adults not necessarily making good 

decisions, young adults thinking that they aren’t going to go to college or that they aren’t going to need college, or people who have 

been out of high school maybe for 10, 20 years needing math and 

science to go back in. 

They go to the community colleges. They spend a lot of time and 

energy doing remedial work to get up to a standard in order to 

start taking classes. 

I wonder if there’s been any discussion about even to make it 

more cost effective and user friendly, especially in rural areas, to 

look at the way we view community education. 

In Minnesota, community education can also sometimes mean 

math, science, and writing classes for adults going back. 

If you have any comments you’d like to make on that. 

And then thirdly, and this isn’t as related, but the housing foreclosures. 

One of the most important things, I can tell you as a teacher, is 

stability in a child’s life. 

What brings a child the most stability is knowing that there’s 

going to be a roof over their head and there’s going to be a parent 

there, and there hopefully will be something nutritious on the 

table, and if you’re from a cold weather climate like the chairman 

and I, that there’s some heat in the house. 

What do you see the effect or are you concerned about the effect 

of what we’re seeing with some of the foreclosures, especially in the 

areas that we’re seeing now, and what should we be doing to prepare ourselves and our schools and these students, to give them an 

opportunity during what proves to be very, very tough times, especially for these families? 

Mr. SPRIGGS. If I can take a first stab at one of your concerns, 

and that is, the community block grants provide help for a lot of 

the agencies that do weatherization in rural areas and provide 

housing counseling. 


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So now would not be the time to want to cut those programs, because a lot of those families that may be facing foreclosure need the 

housing counseling advice, and they need it from someone who will 

be impartial. 

One of the big problems out there is finding a paid-for housing 

counseling service that isn’t tied to the industry. 

And weatherization is one of those great services that takes 

place, particularly in Minnesota and Idaho and Wisconsin, that 

these community action agencies provide. So keeping them in place 

would be very important. 

Mr. HOLZER. I’ll take a stab at least at the first question you 

raised about these international comparisons. 

And I agree totally. If we define more broadly, as Mr. Walsh suggested, that we should also include expenditures on vocational educational for high school students, college students, community college students, adult displaced workers, that’s a broader concept, 

but if you defined it that way, the gaps between us and many of 

these other industrial nations would likely be even larger. 

And there we actually have quite strong evidence, high quality 

career and technical education for young people, so I’m not talking 

about old, old-fashioned voc ed. I’m talking about career academies, 

tech prep, those kinds of models. Those are very cost-effective. And 

yet we invest very little in them, and those investments have, if 

anything, diminished over time. 

So again, defining it more broadly that way makes the point, I 

think, even more valid. 

In terms of your point about community education, and I’m trying to think of other examples that would fit that model, I think 

there are some states, and I’m familiar with the state of Kentucky, 

that has developed a statewide model for all of its community colleges, to make that education much more accessible to low-income 

adults, as well as young people in all their sites across the state, 

and to link those training programs with employers. 

So they have these so-called bridge programs to try to remediate 

the basic skill deficiencies, and then to move those into more occupational based training. 

And without rigorous evidence on effectiveness, they look quite 

impressive, just in terms of what they’ve managed to achieve statewide. So one of many models that we might try to emulate in other 

places. 

Mr. OBEY. We have this vote. 

[Recess.] 

Mr. OBEY. Mr. Honda. 

Mr. HONDA. Thank you. Thank you, Mr. Chairman, and the 

ranking member. 

Let me just say to the chairman, I appreciate having these witnesses today, because it validates the kind of things we sense education can really be, in the early childhood and workforce. 

The question I had was about early childhood or Head Start and 

its performance across the country. Although it’s good, it’s uneven, 

and I was hoping that you might be able to explain whether it’s 

uneven through states or regions, and perhaps some of the dynamics that might contribute to the unevenness. 


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Mr. LYNCH. One of the issues is that, with Head Start, there are 

about 1,500 programs across the country, and while they all have 

to follow federal guidelines, they vary in terms of what they specifically do. 

And among important issues that we see is that in some areas, 

the requirements, for example, for teachers are much higher than 

in other areas, so in some areas, all the teachers have Bachelor’s 

Degrees, and even maybe certification in early childhood education, 

and we know from the research that that’s extremely helpful in 

terms of improving the outcomes, versus in other areas, many of 

the teachers only have a high school degree. 

So there’s going to be a variation across the programs, because 

while they follow the federal guidelines, there’s a lot of internal differences in what they’re actually doing. 

Mr. HONDA. The guidelines don’t require a certain level of preparation before you teach or before you’re involved in it? 

Mr. LYNCH. No, they require just a high school degree. 

Mr. HONDA. Okay. So that sort of suggests the need for some sort 

of in-service training for upgrading the training? 

Mr. LYNCH. Absolutely. That certainly would suggest—one of the 

things that we find is that if you were to improve the qualifications 

and training of the teachers and staff, that does generate enormous 

benefits to the children. 

Mr. HONDA. This difference in preparation or requirements, is 

that a phenomenon by regions or is that something that’s just scattered? 

Mr. LYNCH. It varies by state, often, because of state requirements. 

While again, everyone follows the federal requirements, every 

state has their own specific requirements that may or may not go 

beyond the federal minimum requirements. 

Mr. HONDA. Okay. 

Mr. LYNCH. So some states have much more rigid requirements 

than others. 

Mr. HONDA. In the discussion about the children’s continuing 

success as they go on, and when they don’t have a program that 

has had Head Start in it, what is the impact of parents being exposed to Head Start, and are there components of Head Start that 

have parent education, that would suggest that their participation 

does help youngsters’ continuous growth? 

Mr. LYNCH. Well, we know that when parents participate in the 

education of their children, in these early education programs, that, 

again, there too, the outcomes tend to improve for the children. 

And we also know that many of the Head Start programs have 

classes for parents, specifically have training for parents specifically, and that improves a number of things, for example, the incidence of hitting or slapping, the kind of discipline that parents use. 

So there are benefits directly to the kids from their parents participating, and there’s benefits to the parents themselves, in terms 

of being better parents by participating in the programs. 

Mr. HONDA. You mentioned that when a youngster is involved in 

Head Start, there’s less need for special education. 


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Do they assess youngsters for special education at the third and 

fourth year or is this just because of the program or the strategies 

that the kids go through? 

Mr. LYNCH. What we find is that when the children enter the 

public school system, K through 12, that fewer of them are found 

to require special education if they had quality preschool before 

they go into the K through 12. 

So it seems to be an outcome that’s a consequence of the education and the training and the emotional development that happens in the early, in the third and fourth—excuse me—when 

they’re three and four years old. 

Mr. HONDA. So it’s not so much academic preparation, it’s more 

socialization and——

Mr. LYNCH. This is one of the key things that I think is often 

misunderstood, is that among the benefits of early education are, 

some of it is definitely the cognitive outcomes, you know, achievement test scores and things like that, but many other benefits are 

the social and emotional development, less aggressivity, more persistence. 

And we know that this ability to control your emotions and be 

persistent, stick to it, have enormous benefits, and indeed, are 

more predictive of outcomes over life than are things like IQ test 

scores. 

And there is some evidence, of course, that IQ test scores do—

improvements in IQ test scores tend to fade over time, but these 

other benefits persist. 

And it’s a little bit like saying that antibiotics don’t cure the common cold, and therefore the antibiotic is worthless. No, that’s nonsense. Antibiotics may not cure the common cold, but they generate 

enormous other benefits in terms of lung infections, sinus infections, et cetera. 

And it’s the same thing here. We know that the early education 

may not a huge impact in terms of IQ test scores, but in all these 

other areas, they do, and these have long-lasting, lifelong consequences, and that’s very important. 

Mr. HONDA. Thank you. 

Mr. OBEY. A lot of questions, very little time. 

Dr. Lynch, you talked about Head Start and the economic value 

of providing more support for it. Based on your work, my staff estimated that the $164,000,000 

cut from the Head Start program could cost as much as 

$1,200,000,000 over 40 years in lost government tax revenue, reduced individual earnings, and increased costs from crime and 

child abuse. 

Is that a reasonable estimate, and if not so, why? 

Mr. LYNCH. Oh, it’s definitely a reasonable estimate, and indeed 

it could be larger than that. 

One of the issues is that that estimate is based on the things 

that we know that we can quantify, but there are also a number 

of other benefits that are very difficult for us to quantify in monetary terms. 

For example, children who go through Head Start and other 

early education programs are less likely to be teenage parents. 

What’s the monetary value of that? They are less likely to abuse 


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alcohol and drugs. What’s the monetary value of that? That’s not 

included in that estimate. 

So that is a reasonable estimate for the things that we know that 

we can quantify, but it does not include all the benefits. 

Mr. OBEY. Mr. Rudin, we often hear the argument that it’s wrong 

to tax lower income people or middle income people in order to pay 

for increased college benefits for people who will wind up in the 

higher end of the income ladder. 

Yet your statement indicates that there’s a ripple effect which increases income for non-college people as well as people who go to 

college, and you indicate that I think you said there’s a 1.9—— Mr. RUDIN. Percent increase. 

Mr. OBEY. Explain that. 

Mr. RUDIN. Yeah. That’s a——

Mr. OBEY. What I’m getting at is, I’m very suspicious of numbers. I think almost anybody can put together any numbers they 

want. 

How do you arrive at that specific conclusion? 

Mr. RUDIN. The economists that did this study, what they did is 

they looked at whether the spillover effect, they called it, of having 

more college-level educated people in a community would affect the 

earnings of low-income citizens, and in fact, it did. It drove up their 

earnings. For each 1 percent more college graduates in the community, it increased the earnings of non-high school graduates by 1.9 

percent. 

Mr. OBEY. How did they reach that conclusion? What’s the mechanism by which that occurred? 

Mr. RUDIN. Yeah. They did a study of several cities, and they 

looked at both the productivity, and therefore the—first, they 

looked at how many students were—how many of the workers were 

college educated, and then they tried to measure the productivity 

in terms of the wages of both the college graduates and the high 

school and non-high school graduates. 

What they found, and we think this is important, it does illustrate that the broad benefits of an investment in higher education 

are significant. You can get benefits that accrue to people who don’t 

go to college when you increase the percentage of college graduates 

in the workforce. 

The reason why is there’s an increase in productivity, there’s a 

likelihood that you have better and more efficient use of new technologies, the likelihood of increased opportunity to be innovative 

and creative, and the likelihood of greater communications between 

and among workers in a workforce. 

And finally, when a community suffers an economic shock from 

the closure of a plant or the closure of a business or an economic 

downturn like we’re in today, you have workers who are probably 

more likely to have the flexible work skills to absorb that, that economic shock in the community, maybe start their own businesses, 

maybe ease into another job because of their college degree, and 

that can raise the overall economic productivity of a community, 

large or small. 

Mr. OBEY. Your statement indicates that in recent years, increased college enrollment has been almost exclusively in the upper 

half of the income distribution. 


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The administration is recommending that we zero out the SEOG 

student aid program. That’s what, a $757,000,000 reduction. 

Is it fair to say that the elimination of funding for that program 

is likely to add to the education disparity, and also, therefore, add 

to the income disparity in this society? 

Mr. RUDIN. Well, we think that is a fair statement. 

That program serves the people who need access to financial aid 

the most, the neediest students, particularly at a time when Pell 

grants, the purchasing power of a Pell grant has declined in the 

last 20 years from about half of the cost of college to about a third 

of the cost of college. To suggest further cuts, we think would be 

pretty devastating to the people who need the greatest access to financial aid. 

Mr. OBEY. Dr. Holzer, you indicated that we are investing today 

in job training programs, that we’ve had about what, about a 75 

percent reduction from the high point? That’s in job training programs. 

The administration is now recommending that we zero out the 

vocational education program. 

What conclusion do you reach about the advisability of that decision, and what effect is it having on the quality of America’s workforce and the ability of families to become economically upwardly 

mobile, shall we say? 

Mr. HOLZER. I think that’s ill-advised. I think the area of vocational education is one of the areas where we have—is it on now? 

I think the area of vocational education is one of the few areas 

where we have very solid, rigorous evidence on what works, what’s 

cost effective, and I think those federal funds do help to fund career academies, tech prep programs, and a variety of newer models 

that are really much more effective than the older generation of vocational education was, and these are programs that not only benefit lower income Americans, but some of our most at risk populations, while they’re still in school benefit in terms of higher earnings once they graduate, and these benefits persist for at least four 

years after they graduate, so this is really a penny wise but pound 

foolish approach, I think, to cut in areas where the need is great 

and where the evidence of what works is very clear. 

Mr. OBEY. Dr. Spriggs, the administration is also asking for a reduction in the low-income heating assistance program of roughly 22 

percent. 

I have constituents in my district—two weekends ago it was 28 

below zero. I’m talking about real temperature, not the chill factor. 

Ten days earlier, it was 38 below zero. 

And the problem in our state is that right now the state forbids 

energy companies from cutting off people’s heating supplies, even 

if they haven’t paid their bills, but that expires in April. 

I’ve got constituents who make 15,000, 18,000 bucks, who have 

a $4,000 heating bill. I don’t know how in hell they’re going to pay 

that. 

And we have such a small percentage of people who are eligible 

for LAHEAT, who are in fact collecting. 

You talked about using programs like the community service 

block grant in order to plug people into information about what 


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they’re entitled to, where they can get help. How do you tie those 

two together? 

You’ve got a lot of people in this Congress who think that programs like CSBG are just liberal social fantasy programs, it’s 

money down a rathole. 

Are there any specific examples you can give about the direct 

benefit of those programs to low-income people? 

Mr. SPRIGGS. Well, specifically, in the case that you just raised, 

about access to LAHEAT, and in particular the CSBG agencies 

themselves overwhelmingly are the major source of weatherization 

help for low-income families. 

Mr. OBEY. Can you give me examples of how they might help to 

plug people into health care networks that they otherwise would 

not plug into? 

Mr. SPRIGGS. One of the things that the community action partnerships do and the community action agencies do is tie the, especially the old age and children, directly into programs that they 

need. 

The mother who is trying to keep a job, isn’t on TANF but needs 

to connect to child care services, or the mother who is taking care 

of an elderly parent and needs assistance in getting adult day care 

and access to that, that’s what these programs do. They connect 

the individuals to these types of services. 

So withdrawing those services means that you would lose a potential worker. She would have to stay home in order to take care 

of her parents, or she might have to stay home to take care of her 

children. So these are the kind of gaps that are filled. 

And foster care—most of the hard-to-place children receive assistance through the foster care programs, again done either by the 

state or in partnership through the CSBG agencies. 

So you have young men who present severe mental problems because of all the stress and strains they’ve been put through, and 

those families couldn’t take on the burden of dealing with a foster 

care child with those issues, if they didn’t have access to these programs. 

So it’s really filling the holes for folks who would otherwise fall 

through the cracks of programs we are already funding, but they 

can’t connect to the programs. 

Mr. OBEY. One last question. 

We have a lot of concern in this society about abortion. We have 

a lot of political controversy about it. But I don’t know of very 

many people, if any, who are thrilled by the idea of abortions. 

We always look for ways that we can minimize the pressure on 

women to have an abortion. 

How do you think these programs fit into that? Of what utility 

is a program like community service block grant, for instance, in 

taking the pressure off women, economically, to have an abortion 

and not carry their fetus to full term? 

Mr. SPRIGGS. Well, even before that stage, many of the CAA 

agencies are the way in which family planning gets funneled, not 

family planning in that sense, but family planning in sense of encouraging marriage. This is where marriage counseling takes place, 

and that sort of thing. 


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So the route through which people could get help who might not 

otherwise have the money for getting that kind of counseling, that’s 

how we funnel that money. 

And at the local level, to provide the safety net that lets the 

women know that there would be access to child care, that there 

would be access to other support systems, that’s how she knows 

that’s going to take place. 

So it’s the existence of these programs that can reassure her that 

there will be help, that she won’t be on her own, and that there 

will be services that could help her through the problem. 

Mr. OBEY. Thank you. Just one other thing with respect to 

health care. 

In Portage County, in the southern part of my district, the local 

CAP agency works with programs like the community service block 

grant in order to provide access to dental care for thousands of poor 

people who otherwise would have no ability to get it. 

I’ve been told of several cases of people who have actually died 

because of dental problems that have gotten out of control. 

So I think there are many indirect benefits for funding of programs like that, that aren’t generally recognized. 

Mr. Walsh, any other questions? 

Mr. WALSH. No, thank you, Mr. Chairman. 

Mr. OBEY. Anyone else? 

[No response.] 

Mr. OBEY. All right. Thank you all very much. It’s a miracle we 

managed to finish before the next roll calls. 

Thanks again. 


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(309) 

WEDNESDAY, MARCH 5, 2008. 

EXPANDING HEALTH CARE ACCESS 

WITNESSES 

JEANNE LAMBREW, PH.D., ASSOCIATE PROFESSOR OF PUBLIC AFFAIRS, UNIVERSITY OF TEXAS, AUSTIN, TEXAS 

DEBORAH CHOLLET, PH.D., SENIOR FELLOW, MATHEMATICA POLICY 

RESEARCH 

GREG NYCZ, EXECUTIVE DIRECTOR, FAMILY HEALTH CENTER OF 

MARSHFIELD INC. 

RICHARD POPPER, EXECUTIVE DIRECTOR, MARYLAND HEALTH INSURANCE PLAN 

Mr. OBEY. We are missing one witness, but I think we will get 

started anyway. 

As I have noted several times before in these hearings, we are 

taking a lot of testimony. We will be having a lot of debate and discussion about where we ought to be putting our money in terms of 

programs under the jurisdiction of this Subcommittee, and that discussion usually takes place in terms of what does it cost to do this, 

what does it cost to do that, what does it cost to do that. We do 

not very often have a focus on what it costs not to A, B, or C, and 

that is basically what I want to get into today. 

We have a lot of subjects before this Subcommittee. One of them 

that I am most interested in is the question of access to health 

care. I do not care about people’s political theology. I do not care 

whether health care services are delivered at the local level, State 

level, Federal level. I do not care. I could care less if we have a system that is seen as largely a government-oriented system or a privately-oriented system. 

What I care about is whether every blessed human being in this 

Country has access to the health care they need without sweating. 

So we have a number of witnesses here today, I think, who can 

walk us through the cost of not meeting these needs. 

There is one other aspect that I would like to focus on, because 

I believe that regardless of what the rhetoric is in the Congress or 

in this town, I believe that whoever is elected president next time 

is going to have no choice but to deal with the question of universal 

health care, and if that is the case, then the question is since we 

do not have jurisdiction over that issue—but we do have responsibilities with respect to a large variety of health programs in this 

bill—the question is what efforts should we be focusing on, what 

programs should we be focusing on; what programs should we be 

expanding or changing in order to try to prepare the health care 

system for the day when we will have universal coverage and universal meaningful access. 

So that is basically what I want to talk about today. 


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Before I call on our witnesses, let me simply ask Mr. Walsh for 

any comments he might have. 

Mr. WALSH. Thank you, Mr. Chairman. Thank you for holding 

this hearing. I very much appreciate your comments regarding universal health insurance, universal access to health care. I think 

that you are right, I think whoever is the next president will need 

to deal with this in a realistic way during the campaign and as 

president, and I think it is a debate that the Country is ready for. 

I very much appreciate the opportunity to hear from our witnesses today, all from the different perspectives on health care and 

access to health care. I think your views are very important to us 

in our consideration of this important issue. 

I do note that Dr. Chollet has a degree from Maxwell School at 

Syracuse University, which is a great school. It is the number one 

school of citizenship and governance in the Country. My son has 

a degree from there also, for which I am very proud. 

So we welcome you today and—— Mr. OBEY. What a case of rampant conflict of interest. [Laughter.] 

Mr. WALSH. She was not my witness, Mr. Chairman, but I am 

delighted that she is here. 

This is a key issue for us going forward, and we welcome your 

testimony and look forward to asking a few questions and delving 

into your expertise. 

Thank you, Mr. Chairman. 

Mr. OBEY. Thank you. 

Dr. Jeanne Lambrew is a professor at the Lyndon B. Johnson 

School of Public Affairs at the University of Texas at Austin; Dr. 

Deborah Chollet is Senior Fellow at the Mathematica Policy Research; Mr. Greg Nycz—in the interest of full disclosure, I should 

confess that I have known Mr. Nycz for many years. I regard him 

as a good friend—he is Executive Director of the Family Health 

Center at Marshfield, Wisconsin; and we do not have him here yet, 

but I expect he will be here shortly, Richard Popper, Executive Director of the State of Maryland Health Insurance Plan. 

So let me ask each of you—we will put your statements in the 

record—if you would summarize your statements, then we will get 

to the questioning. 

I want to begin with you, Dr. Lambrew. 

Ms. LAMBREW. Chairman Obey, Ranking Member Walsh, and 

other members of the Committee, I thank you for the opportunity 

to testify today on expanding access to health care. I do need to 

apologize; I lost my voice. I sound worse than I feel, but I will try 

to get through this. And I also have some figures I will be referring 

to that are in my submitted statement. 

I also want to thank you for your contributions to improving the 

health of vulnerable Americans. Your jurisdiction over programs 

that have served as a literal lifeline to people have really made a 

difference, the access in our Nation, and I also think it is commendable that the way you are looking at the broader issues of 

health access today. 

What I would like to do in my testimony is review the evidence 

that suggests that health reform should be at the top of the next 

Congress’s agenda. I will do that by looking at a snapshot of the 


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system, looking at trends, reviewing the research and the implications of our broken systems. In addition, I will offer several observations about solutions that are being considered. 


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Ms. LAMBREW. But, to start with, nearly one in five of all Americans reports some sort of access problem, meaning that they cannot 

access health care because of cost. This largely results from lack of 

health insurance coverage. We have 47 million Americans who lack 

health insurance at a point in time, but to put this into perspective, as you can see in Figure 1 in the testimony, that is more than 

the whole population of the West Coast of the United States, it is 

more than the population of Canada, and it is double the number 

of people who have diabetes in this Nation. It is a large problem. 

[The information follows:] 


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Ms. LAMBREW. But even looking at those statistics is misleading 

and kind of understating the problem. As you can see in Figure 2, 

fully one out of three Americans, 82 million Americans, has some 

gap in coverage over the course of two years; and even having a 

small gap in coverage means a person behaves more like an uninsured person than an insured person in terms of their access patterns. 

[The information follows:] 


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Ms. LAMBREW. While it is a common problem, we also know that 

there are patterns among the uninsured. Age matters. When you 

look at Figure 3, which kind of shows your insurance status from 

age and the different types of insurance, we see that Medicare does 

provide universal coverage for our seniors. We have virtually no 

uninsured seniors. Look at the other end of the spectrum. We have 

very few uninsured children. Clearly, 9 million uninsured children 

is a lot, but the rate of uninsured children is less than that of any 

other non-elderly population. 

Young adults have the highest uninsured rate, primarily because 

they are losing access to their family coverage and they experience 

significant work transitions. And then we see older adults who are 

not yet eligible for Medicare have a low uninsured rate, but they 

are at risk for all sorts of health problems and cannot easily access 

health coverage when they need it. 

So we have age patterns. We also have work patterns. What we 

do know is that, contrary to popular perception, about four in five 

uninsured Americans are in working families. About 83 percent of 

people who have access to employer-based insurance enroll in it, 

but we see a lot of people who do not have access to employerbased coverage. Why is that? Part of it is because small firms are 

not likely to offer health insurance coverage. Only 45 percent of 

firms with fewer than 10 employees offer health insurance today. 

Firm type matters as well. As you can see in Figure 4, we have 

different patterns. Retail firms are much less likely to offer health 

insurance coverage than manufacturing or State or local governments. 

In addition to work and the work patterns we see in our uninsured problem, we also have income patterns. About two-thirds of 

our uninsured Americans have income below 200 percent of the 

poverty threshold, which is about $21,000 for a family of four. Only 

about 36 percent of low income workers have ever even been offered health insurance, even though they are more likely to take 

it when they get it, and they have few affordable options in the individual market. So we all know income matters in our health insurance system. 

But before I kind of turn to the trends, I do want to say un-insurance is one problem, but under-insurance is another one. Because 

the costs of premiums and health care cost sharing have risen faster than wage growth, we see that about 16 million people are 

under-insured, meaning they are paying a large fraction of their income out of their pocket even though they have a health insurance 

card. This is a big problem for personal bankruptcies. We know 

that in 2001 about half of all personal bankruptcies were caused 

by medical debt. 

[The information follows:] 


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Ms. LAMBREW. In addition, when you look at Figure 5, you see 

that when we look at people who are in the individual market who 

have low income and high costs, they are paying as much out-ofpocket as uninsured people. Their health spending comprises about 

50 percent of their income, which is pretty startling for somebody 

who actually has health insurance. 

[The information follows:] 


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Ms. LAMBREW. So looking at these grim statistics, people wonder 

is it getting better or worse. Unfortunately, we see in Figure 6 that 

we have had a significant growth in our uninsured population. The 

number of uninsured Americans has growth at a rate that is three 

times that of population growth and seven times that of job growth. 

We also have seen that the profile of the uninsured has changed 

recently. Almost all of our uninsured growth is amongst adults, not 

children, and that is thanks to the children’s health insurance program and Medicaid that have served as a Safety Net. 

[The information follows:] 


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Ms. LAMBREW. In addition, we have seen the uninsured kind of 

creeping into the middle income distribution. When you look at Figure 7, you can see—and it is a little bit of a complicated chart—

that we are seeing kind of constant growth of the uninsured 

amongst medium-and high-income people; was, the low-income population kind of ebbs and flows with the economy, depending on how 

we are doing. So we actually can anticipate, with the economic 

downturn, we will see more low-income uninsured, but t has been 

a steady erosion of coverage among middle-income Americans. 

Why is this happening? We all know it is because employer coverage is declining. The rate of firms offering coverage has dropped 

from 69 percent to 60 percent just since the year 2000, more precipitous decline among small firms. This is because costs are climbing. Again, since the year 2000, we have seen premiums cumulatively increase by 98 percent; was, wages have only grown by 22 

percent, eating away at our wage base as well as diminishing our 

employers’ competitiveness. 

[The information follows:] 


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Ms. LAMBREW. Looking at patterns across States, you see one 

State and we see patterns across all States, but the uninsured population is concentrated primarily among low-income States; not a 

surprise when health insurance is so expensive. So if you look at 

the map that we have shown you on Figure 10, what we see is we 

have lot of uninsured people in the South and Southwest. Being 

from Texas, we have the highest rate of uninsured in the Nation, 

and you can see it is partly because of the job structure: fewer 

manufacturing jobs, more service industry jobs, more part-time 

work. 

[The information follows:] 


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Ms. LAMBREW. In addition, we cannot correlate that with high 

health care costs. The next chart shows that we basically have different patterns for high health care spending. We have higher 

health care spending in the Northeast primarily, with a swath kind 

of in the middle part of the Country. How does that relate to 

things? We know that there are higher costs of living and higher 

aging populations in those States. 

But it does not quite correlate with everything else we think. We 

do not have a good relationship between costs and quality. So, for 

example, even though you can see high costs areas in the Northeast, we do not necessarily see better outcomes in the Northeast. 

So we have a cost problem that is in a different place than our uninsured problem. 

But if you look at the third map on Figure 12, what we see is 

that when we look at cost growth the whole Nation is affected. We 

really kind of see that every State has this problem of high health 

care cost growth, so the States that are low now are going to catch 

up to the other ones quite quickly. 

Before talking about the consequences of these patterns, though, 

I have to say that racial variation is as important as geographic 

variation. We have large serious racial disparities in our coverage 

patterns so that we know that African-Americans are uninsured at 

a rate of 22 percent and Hispanics at a rate of 36 percent compared 

to 13 percent for white Americans. This contributes, but does not 

fully explain, why we have racial disparities in our health system. 

Why do these statistics and trends matter? We know that being 

uninsured is associated with worse access. Uninsured people are 25 

percent more likely to report delaying or foregoing needed care. We 

know that about 22,000 people die each year because of lack of 

health insurance. To put that into perspective, that is more than 

the number of homicide deaths in the U.S. in the same year. We 

also know it affects health and financial security; that it is a family 

problem, it is a business problem. We know it is an economic problem. Having these uninsured people diminishes our economic prosperity by $65,000,000,000 to $130,000,000,000 each year. 

But I do want to say, as I think Chairman Obey indicated, that 

access to coverage is important, but it is not sufficient, because we 

do need to have high quality coverage and a Safety Net that makes 

sure that people can get access to the care that they need. We are 

lacking an adequate supply of primary care providers, as this Committee knows. For example, between 1997 and 2005, the number 

of medical school graduates entering family practice dropped by 50 

percent. 

We also have non-financial barriers to access that persists, anywhere from lack of information about when and how to access the 

system to subtle forms of discrimination that still pervade our system. So a health reform plan designed to improve access should 

start with expanding coverage and improving efficiency, but cannot 

end there. It really has to do more to succeed in promoting access 

to valuable health care. 

I will end by just making three comments about the solutions 

that are out there. Clearly, we are hearing a lot about health reform in this particular presidential election, but I think it is also 

something that the Congress has consistently put on the table 


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every year, including members of this Committee. Rather than discussing these ideas in depth, I think there are three comments that 

I would make for each of these proposals. 

One is that it is important to recognize we cannot address one 

without the other. We have to address the costs and quality of access problems simultaneously because, if we do not address costs, 

the access problems will persist. 

Second, we really have to look at, probably, national solutions. 

States have and can provide us with frameworks and feasibility of 

different ideas and solutions. They really are responsible for local 

quality and kind of innovation. At the same time, we have to recognize the fact that we cannot construct an effective and efficient system State-by-State. There are different challenges that the States 

face, both structural—like balanced budget requirements—as well 

as challenges that Deborah Chollet will talk about. It also, going 

State-by-State, tolerates similar inequality. If we have more uninsured people in low-income States, by definition those low-income 

States cannot do much about them. So if we are really going to try 

tackling this problem, we have to do it nationally. 

I will say, lastly, that in this time of debate—and I think, Chairman Obey, you said this at the start—we cannot let the perfect be 

the enemy of the good. There are solid ideas out there that can be 

crafted. I think we see a lot of commonality among some of the proposals that have been put on the table. But, most importantly, I 

think that the need for action is now. 

So I will stop, and thank you again for the opportunity to testify. 

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Mr. OBEY. Dr. Chollet. 

Ms. CHOLLET. Mr. Obey and members of the Committee, good 

morning and thank you for inviting me to testify this morning. I 

also commend you for your sincere interest in this topic and your 

concern about access to care for all Americans. 

The Robert Wood Johnson Foundation State Coverage Initiatives 

issues each year a State of the State Report, and in the last year 

I think aptly said that for many States that are moving forward, 

the status quo is no longer an option. And it is no longer an option 

for the reasons that Dr. Lambrew indicated: Costs are out of control, coverage is eroding, access to care is impeded, and the impediments to access to care also reflect the quality of care and ultimately the cost of care. So this tangle of problems has become intolerable in virtually every State, but some States have begun to 

act on it. 

You asked me to address the current and the planned State comprehensive access initiatives. My written testimony addresses the 

initiatives in four States—New York, Maine, Vermont, and Massachusetts. The planned initiatives in other States generally are 

variants on these. The States that are moving forward have taken 

pages from the books of these States and combined them in ways 

that are unique and still changing as we speak, as the legislatures 

continue to debate these questions either in regular session or in 

some States, like New Mexico, in special session. So those questions and the configuration of their initiatives is changing as we 

speak. 

But I would like to go back to these four initiatives which have 

become the templates for reform in many States. While they have 

many details and they differ from each other, they have a few elements in common that I think are key. 

The first is that each serves small group workers and individuals 

with income above the State’s Medicaid and CHIP eligibility levels, 

but for whom conventional insurance is clearly unaffordable. Medicaid and CHIP stop in most States around 250 percent of poverty 

or less, and health care in most States is unaffordable below 300 

percent of poverty, leaving a large gap of adults and children without access to insurance, especially if they are not offered insurance 

through an employer. 

The second is each of these programs offers deep subsidies to 

these target populations in order to make health care affordable; 

not only to make the premium affordable, but in some States, depending on the configuration of the product, to make the out-ofpocket spending that Dr. Lambrew referred to also affordable. 

The third is that each hopes to encourage small employers to 

continue to offer coverage, but none relies on this strategy. Each 

expects to serve large numbers of individuals as group coverage 

erodes, especially for low-wage workers. None of them anticipate 

that that erosion of coverage in the group market is going to stop 

any time soon, and, in fact, they all expect that it will ultimately 

play out to a dominantly individual health insurance market in 

their State, especially, as I said, for this target population of low 

wage workers. 

And, finally, each offers a defined insurance product or set of 

products that compete in the commercial health insurance market 


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and, as a result, these programs anticipate that it would be entirely possible that they would become the dominant insurer for the 

segment of the population that they would serve, that is, individuals and small group workers. 

There are some essential differences in this strategy and my 

written testimony goes through some of them in great detail or in 

significant detail. 

One, the Healthy New York program is a reinsurance program; 

it is not a direct insurance program. It works with HMOs and picks 

up a portion of the costs—generally called a corridor reinsurance 

strategy—picks up a portion of their costs between $5,000 and 

$75,000 per worker or per enrollee per year, so that when the enrollee’s premiums accumulate to $5,000, Healthy New York kicks 

in 90 percent of the cost at that point for each dollar spent, up to 

$75,000. Above $75,000, the carrier is expected to privately reinsure or otherwise retain the cost of that coverage. 

Healthy New York is offered through HMOs in the State. HMOs 

are the predominant source of style of coverage in New York State, 

so the Healthy New York product is available in every community. 

Maine operates the Dirigo Choice program, which serves small 

group workers and individual residents with incomes below 300 

percent of poverty. Dirigo offers three comprehensive health insurance products, each with high deductibles, each, when not subsidized, is qualified for a health savings account. The enrollees 

below 300 percent of poverty are subsidized in two ways: their premium is bought down by the program so that they are paying an 

income-scaled premium; the deductible is bought down so that the 

deductible, that very high deductible, is income-scaled for enrollees 

below 300 percent of poverty; and the out-of-pocket limit is reduced 

to make both the premium and the uninsured expenditures in the 

plan more affordable to low income families and individuals. 

Vermont operates a program called Catamount Health, which is 

a standard PPO product with a $250 deductible, relatively low. It 

subsidizes premiums for employees also below 300 percent of poverty. It is a little different from the other two programs in that it 

relies directly on an employer assessment—and I will come back to 

that issue because it relates to the ERISA question that has already come up. 

Vermont is also, unlike the other programs, committed to considering an individual mandate requiring all of their residents to obtain and keep health insurance coverage if in fact the combination 

of the Catamount Health plan, outreach efforts to enroll eligible 

residents in Medicaid, and Dr. Dynasaur, their CHIP program, do 

not achieve 96 percent coverage by 2010. So they are on a track 

to reconsider the success of this program in just a couple of years. 

Massachusetts has enacted arguably the Nation’s most comprehensive set of reforms in 2006. Effective in 2007, Massachusetts 

now requires every resident to be insured. It blended its small 

group and individual market so that the products that are available to small groups are available to individuals at the same price. 

It established a connector to vet and market health insurance 

plans to individuals and small groups. Within the connector, it established Commonwealth Care, which is a program to subsidize inVerDate Aug 31 2005 04:32 Sep 09, 2008 Jkt 043194 PO 00000 Frm 00338 Fmt 6601 Sfmt 6602 E:\HR\OC\A194P2.XXX A194P2

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dividuals with income below 300 percent of poverty, to help them 

meet the mandate to obtain coverage. 

Massachusetts, at the same time, expanded its Medicaid program 

so that all children at 300 percent of poverty are eligible for Medicaid. That means that the Commonwealth Care program is targeted to adults below 300 percent of poverty, while their Medicaid 

program picks up children. 

It also assesses employers, like the Vermont program, to pay for 

each worker who is uninsured. But it is also, like the Catamount 

program, a very nominal assessment so as to not basically antagonize ERISA. 

In addition, Massachusetts requires all employers with at least 

11 employees to offer a Section 125 plan, sometimes called a cafeteria plan, to help individuals pay for health insurance with pretax dollars. That means that individuals who are offered an employer plan, many of whom, surprisingly, do not have access to a 

Section 125 plan, can begin to pay their contributions to care with 

pre-tax dollars, reducing the cost of their premiums by as much as 

a third. 

In addition, individuals who do not have an offer of an employerbased plan can use their Section 125 plan to buy individual premiums through the Connector or elsewhere. 

And, finally, Massachusetts focused on preserving the Safety 

Net, recognizing that this is a work in progress; and they combine 

and rationalize their streams of funding to support Safety Net providers in an uncompensated care trust. 

You asked me to comment on whether the individual State programs, such as these programs, could build toward a national system ensuring access to care for every American, and I believe that 

they could. But not without a Federal vision and not without Federal leadership. 

Every State that seeks to ensure access to coverage for all of its 

residents has to navigate a maze of Federal laws and regulations 

related to their Medicaid and CHIP programs; related to ERISA, 

which governs employer-sponsored health insurance benefits, both 

insured and self-insured in many ways; various provisions of the 

Internal Revenue Code that interact with other Federal laws; 

HIPAA, the Health Insurance Portability and Accountability Act, 

which governs small group coverage at the Federal level—at least 

sets out basic rules for small group coverage and some basic rules 

for individual coverage in the States as well. And the process of 

navigating these kinds of Federal rules and regulations is arduous. 

Every State that enacts comprehensive reform sets itself up, in effect, for a challenge based on one of these laws to either have their 

laws preempted or sets themselves up to somehow run afoul of 

Medicaid and CHIP regulations and risk loss of Federal funding for 

those programs. 

Nevertheless, I believe that there is a very strong reason to pursue State-based systems of reform within a Federal vision, and that 

is largely because the States are closer to the problems of access 

and, therefore, State policy-makers can be more accountable to 

problems of access on an ongoing basis. In addition, the States 

have a long history of insurance market oversight and consumer 

protection, and that history really should be maintained and 


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strengthened with a national guarantee of access to coverage, not 

overruled or offset. 

So, with those comments, I again thank you for the opportunity 

to testify and look forward to a further conversation. 

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Mr. OBEY. Thank you. Mr. Nycz. 

Mr. NYCZ. Chairman Obey, Ranking Member Walsh and other 

members of the Subcommittee, we heard kind of an excellent national review and an overview of what is going on in the States. 

I want to take you down into the trenches in terms of what is happening in community health centers in delivering care directly to 

people. 

Our community health center is located in North Central Wisconsin. We cover about 8700 square miles of territory and we provide medical, mental health, oral health, and pharmaceutical services to approximately 50,000 low-income people in our State. 

On behalf of our patients, volunteers, and board members, the 

staff of more than 1100 community health centers nationwide, I 

would like to thank you for the trust you have placed in the community health center programs to help us help people and return 

real value to the taxpayer and the health care system. 

This Subcommittee has put in place a primary health care infrastructure that each year touches the lives of over 17 million Americans, and I hope you are justly proud of that work, because it 

means a ton in our communities. With your help, we are capable 

of expanding this system of care to reach 30 million Americans by 

2015. 

In the coming health care debate, policy-makers and advocates 

must focus not only on providing everyone insurance, but on building and strengthening the critical infrastructure needed to put that 

insurance to use in our rural and inner city communities. 

I want to share three specific examples that demonstrate the importance of the investment you make in community health centers 

and why strengthening that infrastructure must be a critical component of any health care reform proposal. 

Those of you from rural States understand the difficulties many 

smaller, more isolated communities have in recruiting and retaining physicians, let alone dentists, mental health providers, and 

pharmacists. In partnership with their communities, community 

health centers are solving these problems while providing vital 

health care services and badly needed economic boosts for their 

communities. 

A number of years ago there was talk of de-funding Northern 

Health Centers, which serves Northeastern Wisconsin. It is a predominantly very pretty part of the State. The concern was that 

they were a small center and they had perennial problems with 

provider vacancies. I volunteered to help them. At a meeting with 

Federal officials, a young man from the community made this 

point: ‘‘I have a master’s degree, I have a great job with the school 

system, and I have great insurance, but on a snowy winter night, 

when my wife and I were awakened by our sick child, we realized 

we had lost something very special: access to health care.’’ With 

slippery roads and the nearest hospital 45 miles away, they anguished over what to do. He said, in the past we could call the 

health center and a provider would meet them down at the health 

center and take care of their child. He said he wanted his health 

center back. And so did over 5,000 rural residents who signed a petition circulated throughout the area. 


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The point made was if not the health center program, then who 

would help their community? With a show of strong local support, 

the Federal representatives answered the call. They did not fund 

the health center. The community rallied under the leadership of 

that same well-insured individual. They built a new facility and 

today they are looking at their second expansion in the face of unprecedented demand for dental and other primary care services. 

Those of you who represent urban areas may have noticed in 

your districts what we are experiencing in Milwaukee: health care 

infrastructure tends to flow, over time, out of the inner cities and 

into more affluent locations, leaving some neighborhoods lacking 

basic primary care. The result: people gravitate to hospital emergency rooms for their care. 

The Milwaukee community is responding by creating the Milwaukee Health Care Partnership. The partnership has brought together the major health care systems, the community health care 

centers in the city, and county and State governments. They are 

developing a comprehensive plan to deal with the uninsured. Key 

among those plans are growing the inner city’s primary care infrastructure with an initial focus on Milwaukee’s community health 

centers. 

Like many States, Wisconsin has increased its investment in 

health centers. These investments help to further leverage the continued growth in the Federal community health center program 

made possible by this Subcommittee, making a big difference in the 

lives of inner city residents and helping to improve the efficiency 

of our health care system. 

Finally, I would like to pose a simple, but important, question. 

What happens when you open a new dental clinic in Wisconsin, a 

clinic that takes all based on need, not ability to pay, and a clinic 

that provides a sliding fee for those with limited financial means? 

In June of last year, we opened our third dental clinic in Chippewa Falls. In the first six and a half months, we treated over 

5,800 patients. Our patients came from 42 of Wisconsin’s 72 counties, often driving hours to get to our clinic. We have never advertised this clinic, our marketing budget is zero, and as of today we 

are booked out through May. 

This map over here illustrates how far poor people need to travel 

to get dental services. And for those of you who are not familiar 

with the State, you can see in the far southeastern part of the 

State that we have had people from Milwaukee and Kenosha come 

to our health center in Chippewa Falls. That is 250 to 300 miles 

distant. Green Bay—which many of you may know where that is—

that is 190 miles distant. 

Think about how far you folks have had to travel for your last 

dental checkup and think about the difficulties that many of these 

poor folks face trying to get dental services. 

So why do our largely poor patients travel so far? The answer is 

simple, it is pain. It is unrelenting oral pain. They have no access. 

In Wisconsin, 20,000 people per year go to emergency rooms because of non-traumatic oral pain. We do not know how many more 

show up in urgent care centers or in physician offices. They get 

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This year we will provide dental services to over 25,000 patients 

in need. Still, over half a million low-income people in our State 

lack access today. 

I would like to share just one example of how oral health and 

general health are connected, and the importance of your investments in health centers. 

A diabetic patient presented as jaundiced and very ill, and this 

was at one of our dental centers. He had a large lesion on his leg 

for the past four years that would not heal. He also had severe oral 

health disease. Following a full mouth extraction and dentures, he 

reports his blood glucoses are under control, he has good skin color, 

his skin lesion finally healed, and he is very happy. 

You are called upon to make tough choices with limited resources. Health centers return real value to people all across this 

great country of ours. Health centers also return real value to the 

taxpayers of this country. We are grateful for the investments you 

have made in our system of care, yet, we can and should do more. 

We are prepared to do with your help. 

Thank you. 

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Mr. OBEY. Thank you. 

Mr. Popper, I am sorry that you look like you were a suspicious 

character and could not get through security this morning. [Laughter.] 

Mr. POPPER. That is quite all right. I could have gotten here earlier. My wife was injured last night, so I had to get a four-yearold and eight-year-old off to school this morning. 

Mr. OBEY. Is she all right? 

Mr. POPPER. She is okay. She just is not very mobile, so I had 

to get the young ones off to school. I would not have had the security problem if that had not happened. 

Mr. OBEY. Well, thank you for making the effort. 

Mr. POPPER. No problem. Thank you. I am really honored to be 

here to speak to you this morning. 

My name is Richard Popper. I am Executive Director of the 

Maryland Health Insurance Plan. 

The Maryland Health Insurance Plan is one of 34—soon to be 

35—State high-risk pools available in soon to be 35 States in the 

United States. Although I only represent one high-risk pool, I do 

have a sense of some of the broader issues—which I am going to 

speak about today—regarding high risk pools. I used to be a member of the board of directors of the National Association of Comprehensive Health Insurance Plans, which is the high-risk pool association, and prior to that I was the Assistant Director of the California Managed Risk Medical Insurance Board, which oversees 

California’s high-risk pool and also their S–CHIP program, Healthy 

Families. For that I worked in Los Angeles County government, 

which is ground zero, as we all know, for the uninsured. So I do 

have somewhat of a broad perspective beyond Maryland. 

The Maryland Health Insurance Plan, as I said, is one of soon 

to be 35 high-risk pools across the United States. High-risk pools 

are nonprofit or government organizations created to offer health 

insurance to the uninsurable population—and that is different than 

the uninsured. To understand who the uninsurable population is, 

you need to understand sort of how the health insurance market 

is set up in the United States, which some of the previous speakers 

talked about. 

Health insurance in the United States is voluntary. You can opt 

to purchase it if your employer offers it or you can opt not to. If 

you do not have employer-based coverage and your income is not 

low enough to be on Medicaid or M–CHIP, but you are not sick 

enough or old enough to be on Medicare, you have to buy an individual insurance product, similar to buying car insurance: you go 

to see an agent or you can buy it online. And just like with car insurance, with car insurance you can get denied car insurance if you 

have a poor driving record. 

In the individual health insurance market in the States that 

have high-risk pools, you can be denied health insurance because 

of your health condition. It can be something as serious as you 

have leukemia, cancer, diabetes, or it could be you are 20 pounds 

over weight standards. In Maryland we have one plan that denies 

people for severe acne. It can be that much of a difference in health 

conditions that result in an individual insurance plan denying you 

coverage. 


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So when you want to buy insurance, you have the means to buy 

insurance, and no one will sell it to you, in the States that have 

high-risk pools, people are denied health insurance and they become what we call uninsurable. They want to buy insurance, no 

one will sell to them, so they turn to a State high-risk pool. Currently, the 34 State high-risk pools across the U.S. have 190,000 

subscribers enrolled in them, and, as I said, those people’s health 

condition can vary significantly, from something very serious to 

something fairly minor, but because they have added risk, carriers 

do not want to provide them coverage. 

Risk pools provide individuals access to comprehensive health insurance coverage, but, because it is a risk pool, they pay a higher 

premium, generally, than what healthy people would pay if they 

were granted an individual policy and could pass medical underwriting. On average, risk pools surcharge their premiums for enrolled members from about 125 percent, or 25 percent above what 

healthy people would pay, to 200 percent, or twice the rate at what 

healthy people would pay for an individual insurance product. 

About nine of the high-risk pools States offer a low-income subsidy. Maryland is one of those States that tries to discount the premiums for low-income individuals to try to create sort of a bridge 

from the Medicaid program so that the premium can be more affordable for people who are low-income but uninsurable. 

The reason high-risk pools charge more premium is because we 

are in business to lose money; we do not make profits. Our loss ratios vary from 110 percent in one State to 390 percent, which 

means for every $1.00 in premium we get, we have claims costs 

that are $1.10 in one State all the way up to for every $1.00 in premium we get we have $4.00 in claims costs. So in order to subsidize that, we charge higher premiums, but we also do assessments or other funding mechanisms among the 34 States. Most of 

the States assess individual market and some States small group, 

small employer health plans that are regulated by the States, and 

they assess it equally among all the other people who have group 

insurance or individual insurance. 

A couple of the other States use maybe tobacco funds or tobacco 

tax. In Maryland, we have a hospital assessment, so whenever you 

go into a hospital in Maryland, you pay a sales tax, almost, on top 

of your facility fee that helps fund the high-risk pool. It is designed 

to provide a broad assessment to fund these people with chronic 

health conditions or uninsurable health conditions to make the insurance affordable and help subsidize the high-risk pool, which otherwise could not be designed. 

In understanding high-risk pools, you need to understand we are 

not like the Massachusetts initiative or Healthy New York. We are 

not designed, as I say, to save the world, to cover everyone. We are 

not designed to provide universal coverage in our high-risk pool. 

What we are designed to do is provide sort of universal potential 

access to everyone. Everyone in the State who wants to buy health 

insurance can buy health insurance; it becomes a question of affordable, which we know is the key question. 

The makeup of high-risk pools is very interesting. About a third 

of the Maryland high-risk pool are self-employed individuals. Other 

populations that enroll in high-risk pools are unemployed people, 


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employed people who work at companies that do not offer health 

insurance coverage, people who are retired or disabled. About a little more than half of the enrollees are women and enrollment can 

vary State-to-State. Some are more dominated by the self-employed; others have high levels of employed people. 

In Maryland, if you look at my testimony, page 3, I lay out some 

of our most popular or most top-reported occupations of employed 

people who enroll in the high-risk pool. This includes sales representatives, consultants, realtors, truck drivers, limo drivers, 

nurses, day care providers, housekeepers, waiters, teachers; people 

you bump into every day who do not have insurance coverage 

through their job but need to buy it and want to buy it, and the 

high-risk pool is the only place where they can get it. 

It is usually a temporary stopping place. Most of our members 

only enroll for, on average, two years. We have some people who 

will be with us for ten years, but, on average, people come and then 

they get other coverage. Maybe they are so disabled they are in the 

waiting period for Medicare to kick in after two and a half years; 

maybe their spouse gets a job; maybe they go into Medicaid because their situation deteriorates. But we tend to be a transient 

health insurance plan, not a long-term one. 

States have used high-risk pools to respond to recent Federal 

mandates to expand coverage. Some of the previous speakers 

talked about HIPAA, the Health Insurance Portability and Accountability Act of 1996. That required States to offer guaranteed 

issued coverage to individuals who had group coverage and exhausted it; either their employer dropped the health insurance plan 

or they left their job or were fired or decided to retire; they took 

up COBRA—which we know can be expensive—they maxed out the 

COBRA; at that point they have a two month, 63 day guaranteed 

issue period and States are required to offer these people guaranteed issue. 

And most of the high-risk pool States, the high-risk is the guaranteed issue mechanism that allows people who have this Federal 

mandate that they must get health insurance, their only option to 

go to is the high-risk pool. Thirty percent of the Maryland health 

insurance plan’s 13,000 members are eligible because of this Federal mandated HIPAA right that they have. 

Also, in 2002, Congress passed the Federal Trade Act that required States or encouraged States to offer mechanisms for people 

who lost their job because of international trade or whose pension 

plan went insolvent and their pension was taken over by the Pension Benefit Guarantee Corporation and they no longer had their 

group coverage as well. Maryland and a lot of the high-risk pools 

are the mechanism in the States, besides COBRA, that offer coverage for these people to access the 65 percent tax credit that is 

used for the Federal Government to subsidize the cost of their premium either in COBRA or in the high-risk pool. 

Maryland had the highest take-up of any State in terms of 

HCTC, the health coverage tax credit-eligible populations, largely 

because we were Bethlehem Steel, which went insolvent and was 

broken up into pieces and 20,000 former employees and retirees of 

Bethlehem Steel in Maryland had no place else to go if they were 

under age 65 to get their health insurance, and they came to the 


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Maryland Health Insurance Plan. So we do not have the highest 

HCTC enrollment; we have the highest take-up rate. 

Also, we get a lot of people who have been approved for Social 

Security because they are obtaining Social Security early, at age 

62, or because they are on Social Security disability and they have 

to wait two and a half years for Medicare coverage to kick in. We 

get a lot of referrals from congressional offices for people who finally get approved for Social Security disability, but they have to 

wait two and a half years for Medicare and their income is not low 

enough to be on Medicaid, so they often call us up to refer them 

over to the high-risk pool in the State of Maryland. 

We also do outreach to all the Social Security field offices in 

Maryland so that folks who get Social Security disability know that 

there is something for them to hold them over until Medicare kicks 

in after up to two and a half years. 

So because high-risk pools have formed a way to either meet recent Federal mandates or to fill in the cracks in the health insurance marketplace, Congress, in 2002, for the first time, appropriated funding authorized by the Federal Trade Act to high-risk 

pools. This was wonderful for the high-risk pools because, previously, we were dependent on State funding or assessment funding; and that appropriation amounted to $40,000,000 in fiscal year 

2003, another $40,000,000 in fiscal year 2004. Maryland was the 

first State to receive this new Federal funding, which we were really grateful for, and it does help us to reduce premiums or reduce 

member costs or disease management programs, and also expand 

our capacities. 

The funding, which we really appreciate this Committee having 

a lead role in because in fiscal year 2008, in December, this Committee was able to appropriate, through the leadership especially 

of Chairman Obey, $49,000,000 to keep this program going because 

it has not been appropriated every year. It was not appropriated 

in fiscal year 2005; it was not appropriated in fiscal year 2007. So 

we really appreciate it and we look forward to Maryland getting its 

share. 

As you look at different options that some of the previous speakers discussed to expand coverage, please bear in mind that in a lot 

of these options to expand coverage high-risk pools will play an important part. If the Federal Government elects to mandate insurance, that everyone has to have health insurance coverage, like a 

lot of States do for to meet that mandate, will use the high-risk 

pool, because that is an option for people who are high-risk, as a 

mechanism to make sure that there is guaranteed access to health 

insurance in order to meet the Federal mandate. 

If Congress, instead of mandating coverage, elects to provide subsidies to encourage people to buy coverage—such as a tax credit, 

which we already administer through the Federal Health Coverage 

Tax Credit Program—again, high-risk pools will be a mechanism 

through that tax credit for people to buy coverage if they are uninsurable. 

The last thing I would ask the Committee to think about is that 

if this issue of expanding health coverage and reducing the uninsured continues to take up a lot of your time analyzing options, debating options, and it goes on for a number of new years and inVerDate Aug 31 2005 04:32 Sep 09, 2008 Jkt 043194 PO 00000 Frm 00368 Fmt 6601 Sfmt 6602 E:\HR\OC\A194P2.XXX A194P2

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volves the new administration that will come in next year, bear in 

mind that high-risk pools are serving the uninsured today, tomorrow, next week, next year. So as these debates go on at the macro 

level, please bear us in mind that we are down in the micro level 

actually serving these folks and providing them coverage today. 

So thank you again for inviting me to come today. I hate to be 

the one who arrived late and leaves early, but I have a State budget hearing at 1:00, and while your allocation of risk pools gave us 

$3,000,000, I have $100,000,000 on the table in Annapolis at 1:00, 

so, with all deference to you, I will have to leave around 11:45. But 

thank you very much. 

[The information follows:] 


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Mr. OBEY. All right. 

Mr. Walsh. 

Mr. WALSH. Thank you, Mr. Chairman. 

That was fascinating. Thank you all very much. I would like to 

ask three questions. I have five minutes, so I will try to make my 

questions brief, if you could make your answers brief. 

Dr. Lambrew, you gave us this great package of charts and in 

it you say that 47 million Americans are uninsured, and on the 

next chart you say at some point 82 million are uninsured, 26 million are always uninsured and 36 million are temporarily uninsured. Can you sort of explain that a little bit, those disparities in 

numbers? 

Ms. LAMBREW. Thank you. What happens is that you basically 

have the 47 million is a mix of the two, it is a mix of people——

Mr. WALSH. Always and sometimes? 

Ms. LAMBREW. Exactly. And that is why you cannot see the 47 

million on the chart. They are also different data sources, just so 

you know, so that often comes out. But when we try to figure out 

how to target the uninsured, it is tough, because we have some 

people who are just the chronically uninsured—these are people 

who generally have high health costs or have some preexisting condition, have trouble getting insurance, but more often they are people who are unemployed or coming in and out of jobs and they just 

cannot afford it. They do not have the access to it, nor can they afford it. 

Mr. WALSH. Thanks. 

Dr. Chollet, you talked about the different State plans and I 

think what you said was it would not be a bad idea for every State 

to have their own plan as long as the plan was to get everybody 

under the umbrella, but have the Federal Government basically get 

out of the way. Is that what you said? 

Ms. CHOLLET. Not quite. I think the vision for State level plans 

has to come from the Federal Government. I think there has to be 

a national vision. I personally—— Mr. WALSH. So create a template for these State plans? 

Ms. CHOLLET. Yes, sir. 

Mr. WALSH. And then change the rules federally so that would 

enable those? 

Ms. CHOLLET. That is right. And HIPAA in many ways is a good 

example of that, which laid out a national vision for how small 

group health insurance should be marketed, guaranteed issue; it 

established minimal rules for individual coverage—it should be 

guaranteed renewable. HIPAA stepped back in some very key 

areas and, therefore, to my mind, it does not meet its stated objective of making coverage available to everybody regardless of health 

status, but it made some very important contributions and it 

amended Federal laws as necessary to make that vision 

implementable by the States. 

So I think the vision does have to come from the Federal Government. I do not think, though, there should be 50 unique State programs that are totally unique in all respects. I think citizens 

should be able to expect some continuity moving from State to 

State, but the minimal continuity is that they should have access 

to affordable health care somewhere. 


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Mr. WALSH. Great. Thank you. 

And Mr. Nycz, the community health centers provide a remarkable service, I agree. Our community health center in Syracuse, 

New York is headed by a dentist, so that is something he cares, 

obviously, very deeply about. But the question I had—and you got 

at this a little bit—regarding health coverage or access to health 

care in those communities, whether it is Chippewa Falls or it is 

downtown Syracuse, can you tell me how much cheaper it is to 

treat a patient in a community health center setting as opposed to 

going to a hospital emergency room? 

Mr. NYCZ. There are a lot of national figures on how much community health centers save, which we can get that information to 

you, but the cost of not taking care of people—I think which is also 

the Chairman’s point—is huge, and these folks that are going to 

dental emergency rooms, they are getting 250—the Medicaid agency has to pay about $250, on average, for those folks, who leave the 

emergency room after $250 of expense with the same problem they 

entered, and they still need care. 

So they come to us. We are trying to redirect them to save that 

$250 on the dental side. And as I said, in Wisconsin we know that 

there are at least 20,000 a year of those visits, and the vast majority of those are Medicaid. So we are paying, taxpayers are paying 

for those visits. They do help people with pain and give them something for the infection, but the underlying disease process continues. 

Mr. WALSH. Whatever you can garner to provide us, just unit 

cost, you know, community health center visit, triage sort of visit 

versus emergency room. 

Mr. NYCZ. The other thing I will say is they are struggling with 

this in Milwaukee and I think they got an excellent plan. It is 

going to take more because people have now oriented themselves 

to emergency rooms; they just show up. So they are trying to work 

in information technology in that to link the community health centers with the emergency rooms and then address the health literacy issues and redirect them. So even if you have community 

health centers and you open up access, we still have to think smart 

about this in terms of redirecting those patients out of the expensive emergency rooms. 

And the last thing I will say is a lot of people who go to emergency rooms end up in the hospital. 

Mr. WALSH. That is true. Thank you very much. 

Mr. Chairman, I yield back. 

Mr. OBEY. Ms. Roybal-Allard. 

Ms. ROYBAL-ALLARD. Dr. Lambrew, first of all, thank you for 

sharing your snapshot of our broken health care system. What you 

did not include in your testimony today, but have included in your 

past writings, is your analysis of the under-use of preventive health 

services in this country and our inability to realign incentives from 

sickness to wellness. 

This under-use of prevention services is highlighted by the fact 

that CDC’s budget has been losing ground over the past few years 

and this year the President wants to further cut CDC’s budget by 

$433,000,000. In your opinion, what has been the consequences of 


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these cuts to prevention and what percentage of our national budget do you think should be devoted to prevention? 

Ms. LAMBREW. That is an excellent question, and I think that 

when we think through what we spend now, they are not very good 

estimates, but of our roughly $2,000,000,000,000 health system, we 

estimated that about 1 percent to 3 percent is dedicated to prevention; and that is not just through CDC, it is also through health 

insurance companies paying for mammographies and screening, 

etc. That is very, very little in the face of what our new challenges 

are. 

This century, our challenges are chronic illness. It really has 

eclipsed all the kind of historical sources of diseases, to the point 

where, when you look just at obesity, we know that the next generation of children may have shorter life expectancies than their 

parents because of the obesity crisis. We have not seen that ever 

since we have been recording these statistics. 

Can we solve this only through health insurance? Absolutely not. 

It has to be a partnership with communities, schools, workplaces, 

as well as ensuring that the high value preventive services that we 

do know get delivered in the health care system are affordable and 

available. It really does require a comprehensive approach. 

And going back to the previous question about can we actually 

save money, the statistics are pretty overwhelming. I mean, we 

know if we fully immunize all children, we could save about 

$40,000,000,000. I cannot remember over what time period, but we 

can save from immunization. If we could tackle this obesity crisis, 

the statistic is startling. Returning seniors’ obesity levels back to what it was in the 1980s could save Medicare $1,000,000,000,000 

over 25 years according to a bunch of very smart economists. 

So there is clearly a need to invest in prevention. We do not do 

a good job. It needs to be done in partnership with CDC and the 

public health system as well as the integrated system. I have definitely been proposing ideas, something like a wellness trust, as a 

way to consolidate and redeploy our prevention dollars to really get 

at that. 

Ms. ROYBAL-ALLARD. What specific impact does the under-use of 

prevention have on our under-insured population and do you think 

that it is possible to build a realignment of incentives from sickness 

to wellness into the current healthcare system? 

Ms. LAMBREW. Sure, and the under-insured issue for people with 

insurance not using it, I might get this not exactly right, but there 

was a study recently that looked at Medicare co-pays that said 

even just adding a $10 co-pay for mammography for seniors resulted in a significantly big drop in utilization. So we know it is 

a problem because we do not have financial incentives out there for 

people to use the type of preventive services that they need. 

I will say we also every week we see new studies from the American Cancer Society and other folks that say that because of our 

lack of comprehensive prevention, we get diagnosed later when it 

is harder to deal with our cancers than any other nation. 

Ms. ROYBAL-ALLARD. If we are going to successfully realign our 

priorities, should we also be focusing on educating the right mix of 

providers within the healthcare system and what do you think that 

mix should be? 


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Ms. LAMBREW. Absolutely. When we think through our challenges, when I talked about the primary care shortage, we do not 

have enough providers in the primary care community to deal with 

our acute and chronic illness, let alone the kind of prevention workforce that we need. 

There was one study that said if we had every doctor provide the 

recommended clinical preventive services, it would take that doctor, for a typical patient load, seven hours out of a day to do so. 

We need to find new ways of delivering prevention, given how critical it is. 

Some of the ideas I have been working on: look at broadening the 

prevention workforce, creating new certification programs, making 

sure that the pharmacists, the people in schools and workplaces 

can do this because a lot of it can be done in those settings. 

But I would say, going back to Chairman Obey’s earlier comment 

about what do you all do to get ready for health reform, the workforce issue is enormous, just enormous. We need the software as 

well as the hardware, software being the people who can really dig 

in and get these systems aligned, as well as the hardware of clinics 

and hospitals and information technology to make it all work. 

Ms. ROYBAL-ALLARD. Dr. Chollet, in your testimony, you speak 

about the importance of giving the States broad authority to develop their Medicaid and S–CHIP programs. In the last two years, 

CMS has issued a series of seven regulatory packages designed to 

decrease the Federal outlay of Medicaid services. Many of these 

were originally rejected by Congress because they eliminate payments for legitimate healthcare expenses and because they pass 

the unfunded cost on to the States. 

Now, California has approximately 6.7 million individuals on its 

Medi-Cal program and the fiscal impact of these rules on the State 

will be several billion dollars annually. The result will almost certainly be to destabilize an already fragile healthcare safety net system, causing closure of hospitals and the reduction of services. 

Do you have any thoughts on how the Federal Government can 

reduce Medicaid expenditures without passing legitimate 

healthcare costs on to the States and without compromising access 

for our most vulnerable citizens? 

Ms. CHOLLET. Ms. Roybal-Allard, it is an excellent question. 

This is a huge issue for every State and certainly for a State like 

California. The complexity of the Medicaid and CHIP rules, the capriciousness from the States’ perspective of funding for these programs, the lack of reliability with respect to how the budget will 

change from year to year has had a huge chilling effect. 

These programs are the baseline. They are essential to the fabric 

of how the States finance healthcare and increasingly so as group 

coverage has eroded and as individual health insurance coverage 

has moved out of the reach of populations below 300 percent of poverty in every State and in some States, arguably, below 400 percent 

of poverty. 

The problem has reached into the middle class, but the States 

find that they are not able to rely on funding at the very base any 

longer, and therefore many States just sit and wait and wonder 

what is going to happen to their Medicaid and CHIP budgets. 


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I think what I would suggest and what I introduced in my written testimony is that these rules be rationalized so that the Federal Government and the State governments can reliably predict 

what the expense is going to be and that there be a Federal Government commitment to making these programs a stable foundation for every State. It is what they need and, in the absence of 

it, the States cannot move forward in guaranteeing access to coverage for their middle income populations which are increasingly at 

risk. 

Mr. OBEY. Mr. Honda. 

Mr. HONDA. Thank you, Mr. Chairman. 

I think, Mr. Nycz, you had a comment to her question. I thought 

I would give you an opportunity to respond. 

Mr. NYCZ. Yes, actually I do have an idea on how you can reduce 

Medicaid expenditures and improve quality, and that is expand the 

community health center program. There is research that demonstrates that health centers can provide cost to Medicaid patients 

at a lower rate by championing things like prevention and early detection. 

The other point that I guess I would make is that there was a 

brand new article just came out this month in Lancet Oncology, 

and they took a look at all the people with cancers in the country 

and found that uninsured and publicly insured through Medicaid 

have way more late stage cancers, and they did not find that for 

Medicare which was interesting. 

In one of the commentaries on that in that same journal, they 

mention that Canada, the U.K., places where they do have universal health coverage, there is still it is much less common for individuals who are lower income, lower educational level to access 

screening services. 

So having insurance alone is not enough. You need an army on 

the ground that can help work with people in the communities, and 

that is why I support and I have been working for community 

health centers for the last 35 years. 

Mr. HONDA. Thank you. 

Let me just add my appreciation to the Chairman for putting 

this together. This is a helpful discussion for me. 

One of the areas that is of interest to me is the ability for our 

community health centers to have adequate resources to find culturally and linguistically competent providers and implement best 

practices in our communities. What kind of activities exist right 

now and what are some of the gaps that we should be looking at? 

Mr. NYCZ. Well, first of all, you provide support for an amazing 

array of programs that come together synergistically to help in 

communities, and the workforce issue is really key. The National 

Health Service Corps is critical to growing community health centers. That is absolutely critical. 

But you also fund State primary care associations, rural State 

association. Those folks come together, and they help us recruit 

dentists, for example. They have dental recruitment programs. 

We use Telehealth, for example, which your Committee also 

funds to extend mental health services to remote areas. 

Finally, I think we try to get bilingual-bicultural staff, but in the 

end we are increasingly looking to growing our own. The National 


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Association of Community Health Centers work with A.T. Still University. They have stood up a dental school. They have stood up a 

medical school. 

Ultimately, I think we are going to have to address the workforce 

issue by finding those people who are uniquely qualified to serve 

the patients in the areas where we are trying to help. 

Mr. HONDA. I have visited a lot of reservations, and what I think 

I saw was pretty devastating. It was appalling. Where does that fit 

in the context of the things under discussion since we are talking 

about sovereignty and also delivering healthcare. 

Mr. NYCZ. In Wisconsin, most of the tribes after that Indian 

Health Self-Determination Act, I think 1984, most of the tribes 

chose to have their own healthcare facilities. They are also plagued, 

however, with difficulties in recruiting and retaining. 

They do have federally-qualified health center status in Wisconsin. The State in that program helps them a lot, but workforce 

issues continue to plague, I think, tribal clinics. 

Part of what A.T. Still is doing in dentists and physicians is they 

are growing people with the specific thought that they would go to 

work in community health centers and in tribal clinics and in VA 

facilities across the Nation. 

Mr. HONDA. Very quickly, before my time is up, Mr. Conyers has 

a bill, H.R. 676. Do you have any reaction to that bill, or do you 

know anything about that bill? 

Mr. NYCZ. I guess I do not. I do not know, but I kind of side with 

what the Chairman said. As a health center director, I do not care 

what is done. If it can help people get healthcare, I am for it. 

Whether it is incremental or universal, the fact remains it is not 

going to be just providing coverage and money. It is going to be in 

the trenches with the right people, bicultural, bilingual folks who 

can take care of people on their level and who can champion prevention. 

So I am sorry I cannot comment on that particular. 

Mr. HONDA. Thank you, Mr. Chairman. 

Mr. OBEY. Mr. Ryan. 

Mr. RYAN. Thank you, Mr. Chairman. I appreciate this hearing 

too. This has been great. So thank you for all your time. 

I have a couple of questions and then a question for the whole 

group. 

Mr. Popper, one of the questions I have is you get these folks into 

the high risk pool. Have you done any analysis as to what the savings has been even though their premiums are high and they pay 

more? Have you done anything to study, even though the costs are 

high, what savings there are to the system? 

Mr. POPPER. I cannot speak about all 34 States, but the Maryland Health Insurance Plan was designed to reduce uncompensated 

care. That is our statutory mission and that is why the hospitals 

agree to this surcharge on hospital facility fees to fund the program 

because they realize that if our population does not get insurance, 

these folks will end up in the emergency room and getting all their 

services through the emergency room. So we have a proven method 

of reducing uncompensated care by keeping people out of the emergency room. 


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Only about a third of our costs go to hospitals. The rest goes for 

prescription drugs, specialty outpatient, primary care physicians, 

durable medical equipment, what have you. So we are designed to 

reduce uncompensated care, and we do do that because really these 

folks would have no other place to go. 

Mr. RYAN. What has been the reduction? 

I mean I know that the hospital assessment does not pay for everything. You are piecing this whole thing together. 

Mr. POPPER. Right. 

Mr. RYAN. But has there been a reduction in these folks going 

to the emergency room that you could somehow quantify? 

Mr. POPPER. Oh, yes, clearly. What is interesting in the Maryland Health Insurance Plan is that our losses for the first two 

months that people are enrolled are twice as high as they are after 

someone has been in the plan for twelve months. 

So people come in. They are uninsured. Seventy percent of our 

new members are coming freshly in uninsured, and they access 

services because they have a lot pent up demand in things, and 

then the costs drop within a year, our per month costs. So that 

drops. 

In terms of a dollar for dollar of every dollar in the Maryland 

Health Insurance Plan reduced three dollars in uncompensated 

care, I do not have that number for you today. I could work to get 

it for you. 

Mr. RYAN. Yes, if you could, that would be great. 

Mr. NYCZ. Because we see their medical costs drop after being 

in the plan. 

Mr. RYAN. If the national association has that information for the 

34 States, that would be great too. 

Mr. NYCZ. I will work on getting that for you, Congressman. 

Mr. RYAN. I appreciate it. Thank you. 

Dr. Lambrew, you mentioned 1 to 3 percent of healthcare money 

is spent on prevention. Do you have any recent numbers on every 

dollar of prevention that is spent, how much that saves us in the 

system? 

If you said it, I missed it and I apologize. 

Ms. LAMBREW. I did not say it partly because it depends on what 

the prevention is. Prevention is a term that covers lots of different 

services, anywhere from a mammography which is quite clinical 

down to smoking cessation which is more about how do we prevent 

people or encourage people to quit. 

There have been some studies of workforce-workplace wellness 

programs that try to say that the range of activities that businesses usually conduct, which is trying to get people or encourage 

people who have chronic illness to adhere to services, making a 

good cafeteria, all that kind of good stuff. 

The studies generally say for every dollar you invest, you save 

three dollars within several years, and that is the closest I have 

seen to anything as kind of a generalized study on this, but it is 

on the workplace wellness system for kind of an average set of 

workers. 

Again, we can see it service by service. We have some cumulative 

sense, but I know there is a whole effort going on. I think the 

Urban Institute has a big project. CBO is considering this right 


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now because if we do not get better at figuring this out, how can 

we expect you to make the investments? 

Mr. RYAN. One final question and I guess I will throw it to you, 

Dr. Lambrew since I love the Center for American Progress, and 

I will let you hit this out of the park. 

I think we have made some mistakes as far as how we present 

this, and Mr. Honda mentioned Mr. Conyers’ bill of which I am a 

cosponsor. The fact that in the U.K. and in France, their life expectancy is a couple years longer than ours here. We make this 

healthcare argument. Our argument should be you will live longer 

if we put this system in place. 

So I want to ask you why is it in the U.K. and France that they 

live longer than we do here in the U.S.? 

I have been to France a couple times. A lot of smoking going on 

over there. I wonder how that fits in. [Laughter.] 

Ms. LAMBREW. Yes. Actually, I should check the statistics. I still 

think we might smoke more. 

We are similar in many respects especially if you look at some 

of the European nations and Australia in terms of our demographics. It is not significantly different. 

Income statistics are generally similar. McKinsey Global Institute has been doing some studies, looking at controlling for wealth, 

how do our costs compare? 

We stand out because we allow this uninsured problem to persist. There is no doubt that is why we are singularly different than 

these other nations. Every other industrialized nation does find a 

way to provide basic access to their citizens. As a result, it is not 

just infant mortality and life expectancy. It is outcomes from surgery. 

The study that we just heard about is a landmark study. There 

was another one in Health Affairs a month ago that talked about 

deaths amenable to healthcare, that found that everybody is declining but here we decline slower. Every other country has kind of 

dropped in their deaths amenable to healthcare at a much more 

rapid rate than we have. 

To throw in another one, a study that looked at people who join 

Medicare and followed them five years out and found that people 

with chronic illness who join Medicare have a significant improvement in their health status after five years being on Medicare. I 

mean the statistics are overwhelming. 

Health insurance matters. We do not provide it to most people. 

It is not everything, and we do need to have complementary systems. It is solvable. It is important, and I do hope that this becomes the election issue that it promises to be. 

Mr. OBEY. Let me ask a few questions. We are told that we are 

probably going to have votes around 11:30 on the floor, so that will 

pretty much crunch this hearing. 

Mr. Popper, whenever you feel that you have to leave, please feel 

free to. We understand the situation. 

Dr. Lambrew, let me ask a basic question first. You indicated in 

your statement that access needs to be addressed in order to address skyrocketing healthcare costs. Some people would say that is 

counter-intuitive, that the more access you have, the more cost, the 

more you are going to drive up cost. 


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Tell me why you say what you said. 

Ms. LAMBREW. I think there are multiple different reasons, but 

the two I would bring to the fore because we have some data on 

it are, first of all, when we have again the 82 million people who 

have gaps in coverage at some point in time, to the extent that 

they incur costs through the emergency room, because there are 

other uncompensated care costs in the system, most of those costs 

get passed along to other people in the form of what is called the 

hidden tax where we basically are paying for that uncompensated 

care because providers have to charge people who have insurance 

more. 

One study suggests that every family pays $922 more per year 

in premiums because of this cost shift of what can be claimed on 

the uninsured being shifted to people who already have health insurance. 

It is a vicious cycle: more uncompensated care, more of a cost 

shift to people with insurance, the more expensive it is, the more 

people drop coverage. So, number one is this idea of cost shifting 

that exists in the system. 

The second, and there was a study done by the Commonwealth 

Fund back in December that really tried to illustrate this, is we 

know there are some things we could do to change our cost trajectory: prevention, chronic disease management, information technology, making our system more rational and less complicated. All 

that is harder to do if we have gaps in the system. 

So we are limiting and inhibiting our system-wide cost containment tools by having people coming in and out of coverage arrangements and not being able to implement the types of changes we 

know. 

I mean when you look at what the Congressional Budget Office 

has been doing, the director keeps testifying and saying, our budget 

problem is a healthcare problem, and we cannot solve the Medicare 

and Medicaid problem until we solve the system-wide problem. 

It is a huge problem. We have to solve the system-wide problem. 

As one economist said, covering all the uninsured is a prerequisite 

to doing so. 

Mr. OBEY. Anybody else want to comment on that? 

Ms. CHOLLET. I would like to add one comment that relates to 

the earlier discussion about health status and investment in 

health. Part of the problem of people rotating in and out of coverage when they rotate in and out of jobs, when their income falls, 

when their circumstances change, is that it gives the system a very 

short-term perspective. 

The carriers, in particular, focus on the next year. If you ask 

them to try to project a premium, for example, that they would 

offer over three years, they have a hard time doing that because 

they think that population, their covered population is going to 

change year by year. 

That means when you have an investment of a dollar that will 

yield a three dollars rate of return over three years, every carrier 

sees it, at best, as a wash because I only expect to have that person 

in my plan for one year. 

So the process of rotating people in and out of coverage generates 

this very short-term perspective and subverts any investment in 


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health status, and I think that is a problem that is unique to this 

country. One of the reasons that other countries do have better 

health statistics is because there is, in fact, a rate of return to investment in health status. 

Mr. OBEY. Well, it seems obvious to me that we have the most 

perverse disincentives in the world for people to focus on prevention because, very frankly, for many of these diseases the consequences show up later in life. 

That means that if people transfer insurance companies two or 

three times, the insurance company cares about the people they are 

covering today, and they know that it is very likely in the end that 

it is going to be Medicare that will wind up getting stuck with the 

long-term ills. So why should they focus on it? 

Dr. Lambrew, you said that 22,000 people die because of the lack 

of insurance. I am always suspicious of numbers and statistics, 

with all due respect to the mathematics part in your title. Where 

do you get that number? How hard is it and how can you back it 

up? 

Ms. LAMBREW. The number comes from the Institute of Medicine 

which, back in years 2001 through 2004, conducted a series of reports, comprehensive reports, looking at the literature and trying 

to document everything from does insurance matter kind of on an 

access basis all the way through the economic cost to society. 

They, back then, estimated that about 18,000 adults would have 

conditions. I think that they looked at the condition at death, 

looked at their insurance status prior to death and estimated that 

of all the deaths in a year 18,000 were due to, again, what is called 

amenable to healthcare sorts of diseases. 

But the numbers have been updated since then because that 

number was for 2003, I think, to 2007 which is what the Urban Institute did just this fall through the spring. 

Actually, I would say as a note, it is controversial. I do not want 

to discount that, but at the same time when we do know, again, 

we can do the accumulation of evidence. I think there have been 

some very good reviews of the evidence that say if we take it as 

a whole, because we cannot necessarily pick one thing or one reason why people die, it does have a difference. 

Mr. OBEY. All right. 

Dr. Chollet, well, I think virtually all of you talked about the fact 

that we are losing employer-based coverage and seem to be evolving to individual coverage. To me, that again is exactly going in the 

wrong direction because the whole idea of insurance to spread risk 

as widely as possible so that you do not wind up encouraging all 

kinds of cherry-picking. 

What are the best things that Congress can do to try to reverse 

that trend, short of passing universal healthcare which I hope we 

do yesterday? 

Ms. CHOLLET. Mr. Obey, I do not think I have a clear answer for 

that question because there are so many forces that contribute to 

the loss of employer-based coverage. The biggest one, of course, is 

healthcare costs generally and, therefore, the cost of health insurance. If health care costs generally did not outpace earnings growth 

by order of magnitude, probably we would not see the erosion of 

employer-based coverage. 


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There are no more tricks, if you will, in the Federal pocket 

around tax exemption. So that is not any longer on the table. 

And, there is no way to offset the fact that an employment-based 

system puts American companies at a disadvantage in international competition. 

I think the States have become more or less resigned to a lot of 

movement between especially small group coverage and individual 

coverage and are looking for ways to accommodate that movement 

rather than try to counteract it. 

So, in answer to your question, I think the best thing the Federal 

Government can do is to pay attention to the fact that there is 

going to be movement in and out of employer-based coverage, that 

small employers that now offer coverage are not likely to continue 

to offer coverage, and that low wage workers cannot take a discount on their wages to pay for health insurance. 

So support of those kinds of systems that enable people to move 

between individual coverage and group coverage, if it is offered, 

and retain access to healthcare and their providers, I think would 

be the most important service that the Federal Government could 

offer. 

Mr. POPPER. Just some color commentary from the back yard, the 

third or fourth largest segment of employed individuals who apply 

to the Maryland Health Insurance Plan are consultants. The Federal Government and—I will probably get in trouble with the governor—the State Government are using more and more contractual 

workers and consultants to do their work. We have people applying 

to the Maryland Health Insurance Plan who work for Voice of 

America, and you would be amazed the Federal agencies they work 

for and they do not get health insurance. So they have to turn to 

the individual market to get coverage. 

You can talk about tax incentives to buy, health credit tax incentives, this and that, but you have the sort of overall market trend 

in employment that Fortune 500 companies, small business, governments are moving more and more away from employing people 

and instead contracting with them. 

With Maryland State employees, you get access to buy the employee health benefits, but the State does not put any money towards it. So you have to buy the full loaded group cost to buy it, 

and a lot of those people do not do it. Then when they get sick, 

they come over to the Maryland Health Insurance Plan. 

With the Federal Government, if you are a contractor, I do not 

think you get an option to buy into the Federal health system. So 

just some news from the back yard in terms of the type of people 

we see coming into the risk pool. 

Mr. NYCZ. The other thing that I have observed over the last 35 

years is insurance is not what it once was when we started the 

Greater Marshfield Community Health Plan comprehensive first 

dollar coverage. 

When you think about what is insurance and why do we have 

it, if you are a person of means and you have assets that you want 

to take care of, then insurance helps you spread the risks so that 

you do not have to tap your assets in the case that you get really 

sick. 


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If you are a low income person without any assets, with very little revenue, insurance in that sense does them no good. So then 

you look at to what extent does that insurance used in a different 

fashion as a tool to allow them to access health services. 

And so, you would evaluate insurance differently if you were 

looking at a low income, uninsured population compared to, in the 

State risk pools, people who generally have more means but because of their work environment and their preexisting health conditions cannot get insurance in the individual market. 

Ms. LAMBREW. A very quick comment which is I do some work 

with a coalition called the Better Healthcare Together which is famous for Wal-Mart and SEIU being the key members. They basically say that they do not think that they can solve this on their 

own, so they are trying to advocate for national change. 

But, in the interim, there is one thing you all are responsible for 

and people are grateful for which is funding the research on what 

works and what does not. At the end of the day, we are going to 

have to figure out who gets what. 

I do not want to use the word, rationing, because that is an ugly 

word, but until we can prioritize what is high value and what is 

low value and figure out how to do that, we are not going to be 

able to get at this trend. 

Comparative effectiveness research, which you funded through 

AHRQ, is critical. We see the business coalitions coming behind it. 

Our CBO director has said this could save. It actually could selffund itself over 10 years according to what their estimate of the 

CHAMP Act. 

I thank you all because that is an important, critical investment 

that you have been making over time. 

Mr. OBEY. We will hear more of this, this afternoon, in our panel. 

But it certainly seems to me that if we are moving, and I profoundly believe that we are, to universal healthcare being dealt 

with at the Federal level, you have tremendous incentives to actually figure out what does work and what does not work because the 

Federal Government is going to be spending a hell of a lot more 

money. It would be nice if we spent it on something that was useful. 

Mr. Nycz, you know how much this subject bugs me, but it really 

bugs me that dental care seems to be looked at as one of those 

fancy extras that is not basic to real healthcare. I wonder if you 

would just take a couple minutes to comment on why that is not 

true and also tell me, give me some examples of how dental care 

has led to catastrophic health situations for individuals. 

Mr. NYCZ. Well, I think maybe part of the reason dental care is 

viewed that way is because as a profession you hear a lot and you 

see on billboards, people are talking about cosmetic dentistry, not 

dental health related stuff but cosmetic. So people get the impression that is teeth whitening. That is everything else. 

Most of the people are deeply affected by this problem pretty 

much live in the shadows of our society. Folks with means, I still 

believe, do not fully understand this problem, but we have a raging 

epidemic of early childhood carries. 


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I mean it breaks your heart to see kids coming in where you say 

we have to pull six teeth. We have to do crowns, and this is a little 

six year old child. 

How does it affect the family when you have a child with chronic 

pain, up all night? You have to go into work. You cannot go into 

work. I mean I think it affects productivity. When children are affected that way, the parents are affected that way. If you cannot 

get help for your child, that is a horrible feeling as a parent. 

You can go from children. You go through the life cycle. You can 

up to people who are thinking about having children. The research 

that we are getting out the National Institute or Oral and Cranial 

Facial Research says there may be an impact of periodontal disease 

in pregnant women on the birth of their child. 

The Journal of Obstetrics and Gynecology, I think back in January of 2006 or 2007, had an article telling ob-gyns to take a look 

in the mouth and, if you have a woman with progressive periodontal disease, it may lead to a very low birth weight baby. 

The researchers are still working on that, but my view on that 

is if you have a pregnant mom and she has periodontal disease, a 

lot of these folks are on Medicaid. They cannot get care. So even 

if you tell the ob-gyns you have to refer them, unless you have a 

place for them to go, then they just load up guilt on them. 

We do not wait, so we prioritize pregnant women with periodontal disease. Even though we have waiting lists, we will put 

them at the head of the list and get them because it may mean. 

I mean think about how many thousands of births we have in 

Milwaukee. We have this huge disparity in low birth weight babies 

and infant mortality between the black community and the rest of 

the community. How much of that is driven or could be driven by 

the fact that they are not getting access to basic services including 

dental? 

So you go up the ladder. You go to the elderly. There is no dental 

benefit for the elderly. How does it affect the nutrition of someone 

who cannot chew because they have few teeth and the teeth they 

do have are painful and they do not have money to get dentures? 

So it affects their nutrition. 

Studies out of England and here, if you are institutionalized and 

you are an elderly person, you can aspirate or inhale bad oral bacteria that can cause pneumonias. In England, they found one of the 

largest reasons for people going from nursing homes into hospitals 

is because they are aspirating these bad oral bacteria into their 

lungs and because of their fragility, they are contracting pneumonias. That is a great expense. 

I know that is happening in our Country too. We are going into 

the nursing homes. We are training the nursing professionals on 

how to brush the teeth of the nursing home residents so they get 

daily oral hygiene to prevent that from happening rather than 

waiting for them to hit the hospital where we just fill them with 

antibiotics and hope that they are okay. 

We have had vets, a lot of people. There is a lot of talk about 

honoring our vets and that. When we built the Chippewa Center, 

we talked to the Veterans Affairs person there, and he said he gets 

10 calls a week from veterans of all wars who cannot get dental 

care because, of course, it is not service-related. 


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And job services agencies, we spend a lot of money trying to help 

low income people get better, pick themselves up by their bootstraps, get better education and get into a job. Yet, in Clark County, a county of 33,000, they tell me there is 100 adults a year that 

they cannot place in jobs because of rotten, broken and missing 

teeth. 

Why do we tolerate that? I mean we can fix that. Community 

health centers can fix that if we get enough capacity. 

I do not care where you go on the life scale, sometimes it is jobs. 

In my written testimony, we talked about a 20 year old who came 

in depressed, with horrible oral health. She did not have a job. She 

was going nowhere. 

It turned her life around. She has a job now. She is feeling better 

about herself. 

I could go and on. There are so many examples. If anybody talks 

to you like that, I would invite you to invite them to our centers 

and have them sit down and talk to some of the people. 

When I was in Ladysmith, we had a fellow from Chippewa Falls, 

55 miles south, before we built the Chippewa Falls clinic. He saw 

somebody with a suit walking around, and he asked the dentist 

who was working on him, who is that? Oh, that is the director, 

Well, have him come in here. I want to show him my mouth. 

Soda drinker since age six, this person is going to be a denturist 

at the age of 20, but he had to get from Chippewa Falls to 

Ladysmith. It was a great burden for him to get there, and we 

could not do this all at once. So he was saying, can you please get 

care closer to home which is one of the reasons we built. 

I told him, I do not need to embarrass you by looking in your 

mouth. We are already working on it. 

The disability community has two or three strikes against them. 

Dentistry is largely a small for profit, solo enterprise. If you want 

to entertain and take care of intellectually and neural developmentally disabled people, you cannot do it in a standard office. You 

got to have a larger space. You got to have wheelchair lifts and 

special equipment, and it takes three times as long to take care of 

standard work. 

So it is expensive to take care of them. It takes longer for all 

those reasons. You need special facilities. They do not get care. 

Some of the people who are traveling the furthest to get to us are 

the people for whom travel is the most difficult, people with severe 

disabilities. 

Mr. OBEY. Thank you. 

One last question, then I will pass the witness until the bells 

ring. If you were to pick out the top three or four things that this 

Committee ought to do or the top three or four places where we 

ought to put additional resources to deal with the issue of access, 

just very quickly, where would you put it? 

Mr. NYCZ. I have great ideas on this: increasing community 

health centers. We are asking for funds that are not in excess of 

what we can achieve. It is a planned growth strategy. 

There is plenty of research that shows health centers save 

money, and there is plenty of research that shows where you build 

primary care infrastructure, the costs—Winberg’s work and so 

forth—even for the Medicare program where you have an overVerDate Aug 31 2005 04:32 Sep 09, 2008 Jkt 043194 PO 00000 Frm 00388 Fmt 6601 Sfmt 6602 E:\HR\OC\A194P2.XXX A194P2

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supply of specialists relative to primary care, less quality, higher 

costs. 

So you guys are actually building primary care infrastructure 

and building that infrastructure is, in a sense, a core healthcare reform that may allow us, when we get to universal health insurance, 

to afford it better. So I would say absolutely that, and then the National Health Service Corps has to come hand in hand because we 

have to be able to staff those facilities. 

And, if I get another one, I would say Telehealth is something 

that does help in the remote, rural areas, and definitely we are 

finding it very helpful. 

Mr. OBEY. How about the rest of you? 

Mr. POPPER. I would just say in terms of what this Committee 

could do is the high risk pool funding that has been provided, 

which we really appreciate, has not been provided consistently. 

There has been some move on the part of Congress in authorizing it to try to target it and put in incentives, so the money is 

used to expand access or reduce member cost which Maryland has 

no problem with. That is the way we use it. But if it is not provided 

consistently, it is hard. 

We talked earlier about insurance plans not being able to predict. Dr. Chollet talked about not being able to plan next year. If 

we do not get the funding consistently, it is hard to insure, as we 

did in Maryland, 300 more people in our low income program, offering really low premiums. Then the money is not appropriated next 

year, and then the premiums go up or we cannot sustain it. 

So in insurance, for us, and I know you have a lot of people asking for funding, but if it could just be consistently provided, that 

would be very helpful to the pools to make sure we sustain the affordability and access goals that this Committee wants us to sustain by providing us the funding. 

Ms. CHOLLET. I would second both of those statements. I think 

there would be three places that I would focus on, and the first 

would be community health centers. I think they are essential, and 

they have been under-funded. There is no replacement for them. 

Second is an issue we talked about before, which is effectiveness 

research and not just any effectiveness research but effectiveness 

research that is really targeted to helping health plans and health 

programs prioritize delivery of services. 

Oregon did this decades ago or 15 years ago and still stands out 

as a unique model of a State that actually examined the relationship between illnesses and services and decided on what was effective and what was not and actually prioritized what would be funded by their Medicaid program and were able to remove categorical 

eligibility rules so that everybody under poverty is eligible for the 

program and eligible for services that are deemed effective across 

the provider community. 

And, finally, in the area that Mr. Popper referred to, assistance 

to the States and helping them maintain and build new programs. 

It is not only the administrative cost assistance that was given to 

the high risk pools but the State Health Planning Grants that you 

sponsored, Mr. Obey, to help States plan for a better system and 

to maintain capacity for that level of planning and public discussion in lean economic times. 


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I think in the absence of those State Health Planning Grants, we 

would not have seen the leader States that I mentioned in my written testimony. They relied on those funds to have a public discussion and to build and maintain the capacity that was needed in the 

State to enact those pieces of legislation. 

Mr. OBEY. Thank you, Mr. Popper. 

Ms. LAMBREW. Going last is hard because they said everything 

I want to say as well, but I will say in addition to the workforce 

and comparative effectiveness research, two different things on prevention and on the State planning grants. 

On prevention, I think we should look hard at how we spend our 

money, how it is divided up within CDC programs, within the block 

grants because I think if we did a rackup and then tried to figure 

out how would we think through potentially pooling, redeploying 

and then increasing the amount of public health spending on it, it 

is a little bit more dramatic. 

It is not just increasing the spending. It is thinking about the 

spending. I think it might be a good time to do it if we are on the 

verge of a national debate. 

The second thing I would say is with the State planning grants, 

it did certainly help people. Hands down, States did things they 

would not have otherwise done without it. 

But it also created a set of really engaged people who are advocates now, who have moved through different levels of government. 

Some of them have come to Washington, and others have gone everywhere else. 

That is a human workforce capital investment that is not in the 

provider community but in the policy community. I do not know if 

there is anything else we could do with that, but I cannot begin to 

tell you how many times I have spoken with a group and worked 

with different States. Some real smart people have come into this 

field as a result of those grants. 

How we can think about workforce investment and policy is 

something I think you ought to pursue. 

Mr. NYCZ. I would like to say something about NIH because that 

is obviously a big part of what you fund every year. I think the 

NIH roadmap and the push to try to move knowledge into communities and to get things flowing is really a good trend. 

Again, I will come back to community health centers. As a community health center director, I view myself as a consumer of research results, to try to translate those results and put them into 

practice. 

I think societal investments that we make as a society in research. The outcomes of those investments should be available to 

everyone in that society, and health centers are helping to do that. 

The CTSA programs now and their roadmap where they are trying to build translational research support in 60 major health 

science institutions—Madison, U.W.-Madison School of Medicine 

and Public Health has received one of those grants. They are 

reaching out to community health centers and trying to establish 

what I call kind of knowledge pipelines that will help us translate 

data. 

The work that is coming out sooner and the people who bear the 

disproportionate burden of disease are the folks we serve, are the 


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poor. We have to find a way for them to capitalize on the research. 

I think the roadmap and some of the move to translational research should be applauded. 

Mr. OBEY. Thank you. 

Mr. WALSH. Thank you, Mr. Chairman. Mr. Nycz, the Federal 

budget provides about $2,000,000,000 for community health centers, but the actual budgets—costs to maintain, to run, to provide 

services at those clinics—is roughly about $9,000,000,000. Where 

does the rest of that money come from? 

Mr. NYCZ. A big part of it is medical assistance. Because of 

where we are located, we serve a lot of medical assistance patients. 

Mr. WALSH. Can you be more specific on medical assistance? 

Mr. NYCZ. When we serve Medicaid patients, we bill for those 

services and we receive payment. So that is a huge chunk. 

Mr. WALSH. So, Medicaid payments. 

Mr. NYCZ. Medicaid payments. A smaller chunk but more active 

in the rural areas is we also serve low income Medicare patients, 

and we get money for that. 

Plus, in the community health center program, pretty much everybody, unless you are in abject poverty, pays something on a sliding fee. For example, in our center, we get over a million dollars 

a year in sliding fee payments. That helps us with our programming. 

Mr. WALSH. Thanks. 

The two ladies who spoke more on the macro level, the idea that 

the western democracies in Europe are basically government-run 

healthcare systems. I am told that creates two tiers of healthcare, 

the healthcare for everybody and then the healthcare that individuals who have means go outside of that system. 

Is that, in fact, true? If so, what does that do the overall quality 

of healthcare in those countries, first. Second, does that create a 

more positive healthcare system for those countries? 

Ms. LAMBREW. I will let Dr. Chollet talk in a second, but in 

terms of, I will just take on three issues. 

One is this idea of waiting lists and queues and what are the 

data showing on that. I think what happens here is that we do 

have our own type of queues. If you are low income, uninsured, you 

have a different system and often find yourself waiting, not getting 

access to care that you need for delays and money reasons. 

We also, interestingly enough, for our insured population, our delivery system is stressed enough that same day access to 

healthcare is worse here than in European nations. So if you are 

insured and you need to see your doctor today for an urgent need, 

you are more likely to wait here than most, not all, other nations. 

So we see that their triage system is more for discretionary service, kind of oriented things. We have here a socioeconomic kind of 

triage system as well as one that because of our delivery system 

stress and lack of a system, we have people waiting for urgent care. 

On tiering and two tier systems, I do not know that there is any 

country that is so government-run that there is no such thing as 

an outside system. Canada has been debating whether or not they 

allow for private insurance on top of their provincial insurance. 

But, for the most part, every system allows it because they want 


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to be able to have a system where people have the basics and then 

people who have means get more. 

Mr. WALSH. What percent of the people take advantage of those 

second tiers, third tiers? 

Ms. LAMBREW. I am just going to say offhand that we looked at 

this two years ago. At the low end of the scale, it is a couple percentage points, I think, in Britain and in—I am trying to think 

what other nation. 

Australia has been trying to promote it because Australia kind 

of has a basic Medicare program. They want to be able to have 

more in a second tier than they have now, but they have not had 

very much success with it. So it depends. 

Mr. WALSH. What is the overall impact on healthcare because of 

that second tier or third tier? 

Ms. LAMBREW. You know it is hard to find. As Senator Daschle, 

whom I work with, says often, we have islands of excellence in a 

sea of mediocrity. 

We have some excellent healthcare. We have some outcomes that 

cannot be beat. 

But there are very few studies that say systematically when you 

look at across not just our statistics on our health but our outcomes, survival from different types of treatment. When you have 

cancer, what are your odds of survival? These are the sorts of statistics that for people in the system, are they getting the kind of 

quality care, and we just do not rank at the top. 

Part of it access. It cannot all be access, but it is the area that 

distinguishes us. 

Ms. CHOLLET. Just in answer to your question, what is the impact of the private sector tier, if you will, on the public program, 

there is not enough of the private sector tier to wag that dog, if you 

will. The public program really defines the quality of care and access to care in the nation, and the rest of it sort of sits on top and 

does not do significantly other than what the public system does. 

What it does is allow a different system of triaging, but it does 

not allow a different quality of care per se. 

Mr. WALSH. Thank you both very much. 

Mr. OBEY. Mr. Honda and Mr. Ryan, we have five minutes. 

Mr. HONDA. Listening to you, it sounds like some of the opportunities that are out there could be taken up by school districts too, 

where they use their school facilities like the district office and colocate social services, health services and things like that. 

I was reminded of when we put our new district office together 

for the Franklin-McKinley School District, we put a doctor’s office 

in to make sure that all the kids were up to date on their shots, 

and then a dental office to make sure that the youngsters were getting good dental care. 

10 years ago, I first heard that we saved a kid from dying of dental infection. I had never thought about that before; hearing what 

you are saying now just brings it even up to a higher level of urgency. So I appreciate all of your work and your input. 

Mr. RYAN. Yes, I have one question that I would be surprised if 

you had the answer to. One of the issues, the core issues in our 

Country is the level of stress that we live under in the United 

States as opposed to some of the European countries. 


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I know I jokingly mentioned smoking, but to watch, as you all 

do and as we do from our levels and at the local level, the amount 

of stress that the families go under that are dealing with these 

healthcare situations. 

I was just having a conversation with a friend of mine the other 

day whose wife had a premature delivery, one pound, two ounces, 

a year or two ago. Now she is in the second pregnancy, has had 

surgery and obviously had one premature birth and is going 

through all these surgeries and everything. The insurance company 

says to the family, this is not pregnancy-related, so we will not 

cover it. 

Whether it is the dental or any situation that you guys are dealing with in the trenches, have we been able to measure the effects 

of stress in our society and how this just exacerbates a lot of these 

health issues that are being dealt with? 

Mr. NYCZ. I am not familiar with that research, but I will tell 

you in kind of linking back to the schools, that we have programs 

that work in after school time. One of the observations we have 

had where we have 300 some kids in high need. We work on homework. We do all kinds of things with them. 

One of the observations that came out of that is it lowers the 

stress in the families because their children have a place to go. Frequently, mom and dad are both at work. Then when they come 

home and they are tired from the end of the day, the kids’ homework is done. They are doing better in school. 

I was surprised myself to learn about this when we were looking 

at the impacts of our after school programs. The schools love it. 

They refer to these programs, and they are now working on trying. 

They would like us and the United Way may help us at some point 

to put in a dental facility right there where these kids are coming 

in. 

I mean we have had actual examples in terms of there are some 

simple things you can do. You know where your kids are. They are 

in a good program. They are eating right. There is recreation. 

There is a gym there. They are learning homework. Many of them 

come back to volunteer. 

The surprise was in the family surveys that it alleviated family 

stress. 

Mr. RYAN. This is almost directly related to a lot of the mental 

health promotion that we talk about here. 

Ms. LAMBREW. I will just add quickly. Last year, there was the 

Child Health Summit or Child Summit that you had here at the 

House, and there was a scientist who is beginning to look at some 

of the clinical research on prenatal stress and how that could affect 

the child. 

We had some clinical linkages, but I think also there is a growing body of research that says in addition to our kind of obvious 

mental health problems, behavioral problems like alcohol use, drug 

use, and even obesity. Obesity may be self-medication for families 

under stress. 

If we cannot figure out the role of stress in some of behavioral 

as well as our clinical settings, we are going to continue to have, 

I think, this chronic disease epidemic. [Laughter.] 


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Mr. HONDA. I think that when we talk about being more efficient 

and saving time, we do not use the time that we save. 

Mr. WALSH. You need to add an iPod to that, and it will calm 

it right back down. 

Ms. LAMBREW. We will have NIH fund the study of getting rid 

of BlackBerrys, iPods and cell phones in how to reduce stress. 

Mr. RYAN. I want to volunteer for that study if I can. Thank you 

very much. 

Mr. OBEY. Thank you all. We appreciate your time. 

The Committee will resume at 2:00 in the full Committee hearing room. 


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(403) 

TUESDAY, MARCH 11, 2008. 

IMPLICATIONS OF A WEAKENING ECONOMY FOR 

TRAINING AND EMPLOYMENT SERVICES 

WITNESSES 

SANDI VITO, ACTING SECRETARY, PENNSYLVANIA DEPARTMENT OF 

LABOR AND INDUSTRY 

BRUCE WYNGAARD, VICE CHAIR, OHIO WORKFORCE POLICY ADVISORY BOARD 

ANDREW SUM, DIRECTOR, CENTER FOR LABOR MARKET STUDIES, 

NORTHEASTERN UNIVERSITY 

LARRY E. TEMPLE, PRESIDENT, NATIONAL ASSOCIATION OF STATE 
(i) 

W I T N E S S E S 

Page 

Bernstein, Jared ...................................................................................................... 1 

Chollet, Deborah ...................................................................................................... 309 

Greenstein, Robert ................................................................................................... 1 

Holzer, H. J .............................................................................................................. 189 

Howard, John ........................................................................................................... 489 

Lambrew, Jeanne ..................................................................................................... 309 

Landrigan, Philip ..................................................................................................... 489 

Leigh, J. P ................................................................................................................ 93 

Lynch, R. G .............................................................................................................. 189 

Melius, James .......................................................................................................... 489 

Meyerson, Harold ..................................................................................................... 1 

Nyez, Greg ................................................................................................................ 309 

Popper, Richard ....................................................................................................... 309 

Prezant, David ......................................................................................................... 489 

Reibman, Joan ......................................................................................................... 489 

Rudin, T. W .............................................................................................................. 189 

Spriggs, W. E ........................................................................................................... 189 

Sum, Andrew ............................................................................................................ 403 

Temple, L. E ............................................................................................................. 403 

Thorpe, K. E ............................................................................................................. 93 

Viard, A. D ............................................................................................................... 1 

Vito, Sandi ................................................................................................................ 403

Weinstein, J. N ........................................................................................................ 93 

Wyngaard, Bruce ..................................................................................................... 403 

Æ 


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