COMPREHENSIVE HEALTH CARE REFORM 

DISCUSSION DRAFT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JUNE 23, 24, & 25, 2009 

Serial No. 111–54 

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COMPREHENSIVE HEALTH CARE REFORM DISCUSSION DRAFT 


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COMPREHENSIVE HEALTH CARE REFORM 

DISCUSSION DRAFT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JUNE 23, 24, & 25, 2009 

Serial No. 111–54 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 


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COMMITTEE ON ENERGY AND COMMERCE 

HENRY A. WAXMAN, California, Chairman 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER S. MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

JERRY MCNERNEY, California 

BETTY SUTTON, Ohio 

BRUCE BRALEY, Iowa 

PETER WELCH, Vermont 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

(II) 


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(III) 

SUBCOMMITTEE ON HEALTH

FRANK PALLONE, JR., New Jersey, Chairman 

JOHN D. DINGELL, Michigan 

BART GORDON, Tennessee 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

JAN SCHAKOWSKY, Illinois 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

JANE HARMAN, California 

CHARLES A. GONZALEZ, Texas 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER S. MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

BETTY SUTTON, Ohio 

BRUCE L. BRALEY, Iowa 

NATHAN DEAL, Georgia, 

Ranking Member 

RALPH M. HALL, Texas 

BARBARA CUBIN, Wyoming 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

STEVE BUYER, Indiana 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 


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(V) 

C O N T E N T S 

June 23, 2009 

Page 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 1 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 3 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 4 

Hon. Phil Gingrey, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 4 

Hon. Lois Capps, a Representative in Congress from the State of California, 

opening statement ................................................................................................ 5 

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, opening statement ............................................................................ 5 

Hon. Jim Matheson, a Representative in Congress from the State of Utah, 

opening statement ................................................................................................ 6 

Hon. Tim Murphy, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 7 

Hon. Donna M. Christensen, a Representative in Congress from the Virgin 

Islands, opening statement ................................................................................. 7 

Hon. Zachary T. Space, a Representative in Congress from the State of 

Ohio, opening statement ...................................................................................... 8 

Hon. Janice D. Schakowsky, a Representative in Congress from the State 

of Illinois, opening statement .............................................................................. 9 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 9 

Hon. Tammy Baldwin, a Representative in Congress from the State of Wisconsin, opening statement ................................................................................... 10 

Hon. Doris O. Matsui, a Representative in Congress from the State of California, opening statement .................................................................................... 10 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 269 

Hon. Anna G. Eshoo, a Representative in Congress from the State of California, prepared statement .................................................................................. 275 

Hon. Kathy Castor, a Representative in Congress from the State of Florida, 

prepared statement .............................................................................................. 276 

Hon. Bruce L. Braley, a Representative in Congress from the State of Iowa, 

prepared statement .............................................................................................. 279 

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

of Pennsylvania, prepared statement ................................................................. 284 

WITNESSES

Ralph G. Neas, Chief Executive Officer, National Coalition on Health Care ..... 11 

Prepared statement .......................................................................................... 14 

Richard Kirsch, National Campaign Manager, Health Care for America Now . 30 

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

Stephen T. Parente, Ph.D., Director, Medical Industry Leadership Institute .... 37 

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

Marian Wright Edelman, President, Children’s Defense Fund ........................... 98 

Prepared statement .......................................................................................... 102 

Jennie Chin Hansen, President, AARP ................................................................. 123 

Prepared statement .......................................................................................... 125 


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VI 

David L. Shern, Ph.D., President and Chief Executive Officer, Mental Health 

America ................................................................................................................. 136 

Prepared statement .......................................................................................... 139 

Erik Novack, MD., Orthopedic Surgeon, Patients United Now ........................... 146 

Prepared statement .......................................................................................... 149 

Shona Robertson-Holmes, Patient at Mayo Clinic ................................................ 164 

Prepared statement .......................................................................................... 166 

Jeffrey Levi, Ph.D., Executive Director, Trust for America’s Health .................. 197 

Prepared statement .......................................................................................... 200 

Brian D. Smedley, Ph.D., Vice President and Director, Health Policy Institute, 

Joint Center for Political and Economic Studies ............................................... 213 

Prepared statement .......................................................................................... 215 

Mark Kestner, M.D., Chief Medical Officer, Alegent Health ............................... 240 

Prepared statement .......................................................................................... 243 

June 24, 2009 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 287 

Prepared statement .......................................................................................... 290 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 296 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 297 

Hon. Nathan Deal, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 299 

WITNESSES

Kathleen Sebelius, Secretary, Department of Health and Human Services ...... 300 

Prepared statement .......................................................................................... 303 

Answers to submitted questions ...................................................................... 348 

Sidney M. Wolfe, M.D., Director, Health Research Group at Public Citizen ..... 360 

Prepared statement .......................................................................................... 363 

Steffie Woolhandler, M.D., Associate Professor of Medicine, Harvard Medical 

School, and Co-Founder, Physicians for a National Health Program .............. 366 

Prepared statement .......................................................................................... 368 

John C. Goodman, Ph.D., President and CEO, National Center for Policy 

Analysis ................................................................................................................. 370 

Prepared statement .......................................................................................... 372 

Michael O. Leavitt, Former Secretary, U.S. Department of Health and Human 

Services ................................................................................................................. 405 

Prepared statement .......................................................................................... 407 

Joseph Vitale, Chairman, Committee on Health, Human Services, And Senior 

Citizens, New Jersey State Senate ..................................................................... 410 

Prepared statement .......................................................................................... 412 

W. Ron Allen, Chairman, Jamestown S’klallam Tribe ......................................... 419 

Prepared statement .......................................................................................... 421 

Jay Webber, State Assembly, State of New Jersey ............................................... 440 

Prepared statement .......................................................................................... 442 

Raymond C. Scheppach, Ph.D., Executive Director, National Governors Association .................................................................................................................... 446

Prepared statement .......................................................................................... 448 

Robert S. Freeman, Deputy Executive Director, Cencal Health, California 

Association of Health Insuring Organizations ................................................... 453 

Prepared statement .......................................................................................... 455 

Ron Pollack, Executive Director, Families USA ................................................... 461 

Prepared statement .......................................................................................... 463 

Scott Gottlieb, M.D., Resident Fellow, American Enterprise Institute ............... 493 

Prepared statement .......................................................................................... 497 

Thomas Miller, CEO, Workflow and Solutions Division, Siemens Medical 

Solutions, USA ..................................................................................................... 499 

Prepared statement .......................................................................................... 501 

Kathleen Buto, Vice President for Health Policy, Johnson & Johnson ............... 510 

Prepared statement .......................................................................................... 513 

William Vaughan, Senior Health Policy Analyst, Consumers Union .................. 520 

Prepared statement .......................................................................................... 522 


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VII 

Paul Kelly, Senior Vice President, Government Affairs and Public Policy, 

National Association of Chain Drug Stores ....................................................... 551 

Prepared statement .......................................................................................... 553 

Answers to submitted questions ...................................................................... 575 

June 25, 2009 

WITNESSES

Glenn M. Hackbarth, Chair, Medicare Payment Advisory Commission ............. 582 

Prepared statement .......................................................................................... 584 

Daniel R. Levinson, Inspector General, U.S. Department of Health and 

Human Services ................................................................................................... 605 

Prepared statement .......................................................................................... 608 

Ted D. Epperly, M.D., President, American Academy of Family Physicians ..... 658 

Prepared statement .......................................................................................... 661 

M. Todd Williamson, M.D., President, Medical Association of Georgia .............. 670 

Prepared statement .......................................................................................... 672 

Karl J. Ulrich, M.D., Clinic President and Ceo, Marshfield Clinic ..................... 715 

Prepared statement .......................................................................................... 717 

Janet Wright, M.D., Vice President, Science and Quality, American College 

of Cardiology ......................................................................................................... 725 

Prepared statement .......................................................................................... 727 

Kathleen M. White, Ph.D., Chair, Congress on Nursing Practice and Economics, American Nurses Association ....................................................................... 730 

Prepared statement .......................................................................................... 732 

Answers to submitted questions ...................................................................... 1042 

Patricia Gabow, M.D., Chief Executive Officer, Denver Health and Hospital 

Authority, National Association of Public Hospitals ......................................... 739 

Prepared statement .......................................................................................... 741 

Dan Hawkins, Senior Vice President, Public Policy and Research, National 

Association of Community Health Centers ........................................................ 754 

Prepared statement .......................................................................................... 756 

Bruce T. Roberts, RPH, Executive Vice President and CEO, National Community Pharmacists Association .............................................................................. 763 

Prepared statement .......................................................................................... 765 

Bruce Yarwood, President and Ceo, American Health Care Association ............ 773 

Prepared statement .......................................................................................... 775 

Alissa Fox, Senior Vice President, Office of Policy and Representation, Blue 

Cross Blue Shield Association ............................................................................. 792 

Prepared statement .......................................................................................... 794 

Kelly Conklin, Owner, Foley-Waite Custom Woodworking, Main Street Alliance ....................................................................................................................... 832

Prepared statement .......................................................................................... 835 

John Arensmeyer, Founder and CEO, Small Business Majority ......................... 841 

Prepared statement .......................................................................................... 843 

Gerald M. Shea, Assistant to the President, AFL–CIO ........................................ 849 

Prepared statement .......................................................................................... 851 

Dennis Rivera, Health Care Chair, SEIU ............................................................. 867 

Prepared statement .......................................................................................... 869 

John Castellani, President, Business Roundtable ................................................ 873 

Prepared statement .......................................................................................... 875 

John Sheils, Senior Vice President, The Lewin Group ......................................... 884 

Prepared statement .......................................................................................... 886 

Martin Reiser, Manager of Government Policy, Xerox Corporation, National 

Coalition on Benefits ............................................................................................ 912 

Prepared statement .......................................................................................... 914 

Howard A. Kahn, Chief Executive Officer, L.A. Care Health Plan ..................... 936 

Prepared statement .......................................................................................... 938 

Karen L. Pollitz, Project Director, Health Policy Institute, Georgetown Public 

Policy Institute ..................................................................................................... 943 

Prepared statement .......................................................................................... 945 

Karen Ignagni, President and CEO, America’s Health Insurance Plans ............ 956 

Prepared statement .......................................................................................... 958 

Janet Trautwein, Executive Vice President and CEO, National Association 

of Health Underwriters ....................................................................................... 978 

Prepared statement .......................................................................................... 980 


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VIII 

SUBMITTED MATERIAL

Chart, Blue Cross Blue Shield, submitted by Mr. Burgess .................................. 1000 

Letter of June 15, 2009, from the County of Los Angeles to Ms. Harman ......... 1004 

Report by Health Care for America Now, dated May 2009, submitted by 

Mr. Pallone ........................................................................................................... 1006 

Letter of July 2, 2009, from the Health Care for America Now to the Committee .................................................................................................................... 1012


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(1) 

COMPREHENSIVE HEALTH CARE REFORM 

DISCUSSION DRAFT, DAY 1 

TUESDAY, JUNE 23, 2009 

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

The subcommittee met, pursuant to call, at 9:39 a.m., in Room 

2123, Rayburn House Office Building, Hon. Frank Pallone, Jr., 

[chairman of the subcommittee] presiding. 

Present: Representatives Pallone, Dingell, Green, DeGette, 

Capps, Schakowsky, Baldwin, Matheson, Barrow, Matsui, 

Christensen, Castor, Sarbanes, Murphy of Connecticut, Space, Sutton, Deal, Whitfield, Murphy of Pennsylvania, Burgess, Blackburn, 

Gingrey, and Barton (ex officio). 

Staff Present: Karen Nelson, Deputy Committee Staff Director 

for Health; Purvee Kempf, Counsel; Sarah, Despres, Counsel; Jack 

Ebeler, Senior Advisor on Health Policy; Robert Clark, Policy Advisor; Tim Gronniger, Professional Staff Member; Stephen Cha, Professional Staff Member; Allison Corr, Special Assistant; Alvin 

Banks, Special Assistant; Jon Donenberg, Fellow; Camille Sealy, 

Fellow; Karen Lightfoot, Communications Director, Senior Policy 

Advisor; Caren Auchman, Communications Associate; Lindsay 

Vidal, Special Assistant; Earley Green, Chief Clerk; Jen Berenholz, 

Deputy Clerk; Miriam Edelman, Special Assistant; Ryan Long, Minority Chief Health Counsel; Chad Grant, Minority Health Counsel; Brandon Clark, Minority Professional Staff; and Aarti Shah, 

Minority Health Counsel. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW 

JERSEY 

Mr. PALLONE. The hearing of the Health Subcommittee is called 

to order. And I will start by recognizing myself for an opening 

statement. 

Today we are meeting to examine a discussion draft on comprehensive health reform. The subcommittee will also convene to 

receive testimony tomorrow and Thursday. 

In addition, the full committee will meet tomorrow morning to 

hear from the Secretary of Health and Human Services, Kathleen 

Sebelius. 

Comprehensive health reform is a goal that has alluded reformers, Democrats and Republican alike, for over a century. As a result, the problems that plague our healthcare system have continVerDate Mar 15 2010 06:20 Aug 17, 2012 Jkt 074088 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 E:\HR\OC\A088.XXX A088

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ued to grow worse. The ranks of the uninsured continue to swell. 

The cost of insurance and medical care continues to skyrocket. The 

quality of care delivered becomes more and more erratic. 

After years of failing to address these problems, we find ourselves in a situation where our broken health care system is a clear 

and present danger, in my opinion, to the economic health of this 

nation. Government budgets are being overrun by the mounting 

costs of health care, crowding out funding for other key services. 

American businesses are disadvantaged as they try to compete in 

the global marketplace, and American families are being driven 

into bankruptcy by ballooning medical debt or forgoing critical care 

altogether. 

President Obama understands that these problems require urgent action, which is why he has called upon Congress to pass comprehensive health reform legislation this year. And health reform 

is an issue that generates great interest and controversy. That certainly we know. And while we may not all agree on a common solution, I think we also know that we can’t let this opportunity pass 

us by. 

Maintaining the status quo and allowing these problems to continue to fester is no longer an option. Nor can we simply resign 

ourselves to making marginal improvements as we have done in 

the past. The time has come for comprehensive reform, and the discussion draft we are reviewing this week is a starting point for that 

debate. 

The discussion draft envisions a world where every American 

family has access to affordable and quality health coverage. Those 

who are currently unable to access coverage through our public 

programs, employers or the individual market will now be able to 

do so through a reformed insurance marketplace that guarantees 

access, quality and affordability. People who already have health 

coverage will be able to keep their coverage and their choice of doctors. 

But health reform isn’t just about improving coverage and access; 

it is also about improving the public health. Too many people are 

suffering from preventible illnesses and conditions, such as cardiovascular disease, respiratory diseases, and obesity-related illnesses. 

Accordingly, we must change the way we think about medical 

treatment by focusing on preventive care, as well as the quality of 

care being given. And this discussion draft aims to do just that. 

There are a lot of other important details about the discussion 

draft that I am not mentioning, which I hope will be explored over 

the course of the next 3 days. I just want to speak directly to those 

who will stand in opposition to our efforts. For those who have legitimate concerns with the draft, I simply urge you to talk to us 

about your ideas. We want to work with those of you who are truly 

interested in being constructive participants in enacting health reform this year. But for those who stand in opposition simply for opposition’s sake, I urge you to rethink your position. After a century 

of inaction, the American people want to see change. They want to 

see health reform enacted, and we intend to deliver it to them. 

Thank you. 

And now I will yield to our ranking member for the day, the gentleman from Texas, Mr. Burgess. 


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OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. Thank you, Mr. Chairman. 

It seems like I have been waiting my entire career for just this 

time. I gave up a 25-year medical practice to run for Congress, and 

I didn’t do so to sit on the sidelines with really what could be the 

biggest change in our system since the enactment of Medicare almost 45 years ago. 

And here we are this morning calling up 10 panels to walk us 

through a legislative proposal released late last week, and it is 

pretty skimpy on some of the details. Now, I recognize what a draft 

is, and I understand that a draft means that everything is not completed, but for a draft that mentions ‘‘fee’’ 54 times, ‘‘tax’’ 58 times 

and ‘‘penalty’’ 98 times, isn’t it odd that we have nothing as pertains to financing this legislation? 

So, Mr. Chairman, will we have a legislative hearing on the actual bill that this committee might markup when that bill becomes 

available? I feel like we ought to emphasize the care part of health 

care, and this debate continues to be defined by two words, ‘‘cost’’ 

and ‘‘coverage.’’ Yet we need to know how many people are covered 

under this proposal, or how much it will cost, or how we are going 

to pay for it. 

Mr. Chairman, will you commit that we will at least have a CBO 

score on the bill that we will mark up, since we do not have one 

on this bill? 

Now, everyone if the CBO were here to testify, which they are 

not, will they be able to tell us how much this bill will cost in the 

outyears? Every change in the Tax Code, every cut in spending 

that achieves savings only gets us out 10 years. From there on out, 

it will mean Congress will be having to find tens of billions of dollars a year to keep whatever program we enact, to keep that going. 

And most importantly, as I said, coverage does not equal access. 

What does this bill do for patients? What does this bill do to ensure 

that we will have an adequate supply of physicians? 

Now, Mr. Chairman, the President said in his break out— after 

one of the break out sessions last March, that he wanted to find 

out what works. He said it again at the American Medical Association last week. I applaud him for having an open mind. I wish this 

committee, I wish this committee had the same type of open mind. 

You just said you want to work with people who are willing to 

work with you. Why, then, Mr. Chairman, have we been excluded 

from the drafting of this bill only to receive it, again, late last week 

and in a very incomplete form? 

Now, I was hopeful and I am still hopeful that we can write a 

bipartisan bill. Since no Republican has been consulted thus far, 

the totality of this bill, I think that is a disservices to our constituents. I think that is a disservice to Americans. 

Mr. Chairman, we do stand ready to work with you when it is 

possible; and when it is not, we stand ready to try to educate you 

where you are wrong. And that is what this process should be 

about. But it should be done in the arena in the full light of day 

and not behind closed doors in the dark of night. That is how our 

constituents are best served. That is how the American people are 


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best served, and certainly for America’s patients and doctors, we 

should do no less. 

I would yield back the balance of my time. 

Mr. PALLONE. Thank you. 

May I just mention, Dr. Burgess was sitting in as the ranking 

member, so I gave him the 3 minutes or close to it. But because 

we want to hear from the witnesses today and we have so many, 

I am asking members to try to limit their remarks to 1 minute 

today. 

Hopefully you got notification of that, because remember, not 

only the Health Subcommittee members are able to participate 

today; any member of the Energy and Commerce Committee is able 

to give an opening statement or participate. So that is why we limited it to 1 minute. 

Next is the gentlewoman from Colorado, Ms. DeGette. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you, Mr. Chairman. 

I will just point out to my friend from Texas, here we are in the 

light of day, and we are going to have 3 days of hearing on this 

draft. 

And I want to thank you, Mr. Chairman, for doing that. 

This is a monumental undertaking, and it is going to take 

everybody’s wisdom and advice. I want to talk about a couple of 

things that we all care about in this bill. I think we are all going 

to have to do that today because it is such a comprehensive bill. 

First of all, automatic enrollment of newborns into Medicaid will 

ensure that all children have access to necessary immunizations 

and well-child visits during the first and most important year of 

life. 

Secondly, primary care workforce incentives and training programs, like student loan repayments and higher reimbursements 

for primary care, will help with the workforce we need. 

And finally, a strengthened infrastructure for health care quality 

will let us pay—let us identify and track key health indicators. 

I want to agree with you for the need for prevention, and I just 

want to close by saying, we are either going to pay now or we are 

going to pay later, and I suggest we focus on Americans’ health. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. 

The gentleman from Georgia, Mr. Gingrey. 

OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Mr. GINGREY. Thank you, Mr. Chairman. 

Mr. Chairman, I want to ensure that every American has quality 

health care. 

Unfortunately, this legislation will do nothing but ensure that 

millions of Americans lose the coverage they currently have. By including a government health plan and a mandate that every American purchase health insurance, this bill guarantees that the only 


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insurance plans available to Americans and businesses are those 

that are designed and sold by government bureaucrats. 

For those that argue that the government plan will merely compete, studies have shown that such a plan will drive out competition and indeed become a monopoly. 

This, the bill before us argues, is the responsible thing to do. By 

way of government-made products, mandates, taxes and partisan 

politics, this legislation will take quality market-driven health insurance away from millions of Americans and lead inexorably to a 

single-payer national health care system. 

We can do better, Mr. Chairman. The minority party has some 

well-studied ideas for improving the affordability, the access and 

availability of health care. 

So far, the majority party in the House has turned a deaf ear toward working in a bipartisan manner. For the sake of the American people and those patients I cared for, for over 30 years, I urge 

you to listen carefully to all voices, and I yield back. 

Mr. PALLONE. Thank you. 

Vice Chair of the subcommittee, the gentlewoman from California, Mrs. Capps. 

OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mrs. CAPPS. Thank you, Chairman Pallone. 

And thank you, Chairman Waxman and Chairman Emeritus 

Dingell, for your excellent leadership and the hard work that you 

and your staffs have put into this draft legislation. 

As a nurse turned Congresswoman, this debate is one I have 

waited for, for a very long time. We have had many hearings on 

this topic, bipartisan hearings, and I thank you for that opportunity, that it really, truly is coming from all the people we represent. 

Our Nation’s health care system is in shambles, and with legislation, we will finally take the most important steps we can to fix it. 

We will put the emphasis on wellness instead of just illness. We 

will give patients greater choice and protection in the health insurance market. We will make sure that everyone has access to the 

care they need and deserve. 

It is going to take a long time, some difficult choices, and perhaps a few pennies to get it underway. But we must act, and we 

must act now. The price of inaction is simply too high. I look forward to this coming week and the discussions we will have on how 

to perfect this legislative proposal. 

I yield back. 

Mr. PALLONE. Thank you. 

The gentlewoman from Tennessee, Mrs. Blackburn. 

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

As I have said so many times in this committee, what is on the 

table for us to consider is in essence the Tennessee TennCare experience all over again. And for those of you who do not know, that 


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was Tennessee’s attempt at an executive order program of the Governor’s Office. This was their attempt at Medicaid managed care. 

The plan, that plan is what our Democrat Governor in Tennessee 

recently called, and I am quoting him, ‘‘a disaster.’’ 

Eventually that program consumed every single penny of new 

revenue in our State. I was a State Senator tasked with funding 

that program. That program nearly bankrupted the State of Tennessee. It is not a model for future success. It is a model for a looming fiscal disaster. 

And I have no clue who the majority thinks is going to pay for 

this thing. I have no idea where they think they are going to get 

the money for this. Let me tell you, go look at the 10 care records. 

We cannot afford this program. There is no money to pay for it. 

You cannot borrow enough money to pay for this program. 

In Tennessee, we know that this public option always costs more 

than initial projections. Cost overruns were through the roof. Patients are always going to choose free rather than out-of-pocket 

care. Employers will force their employees onto the system. That 

is why you are going to see more than 120 million Americans moving off of private insurance if this goes through. Sound the alarm 

bell. This is not—— 

Mr. PALLONE. The gentlewoman, I just wanted you to know you 

are a minute over. 

Mrs. BLACKBURN. Mr. Chairman, I thank you for that, and I 

think this is an incredibly serious situation. And I thank you for 

your patience. 

Mr. PALLONE. Thank you. 

I am trying to keep people to a minute. I am not going to stop 

you if you go a little over. 

Mrs. BLACKBURN. It is fine. I apologize. 

Mr. PALLONE. All right. 

The gentleman from Utah, Mr. Matheson. 

OPENING STATEMENT OF HON. JIM MATHESON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH 

Mr. MATHESON. Thank you, Mr. Chairman. I will do my best 

with a minute. 

We use the terms cost, access and quality a lot around here, but 

we really do need to focus on all three. That is what we are trying 

to do here. I think this is the most complex piece of legislation we 

are going to work on in our careers. And just maintaining the status quo is not an option. Our health care system is driving up costs 

in a way, both the public sector and the private sector. We can’t 

sustain the path we are on. 

I fear this discussion has focused so much on access, we are not 

also looking at the unproductive system we have now. There is so 

much money in our health care system today that is spent in irrational ways. There are so many perverse incentives built into our 

health care system. And if we want to achieve what our President 

has asked us to do, which is to bend the curve, the cost curve, the 

plots where costs are going, if we want to achieve that, that is 

where we can really accomplish something as a group. 

So I encourage this committee, as we look at this legislation, to 

look for ways to make our health care system more efficient, get 


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rid of perverse incentives. And if we do that, I think we will secure 

a better future regardless of how we structure the plan. 

Thanks, Mr. Chairman. I yield back. 

Mr. PALLONE. Thank you. 

The gentleman from Pennsylvania, Mr. Murphy. 

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA 

Mr. MURPHY OF PENNSYLVANIA. Thank you, Mr. Chairman. 

And I am thankful we are finally moving forward on this. Certainly there is not a member in this room on either side of the 

aisle, no matter what one’s political leanings, who is not totally 

dedicated to reforming our health care system as many of our witnesses are, too. 

The question is, which direction? From the time I arrived in Congress in 2003 and through my time before as a State senator, I focused my energies on trying to reform this system. Just on the 

issue of hospital-borne infections alone since I have been in Congress, 350,000 people have died, hundreds of thousands more from 

other errors. And we have spent hundreds of billions of dollars in 

wasted health care. 

Our current system of $2.4 trillion wastes about $700 billion a 

year. Our Medicare and Medicaid system are filled with problems. 

We need to address those first. But don’t take my word for it. Take 

Members of Congress’s word for it. In the 110th Congress, 452 bills 

were brought forward by Members of Congress to reform Medicare 

and Medicaid. Members of Congress signed up to cosponsor those 

452 bills 13,970 times. 

Members of Congress think we have trouble if the Federal Government is going to run a health care system. We are not there. 

A bill that looks at who pays for premiums and co-pays is not 

health care reform. A bill that looks for taxes to pay for these 

things is not health care reform. A bill that reduces costs by reducing payments to physicians and hospitals is not health care reform. 

We have to reform that system. We have the talent and the ability to do that. And I hope that as we progress in the coming weeks 

on this health care reform system, we truly can look at focusing on 

outcomes and not quantity and really make health care more affordable and accessible for millions of Americans who right now 

can’t afford it. 

Thank you. And I yield back. 

Mr. PALLONE. Thank you. 

The other gentleman from Georgia, Mr. Barrow. 

Mr. BARROW. I will waive an opening. 

Mr. PALLONE. The gentlewoman from the Virgin Islands, Mrs. 

Christensen. 

OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A 

REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. 

And I want to begin by using this opportunity to recognize the 

fair and open way in which the Chair Emeritus Dingell, Chairman 


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Waxman and you, Chairman Pallone, have conducted the process 

of getting us to this point today and to thank you and your staff. 

The bill acknowledges that insurance is not enough and takes 

steps to promote prevention and wellness, to expand services and 

to eliminate health disparities. We appreciate and applaud your efforts. 

But if we are to truly transform our system, we will continue to 

push the committee to go further. One specific area where more 

progress is needed is in the treatment of the territories. Just as we 

will willingly and proudly fight and die in every war and conflict 

in defense of our Nation, we believe that we deserve the same access to health care as every other citizen and legal resident of the 

United States. We understand ‘‘universal health care’’ to mean universal health care. 

And finally, I believe that the health and well-being of every person living in this country is important enough and vital enough to 

our Nation’s productivity, competitiveness, strength and leadership 

that passing a meaningful and effective health care reform bill 

should not require an immediate offset for every provision. Prevention saves. It saves lives first of all, and it saves money as well. 

Thank you, and I yield back. 

Mr. PALLONE. Thank you. 

The gentleman from Ohio, Mr. Space. 

OPENING STATEMENT OF HON. ZACHARY T. SPACE, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Mr. SPACE. Thank you, Mr. Chairman, for your time and your 

tireless work on behalf of American consumers. 

We stand before a debate so historic and significant that it arises 

but once every several generations, and that stake is an issue of 

no less importance than the health of the American citizen, along 

with the health of the American economy. For, even though we 

boast of the most sophisticated health care, technology, and talented health care professionals in the world, their services are 

often out of reach of the average working American. 

Today I offer three areas of critical importance where improvements must be made. First, we must grow and nurture our rural 

health care workforce to ensure the same quality of care is offered 

to all residents of this country regardless of where they reside. 

Second, we must make quality affordable health care a reality for 

every resident of this country by making reforms that capture the 

power of the free market, harnessing what is best about market 

forces. 

And third, we must change how we treat chronic diseases, taking 

more steps to encourage prevention and managing care of those 

that they afflict. An investment on the front end will only result 

in a higher quality of life for those who suffer from chronic diseases 

and cost savings of billions of dollars to our health care system. 

Just as history has judged our efforts to battle for democracy 

abroad and put men on the moon, we, too, shall be judged for our 

response to this critical moment in history. We truly cannot afford 

to fail. 

I yield back. 

Mr. PALLONE. Thank you. 


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The gentlewoman from Illinois, Ms. Schakowsky. 

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman, for moving us closer to getting where we all want to be, and that is the goal of comprehensive reform of our health care system. 

I want to thank Chairman Waxman and Chairman Emeritus 

Dingell who have provided wonderful leadership. 

This is a historic moment. Americans are counting on us for 

guaranteed access to affordable quality health care and we have to 

ask now—act now. People are forgoing care, families are falling 

into bankruptcy, businesses are struggling to make ends meet. I 

want to focus on two provisions. 

First and most important, the public health insurance option. 

Consumers need a real choice, and the insurance market needs real 

competition. A robust public option provides both. It is essential to 

meaningful reform. 

Second is the inclusion of the nursing home quality and transparency act no-cost legislation, which as the title says, will improve 

quality and transparency, helping nursing home residents and 

their families. There are so many important provisions in this bill 

and I look forward to moving it and at long last creating an American health care solution that meets America’s health care needs. 

I yield back. 

Mr. PALLONE. Thank you. 

The gentleman from Texas, Mr. Green. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman. 

I want to thank you for holding this series of hearings on the 

health reform discussion draft. I am pleased we are starting the 

process on addressing the issues facing the 47 million uninsured 

individuals in our country. There is a lot of good things in the discussion draft that I know we will hear about and we will talk about 

over the next few days. 

One of the issues that I would like to point out is something I 

have been working on with a number of members on our committee 

that the discussion draft doesn’t include, the elimination or the— 

over a period of years, the 24-month disability waiting period for 

disabled individuals under 65 for Medicare. Unfortunately, once 

again, we leave these individuals out in the cold. Currently 1.8 million individuals are stuck in a 24-month waiting period. Of those 

individuals, 39 percent are uninsured, and 13 percent will die before they endure that 2-year wait. 

Congress deliberately created the waiting period in 1972 to keep 

Medicare costs down. And I believe the 24-month waiting period is 

a shameful example of how we refuse to cover disabled individuals 

whose medical treatment is deemed too costly. I sponsored ending 

the Medicare disability waiting period for 5 years, and each year, 

we were unable to move the bill because it is too expensive. And 

again in this draft, we refuse to address the issue. So the reform 


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drafts would allow some of the individuals to obtain a government 

subsidy to purchase insurance through the exchange. And if they 

live through the 24-month waiting period, once they receive their 

disability determination, they can then switch to Medicare. 

Why would we want disabled and chronically ill switching insurance coverage and possibly switching physicians? And I am not 

sure the exchange will provide these disabled individuals of the 

complex medical treatment and coverage for equipment that they 

need. And I strongly urge the committee not to push aside those 

who endure that 24-month waiting period, even after you wait to 

get a disability determination from Social Security just for monetary concerns. We can eliminate that waiting period over a period 

of years and show that we do recognize the problems the disabled 

have. 

And I yield back my time. 

Mr. PALLONE. Thank you. 

The gentlewoman from Wisconsin, Ms. Baldwin. 

OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN 

Ms. BALDWIN. Thank you, Mr. Chairman. 

And thank you to our witnesses for being here today. We have 

before us what is an amazing accomplishment, the work of many 

years of research and analysis and a collaborative effort of this diverse committee. It is difficult to overstate the importance of our 

task. We have been in this position before, but this time we simply 

must succeed. 

As President Obama said earlier this year at our Joint Session, 

health care reform must not wait; it cannot wait, and it will not 

wait another year. As we debate the details and the intricacies of 

this draft, I want to be sure that we remember the people, the children and the families that are waiting with great hopefulness for 

us to act. Our country is suffering under this growing burden, and 

it is our responsibility to answer their call. 

I am very pleased to see that this draft includes a public health 

insurance option. I have been unwavering in my support for this 

aspect of reform, and I believe that this plan will lead the way for 

reforming our delivery system, emphasizing prevention and paying 

for quality. 

I have a few suggestions for improvement to the bill, but I look 

forward to working with my colleagues on moving this forward. 

Thank you again, Mr. Chairman. I yield back the remainder of 

my time. 

Mr. PALLONE. Thank you. 

The gentlewoman from California, Ms. Matsui. 

OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Ms. MATSUI. Thank you, Mr. Chairman. I want to thank you, 

Chairman Waxman, Chairman Emeritus Dingell, on the excellent 

work to get this crucial legislation to where it is today. 


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I am particularly pleased with Section 2231 and Section 2301 of 

the draft bill. These sections build off legislation I wrote to create 

a public health workforce corps and to centralize prevention spending in a wellness trust fund. Public health and prevention are critical aspects of a strong health care system. They must be part of 

our national strategy to control health care costs, create better 

health outcomes for people, and ensure that the health care system 

works for all Americans. 

Without public health and prevention, we will never drive down 

health costs, nor will we move our society from one focused on 

treating sickness to one that promotes wellness and healthy living. 

I urge my colleagues to support these critical components of the 

draft bill before us today, and I yield back the balance of my time. 

Mr. PALLONE. Thank you. 

STATEMENTS OF RALPH G. NEAS, CHIEF EXECUTIVE OFFICER, 

NATIONAL COALITION ON HEALTH CARE; RICHARD KIRSCH, 

NATIONAL CAMPAIGN MANAGER, HEALTH CARE FOR AMERICA NOW; AND STEPHEN T. PARENTE, PH.D., DIRECTOR, 

MEDICAL INDUSTRY LEADERSHIP INSTITUTE 

Mr. PALLONE. The committee will now receive testimony from the 

witnesses. And I will call up our first panel. Let me introduce each 

of them at this time if I could. Starting on my left is Ralph G. 

Neas, who is chief executive officer of the National Coalition on 

Health Care. Next to him is Richard Kirsch, who is national campaign manager for Health Care For America Now. 

Good to see you. 

And then we have Dr. Stephen T. Parente, who is director of the 

Medical Industry Leadership Institute. 

And this panel is on health reform coalition views. I am going 

to ask each of you to give a 5-minute statement. Of course, your 

full statement becomes a part of the record. And then when you are 

done, we will start having questions for the panel. 

And we will start with Mr. Neas. Thank you for being here. 

STATEMENT OF RALPH G. NEAS 

Mr. NEAS. Chairman Pallone and Ranking Member Burgess and 

members of the full committee and subcommittee, thank you so 

much for the opportunity to appear before you on this momentous 

occasion, day one of hearings to discuss the House Tri-Committee 

Health Care Reform Discussion Draft. 

I am pleased and proud to be joined by the founder, the visionary 

founder, and president of the National Coalition on Health Care, 

Dr. Henry Simmons, who is sitting right behind me. Among many 

other things, Dr. Simmons was the deputy assistant secretary to 

President Richard Nixon for health in the early 1970s. 

The National Coalition on Health Care is honored to be here and 

heartened by the progress made by the three committees. We hope 

that this draft bill can serve as the springboard for comprehensive 

and sustainable health care reform. Like you, we believe that the 

time for action is now, this year. 

Reform of our health care system is a vital condition precedent 

for fixing the nation’s faltering economy. The fiscal crisis facing us 

cannot be addressed successfully without the simultaneous overVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 E:\HR\OC\A088.XXX A088

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haul of our health care system. America is on a dangerous path to 

sharp increases in the cost of health care and the numbers of uninsured and underinsured Americans to unsustainable burdens on 

our economy and on Federal and State budgets, and to indefensible, avoidable harm to millions of patients and massive waste 

from substandard and uncoordinated health care. 

The rigorously nonpartisan National Coalition on Health Care is 

the Nation’s oldest, broadest and most diverse alliance of organizations working for comprehensive health care reform. The coalition’s 

78-member organization stands for more than 150 million Americans. 

The Coalition’s five basic principles for health care reform, coverage for all; cost containment; improved quality and safety; simplified administration; and equitable financing, are interdependent. 

We believe reform, to be effective, must address all of these issues 

in a systemic way that recognizes their interconnectedness. 

After more than 18 months of deliberations, the Coalition developed a set of principles and specific recommendations. I would ask 

that they be included for the record, along with my written statement. As the Coalition operates on the basis of consensus, we have 

begun an expedited process of discussing the provisions of the draft 

bill with our members. Only as these internal consultations 

progress will we be able to provide more detailed views and consensus recommendations regarding optimal formulation of the final 

bill. 

However, let there be no doubt that the Coalition strongly commends the cross-jurisdictional collaborative tri-committee effort to 

address the central challenges facing our Nation in health care, 

specifically how to slow the growth of health care costs; how to extend coverage to Americans without health insurance; and how to 

improve the quality of care and the efficiency with which it is delivered. 

The draft is appropriately ambitious in its scope and its recommendations. We believe that reducing costs while expanding coverage not only can be done but must be done. Now is the time to 

be pragmatic and bold, to keep what is good and to fix what is broken in our Nation’s health care system. We must come together to 

pass systematic reform that sets our Nation on a better path toward affordable, high quality care for all Americans and solid fiscal 

responsibility. 

The Coalition members have long believed that securing coverage 

for all Americans should incorporate a range of mechanisms, including responsibilities for individuals and employers; the expansion of existing public programs, such as Medicare and Medicaid; 

information and framework to improve competition among private 

insurance plans; and the creation of an additional and carefully designed public option. 

The Coalition would encourage consideration be given to adding 

detail to the definition of the service to be covered in an essential 

benefits package. Many of our members would want us to emphasize the importance of calibrating the revisions regarding the public 

option to make sure that it would function as the drafters clearly 

intend on a level playing field with other plans. 


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We applaud the inclusion of a wide range of measures to improve 

the efficiency of health care liberally while enhancing the quality 

and safety of care and also providing support for evidence-based 

prevention. Escalating health care costs puts health care coverage 

out of the financial reach of tens of millions of Americans and their 

employers. Thus we suggest consideration of the use of short-term 

regulatory constraints to slow the pace of increase in the cost of essential coverage. 

The Coalition applauds the chairman for the leadership. The 

enormous added momentum your joint efforts have given to the reform process cannot be overstated. Indeed, this is truly an extraordinary moment in history. Too much is at stake for us to risk failure due to partisanship. It is only through a commitment to shared 

responsibility and shared sacrifice that we can rise to meet this 

once-in-a-generation opportunity to develop an achievable and 

uniquely American solution. To protect the generations to come, let 

us work together to enact health care reform that is at once moral 

and fiscally sound. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Neas follows:] 


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Mr. PALLONE. Thank you, Mr. Neas. 

And as I mentioned, all of your written testimony, your documents that you gave me, will be included in the record. So you 

don’t have to make a special request for that. 

Mr. Kirsch. 

STATEMENT OF RICHARD KIRSCH 

Mr. KIRSCH. Good morning, Chairman Pallone, members of the 

committee. My name is Richard Kirsch. I am the national campaign manager of Health Care For America Now, a coalition of 

more than 1,000 organizations in 46 States that are committed to 

a guarantee of quality, affordable health care for all according to 

specific principles. 

Those principles have been endorsed in writing by the President 

of the United States and 196 Members of Congress, including 176 

Members of this House from both parties. 

And I am so glad to be with you this morning because the legislation you have drafted meets those principles. It would deliver on 

the promise of quality, affordable health care for all in a system 

that is retooled to deliver better quality at lower costs. You have 

done so in this unique tri-committee process that recognizes the urgency and historic imperative of this issue. 

Our current health care system is a huge stumbling block to the 

American dream. No matter how hard we work or make responsible choices for ourselves and our families, our health care system 

too often gets in the way. For too many families, one serious illness 

can mean financial disaster. As medical costs contributed to more 

than three out of five personal bankruptcies and the great majority 

of those were people with insurance. 

And even if you have good insurance, you find your choices limited and your dreams deferred. You want to look for a new job, 

start that new business, retire at age 59; trapped because you 

won’t be able to get affordable coverage if you can get coverage at 

all. And, of course, there are too many families that can’t get coverage at all. 

Neither can many small businesses, that other great engine of 

the American dream, who want to do the right thing for their employees but can’t as health care premiums skyrocket every year. 

The good news is we can fix what is wrong with the system with 

a uniquely American solution. For those who say we can’t do this, 

it is too complicated, it is too much to take on, it is too much at 

once, your legislation is proof positive that, yes, we can. 

As Americans begin to pay attention to the health care debate, 

they will increasingly ask, what does this mean to me? Here is how 

I would explain how this works to the average American and why 

it will make their lives better. If you have good health coverage at 

work, you can keep it. But there will be two important changes. 

Under your legislation, you no longer have to worry about your coverage at work getting skimpier every year or your employer taking 

a bigger chunk each year out of your paycheck. Your employer coverage will not be barebones. It will cover most of your health care. 

It won’t stop paying if you get seriously ill. Your job will pay a good 

share of coverage for you and your family. 


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One more thing. Whatever job you take, you will have good 

health care. That is because all employers will either provide coverage or help pay for it. 

If you don’t get health coverage at work or you work several 

part-time jobs, you are self-employed, retire early or simply out of 

work, you will now be able to get good affordable coverage. You 

won’t be turned down because of a pre-existing condition or 

charged more because you have been sick or you are a woman of 

childbearing age. You can still be charged more if you are older but 

only so much. 

And how much will it cost you? The amount you pay will be 

based on your earnings and the size of your family, with assistance 

for low-, moderate-, and middle-income families. To get insurance, 

you go to a new marketplace called an exchange, one-stop shopping 

for health coverage. All plans will have a decent level of benefits 

and play by the same rules. No matter which plan you choose, your 

out-of-pocket costs will be limited, no more catastrophic medical 

bills. 

You will have a choice of the new public health insurance plan, 

too. So you won’t be limited to the same private insurance companies that have a record of denying or delaying care while they raise 

premiums three or four or five times more than wages. 

As the President says, there are two reasons for offering the 

choice of a public health insurance plan. The first is to lower costs, 

a plan that doesn’t pay the average CEO $12 million a year or skyhigh administrative costs. The mission of the public health insurance plan will be to drive the kind of delivery systems changes we 

need to innovate, provide better value, and invest in our community’s health. A plan that will inject competition into 94 percent of 

markets that—or into competitive under DOJ standards. 

The second reason the President says we need a public option is 

to keep insurance companies honest. The 93 percent of Americans 

who don’t trust private insurance companies know that no matter 

how much we regulate them, their first order of business, actually 

their legal fiduciary responsibility to the shareholders, is to make 

a buck. And when they pay for someone’s costly care, their profits 

go down. 

An additional reason for the public health insurance plan is to 

ensure they make real progress at eliminating the barriers and disparities in access to needed services that are too often experienced 

today. 

Poll after poll shows strong support for the choice of a public 

health insurance plan with strong support on bipartisan lines. 

This legislation also answers the crying need for small business 

for affordable coverage by offering tax credits, and allowing small 

businesses to enter the exchange, and gives them the advantage of 

large pools and lower costs. 

The legislation does a great deal more for the poor through Medicaid, for seniors on Medicare, to address the lack of primary care 

providers and the disparities and access to health care. 

I am almost done. 

Are there ways of improving this draft? Although there are, there 

are not a great number. And I will detail that in my written testimony. Let me conclude by asking you to keep one question in mind 


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over the coming weeks: As you hear from a myriad of interest 

groups complaining about this and that, it is the question that your 

constituents will ask at the end of the day, will I have a guarantee 

of good coverage that I can afford? The draft legislation you presented answers with a resounding yes. And if the answer remains 

yes next fall when you send the bill to the President for his signature, you will have done your jobs and in doing so made history. 

Thank you. 

[The prepared statement of Mr. Kirsch follows:] 


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Mr. PALLONE. Thank you. 

Dr. Parente. 

STATEMENT OF STEPHEN T. PARENTE, PH.D. 

Mr. PARENTE. Thank you, Chairman Pallone and members of this 

committee, for this opportunity. 

We are in the midst of the seventh major attempt of national 

health reform, beginning with the Wilson administration. Since 

that first attempt, there has been President Roosevelt’s second attempt in 1936; President Truman’s third attempt in 1948; President Johnson’s fourth attempt leading to a compromise that created Medicare and Medicaid; President Nixon’s limited fifth attempt; President Clinton’s sixth attempt. 

With President Obama’s call for reform, will seven be the lucky 

number? 

My name is Steve Parente. I am a health economist from the 

University of Minnesota and a principal of a health care 

consultancy, HSI Network. My areas of expertise are health insurance, health information technology, and medical technology evaluation. 

At the university, I am a director of an MBA specialization in the 

medical industry and a professor in the Finance Department with 

an adjunct appointment at Johns Hopkins School of Public Health. 

Most recently, I and my colleague, Lisa Tomai from HSI, have 

scored health reform proposals as they have emerged in the last 4 

weeks. We are using ARCOLA, a microsimulation methodology initially funded by the Department of Health and Human Services 

and published in the journal, Health Affairs. 

There are two things people most want to know about these proposals. One, how many of the uninsured will be covered? Two, what 

will it cost the Nation in 1 year and in 10 years? HSI estimates, 

like CBO’s recent results, find there is no free lunch to expand 

health insurance coverage. 

Our early assessment of the Senate Finance Committee proposal 

shows a 74 percent reduction in the uninsured with a 10-year cost 

of $2.7 trillion using a public option plan modeled after the Massachusetts Connector. 

We also modeled an FEHBP version of that plan and got a cost 

of over $1.3 trillion, but with a 30—only a 30 percent reduction in 

the uninsured because the plan is generally more expensive and 

not enough incentives are given. 

CBO scored the Kennedy bill last week at approximately a 30 

percent reduction for $1 trillion over 10 years. Using the ARCOLA 

model, we found nearly everyone will be covered if all elements of 

the Kennedy bill were enacted at a 10-year cost of $4 trillion. That 

$4 trillion estimate over 10 years assumes a public option plan 

with bronze, silver and gold levels and the proposed insurance exchange with a subsidy for premium support that is income-adjusted 

and calibrated at the silver level. 

The silver level is what most Americans would like in health insurance today. It is the equivalent to a PPO plan with medium levels of generosity, something with a 15 percent co-insurance, manageable co-pays and good access to physicians and hospitals. 


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We accounted for the public plan being reimbursed at 10 percent 

above Medicare reimbursement, which is also 10 percent below 

commercial insurance plans. 

In the individual market, we assume the public option plans 

would be community rated and the rest of the individual market 

would be as it is today. For those offered insurance, we assume the 

public plan would be—my teleprompter broke. Because the public 

plan can compete with the individual and group market offerings, 

we saw a crowd-out in the public plan of 79 million covered lives 

with the majority of people leaving employer-sponsored mediumsized PPOs and HMOs. 

At this time, we are the only group yet to score the full Kennedy 

proposal. We released it last Sunday, June 14th, on our HSI network.com home page, 2 days before CBO’s preliminary estimate. 

This work was completed as a public service without a funder from 

industry or a political sponsor. 

Some proposals we have examined have specific pay-fors already 

scored by CBO that can substantially reduce their cost, such as the 

Coburn-Ryan bill, with a 72 percent reduction and a 10-year cost 

of $200 billion with the pay-fors accounted for or $1.7 trillion without. 

One conclusion emerges every time we score a plan: None are 

revenue-neutral. Even with Medicare and Medicaid pay-fors, the 

savings in those programs need to deal with the cost pressures of 

those programs. In all likelihood, these proposals, if enacted, would 

escalate the rate of growth of our national debt, particularly the 

Kennedy plan. 

As a Nation, we are on the verge of making a multimillion dollar 

gamble that more per-capita health care deficit spending will make 

us better off as a society. We are wagering with starting bids in 

trillions that have excessive spending in the health care system. 

Hoping that these billions and trillions will lead to a breakthrough 

medical technology that can eliminate whole diseases, such as diabetes and Alzheimer’s. This is actually not a bad path. It happened 

before with tuberculosis, but not quite at this level. 

It is not an unreasonable wager since Federal funding for heart 

disease and cancer either directly through research or indirectly 

through Medicare has yielded state-of-the-art medical care, but it 

is a wager nonetheless. And we find our reckoning is not only with 

the future debt of our children, but their security when the economic crisis has brought international scrutiny upon the U.S. from 

the principal purchasers of our treasuries. 

Furthermore, saving businesses from paying health care costs or 

a State government with Federal intervention is simply an accounting cost shift that only saps our long-term economic growth. 

President Obama spoke recently in Wisconsin of the need to expand health coverage to bend the cost curve down. I watched him 

say it 3 times in 5 minutes. 

May I respectfully suggest that bending the cost curve down 

starts with active management of Medicare. For 5 months, we have 

been without a CMS administrator while there have been over 400 

billion in—— 

Mr. PALLONE. Dr. Parente, I don’t mean to interrupt, but you are 

a minute over, so If you could kind of wrap it up. 


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Mr. PARENTE. I will wrap up. Pardon me. 

In summary, there is greater consensus today that health care 

reform must be undertaken. It will not be free. It will, as it always 

was, be a political decision that was more so political than economic. So much can be done now with great expansion, but it will 

come at great cost. 

Thank you. 

[The prepared statement of Mr. Parente follows:] 


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Mr. PALLONE. Thank you. 

We will now have questions from the members of the subcommittee. 

I should mention that everyone, again, that members of the full 

committee are going to participate in the same way and have 5 

minutes each. And if you were here and passed on the opening, you 

will get an extra minute. But if you weren’t here, then you don’t 

get an extra minute. Just to make the rules clear. 

And I am going to start with myself. I am trying to get two questions in here, one about the need for comprehensive reform and one 

about the public option. So I will start with the comprehensive reform. But if we go too long, I may stop because I want to get to 

the public option, too. 

Mr. Neas, the National Coalition on Health Care has always envisioned the need to address health reform in a comprehensive 

manner, as your testimony sets out this morning. And in our discussion draft, we address issues ranging from the workforce and 

prevention and wellness to coverage costs and quality improvement. Is it possible to address this in a piecemeal fashion, or do 

we need the comprehensive approach to tackle this issue? 

Mr. NEAS. Mr. Chairman, it is absolutely essential that this be 

done in a comprehensive way, as we point out in our testimony and 

all of our published materials. It is essential that we have systemic, systemwide change in this country in our health care system. To do it piecemeal, we could end up with a system much 

worse. You could cover everybody, but you don’t have cost containment or you don’t have it paid for in the right way or you don’t 

have quality. All of these principles are interdependent. They rely 

on one another. You have to do it all at once. You can’t do it incrementally, and you can’t do it piece by piece. 

Mr. PALLONE. OK. 

Let me go to Mr. Kirsch, then, about the public option. We have 

a public option in the discussion draft in a manner that assures, 

in my opinion, the levelest possible playing field with the multiple 

private insurers who will also be competing with the public option. 

So I have four questions, and I am just going to read them and ask 

you to try to get through them in the next few minutes here. 

First, why do we need a public health insurance option? Won’t 

the exchange function better with just the competing private insurers? 

Second, what do you think of the alternatives to the public option 

set out in or draft? People have mentioned co-ops or State By State 

options or a public option triggered only if certain criteria are met. 

And then, third, you know, outside the Beltway, as I guess we 

don’t really care much about the Beltway anymore, is the public option a partisan issue? 

And fourth, would a public option help or hurt small businesses? 

If you could try to address those in 3 minutes or less. 

Mr. KIRSCH. And try to talk not too fast. OK. 

Why a public option? If we don’t, we are just rearranging the 

deck chairs on the Titanic, and I guess the regulation is maybe giving those chairs a shiny coat of paint. 

The fact is we have had a private insurance industry that has 

been running our health care system for quite a while now. We 


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have had premiums go up several times as much wages—in some 

states, multiple, multiple times as much as wages. At the same 

time people have poor quality care, and they are used to denial and 

delays all the time from health insurance companies. 

We need a public option to do the two things the President says, 

to lower costs, to have an actor in the system that is mandated to 

have a kind of lower cost operations it can have, and also to keep 

insurance companies honest because their bottom line will always 

be hurt every time they pay for a significant claim. 

Mr. PALLONE. What about the alternatives, the co-ops that trigger—— 

Mr. KIRSCH. The alternatives are basically ways to kill the public 

insurance option. The trigger is basically saying, we are not going 

to have it unless things get worse. There is an old expression: Fool 

me once, shame on you; fool me twice, shame on me. The insurance 

industry basically said in 1993, 1994, leave it to us to fix the system. We have seen what we have gotten. We can’t wait any longer. 

We have waited a long time for the insurance system to fix this 

system, and they have failed. 

The co-op, an interesting comment from an Oppenheimer & Company analyst says, the co-op proposal is a great gift to publiclytraded insurance companies. It is doomed to fail. It was basically 

a political invention to try to placate Republicans who didn’t want 

a government role in providing an option, and it has no policy benefits. We have lots of nonprofit insurers in this country that 

haven’t done the market-changing factors we need to provide the 

kind of care. 

Mr. PALLONE. Third, would be outside the Beltway, is the public 

option a partisan issue? 

Mr. KIRSCH. No. It is extraordinarily popular. The first polling 

question we asked was, public, would you prefer a public plan, just 

a choice of just public insurance, private insurance, or public and 

private insurance? Not only did 73 percent of Americans say they 

wanted a choice; that included 63 percent of Republicans. 

In the case of the New York Times poll just released over the 

weekend, 72 percent of Americans say they wanted a choice of the 

language of a government-administered plan like Medicare to compete with private insurance. So using the government word, and 

still 73 percent of Americans wanted it, including 49 percent of Republicans, which means more than—and many fewer than that opposed it. 

Mr. PALLONE. What about the impact on small businesses? 

Mr. KIRSCH. And small businesses? Small businesses like everyone else need lower-priced coverage. And again, there are a lot of 

things in your legislation that make huge advantage of small business. We should talk about it. One of those is the public option because to the extent the public option is offering good quality at a 

lower cost, small businesses will benefit. 

Mr. PALLONE. Thank you. 

Mr. Burgess. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Dr. Parente, first off, you were—the buzzer or someone interrupted you where you were about to make a point about not having 

a CMS director. Would you care to finish that point? 


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Mr. PARENTE. Simply to say that there should be a CMS admin- istrator given that there is $400 billion that has already been spent 

by that program. If you want to bend the cost curve down, one of 

the places where the costs are going out the door right now is 

Medicare and Medicaid. That needs active management. 

If even people were to put in modernization for some of the 

fraud, things that have been put on the table, some of it actually 

in the bill, that would be useful. But right now, because it is essentially a caretaker administration over at CMS, none of that can 

occur. 

Mr. BURGESS. Let me ask you a question, and certainly, you 

know, hats off to your group for doing that exhaustive work on the 

Kennedy bill under such a short period of time. Are you going to 

do a similar scoring for the draft discussion that we have in front 

of us this morning? 

Mr. PARENTE. Yes. 

Mr. BURGESS. And when might we expect for that information to 

be publicly available? 

Mr. PARENTE. I am hoping that it would be on the HSI Web site 

by tomorrow morning at 8:00 a.m. 

Mr. BURGESS. Tremendous. Thank you for doing that as well. 

Now, when you were here last fall, I think it was the day after 

Lehman Brothers failed, if I recall correctly, and the whole world 

changed. This $4 trillion figure that you talked about for the three 

tiers of the public option under an FEHBP-type structure, you also 

referenced a low end that would be essentially Medicaid for all that 

would be much less expensive. And if I recall correctly, that was 

about $60 billion a year or $600 billion over 10 years. Do I recall 

that correctly? 

Mr. PARENTE. That is correct. 

Mr. BURGESS. Now, assuming that the reality lies somewhere in 

between those two— well, let me just ask you this. Have you 

looked at—under the proposal before us today, Medicaid is offered—a full Federal component of Medicaid is offered for everyone 

at 133 percent of poverty and below, not just the existing populations, but for all populations. Do you have an idea what the cost 

for that is? 

Mr. PARENTE. Not as specifically. Actually, the public option 

plans, with the subsidies that are proposed, at least in the Kennedy bill, addresses a fair bit of the population. A round guess on 

that cost would be probably somewhere in the vicinity of about— 

no more than about $30 billion or $40 billion per year. 

Mr. BURGESS. Very well. 

Let me ask you a question. And we hear the President all the 

time, in fact he said at the White House last March, that the only 

thing that was not acceptable was the status quo and, if you like 

what you have, you can keep it. Well, it is kind of tough to reconcile those two positions. 

Do you think, under the bill that is under consideration today, 

the draft bill, the tri-caucus bill that is out there, do you think it 

is reasonable to assume that, if you like what you have, you can 

keep it, under the parameters of the bill that are before us today? 

Mr. PARENTE. I think it is really determined by how the public 

plan is ultimately deployed. I mean, as you all know, it is a very 


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long road from whatever this legislation is to enactment, which 

could be 3 to 4 years from now. 

The concern, really, is crowd-out. It is hard to say what the public plan model would look like, in terms of logistical, operational 

terms. It if it operates like TRICARE, that could be a crowd-out potential. If it operates like FEHBP, that would definitely be a crowdout potential because it is more generous than the standard market 

today. 

Mr. BURGESS. Mr. Kirsch, let me ask you a question. In yesterday’s Politico you have an opinion piece, and you talk about the 

three things that are likely to make this legislation happen. And 

the third thing, the organization where it counts most outside the 

Beltway—now, I don’t know how far outside the Beltway you have 

gotten. In north Texas, I will tell you that 65, 68 percent of the 

people in my district—and it is not a wealthy district, it is a working district, a rural district, an inner-city district, as well as a suburban district—but 65 to 68 percent of the people in my district are 

satisfied or very satisfied with the insurance coverage that they 

have today. 

In spite of the fact that so many people are demanding change, 

that seems like a pretty high number that is accepting of where 

they are right now. 

Mr. KIRSCH. Well, it always depends, on all these things, on how 

the questions are asked. Basically, if we look at the views nationally, according to the New York Times, 85 percent of people believe 

that the health insurance system needs fundamental change or it 

needs to be completely rebuilt; 86 percent believes it is a somewhat—61 percent believe it is a serious threat to the economy. 

What people are dealing with is they may be happy with their 

insurance at the moment, but what they are totally terrified of is 

what happens if they lose their job. And so they want a system—— 

Mr. BURGESS. Correct. And let me just interrupt you there, because I think we can address those problems and correct those 

problems without turning the entire system on its head. 

Now, the last New York Times-CBS poll that I guess is the one 

you are referring to, just a curious figure down toward the end of 

it: Of the people polled, 48 percent voted for President Obama, 25 

percent voted for Senator McCain, and 19 percent didn’t vote. 

That is a curious sampling, and I wonder if that may not have 

skewed the results that were reported so widely on the Sunday 

shows yesterday. 

Thank you, Mr. Chairman. You have been generous. I will yield 

back my time. 

Mr. PALLONE. Thank you. 

The gentlewoman from Colorado, Ms. DeGette. 

Ms. DEGETTE. Thank you very much, Mr. Chairman. 

Dr. Parente, I read your testimony, and I wanted to talk with 

you a little bit about some of your analysis around the public plan 

and cost savings and so on. 

I certainly agree with you that we need to try to get cost savings 

in Medicare and in other programs. But what we have seen, for example, in Massachusetts, since they have put together their connector system without a public plan, the good news is they got almost everybody enrolled in health care. The bad news is they got 


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absolutely no cost savings, and their costs are going up as much 

as everybody’s. 

So I am just wondering if you can tell me—and I apologize, I 

didn’t read your piece in Politico. But I wonder if you can tell me, 

do you think all potential public plans are a poor idea or just ones 

that would cause this crowd-out? 

Mr. PARENTE. I don’t think all public plans are a bad idea. I 

think, as I understand as an economist what you are trying to 

do—— 

Ms. DEGETTE. Or, at least, what you have done is you have analyzed the Senate bill. 

Mr. PARENTE. Right. 

Ms. DEGETTE. And I understand that was the bill that was out 

there. But we, as you know, are a little sensitive over here about 

having our own bill and having it be a work in progress. So you 

can give your opinion on the Senate bill, recognizing that is not our 

bill. 

Mr. PARENTE. I understand. And there are similarities, so—— 

Ms. DEGETTE. Yes. 

Mr. PARENTE. —a lot of the structure is very similar. Like I said, 

I applaud some of the things that are put in for Medicare that are 

related to cost savings and such. 

A public plan is designed to inject competition into the system. 

What concerns me is that there already is quite a lot of competition 

in the private insurance market space. A few things—— 

Ms. DEGETTE. Well—— 

Mr. PARENTE. A few issues—just one clarifying comment. If you 

look at what Massachusetts did very well, it simplified the benefits 

so that most people can get a sense of what was available. 

Ms. DEGETTE. Right. 

Mr. PARENTE. But if you look at what actually did the deed to 

get everybody covered, it was mostly through high-deductible 

health insurance plans. 

Ms. DEGETTE. Well, you know, I am sorry, I have a limited 

amount of time and we have two other witnesses. But there was 

a study that was just released by Health Care for America that 

found that 94 percent of the communities in the country do not 

have a competitive health insurance market. For example, in Pueblo, Colorado, they have one provider, WellPoint, that has 76 percent of the market share. And so, in fact, we don’t have robust competition in 94 percent of the country. 

So I am wondering, don’t you think that a public plan might be 

able to help with competition in communities like that? 

Mr. PARENTE. Not if it doesn’t have active price competition. So 

my concern is what if the—— 

Ms. DEGETTE. Right. Well, let’s say it does have active price competition, then your objection is that everybody leaves the private 

plans because it is cheaper. But isn’t that a noble goal? 

Mr. PARENTE. To have everybody leave the private plans? 

Ms. DEGETTE. No, that people be able to buy cheaper health insurance. 

Mr. PARENTE. Yes, that is a noble goal. But if you are going to 

regulate the public plan to basically go into price competition with 

the private insurance industry, you have to ask with your question, 


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how are you going to be able to price-fix those public plans to be 

able to do that? 

Ms. DEGETTE. Oh, you know, just so you know, at least from the 

view of—at least from my view, I don’t think that we should pricefix the public plan and give them an artificially low price. I think 

most of us on this committee would think, if we have a public plan, 

they should be able to compete with the private insurance companies. 

Mr. Kirsch, I am wondering if you can comment on that study 

by Health Care for America and why that necessitates the need for 

a public plan. 

Mr. KIRSCH. Right, yes, Congresswoman, as you said, 94 percent 

of the market—this is actually AMA data that we use in our 

study—are highly concentrated by Department of Justice standards, which means people don’t really have choices in State after 

State, like in Pueblo, Colorado, and municipalities or areas around 

the country. 

It is also the question of the right kind of competition. It is having competition; it is also having competition for an insurance company that cares about people’s health care more than a healthy bottom line. So it is both factors we are looking at. 

Ms. DEGETTE. Yes. And it would seem to me, for all the panelists, Mr. Neas and everybody, that one way that we could improve 

our health care system is to get the competition, but also to try to 

get cost savings through Medicare. And I don’t think those things 

are mutually exclusive, do you, Mr. Neas? 

Mr. NEAS. Absolutely not. And I think we can applaud the work 

of some of the States, like Massachusetts or Tennessee. However, 

they were not systemic, systemwide reform that addressed cost containment, that addressed simplified administration and other 

issues. You have to do it as a comprehensive package. 

This could be done. And I think the committee has done a good 

job, a good start, on the public plan, trying to make sure that it 

would be on an equal playing field, not giving an advantage, be fair 

and competitive. 

Ms. DEGETTE. And I won’t vote for a public plan that has an unfair advantage over the private plans. But I do think we need to 

find some place for competition, to keep everybody trying to find 

their best price points. 

Thank you very much, Mr. Chairman. 

Mr. PALLONE. Thank you. 

The gentleman from Georgia, Mr. Gingrey. 

Mr. GINGREY. Mr. Chairman, thank you. 

I want to address my first question to you, Mr. Kirsch. You made 

a statement in response to one of my colleagues, I think the question of why the public option plan. And you said, well, the insurance company—the health insurance companies are so egregious in 

what they have failed to do. I think you said, fool me once, shame 

on me; fool me twice—or just the opposite—fool me once, shame on 

you; fool me twice, shame on me. 

Why do you feel that, based on that, that we should give the, as 

I think this will do, this bill, the death penalty, essentially, to the 

private market? Why not give them 30 years in prison rather than 

the death penalty? Why is it you want to come down so hard? 


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Why not let an exchange function, at least for a period of time, 

to see how that competition works to bring down prices, as it has 

indeed done by the prescription drug plans in Part D of Medicare? 

Mr. KIRSCH. So, let me just say that single-payer would be the 

death sentence. This option is, in effect, saying, ‘‘You get a chance, 

but you don’t get to have the field to yourself.’’ I want to address—— 

Mr. GINGREY. But let me interrupt you just for a second. You understand I feel like that a public option is a step, a giant step, toward a single-payer. 

Mr. KIRSCH. So I was just going to address, if I could—and this 

level playing field thing drives me crazy. 

Private insurance companies have 158 million to 170 million customers. There are networks in place, they have years of brand loyalty, they have contracts with businesses, they have a well-established place in American society. They are going to continue, as 

they have done in Medicare, to try to do everything possible to 

cherry-pick and avoid people who have high health care risks even 

in a regulatory scheme. 

In terms of a level playing field, the public health insurance option is going to start at an enormous disadvantage because it 

doesn’t have all those things in place. And when the private insurance companies whine that can’t compete with the government, I 

have to begin to wonder, do they really believe the polls that say 

that 93 percent of Americans don’t trust them, and that is why 

they can’t compete? 

Mr. GINGREY. Well, let me ask you this question. You say on 

page 2 of your testimony, and I quote, ‘‘The good news is that we 

can fix what is wrong with the system with a uniquely American 

solution’’—a uniquely American solution similar to what we did 

with AIG, uniquely American solution similar to what we did with 

General Motors? 

What is uniquely American about interfering with the free-market system in this country? 

Mr. KIRSCH. Well, first of all, we are not talking about bailing 

out the insurance industry like we bailed out General Motors and 

AIG. We are talking about giving the insurance industry some competition. 

And what is uniquely American about this is saying, we are not 

going to have a system that is just private, we are not going to 

have a system that is just public; we are going to build on what 

works in America. 

What works, in some ways is private insurance, has got problems, has worked for our parents and grandparents, is Medicare. 

We are going to use two systems you are familiar with and combine 

them, and that is the uniquely American part of the solution. 

Mr. GINGREY. Let me switch to Mr. Parente. 

Mr. Parente is an economist. I would like to get your opinion on 

what impact will the employer responsibility policies in this draft 

have on employers’ ability to create jobs and put more people back 

to work? I want you to answer that. 

And I also want to know if you have seen anything in this draft 

legislation in regard to the reserve funds that the public plan 

would have to come up with. And where would they get that money 


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to be on a level playing field with the private health insurance 

plans that also would be competing in the exchange? 

Mr. PARENTE. The employer question, first of all, it really depends on the size of the employer. There is—I have to look at this 

more carefully, will before 8:00 a.m. Tomorrow morning. But there 

is the provision that there has to be some pay or play option that 

is in this. That will always impact employers in a way depending 

upon the size of those particular employers that are in place. 

And your second question? 

Mr. GINGREY. Well, let me switch it over to Mr. Neas on the second question. 

Mr. Neas, do you see anything in this draft that calls for the 

public plan providing a reserve fund before they can do business, 

just like any other health insurance company doing business? Any 

State in this country would have to have a certain amount of 

money available before they could start offering a product so that 

they could cover these claims that occur. They would have to have 

that reserve. 

Where would it come from in the Federal Government plan, and 

how much money are we taking about? 

Mr. NEAS. Mr. Gingrey, I must confess not to knowing every single phrase or sentence in the bill. My recollection from going over 

the materials over the weekend was that the committees plan to 

have this public insurance option compete on an equal level, be 

competitive. 

And, as I understand it, also that there would be an initial investment with respect to the reserve at the beginning, and then the 

public insurance option would be self-sufficient after the second or 

third year. 

I defer to counsel and others up there, the members, but I think 

that is my recollection. 

Mr. GINGREY. Mr. Neas, thank you. 

And, Mr. Chairman, thank you for your indulgence. 

I assume that money would come from the general fund and from 

John Q. Taxpayer. 

Thank you, and I yield back. 

Mr. PALLONE. Our vice chair, Mrs. Capps. 

Mrs. CAPPS. Thank you, Mr. Chairman. 

And thank you for your testimony, to each of you. 

Mr. Kirsch, your organization, Health Care for America Now, has 

good representation in my district, so I will be addressing my conversation with you, because it comes right from some of the people 

who have been talking with me. 

But I did want to mention in this discussion of competition, 

which I am happy we can get in to, agriculture is the basis of my 

congressional district in California, and large parts of it are rural, 

therefore. And, in those areas, there is only one private option. I 

don’t call that competition. Maybe that is why there is such enthusiasm among many of my constituents for change, because they see 

a monopoly in health care delivery. If you make too much money 

so that you can’t be on Medicaid, then you have to buy this plan 

that they keep raising and they do. Plus, we have a provider issue 

because it is a locality problem with our low reimbursement rate. 


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So that combination is really—in so much of America we didn’t 

bring those points together. It is a part of our reform legislation, 

as well. So I am pleased that we have this opportunity to really get 

into what competition means. 

And I want to get to that in a minute, but would you just expand 

for maybe a minute on so on why we cannot wait any longer? 

There are a lot of people here in Washington, D.C., and some 

who are overwhelmed with our financial burdens, our economic situation, plus our debt, they are saying, ‘‘Why would you want to 

bring this up now?’’ to our President. And some of us, maybe, are 

wondering, too, because our agenda is really full. 

Now, as I said in my opening, as a public health nurse, this is 

why I came to Congress, in large part because we have a system 

that isn’t working, that is already so costly. I mean, we are talking 

about the huge costs of health care. We are already paying more 

than any other country in the world for health care. 

So why must we seize on this very crowded moment in our agenda to do this? 

Mr. KIRSCH. Well, I think you have answered the question yourself. I mean, you know, the fundamental point that to fix the economy in the long run we have to fix health care is just true. It is 

a point that the President has made, that Peter Orszag has made. 

Our failure to do that, our failure to have a system which provides good coverage to everyone and systemic ways of controlling 

costs, is why we continue to have a system where health care inflation is larger than greater inflation, why we continue to outpace 

the rest of the world in how much we spend and yet get poor results. 

What is true about the rest of the world is they understand that 

health care is not a private good, it is a public good. And there are 

two things you do with a public good: You regulate it or you provide it directly. 

Mrs. CAPPS. Let me interrupt you. Do you think that feeling is 

shared in this country, that that is what it ought to be? 

Mr. KIRSCH. Absolutely. And, again, the New York Times poll, 

great data from this about the public’s feeling—I will pull it out— 

but that the government can do a better job of controlling health 

care costs than private insurance. 

What the public actually understands is really interesting in 

this. They understand that nobody other than the government is 

strong enough to stand up to private insurance and the role they 

have in their life, the kind of thing your constituents see all the 

time. They want a strong, public government role for regulating the 

private insurance industry and providing a choice, so the only 

choice isn’t private insurance. 

And, you know, if you look at why so many larger employers now 

are saying they want reforms, it is because they understand the 

current system is unattainable, and small business—unsustainable. 

Mrs. CAPPS. Let me ask you to use—and I wish I had time to 

ask all three of you. I think there is a huge lack of understanding. 

And I hope that these hearings and our President’s press conference today and all the other things are going to really help explain to the American people what a public option is, that it is a 

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sidized program any more than any of the other options will be. If 

we have health reform, we are going to give an opportunity for everyone to be participating. And most people, so many people, up to 

400 percent of poverty, are going to need help. 

Mr. KIRSCH. Right. And I think what I am finding as I talk to 

constituents, and you may find the same thing, is there is a huge 

confusion between the exchange and the public insurance option. 

This is a new concept for people. 

So people ask me questions like, I was on the phone yesterday 

and they said, ‘‘Well, will the public option cover the following 

things?’’ I said, ‘‘This is the wrong question.’’ 

Mrs. CAPPS. Yes. 

Mr. KIRSCH. We are going to have a system—and what your bill 

does, which is great, is it says that every plan in the exchange will 

have to meet these benefits. And, actually, after 5 years, every employer will have to meet these benefits. So we are establishing a 

standard across the country. 

And so much of what your legislation does, which is important 

in terms of a level playing field, is it says we are going to create 

a basic standard of health care in the employer system, which is 

one reason that we won’t have the crowd-out, as well as in the exchange, and the public option will be one more option in that. 

But that gives everybody the question of, again, will I be guaranteed good, affordable health coverage? Well, you know it will be 

good if it meets those standards. 

Mrs. CAPPS. Uh-huh. And I think you are absolutely right that 

what the public is asking for is certainty. The great fear that people have with the health plan that they may even like is that there 

is no guarantee that next year the premiums will go up. 

We did this Managed Care Modernization Act, and seniors welcomed the opportunity for a chance at lower costs, but then they 

found out that, at any moment, those companies—the insurance 

companies have had nobody overseeing the way they were able to 

manipulate the markets. 

I will yield back for now, but thank you very much, all of you, 

for helping us have this conversation. 

Mr. PALLONE. Thank you. 

The gentlewoman from Tennessee, Ms. Blackburn. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

And I want to thank all of you for being here. And I have a list 

of questions that I would love to go through with you all. 

Mr. Neas, I think I will start with you. You know, you make a 

pretty bold statement on page 1 your testimony. ‘‘The economic crisis facing us cannot,’’ which you underline, ‘‘be addressed successfully without the simultaneous adoption of a comprehensive, sustainable overhaul of America’s health care.’’ 

Do you have specific research that you are citing in that, and 

would you like to submit that for the record? 

Mr. NEAS. Yes, I do—— 

Mrs. BLACKBURN. Great. I would love to have—— 

Mr. NEAS. —Congresswoman. I would love to depend on the 

chairman of the Federal Reserve—— 

Mrs. BLACKBURN. OK. And let me ask you also—— 

Mr. NEAS. May I finish that question? 


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Mrs. BLACKBURN. Do you have any program that was a publicprivate option, competition, that you can point to that has been 

successful or successfully implemented? 

Mr. NEAS. I think there are many examples of where there has 

been a public-private—— 

Mrs. BLACKBURN. Can you cite one for me for the record? 

Mr. NEAS. I would certainly say that the Medicare and Medicaid 

and Veterans, all the so-called public programs have much interaction with the private—— 

Mrs. BLACKBURN. Can you look at the States and give us one? 

Because we know in Tennessee and Massachusetts they have both 

been shown as being examples that do not work. 

And, you know, there was a question, in our question period, 

someone mentioned price-fixing with the public plan. What we 

found in Tennessee is that you cap what is going to be paid 

through that public plan and everything gets cost-shifted over to 

the private plans. And then you limit your access, and your private 

insurance becomes unaffordable. And rural areas like mine lose 

out. 

So it just really—it doesn’t have a great track record. So I appreciate your willingness. 

Second question for you: Do you think this can only be addressed 

by the Federal Government? Can the States not help address this? 

Can the private sector not address this? 

Mr. NEAS. The States have to be part of this. The private sector 

has to be part of this. But we also need a national plan that is systemic and systemwide—— 

Mrs. BLACKBURN. And you think everybody has to be in the plan? 

Mr. NEAS. Absolutely. 

Mrs. BLACKBURN. OK. Then do you agree with the premise over 

in the Senate where they are wanting to exempt the unions and 

the union workers would not have to pay? Let’s see, those that are 

covered under collective bargaining agreements would not be subjected to the tax. The tax is on the health care benefits. 

Mr. Kirsch, I see you weighing in on that. Do you want to speak 

on that one? 

Mr. KIRSCH. Sure. I mean, first of all, you are talking about a 

question of whether or not we should be taxing people who have 

good health care benefits. And I think that is the wrong direction. 

Mrs. BLACKBURN. So tax everybody but not the union. 

Mr. KIRSCH. No, no, no. We don’t think you should tax—— 

Mrs. BLACKBURN. OK. 

Do you, Mr. Neas, think the unions ought to be exempted, or 

should union workers have to pay on this also? 

Mr. NEAS. I don’t think there is any provision in the Senate that 

is trying to treat union members differently than any member of 

society. 

May I answer a couple of your questions just for 20 seconds or 

so? 

I do want to go back to the private-public blending, the partnership. But, most importantly, you just can’t, as in Tennessee or Massachusetts, address coverage for all or one these principles. You 

have to look at the cost, you have to look at the financing and the 

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proximately a trillion of that, according to dozens of studies, is 

waste and inefficiency. The money is there—— 

Mrs. BLACKBURN. OK. Let me interrupt you. Reclaiming my 

time, I appreciate that. And I would like—I am so limited on time, 

and I have so many things. 

But Mr. Kirsch has just said that he is opposed to a single-payer 

system. And then your group sponsored a rally last year, and here 

is a comment that was made by a Member of Congress, said, ‘‘I 

know many people here today are single-payer advocates, and so 

am I. Those of us that are pushing for a public insurance option 

don’t disagree with the goal. It is not a principled fight. This is a 

fight about strategy, about getting there, and I believe we will.’’ 

So, you know—— 

Mr. NEAS. Congresswoman—— 

Mrs. BLACKBURN. —we have to look at this. If we have those that 

say, ‘‘I am not in favor of a single-payer system; we really don’t 

want to go there,’’ and then others that say, ‘‘Well, this is a step 

along that way,’’ as others members, in their questioning, have 

asked you today, I think that that causes us tremendous, tremendous concern. 

And, Mr. Kirsch, I think it is fair to say that maybe you don’t 

like the insurance companies, but, nevertheless, would you—your 

wanting to get to good, affordable coverage for all, that is a goal 

that I have. Going through what we have done, access to affordable 

health care for all of my constituents I think is an imperative. And 

everyone should be able to have access to that. 

Now, are you completely opposed to a private-sector solution? Are 

you open to that? Or do you feel like it has to be done through government control? 

Mr. KIRSCH. Well, let me just quickly—if you are saying we are 

going to continue to have this solved through the private market 

that got us into this mess, yes, I am opposed to that. 

Mrs. BLACKBURN. OK. 

Mr. NEAS. Fifteen seconds, Congresswoman? We did not have a 

rally last year. No one said anything like that at one our rallies. 

I think your facts are incorrect. 

Mrs. BLACKBURN. OK, I appreciate the clarification. 

Mr. Chairman, I will yield back. And I have some questions I 

didn’t get to that I would love to submit for the record. 

Mr. PALLONE. Every member can submit questions for the record. 

I will mention it at the end, but I can mention now, within 10 days 

we usually ask members to submit their written questions and 

then we ask you to get back. 

The gentleman from Georgia, Mr. Barrow. 

Mr. BARROW. I thank the Chair. 

We have heard a lot about how beneficiaries are going to benefit 

under various proposals in the tri-committee draft. I want to hear 

a little bit about how providers are going to benefit. 

Where I come from, people are mighty concerned about being 

able to keep their choice of doctor and their choice of hospital, but 

it would probably be more accurate, where I come from, to talk 

about getting that choice back, because a lot of folks don’t have a 

choice in the current system as to where they can go to get the 

treatment. 


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And you talk to doctors, and they have this problem writ large. 

The consolidation of business in the health insurance sector has allowed fewer and fewer insurers to exert and abuse what is essentially a monopoly power to decide what folks are going to get reimbursed. 

So when I hear folks talking about how participating in a public 

plan is going to get you at least what you get with Medicare plus 

5, or something on that order, you are talking about a system that 

is already so bad it broke, where they were ignoring what is going 

on in the private sector, where the private insurers say, ‘‘If you are 

not in our network, you don’t get to treat anybody, because we are 

the only insurer in town.’’ 

So what I want to know is, how are the rights of doctors and hospitals going to be strengthened here? I read a lot in the summaries 

about how the interests are going to be served pie-in-the-sky-wise, 

you know, down the road—we are going to grow the universe of 

providers, we are going to provide incentives to get more folks into 

the game. 

Well, that stuff sounds good, but what about the rights? What 

can folks expect, as a matter of law, if this draft were to be enacted, in terms of what doctors get to participate in what plans, 

how insurers can discriminate against doctors of good standing in 

their community? How is this going to change in terms of how the 

world looks to doctors? 

Who can go first on that? Mr. Kirsch, do you want to take a stab 

at that? 

Mr. KIRSCH. Well, I think the first thing to note is that, while 

there are some access problems in Medicare, 97 percent of doctors 

accept Medicare. And, you know, seniors find that they get covered 

with a large variety of doctors in their community through Medicare, and you don’t have the kind of network problems you have 

in private insurance, where you have restricted networks and, you 

know, you may change insurance plans and you lose your choice of 

doctor. 

Mr. BARROW. The range of the benefits package is good, or at 

least it is standardized. Folks have a pretty good idea of what to 

expect in terms of what is covered. Doctors don’t like, though, the 

way we have abused the system with the constant—you know, the 

sustainable growth rate issues have sort of abused that system so 

much that it is no longer the gold standard, in terms of what doctors look for and what they expect to get. They need to be reimbursed for the reasonable cost of what they are doing. 

Mr. KIRSCH. Right. And I know that, you know, one of the things 

about the STR fix will hopefully mean that we are on a long-term 

path to make that more comfortable for physicians. At the same 

time, from a point of view of physicians participating, they participate in Medicare, and one of the things about a public option, having a stable—stability—and we would expect physicians participating the same way they do in Medicare, particularly in your legislation, paying 5 percent more than Medicare. You would then 

solve a lot of this problem of choice and stability for individuals, 

and then doctors would have a system that they can enter in at an 

enhanced rate for Medicare, particularly with that STR fix. 


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Mr. BARROW. So, basically, what you are saying is, if the doctors 

are being pushed around by the one or two dwindling providers— 

payers in the market, they have a place to go—— 

Mr. KIRSCH. Absolutely. 

Mr. BARROW. —that they don’t have right now? It is guaranteed 

to be open to them. 

Mr. KIRSCH. Yep. 

Mr. BARROW. OK. How about hospitals? How will hospitals come 

out of this, especially rural hospitals? How are their interests going 

to be strengthened or served by the draft? 

Mr. KIRSCH. Well, you know, a huge burden for hospitals is uncompensated care. It is an enormous, enormous burden. And, you 

know, hospitals are always faced with, what do you do when someone comes to the emergency room who needs medical care and isn’t 

covered? Let’s provide coverage for those folks. And that is a revenue source for the hospitals, as opposed to having to collect—you 

know, not have the revenues, hurt their bottom lines, cost-shift to 

other payers. 

So, you know, the estimates are that, actually, insurance policies—the average family insurance policy includes $1,100 for uncompensated care. Most of that is in hospital settings. And it is one 

way that, over time, as we get everybody in the system, we can reduce other premiums and also have a revenue source for hospitals 

that they don’t have now. 

Mr. BARROW. Mr. Neas, do you want to chime in? 

Mr. NEAS. I just wanted to add, regarding the doctors, this is a 

very important point. I said in my testimony that we have 78 organizations that stand for 150 million Americans. One the best things 

is we have about 10 medical societies in the National Coalition on 

Health Care. That was not the case in 1993 and 1994. 

And I know, sitting down with the doctors and nurses and others, with Henry Simmons and others on the staff, I said, ‘‘Why are 

you doing it this time?’’ And they said, ‘‘This time is different. We 

see an attempt to have comprehensive, systemwide, systemic reform. We don’t mind making some sacrifice, as long as it is a 

shared sacrifice, a shared responsibility. We can give up something 

if everyone is going to be giving up something.’’ 

They want predictability. They want to make sure they are getting reimbursed. But they want a system that works, that is sustainable. And I think ‘‘sustainability’’ might be the most important 

word that I am going to state today before this committee. But I 

think that is why you are getting so much participation from all 

the stakeholders. This is such a different environment than 15 

years ago, and I think that is the reason why. 

Mr. BARROW. Well, we are addressing the interests and the 

rights of the existing universe of health care providers. Let’s go 

back to the subject I passed over for a second, and that is the longterm problem of supply and demand, the fact that we don’t have 

enough primary health care providers, for example. 

Mr. NEAS. That is a big—— 

Mr. BARROW. Do you think the incentives and the proposals that 

are in this bill are adequate enough or robust enough or are muscular enough in order to be able to provide us the growth in the 


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sector of the health care community that is being underserved right 

now, not by area, but by area of practice? 

Mr. NEAS. We have been meeting with the medical societies and 

one of our newest members, the American Association of Medical 

Colleges and Teaching Hospitals, and they have been pointing out 

to us this extraordinary workforce issue. 

And, as you know all too well, primary doctors now only account 

for about a third of all the doctors in the country, sort of the reverse of what it was just 20, 25 years ago. We need more nurses, 

we need more doctors, we need more training, we need more 

money. We have to invest in our providers and our doctors and our 

nurses. 

Mr. KIRSCH. And there are several measures in this legislation 

that do that. There are increases to the National Health Service 

Corps—— 

Mr. BARROW. My question was, though, are they adequate 

enough? Do you think they are strong enough to actually make a 

difference, to bend the curve in the areas that are being served 

by—— 

Mr. KIRSCH. Well, there are significant investments in doing this, 

which is really neat, in a whole variety of measures that the bill 

includes. 

Mr. BARROW. All right. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. 

Ms. Christensen. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. 

Let me begin with Mr. Neas. And I thank all of you for being 

here this morning. 

Mr. Neas, I agree with your statement in your testimony that 

this is not the time for halfway measures, but I also take the position that coverage alone doesn’t reform the system. None of the 

principles in the national coalition address the huge gaps that exist 

in the health of people of color, in rural areas, or the poor. 

Where and how does the elimination of these disparities that 

drain the system and our communities fit in your agenda, or is it 

included inherently in those five principles? 

Mr. NEAS. You raise such an important issue. I was just meeting 

last week with many of the groups who are working on the disparity issues. 

The question has been asked about how urgent this issue of enacting this bill is, and what is the crisis. It is an extraordinary crisis; we cannot afford to wait. 

And I am addressing your issues. It is not just the Federal Government’s fiscal crisis and economic crisis or the State and local 

governments’, but it is the people who are being affected. 400,000 

Americans die every year because of preventable medical errors, infections that they get in hospitals, just by mistakes. Millions more 

are harmed. 

Those who are uninsured or those were are underinsured—many 

disproportionately are minority people without wealth—are the 

most affected by this. But it affects all of society. It affects our productivity. It affects the bottom line of businesses and the State and 


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local governments. This is a crisis of enormous proportions that 

cannot wait. The costs of inaction are unbelievable. 

Mrs. CHRISTENSEN. Oh, I am not suggesting that we should wait. 

I am suggesting that all of it ought to be included. 

Mr. NEAS. That is our position. That is why we say systemic, systemwide, which would address the issues that you are raising, 

which are very important. And without systemic, systemwide reform, you can’t get to that. 

And we have to make special efforts to make sure every American, including those who do not now have access or do not now 

have the affordability issue or the quality issues addressed, get 

those issues addressed. 

Mrs. CHRISTENSEN. Thank you. 

Mr. Kirsch, I know that eliminating disparities is one of your 

principles. But to be able to answer the question, as you say, at the 

end of the day, ‘‘Will I have a guarantee of good coverage I can afford?’’, if to be able to answer that affirmatively we have to fund 

this bill without a complete offset, should we cut back on being able 

to answer that question fully just to meet the $1 trillion limit? Or 

do you see us maybe budgeting for prevention, knowing that it will 

save money in the long run? 

Mr. KIRSCH. Let me say that there are eight specific—by our 

count, there are eight specific measures to deal with inequities in 

health care for communities and people of color in your draft legislation. So that is really encouraging, and we are glad to see that. 

But to this question of should an artificial, a trillion-dollar figure 

be used for this? Absolutely not. You know, I understand that the Bush tax cut was $1.9 trillion 

over 10 years, and $1.3 trillion of that was for the 20 percent of 

people in the upper-income brackets. You all made the right decision, I think the right decision, to spend about $800 billion just for 

2 years on the economic situation. We are going to be spending 

around $42 trillion on health care in the next 10 years. That is assuming a 5 percent inflation rate for health care, which is actually 

probably an optimistic rate. 

So if we are talking about, at $42 trillion, adding $1 trillion or 

$2 trillion, it is really important to realize that if we believe what 

we do believe, which is that we have to create the kind of systemic 

reforms along with lower costs, we need to make the investment to 

realize those goals. 

And these figures that sound so large, when we are talking about 

10 years and the size of the health care system, are really not that 

large. So this should be driven on doing it right and coming with 

the resources to do it. 

Mrs. CHRISTENSEN. Thank you. 

Dr. Parente, much of the savings and reduction in health care 

costs, although they may be realized outside of the 10-year window, 

will come from community public health measures and broader 

policies implemented across all agencies, as well as for a more efficient system and the elimination of fraud and abuse. 

Did you have any models that took into account community public health measures that would be implemented, or addressing the 

social determinants of health, and did that affect the costs? 

Mr. PARENTE. The models just aren’t precise enough to do that. 


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I mean, I personally recognize those are very good things. I actually brought along a book from 1932 that states that all of the 

same objectives that we want to achieve here today with this bill 

pretty much were there. This is a longstanding goal, what we are 

trying to do. This is from the Committee of the Cost of Medical 

Care from University of Chicago. 

But they can’t be accounted for. And, actually, a lot of things 

cannot be accounted for. Health IT savings cannot be accounted for 

easily. Prevention can’t be accounted for quite easily, as well. And 

a 1 percentage point difference, in terms of the cost increases in 

health care, vastly change what these projections will look like, as 

well. 

Mr. PALLONE. Thank you. 

The gentlewoman from Illinois, Ms. Schakowsky. 

Ms. SCHAKOWSKY. I want to talk about cost for a minute, because 

the cost numbers—and let me ask you, Mr. Neas. Dr. Parente’s 

study looks at the funding for the Federal Government as if that 

is the only factor that we ought to consider. And I don’t know, the 

$4 trillion or whatever, I have some disagreements over the—or at 

least my staff suggest that, having looked at that, some problems 

with the methodology. But that is not the central question. 

When do we consider total costs spent by Americans—businesses, 

individuals, out-of-pocket, premiums, co-payments, all those things? 

When we talk about costs, don’t we have to think about the aggregate and not just the Federal spending? 

Can you answer that, Mr. Neas? 

Mr. NEAS. Absolutely. 

Some people were upset last week by CBO, by Congressional 

Budget Office. And I am not saying I agree with how they scored 

everything, but we are going to look back and thank the Congressional Budget Office, because they put on the table the cost issue. 

And I think, for this to be sustainable, we have to, as the President 

has said, make this budget-neutral. 

But you asked the right question. It is not just an issue of payfors or the issue of the Federal Government; it is looking at the entire system. The best phrase that I heard so far in the last 6 

months, again, out of the President, is shared responsibility, shared 

sacrifice. 

Let’s take the pharmaceuticals, let’s take the insurance industry. 

They are obviously very happy about where this is going in terms 

of 10, 20, 30, 40 million new customers. They are going to the 

table, they are participating, and I applaud them. And I know they 

want predictability. I know they are scared, like we all are, by the 

economic conditions. But they have to come to the table and give 

up something too. 

There is a lot of money that has to be saved by the pharmaceuticals, by the providers, by all of us, by the insurance companies. I said before about that, $2.5 trillion. The money is in the system; we just have to spend it well. We have to look at the cost containment—— 

Ms. SCHAKOWSKY. OK. Let me see if anyone else wants to comment. 

Dr. Parente. 


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Mr. PARENTE. Well, the cost issue is, I think, the dominant concern that you really need to address here. Because of the situation 

we were in, actually the day that I testified last—— 

Ms. SCHAKOWSKY. See, I don’t even agree with that. I mean, I 

don’t even agree with that. I mean, I think that the polling showed, 

too, that the American people, a majority, said they would even be 

willing to pay somewhat more to have universal health care. 

So your—but go ahead. 

Mr. PARENTE. Let me put it back to you as a question. 

Ms. SCHAKOWSKY. Yes, go ahead, sure. 

Mr. PARENTE. Are the American people willing to take hyperinflation that could come if this thing basically capsizes treasuries? 

Because if that happens, it will come because of this bill. 

Ms. SCHAKOWSKY. Mr. Kirsch? 

Mr. KIRSCH. Well, you know, I would say what Mr. Orszag says, 

which is that the current biggest threat to the Federal Treasury 

right now is the current health care system. And if we don’t get 

our hands on that, we are really in a huge economic problem in the 

long run. 

Mr. PARENTE. And the only way you can bring those costs down 

is a statist solution that would control costs, which—let’s be honest—that is what you are advocating, a statist solution. 

I am sorry, I was out of order. 

Mr. KIRSCH. We are actually advocating a system that has systemwide cost containment in a way that focuses on better delivery. 

And, you know, there has been a lot of discussion of this trip 

from Dr. Gawande to McAllen, Texas, and looking at the perverse 

incentives there that lead to such high Medicare spending versus 

the, kind of, right systems that you have in a place like Mayo or 

others. 

So we have to focus on good delivery, on prevention, all those 

things. And what I do think is important about your first question 

is that we have to look at this as a whole system. For instance, if 

we don’t provide coverage for someone with a benefit package, it 

doesn’t mean, like, their health need disappears. 

Ms. SCHAKOWSKY. Right. 

Mr. KIRSCH. If you don’t, for instance—I mean, I think you generally have a good benefit package. I would criticize one thing: You 

have left out dental. Now, you get that as part of your basic package in Congress. 

Ms. SCHAKOWSKY. Very poorly. 

Mr. KIRSCH. Very poorly, but there is none in this. And it means 

that, you know, how many members of the committee may have 

been to a periodontist, and what would happen if you couldn’t have 

it? 

So, understand that leaving it out may save the Federal Government money, but it shifts tremendous cost onto that family, it 

makes their health more expensive, it makes them harder to be in 

the workforce. It is a whole system we have to look at. 

Ms. SCHAKOWSKY. I wanted to just make a comment. I may have 

time for that. 

This issue of competition, I think, is also bogus, because right 

now the insurance industry and Major League Baseball are the 

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guson. And so, 94 percent of markets are noncompetitive right now. 

So this argument that somehow, you know, we ought to leave it to 

the private sector and competition is just absolutely false. 

The insurance industry has tried all its time to avoid competition, and it seems to me that the injection of a private health insurance option—and, frankly, I cannot think of a public interest reason why that is not an advantageous thing to do. To have a choice 

would actually inject competition. 

And I yield back. 

Mr. PALLONE. Thank you. 

The gentleman from Texas, Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman, for our first full hearing 

on the draft. 

And I appreciate our first panel of witnesses for being here. 

I have a district in Houston, Texas, and Texas has the highest 

percentage of uninsured in the country and also the highest number of uninsured. And I will give you an example of why we need, 

I think, a public plan to compete. If the private sector could have 

dealt with the 45 million estimated number of people, they would 

have already done it, because they would be making money on 

them. 

I have huge refineries in my district, chemical facilities. About 3 

years ago, the CEO of Shell Western Hemisphere sat in our office 

and said he was transferring some production jobs from their 

chemical facility in our district in Deer Park, Texas, to the Netherlands. Two reasons: The natural gas at that time from the North 

Sea was cheaper, and the cost for health care in the Netherlands 

was cheaper than the cost in Deer Park, Texas. 

Now, it is a union-organized plant, but that was the business decision they made. And for a number of years, sitting on this committee, I have been wanting to hear from the business community, 

saying, ‘‘Look, this is a cost issue that we have. We can’t compete 

in Deer Park, Texas, because of our high cost of health care in our 

Nation.’’ 

So I know there are a lot of businesses who are part of the coalitions, various coalitions, on this. And I wish if could just address 

that. And I know it came up in the last questioning. 

You know, we have polls all over the board, but I think the one 

that I saw over the weekend and talked about, 70 percent of the 

American people want some type of government-run insurance. 

Now, a public plan is not government-run insurance, by any 

means. But a public plan that will give the insurer hopefully not 

last resort because otherwise it will be so costly, but an insurance 

product that people can go to have a medical home instead of showing up at emergency rooms. 

And I will start with you, Dr. Parente. 

Mr. PARENTE. Yes, I appreciate the concern about jobs. I mean, 

there has been research that shows that it is ambiguous just how 

much job loss is associated with essentially the provision of health 

insurance, or that cost that is associated there. 

That said, let me tell you what I think could work. It starts with 

understanding, what is insurance? Insurance technically is a provision of a policy, therefore fairly high-cost with low-probability 

event. That is not health insurance, nor is it health care. We throw 


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those terms around quite a bit. If we were to offer insurance for 

all and call it really health insurance, that is a catastrophic plan, 

probably with a $5,000 or $6,000 or $7,000 deductible. 

And to answer the previous question about what we can do bet- ter to do with $2.5 trillion a year, if you distributed that with an 

individual mandate to the entire country, you would have money 

left over. But that is not what we do. And because of that, we have, 

over a period of time, basically thrown in prevention, other services. 

If you think about what the medical home originated from, it 

originated from the HMO Act of 1974, more or less saying let’s 

move to a capitation model. It seems like it is back to the future. 

What was missing was health IT and actually some sort of cost accounting to make performance metrics come in. Maybe now with 

the stimulus bill that will happen, but that is still a long time coming. 

The concern is that that design tried to emphasize prevention financially by having extremely low co-pays. The unintended consequences of that was that when pharmaceuticals went from basically nontrivial expenses to suddenly being covered by generous 

health insurance plans, those $5 or $10 co-pays got translated beyond just an office visit practice with a gatekeeper that was mandatory to everyone. That is what has driven up our costs. We are 

the enemy of ourselves here. 

So the way to fix it, if you want to fix it and have it be budgetneutral, individual mandate, catastrophic plans, let the rest buy up 

by State preference, however you want to do it, that is budget-neutral. And it would actually preserve the most important thing that 

I think Americans want, and I think it is in your surveys—— 

Mr. GREEN. Well, let me respond to that, because I only have, actually, 25 seconds last. 

Again, coming from the State of Texas where we have individual 

State options, we have 900,000 children in Texas right now who 

are qualified for SCHIP or Medicaid who are not on it because the 

State won’t pass the match. 

The one thing that I asked the Chair: to have a national plan. 

And don’t come up with something that will say the States will 

make this option, because we know what will happen in certain 

States. And, again, I was a legislator for 20 years in Texas, and 

so I bring that as experience to you. 

I know I am out of time, Mr. Chairman. Thank you. 

Mr. PALLONE. Thank you. 

The gentlewoman from Wisconsin, Ms. Baldwin. 

Ms. BALDWIN. Thank you, Mr. Chairman. 

I wanted to just comment. I am going to sound a little bit like 

a broken record on this, because my fellow committee members 

have heard me talk about the public option we have available in 

Wisconsin in our Medicare Part D program. And I don’t know if 

any of the witnesses today have had a chance to study that, but, 

to me, it is ample evidence that a public option can be available 

and can compete favorably. 

Let me just quickly comment on it. For perhaps a series of coincidences, we had a pharmacy waiver before the Medicare Part D program was implemented. We had a program available to seniors in 


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Wisconsin called SeniorCare. Our congressional delegation fought 

on a bipartisan basis to keep that program when Medicare Part D 

was implemented and make it a choice available to seniors and 

other eligible folks in Wisconsin. 

And it has operated at about a third of the cost per enrollee compared with the private-sector options. But for those who think that 

having such a public option would drive away the private-sector 

competition, I can also tell you that Wisconsin has among the most 

vibrant array of private options for its citizens, I think I have 

heard more than any other State in the union. 

So I just want to draw that to people’s attention and perhaps, 

when grilled about is there an example that you can point to anywhere in the country of an exchange that has been set up with a 

public option competing with private options, you can study this, 

and I think it is a great example. 

I want to move from that to a related issue of State innovation 

as we move forward with this. 

Mr. Kirsch, you are committed to a strong and robust public 

health insurance option, and I am interested in your perspective on 

the role of States. Do you think that the ability of States to play 

a role in running these exchanges will enhance a national exchange? And do you think that this ability will empower them to 

build upon the reforms that we pass at the national level? 

Mr. KIRSCH. Well, the legislation, as I read it, says States or 

groups of States can set up exchanges. And, you know, we think 

that that is an important option. It doesn’t have to be just an individual State. I mean, you want these exchanges—every time you 

create an exchange, you have to set up another entity. And so, if 

groups of States can do it, it may be more efficient than having individual States do it. 

And, you know, if you have a national public health insurance 

option, such as we have posed, then it is going to deal with each 

exchange. And so it becomes one more way of—less administrative 

hassle if it is dealing with fewer exchanges. 

So it is fine to say States can do this, but we think groups of 

States doing it, looking at more efficient ways to set up exchanges, 

manage them, makes sense too. There is no reason, just because 

we have 50 States in the country, that we have to have 50 separate 

exchanges. 

Ms. BALDWIN. I don’t know if Dr. Parente or Mr. Neas have any 

comments on the State role in this. 

Mr. PARENTE. I think States are a tremendous place for innovation. Actually, what I would welcome to see, how an exchange 

would go forward, is it actually would be something that would repeal McCarran-Ferguson and allow plans to compete across State 

lines. Because that would allow the innovations of those private 

players in Wisconsin that have demonstrated such innovation to 

actually compete in Santa Fe. I think that would be a nice solution. 

Ms. BALDWIN. Mr. Neas? 

Mr. NEAS. Congresswoman, I think this is an excellent question 

to ask, and it reminds me of a conversation I just had with my 

boss, Dr. Henry Simmons, a few days ago. We are talking, obviously, about having a comprehensive, systemwide, national health 

care plan. 


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However, this is only the first half of what we have to do. Once 

this is enacted this year, then we are going to have to implement 

it, oversee it, and enforce it. And I think the States are going to 

play an incredibly important role in that and be partnering with 

the Federal Government. 

I think it does reinforce what this committee’s role is going to be 

in overseeing whatever does get done at that level, as well as organizations like ourselves. The implementation and enforcement of 

this law, which will hopefully be done in conjunction with the 

States, is a question that should be addressed now and forevermore. 

Ms. BALDWIN. Thank you. 

Mr. PALLONE. Thank you. 

The gentleman from Kentucky, Mr. Whitfield. 

Mr. WHITFIELD. Thank you, Mr. Chairman. 

Dr. Parente, you mentioned the staggering national debt. And we 

are on the verge of making a multi-trillion-dollar decision relating 

to health care. 

In your mind, are there more cost-effective alternatives to expanding health insurance coverage than the Kennedy bill or the 

bill before us today? 

Mr. PARENTE. As I said in the testimony, it is hard to, sort of, 

have a silver bullet for this at all. I think if you have a mandate 

on some very basic coverage, with some provisions for prevention, 

that will lower the price tag considerably, perhaps by half. 

It still may not make it free; you are going to need to find some 

way to have this be paid for. But what it does is it actually, sort 

of, says to the American people, ‘‘You have a right so that if something happens and you face a catastrophic illness, you will be covered, and you will have choice of physician, and that is what we 

will guarantee.’’ 

But to actually go beyond that and to put it into ‘‘you have a 

right to a public option plan, which is based on sort of an FEHBP 

model of a BlueCross BlueShield plan that has been morphing for 

the last 60 years’’ adds a little too much extra cost, approximately 

probably 70 percent extra cost than you need to have, and probably 

reinforces the same behaviors you have in the inefficient system we 

have today. 

Mr. WHITFIELD. Well, you know, of course, all of us are concerned 

about cost, and that is particularly important today with the economy being what it is and the amount of money that we are spending. But, in addition to that, of course, the American people want 

a quality health care system that they all have access to. They 

want health insurance that they can afford. And we want models 

that can be adopted, that we do not have the spiraling costs in 

health care. 

And I have been reading recently, and I know he has testified 

over on the Senate side quite a bit, the CEO of Safeway. And I 

know that when the Medicare program started in 1965, CBO estimated that by 1990 the cost would be somewhere around $9 billion. 

As it turned out, in 1990 the cost was around $100 billion or so. 

The thing that I like about this Safeway model, it appears from 

the evidence that the CEO is providing that they have actually 

been able to control health care, the cost, but, more important, they 


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have given their employees the right to make decisions on who 

they want to see. And they also have developed a system of transparency so that employees can shop around and determine the 

costs that various providers charge, and there is a real disparity in 

that. 

So I would like to get your comments, those of you familiar with 

the Safeway program. And, Mr. Neas, I know you would like to 

make a comment on that, so go ahead. 

Mr. NEAS. I do want to salute Steven Burd, I believe is the CEO 

of Safeway, and all those who make voluntary efforts with respect 

to well-being and prevention. I don’t think there are any independent studies that corroborate what Mr. Burd has put before the 

committees of the House and the Senate. 

And you are talking about cost, I do think that much of what is 

in the bill, whether it is the Kennedy bill or this bill or things that 

the President has brought up, there are good, long-range, cost-savings measures. I don’t think anyone really has yet addressed the 

short term. And I think we are going to need some short-term regulatory constraints on the increase in the expenses systemwide. 

As Congresswoman Schakowsky was saying, it is everyone’s responsibility, but we need some short-term cost control in the bills 

that come out of the House and Senate, not just the long-term costsaving measures. And I would hope that would be something that 

this committee and others would address. 

Mr. WHITFIELD. Yes. 

Mr. KIRSCH. I think what is good about what Steve Burd has 

done at Safeway and people have done at Pitney Bowes and a lot 

of other companies in the country is they have actually looked at 

ways to control costs. And, as you said, the key has been to not 

have financial barriers to preventive care, to get people in the system early. 

One of the reasons we want a hybrid system is to encourage that 

kind of innovation and encourage it more in Medicare. If you look 

at Senator Baucus’s options paper, it is all these things that Medicare has done to be innovative. So let’s have the private sector innovate, let’s have the public sector innovate, let’s look for better delivery systems. That is what we have to do if we are going to move 

toward a solution that makes this affordable for everybody. 

Mr. PARENTE. Just a quick comment. I studied consumer-driven 

health plans, and actually there is a report I have that was published by HHS last year that looks in design very similar to 

Safeway and found that it actually saved costs, at least bent down 

the curve, and prevention wasn’t touched. 

That is why I am advocating that as a model, because I think 

that could be a very cost-effective solution if the financial incentives are structured that way. 

Mr. WHITFIELD. Thank you. I guess my time has expired. 

Mr. PALLONE. Thanks. 

The gentlewoman from Florida, Ms. Castor. 

Ms. CASTOR. Thank you, Mr. Chairman. 

And thank you all for your advocacy efforts. 

Briefly, could you all, in 20 seconds, take a turn and characterize 

CEO profits of HMOs and CEO salaries, HMO CEO salaries and 

HMO profits over the past 10 years? 


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Mr. NEAS. I would have to give you my personal anecdotal response to that, that it seems excessively high over the last 10 

years. There seem to have been numerous press stories that underscore the extravagance of some of those salaries and some of those 

profits. 

Mr. KIRSCH. I think we are looking at average CEO salaries of 

$12 million for the top 10 insurance companies in 2007; average 

profits of about $12 billion, $13 billion. 

Ms. CASTOR. Did you say billion? 

Mr. KIRSCH. Billion for the profits. Top 10 CEO salaries of $12 

million. And I believe there was a 400 percent increase in profitability from around 2000–2007. I am doing this from, sort of, my 

visual memory, but it gives you a scale of the kind of increase in 

profits we have seen in the industry over the last years. 

And I want to conclude with a quote from Angela Braly, the CEO 

of WellPoint, We are talking a financial analyst, about what kind 

of decisions they are making. She says—this is a whole sentence— 

‘‘We will not sacrifice membership for profitability.’’ In other words, 

we are not insuring more people if we are going to lose money on 

them because they cost us too much. 

Mr. PARENTE. They have been going up; we all know that. The 

question is whether or not they are returning value. 

I spent 2 or 3 years working at a nonprofit BlueCross BlueShield 

plan. I liked the people, I liked the management. I was sort of disturbed by how inefficient everything could be. That is what drove 

me to become an academic, I suppose. And no comments there. 

But what I found in terms of some of the good plans that are 

publicly traded is they introduced innovations that I was dying to 

see done in those nonprofit BlueCross BlueShields. And if there is 

anything that I think is of virtue to this public option plan, it is 

to put some competition into those plans for better business practices. 

But keep in mind, those better business practices I see are coming mostly out of the for-profit plans that are being demonized. So 

I am of mixed mind when talking about what the return on investment of those salaries tend to be. 

Ms. CASTOR. Well, let’s just—I think we can all agree the American people are concerned, to put it mildly. I would say that they 

are angry. 

In my home State of Florida, there is a recent example of the 

largest managed care provider, private HMO, whose offices were 

raided some time ago by the FBI, charged by the Justice Department, and just settled the case because Florida had embarked on 

a pilot project to privatize Medicaid. 

So this private HMO came in and won the bid, and it turned out 

that they were paid money to provide health care services for children under Medicaid and under the State children’s health insurance company. And rather than provide the medical services, they 

pocketed the money, and have just settled the case for $80 million 

that they are going to pay back to the State of Florida. 

Meanwhile, the CEO was receiving multi-million-dollar salaries. 

They were posting the highest profit margins in the history of managed care in our State. 


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So when we talk about cost, isn’t there enough cost—isn’t there 

enough money in the health care system now? In fact, the CEO of 

a Florida HMO paid a visit last week, and that is exactly what he 

said to me: ‘‘There is enough money in the system. If you adopt a 

public option and a comprehensive health care reform bill, we can 

get this done.’’ 

In contrast to all that, what is happening to the average American family? Health care costs are driving Americans into financial 

ruin. A recent Harvard University study said that 62 percent of 

bankruptcy cases now are caused or influenced by medical bills— 

62 percent. In 2001 it was 50 percent, and in 1981 it was 8 percent. 

And now with the rising numbers of uninsured, they are often 

completely hammered because they have to pay the entire bill, 

whereas if you actually have health insurance, you benefit from the 

negotiated lower prices. 

Many people, in this day and age, really have nothing left because they took out a mortgage on their home; now their home is 

worth thousands and thousands of dollars less. 

Isn’t the real crowd-out issue the fact that Americans do not 

have access to affordable health care? Health care costs have skyrocketed, and their paychecks haven’t kept up. Isn’t that the real 

crowd-out issue we are going to tackle in this health care reform? 

Mr. KIRSCH. Absolutely. 

Mr. NEAS. Absolutely. 

Mr. PARENTE. Just very—I know I only have a second here. The 

reason why costs go up is that we like medical care and it works 

really well. And, societally, that is a decision we are taking. 

Individually, everyone has their hardship concerns, and I do not 

belittle at all what you are saying. But understand why this is occurring. Health care is a good, and we all want it. And we are not 

willing, necessarily, collectively, or have found the right mechanism 

to distribute that desire to meet our economic challenges. 

Mr. KIRSCH. I would just say, if you look around the world, you 

see there is higher utilization in a lot of countries and they spend 

a lot less and get good quality. So I would disagree with Dr. 

Parente. 

Mr. PARENTE. And let me make one personal comment back to 

that. 

I worked for the British National Health Services, my first job, 

because I believed in single payer when I was 21 years old. When 

I worked for the British National Health Service, I was in southwest London in a teaching hospital. 

Here is how they saved money, because they still do it the same 

way. Would you like to guess here, anyone, how many long-term 

beds, skilled nursing beds, they had available to a quarter-million 

people in that space? Anyone? How about 31. That is how you save 

money and how they did it. 

That is why U.K. has the most advanced hospice program in the 

world, because, in order to save those resources, with a soft, velvet 

touch, you basically were able to say to someone who was 80, ‘‘You 

have CHF. I am sorry. This is the end of the road. Let’s make you 

comfortable.’’ Here, we don’t do that as much. 

Mr. NEAS. Congresswoman, you are really getting to the heart of 

the matter here as to why we have the kind of polling that we 


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have. People are starting to find out about these outrages. And we 

do have some of the finest, if not the finest, health care in the 

world, but, as Mrs. Christensen said, if you can afford it. But there 

are tremendous disparities. 

And I said a little while ago, 400,000 preventable deaths per year in our system—400,000—costing $700 billion, $800 billion a year. 

These are all costs that could be addressed by systemic, systemwide care. This is a scandal that this is happening, absolutely a 

scandal. And you were talking about the cost for individuals and 

the bankruptcies, four times as much for health care costs as the 

increase in wages. 

When people find out about this, as good as the polls are now, 

they are going to be even better. There is going to be a popular uprising on behalf of this kind of bill and for comprehensive health 

care reform this year. It is absolutely necessary. 

Mr. PALLONE. I let them go because I didn’t want them not to 

have the opportunity to answer your question, but we have to move 

on. Thank you. 

The gentlewoman from Ohio, Ms. Sutton. 

Ms. SUTTON. Thank you, Mr. Chairman. 

Mr. Kirsch, I want to thank you for being here. I want to thank 

you all for being here. And, Mr. Neas, thank you for your leadership of your very diverse coalition. We appreciate it. 

But, Mr. Kirsch, the coalition’s five basic principles for health 

care reform: coverage for all, cost containment, improved quality 

and safety, simplified administration, and equitable financing. 

That is how you—or is that Mr. Neas? I am sorry, Mr. Neas. I 

apologize. 

Mr. NEAS. That is all right. 

Ms. SUTTON. I bet you agree with those. 

Mr. KIRSCH. Sure. 

Ms. SUTTON. Mr. Neas, those are the broad principles that your 

coalition is fighting for in health care reform; is that correct? 

Mr. NEAS. Those five principles, buttressed by many, many specifications that are part of our pamphlet. I bring this everywhere. 

Just like Senator Robert Byrd brings his copy of the Constitution, 

I bring this blueprint for reform, which has specifications that 80 

organizations spent 18 months putting together to implement those 

five principles. 

Ms. SUTTON. And I appreciate that and I appreciate that commitment, much the way I appreciate the commitment to the Constitution. 

Dr. Parente, do you agree with those five basic principles for 

health care reform? 

Mr. PARENTE. Yes. 

Ms. SUTTON. OK. 

And I just have a question, Dr. Parente, about—I apologize that 

I didn’t get to hear your testimony, but I did get to read it. And 

so, based on that, you discuss at some length the parts of health 

care reform that can create costs without any regard for the many 

cost savers that will be included. 

So, in particular, I am interested in your score of the public 

health plan option. You don’t seem to consider that with a public 

health plan comes increased competition. You sort of almost scoff 


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at that in your testimony, that it will increase access and drive 

down premiums for beneficiaries. 

Why do you choose to disregard that? 

Mr. PARENTE. Because there is not a study to show that it would 

work. 

Ms. SUTTON. OK. So, until somebody shows you a study—and I 

heard Ms. Baldwin talking about what is true in her State. Are you 

saying that there is no demonstrable evidence based on what is 

happening there to support this kind of conclusion? 

Mr. PARENTE. Not on a national scale. 

I am from the upper Midwest, as well. We in the upper Midwest, 

as was in the New Yorker article, just do things differently. We are 

more cooperative, maybe because it is cold. But to generalize this 

out to the Nation is not easy to do. 

I mean, just take the examples from Florida. I guarantee you, 

Wisconsin and Iowa and Minnesota are really low on fraud. Florida, on the other hand, is the capital for the world. 

To find a one-size-fits-all solution is going to be difficult. That is 

why I propose, if you are going to do something like an exchange, 

let insurance companies buy in each other’s markets or compete in 

each other’s markets and not be constricted to the same State-specific things that McCarran-Ferguson does today. 

Ms. SUTTON. You know, a couple of things. You will concede 

then, though, that there is some, on a State-wide basis, evidence 

to support that a public plan can drive down costs and increase 

competition? 

Mr. PARENTE. No, I—not at a national scale. 

Ms. SUTTON. I know. I said at a State level. 

Mr. PARENTE. There is evidence of State innovation that is successful. 

Ms. SUTTON. OK. 

Mr. Kirsch, would you like to comment? 

Mr. KIRSCH. Well, Medicare has less than 5 percent annual inflation. Private insurance is about 7.5 percent inflation. Commonwealth Fund thinks the premiums—if we use Medicare rates, you 

guys are talking about Medicare plus 5 percent, would have 20, 30 

percent savings. 

So there are studies. Urban Institute says it will save money. 

Jacob Hacker at Cal-Berkeley thinks it will save money. So there 

are a bunch of studies that say it will actually save significant 

money. And we have seen that Medicare has lower inflation than 

private insurance. So I would beg to differ. 

Ms. SUTTON. OK, thank you. 

Dr. Parente, can you tell me, do you think that the majority of 

the millions of uninsured Americans, do you think that they are 

just simply waiting for the right plan to come along? 

Mr. PARENTE. No, I—no. I think that there is a real problem. You 

know, most people would refer to this as a market failure, to have 

this level of folks be uninsured. 

I think the question people have to ask is, when people hear that 

45 million or probably now 50 million number by the time this year 

shakes out, you know, it is—the question I think people think 

about is, is that the number of people that started the year uninsured and ended the year uninsured and found nothing in beVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00101 Fmt 6633 Sfmt 6633 E:\HR\OC\A088.XXX A088

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tween? Because that number is quite different. That number is a 

fraction of 50 million. 

Ms. SUTTON. With all due respect, I think people, when they hear 

that number, think that is totally unacceptable in a country as 

great as this, that we would have millions of people uninsured with 

access to care when they need it. 

But I am going to move on. I just have—— 

Mr. PARENTE. I just—I would agree. What I am saying is focus 

on the folks that start and finish the year uninsured. That is a priority. 

Ms. SUTTON. Do you think that the American people who have 

insurance through the private insurance industry are very pleased 

with their care? 

Mr. PARENTE. I have seen surveys that suggest that they are not. 

But it is heterogeneous mix, and they are upset for different reasons. 

Ms. SUTTON. Do you think that it is appropriate that the pre-existing condition exclusions that exist in the private market should 

continue? 

Mr. PARENTE. It all depends upon whether those pre-existing 

conditions actually really get premium to a point where insurance 

is unaffordable, which, actually, in several States it has done. 

Ms. SUTTON. OK. 

I know that my time is up. Thank you. 

Mr. PALLONE. Thank you. 

The gentlewoman from California, Ms. Matsui. 

Ms. MATSUI. Thank you, Mr. Chairman. 

I would like to focus in on one area. I would really like to ask 

a lot of questions, but this is one area I am really focusing in on, 

and this is prevention as an overall part of the health care reform. 

And we can’t forget it, because we understand that we need to 

prevent people from getting chronic diseases like heart disease, diabetes, and asthma. And unless we do, the costs of our health care 

system will just go up, no matter how well an insurance exchange 

is structured. 

More than 75 percent of the health spending in this country 

today is attributable to chronic illness, but only about 3 percent of 

our health care spending is for preventive services and disease promotion. 

Mr. Kirsch, your organization platform states that health care reform will emphasize quality care, including coverage for prevention 

and primary care, and good management of chronic conditions. 

And, as you know, our draft bill requires insurance companies to 

cover preventive services and waives our co-payments for these 

services. 

Is your organization’s vision for preventive care fulfilled in this 

legislative draft before us today? 

Mr. KIRSCH. Well, yes, in terms of the benefit package, absolutely. Because what you have done is, as you have said, you have 

made prevention a standard part of the benefit package and, eventually, employer-based coverage, as well as the exchange, and you 

have done it without financial barriers to care. And you have also 

made a significant investment in the legislation into increasing the 


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number of primary care providers, because we are going to need 

that to be sure this preventive care is delivered. 

Ms. MATSUI. But do you think the bill could be strengthened to 

place an even greater emphasis on preventive care? 

Mr. KIRSCH. Well, the benefit package in terms of prevention is 

good. Now, some of the details of the benefit package are going to 

be left, under your bill, to a board to set that. The question is how 

much is put in law now versus not. 

But the point is, you have said prevention, you have said financial barriers, and you have made the investment in a primary care 

infrastructure. So we think these are really, really good. 

Ms. MATSUI. OK. Given that the draft bill requires a certain level 

of coverage for preventive care services already, do you see any role 

for the public option in driving private insurance toward a model 

that focuses more on services that will help people avoid getting 

sick in the first place? 

Mr. KIRSCH. Well, we hope so. 

You know, I had an interesting conversation years ago with the 

CEO of an insurance company who said, ‘‘It doesn’t pay for us to 

invest in prevention, because we are only going to have these folks 

for a year or 2, so any savings won’t accrue to our benefit.’’ That 

is the kind of calculation you make if you run an insurance company. Or you just do your marketing to people who don’t need a 

lot of health care in the first place. 

A public option whose mandate is the public good, who is looking 

at the long term, will have a different set of incentives to look at: 

how do we promote the public health, how do we keep people in, 

how do we avoid them getting sick, having good chronic care management and innovate in that. 

And it is very important that one of the goals you specifically 

laid out in this legislation for the public option is innovating delivery system options that do that. And so not being simply—you 

know, Medicare has done some of that, Medicare needs to do better. But the fact that you all made that a specific mandate for the 

public option is incredibly important. 

Ms. MATSUI. So you think this is a real opportunity here on the 

public option aspect of it? 

Mr. KIRSCH. The public option, actually, specifically is charged by 

the legislation with doing that kind of innovation delivery system 

to focus on better chronic care management, to do the kind of 

things you are asking about. 

Ms. MATSUI. Mr. Neas. 

Mr. NEAS. I just want to add to that. 

There are some excellent provisions in the bill, and I think there 

is more and more discussion with respect to best practices and 

looking at Intermountain and Cleveland and Mayo and other 

places. 

But I think it is very important to make sure that your deliberations and your eventual decisions and how it is implemented is evidence-based. And I think that is so essential for making this all 

work. 

Ms. MATSUI. I believe that, too, and I think that there is evidence 

available. It is trying to get the evidence in the manner in which 

we can actually compare. And prevention and wellness, for many 


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people, seem to be more something that is a fluffier side. But, for 

me, I would rather not get sick. And I think if we don’t get sick, 

we will probably lower the health care costs anyway. 

But I was also considering, too, what—Mr. Neas, you did a lot 

of work on health care costs and how they hurt small businesses. 

And can we use the same model here that Safeway has used, as 

far as what they have done as far as prevention and wellness, as 

far as having small businesses do the same things too? 

Mr. NEAS. I had an opportunity to respond to another member 

regarding Steven Burd and Safeway and saluted him for his innovations and his well-being and prevention efforts. I also did hasten 

to add that there hadn’t been any independent study to corroborate 

some of the claims that have been made. 

But, certainly, we want to welcome efforts by the private sector, 

by everyone, to try to keep people well, to prevent things from happening. That is an important part of the equation. 

Ms. MATSUI. I think I have run out of time. Just quickly. 

Mr. KIRSCH. Just quickly, though, I think the key and one of the 

reasons to have a strong public option is, how are we going to 

take—it is great that Safeway or Pitney Bowes or IBM can do it; 

how are we going to translate that into small businesses? 

If we have a public option that drives those things and then 

small business, in exchange, can benefit for their employees, we 

can make it more than just the innovators in the private sector. 

Ms. MATSUI. That is great. Thank you. 

Mr. PALLONE. Thank you. 

The gentleman from Utah, Mr. Matheson. 

Mr. MATHESON. I waive. 

Mr. PALLONE. The gentleman from Massachusetts, Mr. Markey. 

Mr. MARKEY. Thank you, Mr. Chairman, very much. 

This is an historic time, and we are very proud in Massachusetts 

that we adopted a new law that puts us in the same role, as revolutionaries, that our State has historically played in many other 

areas, except we are not any longer talking about Minutemen but 

MinuteClinics up in Massachusetts, and not Red Coats but the 

white coats of doctors, in terms of this revolution that we are trying to create. 

What I would ask is, if we could, get your opinion as to this Massachusetts plan, and what lessons you draw from it, and what you 

would try to emulate or avoid in moving forward. 

And we have moved now to 97.4 percent of our citizens with coverage, which is something that obviously we had as our goal. It has 

only been in place for a couple of years, but it obviously has been 

successful to that extent. 

But, Mr. Neas, could we begin with you? And welcome back to 

this committee, for the many times you have been here. And whatever observations you have I would very much appreciate. 

Mr. NEAS. Mr. Chairman, it is an honor and a pleasure to be 

back here. And, as you know, as a product of Massachusetts, as the 

former chief counsel of Republican Senator Edward W. Brooke, I 

am very proud of what Massachusetts has done—Senator Kennedy, 

yourself, the legislature, Mitt Romney, and others—especially with 

respect to, I believe, including about 95 percent so far of the population of Massachusetts. 


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Having said that, I know Massachusetts made a political decision 

several years ago that it was not going to address the cost management issues at that time. So we have my very good friend, Governor Deval Patrick, going to the legislature right now and going 

around the State to make sure there is additional legislation that 

would address the skyrocketing costs and increase in costs that affects Massachusetts and every other State in the Union and is such 

a national emergency. 

So there are wonderful lessons to be learned from Massachusetts. 

There are also lessons that you expected, that it was not a sustainable plan unless the money was going to be raised and/or the costcontainment issues were going to be addressed. I think Massachusetts is starting to do that. 

And I believe, with a national plan that addresses health care reform in a systemic, systemwide way and works in partnership with 

Massachusetts, the Paul Revere work that has been done will be 

completed over the next few years, the next number of years. 

Mr. MARKEY. Thank you, Mr. Neas. 

Mr. Kirsch. 

Mr. KIRSCH. Sir, I have a daughter who is a nurse at Children’s 

Hospital in Boston. 

Mr. MARKEY. Beautiful. 

Mr. KIRSCH. But, in terms of your question, more importantly, I 

have a daughter who just moved to Boston, Somerville, has taken 

not a very well-paying job between college and graduate school, but 

has good health insurance because of what you have done. And when she was between jobs, we had to pay more than $300 

for a medication she is on for a chronic condition. That was a lot 

of money for us to pay. What would have happened if she weren’t 

able to have that—now be able to get that coverage through the 

plan? 

The plan has been successful by expanding coverage to low-income and moderate-income people in Massachusetts. It is extraordinarily important. 

Where are the things that we think can be improved? 

One is, unfortunately—and this is a fiscal problem because the 

State is just doing it—the subsidies don’t go more than 300 percent 

of poverty level, which means there are a set of people who have 

been exempt from the program because it is not affordable. What 

is good about your legislation is it goes up to 400 percent of poverty 

level. It also allows you to look at regional differences in costs, 

which is very important. 

Second of all, it doesn’t have a public option in Massachusetts. 

And by injecting that kind of role in controlling costs, that is an 

important factor. 

Third, you don’t really have employer responsibility because of 

the ERISA challenges and also because Governor Romney wasn’t 

crazy about it. Employer responsibility is very important in terms 

of finding a lot more revenues. You are able to get away in Massachusetts because you are one of the highest employer-sponsored insurance penetrations in the country. You can’t do that in other 

places. 

So a lot of good things in the Massachusetts model were shown, 

but some things that we think can strengthen it. And, as Mr. Neas 


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said, you are all starting to deal with the cost-control issues, which 

are being built into the Federal reforms. 

Mr. MARKEY. OK. Thank you, sir. 

Dr. Parente. 

Mr. PARENTE. I think you should be applauded for doing it. I 

think it is a landmark initiative. 

Costs are the big issue, as are being discussed and have been 

previously mentioned. I think also there could be longer-term 

issues in terms of competition. 

One thing that was learned that actually some of our work 

showed previously was that some of the higher-deductible plans or 

the low-option PPOs would be the magic price point to get many 

people to get the right incentives to come in. And we just have to 

be sure that if this happens, what we are discussing here, that 

those options are on the table as well. 

One thing that—I will make this very brief comment—was that 

you really need to have as many private insurers to compete as you 

can. And I remember that that wasn’t an initial concern, but that 

looks like it is being addressed. 

Mr. MARKEY. Thank you, Dr. Parente. 

But there are a lot of things in common, Mr. Chairman. You 

know, it includes expanding Medicaid, creating a connector to help 

patients select a plan, and helping to subsidize the low-income citizens so that they can have access to health care. 

So I think the general principles are very similar. And we can 

learn, actually, from what went well and what needs to be reformed in the future. 

And I thank you for your leadership. 

Mr. PALLONE. Thank you. 

And I think we are done—Mr. Dingell? Chairman Dingell. 

Mr. DINGELL. Thank you, Mr. Chairman. 

Your study of the costs was just limited to the Kennedy bill; is 

that correct? 

Mr. PARENTE. It was also done, one on Coburn-Ryan and also one 

on the Senate Finance Committee, as well. 

Mr. DINGELL. I see. You have not done one on the bill that is 

right now, the draft? 

Mr. PARENTE. No. As I mentioned earlier, I hope to have estimates on that done by tomorrow morning at 8:00 a.m. 

Mr. DINGELL. OK. 

Now, I am curious, you have mentioned the English health system. Is there any significant similarity between the English health 

system, of which you appear to be critical, and the discussion draft 

that is before the committee? 

Mr. PARENTE. Actually, I am not critical of the English system. 

I am just bringing it up as a comment. I think both systems grew 

out of, if you will, the socioeconomic history of each country. 

Mr. DINGELL. But there is no similarity between the two, is 

there? 

Mr. PARENTE. Well, there will be increasing similarities if we 

have to ration care. 

Mr. DINGELL. Why do you make that statement? 


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Mr. PARENTE. Because the only way you can actually hold the 

cost curve down effectively with Medicare is effectively to limit patients. 

Mr. DINGELL. This is your assumption; is that correct? 

Mr. PARENTE. It is an assumption—— 

Mr. DINGELL. And, as in all other studies, the study is only as 

good as the assumption, isn’t that right? Garbage in, garbage out. 

Mr. PARENTE. Not necessarily. But if it is garbage in, garbage 

out, then all the Commonwealth stuff has to be thrown out, too, 

Congressman Dingell. 

Mr. DINGELL. Now, this is not a single-payer system that we are 

talking about here, is it? The European system is a single-payer 

system to which you are referring; isn’t that right? 

Mr. PARENTE. The European system is made up of many countries—— 

Mr. DINGELL. Let’s talk about the British. 

Mr. PARENTE. They are not all single-payer systems. 

Mr. DINGELL. The British system is a single-payer system, is it 

not? 

Mr. PARENTE. It is a single-employer system, yes. 

Mr. DINGELL. Now, your assumption that there will be rationing, 

there is rationing right now, isn’t there? 

Mr. PARENTE. Yes, there is. 

Mr. DINGELL. We have 47 million Americans who don’t have any 

health care. And, during the course of a year, we have as many as 

86 million who have no health care. Obviously, those people without health care are being rationed, are they not? 

Mr. PARENTE. Yes, they are. 

Mr. DINGELL. OK. 

I guess that is all the questions I wanted to ask. Thank you, Mr. 

Chairman. 

Thank you, gentlemen. 

Mr. PALLONE. Thank you, Chairman Dingell. 

And I think we are done with questions, so I want to thank you 

all. It was very helpful. Appreciate it. And, you know, as we move 

along, we are going to certainly keep your ideas in mind. Thank 

you. 

And I would ask the next panel to come forward. 

And let me remind members that we are not taking a lunch 

break. And the reason for that is because I think, as the day goes 

on, we will get more members of the full committee, who, as I mentioned, can participate. So if you want to take lunch, maybe go 

while another member questions. 

We are going to get right to it, so if the second panel would be 

seated, I would appreciate it. If you could take your seats. 

Are we missing Dr. Shern? I think we will start, at least with 

the introductions. Is that Dr. Shern? OK, thank you. 

Let me introduce the panel. Again, this is the panel on consumers’ views. And from my left is Dr.—I shouldn’t say ‘‘doctor.’’ 

You may, in fact, be a doctor, but she is certainly well-known in 

any case—Marian Wright Edelman, who is president of the Children’s Defense Fund. 

Thank you for being here. 


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Next is Jennie Chin Hansen, who is president of AARP. And 

then we have Dr. David H. Shern, who is president and chief executive officer of Mental Health America; Dr. Eric Novack, who is an 

orthopedic surgeon with Patients United Now; and, finally, Shona 

Robertson-Holmes, who is a patient at the Mayo Clinic. 

I assume in Rochester right? 

Ms. ROBERTSON-HOLMES. Actually, no, Arizona. 

Mr. PALLONE. Arizona, OK. 

Again, you know we have 5-minute statements. Your full statement will be submitted for the record, and whatever else you would 

like to put forward. And then we will have questions after. And we 

will get written questions, you know, in the next few days to be 

submitted to you in writing. 

And I will start with Ms. Wright Edelman. Thank you for being 

here. You have been here so many times. 

STATEMENTS OF MARIAN WRIGHT EDELMAN, PRESIDENT, 

CHILDREN’S DEFENSE FUND; JENNIE CHIN HANSEN, PRESIDENT, AARP; DAVID L. SHERN, PH.D., PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, MENTAL HEALTH AMERICA; ERIK 

NOVACK, MD, ORTHOPEDIC SURGEON, PATIENTS UNITED 

NOW; SHONA ROBERTSON-HOLMES, PATIENT AT MAYO CLINIC 

STATEMENT OF MARIAN WRIGHT EDELMAN 

Ms. EDELMAN. Well, thank you so much for the opportunity to 

testify on behalf of the 9 million uninsured children and the millions more underinsured children, which we have a chance to correct this year. 

And we have said many good things about your proposals. They 

are in the written testimony. And I want to just limit myself to my 

hopes for true health reform for all children and pregnant mothers 

within any health insurance plan. So, whatever you adopt as a 

health insurance plan for all Americans, I want to just make sure 

that all children, all pregnant women are treated equitably and get 

affordable, comprehensive coverage. 

And what a great opportunity this is. I am so pleased. And thank 

you for the CHIP bill that you enacted and the President signed, 

and that was a significant step, but we now have a chance to finish 

the job. That was not true health care reform for all children, and 

it is not the child health mandate that the President promised. But 

here we can do it now. 

The need for health care reform that expands coverage for all 

children, cure benefit inequities between CHIP and Medicaid children, and establish a national floor of eligibility of 300 percent to 

end the lottery of geography across 50 States and to simplify enrollment and retention, particularly in Medicaid and CHIP, are the 

key things that I would hope that you will address in your final 

health proposal. 

In these particularly devastating economic times, when the number of poor children could rise by 1.5 million to 2 million more, the 

need for a guaranteed, strong health care safety net to ensure their 

continuous access to coverage and every opportunity for a healthy 

start in life is absolutely urgent. 


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I want to just address these four points for a brief moment each. 

One is I hope you will ensure health care coverage is affordable 

for all children and pregnant women and with a floor of 300 percent of the Federal poverty level, which is about $66,000 for a family of four. 

Just as all children in the United States are entitled to a free 

public education, all children should be entitled to affordable 

health care. The high number of uninsured children exacts a high 

health, economic, and social toll on these children, the families, and 

our Nation. Uninsured children are at high risk of living sicker and 

dying earlier than their insured peers and are almost 10 times as 

likely as insured children to have an untreated medical need. 

These consequences of untreated medical needs can carry on into 

adulthood, and we must prevent them. 

The consequences of being uninsured fall disproportionately on 

children of color, who represent almost two-thirds of all uninsured 

children. Children of color are at higher risk than white children 

of having unmet health and mental health and dental health 

needs. And they are at greater risk of being sucked—because of the 

absence of this preventive health and mental health coverage—of 

being sucked into something the Children’s Defense Fund is very 

concerned about that we call the cradle-to-prison pipeline. 

Many children without mental health services are having to be 

locked up in order to get mental health care in their community, 

at an enormous cost of $100,000 and $200,000 a year. Children 

should not have to go to jail in order to get mental health coverage. 

You can cure that this year. 

The need for health care begins with maternity coverage. We 

have 800,000 pregnant women who are uninsured and having babies every year. They receive less prenatal care than their insured 

counterparts. They face greater risk for expensive and tragic outcomes, including complications, low birth weight, preventable illness, and even infant and maternal death. 

We have about 350,000 low birth weight babies in the most recent data. The cost is 25 times greater than normal birth weight 

babies. We are the only industrialized country that does not provide prenatal care to all of its mothers. You can cure that. I hope 

your health reform act will do that. 

All of our children need to be able to get what they need regardless of the State they live in. Today, each State sets its own income 

eligibility level for CHIP and Medicaid, which results in a profoundly inequitable patchwork of eligibility across the United 

States. 

Imagine being a low-income parent or grandparent raising several children. One is eligible for Medicaid, the other is eligible for 

CHIP, with different income eligibility standards and benefit packages for each program. Why should a child in North Dakota be eligible for CHIP if their parents earn more than 150 percent of the 

Federal poverty level, while in 12 States and the District of Columbia families can earn twice that amount and children are still covered? 

Children’s ability to survive and thrive and learn must not depend on the lottery of geography of birth. A child is a child wherVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00109 Fmt 6633 Sfmt 6633 E:\HR\OC\A088.XXX A088

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ever they live. They should have the comprehensive benefits. We 

must end this inequitable system. 

Ten States have no children eligible for Medicaid above 133 percent, but half of our States offer Medicaid to children of all ages 

with families with incomes above 133 percent of the Federal poverty line. Almost half cover children at 200 percent. Thirty-nine 

States offer CHIP to children of families between 185 and 400 percent of the Federal poverty line. 

We urge a national eligibility floor of 300 percent for all children 

and pregnant women wherever they live. And we should not force 

parents to have to choose between paying for child care, paying for 

health care, paying their rent. And so this is our chance to, sort 

of, give them the kind of national health safety net that I, as a 

grandma, have. I think I am important, but I think my grandchildren are even more important, and we should treat them fairly. 

Secondly, we hope that all children will have the same comprehensive benefit packages, which include health and mental 

health coverage. We like the EPSDT program. It was designed and 

is appropriate for children. Children are not little adults. It has 

health and mental health coverage. 

We believe and if you believe that every child’s life is of equal 

value and that children don’t come in pieces and they should get 

what they have to have their conditions diagnosed and treated 

early and prevent later costs, I hope you will make sure that every 

CHIP child and every child in the exchange will get the same benefits that the Medicaid children get. 

Mr. PALLONE. I hate to slow you down, but you are a minute 

over. 

Ms. EDELMAN. I am a minute over already? Good gracious. 

Two last quick things, and I will just end, Mr. Chair. 

Thirdly, all of our eligible children should have simplified ways 

of getting and keeping enrolled. The bureaucratic barriers that 

keep 6 million of the 9 million uninsured children now unenrolled 

need to be addressed. The package, as I see it, does not do that. 

We think that—and we lay out in our testimony, our written testimony, and we lay out in specific legislative language in the All 

Healthy Children’s Act the steps that you can take to make Medicaid work. 

I am glad you have moved to 133 percent of the Federal poverty 

level for adults, but children are already eligible for 133 percent 

but they are not getting it because of the bureaucratic barriers 

which you must address through the simplification measures we 

lay out. 

And lastly, I just want to say, I know people are saying cost and 

we can’t afford it. Well, you know, we can afford whatever we want 

to afford. We do not have a money problem in our Nation with a 

$14 trillion GDP. You found the money to bail out the banks, you 

found the money to bail out the insurance companies, you found 

the money to do the alternative minimum tax. We can find the 

money if we believe in it to make sure that we give our children 

a chance to survive and to thrive. That is cost-effectiveness. 

And while CBO may not score prevention, we know that dollars 

invested in immunizations save States millions annually. And we 

know that if you give a child an office visit in a primary health 


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care setting, which is about $100 in Harris County, Texas, it is 

going to cost you $7,300 if they go to the emergency room and have 

to be hospitalized. 

If you want to contain costs, children is where you do it. All of 

them should be covered. All should get the same benefits. It should 

be simple and easy. And you have a great opportunity to do it right 

this year. 

Thank you. 

[The prepared statement of Ms. Edelman follows:] 


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Mr. PALLONE. Thank you. 

Ms. Jennie Chin Hansen? 

STATEMENT OF JENNIE CHIN HANSEN 

Ms. HANSEN. Thank you. 

Chairman Pallone, Ranking Member Deal, and distinguished 

other subcommittee members, I am Jennie Chin Hansen, president 

of AARP. Thank you very much for inviting me to be here today 

and for your leadership on leading comprehensive health care reform. 

Enacting legislation to give all Americans quality, affordable 

health coverage options is AARP’s top priority this year. The draft 

tri-committee legislation marked substantial progress toward this 

goal. 

Today, I am really proud to represent nearly 40 million members 

of AARP, half over the age of 65 and half below 65. Both age 

groups face serious problems in today’s health care system, especially the 7 million people aged 50 to 64 who are uninsured. 

The draft includes critical reform priorities for AARP members 

for all ages. For our younger members, it would curtail discriminatory insurance market practices that use age and health status to 

block access to affordable coverage. Reforms must include strict 

limits of no more than 2:1 on how much more insurers can charge 

to people who are in this age bracket of 50 to 64. 

Reform must also provide sliding-scale subsidies for those who 

need help to make coverage affordable, as well as provide some 

strict limits on cost-sharing. The draft legislation achieves our 

goals on these vital points in health care reform. 

For our older members, the draft closes Medicare’s prescription 

drug donut hole so that they will be able to afford the medications 

that they need. This drop in coverage has been a major reason why 

one in five people who get drug coverage through Medicare delayed 

or didn’t even fill the prescription because of that cost. Under current law, the hole keeps getting larger every year. The draft begins 

to close the donut hole and includes other steps to lower drug costs. 

And for people with limited incomes, the draft closes the gap 

right away by strengthening the Part D low-income subsidy and 

eliminating its asset test that penalizes people who really did the 

right thing in saving for a small nest egg in retirement. 

The draft also fixes Medicare’s broken system for paying doctors 

and puts Medicare on a path to fiscal stability by revising payment 

systems to reward quality instead of quantity of care. It includes 

incentives to reduce costly and preventable re-hospitalizations. It 

strengthens our health care workforce that we know is actually, at 

this point, short already, let alone what will happen in the future. 

And it takes important steps to address racial and ethnic disparities in care. 

Many challenges remain on the road to really full, comprehensive 

health reform. But AARP and many other stakeholders share a 

broad and growing consensus that any differences that we may 

have cannot stop us from finding common ground and enacting 

comprehensive health care reform this year. We know—and it has 

been said time and time again—the status quo is just 

unsustainable, and we cannot afford to fail. 


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Thank you all for your leadership, and we continue to looking 

forward to work with all of you in Congress to enact this comprehensive reform this year. 

Thank you. 

[The prepared statement of Ms. Hansen follows:] 


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Mr. PALLONE. Thank you. 

Dr. Shern. 

STATEMENT OF DAVID L. SHERN 

Mr. SHERN. Mr. Chairman, members of the committee, Mental 

Health America is honored to participate in today’s hearing on 

ways to reform our health care system. 

I want to start by expressing our appreciation for the many important proposals included in the tri-committee bill released last 

week that recognize how integral mental health is to overall 

health. 

You know, this is our centennial year; our organization is 100 

years old this year. And for the last 100 years, we have advocated 

for people with mental health. And from the beginnings of our organization, we had kind of a dual vision. On the one hand, we were 

concerned with people who had severe and disabling illnesses, who 

would have traditionally been treated in State hospitals. But, on 

the other hand, from our very beginning we have had a commitment to a public health perspective and to prevention as the only 

real way to drive down the prevalence of illness. 

So we are very heartened by this bill, because we see it as including many of the issues that need to be addressed in order to 

become the healthiest nation. We think that it addresses historical 

patterns of discrimination by including parity for mental health 

and substance use services. And, importantly, it addresses the prevention and management of chronic diseases as the real strategy 

to control costs and improve overall health care status. We think 

these are very important. 

You know, mental health and substance use conditions are really 

paradigm cases for what goes wrong when we discriminate against 

a class of illnesses and fail to prevent and appropriately treat 

them. And this resonates very much to what Ms. Wright Edelman 

was talking about, in terms of not addressing issues of mental 

health services in children. 

Increasingly, our science is telling us that mental health and 

substance use conditions—we used to think they were diseases of 

early adulthood. We now know that they are diseases of adolescence. They are developmental disorders that occur early in life. 

For all people who are going to develop a mental health diagnosis 

during the course of their life, 50 percent of those people will have 

that diagnosis by the time they are 14 years old. However, they 

will not receive services until, on average, they are 24 years old. 

So, during that 10-year period, substantial disability begins to 

develop. Academic achievement starts to drop off; these are very 

strong predictors of academic achievement. Ultimately, occupational achievement is compromised. We need to do a much better 

job at early identification and addressing issues of mental health 

and substance use disorders if we are going to develop the healthiest nation. 

The reason that WHO estimates that mental health and substance use conditions are, in fact, the most burdensome of all 

health conditions, causing twice as much burden of disease as cardiac illnesses, is in part because they are diseases of early adolescence that we do not effectively address. 


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So, clearly, this bill, from our perspective, includes all the key 

components that are necessary to start to address this problem, at 

least structurally. 

First of all, it clearly addresses the importance of preventative 

services. You know, I think in some contradiction to some of the 

things that were said earlier, we have a brand-new report from the 

Institute of Medicine that was released in March that is a comprehensive summary of what we know about the effectiveness of 

preventative services for emotional and behavioral disorders in 

children and young adults. 

And we know a lot. Our science base is strong. We know that 

community-based interventions work, and we applaud the committee for emphasizing the importance of community-based interventions. We know that early identification when coupled with 

treatment works, as the Preventive Services Task Force has indicated. And we applaud the committee for including those services, 

as well. 

It is also clear, if you look at what is required to manage chronic 

disease, it is very clear that in order to do that you need to address 

the entire person, not the person in segments or subspecialties. The 

notion of the medical home that is included in the bill I think is 

extraordinarily important, and the inclusion of behavioral health 

services in that medical home is absolutely critical. 

Not only are mental health and substance use conditions the 

most chronic illnesses, they are the most common co-occurring illnesses with other chronic disorders. And when they co-occur, they 

drive costs way up, drive outcomes way down. So the medical home 

and comprehensive integrated care is clearly an important part of 

what we need to accomplish here. 

You know, we have a tragedy in this country in that people with 

chronic mental illnesses who are served in our public system die 

25 years early—25 years early. They are dying on average in their 

50s. And they are dying from a broad range of the same disorders 

that will kill all of us in our 70s or 80s or 90s. 

So it is a critical imperative that we address comprehensively the 

needs of that population as well as persons with other chronic conditions who are likely to have mental health and substance use 

conditions. 

Finally, I would just like to say that closing the donut hole is 

very important for people who rely on psychiatric medications, 

which can be very expensive. 

The committee’s attention to workforce provisions is critically important. As several people have noted, we have a very predictable 

workforce crisis coming up on us quickly. 

And then, finally, a word about comparative effectiveness research. You know, I left academia 3 years ago at the University of 

South Florida, where I used to work for Ms. Castor’s mother, to 

join an advocacy organization because of my frustration with our 

inability to get our incredible science base to people who need those 

services. 

Comparative effectiveness research provides a framework for us 

to better codify and understand what works and to translate it into 

information that can be supportive of individuals and their clinicians, their caregivers, in making better decisions. 


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So I applaud the committee for all the components of the bill, 

which seem to nicely round out both improving the quality of care, 

emphasizing preventative services, and bringing better science to 

bear in terms of our decision-making processes. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Shern follows:] 


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Mr. PALLONE. Thank you, Dr. Shern. 

Dr. Novack. 

STATEMENT OF ERIK NOVACK 

Dr. NOVACK. Good afternoon. I want to thank Chairman Pallone 

and the rest of the committee for having me here today. My name 

is Eric Novack, and I am a medical doctor who has actually spent 

the last 23 years training and working in health care. 

Make no mistake: The variability for everyone in this room and 

your families to seek out the kind of health care you believe is best 

is under direct assault. And the risk you will lose control over your 

health and health care has never been greater. Unbelievably, nowhere in the U.S. Constitution or in the Constitution of any of the 

50 States do any of us have any right to be in control of our own 

health. 

In November 2008, Arizona’s Proposition 101 sought to place two 

basic rights into the State Constitution: first, to preserve the right 

of Arizonans to always be able to spend their own money for lawful 

health care services; and second, to prevent the government from 

forcing us to join a government-sanctioned health care system. 

Because once we are forced into a plan, our health care options 

will be restricted by the rules of the plan, whether it be public or 

private. It was a true grassroots campaign, and an idea went from 

concept to well over a million votes in less than 18 months and 

failed by less than one-half of 1 percent. 

Fortunately, the Arizona legislature has courageously recognized 

the critical issues raised by the initiatives and, just yesterday, referred the Arizona Health Care Freedom Act to the ballot in 2010. 

Unfortunately, the reforms that have recently passed Congress 

and the bulk of those that are being considered do not appear to 

have much respect for the basic freedoms that the Arizona initiative seek to protect. 

The stimulus bill was used as a tool to vastly expand the Federal 

health care bureaucracy. By the end of 2014, every American will 

be forced to have an accessible electronic health record that can be 

viewed by government officials without consent, permission, or notification. 

The stimulus bill created the Federal Coordinating Council for 

Comparative Effectiveness Research, whose ultimate function will 

be to become a Federal health care rationing board for all Americans, starting with seniors. As Health and Human Services Secretary Kathleen Sebelius said during her confirmation testimony, 

quote, ‘‘Congress did not impose any limits on it,’’ referring to the 

council. 

And now MedPAC may be empowered to make the full slate of 

recommendations for every condition and treatment. Congress will 

only be able to make an up-or-down vote on the entire package. 

The President recently spoke to the American Medical Association, touting the importance of using evidence-based medicine to 

figure out what works and what does not. When it comes to the 

best treatments for our ailing health care system, we have some 

compelling evidence. 


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Leaders in Congress regularly cite Massachusetts as the model 

for reform. But what really is going on in Massachusetts, and do 

we want to repeat it on a grand scale? 

Costs are even more out of control than in the country as a 

whole. Use of the emergency room for care has not diminished despite the higher percentage of people with insurance. And there is 

exactly zero evidence—there is exactly zero evidence—that forcing 

people to have insurance has made any difference on slowing 

health care spending. 

Medicare has tried several disease management and prevention 

projects. The idea that spending money upfront to prevent Medicare patients from needing expensive hospitalizations and disease 

complications will save money in the long run. 

Unfortunately, the results do not bear that out. Among the conclusions in the June 2007 report to Congress on the trials, quote, 

‘‘Fees paid to date far exceed any savings produced.’’ In other 

words, the cost of administering the plan made the prevention plan 

more expensive. 

Real research also suggests that obesity and smoking prevention, 

while admirable, do nothing to reduce health care spending. 

Supporters of the President have also reviewed the literature on 

the impact of electronic health records on spending and concluded, 

quote, ‘‘We need the President to apply real scientific rigor to fix 

our health care system rather than rely on elegant exercises in 

wishful thinking.’’ 

And research has been done demonstrating geographical variations in health care spending, but there is no evidence that having 

Washington forcibly taking money being spent in Massachusetts, 

New York, or California and sending it to lower-spending States 

will improve anyone’s health. 

We cannot afford to make mistakes that will mean our grandchildren will, in the words of the President, suffer from, quote, ‘‘spiraling costs that we did not stem or sickness that we did not cure.’’ 

Congress should fix Medicare first before radically changing the 

health care of every American. Congress should demonstrate that 

the government can prevent the disturbing failures even more exposed this week of the VA system before radically changing the 

health care for all Americans. And Congress should work very hard 

to increase the options and availability for the 3 percent of Americans who are truly, quote, ‘‘chronically uninsurable’’ before radically changing the health care for the other 97 percent. 

Health care reforms are critically needed. Our path is 

unsustainable. But jamming through a piece of legislation that few 

will have read and the American public will not have had time to 

fully review makes no sense. 

The cynics who shout that we cannot have health care reform 

without sacrificing our personal freedoms are false prophets offering a false choice. I urge the members of this committee to consider 

health care legislation that protects individual liberty, preserves 

privacy, limits government power, and has reforms that have actually been shown to work—in other words, reforms that protect patients first. 

Thank you very much for the opportunity to present my views 

today. 


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[The prepared statement of Dr. Novack follows:] 


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Mr. PALLONE. Thank you, Dr. Novack. Ms. Robertson-Holmes, 

thank you for being here. 

STATEMENT OF SHONA ROBERTSON-HOLMES 

Ms. ROBERTSON-HOLMES. Thank you. Thank you, Chairman and 

members of the committee. Four years ago sitting in my doctor’s 

office, never did I believe I would be here in Washington talking 

about this situation. But I am here because I was fortunate enough 

to be able to in amongst my nightmare come to this country and 

get treatment. 

I actually am the face of public insurance. We have—I am from 

Canada and we do have public insurance, a mandatory monopoly 

on our insurance. And I am here to say when it doesn’t work, it 

doesn’t work. Unfortunately, in Canada we have 33 million people, 

which is approximately the size of the State of California, and we 

currently have 5 million people without family doctors. 

What started many years ago as a seemingly compassionate 

move in our government to treat all equally and fairly by providing 

the same medical coverage has in fact turned into a nightmare of 

everyone suffering equally. Now we have limited resources and 

funds that offer timely treatment to our citizens. 

A system like this starts to crack under pressure and special 

treatment is ultimately given to those who have contacts and resources to jump the line for treatment, and for someone like myself, 

the average Canadian citizen, forced to go to another country for 

care. 

I will never get the time, money or life back that I have dedicated to the fight to basic treatment that I was promised by my 

government; but not only promised, it was ordered. I will never forget the experience of the treatment in a facility suffering so bad 

from government funding and shortages of staff and resources. 

I know that the American health care system is not perfect, but 

I do credit the system for saving my life. It is because of the choices 

available here in this country that I was able to receive immediate 

care. We as Canadians have one insurance company, the government. We have no options. We can’t choose another country, we 

can’t supplement with after-tax dollars to purchase extra care. 

We can purchase health insurance for our pets, but not our children. I have very few rights as a patient. Patients there have to 

fight for every basic service and care, much less any kind of specialized care. 

Another thing that I would really like to point out is that our 

health care is not free. In fact, I would argue that the cost is much 

greater than the tax we pay each and every citizen towards this 

care. The costs are loss of quality of life while living with pain, discomfort, or just the fear of the unknown and also for waiting long 

term for diagnostic testing, the cost of employers and self-employed 

people waiting for employees to be treated and be well enough to 

return to work. 

Medications are also something that Canadians are struggling 

like Americans to pay for. We are not covered for our medications 

under our health care plans. We pay the cost of local ERs closing, 

losing a wealth of talented doctors that leave the country because 

they just don’t have the resources to do their job properly at home. 


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We have rationed services and treatments and a fear of living without a safety net. 

The one thing that I wanted to sort of point out when I was making my testimony today was if I have gotten any criticism from 

anybody that I have done for what I have done is that I must have 

had the resources in order to be here today. I am here to say that 

I didn’t. I am so average, and in order to get what I had to do, my 

husband took a second job, he put a second mortgage on our house. 

We owe every single person we know money. And I will never forget all of that that has happened, but I also want to wake up grateful for what happened to me in America. And I want to have those 

same options in Canada. 

And I just felt from the very beginning of my experience that it 

was my job to point out to both Canadians and Americans what we 

can do together and what we need to learn from each other’s situation. 

Thank you. 

[The prepared statement of Ms. Robertson-Holmes follows:] 


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Mr. PALLONE. Thank you. And now we have questions, 5 minutes 

from the panel. And I am going to start with myself. And let me 

just say I am not looking for a response. But I really appreciate, 

Ms. Robertson-Holmes, that you came today. I am not being critical 

in any way because I know you took your time. But I really have 

to stress that this draft is not meant in any way to put together 

a single payor system or emulate Canada. Canada is a nice place, 

but I am not really looking to create a Canadian system or even 

praise the Canadian system because I really believe that the draft 

implements a uniquely American system that in no way replicates 

Canada. But I appreciate your being here. I am not trying to denigrate it in any way. 

Ms. ROBERTSON-HOLMES. The problem is it is a very slippery 

slope. Once you start on that sort of road—and unfortunately a lot 

of the Americans that I am talking to have said to me, well, we 

are going to get free health care too, we are going to get Canadian 

style health care. 

Mr. PALLONE. Well, I think you are right, that there are some 

people who think that somehow this is single-payer, but I just want 

to stress I don’t think it is and I don’t see how it becomes a singlepayer. But whatever, I appreciate your being here. And I don’t 

want to take away in any way the fact that you came here and how 

difficult I am sure it was to be here. 

Let me ask the question of Ms. Wright Edelman about Medicaid. 

I am very proud of the fact that in this discussion draft we really 

discuss Medicaid in a major way in the sense that we are trying 

to cover and fill in the gaps with 100 percent Federal dollars for 

those who are not covered by the States now up to 130 percent, 

that we are increasing the reimbursement rates so that it is more 

like Medicare. A big part of this is Medicaid, And I think in many 

ways it hasn’t really gotten attention, unfortunately. 

But what I wanted to ask you is, there have been those who say 

that once we—if we set up what is in the discussion draft, that 

Medicaid would no longer be needed and that those people who are 

in Medicaid should be put into the Exchange, be able to get their 

insurance with the Exchange. The draft doesn’t do that and—because we are concerned that that might be harmful, at least initially to Medicaid. 

So I just wanted you to discuss the types of benefit and cost sharing protections available in Medicaid that are generally not found 

in private health insurance products. And if you could talk about 

the need to keep and improve the Medicare safety net undisturbed 

for years to come in response to those critics. We are not putting 

Medicaid in the health Exchange. 

Ms. EDELMAN. I hope you will not. Do not put Medicaid into the 

Exchange. Nobody should end up worse off than they are currently. 

Medicaid is a crucial safety net. I applaud in my written testimony 

your extension of 133 percent for all. And the adults that need that 

help, I applaud you for it. I am glad that you are reaffirming it for 

children, but all children are currently covered at that level. So it 

will not result in an increase. 

But what we do hope you will do in protecting Medicaid—in fact, 

I would like it if you want to take it up to 300 percent. That would 

be wonderful, too. I don’t care how you do it, as long as you can 


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kind of try to get all those folk who are uncovered, but I think that 

Medicaid is essential, it is comprehensive benefits. As I go for children, it is essential. The fact that it is an entitlement is absolutely 

crucial, and I think it is one of the strongest pieces of what you 

have done. 

On the children’s front, I hope that you will make sure that Medicaid’s benefit protections are extended to CHIP children and children in the Exchange because we think it is the most appropriate 

benefit package. So we hope you will do that. But it also raises another important point because many of the children now at 133 

percent of poverty under Medicaid are eligible but are not getting 

it because the bureaucratic systems are impeding that. So one of 

the things that is essential if the children under 133 percent of 

Federal poverty level are going to get their Medicaid coverage, we 

are going to have to simplify. And we have laid out a number of 

simplification steps. 

One of the good things you have in your provisions is automatic 

enrollment of any child that is uninsured at birth. I think that is 

fantastic. We would like to see automatic enrollment for any child 

that is in any means-tested program. We would like to have 12 

months continuous eligibility. We have laid out a number of steps 

that can be taken to ensure that those children currently eligible 

for Medicaid will in fact get it. But you are going to have to do the 

systems reform to make it effective. 

Mr. PALLONE. I appreciate it. And I am sorry to stop you, but I 

want to ask another question of Ms. Hansen. Yesterday the 

PhRMA and the President announced some kind of a deal to cut 

costs for seniors with incomes up to $85,000 in the doughnut hole 

by 50 percent; in other words, to fill in the doughnut hole in part, 

the people whose incomes are up to $85,000, that they would only 

pay 50 percent for brand name drugs once they fall in the doughnut hole. 

Now, I am not taking away from that. I appreciate the fact that 

the pharmaceuticals are doing that. But in the discussion draft, we 

fill about $500 of this cost for the doughnut hole immediately and 

then phase out the doughnut hole for all Medicare beneficiaries 

over time. And we also reinstate the ability of the Federal Government to get the best price for prescription drugs for the most vulnerable low income Medicare beneficiaries. Those are rebates again 

to fill the doughnut hole. 

How do you see this provision in the draft, the discussion draft 

as working together with the commitment by the pharmaceutical 

manufacturers yesterday? I don’t see them as mutually exclusive. 

I think they are both positive. But I just wanted you to comment 

on that. 

Ms. EDELMAN. Well, I have actually—— 

Mr. PALLONE. Well, I was going to ask Ms. Hansen originally. Go 

ahead. I am sorry. We are just out of time. Go ahead. 

Ms. HANSEN. Thank you. Mr. Chairman, we agree with you. This 

does not preclude the continuance of it because it is actually only 

50 percent of the doughnut hole and for people who are at that income level. It doesn’t cover every Medicare beneficiary. But it is— 

part of what it does do for the people who are on drug coverage, 


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as I stated briefly, that people who are falling in that hole are not 

oftentimes continuing with their medications. 

So part of our job as an organization is to really get the most relief in the quickest time on behalf of people who are already in that 

conundrum. I mean, that even relates to people who are becoming 

bankrupt as well. So that cost element is real important. 

I think what the draft does is importantly to continue to build 

on that so that we have a more whole, seamless coverage on behalf 

of people. So I do think that they can work—and we are continuing 

to work with you on making sure that coverage continues. 

Mr. PALLONE. And I appreciate that. I know you were part of this 

deal. I don’t know if that is the right word, or agreement yesterday. 

But I also appreciate your working with us to try to completely fill 

the doughnut hole. 

Ms. HANSEN. I just wanted it to be really clear, I think it was 

Senator Baucus that really took the leadership role with PhRMA. 

And I know that the President supported it. And we again appreciated it because it makes such a big real difference in people’s 

pocketbooks. 

Mr. PALLONE. We try not to talk about the Senate here, but there 

are occasions we have to acknowledge their existence. 

The gentleman from Georgia, Mr. Gingrey. 

Mr. GINGREY. Mr. Chairman, thank you. I want to ask Ms. 

Shona Holmes. First of all, thank you for your testimony. We really 

appreciate that. And I as a medical doctor, I mean, I understand, 

I think, what you were describing to us. I guess a benign pituitary 

tumor, the pituitary gland is about the size of your little thumbnail 

in the normal circumstance. But when it is growing so rapidly as 

in your case, it is right in front of the optic nerve where it crosses 

over and as it compresses on that optic nerve, as it gets larger, that 

is what would lead to the blindness and I am assuming the doctors 

at the Mayo Clinic in Arizona informed you of that and said that 

you really need to get this surgery done within about 6 weeks. 

Now you went back to Canada and I understand from your testimony they said that there was no way they could do it in the 6 

weeks. Did they say why? Did they have a reason for that? 

Ms. ROBERTSON-HOLMES. The biggest problem in Canada is that 

the wait times even just to get in to specialists in order to get diagnostic testing done. So when I returned to—in fact, I had this false 

sense of security when I was in Arizona because 2 of my doctors 

were, in fact, Canadian. I have never questioned the talent that 

comes out of the medical system in Canada. They just don’t have 

the resources. And so when I saw these doctors, they said go home, 

you can get this done at home and you have insurance, this is what 

you should do. Here is your—— 

Mr. GINGREY. And you said it would probably have cost you 

$100,000 to have it done in the United States. 

Ms. ROBERTSON-HOLMES. In total, with all my expenses and everything being away, and I had to return—I took 3 solid runs at 

this particular situation. So this is not just that I fell through a 

crack. And I had to go—I had to go originally for diagnostic testing. 

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Mr. GINGREY. So there was a real problem with the rationing basically, a long queue, and getting—— 

Ms. ROBERTSON-HOLMES. And at the time I was also diagnosed 

with a potential tumor in my adrenal and it was recommended at 

the Mayo Clinic at that time that I have that surgery and, you 

know—— 

Mr. GINGREY. That additional surgery. And also that was going 

to be delayed in Canada as well? 

Ms. ROBERTSON-HOLMES. Three years to the date. 

Mr. GINGREY. Time is running out. I want to ask you one other 

thing. In your testimony you credit the United States health care 

system for saving your life. You just said that. You also mention 

your lack of rights as a patient in Canada. Tell me, as someone 

who has seen health care from both sides of the Canadian border, 

what advice can you give to American patients who may be following this debate in Congress? 

Now, keeping in mind what our chairman and I know in all sincerity he mentioned that this is in his opinion not nor is it designed 

to lead to a single-payer, U.K. or Canadian type system. That is 

what Chairman Pallone said. You have some concerns about that. 

I have some concerns about that with this public option. 

What would you say to the American people in regard to this? 

Ms. ROBERTSON-HOLMES. It is my understanding from—actually 

all my family is in Great Britain and it actually is a 2-tiered system. They actually have public and private, and they are almost in 

worse condition than we are. What I am saying is I am insured. 

I have insurance. But the money isn’t there. It is expensive. Health 

care is expensive anywhere. And I was promised that I had insurance. But when it came to using the services that I was supposed 

to be covered for, they weren’t there. 

Mr. GINGREY. Yes. So having an insurance, a plastic card doesn’t 

guarantee you access, affordability, availability if there are no physicians there to provide that care. 

Great point. Thank you very much for your testimony and for 

your response. I want to go now to Dr. Novack, Dr. Novack, thank 

you. I know you practiced orthopedic surgery—is it in Arizona, I 

think you mentioned to us. And you reference in your testimony 

the study published I think May of 2009, the Journal of Health Affairs, one in five Massachusetts adults were told in this last year 

that a desired physician was not taking new patients. Here again, 

they had insurance, they had coverage, they just couldn’t find a 

doctor. Do you know if the type of insurance a person carried influenced their ability to see their desired physician, whether it was 

the public plan option or a private plan option? There was a delta 

in regard to who can get—— 

Dr. NOVACK. I don’t have an answer for you on that. What it is 

illustrative of is the regular attempts to conflate health insurance 

with health care. So here the 47 million number, which is a bit inaccurate in and of itself, that don’t have health care, those are people who don’t have health insurance. And since 20 million of these 

people change every year because of job changes, et cetera, about 

10 million are in the country illegally, about 10 million are between 

18 and 30 and don’t think they will ever get sick. You are left with 

about, as I mentioned, about 3 percent of the country that is chronVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00184 Fmt 6633 Sfmt 6633 E:\HR\OC\A088.XXX A088

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ically uninsured. So just giving people health insurance, what we 

see in the Massachusetts example, is no guarantee that you have 

access to health care. 

Mr. GINGREY. Mr. Chairman, if I might ask Dr. Novack to submit 

a written answer to my question in regard to the different discrepancies between or among the plans where there were no doctor 

available, I would appreciate that. My time has expired and I yield 

back. 

Mrs. CAPPS [presiding]. Yes. 

It is a pleasure now to yield 5 minutes to our chairman of the 

full committee, former chairman, John Dingell. 

Mr. DINGELL. Thank you, Madam Chairman. I would like to 

begin by welcoming our old friend and my very dear personal 

friend, Marian Wright Edelman, to the committee. I am delighted 

to see you here, Marian. 

Ms. EDELMAN. Nice to see you. 

Mr. DINGELL. I want to get right down to the business at hand 

here and to say to you, Ms. Holmes, welcome. Your comments I 

found to be most interesting. Tell me, you are referring to a singlepayer system you have in Canada; is that right? 

Ms. ROBERTSON-HOLMES. I am, yes. 

Mr. DINGELL. You are aware that the draft that is before us is 

not a single-payer bill? 

Ms. ROBERTSON-HOLMES. All I am aware of is I needed to tell 

what my story was. 

Mr. DINGELL. So then help me. How would your concerns with 

a single-payer system apply to the draft of the legislation we are 

working on today? 

Ms. ROBERTSON-HOLMES. My concerns are basically in order to 

open up the communications so that people know the questions to 

ask when a bill is passed so that they know what is safe to get 

into—— 

Mr. DINGELL. In other words, your comment is a warning rather 

than a criticism? 

Ms. ROBERTSON-HOLMES. Just my experience. 

Mr. DINGELL. Well, I think it is a very good criticism, and I 

thank you for it, or rather a very good warning as opposed to a criticism. 

Now, Dr. Novack, I found your—you made a very frightening 

comment here that I would like to address with you because if your 

fears are correct, this is a very bad situation. And in this—and I 

can tell you that I am going to stay up night and day to get it out 

if there is anything like that in here. You made this statement. 

You said no matter what name the bureaucrats and politicians 

want to use, the plan being put forth by the committee will mean 

Washington bureaucrats will have the power to deny you care. 

That is a very frightening statement, and I would appreciate it 

if you can tell me where in this draft that there is language that 

would authorize that so that I can get this out? I will work with 

you to get it out. Tell me where it is. 

Dr. NOVACK. I think the issue here is when you—what has been 

very vague of course is exactly how the cost control is going to happen. 


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Mr. DINGELL. No, no, no, no. Where is the language? You made 

a bold, flat statement, and frankly I am scared to death. Now, I 

want you to tell me where it is in there so I can get it out. 

Dr. NOVACK. I don’t have the exact line for you, sir. But I 

can—— 

Mr. DINGELL. But where is it, Doctor? I would probably be unfair 

to you because you are a doctor and I am a lawyer, and I would 

never presume to tell somebody how to take out an appendix or to 

replace a knee, but I do know a little bit about drafting law. I have 

been doing it for about 50 years and you made a statement that 

scares the bejabers out of me, and I want you to tell me where it 

is. 

Dr. NOVACK. Again, I don’t have the exact line numbers for you, 

but I will get it for you. 

Mr. DINGELL. So you made the bold statement, though, which 

you are not able at this time to tell us where the language is in 

the bill that has caused you to make this statement, and I will repeat it again because quite frankly it is a very serious charge: No 

matter what name the bureaucrats or politicians want to use, the 

plan being put forth by the committee will mean Washington bureaucrats will have the power to deny you care. And you capitalized ‘‘deny you care.’’ 

Dr. NOVACK. Again, the answer here is that we know that care 

is going to be denied because you have to come up with a package—the plan is to come up with a standard benefit package and 

then to give some authority the ability to determine which benefits 

are going to be accessible to—it will start with seniors, I imagine, 

if we start applying this to patients in Medicare first. If those benefits are different than the benefits that people currently enjoy 

today, that will potentially be care that will be either delayed or 

denied for what they are getting right now. 

Mr. DINGELL. That is the basis for your statement, is it? 

Dr. NOVACK. Yes. 

Mr. DINGELL. I find that to be interesting. It is kind of like building a house of cards here or maybe setting up a straw man. And 

that is a good thing to do because then you can knock them down 

fairly easy. But I still want to hear you tell me what is the precise 

thing. 

Let us go to something. You have got Blue Cross and Blue 

Shield. You have got Aetna. You have got all kinds of insurance 

companies in this country. Do you remember when we had the big 

fight over patient’s bill of rights? Do you remember that? 

Dr. NOVACK. Not entirely. 

Mr. DINGELL. The AMA was very, very interested in it, and they 

were very helpful to me in my efforts to try to get that legislation 

through. That was to stop a bunch of health insurance bureaucrats, 

green eyeshade actuaries from telling you as a doctor what you 

could do and telling me as a patient what treatment I could get. 

And I find your same apprehensions were joined in by my friends 

at AMA when we tried to correct this iniquitous situation which we 

have now. And I am trying to find out where the abuses that we 

complained about are to be found in the legislation. 

Dr. NOVACK. Sir, I think—— 


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Mr. DINGELL. And how this situation, even if it is as you say, is 

true, would be worse than that which we have now where we have 

47 million Americans who haven’t gotten any health care and who 

haven’t got anybody to tell them what they can have or not have. 

The only thing they can say is you can’t have treatment because 

you can’t pay your bill. 

Dr. NOVACK. Well, I think the question is what kind of tradeoff 

are we looking to make. It is true and I can tell you both as a provider and as a patient and as a patient advocate that there is often 

times no love loss between me and the bulk of the private health 

insurance industry. The tradeoff that the legislation appears to be 

making is to be moving away from green eyeshade private health 

insurers towards green eyeshade Washington bureaucrats. And I 

think at the end of the day when we look at examples where there 

have been abuses in the private health insurance industry, there 

is resource. When Blue Cross did recisions in California and other 

companies did recisions in California, there has been significant— 

but my concern is, for example, in the VA system—there is no resource to the 10,000 people that are exposed to HIV—— 

Mr. DINGELL. My time has expired. Thank you. 

Mrs. CAPPS. Thank you, Mr. Dingell. And I yield now 5 minutes 

for questions to Mr. Whitfield. 

Mr. WHITFIELD. Thank you, Madam Chairwoman. Let me ask 

you, have any of you read this bill? Ms. Edelman, have you read 

this legislation? 

Ms. EDELMAN. I have read or my staff has read it multiple times 

and we have struggled to make sure that I read the key portions 

of this bill that relate to children. 

Mr. WHITFIELD. When did you all receive it? 

Ms. EDELMAN. We got it on Friday and it is over 800 pages long, 

but we have done the best we could. 

Mr. WHITFIELD. Well, I don’t think any of you have read it. Certainly I have not read it. Not many members up here have read 

it. And one of the things we are concerned about, when you have 

this sort of dramatic change in health care—and evidently this bill, 

they are going to try to bring it to full committee the first week 

of July or the second week of July. We don’t really have a lot of 

time here. 

But let me just talk philosophically about a couple of things and 

then I will get into some specific questions. I would ask all of you, 

does the American taxpayer have the responsibility to pay for nonemergency health care for illegal immigrants? Ms. Edelman, what 

do you think? 

Ms. EDELMAN. I think all children should be covered because as 

a public issue if there are any children that are in our country or 

in our schools—all children go to schools. 

Mr. WHITFIELD. What about adults? 

Ms. EDELMAN. I am here to talk about children. Our bill is about 

all children being covered. 

Mr. WHITFIELD. What about you, Ms. Hansen? 

Ms. HANSEN. We don’t have a policy on immigration because that 

is not part of our public policy covering our—— 

Mr. WHITFIELD. So you don’t have a position? OK. Dr. Shern, 

what about it. 


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Mr. SHERN. Similarly we don’t have a position on—— 

Mr. WHITFIELD. Dr. Novack. 

Dr. NOVACK. I would just say currently as a provider—and I take 

about 14 days of emergency room call every month, I take care in 

the Phoenix area of a whole lot of people who are not in the country legally and they get the same care, whether—— 

Mr. WHITFIELD. But I said nonemergency room care. 

Dr. NOVACK. I think that given the tens of trillions of dollars of 

unfunded liabilities, that we ought to be directing the resources to 

people in the country legally first. 

Mr. WHITFIELD. There has been a lot of discussion here about 

there is not going to be any government payor plan or government 

plan. And yet in section 203 of the bill, which very few of us have 

read, it says the Commissioner that will be established under this 

legislation shall specify the benefits to be made available under Exchange, participating health benefit plans during each plan year. 

And I have been told that that applies not only under the government option but also the private plans. 

So do you think it is right that some government officer will be 

dictating what benefits will be available under private as well as 

the public option plan? Dr. Shern. 

Mr. SHERN. Well, I think that the intention, as I understand it 

of that provision, is to provide a floor of services that will be available for everyone upon which you can build. And I also think that 

if—— 

Mr. WHITFIELD. That is your understanding. Do you know that 

to be a fact? 

Mr. SHERN. No, I don’t know that to be a fact. 

Mr. WHITFIELD. What about you, Ms. Hansen? 

Ms. HANSEN. I can’t answer it. 

Mr. WHITFIELD. Have you read the bill? 

Ms. HANSEN. Not since Friday. 

Mr. WHITFIELD. But you all have helped work on this legislation. 

You have been a part of drafting this legislation; is that correct, 

Ms. Hansen? 

Ms. HANSEN. We don’t draft the legislation. 

Mr. WHITFIELD. Did you have input into it? 

Ms. HANSEN. There have been conversations between our staff. 

Mr. WHITFIELD. Now, the CBO says that they estimate 15 million people will lose their present insurance, health insurance coverage as a result of this legislation. So, Ms. Hansen, what would 

you say to your members who will lose their employer health coverage because of this bill? 

Ms. HANSEN. Well, we take the position that people—the principle of choice—and we also support that people who have insurance now can and want to keep that. And that is something that 

we actually believe in the maintenance of a public and a private—— 

Mr. WHITFIELD. Does this legislation give each individual the 

right to keep their current insurance? 

Ms. HANSEN. Those are the principles that we are supporting. 

Mr. WHITFIELD. But do you know for a fact that it does it? Do 

you know for a fact that it does it? 


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Ms. HANSEN. I don’t know for a fact personally, but the principles I can ascribe to—— 

Mr. WHITFIELD. My understanding is that this legislation also includes an employer mandate which will force businesses to either 

provide health insurance to their employees, which is fine, or pay 

a tax of 8 percent of wages paid. Now, that is going to particularly 

hit hard small businesses. And there have been estimates that 

there may be 4.7 million Americans that would lose their jobs because of the additional tax that small business men and women 

will have to pay. 

Does that concern you all? Does that concern you at all, Dr. 

Shern? 

Mr. SHERN. If those estimates are correct, that would be a concern. 

Mr. WHITFIELD. Ms. Hansen. 

Ms. HANSEN. Right. We feel that the ability to cover should also 

be supplemented by understanding affordability and cost for both 

employer, as well as the employee. 

Mr. WHITFIELD. OK. 

Ms. EDELMAN. But it is also my understanding that small businesses can buy into a public plan, but everybody should be contributing something. 

Mr. WHITFIELD. Everyone. 

Ms. EDELMAN. This should be a shared sacrifice. 

Mr. WHITFIELD. Let me ask you a question. What do you think 

if we just took the money that this plan is going to cost and just 

put everyone under Medicaid? I mean, I know you are a supporter 

of Medicaid. It is a good system. What do you think about that? 

Ms. EDELMAN. Well, I think that the committee can deliberate. 

I don’t care how we do it. We should thoughtfully determine that 

we are going to get health coverage for everyone. What they are 

trying to do here is to give people—— 

Mr. WHITFIELD. Would you be opposed to everyone being under 

Medicaid? 

Ms. EDELMAN. I would be not be opposed to all children being 

under Medicaid. That is what I know about. 

Mr. WHITFIELD. What about adults? 

Ms. EDELMAN. But I think that the issue here is how we are 

going to give everybody coverage and choice about a public or a private—— 

Mr. WHITFIELD. And my question is would you object to everyone 

being under Medicaid? 

Ms. EDELMAN. I am here to talk about children today and to say 

whatever plan we do, that we should absolutely make sure that all 

children and pregnant women are covered, and I would love it if 

Medicaid took them all up to 300 percent, all of the children got 

the Medicaid benefits and the Medicaid entitlement. 

Mr. WHITFIELD. I think my time has expired. 

Mrs. CAPPS. Thank you, Mr. Whitfield. 

May I just make a correction to a statement that was made? It 

is my impression or my understanding that CBO has not taken a 

position on this bill and that actually a private-public benefit advisory committee determines what the benefit is that should be on 


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the floor—or what is offered in coverage in the new marketplace or 

sold in the new marketplace, and that is just for the record. 

And I now call upon or recognize our colleague from Colorado, 

Ms. DeGette, for 5 minutes. 

Ms. DEGETTE. Thank you, Madam Chair. And I want to add my 

thank to Ms. Robertson-Holmes for coming today. It is always important to hear the patient perspective. When you were testifying 

about the great care that you got at the Mayo Clinic, I was thinking about my next door neighbor when I was a little girl, Randy 

West. I knew him since I was 6 years old. And about 2 years ago, 

Randy was diagnosed with prostate cancer and he was treated and 

the doctor said they thought he was cured. And then the next 

spring when his private insurance plan came up for renewal, his 

insurance company said they would renew his insurance but that 

they would not insure him for any future complications he might 

have gotten from the prostate cancer. So he said, well, why should 

I get insurance then because that is the thing that is the most likely to affect me. So he didn’t get the insurance renewal, and you 

know the rest of the story. Last summer, his symptoms returned, 

he went back to his old doctors, his old doctors would not now treat 

him because he didn’t have health insurance anymore and he spent 

about 2 or 3 months trying to get on to Medicaid so he could afford 

to go see the doctor and get treatment for his now advanced prostate cancer. Last week, on Wednesday, was Randy’s 57th birthday, 

and he died suddenly of a heart attack because of the advanced 

prostate cancer that had riddled his body. 

So there are problems with the single-payer system in Canada, 

but there are real problems for 47 million Americans like my friend 

Randy West who died because he didn’t get the insurance. And I 

don’t even need a response to that. I just want to say what we are 

trying to do is make it so insurance companies don’t deny people 

for those pre-existing conditions and so that people who have diseases in this country can go to the doctor. 

And I just want to point out to you, Ms. Hansen, I want to thank 

you for mentioning the Empowered at Home Act in your written 

testimony because Chairman Pallone and I worked on this bill a 

lot together, and what that does is it incentivizes States to provide 

home and community-based services which allows disabled individuals to stay in their homes. It is not only about better health outcome, it is also more cost effective. And so I want to thank you for 

that, and I think, Madam Chair, that is an important component 

to keep in the bill as we move along. 

And finally, I have to thank my dear friend, Ms. Edelman, all of 

our dear friends and a real icon for children in this country for 

coming over today, and I want to ask you a couple of questions 

about kids. As you know, I have worked for many years on kids’ 

health. 

The first one is, do you think that as we design a program to try 

to enroll all kids in this country in health insurance or some kind 

of health coverage that we should look at their unique needs and 

not just assume that the adult programs will cover them? 

Ms. EDELMAN. Yes, which is why we feel so strongly about the 

Medicaid benefit package which has been thought through as being 

the most child appropriate because it is targeted at children and 


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it is targeted at early diagnosis and early treatment. So I don’t 

think we need to reinvent anything, and I hope you will not come 

up with a benefit package, whatever it is, that takes away what 

children now have that works, and we want you to extend that 

package to all children because that is what we think they need. 

Ms. DEGETTE. And that includes mental health and—— 

Ms. EDELMAN. Mental health. It is the comprehensive, all medically necessary services. And we think that that should be Medicaid children, CHIP children and any children regardless of 

whether they are in an Exchange or not. 

Ms. DEGETTE. And we talked earlier. I think you mentioned in 

your testimony the early and periodic screening diagnosis and 

treatment benefit. That is very expensive, though. And I am wondering if you can opine as to whether you think that additional cost 

is worthwhile and might even save money in the long run for kids 

and, if so, why. 

Ms. EDELMAN. I think it would save money and when we had 

Lewin & Associates do cost estimates for extending coverage to all 

children and giving them the Medicaid benefit packets, they said 

that you could extend the EPST benefit packets to all 9 million uninsured children—this was a 2-year ago study—and for about 12 

percent added cost. 

So I think that the cost effectiveness of this in the long run is 

going to pay itself back. So we think it is not a big huge add-on. 

Ms. DEGETTE. Part of the draft legislation, and part which I am 

sure you have read because it applies to children, is the part that 

if children come in at birth and their parents don’t have insurance 

would automatically enroll them in Medicaid for the first year. 

Do you think that is a good step in the legislation? 

Ms. EDELMAN. I think that is terrific. And we would like to have 

automatic enrollment when they go to preschool or if they are in 

any WIC program or early Head Start program. You want to get 

children in because they are prevention. You want to prevent 

them—— 

Ms. DEGETTE. And preventive care for children actually 

saves—— 

Ms. EDELMAN. Many, many dollars on the other end. And we can 

give you added testimony that shows you the cost of doing that. 

Ms. DEGETTE. I would appreciate it if you would supplement 

your testimony in that direction. Thank you very much, Madam 

Chair. 

Mrs. CAPPS. Thank you, Ms. DeGette. And now I am pleased to 

recognize for 5 minutes Dr. Burgess from Texas. 

Mr. BURGESS. Thank you, Madam Chair. Ms. Wright Edelman, 

let me just ask you a question. Last fall, in the interest of full disclosure, I was a surrogate for the opposite side. I got to know President Obama’s proposals last fall pretty well because I always had 

to prepare to argue against them. And one of the overarching 

themes that was always put out there first was that there was 

going to be a mandate to cover children under President Obama. 

Have you talked to him lately about what happened to that? 

Ms. EDELMAN. No. But he certainly knows that I am expecting 

him to keep his promise. And I know that he has expressed his 

great interest in seeing that we take care of all of our children, and 


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I think that this is the time to do it and the individual mandate—— 

Mr. BURGESS. I don’t mean to interrupt, but I always had difficulty getting his surrogates to identify the definition of a child. 

Sometimes it was age 19, sometimes it was age 25, sometimes it 

was age 27. Do you have an opinion as to where that limit should 

be set? 

Ms. EDELMAN. Well, I certainly—we would take the definition of 

a child that is under Medicaid or CHIP now, but I think that we 

are talking about everybody getting coverage. And we know that 

there are a lot of younger people in college—— 

Mr. BURGESS. But in the interest of time, I have got to interrupt 

you. What is the difficulty with a child on Medicaid today? What 

is the difficulty with getting them in to see a dentist if they have 

dental coverage under Medicaid? 

Ms. EDELMAN. Well, the first part—Texas, since you have the 

highest number of unenrolled children and we—— 

Mr. BURGESS. Let us just focus on those enrolled. 

Ms. EDELMAN. Well, may I provide reimbursement rates? We all 

heard—and because children do still face bureaucracies. But let us 

just take the child out in Prince George’s County, Deamonte Driver, who—Deamonte Driver died last year—tried to get—25, 26 dentists his mother went to, couldn’t get them to take him because of 

the low Medicaid, low reimbursement rates, and I know you are 

trying to do something about that in your proposal. And the upshot 

was his tooth abscessed and infected his brain and then he died. 

250,000 emergency rooms have huge bureaucratic barriers first to 

even enrolled children and not enough providers, and in rural 

areas it is worse. 

Mr. BURGESS. But fundamentally the problem has been reimbursement rates. 

Now, Dr. Novack, you talk about 14 days out of every month you 

cover the emergency room, and we have put a mandate on providers. We may not have a mandate for kids, we may not have a 

mandate on employers or a mandate on individuals, but you have 

a mandate called EMTALA, which requires that within 30 minutes 

of somebody showing up at the door you have to see them. Is that 

not correct? 

Dr. NOVACK. That is correct. And the consequence, of course, is 

that a very large majority of my colleagues just no longer have any 

privileges at the hospital. So for sometimes some complex things, 

where it might be nice to have a particular person available and 

when someone comes into the emergency room, you are no longer 

even able to get that person’s assistance on a difficult case because 

of the regulations. People abandon their privileges completely. 

Mr. BURGESS. And this is an extremely—and both of these issues 

are really getting to the same problem. And I recall back in—I 

practiced obstetrics back in Texas for 25 years, and we made an 

agreement amongst ourselves that our individual practices would 

each take a certain number of Medicaid patients every month into 

our obstetrics practice so no one would be unduly burdened by a 

larger number of patients who reimbursed at a lower rate. And 

that worked great until you had somebody who had a complicating 

medical condition and they had to be referred to a specialist. And 


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it was virtually impossible to find anyone because of just exactly 

what you described, those very low reimbursement rates. 

As we sit up here and plan a national program that may very 

well be based on Medicaid, I just think we are obligated to make 

the program that is already there work first and demonstrate that 

it can work before we go extending it to increasingly larger segments of the population. 

Dr. Novack, do you have an opinion about that. 

Dr. NOVACK. My sense is that it is no different than when I do 

something in orthopedics, which is you are not going to introduce 

a new procedure until there is some data in a small group that it 

works. And what is being proposed here is to push through massive 

legislation in an incredibly short order where there has not been 

full time for people across the country to look at it and examine 

the problems and try to get it passed before people realize what 

has happened. And then all of us as patients will live with the unintended consequences of those actions. 

Mr. BURGESS. So we should have evidence-based policy as well 

as evidence-based medicine? 

Dr. NOVACK. I suspect the—as Shona has demonstrated, look, 

there are good people in health care, whether they are physicians, 

nurses, all through the system, top to bottom in lots of places, not 

just the United States. But the system within which you are allowed to provide care is as important to the delivery as the people 

providing it. So if we are not willing to put the same level of attention and same level of attention to detail on the level of intellectual 

rigor into designing the system, it is doomed to fail. 

Mr. BURGESS. Doomed to fail. Shona, let me just—I know I have 

no time left, but I just wanted to let you know that my grandfather 

was an academic OB at the Royal Victoria Hospital in McGill and 

my dad also did his training at McGill Medical School. He did a 

fellowship at Mayo Clinic back in the 1950s, when there was only 

the one in Rochester, and never went back to Canada. And I am 

so grateful you are here today, and thank you for sharing your 

story with us. 

Ms. ROBERTSON-HOLMES. I don’t want to pull down any doctors 

or anything from either side of the border. It is just what they are 

able to do. 

Mr. BURGESS. The doctors and nurses are all good people. The 

systems they are having to work under are where we are encountering the stress. Again, thank you for sharing your story with us 

today. 

Mrs. CAPPS. Thank you, Dr. Burgess. And now I would recognize 

myself for 5 minutes. 

I want to just point out that this legislation is not coming out 

of nothing, that there are—I will just mention three examples of 

best practices or good care, medical home, if you want to call them 

that. Cleveland Clinic is one, Mayo Clinic is another. John Hopkins. All have been very participatory. And many of our hearings 

have been focused on areas where practices have worked and 

where we see examples in small communities. 

I want to start with you, Dr. Shern. Mental health and substance 

abuse are some of the most chronic and disabling of conditions. 

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nosis. And diagnosis, we all know, oftentimes happens much after 

the symptoms begin. This increases the risk of developing a very 

costly disability. Mental health and substance abuse conditions 

often also go hand in hand with other costly chronic conditions like 

diabetes and heart disease. 

Can you comment—and I want to turn to children as well as a 

former school nurse. We must address that. But I want you to comment briefly on how we might be able to improve the provisions of 

the draft bill to better guarantee earlier access to mental health 

treatment. We tried to take as many steps as we could, but this 

is a single—with all the stigmas and stuff still around, please address this for us. 

Mr. SHERN. First of all, I would say that we are lucky to have 

the Institute of Medicine report on prevention in general, and there 

are many things we can do universally to drive down the rates of 

mental illness over a long period of time. 

So one thing we should think about—and I think that the community task force that is anticipated in the bill is, in fact, moving 

in the direction of the evidence about what is effective in terms of 

prevention. I also think that the inclusion of mental health 

screenings in adolescents, as recommended by the Preventive Services Task Force and as included in the bill, is a very important step 

forward. 

It is ironic that we test eyes, we test hearing, we look to see 

whether or not there is a scoliosis in the spine, but we don’t test 

kids for the things that they are most at risk for routinely, and 

those are social and emotional problems. We have data that indicates that when we do that with an appropriate model, as the Preventive Services Task Force has recommended, we can effectively 

identify and treat those conditions and that will be beneficial in the 

long run. Anything we can do to strengthen those provisions I 

think would be very helpful. 

Mrs. CAPPS. And I am going to have to ask you to submit this 

to the written record. If you have ideas about how we could better 

integrate—support better integration of behavioral health and medical care, as well as in a way of maybe branching out. Hopefully 

this will be a beginning start and then we can expand upon it. 

You mentioned children naturally. Because when you talk about 

health care and mental health, really, as you know, Dr. Edelman, 

Marion Wright Edelman, that is when we should start looking at 

screenings. I want you to focus on a different topic. When you mentioned children, I always think of the mother and I want to elaborate on the importance. I would like to hear you elaborate on the 

importance of ensuring that women receive adequate maternal care 

coverage and the effect of a mother’s health on the health of her 

children. It is so clear to those who have studied it that if you have 

adequate prenatal care, your chances of having a healthy baby are 

that much more important. 

Ms. EDELMAN. Well, a depressed mother is not going to be the 

best mother for her child. So what is good for the mother is always 

good for the child. So it is in all of our self-interest to make sure 

that mothers do get prenatal care, that any problems that they 

have are—substance abuse problems, domestic problems, other 

things that may lead to them being less able to do all they need 


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to do for their children, those can be detected early and treated 

early because the impact on their children in the short and long 

term will be enormous, and we also just know the cost effectiveness 

of prenatal care, if they are having babies that are at low birth 

weight, are not adequately nourished, and don’t know how to take 

care of themselves and their children. So you can’t separate the 

two. So I think going forward we should make sure that the mother 

is in good shape and the children are in good shape. 

And I am happy to submit additional evidence of the effectiveness of prenatal care and the effectiveness of maternal care and 

hope that there will be a full fledged capacity to make sure that 

all children have mothers who get full maternity care in this bill. 

Mrs. CAPPS. Thank you very much. We have done a bit of work 

in Congress recently to recognize the situation around maternal 

mortality. But also the fact that—I don’t think many Americans realize that this country, the United States, has one of the highest 

rates of infant mortality, 27th out of 30 industrialized countries. 

That is a red flag for starters. 

And I want to thank each of you again for your testimony. And 

now I will recognize Mrs. Christensen for 5 minutes for her questions. 

Mrs. CHRISTENSEN. Thank you, Madam Chair, And I thank all 

of you for your testimony. Ms. Chin Hansen, AARP has taken a position back a few years ago in support of lifting the Medicaid cap 

for the Territories. This bill does not go that far. 

Is it still the position of AARP that all of the Federal programs 

should be equally accessible to all Americans regardless of where 

they live? 

Ms. HANSEN. As you have in my written testimony, that it does 

speak to really supporting that elevation. So it is something that 

we continue to support. 

Mrs. CHRISTENSEN. Thank you. Dr. Shern, you talk about providing mental health care and the savings that we would realize 

from that and the reduction in the productivity losses that we experience, and you give some pretty good figures to back that up. But 

I wonder if just for the record you would speak to the impact of 

treating mental health, mental illness, and chronic disease and 

how that would also produce savings in terms of chronic disease 

treatment. 

Mr. SHERN. Mrs. Christensen, as I said in my verbal testimony 

today, mental health conditions are the most likely co-occurring 

conditions with other chronic illnesses. And when they occur, there 

is lots and lots of data that indicates that the course of treatment 

is much rockier, costs are much higher and outcomes are much 

poorer. We have a study of older adults with diabetes, called the 

Prospect Study, who also had depression, half of whom were randomly assigned to effective depression treatment, the other half 

were assigned sort of a watchful wait and counseling but to balance 

off the amount of time that was spent. What we found was over 

a 2-year period, those people who didn’t have their depression effectively treated died at twice the rate of the individuals who had 

their depression effectively treated. 


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And in this study we found that in the first year there was an 

overall cost increase for care, but in year two the overall cost of 

care for those people declined and their clinical status improved. 

So we have lots of examples of what is called collaborative care 

models in which the entire person’s needs are addressed. In this 

case we are talking about diabetes and depression. 

Additionally and quickly, if you look at workplace presenteeism 

and productivity, there is also ample data—and this gets to your 

earlier point about thinking about costs more broadly than simply 

the costs within health care sectors—there is ample data that 

shows that these are very cost effective programs that have effective return on investment. 

Mrs. CHRISTENSEN. Thank you. And, Ms. Edelman, I think most 

of the questions that I wanted to ask you have already been asked. 

But you know that I have always shared your passion and your 

commitment to making sure that every child and pregnant female 

has been covered. 

We are expecting a PAYGO bill to come to the Congress shortly. 

I think it is still coming and, cost being the major barrier to achieving what we all know we need to achieve on behalf of children and 

really all Americans, do you agree that it is important enough to 

take this issue out of PAYGO if that is where it needs to be? 

Ms. EDELMAN. Well, I don’t think we have a money problem in 

the richest nation on Earth. I think we have a values and priorities 

problems and that if we can find the money for all the more powerful special interests, if we can continue without having had a 

PAYGO for the tax cuts, many of which came through the Bush administration, if we could find the money so quickly for bailing out 

the banks and the others, if we can continue to have these disparate things, I don’t for a moment believe we can’t afford to take 

care of our children. It is really about values. And if we are serious 

about cost containment and if we are serious about prevention and 

if we are serious about creating a level playing field for everybody 

and if we believe, as we profess to believe and which is America’s 

promise, that every child’s life is of equal value, then we will find 

the money to do what is right and cost effective. So I hope we will 

do it. 

Mrs. CHRISTENSEN. Dr. Novack, do you agree—I don’t agree with 

a lot—some parts of your testimony, but I agree with your position 

on MedPAC, if I understand it correctly, and where you say that 

using cost control as a driving force behind health reform will turn 

every American from being a patient to an expense. 

Do you also agree that this ought to be done regardless of cost 

because we cannot, as the President said, afford not to do it? 

Dr. NOVACK. No. I disagree. I think that if we look at overall government spending, government should work the same as families. 

And that at some point we have—look, we actually have a health 

care bubble. It is like we had a housing bubble. Our overall unfunded liabilities are massive in health care, and that bill will come 

due some day no matter where people want to stick it on the ledger. So given all the bailouts—and I share the concerns with the 

other members of the panel about some of the bailouts that have 

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phone. But that is not an excuse to not use basic fiscal responsibility when we are trying to reform health care. 

Mrs. CHRISTENSEN. But families do it in emergencies, borrow to 

meet those emergencies and make sure that they are taken care of. 

Mrs. CAPPS. Now I recognize Mr. Green for 5 minutes. 

Mr. GREEN. Thank you, Madam Chairman. 

Dr. Shern, I am a cosponsor of H.R. 1708, the Ending Medicare 

Disability Waiting Period Act, and it would actually phase out the 

24-month disability waiting period for disabled individuals. And I 

want to thank you for being a member of the coalition in the 2-year 

waiting period which has more than 120 members. 

Can you speak on the importance of that elimination, that 24- 

month waiting period for individuals with mental disabilities and 

illnesses, even with the creation of this Exchange that is in the 

bill? 

Mr. SHERN. I think it is very important that we eliminate that 

waiting period. It is such a counterintuitive thing. And you know 

how difficult it is for someone to qualify for SSDI, to make it 

through the disability process. And people with mental health and 

substance use conditions have a particularly difficult time making 

it through. And then once one finally gets through to say, well, in 

2 years—it was now agreed that you have a chronic illness that 

needs to be treated and say, well, the good news is you made it 

through the SSDI. The bad news is we are not going to be able to 

provide you healthcare coverage for 2 years. It makes no sense. 

So I think that that repeal is really important. Anything we 

could also do to expedite the elimination of the discriminatory 50 

percent copay in Medicare. We took care of eliminating it over a 

5-year period. We have good data to show that that, in fact, drives 

cost on the inpatient side by denying people or making it more expensive for them to get ambulatory care. 

So we are very enthusiastic about reducing that 2-year waiting 

period, and anything we can do to drive down that copay I think 

would also be very cost effective and beneficial. 

Mr. GREEN. Dr. Edelman, in Texas we have the largest uninsured in the United States and approximately 900,000 children uninsured. Approximately 600,000 of those children are Medicaid eligible but unenrolled and the remainder are SCHIP eligible but 

unenrolled. This can be attributed to times in the past when Texas 

was facing budget issues and required parents to reenroll their 

children in SCHIP every 6 months and the same with 6-month reenrollment for Medicaid. There are two pieces of legislation. In fact, 

my colleague, Ms. Castor from Florida, and I both are cosponsors 

of it. 

In your testimony you mentioned 12-month continuous eligibility 

for Medicaid as part of the solution to the problem with the number of uninsured children in the U.S. Can you explain why that is 

important also, the 12 months for the SCHIP program? 

Ms. EDELMAN. Well, I think that if you want to keep children enrolled, and you should make the enrollment and re-enrollment procedures as easy as you can possibly make it, rather than as difficult as many States, including Texas, has made it. And we lost 

a child last year to Bonnie Johnson whose mother tried to do everything right but couldn’t get her paperwork sorted out in Texas, and 


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this 14-year-old child died from kidney cancer, which could have 

been allayed had he not been dropped from coverage for 4 months. 

And I have been so pleased that the business community in 

Texas has come now and really understood the importance of investing preventively and that Texas is losing millions of dollars, in 

fact almost a billion dollars, by turning down a Federal match and 

the local taxpayers are paying for it in emergency care. 

And so I just hope that we can—and we have submitted as a part 

of our longer testimony all of the simplification things, including 

the 12-month eligibility, presumptive eligibility, express lane, and 

a number of things that can make it easy to get children in for preventive care. And I would love, Mr. Green—and thank you for your 

comments this morning—to submit for the record the new study 

done by the Baker Institute that talks about the cost effectiveness 

of investing in coverage for all children in Texas and nationally, 

and lastly, some of the studies the business community have done 

in Texas in support of their reforms for 300 percent eligibility in 

Texas, as well as for the 12-month continuous eligibility. 

Mr. GREEN. And we know that the numbers—you can actually 

decide if you want to keep children off of CHIP or even Medicaid, 

you know, if you make those parents go down and stand in line 

every 6 months as compared to the year. Now, during that year 

they can still be investigated. If somebody finds out that family 

may not be qualified for Medicaid or even SCHIP, they can go get 

that. I appreciate it. 

Also, Congressman Doggett is working with the Ways and Means 

Committee on the same issue for both SCHIP and Medicaid. Hopefully we can at least get SCHIP. It is much smaller, but we need 

to do that, look at the total goal for Medicaid also. 

Dr. Novack, let me just ask questions about your statements. 

Health care reform must be built on a foundation consisting of the 

protection of the right of individuals to control their own health 

and health care, not special interests of government bureaucrats. 

I would submit right now I don’t know if it is controlled by government, but it is controlled by somebody on special interests. If you 

are lucky enough to have insurance and you get preapproval, I can 

tell you that it is already going to be controlled by someone that 

is—whether it is insurance companies or Medicaid officials or 

someone else. So I agree with you. I want health care to be controlled by individuals, but we all have to answer to someone. And 

I can’t just go to the doctor and get everything I want. They tell 

me that is not part of the policy or you not treated for that. 

Let me go next to your statement on the first preserving the 

right to be able to spend their own money, and let me understand. 

In Arizona, there is a constitutional amendment that the goal is to 

preserve the right to always be able to spend your own money for 

lawful health care services? 

Dr. NOVACK. That will be on the ballot in 2010. 

Mr. GREEN. Is there something in Arizona law that prohibits people from spending their own money for their health care? 

Dr. NOVACK. No, but it is in Federal law, from the 1997 Balanced 

Budget Act, that effectively prevents Medicare beneficiaries from 

spending their own money. If you are a patient on Medicare and 

you come to me as a Medicare provider—and let me give you—if 


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you bear with me, because it only takes a moment to do an example. If you have had your hip replaced, for example, two or three 

times and you need it done for the fourth time, which happens, you 

want to go to somebody who really knows what they are doing. 

Well, the physician you want to go to who does a lot of replacements, what we are seeing more and more frequently is that those 

people are no longer doing what we call redo or revision operations. 

And the reason is why for a primary or first-time uncomplicated 

hip replacement, Medicare pays $1,400. But for a redo—— 

Mr. GREEN. I understand where you are coming from. Let me 

give you another example, though. 

Mr. PALLONE [presiding]. Excuse me. You are over almost a 

minute and a half. So I would like to end this if I could. 

Mr. GREEN. Let me ask you just to compare to that. If someone 

comes into you—— 

Mr. PALLONE. Mr. Green, you can’t ask an additional question. 

Mr. GREEN. We don’t have time? 

Mr. PALLONE. If he wants to respond, fine. 

Mr. GREEN. I just wanted to make the comparison, Mr. Chairman. 

Dr. NOVACK. The difference is a $250 difference for what would 

be three times the work. So if you say I want Dr. Jones to do the 

operation, I will pay you the difference out of pocket because it is 

extra time, the only recourse a physician has is to resign from 

Medicare and not see any Medicare patients for 2 full years. 

Mr. PALLONE. If you want to respond to that, you can. But I have 

got to move on. 

Dr. NOVACK. It is technically an effective prohibition on spending 

your own money on health care. 

Mr. PALLONE. If you want to respond to that. 

Mr. GREEN. There are a number of members here who voted for 

that Balanced Budget Act in 1997. There is a lot of things that 

have happened since then that I disagree with. But I also know one 

of the concerns is that in an area that I have that is not a wealthy 

area, if we didn’t have that, if we didn’t have the current provision 

in the 1997 act, we would not have people being able to find a doctor to be treated under Medicare—because they couldn’t afford that 

extra money plus what they are already spending on Medicare. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. The gentlewoman from Tennessee, 

Mrs. Blackburn. 

Mrs. BLACKBURN. Thank you, Mr. Chairman, and thank you all 

for taking your time to be here. 

Ms. Holmes, I wanted to talk with you for a few minutes. It 

sounds like you had an incredible journey. 

Ms. ROBERTSON-HOLMES. I did. 

Mrs. BLACKBURN. And you were happy to be able—and grateful 

and fortunate to be able to find health care. You were here during 

the first panel and you have heard what I have had to say about 

TennCare in the State of Tennessee and our concerns there, because what you outline in your testimony is what I see happening 

many times in our State. You had to fly 2,000 miles to access 

health care. In rural west Tennessee, because of all the cost shifting that has taken place, because people are not able to access 


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health care and many providers are no longer taking TennCare, 

then they find that that health care is available a long way away 

from them. And sometimes 30 miles might as well be 3,000 miles 

if no one has the ability to take you there. And I am just assuming, 

from what I read in your testimony and listening to you, that your 

outcome had you had to depend on a single-payer system that allows you no recourse, that allows you no alternatives, which says 

take a number, get in the queue and wait your turn, that your outcome would have been very, very different. 

Ms. ROBERTSON-HOLMES. Very, very different. And this is the 

whole reason why I am here because I feel very—to stick my nose 

in American business, but I was fortunate to be able to come here. 

But not only did I have to just travel away from my home, I had 

to travel outside my country. And when it gets like that—because 

it is actually illegal for me to try and do what I did in Canada. And 

that is what we have to be able to—to open the doors of communication about and realize that you get rationed care. It is one 

thing to not have insurance, and it is another thing to have insurance and not have doctors. 

Mrs. BLACKBURN. So basically your government provided insurance. When you needed it, your government provided insurance 

was worthless to you? 

Ms. ROBERTSON-HOLMES. Exactly. 

Mrs. BLACKBURN. So you mortgaged your home, put a second 

mortgage on your home. Your husband picked up a second job. 

Ms. ROBERTSON-HOLMES. That is right. 

Mrs. BLACKBURN. And you got the money that was necessary, the $100,000 to pay for that. 

Ms. ROBERTSON-HOLMES. Yes. 

Mrs. BLACKBURN. Now when you had flown back to Mayo and 

then you went back to Canada with your test results, and you said 

all right, here it is, I am going to be blind in 6 weeks, did a bureaucrat make the decision or a physician make the decision? 

Ms. ROBERTSON-HOLMES. They wouldn’t even look at my medical 

reports. It was get back in line and wait. 

Mrs. BLACKBURN. So the bureaucrat turned to a citizen and said, 

you are out of luck, get in line? 

Ms. ROBERTSON-HOLMES. Get in line. 

Mrs. BLACKBURN. That is real compassion, isn’t it. 

Ms. ROBERTSON-HOLMES. No, absolutely zero compassion from a 

country that is known to be compassionate. The same country that 

will cover illegal immigrants the second they arrive in our country. 

Mrs. BLACKBURN. Thank you, ma’am. 

Ms. Hansen, a quick question for you, and thank you for being 

here and I know you all work hard for our Nation’s seniors. I have 

lots of seniors in my district and I had the opportunity this weekend to visit with some of them. You know, they are really very concerned about what they have been hearing from the Obama plan, 

because they feel like they have had money taken out of their paycheck every week and now they get to near retirement or they get 

to retirement and they are being told basically that that is worthless to them, that if there is a nationalized plan that they are going 

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cerned about losing Medicare Advantage, they are very concerned 

about losing options, and concerned with losing their Part D coverage. 

What would you suggest that I tell these seniors that say I have 

been putting money in, it is my money and came out of my paycheck, I have been letting the government have first right of refusal on that money all of these years, and now it is basically people—everybody is going to have the same thing? How do you respond to that? What should I tell the senior? 

Ms. HANSEN. Well, I think that what I think I have heard that 

the President said if you have current insurance and it works for 

you, you can keep it. So I don’t know if in this discussion whether 

it is that everything comes back into the pot, and I don’t think that 

the Medicare program is meant to be structurally dismantled. So 

I think that my sense is that their assurance of whether it is the 

Medicaid program that Dr. Edelman has spoken about and Medicare. I mean, we have these right now codified in law with each 

of these different parts. So there is that. 

I think one of the things that we want to do is to make sure they 

get best value for their hard earned money, for what they have 

spent. So in other words, we want to make sure they get safe care, 

we want to get timely care. We want to make sure when they need 

medications, and most older people have medications, of the fact 

that it is affordable for them. 

So these are the things that I know AARP really strongly supports, and so I think the ability to really square as to what is discussed about President Obama’s plan and the principles of maintaining choice, coverage, and private options. 

Mrs. BLACKBURN. Thank you, I yield back. 

Mr. PALLONE. Thank you. 

Gentlewoman from Ohio, Ms. Sutton. 

Ms. SUTTON. Thank you very much, Mr. Chairman. Five minutes 

isn’t going to do it, but I am just going to request that Ms. Wright 

Edelman and Ms. Chin Hansen and Dr. Shern, if I can follow up 

with you outside the committee to talk about some ideas of how we 

might strengthen some things and make this work for our children 

and our seniors and those who have needs, Dr. Shern, you have so 

eloquently identified. 

I want to thank you very much, Ms. Robertson-Holmes, for coming and testifying. Dr. Novack. And I want to address the issue 

that I think you raise. And I think it is very important as we have 

this discussion to talk about the reality that this isn’t just about 

getting people health care insurance. This is about improving the 

delivery of health care to people when they need it the most in a 

way that makes sense both for health outcomes and economically. 

And so your point is well taken when you talk about you paid for 

your insurance, right? 

Ms. ROBERTSON-HOLMES. Oh, sure. 

Ms. SUTTON. And when you needed it, it wasn’t there. 

Ms. ROBERTSON-HOLMES. Right. 

Ms. SUTTON. I listen to you because I was so struck because I 

was in the State legislature in Ohio and did a lot of work related 

to the private insurance industry, and that very same problem, 

people who paid for care and then when they needed it and their 


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doctor said they needed it, the insurer wouldn’t pay for the coverage that they had been paying for all this time. And there is a 

person by the name of Linda Kerns, it is K–E-R–N-S, Doctor. And 

Linda was a witness who came in to testify. And Linda was a very 

special person and most people are, but she was special because 

she was actually an HR person for an insurance company. And 

Linda had a history in her family of breast cancer, that was a very 

aggressive form of breast cancer. And so her doctor when she went 

in for treatment, that she was vulnerable for this potential for 

breast cancer, the doctor wanted to treat her aggressively, and the 

insurance company bureaucrats overruled the doctor and said no, 

I am sorry, you have been paying for coverage but that care is not 

going to be provided, we don’t think you need it. So she didn’t get 

it. She didn’t get that coverage. 

Now what she did was what you did. She eventually over time, 

with great delay, raised the money and went into debt to get that 

surgery, but there was a delay. So we really never know the value 

of that delay or the health outcome. 

Ms. ROBERTSON-HOLMES. Irreversible tissue damage, no question. 

Ms. SUTTON. And in this country, unfortunately, there was no recourse for her even if there was a proven health consequence to the 

unreasonable delay or denial of that coverage, even though if a doctor had done it—if a doctor had said we are not giving that to you 

and then he was found to have unreasonably delayed or denied 

then, there would have been a malpractice case against them. 

There was no accountability for that private insurer to be held accountable for the health outcome other than the cost of the procedure, not the loss of life or health. 

Ms. ROBERTSON-HOLMES. That is the exact same situation as we 

have, and there is no accountability from the government. 

Ms. SUTTON. See, this is my point though, because you experienced that under your system. We see people experience that here 

under our system as well and people going into bankruptcy because 

the costs are spiraling or they don’t have access to the care they 

need when they need it. The problem is that I guess maybe what 

I would ask is that if you had—and you talked about the need to 

have some competition for your government-run plan, and that is 

exactly what we are offering here. We are assuring that people 

have access to coverage in this country, and right now the private 

insurers are the only game in town. If they unreasonably delay or 

deny, no accountability. If we have a public option that also allows 

people to have the chance to purchase it, that that cannot only 

drive down costs but I would argue can drive up the quality of the 

delivery of care. 

And so I just point that out, because I can’t help but think of 

Linda. 

Ms. ROBERTSON-HOLMES. And I understand and the major difference between the two of us is—— 

Mr. PALLONE. Ms. Robertson, you have to turn that mike on, because otherwise you won’t be transcribed. 

Ms. ROBERTSON-HOLMES. The major difference between her and 

I is that what I did by coming to this country, mortgaging my 

house, et cetera, et cetera, was illegal for me to do at home. It is 


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not an avenue for me to do at home. I cannot step out of that. I 

am mandated to use that, and that is it. 

Ms. SUTTON. And you would have preferred to have the option 

of buying private insurance and then you would be resolved? 

Ms. ROBERTSON-HOLMES. Or if worse came to worse, the same 

situation that happened to me here, I could have at least stayed 

in my house, had my children with me, had my father, you know 

months before he passed away still with me at my hospital bed. Instead I was in Arizona 2,000 miles away alone. 

Ms. SUTTON. I understand, and I thank you very much for your 

testimony. 

I know I am out of time. So bureaucrats there, bureaucrats here. 

Of course this bill I know you had the question, Dr. Novack, from 

our chairman emeritus about the exact language that you used in 

your testimony to describe the bureaucrats that will in your opinion be performing the functions under this bill, but it really does 

provide, the bill, if you find the language, it provides for health 

care professionals to do the analysis and of course what we must 

tell the American people is that right now insurance companies are 

doing it. 

So with all due respect, thank you. 

Dr. NOVACK. My answer is—— 

Mr. PALLONE. Listen, I am sorry. I don’t think she was addressing a question to you. 

The next person is the gentlewoman from Florida, Ms. Castor. I 

apologize that I passed over you by mistake. 

Ms. CASTOR. Thank you, Mr. Chairman, and thank you to all of 

the witnesses who are here. 

To Dr. Shern, you were an outstanding director of the Florida 

Mental Health Institute in Tampa at the University of South Florida. They miss you there, we miss you. USF is doing great things, 

as you know, in medical, in health care policy and research. 

Back in Tampa before I was elected to Congress, I served as 

county commissioner and the county government there had the responsibility for all health and social services, including very fairly 

robust children’s services, compared to many other places across 

the country. But I was always floored by the total lack of mental 

health care services. There is nothing, there is nothing for these 

families that struggle day to day with what is going on in their 

homes. 

Now of course the county government also had responsibility for 

law enforcement and the county jail, and the greatest advocate for 

mental health care services was always the sheriff and the folks 

that were running the county jail because they understood the population in jail, and that is the most expensive way to address mental health care in America. 

So I am pleased that the discussion draft here in the House 

takes the first few steps in providing that comprehensive early integrated care, and there is no better place to start of course than 

with children. 

As a mother, what would I do if I didn’t have the same pediatrician that I have had for my daughter’s 12 years of life to be able 

to just make that phone call, to call a nurse in the office. It is very 

cost effective rather than trying to chase down and go to a clinic 


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or go into an emergency room. We are all paying for that very expensive model out there. If you have health insurance and you 

think you are not paying for other people’s care right now, you are 

wrong, you are. That is one of the reasons your health insurance 

bills and copays have been increasing over time to such a great extent because of the uninsured showing up in the ER. 

But to promote this early integrated comprehensive care reform 

that we have taken a stab at here early in our discussion draft, I 

would like you to focus on a couple of things. Workforce. We know 

we don’t have those primary care medical professionals, and I am 

not sure we have the mental health professionals that we need. Are 

we doing enough in our discussion draft to tackle that problem? I 

would also like you to address the terrible bureaucratic red tape. 

Ms. Edelman has emphasized that time and time again. You have 

some good recommendations in here, but I don’t think the discussion draft goes far enough. In the State of Florida we have 800,000 

children that do not have that easy access to the doctor’s office. The 

State of Florida even one time quit printing the application form 

for SCHIP. 

So what else can we be doing to knock down these crazy bureaucratic barriers that make it difficult for a parent just to walk into 

the doctor’s office and make sure that their son or daughter gets 

a checkup? So the workforce issue and this terrible bureaucracy. 

Mr. SHERN. Workforce is a critically important component, and 

I am heartened it is addressed in the bill, and of course we would 

always like to be able to do more, because we have a real pipeline 

problem in terms of people who were being trained to deliver the 

services that we need across the spectrum. 

You talked about primary care physicians. I think we continue 

to rely more and more and more on primary care physicians in the 

medical home. As we know, the current incentive system isn’t producing enough primary care physicians and we are not reinforcing 

them or rewarding them to the degree to which we can or should. 

Additionally, I think we need to think about what we can do to 

continue to improve practice of people who are in practice now. We 

don’t have very good models for doing that. We have what has been 

characterized as the Nike model. We sort of train them and say go 

out and just do it. We give them CME but we know that the CME 

doesn’t do what it needs to in terms of improving skills. 

And there are other models, some with the hope of HIT is better 

support, and comparative effectiveness research is better support 

for people to make better decisions. 

And I think I will defer to my colleague, Ms. Wright Edelman, 

to talk about bureaucracy. 

Ms. EDELMAN. Well, I just think a single eligibility standard for 

everybody, for all children, that is why we suggest 300 percent will 

make it easier rather than have all these different eligibility standards. A single set of benefits that are child appropriate, it will 

make it a whole lot easier. 

And secondly and third, we talk about all the simplifications and 

we have it in legislative language, they are all included in the All 

Healthy Children Act, would be another terrific start. But getting 

rid of all the State lottery and all the disparate things and the two 

child health bureaucracies, whether the children are in Exchange 


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or in EPS or Medicaid or in CHIP, they should all get what they 

need with a single eligibility standard, comprehensive benefits, and 

the simple sort of measures that we all know how to do. 

And I just hope that you will look at the specific legislative language. We will be happy to submit it as part of our testimony. And 

these are the true child health reforms we need in order to make 

sure that all of our children get what they need. 

Mr. PALLONE. Mr. Sarbanes. 

Mr. SARBANES. Thank you, Mr. Chairman. I want to thank the 

panel. Mr. Chairman, I want to thank you and Chairman Waxman 

and everyone who has been working on this issue for so long, because this is it, this is not a dress rehearsal. These panels that we 

are having probably are kicking themselves that they are here to 

speak on an actual discussion draft that includes these critical proposed changes to our health care system. I just hope that Americans watching this realize that this is exactly what they were pushing for in the last couple elections where they were expressing their 

frustration with the current health care system. 

This is our chance to get this right. It doesn’t have to be perfect, 

but we have to get a new framework in place, one that we can 

build on and one that answers the frustrations and the feeling of 

helplessness that millions of Americans feel out there. 

I think the source of that is many fold, but I will point to a couple things, that sense of helplessness that I am describing. One is 

that you deal with an insurance industry that appears to be primarily engaged in the exercise of denying payment for the kinds 

of services that people need. And there is a paper chase. You get 

these things in the mail that say we will not pay, this is not a bill, 

this is your third notice, this is your fourth notice. Many Americans just give up after a certain point because they can’t fight it. 

So that is one source of the frustration. That is why I think we 

need a public plan option to compete, and I am not going to revisit 

that discussion. But as a train leaves the station on health care, 

if public plan is not on the train, it is a train to nowhere. It has 

got to be there. 

The second source of frustration on the part of many people is 

they know that there are certain kinds of things that if that was 

reimbursed in the system it would be better for their health, it 

would save the system money over the long term. They can see it, 

it is right there, but the system doesn’t cover it. 

Elderly patients know that if they can spend another 20 minutes 

with their physician or half an hour, God forbid, that in that time 

the physician could better understand their situation and probably 

prescribe a regimen that would make a lot more sense to that patient and save the system over the long term. But physicians who 

do that are penalized by a system that doesn’t recognize that kind 

of primary and preventive care. 

So that is another thing that needs to be on the train as it leaves 

the station, primary and preventive care. The other one is investing in the workforce. Because if we have the coverage, that is all 

very well, you show up with your insurance card, but there is no 

providers to deliver the care. 


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So these are all things that are a part of this draft, this is why 

people need to be incredibly excited that we are talking about this 

right now. This is it, this is it. This is the moment. 

Now with that preface, let me go to health care delivery. I wanted to ask you, Ms. Wright Edelman, because you talked a lot about 

SCHIP and getting these services to children, but continue to be 

frustrated on kind of the delivery system. Congresswoman Capps 

and I have pushed to try to create more school-based health centers 

and also allow for reimbursement of services provided there if they 

would otherwise be reimbursed if delivered in a physician’s office 

setting. 

Could you just speak briefly to this idea of capturing people 

where they are, this concept of place-based health care, go to where 

the children are, make it easier to access services at that point on 

the front end? Ninety-eight percent of our kids ages 5 to 16 are in 

one place 5 to 6 days a week. 

Ms. EDELMAN. In school. 

Mr. SARBANES. For 6 or 7 hours. We ought to take advantage of 

that. So if you could speak to that as part of this overall perspective. 

Ms. EDELMAN. I want to say amen. You go to where they are, you 

make it as easy as you can. We need to expand the community 

health centers, we need to expand school-based health centers. And 

if the mother is in WIC and that is where kids are coming in, you 

get them enrolled and you make sure that you are making it available. And one of these days I look, as we talk about health and 

school reform, is that we can really make the new schools that we 

construct real community centers and collocate services so that is 

easy rather than hard for people to get their care. 

So whatever we can to go where children and families are and 

to make sure that it is accessible would be terrific. I think none of 

this is rocket science. I think we know how to do it. 

And I just want to reemphasize what you have just said. This is 

it. You have got all the skeletons for what you need to get done 

in your plan. We just need to kind of finish it and make sure that 

you have got the instructional forms there. 

And I would like to say one little thing, because this is not a 

dress rehearsal. This is a window of opportunity. If we miss this 

opportunity, we are going to lose more generations of children and 

see escalating costs. 

I just was looking for a thing that is in the written testimony 

about the President’s statement. And I guess I think it states what 

you have stated in strong terms. He says I refuse to accept—when 

he was signing the CHIP bill—that millions of our kids fail to meet 

their potential because we failed to meet their basic needs. 

In a decent society there are certain obligations that are not subject to tradeoffs or negotiations. Health care for our children is one 

of those obligations. This is the moment to fulfill that obligation, 

for you to fulfill it you know how to do it, you have got lots to build 

on. We have been working and many of the leaders here on Medicaid for 42 years. We know from the incremental problems how to 

make it simple, but we can address the health infrastructure. You 

made such a good start. I just hope you can just finish it and make 


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sure that it is transformational and true health reform for all of 

us. 

Mr. SARBANES. Thank you very much. I yield back. 

Mr. PALLONE. Thank you, and I think we are done with the questions, but I want to thank all of you again. Obviously what we are 

doing is crucial and we do plan to move ahead and meet the President’s deadline. Thank you very much. Again, you will get written 

questions within the next 10 days and we would ask you to respond 

to those. 

Could I ask the next panel to come forward, please? 

Could I ask those who were standing or talking to leave the room 

so we can get on with our third panel? 

Let me introduce our three witnesses here. Again starting with 

my left is Dr. Jeffrey Levi, Executive Director for the Trust for 

America’s Health. Next is Dr. Brian Smedley, Vice President and 

Director of the Health Policy Institute, Joint Center for Political 

and Economic Studies. And then we have Dr. Mark Kestner, Chief 

Medical Officer for—is it Alegent Health? 

Dr. KESTNER. Alegent. 

Mr. PALLONE. Alegent Health. And this panel is on prevention 

and public health, certainly one of the more important parts of 

what we are discussing in the discussion draft. You heard me say 

before that we ask you to talk for about 5 minutes and your written testimony, your complete written testimony will become part of 

the record. And we will have questions after for 5 minutes from the 

members, and we may send you written questions afterwards 

which we would like you to respond to as well. 

I see we are joined by our ranking member, Mr. Deal. And we 

will start with Dr. Levi. It is Levi? 

Mr. LEVI. Yes, it is. 

STATEMENT OF JEFFREY LEVI, PH.D., EXECUTIVE DIRECTOR, 

TRUST FOR AMERICA’S HEALTH; BRIAN D. SMEDLEY, PH.D., 

VICE PRESIDENT AND DIRECTOR, HEALTH POLICY INSTITUTE, JOINT CENTER FOR POLITICAL AND ECONOMIC 

STUDIES; AND MARK KESTNER, M.D., CHIEF MEDICAL OFFICER, ALEGENT HEALTH 

STATEMENT OF JEFFREY LEVI, PH.D. 

Mr. LEVI. Thank you, Mr. Chairman, and thank you for the opportunity to testify on the House discussion draft of health reform 

legislation. 

Trust for America’s Health and our colleagues throughout the 

public health community are delighted that this legislation recognizes that prevention, wellness, and a strong public health system 

are central to health reform. We also support the premise that 

without strong prevention programs and a strengthened public 

health capacity surrounding and supporting the clinical care system, health reform cannot succeed. 

While my testimony will focus on the public health provisions of 

the discussion draft, I must first say that universal quality coverage and access to care are central to health reform. We believe 

this bill can achieve this goal. Inclusion of evidence-based clinical 


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preventive services as part of the core benefits package with no copayments also assures cost effective health outcomes. 

Trust for America’s Health has worked with over 200 organizations to articulate the importance of prevention and wellness to 

health reform. Our joint statement is attached to my written testimony and I will briefly review its key components. 

First, we have urged that as part of a renewed focus on public 

health Congress should mandate the creation of a National Prevention Strategy. The discussion draft meets the central criterion by 

requiring the Secretary to develop a National Prevention and 

Wellness Strategy that clearly defines prevention objectives and offers a plan for addressing those priorities. 

Second, the groups urged establishment of a trust fund that 

would be financed through a mandatory appropriation to support 

expansion of public health functions and services that surround, 

support, and strengthen the health care delivery system. We envision the trust fund supporting core governmental public health 

functions, population level non-clinical prevention and wellness 

programs, workforce training and development, and public health 

research that improves the science base of our prevention efforts. 

We applaud the inclusion of the Public Health Investment Fund, 

which will support through mandatory appropriations the core elements of the public health title, including the prevention and 

wellness trust. By including mandatory funding for community 

health centers, the discussion draft also assures a much closer link 

between the prevention and wellness activities that happen in the 

doctor’s office and those that happen in the community. 

Let me now review some of the key activities associated with the 

investment fund and our rationale for supporting them. On workforce, the focus on frontline prevention providers and public health 

workforce places appropriate emphasis on where the need is greatest in our health care system. Assuring the development of a robust public health workforce through creation of the public health 

workforce core, which will offer loan and scholarship assistance, finally places public health recruitment, training, and retention on 

par with the medical profession. 

Community prevention and wellness programs are also critical. 

The expanded investment in these programs will be important to 

the success of health reform. There are evidence-based proven approaches that work in the community setting to help Americans 

make healthier choices, by changing norms and removing social 

policy and structural barriers to promoting healthier choices. We 

know that targeted uses of these interventions can reduce health 

care costs. We are particularly pleased to see that this draft recommends establishing health empowerment zones where multiple 

strategies can be used at one time. 

In terms of support for core public health functions, we appreciate the recognition in this draft that the strength of our Nation’s 

State and local health departments will significantly affect the success of health reform. Without the capacity to monitor population 

health, respond to emergencies, and implement key prevention initiatives, the health care delivery system will always need to backfill for a diminished public health capacity at a higher price in dollars and human suffering. 


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Improving the research base and revealing the evidence is also 

an important component of this legislation, and it makes a crucial 

investment in both public health and prevention research. While 

we have a strong base of prevention interventions today, much 

more needs to be learned about non-clinical preventive interventions, including how to best translate science into practice and how 

to best structure public health systems to achieve better health 

outcomes. 

Dr. Smedley will address in more detail the issue of inequities, 

but I want to note that we are pleased that this draft focuses on 

disparities in access and health outcomes. From better training to 

targeting resources in communities where disparities are greatest, 

we harness what we already know will work to reduce inequities. 

We must recognize that the goal of health reform is not just creating equality of coverage and uniform access. We need to assure 

equity in health outcomes, too. 

Mr. Chairman, there are few times that we have the privilege of 

watching history being made. This may well be one of them. If the 

public health provisions of this draft become law, in the years 

ahead we will witness the transformation of our health care system 

from a sick care system to one that emphasizes prevention and 

wellness. This is what our Nation needs and what the American 

people want. 

Recently, Trust for America’s Health released the results of a national bipartisan opinion survey. Perhaps the most impressive finding in that survey was that given a list of current proposals considered as parts of health reform, investing in prevention rated highest, even when compared to concepts like prohibiting denial of coverage based on pre-existing condition. 

In short, by placing this emphasis on prevention and wellness in 

the discussion draft, this committee is responding to a compelling 

call from the American people. 

On behalf of our partners in the public health community, Trust 

for America’s Health thanks you for your leadership and looks forward to working with you to see these enacted into law. 

[The prepared statement of Mr. Levi follows:] 


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Mr. PALLONE. Thank you. 

Dr. Smedley. 

STATEMENT OF BRIAN D. SMEDLEY, PH.D. 

Mr. SMEDLEY. Thank you, Mr. Chairman, for the opportunity to 

provide testimony on the potential to address racial and ethnic inequities in health and health care in the context of the tri-committee health reform legislation. 

For nearly 40 years the Joint Center for Political and Economic 

Studies has served as one of the Nation’s premier think tanks on 

a broad range of public policy issues of concern to African Americans and our communities of color. We therefore welcome the opportunity to comment on this important legislation. 

Many racial and ethic minorities, particularly African Americans, 

American Indians, and Alaskan Natives, native Hawaiians and Pacific Islanders, experience poorer health relative to national averages from birth to death. These inequities take the form of higher 

infant mortality, higher rates of disease, and disability and shortened life expectancy. 

Health inequities carry a significant human and economic toll, 

and therefore have important consequences for all Americans. They 

impair the ability of minority Americans to participate fully in the 

workforce, thereby hampering the Nation’s efforts to recover from 

the economic downturn and compete internationally. They limit our 

ability to contain health care costs and improve overall health care 

quality. And given that half of all Americans will be people of color 

by the year 2042, health inequities increasingly define the Nation’s 

health. It is therefore important that Congress view the goal of 

achieving equity and health and health care not as a special interest, but rather as an important central objective of any health reform legislation. 

To that end, the draft tri-committee legislation contains a number of important provisions that will strengthen the Federal effort 

to eliminate health and health care inequities. Importantly, the 

legislation offers the kind of comprehensive strategy of targeted investments that are likely to help prevent illness in the first place, 

manage costs when illness strikes, and improve health. 

Over the long haul these provisions will result in a healthier Nation with fewer health inequities, greater workforce participation 

and productivity, and long-term cost savings. These provisions do 

several things. 

They emphasize and support disease prevention and health promotion. For example, the legislation would require the CDC Clinical Preventative Task Force and Community Preventative Task 

Force to prioritize the elimination of health inequities. 

In addition, the legislation would authorize health empowerment 

zones, as Dr. Levi has emphasized, locally focused initiatives that 

stimulate and seed coordinated, comprehensive health promotion 

and community capacity building. 

Provisions in this draft legislation would also improve the diversity and distribution of the health professional workforce; for example, by increasing funding for the successful programs such as the 

National Health Service Corps and Health Careers Opportunity 

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ed health professions in shortage areas, particularly nursing, and 

encouraging the training of primary care physicians. It will also 

strengthen Medicaid by expanding eligibility and by increasing reimbursement rates for primary care providers. And it will improve 

access to language services; for example, by requiring a Medicare 

study and demonstration on language access. 

While the tri-committee draft bill addresses a number of important needs to achieve health and health care equity, there are several areas where the legislation could be strengthened with evidence-based strategies that will improve the Federal investment in 

health equity. These include encouraging the adaptation of the 

Federal cultural and linguistic appropriate services standards 

which would help improve access and quality of care for diverse 

populations, expanding successful community-based health programs such as the Centers for Disease Control and Prevention’s 

Racial and Ethic Approaches to Community Health Program, addressing health and all policies by funding and conducting health 

impact assessments to understand how Federal policies and 

projects in a range of sectors influence health. 

Strengthening the Federal health research effort by elevating the 

National Center on Minority Health and Health Disparities to institute status. The national center has led an impressive effort to 

improve research on health inequities at NIH and needs the resources and influence associated with institute status to continue 

this work. 

Strengthening Federal data collection by establishing standards 

for the collection of race, ethnicity, and primary language data 

across all public and private health insurance plans and health 

care settings, and insuring that immigrants lawfully present in the 

United States face the same eligibility rules as citizens for public 

programs, including Medicaid, Medicare and CHIP. 

Mr. Chairman, in conclusion, addressing health inequities requires comprehensive strategies that span community-based primary prevention to clinical services, a long-term commitment and 

investment of resources and a focus on addressing equity in all 

Federal programs in all elements of health reform legislation. The 

failure to do so ignores the reality of important demographic 

changes that are happening in the United States and fails to appreciate the necessity of attending to equity as an important step 

in our effort to achieve the goals of expanding insurance coverage, 

improving the quality of health care, and containing costs. 

Encouragingly, the tri-committee draft bill recognizes the importance of achieving equity in health and health care and proposes 

a number of policy strategies to achieve this goal. 

Thank you, Mr. Chairman, and we look forward to working with 

you on this important legislation. 

[The prepared statement of Mr. Smedley follows:] 


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Mr. PALLONE. Thank you, Dr. Smedley. 

Dr. Kestner. 

STATEMENT OF MARK KESTNER, M.D. 

Dr. KESTNER. Good afternoon, Mr. Chairman and members of the 

committee, and thank you for the opportunity to be with you today. 

May name is Dr. Mark Kestner, and I am the Chief Medical Officer 

for Alegent Health. 

Today I want to give you a brief overview of Alegent Health’s experience with prevention and wellness. We are both the large employer and a substantial provider of health care, which gives us a 

unique perspective on these issues. 

Alegent Health is a faith-based, not-for-profit healthcare system 

that serves eastern Nebraska and western Iowa. We have 9,000 

employees and 1,300 physicians that are proud of the care we provide in our 10 hospitals and in our 100 sites of service. Alegent is 

the largest nongovernmental employer in Nebraska, and each year 

we serve more than 310,000 patients. 

As a provider, we believe we are a model for post-reform health 

care systems. We employ substantial health care information technology to improve the quality and safety of the care we provide. 

Through the dedication and commitment of our physicians, a combination of both employed and independent physicians, we have 

standardized care and implemented evidenced-based care order 

sets across more than 60 major diagnosis fees that are continually 

raising the bar on the quality of care we provide. 

Our CMS core measure and HCAP scores are consistently among 

the highest in the Nation. In June of 2008, the Network for Regional Health Care Improvement identified Alegent as having the 

best combined health care quality scores in the Nation. Through 

the implementation of health IT and adoption of evidence-based 

care, Alegent is increasing the quality of care we provide while simultaneously lowering the costs that we provide. Last year we reduced our resource utilization, and the cost of the care continues 

to decline. 

We are proud to have shared these and other initiatives with 

Health and Human Services Secretary Kathleen Sebelius 10 days 

ago when she paid a visit to us. And yet, Mr. Chairman and members of the committee, in our estimation the efforts of providers to 

raise quality and lower costs is only a small portion of what we 

need to do. We adamantly believe that people must be more accountable for their health. And in doing so, we must incentivize 

them and give them good information. 

We began our journey with greater consumer involvement in 

health care 3 years ago when we made a commitment as an organization to more fully engage our workforce and their health. We 

spent a year designing a new benefit plan that promoted health 

and wellness among our employees. In pioneering the new benefit 

plan, we identified incentives to encourage healthier behaviors and 

tools to provide meaningful costs and quality information as areas 

where Alegent could foster individual engagement in health care. 

There are two important constructs to Alegent’s employee health 

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zations and colonoscopies. If it is preventative, it is free. As a result, our workforce is consuming more than two and a half times 

the preventive care than the Nation at large. That is an investment 

we are willing to make even without longitudinal studies to quantify the financial benefit to our organization. 

Second, through an innovation called Healthy Rewards Program 

we pay people to make positive changes in their lifestyle. If an employee quits smoking, loses weight, more effectively manages their 

chronic diseases like diabetes, or makes other positive changes that 

affect their lifestyle, Alegent provides a cash reward. To encourage 

wellness and prevention and help our employees get healthy, we 

offer a variety of assistance programs free of charge, free weight 

loss counseling, free smoking cessation, and chronic disease management programs. For those who need a little bit of extra help, 

we offer free personal health coaches. 

Our objective was first and foremost to improve the health of our 

workforce, and we believed by doing so our costs would decline. 

And while we are still building data on the effects of our efforts 

that had been on productivity and absenteeism and organizational 

health care costs, I can report that a majority of our employees 

take an annual health risk appraisal and today have lost 15,000 

pounds as a workforce, and more than 500 of our employees have 

quit smoking. 

Our approach has allowed us to substantially slow the growth of 

our health care spending. Over the first 2 years our cost increases 

were limited to an average of 5.1 percent despite trends in the 8 

to 10 percent range. As we approach a new benefit plan year, we 

are carefully constructing a advanced medical home pilot for our 

chronically ill employees and several large employers in the community. 

Key to our results was their use of the HSA and HRA accounts, 

which give employees better control in their health care dollars and 

allow us to directly reward people for changing unhealthy behavior. 

The data we examined developing our benefits plan suggests to 

us that people would be more inclined to take advantage of health 

and wellness programs, even free ones, if they were incentivized to 

do so. For us the use of HSAs and HRAs facilitates this process 

and provides employees an immediate tangible benefit in the form 

of subsidized health care costs. But to give our employees more 

control required us as providers to make other dramatic changes. 

First and foremost, we created tools to provide meaningful and relevant cost and quality information. We have a quality Web site 

where we publicly report our 40 quality measures, CMS 20, the 10 

skip and the 10 stroke measures, and our compliance with these 

measures ranges anywhere from 97 to 100 percent. 

In January of 2007, we introduced a Web-based cost estimating 

tool called MyCost, which is the first of its kind in the country. By 

working with third-party payer insurance database, MyCost was 

able to verify insurance policies and deductibles in order to provide 

patients an extremely accurate price estimate on more than 500 

medical tests and procedures. In a little over 2 years, 85,000 individuals, employees and members of our community, have used it. 

In summary, Alegent Health began our health care reform several years ago when we made an organizational commitment to 


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dramatically improve quality, lower cost, and adopt health information technology. We knew that this would help us become more effective and efficient providers, and the data shows that we are becoming successful in reducing our costs and our resource utilization. And yet, Mr. Chairman and members of the committee, that 

was simply not enough. Our challenge as a country, as physicians, 

nurses, Members of Congress and employers, individuals, and families is to find a way to help people become more individually responsible for their health care. 

Thank you. 

[The prepared statement of Dr. Kestner follows:] 


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Mr. PALLONE. Thank you. Thank all of you, and we will now take 

questions, and I will start with 5 minutes. 

I wanted to really focus, if I could, on the questions to Dr. 

Smedley, because of the disparities issue. All of you talked about 

the importance of prevention and wellness, and that is certainly 

what we hear in regard to health reform. And specifically experts 

tell us we have to address prevention and wellness at the community level if we want health reform to lead to the best health outcomes for our constituents. That is definitely the case for elimination of health disparities. Disparities arise not just because of 

differences in medical care, but also because there are factors that 

make it harder for some people than others to make healthy 

choices. 

Dr. Smedley, I have been most familiar with this with Native 

Americans because I am a vice chair of the Native American Caucus. I don’t have any tribes in New Jersey, but over the years being 

on the Resources Committee, I have paid quite a bit of attention 

to the Native American issues. Best example probably was with the 

Pima, the Tohono O’Odham, where you saw that traditional diet, 

ranching, desert products were lost and they using, eating processed foods, and it was hard to go back to traditional diet because 

the ranches were gone and the desert had changed and it just 

wasn’t possible to do that. 

So in the draft proposal we target funds to community based 

interventions or services with the primary purpose of reducing 

health disparities. Can you tell us how the recommendations from 

the Community Prevention Task Force, that is housed at CDC and 

whose work is strengthened in the draft proposal, can be used to 

target health disparities? And anything else about addressing 

health disparities within the context of prevention and wellness. 

What do you see as some of the areas that require new or additional research? 

All in about a minute because I have a second question to you. 

Mr. SMEDLEY. Sure, Mr. Chairman, I will try to be very brief. As 

you pointed out, place matters for health. Where we live, work, 

study and play is very important. Certainly it is important that we 

all take responsibility for our individual health choices, but sometimes those health choices are constrained by the context in which 

we live, work, and play. Since you pointed out in many communities of color we face a number of health challenges, often the retail food environment is poor in segregated communities of color. 

You have a relative abundance of fast food outlets, poor sources of 

nutrition, a relative lack of grocery stores where you can get fresh 

fruits and vegetables. Similarly in many communities of color we 

lack safe places to play, recreational facilities, places to exercise. It 

is harder to encourage an active lifestyle under those conditions. So 

the CDC Preventative Task Force is an evidence-based process that 

tries to identify what are the kinds of community-based prevention 

strategies that will help to address these kinds of conditions. We 

think that is very important. So I certainly applaud the provisions 

in the draft bill that would strengthen that process. 

Mr. PALLONE. Now on the workforce, again I will use American 

Indians because I am most familiar, I think there are maybe, over 

2 million Native Americans and last count less than 500 American 


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Indian doctors, 400 something. They have an organization. I went 

to speak to them once, and that is the entire membership. 

In the discussion draft there are a number of provisions that will 

increase representation of racial and ethnic minorities. We have 

additional investment in the National Health Service Corps. Basically, how would these workforce provisions help address health 

disparities? Why is increasing the diversity of the workforce and 

not just its scale important in reducing health disparities? You 

could argue why do you need more Native American doctors, why 

can’t other people take care of Native Americans. But I know that 

there is an issue there, and I would like to you discuss it. 

Mr. SMEDLEY. Absolutely. The research is very clear that when 

we increase the diversity of the health provider workforce all of us 

benefit. So for example, we know that providers of color are more 

likely to want to work in medically underserved communities. 

Their very presence increases patient choice. We talk a lot about 

many patient choice. For many patients of color it is often harder 

to bridge those cultural and linguistic barriers without a provider 

of your own racial or ethnic background. 

It is also true that diversity in medical education and other 

health professions education settings increases the cultural competence of all providers. We need to be thinking about ways to improve the cultural competence of all of our health care systems, because as I mentioned in my testimony, very soon, in shortly over 

30 years, this is about to be a Nation with no majority population. 

Our health systems need to be prepared to manage that diversity. 

And so this is one of the many reasons why diversity among health 

professions is important, and the provisions in the draft bill such 

as strengthening the title VII and VIII of the Health Professions 

Act are a very important toward increasing the diversity and distribution of providers. 

Mr. PALLONE. Thank you. 

Mr. Deal. 

Mr. DEAL. Thank you, Mr. Chairman. This whole panel is supposed to be dealing with prevention and public health, and I appreciate all of you being here. But I have heard a lot of words and I 

have heard little examples of specifics on this thing. Because it 

seems to me if we talk about the words ‘‘prevention’’ and 

‘‘wellness,’’ we are talking about changing of lifestyles. 

Now we heard Dr. Kestner talk about his company and the way 

that they incentivized wellness was through financial type rewards. 

We heard Dr. Smedley just a minute ago talk about communitybased strategies and the fact that you don’t have enough grocery 

stores in some communities to sell fresh fruits and vegetables, don’t 

have safe playgrounds that cause us not to get enough exercise. 

In a health bill, a health reform bill, what are the specifics we 

can do to change people’s lifestyles? Because you don’t think of that 

in the normal context of a health care reform measure. 

Now specifically, and I am going to use this is a specific example 

of a question that I think we ought to address, in the Food Stamp 

Program, for example, we are pouring millions and hundreds of 

millions of dollars into it, and the recent stimulus package has 

powered even more money into the Food Stamp Program, but we 

don’t have any guidelines like we have in the WIC Program, as I 


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understand it, to make sure that the taxpayers dollars that are 

helping fund the purchasing of food doesn’t go to buy things that 

work at counter purposes with what we are talking about here of 

wellness. 

Dr. Levi, let me start with you and ask if you would just comment on that. 

Mr. LEVI. I think your point is very well taken. If we think of 

this as not a health care financing bill but a health bill, then we 

need to be addressing all of the elements that comprise helping 

people be healthier, and a lot of that is about exercising personal 

responsibility but then creating the environment where people can, 

not just through financial incentives, but really we change the 

norms of our society so people make healthier choices. 

To that end, there is actually an experimental program now that 

is getting underway within the Food Stamp Program, so that people will be will in a sense get higher credit if they buy healthier 

food. So that is one way of incentivizing people. There are certainly 

other things that can be done within the Food Stamp Program that 

would incentivize the purchase of healthier foods. 

But we also have to make sure those healthier foods are available, which is not the case in all communities. We need to make 

sure that people understand and know that the healthier foods are 

indeed what they should be eating. And so what it really takes is 

the kinds of community interventions that I think are envisioned 

in this legislation that, particularly under the concept of health empowerment zones, look at multiple aspects of the community. Is 

healthy food accessible? Do people know about the healthy foods? 

What is happening in the schools in terms of educating kids and 

changing norms? How active are kids able to be? How active are 

adults able to be? And taking all of those elements and developing 

comprehensive strategies. We have examples of successes like that. 

We have them in the Steps Program funded by the CDC, in the 

Reach Program funded by CDC, in the Pioneering Healthier Communities that are organized by YMCAs and other national organizations to bring communities together to identify what their communities need to make healthier choices, easier choices for the average person. 

That is what is going to change. You know, we are talking about 

bending the cost curve. If we do that, we can have a dramatic impact on people’s health and what they will be demanding of the 

health care system. 

Mr. DEAL. I think we all agree we want our children and everybody to be healthier and exercise better choices in their lifestyles. 

Dr. Smedley, are we talking about subsidizing grocery stores to 

come in to certain communities as a way of providing these kind 

of choices? Is that what you are talking about? 

Mr. SMEDLEY. Well, Congressman, there actually are some very 

interesting initiatives that have leveraged public investment to 

stimulate private investment. For example, the Commonwealth of 

Pennsylvania has the Fresh Food Financing Initiative, which has 

provided that double bottom line of benefits both to private investors as well as to government investing in creating incentives so 

that we can create a healthier retail food environment. 


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I think that many of the examples that Dr. Levi just mentioned 

are important examples of comprehensive strategies, because often 

we find that there is not just one issue that is a problem in the 

community. It is not just a problem of food resources and food options, but there are many multiple and systemic problems. Addressing those comprehensively as the Reach Program does and 

other programs is the way to go. 

Mr. DEAL. I think in our educational activities maybe we should 

teach people how to turn the television set off a little bit. 

Mr. LEVI. Absolutely. 

Mr. DEAL. Thank you. 

Mr. PALLONE. Chairman Dingell, is he here? I am sorry, our Vice 

Chair, Mrs. Capps. 

Mrs. CAPPS. Thank you, Mr. Chairman. 

I would like to say, as someone who spent my life in the last couple of decades in public health as a school nurse, this is a panel 

that I really appreciate, the testimony of each of you, and I also 

look forward to this 5 minutes being just dedicated to proving the 

worth of prevention, in other words, my frustration with CBO for 

not being able or not scoring this topic. 

And Dr. Levi, I will start with you, but I hope I give a chance 

for each of you to comment. 

Your testimony mentions a report from Trust of America’s 

Health released last year showing the return on investment from 

proven community level prevention. Can you explain briefly the 

methodology of this report if you think this could help me or help 

us all in our case towards scoring savings? We have to learn how 

to do this as government as well; otherwise, we are not going to 

be able to counter some of the front costs that are entailed here. 

Mr. LEVI. I agree, and you know, I think making the case to the 

Congressional Budget Office is going to be critical at some point. 

I would preface my explanation of our report in our work by saying, whether or not CBO is convinced should not stop us from investing in prevention because whether we meet the narrow criteria 

that CBO is forced, in some respects, by law to address shouldn’t 

mean that we don’t see this as a worthwhile investment in improving the Nation’s health. 

We worked with the New York Academy of Medicine, Prevention 

Institute and, above all, the Urban Institute economists to develop 

a model that looked at successful community level prevention efforts, in other words, efforts that took place outside of the doctor’s 

office, to see whether, through education, through changing the environment, changing policies, we could see improved health outcomes. 

We focused ultimately on smoking cessation, physical activity, 

and nutrition, which are the drivers of some of the most expensive 

health care costs that we see today. And what we found was that 

there are, indeed, successful examples of those interventions. What 

we found also is that we probably can implement those at probably 

less than $10 per person, and even if we saw only a 5 percent impact of those interventions, which is very much on the conservative 

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The challenge here is that the winners in this, if you want to call 

it the winners, the people who save, are better care, the private insurers, and to some degree also, Medicaid. In the CBO scoring system, a discretionary investment that has pay off on the entitlement 

side can’t be scored in anyone’s favor, and that is actually a congressional rule. But just as importantly, I think what we need to 

think about is that those who benefit are not necessarily contributing, and so we need to think of this as a public investment that 

will ultimately reduce overall health care. 

Mrs. CAPPS. My question to you now is very pragmatic, and I am 

going to expand it to all three of you, and time is of the essence. 

I mean, this is really an obstacle, in my opinion, to the pushback 

against the huge cost, as it is portrayed, of this health care legislation. Can you give us some advice, what can Congress do to facilitate the process of enabling CBO, or whatever term you want to 

use, to be able or have that capability of scoring prevention? 

And you know, you are not even talking about quality of life for 

consumers of health. We will take that off the table, because that 

is probably hard to measure, or longevity, that has been held up 

by some to be a deterrent because as people live longer, they are 

going to get more chronic diseases over the course of their lifetime. 

You know, what should we do on this committee to begin that process? I will start with you briefly. 

Mr. LEVI. Two very quick comments. One is, Congress can remove this firewall between discretionary investment and entitlement savings. 

I think the second is to start a dialogue with the economics community and the Congressional Budget Office, because not everyone 

agrees with this notion that you just mentioned that if we reduce 

these chronic diseases, then people are going to live longer, and 

they are ultimately going to cost more. There is this whole concept 

we call compression of morbidity which suggests that if we actually 

reduce obesity, and there are a number of models from a number 

of different economists now that tend to show, for example, if you 

reduce obesity, you are not necessarily prolonging life, but you are 

improving the quality of life and reducing health care costs because 

the chronic diseases are additive. They don’t necessarily shorten 

life, and so I think those are two examples. Start that dialogue and 

remove some barriers. 

Mrs. CAPPS. Thank you. I know I have used my time. I don’t 

know if there is a way for a quick response from the other two if 

they want to. 

Mr. PALLONE. Go ahead, sure. 

Mr. SMEDLEY. I would just add, I think that Dr. Levi answered 

that quite well. We also need to consider the next generation is 

likely to be less healthy than the current adult population. 

Mrs. CAPPS. Why is that? 

Mr. SMEDLEY. Because they are more obese. They are at risk for 

more chronic diseases. So we need to be considering the fact that 

this is the generation that will support my colleagues and I in our 

old age. So hopefully we will be forward thinking. 

Mrs. CAPPS. Is that documented that they are less healthy? 

Mr. SMEDLEY. Yes. 

Mrs. CAPPS. Any further point from you? 


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Mr. SMEDLEY. Be happy to provide reference. 

Mrs. CAPPS. Please do. 

Dr. KESTNER. I would just comment that we have senior experience in showing that preventative care decreases our expenses. 

Mrs. CAPPS. So there is data out there? Any of you want to supply any information, I would appreciate it very much. 

Mr. PALLONE. Sure. Any follow-up in writing is appreciated. 

Thank you. 

Gentleman from Texas, Mr. Burgess. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Dr. Smedley, I am very interested in some of the things to which 

you testified and may be beyond the scope of what we are doing 

and dealing with in these hearings, but I have similar neighborhoods in my district, and there is not a grocery store from one end 

of the community to the other. Plenty of places to buy alcohol, typically in 40-ounce containers, and plenty of places to buy fast food, 

and of course, cigarettes are available on every street corner. 

This just points to one of the difficulties that we have, and we 

had worked with a group Social Compact. They are so far away 

from our last Census in 2000, it is very difficult to get private grocery stores interested in moving back to the area because they say, 

well, the demographics just won’t support a grocery store, but in 

fact, the demographics have changed and the purchasing patterns 

have changed, and again, we are still far away from the Census. 

Social Compact was able to put out some data that showed perhaps 

this is worthwhile of a Wal-Mart Supercenter, for example, locating 

in the area. We are actively trying to push that, but it is just extremely difficult to get those things accomplished. No problem at 

all getting another liquor store to move in. It is really hard to keep 

them out in fact. 

I just wonder if we shouldn’t allow a little more flexibility in 

some of our Federal food stamp programs. You can’t buy alcohol; 

that is correct. Can’t buy cigarettes; that is correct. Can’t buy hot 

food, but there are some hot foods like a rotisserie chicken, for example, that may serve a family’s nutritional needs very well. And 

the fact that that activity is restricted may be putting an undue 

burden on people who are willing to move into the community. 

And I don’t purport to have any of the answers. I have worked 

with some of the people at Robert Wood Johnson in trying to craft 

language that we might put in a bill, but it is extremely difficult. 

But I appreciate what you are doing, what you are trying to do because I think that gets to the root of a lot of the problems that I 

know I see it at home. And you are correct; the next generation is 

only going to be successively less healthy because some of the 

learned behaviors that are going on today. 

I want to talk about Alegent for just a moment because you are 

a success story, and we heard from a previous panel that maybe 

we should be pursuing evidence-based policy, and your policies at 

Alegent are clearly something that are worthy of not just our attention and study but perhaps our emulation. And you have showed 

rather dramatically, I think, you and Wayne Sensor have shown, 

you can’t just make things free; you have got to make them important, and the way we make things important is attach money to 

them. 


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So I hope that this committee will look seriously at what you 

have done with your health reimbursement accounts and your 

health savings accounts and your ability to bring people in not just 

to affect things on a small scale but to affect things on a large 

scale. And the impressive thing is you did it with your 9,000 workforce first before you went forward and began to sell it to the rest 

of the community. 

So, again, I hope we will look seriously at what you have done 

and what you have been able to accomplish. My understanding— 

and tell me if I am correct, Dr. Kestner—on the consumer based 

health plan, if you look at high-option at PPO plans, they are going 

at about a 7.5 percent year rate of growth as far as costs; Medicare 

and Medicaid, 7.3, 7.8 percent, depending upon who you want to 

read; but consumer directed health plans are growing at about 2, 

2.25 percent a year. Has that been your experience as well? 

Dr. KESTNER. Our cumulative 2-year experience is 1.5. 

Mr. BURGESS. 1.5? 

Dr. KESTNER. Excuse me, I am sorry, 5.1. And I think we recognize that the impact going forward will be on preventative measures. We still have patients that have problems with obesity, with 

smoking, and those are things that we are going to have to—that 

are going to be expensive for us in the long run. So, on the short 

term, we have already seen a benefit in implementing a strategy, 

and on the long term, we anticipate seeing an increasing decrease 

in our health care expenses. 

Mr. BURGESS. Now, I don’t know if you have had a chance to 

read the draft that is before us today for discussion, but as far as 

you are aware does the draft that has been proposed by the majority, does it increase or decrease your ability to do what you want 

to do particularly with health savings accounts? 

Dr. KESTNER. Right. I think any strategy needs to engage the patient in the dialogue, empower them in economic decisions regarding access, but allowing open access. And I think the most important thing from my perspective is the ability to engage the dialogue 

when they are well. All too often we access health care at a point 

of sickness, and really preventative care is engaging people and 

starting the dialogue when they are well. So any strategies that 

focus on prevention and begins that dialogue early I think are benefits to the population at large. 

Mr. BURGESS. Just one more brief question. Do you allow for 

partnering with your physicians and your facility at all? Are there 

like inventory service centers where there is physician ownership 

involved in any of Alegent’s facilities? 

Dr. KESTNER. Yes. We have joint ventures in ambulatory service 

centers. 

Mr. BURGESS. Are you aware that the draft under discussion 

today would prohibit such activities in the future? 

Dr. KESTNER. I am superficially aware of discussions that are 

going on. 

Mr. BURGESS. Do you believe in the pride of ownership? I mean, 

when a physician has an ownership position in an entity, my feeling is it makes it run better. 

Dr. KESTNER. I believe with the dialogue that we have had in our 

health system our physicians feel pride of ownership, whether they 


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have an investment interest or not. I think that has been part of 

our culture of giving physicians decision making and the ability to 

drive health care through evidence-based care and empowering 

them to make decisions for our health care delivery model. So, 

whether they have an investment interest or not, I think we have 

tried to make sure they have a pride of ownership in our system. 

Mr. BURGESS. Do you think this bill before us today fosters that 

empowerment? 

Dr. KESTNER. The one that is up for discussion at this point in 

time? 

Mr. BURGESS. Yes. 

Dr. KESTNER. Yes. 

Mr. BURGESS. Thank you. 

Mr. PALLONE. Thank you. Gentlewoman from the Virgin Islands, 

Mrs. Christensen. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman, and thank you for 

being here to all of the panelists. 

Dr. Levi, we have really appreciated the work from the Trust for 

America’s Health, and we appreciate also your support of the 

health empowerment zones. 

One of the basic services that is not covered for adults is dental 

care. How important do you think that it is that it be included in 

terms of prevention or its impact on chronic diseases and other 

health care problems? 

Mr. LEVI. We believe access to dental care is a vital component 

to keeping people healthy and keeping people functioning and economically productive. There is growing evidence, especially on preventive care, of links of good dental health with even heart disease. 

And so there is, indeed, a correlation with some chronic diseases, 

but just as importantly, I think, you know, good oral health keeps 

people healthier, keeps people functioning, keeps people out of pain 

and, therefore, probably more employable. So it is both a health 

benefit and an economic benefit. 

Mrs. CHRISTENSEN. Thank you. 

Dr. Smedley, welcome back. 

Mr. SMEDLEY. Thank you. 

Mrs. CHRISTENSEN. The Iowa Medical Treatment Report on equal 

treatment of which you are the lead author and editor was a landmark document, and the recommendations from that report have 

been held up as the standard for eliminating health disparities. 

You mentioned a few areas, but if there are any others, to what 

extent does this draft legislation meet and address those recommendations? And where are we falling short? 

Mr. SMEDLEY. Sure, yes, thank you. 

There are a number of provisions within this draft bill that address some of the provisions or the recommendations of the Iowa 

Medical Treatment Report. As I mentioned in my oral testimony, 

there are some areas where we can go further in terms of adopting 

the Federal Cultural and Linguistic Appropriate Services Standards, ensuring that we strengthen our Federal health research. 

Data collection is also one of those areas where I think it is clear 

that we are going to have to have a much more robust systematized system of collecting data on race, ethnicity, primary language 

and probably other demographic variables in order to understand 


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when and under what circumstances we see inequality in both access to and the quality of care as well as outcomes. 

I will even go a step further and suggest that we ought to publicly report these data because that will give us a level of accountability both for consumers, for providers and health systems, as 

well as government. One of the responsibilities of government, of 

course, is to ensure that there is not unlawful discrimination in the 

provision of care, and until we publicly report and more carefully 

collect this data, we will not know when that occurs. 

Mrs. CHRISTENSEN. Thank you. 

Dr. Kestner, I really applaud the fact that in the absence of the 

longitudinal data showing what that investment might pay back 

from providing that free preventative care, you did provide it for 

all employees. And you have talked about some of the shelter and 

benefits that you have already seen. 

But in looking at the public plan that we are proposing, and the 

possibility that it would allow for innovation, you are a not-for-profit. Is there something in your experience that can inform and 

maybe support what we are trying to do in a public plan and its 

ability to do the kind of innovation that we see that you are doing 

at Alegent? 

Dr. KESTNER. I would hate to see any plan be nothing more than 

a reproduction of what we already have, which is people seeking 

care when they hurt; people being given a pill and not understanding the cost of that pill; and then not returning unless they 

have been noncompliant or haven’t gotten better. 

And so I think that any plan that engages the consumer in the 

dialogue about not only the consequences of their health care decisions but the cost of their health care decisions is going to be important. 

Mrs. CHRISTENSEN. Thank you. 

And Dr. Smedley, in my last couple of minutes, we talked about 

diversity in the health care workforce. You weren’t just talking 

about doctors and nurses, were you? 

Mr. SMEDLEY. Yes. We need diversity in all of our health professions. Allied health professions, mental health fields, dentistry. 

Mrs. CHRISTENSEN. What about some of those commissions and 

councils and tasks forces? 

Mr. SMEDLEY. The CBC task forces—yes, absolutely, we need diversity on all of the policy-making bodies that are outlined either 

in this draft legislation, as well as existing bodies because, again, 

with the changing demographic of this Nation, with the importance 

of addressing demographic and equity issues, we need to put these 

issues front and center in all of our conversations around health 

policy. So I would strongly encourage diversity in all of its forms 

to be represented on these task forces and panels. 

Mrs. CHRISTENSEN. Thank you. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. 

Gentleman from Georgia, Mr. Gingrey. 

Mr. GINGREY. Thank you, Mr. Chairman. 

Dr. Smedley, in your testimony you talked about racial and ethnic minorities and disparity in care. You state, a potentially significant source of racial and ethnic health care disparities among inVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00267 Fmt 6633 Sfmt 6633 E:\HR\OC\A088.XXX A088

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sured populations lies in the fact that minorities are likely to be 

disproportionately enrolled, and I think we will quote, lower tier 

health insurance plans. There are large access problems in the 

Medicaid program where many beneficiaries are unable to find a 

doctor that accepts Medicaid because of inadequate reimbursement 

and high administrative burdens. Do you believe the governmentrun Medicaid program and how it is administered exacerbates 

health disparities? 

Mr. SMEDLEY. Well, Congressman, I think that, in the case of 

Medicaid, you are absolutely right, that low reimbursement rates 

simply make it prohibitive for providers to accept, in some cases, 

Medicaid patients. 

But this draft bill would increase reimbursement rates in ways 

that I think will hopefully encourage take up of Medicaid patients. 

Unfortunately, we have associated stigma with Medicaid, despite 

the fact that it is a very comprehensive benefit plan. As Ms. Wright 

Edelman pointed out earlier, it offers a number of very, very important benefits particularly for children who are at risk for poor 

health outcomes. 

So I think we can build on the Medicaid program, improve it, 

and ensure that patients who have Medicaid coverage are actually 

able to get the care that they need. 

Mr. GINGREY. Thank you for that response, and of course, you 

mentioned that there would be improved reimbursement. That is 

true for primary care physicians and medical home managers, but 

certainly, the reimbursement is likely to be less for specialists, general surgeons, OB/GYN doctors, et cetera. So you think if Medicaid 

beneficiaries had an opportunity, and we have suggested that from 

this side, our ranking member has suggested a number of times, 

if Medicaid beneficiaries had the opportunity to opt into a private 

policy with government assistance, so-called premium support, do 

you believe they would find it easier to find a doctor that would 

take them? 

Mr. SMEDLEY. Congressman, I am not aware of any data that you 

would inform an answer. I know that some of the proposals that 

were offered in terms of tax credits and so forth were insufficient 

to cover the cost of private health insurance. I believe the cost estimates now for a family is about $12,000. So, clearly, we would need 

a sizeable tax credit for a low-income family to afford a private 

plan like that. 

Unfortunately, I have no data. 

Mr. GINGREY. Well, reclaiming my time, certainly, it would remove the stigma, and when you are talking about let’s say the 

CHIP program, rather than having the child or children running 

all across town trying to find a doctor that would accept CHIP, it 

would be wonderful if they could, with premium support, be enrolled in a family policy so everybody could kind of go to the same 

medical clinic. 

Let me switch over to Dr. Kestner for just a second because you 

were talking about HSAs. I think, Dr. Kestner, in your testimony, 

you credited HSAs and HRA’s as keys to disease management lifestyle changes. 

Earlier, I don’t know if you heard on the first panel, Dr. Parente 

of the Medical Leadership Institute, he suggested that rather than 


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what is recommended in this 800-page draft document from the tricommittees that would require everybody to have first dollar health 

insurance and also for employers to provide it; his suggestion was, 

if there is going to be a requirement on the part of the so-called 

patient, maybe it should be a requirement for catastrophic coverage 

and not first dollar. The catastrophic coverage, of course, would 

prevent all these bankruptcies, these three out of five bankruptcies 

that people talk about that are brought about by basically serious 

medical illnesses that folks can’t pay for. What do you think about 

that suggestion? 

Dr. KESTNER. Well, our strategy has been to be transparent with 

costs so that consumers can make educated decisions. So, if I have 

a condition that requires immediate care, I have an option of going 

to an urgent care center, see my primary care doctor or an emergency department, and each of those costs something different. 

Part of my decision-making will be, what is coming out of my 

pocket as far as the first dollars, and certainly, it is a more costeffective strategy to go to a primary care physician, if I know I am 

paying $10 for that visit, as compared to an emergency department, where I potentially would be paying far more. 

And so I think it is important for us to have a strategy that engages the consumer in the day-to-day decision-making that they 

have with regards to that. 

Mr. GINGREY. Let me reclaim my time in the 1 second that I 

have got left, Mr. Chairman, if you will bear with me. 

You know, it is estimated that of the 47 million or 50 million people that don’t have health insurance in this country, that maybe 18 

million of them are folks that make at least $50,000 a year, and 

I would suggest to you that a lot of them are going bare, opting 

out of getting health insurance because they feel like they don’t 

really need it. They are 10 feet tall and bulletproof, and they are 

kind of wasting their money. And they know, at the end of the day, 

if they pay over a period of 15 or 20 years with an employer-based 

system, and then all of the sudden they get sick and they lose their 

job, that the insurance company is going to either say, you are not 

insurable, we are not going to cover you, or if we do, we are going 

to charge you 300 percent of standard rates. 

Maybe, you know, there is a place here for insurance reform in 

regard to people like that who have done the right thing and have 

credible service, and therefore, they shouldn’t have to pay these exorbitant rates or even get in a high-risk pool because they have 

done the right thing. 

Mr. Chairman, I know I have exhausted my time. There is probably not time for a response unless you want to allow—— 

Mr. PALLONE. If you would like to respond, go ahead. 

Dr. KESTNER. No, thank you. 

Mr. LEVI. Mr. Chairman, if I can make one very short point. 

The question was about first dollar coverage, but as I understand 

Alegent’s program, there is first dollar coverage for preventive services, and since this is a panel about prevention and public health, 

I think it is really important to keep in mind that the things that 

are going to save people’s lives and ultimately save health care 

costs are the things that really need to have first dollar coverage 


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without copayments because that is what is going to incentivize 

better. 

Mr. GINGREY. Certainly with the preventive care I would agree 

with that. 

Mr. PALLONE. Thank you. 

Gentlewoman from Illinois, Ms. Schakowsky. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

I wanted to ask Mr. Kestner a question. Your Web site says, ‘‘we 

are proud to offer a generous financial assistance program.’’ But 

then it goes on to say, ‘‘medical bills are limited to 20 percent of 

a total household family income.’’ 

So a family of four making $55,000 a year, with a $200,000 medical bill, my staff—they are always right—calculated that the family would have to pay $11,000. So as we are sitting here talking 

about affordability, do you think a family of four making $55,000 

should be paying $11,000 in medical bills? 

Dr. KESTNER. I believe we do have a very generous commitment 

to our community with regards to indigent care. We have contributed $60 million—— 

Ms. SCHAKOWSKY. But indigent—$55,000 is probably not indigent. So the statement that you have—I guess really what I am 

getting at, even with your program, which may be more generous 

than most, we are still talking about really significant out-of-pocket 

costs that could be overly burdensome for a family, right? 

Dr. KESTNER. That could be, yes. 

Ms. SCHAKOWSKY. Here is one of the things I want to get at. This 

issue of the necessity of patients to really understand the cost of 

health care presumes that medical decisions are mostly patientdriven, and I just—I unfortunately didn’t hear your testimony. I 

was with a doctor. I just fractured my foot, and you know, I didn’t 

go in there and say, give me some X-rays and I think I need a boot, 

which I now have, and you know, I mean these are things that the 

doctors tell us. 

And when we looked at that article about McAllen, Texas, versus 

El Paso, probably everybody’s read it in the New Yorker, about the 

amount of difference in Medicaid payments per patient, wouldn’t 

you all agree that this is by and large overwhelmingly providerdriven as opposed to consumer-driven? 

Dr. KESTNER. I will just comment on our experience. Since engaging our physician workforce in the discussion of evidence-based 

care and standardizing our processes and having a transparent, 

quality Web site, we have been able to demonstrate a decrease in 

our cost of care. I think that is where the discussion begins is when 

we have to engage people in the discussion about what the evidence shows, what is necessary, and have that healthy dialogue 

that we all loved in medical school, as compared to being driven by 

the decisions that are made today which may be fear of malpractice—— 

Ms. SCHAKOWSKY. May be self-referral and profit. 

Dr. KESTNER. I think by and large most physicians want to do 

the right thing, but I think we have put them in a system where 

doing the right thing may not be evidence-based and, at times, may 

not be the best for the patient. 


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Ms. SCHAKOWSKY. So, Dr. Smedley, would you agree that mostly 

patients don’t decide about their health care? 

Mr. SMEDLEY. I think that is absolutely right. Patient decisions 

are often shaped by the options presented by doctors. In the cases 

of patients of color, which is my concern, there is some evidence 

that patients of color are not provided with the same range of options as the majority group patients. So if that is the case, then I 

think we need to be very concerned that these are not truly consumer-informed decisions. 

Ms. SCHAKOWSKY. Also, one of the things that this article, if you 

handle it right, the way I read it, at McAllen, Texas, is that the 

doctors actually were not directing people to preventive care, that 

a decision had been made in certain places and I guess other places 

around the country, too, not to engage in preventive care. And 

again, I am assuming your testimony was even cost-wise, aside 

from health-wise, this is a bad decision. 

Mr. SMEDLEY. That is correct. 

Ms. SCHAKOWSKY. OK. Thank you. 

Mr. PALLONE. Thank you. 

Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. And I would like to 

thank our panel for being here, the last panel. 

We know that diabetes and obesity sometimes are economic-related, but we know in the minority community, whether it is African American, Hispanic, Asian American, it is almost an epidemic. 

And one of the best ways you deal with that is through prevention. 

Don’t wait for that diabetic to know they are diabetic. Maybe it is 

pre-diabetes, and they have a diabetic episode before they go into 

an emergency room. That is what is so important about the prevention. 

On our committee, I get frustrated because literally 2 years ago 

with our current OMB director, we were on a health care panel for 

U.S. News and World Report, like most Members of Congress get 

frustrated because we try and get a score on prevention, and he 

told me in front of all the other folks, this is not your—he was 

former CBO, Congressional Budget Office, director—he said, this is 

not your father’s CBO. Send us those, and we will score them better. 

We are not seeing any changes. Granted he is at OMB now, and 

I don’t know if OMB has changed, but I would sure like it. 

And that is our frustration, and Dr. Levi, you talked about it. 

There are so many things we need to do for health care in our 

country that needs to push the envelope further back instead of 

waiting till someone finds out that they have these chronic illnesses. 

Dr. Levi, as you know, school-aged children is the population 

group that is most responsible for transmission of contagious respiratory viruses like influenza. Just recently, I introduced a bill, 

H.R. 2596, the No Child Left Unimmunized Act, which would authorize HHS to conduct a school-based influenza vaccination program project to test the feasibility of using our Nation’s schools as 

vaccination centers. And what are your thoughts on making it 

school-based vaccinations, especially for some of the influenza virus 

vaccines? We already use, in our district, and I know a lot of school 


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districts use their schools for vaccinations for the mandatory vaccination programs throughout the school. But what do you think 

about making them for other vaccines, including influenza? 

Mr. LEVI. I think it is a very good idea, and I think we need to 

be as creative as possible to make sure that as many people as possible are immunized. I think, in reality, that as we are facing this 

pandemic of H1N1 influenza and seeing that young people may be 

among the most vulnerable, they may be highly prioritized for a 

pandemic vaccine come the fall, and using our schools may be one 

of the most effective ways of doing that, and that could be a wonderful proof of concept for your legislation. 

Mr. GREEN. Any other from anyone else on the panel? 

If not, thank you, Mr. Chairman. 

Ms. SCHAKOWSKY. Will the gentleman yield? 

Mr. GREEN. I would be glad to yield to my colleague from Chicago. 

Ms. SCHAKOWSKY. This business of how we score is a really troublesome thing. I am just wondering, is there the kind of research 

conducted, not just on health outcomes where we concede prevention pays and it really works, but how it actually saves dollars? 

You know, I really think when we are talking about 10 years, you 

know, we are looking out into the future when we talk even about 

the costs, then we ought to have something. Is there some research 

that can help us quantify that? 

Mr. LEVI. Well, ironically, the wider the net you cast, the more 

research there is, certainly in terms of productivity, in terms of 

contributing to a tax base, in terms of not requiring disability payments, all those kinds of things. You know, you can’t mix and 

match those things in the scoring process, and I think I want to 

come back to—— 

Ms. SCHAKOWSKY. Did you say we cannot mix and match? Why 

not? I think we need some advocacy help here from those who believe that prevention is the key to help us do that. 

Mr. LEVI. But some of these rules have been set and can be 

changed by Congress, and that is what—that may indeed be what 

it takes. 

I think it is also important to think about sort of the evidence 

standard, and you know, we look for, you know, there are different 

levels of evidence that you may need to make it move forward with 

a decision. But I think when you have so many businesses voting 

with their feet around prevention programs, whether it is clinical 

preventive services or even nonclinical preventive services—— 

Ms. SCHAKOWSKY. By that you mean buying them? 

Mr. LEVI. By buying it, investing in it, and saying they have the 

evidence for their stockholders that this saves them money. It 

seems odd that the private sector can be ahead of the public sector 

in recognizing the value. 

Ms. SCHAKOWSKY. That is a really good point. Maybe we ought 

to enlist some of those findings. I know my nephew does preventing 

back injury at a lot of factories, and it works. Anyway, thanks. 

Mr. GREEN. Mr. Chairman, I know I am out of time, but I would 

hope we would push back just what this panel is about and look 

at prevention and as best we can to fund that and use our own examples maybe over the next 10 years and show we can reduce obeVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00272 Fmt 6633 Sfmt 6633 E:\HR\OC\A088.XXX A088

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sity, we can reduce diabetes, and some of things that we are going 

to pay a lot of money for if we don’t in some type of national plan. 

Mr. LEVI. And that is certainly part of the goal through the Recovery Act in terms of the community-based prevention programs 

that are being funded there, and that I know that HHS is working 

very hard to make sure that the evaluation system that is developed for that investment will be able to help us answer these questions. 

Mr. PALLONE. Thank you. 

Gentlewoman from Tennessee, Mrs. Blackburn. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

You all must feel like you are batting cleanup. You have been 

here all day I bet listening to all of these, and I appreciate the 

focus that you have on prevention and wellness programs. I think 

many times we look at medical care, but we don’t look at health 

care and don’t look at health, and it is frustrating for us. 

And so many times I have said I thought one of the greatest 

disservices that we have done to children is they no longer have 

physical education, and they don’t take life—when they are all 

through school, they don’t have physical education classes that they 

are attending, and then secondly when they get into high school, 

they don’t have life skills classes, so they don’t understand the impact of what they eat, of the different food groups or the food pyramid and how that affects their lives, the importance of the interface between exercise and also what they eat and how that weighs 

in on some of the health issues, as we have read in testimony that 

has been given to us today and heard from some of our witnesses. 

Obesity, diabetes, chronic heart disease, if you address those, you 

would move a long way toward addressing some of our Nation’s 

health care woes. And many times people say, well, change how 

you are looking at this; look at it as health, as opposed to looking 

at it with medical care delivery. And of course, having been—as 

someone who served in a State legislative body and looking at 

these issues and bringing that to bear here at the Federal level, 

sometimes, you know, you do stop and think a little bit about that. 

What I would like to hear from each of you in the 3 minutes that 

I have, I want each of you to tell me if this 852-page bill, if you 

think, at the end of the day, it is going to provide a structure for 

Americans to be healthier and thereby need to consume less medical care, because the quality of life and the way this affects individuals should be a focus of the policy that we decide what is going 

to happen as we look at health reform. We all know that the system needs some reforms. I am one of those that favors handling it 

through the private sector so that it stays patient-centered and 

consumer-driven. 

But I would like to hear from each of you, at the end of the day, 

the draft before you, would it allow for greater emphasis on 

wellness, for prevention, for healthier lifestyles, and individuals to 

consume less medical care? 

Dr. Levi, we will start with you. 

Mr. LEVI. Absolutely, on both the clinical side and the community side, and I will make three very quick points. 


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First, solid coverage there are no copayments of the evidencebased clinical prevention services I think is critical. Whether it is 

a public program, a private insurance plan, it has to be there. 

Second, the investment in community prevention will get at the 

very things that you are talking about. Some of the best community-based prevention programs are the ones that target kids, get 

them to change their lifestyles, and through the kids, they educate 

their parents, because some of us are just over the hill and 

uneducable unless we are reached through kids. And we can make 

those permanent lifestyle changes, and that is why the investment 

in community preventive programs is going to be so important. 

And third, and I think just as importantly is this investment in 

the core public health capacity because if we strengthen our State 

and local health departments then they will be able to provide the 

services that surround the normal health care delivery system. 

Mrs. BLACKBURN. I need to move on. I am running out of time. 

Dr. Smedley. 

Mr. SMEDLEY. As you know, we spend less than 5 cents out of 

every health care dollar on prevention. This draft bill takes a step 

toward righting that equation. 

It is also true that we have not paid enough attention to the 

issues of achieving equity, ensuring that everybody has access to 

primary care. These are all important elements that are reflected 

in this draft bill which I think are going to save costs. 

Mrs. BLACKBURN. But should it be mandated or be personal 

choice? 

Mr. SMEDLEY. I don’t believe this bill creates that kind of mandate. But what it does, through the investment in prevention, is it 

creates healthier communities. 

Mrs. BLACKBURN. OK. 

Dr. Kestner. 

Dr. KESTNER. I think the bill addresses the access issue as well 

as the investment in primary care and public health, and I think 

that is where the first relationship should be established with our 

citizenry is in a public health sector and primary care, as compared 

to outside of care that we experience today. 

Mrs. BLACKBURN. Thank you very much. 

I yield back. 

Mr. PALLONE. Thank you. 

Gentlewoman from Wisconsin, Ms. Baldwin. 

Ms. BALDWIN. Thank you, Mr. Chairman. 

I appreciate the fact that you have had this panel today devoted 

to public health and prevention and health care disparities. 

I am introducing a bill today that is very relevant to this topic. 

What the bill does is it takes the first steps in identifying and addressing health care disparities faced by lesbian, gay, bisexual and 

transgender Americans. The bill is based in large part on the extraordinary work of the tri-caucuses on racial and ethnic health 

care disparities; the Congressional Black Caucus, the Congressional Hispanic Caucus, and the Asian, Pacific Islander Caucus 

have done extraordinary work teaming together to put together a 

bill that is called the Health Equity and Accountability Act which 

I believe will also be introduced this week. 


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We know that there are disparities in health care faced by the 

LGBT community, but we know this largely based on anecdotal information or some data derived from locally administered or privately administered health surveys. And I can tell you that it was, 

in some cases, quite challenging putting together this legislation 

because of the lack of data and the lack of evidence. 

And so I want to just ask some very basic questions, starting 

with you, Dr. Smedley. Having studied racial and ethnic health 

care disparities, how important is data collection to understanding 

and addressing health care disparities? 

Mr. SMEDLEY. It is absolutely vital. 

In the case of LGBT populations, as you pointed out, lacking 

data, it is difficult to understand when and under what circumstances these populations face both health status and health 

care inequities. So it is very important to have that data. Once we 

have that data, we not only raise public awareness, but we can 

focus and target our intervention so we are addressing the problem 

successfully. 

Ms. BALDWIN. The National Health Institute survey, which I understand to be the Federal Government’s most comprehensive and 

influential survey, does not include any questions on sexual orientation or gender identity. Do you think it should? 

Mr. SMEDLEY. Yes. 

Ms. BALDWIN. And to my knowledge, actually, no Federal health 

survey at all includes any questions on sexual orientation or gender 

identity. Do you think this would be important as a routine inclusion in health surveys where we are trying to collect information? 

Mr. SMEDLEY. Yes. I believe that, I may be mistaken about this, 

but I believe that BRFS, the Behavioral Risk Factor Study, may 

allow that as an option, but we should certainly ensure that we are 

understanding all of our populations where we see inequalities in 

health and health status. 

Ms. BALDWIN. I would ask you also, Dr. Smedley, how important 

and relevant are goal setting and aspirational documents like 

Healthy People 2010? I know there is an effort under way to revise 

and update for Healthy People 2020 document. How important are 

these goal-setting documents to reducing health care disparities? 

Mr. SMEDLEY. Again, vitally important. Some have criticized 

Healthy People 2010 for having goals that are difficult to attain, 

but unless we articulate what our vision is of a healthy society, it 

is going to be very difficult to put in place the policies and indeed 

to create the political to achieve those goals. I believe it is very important that we have strong aspirations for equity for millions of 

populations that face inequity. 

Mr. LEVI. If I could just add one point here, I think one of the 

criticisms in the past of the Healthy People process has been we 

set goals, and we don’t have the data sets to tell us whether we 

are even achieving those goals, and part of what is in this discussion draft is creating an assistant secretary for health information, 

which would increase I think the transparency of the data and create a process by which we would do a better job of answering some 

of the questions that you want to have answered. 

Ms. BALDWIN. I would note, from the Healthy People 2010 document, this is sort of a vicious cycle because it is silent to LGBT 


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health issues because the authors of that document said, we don’t 

have any data to point to any disparities, so we can’t talk about 

how we need to address those disparities. 

Dr. Levi, I know your organization has done terrific work on 

demonstrating that community-based prevention programs can 

have a significant return on investment, and it is also my understanding that different communities targeted often respond differently to different interventions. 

So tell me a little bit about targeting those interventions, and 

how much do these programs need to be targeted or tailored to do 

different cultural subgroups? 

Mr. LEVI. I guess I would answer it in two ways. One is we have 

a lot of evidence that from some national programs like the 

REACH program, Access program, or the Pioneering Healthier 

Communities Program, where there is an overall goal of trying to 

reduce the prevalence of certain conditions and a recognition on a 

community basis what is happening in that community. Some communities need more exercise promotion. Some people need more 

nutrition promotion. Some people have higher rates of smoking. 

Those kinds of particular issues need to be addressed in the context 

of the community. 

And then there is a second part, which is what sub communities. 

That is thinking more geographically. And then when you are 

thinking about racial and ethnic communities or the LBGT communities, what particular issues do you also need to think about? 

And I think the LBGT community is a perfect example. If we had 

thought about community prevention at the very beginning of the 

HIV epidemic, we would have been addressing what Ron Stall 

from, formally at CDC, talks about syndemics, which is, the risk 

for the disease you are wanting to prevent, in this case HIV, is related to other factors, such as experience of domestic violence, mental health issues, alcohol issues. It can be smoking, depending on 

what aspect you are looking at. That all needs to be addressed together. 

And when you are thinking about community prevention, that is 

what you want to do; you want to bring all of these pieces together. 

But coming back to the beginning, you can’t do it without data. 

Ms. BALDWIN. Thank you. 

Mr. PALLONE. Thank you. 

Gentlewoman from Florida, Ms. Castor. 

Ms. CASTOR. Thank you, Mr. Chairman. Thank you all for your 

testimony. 

I am fortunate that back in my hometown I have a great College 

of Public Health, and the dean there is Dr. Donna Peterson. I have 

been keeping her informed all the way along during the health care 

reform discussion dialogue from the outline now and into the discussion draft. 

And her initial comments were, boy, you all are on the right 

track when it comes to community health centers, and there is certainly a consensus in the Congress, many of them rooted on issues 

of Chairman Waxman, Chairman Pallone, Mr. Clyburn, the Whip. 

We are on track with workforce issues. Everyone, there is great 

consensus around improving the primary care of the workforce, and 

the SGR, how we are going to compensate those folks. 


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She expressed some concern on whether or not we are really 

doing enough for community’s public health initiative. We see the 

initial draft here, the discussion draft, and I thought that Ranking 

Member Deal raised a good point, too, about personal responsibility 

and how we get parents to turn off the TV and encourage their kids 

to exercise. And it can’t just be that we hope that people see President Obama and the First Lady work out in the morning, and that 

is going to be a great inspiration. We need a Surgeon General, I 

think, that is going to be very proactive. And we don’t have that 

yet. We need the CDC to take an even more proactive role. 

We know back home, our local governments and school districts 

and States, many are in severe budget crises, and oftentimes, the 

first things to go are the sidewalks, the other—the parks initiatives, summer programming for kids. 

Tell me, what is out there right now, what do local communities 

depend on right now from the Federal Government on those community public health and investing in infrastructure initiatives? 

What grants are there now? And then we can talk about what is 

in the discussion draft and where we need to go. 

Mr. LEVI. There certainly are Federal programs that will support 

this kind of community prevention, but we are talking a fraction 

of the level of investment that is in the discussion. 

Ms. CASTOR. And it is out of which—is it out of HHS? 

Mr. LEVI. Mostly out of HHS and mostly out of CDC, but the 

budgets for those programs have either been relatively flat or declining over the last 5 years. Our entire effort around chronic disease prevention has been declining over the last 5 or 6 years. Obesity is a perfect example where we recognize that this is a huge 

public problem, and we haven’t even found the resources to fund 

every State to have an obesity program, and particularly now, in 

a time of economic crisis, it is not like State and local governments 

have the resources to backfill. And in an economic recession, it becomes even more important for us to be thinking about those issues 

because it is harder to eat healthier—— 

Ms. CASTOR. I have a limited time. Is there another Federal pot 

of money or initiative you identified besides this CDC? 

Mr. LEVI. The other pot of money, the big pot of money is the $650 million in community prevention that is in the Recovery Act 

and that will be released shortly. 

Mr. SMEDLEY. If I could add, not only are those funds from the 

prevention and wellness also good, I think the entire stimulus 

package can be looked at as a public health intervention because 

of the many provisions around housing, transportation, early education. We know that early start, healthy start programs work. 

They save money, as Dr. Levi indicated. 

So if we can think about the stimulus dollars as a public health 

intervention and ensure that those dollars are going to communities to create safe public transportation to stimulate healthy lifestyles, then this can meet multiple purposes. 

Ms. CASTOR. And in your health reform bill, we need to build 

upon those historic investments that come out of the Recover Act. 

I mean, Donna Christensen has a great empowerment zone initiative, but it seems like our local communities need a new healthy 

communities block grant initiative that is consistent over time that 


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maybe doesn’t compete with the other—if there is anyone from the 

Association of Counties Or League of Cities that you all work with, 

I would like to investigate that. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you, and I think we are done for today. 

I want to thank all of you, and again, as I mentioned, you will 

probably get some written questions that we would like you to get 

back to us as soon as you can, but again, this is a very important 

part of what we are doing, the prevention and the public health 

provisions. So thank you as we proceed. 

And let me remind Members we are going to recess because we 

will be reconvening tomorrow as well as Thursday. Tomorrow, at 

9:30, the full committee will meet to hear from Secretary Sebelius, 

but after that is done, we will reconvene as a subcommittee and 

have a number of panels to continue with the subcommittees activities. 

So, without objection, this subcommittee will recess and reconvene tomorrow following the conclusion of the full committee hearing that begins at 9:30 a.m. 

[Whereupon, at 3:25 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 


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COMPREHENSIVE HEALTH CARE REFORM 

DISCUSSION DRAFT—DAY 2, PART 1 

TUESDAY, JUNE 24, 2009 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The committee met, pursuant to call, at 9:41 a.m., in Room 2123, 

Rayburn House Office Building, Hon. Henry A. Waxman [chairman 

of the committee] presiding. 

Present: Representatives Waxman, Dingell, Markey, Rush, 

Eshoo, Engel, Green, DeGette, Capps, Harman, Schakowsky, Gonzalez, Inslee, Baldwin, Matheson, Melancon, Barrow, Hill, Matsui, 

Christensen, Sarbanes, Murphy of Connecticut, Sutton, Braley, 

Welch, Barton, Hall, Upton, Stearns, Deal, Whitfield, Shimkus, 

Buyer, Pitts, Walden, Terry, Murphy of Pennsylvania, Burgess, 

Blackburn, Gingrey, and Scalise. 

Staff Present: Karen Nelson, Deputy Committee Staff Director 

for Health; Andy Schneider, Chief Health Counsel; Purvee Kempf, 

Counsel; Sarah Despres, Counsel; Jack Ebeler, Senior Advisor on 

Health Policy; Robert Clark, Policy Advisor; Tim Gronniger, Professional Staff Member; Stephen Cha, Professional Staff Member; Allison Corr, Special Assistant; Alvin Banks, Special Assistant; Jon 

Donenberg, Fellow; Camille Sealy, Fellow; Karen Lightfoot, Communications Director/Senior Policy Advisor; Caren Auchman, Communications Associate; Lindsay Vidal, Special Assistant; Earley 

Green, Chief Clerk; Jen Berenholz, Deputy Clerk; Mitchell Smiley, 

Special Assistant; Miriam Edelman, Special Assistant; Ryan Long, 

Minority Chief Health Counsel; Brandon Clark, Minority Professional Staff Member; and Chad Grant, Minority Legislative Analyst. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. In February, President Obama called upon the 

Congress to enact legislation to reform America’s health care system. In April, Governor Kathleen Sebelius was sworn in as Secretary of Health and Human Services. Her Department has the 

lead responsibility for improving the health of the American people. 

Last Friday, I joined with Chairman Rangel and Chairman Miller and Chairman Emeritus Dingell to propose a discussion draft 

on health reform. This morning, we have the honor of hearing SecVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00297 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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retary Sebelius present the administration’s views on the discussion draft. 

Based on her contributions today and on what we will hear and 

learn from the 50 stakeholders appearing before the Health Subcommittee this week and on the input from the Members, we will 

revise the discussion draft and introduce a bill for consideration by 

the three committees. 

Our legislation will reduce health care costs. It will cover all 

Americans. It will improve the quality of care. And it will be fully 

paid for. The lead author will be John Dingell, chairman emeritus 

of this committee, who has faithfully carried on his father’s legacy 

as an undisputed leader in the struggle for health reform. 

I want to emphasize a few important points about the discussion 

draft. First, it is just that, a draft for discussion for the legislation. 

We are seeking input from the administration and others because 

we want to improve the draft before introducing legislation. 

Second, the draft builds on what works in our uniquely American 

system. It builds on the employer-based system for providing 

health coverage to workers and their dependents. It relies on and 

improves Medicare as a source of health coverage for the elderly 

and the disabled. It builds upon Medicaid to extend coverage to 

low-income Americans. 

Third, the draft fixes what is broken. It fixes the broken individual health insurance market by creating a new insurance exchange through which uninsured Americans can enroll in their 

choice of health care plan. Those who cannot afford to purchase the 

coverage available in the exchange will receive assistance. 

A public option will be available within the insurance exchange 

to give consumers an alternative to private health insurers for 

their health care coverage. This public option will be self-supporting, will not receive ongoing subsidies from the Federal Government. The public option will compete. No one is obligated to 

sign up for the public option. No provider is obligated to provide 

medical services under the public option. But the public option will 

provide competition so that we can make the market work and 

keep everybody honest. 

The draft contains provisions to reduce rural, racial, and ethnic 

disparities in disease incident and treatment. The draft fixes a broken Medicare physician payment system and prevents the irrational cuts that are scheduled under current law from going into 

effect. 

The draft takes the steps necessary to fix the shortage of primary 

care practitioners and nurses and other providers. And, finally, the 

draft ensures that people have a choice: choice of doctors, choice of 

benefits packages, and choice among insurance plans. 

This approach builds on what works and fixes what is broken 

and makes sure that people have choices. It is pragmatic, and it 

will produce the results the Nation’s health care system so desperately needs: lower costs, broader coverage, and better quality. 

Today we will continue on a journey that began over a hundred 

years ago to provide health insurance for all Americans. Some of 

our greatest Presidents of the 20th century—Teddy Roosevelt, 

Franklin Roosevelt, and Harry Truman—were advocates for health 

insurance for all Americans. President Clinton fought hard for his 


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administration’s proposal. Those initiatives may have failed, but 

the hope that inspired them was never defeated. The time has finally come to redeem that hope and to deliver true health reform. 

In my conversations with colleagues and constituents, I am getting the clear sense that there is now a willingness to tackle this 

issue and to resolve the problems and bring forward a much better 

health care system for all Americans. With President Obama in the 

White House, we now have the best opportunity ever to enact 

health reform. I am determined that we not let this opportunity 

slip from our grasp. 

I look forward to this morning’s testimony and continue with urgent pragmatism to send health reform legislation to the President 

for his signature this year. 

I want to recognize for an opening statement the ranking Republican member of the committee, Mr. Barton. 

[The prepared statement of Mr. Waxman follows:] 


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OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. Thank you, Mr. Chairman. 

You and I, earlier this year, attended several White House health 

care summits. At those summits, both in the large meetings and 

in the working group meetings, I said that the Republicans in the 

House and the Republicans on this committee were very ready and 

very willing to work with the President, with you and Mr. Pallone 

and other members of the majority to create a new health care system for America. 

There is no Member of Congress on either side of the aisle that 

is opposed to improvements and reforms in our current health care 

system. So we were ready to work. You told me repeatedly that you 

were ready to work with myself and the other Republicans. 

Having said that, actions speak louder than words. While you 

and I have held several meetings, personal meetings—and we held 

one meeting with Chairman Pallone and Ranking Member Deal of 

the subcommittee, we agreed to work together. The brown bag 

lunch that was supposed to occur because of that was scheduled 

and rescheduled. And, finally, last week, we were supposed to have 

had it last Friday at noon. We were called the afternoon before and 

told that that brown bag lunch on a bipartisan basis could not be 

scheduled because you were attending a press conference to unveil 

the Democratic health care bill. 

That is not bipartisanship. That is not inclusiveness. It sure 

made me feel like the young woman who was being wooed by a 

young man and the young man kept promising to take her out on 

a date, and he finally called her up and said, ‘‘Well, I know we had 

a date tomorrow, but I can’t do it because I am getting married to 

somebody else.’’ I guess there are some people that do both, but 

luckily you are not one of them and I am not either. 

But it is what it is. So we now have a bill. We have the Secretary 

of Health and Human Services here to probably wax eloquent in 

support of your bill. I haven’t read her testimony, but I bet it is 

going to be supportive. 

The good news is we are going to have a series of hearings, and 

we will, at some point in time, go to markup. Hope springs eternal 

on our side that some of our ideas may yet be included. 

The bill in its current form—I have not read all 805 pages of it; 

I am not going to fib about that. But I have seen summaries, and 

it is a massive government involvement in Americans’ health care. 

It is hugely expensive. I have seen estimates as high as $3 trillion 

over 10 years. I am told that the word ‘‘shall’’ is mentioned over 

1,300 times. I am told that there are 38 new mandates, that there 

are dozens of new bureaucracies. 

I listened to your opening statement, Mr. Chairman, and heard 

you say that nobody has to take the government plan who doesn’t 

want it. That may well be true, technically, but if you put so many 

mandates on private insurance that it becomes cost-prohibitive, 

and if you raise the Medicaid eligibility to 400 percent, there are 

going to be millions of Americans that lose their coverage because 

the private businesses that offer it can’t afford it, and then there 

are going to be millions of Americans who say, why should I pay 

a monthly premium of X dollars when I can go on Medicaid and 


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pay little or nothing? You know, the short of it is that, if your bill 

were to become law, we wouldn’t have much of a private health 

care system in America within 10 to 20 years. 

So put me down as undecided, Mr. Chairman. We will work with 

you. We have a number of amendments. We have a Republican alternative that is private-sector-based, lets the individuals maintain 

their choice. We do some of the things that you do in your bill. We 

do have a permanent physician reimbursement fix. We do have a 

tax credit, reimbursable tax credit for low-income Americans. 

But the big difference between the Republican bill and the Democratic proposal is that on the Republican side we still believe in the 

marketplace, we don’t have all the mandates, we don’t force Americans into a government plan that we think is not very good for 

America. 

With that, Mr. Chairman, I will submit the rest of my statement 

for the record, and look forward to these hearings. 

Mr. WAXMAN. Thank you, Mr. Barton. And I am sincere in saying 

I want to work with you and share a brown bag lunch with you. 

And this bill is a draft. 

I want to recognize Mr. Dingell, the chairman emeritus of the 

committee, the champion of health care reform, and the man who 

will be the first name on the legislation that will produce health 

care reform. 

Mr. Dingell. 

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. DINGELL. Mr. Chairman, first, thank you for holding this important hearing. And thank you for your remarkable leadership on 

moving forward towards resolution of the health care problems we 

have in this country. 

I want you to know that I am grateful and proud, and I am particularly appreciative of the kind words you said about my dad. 

And on behalf of my dad and I, I want to thank you for your kind 

words and thank you for your friendship. 

I also want to do something of a personal character here, and 

that is to welcome Secretary Sebelius to the committee. 

Your father was a valuable member of this committee and sat in 

this room for a number of years, and we were always proud to have 

him here. And your father-in-law was a valuable Member of the 

House, as you will recall, and was a man who was much respected. 

So your coming is like coming home, and we hope you feel that 

way, Madam Secretary. 

This week marks the beginning of a truly historic process, an opportunity to fulfill our moral and economic obligations to provide 

quality, affordable health care coverage for all Americans. 

The current system is not working. When my dad started on this 

years ago, it was a matter of humanitarian concern. Americans 

were dying for want of health care, and health care was not available to most Americans. Today, that still is true to one degree or 

another, but it is now an economic necessity, something which 

must be done to enable the United States to continue to compete 

in the world marketplace. And our industries are being killed by 


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the lack of this kind of support in a fiercely competitive world economy. 

Forty-seven million Americans are currently without health care, 

and upwards of 86 million will be without health care at some 

point during this year. More and more Americans are being forced 

to make decisions they never should be forced to make: Do they 

pay their monthly health insurance premium, if they can get a 

health insurance policy, or do they pay the utility bills, the mortgage, or do they buy food for the family? 

American business owners are facing a tough decision as to 

whether to meet the monthly payroll or to pay health insurance 

contributions for their employees. And if you look at the American 

automobile, it has $750 worth of steel in it and $1,600 worth of 

health care. Foreign competitors don’t confront that problem. 

The Federal budget can no longer sustain our current health care 

spending. If health care costs grow unabated, the costs to the country will be more than 20 percent of its gross domestic product on 

health by 2018. 

The discussion draft—and I stress the words ‘‘discussion draft’’— 

we are considering is a uniquely American solution to this crisis. 

It has been a privilege for me to work with you, Mr. Chairman, 

with Chairman Rangel and Chairman Miller on putting this draft 

together. And I want to commend all of those, including the subcommittee chairmen of the three committees, who have worked so 

hard to bring about unprecedented coordination that went into producing this single discussion draft for the three committees of jurisdiction. 

And I want to make some things clear. The discussion draft will 

not create a single-payer system. It will not ration care. It will not 

attempt to destroy the private-market system or the system of employer-sponsored health care many Americans enjoy today. And 

anybody who says otherwise simply hasn’t read the bill or is not 

being truthful either with himself or anybody else. 

That being said, each of us in this room has our own vision of 

what ideal health care reform looks like. While the specifics may 

be different, we all share some common goals. First, we must pass 

legislation that reduces the cost of health care for families, businesses, and government. Second, we must pass legislation that 

makes quality, affordable health care available to all Americans. 

And we must pay for this legislation, and we must pass the legislation now. 

The choices we make over the coming months are going to be historically significant, and they will rank with the passage of Social 

Security and Medicare. If we are courageous and enact comprehensive health care reform, our product will meet the test of history 

and, I would note, will rank, as I mentioned, with Medicare and 

with Social Security. 

Medicare was mentioned on the editorial page on Sunday of the 

New York Times. It is only short of the flag in its popularity. If 

we are not courageous, we will have failed this generation and generations to come, and the country will suffer for it. 

I am certain this year that we will pass comprehensive health 

care reform that will build on the existing system and keep intact 

that which is working in our system, and give people the piece of 


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mind that, no matter what life changes they face, they will always 

have access to health insurance. The American people deserve 

nothing less. 

Thank you, Mr. Chairman. 

Mr. WAXMAN. Thank you very much, Mr. Dingell. 

I now want to recognize Mr. Deal. Mr. Pallone, as the chairman 

of the subcommittee, gave his opening statement yesterday. Mr. 

Deal did not have that opportunity. And I want, by unanimous consent, that all members have an opportunity to submit a written 

statement, opening statement for the record. 

Mr. Deal, for the last opening statement. 

OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Mr. DEAL. Thank you, Mr. Chairman. And thank you for holding 

this hearing, a series of panels today and tomorrow. 

I want to welcome all of the witnesses who are joining us. Especially express my appreciation and welcome to Dr. Todd 

Williamson, who is the president of the Georgia Medical Association. Certainly, as we consider this draft this week, hearing from 

these witnesses is important. 

Mr. Chairman, I think we have reached consensus that appropriate reforms are necessary, but we differ with respect to the right 

methods of reform which will yield cost and higher-quality savings 

and the decisions that should be left to doctors and patients and 

not Federal bureaucrats as they make choices about health care for 

our people. More government, in my opinion, is simply not the answer, but the draft before us seems to think that that is the answer. 

As far as the Republican views are concerned, we have seen thus 

far an attempt to approach health care reform in a bipartisan fashion that has resulted in what we consider to be a partisan proposal 

which refuses to address the concerns of Members on our side of 

the aisle. Last Friday, we received an 852-page reform draft. That 

is merely 1 legislative day before the committee began its hearings. 

We are concerned about the cost. The Congressional Budget Office has yet to weigh in on those costs. Early analysis by Mr. Steve 

Parente, who testified before our Health Subcommittee yesterday, 

scores the legislation at a whopping $3.5 trillion over the next decade. We need to come up with real solutions to improve health care 

that American families can afford. 

The promise of the Obama administration and the leadership 

here on the Hill has been that if you like what you have, then you 

can keep it. I believe that is simply a play on words, because if this 

draft does what I think it will do, it will destroy that private health 

insurance market and will ultimately lead to what I consider a onesize-fits-all government plan. 

If we focus on reforming the health care delivery system with the 

benefit of the American people in mind, then we should not focus 

our efforts on things that will destroy the private insurance market. I believe we should be encouraging physicians to enter into the 

field of medicine as the demand for health-care-related services will 

continue to grow. 


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But with the proposal before us today, which benchmarks public 

plan reimbursements to Medicare, that in itself continues to drive 

providers out of the system. And I believe we will fall short of the 

objective that all of us share: of having a system that encourages 

doctors to enter, it promotes physician-patient-driven decisions, 

and allows everyone to gain access to health care coverage. 

Mr. Chairman, we all agree that changes to our health care delivery system have the potential to yield significant savings and 

improvements in the efficiency of delivery of care, but we must ensure that reforms that we put into place promote competition and 

transparency. 

As we move forward, I hope we will get that CBO score. I think 

it is important to the deliberations that lie before us. 

And, Mr. Chairman, I want to reiterate again that those of us 

on our side of the aisle look forward to being able to work in a bipartisan fashion as we consider the potential for amendments that 

will obviously be suggested. 

Thanks again to our witness, our Secretary, and thanks to all the 

witnesses who will make up the panels that will follow. 

With that, I yield back. 

Mr. WAXMAN. Thank you very much, Mr. Deal. 

Well, it is my pleasure to welcome Kathleen Sebelius to our committee for the first time as our Nation’s Secretary of Health and 

Human Services. And it is highly appropriate that your first testimony is on the reforming of the Nation’s health care system. That 

is the President’s highest priority and is a subject on which the 

Secretary brings a unique breadth of experience, most recently as 

a two-term Governor of Kansas, service for 8 years as Kansas State 

Insurance Commissioner—exceptionally valuable experience as we 

proceed with enacting and implementing health care reform—and, 

before that, 8 years in the Kansas House of Representatives. 

Madam Secretary, I want to welcome you. We look forward to 

working with you and to your testimony today. Your full prepared 

statement will be in the record, and we would like to recognize you 

to proceed as you see fit. 

STATEMENT OF THE HON. KATHLEEN SEBELIUS, SECRETARY, 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Secretary SEBELIUS. Thank you, Chairman Waxman, Chairman 

Emeritus Dingell, Ranking Member Barton, Chairman Pallone, 

Ranking Member Deal. Thank you for this opportunity to join you 

for a critical conversation about health reform in America. 

As the chairman emeritus has already recognized, my father did 

serve on this committee, and he was here when Medicare was 

passed. So I feel privileged to be part of this historic conversation 

and delighted to have the chance to work with you on this critical 

issue. 

No question that your release of a discussion draft last week 

with your colleagues from Education and Labor and the Ways and 

Means Committees represents an historic moment in this debate. 

We not only appreciate the hard work you have already done but 

are grateful for all the work that you are about to do as we work 

together to, at long last, enact reform. 


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Health reform constitutes one of our most important domestic 

priorities, and we know the cost of doing nothing is simply too 

high. As the President has said, unless we fix what is broken in 

our current system, everyone’s health care is in jeopardy. Reform 

is not a luxury, it is a necessity. 

Today in America we have, by far, the most expensive health system in the world. We spend 50 percent more per person than the 

average developed country, spending more on health care than 

housing or food. Health insurance premiums have doubled since 

2000, and the high cost of care is crippling businesses who are 

struggling to provide care to their employees and stay competitive 

in this global world. 

Small businesses and their workers, the backbone of the American economy, are clearly suffering. As recently as 16 years ago, 61 

percent of small businesses offered health care to their employees. 

Today, only 38 percent do. 

Last week, I was in Congressman Pallone’s district with business 

owners in New Jersey who met with me about the sacrifices they 

have to make in their companies in order to provide health benefits 

to their employees. Even then, some of their employees can’t afford 

the care they need. 

We spend more on health care than any other Nation but aren’t 

any healthier. Only three developed countries have higher infant 

mortality rates. Our Nation ranks 24th in life expectancy among 

developed countries. More than one-third of our citizens are obese. 

And we know that 75 percent of our health costs are spent on 

chronic disease. 

Without reform, these problems only get worse. In 2008, we spent an estimated $2.4 trillion on health care. If we do nothing, 

by 2018 we will spend $4.4 trillion. Today, we spend about 18 percent of our GDP on health costs. Doing nothing, those costs reach 

34 percent of GDP by 2040, and 72 million Americans will be uninsured. The CBO has recently estimated that, by 2025, 25 percent 

of America’s economic output will be tied up in the health system, 

limiting all our other investments and priorities. 

So there are many problems with our health system today, but 

there is also a reason for optimism. Across this country there are 

lots of examples of hospitals and providers who are using new technology, cutting costs, and improving the quality of care. 

Two weeks ago, I was in Omaha, Nebraska, at Lakeside Hospital, an Alegent health care system, one of the Nation’s first fully 

digital hospitals, and saw firsthand how health information technology can help doctors and patients. Health care providers like the 

Kaiser system in California, the Mayo Clinic, Geisinger, Intermountain Health Care, have lowered costs but, more importantly, 

have improved outcomes for their patients. I have spoken to community health center providers from Ohio, Tennessee, and Pennsylvania who have helped outline how health information technologies 

helped them save resources and provide better care. Our challenge 

is how to take the best practices and spread them across the entire 

country. 

I have every confidence we can meet the challenge and achieve 

the goals of achieving of reducing costs for families, businesses, and 

government, protecting people’s choices of doctors, hospitals, and 


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health plans, and, at long last, assuring affordable, quality health 

care for all Americans. And we can do it without adding to the deficit. 

Now, the President is open to good ideas about how we finance 

health reform, but we are not open to deficit-spending. Health reform will be paid for, and it will be deficit-neutral over 10 years. 

The President has already introduced his proposals that provide 

about $950 billion over the next decade to finance health reform. 

Many of the resources come from wringing waste out of the current 

system and aggressively prosecuting fraud and abuse. We are currently paying for strategies which don’t work or overpaying for 

medicines and equipment. It is time to make a better use of these 

dollars. 

We know that reform can reduce costs for families, businesses, 

and government, protect people’s choice, and assure affordable 

health care. As we move forward, we will be guided by simple principles: protect what works about health care, and fix what is broken. 

We have reviewed the key features of the tri-committee draft 

proposal, Mr. Chairman, from you and your House colleagues, and 

it is clear that you and your committee have embraced these principles. 

By creating a health exchange that will ensure numerous private 

insurance plan options along with the public insurance option, the 

plan promotes choice and competition. By lowering health costs and 

providing premium credits, the plan makes health care affordable 

for all Americans. By investing in prevention and wellness initiatives, we help to prevent disease and illness and allow Americans 

to live longer, healthier lives. And with meaningful delivery system 

reforms, your policies offer lower-cost yet higher-quality health 

care. 

Under the plan you have proposed, Americans will no longer 

have to worry about being denied care because of a pre-existing 

condition. They will have easier access to tools that can help them 

prevent disease and stay healthy. Investments in primary care and 

underserved areas will improve all Americans’ access to care. And 

the Medicaid reforms proposed in this bill have taken important 

steps to improve the critical safety net program, making it an income-based program and improving reimbursement for primary 

care. 

This discussion draft represents an historic step forward. And 

while we are still examining all the details, I agree with the President, who said this proposal represents a major step toward our 

goal of fixing what is broken about health care and building on 

what works. 

So, Mr. Chairman, I am eager to work with this committee and 

your colleagues in the House and colleagues across the aisle in the 

Senate to deliver the reform we so desperately need. And I appreciate the opportunity to engage in this discussion, and look forward 

to your questions. 

[The prepared statement of Secretary Sebelius follows:] 


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Mr. WAXMAN. Thank you very much, Secretary Sebelius, for your 

testimony. 

I want to start off the questions period myself. 

This issue of health care reform was part of the campaign President Obama waged in order to be elected President. And if there 

is any issue for which he has a clear mandate, it is to work on this 

very issue. And he has made this his number-one domestic priority. 

And I want to underscore, in questioning you, some of the aspects 

of what he hopes to accomplish and what he wants us to do in this 

effort. 

Based on the President’s approach, our draft—and it is just a 

draft—sets out a comprehensive approach to reform. It addresses 

prevention and wellness; the health care workforce; quality of care; 

broad-based, shared responsibility in dealing with the costs; and 

coverage through insurance reforms; a new exchange for people to 

go to get their insurance; affordability credits; improvements in 

Medicaid; substantial savings and improvements in Medicare. 

Is this what the administration is committed to, or should we approach this in a more compartmentalized manner? Should we approach this in a comprehensive way? 

Secretary SEBELIUS. Well, Mr. Chairman, as you said, this was 

one of the key priorities of then-Senator Obama and now-President 

Obama, and he believes strongly that we can’t fix the economy 

without fixing health care. And so a comprehensive approach to a 

reform of the system is what is required and, I think, is what this 

legislation addresses in many of its components. 

There is no question that you can’t do just one thing at a time 

in order to have the system work for all Americans and fundamentally lower costs. There is no question that we can’t continue on the 

cost curve that we are on right now. It is unsustainable and will 

not serve anyone well. Those who have health insurance now are 

a month, a year, 2 years away from not being able to afford the 

coverage they have. Those who don’t have coverage can’t access 

some of the best technology and the best medical care in the world. 

So we need a comprehensive approach, and we need to essentially shift the system toward wellness and prevention and away 

from the sickness system that we have. So I think the elements 

that you have put forward in the discussion draft do just that. 

Mr. WAXMAN. Undertaking this kind of comprehensive reform is 

pretty complicated, and it is going to require an enormous amount 

of effort from Members of Congress, some of whom will say, ‘‘Well, 

maybe we should delay, maybe we should go slower, maybe we 

should do it next year or the year after.’’ 

What is the administration’s view of the timetable for action and 

the need for action? 

Secretary SEBELIUS. Well, I think the President feels strongly 

that there is an enormous urgency about this issue which has directly to do with our economic well-being as a Nation and our competitiveness in a global society; that our workers are less competitive with their colleagues across the world because of the increasing costs of health care borne by individual business owners. 

Small-business owners, the engine of our economy in States 

across this country, the fastest growing segment of our economy, 

are often less competitive to have high-quality workers, talented 


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workers because they seek to have health care provided along with 

their wages, and too many small employers can’t any longer do 

that. 

Our focus on prevention and wellness needs to be dramatically 

increased so we not only have a healthier society and lower costs, 

but have a society where our children are not facing the prospect, 

which currently American children face, where we are seeing the 

first generation who may live shorter lives than their parents 

based on the rise in diabetes. 

So we have some challenges, Mr. Chairman, that cause us to 

enact legislation this year, to urge the action of both the House and 

the Senate on this important issue. It is difficult, it is complicated. 

If it were easy, as the President likes to say, it probably would 

have been done a long time ago. 

Mr. WAXMAN. Let me ask you one last question, because my time 

is almost out. We have businesses who pay too much; we have government that is paying too much. We have small businesses who 

can’t afford it at all for their employees. And, of course, if you are 

without insurance and you have to go pay for your health care bill, 

it is impossible. So a lot of people go without the needed services. 

Do you think we need a shared responsibility for every sector— 

individuals, employers, providers, and government—to move forward together and that everyone has to share in the cost? No particular sector says somebody else will pay for me, but we all have 

to be in there and share in the costs? And, collectively, we are all 

better off as a society. 

Secretary SEBELIUS. Well, I don’t think there is any question 

that, if you build on the current system, which is absolutely what 

the President wants to do and what the discussion draft proposes, 

then there is a shared responsibility. 

Over 99 percent of large employers provide health care coverage. 

A lot of small employers already do, but some don’t. We have situations where some Americans opt in and some opt out of the insurance market. We need more personal responsibility, certainly, in 

the life choices we make, which can help lower health costs. We 

need parents to get involved and informed. We need more preventive care. 

So there is certainly a sense that we are in this together. This 

is a fundamental issue. It is probably the most personal issue to 

every American, what happens to their health care, their family’s 

health care. And I think there is no question that it needs to be 

comprehensive and it needs to involve everyone. 

Mr. WAXMAN. Thank you very much. 

Mr. Barton? 

Mr. BARTON. Thank you, Mr. Chairman. 

Thank you, Madam Secretary, for being here. 

You said in your opening statement that there would be no deficit-financing as a result of this health care reform package if it became law. Is that literally true? 

Secretary SEBELIUS. Mr. Chairman, I was quoting the President. 

The President has said consistently that he will not sign a bill unless it is paid for. 

Mr. BARTON. So, we just want it established on the record right 

off the bat that there will be no increase in the deficit as a result 


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of a comprehensive health care package if it does become law? That 

is just, I mean, plain language. 

Secretary SEBELIUS. That is what the President has stated as 

one of his top priorities: It will be paid for within the period. 

Mr. BARTON. OK. 

Let me walk through just one part of your program. Creates a 

new category of coverage under Medicaid at 133 percent of poverty, 

which will be 100 percent paid for by the Federal Government, no 

State match, for childless adults between the ages of 19 and 64. 

This one provision, if I understand it correctly, could add as many 

as 20 million Americans to the Medicaid program. 

Now, I don’t know what the cost number is for coverage per person under Medicaid, so I just picked a number. And if my number 

is wrong, correct me. But I said $6,000 a year for insurance. That 

may be too high. But if you cover 20 million people at $6,000 per 

year, that is $120 billion right there per year. 

How do you pay for that? What are some of your pay-fors? Because, in the bill, they are to be determined later. So give me an 

example of a pay-for that is $120 billion a year. 

Secretary SEBELIUS. Congressman Barton, the President has proposed about $660 billion in savings from the current Medicare and 

Medicaid program. In addition, he has proposed revenue enhancers 

of about—— 

Mr. BARTON. That is over a 10-year period. 

Secretary SEBELIUS. Yes, sir. And I think your figure is—— 

Mr. BARTON. Per year. $120 billion per year. 

Secretary SEBELIUS. Well, I would start with the premise that, 

first of all, I don’t know the numbers accurately, and I assume that 

your $20 million is within the ballpark. 

I just can tell you that, whatever the proposal that comes forward, the President has insisted that the bill will be paid for. The 

measures that are proposed will be paid for. 

Mr. BARTON. You are a former Governor, I believe. Isn’t that correct? 

Secretary SEBELIUS. Yes, sir, two-term. 

Mr. BARTON. I believe of Kansas, is that—— 

Secretary SEBELIUS. Kansas is the State. 

Mr. BARTON. Governor of Kansas. Does Kansas have a balanced 

budget requirement for its State budget? 

Secretary SEBELIUS. Yes, sir. 

Mr. BARTON. It does. OK. When you were Governor of Kansas, 

by law, you had to submit pay-fors when you submitted a budget 

that spent money. Isn’t that correct? 

Secretary SEBELIUS. Well, we spent money within the revenues 

we had. 

Mr. BARTON. Yes, ma’am. Now, again, my numbers may not be 

the number, but they are definitely in the ballpark. If I give the 

President the benefit of the doubt that there are out there $600 billion over 10 years in savings, $60 billion a year, this one expansion 

in Medicaid is still $60 billion a year short. 

You are the Secretary of Health and Human Services. I assume 

you have had some interaction with Chairman Waxman and Chairman Rangel, Chairman Miller in providing this draft bill. You have 

to have some idea of how you are going to pay for it. 


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And, again, I am giving you the benefit. If the President says he can save $60 billion a year, I will stipulate, for purposes of this 

hearing, he saves 60. But I think you need to put $60 billion more 

in savings or in tax increases on the table. 

Secretary SEBELIUS. Well, Mr. Barton—— 

Mr. BARTON. You had to do it when you were Governor. 

Secretary SEBELIUS. That is true, sir. And this is a discussion 

draft. What I can assure you is, at the end of the day, the bill that 

passes will be paid for. We will work closely with the chairman 

here in the House and the Senators on the other side to come up 

with strategies to do just that. 

Mr. BARTON. Well, shouldn’t we tell them upfront? 

Secretary SEBELIUS. We don’t have a CBO score yet for this bill 

nor a score for the various proposals that are in this bill. But I 

can—— 

Mr. BARTON. But at least you have to put on the table where you 

are going to get the money. 

Secretary SEBELIUS. I understand. 

Mr. BARTON. It is not a box of chocolates, you don’t know what 

you are going to get, and you just pull it out, ‘‘Oh, there is $60 billion.’’ Whatever. 

Well, Mr. Chairman, my time has expired. But I think we have 

established a basic point. I mean, it is a good thing if you are going 

to have no deficit-financing. I commend the President for that. But 

it is a bad thing if you don’t shoot straight with the American people where you are going to get the money. 

And nobody says that we are going to be able to save money to 

pay for these huge expansions, totally by savings pay for these 

huge expansions. I just pointed out one part of the bill, and already 

we are at least, in my numbers, $60 billion per year short. 

Thank you, Mr. Chairman. 

Mr. WAXMAN. Thank you, Mr. Barton. 

Mr. Dingell. 

Mr. DINGELL. Mr. Chairman, I thank you. 

Madam Secretary, again, welcome. My questions will, I hope, 

evoke a yes or no answer. 

Would it be appropriate to state that the tri-committee discussion draft that was released last week aligns with the health reform principles the President has outlined earlier this year? Yes or 

no? 

Secretary SEBELIUS. Yes, sir. 

Mr. DINGELL. Now, Madam Secretary, there has been quite a bit 

of discussion about the inclusion of a public health insurance option in the reform legislation. Does President Obama support the 

inclusion of a public health option in the reform legislation? 

Secretary SEBELIUS. Yes, he does. 

Mr. DINGELL. Madam Secretary, hospitals and doctors are not required to participate in the public option. Is that correct? 

Secretary SEBELIUS. That is correct. 

Mr. DINGELL. Premiums and co-payments under that part of the 

proposal will cover the claims, will they not? 

Secretary SEBELIUS. I am sorry, sir? 

Mr. DINGELL. I said, premiums and co-payments under the public option will cover the costs. 


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Secretary SEBELIUS. That is my understanding. 

Mr. DINGELL. The public option must adhere to the same rules 

and regulations as all other plans. 

Secretary SEBELIUS. That is correct. 

Mr. DINGELL. The public option will be administered by a separate agency from the one that runs the exchange. 

Secretary SEBELIUS. That is the way the draft is written, yes, sir. 

Mr. DINGELL. The public option will offer the same minimum 

benefit design as all other plans in the exchange. 

Secretary SEBELIUS. Yes, a level playing field. 

Mr. DINGELL. Individuals and families will be permitted to apply 

subsidies towards both public and private plans in equal fashion. 

Secretary SEBELIUS. Yes, sir. 

Mr. DINGELL. And I apologize, too, Madam Secretary, but we 

have a lot of business to do here, and I hope I am not being discourteous. 

Madam Secretary, there has been justified concern over the consolidation of the health insurance market and the impact it has on 

health insurance claims. According to the American Medical Association, 94 percent of the insurance markets in the United States 

are now highly concentrated. This has decreased the amount of 

competition, and this is a major cause of spiraling health concerns. 

Yes or no? 

Secretary SEBELIUS. There is a monopoly in much of the country 

in the private insurance market, yes. 

Mr. DINGELL. Now, this is a serious concern then. How does the 

public plan address this concern? And this is not yes or no. 

Secretary SEBELIUS. I appreciate that. 

I think what the public option within the marketplace, within 

the new health exchange, does is use market principles—competition and choice—to lower costs and provide consumers a choice of 

plans. 

So I think that the public option—absent a public option, in 

many areas in the country, two-thirds of my State, for instance, 

and States around this country, there would be only one choice, 

which is not terribly effective in terms of holding costs down and 

certainly does not provide consumer choice of a side-by-side plan, 

which is why States in State employee plans create public options 

standing side by side with private, why many States have done 

that in the children’s insurance program, side-by-side options, to 

give choice and provide some competition. 

Mr. DINGELL. Now, Madam Secretary, as a former Governor and 

a former insurance commissioner, you are able to speak to this 

question. State insurance regulators are not able to regulate except 

as regards solvency of the insurance companies. Is that not correct? 

Secretary SEBELIUS. Sir, they can regulate solvency and also 

have some cost regulation, but, frequently, if there is no choice in 

the market, cost regulation is almost irrelevant. 

Mr. DINGELL. So competition being put into the market would be 

the one thing that would make this system work by having the 

public option there. Is that correct? 

Secretary SEBELIUS. Well, again, it is a marketplace strategy 

that competition is often much more effective than heavy-handed 

regulation. 


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Mr. DINGELL. Now, Madam Secretary, there are questions about 

whether the tri-committee proposal is a complex concept. It includes exchanges, a public health option, subsidies, Medicare and 

Medicaid improvements, responsibilities for individual employers. 

Will the administration be able to fully implement and administer this proposal? 

Mr. WAXMAN. Thank you, Mr. Dingell. 

Secretary SEBELIUS. Yes. 

Mr. WAXMAN. Your time has expired, but we do want the to get 

the answer. 

What is the answer? 

Secretary SEBELIUS. Yes, sir. 

Mr. WAXMAN. That is it? 

Mr. DINGELL. That is why I asked it that way, Mr. Chairman. 

Mr. WAXMAN. Thank you, Mr. Dingell. 

The gentleman from Georgia. 

Mr. DEAL. Thank you, Mr. Chairman. 

Madam Secretary, our esteemed chairman made a comment back 

during the markup of the American Recovery and Reinvestment 

Act, which said, ‘‘I think it is highly unlikely that you are going 

to find millionaires who would like to go on Medicaid.’’ 

One of the concerns that this bill arises in the minds of many 

of us is whether or not we are treating low-income citizens as second-class citizens by automatically enrolling them in Medicaid. 

So my question would be this: Why do you believe that a family 

making $29,000 a year is not as able to make choices as a family 

making $30,000 a year? And why would it be better to simply automatically enroll them, with no choice, in Medicaid, as opposed to 

giving them a subsidy to allow them to go into the private insurance market? 

Secretary SEBELIUS. Well, Congressman, some of those families, 

a limited number, are in jobs right now where they have employerprovided coverage, and they certainly would not shift that coverage. 

But a large number, particularly of, not families, but single 

adults who are at 100 percent or below the poverty line, who are 

making often a very small amount of money, have no coverage at 

all. They are uninsured and find themselves not in an ownership 

capacity. 

So I think the committee’s look at expanding Medicaid to 133 

percent also follows the experience of many States that have already done that and found that the most effective strategy to expand coverage. It is a larger market. It often provides a benefit 

package that is cost-effective and, frankly, is often far less expensive than the private options that exist, which is why States who 

have expanded coverage have chosen the Medicaid route instead of 

the private insurance route. 

Mr. DEAL. As I understand the draft, it would propose that everyone under the age of 65 who is under the 133 percent of the 

Federal poverty level would be enrolled in Medicaid. 

Can you give us, first of all, how many people do you think that 

that encompasses? And how many of those people currently have 

private health insurance? 


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Secretary SEBELIUS. Sir, I don’t want to cite numbers off the top 

of my head. And I can easily return to you with those numbers. I 

apologize. 

I know that there are a fairly significant number of the so-called 

childless adults, not parents, typically because a number of States, 

again, have taken steps for parents whose children are eligible for 

the CHIP program to actually provide expanded family coverage, 

because they found that a very effective strategy when enrolling 

children. 

But I think we are talking primarily about childless adults often below that—I think they make less than $6,600 a year if you are 

at 133 percent of poverty. And I can get back to you with those specific numbers. I apologize. 

Mr. DEAL. Would you please do that? 

Secretary SEBELIUS. Yes. 

Mr. DEAL. On page 73 of the bill, there is a provision that provides for automatic enrollment—— 

[Interruption in hearing room for medical emergency. Brief recess.] 

Mr. WAXMAN. The committee will come back to order. 

A young woman who is an intern here on the Capitol got dizzy, 

fell down, and hit her head. And she was attended to by a number 

of members and staff who are medical people, doctors, and the 

emergency assistance at the Capitol. So hopefully she will be fine, 

God willing, and there will be no consequences as a result of it. 

But I do want to make that comment. And as we get any further 

reports, I will inform everybody of the situation. We are distressed 

about this incident, but with good medical care and the resilience 

of youth, even the President’s health care bill will not scare her 

from recovery. Maybe the hope of it will spur her on. 

Mr. Deal, you were in the middle of your questions, and I want 

to recognize you for 2 minutes. 

Mr. DEAL. Thank you, Mr. Chairman. 

Madam Secretary, on page 73 of the bill, it provides for the automatic enrollment of individuals into the Medicaid program. 

I want to just ask you if the citizenship and identity verification 

requirements that are in the current law will still appertain into 

the automatic enrollment processes. 

And will you assure us that individuals who are illegally in our 

country or otherwise ineligible for taxpayer-supported Medicaid 

will not be enrolled under this provision of this bill while you serve 

as our Secretary? 

Secretary SEBELIUS. Mr. Deal, I can assure you that States now, 

because of the various Federal rules requiring verification of identity, have those systems in place and really have, I think, developed systems to verify identity not only of existing clientele but of 

enrolling clientele. And that would certainly be in place as we move 

forward. 

Mr. DEAL. So it would not be your intention or something that 

you would not allow to happen that the automatic enrollment process would not overlook or override those current verification requirements. 

Secretary SEBELIUS. That is correct. 

Mr. DEAL. Thank you, Madam Secretary. 


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And I yield back my time, Mr. Chairman. 

Mr. WAXMAN. Thank you, Mr. Deal. 

Mr. Pallone, the chairman of the subcommittee. 

Mr. PALLONE. Thank you, Mr. Chairman. 

And thank you, Secretary, for being with us today. 

I wanted to take my time just to ask about Medicare and Medicaid. I think there is a certain amount of confusion because, obviously, in this discussion draft, and the President has stressed, that 

we can save money that would be used to pay for this plan through 

savings in Medicare and Medicaid. But, at the same time, there are 

major enhancements and improvements in both programs that are 

in the discussion draft. And I think there is a certain amount of 

confusion about that. 

Overall, I think that if you view the combination of the Medicare 

and Medicaid savings and the benefit enhancements, overall there 

is a marked improvement in both Medicare and Medicaid. But I 

wanted to just ask you questions about that. 

In other words, the draft proposes to begin filling in the donut 

hole in the Medicare prescription drug benefit, to eliminate costsharing on preventive services, to expand the eligibility and accessibility of Medicare subsidies for low-income enrollees. 

Taken as a whole, how do you view the combination of these 

Medicare savings proposals and the benefit enhancements as an 

improvement in the Medicare program? 

Secretary SEBELIUS. Well, Congressman, I think that there is no 

question right now that there are areas where we are spending 

money that don’t result in higher-quality care or better results for 

patients. I think what this discussion draft puts forward is a way, 

as you have suggested, to enhance the current program, to put dollars into areas where we think there will be much better results 

for patients. 

Hospital re-admissions is a category that is targeted for some focused attention. One out of every five patients leaving the hospital 

is re-admitted within a series of weeks. That is not good for the patient, and it certainly costs a lot of money to the system. So, coordinating post-release care, actually providing incentives for follow-up 

care is a significant improvement that will not only lower cost for 

re-admissions but actually provide a lot better care for the patients. 

And those, I think, are the kinds of examples that the discussion 

draft incorporates. Better quality in the long run, following what 

we know are best practices that are in some parts of the system 

but not appearing throughout the system, and, frankly, not continuing to overpay for services that have no shown benefit or result. 

Mr. PALLONE. Did you want to talk about filling the donut hole 

in this context? Because I know that is very much on the minds 

of the seniors, and we do propose to do that in this discussion draft. 

Secretary SEBELIUS. Well, I think that is a huge step forward. As 

you saw, the chairman of AARP recently endorsed the strategy that 

is appearing in both the House and the Senate to fill the donut 

hole. 

It is a huge issue. I can tell you, as an insurance commissioner, 

we used to face this situation with citizens who had no idea or really hadn’t counted on the fact that their benefits would suddenly 


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cease and their premiums would continue on. They hadn’t saved 

appropriately for it. And often they were the—I mean, the first people to hit the donut hole were the folks who had the highest cost 

in prescription drugs. And it was not only a huge shock but something that forced a lot of people to stop buying their medications, 

to stop following the doctor’s prescriptions, to end up in the hospital again without the care to keep them well. 

So this is a huge issue for seniors across this country who have 

benefitted greatly from lower-cost drugs but, when they hit the barrier, are really in worse shape than they were in the beginning because they are still paying premiums and they have no health prescription benefit. 

Mr. PALLONE. Now, what about Medicaid? There is a major expansion here in terms of increased reimbursement rate, covering 

people in many States that, you know, that are below the 100 percent or the 133 percent with Federal dollars. Would you want to 

comment on that? 

Because I just want to stress how, even though we are having 

savings from Medicare and Medicaid, we are really improving the 

programs significantly. 

Secretary SEBELIUS. Well, there, again, a lot of the conversation 

with providers, at least in my home State, was not really focused 

on Medicare, which is often a very popular program, but on Medicaid, which often under-reimburses doctors and particularly primary care and family providers. So, enhanced reimbursement for 

primary care, I think, is a huge step forward. 

And, frankly, having a situation where, if you are an adult or a 

family below 133 percent of poverty, wherever you go, you would 

have the same benefits. If you move across the State line, if you 

need to travel with your family elsewhere, you would have similar 

benefits, the kind of portability that currently is not available to 

a lot of people because the benefits change each State at a time. 

So that is a significant step forward. 

Mr. Pallone, while you are discussing Medicaid, I just wanted to 

share with the committee that at least my staff has told me that 

the number, at least that we have been given by CBO, for childless 

adults, non-disabled childless adults who are in Medicaid is really 

a $3,000-a-person average cost, not $6,000 as was suggested. 

Mr. PALLONE. Thank you very much. 

Mr. WAXMAN. Thank you, Mr. Pallone. 

I want to now recognize Mr. Whitfield. 

But I do want to announce to members there is pending on the 

House floor a Republican motion to adjourn. We are going to continue the hearing, so those who want to respond to that vote should 

do so and then come back. But we will proceed. 

Mr. Whitfield. 

Mr. WHITFIELD. Mr. Chairman, thank you very much. 

And, Madam Secretary, we are pleased that you are with us here 

today. 

You know, the question about the prescription drug benefit reminds me that, of course, before we passed the prescription drug 

benefit, most citizens on Medicare did not receive that benefit, and 

so they were paying for those medicines. And now we are trying 

to fill the donut hole so they don’t have to pay for that either. 


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So, as politicians, you know, we like to expand coverage and give 

coverage and make it—it sounds like that we don’t want anyone to 

pay for anything. And yet, I know your father was involved with 

Medicare, according to your testimony, and I was looking at some 

of the debate about Medicare when it was adopted in 1965, and 

they were making some of the same arguments that you were making, really, in your testimony. And in 1965 they projected that, by 

1990, the cost of Medicare would be $9 billion. As it turned out, it 

is almost $200 billion. 

And so, we all like to—we know that our health care needs to 

be reformed. And then when you talk about it being paid for, it is 

going to be budget-neutral, and then when they talk about, well, 

we are going to get a lot of money out of increasing efficiencies, 

wringing waste out of the current system, and being more aggressive to stop fraud, you know, it is so nebulous. 

And you are a very practical person. You have had experience as 

a governor. Do you honestly think that we can reform this system 

and actually save money and yet provide better quality health 

care? 

Secretary SEBELIUS. Congressman, I do. And I do so not based 

on some hypothetical situation, but based on visiting health systems throughout this country, in the middle of the country, on the 

coasts, that do just that: who have higher-quality outcomes timein and time-out for their patients, who have used technology and 

the provider protocol provided to make sure that the results are 

better each and every time, and who lower cost. 

I have seen it in systems around the country, and I am absolutely confident that we can do it throughout the United States. 

Mr. WHITFIELD. Well, I am glad you are confident, but, you 

know, I really am skeptical about it. But I hope you are right. 

But when we talk about being budget-neutral, that is good for 

the government, and, of course, the taxpayers pay for the government. But then this bill has a pay-or-play mandate on employers, 

requiring them to provide a minimum benefit, as established by the 

Health Benefits Advisory Council, of 8 percent of wages paid. So 

there is a mandate there for small-business people to pay 8 percent 

of wages to provide a benefit defined by a commission that is established in this bill. So, for these small-business people, I mean, if 

someone has wages they are paying $500,000 a year, that is going 

to cost them $40,000. 

Now, are you concerned about the ability of small businesses to 

be able to continue to be competitive and provide jobs for the employees and pay this, as well? 

Secretary SEBELIUS. Well, absolutely, I am concerned about the 

competitiveness of our small-business owners. And I think health 

care costs are one of the areas that is a huge challenge for every 

small-business owner I talk to. They can’t get great employees 

without offering health benefits. They are priced out of the market. 

So, several things in this bill. First of all, the discussion draft 

makes it clear that there will be a specific small-business exemption from the pay-or-play. It is my understanding that the committees are still working on the language. So that will occur. It is in 

the Massachusetts—— 


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Mr. WHITFIELD. No, I know that there is an exemption, but there 

are going to be some people that will be hit by this. 

Secretary SEBELIUS. And the—— 

Mr. WHITFIELD. And that is OK. 

Secretary SEBELIUS. —creation, though, in the marketplace, I 

would suggest, actually gives them a cost advantage that they don’t 

have now, pooling larger risk, giving affordable coverage. 

Mr. WHITFIELD. Let me ask you just one other question, because 

my time is about expire. One of the criticisms we always hear 

about a one-payer, single-payer system and universal health coverage in other countries is that it rationalizes health care. And, in 

America, our most expensive part of health care deals with end-oflife care. That is a big percentage of the way we spend money. 

And I am not saying there is anything wrong with rationalizing 

health care. But, to really get big savings, do you think that we 

should be rationalizing health care in the U.S.? Many countries do 

because that is the way they control their costs. I mean, do you 

think that we should be doing that? 

Secretary SEBELIUS. Absolutely not. I think that, again, the creation of a health exchange marketplace is not a single-payer system. And I think you will hear today from some proponents who 

will strongly suggest that we should be looking at a single-payer 

system, but that is not what the President, that is not what the 

chairman have put forward. They have put forward a plan that 

builds on the current system. 

Rationing care, frankly, is something that happens each and 

every day under our current system, and it is often done by private 

insurers who get between a doctor and their patient and decide 

which practices can be met, which procedures can be paid for, what 

prescriptions. 

I think this is an opportunity, really, to make sure we have more 

patient-centered care, that we follow the protocols that work. 

Mr. WHITFIELD. Thank you, Mr. Chairman. 

Mr. WAXMAN. Thank you, Mr. Whitfield. 

Mr. Markey. 

Mr. MARKEY. Thank you, Mr. Chairman, very much. 

Last year, Madam Secretary, I introduced legislation with thenCongressman Rahm Emanuel and Congressman Chris Smith from 

New Jersey called the ‘‘Independence at Home Act.’’ And the bill 

created a Medicare pilot project focused on improving the coordination of care and reducing costs for the most vulnerable Medicare 

beneficiaries, those with multiple severe, chronic conditions, such 

as Alzheimer’s, ALS, Parkinson’s, and other complex, debilitating 

diseases, who also need help with two or more activities of daily 

living, such as dressing, feeding, et cetera. 

CBO has reported that 5 percent of Medicare beneficiaries account for 43 percent of overall Medicare spending. And CMS has 

noted that approximately 20 percent of Medicare beneficiaries with 

five or more chronic conditions, account for 66 percent of program 

spending. 

Could you talk a little bit about how we can focus on those Medicare beneficiaries with multiple chronic diseases and how perhaps 

a program like that, focusing on home and better coordination, can 

help to reduce the costs? 


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Secretary SEBELIUS. Well, we have not only the demonstration 

that you are responsible for but, I think, a number of projects 

under way looking at coordinating care, particularly for the vulnerable, high-cost individuals. And, certainly, having an opportunity to 

do that in a home base instead of a hospital-based service is not 

only better for the patient but may provide some enhanced cost 

savings. 

So we are eager to work with you, Mr. Markey, to continue to 

figure out better ways to not only coordinate care for individuals 

who suffer from various chronic diseases and have ongoing underlying conditions, but also to make it a more patient-centered system, which would lead us to more home care delivery. 

Mr. MARKEY. OK. So, in terms of home-based programs for the 

beneficiary population, do you see a shifting in that direction to 

make sure that, you know, we try to reduce costs by trying to stabilize these people at home? 

Secretary SEBELIUS. Well, as you know, there is a lot of effort 

under way, and a lot of it has been at the State basis, and I am 

hoping that with health reform we can have a real collaborative 

partnership on rebalancing care, both not only trying to prevent 

hospitalizations before they occur and provide care at home but 

also the nursing home. A number of the patients that you are describing often end up in a nursing home setting because they don’t 

have access to the wrap-around services that they need. 

So we would like to enhance that sort of home-based care, the 

care that really allows people to not only be more independent but 

also at a lower cost than in a hospital or a nursing home. 

Mr. MARKEY. Our bill also would enable teams of primary care 

doctors, NPs, pharmacists, and other care providers to form an organization to contract with HHS to provide services to these chronically ill beneficiaries in their homes as part of a 3-year demonstration. 

The organizations would be required to achieve savings of at 

least 5 percent compared to what these beneficiaries would cost if 

they were served by these coordinated care organizations. If they 

don’t, they must repay Medicare. If they achieve more than 5 percent, they can keep 80 percent of these savings, with 20 percent of 

the savings returned to Medicare. 

Do you think that makes any sense, to have cost-savings sharing 

as a system that we could construct in the country? 

Secretary SEBELIUS. Well, I certainly support the notion of beginning to pay for outcomes and not for contact. Too much of the 

Medicare system is driven right now by the number of times a provider touches a patient, not necessarily what happens at the end 

of the day. 

So the system you describe, which not only would provide for a 

coordinated strategy, which is really what we need to occur 

throughout the country, but also save money, it makes sense to 

provide those incentives to providers. 

Mr. MARKEY. Great. 

Thank you for your service. Thank you for being here. 

Mr. WAXMAN. Thank you, Mr. Markey. 

Mrs. Christensen. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. 


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And I guess there is some benefit, I guess, at least in this instance, to being a delegate and not having to go to vote. 

Welcome, Madam Secretary. It is good to see you. 

Last week, we had some very good conversations on health disparities, but I note that, at least in reading your testimony, because I had to step out, both in the Senate and here, there was 

very little, if any, reference made to this very important issue that, 

by itself, results in close to 100,000 premature, preventable deaths 

every year. 

So I hope that you will work to ensure that your entire Department is very sensitive to this critical issue and that the Office of 

Minority Health and, in particular, the National Center for Minority and Health Disparity Research will be elevated to an entity 

that is very critical to achieving the goals of eliminating health disparities. 

The bill directs that a national prevention and wellness strategy 

initiative be in place, and you will be responsible for identifying the 

key health and health care disparities. Could you discuss briefly 

how you plan to fulfill this requirement and ensure that all areas 

of concern be identified? 

And how will the Agency for Healthcare Quality and Research be 

involved, since they have been doing national health disparity reports for the last 5 years? 

Secretary SEBELIUS. Well, as I shared with you, Congresswoman, 

last week, I am, as the new Secretary, concerned that we make 

sure we do a lot more than publish the yearly reports, which have 

alarming statistics about health disparities. And, frankly, they are 

not getting any better; the gap is, in fact, widening. 

Health reform is a piece of the puzzle. I don’t think there is any 

question that having access for everyone to higher-quality preventable care, a health home, is a step in the right direction. 

But I had a recent very productive meeting with stakeholders 

representing a lot of the groups who are often underserved and assured them that we not only wanted a one-time meeting but I want 

an ongoing strategy. 

I have met with our team at our Center for Research and Quality 

about how it is that we are going to actually begin to close this gap, 

because just providing reform and continuing the gap doesn’t work. 

So we are aggressively taking on not only what has been already 

reported as effective strategies, but want the new team to be particularly focused on the issue of great concern to you and to me. 

Mrs. CHRISTENSEN. I have another issue of great concern that 

really relates to territories. In your testimony, you said that reform 

is not a luxury, it is a necessity, and I definitely agree with that. 

And, because it is a necessity, I think that certain issues, like equitable coverage for all Americans, should not really be held hostage 

to cost. And we discussed that a lot at the hearing yesterday. 

That said, I am interested in hearing your thoughts about the 

treatment of the U.S. territories in the current draft. We have been 

working for years to remove the Medicaid cap. The bill, while it 

does provide additional funding to the territories, does not move us 

in that direction at all. And we are not eligible for subsidies. 

So, to me, it makes it far less possible for men and women, 

American citizens, legal residents living in the territories to 


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achieve the benefits that this bill will provide for the rest of Americans. So I would like to hear your thoughts on that. 

Secretary SEBELIUS. Well, Congresswoman, I would like to provide an opportunity for you to have that discussion with me and 

our staff and really would like to work with you as this process— 

this is a work in progress, and it is a discussion draft. And I would 

just like to work with you to see how we can help enhance the 

areas that you have identified as problematic. 

Mrs. CHRISTENSEN. Thank you. 

Thank you, Mr. Chairman. 

Mr. WAXMAN. Thank you very much, Mrs. Christensen. 

Mr. Stearns. 

Mr. STEARNS. Thank you, Mr. Chairman. 

Madam Secretary, I note that you earlier said that, with the 

donut hole, that the benefits stop and the payment continues. But, 

of course, you understand that is for a small amount of time until 

they get above a certain amount, and then almost 100 percent of 

their benefits are paid for. 

I think you understand that. So it is not proper to say that their 

benefits stop, because their benefits—— 

Secretary SEBELIUS. Well, they stop for a substantial period of 

time, depending on how fast—— 

Mr. STEARNS. Yes, yes, but—anyway, I have two questions, 

Madam Secretary. 

The President has indicated that if you—he said, quote, ‘‘If you 

like your health care plan, you will be able to keep your health care 

plan, period. No one will take it away from you, no matter what.’’ 

I have here—The Lewin Group has done a study, and it is a bipartisan study, which found that 120 million people, nearly 67 percent of non-Medicare Americans, would lose their current coverage 

and be forced into a government-run insurance if a government 

plan was included. 

Do you have any evidence that, if a government plan is offered, 

that 120 million people will be able to keep their current insurance? 

Secretary SEBELIUS. Well, Congressman, it is my understanding 

that that Lewin study has been updated or at least disputed by a 

number of people, that those numbers were significantly higher 

than folks—— 

Mr. STEARNS. So your answer is that you dispute the Lewin plan. 

Secretary SEBELIUS. I do. 

Mr. STEARNS. OK. 

The next question is then, I have here a study by the HSI Network, LLC, June 24, 2009. Their study said that the bill we are 

discussing today would cost an astounding $3.5 trillion. Do you dispute that fact? 

Secretary SEBELIUS. Sir, I am waiting to see what the CBO score 

says. I don’t know the figures that you have just quoted. I don’t 

know who the group is. 

Mr. STEARNS. Have you seen this report? 

Secretary SEBELIUS. No, I have not. 

Mr. STEARNS. OK. 

Now, the President has indicated that if any bill arrives from 

Congress that is not controlling cost, that is a bill he can’t support. 


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So the first question is, you don’t agree this report; you don’t know about it. They say it is going to cost $3.5 trillion. Where, if 

it is not 3.5 or 3.2 or, let’s say, 2.8, where are you going to get the 

money to pay for this bill? 

Secretary SEBELIUS. Again, Congressman, I think that once the 

bill is scored and once the proposals are put forward, I am eager 

to work with the committees in the House and the committees in 

the Senate to identify the cost savings. 

The President has proposed about a billion dollars’ worth of revenue enhancements and cost savings that he feels are appropriate 

to spend on this. There are other ideas that are being proposed by 

Members of the Senate and Members of the House, and we are 

eager to work on paying for the bill. 

Mr. STEARNS. Well, of course, $1 billion is not going to approach 

$3.5 trillion. 

Secretary SEBELIUS. But, sir, I—— 

Mr. STEARNS. So $1 billion is just a pittance compared to the 3.5 

that this report shows it is going to cost. 

Another question is that you really don’t have any idea where 

you are going to get the money to pay for this. Do you have any 

evidence that shows if the government spends $3.5 trillion that it 

will save money? Let’s not take the $3.5 trillion, let’s just ask you, 

if we spend all this money, where are you going to save it? 

Secretary SEBELIUS. Sir, I think you start from the premise that 

we can’t afford what we are doing. So not doing anything is not an 

option. $2 trillion-plus a year is being spent, and Americans are 

less healthy than they were years ago. So we have to change what 

currently is happening. 

And I think there is every evidence that the combination of 

health technology, driving quality, and actually beginning to pay 

for prevention and wellness, promoting primary care instead of disease care, is a huge cost-saver over time. It is effective to have 

Americans in healthier conditions. It is good for our businesses, it 

is good for our workforce. So it will save money. 

Mr. STEARNS. Well, I think all the things you suggested both 

sides would agree on. What the question is is, how do we do that? 

How do we reform the system so that there is universal access, universal affordability, but at the same time, we don’t have a government program that is going to cost $3.5 trillion that is not paid for, 

with no statistics to show that it is going to save money? 

There could be an alternative suggestion. And I just suggest, 

Madam Secretary, that you read the HSI Network, LLC, report 

that came out and go back with the latest report from The Lewin 

Group. And I think certainly before you come up here, you should 

have some answer how you are going to pay for this. 

And, with that, I yield back. 

Mr. WAXMAN. Thank you, Mr. Stearns. 

Ms. DeGette. 

Ms. DEGETTE. Thank you very much, Mr. Chairman. 

Madam Secretary, one area that I have been working extensively 

with Chairman Waxman and also Senators Rockefeller and Whitehouse on is legislation that would strengthen the Federal health 

care quality infrastructure in order to identify and track key health 

indicators, as well as to develop and implement new science across 


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the States. What this bill does that we introduced would establish 

national priorities for health care quality, and it specifies that pediatric health care quality is one of the first. 

And a lot of this legislation has now been incorporated in the discussion draft that we are talking about today. But the draft bill 

also contains a provision that requires the director of the Agency 

for Healthcare Research and Quality to work with you, as Secretary, to develop quality measures for the delivery of health care 

services in the United States. 

And I think this is an important requirement, but I am worried 

about the implications for pediatric health care quality measures, 

because even though the discussion draft requires the measures to 

be designed to assess the delivery of health care services to individuals, regardless of age, the section is funded with Medicare dollars. 

And so, under the previous administration, HHS determined that 

Medicare dollars could not be used for pediatric measures. 

I am wondering if you can comment on this and what plans the 

administration has to address pediatric health care quality and 

what the view of the agency is going to be. 

Secretary SEBELIUS. Well, Congresswoman, I think that we are 

convinced that Medicare can be a leader in improving quality of 

care for all Americans. And, certainly, the development of quality 

standards, I think, is appropriately done under that umbrella. 

But all Americans definitely includes children, and that is a huge 

priority of the country’s moving forward. So there will be a coordinated effort to make sure that the pediatric standards are very 

much developed in terms of quality outcomes. 

Ms. DEGETTE. And do you think that can be done with the Medicare dollars? Or is that something we are going to have to explore, 

as we move forward to the final legislation? 

Secretary SEBELIUS. In the discussions with our current leadership team at CMS, they are confident that we could fulfill the mandate that is in the bill right now to develop standards, including 

pediatric standards. 

Ms. DEGETTE. OK. Because there is—I know you recognize, the 

medical establishment, and, of course, our icon who was here, Marian Wright Edelman, who was here yesterday: Children are not 

just mini-adults. So we have to develop separate standards. 

Secretary SEBELIUS. That is right. 

Ms. DEGETTE. I wonder if you could talk for a minute about the 

administration’s view on the title 7 health workforce dollars that 

are included in the discussion draft. 

Secretary SEBELIUS. Well, I think, as you look toward the future 

of a reformed health system, workforce issues are hugely important. And I think that a step was taken, a significant step, in the 

stimulus act, beginning to fund the pipeline of critical health care 

workers: doctors, mental health providers, nurse practitioners, additional nursing staff. 

And this discussion draft, I think, takes that to the next chapter, 

which recognizes not only a shift in incentives for doctors to focus 

on primary care, but also has enhanced workforce capacity, again, 

with a whole series of initiatives that would provide for more 

health care providers in more parts of the country. 

Ms. DEGETTE. Thank you. 


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One last question. One of the provisions I was really pleased to 

have included in the discussion draft was the idea of auto-enrollment at birth for children whose parents don’t have insurance 

plans, to put those babies in, and then 12-month continuous eligibility for children. 

I am wondering if you can comment on the administration’s position on that kind of auto-enrollment. 

Secretary SEBELIUS. Well, I think it has been shown that the enrollment efforts vary from State to State, often. And some still require a face-to-face visit; others have various complicated forms. 

So what has been proven as best practices, I think, is an easier 

presumptive enrollment when kids show up at the hospital. Certainly, auto-enrollment at the time of birth would facilitate including children in the system and make sure they get a healthy start 

on life. So I think that is a big step forward. 

Ms. DEGETTE. Thank you. 

Thank you very much, Mr. Chairman. 

Mr. WAXMAN. Thank you, Ms. DeGette. 

Mr. Buyer. 

Mr. BUYER. Thank you very much. 

Madam Secretary, what type of revenue enhancers have been 

discussed? 

Secretary SEBELIUS. Well, at this point, Congressman, the President has proposed a return to the itemized deduction that was 

present in the days of Ronald Reagan and feels that that would be 

an appropriate way to raise additional revenues. 

Mr. BUYER. How much? About how much revenue would that 

raise? 

Secretary SEBELIUS. $340 billion is my recollection. 

Mr. BUYER. OK. What are some other ideas that have been discussed? 

Secretary SEBELIUS. That is the revenue enhancer that the President has proposed. 

Mr. BUYER. That is $340 billion. What else? 

Secretary SEBELIUS. That is the revenue enhancer that the President has discussed. He has also proposed over $660 billion worth 

of saving. So we are at about just under a trillion dollars. 

Mr. BUYER. OK. And we are still looking for another $2 trillion? 

Secretary SEBELIUS. Sir, I don’t know—I have never had anybody discuss a $3 trillion bill, so I am not really prepared to talk about 

a $3 trillion bill. I don’t think there is a score on this bill. It is my 

understanding—— 

Mr. BUYER. Going to the itemized deduction, could you talk about 

that just a little bit further? Who would that impact? 

Secretary SEBELIUS. It would impact basically the wealthiest 

Americans, who currently are paying a different level of tax rate 

on their itemized deduction than middle-income Americans. And it 

would, again, restore the rates—— 

Mr. BUYER. OK. At that would be set—at what adjusted gross income level would that be set? 

Secretary SEBELIUS. Pardon me? 

Mr. BUYER. At what adjusted gross income level would that be 

set? In other words, you are either going to deny additional 

itemized deductions—is that what you are discussing? 


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Secretary SEBELIUS. It just readjusts the rate. They continue to 

itemize deductions, the highest-income Americans—— 

Mr. BUYER. So if an American family making $80,000—— 

Secretary SEBELIUS. No, sir. It is my understanding that it is over $200,000, the last time I saw the proposal, but that could have 

changed. 

Mr. BUYER. At $200,000. But then what happened to the President’s promise and assurance to the American people that he would 

not increase taxes on anyone making below $250,000? Aren’t you 

going to set 250? Otherwise, he breaks his promise to the American 

people. 

Secretary SEBELIUS. Sir, he has put forward this proposal, and 

he is eager for Congress to talk about it. He thinks this is a way 

to raise additional revenue for—— 

Mr. BUYER. So it is OK for him to promise one thing to the 

American people and do another, just like what George Bush did. 

‘‘I won’t increase taxes,’’ and he did it anyway. So that is what your 

boss is proposing. 

Did you say, to remind your boss, ‘‘Wait a minute, I am your 

Cabinet Secretary, I am responsible for this. Do you realize you are 

about to break your promise to the American people if you do this?’’ 

Secretary SEBELIUS. I did not say that to the President. 

Mr. BUYER. What did you say to the President? What did you advise the President? 

Secretary SEBELIUS. I told him I was eager to help him pass 

health reform, and I was eager to help fulfill his commitment that 

it would be paid for within the period of time that the bill proposes, 

over a decade. I think that is a fair promise to the American people, that it won’t increase the deficit. And I am eager to work with 

you, sir, to help get that done. 

Mr. BUYER. Medicaid, when you were Governor and as a commissioner of Medicaid, States get a grade with regard to the administration of Medicaid by the States. What was your grade when you 

were the commissioner and Governor with regard to the administration of the Medicaid plan? 

Secretary SEBELIUS. Grade by whom? 

Mr. BUYER. Pardon? 

Secretary SEBELIUS. Who is grading me? I don’t know what you 

are talking about. But, I mean, I guess the people of Kansas 

thought I got a pretty good grade because I got re-elected as insurance commissioner and as Governor. 

Mr. BUYER. OK. Well, you got a D. Maybe you thought that was 

good and that was acceptable. I am only concerned that, if you 

think that a D is good and acceptable and you are glib about it 

here today, Madam Secretary—— 

Mr. WAXMAN. Will the gentleman yield? 

Secretary SEBELIUS. Sir, I don’t know what you are talking 

about. 

Mr. WAXMAN. Will the gentleman yield? Who graded—— 

Mr. BUYER. No, I am not going to yield. 

The question I have here is, if we are going to say unto our 

States that we are going to—the Federal Government will pick up 

additional cost on Medicaid, aren’t we sending a signal unto the 

States that if the Federal Government is going to pick up addiVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00339 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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tional costs, that they don’t have to be as concerned and cost-conscious? Should I worry about that? 

Secretary SEBELIUS. Well, I would say that the bulk of the Medicaid beneficiaries will still have a very significant State share. And 

I don’t know any Governor in the country who is not concerned 

about the cost of Medicaid. 

Mr. BUYER. One of the other things that does concern me, 

though, is with regard to doctors, you say that everyone will be 

guaranteed their choice of their doctor. Yet, when we are going to 

have some shifting that, in fact, will occur—and that, in fact, is recognized. So an individual who likes going to their doctor, now all 

of a sudden, their plan may not be—their doctor may say, ‘‘I am 

not going to participate in the government option.’’ Then they lose 

their choice of doctor. 

Would that be correct under this plan? 

Mr. WAXMAN. The gentleman’s time has expired. 

Secretary SEBELIUS. Only if the individual chooses the public option. 

Mr. BUYER. Say again? 

Secretary SEBELIUS. Only if the individual chooses the public option. 

Mr. BUYER. Right. Then they lose their choice of doctor if the 

doctor does not participate. 

Secretary SEBELIUS. Well, that is the individual’s choice. Doctors 

would not be mandated to be in the program, that is correct. 

Mr. WAXMAN. And that is true of private insurance, as well. 

Secretary SEBELIUS. That is true. 

Mr. WAXMAN. The gentleman’s time has expired. 

Mrs. Capps. 

Mrs. CAPPS. Welcome, Madam Secretary. And thank you very 

much for being here today and for your testimony. 

I just want to make one brief comment about a population, about 

a group of people being discussed earlier in the conversation, those 

who will be covered, the childless adults who would be covered 

under Medicaid in this legislation, with the cost amount. You are 

being asked about it. It is not as though these are folks that we 

are not paying for already and the kind of health care they receive 

currently, which is most often way expensive and inappropriate for 

their health needs—no prevention and so forth. I think that needs 

to be part of the discussion. 

But my questions to you have to do with the part of the country 

you come from, Kansas, as well as part of my district, which is 

rural America, and some of the barriers to care there. 

But, first, I want to take advantage of your expertise as insurance commissioner for a State and have you share with us briefly 

about some of the types of reforms that are needed to improve our 

current insurance market, some of the common abuses that you 

have seen, and how you believe this bill will address—and that will 

actually be a big cost savings, as well. 

Secretary SEBELIUS. Well, thank you, Congresswoman. 

I think there is no question, particularly in the individual market 

but also often in the small-business market, there are constantly 

cherry-picking activities by private insurers, which do one of two 

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creased year after year, driving people out of the marketplace. But 

also, in the individual marketplace, the pre-existing condition barriers often either make insurance impossible to obtain or totally 

unaffordable to obtain. 

So it is a huge barrier to Americans accessing quality health 

care. 

Mrs. CAPPS. And are there provisions specifically in this legislation that you believe will address this? 

Secretary SEBELIUS. Absolutely. Not only the kind of—you have 

a couple of provisions. You have a loss ratio provision, which would 

allow a different oversight to medical loss ratios, helping to eliminate some of the overhead cost. There is a provision that would exclude insurers any longer from denying people coverage based on 

pre-existing conditions. And there is a much more community-rated 

aspect to the health exchange, which would, again, limit the kind 

of spikes in cost that small-business owners often see driving them 

out of the marketplace. 

Mrs. CAPPS. Thank you. 

Now, to a part of my district, I represent a county in California, 

San Luis Obispo, in which one company, WellPoint, has way more 

than 50 percent of the market. It is the only private insurer. And 

the county also has a shortage of primary physicians because of a 

locality or reimbursement issue that is far different from what the 

cost of living in the area really is. But this county also doesn’t quite 

qualify for a health professional shortage area. So there are these 

traps that many of the folks feel like they are existing in. 

Could you talk about your experience, maybe, that is similar, but 

also how this legislation could improve the choice of health plans 

for consumers in a county such as the one I have described; and 

how, also, we really need to be able to attract new physicians to 

certain areas like the one I mentioned and many others in rural 

America, as well as some underserved areas in metropolitan areas, 

as well? 

Secretary SEBELIUS. There is no question, I think, that the public 

option in the marketplace achieves the very goals that you just described, where consumers would have choice and there would also 

be cost competition—two principles, I think, that the administration very much believes in. 

In terms of the workforce issue, again, the initial investment in 

the stimulus act began the pathway to enhancing workforce, particularly in underserved areas, with a doubling of the Commissioned Corps. But I think this bill takes an even bigger step forward, recognizing that loan repayment is an effective strategy. It 

attracts people to underserved areas. 

I would say the implementation of health IT will be a significant 

enhance factor for providers who often don’t want to be isolated 

but, with health IT, can be in frequent consultation with specialists 

and with colleagues in various parts of the country, in various 

parts of the State, so they are not in isolated practices. 

So there are a number of features that are not only in this discussion draft but in the bills that you have previously passed that 

I think really help to address the workforce issue. 

Mrs. CAPPS. Thank you very much. 

I yield back. 


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Mr. WAXMAN. Thank you, Mrs. Capps. 

We now go to Mr. Burgess. 

Mr. BURGESS. Thanks, Mr. Chairman. 

Madam Secretary, I am over here in the broom closest, behind 

the kids’ table, which is where they keep me on this committee. 

And welcome to our committee this morning. 

During your confirmation hearing before the Senate, I believe the 

statement was made that you said, ‘‘If confirmed, I will not only 

be an eager partner to work with Congress, but that I understand 

bipartisanship.’’ Is that a reasonable facsimile of the testimony that 

day? 

Secretary SEBELIUS. Yes, sir. 

Mr. BURGESS. Now, I know that the Senate HELP Committee, 

the ranking member has sent a letter, June 16th, in a follow-up to 

a request submitted June 10th sent by the ranking member of the 

Senate HELP Committee, where they note that despite providing 

technical assistance to the majority regarding the Affordable 

Health Choices Act, that same courtesy had not been made available to the minority of the committee. 

When can we tell the Senate to expect that you are going to help 

them, the Republicans on the Senate HELP Committee, with the 

same technical assistance that you have provided to the majority 

on the Senate side? 

Secretary SEBELIUS. Sir, it is my understanding that our staff 

and Nancy-Ann DeParle, who is the White House head of the 

Health Reform Office, have been in the House and in the Senate 

on a daily basis, providing information and expertise, modeling, a 

whole variety of situations. 

I am not sure specifically what was requested that has not been 

provided, but I know that they have been available, accessible, and 

very present day-in and day-out. 

Mr. BURGESS. Well, Mr. Chairman, I would ask unanimous consent to make the Senate letter part of the record. 

And then, just a follow-up: For our committee here, on the House 

side, will that same technical expertise be made available to the 

minority in the House? 

Secretary SEBELIUS. Sir, as much as we can provide background 

information and assistance, we stand ready to do that. 

Mr. BURGESS. And we stand ready to access that. 

Let me ask you a question. In your prepared testimony this 

morning, there is a discussion about the President has introduced 

proposals that will provide nearly $950 billion over 10 years to finance reform. That is following the statement, the President is 

open to good ideas on how we finance—will not add to the deficit. 

Now, in a world in which 96 percent of people have health coverage, am I correct in presuming that the money that is afforded 

for disproportionate-share hospitals and upper payment limits, that 

those fund will no longer be necessary for our safety net hospitals? 

And is that where a portion of this $950 billion is coming from? 

Secretary SEBELIUS. There is a proposal as part of the package 

that at least a reduction in the DSH payments be anticipated as 

health reform is fully implemented. 

I don’t think anybody anticipates a world in which there would 

be no additional help and assistance to those hospitals that are 


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providing the bulk of care to people who are uninsured, but hopefully the uninsured will go down. 

There are additional, I think, features about that—cultural competency—a range of additional services that have to be provided. 

Mr. BURGESS. And just to point out, in my home State of Texas, 

a significant number of the uninsured are in the country without 

benefit of a Social Security number. And until we resolve that 

issue, the need for safety net hospitals is going to continue, because 

I suspect that there will be some people who are left out of the 96 

percent who actually have health coverage. 

Now—and I was glad to hear you re-emphasize this morning that 

the President wanted to protect what works and fix what is broken. 

I am glad you went to Omaha. I went to Omaha earlier this year. 

In fact, Alegent came here last year and did an event with us. They 

are one of the forward-looking institutions in this country, and 

there are many others. 

But testimony at this committee yesterday really—without the 

ability to have the health savings account and the health reimbursement account to be able to provide the correct incentives for 

their patients to access the preventive care that we all want people 

to feel is important, without those tools it would be very difficult 

for them to operate the kind of facility that they have today. 

Secretary SEBELIUS. I am sorry. Without the health savings—— 

Mr. BURGESS. Without the health savings accounts and the 

money made available through health reimbursement accounts. 

And I guess what I am getting at is, could we get this morning 

a definitive answer? From my read of this bill that is before us, it 

appears that health savings accounts are not going to count as 

qualified coverage. Is that correct, from your reading of the bill? 

Secretary SEBELIUS. Sir, I can’t—I will go back and make absolutely sure. I don’t—I know that there is no intent to eliminate 

health savings accounts. How they are actually defined I need to 

recheck. But health savings accounts would still be available to 

Americans as they are today. 

Mr. BURGESS. I am not certain that that is correct under the language of the bill. And I think the President could do a good service 

by instructing us to help people avoid a penalty for not having 

credible coverage or qualified coverage if they choose to get their 

insurance through a health savings account and, again, that have 

the—— 

Secretary SEBELIUS. You are saying a health savings account absent another insurance policy. 

Mr. BURGESS. That is correct. 

Mr. WAXMAN. Will the gentleman yield to me? Your time has expired, but I did want to clarify—— 

Mr. BURGESS. No, my time is just starting. It hasn’t gone green 

yet. 

Mr. WAXMAN. Well, I don’t want to dispute with on you that, 

but—— 

Mr. BURGESS. I will be happy to yield to the chairman. 

Mr. WAXMAN [continuing]. I want to clarify that I do believe that 

health savings accounts are not adversely affected in the draft bill. 

That would be a ways and tax issue. But I don’t think that is the 


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intention. And we will get a clarification because you raise an important question. 

Mr. BURGESS. Just briefly reclaiming my time, if you look at the 

rate of increase of all of the different products out there—high option PPO, Medicare, Medicaid—all increase at a rate of 7.5 percent 

a year. We heard testimony from the chief medical officer at 

Alegent yesterday that their rate of increase was about 5 percent 

a year. 

So it seems to me that, if we want to figure out what works, we 

would look at those types of programs, give people an incentive to 

select healthy behaviors, make it important to them, and I think 

we will find that people, by and large, will do the right thing. It 

is not for everyone—— 

Mr. WAXMAN. Mr. Burgess, thank you very much. Other members are waiting, and the Secretary is going to have to leave, so I 

do—— 

Mr. BURGESS. I yield back. 

Mr. WAXMAN [continuing]. Want to get to some of the others. 

Ms. Matsui. 

Ms. MATSUI. Thank you, Mr. Chairman. 

And welcome, Madam Secretary. We are so happy to see you 

here. 

Secretary SEBELIUS. Thank you. 

Ms. MATSUI. I was pleased to see that components of legislation 

that I authored in the Public Health Workforce Investment Act 

were incorporated into the draft bill before us today. The creation 

of a public health workforce corps is a major step forward and will 

revolutionize public health forever. 

It is also, as you know, a necessary step because we are staring 

a public health workforce crisis directly in the face. In order to satisfy our future public health needs, we will need to train three 

times as many public health workers as we are today. Otherwise, 

the rates of obesity, diabetes, and other chronic diseases will likely 

rise. And we need to reinvest in this crucial part of our public 

health infrastructure so that we can take community-based action 

to prevent a long-term public health crisis. 

Secretary Sebelius, you are head of what I figure is the largest 

public health agency in the world. You probably know as well as 

anyone that the public health workforce is rapidly aging. By 2012, 

half of the public health workforce, in some States, will be ready 

to retire. 

In my opinion, our public health system did a good job in managing the recent H1N1 flu outbreak, but this incident has shown 

us how critical it is to not let our public health workforce deteriorate any further. And I am pleased that my piece of it was incorporated into the draft bill. 

Madam Secretary, I want my colleagues to understand how critical the public health workforce is. Will you please outline for the 

benefit of this committee how your job is dependent on having a 

robust public health workforce backing you up? 

Secretary SEBELIUS. Well, Congresswoman, first of all, thank you 

for your leadership in this area and your longstanding expertise 

and insistence that the public health infrastructure has to be part 

of this dialogue and discussion. 


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And I think you appropriately identified the recent situation, still 

with us, of the H1N1 virus and the anticipation that we will need 

additional activity points to the need for a robust infrastructure. 

And, as you correctly point out, in many parts of the country, it is 

not robust enough now, and we are facing a looming retirement of 

lots of individuals. 

So having not only the pipeline—you know, the Commissioned 

Corps has doubled—there are efforts to enhance, again, through 

the Recovery Act, the community health center aspect of the public 

health backbone in this country. And I think that is an important 

step forward. 

No question that we need not only further attention to workforce 

issues, but also further attention to quality standards in public 

health agencies throughout the country. And I can assure you that 

our new leadership of Dr. Tom Frieden at the Centers for Disease 

Control is a huge believer that the people health infrastructure 

needs to be enhanced and needs to be improved and needs to be 

focused on. And he is coming to this job as a new CDC leader with 

that agenda at the forefront of his priorities, and it is one that I 

share. 

Ms. MATSUI. Well, why are we facing such a crisis in the public 

health workforce today? I know part of it is that we need more 

graduates from public health programs. But I think the other part 

of it is that we may not have the right incentives for the graduates 

we do have to enter public service. 

Secretary SEBELIUS. Well, I think the whole incentive system in 

health care is one that is on the table for review as we look at the 

reform agenda, how we not only attract more students to medicine 

in the first place, but how we attract more of those students to the 

appropriate shortages. 

Ms. MATSUI. But do you think that the scholarship and loan repayment provisions in the draft bill will help incent public health 

graduates to the public workforce? 

Secretary SEBELIUS. I don’t think there is any question that 

those strategies have been proven to be enormously effective. 

Students, unfortunately, today are emerging with mountains of 

debt, and often public health officials aren’t paid as handsomely as 

some in the private sector. So helping to retire that debt, helping 

to erase that debt, is an enormous step to allowing students to actually make choices that they might find more rewarding but currently find financially out of reach. 

Ms. MATSUI. OK. I thank you very much. 

I yield back the balance of my time. 

Mr. PALLONE [presiding]. Thank you. 

The gentleman from Georgia, Mr. Gingrey. 

Mr. GINGREY. Madam Secretary, thank you for being with us this 

morning. You were asked a little bit earlier about your grade as 

Governor. I would say that your grade so far this morning has been 

pretty good. So hopefully you won’t mind a couple of tough questions from me. 

Quoting in your testimony, ‘‘Without reform, according to the Medicare actuaries, we will spend about $4.4 trillion on health care 

in 2018. And, by 2040, health care costs will reach 34 percent of 

GDP.’’ 


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Madam Secretary, these numbers are, indeed, staggering, and I 

share your concerns. However, I have another concern; I need to 

be reassured that you share that. 

The Medicare trustees report that the Medicare program will become insolvent by 2016. Roughly 45 percent of Americans currently 

receive their health care from a government payer, and yet your 

testimony focuses almost exclusively on the private sector, privatesector health insurance companies, and ways in which they should 

be reformed. 

Since his inauguration, President Obama has spoken of the need 

for entitlement reform. Certainly, President Bush did the same. So, 

given that 45 percent of all Americans get their health care from 

a government program and the fact that your Department oversees 

the largest government program tasked with insurance that quality 

health care for our seniors is available both today and in the future, shouldn’t entitlement reform be an integral part of this legislation? 

Secretary SEBELIUS. Yes, sir, I think it definitely should. And 

that is why I am confident that not only a number the proposals 

to enhance quality for seniors are important—and we have talked 

a bit about closing the donut hole, which is a huge issue—but also 

the savings that are proposed by the President will enhance the 

lifetime of the Medicare program that you have just cited and also 

lower premium rates, Part B premium rates, for the seniors who 

are paying them. 

So it is a win-win-win situation. It helps to pay for a longer life, 

frankly, of the program that is so important to millions of American seniors—— 

Mr. GINGREY. Well, Madam Secretary, reclaiming my time since 

it is so limited, I would have to tell you that I think that is nibbling around the edges when the latest Medicare trustee report 

says that, by 2083, we will have $37.8 trillion worth of unfunded 

liability in the Medicare program. 

You state that, since 2000, the year 2000, private health insurances premiums have almost doubled, growing three times faster 

than wages. Madam Secretary, do you know what percentage Medicare Part B premiums have increased since 2000? You just referenced that just a second ago. 

Let me just tell you if you don’t have it on the tip of your tongue, 

they have more than doubled since 2000; 11.7 percent. That is how 

much Medicare Part B premiums have gone up since 2000. So I 

would suggest to you that the parity between Medicare Part B premium increases and insurance, private insurance premium increases suggest that high health care costs are rampant, and they 

are integrated. So it is not just private, but it is public as well. So 

we need both private insurance reform and Medicare reform. Simply to turn the system over to the government I think will not solve 

this problem and, without addressing Medicare reform, will leave 

many seniors without quality health care coverage. 

Let me just real quickly, if I might, Mr. Chairman. 

Secretary, you quote in your testimony that, reform will guarantee choice of doctors and health plans. No American should be 

forced to give up the doctor they trust or the plan they like. If you 

like your current health care, indeed you can keep it. 


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Do I take it from your testimony that you mean all Americans 

will be able to keep the health plan that they like, including the 

11 million seniors who get their Medicare from Medicare Advantage? 

Secretary SEBELIUS. Well, sir, I certainly hope so. 

The proposal to stop overpaying for Medicare Advantage is one 

that is included in the President’s cost savings. After years of examination, there are no enhanced benefits, and they are being paid 

at about a 14 percent higher rate than other programs. As you 

know, the Center for Medicare Services has proposed that there be 

fewer plans this year because of the proliferation of plans and the 

fact that consumers often didn’t choose them. We have got a bunch 

of plans that have fewer than a hundred people choosing them, and 

that is not a very cost-effective way to run a system. So there will 

be a consolidation. But, ideally, the doctors and the networks will 

remain available. 

Mr. PALLONE. The gentleman’s time has expired. 

Mr. GINGREY. Mr. Chairman, I thank you for your patience. 

Madam Secretary, I thank you for your response. 

Mr. PALLONE. Thank you. 

Next we have the gentleman from Ohio, Mr. Space. 

Mr. SPACE. Thank you, Mr. Chairman. 

Thank you, Madam Secretary, for joining us today. And as a native Ohioan, I want to welcome you as well. 

There are so many different areas worthy of discussion that it is 

difficult for me to define one to ask you about. But given the rural 

nature of my district and Ohio generally, and given the special 

challenges that those in rural America face when accessing health 

care and the barriers that we have got, and given that one of those 

challenges happens to be attracting and retaining sufficient workforce, specifically primary care doctors, specialists, some adolescent 

specialists, in particular, what in your assessment does the President’s initiatives and what does this bill do with respect to attracting and retaining quality workforce in rural areas where that has 

historically been a problem? 

Secretary SEBELIUS. Well, Congressman, I share your concerns 

about rural access. It certainly is something I worked on as Governor of a State like Kansas, where two-thirds of our population is 

in very rural areas. 

I think there is no question that the incentives for enhanced 

workforce is a step in the right direction. I think that telemedicine, 

which is on the horizon and certainly an important component of 

health IT, is a huge step forward. A lot of providers in Kansas, and 

I am sure in Ohio, are concerned about their isolation and want to 

make sure they are able to access colleagues and access consultation. And I think the steps that are included in this legislation that 

pay for student loans and encourage additional incentives for primary care and family care doctors also enhance the workforce in 

rural as well as urban areas. 

Mr. SPACE. And I just have a couple more minutes, and I want 

to just make a comment as a followup. You mentioned telemedicine, and I guess I want to take this opportunity to explain to you 

as a member of the administration just how important it is to access broadband and high-speed Internet in those areas that can 


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benefit from telemedicine; that bridging that digital divide is so 

very important in so many areas, including accessing quality 

health care. 

One other area I wanted to bring up has to do with some of the 

geographic disparities pertaining to chronic disease. And coming 

from Appalachia, one of the things we see, for example, is a higher 

rate than average or normal in diabetes incidents. How do we 

make wellness and prevention programs address these specific regional disparities when it comes to chronic diseases like diabetes? 

Secretary SEBELIUS. Well, there is a new grant that we just 

made available which actually focuses specifically on areas with 

the highest rates of diabetes and chronic disease in terms of providing incentives and providing additional resources, to not only coordinate care but do much more effective monitoring of conditions. 

I think that there is no question that preventive care at a much 

earlier stage helps. But also what helps to prevent hospitalizations, 

amputations, a variety of things, is to make sure that those suffering from diabetes actually are staying on an appropriate regime, 

and that monitoring is what the grant is designed to do. I think 

we are trying to follow some best practices which have proven to 

be very effective. And my guess is that your area is likely to be, 

unfortunately, rising high on the list of an area that is likely to be 

one of the—I think there are 133 communities that will have additional resources to focus just on this effort. 

Mr. SPACE. Thank you, Madam Secretary. 

And I yield back my time. 

Mr. PALLONE. Thank you. 

Mr. Walden. 

Mr. WALDEN. Thank you, Mr. Chairman. 

Madam Secretary, thanks for being here today and the work that 

you are doing. I have some questions. 

I, like many of my colleagues, am just starting to look through 

the discussion draft that is out. And I know that you have undoubtedly played a role in working with some members of the committee 

on this. So if you can help me on some of these things. 

Is it true that, under the bill, an employer could be subject to an 

8 percent tax even if they offer a worker an employer-sponsored 

health care policy? 

Secretary SEBELIUS. Yes, I think that is accurate; that there are 

some ways, if it isn’t determined to be credible coverage, that you 

could have the pay-or-play provision. 

Mr. WALDEN. And I think, if I am reading it correctly, isn’t it 

also true that if the employee decided to go through their own plan, 

the employer could still end up having to pay, if they went through 

the exchange, I guess it is? Tell me how that process works. Because an employee could refuse the plan from the employer. Correct? 

Secretary SEBELIUS. I must confess, Congressman. 

Mr. WALDEN. The people behind you are shaking their head yes. 

Secretary SEBELIUS. I am not familiar with that specific provision. I would be glad to get back. If you want to give me the questions, I will immediately respond. I am just not—— 

Mr. WALDEN. Well, my understanding is that an employer could 

offer an employee—employer sponsored health coverage, and then 


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the worker could turn it down and enroll in an exchange plan. The 

employer would still be liable for the 8 percent tax even though 

providing the employer-sponsored care could be cheaper, is what I 

understand. So if you could take a look at that. 

Secretary SEBELIUS. I will definitely take a look at that. 

Mr. WALDEN. And is it true that, in order for the employer to 

avoid paying the 8 percent tax, the employer has to offer a plan 

that the new commissioner deems to be a qualified health benefit 

plan? 

Secretary SEBELIUS. That is correct. 

Mr. WALDEN. Can an employer require an employee to accept the 

employer-provided health care coverage? 

Secretary SEBELIUS. Can you require an employee to accept it? 

I don’t know again how the provisions are drafted. I am not aware 

of any mandatory—in a private insurance market, how you mandate that anyone accept a plan. But I haven’t read the outline of 

the bill. Sorry. 

Mr. WALDEN. Do you know if, in these provisions, are States and 

Federal Government considered employees under this draft? 

Secretary SEBELIUS. States and Federal Government? 

Mr. WALDEN. Considered employers. 

Mr. PALLONE. Mr. Walden, can I just—I am not trying to stop 

you, but I mean, the draft—the discussion draft is put together by 

the Members, and I don’t know that she can necessarily be the person to comment on what is in it. But if you want to continue. 

Mr. WALDEN. Well, we are on my time here. 

Mr. PALLONE. I am going to give you some extra time. But I just 

want you to understand that we didn’t ask her here to comment 

on the provisions of the draft, per se. 

Mr. WALDEN. Oh, I thought earlier she was indicating that the 

administration supports this draft or concepts of this draft. Is that 

not true? 

Secretary SEBELIUS. Sir, I said that we support the principles 

that prompted the draft. I am sorry, I am not—the draft came out 

on Friday, and I didn’t write the draft, and I am not intimately familiar. But I would be happy to answer questions if you have questions for me. I would be—— 

Mr. PALLONE. I mean, I don’t want to stop you. 

Mr. WALDEN. Reclaiming my time, if I could. So you haven’t read 

this draft either then? 

Secretary SEBELIUS. I have read it. I can’t—I don’t have it memorized. 

Mr. WALDEN. No, I appreciate that. You are ahead of me. I 

haven’t read it fully. But I also know the way this committee has 

been operating of late, it moves rather rapidly. So I doubt we will 

have a chance to ask you these questions before we suddenly have 

to vote on this. So that is why—I don’t mean to be disrespectful. 

I know that others on the committee have asked you a pretty specific set of yes-or-no questions. 

Secretary SEBELIUS. Again, I am just trying to be honest with 

you. If I don’t know the answer, I will be happy to get it for you. 

Mr. WALDEN. Let me go to another point then, and that was a 

comment you made about Medicare and Part D. And this I don’t 

think is necessarily in the draft. Do you know what the Medicare 


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Part B premium was in 2000? I am not going to play a gotcha 

game here, but it was about $45.50. In 2008, it was $96.40. Medicare Part D for 2009 was $29, which was 30 percent lower than the 

original projected when we passed Medicare Part D in 2003. 

I understand you issued a report yesterday showing that employer-sponsored premiums for health care doubled between I think 

it is 2000 and 2008 for health insurance. Medicare Part B premiums have more than doubled, 110 percent increase, in the same 

time span. 

I think what a lot of people are asking me about, when I was 

home in Rufus and Arlington and Fossil out in my district, they are 

saying, if Medicare is going broke by 2017 and we are just going 

to expand and add all of these people into a government-run system, but we can’t get access to providers now in the governmentrun system, which as you know is a big issue in rural areas, getting access to a doctor if you are on Medicare. They are saying, how 

is this new government-run plan going to hold down costs? And 

how is it going to expand? How are we going to pay for this, is the 

underlying issue here. And the estimates, they are just saying, you 

know, you talked about health insurance could cost us, or health 

coverage, $4 trillion or something. This plan alone I think some estimates are that. So people at home are really struggling with the 

dollar amounts here. 

Secretary SEBELIUS. Well, Congressman, the plan, again, at least 

the payments the administration has put forward, not only saves 

dollars in Medicare but helps to expand the life expectancy of the 

Medicare trust fund, an important feature, and lower overall costs 

in the Part B premium for the beneficiaries who are currently paying, as you say, a higher cost. 

I am a believer that Medicare has to get at the front of the lowercost, higher-quality care for the beneficiaries of the system, and 

that we can be not only innovative but help to drive the best practices which exist now in various parts of the country to scale. So 

that is really one of the intents of the new program moving forward. 

Mr. WALDEN. All right. 

I appreciate that, and I will close with this, that I spent 5 years 

on a small community hospital board, and it seemed that Medicare 

gave us the most headaches, not the least reimbursement but second to least reimbursement, and there was enormous cost shift 

going on when the Federal Government was involved. And now you 

have got this access issue, trying to get physicians that will even 

take Medicare patients. 

I don’t want us to just create a government-run system that mirrors one that isn’t sustainable right now. And you know as well as 

I do that some of the goofy rules in Medicare that drives seniors 

to the hospital to get an injection when they should be able to get 

it at home. Telemedicine is a great thing. But if you are a provider 

and you are on the other end of the telemedicine, you don’t get reimbursed for that consultation under Medicare. So there is a disincentive to doctors to participate. 

There are some things, irrespective of this debate, we could do 

to really improve Medicare, I think. 

Mr. Chairman, thanks for your generosity on the time. 


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Mr. PALLONE. Sure. 

Now, let me just remind members—we mentioned this earlier, 

but I want you to know that the Secretary has to leave at 12:00. 

Now, of course, we are going to have written questions from many 

members, including those who have already spoken and those who 

have not, to follow up, and she will get back to us. 

Mr. DEAL. Mr. Chairman. 

Mr. PALLONE. Yes. 

Mr. DEAL. Could we ask the Secretary if she could have the answers back by July 6? I think that would give about a week. 

Mr. PALLONE. Normally we submit the questions within 10 days. 

So that would—I am trying to figure this out here. If you all agree 

to send her the questions within 10 days, then I think she has to 

have at least—I don’t know. July 6 is kind of early, isn’t it? 

Mrs. BLACKBURN. Mr. Chairman. Just as a form of suggestion to 

this, maybe with the remaining time, those of us that do have specific questions, if we can just address our question to her and then 

not get a response but get the response in writing. 

Mr. PALLONE. This is what I am going to do. She has about 5 

minutes left or 10 minutes left. I have Mr. Engel is next, and then 

I have you, the gentlewoman from Tennessee. I think that is all we 

are going to be able to do. I am not going to put a timetable on 

when you get back to us with the written responses at this time. 

Mr. SCALISE. Mr. Chairman. I would like to be on that list, too, 

for questions. 

Mr. PALLONE. All right. Let me explain again. Anyone can submit written questions. Normally the committee asks—— 

Mr. TERRY. I think, on something this important, I am just really 

offended that we don’t have the opportunity to ask questions to 

her. 

Mr. PALLONE. I don’t know what to tell you. I just don’t want to 

waste the time that we have remaining. 

Mr. TERRY. Other directors and Secretaries came in when we 

were the majority, and you raised holy hell if they didn’t stay here 

for every question. 

Mr. PALLONE. Well, there is not much I can do about that now. 

I am going to ask Mr. Engel—you are next. Go ahead. 

Mr. ENGEL. Thank you. 

Thank you very much, Mr. Chairman. 

Madam Secretary, first of all, welcome. I heard your opening 

statement, and I was delighted when President Obama selected 

you, and I think you are doing and will continue to do a great job. 

So welcome. 

I want to call two things to your attention, which are two health 

priorities of mine. 

Firstly, I was pleased to see that my legislation, the Early Treatment for HIV Act, which I introduced with Speaker Pelosi, was included in the House Tri-Health draft. We call the bill ETHA. And 

ETHA, in conjunction with the House’s proposal to cover all lowincome people under the Medicaid program up to 133 percent of the 

Federal poverty level, is a significant step towards reducing the 

number of uninsured people with HIV in our country. 

As you know, ETHA, this bill, addresses a cruel irony in the current Medicaid system. Under current Medicaid rules, people must 


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become disabled by AIDS before they can receive access to Medicaid. This is care that could have prevented them from becoming 

so ill in the first place. In other words, Medicaid won’t help you unless you have full blown AIDS. And as you know, if someone tests 

positive for HIV, it could be a number of years before they have 

full blown AIDS, so it makes much more sense to help those people 

once they test positive, to try to stave off the full blown AIDS. And 

it is an irony that you couldn’t do it. 

So what ETHA does, it gives States the option to provide people 

living with HIV access to Medicaid before they become disabled by 

AIDS. President Obama repeatedly in his quest for President said 

that he supports it; when he was in the Senate, he cosponsored the 

bill. And I just want to ask you if I can continue to count on the 

administration to continue to support ETHA? And will you work 

with the States to take up this option if it is included in the final 

reform package? 

Secretary SEBELIUS. Yes. 

Mr. ENGEL. Thank you. That is the answer I was looking for. 

And secondly, the second priority is home infusion. And we know 

that some delivery system changes need to be part of our health 

reform package. And this legislation, the second piece, addresses an 

anomaly in the Medicare program that forces patients into hospitals and nursing homes to receive their multi-week infusion therapy when the same care could be delivered safely in the patient’s 

home where the patient prefers to be without standing, results in 

lower costs and virtually no risk of health care acquired infections. 

So I believe that it makes no sense that Medicare pay pays for 

all costs associated with infusion therapy when it is provided in far 

more costly hospital and nursing home settings but will not pay for 

the cost of home infusion. 

For decades, private health insurance has covered home infusion 

therapy. It is used extensively by Medicare Advantage plans. Medicaid programs cover it, but Medicare fee-for-service stands alone 

in the failure to cover the services, equipment, and supplies needed 

for home infusion therapy. 

So my bill, which is the Medicare Home Infusion Therapy Coverage Act, I have introduced with 92 Members of Congress, I have 

introduced it with my Republican colleague Tim Murphy, and 20 

members of the Energy and Commerce Committee are sponsors. So 

I am going to ask you the same question: Can I have your commitment that your staff will work with me and Chairman Waxman’s 

staff on meaningful legislation to close the Medicare home infusion 

benefit gap? 

Secretary SEBELIUS. We will certainly look forward to working 

with you and seeing what can be done about this area. 

Mr. ENGEL. I thank you, and returning back my time 1 minute 

and 17 seconds, I want it duly noted, Mr. Chairman, to give someone else a chance. 

Mr. PALLONE. It is duly noted. 

The gentlewoman from Tennessee, Mrs. Blackburn. 

Mrs. BLACKBURN. Thank you so much, Mr. Chairman. 

And Madam Secretary, thank you very much for taking your 

time to be here. I understand you have to go to the White House 

for a taping. And I would hope that—— 


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Secretary SEBELIUS. With the Attorney General, but—— 

Mrs. BLACKBURN. I am sorry then, I was misinformed. 

But I would certainly hope that you will be able to return and 

answer the questions that those on the committee have about the 

health care plan. Could you give us a commitment to answer these 

before the markup? 

Mr. PALLONE. Let me—Mrs. Blackburn, I am not going to take 

away from your time; I will give you an extra minute or so. I know 

that members are interested in getting timely responses, but we 

are not—we don’t have the opportunity at this point to say that the 

Secretary is going to come back. So what I am going to ask is that 

members submit their questions as quickly as possible, and I would 

ask the Secretary to respond to those questions as quickly as possible. 

Mr. TERRY. Will the gentleman yield? 

Mr. PALLONE. No. I want to get through this. 

Mr. TERRY. So are you telling the witness not to answer the 

questions? Parliamentary inquiry, are you telling the witness not 

to answer that question? 

Mr. PALLONE. No. I thought I said the opposite. 

Mr. TERRY. No, you didn’t. You told her not to answer is the way 

I interpret it. 

Mr. PALLONE. Let me start over again. Mrs. Blackburn has the 

time. We are going to start again. 

Mrs. BLACKBURN. I would like to reclaim my time, Mr. Chairman, as soon as you finish your speech. 

Mr. PALLONE. What I am saying is we are not asking the Secretary to come back at this time. We are asking—— 

Mr. SHADEGG. Mr. Chairman, point of order. 

Mr. PALLONE. Yes. 

Mr. SHADEGG. The Secretary is here to speak on the single most 

important piece of legislation, most far-reaching piece of legislation 

in my 15 years in the United States Congress. There are at least 

four members here, at least four, maybe five or more, who have not 

had an opportunity to question her. 

Mr. TERRY. And have been here since the beginning. 

Mr. SHADEGG. And would like to be able to do so. We fully understand her schedule. She has important things to do. That is perfectly all right. 

But I think it would be reasonable for this committee, given the 

scope of the legislation that it is moving, to ask the Secretary to 

come back sometime before this bill moves through full committee. 

Mr. PALLONE. What I am saying to you, and I will repeat again, 

is the following: The Secretary is here to give the administration’s 

response to the discussion draft. I am not asking her to commit at 

this time to come back because, first of all, I don’t know her schedule and I don’t know whether that is possible. 

Mrs. Blackburn can ask, but I don’t want her to feel that she has 

to commit to this at this time because I don’t know her schedule. 

Mr. WALDEN. Point of order, Mr. Chairman. 

Mr. PALLONE. I will now ask Mrs. Blackburn to continue. 

Mr. SHADEGG. I think we are on my point of order. 

Mr. PALLONE. And when sheis done, we are going to have to ask 

the Secretary to leave because she has to leave. 


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So I will go back to Mrs. Blackburn. We will start the clock 

again. It is the gentlewoman’s time. 

Mrs. BLACKBURN. And thank you, Mr. Chairman. 

And Madam Secretary, I hope that we will be able to resolve 

this. 

You know, when my constituents talk to me about this issue, 

they are fearful of what may be included in this plan. And coming 

from Tennessee, and you having been a Governor, I think you can 

understand that. 

And when they hear remarks about it being deficit-neutral, not 

increasing the debt; you have made statements that it would be 

paid for; you have talked about reducing the itemized deductions, 

my constituents are very, very concerned about how this would be 

paid for. 

The other members of this committee have constituents who are 

equally concerned about this. Of course, our concern in Tennessee 

finds its nexus in the problems that existed with TennCare. I know 

Governors have many times gone to school on what happened with 

TennCare and used that as an example of what they did not want 

to do. 

I would like to have a response from you. You can submit it to 

me in writing. You can begin the response here, because I do have 

more questions, on what you would see as the lessons learned and 

what you would not want to do that was from the TennCare template. What were the lessons that you learned in looking to that? 

Do you realize that you can’t provide gold-plated, all health care for 

free for everybody? Do you realize that a public option which is 

government-run, government-financed, does not work in competition with the private option? That is one question I have to present 

to you. 

The second one is Medicare Advantage. And I know you have a 

heart for dealing with health care for seniors, and I appreciate 

that. My constituents—I have 56,000 seniors in Tennessee that are 

on Medicare Advantage. They very much want to keep those options, and I would like to hear from you what you envision a Medicare Advantage program looking like once the Obama plan goes 

into place, how you see that being delivered, what you think the 

options are going to be. 

It is of concern that those options are going to be restricted. And, 

again, when individuals—when members of this committee sit 

here, when we hear from our constituents the panic that they feel, 

especially from seniors who say, look, I have got—I am seeing this 

being taken away. 

Mr. PALLONE. If the gentlewoman would hold for a second. 

Mrs. BLACKBURN. My mike is not being touched. 

Mr. PALLONE. Now it is OK. 

Mrs. BLACKBURN. But seniors are very fearful that they have 

paid into a system; this was a part of their retirement security, a 

part of their savings, if you will, because it was money that the 

government took first right of refusal on their paycheck, took that 

money out. Now you have got somebody in their 70s; they have got 

their doctors set. They have got their Medicare Advantage set. 

They have their system in place, and they are seeing this savings 

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all program. And this causes tremendous concern from them. So, 

your response as to what Medicare Advantage would look like 

would be appreciated. 

Secretary SEBELIUS. Congresswoman, I would be happy to answer both of those questions. I can’t do it now in person; as you 

said earlier, you wanted to address the question and have me respond, and I will do that promptly. 

Mrs. BLACKBURN. Thank you. I appreciate that. 

And at this time I will yield the balance of my time, if I can, Mr. 

Chairman. 

Mr. PALLONE. I couldn’t hear you. Who is she yielding to? Mr. 

Pitts. 

Mr. PITTS. Thank you, Madam Secretary. 

Section 222 of the bill states that there is an amount that is 

going to be appropriated to the Secretary for the purposes of starting up the government plan. And that number is, quote, to be supplied in the text of the bill. 

Do you have any idea how much it will cost you to start up this 

government-run plan? 

Secretary SEBELIUS. No, sir, I do not. 

Mr. PITTS. You mentioned the President’s repeated promise that 

the health reform bill will be deficit neutral. Are there any other 

deal breakers for the administration? Does the legislation have to 

include a government plan? Does it have to include an individual 

mandate? Does it have to include an employer mandate? Can it increase taxes on families making under $250,000 per year, for example? 

Secretary SEBELIUS. Sir, I think that the President’s principles 

are that the plan needs to lower costs for everyone, needs to improve quality of care, needs to provide coverage for all Americans. 

And around those principles, that he—and be paid for within the 

period of time. Those are the fundamental principles that he has 

articulated. And he has, during the course of the discussion, had 

various proposals on some of those areas. 

I need to mention that I misspoke earlier to the Congressman; 

proposal that he had for the itemized deduction return is for families making 250 or more—$250,000 or more. I was corrected, and 

I will be happy to provide that additional information. 

Mr. PALLONE. The gentleman’s time—or the gentlewoman’s time 

has expired. 

Now, again, I am just going to repeat. I know you have to leave. 

Members will get back to you as quickly as possible with written 

questions, and we would ask, Madam Secretary, that you try to respond to those as quickly as possible. 

Secretary SEBELIUS. Very quickly. 

Mr. PALLONE. And thank you so much for being here today. We 

appreciate your time. Thank you. 

Now, let me explain. We are going to adjourn the full committee, 

and then the subcommittee reconvenes, the Health Subcommittee 

reconvenes at 1:00, and we have three panels for the rest of the 

day. 

Mr. WALDEN. Point of order. 

Mr. DEAL. Point of order. 

Mr. PALLONE. Mr. Deal. 


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Mr. DEAL. Mr. Chairman, with all due respect to the Secretary, 

this was billed as a legislative hearing on a draft. 

Mr. PALLONE. Yes. 

Mr. DEAL. We have heard the Secretary say that she did not participate in that draft preparation, nor has she apparently, as she 

said, had the opportunity to read it, which is one of the limitations 

that we all labor under in this time frame. 

I would simply urge you to urge our full chairman of the full 

committee that it would be almost mandated, I think, that she return to answer questions when we move to a legislative proposal. 

We are talking about a draft. But here, when it moves to a legislative proposal, that we be allowed the opportunity to ask and to 

have answered questions. 

You made the statement that she was speaking on behalf of the 

Obama administration as it relates to the draft. I know that she 

has done so in general terms, but I think there are some specifics 

that we should have the opportunity to ask specifics about. I would 

urge you to urge our chairman to ask her to return to this committee. I think it is due diligence for all of us to have the opportunity to explore these questions in person with her. 

Mr. PALLONE. Well, let me just say I can’t make that commitment, Mr. Deal, and for various reasons. I think a part of it is the 

fact that we have a draft, and obviously, there are going to be 

changes to that based on your input, the input from both sides of 

the aisle. 

And we really asked her here today to comment on what the administration thought about the draft. There has never—the bill is 

never going to be exactly what the President wants or doesn’t 

want. But I just can’t make that commitment. So I appreciate your 

asking, but I can’t. 

Mr. SHADEGG. Mr. Chairman, you are saying you can’t commit 

to ask? 

Mr. PALLONE. I can’t commit the administration—— 

Mr. SHADEGG. No. His request is that you ask the full chairman. 

Mr. PALLONE. Look, she has been here. She has testified. You 

can ask her questions. I am going to leave it at that. And we are 

going to adjourn and start the subcommittee hearing at 1:00. 

Mr. SHADEGG. There are 12 Republicans who have not even had 

a chance to speak and ask her questions. 

Mr. PALLONE. Members were told that she was going to leave at 

12:00. 

Mr. SHADEGG. We understand that. We are simply asking that 

she come back on a piece of major legislation. 

Mr. PALLONE. I can’t make that commitment at this time. 

Mr. SHADEGG. So you are refusing to allow us to ask questions? 

Mr. PALLONE. I can’t make that commitment, and we are going 

to adjourn at this time. 

Mr. SHADEGG. Can you at least commit to ask the chairman? 

Mr. TERRY. Parliamentary inquiry. I request a recorded vote. 

Mr. PALLONE. Look, I am going to certainly express your views, 

but I can’t commit the Secretary to anything at this time. I am 

going to express the views. 

Mr. TERRY. I request a recorded vote on a motion to adjourn. We 

can ask for a recorded vote. 


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Mr. PALLONE. You can make that request. All those in favor on 

the motion to adjourn. Let me just ask. 

Mr. WALDEN. We already have a motion before us, which is a motion to adjourn. The chairman has entered that motion. 

Mr. PALLONE. I think what we will do at this time, we had a 

vote, and it was defeated, to adjourn. So at this time, we are just 

going to recess. 

Mr. TERRY. We asked for a recorded vote. 

[Recess at 12:13 p.m.] 

Mr. WAXMAN. Before we go to the hearing in the Health Subcommittee, I would like to reconvene the full committee, which had 

an opportunity to hear from Secretary of HHS Sebelius. And not 

all Members were able to ask her questions or explore all the concerns that they had. So I would like to suggest that we will ask 

her to respond in writing to any questions that any Member wishes 

to submit. We will request that she respond in a timely manner so 

that Members can receive her responses before we go to markup 

in our committee. We will urge her to do that. We can’t force her 

to do that, but we will urge it. 

And I understand some Members may wish to meet with her, 

and of course I don’t know her schedule, but I think it is always 

helpful to have people available to meet with Members. 

So without objection, what we will do is hold the record open for 

responses from the Secretary to written questions from the members of our committee. And we would urge the Secretary to respond 

for the record before we get to the markup in this committee. Without objection, that will be the order. 

So that the subcommittee can now meet and further have a hearing on the issue, I would like to ask that the full committee now 

be adjourned. And without objection, that will be the order. 

[Whereupon, at 1:10 p.m., the committee was adjourned.] 

[Material submitted for inclusion in the record follows:] 


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COMPREHENSIVE HEALTH CARE REFORM 

DISCUSSION DRAFT—DAY 2, PART 2 

TUESDAY, JUNE 24, 2009 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 1:15 p.m., in Room 

2123, Rayburn House Office Building, Hon. Frank Pallone, Jr., 

[chairman of the subcommittee] presiding. 

Present: Representatives Pallone, Dingell, Gordon, Eshoo, Engel, 

Schakowsky, Weiner, Matheson, Gonzalez, Castor, Sarbanes, 

Green, Space, Sutton, Waxman [ex officio], Whitfield, Shadegg, 

Buyer, Pitts, Myrick, Blackburn, and Gingrey. 

Also present: Representative Hill. 

Staff Present: Karen Nelson, Deputy Committee Staff Director 

for Health; Andy Schneider, Chief Health Counsel; Purvee Kampf, 

Counsel; Jack Ebeler, Senior Advisor on Health Policy; Robert 

Clark, Policy Advisor; Tim Gronniger, Professional Staff Member; 

Stephen Cha, Professional Staff Member; Allison Corr, Special Assistant; Alvin Banks, Special Assistant; Jon Donenberg, Fellow; 

Camille Sealy, Fellow; Karen Lightfoot, Minority Communications 

Director/Senior Policy Advisor; Caren Auchman, Minority Communications Associate; Lindsay Vidal, Minority Special Assistant; 

Early Green, Minority Chief Clerk; Jen Berenholz, Minority Deputy 

Clerk; and Miriam Edelman, Minority Special Assistant. 

Mr. WAXMAN. And I want to call on Mr. Pallone to convene the 

subcommittee so that we can get a further record from witnesses 

on the health care issue. 

Mr. PALLONE. The hearing of the Health Subcommittee is reconvened. And we are now going to our next panel which is the Panel 

on Single-Payer Health Care. And I would like to start by introducing each of the witnesses. 

Beginning on my left is Dr. Sidney M. Wolfe, who is Director of 

Health Research Group at Public Citizen. And then we have Dr. 

Steffie Woolhandler, who is Associate Professor of Medicine at Harvard Medical School and Co-Founder of Physicians for a National 

Health Program. And, finally, Dr. John C. Goodman, who is President and CEO of the National Center for Policy Analysis. 


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STATEMENTS OF SIDNEY M. WOLFE, M.D., DIRECTOR, HEALTH 

RESEARCH GROUP AT PUBLIC CITIZEN; STEFFIE 

WOOLHANDLER, M.D., ASSOCIATE PROFESSOR OF MEDICINE, HARVARD MEDICAL SCHOOL, CO-FOUNDER, PHYSICIANS FOR A NATIONAL HEALTH PROGRAM; AND JOHN C. 

GOODMAN, PH.D., PRESIDENT AND CEO, NATIONAL CENTER 

FOR POLICY ANALYSIS 

Mr. PALLONE. And I think you know how we proceed, but I will 

mention that we ask you to give us a 5-minute, approximately 5- 

minute opening statements. So your full testimony is submitted for 

the record, and when you are done we will have questions from the 

subcommittee. 

And I will mention again that, because of the importance of this 

issue, we are having full committee members participate. They will 

be after the subcommittee members, but they will participate with 

their questions as well. And we will start with Dr. Wolfe. 

Mr. BUYER. Mr. Chairman, may I ask unanimous consent to 

speak out of order for 1 minute? 

Mr. PALLONE. Sure. 

Mr. BUYER. I want to thank you. What I want to do is I want 

to extend my apology to the Secretary. In the last hearing during 

my questions to the Secretary, I had stated that the State of Kansas Medicaid program had received a D rating when she was the 

Governor of the State. According to the health reform dot org Web 

site run by the Department of Health and Human Services, she 

was given—a D rating had been given to the U.S. health care system. And I meant to ask the Secretary whether the Kansas Medicaid program merited a D rating. 

I misspoke and created the impression that while she was Governor that she specifically—her program had been rated a D. That 

is wrong. And with that I extend my deepest and sincerest apologies to her for creating such an impression. And for that I apologize 

personally to the Secretary. 

Mr. PALLONE. Well, thank you. I thank the gentleman. 

Dr. Wolfe. 

STATEMENT OF SIDNEY M. WOLFE, M.D. 

Dr. WOLFE. Thank you. What if you picked up the morning paper 

tomorrow and saw the following headline: 50 People Died Yesterday Because They Lacked Health Insurance? The next day the 

same headline, and the next as well. 

This is the average number of people in the United States who, 

according to a 2004 report from the National Academy of Sciences, 

die each day; more than 18,000 a year, because they lack health 

insurance. 

How should we respond to this unacceptable and embarrassing 

finding? Not by saying, as President Obama has said, that if we 

were starting now from scratch we would have a single payer, but 

it is too disruptive. Or as the health insurance industry said last 

week, having the public option that is just an option would be too 

‘‘devastating’’. What could be more disruptive and devastating than 

being one of 45 million people who are uninsured, from whose 

ranks come 18,000 people who die each year because of that dangerous status? 


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The real question is why should we tolerate the fragmented, 

highly profitable, administratively wasteful private health insurance industry any longer? 

In this regard, the public is way ahead of either President 

Obama or most people in the Congress in its distrust of the health 

insurance industry. 

In a recent national Harris poll last fall, the following question 

was asked: Which of these industries do you think are generally 

honest and trustworthy so that you normally believe a statement 

by a company in that industry? Only 1 in 14 people, or 17 percent, 

thought that the health insurance industry was honest and trustworthy. The only industries that were worse than the health insurance industry were HMOs, 7 percent; oil, 4 percent; and tobacco, 

3 percent. 

The Congress, on the other hand, trusts the health insurance industry and feels compelled to come up with a solution that avoids 

a big fight with them, not only writing them into the legislation, 

but assuring further growth of that industry. The Congress wants 

to believe that the health insurance and pharmaceutical industries 

will be good citizens and voluntarily lower their prices to save some 

of the money that is necessary to fund health insurance. 

Several weeks ago, the collective forces of the health industry 

promised that they could voluntarily save $2 trillion over the next 

10 years. But the amount that can be saved over the next 10 years 

by just eliminating the health insurance industry and the $400 billion of excessive administrative costs it causes every year is $4 trillion, in one fell swoop. This would be enough to finance health care 

for all, without the additional revenues the Congress and the administration are desperately seeking. 

As an example of administrative waste, over the last 30 years or 

so, there may have been two to three times more doctors and 

nurses, pretty much in proportion to the growth of the population. 

But over the same interval of time, there are 30—30—times more 

health administrators. These people are not doctors. They are not 

nurses. They are not pharmacists. They are not providing care. 

Many of them are being paid to deny care. So they are fighting 

with the doctors, with the hospitals, to see how few bills can be 

paid. That is how the health insurance industry thrives, by denying 

care, paying out as little as it can. 

There is no question that we have a fragmented health insurance 

industry and it thrives on being fragmented, avoiding any kind of 

serious centralized examination or control which could affect—improve quality, costs and everything. 

The drug companies make much more money with this insurance 

fragmentation because there is no price control. The insurance 

companies make much more money because they can push away 

people who aren’t going to be profitable, let public programs take 

care of those patients who are ‘‘unprofitable’’. 

What the President and the Congress are really realistically advocating, since there is absolutely no possibility of having enough 

money to cover all people in this country as long as the private forprofit health insurance industry is allowed to exist, is more incremental reform, not national health insurance. 


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It is now 44 years since Medicare and Medicaid. In the interim 

there have been many experiments in this country and abroad to 

try and provide universal health coverage. Other countries have 

uniformly rejected the private for-profit insurance industry and 

have adopted national health insurance. 

There are little experiments going on in Germany and Australia, 

but mainly it is national health insurance. Is everyone else wrong 

and only the United States is right? 

A recent study by OECD, which is the Europe-based Organization for Economic Cooperation and Development, provided health 

insurance data from its 30 member countries, including Europe, 

the United States and others. The latest data showed that 27 of the 

30 countries had health insurance coverage for more than 96 percent of the population, with only Germany having any non-public 

coverage, 10.3. 

The other three that didn’t have 96 percent coverage were Mexico, with 60.4 percent; Turkey, with 67.2 percent; and the United 

States, with 84.9 percent, of which 27.4 percent was public coverage. 

In Canada back in 1970, they were spending the same percentage of their gross national product as we were on health. They also 

had millions of uninsured people and many of the same insurance 

companies, such as BlueCross BlueShield. They decided to just get 

rid of the health insurance industry. They had experimented with 

it in Saskatchewan ten years earlier and it had worked so well 

they couldn’t wait to do it nationally. So where there is a will there 

is a way. 

There is no way we are ever going to get to having good health 

insurance for everyone as long as there is a health insurance industry in the way of obstructing care. 

One more recent experiment abroad includes Taiwan, where in 

1995 they said we don’t like the fact that 40 percent of our population are uninsured. They passed essentially a single-payer plan, 

and within a few years, 90 to 95 percent of people were covered. 

In the U.S. we have had experiments as well, with seven States 

having instituted various versions of the public-private combination 

that this legislation seeks to provide. In none of these States has 

this worked. Once several years had elapsed with little improvement in insurance coverage, it was back pretty much to where it 

started, despite initial enthusiasm and short-lived decreases in uninsured. 

So as we consider what to do, which experiments do we follow? 

The ones that were successful, all of which for practical purposes 

eliminated the private insurance industry, or the failed U.S. State 

examples, all of which were built on this industry? 

If instead of saying that a single-payer program is not politically 

possible, the President and the Congress need to say it is not only 

politically possible, politically feasible, but it is the only practical 

way national health insurance will ever happen. And anything 

short of that is essentially throwing tens of billions of dollars at the 

insurance industry. And if you are afraid of the insurance industry, 

then you are afraid of doing the right thing, which is having everybody in and nobody out. 

[The prepared statement of Dr. Wolfe follows:] 


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Mr. PALLONE. Dr. Woolhandler. 

STATEMENT OF STEFFIE WOOLHANDLER, M.D. 

Dr. WOOLHANDLER. Members of the committee and Mr. Chairman, I am Steffie Woolhandler, a primary care doctor in Cambridge, Massachusetts, and associate professor of medicine at Harvard. I also co-founded Physicians for a National Health Program, 

and our 16,000 physician members support nonprofit single-payer 

national health insurance because of overwhelming evidence that 

lesser reforms, even with robust public plan option, lesser reforms 

will fail. 

Private insurance is a defective product. Unfortunately, the tricommittee plan would keep private insurers in the driver’s seat 

and, indeed, require Americans to buy their shoddy products. Once 

failure to buy health insurance is a Federal offense, what comes 

next? A Ford Pinto in every garage, lead-painted toys for every 

child, melamine chow for every puppy? 

Even middle-class families with supposedly good coverage are 

just one serious illness away from financial ruin. My colleagues 

and I recently found that medical bills and illness contribute to 62 

percent of all personal bankruptcies, a 50 percent increase since 

2001. Strikingly, three-quarters of the medically bankrupt had 

health insurance when they first got sick. In case after case, the 

insurance families bought in good faith failed them when they 

needed it most. Some were bankrupted by copayments and 

deductibles and loopholes that allowed their insurer to deny coverage. Others got too sick to work, leaving them unemployed and 

uninsured. And insurance regulations like those in the tri-committee bill cannot—cannot—fix these problems. 

We in Massachusetts have seen in action a plan virtually identical to the one you are considering. In my State, beating your wife, 

communicating a terrorist threat, or being uninsured all carry 

$1,000 fines. Yet despite these steep penalties, most of the new coverage in our State has come from expanding the Medicaid-like programs at great public expense. 

According to the State’s disclosure to its bondholders, our health reform has cost $5,000 annually for each newly insured adult. That 

is equivalent to over $200 billion annually to cover all Americans 

with this style of program, or about $2 trillion if you want to do 

it over 10 years. 

But even such vast expenditures haven’t made care affordable for 

middle-class families in Massachusetts. If I were to lose my Harvard coverage, I would be forced to lay out $4,800 for a policy with 

a $2,000 deductible before the policy paid a penny, and a 20 percent copayment after that. 

The skimpy, overpriced, private coverage like this left one in six 

Massachusetts residents unable to pay their medical bills last year. 

One in six unable to pay their medical bills. 

Meanwhile, rising costs have forced our legislature to rob Peter 

to pay Paul. Funding cuts have decimated safety-net hospitals and 

clinics. Today the State announced that health reform funding 

would be cut by $115 million as of July 1. Only 115 million. And 

our State Treasurer Cahill opines that Massachusetts could no 

longer afford reform. That is in today’s Boston Globe. 


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As research I published in the New England Journal of Medicine showed, a single-payer reform could save about $400 billion annually by shrinking health care bureaucracy enough to cover the uninsured, and to provide first-dollar coverage for all Americans. A 

single-payer system would also include effective cost containment 

mechanisms, like bulk purchasing and global budgeting. As a result everyone would be covered, with no net increase in U.S. health 

spending. 

But these savings aren’t available, are not available unless we go 

all the way to single payer. Adding a public insurance plan option 

cannot fix the flaws in Massachusetts to our reform. A public plan 

might cut private insurer profits, which is why private insurance 

companies hate it, but their profits account for only about 3 percent 

of the money squandered in bureaucracy. Far more goes for marketing, to attract healthy profitable members, and demarketing, to 

avoid the sick. And tens of billions are spent on the armies of insurance administrators who fight over payment, and their counterparts at hospitals and doctors’ offices. All of these would be retained in the public plan option. And overhead for even the most 

efficient competitive public plan would be far higher than Medicare’s, which automatically enrolls seniors when they turn 65, 

disenrolls them only at death, deducts premiums automatically 

from Social Security checks, et cetera. 

Unfortunately, competition in health insurance involves a race to 

the bottom, not the top. Competition in health care is a race to the 

bottom and a competing public plan would be pushed to the bottom. Insurers compete by not paying for care, by denying payment 

and shifting costs onto patients or other payers. These bad behaviors confer a decisive competitive advantage. A public plan option 

would either emulate them, becoming a clone of private insurance, 

or simply go under. 

A kinder, gentler, public plan option would quickly fail in the 

marketplace, saddled with the sickest, most expensive patients, 

whose high costs would drive premiums to uncompetitive levels. 

In contrast, the single-payer reform would radically simplify the 

payment system and redirect the vast savings to care. Hospitals 

could be paid like a fire department, receiving a single monthly 

check for their entire budget, eliminating most billing. Physicians; 

billing would be similarly simplified. 

Eight decades of experience teaches that private insurers cannot 

control cost or provide American families with the coverage they 

need. A government-run clone of private insurer, a government-run 

clone of private insurers called a public plan option cannot fix these 

flaws. Only single-payer insurance can. Thank you. 

Mr. PALLONE. Thank you. 

[The prepared statement of Dr. Woolhandler follows:] 


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Mr. PALLONE. Dr. Goodman. 

STATEMENT OF JOHN C. GOODMAN 

Mr. GOODMAN. Thank you, Mr. Chairman, members of the committee. Every single health care system in the world today faces 

three fundamental problems: cost, quality, and access. In our own 

country, health care spending is rising at twice the rate of growth 

of income, and has been doing so for 40 years. If that continues, 

clearly health care will crowd out everything else that we care 

about. 

But we are not worse in this respect than other developed countries. Over the last 40 years the real rate of growth of health care 

spending per capita in the United States has been just slightly 

below the OECD average. We have quality problems in this country. But despite those problems, we appear to, overall, deliver a 

higher level of quality than just about any other country. We are 

number one in the world, for example, in survival of cancer patients. 

We have access problems in this country, but I think we do better than just about any other country with a heterogeneous population. The U.S. population gets more preventive care by far than 

Canadians, for example. Americans get more mammograms, more 

Pap smears, more PSA tests, more colonoscopies, by quite a considerable margin than the Canadians do. 

Low-income white Americans appear to be in better health than 

low-income white Canadians. The minority population of the 

United States seems to do better in our health care than the Inuits 

or the Crees in Canada, or the Aborigines in Australia, or the 

Maori of New Zealand. 

Now, what about the proposals being considered by Congress 

right now? What will they do for the problems of cost, quality and 

access? When Peter Orszag was head of the Congressional Budget 

Office last year, he examined all of the major proposals that can 

Candidate Barack Obama was making to lower health care costs, 

preventive medicine, coordinated care, electronic medical records, 

evidence-based medicine and so forth. And what the CBO concluded was that none of these proposals would make any significant difference in rising health care costs. On the other hand, if we spend an additional $150 billion a year 

on health care, that almost certainly will contribute to health care 

inflation, making the problem of cost worse, not better. 

What about the problem of quality? Well, there is nothing that 

I have seen in any of the proposals being seriously discussed that 

would appear to make any significant difference in the quality of 

care that Americans receive. 

But on the other hand, if we create an artificial market in which 

insurance companies are forced to community rate their products 

to millions of people and do so annually, they will very quickly discover that they want to seek to attract the healthy and avoid the 

sick. And once enrollment occurs, they will seek to overprovide to 

the healthy and underprovide to the sick. That is good if you are 

healthy. It is not going to be good if you are sick. 

So we are setting in place an artificial market in which the incentives to underprovide are going to be very strong. And the more 


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competitive that market is, the more insurers will be inclined to act 

on those financial incentives. 

What about access? Well, again, we do have access problems in 

this country. No doubt about it. But we are not going to solve those 

problems by putting millions of people into Medicaid and encouraging private—people with private plans to drop their private coverage and enroll in Medicaid, as a number of the proposals now 

would do. Basically that is what Massachusetts did. Massachusetts 

cut its uninsured rate in half, and it did so by putting thousands 

of people into Medicaid and thousands more into private plans that 

are paying Medicaid rates. And those people are finding they have 

difficulty in obtaining access to care. 

A study just last month concluded that the wait to see a new doctor in Boston is more than twice as long as it is in any other U.S. 

city. And for Massachusetts as a whole, the number of people who 

go to hospital emergency rooms today for non-emergency care is as 

great as it was 3 years ago, before the Massachusetts health care 

plan was started. Medicaid is not a solution for the problems of the 

uninsured. 

The cancer studies show that in terms of delays in treatment and 

delays in detection, being on Medicaid is only marginally better 

than being uninsured. And when people drop private coverage to 

join Medicaid, they are leaving a plan which allows them to see almost any physician, go to almost any facility, get care fairly 

promptly, and go into a system where there are long delays and 

where there are much fewer choices. 

So the real danger, Mr. Chairman, is that we are about to pass 

legislation that will not only not lower the cost of care, but will 

make it higher; that will not improve quality, and may actually 

cause quality of care to go down; and may even make health care 

less accessible for millions of people. Thank you. 

Mr. PALLONE. Thank you, Dr. Goodman. 

[The prepared statement of Mr. Goodman follows:] 


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Mr. PALLONE. Thank all of you. 

Now we will take questions. We will give you questions from individual panel members. We have 5 minutes each, and I will start 

with myself. 

And this is about the public option. As you know—and this is to 

Dr. Wolfe or Dr. Woolhandler, or both of you—as you know, the 

discussion draft would create a public option to compete with private plans to offer coverage within the new health insurance exchange. Uninsured Americans would choose to enroll in any of the 

plans in the exchange, either public or private, and there has been 

concern expressed in some quarters that this public option would 

inevitably evolve into a single-payer system. 

For example, last Friday, when the discussion draft was released, 

Scott Sirota, the head of BlueCross and BlueShield Association 

warned—and I will quote—that the proposed creation of a government-run health plan would jeopardize the coverage of 160 million 

people who receive their benefits through their employer today. 

An independent analysis by the Lewin Group estimates that tens 

of millions of people would shift to a government plan, dismantling 

the private market that is free to innovate without the political 

pressures that often stifle efforts to innovate in government programs like Medicare. 

Now, we are going to have BlueCross BlueShield and the Levin 

Group here tomorrow. But what I wanted to ask you today is 

whether you think Sirota is right. Will the public option strangle 

the private health insurance industry and become a single-payer 

system? 

I will start with Dr. Wolfe and Dr. Woolhandler. 

Dr. WOLFE. We have heard the same things that you have heard, 

Congressman Pallone, that somehow or other the public option is 

really a Trojan horse or a stalking horse for the single payer. What 

that would mean would be that if a public option were to pass, 

alongside with the private, that it would allow the public option to 

be as good as it can be. And essentially, if that were the case— 

which I don’t think is going to happen—it might in fact lead to single payer. 

I think there is zero possibility that anything that anyone is remotely considering as the public option would lead to a singlepayer program. I think that it is more likely that it would give bad 

word or bad reputation to a public option because it would be so 

emasculated. I mean, at this point, I would say that the chances 

are 50/50 that either the public option would be completely scuttled—which I think is possible, President Obama said yesterday he 

wouldn’t be opposed to signing a bill even it if didn’t have that— 

or it would be so emasculated that it won’t be competitive as it 

should be with the private plan. So I just don’t think that that is 

realistic at all. I think that this is sort of scare tactics from the 

right, which includes the entire health insurance industry. 

Mr. PALLONE. And Dr. Woolhandler, because I want to get to another question. 

Dr. WOOLHANDLER. A public plan option is not single payer, nor 

would it lead to a single payer. As you have envisaged it in the tricommittee report, it is going to be an identical clone of private 

health insurance with a public label on it. And that still might be 


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OK if competition and health care were about giving people care. 

But competition health insurance is about not giving people care, 

about competing to enroll a lot of people and not cover them. And 

if you don’t behave like that, if you don’t misbehave like that, you 

go out of business in a competitive market. 

So a private insurance clone with public label is not going to 

solve this problem. It is really irrelevant to the problem of access 

to care. And I appreciate the private insurance industry doesn’t 

want it. They don’t want any new competitors. But they are wrong 

when they say that what is here in this bill is going to lead to single payer. That is not true. 

Mr. PALLONE. Well, I am probably going to say something that 

you won’t want to hear. But I am beginning to feel more and more 

that, since I am getting so much opposition from the insurance industry that the public option is going to hurt them, and so much 

opposition from single payers that the public option won’t work, 

that I actually now believe that we have a great discussion draft 

because neither group likes it. But that is not a question. That is 

just my comment. 

I wanted to ask Dr. Woolhandler, on the bankruptcy issue, I 

know you did this important study on bankruptcies and health insurance, and as you testified this afternoon, your study found that 

medical bills and illnesses contribute to over 60 percent of all personal bankruptcies. Three-quarters of people with these medical 

bankruptcies have insurance at the start of their illness. It was a 

real eye-opener for me. 

In the discussion draft, we have consumer protections that would 

prevent the abuses of the past, practices like medical underwriting 

and preexisting conditions exclusion and rescissions which deny or 

take away coverage just when it is needed most. So I am happy 

with these consumer protections in our discussion draft. 

And I wanted to know, you know, whether you thought the 

House discussion draft addresses some of these critical consumer 

protections adequately, based on your research. 

Dr. WOOLHANDLER. There is nothing in the draft that would have 

protected families from bankruptcy. The average family in medical 

bankruptcy had unpaid medical bills of about $17,000. And in your 

draft you would allow people to have out-of-pocket expenses of 

about $10,000 per family per year. So in less than 2 years, if you 

had a serious illness, you could accumulate $17,000 in out-of-pocket 

expenses that bankrupted families in our study. 

So the protections you have, maybe they are better than no protections, but based on the actual circumstances that drove people 

to bankruptcy in our study, no, the bill would not protect people 

from bankruptcy. 

Mr. PALLONE. OK. I know we are not going to agree on everything, but I do think that it is important that these insurance 

abuses be eliminated, and we are certainly making an effort in that 

regard. Thank you very much. 

The gentleman from Indiana, Mr. Buyer. 

Mr. BUYER. Thank you very much. 

Dr. Goodman, the legislation mandates a massive expansion of 

the Medicaid program that some believe could lead to well over 20 

million Americans becoming enrolled, then, into the Medicaid proVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00396 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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gram. First of all, I would like to know your thoughts about this 

as a proposal. And do you believe that there will be a similar 

crowd-out effect as is currently being seen in the SCHIP program? 

Dr. GOODMAN. Well, I do. And I think that is what is intended; 

that when you make something available for free, even if the quality is not as good, people will tend to drop the high-priced alternative. That is what happened in SCHIP. That is what happened 

in TennCare in Tennessee. That is what happened in Hawaii. So 

we have quite a number of examples of people dropping private 

coverage to take advantage of public plans. 

What happens in Medicaid is that it is really an inferior insurance plan. It pays, in many places, 40 percent below what the private market is paying. And so the Medicaid patient is the last patient the doctor wants to see at the end of the day. So you have 

increasingly long waits to see doctors, difficulty finding new doctors 

that will even see Medicaid patients, and pretty poor results when 

it comes to serious health care like cancer care. 

Mr. BUYER. And in those cases that you just discussed, where the 

crowd-out effect had occurred within the SCHIP program, what 

was the impact upon insurance premiums because of the crowdout? Did they increase or decrease? 

Dr. GOODMAN. I don’t know what the effect has been on insurance premiums. On the crowd-out, the Congressional Budget Office 

estimated that the bill that Congress passed in January, that 

would put 4 million new children into SCHIP, as many as half 

those children would leave private coverage in order to enroll in 

that coverage. 

Mr. PALLONE. Dr. Goodman, I am told your microphone may not 

be on. Is it? 

Dr. GOODMAN. Can you hear me now? 

Mr. PALLONE. I was more concerned about the transcription. OK. 

Thank you. 

Dr. GOODMAN. When those children had private insurance they 

could see almost any doctor, go to almost any facility in the area 

where they live. Once they go into Medicaid they could see far 

fewer physicians, go to fewer facilities, and their choices are more 

limited and their wait for care is longer. 

Mr. BUYER. There have been some comments with regard to— 

that a public option plan would be able to compete on a level playing field with private insurance. Are you familiar at all at the tax 

revenues that are paid into the States and the Federal Government 

because of the insurances, the tax on their revenues? I mean, I 

guess if we were to have a public plan that would compete equally 

with private plans, my question would be, would we need to exclude these companies from State and Federal taxes in order for us 

to be able to compete on a level playing field? 

Dr. GOODMAN. What a level playing field means to me is that the 

public plan doesn’t get any advantages. It cannot do what Medicare 

now does and use the monopoly buying power of the State to push 

the rates it pays down below 30 percent below market. It can’t use 

the criminal law to enforce its contracts when everybody has to use 

the civil law. And it can’t avoid the payment of taxes on revenues. 

And it is allowed to go bankrupt. But if you protect it the way 


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Medicare is protected, having protections that private insurance 

does not have, then that is not a level playing field. 

Mr. BUYER. And that public option with regard to the coverage 

of health would be far greater than perhaps a private plan, would 

it not? 

Dr. GOODMAN. Well, I don’t know. I wouldn’t object to competition if it is a real level playing field. If it is a real level playing 

field, you just create a corporation; you can call it a corporation, let 

it sink or swim on its own, and I don’t think it would much matter. 

But if it has advantages that Medicare now has over private insurers, it would matter a lot. And when you hear these estimates from 

Lewin and others, they are assuming it would have the advantages 

that Medicare has that private insurers do not. 

Mr. BUYER. It is hard for me to imagine this competition, to create a public option and say that it will be on an equal plane with 

private insurance. And the reason I say that is I am sitting here 

with my colleague, John Shadegg—and Joe Barton was here. There 

were five of us that worked really hard when we were creating the 

Medicare drug discount card program, and then our analysis into 

the Medicare Part D, and we were trying to create choice and competition in the marketplace. At the same time, my Democrat colleagues were questioning whether or not that would be ever be successful. In particular, the Chairman, Henry Waxman, was very 

critical of what we were doing, and wanted a government position 

in there. 

But in the end, we went pro-market forces and were able to reduce the price. As a matter of fact, we got all the estimates all 

wrong. In the end, we were able to save tens and billions and billions of dollars. And now trying to provide that same analysis into 

this one, to me, it creates a heterodox. And you are taking doctrine 

which people know and understand, and giving it a completely different definition. And so we are screwing up words, languages, and 

it just doesn’t fit. I yield back. 

Dr. GOODMAN. May I answer that? 

Mr. PALLONE. Was it a question? Go ahead. 

Before you go, let me just mention we are going to have—well, 

we have three votes pending. I will hear from a couple more members and then we will recess. But go ahead, Doctor. 

Dr. GOODMAN. Part B competition I think is working well, better 

than anyone predicted that it would work. But that is different 

than what we are now talking about. What most people don’t realize is that Medicare is, almost everywhere, administered by 

BlueCross. Now, do we really think that BlueCross administering 

Medicare is any more efficient than BlueCross administering other 

plans? No, of course not. 

So why is it that Medicare has an advantage? It is because of advantages that are created by government, by law. So a level playing field would mean that anything administered by BlueCross 

plays by the same rules. And then I think it really wouldn’t matter 

whether we call it public or not. 

Mr. PALLONE. Thank you. Chairman Dingell. Questions? 

Mr. DINGELL. Not at this time, Mr. Chairman. Thank you. 

Mr. PALLONE. Ms. Eshoo? 


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Ms. ESHOO. Thank you, Mr. Chairman, for holding these series 

of hearings. And to all of the witnesses, I respect and admire the 

work that you have done and your testimony here today. There are 

great passions around single payer. I know that from some people 

in my own district, others in California, and certainly people across 

the country. 

Let me ask you about something that I think important to the 

American people. In fact, I think they kind of have it in their DNA. 

Nobody likes—no American, I don’t think, really likes a one-sizefits-all. They really like to have choice. So I know that—I mean, 

single payer doesn’t provide that. 

But I am asking you very sincerely, do you believe that this 

would—do you think that single payer could in any way preserve 

choice for patients? Because as I understand single payer, it is 

just—it is the one system that is paid by one outfit, the Federal 

Government, and that is it. 

Dr. WOOLHANDLER. OK. Well, from the patient’s point of 

view—— 

Ms. ESHOO. And we have learned a lot from—and I was here, I 

was here for the health care debate in 1993–1994. And if there was 

anything that I heard from my constituents it was, don’t force me 

into a plan. If I have what I have and I like what I have, that is 

what I want to stay with. 

Dr. WOOLHANDLER. Well, the choice that patients care about is 

that they are able to choose any doctor or hospital they want. And 

of course, that kind of choice is enhanced and expanded in single 

payer. In a single-payer system you go to any doctor, you go to any 

hospital. So that is the choice patients care about. Once they know 

the bill is going to get paid, they don’t care about how the insurance person is. They care about the doctor and the hospital. 

From the doctors’ point of view, the choice we want is to be able 

to do what is best for our patients and not have to ask permission 

from some private insurance bureaucrat or be told we can only 

refer patient X to doctor Y because of restrictions. So choice is actually bigger. 

The important choice, the choice of doctor is hospitals is bigger. 

Ms. ESHOO. What the Democrats are proposing in the bill does 

preserve some choice that matches somewhat what you just described. And that is that they have a choice of doctors, they have 

a choice of hospitals. 

Dr. WOOLHANDLER. But that is actually generally not a characteristic of private HMO coverage in this country. 

Ms. ESHOO. Well, as it stands today. But I think that we have 

to ramp-up what we are talking about, because we are comparing 

and contrasting new ideas. We know what is broken. I mean, we 

don’t need panels of people and all kinds of hearings to reiterate 

what is broken. We are looking at how to fix this thing. 

So, you know, again, I mean I admire your work. I really think 

that if we were starting from scratch, from total scratch in the 

country, probably what you all described today is what would be 

built. But we are not starting from scratch, and that is why I think 

a public option is so important. 

Can you tell the committee how you think a single-payer system 

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tant because we constantly have to be pushing the edges of the envelope out in our country on this? It is what makes the best part 

of caring for people in our country, the high end of it, something 

that is admired by people in different parts of the world. 

So can you enlighten us on that and how you think your proposal 

would do that? 

Dr. WOLFE. One of the things that gets focused on so much with 

single payer is that the government collects the money and pays 

the bills. Anyone can go to any doctor and hospital. But the very 

important element that doesn’t get talked about very much is that 

you have a single data system. So for example, in Ontario, they can 

easily look at every patient in Ontario who got a certain prescription drug over a 2-year period, and then look to see how many of 

them had to get hospitalized because of something that is suspected to be an average reaction. 

Ms. ESHOO. That is tracking the statistics. I am talking about innovation in medical devices and biotechnology. 

Let me ask one last question here because I only have 17 seconds 

left. How do you pay for your system that you are advocates of? 

Dr. WOOLHANDLER. Well, the beauty of single payer is it contains 

its only funding. 

Ms. ESHOO. How do you pay for it? 

Dr. WOOLHANDLER. You simplify administration. Currently, administration—— 

Ms. ESHOO. What is the savings over 10 years? 

Dr. WOOLHANDLER. It is $400 billion a year. So that is 4 trillion. 

You don’t really save it because you take that same 4 trillion and 

use it to cover the uninsured and plug the holes in coverage for 

people who now have these crummy private policies. But you don’t 

raise total health spending by a single penny. You just simplify administration, capture just under 400 billion annually by administrative simplification, and then you use that to provide care. 

Ms. ESHOO. Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. I am going to ask Mr. Gingrey next, 

and then we will recess after him. 

Dr. GINGREY. Mr. Chairman, thank you. I am going to go 

straight to Dr. Goodman with my questions, because I don’t think 

any constituents in the 11th of Georgia, or any stakeholders, 

whether they are doctors or hospitals or especially insurance companies, would want to hear me ask any questions of Dr. Wolfe or 

Dr. Woolhandler, based on their testimony. I would like to address 

a couple of questions, though, to Dr. Goodman. 

Dr. Goodman, many of my constituents fear that a governmentrun council making health coverage determination for a government-run insurance plan will impede or stop their ability to receive 

quality health care and eventually result in a government-run 

health care system where it is bureaucrats in Washington controlling their health care decisions. 

Some of my Democratic colleagues say that a government-run 

plan will only provide choice and not lead to a single-payer system. 

Now, my concern, of course, is that it will—and the old expression, if it walks like a duck and it quacks like a duck, you can bet 

that it probably is a duck. And speaking of ducks, you mentioned 

long wait times in other foreign countries like Canada. 


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In Norway, for instance, patients can expect to wait an average 

of 133 days for a hip replacement, 63 days for cataract surgery, 160 

days for knee replacement, 46 days for bypass surgery, after having 

been approved for the procedure. 

Well, Dr. Goodman, it seems that quality health care is not only 

the doctor you see, but the amount of time it takes to get through 

the door. In your opinion, are waiting times symptomatic and consistent with a government-run health care system? 

Dr. GOODMAN. Well, yes. And you get long waits because you 

make medical care free to the patient, and you limit resources. And 

so demand exceeds supply at every margin. So you wait for everything. 

I might point out that we are getting a waiting problem in our 

health care system, too. We are inching toward Canada without 

changing anything about how we pay for health care, and I am concerned about that. On the Health Board, you know, I have to rely 

on Senator Daschle and the book he wrote and what he said 

about—— 

Dr. GINGREY. The book titled Critical? Is that the book? 

Dr. GOODMAN. The book that Senator Daschle wrote about health 

care. 

Dr. GINGREY. Critical, I think, was the name of that book. 

Dr. GOODMAN. Now, Senator Daschle pointed to the British example of the Health Board with the acronym NICE and he said, 

what do they do? They compare treatments and they compare 

costs, and they compare benefits and they look at effectiveness. 

And quite frankly, in Britain there is sort of a cutoff point. They 

don’t want to spend much more than $35,000 to save a year of life. 

And that means that in Britain, people often do not get cancer 

drugs that are routinely available in the United States and on the 

European Continent. 

So yes, I am very concerned about that. And I am concerned, not 

that the government is going to tell doctors what to do, because 

even in Britain it doesn’t always tell doctors what to do, but that 

it will give cover to health plans that already have an economic incentive to underprovide to the sick anyway. And if the Health 

Board is saying, you know, that expensive drug is experimental 

and we really don’t need to buy it, that is all the health plan would 

need by way of guidance in order to deny coverage. 

Dr. GINGREY. Well, let me reclaim my time, because I did want 

to put out some statistics which speaks to exactly what you are 

saying, because you stated in your testimony that health care plays 

a leading role in determining the outcomes for diseases such as 

cancer, diabetes and hypertension. As a physician, practicing 26 

years, OB–GYN, I cannot agree with you more. 

Focus on cancer just for a moment. You mentioned that the 5- 

year survival rate of women diagnosed with breast cancer in the 

United States is 90 percent, versus 79 percent for women in Europe. You also mentioned the United States has a better relative 

survival rate than Norway for colon, rectal and breast cancer, lower 

rates of vaccine preventable pertussis, measles, Hepatitis B. Given 

that we do live in a global economy where breakthroughs in medical science and technology can be shared with patients in other 


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countries half a world away, I am curious as to your thoughts for 

this disparity. What is the difference? 

These survival rates are significantly different. 

Dr. GOODMAN. In the first place, there is a difference in diagnosis. And remember—take mammograms. American women get 

more mammograms than Canadian women do. They get more Pap 

smears than Canadian women. 

Then there is the treatment. And regardless of the state of medical science, people in other countries may not get the same treatment that we get. 

And then there is access to expensive but effective drugs. And in 

other countries, that is controlled more than it is in the United 

States. So those are three things I would point to. 

Dr. WOOLHANDLER. I would just like to go on record as saying 

I disagree completely with what Dr. Goodman is saying. I don’t 

think that is supported by the scientific evidence. 

Dr. GOODMAN. Well, I would like to say that I have a paper here 

with more than 100 peer-reviewed studies that we drew on to make 

these statements. 

Mr. PALLONE. We are going to have to—— 

Dr. GINGREY. Mr. Chairman, thank you. I realize my time has 

expired. And I appreciate Dr. Woolhandler’s comment. And Dr. 

Goodman, thank you for responding to those two questions. 

And I yield back, Mr. Chairman. 

Mr. PALLONE. Thank you. We have three votes and we will be 

back maybe half an hour or so. The subcommittee stands in recess. 

[Recess.] 

Mr. PALLONE. The hearing of the Subcommittee on Health will 

reconvene. And I apologize. What did I say, we would be back in 

half an hour? I obviously misjudged that. Hopefully we will have 

some time now, though. 

And our next member for questions is the gentlewoman from Illinois Ms. Schakowsky. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. I regret that I 

didn’t hear all the testimony, but I am quite familiar with both Dr. 

Wolfe and Dr. Woolhandler. And I also want to refer a bit to Dr. 

Goodman’s testimony which has been told to me. 

I am a supporter of a single-payer, something that has been used 

to sort of beat me over the head, because I understand that it is 

going to—I believe that the compromise that we have that—that 

the President and the bill, the draft bill, endorses is something that 

I endorse as well, because I think that it is an important beginning 

to controlling costs and to providing—and to providing good service. 

But I do find it pretty ironic, when I say ‘‘beaten over the head,’’ 

I am talking really about the other side of the aisle, and people 

who, I can’t quite figure it out, find that it is quite all right—and 

I don’t know what the public interest rationale is—is to defend the 

private insurance industry, which has had their way with us for all 

these years without much accountability and gotten us into this 

mess, and why those of us who are single-payer advocates who are 

willing to compromise, but the other side who are all for just the 

insurance industry are not, talking about giving Americans a 

choice. And I find it not very collegial and certainly not in the best 

interest of providing health care to all Americans, which, after all, 


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is the goal of the exercise, not to figure out how we can prop up 

the private insurance industry. Those of us who have agreed to the 

compromise think that they ought to be able to compete. But that 

is not the principal goal here. And we are willing to set up a situation where it is—you know, maybe it is easy enough for them to 

do, but not if they continue to do what they have been doing. They 

are going to clearly have to change their ways in order to compete. 

I am really sorry, I guess—I am not—about that, but that is the 

reality. 

I was just talking to a representative of Cook County Hospital, 

Dr. Goodman, who was telling me that in Cook County Hospital, 

which is our public hospital, the wait for colonoscopies, hip replacements, and certain gynecological services is up to 2 years. So let 

us be clear that there are certainly people waiting in line now. 

And I have to tell you, my understanding is— you can correct me 

if I am wrong—that you said if you compare white patients in the 

United States to white patients in Canada, the outcomes are the 

same; but if you compare minority patients to Aborigines, we are 

doing better. Oh, my God. I cannot believe that you said that in 

a public hearing. We are all Americans, and to somehow separate 

out those minorities and compare them to Aborigines as opposed to 

white Americans, minority Americans, all Americans, Canadian 

Americans—Canadians, et cetera, that would be reasonable. The 

other comparisons are offensive. And I don’t know if you want to 

comment on that or defend yourself on that. 

Mr. GOODMAN. I am not sure you heard my testimony. I said we 

have access problems. And there have been lots of studies that 

show that—— 

Ms. SCHAKOWSKY. Did you make that comparison? 

Mr. GOODMAN. These problems are more severe for minorities in 

the United States than the white population. But it is also true in 

Canada, it is also true in New Zealand, it is also true in Australia. 

And if you compare our progress to theirs, we are ahead of them. 

We are doing better than they are doing. 

Ms. SCHAKOWSKY. Well, let me ask about this. Dr. Wolfe and Dr. 

Woolhandler, Dr. Goodman has testified that, again, if you compare 

whites to whites, that we are—it is about even. But I wondered if 

you could actually talk to us about how we are doing compared 

internationally to other countries that actually do provide health 

care for all of their citizens. 

Dr. WOLFE. Well, in my testimony I referred to what percentage 

of people in the 30 OECD countries have insurance. And as I said, 

for 27 of the 30, it was over 96 percent. But in the same report, 

which just came out a few months ago, they also asked the question: How many people in various countries have an unmet care 

need? And that is sort of what they are talking about. Unmet care 

need was defined as unfilled prescriptions or missed medications; 

medical problems; didn’t visit a doctor; missed tests, treatment or 

follow-up. And here the comparisons are really striking. 

In the United States, for people who were below average income, 

below average income, over half of them had an unmet care problem, 52 percent; whereas, in Canada, it was 18 percent, just about 

a third as much. And even for the people with—that was below average income. For people with above average income, again, it was 


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three times more likely in the United States to have an unmet care 

problem. 

When you look at these seven countries—— 

Ms. SCHAKOWSKY. So what you found contradicts what Dr. Goodman just said, that we are doing better. 

Dr. WOLFE. That is right. OECD—and this is generally agreed 

upon, and the United States is one of 30 countries that belong to 

it. They produce very interesting data not only on health, but other 

measures, and they put these out frequently. These are valid comparisons, interestingly, and they really go against what Dr. Goodman said earlier, a couple hours ago, that there are more access 

problems here, there—that there are more access problems in other 

countries than here. There are more access problems whether you 

are above average income or below average income in the United 

States than in other countries. And obviously one of the reasons is 

that people are all insured, and they don’t get thrown out of emergency rooms as people frequently do in the United States, violating 

the patient dumping law. 

Mr. PALLONE. We are going to have to move on. 

Mr. Shimkus. 

Mr. SHIMKUS. Mr. Chairman, can I defer and come back in the 

next Republican round so I can listen? Can I just defer, whoever 

is next on the list? 

Mr. PALLONE. You want Mr. Shadegg to go first? Sure. 

Mr. Shadegg. 

Mr. SHADEGG. Thank you, Mr. Chairman. 

Mr. Goodman, do you agree with the statement of Mr. Wolfe that 

there are frequent violations of the laws requiring the treatment of 

patients at hospital emergency rooms in the United States? And 

are you aware of any studies that show that? 

Mr. GOODMAN. I am not, but—— 

Mr. SHADEGG. I don’t think your microphone is on. 

Mr. GOODMAN. No, I am not. But I do concede we have an access 

problem, and I think the waiting in hospital emergency rooms in 

this country is atrocious. We had in Dallas a man who waited 19 

hours and died before he ever got care. So I don’t know if any law 

was violated, but I don’t think that should be happening. 

Dr. WOLFE. If I could respond. 

Mr. SHADEGG. I am sorry, my time is limited. 

I would agree with that. Can you tell me, since he challenged you 

on the point made earlier, would you reiterate the point made earlier and explain to me or contrast for me waiting times or waiting 

periods in the United States under the current system versus those 

experienced in England or Canada? 

Mr. GOODMAN. Well, see, what I think is happening in our hospital emergency rooms is exactly what happens in Toronto and exactly what happens in London. We are rationing care here just like 

they are rationing care in other countries. And to talk about everybody having access to care just because they are paper insured is 

nonsense. The reality is that lots of people aren’t getting care they 

need when they need it in a timely way around the world. And I 

think that if you look at the data, we do a reasonable job with a 

heterogeneous population compared to other countries. We could do 


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a lot better, but let us not pretend that they are way ahead of us, 

because they are not. 

Mr. SHADEGG. Let me make a statement. I am unaware of waiting periods in the United States at any facility, emergency room or 

otherwise, of months. And I am very much aware of waiting periods in Canada for various procedures that go more than a month. 

That is not a question; that is my statement. 

What is your suggestion or what would you do as opposed to— 

I presume you do not favor a public plan? 

Mr. GOODMAN. No, I don’t. 

Mr. SHADEGG. What would you suggest we do rather than moving to a public plan? 

Mr. GOODMAN. I think we ought to focus with the problem we 

began with, and that is the uninsured. What should we be doing 

for them? Right now, if they buy their own insurance, they get no 

tax relief whatsoever. Right now, if your employer—your employer 

is not allowed to buy for you insurance that you can take with you 

when you leave a place of employment. It is illegal in every State 

to buy personal portable insurance, which is the only kind of insurance that people can take with them in and out of the labor market 

and from job to job. 

Mr. SHADEGG. You are familiar with the legislation that I introduced that would allow individuals to buy health insurance that 

was qualified under a Federal law, and then written to comply with 

one State’s law and then be sold in multiple States? 

Mr. GOODMAN. I am, and I think that is a good idea. 

Mr. SHADEGG. And would that bring down the cost of insurance? 

Mr. GOODMAN. I think it would. 

Mr. SHADEGG. And would that reduce the number of uninsured? 

Mr. GOODMAN. I think it would. 

Mr. SHADEGG. What would be the best mechanism you think for 

making insurance portable for those Americans who do not have 

health insurance? And would it include a refundable tax credit as 

I have proposed and others such as Congressman Ryan and Senator Coburn? 

Mr. GOODMAN. The Coburn bill is a wonderful bill, but even 

without going that far, we need to give tax relief to people who buy 

their own insurance. We need to allow employers to buy the kind 

of insurance that people can take with them and is individually 

and personally owned. And we need to get rid of a lot of these State 

regulations which force up the price of insurance and price way too 

many people out of the market. 

Mr. SHADEGG. That last point is exactly what we were doing with 

my legislation that would let you buy a policy essentially filed in 

1 State and then sold in the other 49. 

Mr. GOODMAN. That would be the practical effect of it. Yes. 

Mr. SHADEGG. It would be the practical effect of reducing those 

mandates and thereby bringing down the cost of health insurance? 

Mr. GOODMAN. That is right. 

Mr. SHADEGG. You and I have talked about refundable tax credits and about the outrage of a current American law which says 

that if you get tax—if you get health insurance through your employer, it is pretax, but if you buy it on your own, it is taxed. We 

have been talking about that for how many years now, John? 


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Mr. GOODMAN. At least two decades. 

Mr. SHADEGG. It seems to me—— 

Mr. GOODMAN. And it is just as bad now as it was two decades 

ago. 

Mr. SHADEGG. If we just changed that law and said we are going 

to allow all Americans who want to buy health insurance to do so 

on the same tax-favored basis as businesses can do, that would create dramatically more competition in the health insurance industry, wouldn’t it? 

Mr. GOODMAN. Well, but, more importantly, it would allow people 

who are on their own to have tax relief and would encourage them 

to buy insurance which they are not now buying. 

Mr. SHADEGG. If we coupled that with a refundable tax credit for 

those who can’t afford health insurance, which is what I would propose doing, we would both bring down the cost of health insurance 

for all Americans and drive up quality; would we not? 

Mr. GOODMAN. That would be the most important thing, most 

important change in the health care system: Give every American 

a refundable tax credit. Let it be the same for everybody. And in 

the latest Coburn bill I think it is $5,700 for a family. So the first 

$5,700 is effectively paid for by the government for everybody. And 

then additional insurance comes, after tax, out of our own pockets. 

It would radically change the kind of insurance we have. It would 

change everyone’s incentives. Nothing would—that I can think of 

that has been proposed recently would have a bigger impact on the 

health care system. 

Mr. SHADEGG. The Republican-proposed refundable tax credit for 

health care has been on the table for years by Senators, like Senator Tom Coburn, and I, who have been advocating it. That would 

have solved the problem of America’s uninsured a long time ago; 

Would it not? 

Mr. GOODMAN. It would go a long way toward it. 

Mr. SHADEGG. Thank you very much. 

I thank you, Mr. Chairman, for your indulgence. 

Mr. PALLONE. Mr. Weiner. 

Mr. WEINER. Thank you, Mr. Chairman. 

Is there consensus of the three of you on the panel that the administrative costs for private insurance claims is much higher than 

what it is for the Medicare system? We will start with you, Mr. 

Goodman. 

Mr. GOODMAN. There probably isn’t a consensus here, because 

the statistics that you heard earlier count the private insurers’ 

costs of collecting premiums, but they ignore the government’s cost 

of raising taxes. If you want to make a fair comparison, you have 

to compare apples with apples and oranges with oranges. 

Mr. WEINER. So the administrative costs, you mean the IRS? 

Mr. GOODMAN. Yes. 

Mr. WEINER. If you back out the IRS for the purpose of this conversation, then it is obviously—is there any disagreement that the 

Medicare system is much more administratively efficient than private insurance? 

Mr. GOODMAN. Well, if you mean by backing out the IRS, we ignore the cost of getting public funds, but we count the cost of getting private funds, then, yes, Medicare would be cheaper. 


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Mr. WEINER. Is there anything that we can learn from how Medicare does things administratively? Is there an obvious place that 

we can find that that efficiency is found? Dr. Woolhander, would 

you have a sense of is there something in that? I know, for example, that insurance companies benefit to some degree monetarily 

from delays and inertia. Right? If they don’t pay, for example, a 

doctor, reimburse a doctor or a hospital for a 30- or 60-day period 

of time, they make money on the money that they are not allocating. There are things like that. 

But are there other elements that we can learn if we wanted to 

teach the private insurance companies? Which is what President 

Obama said the other day in his press conference, he thought it 

might be instructive for the private guys to copy some of the things 

that the public model does. Is there any one or two things that 

jumps out at you that makes Medicare more efficient? 

Dr. WOOLHANDLER. There are a lot of things, but you couldn’t 

transplant them to private insurance, because private insurance 

makes their money by not paying the bill, by collecting lots of premiums and not paying. So there is lots of expenses they have that 

are essential to their competitive strategy. So they want to be very, 

very careful to recruit healthy people. 

Mr. WEINER. I understand that, but you are answering a different question. I understand they are not going to want to do it. 

I am asking you, if you were to say, here are two or three things 

that Medicare does that they do more efficiently than private insurance, like are there a couple that may come to mind that might inform the committee’s deliberations here? 

Dr. WOOLHANDLER. Medicare is universal, and it does use the 

IRS to collect money and the Social Security System, which is a 

very efficient way to do it because those things exist already anyway, and they are not going to disappear or get any smaller. 

Mr. WEINER. So their building apparatus is much more efficient. 

Dr. WOOLHANDLER. They are collecting of—the equivalent of premiums is much more efficient. Also, Medicare doesn’t do any cherry-picking. They don’t try to attract healthy people and keep sick 

people out. They can’t. It would be illegal. They take everyone. So 

they don’t have any so-called marketing expenses, which is really 

about recruiting healthy people and keeping sick people out. 

Mr. WEINER. Dr. Wolfe, let me ask you this question. Doctor, feel 

free to weigh in when he is done. The argument made against single-payer—and I don’t know how persuasive it is, and, frankly, I 

plan on offering single-payer as an option here when we mark up 

the bill. But the argument that is made is there are a lot of people 

for whom their present insurance plan is satisfactory. They say 

that they are satisfied with it, they like the doctor relationship, 

they don’t mind getting the bills. They like what they have chosen. 

And a political argument is made that essentially says don’t, 

when you are trying to do something this big and difficult, pursue 

what Dr. Goodman has been pushing; try to solve the problem 

without creating the big tumult around people who don’t generally 

see there would be a problem. That is a pretty persuasive argument on a political level; I mean, to say to 120-, 130-, 140 million 

people, we are not going to touch your thing that you have. 


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How do you respond as an advocate for single-payer for the idea 

that while it might be more efficient for the reasons you stated in 

your testimony, we may be permitting the perfect to be the enemy 

of the good by creating an untenable political dynamic? Why don’t 

you give us your response for that. 

Dr. WOLFE. I think the main response is that people would be 

concerned if you thought they were going to disrupt the relationship they had with their doctor, with their dentist, with their physical therapist, with their hospital. And the single-payer is looking 

only at how the money is collected and how the bills are paid. 

There is no reason why anyone who is going to Dr. A would not 

be allowed to go to Dr. A if there was a single-payer system. In 

fact, they might also want to go to Dr. B, who they would have 

liked to go before. 

Mr. WEINER. Because, in your vision of the single-payer, a doctor 

would be compelled to participate; otherwise, they wouldn’t be able 

to be a doctor in the United States because they would be opting 

out so many patients? 

Dr. WOLFE. Right. In Canada and lots of other countries, if you 

are going to receive money for delivering medical care, you can’t 

discriminate against this or that kind of patient, so that, if anything, the doctor-patient relationship would be enhanced instead of 

disrupted. A patient could go to a doctor that they couldn’t have 

gone to before because that doctor wasn’t in their pool. There is no 

such thing as your limited pool of doctors or hospitals, for that matter, you can go to. 

So in terms of—the disruption is really a disruption of the health 

insurance industry, not of the doctors, not of the patients. I mean, 

the reason why 60 percent of the doctors in Massachusetts in a 

study published a couple years ago support single-payer is that 

they are getting sick and tired of spending so much time in their 

offices fighting with insurance companies to pay bills, hiring people 

that are not delivering medical care, but are just sort of engaging 

in phone or e-mail or fax wars. So I think that if the focus is the 

patient, then it is less disruptive. 

Mr. WEINER. I thank you. And my time has expired. I would just 

caution you, Dr. Wolfe, that what you are answering is a substantive question, and mine was a political one. Someone who has 

Oxford who then is going to go to a single-payer is going to lose 

their Oxford whether they get the same doctor or not. That is the 

rhetorical challenge that we have as advocates for a better system. 

But I appreciate the candor of your answer. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. 

I am just going to ask Members, I know we each have 5 minutes, 

but this is the first of three panels. Just try to at least end your 

questions within the 5 minutes. I don’t have a problem if the panelists’ answers go beyond the 5, but I want our questions or comments to end at the 5 minutes, otherwise we are going to be here 

until 8:00 or 9:00 tonight. 

Next is Mr. Shimkus. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 


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There are a couple ways that Members could come to these hearings. This is a very important issue. And I think we all come in 

all the seriousness that we should. 

You know, first, just on this rush to move, I have talked about 

in the energy bill having a discussion draft that people can’t really 

talk about because we know the discussion draft will not be the 

bill. It is not going to be it. So when we end up marking the bill, 

we are going to get a bill on a Friday, just like the energy bill, 

which will have 300 more pages that my staff will try to e-mail me 

at home that they hope that I will read and go over to be prepared 

for a markup. 

So this process is—the health care is broken, this legislative 

process. Now, we can do it in this committee. We did it in FDA reform. We really did. Democrats worked with us, we compromised, 

we got a good bill. We got a bill that passed out on a voice vote. 

Major reform in the Food and Drug Administration. And I think 

people are—you win some, you lose some. Overall we are pretty 

happy. We didn’t have that in energy, and we are going to have a 

Texas death match fight on the floor come Friday. We are not going 

to have it here, and so we are going to have another Texas death 

match fight whenever this moves to the floor. And it is just too important of an issue to do that. 

So I have always been struck by why don’t we move—I mean, 

there is an incremental process, and people understand that, and 

call our bluff. Let us get insurance to more people. Let us try associated health plans. Let us try giving people tax incentives. Prove 

us wrong that a private system doesn’t work, and then the public 

option might be the default. Maybe a one-payer might be the default. 

I was in Chicago at the American Society of Plastics, and I 

talked to a legislative luncheon with some of my colleagues. One 

of the guys there whose spouse was attending sold medical technology, and he had just come back from Canada. This hospital was 

excited to buy their second MRI, and they are going to reduce their 

wait list from 8 months to 4 months for an MRI. I am not making 

this up. We all know, there are horror stories on both sides. So my 

plea is for us to try to move in a way that we can try to cover people before we bring what I believe is the heavy hand of government. 

Let me go to questions. Let us talk about this, Mr. Goodman, 

first, and I will let people chime in. I am not really trying to 

incentivize one side or the other. Usually I do that, but not here. 

Let us talk about this Medicare thing, and let us address—every 

time politicians talk about saving the government money, what is 

the first thing off our lips? Waste, fraud, and abuse. And where do 

they point that this waste, fraud, and abuse is? Medicare and Medicaid. And my friend from New York talked about the cost of this. 

Shouldn’t the cost of waste, fraud, and abuse be part of this calculation if we are going to compare private insurance with a government-backed product? 

Mr. GOODMAN. Well, it should be. And in my opinion, the thing 

that Dr. Woolhandler praises about Medicare and Medicaid is, in 

fact, one of its faults. It spends too little on the administration. You 

ought to spend some resources watching where the dollars go. And 


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apparently there is an enormous amount of fraud in Medicaid and 

Medicare, and you are not going to get rid of it if you don’t spend 

some resources to find out where the dollars are going. 

Mr. SHIMKUS. And the percentages of like 30 percent claims, that 

are paying claims that shouldn’t be paid. So 10 percent. I can’t 

even read my notes anymore. But there is a credible cost, if you 

are going to claim you are going to save money on waste, fraud, 

and abuse, that it ought to go into. That would be good money to 

go after, the return on the investment. 

Let me just finish with this in my time, and I want to be respectful to the Chairman. The Massachusetts example just recently released, what are they doing? They are going to raise their costs, 

they are going to cut services, they are going to reduce their beneficiaries. That was just announced today. What does it make us feel 

like that is not where we are going to be if we move to a one-payer 

system or a public option? 

Dr. WOOLHANDLER. The one aspect of Massachusetts that is very 

prominent, and it is actually in this bill, in the tri-committee bill 

that we haven’t discussed much—— 

Mr. SHIMKUS. The draft language. There is no bill. A bill is a bill 

when you actually drop it and it gets a number. 

Dr. WOOLHANDLER. The tri-committee draft includes an individual mandate, just like Massachusetts, which is, of course, what 

the private insurance industry wanted. They said that was their 

number one thing that they wanted was an individual mandate. 

And it is here in this bill called ‘‘individual responsibility.’’ 

Mr. SHIMKUS. But Massachusetts is cutting benefits, raising premiums, and reducing—cutting service. 

Dr. WOOLHANDLER. Absolutely. Absolutely. Because it is not affordable what they have done. And the individual mandate piece 

hasn’t worked. It has been very punitive, and it is here in the tricommittee draft. And it is a complete gift to the private health insurance industry, just as it was in Massachusetts, because it is 

saying that the government is going to make it illegal not to buy 

private insurance. And that is actually something that needs to be 

discussed and is really totally caving in to the insurance industry 

no matter what else is in this bill. 

Mr. PALLONE. Mr. Deal. 

Mr. DEAL. I would like to follow up, Dr. Wolfe, on something that 

you said about how your world of a single-payer would work. And 

I believe you said it in response to an earlier question that, in a 

single-payer world, physicians would either be in the system accepting the payments that the system dictates that they are entitled to, or else they would not be able to practice, period. Is that 

correct? 

Dr. WOLFE. Well, they can practice privately and collect money 

from patients. There is nothing to stop that. In the United Kingdom the so-called Harley Street physicians are physicians who 

aren’t part of the national health service. They practice. They have 

expensive practices for patients who can pay them. 

The only point I was making is that the Canadian system, which 

is called Medicare for everyone in the country, is one that if a physician wants to take care of patients who don’t have money to go 

to a private doctor, then that physician needs to participate. 


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The physicians in Canada actually make reasonably large 

amounts of money with the kinds of prices that are placed on the 

services by the government. So it is not—it is restrictive only to the 

sense that if someone really wants to practice medicine for someone 

other than a group of very wealthy people, they participate in the 

program. Again, they are in private practice; they are not working 

for the government, they are just getting paid by the government. 

Mr. DEAL. One of the concerns that we currently have is doctors 

who will not take Medicare patients simply because reimbursement 

rates they consider are not adequate. 

Under the proposal that we are looking at, the public option 

plan, as I understand it, keys reimbursements to Medicare reimbursement rates. Now, one of two things is going to happen. Either 

the public option plan is not going to be able to get any doctors to 

sign up to participate without coercion to do so, or the private 

plans are going to decide that the only way they can compete with 

the government is to ratchet down their reimbursements to the 

Medicare levels; and, therefore, the private insurance market providers are going to have the same complaints that they currently 

have in our Medicare reimbursement system. 

Dr. Goodman, maybe I could ask you to comment on that. 

Mr. GOODMAN. Well, I think you are exactly right, except I don’t 

think it will be all one way or the other. With that kind of system, 

what we will gravitate to is a public system in which most people 

will be enrolled, and the doctors will be paid below-market rates. 

And then there will be a private system, just like they have in the 

United Kingdom, or some version of that, and anyone who has the 

money will buy better coverage, and they will be seen first by the 

doctors, and they won’t wait as long. And Britain has a two-tier 

system, and what you are pointing toward would be a two-tiered 

system for the United States. 

Dr. WOLFE. Could I just respond briefly to that? Which is, one 

of the reasons that we are opposed to this public-private option is 

that it does cause some of the exact things you are talking about. 

Why should it be that a given doctor should not get the same 

amount of money for seeing patient A versus patient B versus patient C versus patient D? In other words, what I am saying is that 

under a single-payer system, the doctor could see any patient they 

want; the patient could go to any doctor they want without the fear 

that this doctor won’t see them because they are not getting paid 

as much as they would be paid if they had some other insurance. 

It is bewildering to a doctor and their staff to have to look at a 

patient and say, do they have this plan or plan number 10 or plan 

number 20? And if they have that, does it cover this or that or 

whatever? It is just an unbelievably complicated matrix, as opposed 

to just saying you go to the doctor, and whenever you are or whoever you are, the doctor gets reimbursed the same amount. I think 

that that kind of twofold system that is possibly built into the draft 

bill that we are discussing isn’t a good idea. But it is not the only 

reason the draft bill is not a good idea. 

Mr. DEAL. We agree on that last statement. 

Dr. WOOLHANDLER. I would just have to say as a practicing physician in Massachusetts not only do I take Medicare and welcome 

it, but essentially every doctor in the State of Massachusetts takes 


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Medicare. And, you know, none of us are going to the poorhouse. 

So I know there are people who can command even higher payments than Medicare pays, but Medicare payment is generally 

compatible with a pretty good standard of living for the medical 

profession. So I wouldn’t worry too much about that issue, personally, coming from Massachusetts. 

Mr. DEAL. Well, coming from Georgia, I can tell you firsthand 

that we are having physicians who will refuse to continue to treat 

long-term patients that they have had for many, many years when 

those patients become Medicare-eligible simply because of the reimbursement rates, and they consider them to be inadequate. And my 

State at least, I think, is experiencing that kind of problem currently, and I just don’t want to see us magnify that problem. 

I believe my time is up. Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. 

Dr. Burgess. 

Dr. BURGESS. Thank you, Mr. Chairman. You had no choice but 

to come to me, and I appreciate the time. And just for the record, 

I always saw Medicare patients in my practice in Louisville, Texas, 

because my mother told me I had to, and it made it very simple 

to follow that rule. 

Dr. Goodman, Dr. Wolfe testified just a moment ago that, in Canada, the doctor-patient relationship is enhanced by having a singlepayer system. Is that your opinion also? 

Mr. GOODMAN. No. No. No, it is not. I think in general thirdparty payment undermines the doctor-patient relationship, and 

that the ideal relationship is for the patient to control the dollars, 

and that is why I have advocated for many years the health savings account. I would like to see patients control a third or fourth 

of all the dollars. And for chronic patients, they can control even 

more than that. 

And we are doing this in Medicaid, by the way. We have a cash 

and counseling pilot program under way in more than half the 

States where the Medicaid homebound disabled control their dollars. They can hire and fire the people who provide them with services. There is 98 percent satisfaction. Well, there isn’t any health 

care system in the world where you get 98 percent satisfaction. 

So we know that health care can be more satisfying, and we can 

meet the needs of patients in a better way if we reduce the role 

of the third-party payer, whether it is government or private. 

Dr. BURGESS. And I actually agree with that as well, and I have 

often wondered why we don’t construct a system where it is possible for an individual to have more of a longitudinal relationship 

with their insurance company. If an insurance company or a Medicare system is a necessary evil, why would we not construct one 

where there is some sensitivity to the purchaser on the part of the 

seller just like there would be in any other transaction? 

We heard just a moment ago from the gentleman from New York 

about there being a policy versus a political question. I also wonder 

if the back door into the policy that is desired, which may be a single-payer system, is to not involve ourselves in political 

incrementalism at this point in order to achieve that desired goal. 


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Dr. Wolfe, I wonder, do you see that as being part of the trajectory or part of the desired outcome of the—I realize it is not a bill, 

but the draft that we have in front of us this afternoon? 

Dr. WOLFE. I think I alluded a little bit to this earlier, but I 

think that we now have essentially 44 years since the last health 

insurance was passed, Medicare and Medicaid. And many people 

hoped, and I think sincerely, that somehow during the 44 years we 

would incrementally be able to cover more people with health insurance, and it just hasn’t happened. I mean, we have the same insurance companies, some new ones that are more HMOs and so 

forth than there were back then, but I think the incrementalism 

just hasn’t worked, and particularly compounded by the economic 

problems of the last year or two, things are getting tougher and 

tougher. I would expect that the number of uninsured will rapidly 

go over 50 million, it is close to that now, if we had numbers from 

2009. 

So I don’t see—back to your question directly. I don’t see anything in this draft bill, as we are correctly talking, it is a draft bill. 

It is. And there is a lot of distance between here and, if anything— 

I say ‘‘if anything’’ seriously—is going to come to the floor. But I 

don’t think there is anything that is in the draft bill that, to me, 

could be rationally viewed as a stalking horse as a way towards a 

single-payer. If anything, one could argue that it is away from a 

single-payer. Because if it is changed and comes to the floor with 

some form of a public partnership with the private, it is going to 

be so bad that, if anything, it will move away from the single-payer 

rather than towards it. 

Dr. BURGESS. Like Ranking Member Deal, I do agree on that last 

point. 

Let me just ask you a question, because my time is going to run 

out. There has been some allusions to Canada versus the United 

States. My understanding, correct me if I am wrong, the Canadian 

system, their health care system, is on a budget. Their Parliament 

passes a budget every year, just as we do, and their health care 

expenses are going to be budgeted. Ours, in this country, we have 

the largest single-payer system in the world. It is called Medicare 

and Medicaid. We don’t budget for that; we just simply say, send 

us your bills, and we are going to pay them, and we will draw 

down the Federal Treasury or expand the deficit in order to do 

that. 

Do you think we should look more at Canada’s budgetary system 

as a way to controlling some of our costs in our public system, in 

our Medicare and Medicaid system? 

Dr. WOLFE. Well, one of the advantages of having a single-payer, 

single-insurer collector of money is that you can more easily do 

what is called in Canada global budgeting. So for a given hospital, 

for instance, instead of counting every—— 

Dr. BURGESS. But you have already got 50 percent. 

Dr. WOLFE. But I am saying they are not doing it. 

Mr. PALLONE. Can I just ask Dr. Wolfe to answer the question, 

because the time has expired. 

Dr. WOLFE. The answer to the question is in Canada global budgeting is a good idea. We could benefit from it here. I don’t think 

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ministrative costs are certainly low, and there have been some 

forms of price control on everything other than prescription drugs. 

So I think we could learn from that. But Medicare has now been 

around for 44 years, and, if anything, for a bunch of reasons it is 

getting worse than it was at the beginning. So we need to go back 

to some of the original principles of Medicare. 

Dr. BURGESS. Some of our distributional issues would become 

greater, though, with a budgetary constriction. 

Mr. PALLONE. Dr. Burgess, you are a minute over. You can’t ask 

any more questions. We have got to move on. Thank you. 

Let me thank all of you. We appreciate it, and I think it was a 

good discussion. I am sorry that you were interrupted so long with 

the votes. 

Mr. PALLONE. Let us ask the next panel to come forward, please. 

This panel is on State, local, and tribal views. I ask our panelists 

to be seated. 

Now, let me just warn everyone that you are seated out of order, 

so I am not going to ask anybody to change, but I am going to call 

Members to speak on the order that I have here. So let me introduce everyone. 

First is Honorable Michael Leavitt, who is former Secretary of 

U.S. Department of Health and Human Services. Thank you for 

being with us. I know you can’t stay the whole time, but that is 

fine. We have you first. 

Second is my good friend, the Honorable Joseph Vitale, who is 

chairman of the Committee on Health, Human Services and Senior 

Citizens of the New Jersey State Senate, who his district is in my 

congressional district, and he has been here before, and we appreciate your coming today as Senator Vitale. 

Then I have W. Ron Allen, who is the chairman of the Jamestown S’Klallam Tribe. 

And then we have the Honorable Jay Webber, who is a State assemblyman from my State of New Jersey. Welcome. 

And then is Dr. Raymond S. Scheppach, who is the executive director of the National Governors Association. 

Then we have Robert S. Freeman, who is deputy executive director of CenCal Health, California Association of Health Insuring Organizations. 

And finally is Ron Pollack, who is executive director of Families 

USA, again, a frequent visitor to this subcommittee. 

So we will start with the Secretary Leavitt. Thank you for being 

here. 

Let me mention again, I think you have probably heard it 

enough times, but 5 minutes. We ask you to speak for 5 minutes. 

Keep it to that. Your written testimony will become part of the 

record. And, of course, after you are finished, we will have questions from the panel. 

Secretary Leavitt. 


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STATEMENTS OF MICHAEL O. LEAVITT, FORMER SECRETARY, 

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES; JOSEPH VITALE, CHAIRMAN, COMMITTEE ON HEALTH, HUMAN 

SERVICES, AND SENIOR CITIZENS, NEW JERSEY STATE SENATE; W. RON ALLEN, CHAIRMAN, JAMESTOWN S’KLALLAM 

TRIBE; JAY WEBBER, STATE ASSEMBLY, STATE OF NEW JERSEY; RAYMOND C. SCHEPPACH, PH.D., EXECUTIVE DIRECTOR, NATIONAL GOVERNORS ASSOCIATION; ROBERT S. 

FREEMAN, DEPUTY EXECUTIVE DIRECTOR, CENCAL 

HEALTH, CALIFORNIA ASSOCIATION OF HEALTH INSURING 

ORGANIZATIONS; AND RON POLLACK, EXECUTIVE DIRECTOR, FAMILIES USA 

STATEMENT OF MICHAEL O. LEAVITT 

Mr. LEAVITT. Thank you, Mr. Chairman. And thank you for your 

acknowledgement of my inability to stay the whole time. But I am 

pleased to be here. 

My formal statement, I will summarize it by saying I have listed 

10 things in this draft that I believe could be unifying principles, 

I have listed 10 things that I believe are serious problems, and 10 

ways I think those could be resolved. So the committee will have 

access to that. And to the extent that you have questions for me, 

I would be happy to respond to them either in writing or later publicly. 

I was intrigued, however, by conversation in the earlier panel, 

and I would like to take my time to respond to the question of 

Medicare’s efficiency. I suspect I am the only, or at least one of the 

only, people in this room who has actually overseen Medicare, and 

I would like to answer the question as to its relative efficiency, if 

I could. 

If the question is does Medicare issue checks on a more efficient 

basis than anyone else, I think it is important to answer that: Yes, 

Medicare issues checks more efficiently than anyone else on the 

planet. And we should, because Medicare issues about 1 billion of 

them a year. 

The problem isn’t its administrative efficiency. The problem is 

what it pays and how it pays it. 

Medicare has three fundamental problems, in my assessment. 

The first I call silo syndrome. Silo syndrome is a function that everything is paid without coordination. So it isn’t how efficiently it 

pays; it is the fact that it pays the wrong things and pays too many 

things, and does not require any level of coordination. 

If we were to impose on, say, the automobile industry the process 

of finance in the health care industry, you would walk into a car 

dealership and you would say, I want to buy a car. The dealer 

would say, we can see you do. Pick one out, and we will send you 

the bills later. And a few months later or weeks later, you would 

get one from the chassis maker, you would get one from the tire 

manufacturer, you would get one from the dashboard people, one 

from the windshield, and one from the dealer. And the dealer 

would say, you were in the showroom for a while, then you went 

to the salesman’s office, and then there was that $21.97 cup of coffee you thought you were getting because you thought you were 

thirsty. 


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The point is that if there was a steering wheel that was $800, 

the manufacturer of the car under the current system would say, 

we can’t afford that because we have got to deliver it for $23,000. 

In the health care system, if the crutch’s provider in a knee oper- ation says, we want $400 for the crutches, we just provide it. There 

is no coordination. 

So it is not the fact that we are able to issue checks efficiently; 

it is that all of the care is siloed and uncoordinated, and that runs 

up the costs. So what might look like efficiency, I would suggest to 

you, is not. 

The second problem with Medicare is that it has what I call 

chronic more. Everything is oriented to more. 

And the third point I would say is that it is quality indifferent. 

So it isn’t efficient because it can issue more checks than anyone 

on the planet. It is inefficient because it is siloed, because it is 

quality indifferent, and because every incentive leads to more. And 

I suspect you will see that reflected in my testimony as to why I 

oppose and why I hope our country will not go to a public option 

plan. For us to adopt a system that has moved our country financially toward what I believe will be its most devastating financial 

crisis and then put more people in it is like suggesting that we are 

going to cure obesity with a perpetual regimen of double calories. 

That is not the solution, and I have listed in my testimony a series of suggestions on how I believe this bill could unifying, how the 

bill could become a bipartisan proposal, and I am very hopeful that 

that can occur. This country badly needs for every American to 

have access to insurance. We desperately need to reform the system. And I hope very much that this will be a moment where we 

can do so on a bipartisan basis. Thank you. 

Mr. PALLONE. Thank you, Mr. Secretary. 

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Mr. PALLONE. Senator Vitale. 

STATEMENT OF JOSEPH VITALE 

Mr. VITALE. Thank you, Chairman Pallone and members of the 

committee. I am Joe Vitale. I chair the Senate Health Committee 

in New Jersey, and pleased to be here again. I was here a couple 

years ago when we were debating the reauthorization of SCHIP 

and what it meant to my State and to the millions of parents and 

children who we are now blessed to cover under that program. 

I wanted to highlight some of the sentinel points of New Jersey’s 

journey toward health care reform as well as my personal view as 

a State legislator, a leader in health care reform, and as a small 

business owner as well, to discuss the access to affordable and dependable health care for not just the 1.3 million uninsured New 

Jerseyans, but the remaining 45-some million Americans. 

New Jersey has learned many lessons as we grappled with the 

complexity of reform over the past several years. Our State’s reform efforts will benefit the proposals being discussed here in 

Washington now. 

When SCHIP was first adopted in 1998, New Jersey initially offered enrollment for children whose family income did not exceed 

200 percent of the Federal poverty level. Shortly thereafter, we increased eligibility to 350 percent of Federal poverty for those kids, 

recognizing that we needed to do more, that New Jersey was an expensive place to be low-income, and we needed to get those kids insured because the parents couldn’t afford the insurance on their 

own or through their employer. 

In addition to expanding affordable access to kids, we also began 

to welcome parents into our program through a waiver by CMS 

whose families’ income did not exceed 150 percent of the Federal 

poverty level. These legislative initiatives became the foundation 

upon which we in New Jersey have begun to build a framework for 

providing universal, portable, affordable, and sustainable health 

care access to New Jersey’s remaining 1.3 million uninsured. 

Our efforts began nearly 3 years ago with the formation of a 

working group comprised of 22 policy experts representing a wide 

variety of experience and professional background. I believed then, 

as I do today, that New Jersey could not have enacted our most 

recent reforms without taking the necessary time to painstakingly 

understand the complexity of reform’s impact on the diverse group 

of stakeholders health care encompasses. 

Our working group met for 21⁄2 hours every week, worked on a 

daily basis with staff to process the input from those sessions, and 

traveled the country from San Francisco to Chicago to Washington 

to meet with other States actively reforming their systems. We 

shared the reform efforts each of us were undertaking and met 

with national policy groups with expertise in health care access, 

quality, cost modeling, efficiency, and insurance reform. It was 

through those efforts that we were able to offer a thorough and 

well-planned legislative proposal that enjoyed overwhelming bipartisan support approval moving from announcement to passage into 

our law in a short 4 months. 

Our most recent initiative accomplished much. It increased eligibility for more working parents whose income did not exceed 200 


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percent of the Federal poverty level. We established a buy-in program for children whose families’ income exceeded our SCHIP cap 

of 350. This program was created after negotiating with two of our 

State’s leading health plans, who agreed to offer an excellent benefit design at a very low price. This program does not use any State 

or Federal dollars. 

We implemented a kids first mandate that required all eligible 

children to enroll in either a free or very low-cost health insurance 

program in our State. It required the Department of Treasury to 

include a check-off on all State income taxes, tax returns that seeks 

information on filers regarding the health insurance status of 

household dependents. This provision enabled New Jersey to be the 

first State in the Nation to utilize the express enrollment process 

approved here in Washington and CHIPRA. It also directed our 

State Department of Human Services to design a cost-effective and 

thorough enrollment outreach program, and to design a minimum 

hardship exclusion or premium hardship exclusion that does not 

allow an enrollee to jump out of coverage, that provides for an income set-aside that can lower their premium to an affordable level, 

but also maintains them in coverage and not out of coverage. 

It also instituted a number of reforms so individuals or employer 

market that made those policies more affordable will dedicate a 

larger percentage of collected premiums to the actual provision of 

care. 

I am proud of what we have accomplished in New Jersey. We 

have been one of the most progressive States in offering expanded 

access to hundreds of thousands of children and working parents, 

and we are currently well on our way toward comprehensive and 

transformational reform. But, as you know all too well, States can 

only do so much. We have limited finances. We have limited political will. And with States having different programs at different 

levels for children and for parents in some States, it becomes just 

undependable and unreliable. 

We in New Jersey, though we are proud of the work we have 

done and the great steps and strides we have made to insure hundreds of thousands of kids and many parents in our State, we need 

the Federal Government. We need your leadership and the leadership of your colleagues and the President to make sure that the remaining 1.3 million who are uninsured today and those who will 

become uninsured have access to the same kind of health care that 

we all enjoy; that they will have the same kind of card that we all 

have. And, in some cases, I know we all take for granted maybe 

the health care that we do have, but for them, they wake up every 

day with the fear that they will get sick, their kids will get sick, 

they won’t have the ability to pay. And a national program that 

brings together in a large group those millions of Americans who 

need our help is well justified and well needed. And I want to 

thank you for the effort. 

Mr. PALLONE. Thank you, Senator. 

[The prepared statement of Mr. Vitale follows:] 


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Mr. PALLONE. And thank you for waiting, all of you, actually. I 

know you have been here since early this morning. So I appreciate 

it. 

Next is Mr. Allen. 

STATEMENT OF W. RON ALLEN 

Mr. ALLEN. Thank you, Mr. Chairman. My name is Ron Allen. 

I am the Chair and CEO for the Jamestown S’Klallam Tribe located up in Northwest Washington. And I am also an officer at the 

National Congress of American Indians. And my testimony presented to you and the committee is on behalf of our organization 

that represents and advocates for all Indian Nations from Alaska 

to Florida, representing over 560 Indian Nations and communities 

and 4 million people. 

As I listened to the dialogue all day today, we find it interesting. 

When we talk about the unmet needs of health care, no one knows 

that more than Indian Country. I was listening to some interesting 

comments this morning about how America is high represented in 

cancer recovery rates and diabetes recovery rates, et cetera. Well, 

in Indian Country we have the highest level of cancer rates and 

deaths and diabetes crisis, tuberculosis exposure, et cetera, than 

any other ethnic group or any other sector of our society. And it 

reflects the incredible unmet needs in our Indian communities. 

But what we do believe is that this initiative that is being advanced by the Congress and by the administration is an important 

one. We agree that the idea of addressing and reducing costs and 

providing competent care and affordability and quality is something we all look forward to, and that the Indian tribes across 

America concur that that has to happen. 

We want to remind the Congress, it seems like every time a key 

piece of legislation that emerges, that the tribal governments are 

a part of the American political family, and that we are governments, and that we are very unique in America as governments 

and as employers, as governments and our businesses that are important to the revenue generation for our essential services, including health care in our communities. And any legislation that is advanced to address a subject matter as this must include our government. 

So we appreciate what is being advanced in all the different components of this proposed bill, but we do want to point out there is 

a number of issues that we are concerned about, and that we would 

urge you as the committee and as the Congress to consider these 

specific conditions that are essential for the services to be provided 

to the Indian communities because of our unique conditions and 

how services are provided to the American Indian, Alaskan Native 

peoples across the Nation. 

We need the legislation to exempt American Indians and Alaskan 

Natives from mandates and penalties. We need this legislation to 

exempt tribal governments from the employee-employer penalties. 

It is essential that the American Indians, Alaskan Natives should 

be eligible for those insurance subsidies, and that the portability 

component is also essential for our people as well. It explicitly 

states that the Indian Health Service and the tribes are essential 


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community providers so that is clear that that is how the services 

are being provided. 

And another key component that we are concerned about is making sure that it is clear that the health care services that are provided to the Indian people, that they are exempt as income. The 

IRS wants to identify these resources as taxable income, and for 

the Indian communities we have paid for it. They are reflected in 

our treaties and the commitments of this Nation. This Nation is 

great because of the commitment of the Indian communities across 

the Nation, and so, therefore, that as prepaid health care, they 

should not be taxed for services that have been long overdue from 

this Nation to our communities. 

So these aren’t just a wish list. They are critically important to 

make it effective to fulfill what we believe is the unmet need for 

our communities consistent with a lot of sectors of America. 

The Health Care Improvement Act is important, and it does need 

to be passed and addressed, but it is not—this does not replace 

that bill, that legislation, that is fundamental for Indian Country 

and is so important for all of us. 

There are many other points I could address, but I think that I 

have highlighted the main issues. Our testimony has identified a 

long list of issues and recommendations that we have made to you, 

and we look forward to working with you, the committee members, 

the staff, and the President, on making this happen to raise the 

level of health care for all people, including American Indians and 

Alaskan Natives. 

Thank you, Mr. Chair. 

Mr. PALLONE. Thank you, Mr. Allen. 

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Mr. PALLONE. Next is Assemblyman Webber. Thank you for 

being here as well. 

STATEMENT OF JAY WEBBER 

Mr. WEBBER. Thank you, Chairman. And I would like to thank 

the committee for the invitation. 

My name is Jay Webber. I represent the 26th legislative district 

in the New Jersey State Assembly. I am here actually like Senator 

Vitale; I think we both take great pride in our State, but we have 

different views of the state of health care in our State. And one of 

the reasons that we are in such desperate need of reform in New 

Jersey is some of the things that we have done in the past. 

My message to the committee, if I can leave one, is please don’t 

do to the Nation what New Jersey has done to itself. We embarked 

on a series of reforms in 1992 with the intent of improving access 

to health care and health care insurance for our citizens. Many of 

the policies we put in place have been discussed already in the 

committee today, things like guaranteed issue, community rating. 

There were a series of mandated coverages that have continued to 

be piled on. And even as recently as this year, the legislature and 

the Governor raised the minimum loss ratios for insurance companies in our small-employer and individual markets. 

These reforms, so-called, have created what I would call a toxic 

mix for destroying the health insurance market in the State. Actually, one commentator called New Jersey the poster child for how 

to destroy the health insurance market. And the results have been 

rather predictable: Costs for health insurance in New Jersey have 

skyrocketed to the point where today the average premium for families on the individual market is as much as twice the national average. Small employers find themselves not being able to afford to 

provide insurance to their employees anymore. And consumers 

have fewer choices as fewer insurance companies write policies in 

the State. 

The reforms in 1992 did not result in a reduction in the number 

of uninsured. Quite the contrary. Whereas in 1992 we had 13.9 percent of our population uninsured, after these reforms the uninsured 

population stands today at about 15.8 percent. 

I have a lot more statistics in my written testimony to the subcommittee, but there is one story I would like to relate to you. A 

constituent wrote in to me just after the bill that Senator Vitale 

discussed earlier—just after that bill was passed. A man named 

Fred, he is a CPA, his wife is quite ill with a lot of doctors bills. 

Very content with his coverage that his employer was able to provide him, but after the bill that the senator discussed was passed, 

and the minimum loss ratios were put into place, the insurance 

company stopped writing insurance in New Jersey, and Fred lost 

his insurance coverage. His employer could no longer afford to purchase it. 

There are stories like that being played out across the State as 

our attempts to reform the system wind up doing more harm than 

good. There are solutions that I advocate vigorously and many 

members of the legislature do advocate in New Jersey, the most 

prominent of which would be to allow New Jerseyans to purchase 

health insurance across State lines. Increasing competition and 


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consumer choice will provide less expensive and higher quality 

health care to New Jerseyans. It will lower their premiums. And 

one study by University of Minnesota economists estimated that as 

many as 700,000 New Jerseyans would be able to afford to buy 

health insurance if they simply were allowed to purchase health insurance across State lines. That is 700,000 or almost 50 percent of 

the uninsured population in the State wiped off the uninsured rolls 

without spending a taxpayer dime. I think that is a significant reform that we should try. 

There is great enthusiasm for that measure; and I have gotten 

unsolicited letters, e-mails all across the State, not just from constituents in my district, urging the legislature to go forward with 

it. I just think it is no longer acceptable to trap New Jerseyans in 

a State and in a system that they want to leave. We have New 

Jerseyans who are looking to purchase health insurance out of 

State, would do it if they could, and insurers who would sell them 

insurance if they were allowed to come in and sell policies free of 

the underwriting rules and the coverage mandates that New Jersey 

puts on them, but we stand in their way with regulations and laws 

that block those transactions. 

I discussed with a colleague of mine on the floor of the assembly 

why they opposed the Health Care Choice Act that I have sponsored in New Jersey, and the answer was quite simple, and it was 

rather disturbing. And the answer that I got was, we need their 

lives. We can’t have New Jerseyans who would buy cheaper health 

insurance across State lines who might be uninsured today. We 

can’t have them leaving the State because we want to do single 

payer, and we need their lives to subsidize the sicker and the older 

in the State. 

I disagree with that approach; and it is disturbing to me that 

after—you know, more than 20 years after Ronald Reagan went to 

the Brandenburg Gate and told the Soviet Union to tear down that 

wall in Berlin, that New Jersey continues to put up walls to trap 

its citizens in a system that is failing them and that they want to 

leave. 

So if that is the enduring lesson that I can bring to you today, 

that is what I am trying to do. Again, I would respectfully request 

that the members of the committee and Congress not repeat the 

mistakes that New Jersey has made on a national level. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you, Assemblyman. 

[The prepared statement of Mr. Webber follows:] 


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Mr. PALLONE. Dr. Scheppach—I had to ask how to pronounce it. 

STATEMENT OF RAYMOND C. SCHEPPACH, PH.D. 

Mr. SCHEPPACH. Thank you, Mr. Chairman. I appreciate the opportunity to appear before you today on behalf of the Nation’s Governors. 

I will very quickly focus on six issues, the first with respect to 

the insurance reforms. 

Although we agree that the Federal Government probably should 

set the market rules with respect to guaranteed issue and renewability, we think the rate bands in the bill are too narrow. They 

should be broader so that States have the ability to go above those 

particular minimums. 

We are also very concerned that a lot of the State insurance reform is being preempted essentially by the Health Choices Administration in the bill. We think that States do a relatively good job 

of protecting consumers, but we think that the bill is going to add 

a lot of confusion with respect to who does regulation and who does 

enforcement. Is it the State, is it the Department of Labor, is it the 

independent agency or the Department of Human Services? 

Finally, I think there is going to be a real challenge in setting 

of market rules outside the exchange to be consistent with the ones 

in the exchange, because different rules would likely perpetuate 

the risk selection and fragmentation that exists in the marketplace 

today. With respect to the health insurance exchanges, it seems 

that the draft bill creates a super independent agency, the Health 

Choices Administration, to make just about every decision with respect to exchanges. There does not seem to be any clear advantage 

for States to design and administer the exchanges, and yet they 

have the expertise and capability and I think it is very important 

that the other subsidized population needs to be well coordinated 

with Medicaid. 

The bottom line is, given the rigidity of the administrative rules 

here, I question at this time whether a substantial number of 

States would actually opt in to the system. 

With respect to the Medicaid expansion, while governors differ 

somewhat on the Medicaid expansion, my sense is that they would 

question the necessity of increasing the eligibility of childless 

adults and parents over 100 percent of poverty. It seems that these 

individuals could be made directly eligible for the other subsidy 

and receive their benefits through the exchange. 

Governors do, however, very much appreciate the fact that the 

committee is willing to have the Federal Government pay 100 percent of the expansion. The phased-in mandate to increase reimbursement rates for primary care physicians give States pause, but 

we do realize that it is a very, very small percentage of the total 

reimbursement rate. 

Governors do support the choice for individuals to move out of 

Medicaid into the exchange. However, we would not support requiring States to provide the wraparound benefit. This would also include the CHIP population. The problem is that the wraparound 

benefit is administratively difficult, and maintaining the additional 

benefits may weaken the negotiating power of the exchange in receiving the most competitive prices. 


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With respect to the dual eligibles, there is a number of provisions 

in the bill that we do think strengthen the integration of the dual 

eligibles, so governors are generally supportive of those provisions. 

And, also, with respect to the drug benefit rebates and a number 

of the provisions there, governors support that as well. 

Just one final comment on the transition, that if and when this 

bill passes it is going to be a huge implementation role for States 

and others; and, therefore, I think that the bill should include specific provisions about some up-front money for States to build capacity to implement as well as certain certifications when the insurance reforms are done and what other components are willing 

to be administered. 

Clearly, you have got to coordinate the individual mandate, the 

other subsidized population, as well as the employer mandate in 

the bill. 

Thank you for the opportunity to testify. I look forward to working with the committee as you move the bill forward. 

Mr. PALLONE. Thank you. 

[The prepared statement of Mr. Scheppach follows:] 


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Mr. PALLONE. Mr. Freeman. 

STATEMENT OF ROBERT S. FREEMAN 

Mr. FREEMAN. Mr. Chairman, members of the committee, my 

name is Robert Freeman; and I am here to represent five publicly 

run health plans that administer the Medicaid, SCHIP, and other 

programs for low-income individuals. We currently serve 9 and 

soon to be 11 California counties, and our group is the California 

Association of Health Insuring Organizations. 

Today, I hope to provide a local perspective of what is currently 

being accomplished by our publicly sponsored health plans in California. I do so in the hopes that it may serve this committee as it 

addresses the massive task of national health care reform. 

I would like to briefly describe how our health plans operate. I 

hope that it will further discussion by policy makers in relation to 

the health care delivery administration at the local level as opposed—I mean, in addition to the State and national level. 

County organized health systems are one of two public plan models in California, and we have been in existence for over 25 years. 

My plan, CenCal Health, was the first, beginning operations in 

1983. Since that time, four other county organized health systems 

have been established in California and one in Minnesota. These 

five plans have built on their success and will soon be effectively 

providing access to high-quality health care to over 880,000 individuals. That is larger than 25 State Medicaid programs. 

Our governing boards consist of local government officials, physicians, hospital administrators, plan members and other health providers. We are independent of county government and function as 

a business. Although we are public entities, we have no guarantee 

of perpetuity so, like a business, if we don’t do our jobs well, we 

can go away. We also operate full-risk contracts with the State of 

California, necessitating efficiency and innovation. 

We are cost-effective. In relation to CenCal Health, 92 cents out 

of every dollar goes to the direct provision of health care services. 

Further, the California legislative analysts, which is similar to 

the Congressional Budget Office, has stated that county organized 

health systems annually save the State of California $150 million 

over what it was would otherwise spend on its Medicaid program. 

As public entities, all governing board meetings are public, and 

board decisions are made in an open and transparent environment. 

Our plans also have broad-based provider networks. We found 

the policy of broad-based provider networks to be very effective in 

both providing member choice and building community support. 

Speaking of my own plan, we have approximately 90,000 members and have 289 primary care physicians, 1,200 specialists, 9 hospitals, and 113 pharmacies who serve our population in two counties. 

We also believe that our broad-based provider policies have contributed to the high quality of care we provide to our members. The 

State of California has a series of indicators that annually measures to assess access to care and quality of care levels, mostly preventive. County organized health systems are consistently high 

performers in relation to these measures. We also score well in biannual consumer satisfaction surveys. 


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With this in mind, we believe that the public health plan concept 

currently works at the local level in relation to our plans. Further, 

in relation to the SCHIP program in California, public plans compete with private plans effectively and fairly, with neither private 

nor public model working from a disadvantage. 

In the areas of Medicaid expansion and creating vehicles who 

serve currently uninsured, we are in favor of both concepts. Expanding the Medicaid programs is an existing means to provide 

health coverage to currently uninsured individuals. The infrastructure to provide the care already exists, as do significant State and 

Federal standards, requirements, and regulations to protect members, providers, and others. 

The health insurance exchange concept outlined in the draft legislation seeks to create a fair and reasonable means of providing 

access to care and quality of care and choice. We do suggest that 

extra care be given to ensure the development of a health exchange 

will do no harm to existing health care programs and safety nets 

in our communities that currently work well. Our association believes the transparency provisions in the draft legislation are essential to build and maintain public trust in the delivery system. 

I will conclude my remarks by requesting the committee to take 

a good look at local delivery of health care options in relation to 

national health care reform. We believe including such a local component would promote community involvement, investment, and 

enthusiasm in national health care delivery as all health care delivery is local. 

Thank you for your time. 

Mr. PALLONE. Thank you, Mr. Freeman. 

[The prepared statement of Mr. Freeman follows:] 


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Mr. PALLONE. Mr. Pollack. 

STATEMENT OF RON POLLACK 

Mr. POLLACK. Thank you, Mr. Chairman. Thank you and members of the committee for your prodigious patience. Very much appreciated. 

I want to thank you for the draft bill that has been offered. We 

think it goes in the right direction for a number of reasons. I was 

asked by the staff to focus my remarks on the changes with respect 

to the Medicaid program, and so I will focus my comments on that. 

As you know, Medicaid provides coverage today for almost 60 

million low-income people, approximately half of whom are children; and we think that Medicaid is the right vehicle to provide 

coverage for the poor. Medicaid provides certain things that simply 

don’t exist today in the private marketplace that I think are absolutely critical for low-income populations. 

A recent article in Health Affairs pinpointed how important it is 

to provide cost-sharing protections for low-income people; and if 

they don’t have those cost-sharing protections, it means they are 

unlikely to get the services that they need. 

Well, Medicaid rises to that challenge. Medicaid does not require 

premiums or enrollment fees. Copayments for individual services 

are limited normally to nominal amounts. Certain kinds of services 

are exempt from cost sharing, things like preventive care for children, emergency services, pregnancy related services; and certain 

populations also are exempted from cost sharing: foster children, 

hospice patients, women in Medicaid, breast or cervical programs. 

These are very important protections that simply do not exist in 

the private sector. 

But, over and above that, Medicaid provides certain kinds of 

services. For example, for children, early and periodic screening, diagnosis, and treatment was very important so that children get 

preventive care and any diagnosis that shows that something needs 

to be taken care of does get treated. Transportation is provided to 

doctors’ offices for appointments and to community health centers. 

There are appeals rights that are very important that do not exist 

in any similar robust fashion in the private sector. 

There aren’t insurance market problems like you have in the private sector, kinds of problems that would be corrected over time 

with the bill that you have introduced. 

Medicaid provides good health outcomes. As the Kaiser Commission on Medicaid and the Uninsured reported in May of this year, 

those in Medicaid are less likely to lack a usual source of care. Obviously, that is true, compared to the uninsured, but it is also true 

compared to those with private insurance. They are more likely to 

have a doctor’s appointment in the last year. They do not have an 

unmet health need with the same frequency as those who are uninsured and those that have private insurance. Low-income women 

are more likely to have a pap test in the past 2 years. 

So Medicaid does provide very significant services for this important population, and it does so while costing approximately 20 percent less to cover people in Medicaid than it would cost if they purchased coverage in the private market. 


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Now, building on Medicaid and strengthening the eligibility 

standards is something that I believe is close to consensus agreement. There was huge support for this from the various stakeholders: American health insurance plans, Blue Cross/Blue Shield, 

American Medical Association, American Hospital Association, 

AARP, NFIB, Chamber of Commerce, Business Roundtable. We all 

reached agreement about the importance of doing this. 

And one of your favored colleagues of the past, Billy Tauzin, and 

we at Families USA have agreed that it is very important to extend 

eligibility, as this draft bill does, to 133 percent of the Federal poverty level. 

So I want to concentrate on why I think that measure is so important. We have huge differences today between different populations, children, their parents, and other adults who do not have 

dependent children. For children, due to the confluence of the Children’s Health Insurance Program and Medicaid, in almost every 

State children are eligible for coverage if their income standards 

are below, family standard is below 200 percent of poverty. And in 

some States, as you know, Mr. Chairman, some States have exceeded that. 

However, for parents, in only 16 States and the District of Columbia does the eligibility standard even reach the Federal poverty 

level, which, mind you, for a family of three is only $18,310. Indeed, the median income eligibility standard among the 50 States, 

as you will see in the chart at the end of my testimony, is only 67 

percent of the Federal poverty level, roughly $12,300 for a family 

of three. 

Mr. PALLONE. Mr. Pollack, you are a minute over. If you could 

summarize. 

Mr. POLLACK. I apologize. I would just say I think this would be 

very helpful if we did extend eligibility, irrespective of family status; and I am glad that the committee appears to want to go in 

that direction and pay for those costs. Thank you. 

Mr. PALLONE. Thank you. 

[The prepared statement of Mr. Pollack follows:] 


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Mr. PALLONE. I want to thank all of the panelists. 

Now we are going to go to questions, and we are going to start 

with Ms. Schakowsky. 

Ms. SCHAKOWSKY. I appreciate your beginning with me, Mr. 

Chairman. I really have just one question. 

Mr. Freeman, I wanted to, first of all, thank you for flying from 

California to testify this evening. And I really want to thank all of 

you. I was in the State legislature in 1993 and testified at a very 

similar panel about what the State of Illinois was doing. So it is 

a little bit deja vu for me too. 

I want to congratulate your county and the other California 

counties that operate health plans and for providing a public option 

for families enrolled in Medicaid and the CHIP program. 

I wanted to ask you about a provision in the discussion draft that 

is intended to reduce waste and increase value for Medicaid taxpayers, for the taxpayer dollars that your State and the Federal 

Government is paying. The provision would require that all Medicaid-managed care plans have a medical loss ratio of at least 85 

percent. You have already testified that your plan’s medical loss 

ratio is a pretty remarkable 92 percent. So I think everybody understands that that means—85 percent, it would mean that of 

every Medicaid dollar that is paid to the plan, at least 85 cents are 

used to pay for health care services furnished by hospitals and doctors and other providers. No more than 15 cents on the dollar could 

be used for marketing administration or, in the case of private, forprofit plans, payouts to shareholders. 

So do you believe that it is reasonable for taxpayers to expect 

that any well-managed plan, whether public or private, have a 

medical loss ratio of at least 85 percent? We have heard from some 

that that is somehow unreasonable, so I would like to hear what 

you say about that. 

Mr. FREEMAN. Well, I will just respond from our own experience. 

First of all, the California CHIP program has that requirement. 

So every plan—— 

Ms. SCHAKOWSKY. Same requirement? 

Mr. FREEMAN. Yes, same requirement. And as for our plan and 

our sister plans, none of our plans have had an issue of meeting 

that requirement on a consolidated basis. It has never been an 

issue for us. 

Ms. SCHAKOWSKY. You looked like you wanted to say something. 

Do you have that at all? Do you have a requirement on loss ratio? 

Mr. VITALE. Yes, thank you, Congresswoman. We just changed 

our medical loss ratio in New Jersey from 75/25 to 80/20, which 

means that more money will be directed toward providers and the 

care that they provide to reimbursement with regard to doctors and 

hospitals. 

It is something that works in our State. It hadn’t been changed 

in years. So we took an incremental step. We had discussed 85/15, 

but we settled at 80/20, which literally puts millions of dollars 

more into the providers’ side of the equation and a little less money 

into the profit side of the insurance industry. 

It did not cause any disruption in the insurance industry market. 

A couple of small companies closed and moved out, but that was 


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unrelated to the 80/20 change. It is just that more money is now 

spent on the provider side, then less in the pockets. 

Ms. SCHAKOWSKY. Does anyone else want to comment on that? 

Yes. 

Mr. WEBBER. I just take a very different view from Senator 

Vitale on the issue. And in fact, Guardian, which is a not a small 

provider, the representative was in my office last week saying the 

80 percent loss ratio made us leave the State. They simply couldn’t 

be profitable in New Jersey after the loss ratio went to 80 percent. 

And that is actually what caused the constituent that I referred 

to during my testimony to lose his coverage. The insurance company told him flat out that because New Jersey is going to impose 

an 80 percent loss ratio and because they are going to make us 

write in the individual market, which is not profitable for insurers 

in the State, we are going to pull out of New Jersey and you are 

going to lose your coverage. 

So there is a difference of opinion from the legislators in New 

Jersey as to whether this 80 percent loss ratio is a good thing. 

Mr. SCHEPPACH. The only comment I would make is that we are 

dealing with three separate populations in Medicaid. You have got 

the women and children, you have got the disabled, and you have 

got the long-term care. I am just saying that the mix there, because 

the disabled and long-term care are more intensive in terms of 

managing, if it is done correctly, integrating the services. So States 

that have an unusual percentage of that might have more difficulty 

meeting that than other States. 

Mr. VITALE. I just wanted to follow up on my colleague’s response 

to you. I appreciate your years in the State legislature and understanding the nuances of that business. 

When I spoke with the Department of Banking and Insurance 

and I learned that Guardian and a small company left, their letter 

to the Department had nothing to do with the MLR, with the medical loss ratio. In fact, it had to do with other reasons. 

You know, there are—most every—well, actually, every insurance company who writes in New Jersey already has a higher MLR 

by practice. We put it—we codified it into law. They don’t. 

There isn’t one company that is going to leave that State. They 

are profitable. Some of it is difficult, just like any other business. 

But for those who are in that State, whether it is Horizon or it is 

Blue or it is anyone else, they are doing just fine. They would always like more. 

And when a lobbyist or a representative from an insurance company will come to my office and complain to me that they are going 

to make less this year, well, that is just what they do. They will 

want to put the fear into any legislator that, if something changes, 

if the dynamic in the insurance industry changes, if they are made 

to pay more to providers and put less in their pocket, then the sky 

is going to fall and the world will end for them; and none of that 

has happened. 

Ms. SCHAKOWSKY. Thank you very much. 

Mr. PALLONE. The gentleman from Georgia, Mr. Gingrey. 

Dr. GINGREY. Mr. Chairman, I am not quite ready. If you could 

come back to me, or if I am the only one I will get ready. 

Mr. PALLONE. Sure. 


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Mr. Shadegg, do you have questions? 

Mr. SHADEGG. I do, Mr. Chairman. Thank you very much. I 

would like to ask each of the witnesses a set of three brief questions. I would like just a quick answer to them, if I could. 

First would be, do you have a copy of the tri-committee discussion draft? Yes or no. When did you receive it, and have you had 

a chance to read the entire bill? 

Mr. Allen, do you have a copy? 

Mr. ALLEN. Yes, we do have a copy. We received it Friday. We 

have reviewed it as best we can over the weekend. 

Mr. SHADEGG. I understand the ‘‘we’’. I like the pronoun. Have 

you read the bill personally? 

Mr. ALLEN. No, I have not. 

Mr. SHADEGG. Mr. Vitale? 

Mr. VITALE. We have received a copy in our office, and we have 

not reviewed it yet. Thank you. 

Mr. WEBBER. I have got an answer to only one of your questions, 

the first one. No. 

Mr. SHADEGG. You don’t have a copy of the bill? You were not 

provided a copy of the bill? 

Mr. WEBBER. No. 

Mr. SHADEGG. OK. Doctor. 

Mr. SCHEPPACH. Yes, I have a copy of the bill. I received it Friday; and, yes, I have read the entire bill. 

Mr. SHADEGG. Thank you. You are the first. 

Mr. Freeman. 

Mr. FREEMAN. Yes, we received the bill. We received it Friday 

around noon California time. And I have read—I think I am on 

Page 115. 

Mr. SHADEGG. Out of? 

Mr. FREEMAN. 852. 

Mr. SHADEGG. Thank you. 

Mr. Pollack. 

Mr. POLLACK. I did receive the bill on Friday. I have read portions of the bill. Our staff has read the entire bill. 

Mr. SHADEGG. Thank you very much. 

Assemblyman Webber, I appreciate your testimony. I was able to 

watch it from my office. I do appreciate your efforts on behalf of 

consumers; and I, as you know, share your interest in allowing the 

across State purchase of health insurance so that we could bring 

some competition to the market and bring down cost. 

But I guess we are looking at a broader debate here. We are 

looking at the government becoming vastly more involved in the insurance sector and, quite frankly, getting the government or giving 

the government a much larger role kind of between patients and 

their doctors. 

You made a plea in your testimony for not—for the Congress not 

to do what has been done in New Jersey. I presume that is a reference to the 1992 legislation in New Jersey and also to guaranteed issue and community rating. Can you expand on that? 

Mr. WEBBER. Well, again, the health insurance market is not 

healthy in New Jersey. In fact, it is very sick. We had at many as 

28 insurers writing policies in the State back in the early ’90s; and 

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tively and efficiently, mandating coverages, putting in minimum 

loss ratios that are not profitable, we are down to about only five 

companies that really write policies on the individual market to 

any great degree. So consumer choice has been virtually eliminated, certainly diminished in the State. 

And, Congressman, I am eager to take on the challenge of health 

care reform at the State level; and we have talked about this many 

times, actually. If we had the opportunity to get at it and allow 

New Jerseyans to get out of State and create a system in which 

they could really shop for policies that suit them, instead of the 

policies that the politicians in Trenton think are suitable for them, 

I think we would go a long way to making health care and the delivery of health care better in New Jersey, and then we can get at 

the rest of the uninsureds. 

Mr. SHADEGG. Mr. Pollack seems to be concerned, and I think 

justifiably so, about uninsured Americans, about those people who 

do not have health insurance coverage at all. If we provided everyone in New Jersey and indeed everyone in America who does not 

have insurance right now and who cannot afford to buy health insurance right now with a refundable tax credit, that is, cash from 

the Federal Government to go buy a health insurance policy of 

their own, do you believe that would take care of, number one, 

their health insurance needs? And, number two, would it benefit 

them to let them make those choices? Or is it better to put them 

in some form of, I guess, a Medicare program or a program like the 

tri-committee draft? 

Mr. WEBBER. No, I think there is broad consensus that people 

want more control over their health care decisions. Certainly the 

refundable tax credit would help. But I have to tell you that, as I 

understand it, the range for a family would be around $5,000; and 

in New Jersey that is not even going to buy half of the average premium for a family. So New Jersey would need a little more reform. 

If we had the opportunity, for example, to buy health insurance 

policies across State lines and got a tax credit to purchase that, 

then we could really start to eliminate the uninsureds from the 

rolls. 

Mr. SHADEGG. Many of us have advocated not only a refundable 

tax credit but the creation of more insurance pools, allowing more 

pooling mechanisms so people would have more choices and obviously creating a level playing field in terms of taxes so people could 

buy health insurance on the same tax basis that a company can. 

Would you support those reforms? And do you think those would 

help the people of New Jersey? 

Mr. WEBBER. Well, absolutely; and that is why I am eager for the 

States to get a shot at this and really take our cut, not in the way 

that New Jersey has tried it but in the way New Jersey can try 

it going forward. And association group plans like you are talking 

about, certainly, after health care choice and interstate purchase of 

health insurance, would be one of the top things we would want 

to do. 

Mr. SHADEGG. Thank you very much for your work in this area. 

And I think Mr. Chairman, I concluded my last question within the 

5 minutes. 

Mr. PALLONE. And I certainly appreciate that. 


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Mrs. Capps, our Vice Chair. 

Mrs. CAPPS. Thank you, Mr. Chairman; and I thank you all for 

your patience and your testimony today. 

I particularly want to thank and welcome my constituent, Mr. 

Robert Freeman. The program that he described, CenCal, and the 

counties that I represent in Congress, I can attest to the fact that 

you, since its beginning, which I was a part of as a community 

member and also one who worked in public health nursing in the 

school districts, that it is very successful, very effective, and now 

has grown to include two counties and is part of, as you describe, 

the alternative ways of delivering Medicaid, which we know as 

MediCal, and Healthy Families in California. 

Now, I want to give you a chance to expand further but ask you 

some—two or three questions. One of the complaints that we are 

hearing from many who oppose a public plan option is that it 

would we weed out unfairly, they say, private competitors. Can you 

elaborate on how CenCal competes and does business alongside of 

private entities for the Healthy Families Program, which is how we 

term the SCHIP in California? Are there still private plans offering 

coverage? And how do you get along with one another? 

Mr. FREEMAN. Thank you, Mrs. Capps. 

Sure, in the California SCHIP program it is called Healthy Families. It is set up as a competitive model where they have the States 

divided into regions and in those regions counties where you would 

have multiple plans compete for the Healthy Families business, 

usually three or four health plans in a designated area. And in 

those areas where, like in Santa Barbara and San Luis Obispo 

counties where we are from, we are a public plan and we compete 

with private insurers, as well as those other areas of the State that 

have public plans. 

And in the 10 years that the Healthy Families Program has been 

going, the competition between the public and private models has 

been, we think, effective. It has been friendly. It has been, I think, 

successful in providing choice and in giving options for those subscribers as to which health plan they would like to join. 

Recently, actually, we have had a couple of the private plans pull 

out of our area because—I don’t know their reasons. I am assuming 

the business situation changed. But—so now we are one of only— 

instead of four plans, we are one of two plans in both Santa Barbara and San Luis Obispo counties. And we do think one of the advantages of our plan is because we are created by—of the community, we can’t exit the market place. We wouldn’t. Our mission is 

to serve our service area. 

But, in general, I think the competition has—it has done as it 

was intended to do at the time. 

Mrs. CAPPS. Actually, I described San Luis Obispo County where 

the number of private providers has dwindled in large part because 

of the lack of providers. It is a very rural area, and the reimbursement rate being so low, and that there really is a monopoly in the 

private sector. So this really is the only choice that families eligible 

for Healthy Families can choose. 

My second question, does the county organized health system, as 

you have experienced it, have bipartisan support both within our 


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county and the State? It is not particularly seen as a partisan program, is it? Does it enjoy broad-based support; I am asking. 

Mr. FREEMAN. It does. All of our plans enjoy, I think, bipartisan 

support at both the local and State level. I think anytime you have 

a public program that delivers what the policymakers intend it to 

do and is very watchful and efficient with taxpayer monies, I think 

that is something that either—no matter what your party affiliation, that is good public policy. And our assemblymen and State 

senators and county supervisors of both parties and over time have 

been supportive, because they do see it is a community run plan 

where the community actually—the health care community gets together to solve problems. 

Mrs. CAPPS. And I know the State appreciates it, because you 

have saved a great deal of money and provide also very individualized services to your constituents. 

Mr. FREEMAN. We do our best, and we think we have been successful. 

Mrs. CAPPS. And you do have representation on your board, all 

of those sectors. I have talked with many of them. 

Finally, can you tell us how you contract with providers, and especially with safety net providers in the community? 

Mr. FREEMAN. Sure. Safety net providers make up—first of all, 

we contract with all the safety net providers in our community; and 

we consider that county clinics, community health clinics, all the 

hospitals. We have all the hospitals. And we also, which is fairly 

unique for a Medicaid plan, we do cover long-term care. So we contract with all the skilled nursing facilities. And we think that it 

has been—it is very effective. 

We know that—it is important to us that these safety net providers stay healthy, because they do see a large portion of our 

membership. They are open at times when our members can get to 

them. 

And we have also been very mindful that some of these, especially some of these skilled nursing facilities, really are watching 

every penny. So we do our best to make sure they get paid as 

quickly as possible; and at times in the past we have literally cut 

checks early so they can meet payroll and so forth, because it is 

in our interest for them to survive. They are part of our community, they are partners with us, and it is certainly in our interest 

to make sure they are as viable as possible. 

Mrs. CAPPS. Thank you. Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. 

Mr. Pitts. 

Mr. PITTS. Thank you, Mr. Chairman. 

I would like to thank the panel for your testimony, especially 

thank Assemblyman Webber for your comments. 

I would like to ask you, Assemblyman, why does health care in 

New Jersey cost so much? Is it because of the mandates? 

Mr. WEBBER. There is a lot of things that drive the cost of insurance in New Jersey. Certainly, the underwriting rules, notice guaranteed issue, that is, the insurance companies have to take all 

comers, regardless of their health condition, and then the community rating that has been modified recently, that also drives up the 

cost of insurance for many. 


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There are other New Jersey specific reasons. I mean, it is an expensive place to live and work and provide the medical care as 

well. 

But, in addition to those factors, we do have as many as 45 mandated coverages for everything from mammograms to cervical cancer to Wilms tumor and infertility treatments, and there is a series 

of mandated coverages that also drive up the cost. 

Mr. PITTS. How has the price of health insurance increased since 

New Jersey enacted these mandates? Can you give us examples of 

the amounts of increases? 

Mr. WEBBER. Well, it is difficult to pin down how much each 

mandate costs and increased the cost of insurance. But the estimate is that for every 1 percent of increase in the health insurance 

premium that mandates cause as many as 8,000 people in the 

State lose their health coverage because their employers can no 

longer afford to provide it for them or because they can no longer 

afford to purchase it themselves. So just in the last, I believe, 7 

years we have had over 110,000 people in the State join the uninsured rolls. 

At the same time, we are putting in rules and mandates. We 

have mandated over 15 coverages in the last 7 or 8 years in the 

State. So we can continue to increase the costs even as people find 

it more and more unaffordable to purchase health insurance in 

New Jersey. And I just think that is backwards. We need to start 

looking for ways we can provide more efficiently health insurance 

to our constituents. 

Mr. PITTS. In your testimony, you mention that your legislation 

maintains your State’s core consumer protections. What are those 

protections? 

Mr. WEBBER. The legislation would require out-of-State insurance companies to come in and be certified by the State Department of Banking and Insurance, the New Jersey DOBI. In order 

to do that, they would submit themselves to jurisdiction to be sued 

in the State of New Jersey; and if there were complaints or appeals, they would have to submit themselves to the jurisdiction of 

the Department of Banking and Insurance to rectify those problems. 

So a New Jerseyan who would purchase, say, a policy from Colorado wouldn’t be going to Boulder to fight with the insurance company. They could go to Trenton or the local Department of Banking 

and Insurance representative. 

I think that strikes the right balance. It gives New Jerseyans the 

opportunity to purchase health insurance that meets their needs in 

terms of the mandated coverages and the underwriting rules that 

might be written in another State, but it maintains protection for 

New Jersey consumers and allows them to deal with their insurance companies in their home State. 

Mr. PITTS. And do you think that a public plan like the one in 

the discussion draft before us will lead to crowding out of the private insurance market? 

Mr. WEBBER. Well, again, I haven’t seen the bill. But I think, 

just intuitively, when there is a government plan available, subsidized by the taxpayers, without any real profit motive or incentive, there are going to be private companies who will dump their 


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employees into what we call New Jersey Family Care, or whatever 

alternative government program is available, especially as those income levels rise for eligibility in New Jersey. 

Now we have 350 percent of poverty. There are going to be employers who recognize that they can still have their employees covered by insurance and not have to pay for it themselves. I think 

intuitively, yes, they will start to crowd out private health insurance. 

Mr. PALLONE. The gentleman’s time has expired. 

I know the clock is a little weird there. I apologize for that. I am 

going to recognize myself for 5 minutes. 

This discussion about the protections, if you will, it really goes 

to the heart of a lot of what we are dealing with in this bill. I 

mean, I have to be honest with you. When I—you know, Members 

from other States are constantly telling me that they want to make 

sure that, you know, that individuals can get insurance regardless 

of pre-existing conditions. 

I mean, the proposal before us says that insurance companies 

can no longer be able to engage in discriminatory practices that enable them to refuse to sell or renew policies due to an individual’s 

health status. They can no longer exclude coverage or treatments 

for pre-existing conditions. It limits the ability of insurance companies to charge higher rates due to health status, gender, or other 

factors, I mean. It is a very important part of the discussion draft. 

And frankly, when I—you know, I am proud of the fact that in New 

Jersey those kinds of discriminations are not allowed. OK? 

So the other thing you have to understand is that, you know, the 

Insurance Trade Association, AHIP I guess it is called, they have 

told us that they are willing to accept new regulations at the Federal level with limitations on their underwriting rating practices, 

no more pre-existing condition exclusion. 

How is it—and I have to get to three questions, so I am going 

to ask you first, Assemblyman Webber. How is it that the trade association thinks that we should include these provisions and you 

don’t? What is the theory? 

I mean, obviously, they think they can sell insurance nationally. 

They are suggesting that these New Jersey provisions be put into 

the Federal legislation. Why are they advocating that? 

Mr. WEBBER. Well, I can’t speak for the insurance industry, for 

sure. And when there is a big hammer hanging over your head, I 

think insurance companies might be willing to compromise more 

than they otherwise would. 

Let’s say this. There are better ways to deal with people with 

pre-existing conditions and those we call the chronically uninsured 

or chronically uninsurable than to require guaranteed issue of all 

insurance policies. 

Mr. PALLONE. And I just don’t have a lot of time, and I want to 

ask Senator Vitale. I mean, my fear is just the opposite, that if we 

don’t include these provisions or, as you suggest in New Jersey, 

that we simply deregulate, it would have major consequences. I 

mean, I would ask Senator Vitale to respond that. I mean, this is 

a cornerstone of what we are trying to do is to not allow, you know, 

to have these protections at a Federal level. You have them at the 

State level. What happens if we don’t have them? 


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Mr. VITALE. Well, it has been very meaningful for the consumers 

in New Jersey to have guaranteed issue, one of the few States that 

enjoys that provision. It guarantees that insurance companies shall 

write a policy and can’t exclude someone because of pre-existing 

conditions. So, essentially, it is take all comers. 

Imagine an environment in New Jersey, as bad as it is in our 

State for those who are uninsured and every other State, for an insurance company to cherry-pick who it is that they would like to 

insure. Will they decide not to insure women of child-bearing years 

because they are higher risk and they are going to be expensive? 

Mr. PALLONE. And gender is one of the things that has been 

used. Exactly. 

Mr. VITALE. That is right. And will they decide not to insure an 

older New Jerseyan, a pre-Medicare New Jerseyan because he or 

she is at higher risk of anything, heart disease, kidney disease, 

cancer? The older you get, the sicker you get. It is a fact of life. 

Will they only want to insure children? 

When you purchase insurance out of State without the safeguards provided in our State, they will only take those who are in 

good condition who are considered to be a good risk, leaving those 

in New Jersey who are considered to be a higher risk, women of 

child-bearing years, older men and women, out of the mix. And the 

way the insurance business works—and I don’t need to give you 

this lesson—is it is about pooling risk with healthy lives and sick 

lives together and risky lives and less risky lives together and you 

come up with an average price. 

Mr. PALLONE. I don’t mean—I know I am going to have to cut 

you off. Regardless of the debate—and I am going to move on to 

Mr. Allen and just make a comment here. Regardless of the debate, 

though, about whether you think we should deregulate in New Jersey and people should go to other States—I mean, the bottom line 

is that what the discussion draft would do would be to basically say 

that insurance companies would have to apply these rules federally 

across the country. And I mean, if the Insurance Trade Association 

says it is OK, I frankly don’t understand why it wouldn’t be. 

But let me just go to Mr. Allen, very quickly, because I am concerned—you know, I want you to comment, if you will. The discussion draft raises Medicaid eligibility levels to 133 percent of Federal poverty in every State. In addition, it makes available incomebased subsidies for persons obtaining insurance coverage in the 

new health insurance exchange. I think these provisions are very 

important for Native Americans; and I just wanted you to comment 

on them, if you could. 

Mr. ALLEN. Well, without a doubt. I spend a lot of energy on the 

Travel Advisory Council for CMS with regard to Medicaid rates. I 

can’t tell you specifically, you know, because I am not the one who 

actually administers it with my tribe. But we can get back to you 

in terms of, is it enough? Is it going in the right direction? And I 

think it is. Off the top of my head, knowing what we have been 

trying to do with regard to the recovery rates for the tribes, that 

it will help us immensely. 

Accessing Medicare and Medicaid has been real challenging for 

the tribes in terms of the policies they administer over there. So 

it has been difficult for us, and we are looking forward to our new 


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opportunities. I can say that if this bill incorporates some language 

in there that strengthens it and puts provisions in there that it improves our ability to, as providers, whether it is through the Indian 

Health Service or the tribal clinics and hospitals, then it is definitely going to improve our ability to raise the level of services to 

all of our people. 

Mr. PALLONE. I mean, we are trying. I mean, you probably know 

that the Indian Health Care Improvement Act, which you know is 

my bill, that I am the prime sponsor, is coming up in Resources 

tomorrow. We have been trying since the beginning of the year to 

incorporate a lot of the provisions of that, you know, in SCHIP and 

the stimulus and also protections in this health care reform or in 

Native Americans. And we will still try to move the other bill. But 

we do want to and we are really trying, as much as possible, to address some of the disparities that we know exist with Native Americans. I just wanted you to know that. 

Mr. ALLEN. I would also like to inform you, Mr. Chair, that, you 

know, times are changing for tribes in terms of how we provide 

services. So our clinics and hospitals provide services to both Indian and nonIndian alike now. It has changed. Where in the old 

days where we just provided services to the tribal citizens; and 

now, because of the diversity of our communities and the communities around us where, like my community, the providers actually 

bailed out in the community, so we basically took on that role. So 

we have a clinic right now where 95 percent of our patients are 

nonIndian. 

Mr. PALLONE. I appreciate that, and I know I went over. But I 

am just concerned that—I want to make sure that the Native 

American concerns come out. 

Mr. Gingrey. 

Dr. GINGREY. Mr. Chairman, thank you for doing that. 

Mr. Chairman, you were just, I think, asking Representative 

Vitale in regard to why, in the State of New Jersey, this situation 

where there would be guaranteed access, community rating, all of 

these mandates that make it untenable for many insurance companies to continue to do business in the State of New Jersey. And the 

chairman said, well, gee, you know, AHIP says it is OK, and they 

are buying into that across the country. 

But I would suggest that they, as soon as we—if we did this— 

and I hope we do—pull out the mandate that everybody has to 

have health insurance, the mandate that they have to do it, and 

employers also have to provide it, that would be at the point at 

which AHIP would say all of a sudden no longer are we going to 

accept community rating and universal mandated coverage. 

So I will just throw that out there. 

Let me ask a question of Representative Webber. Your State, as 

you said in your testimony, has had massive decrease in insurance 

carriers, I think from 28 in 1992 down to seven insurance carriers 

now in the individual health insurance market. Do you think that 

a public plan like the one we are discussing in this draft before us, 

do you think it will lead to maybe some of these private carriers 

coming back into New Jersey or, rather, a further crowding out and 

lesser numbers participating? 


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Mr. WEBBER. Well, I can’t see any of the private insurers coming 

back just because there is a public plan now being made available. 

You know, there will be fewer lives on the private insurance market. I would assume—you know, bear in mind we might have seven 

companies writing policies, but if you are writing policies and 

charge $18,000 a year in premiums, you are really not intending 

to cover anyone. So we really have fewer than seven who are still 

writing policies seriously in the State. I don’t think it is going to 

get any better anytime soon. 

Dr. GINGREY. Let me ask your colleague from New Jersey, the 

Honorable—is it Vitale? And I heard that—in fact, it is right here 

in this document—that New Jersey has in fact enrolled people 

earning as much as $295,000 a year in public coverage. Yet 23 percent of children below 200 percent the Federal poverty level are uninsured. How can that happen in the State of New Jersey? 

Mr. VITALE. Well, let me—I appreciate that question, but it is a 

question that has been asked and answered during budget hearings 

in New Jersey, of which I am a member, also. But it is a question 

that has a very simple answer, and the answer is that there were 

as many as three or four individuals who applied for coverage in 

New Jersey who lied on their forms when they applied for New Jersey family care. And it was through the process of an audit that 

we discovered that lie. And it was corrected. In fact, I wrote additional legislation that required not only that people fill out more 

information on their form in terms of their income but that Treasury do a back check against their wages and the filing so we know 

exactly what they are earning in the year that they are claiming 

they want to be a member of the program. 

So it was a matter of fraud on behalf of the three or four individuals that made big headlines. But—and, unfortunately, tried to 

give a black eye to the hundreds of thousands of honest New 

Jerseyans and parents and children who are doing the right thing. 

Dr. GINGREY. Reclaiming my time. I mean, I have got a sheet 

here of all the States and the average annual premiums in the individual market. In New Jersey, it is $5,300. And you go down to 

Wisconsin, it is $1,200. And I think we are getting some answers 

in regard to what the problem is in New Jersey. 

Mr. Pollack, in the limited amount of time I have left, let me just 

ask you this. I know you have been involved in health care reform 

for a long time. You had a lot of things to say about Medicare Part 

D and government controlling prices and setting prices of drugs 

and things like that. But your organization is, you know, well respected, of course, and has a lot of opinions on all this. 

Let me just ask you a quick question, though. Shouldn’t we require States to ensure that low-income children are covered, let’s 

say in the CHIP program, before opening up coverage to middleand high-income families? 

Now, I ask that question really in a way for my colleague, Representative Nathan Deal, who is the ranking member, as you know, 

on the Subcommittee on Health that has a bill to that effect, that 

had an amendment when we were working on the CHIP program 

to say that if we are going to expand it, let’s at least assure that 

95 percent of those who are intended in the original bill between 


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100 and 200 percent of the Federal poverty level that we cover 

them before going up to 300 and 350 percent. Your response. 

Mr. POLLACK. Well, Congressman, I don’t think it is one or the 

other. The CHIP legislation, which the President signed in February, is designed to accomplish what you just described, namely, 

making sure that more children who have been eligible for CHIP 

actually enroll in the program, and the States are actually provided 

financial incentives in order to do that work. 

Now, when you are talking about 200 percent of the Federal poverty level, remember, for a family of three, that is approximately 

36, $37,000. The average cost of family health coverage today is approximately $13,000. So that is more than one-third of their income. And so if you go above 200 percent of poverty, you are helping people who otherwise could not afford to provide coverage for 

their children. 

And I don’t think those two goals that you described are antithetical to one another. I think we can do and should do a much better 

job of getting kids enrolled who have been eligible and who are not 

in the program; and, at the same time, we should make coverage 

more affordable for those people who simply can’t afford it, even 

though their incomes are above 200 percent of poverty. 

Dr. GINGREY. I thank you. 

Mr. Chairman, I know that my time has expired. I appreciate 

your patience on that. Thank you, Mr. Pollack. 

Mr. PALLONE. Thank you. 

The gentlewoman from Florida, Ms. Castor. 

Ms. CASTOR. Thank you very much, Mr. Chairman. 

Since we have some experts on local and State initiatives, I 

would like you all to address a concern I have. You know, all across 

America, local communities have stepped up to fill the void because 

they don’t have anywhere else to turn. 

For example, in my hometown in Tampa, Hillsborough County, 

we have, for the past 15 years, provided an initiative where if you 

do not have health insurance from any other place, if you don’t 

qualify for Medicaid or Medicare, and you are a working family 

below about 200 percent of poverty, the county has created a partnership with local hospitals and community health centers so that 

these folks don’t end up in the emergency room and county government doesn’t pay those very high costs out of property taxes, which 

everyone hates. 

It is very successful, and it has created a robust primary care 

system of 12 clinics, and hospitals are reimbursed and the doctors 

there are reimbursed. And now, with our health reform initiative, 

it looks like we, the Feds, now will come in and we will cover the 

cost for the people that my community were covering. And that is 

great. That is going to be great for my taxpayers. But I hate the 

thought of losing this award-winning local clinic system of primary 

care system that we have. 

And there are other communities across the country, I think— 

Oakland, California, maybe, San Antonio, Texas, others, plenty of 

others—that have these. How do we, in transition, ensure that 

these terrific initiatives on the local level survive? 

Mr. VITALE. Well, I think the program in Tampa is wonderful, 

and it is programs like that in New Jersey that we are trying to 


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emulate. We have called them collaborative care models. We are 

working with local hospitals who are in close proximity to federally 

qualified health centers and other clinics to transition the uninsured, or even the insured, who present in an emergency department with what is really non-emergent illnesses or injuries. 

We are required, of course, to take all comers, but those who 

present at an emergency department really don’t need to be there. 

So we are working with our local hospitals. So it is a great model. 

I think the question, I hope, I think is, how are those providers, 

those caregivers, doctors and nurse practitioners and nurses reimbursed for the care they would provide? 

Ms. CASTOR. So is it—Dr. Scheppach, is it State leadership that 

needs to step in, because the States will have so much of the responsibility when we are talking about the 133 percent of poverty? 

It is going to be through Medicaid that they will be covered. 

Mr. SCHEPPACH. Yes. I mean, there is a lot of programs now. 

Some States do programs with State-only dollars and a lot of the 

locals do. So there are those sort of tiered effects. This is probably 

going to be—if this bill were to pass, it is going to be a transition, 

I suspect, of 4 to 5 years before you transition. And I think to some 

extent what States would do would be to work with communities 

to ensure that they are doing part of the eligibility. That is feeding 

in. Because all the problems in Medicaid and SCHIP, oddly enough, 

is finding these kids and getting them, in fact, enrolled. And I 

think we are going to have the same problem with the other subsidized populations. 

What worries me very much about this bill, however, is that the 

entire sort of gateway or alliance is Federal. So now you are going 

to have the Federal Government in the middle of this doing insurance regulation for those qualified plans, and then you have got 

States outside that doing nonqualified plans. So I think the coordination problem is going to be greater going forward. I would worry 

about that. 

Mr. POLLACK. Congresswoman, your community is well known as 

doing something that is exceptional. Obviously so many communities across the country don’t do that. And it is one thing to provide primary care as community health centers do. Often people 

who get primary care may have difficulty getting access to a specialist. 

But your question and what Ray was just talking about, I think, 

tells us that, yes, there is going to be a transition, but it makes 

a whole lot more sense to put that lower-income population into 

Medicaid that exists rather than create the exchanges and overburden those exchanges which are going to have significant difficulty 

reaching out to larger portions of the population. Let us keep that 

lower-income population, at least for the time being, in Medicaid. 

Let us see how the exchanges function. But also, let us make sure 

that the protections that now exist uniquely in Medicaid continue 

to be provided to that low-income population. 

Mr. FREEMAN. If I could finish up and briefly add that, again, we 

think that all health delivery is local. And I think we also believe 

that the ability of local communities to address their own needs is 

very effective, and what has happened in your community is a perfect example. 


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And also, when you have the local delivery, you really do—you 

do encourage physicians and hospitals and other health care providers to really talk to each other and work towards this common 

goal of how can we make the community that we all live in a better 

place for all of their citizens. 

So we are big believers in really having whatever comes out of 

the Federal health care reform take a look at what is working at 

the local level and hopefully maintaining that. 

Ms. CASTOR. Good. I look forward to working with you all on 

that. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. 

Mr. Shimkus. 

Mr. SHIMKUS. Thank you, Mr. Chairman. And I have got a couple 

points I want to try to drive, but I will try to be quick and pretty 

efficient. 

Senator Vitale and Assemblyman Webber, when constituents 

have problems with the New Jersey program, do they call your offices? So you have—and that is probably not part of the calculations of the costs. We do the same thing. We have Medicare, Medicaid. We have, I have at least, one person full time to address 

those constituent concerns, and they are not easy, and they are bureaucratic. And I was just wondering, if we take on this as a national health care plan, guess what? We get it all, gang. We are 

going to get all the caseload calls. And that is why you guys support it, because then they won’t be calling your offices. No. 

Let me—and just for the record, Medicare D is very successful. 

Medicare and Medicaid for the 60 years that it was here, still here, 

did not do what the private sector did, which was provide prescription drugs to people who had private insurance. You can’t have 

modern medicine without prescription drugs. Although we have 

carried a system that didn’t have it, and we fixed it, and we are 

under budget, provide better service, and the quality of service is 

high. And I think we can do that in this private sector debate, I 

really do, if we would just give it a chance. 

Let me—I want to go to Mr. Allen real quick. The Indian Health 

Service—I don’t have any Indian tribes, so I am not as familiar— 

isn’t it a one-payer system? 

Mr. ALLEN. It is referred to as a payer of last resort, so it requires that the tribes tap the insurance system or the Medicare or 

Medicaid, and then if there is still a gap in providing services to 

the tribal citizen, then we access the IHS monies. 

Mr. SHIMKUS. OK. Let me go to your encouragement to move 

people, I think, from the Indian Health Service to this insurance 

plan. I guess a better way to ask this is in your testimony, you 

do—you want to exempt the mandates and penalties from the Indian tribes; is that correct? 

Mr. ALLEN. Yes. 

Mr. SHIMKUS. Why would you want to—and we will have problems with that. I know there is tribal issues and sovereignty issues 

and stuff, but if we are going to do a one-size-fits-all arena, we are 

going to have to do a one-size-fits-all arena. I am not sure how we 

start exempting. 


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One of the—and you want—in your testimony you also talk about 

you want exemption from employer mandates that should be exempt even for the Indian tribes that have the benefit of the casinos 

and golf courses and tourism issues; is that correct? 

Mr. ALLEN. Yes. 

Mr. SHIMKUS. And you want that exemption also to employees of 

that facility that may not be American Indians? 

Mr. ALLEN. Say again? 

Mr. SHIMKUS. Say you have an employee at a casino that is not 

an American Indian. 

Mr. ALLEN. Yes. 

Mr. SHIMKUS. And you are pushing for some exemptions of the 

mandates for the insurance provided to them. 

Mr. ALLEN. Yes. Our argument is that the tribal government, 

those businesses are under the umbrella of the tribal government, 

and as a tribal government, that it should be exempt. 

Mr. SHIMKUS. I got it. 

I have got one last question, and I want to try to be respectful 

of the time. 

Senator Vitale, Assemblyman Webber, what is your FMAP percentage? Do you know? Do you know what FMAP is? Do you know 

what your percentage is? 

Mr. VITALE. For those who are Medicaid and those childless 

adults covered in Medicaid are 33 percent of the Federal poverty 

level. 

Mr. SHIMKUS. But what is our share? What is the Federal payment? 

Mr. VITALE. Now, what is it—— 

Mr. SHIMKUS. I think you are 50 percent. Who is California? 

Freeman? 

Mr. FREEMAN. I believe it is 50 percent. 

Mr. SHIMKUS. What would you say if there are States that have 

higher FMAP rates? Would you say that is intrinsically unfair and 

un-American that this Federal Government would allow some 

States to get a higher Federal reimbursement for Medicaid versus 

others? Senator Vitale? 

Mr. VITALE. Well, we are for—— 

Mr. SHIMKUS. I am just talking about fairness. We are all citizens of the United States. The Medicaid is a Federal program, 

shared with the State. We do—we have a ratio of what we are 

going to compensate. Would you say it is fair that some States pay 

less than other States? 

Mr. VITALE. I would say that it is unfair that some States get 

less, and New Jersey is one of those States. 

Mr. SHIMKUS. So I will take that as yes. 

And I am going to end up with Assemblyman Webber. 

Mr. PALLONE. This will have to be the last question. 

Mr. WEBBER. The same question. You are talking to a guy from 

a State who gets pennies back on the dollar that we send down to 

Washington. So I am not going to advocate for New Jersey to give 

money away, if that is the question. 

Mr. SHIMKUS. No. Should every State be given the same ratio? 

Mr. WEBBER. I don’t think I am an expert. 

Mr. SHIMKUS. Say yes. 


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Mr. PALLONE. You can’t tell him what to say. 

Mr. SHIMKUS. Let me tell you, if the bottom line is if Mississippi 

gets 76 percent return, and you are getting 50 percent, should we 

change the law? 

Mr. PALLONE. Don’t answer the question, because he is a minute 

over. We have to try to stick to the time. 

All right. Mrs. Christensen. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. I think just a few 

brief questions. 

Mr. Allen, like Chairman Pallone, I am a member of Natural Resources, and there are several others of us on this Health Subcommittee and on the big committee, so we definitely have an interest in addressing the issues of the Native Americans in our 

country, and the tri-caucus, I will tell you, has taken a position of 

equity for American Indians as well as territories. But we haven’t 

really addressed some of those exemptions that you have put in 

your testimony, so that is very helpful to us. 

But the urban Indians, the Indians who are not on the reservations, we generally have had problems in coverage and reaching 

that population. Do the recommendations in your testimony address the unique issues of that population, or are there other recommendations that you might want to add? 

Mr. ALLEN. The answer is, yes, we have additional recommendations. The provisions in the bill go a long way to helping fill the 

gap. There is a lot of very positive conditions in there, including access to subsidies. 

The issue for us will be that over half of our citizens of each of 

the tribes in general are outside what we call the service area, and 

they are in urban communities, et cetera. And if we are able to access the resources to serve them if they are underserved, then we 

can fill that gap. We can close that gap. That has been an historical gap for the tribes. 

This testimony is in collaboration with the National Indian 

Urban Centers, and they work very closely with us trying to fill 

that gap. But there are service centers who have been severely underfunded historically and don’t even come close to providing the 

quality care that this bill is intended to address. 

Mrs. CHRISTENSEN. Thank you. 

Dr. Scheppach, my Governor and Governor deJongh of the U.S. 

Virgin Islands is an active member of NGA and has signed on to 

the policy statements on health care reform, energy, and many of 

the other ones. We have a particular issue with Medicaid and 

wanting to get the cap lifted, at least begin to move in that direction. Does the NGA have a position on the territories if you support 

it? Are you supporting my Governor in his attempt to move the 

cap? 

Mr. SCHEPPACH. I sure am. We do have a policy position to support all the territories in raising the cap. Yes. 

Mrs. CHRISTENSEN. Thank you. 

Mr. Pollack, it is good to see you here. You have told us about 

some of the reports on Medicaid that show—that are positive, but 

there are also some other reports that, while, yes, there is increased access to services and to care, there is still some reports 

that show that the outcomes are not as good as they need to be. 


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And you didn’t really have a chance to talk about where we may 

need to go to improve on Medicaid, which I feel we definitely need 

to do. Medicaid patients are often in another line if they are not 

in the back of the line because they are Medicaid patients. The 

cost, as you said, of providing that service is lower than the private 

insurance market, but part of that is because they don’t pay, and 

so the providers do not locate or they move out of poor areas. So 

we have access issues. 

You know that I have proposed that we put the Medicaid patients into the public plan. I am not going to necessarily ask you 

to comment on that, but do you have some suggestions as to how 

we can improve Medicaid outcomes? How can we improve Medicaid 

and make it not only just so that patients can get to a physician, 

which is often a problem, but that we can ensure that they have 

better outcomes? 

Mr. POLLACK. I think one of the biggest problems that exists for 

those people on Medicaid is sometimes they have difficulty getting 

a doctor, and that is largely a function of the payments that are 

provided, that are given to providers. 

I am happy to see that in this draft bill there are some improvements made with respect to payments to primary care doctors. I 

think there is also, I think, hope for improvements because there 

is an experiment proposed here, a pilot program for medical homes. 

So I think those kinds of things will lead us in a much better direction in making care actually much more accessible for people on 

the program. 

Mrs. CHRISTENSEN. My time is up, so I don’t get to go back to 

the public plan issue. We will talk about that again. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. 

Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. I just have one question. 

Dr. Scheppach, in your testimony, you mentioned you would oppose changes to Medicaid that were drawn in an unfunded mandate. And having served 20 years as a State legislator, I can relate 

to that. And you say States must take into consideration not only 

actual costs of including individuals on their roles. I understand 

why you oppose a Medicaid expansion if it is unfunded, but what 

about a mandate to cover the population the States are already 

supposed to be covering under Medicare? And I will give you an example. 

In Texas, we have approximately 900,000 uninsured children; 

600,000 are Medicaid-eligible but unenrolled, and 300,000 are 

SCHIP-eligible but unenrolled. And I would like Texas to cover 

those children, and I would like to mandate 12 months of continuing eligibility under both programs to do so. Texas has that responsibility to cover these children, but has repeatedly allowed 

these kids to drop off the SCHIP and Medicaid roles in order to 

avoid paying the State match. We cannot continue to allow children 

to remain uninsured so States can avoid paying their match. 

Short of federalizing Medicaid, what can we do to ensure States 

cover the individuals under Medicaid that they are responsible for 

covering? And I can understand what my colleague Mr. Shimkus— 

although as a lawyer probably the worst case I have ever seen of 


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leading the witness when you say, ‘‘Please answer yes.’’ I don’t 

quite go that far. 

But what can we do short of federalizing Medicaid to get States 

like Texas and maybe Florida from my colleague Ms. Castor to 

cover more of the children particularly, since we have had SCHIP 

since 1997, and Medicaid for 30 years? 

Mr. SCHEPPACH. In all seriousness, one of the problems with 

Medicaid is it is three sort of programs in one. It is women and 

kids, it is the disabled, and it is long-term care. And it is the longterm care that we think is the biggest problem because the demographics are changing and so on, and a lot of the dollars really go 

there. The women and children are relatively inexpensive and a 

good investment. 

And so the problem is, is that Medicaid now is 22, 23 percent of 

the average State budget, about what all elementary and secondary 

education is. And right now, from a State perspective, we are looking at about 180 billion in terms of shortfalls over the next 3 years. 

So what you are seeing, and I think you are beginning to—Texas 

is a little bit better off than a lot of States, but it also has a problem of basically raising the State’s share to cover those. 

I think at some point Medicaid needs to be restructured so that 

the long-term care portion of the population goes into a separate 

trust fund or so on. States, I think, understand it is sort of their 

responsibility, women and children, because it is also a population 

they have to work with in terms of welfare and other things. So 

I don’t think the women and kids are a huge problem. 

Mr. POLLACK. Mr. Green, I would say there are two things in response to your question. First, we obviously can do a whole lot better in terms of the enrollment process. It is rather cumbersome, 

and particularly the reenrollment process. After the year is up, and 

a child has been eligible, they have to reenroll. If they fail to do 

that for whatever reason, they are off the rolls. And there is a lot 

of churning in the program. 

So we can do a lot more in terms of outreach and better enrollment. And the CHIP legislation that passed in February actually, 

I think, provides some opportunities to make that happen. 

But with respect to Texas, there is a very important thing. One 

of the things we know is that children are less likely to enroll if 

their parents can’t enroll with them. And in Texas the eligibility 

standard for parents is a meager 27 percent of the Federal poverty 

level. So if you have got a parent and two kids or two parents and 

one child, if that family has income in excess of $5,000 a year, they 

are ineligible. The parents are ineligible. 

So I think one of the things this bill does is it allows the parents 

to enroll with the children, and I think that will help solve the 

problem you are talking about. 

Mr. GREEN. Well, I have a concern again about the churning, because I know in 2003 when some tough budget decisions like our 

legislators have to make, they cut a bunch of children off of CHIPS. 

And they knew how to do it; they made them reenroll every 6 

months. And you can quantify it very quickly to say you know how 

many kids are going to drop off because the parents just can’t go 

down and stand in line at the Health and Human Services office. 

So that is the concern. 


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Thank you, Mr. Chairman, for your patience. 

Mr. PALLONE. Thank you. And I think that concludes the questions for this panel. But I want to thank you. I know it is late, and 

I know you had to wait a long time, but we really appreciate your 

input, because what you are saying at the State, local, and tribal 

level is very important in terms of what we are doing with this 

health care reform. 

Mr. ALLEN. Mr. Chair, could I correct one point that I said that 

was not right in the record? The Congressman from Illinois asked 

were we asking the tribal government and our casino, our businesses to be exempt? We are asking that our governments are exempt, not our businesses. So that is a distinction that I think he 

was asking for with that question, and I wasn’t quite clear. 

Mr. PALLONE. All right. Thank you for that clarification. 

And thank you all, really, for being here. Thank you. 

Mr. PALLONE. And we will ask the next panel to come forward, 

and this is our panel on drug and device manufacturer views. 

I want to welcome all of you. I know the hour is late. It is already 6:00, and we may end up having votes, too, to interrupt us, 

but hopefully not. And I am changing the order a little bit because 

Mr. Gottlieb, I know, does have to leave. 

So let me first introduce Dr. Scott Gottlieb, who is a resident fellow at the American Enterprise Institute. 

And then to his left, I guess my right, is Thomas Miller, who is 

chief executive officer, workflow and solutions division, for Siemens 

Medical Solutions, USA. 

And then we have Kathleen Buto, who is vice president for 

health policy at Johnson & Johnson. Thank you for being here. 

And William Vaughan, senior health policy analyst for Consumers Union. He is no stranger to this committee. 

And finally is my friend Paul Kelly, who is vice president of government affairs and public policy of the National Association of 

Chain Drug Stores. 

And you know the drill: Five minutes, but your written testimony in complete becomes part of the record. 

And we will start with Dr. Gottlieb. 

STATEMENTS OF SCOTT GOTTLIEB, M.D., RESIDENT FELLOW, 

AMERICAN ENTERPRISE INSTITUTE; THOMAS MILLER, CEO, 

WORKFLOW AND SOLUTIONS DIVISION, SIEMENS MEDICAL 

SOLUTIONS, USA; KATHLEEN BUTO, VICE PRESIDENT FOR 

HEALTH POLICY, JOHNSON & JOHNSON; WILLIAM 

VAUGHAN, SENIOR HEALTH POLICY ANALYST, CONSUMERS 

UNION; AND PAUL KELLY, SENIOR VICE PRESIDENT, GOVERNMENT AFFAIRS AND PUBLIC POLICY, NATIONAL ASSOCIATION OF CHAIN DRUG STORES 

STATEMENT OF SCOTT GOTTLIEB 

Dr. GOTTLIEB. Thank you, Mr. Chairman. I would like to submit 

my oral statement for the record. 

I just want to pick up on some themes that were discussed in 

some of the earlier statements. It is a pleasure to be here, by the 

way. I am from the 12th Congressional District of New Jersey, and 

my parents still live there, so it is a pleasure to be here with you. 


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There was a lot of discussion around Medicare’s efficiency in 

some of the earlier testimony, and the issue of rationing also came 

up tangentially in Medicare. 

With respect to Medicare’s efficiency—and I worked at the agency for a period of time under Dr. McClellan—one of the things that 

Medicare lacks is clinical expertise on the staff, and I think it has 

become quite apparent in recent years. If you look at the structure 

of Medicare, they have about 20 physicians in the entire organization. If you look at private plans, by comparison they will have literally hundreds. And I think this gets to an important consideration when you talk about why Medicare is able to operate with 

less overhead. It is in part because they are not doing a lot of clinical review, for better or worse, in the context of the kinds of reimbursement decisions they have made and even the kinds of coverage decisions they make. 

Just anecdotally, they made about 165 different decisions with 

respect to cancer products since 2000 without a single oncologist on 

the staff of the organization. And why this is important, I think, 

with respect to the intersection of talking about Medicare’s efficiency and the low overhead that they operate with, and then you 

get into discussions around rationing, is because it is without a 

doubt that we already engage in issues of rationing with respect to 

the Medicare program. We are doing it right now in the context of 

coverage decisions and reimbursement decisions and how we go 

about coding. And my fear is that if we expand government control 

over health care, we are going to have to do those things much 

more. 

If you look at the kinds of proposals that have been put forward 

in front of this committee, as well as the proposals in the Senate, 

and you look at some of the cost containment measures in those 

proposals, they are really not very robust. Comparative effectiveness, product medical records, paying for prevention, all those individual proposals might have merit on their own, but there is a reason why the Congressional Budget Office hasn’t assigned meaningful savings to them. 

And so the fear is, of people who talk about the potential for rationing inside a government program, is that in the absence of 

being able to control costs with policy prescriptions that are embedded in these bills, ultimately the default case 2, 3, 4 years from 

now will be to have to engage in more robust rationing decisions 

inside the Medicare program or whatever other government scheme 

we come up with. And if you look at the draft legislation in the 

Senate and the House, you see multiple references to quasi-independent advisory committees that we could certainly contemplate 

could become vehicles for that sort of rationing. 

So why is this important in the context of thinking about Medicare structure and its efficiency and its overhead? Well, if one of 

the reasons why Medicare is efficient and operates with a low overhead is because they don’t have a lot of clinical expertise, the intersection between an organization that is going to be called upon to 

engage in more decisions to deny access on the basis of their own 

clinical judgment and their reading of the clinical literature with 

an organization that doesn’t have a lot of clinical expertise is, quite 


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frankly, frightening. And it was frightening in certain instances, 

anecdotally, when I was at the organization. 

And so in my written testimony today I tried to lay out a couple 

suggestions for how we could improve that process, because if we 

are to go down a road where we will have a system that has to 

make more clinical judgments in the context of what they decide 

to reimburse people for and give people access to, the least we 

should expect is that organization is clinically proficient, it is rigorous, it is based on good science, it is a transparent process. And 

we have none of those things today. 

And so some of the proposals I laid out in my written testimony 

was the creation of an advisory committee structure on Medicare 

where you subject decisionmaking of that body to external therapeutically focused advisory committees. Certainly if we contemplate 

a public insurance plan that will be making similar kinds of decisions either initially or eventually, we should create a similar 

structure. I think we also need to contemplate what the structure 

is for making coverage process decisions, reimbursement decisions, 

coding decisions, and making clinical considerations in the context 

of these programs. 

If you look at the structure right now of Medicare, if you were 

to ask anyone in a company, or if someone in a company, CEO, 

asked one of the subordinates who works on Medicare coverage 

processes what is the process, they would be hard-pressed to delineate that process in a clear and coherent fashion, certainly not with 

the same clarity that you would be able to explain the FDA review 

process, which is very clear, very structured. 

Finally, in the proposals before this committee, there is a proposal for the creation of a comparative effectiveness center agency, 

if you will. I think before we step into that, once again we need 

to think about the structure for how that information will be used. 

And in many contexts of government decisionmaking, when scientific information is being created by a government entity, there 

is very clearly delineated in legislation regulation what the threshold is for an actionable piece of data. When will a piece of data 

reach sufficient scientific rigor to be deemed actionable for a regulatory body? Certainly this is a case at FDA where you have a clear 

threshold for actual information in the context of the paradigm 

around P equals .05. There is no contemplation of what the threshold will be for actionable information on the part of any government organization with respect to comparative effectiveness information. And I think marrying the criteria inside CMS and any 

other government plan with the criteria used by FDA for consideration of comparative information, it certainly would be a step in 

the right direction, and I recently wrote a long paper on this and 

put it out for the American Enterprise Institute. 

But in summation, Mr. Chairman, I don’t see a lot of elements 

in the proposal before this committee that we could have confidence 

are truly going to bend the cost curve in a way where we are realigning reimbursement with the kinds of outcomes we want to see 

these programs achieve. And in the absence of that kind of reimbursement scheme, I fear we are just going to have more of the 

kind of wasteful spending that we have seen under Medicare; that 

the marketplace for health care is inefficient not in spite of MediVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00505 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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care, but, frankly, because of the way Medicare pays for things. 

And so if we go down the route where an organization like Medicare—— 

Mr. PALLONE. I know you said you are summarizing, but you are 

a minute and a half over. 

Dr. GOTTLIEB. I am finishing right now—make more decisions, I 

think the least we can do is make sure it is a clinically rigorous 

process. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. 

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Mr. PALLONE. Mr. Miller. 

STATEMENT OF THOMAS MILLER 

Mr. MILLER. Thank you, Mr. Chairman. It is an honor to be here. 

I represent Siemens Health Care. It is one of the largest medical 

technology companies on the planet. And I can only say to you, 

when I was a young medical physics student at MIT studying 

quantum electrodynamics, I thought that was hard, but the task in 

front of you folks seems to be a lot more difficult than that. 

In the written testimony, we talked about four what I would call 

myths surrounding medical-imaging technology, and we tried to 

dispel those myths. And the myths were, first, that medical-imaging technology increases the cost of care. We would actually argue 

just the opposite. 

It is amazing that the phrase ‘‘exploratory surgery’’ has vanished 

from our vocabulary. It is because of imaging. It used to be 30 percent of appendectomies were unnecessary; we were cutting open 

healthy kids. We don’t do that anymore. It used to be the patient 

coming into an ED with stroke symptoms would be observed, and 

now we use a CT scanner with clot-busting drugs to take care of 

them with potentially millions in cost savings for care later. And 

CT angiography is now being used to intervene in intermediaterisk chest pain patients, avoiding healthy patients going for 

angiography. 

One thing in common with all these examples. We introduced 

something that seems to be expensive, that raises costs, but the 

total cost of care actually goes down. 

The second myth that I wanted to address was that the financial 

self-interest of physicians has led to technology overuse: The evil 

physicians are just lining their pockets by ordering unnecessary 

exams. That is not true. Over 90 percent of imaging tests are ordered by nonradiologists, read by radiologists who have no financial link. In fact, medical imaging increases have happened also in 

Canada, a nation we have talked about a lot today, and there is 

no financial incentive to do so. 

Imaging is being used more. It is being used more because of the 

diagnostic confidence. You know, I am a physician, I want to know 

what is going on with my patients, I will order an image. 

Further reductions in reimbursements are the best means to reduce costs. We would actually argue just the opposite. Demand and 

supply in medical imaging are decoupled. By reducing reimbursement, you reduce supply. You do nothing to affect demand. And the 

DRA, which was implemented a couple of years ago, resulted in 

dramatic cuts, saving up to three times what the CBO estimated. 

Our business was affected by it by a 30 percent reduction, and we 

ended up laying off a bunch of people. I hate laying off people. That 

wasn’t pleasant. 

But last but not least, anyone that even attempts to argue that 

the use of advanced medical technology does not produce health 

care outcomes will have a fight with me. And breast cancer is the 

best example. It has been cited here before. It used to be a death 

sentence. It is not anymore. We find it earlier. 

So what are our suggestions and recommendations to the committees? First, we wish to applaud the committee on four things: 


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First of all, the attempt to permanently fix the Medicare physician 

fee schedule sustainable growth rate formula; second, the abandonment of the Ways and Means Committee formula fix that would 

have created a separate expense target for radiology; the lack of a 

recommendation for radiology benefits managers. Personally, I like 

physicians to manage my care. I also wish to thank the House committees for not increasing utilization calculation on equipment in 

the draft from 50 to 95 percent, as some people estimate. 

Let me make one point clear. A 95 percent utilization assumption 

would result in rationing care. We finance many of our customers. 

We know what their P&Ls look like, and medical imaging centers 

will close. Access will plummet, especially in rural areas. Wait 

times will result possibly for time-critical care, and hospitals in 

their current capital constraints state they can’t pick up the slack. 

Now, 75 percent, your recommendation, is better than 95 percent, but there has no credible data for either number. I think we 

had better study it and figure out what the access impact is before 

we do either. 

So how do you get costs under control? What would we recommend? Well, you could do what Massachusetts General Hospital 

did and have physicians develop appropriateness guidelines. They 

reduced diet patient CT growth from 12 percent per year to 1 percent per year, despite of the fact their outpatient visits went up. 

We could get behind that. 

We have been a strong advocate for accreditation requirements, 

containing the Medicare improvements for patient providers back 

to 2008, which assures that if you don’t meet the accreditation, you 

don’t get paid. 

We support comparative effectiveness research. It might surprise 

you, but we do. We are a fan of our technology. We think it does 

good. But we support it only if it looks at the entire longitude of 

care, because as we have said, we believe in some cases the cost 

for imaging will go up, but the resulting expenses longitudinally 

will go down. 

And, finally, we commend other legislative efforts to fund medical-imaging research. Specifically, we need to find a diagnostic imaging test for prostate cancer to benefit men like mammography 

has benefited women. The PRIME Act in House Resolution 353 

does exactly this. 

To conclude, medical imaging not only improves health care, it 

saves lives, and it also contributes to cost reductions in health care. 

So we should be careful of any policy that could reduce access. 

I thank you for the privilege of representing Siemens Health 

Care in this national dialogue and your patience. 

Mr. PALLONE. Thank you, Mr. Miller. 

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Mr. PALLONE. Ms. Buto. 

STATEMENT OF KATHLEEN BUTO 

Ms. BUTO. Thank you, Mr. Chairman. My name is Kathy Buto. 

I am vice president of health policy for Johnson & Johnson, and we 

really appreciate the opportunity to be here to comment on the discussion draft. We very much support enacting legislation this year 

to provide coverage for all Americans, and we look forward to working with the committee toward that end. 

By way of introduction, I want to just say that I focus on a broad 

array of health policy issues for Johnson & Johnson worldwide in 

many countries, including China and India as well as the United 

States, and I have spent much of my career on these issues, including 18 years with the Health Care Financing Administration where 

I was involved with implementing changes in Medicare and Medicaid and in efforts to pass earlier health care reform legislation. 

I am going to focus on really four things, and leave to you my 

written testimony on a number of other provisions that we support 

in the bill: wellness and prevention, comparative effectiveness research, part D of Medicare, and the public plan. So first wellness 

and prevention. 

As an employer that has focused for more than 30 years on improving the total health of our employees, we strongly support the 

inclusion of prevention benefits and zero cost sharing to promote 

greater wellness in the population. Our CEO, Bill Weldon, was invited recently to meet with President Obama along with other executives to describe their experiences in reducing risk factors in the 

workforce. And I will just give you one example. At Johnson & 

Johnson over a 10-year period beginning 1995–1999 and measuring 

a difference in 2007, we reduced smoking from 12 percent in the 

workforce to 4.3 percent. And we had many results like that, which 

are in the written testimony. So we believe that this is critical. We 

at J&J have saved about $250 million over 10 years through these 

efforts. 

Now, comparative effectiveness research. We are very pleased 

that the bill includes an enterprise that will focus on improving the 

evidence physicians and patients can use to make treatment and 

care decisions. And while we have great respect for the Agency For 

Healthcare Research and Quality under Carolyn Clancy’s leadership, we actually believe a public-private entity provides a stronger 

long-term framework with transparency of methods and processes, 

inclusion of stakeholders, and a focus on clinical comparative effectiveness research. We think a public-private entity can build trust 

and collaboration, which is critical in this important area; leverage 

additional research dollars of physician and academic groups as 

well as industry; and create a broader-based constituency for sustainable funding resources for this enterprise. 

Rather than provide a single assessment of cost effectiveness, we 

believe the entity should provide information that allows the market to determine the relationship between clinical value and costs 

for different patients of varying plans. And I would include, for example, minorities and women who have particular issues in this 

kind of research. 


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Now, switching to Medicare Part D. We want to commend the 

committee for taking on this difficult issue of closing the coverage 

gap or doughnut hole over time. The pharmaceutical industry’s recent proposal to provide discounts of 50 percent for the majority of 

beneficiaries in that gap we think is going to complement your approach by providing immediate relief in reducing those costs. 

We also want to applaud the committee for allowing payments to 

be made through AIDS drug assistance programs and the Indian 

Health Service to count toward meeting the out-of-pocket threshold 

as well. 

Let me conclude by talking a bit about the public plan. We certainly support having a health insurance exchange that can provide 

information for the public on different options, and we support a 

number of the other changes proposed, such as administrative simplification and insurance reforms. We think these changes are 

going to actually make the government plan unnecessary, and we 

believe concerns about a public plan takes the focus off sort of job 

number one, which is achieving coverage of all Americans and 

identifying sustainable financing approaches as well as making 

fundamental changes in the system of care. 

Providers like the Mayo Clinic—and they were recently cited in 

an Atul Gawande article in the New Yorker as providing highest 

quality care at the lowest cost—have been very vocal about their 

concern that the public plan is going to use Medicare rates and 

therefore not cover actual provider costs. Cost shifting will ultimately lead to higher-cost private plans and ultimately a dominant 

public plan that underpays. We are concerned, and our industry is 

concerned, because systematic underpayment of providers will undermine the market base system that allows incentives to find 

cures for cancers, Alzheimer’s, and other dread diseases. 

We also are concerned about government negotiation of pharmaceutical prices reducing the willingness of our industry to undertake risky and long-term investment needed to produce important 

treatments. And we also think this threatens American leadership 

in medical innovation in ways that we don’t fully understand and 

would be hard to anticipate. 

The last point on this is that biologics promise to be a major avenue for breakthrough medicines and one we know the committee 

is considering. We have been at the forefront in the U.S. And other 

countries of supporting a regulatory pathway for biosimilars that 

assures patients safety and preserves incentives for life-changing 

and life-saving medicines. We have strongly supported H.R. 1548, 

introduced by Representative Anna Eshoo, which has over 100 cosponsors. 

I will leave to you the written testimony which enumerates a 

number of other provisions in the discussion draft, such as the 

Medicaid eligibility; expansion of funding for community health 

centers, which we have recently supported in a bill introduced by 

Representative Clyburn and others; as well as a focus on health 

disparities and health literacy; and a process to make payments between two physicians from industry more transparent. 

So thank you again for the opportunity, and we look forward to 

working with you. 

Mr. PALLONE. Thank you. 


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Mr. PALLONE. Mr. Vaughan. 

STATEMENT OF WILLIAM VAUGHAN 

Mr. VAUGHAN. Thank you, Mr. Chairman and Members, for inviting us. 

Consumers Union is the publisher of Consumer Reports, and we 

don’t just test tires and toasters; we try to help people with medical 

products. And we do strongly endorse the approach taken in the 

tri-committee draft, assuming that additional savings are found or 

progressive financing to make sure that it is budget-neutral and 

sustainable over time. 

We believe the draft is a plan that can give all Americans that 

peace of mind of health security and an affordable quality system. 

The draft bill has done an excellent job of identifying a number of 

savings, both large and small, but we hope you can dig deeper for 

some more savings to stop that Pacman that is gobbling up our 

GDP. Gotta try. 

As for PhRMA’s pledge for $80 billion in savings, wow, that is 

great. Congratulations to PhRMA, but I think it was Ronald 

Reagan used to say, trust but verify. We hope that you can get this 

in legislative language in a way that CBO would score it for $80 

billion in savings. 

We like the drafts bill trying to close the doughnut hole, and we 

really like the provisions on helping low-income people in Part D. 

We would like to see that doughnut hole closed faster, but that 

would take more money, and we suspect that PhRMA is likely to 

say, hey, we have given at the office, go away. But we hope you 

will keep pushing on that door a little bit. 

There should be no excuse whatsoever to reduce the pressure for 

the maximum use of generics in Part D. In fact, you might want 

to consider an amendment to get a rebate from Part D plans that 

are poor in doing generic substitution. 

There are a lot of other sources of money on the table. H.R. 1706, 

by Mr. Rush and seven others of this committee, would ban reverse 

payments from brand companies to generics to keep the generic off 

the market. Yesterday the FTC Commissioner said: Gee, that 

would save the government about $1.2 billion a year and consumers $3.5 billion a year. Hope you guys can do that one. 

We have supported Mr. Waxman’s follow-on biologics, but we 

have got to find a solution. Last June—as of last June, Europe had 

approved over 10 of these, and I am assuming they have gone higher, and we are sitting here paralyzed. And so we hope you can 

come together and work something out, because that is essential. 

The June MedPac report that has just come out in talking about 

FOBs also suggested maybe take a look at reference pricing. Why 

pay more for something that doesn’t bring more to the table than 

what you are already paying? 

We urge you to also support giving Medicare negotiating authority in Part D. Once you get a good food and drug safety program 

in place on imports, let us have reimportation or free trade in pharmaceuticals. And, a new idea, require rebates to Medicare for drug 

inflation in excess of population growth and CPI, except—except— 

no rebate on a new kind of drug, a new molecular entity that the 

FDA would identify. This would get you a handle on spending, but 


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move the industry more towards really breakthrough research. If 

my wife sees an ad on TV for a fourth type of ED, she is going to 

throw something at the TV. I mean, we need lifesaving breakthrough research, and not just more of some of these ‘‘me too’s.’’ 

The other areas, we love comparative effectiveness research provisions in your bill. Save the consumers a ton of money. If you 

want to see how it works for consumers, the last page of my testimony takes a look at heartburn medicine and proton pump inhibitor stuff. And if you look at the science that the comparative effectiveness research brings, there is no particular difference between 

a $20 pill and that purple pill. And working with your doctor, check 

it out. We always say check with your doctor first, but why in the 

world would you start with a $200-a-month medicine when you can 

get a $20-a-month one that is just about as good? 

Finally, we endorse the physicians’ payment sunshine provision 

in this bill. That is the one that would disclose how much drug and 

device companies are giving to doctors and med schools. We think 

those gifts aren’t totally free. They come with some strings of influence, and we need to stop that. 

Thank you so much for your time. 

Mr. PALLONE. Thank you, Mr. Vaughan. 

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Mr. PALLONE. Mr. Kelly. 

STATEMENT OF PAUL KELLY 

Mr. KELLY. Thank you, Chairman Pallone and Ranking Member 

Deal. National Association of Chain Drug Stores appreciates the 

opportunity to testify today. 

I am Paul Kelly, vice president of Federal Government affairs, 

and I am substituting today for Carol Kelly, our senior vice president, who was ill and sends her regrets. But I really appreciate 

your indulgence in allowing me to pinch hit. 

NACDS represents the Nation’s chain pharmacies, whose 40,000 

pharmacies and 118,000 pharmacists fill 2.5 billion prescriptions a 

year. That is 72 percent of all prescriptions nationwide. Pharmacies 

are the face of neighborhood health care. There is a community 

pharmacy, on average, within about 2 miles of every American. 

One of pharmacy’s major contributions is helping with medication adherence. Simply put, adherence is taking medications correctly. It has major implications for patient health and for health 

costs. Nonadherence leads to long-term health complications that 

diminish the quality of life, and nonadherence has been estimated 

to cost $177 billion annually. I am here to make recommendations 

that will help prevent this problem from getting worse. 

Preventing it from getting worse involves preserving access to 

pharmacies. Essential to this is reforming the pharmacy-Medicaid 

reimbursement system. As you know, the Deficit Reduction Act of 

2005 would set pharmacy reimbursement for some generic drugs at 

36 percent below cost. The issue is complex, but it boils down to 

a basic principle. This is unworkable for pharmacies, as it would 

be for any health provider. Unless Congress intervenes, current 

policies would put 20 percent of pharmacies at risk, most of which 

serve low-income individuals. 

Last year Congress blocked implementation of these severe Medicaid cuts until October 1, which we appreciate. We also appreciate 

that members of this subcommittee, including you, Chairman Pallone and Mr. Deal, remain highly cognizant of this issue, and we 

really appreciate your leadership, Mr. Pallone, in keeping this 

issue on the radar screen. We are also grateful that the committee 

draft recognizes the need to address this problem, and there is an 

AMP provision in that legislation. But as this legislation unfolds, 

we would emphasize there are several essential reforms that we 

think are needed to ensure a patient-centered Medicaid AMP policy. 

First, average manufacturer price, or AMP, which will be used 

as a basis for reimbursement to pharmacies, must be defined correctly. 

Second, AMP-based Federal upper limits should be determined 

using weighted average AMPs rather than the lower AMP. And we 

sincerely appreciate that the draft includes this provision. 

Third, Federal upper limits should be set when there are three 

sources of supply, the brand and two generics. Setting limits prior 

to that when there are two sources of supply is premature. 

Fourth, there is a concern that the multiplier of 130 percent that 

is proposed in the draft is not sufficient to ensure pharmacies are 

reimbursed fairly. 


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And, fifth, we deeply appreciate the provision in the draft to 

strike the requirement to post brand and generic AMPs on a public 

Web site until AMPs are based on an accurate definition. 

Now, regarding the cost of nonadherence and increasing the 

quality of care. We appreciate the recognition of medication therapy management as part of the medical home concept in the committee’s draft. MTM, medication therapy management, is preventative care and includes services designed to help ensure drugs are 

used appropriately to maximize health and reduce adverse medication events. Pharmacist-provided MTM services have been shown 

in one study to reduce overall health care costs—overall costs by 

$12 for every dollar invested. 

Our recommendation is to enhance and expand the medication 

therapy management program in Medicare Part D, and we thank 

Congressman Ross and Congressman Murphy of this subcommittee 

for their leadership on this issue. 

We have other recommendations, including the need to maintain 

patients’ access to diabetes management tools through their neighborhood pharmacies. Two current rules related to the treatment of 

durable medical equipment and Medicare jeopardize access to diabetes care and jeopardize patient health. We recommend that 

health reform legislation address this misapplication of these rules 

to pharmacies, which pharmacies are already licensed and highly 

regulated by the States. We are the good actors when it comes to 

Medicare durable medical equipment, and additional hurdles and 

costs are simply counterproductive. We thank Congressman Space 

for his leadership on this issue. 

In closing, part of the value of pharmacy is its ability to help patients stay on medication therapy. The improvement of lives and 

reduction of long-term costs is worth fighting for, and we look forward to working with this committee in pursuit of those goals. 

Thank you again for your support, Chairman Pallone, and look 

forward to answering any questions. 

Mr. PALLONE. Thank you. 

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Mr. PALLONE. And we are going to go to questions, and start 

with the gentlewoman from the Virgin Islands Mrs. Christensen. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. And I know the 

hour is late. I am not going to have a zillion questions. But I want 

to start with Mr. Miller. 

And, first of all, let me say that no one supports—I don’t support, 

and I know you don’t support—unnecessary or duplicative tests. 

That being said, though, I really appreciate as a physician your defense of physicians in your testimony and your defense of the diagnostic technologies. As you said, and I had made note of this before 

you said it, I think we have forgotten how far we have come from 

the days when you had to undergo anesthesia, one risk; laparotomy, another risk, to make these diagnoses. But my question— 

you said that your experience is really in HIT. Is that correct? Did 

I read that in your testimony? 

Mr. MILLER. I have actually experience in both diagnostic imaging, HIT, as well as therapies. 

Mrs. CHRISTENSEN. Sure. But I wanted to ask about HIT. I think 

you were very clear in your defense of the technologies. We have 

been told by many that the projected savings from HIT are grossly 

exaggerated. And I wondered if, based on your long-time experience 

on HIT, if you had any thoughts on whether that was the case, or 

whether we would be realizing the savings that we think we are. 

Mr. MILLER. The answer to the question is, unfortunately, it depends. If we simply say that what we will do is digitize all information for all patients at all times and think that will lead to productivity, I think we are misguided. I don’t know about you, when I 

get an e-mail with a huge attachment to it, I still print it out. And 

I used to run with the largest health care information technology 

businesses in the world. 

The fact of the matter is, just like pharmaceuticals, to get efficiency out of health care information technology, you need the right 

information about the right patient and the right context of care 

going to the right provider at the right time. It is a lot different 

than just a big file full of data. If a patient is coming to me with 

severe chest pain, I don’t want to know about the mole that was 

removed last week as the first thing I see in the file. I want to 

know whether they are taking medication. I want to know what 

contraindications for medications there may be. This requires a little more intelligence. 

So I think the potential is there. We certainly have customers 

who have realized a lot of potential. But the devil is in the details, 

and an inexpensive HIT system which simply takes all data, logs 

it, and makes it available will not change productivity. Productivity 

rhymes with activity, not with information. 

Mrs. CHRISTENSEN. Thank you. 

Ms. Buto, we applauded J&J’s wellness and prevention programs 

and also the recent proposal by PhRMA to cut the cost of medication during the doughnut hole by 50 percent. We also appreciate 

your support for elimination of health disparities in the community 

health centers that you stated in your testimony. We do have a 

point of departure on the public plan which the tri-caucus is fully 

supporting, and which I think this committee is bending over backVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00570 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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wards to ensure that it does not undermine our market-based system. 

But I wanted to ask about the CER issue. I have joined with 

other Members in legislation that goes so far as defining the committee that will oversee it and ensuring that the membership on 

that committee, representative of all of the stakeholders, important 

to the tri-caucus as well. We directed that research must be done 

on women and racial and ethnic minorities so that we will really 

have the best science for everyone. And, further, we direct that the 

outcome of that research would only be used to provide clinical 

guidance. 

Does this address some of the concerns that you raised, or are 

there others that remain? 

Ms. BUTO. It sounds like your approach really does address many 

of the concerns I have raised. And I think the other issue that once 

you dig below the surface on minorities and women and other subpopulations is as we get closer to personalized medicine, I think we 

are beginning to realize we need a different approach doing the 

clinical trials that actually helps us sort so that we can provide and 

be more targeted in the treatments we develop. And we are trying 

to figure out how to do that in a way that gets those targeted treatments that, again, will be better value for money in the system, but 

also will get to subpopulations, minorities, women, and others who 

will benefit. And we are still sorting through that. But I think that 

is part of the equation as well, and it sounds like your approach 

would allow for that kind of research to go on. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. 

Mr. GREEN [presiding]. Congressman Deal for 5 minutes. 

Mr. DEAL. Thank you. 

Mr. Kelly, you are familiar, I think, with H.R. 3700 from last 

Congress that was introduced by Chairman Pallone. I believe you 

have generally been supportive of the language that was in that 

piece of legislation. What is missing from this draft that was in the 

bill Chairman Pallone introduced last year, 3700? 

Mr. KELLY. There are some differences. We certainly appreciate 

that the committee in its draft bill has recognized the importance 

of this issue and included improvements to the existing law in the 

bill. We also appreciate your leadership over the years in trying to 

be helpful in this issue as well. 

As I understand it, H.R. 3700 defines AMP in a way that reflected pharmacies’ acquisition costs, which is our top priority and 

really central to this debate. The committee’s draft currently does 

not include that, and that is an important priority of ours, and we 

look forward to continuing to talk to the committee about that. 

That is reflected in our written statement. That is one of the major 

issues. 

Mr. DEAL. You mentioned that States should consider both components of reimbursement when determining what they are going 

to pay pharmacists for. What are those two components? And 

would you explain why it is important to consider both components? 

Mr. KELLY. Certainly. Thank you. 

Historically, pharmacies have been paid for the drug product 

itself and for dispensing the product; so reimbursement here and 


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then a dispensing fee here. In Medicaid, the States on average reimburse the pharmacy $4.40 to dispense the products. All the evidence indicates that it costs the pharmacy about $10.50 to actually 

dispense a prescription drug when you consider all the overhead 

that is involved with running a modern pharmacy today. So it is 

important to make sure that reimbursement for the drug product 

is right, which is why getting the AMP definition is so important 

when it comes to Medicaid product reimbursement, which the Federal Government has sole jurisdiction over. The States control the 

dispensing fees in the Medicaid program. 

And I tell you, this committee and Congress could really help us 

quite a bit with CMS on this issue of dispensing fees. When DRA 

was passed, there was a ton of legislative history which indicated 

the expectation was and the encouragement was that States would 

allow for increased dispensing fees for pharmacies. Well, about a 

half a dozen States have submitted State plan amendments requesting just that, and CMS has shut down every single one of 

them. In fact, just this week the State of Washington submitted a 

State plan amendment that would have increased fees by a nickel, 

and CMS shot it down. So to the extent folks on the committee can 

be helpful in that regard, CMS, we would sure appreciate it. 

Mr. DEAL. So the two products. One is control at the Federal 

level, that being the payment for the drug itself, which is the AMP 

issue that you alluded to, and you don’t think this draft addresses 

that issue as clearly as the Pallone legislation did. And then the 

second component being the dispensing fee, which is a State issue 

by and large, is still left that way under this draft legislation. Is 

that correct? 

Mr. KELLY. There is nothing in this draft that we have seen that 

indicates any policy changes on dispensing fee. And you are right, 

there is product reimbursement, and that relates directly to how 

you define AMP and how you reimburse and calculate the AMP. 

Mr. DEAL. I believe when we were dealing with the MMA, we 

tried to make sure that seniors had a pharmacy that was going to 

be close enough and accessible enough for them to handle their 

pharmacy needs. I don’t think there is any language of a similar 

nature in this draft. Did you find anything that would address that 

issue? And, if not, is that something we should be concerned about? 

Mr. KELLY. We have not seen that in this draft. And you are 

right, that is a part of the Medicare drug benefit. They actually use 

the TriCare health care program access standards for community 

pharmacies, access to community pharmacies. 

Look, seniors want access to pharmacies. Most citizens want access to pharmacies. They want it to be convenient. That is very important. As I said in my testimony, there is a pharmacy within a 

couple miles of everybody, on average, in the country. 

You know, I am not sure how those access standards would fit 

into the context of this bill. It made sense for the drug benefit 

when you were creating that, but I am just not sure at this moment whether it would fit into the context of this particular bill. 

It came up very recently, as you know, and we are still kind of 

combing through it, quite honestly, to get a sense for that. 

Mr. DEAL. Thank you. 

Mr. GREEN. Congresswoman Schakowsky for 5 minutes. 


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Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

I would like to start with Mr. Vaughan, and I welcome you. And 

I don’t know if I have seen you in this role before, but you have 

been on the Hill for a long time, too. 

In your written testimony, you identified as a cost-saver legislation that I introduced with Representative Berry, H.R. 684, the 

Medicare Prescription Drug Savings and Choice Act, which allows 

Medicare to negotiate for lower drug prices. 

I am wondering if you could talk a little bit about how that 

would reduce costs. 

Mr. VAUGHAN. Yes, and thank you for that cosponsorship. And 

it would probably be—you know, we have got good competition in 

generics and stuff—this would be a place where in a biologic that 

came in at one of those very, very, very high prices, if the Secretary 

could work with it a little bit, bring the price down—and I know 

it works. 

I happened to work for the Chairman of the Ways and Means 

Health Subcommittee in 1989 when the first big blockbuster biologic came in, EPO for folks with kidney disease. And as I recall, 

the company wanted a launch price, and the Chairman was saying, 

whoa, we are the monopoly buyer, everybody in the kidney program is in Medicare. And you have got a monopoly company. Let’s 

negotiate. The then-Secretary didn’t particularly want to do that, 

and it took a lot of press releases and screaming and hollering and 

threats of hearings and stuff. 

But I do really believe that that jawboning by just one, not just, 

by a subcommittee chairman on the Hill pushed the Secretary 

enough that we got that price down $3, $4 a unit. We should have 

gotten it down, 8 or 9, you know, if the Secretary had been a little 

more gung ho on it. But that company recovered its entire investment in that drug in 9 months, and is making over a billion dollars 

a year in profit from Medicare from that drug now. And we didn’t 

do a very good job negotiating, but we saved billions. But it can 

work. 

Ms. SCHAKOWSKY. So we don’t have to imagine it. 

Yes, Ms. Buto. 

Ms. BUTO. Bill, I have to kind of disagree with your memory on 

this. I was at HCFA at the time. I actually did negotiate that price. 

And it was done way before the chairman got involved, because the 

company came to us saying, this is an ESRD drug. ESRD is a 

Medicare population. And we decided that—I decided I couldn’t do 

this alone. So I got the Inspector General’s Office and the Office of 

Management and Budget to sit down with us, and we went through 

SEC filings. This was a company with one drug and one drug in 

the pipeline, and we did the best we could around the table to do 

that. I think you all came along; and I think rightfully so, said, you 

know, can’t we maybe take another dollar off? You did that legislatively. 

Ms. SCHAKOWSKY. So you can fight that out later. But the point 

is it worked. 

Ms. BUTO. My point was this: In spite of the fact that it was one 

company with one drug, we had a very difficult time actually doing 

the negotiation. That was actually my point. 


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Mr. VAUGHAN. It is difficult, but you did get some money out of 

it. And I stand corrected. Congratulations to you for having started 

it all. 

Ms. BUTO. It wasn’t about money. Can I just make the point? It 

was about making sure that ESRD beneficiaries had it at the moment that FDA approved it. We wanted to make sure because there 

was no other market that there wasn’t a huge delay before they 

could get access, and that was the reason we needed to set a rate. 

Because otherwise, Medicare waits for a year or so, and the rates 

are set in the marketplace, right? 

Mr. VAUGHAN. Yes. 

Ms. BUTO. It was about access. 

Ms. SCHAKOWSKY. It is about access. But I think if we institutionalize this notion of Medicare being a negotiator, with the huge 

network that it represents, that we can do better than we do right 

now. 

Ms. BUTO. I disagree that. 

Ms. SCHAKOWSKY. You don’t agree with that? 

Mr. VAUGHAN. I do agree. 

Ms. SCHAKOWSKY. Well, don’t insurance companies regularly negotiate for their subscribers? 

Ms. BUTO. They do, and they set formularies, and my experience 

with Medicare is that it has been reluctant, shall we say, to set formulary restrictions on what Medicare will cover, because the notion 

is that—and we always had this underlying our coverage policy— 

is that the beneficiary population is very diverse and usually fairly 

chronically ill. And so to exclude certain things just to get price 

down—— 

Ms. SCHAKOWSKY. Well, in our bill, in the bill actually that we 

are talking about, we do set a formulary in the draft for the public 

option, right? 

Oh, in my bill we actually talk about a formulary so that we can 

negotiate. I guess my time is up. 

Mr. GREEN [presiding]. Out of time, thank you. Congressman 

Pitts, 5 minutes. 

Mr. PITTS. Thank you, Mr. Chairman. Thank you, panel, for your 

wonderful testimony. 

Mr. Miller, you said that a large part of imaging is done without 

any association to the financial self-interest of the ordering physician. You also said that the increases in use of imaging are perhaps 

too often attributed to a financial incentive in ordering the test. 

Do you believe that one possible reason for the rise in imaging 

could be the practice of defensive medicine? Do physicians order 

tests to protect themselves from potential medical liability? 

Mr. MILLER. I can only speculate that that could be the case, in 

some cases. I can also state that if, when we speak to our customers and ask them, because it is important when we design machines we ask them, you know, why do you order tests? What are 

you trying to look for, what are you trying to discover? The great 

majority of time they are really telling us we want to be able to 

see this disease process. We are having difficulty because we don’t 

know if the patient has X versus Y. 


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Now, in knowing if a patient has X versus Y before they treat, 

if that is defensive, then I can only agree with you. It is probably 

also good medicine. 

Mr. PITTS. MedPac has given us clear indication that it feels 

there is a tremendous overuse of medical imaging and that we 

should rein in the use and reimbursement of such use. 

Do you feel that there is overuse, and what do you feel is the appropriate way to get at that issue? 

Mr. MILLER. I don’t think that there is overuse, by and large. Are 

there cases of overuse that might crop up in someplace or another? 

Yes, probably. However, as I stated in my testimony, what we really believe and support as an industry is appropriate in this criteria. 

I do believe that we should have guidelines which are physiciancreated and physician-administered that guide people to say, for 

this type of symptoms, this test is appropriate. For patients with 

this background of illnesses, this test is appropriate. 

Doing so may have, however, two consequences. There are times 

when a test won’t be ordered because it is inappropriate. There are 

other times—and we see this just as often—that a patient will be 

subjected to a slowly increasing series of tests. They will come in 

with chronic headaches and then something has been going on for 

a long time, and an X-ray of the head will be ordered. An X-ray 

of the head will show you the skull. Not many headaches caused 

by the skull. 

So sometimes it could lead to actually an increase in the type of 

imaging that is ordered, a temporary increase in cost. But our argument has been and what I have tried to put forward is that, 

knowing the patient’s condition precisely, characterizing the disease in detail before you start to treat, is probably the best way to 

save cost in health care; because there is nothing more expensive, 

more wasteful or more unethical than treating a patient with the 

wrong treatment for their disease or, even worse, starting the 

treatment for a disease they don’t have. 

Mr. PITTS. I have just a couple of questions on the DRA. You 

mentioned in your testimony the large reductions that the DRA imposed to medical imaging, and that during the first year of implementation, that growth in imaging was reduced to only 1.9 percent. 

What do you think the reasons were for growth in previous 

years? And do you feel that the DRA was the only factor in this 

slowing of the growth? And what was the impact of the DRA and 

the dissemination of new updated technologies to patients? What 

would be the impact on future cuts to advanced imaging technology, such as CT, MRI, PET, nuclear imaging, do you think this 

would—what impact? 

Mr. MILLER. Well, we have an advantage that we do business in 

about 180 countries of the world, so we can look at use patterns 

not only in the United States, but in many other countries and see 

trends and see changes. The DRA had a sudden drop in imaging 

growth, which we didn’t see in any other countries at the same 

time. So, in other words, it must have been the DRA. We didn’t see 

it happen in Canada, we didn’t see it happen in China. We didn’t 

see it happen in South Africa, any country in Europe, et cetera. 

DRA happened, growth was reduced. 


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In other countries where there has been no DRA and no financial 

linkage that would cause overuse, we have seen medical imaging 

increase year over year in almost every other market we are in. It 

is increasing in China, it is increasing in Australia, it is increasing 

in Germany. It is increasing everywhere, because, as I said, we are 

substituting more expensive physical and invasive tests with things 

that are noninvasive, more comfortable for the patient and, frankly, 

looked at as whole as cheaper. 

I think the DRA did cause in some parts of the country, some 

of our customers to, frankly, go out of business. I don’t think that 

it resulted in a sea change in care, but we start to get it to limit. 

And therefore, what I would argue is in some ways—I hate to 

phrase it this way—we gave once at the office. We took a large cut 

in our industry and we are now at the point where more reimbursement cuts to the supplies of a service will definitely cause reduction in access. 

Mr. PITTS. Thank you. Thank you, Mr. Chairman. 

Mr. PALLONE [presiding]. Thank you. Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. The Chair got back. Otherwise I was going to recognize myself for 2 hours to answer—ask 

questions, because I know we were all having so much fun today. 

But I appreciate it, Mr. Chairman. 

Let me first ask, Mr. Miller, you mentioned in your testimony 

the large reduction that the Deficit and Reduction Act imposed on 

medical imaging, and that during the first year of implementation 

that growth in imaging was reduced by only 1.9 percent. 

What do you think the reasons were for the growth in previous 

years, and do you feel like that the DRA was the only factor in 

slowing that growth? 

Mr. MILLER. The growth was starting to slow somewhat in previous years. There were years in which the growth was faster. It 

started to slow even before the DRA. But the DRA was a quantumstep change in the growth of imaging. As I have stated before, I 

believe the growth in imaging has simply to do with its utility. 

One of the best examples I can give is that we will probably see 

a growth in the use of computer tomography in the management 

of chest pain. That is going to grow. And it is going to grow and, 

frankly, if it were my family members or me, I would want it to 

grow, because right now the standard of care in many places for 

chest pain is, you either sit for a long time to get blood tests, the 

blood tests determine whether your myocardium is dying. Or you 

get put in a cath lab for a very invasive exam. A CT-scan for chest 

pain has an almost 100 percent negative predictive rate. In other 

words, if it doesn’t show you have disease, you can go home. 

You are therefore avoiding two things. You are avoiding either 

sitting around the ED, or if it is late at night, getting checked into 

the hospital. Or you are avoiding a $10,000 catheterization. Forget 

about the ethical issues. And I believe, if people have informed me 

correctly, you have some experience with this. 

Mr. GREEN. I do. And I have to admit I joked a few years ago 

that I got belt and suspenders when I was diagnosed for having a 

heart problem. And it turned out, I did the catheter, and then they 

said, well, why don’t we see if we can do the scan? And I sat there 


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and watched it, and I felt like I was getting lobbied with a hospital 

gown on, and paying for it at the same time. 

But I appreciate that because I know in this bill we are concerned about that. I just don’t want, and I don’t think members 

want to cut off some of the newer technologies we can get that are 

less invasive and that actually can be cheaper than, for example, 

a catheter. 

Mr. MILLER. I think that the point I want to make I can best 

make by one also very personal experience, my father; 18 months 

ago my dad had a stroke. Amazingly, I was in the neighborhood 

when it happened. I showed up at the emergency room when he 

had it. The emergency room was outfitted with a state-of-the-art 

CT-scanner, from us. And they were able to rule out hemorrhage. 

He was a candidate for a clot-busting drug. When he came to the 

ED he could barely speak. Part of his face was paralyzed. After the 

drug, some hours later, he now speaks perfectly with his grandchildren. 

Now, I would ask you, was that expensive? Yes. But what would 

be the cost of the rehabilitative care over the rest of his life had 

that not been available? The real issue in looking at these costs is 

we must look longitudinally over the entire not only episode of 

care, but the entire sequence of care. 

Mr. GREEN. Let me go on, because I have questions and only limited time. 

Ms. Buto, I have been working on a piece of legislation, H.R. 

1392, which removes the prompt-pay discount to extend it to wholesalers from the average sales price of Medicare Part B drugs. Most 

of these drugs are oncology therapies, including chemotherapy, and 

are administered in physicians’ offices or in outpatient settings. As 

you know, many oncology practices have been reimbursed for these 

Part B drugs at 2 percent under the price they purchase the drugs 

because of the prompt-payment discount. 

One point of opposition to the bill is that some believe the passage of this legislation and the removal of the prompt-pay discount 

will result in higher costs to the government if manufacturers raise 

drug prices, because the physicians will be reimbursed at the proper rate of the drugs. 

I believe the price increases in the Part B drug market are largely a function of the level of competition for these drugs rather than 

a result of the terms included or excluded from methodology. 

Would you agree with that? And do you believe that the removal 

of the prompt-pay discount will directly result in drug manufacturers raising their prices? 

Ms. BUTO. I do agree with your position, and the prompt-pay discount is really a factor in the average sales price that recognizes 

the cost of doing business. So we really don’t think it is a legitimate factor that should go into the average sales price. 

I agree with you as well that it is the competition among the different drugs in a class that are going to drive the average sales 

price, not removal or adding of this factor to the ASP. 

Mr. PALLONE. Mr. Green, as you can see, the time—the electronic 

timing devices have ceased to exist. 

Mr. GREEN. I promise not to take my 2 hours, Mr. Chairman 


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Mr. PALLONE. You are almost at a minute over. From now on, 

I am going to have to tell you manually what the time is. 

Mr. GREEN. Oh. Can I just get one more question? 

Mr. PALLONE. Sure. Go ahead. 

Mr. GREEN. Again, Ms. Buto, as a strong supporter of H.R. 1548, 

the pathway to biosimilars is sponsored by Representatives Eshoo, 

Inslee and Barto, and I saw your testimony in support of the bill 

as well. 

I am particularly concerned with the patient safety, and this bill 

allows for clinical trials and the approval of biosimilars. 

Could you elaborate for the committee on why clinical trials for 

biosimilars are an important part of the approval process for 

biosimilars? And I believe it is important to allow innovator companies to have adequate time to make a return on their investment. 

There is no incentive for these innovator companies to develop 

these lifesaving treatments, if you don’t allow that. Can you discuss 

the data exclusivity provision of H.R. 1548? 

Mr. PALLONE. Quickly, please. 

Ms. BUTO. Very quickly. And I can just say I am not an expert 

on this, but I will tell you that our clinical experts are available 

to the committee. And one of them was an official in the Biologic 

Division at the FDA. 

But briefly, the reason clinicals are so important is that biologics 

are generally protein-based compounds and they are not chemicals. 

So they are not, they can’t easily be, in fact, they cannot be replicated. And that is why the clinical studies are so important. 

Our own experience is, even when we changed the bottle stopper 

on our biologic, it created an immunogenicity problem that created 

some real adverse effects. So you can make a small change. If you 

are not careful in doing the studies, you won’t know between the 

innovator and the biosimilar. So it is important. 

Mr. GREEN. Thank you for your time. 

Mr. PALLONE. Thank you. From now on I am going to have to— 

oh, it is back up. All right. Here we go. Great. All right. Next is 

Mr. Shadegg. 

Mr. SHADEGG. Thank you, Mr. Chairman. And I trust I will get 

the same indulgence. 

Mr. Miller, I want to begin with you. I have my own experience. 

I had bypass surgery, I think 7 years ago now, and I am a huge 

fan of the work that you and Ms. Buto do. I think it is vitally important that we fund that kind of research and that we fund both 

the development of drugs, cutting-edge drugs and of cutting-edge 

biologics. 

I believe I heard you, Mr. Miller, say that you like a physician 

to manage your health care. Was that—is that what you said? 

Mr. MILLER. Yes, that is. 

Mr. SHADEGG. And I take it you would agree with me that some 

of us who have concerns that physicians won’t be able to manage 

health care if we have government-controlled single payer, whatever you want to call it, health care—at least if it put a bureaucrat 

between you and your physician, you would be concerned about 

that, would you not? 

Mr. MILLER. I would be more than concerned. 


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Mr. SHADEGG. OK. Great. I believe at one point you said that 

something would cause access to plummet and especially in rural 

areas. I take it that is any limitation on technology or on the availability of analytic devices such as the type you are advocating—imaging? 

Mr. MILLER. Here is the point I was trying to make. In many 

rural areas if the reimbursement rates were driven by a formula 

that insisted on a 95 percent—which is not in this draft—but a 95 

percent utilization rate, there will be rural medical imaging centers 

that will just go out of business. I mean, we know this. They will 

go out of business. You might say, well, that is oK. They can just 

drive a little further to a hospital, get imaged there. 

Hospitals these days have capital constraints. They are not ordering extra capacity because they can’t afford it. And even worse 

than that, I mean, populations are getting older. Imaging exams 

are being dominated not by the technology, but getting the person 

into the room, calmed down, on the table, comfortable with the 

exam and getting back off. There is a limitation to what you can 

do. 

And frankly, one last point. The high-tech stuff supports some 

low-tech stuff. Mammography, for example, gets supported by some 

high-tech stuff. That will also go away. 

Mr. SHADEGG. I think your point is exactly right on; that imaging 

has, in fact, in the long run brought down the cost of health care, 

and I think restraints placed on imaging have been a mistake. 

You said that you support, and your company supports, comparative effectiveness research so long as it is looked at in the entire— 

I think you said longitude of care. I would agree with that. But my 

concern is if that longitude of care is looked at by a government 

bureaucrat only looking at dollars and cents, as opposed to a physician or a group of physicians looking at both cost and benefit, I am 

deeply concerned that comparative effectiveness research could, 

quite frankly, put the government in the position of devastating 

both drug development or pharmaceutical development and device 

development. If somebody is sitting in there kind of second-guessing you guys, I don’t know how it doesn’t restrain your capital. 

Mr. MILLER. We have the same fear. We have the fear that if it 

is not done right, it can simply be a way to restrain technology development, which would be horrible for the United States. We are 

are a net exporter of health care technology. That would be a huge 

mistake. 

However, we look at all technology we develop and ask ourselves 

a single question: Does it change the care of the patient in cost, 

quality and time? All three factors must be simultaneously considered. And if so, comparative effectiveness research can be a good 

thing. If not, as you imply, and in the way in which you imply it, 

I would be dead-set against it. 

Mr. SHADEGG. Ms. Buto, I believe you testified very similarly. I 

believe in very carefully selected language you said, in the hands 

of physicians, in the hands of people using it for valuable purposes, 

comparative effectiveness research can be very good; but that if it 

is, in fact, used to ration care, as it perhaps has been done in other 

countries, that would not be good. Am I correct? 


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Ms. BUTO. You are correct. We have had the experience where 

treatments for which there is no alternative have been denied 

based on the application of a cost-effectiveness threshold that most 

people would admit is kind of arbitrarily set. So I do think it is valuable. I think in this country, people will use it; physicians will use 

it and patients will use it. So I have no doubt that it will—the 

value proposition will enter in, but at the right level, rather than 

being set at a national level by a national entity. 

Mr. SHADEGG. You also expressed concern about government negotiation of drug prices. Do you fear that if we had a single-payer 

system or if we get a public plan that has the power of the government behind that? 

Ms. BUTO. Yes. I was reading the discussion draft and there was 

government negotiation within the public plan section. That has 

great concern for us, as I say. I think our concern really comes 

from the cascade of public plan dominating, and then a public plan 

really becoming more commodity-based in its approach, trying to 

squeeze down cost by setting prices. That will definitely inhibit innovation. 

And again, we think this country has been a leader in innovation, and we want to maintain that leadership as well as the strong 

position in the economy that these biologic and pharmaceutical and 

device companies play in making our economy strong. 

So there are a lot of reasons, but the real fear is that you have 

a cascading effect that results in really a commoditization and lack 

of incentive for the research to go on to develop new treatments. 

Mr. SHADEGG. I want to thank all the witnesses for their testimony. I want to thank the Chair for his indulgence. And I just 

want to conclude by saying, for me, the single greatest fear I have 

of either a public plan which would compete with and, I believe, ultimately undermine and destroy private health care insurance, or 

a single-payer insurance, is that it will end innovation. 

And I mean, right now we have clinical effectiveness research 

done by the government. If you put forward either a pharmaceutical, saying it will reduce John Shadegg’s blood pressure, or a 

device that will perform a prostate cancer operation on him, you 

have got to prove that it is clinically effective. 

And I am all in favor of doctors or insurance companies being 

able to use comparative effectiveness to look at the cost effectiveness of my care. I want somebody to say look, Congressman, this 

drug will be financially much better now for you than that drug. 

But putting comparative effectiveness authority in the hands of 

a bureaucrat whose job it is to meet numbers criteria rather than 

to assure, first and foremost, patients’ care, I believe is very dangerous and, I believe, for the world. 

I mean, it seems to me—I happened to just drive down here from 

New Jersey yesterday and passed Johnson and Johnson’s headquarters. And I know that that is a central part of the economy of 

New Jersey. And I just pray that we don’t do something that will 

drive capital away from the cutting-edge research that we have, because I am sitting here alive today because of the work you all 

have done, and I would like America to stay out front. And I fear 

that under any publicly government-run program, we are going to 

inhibit that capital, and we are not going to have the kind of cutVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00580 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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ting-edge medicine that you get when free markets invest and explore for those drugs or those biologics. 

Mr. PALLONE. Thank you. The gentleman from Ohio, Mr. Space. 

Mr. SPACE. Thank you, Mr. Chairman. And I would like to thank 

the witnesses for their indulgence. I know it has been a very long 

day. And I may be the last member to question you. I am sure you 

are happy to here that. 

I come from Ohio’s 18th Congressional District. It is a very rural 

district. It is, for the most part, within Appalachian proper. And 

one of the things that we suffer from is a lack of access. 

Mr. Kelly, I want to thank you for referencing my bill in your 

testimony, which I have had a chance to review. This bill is designed to exempt those pharmacists who have, in good faith, practiced without fraud or abuse from the surety bond requirements 

imposed by the last administration as a part of the Medicare DME 

system. 

And in our district, we have got—I have got one county that has 

one pharmacist in the entire county. We have a significantly higher-than-average incidence of diabetes, and the diabetes we do have 

is not being properly managed. Many of the people that I represent 

don’t have the insurance to purchase test strips, for example, which 

is a very critical component of the management process for those 

who suffer from diabetes, Type 1 diabetes in particular. 

And I am interested in your thoughts on H.R. 1970—that we 

dropped, concerning the exemption of those pharmacists—and as to 

how it will affect those pharmacies that are really serving as the 

primary interface with much of the health consumption community, as well as how it may affect the ability of people who are either uninsured or have policies that don’t provide significant coverage and their abilities to purchase things like test strips or other 

DMEs. 

Mr. KELLY. Certainly. I thank you, Mr. Space. And as to your 

bill, H.R. 1970, we fully endorse it and support it and appreciate 

your introducing it. 

The cost of chronic care has been chronicled a lot in this debate 

on health care reform, and it is very important to get a handle on 

chronic care. Only 50 percent of the folks with chronic conditions 

take their medications as they are prescribed. And that is a problem. The people who can help them with that are pharmacists in 

communities like yours and across the country, in every community, low income and upper income, across the country. 

As it relates specifically to these new requirements, the surety 

bond requirement that the last administration imposed, CMS actually predicted—projected, I should say—that 25,000 DME suppliers 

would probably drop out of the program as a result of this new surety bond requirement. And this surety bond would apply to each 

and every pharmacy in a chain of pharmacies. And that is a big 

deal, not just to members of mine who have 6,000 pharmacies 

across the country, but half of our members have 20 or fewer stores 

in their chain. So we have a lot of small business people operating 

pharmacies across the country. That is going to be a huge expense 

and a huge hassle to them to obtain a surety bond just to continue 

to provide diabetes testing supplies and testing strips and glucose 

monitors to diabetic patients. 


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In Medicare, seniors overwhelmingly obtain their diabetes testing supplies from their local neighborhood pharmacies. And they 

are going in there to get their insulin already. 

Mr. SPACE. All right. And many of these DMEs, glucose monitors 

and test strips, for example, are over-the-counter products. These 

are not prescriptive products, correct? 

Mr. KELLY. That is absolutely right. The patient is able to walk 

in and obtain that equipment from the local pharmacist. Our concern, as you have articulated, is that this new requirement and 

others would really hassle pharmacies out of this program. And 

that destroys continuity of care. And we are talking a lot in the 

health care reform debate about the importance of continuity of 

care. It is especially true with chronic conditions like diabetes. If 

a patient can’t get their diabetes testing equipment at the same 

place where they are already getting their insulin, it doesn’t make 

a lot of sense to us, and you are going to break that bond that is 

so important right now for good care. 

Mr. SPACE. Thank you, Mr. Kelly. And I yield back the balance 

of my time, all 12 seconds. 

Mr. PALLONE. Thank you Mr. Space. Unfortunately for the panel, 

I still have questions to ask. Hopefully, I will be the last one, unless someone else shows up. 

I wanted to start with—I wanted to ask Ms. Buto a question; 

then I wanted to ask Mr. Miller. I will try to get both of these in 

in the 5 minutes or so. 

Ms. Buto, the President reported 2 days ago that the White 

House had reached a deal with pharmaceutical manufacturers to 

cut costs for seniors, with incomes up to $85,000, in the donut hole 

by 50 percent for brand-name drugs. AARP CEO Barry Rand, along 

with Senators Baucus and Dodd and representatives of the pharmaceutical community were involved in reaching the deal. 

We agree with the importance of rectifying this major flaw in the 

prescription drug bill that left seniors with no coverage between 

$2,700 and $4,350. And the discussion draft fills about $500 of this 

cost immediately and then phases out the donut hole for all Medicare beneficiaries over time. And the discussion draft reinstates the 

ability of the Federal Government to get the best price for prescription drugs for the most vulnerable low-income Medicare beneficiaries. Those savings are used to fill the donut hole for all Medicare beneficiaries. 

And my question is—and I asked AARP the same question yesterday—can you clarify for me, do you see this proposed provision 

in the draft as working together with the commitment by the pharmaceutical manufacturers, thereby filling the donut hole for seniors; or do you view your agreement with the White House in lieu 

of that discussion draft provision? 

Ms. BUTO. First let me just clarify something and make sure that 

I have your question correct. You know, we feel that the 50 percent 

discount will provide immediate relief, obviously. A provision that 

we like in the discussion draft is closing the donut hole over time. 

A provision that we don’t like is applying Medicaid rebates to 

Medicare. So I don’t know if that answered your question. 

But I want to be really clear that we do think that closing the 

donut hole over time in the immediate term, being able to provide 


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these 50 percent discounts, will help a lot in making that more possible. We are hoping it will reduce the cost for the committee of 

getting to that closure. But we don’t support the transfer of Medicaid rebates to Medicare. 

Mr. PALLONE. OK. Well, I understand where you are coming 

from. I just wanted to make sure, because of course AARP said 

that they would like to see us go all the way in the way that the 

discussion draft proposes. And obviously I agree with the discussion draft. I just wanted to get your opinion on that. 

Let me get to Mr. Miller. And I am going back to the point that 

Mr. Shadegg touched on about the comparative effectiveness research, you know, in the context of the health reform effort. The 

discussion draft would create a permanent center for comparative 

effective research. And the purpose of the center is to support research to determine, and I quote, the manner in which diseases, 

disorders, and other health conditions can most effectively and appropriately be prevented, diagnosed, treated and managed clinically. 

In my opinion, it is simply about arming doctors with the best 

info possible to help them make decisions with their patients. It 

says nothing about insurance or cost effectiveness. In fact, the draft 

would prohibit the center from mandating coverage policies. 

But even with all that, you know, we get the attacks from—that 

this research somehow is going to ration care or reduce access to 

new technology. 

So I have two questions. Do you believe that thoughtful, methodologically appropriate comparative effective on this research focused on patient outcomes will help or hurt patients? And secondly, 

Siemens, I know, is on the cutting edge of medical imaging technology because it is, you know, it is basically a revolutionary company. Won’t this research simply validate the quality of your products? 

Mr. MILLER. In both my written and oral testimony, I said I am 

for comparative effectiveness research, with a caveat. And the caveat was that it looks longitudinally across care, and it looks to 

validate which technologies result in ultimately, as I mentioned before, the lowest cost, lowest time, and the best quality for the entire episode of patient care. 

We engage in competitive effectiveness research all the time in 

the company. We will have people come to us and say, every year 

we have budget time, and our engineers all want to spend all of 

the money on everything. And we are big, but we still have limited 

budgets like everyone does. So we have to decide do we invest in 

this new MR, do we invest in this new CT, or this new ultrasound, 

or this new thing that no one’s ever thought of yet? 

To do this we engage in our own form of comparative effectiveness research. It may be done more or less well, but these are exactly the same kind of questions that we actually ask when we decide where we invest our innovation dollars. So therefore, we can’t 

be against it in truth. And plus, if all of the statements I made in 

both written and oral testimony are true, if I truly believe them, 

I have nothing to fear. In fact, what should happen, if I am right, 

is that you will end up spending more money on my technology because it improves patient outcomes. So I support it. It must be 


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done the right way. The devil is in the details, but the concept is 

absolutely supportable. 

Mr. PALLONE. All right. That is what I wanted to find out. And 

I appreciate it. And I think that—— 

Ms. BUTO. Mr. Chairman, if I could just add just one other point 

to what Mr. Miller said. 

Mr. MILLER. You are not going to fight with me. 

Ms. BUTO. No, no. I am not going to fight with you. 

I think the other thing, too, to talk a little bit about is the fact 

that I think the appropriate comparisons are really across—in dealing with the condition across the different modalities. One might 

be a device, one might be a drug, one might be watchful waiting. 

So I think people tend to think drug to drug, device to device. 

And the other thing that has recently come in is the geographic 

variation in the costs are actually being driven by variation around 

process of care. So more visits, more testing around a treatment 

can make a big difference. So I think, you know, as the committee 

considers this, just the complexity of the issues and going beyond 

just the notion of drug-to-drug, device-to-device, to get that bigger 

picture of what comparisons were really after. 

Mr. PALLONE. I understand. And that certainly makes sense to 

me. I think we are done with the questions and done with the 

whole hearing. But really, thank you again. Because I think, again, 

your panel as well as the others were very helpful in terms of what 

we are trying to achieve here with health care reform and so we 

certainly appreciate it. 

You may get written questions within the next 10 days. We 

would ask you to respond to them and get back to us as quickly 

as possible. 

Now, again, as yesterday, the committee is going to recess—the 

subcommittee, I should say, is going to recess and reconvene tomorrow morning at 9:30 to continue our review of the discussion draft. 

So the committee stands in recess. Thank you. 

[Whereupon, at 7:24 p.m., the subcommittee recessed, to reconvene at 9:30 a.m. Thursday, June 25, 2009.] 

[Material submitted for inclusion in the record follows:] 


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COMPREHENSIVE HEALTH CARE REFORM 

DISCUSSION DRAFT—DAY 3 

THURSDAY, JUNE 25, 2009 

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

The Subcommittee met, pursuant to call, at 9:35 a.m., in Room 

2123 of the Rayburn House Office Building, Hon. Frank Pallone, 

Jr. [Chairman of the Subcommittee] presiding. 

Members present: Representatives Pallone, Dingell, Gordon, 

Eshoo, Green, DeGette, Capps, Schakowsky, Baldwin, Matheson, 

Harman, Gonzalez, Barrow, Christensen, Castor, Sarbanes, Murphy of Connecticut, Space, Braley, Deal, Whitfield, Shimkus, Shadegg, Buyer, Pitts, Murphy of Pennsylvania, Burgess, Blackburn, 

Gingrey, and Barton (ex officio). 

Staff present: Karen Nelson, Deputy Committee Staff Director 

for Health; Any Schneider, Chief Health Counsel; Jack Ebeler, Senior Advisor on Health Policy; Brian Cohen, Senior Investigator and 

Policy Advisor; Robert Clark, Policy Advisor; Tim Gronniger, Professional Staff Member; Anne Morris, Professional Staff Member; 

Stephen Cha, Professional Staff Member; Allison Corr, Special Assistant; Alvin Banks, Special Assistant; Jon Donenberg, Fellow; 

Karen Lightfoot, Communications Director, Senior Policy Advisor; 

Caren Auchman, Communications Associate; Lindsay Vidal, Special 

Assistant; Earley Green, Chief Clerk; Mitchell Smiley, Special Assistant; Brandon Clark; Ryan Long; Marie Fishpaw; Aarti Shah; 

William Carty; Chad Grant; Abe Frohman; Melissa Bartlett; Clay 

Alspach, and Nathan Crow. 

Mr. PALLONE. The Subcommittee on Health will reconvene our 

hearing on comprehensive health care reform on the discussion 

draft, and we have actually four panels today, and we are going to 

get started. So our first panel is on Medicare payment, and let me 

introduce our two witnesses. First, on my left, is Glenn M. 

Hackbarth, who is the chair of the Medicare Payment Advisory 

Commission, better known as MedPAC. And then next to him is 

the Honorable Daniel R. Levinson, who is the Inspector General for 

the U.S. Department of Health and Human Services. 

We are starting fresh today. If you had been here at seven o’clock 

last night, it wouldn’t have been as—we would have all looked very 

tired, but now we are all fresh, so—you know the drill. We ask you 

to talk about 5 minutes, and your complete testimony becomes part 

of the record, and then we will have questions, and so we will start 

with Chairman Hackbarth. 


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STATEMENTS OF GLENN M. HACKBARTH, CHAIR, MEDICARE 

PAYMENT ADVISORY COMMISSION; AND HON. DANIEL R. 

LEVINSON, INSPECTOR GENERAL, U.S. DEPARTMENT OF 

HEALTH AND HUMAN SERVICES 

STATEMENT OF GLENN M. HACKBARTH 

Mr. HACKBARTH. Thank you, Chairman Pallone, and Ranking 

Member Deal, members of the Subcommittee. I appreciate the opportunity to talk about the Medicare Payment Advisory Commission’s recommendations for improving the Medicare program. 

As you know, MedPAC is a non-partisan Congressional advisory 

body. Our mission is to support you, the Congress, in assuring 

Medicare beneficiaries have access to high quality care, while protecting the taxpayers from undue financial burden. MedPAC has 17 

commissioners. Six of the Commissioners are trained as clinicians. 

Seven of the commissioners have experience either as executives or 

Board members of health care providers or health plants. Three 

commissioners have high level experience in Congressional support 

agencies, or CMS, and we have four researchers who add intellectual rigor to our work. And some commissioners have more than 

one of these credentials. In addition to that, we have a terrific staff, 

headed by Mark Miller, the executive director. 

I want to emphasize the credentials of the commissioners, to emphasize that we are from the health care system in no small measure. As such MedPAC commissioners recognize the talent and commitment of the professionals who serve within the health care system. We are not outsiders, critics who have no appreciation of the 

challenges of being on the front line. MedPAC recommendations 

may be right, they may be wrong. The issues are complex, and 

rarely are they clear cut. But if we are wrong, it isn’t because we 

are inexperienced, or lack a stake in the success of the system. We 

also take pride in our ability to reach consensus on even complex 

and sensitive issues. For example, in our March 2009 report, we 

voted on 22 different recommendations. On those 22 recommendations, there were roughly 300 yes votes and only 4 no votes, and 

3 abstentions. 

All of the MedPAC commissioners agree that Medicare is an indispensable part of our health care system. Not only is it financed 

care for many millions of senior citizens and disabled citizens, it 

has helped finance investments in health care delivery that have 

benefited all Americans. But we also know that Medicare is 

unsustainable in its current form. We must slow the increase in 

costs, even while maintaining or improving quality if care and access. We believe accomplishing that task will in turn require both 

restraint and payment increases under Medicare’s current payment 

systems and a major overhaul of those payment systems. 

Medicare’s payment systems, and, I would add, those used by 

most private payors, reward volume and complexity without regard 

to the value of the care for the patient. Moreover, those payment 

systems facilitate siloed or fragmented practice, whereby provides 

caring for the very same patient to often work independently of one 

another. When care is well integrated and coordinated, it is usually 

testimony to the professionalism of the clinicians involved. That coVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00592 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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ordination and integration is too rarely support or rewarded by our 

payment systems. 

The resulting fragmented approach to care is not only expensive, 

it is dangerous, especially for complex patients, of which there are 

many in the Medicare program. It is MedPAC’s belief that we need 

payment reform that rewards the efficient use of precious resources 

and the integration and coordination of care. But it is not enough 

to simply change how we pay health care providers. We also must 

engage Medicare beneficiaries in making more cost conscious 

choices, or being sensitive to the complex nature of the decisions 

that must be made, and the limited financial means of many beneficiaries. 

It is our belief that the cost challenge facing the Medicare program, and indeed the country, is so great that we need to engage 

everyone, patients, provides and insurers, in striving for a more efficient system. In the last several years, MedPAC has recommended a series of changes in the Medicare program that we believe would help improve the efficiency of the care delivered, while 

maintaining or improving quality. Let me just quickly mention a 

few of those recommendations. 

First is increase payment for primary care services, and perhaps 

a different method of payment as well. Abundant research has 

shown that a strong system of primary care is a keystone of a well 

functioning health care system. 

Second, we have recommended that the Congress take a number 

of steps to increase physician and hospital collaboration, including 

gain sharing, that would encourage collaboration between physicians and hospitals in reducing cost and improving quality. 

Third, we have recommended reduced payment for hospitals experiencing high levels of potentially avoidable re-admissions. As 

you know, about 18 to 20 percent of all Medicare admissions are 

followed by a re-admission within 30 days, at a cost of roughly $15 

billion a year to the Medicare program. 

Next, we have recommended a pilot of bundling, whereby payment for hospital and physician services provided during an admission would be combined into a single payment, and perhaps combined with payment for post-acute services as well. 

Next, we have recommended reform of the Medicare advantage 

program so that participating private plans are engaged in promoting high performance in our health care system, instead of offering plants that mimic Medicare—— 

Mr. PALLONE. Mr. Hackbarth, I want you to finish, but I just 

want you to know you are minute over, so—— 

Mr. HACKBARTH. OK. I am to the last step, Mr. Chairman. Let 

me just close with two cautionary statements. One is changing payment systems, and we must change them, and doing so with some 

speed is going to require more resources and broader discretion for 

CMS than it now has. 

The second caution is that, while we need to reform payment, it 

is going to take some time, and in the meantime, we need to continue pressure on the prices under our existing payment systems 

in the Medicare program. Thank you. 

[The prepared statement of Mr. Hackbarth follows:] 


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Mr. PALLONE. Thank you very much for what is really important 

in terms of what we are trying to accomplish here. I appreciate it. 

Mr. Levinson? 

STATEMENT OF HON. DANIEL R. LEVINSON 

Mr. LEVINSON. Good morning, Chairman Pallone, Ranking Member Deal, and members of the Subcommittee. 

Mr. PALLONE. Your mike may not be on, or maybe it is not close 

enough. Try to move it—no, I think you have got to press—you 

have to—when the green light is on, it—green light on? 

Mr. LEVINSON. It is. 

Mr. PALLONE. Now you are fine. 

Mr. LEVINSON. OK. Thank you. Chairman Pallone, Ranking 

Member Deal, members of the Subcommittee, good morning. I 

thank you for the opportunity to discuss the Office of Inspector 

General’s work at this very important time of deliberations over 

health care reform. 

Based on our experience and expertise, our office has identified 

five principles that we believe should guide the development of any 

national health care integrity strategy. And consistent with these 

principles, OIG has developed specific recommendations to better 

safeguard Federal health care programs. My office has provided 

technical assistance, as requested, to staff from the Committee, and 

we welcome the fact that many of OIG’s recommendations have 

been incorporated into the House Tri-Committee health reform discussion draft. 

Principle one, enrollment. Scrutinize those who want to participate as providers and suppliers prior to their enrollment in the 

Federal health care programs. Provider enrollment standards and 

screening should be strengthened, making participation in Federal 

health care programs a privilege, not a right. 

As my written testimony describes, a lack of effective provider 

and supplier screening gives dishonest and unethical individuals 

access to a system that they can easily exploit. Heightened screening measures for high risk items and services could include requiring providers to meet accreditation standards, requiring proof of 

business integrity or surety bonds, periodically certification and on 

site verification that conditions of participation have been met, and 

full disclosure of ownership and controlled interests. 

Principle two, payment. Establish payment methodologies that 

are reasonable and responsive to changes in the marketplace. 

Through extensive audits and evaluations, our office has determined that Medicare and Medicaid pay too much for certain items 

and services. When pricing policies are not aligned with the marketplace, the programs and their beneficiaries bear the additional 

cost. 

In addition to wasting health care dollars, these excessive payments are a lucrative target for unethical and dishonest individuals. These criminals can re-invest some of their profit in kickbacks, thus using the program’s funds to perpetuate the fraud 

schemes. 

Medicare and Medicaid payments should be sufficient to ensure 

access to care without wasteful overspending. Payment methodology should also be responsive to changes in the marketplace, 


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medical practice and technology. Although CMS has the authority 

to make certain adjustments to fee schedules and other payment 

methodologies, some changes require Congressional action. 

Principle three, compliance. Assist health care providers in 

adopting practices that promote compliance with program requirements. 

Health care providers can be our partners in ensuring the integrity of our health care programs by adopting measures that promote compliance with program requirements. The importance of 

health care compliance programs is well recognized. In some health 

care sectors, such as hospitals, compliance programs are widespread and often very sophisticated. New York requires provides 

and suppliers to implement an effective compliance programs as a 

condition of participation in its Medicaid program. Medicare Part 

D prescription drug plan sponsors are also required to have compliance programs. 

Compliance programs are an important component of a comprehensive integrity and strategy, and we recommend that providers and suppliers should be required to adopt compliance programs as a condition of participating in Medicare and Medicaid. 

Principle four, oversight. Vigilantly monitor the programs for evidence of fraud, waste and abuse. 

The health care system compiles an enormous amount of data on 

patients, providers and the delivery of health care items and services. However, Federal health care programs often fail to use data 

and technology effectively to identify improper claims before they 

are paid and to uncover fraud schemes. For example, Medicare 

should not pay a clinic for HIV infusion when the beneficiary has 

not been diagnosed with the illness, or pay twice for the same service. 

Better collection, monitoring and coordination of data would 

allow Medicare and Medicaid to detect these problems earlier and 

avoid making improper payments. Moreover, this would enhance 

the government’s ability to detect fraud schemes more quickly. 

As fraud schemes evolve and migrate rapidly, access to real time 

data and the use of advance data analysis to monitor claims and 

provider characteristics are critically important. OIG is using innovative technology to detect and deter fraud, and we continue to develop our efforts to support a data driven anti-fraud approach. 

However, more must be done to ensure that we and other government agencies are able to access and utilize data effectively in the 

fight against health care fraud. 

Final principle, response. Respond swiftly to detected fraud, impose sufficient punishment to deter others, and promptly remedy 

program vulnerabilities. 

Health care fraud attracts criminals because the penalties are 

lower than those for other criminal offenses, there are low barriers 

to entry, schemes are easily replicated, and there is a perception 

of a low risk of detection. We need to alter the criminal’s cost/benefit analysis by increasing the risk of swift detection and a certainty of punishment. 

As part of this strategy, law enforcement is accelerating our response to fraud schemes. The HHS/DOG Medical Fraud Strike 

Force model describe in my written testimony is a power anti-fraud 


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tool, and represents a tremendous return on investment. These 

strike forces have proven highly effective in prosecuting criminals, 

recovering payments for fraudulent claims and preventing fraud 

through a powerful sentinel effect. 

In conclusion, our experiences and results in protecting HHS programs and beneficiaries has applicability to the current discussions 

on health care reform. We believe that our five principle strategy 

provides the framework to identify new ways to protect the integrity of the programs, meet the needs of beneficiaries, and keep Federal health care programs solvent for future generations. 

We appreciate the opportunity to work with the Committee, and 

welcome your questions. Thank you. 

[The prepared statement of Mr. Levinson follows:] 


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Mr. PALLONE. Thank you. Thank you both. I am going to ask my 

questions of Mr. Hackbarth, but not because what you said is not 

important, Mr. Levinson. I think this whole issue of enforcement 

and fraud and abuse is really crucial. 

But I—yesterday, Mr. Hackbarth, I asked basically the same 

question of Secretary Sebelius. In other words, you know, on the 

one hand we are talking about reductions in payments for certain 

Medicare and Medicaid programs. On the other hand, we are talking about enhancements and, you know, actually spending more on 

other aspects of Medicare and Medicaid, for example, Medicare 

Part D, filling up the doughnut hole, and you do both. In other 

words, my understanding is that, you know, your recommendations, which we—many of which are incorporated in this discussion 

draft, accomplish both purposes. 

So—what I wanted to do, though, is—I think there is more media 

attention on cuts than there is on what you do to enhance programs, so I wanted you to talk a little bit about what motivates 

MedPAC to propose some of the reductions we are contemplating, 

you know, like the Medicare Advantage, the home health rebasing, 

productivity into payments updates and the rest. But why is it that 

MedPAC sees these as important policy proposals on their own 

terms, not because of, you know, cost savings? 

Mr. HACKBARTH. Um-hum. Well, Mr. Chairman, we believe that 

pressure on the prices in the Medicare payment system is important to force the system towards more efficiency. As you and the 

other members of the Committee know, Medicare has administered 

price systems. They are set through a government process, as opposed to market prices. 

We believe that what we have to do with that administered price 

system is mimic, so far as possible, the sort of pressure that exists 

in a competitive marketplace. The taxpayers who finance the Medicare program face relentless pressure, often from international 

competition, for example, forcing the firms that they work for to 

lower their costs, day in and day out. We think the health care system must experience the same sort of pressure. 

Mr. PALLONE. And then the solvency of the trust fund is extended, and premiums are reduced, and the program is maintained 

for future generations, so that is the ultimate goal? 

Mr. HACKBARTH. Absolutely. 

Mr. PALLONE. And let me ask you another question about—you 

know, we get this argument from some—not too many, but some 

employers and providers complain about alleged cost shifting from 

Medicare to the private sector. The argument is, like—something 

like if Medicare would pay more, private plans could pay less, and 

so health care would be cheaper for employers and others. I don’t 

understand how increasing Medicare payment rates would lead a 

private hospital to decrease the prices it charges private insurers, 

and—can you explain this to me? You know—I mean, I know I am 

asking you the opposite of what you believe, but—— 

Mr. HACKBARTH. Yes. 

Mr. PALLONE [continuing]. I mean, what—— 

Mr. HACKBARTH. Yes. Well, let me start by saying that we believe that Medicare payment rates are adequate. We don’t believe 

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creased. And we—let me focus on hospital services as an example 

of that. We look at the data in several different ways. We have 

looked at time series data, and you see there is a pretty consistent 

relationship in periods where private payments are generous, Medicare margins become negative. And it is our belief that that is because when the private payments are generous, hospitals have 

more money to spend, and they spend it. It is a largely not-for-profit industry. If they get revenue, they will spend it. 

And—then we see the same pattern when we look at individual 

hospitals, so what we have identified is a group of hospitals that 

don’t have a lot of generous payment from private payers. They 

have constrained resources. Those institutions lower their costs and 

actually have a positive margin on Medicare business. They don’t 

have the luxury of additional private money flowing into their institutions. They are forced to control costs, and they do control 

costs as a result. 

Mr. PALLONE. And so you disagree with claims that Medicare is 

responsible for high health insurance premiums? 

Mr. HACKBARTH. No. I—if institutions—clearly the rates paid by 

Medicare and private payers are different. Private payers pay higher rates. It does not follow from that, however, if you increase 

Medicare rates that the private rates would fall. 

Mr. PALLONE. OK. Now, let me just—one more thing about access. You know, we hear about, in some parts of the country that, 

you know, Medicare enrollees say that they can’t find a doctor willing to accept new patients. Based on your research, do you have 

any reason to believe that we have a crisis of access in Medicare, 

that—basically providers not taking Medicare in a significant way? 

Mr. HACKBARTH. Each year we do a careful study of access for 

Medicare beneficiaries, asking both patients and physicians. Our 

most recent patient survey, which was done in the Fall of 2008, 

found that Medicare beneficiaries are most satisfied with their access to care than private patients, privately insured patients, in the 

50–64 age group. 

The one area of concern that we do have is around access to primary care services, especially for Medicare beneficiaries looking for 

a new physician, for example, because they have moved. That is 

the area where we see Medicare beneficiaries reporting the most 

problem, but we also see privately insured patients in the same circumstance reporting problems as well. So we don’t think the issue 

is a function of Medicare payment rates, but rather too few primary care physicians. 

Mr. PALLONE. Which was one of the things we were trying to address in this discussion draft. Thank you. 

Mr. Deal. 

Mr. DEAL. Mr. Hackbarth, let me follow up on one of your comments about your look at those hospitals that have higher ratios 

of Medicare patients and lower ratios of private paying patients. 

Mr. HACKBARTH. Um-hum. 

Mr. DEAL. And I believe your statement was that they are able 

to make a profit and, in fact, be more profitable than some of the 

ones who have lower volume of Medicare patients. Don’t those hospitals receive dish payments, as a general rule? 

Mr. HACKBARTH. Some of them may, yes. 


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Mr. DEAL. Does your recommendation in any way address whether dish payments should continue or be abolished? 

Mr. HACKBARTH. We have had some discussion, Mr. Deal, about 

refocusing dish payments. We have not recommended abolishing 

them. 

Mr. DEAL. OK. Mr. Levinson, the draft talks about expanding 

Medicaid coverage and providing Federal payment of 100 percent 

for some of this expansion of new populations so that the states 

don’t have to pick up even their matching share in their Medicaid 

formula. If that is the case, if the Federal government picks up 100 

percent of this cost, are you concerned that states will no longer 

have the incentive to look for the waste and the fraud and the 

abuse because they don’t really have any stake dollars in that pot? 

Is that a concern, from your standpoint? 

Mr. LEVINSON. Well, it is certainly always a concern about what 

is occurring with the Federal share of Medicaid, and indeed, as we 

look for a larger share of that on the Federal side, it becomes of 

greater interest to us at the Federal level. It is an issue, actually, 

that I, as a member of the Recovery Act Accountability and Transparency Board, is already dealing with, with my colleagues on the 

Board, because the ARA does include a significant increase in the 

Federal share funding to alleviate states of some of the Medicaid 

burden. And in some of the states, particularly in the south central 

part of the United States, we are approaching a level where states 

give little, if any, contribution to Medicaid. So we are focusing on 

ensuring that there are controls in place to make sure that the, you 

know, the Medicaid dollar is protected, but as the Federal involvement becomes greater, the need for more Federal monitoring of 

those dollars also becomes greater. 

Mr. DEAL. Because the states have been the primary enforcement—first line of enforcement against fraud and abuse, with oversight from the Federal. So you are saying that there may be a need 

for more Federal oversight? 

Mr. LEVINSON. That is correct. Historically the Medicaid Fraud 

Control Units, which exist in nearly every state of the union, have 

been really the first protectors, as it is, of the Medicaid program. 

We have provided oversight. In the last several years, though, Congress has provided additional funding to be more involved in the 

monitoring of those Medicaid dollars as the Federal share has increased. 

Mr. DEAL. Mr. Hackbarth, in your testimony, you make reference, I think, to the fact that about 60 percent of beneficiaries 

now buy supplemental policies to cover part of their Medicare cost. 

That seems, to me, a little bit inconsistent with your conclusion 

that the Medicare reimbursement rates are adequate. I know one 

is from the provider standpoint and the other being from the patient standpoint. 

Do you foresee, from the patient standpoint, that if we model everything after the Medicare reimbursement rates and the Medicare 

model, that there is going to be a need for even more purchasing 

of supplemental insurance by the individual patients? 

Mr. HACKBARTH. Well, as you say, Mr. Deal, there are two distinct issues. One is the adequacy of payments rates to providers, 

and we believe those payment rates are adequate. The Medicare 


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benefit package is probably not designed the way any of us would 

design it if we were starting with a clean piece of paper. The design 

could be streamlined, and that process may reduce the need for 

beneficiaries to buy supplemental coverage. For example, if we 

were to add catastrophic coverage, a key missing component on 

Medicare, that might reduce the perceived need for supplemental 

coverage. 

Mr. DEAL. OK. 

Mr. HACKBARTH. We have begun looking at that redesign issue. 

Mr. DEAL. Real quickly, you were going through your principles 

that you have recommended, and you got through most of them, I 

think. In the very short time that I have left, are there any of those 

principles that you are concerned that are not being addressed in 

this discussion draft, in particular any that you have great concern 

about? 

Mr. HACKBARTH. Off the top of my head, Mr. Deal, I can’t think 

of one. 

Mr. DEAL. OK. Thank you, Mr. Chairman. 

Mrs. CAPPS. The chair now recognizes Mr. Murphy for his questions. 

Mr. MURPHY of Connecticut. Thank you very much, Madam 

Chair, and Mr. Hackbarth, thank you so much for all the work that 

you have done guiding this Congress on this issue of moving away 

from a volume based system to a system that attempts to really reward outcome and performance. 

And I think—I, for one, am worried that if don’t take advantage 

of this moment in time, with this health care reform debate, to 

make those changes, that we may never be able to make them. And 

so—I know Mr. Deal just asked you a general question about 

whether there were points of reform that you have pushed that 

aren’t in this bill, but I wanted to ask specifically on this issue of 

payment reform. 

Mr. HACKBARTH. Um-hum. 

Mr. MURPHY of Connecticut. Have you taken a look at this bill 

with regard to payment reform, and how do you think it measures 

up versus what you think could be potentially done through this 

Reform Act, with regard to transforming our payment system? 

Mr. HACKBARTH. Yes. As I indicated to Mr. Deal, I think that the 

bill’s provisions on Medicare are pretty comprehensive, and address 

the major issues that MedPAC has raised about the Medicare program. Having said that, some of the provisions—let me take an example, accountable care organizations rebuttalling. You know, the 

bill provides for pilots of these new ideas, and, in fact, that is what 

MedPAC has recommended. These are complex ideas that will take 

time to develop and refine. So, the bill includes provisions. We 

shouldn’t assume from that that, oh, it is a done deal. There is lots 

of work that needs to be done in CMS, in particular, to make these 

things a reality. 

Mr. MURPHY of Connecticut. Well—and that was going to be my 

second question. You have had a lot of experience in pilot programs, and I think one of the things that some of us worry about 

is that it is—that there has been a lot of research done on, for instance, the issue of accountable care organizations and bundling, 

and I think the majority of evidence is that they work. That they 


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get good outcomes, and they can reduce costs. And so if we are 

going to go into a bill that pilots these, how do we make sure that 

if the pilots turn up with the outcomes that pretty much every 

other—all other work on these payment reforms have done, how do 

we make sure that then that becomes a system-wide reform? 

Mr. HACKBARTH. Yes. This is an issue that I think we discussed 

last time I was with the Committee. The pace at which we make 

changes, reform the Medicare payment systems, is way too slow, 

and one of the things that we have recommended is broader use 

of pilots, as opposed to demonstrations. And the difference, in our 

mind, is that under a pilot, the Secretary has the authority to move 

to implementation if the pilot achieves stated objectives. It doesn’t 

have to come back through the legislative process. We think that 

is a very important step. 

And again, I would emphasize CMS needs more resources to do 

these things both quickly and effectively. They are operating on a 

shoestring, and the work is too important, too complex, to allow 

that to continue. 

Mr. MURPHY of Connecticut. And let me ask specifically about 

this issue of accountable care organizations. And—it seems to me 

that one of the ways that you expand out to a system of outcome 

based performance is that you try to encourage physicians to join 

in and collaborate. 

Mr. HACKBARTH. Right. 

Mr. MURPHY of Connecticut. We have put an enormous amount 

of money in the stimulus bill into giving physicians and hospitals 

the information technology to create those interaction and that coordination. And I guess I would ask you what are the ways that 

we need to be looking at in order to try to provide some real incentives for physicians to coordinate, become part of multi-specialty 

groups, enter into cooperative agreements? And then should we be 

looking at only incentives, or should we be looking at something 

tougher than incentives to try to move more quickly to a system 

by which physicians aren’t operating in their own independent 

silos? 

Mr. HACKBARTH. Yes. Well, the fact that we have a fragmented 

delivery system, I believe, is the result of how we have paid for 

medical care not just in Medicare, but also in private insurance 

programs for so many years. We basically enabled a sort of siloed, 

independent practice without coordination. The most important 

step we can take is change the payment systems so that services 

are bundled together, and physicians of various specialties and the 

various types of providers must work together. And there is abundant evidence that when they do that, we not only get lower costs, 

we get better quality. 

Mr. MURPHY of Connecticut. Thank you very much, Madam 

Chair. 

Mrs. CAPPS [presiding]. Thank you. The Chair now recognizes 

Congressman Burgess for his questions. 

Mr. BURGESS. Thank you, Madam Chair. Mr. Hackbarth, always 

good to see you, and I have several questions that I am going to 

submit in writing because time is so short during these Q&As, and 

I was going to reserve all my questions, in fact, for the Inspector 


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General, but I just have to pick up on a point that we just expressed. 

And under accountable care organization within Medicare, just 

within the Medicare system, with Medicare being an entirely Federal system—it is not a state system, it is a Federal system, so we 

don’t have state mandates in Medicare. It functions across state 

lines. 

If we were to provide an incentive, that is a backstop on liability 

under the Federal Tort Claims Act for doctors practicing within the 

Medicare system who practice under the guidelines of whatever we 

decide the accountable care organization—the proper accountable 

care organization should be, would that not be the types of incentive that we could offer to physicians that would not require increase in payments, but yet would bring doctors—increase their interest in practicing within these accountable care organizations? 

Mr. HACKBARTH. Yes. Dr. Burgess, MedPAC has not looked specifically at the malpractice issue. We principally focus on Federal 

issues. You know, that is our—— 

Mr. BURGESS. But, if I could, we could make liability a Federal 

issue within the Medicare system because defensive medicine does 

cost the Federal system additional dollars, as Dr. McClellan’s great 

article from 1996 showed. 

Mr. HACKBARTH. Right. And my point is that there’s no MedPAC 

position on malpractice issues. As you know, though, I am formerly 

a CEO of a very large medical group, so I have lot of experience 

working with physicians, and I know how large malpractice looms 

in the minds of physicians. Because I have not studied the issue 

in detail, I don’t have a specific recommendation, but I think addressing physician concerns about malpractice is a reasonable 

thing to do. 

Mr. BURGESS. Well, one of the things that really bothers me 

about these discussion in this Committee, you have so many people 

here who have never run a medical practice, as you have, and as 

some of us have. Doctors tend to be very goal directed individuals. 

That is why the fee for service system has worked for so long, because you tell us what to do and what the rules are, and we make 

a living at it. I am not a big fan of bundling. I don’t trust hospital 

administrators, as a general rule, and I would not trust them to 

appropriately apportion out the payments, so not a big fan there. 

But are there—there ought to be other ways to tap into the goal 

directed nature of America’s physicians to achieve the goals that 

you are trying to get, and right now I don’t think, at least from 

what I have seen, we are quite there. 

I am going to actually go to Mr. Levinson, because what you 

have talked about is so terribly important, and—let me just ask a 

question. Right now, within the discussion draft we are talking 

about, I don’t think the numbers are filled in as far as the budget, 

the numbers—the dollar numbers that are going to be there. What 

do you need today in order to do your job more effectively? 

Mr. LEVINSON. Well, we certainly need the resources that we 

have been given by the Congress and by the Executive, and it is 

certainly being used, I think, in an optimum way. But as the mission gets larger, the need for greater resources also is there. 


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Mr. BURGESS. And I am going to interrupt you, that is an extremely important point, because we have increased the FMAP 

on—in the stimulus bill and some of the other things that we are 

talking about doing. Is that not going to increase the burden, the 

pressure, that is placed on you and your organization in order to 

provide the proper oversight? 

Mr. LEVINSON. Certainly our mission has been heading north for 

the last few years, and we are really pressed to enlist really the 

best investigators, evaluators, lawyers and auditors we can find to 

handle, you know, a much larger budget than historically we ever 

have had before. 

Mr. BURGESS. And it is not just you, because my understanding, 

from talking to folks back home in the Dallas/Fort Worth area, 

from—within the HHS Inspector General’s shop, and within the 

Department of Justice’s jurisdiction, there is actually a deficit of 

prosecutorial assets, or, actually, assets have been—been had to 

use for other things, Homeland Security, narcotics trafficking, and 

there is not the prosecutors to devote to the cases that you all develop, to bring those cases to trial. 

Mr. LEVINSON. That is a very important point, and sometimes it 

is overlooked how key it is to understand that the resources that 

are used to fight health care fraud really require a collaborative effort across several different government entities. And if you have 

the Justice Department personnel, but don’t have the IG personnel—— 

Mr. BURGESS. Right. 

Mr. LEVINSON [continuing]. And vice versa, you really have a significant problem. 

Mr. BURGESS. And just one last point—I will submit several 

questions in writing—on the issue that we are hearing so much 

about in McAllen, Texas, where the—McAllen appears to be an 

outlier. Many physicians from the Texas border area were in town 

yesterday. I don’t represent the border area, but they discussed it 

with me. They are concerned, obviously, about the negative press 

that they have been getting over the report by Dr. Guande in the 

New Yorker magazine. Is there any special focus that you are putting on that area because of the possibility of diversion of Medicare/ 

Medicaid dollars within other ancillary agencies, imaging, drugs, 

home health? Are—is the possibility that this number is skewed 

not because of practitioners in the area, but because, in fact, the— 

we don’t have the resources to devote to the investigation of fraud, 

the prosecution of fraud when it is uncovered? 

Mr. LEVINSON. Well, there are a number of high profile areas 

that we oversee that we do need to concentrate on, because they 

do tend to be areas where fraud, waste and abuse tends to become 

a lot more serious than perhaps others. The durable medical equipment area, for example, especially in South Florida, has triggered 

our need to develop a strike force that is specifically devoted to trying to uncover and, to the extent possible, eliminate DME fraud in 

South Florida. We have had very good results there, actually, in 

being able to clean up many of the problems areas. I can point to 

other parts of the country where other kinds of issues have arisen 

that really require a concentrated effort by us, working with our 


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law enforcement partners. I can’t speak specifically to McAllen, 

Texas. 

Mr. BURGESS. Are—is that on your radar screen to pull that into 

the investigative process? 

Mr. LEVINSON. I can only say that the entire nation is on our 

screen, because we have such an extensive jurisdictional requirement. 

Mr. BURGESS. All right. Thank you, Mr. Chairman. 

Mrs. CAPPS. The Chair now recognizes Mr. Green for his questions. 

Mr. GREEN. Thank you. 

Mr. Hackbarth, in your testimony, you cited lack of care coordination and lack of incentive of providers to actually coordinate care 

as a cost burden, and I agree, and we have several coordination 

bills pending before our committee. One is the Realigning Care Act, 

which focuses on geriatric care coordination. Your testimony cites 

geriatrics as an area in which care coordination is especially necessary. Can you elaborate on how geriatric care coordination could 

help lower health care costs? And again, we are dealing with Medicare, but maybe we could also deal with whatever we create as a— 

in the national health care. 

Mr. HACKBARTH. Yes. Geriatricians, as you know, tend to focus 

on elderly patients who have very complex multiple illnesses. And 

for those patients, not only is the potential for inappropriate, unnecessary care large, the risk to the patient of uncoordinated care 

is very large indeed. And so such patients really need somebody 

who is going to follow them at each step, not hand them off to specialists, and then they are handed to another specialist and another. They need somebody as that home base to integrate and coordinate the services. 

Mr. GREEN. And I know that is our goal, is to talk about a medical home, you know, where someone could—any of us—a number 

of us had elderly parents who we have had to monitor the number 

of doctor’s visits simply because they also take lots of different 

medications, and there is nobody coordinating that, except maybe 

a family member. 

Mr. HACKBARTH. And the problem, as you well know, Mr. Green, 

is that Medicare really doesn’t pay for that activity, outside of the 

patient visit, the phone calls that need to be made to pull together 

the services of the well integrated. So we have made a series of recommendations to increase payment for primary care and the medical home, which in addition to the fee based payments, has a per 

patient sum to support that sort of activity. 

Mr. GREEN. And since we are all so concerned about the scoring, 

did MedPAC look at—by creating this benefit of coordinated care, 

could we save on the back end? Is there something we could quantify, say, to CBO, or someone could say, we—over a period of time, 

let us— we think we can save ultimately? 

Mr. HACKBARTH. Yes. Well, it is our hope, and perhaps even our 

expectation, that there would be savings. But what we have recommended, and what the Congress has done, is a large scale pilot, 

so that, in fact, we can hopefully document those savings and to 

have a resulting CBO score from it. 


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Mr. GREEN. OK. And I know we have your—under current law 

we have your welcome to Medicare exam. That—do you think that 

could fit in there with what we would call a geriatric assessment 

initially, and then build on using that primary care? 

Mr. HACKBARTH. Well, potentially, because it gives the physician, 

hopefully a strong primary care physician, an introductory assessment of all of the patient’s problems right from the outset. 

Mr. GREEN. OK. And again, I know there is a provision in the 

bill, and a lot of us have that interest, and that is one of the good 

things about this bill that we are dealing with, but, again, since we 

are looking at scoring, say, you know—and it is hard to get CBO 

to say at the end we can save money. Not only save money, but 

almost—much more humane dealing Medicare, or any patient, in 

all honesty. 

Mr. HACKBARTH. Well, what I can say, Mr. Green, is that—as I 

said in my opening comment, there is abundant evidence that systems that have strong primary care have lower costs and higher 

quality than systems that don’t have strong primary care. You see 

that in international comparisons. You see that in studies within 

the United States that compare regions with one another. You see 

that within health systems. So there is lots of evidence of that sort. 

Whether CBO considers that strong enough to score is—— 

Mr. GREEN. Well—— 

Mr. HACKBARTH [continuing]. A CBO issue, not a—— 

Mr. GREEN [continuing]. Maybe by your testimony we can encourage CBO to look at other countries that have a primary care 

emphasis, and how that can reduce the cost. So maybe the bean 

counters can actually say, this works, and so—I appreciate your 

testimony, and hopefully we will get that in our response when we 

are—when we get that score, so—thank you. 

Chairman—Madam Chairman, I yield back my time. 

Mrs. CAPPS. Congressman Gingrey is now recognized. 

Mr. GINGREY. Madam Chairman, thank you. And I am going to 

direct my questions to Mr. Hackbarth. 

Mr. Hackbarth, one of the barriers to achieving value in Medicare cited in your testimony—you state that Medicare payment 

policies ‘‘ought to exert physical pressure on providers.’’ 

Mr. HACKBARTH. Um-hum. 

Mr. GINGREY. You go on to state that in a fully competitive market, which I am guessing infers that Medicare does not compete in 

a fully competitive market, that this physical pressure happens 

automatically in a fully competitive market. In the absence of such 

a competitive market, you suggest that Congress must exert this 

pressure by limiting payment updates to Medicare physician updates. 

When created Medicare Part D, Congress considered instituting 

a set payment rate in lieu of creating a competitive market, where 

competition among the pharmacy benefit plans might automatically 

keep the cost down. In the end, this Congress elected to go with 

that competitive model and forego payment rates set in statute, 

some of those that exist under current Medicare fee for service. The 

results, as we all now know, is that, due to the private market 

pressure, rather than government price setting, Part D premiums 

are much lower than anticipated, and drug prices have gone down. 


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So, instead of exerting the physical pressure on providers that 

you suggest must be exerted due to the lack of a competitive market to do it automatically, I am curious as to your thoughts on how 

using a competitive bidding process, like what we did in Medicare 

Part D, might achieve the same sort of efficiencies you suggest are 

required in traditional Medicare, but without having to resort to restricting of payments. 

Mr. HACKBARTH. Um-hum. Well, let me approach it from two directions, Dr. Gingrey. If we look at private insurers, and the private insurance marketplace, and we compare the costs of those programs with Medicare costs, what we see is that, on average, and 

my evidence here is from the Medicare Advantage Program, is that 

the bids submitted by the private plans are higher than Medicare’s 

costs, they are not lower. Now, there are some plans that bid lower, 

but on average, the private bids are higher. 

So that is an opportunity for private plans to come in and compete and show that they can reduce costs, and by their own bids, 

they have not done that. 

Mr. GINGREY. You are talking Medicare Advantage? 

Mr. HACKBARTH. Medicare Advantage. 

Mr. GINGREY. But, of course, they—Mr. Hackbarth, they do provide something that these three committees that have come up 

with this draft legislation, if you will, really want, and that is, of 

course, emphasis on things other than just episodic care, treatment 

of pain and suffering, but also wellness prevention and that sort of 

thing. 

Mr. HACKBARTH. Yes. Some do, some don’t. The private plans are 

quite variable in their structure, how they deal with providers, 

what sort of care coordination programs they have, and most importantly, they are quite variable in their bottom line results. Some 

are outstanding, some are not. 

Mr. GINGREY. Yes. Let me go on to another question. I thank you 

for that response. One of the foundations of your testimony today 

is that the American health care system has serious quality problems. You—‘‘At the same time that Americans are not receiving 

enough of the recommended care, the care they are receiving may 

not be appropriate.’’ And then you go on to cite the Dartmouth 

Center for the Evaluative Clinical Services as proof of a wide variation in Medicare spending and rates of service used. 

Just to be clear, when you say the American system, Mr. 

Hackbarth, are you referring to the American Medicare system, 

and not the entire American health care system? Am I correct in 

that assumption, given that the Dartmouth study used only Medicare data for its findings? We are talking about the American 

Medicare system and not the entire health care system? 

Mr. HACKBARTH. Well, in fact, the Dartmouth study is done 

using Medicare data because it is the most readily available comprehensive database. I don’t think there is any reason to believe 

that physicians are practicing different for Medicare patients and 

private patients, but my personal experience in working closely 

with physicians is that it is a matter of principle that they don’t 

vary their care based on the insurance coverage of the patient. 

They treat the patient based on what the patient needs. 


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So I think it is a reasonable inference, if you see this variation 

of Medicare, likely you have the same variation—— 

Mr. GREEN. Well, I know my time is up, Madam Chairman, but 

I—the reason I ask you this question, Mr. Hackbarth, because we 

are going to have another panel, probably several more panels 

today, but I think there are going to be some physicians that are 

practicing in the private market that might want to dispute what 

you just said. But thank you so much for your response, and I yield 

back, Madam Chairman. 

Mrs. CAPPS. Thank you. I now yield myself my time for questions, and I thank you both for your testimony today. Mr. 

Hackbarth, we are sort of picking on you, I think, but you can tell 

from the questions that Medicare payment reform seems to be a 

very pressing issue for many of us. And one of the Medicare payment reforms that we are suggesting in this legislation is a change 

to the Gypsy formula in California so that it is now based on 

MSAs, Metropolitan Statistical Area. 

Two of the counties I represent in California are negatively impacted by the current payment formula. Physicians in both San 

Luis Obispo and Santa Barbara Counties are paid less, much less 

they would say, than the actual cost of practicing medicine. My 

question to you is in general, but also specifically toward California. Will the Gypsy provisions improve the accuracy of payments 

in the new fee schedule areas that you—across the country, as you 

have envisioned them? 

Mr. HACKBARTH. Yes. The provision related to California in the 

bill is based on one of two options that MedPAC developed for CMS 

back in—I think it was 2007. So approach in the bill is consistent 

with the advice that we have given CMS. 

Mrs. CAPPS. Excellent. And then maybe you could elaborate a little bit on the benefit, obviously, that you are seeing from having 

physician payment areas aligned with hospital payment areas, and 

is that, again, consistent around the nation, once we get our alignment correct in California? 

Mr. HACKBARTH. Well, the issue that we focused on was specific 

to California. As you know, the Gypsies work differently in different states, and so our recommendation wasn’t that this approach 

be applied everywhere, but we saw it as a reasonable solution to 

the California issues that you and other members have raised. 

Mrs. CAPPS. Now, we have seen that other area of the country 

have this disparity as well, but you think those are best resolved 

on a regional basis? 

Mr. HACKBARTH. Yes. Different states have elected to resolve it 

differently, and we think the problems are not national in scope, 

but more isolated, and more tailored approaches are the best way 

to go. 

Mrs. CAPPS. And that would be a pattern that you might suggest 

in other areas as well, that we look at regional issues, particularly—at least in the payment schedules? 

Mr. HACKBARTH. Yes. Well, you know, that is a big statement, 

and I—— 

Mrs. CAPPS. Well, I am just wanting to see how far you want to 

go—— 


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Mr. HACKBARTH. Yes. I would like to take a look at—consider the 

issues one by one, as opposed to make that as a broad policy statement. 

Mrs. CAPPS. Well, I know our—my California colleague said this 

has been a real serious detriment to Medicare, and the practice of 

Medicare in our state. In many of the regions that the cost of living 

has been—— 

Mr. HACKBARTH. Right. 

Mrs. CAPPS. [continuing]. Very different from what the allotment 

has been, so this becomes, for us, a really vital component of Medicare reform—— 

Mr. HACKBARTH. Yes. 

Mrs. CAPPS [continuing]. Under this bill. 

Mr. HACKBARTH. Yes. And to say we think the approach in the 

bill is a reasonable one, and it is one of the options that we recommended to see in this. 

Mrs. CAPPS. OK. I am going to yield back my time, and recognize 

Mr. Buyer for his questions. 

Mr. BUYER. I see a company in Tampa just shut their doors to 

500 jobs due to the S–CHIP bill. They are going to send the tobacco—those cigars to be made offshore. Just thought I would let 

everybody know who really cares, I guess. 

This has been a challenge to get my arms around this in a short 

period of time, just to be very honest with you, so—I am trying to 

understand—I just went through that tobacco bill, where the majority froze the market, so they are—now they love this talk about 

competition, and they love to freeze the market in place, and I am 

getting a sense that that is what you are doing in this bill also, 

freezing the market. So those of whom had existing plans, you 

freeze it, grandfather it, and then you have got to figure out how 

you move people into the exchange, and if you—and when we 

freeze that market—so help me here with my logic, because I am 

trying to figure out what you are trying to do. We freeze that market, and you want to move a population into an exchange. You 

can—we will grandfather, so people can keep their existing coverage, but if, at some point in time, that employee chooses to move 

to a government plan, then the employer has to be an eight percent 

tax on it. Is that right? 

Mr. HACKBARTH. Is that—— 

Mr. BUYER. Yes. 

Mr. HACKBARTH [continuing]. Mr. Buyer? 

Mr. BUYER. Congressman Buyer. 

Mr. HACKBARTH. Buyer, I am sorry. 

Mr. BUYER. OK. 

Mr. HACKBARTH. Our focus is on the Medicare provisions of the 

bill, and the bill is not our bill. We—our advisory—— 

Mr. BUYER. OK. So you—— 

Mr. HACKBARTH [continuing]. Our body—— 

Mr. BUYER [continuing]. Can’t answer that question? 

Mr. HACKBARTH. Absolutely—— 

Mr. BUYER. Right 

Mr. HACKBARTH [continuing]. Not. That is beyond our jurisdiction. 


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Mr. BUYER. No, that is oK. Well, let me ask a question, then, 

that is within your jurisdiction. You had—sir, you had suggested 

that encouraging the use of comparative effectiveness information 

would facilitate informed decisions by providers and patients about 

alternative services for diagnosing and treatment of most common 

clinical conditions, is that correct? 

Mr. HACKBARTH. Um-hum. 

Mr. BUYER. Uh-huh means yes? 

Mr. HACKBARTH. Yes, sir. 

Mr. BUYER. Thank you. Following your line of reasoning, could 

the Medicare program also use this research to exert fiscal pressure on drug and device makers, or even restrict certain procedures 

based solely on price? 

Mr. HACKBARTH. What MedPAC has recommended is that the 

Federal government invest in comparative effectiveness research, 

make it available to physicians, patients, insurers, for them to 

make their own decisions about how to use the information. 

Mr. BUYER. Then how best do we, i.e. Congress—how best do we 

make sure that this research is used to inform the consumer and 

providers without being an excuse to exclude or ration certain 

types of care? How do we best do that? 

Mr. HACKBARTH. Well, decisions about how Medicare would use 

the information are issues on which Congress can legislate. What 

MedPAC has recommended is investment in information to be used 

in a de-centralized way by all of the participants in the system. 

Mr. BUYER. All right. Mr. Levinson, the—one of the great concerns I have is—can you—would you be able to address a comparison or an analogy on Medicaid? I know you are Medicare—you 

guys are claiming lanes of jurisdiction here. 

Mr. LEVINSON. Mr. Buyer, we actually—as an Office of Inspector 

General, we oversee all 300 programs of—— 

Mr. BUYER. OK. 

Mr. LEVINSON [continuing]. Of the Department, so—— 

Mr. BUYER. All right. 

Mr. LEVINSON [continuing]. We also have—— 

Mr. BUYER. Most of the—— 

Mr. LEVINSON [continuing]. Side of Medicaid. 

Mr. BUYER. All right, thank you. So most of the fraud cases, with 

regard to Medicaid, are they discovered by the states or are they 

discovered by the Federal government? 

Mr. LEVINSON. Medicaid cases can be developed along a very 

wide spectrum of possible sources. 

Mr. BUYER. I understand, but are most cases discovered in the 

states or by the Federal government? 

Mr. LEVINSON. I would have to find out those numbers for you. 

I suspect it would be mostly states in terms of absolute number. 

But in terms of dollars, because some of the biggest—— 

Mr. BUYER. All right. Don’t do it by dollars, do it by cases. 

Mr. LEVINSON. By the number of cases—— 

Mr. BUYER. I think common sense tells us—let me jump ahead. 

Mr. LEVINSON. Given the Medicaid fraud—— 

Mr. BUYER. I think common sense is going to tell us that if states 

had a stake in the game, that they have an incentive, then, to 

make sure they go after fraud cases. If the Federal government 


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picks that up at 100 percent, my concern is are we disincentivizing 

states with this oversight responsibility, which places more on you, 

and is that a concern to you? 

Mr. LEVINSON. It is a—certainly a very important concern that 

we make sure that every Medicaid dollar—and we, of course, have 

responsibility for the Federal share of that Medicaid—is accounted 

for as much as possible. And as the Federal share, as the FMAP 

goes north, goes up, obviously our reach needs to be greater, our 

concern needs to be elevated on the Medicaid side, absolutely. 

Mr. PALLONE. Thank you. The gentleman from Iowa, Mr. Braley. 

Mr. BRALEY. Thank you, Mr. Chairman. 

Mr. Levinson, to follow up on that point, all of us on this Subcommittee are strongly opposed to fraud in any health care delivery 

system, so let us start with that premise. I think the real elephant 

in the room is that fraud is a small component of what the real obstacle is to meeting full health care reform, and that is waste. Because, according to many reliable projections, there are $700 billion 

annually of waste in Medicare delivery, which is a much greater 

problem. Because if you take that number and multiply it over the 

10 year period of this health care bill we are talking about, you are 

talking about $7 trillion of cost savings that would more than pay 

for the entire cost of the program we are talking about. So isn’t it 

waste that is really the problem here? 

Mr. LEVINSON. Mr. Braley, we try to identify and correct issues 

of fraud, waste and abuse, and we do not have solid figures in 

which to share with you exactly how that pie may be divided specifically. But all of those kinds of issues are of great concern to the 

office, and we have work that supports recommendations on—in all 

of those areas. 

Mr. BRALEY. And they should be of concern to American taxpayers also? 

Mr. LEVINSON. Absolutely. 

Mr. BRALEY. OK. Mr. Hackbarth, I really appreciate the effort 

that you and MedPAC have put into this. You mentioned the objectives of health care reform being high quality care and protecting 

taxpayers from undue financial burdens, and getting back to my 

point that I just made, under the current health care delivery system and reimbursement model, we are wasting billions of dollars 

every year, aren’t we? 

Mr. HACKBARTH. It is our belief that, yes, we can do better with 

less, and there is lots of research to support that. 

Mr. BRALEY. Well—and one of the problems that my health care 

providers and I will have is that for years they consistently rank 

in the top five in every objective quality measurement, and at the 

very bottom of Medicare reimbursement. Isn’t that a summary of 

what is wrong with our health care model today? 

Mr. HACKBARTH. Well, my home state of Oregon is also—— 

Mr. BRALEY. Exactly. 

Mr. HACKBARTH [continuing]. With you in Iowa, and—so that is 

a type of evidence that we can do better for less in Medicare. You 

know, I think it is good for Iowa, good for Oregon, that we have 

got low health care costs and high quality. Not only does it hold 

down Medicare expenditures, it is good for our beneficiaries. It 

holds down their out of pocket expenses, the Medigap premiums. 


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So I don’t want to increase Iowa and Oregon to be more like some 

of the high cost states. 

Mr. BRALEY. Exactly. 

Mr. HACKBARTH. I want to bring the high cost states down to 

Iowa and Oregon. 

Mr. BRALEY. And isn’t that the problem? Because under Medicare’s proposed pay for performance system, the modeling is based 

upon improvement in efficiency. So if you are a state like Oregon 

and Iowa, who is already delivering efficient, low cost, high quality 

health care, you get no incentive from a model of reimbursement 

that is based only on improvement, isn’t that true? 

Mr. HACKBARTH. Well, as we move to new payment systems, 

move away from our siloed fee for service system to bundle payment systems or ACOs, one of the critical decisions that is going 

to have to be addressed is how to set those initial rates for these 

new types—— 

Mr. BRALEY. Right. 

Mr. HACKBARTH [continuing]. Of payment systems. And in that 

is an opportunity to address some of these regional inequity issues 

that have come up in the program. 

Mr. BRALEY. But if you are going to base a public health insurance option on a Medicare model that already has built-in inefficiencies and inequities in reimbursement, what reform hope does 

that give to this country? 

Mr. HACKBARTH. Yes. We need to change the Medicare model. 

Independent of the public plan issue, for Medicare’s own sake, for 

the taxpayers’ sake, for the beneficiaries’ sake, we have to change 

the Medicare model. 

Mr. BRALEY. Well—and I am glad you mentioned that, because 

Congressman Ron Kind and I have introduced the Medicare Payment Improvement Act of 2009, H.R. 2844, that attempts to do just 

that by identifying clear, objective quality measurements that are 

highly recommended by a number of health care organizations that 

are looking to improve efficiencies and increase quality. It examines things like health outcomes and health status of the Medicare 

population, patient safety, patient satisfaction, hospital readmission rates, hospital emergency department utilization, hospital admissions for conditions, mortality related to health care, and other 

items determined by HHS. 

Isn’t it true that until we move to some transformational type of 

health care reimbursement we are ignoring the real cost opportunities to transform health care and provide expanded access to coverage? 

Mr. HACKBARTH. Yes. We believe that we need to adjust payment 

to reflect the quality of care. That is one type of change. But we 

also believe that we need to move away from fragmented fee for 

service payment to paying for larger bundles, paying for populations of Medicare patients. 

The big difference between Iowa and the high cost states is on 

the utilization of services. How many hospital days per 1,000, how 

many referrals to specialists and the like. Iowa tends to be low on 

those things, and the high cost states tend to be high on those 

things. If we move towards a payment system that advantages 


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places with lower utilization, like Iowa, that will begin to address 

these regional inequity issues that you are focused on. 

Mr. BRALEY. Thank you. 

Mr. PALLONE. Thank you, Mr. Braley. Mr. Shimkus? 

Mr. SHIMKUS. Thank you, Mr. Chairman, and I appreciated the 

little comments we had before my questioning. 

I am going to follow up on something I addressed last night, 

and—addressing just the basic FMAP formula, which has been a 

bone of contention for me for many years, because I believe it has 

been flawed, and does not accurately reflect a given state’s need to 

meet its Medicaid obligations. So that is kind of where I am coming 

from. 

The formula does not accurately reflect the difference between a 

state’s fiscal earnings, low income citizens, or cost of delivery of 

service. This results in states like mine, and I think other states, 

if my colleagues would do some research, which—only having a 

match of around 50 percent. We know in the testimony yesterday 

we had New Jersey here, we had California. They are also 50 percent match states, and I have got the list here where every state 

falls. But it falls short of its needs, yet other states have matches 

as high as 75 percent. 

Overall, the FMAP formula has resulted in the Federal government’s financing remaining around 57 percent across the board, yet 

the discussion draft seeks to have states enroll childless adults 

ages 19 to 64, up to 137 of poverty line, and have the Federal government finance 100 percent of this new Medicaid population. That 

was part of the discussion we were having offline. Do you think it 

is fair that we continue to have these inequities among states when 

it comes to FMAP, given we aren’t meeting the needs of many 

states, especially those with low matches? 

Mr. LEVINSON. Mr. Shimkus, would you like me to respond to 

that—— 

Mr. SHIMKUS. Both. 

Mr. LEVINSON [continuing]. Question? 

Mr. SHIMKUS. It is a question to both. 

Mr. LEVINSON. Because I would have to say that our office, not 

being a policy office, we don’t actually establish the FMAP rates. 

We certainly audit those among our auditors, but we are not a program office. We oversee that. So I can’t—— 

Mr. SHIMKUS. So as an auditing office, you wouldn’t disagree 

with that analysis that I have given? 

Mr. LEVINSON. Well, actually, the rate is higher now in some of 

the states as a result of the American—— 

Mr. SHIMKUS. Yes, and that is—— 

Mr. LEVINSON [continuing]. Recovery—— 

Mr. SHIMKUS. That is—yes, that is true, but there are still percentage inequities. So you have a 75 percent state that is now up 

to 83 percent. You have a 50 percent state that is up to maybe 60 

percent, but, of course, there is no assumption—I mean, depending 

upon what we do on a bill, there is no assumption that those 

amounts remain, because the stimulus bill was a short term bill, 

and there is no certainty that that input of money will remain. 

Mr. LEVINSON. Mr. Shimkus, we work with the numbers that we 

are given, as opposed to—— 


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Mr. SHIMKUS. OK. That is—— 

Mr. LEVINSON [continuing]. The numbers ourselves. 

Mr. SHIMKUS. Mr. Hackbarth? 

Mr. HACKBARTH. Mr. Shimkus, we focus exclusively on Medicare 

issues, not Medicaid. That is our jurisdiction under the statute. 

Mr. SHIMKUS. OK. Let me just—then let me go with a few other 

questions, just to put it—you know, our frustration with this process of rushing through and having a draft is we have got to ask 

these questions when we have—and I want to get these out. Would 

it be appropriate, in the context of health reform, to address the 

inequity of FMAP by recalculating the FMAP to accurately reflect 

needs, or, at the very least, level the playing field for every state? 

Mr. Levinson, do you want to—— 

Mr. LEVINSON. Mr. Shimkus, that is really beyond my charter. 

Mr. SHIMKUS. Good. OK. Mr. Hackbarth, same answer? 

Mr. HACKBARTH. Yes. 

Mr. SHIMKUS. OK. So what I am trying to establish is this. Illinois is a 50/50 match state, which means that for every dollar 

spent on Medicaid, we will write a check to the state for 50 cents, 

OK? There are states out there that for every dollar they spend on 

Medicaid, the Federal government sends them 75 cents. If we are 

doing health care reform, and the premise of this bill is when we 

add people to Medicaid, 100 percent of that will be spent, but it 

still does not affect the basic fundamental inequity of the FMAP. 

So what states have to do is they have to game the system. They 

have to go to HHS, they have to find past additional tax incentives 

to get additional rebates. We have the tax increase on beds in hospitals that we passed, so they pass a tax. They remit the tax back 

to the Federal government, the Federal government gives the tax 

back to them, plus some additional revenue. 

So I would encourage folks to look—my colleagues to look at 

their FMAP percentage. And if we are going to move on streamlining health care and reimbursement that—even as we increase 

the amount for the new Medicaid people we bring on, we really 

bring some clarity and equality across the state lines and FMAP. 

And Mr. Chairman, thank you for letting me go 13 seconds over, 

and I yield back my time. 

Mr. PALLONE. Thank you. The gentlewoman from Florida, Ms. 

Castor. 

Ms. CASTOR. Thank you, Mr. Chairman. Good morning. Mr. 

Hackbarth, you state in your testimony that the payment system 

for Medicare Advantage plans needs reform. Medicare Advantage— 

the Medicare Advantage program continues to be more costly than 

traditional Medicare health services. The Medicare Advantage government payments per enrollee are projected to be 114 percent of 

comparable fee for service spending in 2009. It is up from 2008. 

The high Medicare Advantage payments provide a signal to plans 

that the Medicare program is willing to pay more for the same 

services in Medicare Advantage than it does in traditional Medicare and fee for service. 

Our discussion draft tackles the overpayment issue, but what 

would happen if we did not do this? 

Mr. HACKBARTH. Well, let me begin by saying that MedPAC very 

much supports giving Medicare beneficiaries the option to enroll in 


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private plans, so we are enthusiastic about that. Our objections are 

to the current payment system, which, as you say, pays significantly more on average for private plans that it would cost traditional Medicare to pay for the same patients. If we were to lower 

the rate, one of the effects of that would be to send a marked signal 

to private plans about what we want to buy as a Medicare program, and we reward plans that take steps to be more efficient, 

more effective in the care that they provide. 

So long as we continue to pay more, the signal that we are sending is mimicking Medicare, traditional Medicare, just at a higher 

cost, is OK with us. And so long as we send that signal, we will 

get more of that. We have got to change the signal to get the market response that we desire. 

Ms. CASTOR. And ultimately help us control costs across the 

board? 

Mr. HACKBARTH. Absolutely. Even control costs for the beneficiaries as well—— 

Ms. CASTOR. Um-hum. 

Mr. HACKBARTH [continuing]. ecause all beneficiaries, even those 

who aren’t enrolled in private plans, are paying part of the additional costs for Medicare Advantage. 

Ms. CASTOR. And I am afraid these overpayments have created 

incentives for extensive unethical behavior by insurance companies. 

Three-fourths of the states report marketing abuses in Medicare, 

and I have some firsthand experience with this, talking to seniors 

at retirement centers in my hometown, where insurance salesmen 

have come in, targeted seniors with dementia, who have—were on 

traditional Medicare and signed them up for Medical Advantage, 

sometimes under the guise of coming in and selling their Medicare 

Part D policies, and then switching them out. 

And what happens is that senior, who has a longtime relationship with their doctor, oftentimes they lose access to that doctor 

they had under traditional Medicare because their Medicare Advantage plan doesn’t have the same doctor. There have been cases 

that—where cash incentives have been provided to insurance salesmen, and this shouldn’t be—we shouldn’t have these incentives for 

fraudulent behavior. They—I think it has gotten out of hand, and 

unfortunately, CMS has all but abdicated its oversight role. 

The Congress, some years ago, took the states’ ability away, their 

ability to regulate and oversee these terrible marketing abuses. 

Now, our discussion draft, it makes some very subtle change in— 

with enhanced penalties for Medicare Advantage and Part D marketing violations, but don’t you think we need to go back to having 

as robust a strike force as we possibly can so—and give the states 

the ability—you know, they are closer to the ground—the ability 

they had before to tackle the marketing abuses? The National Associations on Insurance Commissioner supports such a move. 

Without it—unless we do this, we will continue to have this huge 

regulatory gap, but what is your view? 

Mr. LEVINSON. Ms. Castor, we certainly work with the states to— 

as much as possible to protect the Medicare and the Medicaid programs. We have a very good collaborative relationship with our 

state auditors and state and local law enforcement. There are jurisdictional divides, and we try to respect those. But to the extent 


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that we can actually understand schemes that are broader than 

just one particular matter, that really allows us to do our work 

more effectively because the fact of the matter is, although we are 

one of the larger Inspector General offices in government, given the 

size of our programs, we are very stretched. We only have a few 

hundred criminal investigators to handle, you know, billions and 

billions of dollars stretched across the country in a variety of 

health care contexts. 

But I certainly would underscore the importance of being able to 

work very much hand in glove with our state and local partners. 

Mr. PALLONE. Thank you. Gentleman from Pennsylvania, Mr. 

Murphy. 

Mr. MURPHY of Pennsylvania. Thank you, Mr. Chairman. I thank 

the panelists for being here. 

Some questions about Medicare. It was founded in 1965. In the 

ensuing years, has there ever been a time when any president or 

any Congress has really gone back and overhauled the program, 

and—this program being established back inpre-CT scan and MRI 

days. Has there ever been a comprehensive overhaul of the system 

to modernize it, reform it, make it work more effectively? 

Mr. HACKBARTH. Well, the payment systems have changed. Medicare began with payment systems—— 

Mr. MURPHY of Pennsylvania. Right. 

Mr. HACKBARTH [continuing]. Were based on cost reimbursement. 

Mr. MURPHY of Pennsylvania. And in terms of how it—because 

today you are talking about a number of interesting reforms, and 

has that ever been attempted before? 

Mr. HACKBARTH. Well, the payment systems have been reformed. 

They have changed substantially over the life of the program. 

Mr. MURPHY of Pennsylvania. But I mean—— 

Mr. HACKBARTH. We think more changes are warranted. 

Mr. MURPHY of Pennsylvania. You are talking about the delivery—like, care coordination and preventing re-admissions and 

things like that. That has never been attempted, right? I mean, in 

terms of overall reforms in the system. 

Mr. HACKBARTH. In terms—there has not been payment reforms 

focused on re-admissions, no. 

Mr. MURPHY of Pennsylvania. OK. I am assuming you are talking about more than just payment reforms today, because your report has a lot more than just how the money gets spent. OK. And 

in that—I mean, I noted in the 110th Congress there was 452 bills 

put in by Members of Congress to make some reforms to Medicare 

and Medicaid, I think 12 passed, and some 13,000 co-sponsors of 

these bills came through members of Congress. So I look upon 

this—and Members of Congress themselves recognize there needs 

to be some changes in Medicare and Medicaid, but it seems to come 

slow. 

I am wondering in this process, where—some of the changes you 

recommend here—and I applaud them, because they are things I 

have been asking for for a long time too. Care coordination, I mean, 

we will pay to amputate the legs of a diabetic, won’t pay to have 

some nurse call them with these cases. We will—we recognize one 

in five chronic illnesses gets re-admitted to the hospital, but we 


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haven’t been working at keeping them out. Those are major 

changes to make here. 

Mr. HACKBARTH. Yes. 

Mr. MURPHY of Pennsylvania. My concern is the speed at which 

the Federal government moves to make changes, number one, and 

two, does the Federal government have to run its own insurance 

plan, given its track record of not being very good at coming up 

with timely changes? Can we come up with some of these changes 

with the Federal government pushing for and mandating some of 

these changes in the private market—— 

Mr. HACKBARTH. Yes. 

Mr. MURPHY of Pennsylvania [continuing]. And in the meantime 

Medicare pushing some within itself? Is that possible to do that? 

Mr. HACKBARTH. Well, I think we need to do some of each. The 

potential for Medicare Advantage is to invite private plans to enroll 

Medicare beneficiaries, do things differently to get better results for 

both the beneficiaries and the program. Because of the way Medicare Advantage works, the way the prices are set, it has not fulfilled that potential. It has allowed private plans to enroll Medicare 

beneficiaries, essentially mimic traditional Medicare, with all the 

same problems. So one of the reasons we believe Medicare Advantage reform is so important is to reward private plans that do it 

better. 

Mr. MURPHY of Pennsylvania. OK. So that is—so, in other words, 

you know, they can just continue on with business as usual, but 

Medicare Advantage, they should really be using these things for 

what it was designed to be, and that is really work at prevention, 

really working at care coordination, am I correct on that? 

There was something else mentioned, or you—a point that was 

made earlier, encouraging use of comparative effectiveness information, public reporting, provider quality, et cetera. This also relates to the issue of evidence based medicine and evidence based 

treatments that many people referred to. Throughout medicine, 

there are many branches that have their own standards and protocols, College of Surgeons, American Academy of Pediatrics. Would 

those be things that Congress or the FDA or HHS could look towards in terms of what these standards might be, in terms of what 

is the best practices and what would be the standards and protocols to use? 

Mr. HACKBARTH. Well, specialties are quite variable in how they 

develop those standards, those protocols. It is difficult to generalize 

about them. Let me focus on the area of imaging as one example. 

We had as a witness before the MedPAC the president of College 

of Cardiology to talk about imaging issues, and one of the things 

that she called for was more information so they can move from 

just consensus based guidelines to evidence based guidelines. 

The potential in comparative effectiveness research is that we 

give physicians and societies the raw material to do a better job at 

what they want to do. 

Mr. MURPHY of Pennsylvania. So—and this is a critically important point, and one that we should not rush, because it is going to 

have long term implications. So the College of Cardiologists or Radiologists or whatever that is, we have to make sure it isn’t just 

they have all sat down and voted that—best thing, but there really 


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needs to be a demand, and this is where a valuable role of government—the HHS or FDA to have oversight to say, we want to see 

evidence based medicine here. Is that what you are suggesting? 

Mr. HACKBARTH. That is the goal. We need information for physicians, as well as patients, to guide that. 

Mr. MURPHY of Pennsylvania. I mean, this is a critical thing, Mr. 

Chairman, and one I hope we continue dialogue on because it is 

going to be a factor that I think makes or breaks the budget, is 

how we go through there, and I think also deal with the issue of 

who is making the decisions, and I think a valuable place where 

this Committee can have tremendous oversight in working with 

medicine, and with that, I yield back. Thank you, sir. 

Mr. PALLONE. Thank you, Mr. Murphy. Gentlewoman from Wisconsin, Ms. Baldwin. 

Ms. BALDWIN. Thank you, Mr. Chairman. 

Mr. Hackbarth, welcome back to the Subcommittee. I recall when 

you were here in March we had quite a dialogue about—as we have 

today, about the difference between pilot projects and demonstration projects, and you expressed then, as you have here today, some 

hesitation about the administrative and regulatory burdens associated with demonstration projects, and how that affects the ability 

to scale those up, if they have proven successful. 

This draft health care reform legislation offers new pilot projects 

in accountable care organizations and medical home models, and I 

am wondering if it is your sense that these pilots will provide us, 

the Congress, and MedPAC with sufficient evidence to make broader payment reforms. And also, if you have examined these provisions in the draft, if you have any recommendations for further improvement. 

Mr. HACKBARTH. Well, on the issue of pilots, we welcome the fact 

that the Committee is looking at pilots, and what MedPAC has advocated, and we have talked about this before, is that Congress 

give the Secretary discretion to test a new payment method and to 

implement it, if the pilot is successful, establish goals in advance, 

and then give the Secretary discretion, plus the resources necessary. 

And an important part of this, I think, is a much larger budget 

for the Department to not just test ideas that come through the 

Congress, but to generate new ideas independently in the Department. Right now the demonstration budget is way too small for 

that. 

Ms. BALDWIN. In your—in MedPAC’s most recent reports, there 

is an interest sidebar concerning the physician group practice demonstration, which serves, really, as a foundation for the accountable 

care organization pilot in the draft bill that we are looking at. You 

noted that a surprising number of the sites for the physician group 

practice demonstration project had high cost growth, and it is 

linked to the risk profiles of the patients at those sites. And it 

strikes me that basically there is an inference that these demonstration sites may be picking up more of their patients’ medical 

issues, resulting in more treatments, and increasing costs. What 

lessons do you suggest that we take from this demonstration? 

Mr. HACKBARTH. Well, in setting payment rates for new payments systems like ACO, the details are very important, and how 


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the targets are set, how the potential gains are shared between the 

providers in the Medicare program, and how you adjust for things 

like risk, the risk profile of the patients. And so there are important steps that have to be taken from endorsement of a broad concept, like ACOs, to making it an operational effective idea. And this 

is part of why we think the Secretary needs some flexibility and 

discretion and design in the resources, to be able to do that quickly 

and effectively. 

On an idea like ACOs, we are unlikely to get it exactly right the 

first time, so there needs to be ongoing cycles of refinement and improvement. That requires discretion and resources. 

Ms. BALDWIN. And we can certainly relate to the difficulty to create a national program to rein in Medicare spending. And on the 

ACOs, the idea is to set spending targets to hold the providers accountable to the targets. If you tied spending targets to national 

averages, I guess I would like to ask how are we going to attain 

or incent participation in higher cost areas, and do you have any 

ideas of how we would address that challenge? 

Mr. HACKBARTH. Yes. Well, this goes back to the dialogue that 

I had with Mr. Braley. One of the very important details in these 

new payment systems, like ACOs, is how you set those targets. If 

you take a group that has a very low historic level of utilization, 

they have been very efficient, very high quality, and say, oK, we 

are going to set your target at your historic level of costs, it is going 

to be more difficult for them to beat that and earn rewards than 

for a practice that is in a very high cost state and performing very 

poorly. That is not an equitable way to get to where we want to 

go, so setting the target rate so that your reward historic performance, as well as future performance is, for me, a goal in the target 

setting. 

Now, in order to do that, you are going to have to squeeze someplace else. You are going to have to squeeze those high cost places 

to offset the cost. So the—again, the details in this are very important, and the Secretary needs to be given the latitude to strike that 

balance. 

Mr. PALLONE. Thank you. Mr. Pitts is next. 

Mr. PITTS. Thank you, Mr. Chairman. 

Mr. Levinson, in your testimony, you mentioned Medicaid specific services that—there are services unique to Medicaid that could 

lead to significant savings, and one example you cite is school 

based health services. You say that OIG ‘‘consistently found that 

school had not adequately supported their Medicaid claims for 

school based health services, and identified almost a billion dollars 

in improper Medicaid payments.’’ Can you go into this further? 

Mr. LEVINSON. Mr. Pitts, we do make audit recommendations to 

the Centers for Medicare and Medicaid Services based on our audit 

findings, as our auditors look at programs that are supported by 

the program, and that is an area that the OIG has identified over 

the last few years as one that CMS needs to focus on more clearly 

to make sure that those dollars are really spent appropriately. 

Mr. PITTS. Well, what were some examples of these improper 

payments? What was Medicaid paying for? 


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Mr. LEVINSON. Well, overall, they were paying for those kinds of 

services that are not included in the program, but I would need to 

provide more detail to you as a follow up to our hearing. 

Mr. PITTS. Now, the Bush administration proposed regulations 

which would stop these fraudulent services and stop wasting taxpayer dollars. However, the present Administration has put a moratorium on these regulations. Do you believe that this moratorium 

should be lifted? 

Mr. LEVINSON. We do not comment on what the Executive 

Branch decides to do with those kinds of regulations or not. We certainly, you know, advance what we believe would be appropriate 

ways of being able to account for the Medicare dollars better, and 

our recommendations are given in the first instance, in these kinds 

of cases, to the Centers for Medicare and Medicaid Services. 

Mr. PITTS. Do you have any idea how much money in total might 

have been wasted in this way? 

Mr. LEVINSON. Our audit findings will indicate the dollars that 

we believe are not appropriately spent under the Medicare program, and I don’t have that dollar figure immediately at my fingertips. We will certainly provide as much detail as we can, based on 

the audit findings we already have. 

Mr. PITTS. All right. In your testimony, you mention the creation 

of the Health Care Fraud Prevention and Enforcement Action 

Team. Can you give me some examples of what cases this team is 

currently addressing? 

Mr. LEVINSON. Well, the most recent example would be the case 

that was publicized yesterday in Detroit, a Medicare infusion drug 

fraud case that has resulted in 53 indictments. There have been 40 

arrests so far. 40 of our agents have been involved in what is 

claimed as $50 million in false claims. 

This is a strike team in which we are working with the FBI and 

local law enforcement to clean up a significant Medicare infusion 

drug problem that now infects the city of Detroit. Some of these 

issues have actually migrated from South Florida, so the strike 

force effort is to try to provide both national and regional focus on 

those kinds of frauds that not only tend to plague particular cities 

in the country, but that also have regional impact. We already have 

strike forces in operation in a number of cities, but the effort now 

will be to extend that to more cities over the course of the next 

year. 

Mr. PITTS. Mr. Chairman, I don’t know—— 

Mr. PALLONE. You want the time? You have a minute left. 

Mr. PITTS. One minute left? 

Mr. PALLONE. I am sorry—— 

Mr. PITTS. How do you get the provider ID—the criminals get the 

provider ID numbers? 

Mr. LEVINSON. Well, obviously through a variety of fraudulent 

means, but it is too easy at this point in our system to get provider 

numbers, and that has been a constant theme of our office over the 

years, that enrollment standards have not been sufficiently rigorous to ensure that we are not allowing, in effect, criminals to 

masquerade as health care providers. 

Mr. PITTS. Um-hum. 


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Mr. LEVINSON. And that has been a significant problem not just 

in Detroit and Miami, but really throughout the country. And one 

of the key principles we have in terms of our anti-fraud fighting effort is to make more rigorous who actually gets in the program, because historically there has been too much a right to access, as opposed to the privilege of actually being enrolled in the program. 

Mr. PITTS. Mr. Buyer wants to follow up. 

Mr. BUYER. I guess—to be responsive here. How are they—are 

they relying on insiders within the system to get these ID numbers, 

or you don’t want to tell us so that others will know how to—I 

mean, we can always—you can tell us offline. 

Mr. PALLONE. Mr. Buyer—let him answer the question, but the 

time is expired. I have to apologize. The electronics have gone off 

again, so I am going to just have to tell everybody when their 5 

minutes is up. But go ahead and answer your question. 

Mr. LEVINSON. Thank you. I think it probably would be better to 

have an offline conversation, because the schemes are varied, and 

some of them are rather sophisticated, and it is probably better not 

to discuss in any detail what actually occurs in a public hearing. 

Mr. PITTS. Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. Next is Ms. Eshoo, and I will just tell 

you when the 5 minutes are up. 

Ms. ESHOO. Thank you, Mr. Chairman. Gentlemen, thank you for 

your testimony today, and to the Chairman for this series of hearings with many panels this week. 

As we look to reshape America’s health care system, we have 

very clear goals that we have set down. We want it to be universal, 

it needs to be affordable. We think that choice is important. We believe that many of the rules that—need to be rewritten that the insurers, the private insurers, employ, amongst them knocking people out because they have pre-existing conditions and gender based 

issues, et cetera. So that is on the—kind of on the one side of the 

ledger. 

The other side of the ledger, in my view, are two major issues. 

One, that we be able to achieve this without raising taxes, and 

number two—maybe I should have said number one. Number one, 

that we reform Medicare and strengthen it. We have read the report of the trustees. We know that they shaved off two years, and 

that we have got until 2017. 2017, believe it or not, is not that— 

it sounds like it is another century away. It is a handful of years 

away. So my question to both of you is what are the large ticket 

items that you can name today for us that will strengthen Medicare? 

Now, Mr. Levinson, I recall a hearing here many years ago on 

waste, fraud and abuse and what—essentially the private sector 

ripping off the public sector, and you have touched on that today. 

In fact, we had testimony from someone whose case had been adjudicated, and he was on his way to prison, and he came here and 

explained how he had ripped Medicare off. And it was, essentially, 

the private sector ripping off the public sector. So what are the 

price tags that you can tell us about in these efforts that will save 

us money, save Medicare money, and overall strengthen Medicare 

as we come through this large effort, this overall effort, to reform 

our nation’s health care system? Because I believe if we don’t reVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00656 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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form and strengthen Medicare that we will not have accomplished 

what needs to be accomplished. 

Mr. HACKBARTH. I am going to go first. I would name four things. 

One is that we need to continue to apply pressure under the existing payment systems of Medicare. 

Ms. ESHOO. Can you speak a little louder, please? Can you speak 

just a little louder? 

Mr. HACKBARTH. We need to continue to apply pressure to the 

update factors in the existing payments systems. 

Ms. ESHOO. And what is that going to—what do you think that 

is going to save us? 

Mr. HACKBARTH. Well, you know, it depends on exactly what the 

levels are, but it is, you know—— 

Ms. ESHOO. Has MedPAC done that work? 

Mr. HACKBARTH. Well, the CBO does the estimates of the budget 

impact of different recommendations. 

Ms. ESHOO. Do you have any idea what that might be? 

Mr. HACKBARTH. You know, we are—again, it depends on the 

specific level, but tens of billions or more over a 10 year horizon. 

A second area that I had mentioned is Medicare Advantage. There, 

as I think you know, the CBO estimate is higher than $150 billion 

over 10 years. A third area that I mentioned is re-admissions, excess re-admissions, and off the top of my head I don’t know what 

the estimate is for that, but there was a proposed one. President 

Obama’s budget on that—a fairly significant number. And the 

fourth area that I would emphasize is assuring primary care. Now, 

that doesn’t lead to a direct savings, but I mention it here because 

if we allow things to go as they are right now, our primary care 

base is going to continue to erode away money. 

Ms. ESHOO. You spoke to that earlier, so I appreciate that. 

Mr. Levinson? 

Mr. LEVINSON. Yes, Ms. Eshoo—— 

Ms. ESHOO. And thank you for your wonderful work as IG. 

Mr. LEVINSON. Thank you very much. 

Ms. ESHOO. We really can’t function well and do oversight without the IGs, and I just think that you all should be canonized, 

so—— 

Mr. LEVINSON. Well, on behalf of—— 

Ms. ESHOO. Be interesting to have a Levinson canonized, right? 

I am pretty ecumenical, though, so—— 

Mr. LEVINSON. Well, it so happens that, of course, Dante was 

talking about fraud 700 years ago—— 

Ms. ESHOO. That is right. 

Mr. LEVINSON [continuing]. So it is an issue that is both timely—— 

Ms. ESHOO. Right. 

Mr. LEVINSON [continuing]. And has a long—— 

Ms. ESHOO. Um-hum. 

Mr. LEVINSON [continuing]. And very troublesome pedigree. But 

on behalf of 1,600 very dedicated auditors and evaluators and investigators and lawyers—— 

Mr. PALLONE. Somebody want to tell her—— 

Mr. LEVINSON [continuing]. Thank you so much. 

Mr. PALLONE [continuing]. Time has—— 


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Ms. ESHOO. Um-hum. 

Mr. PALLONE [continuing]. Expired? 

Mr. LEVINSON. And just—as I look at some of the recommendations that are in our compendium of unimplemented recommendations, our auditors estimate that we could—the program could save 

$3.2 billion over 5 years if we just limited the rental time for oxygen equipment. I mean, I think that there are specific areas where 

there are significant savings that can be had. 

As I look at just our most recent semi-annual report, in terms 

of monies returned to the Treasury, we are expecting, just in the 

first 6 months of the fiscal year, $275 million in audit receivables 

and $2.2 billion in investigative receivables. A lot of that has to do 

with pharmaceutical cases. Pharmaceutical pricing, of course, is a 

very significant area that can also, if properly addressed, can save 

significant dollars. 

It would be hard to come up with total figures on a list of top 

ten, but certainly pharmaceuticals, DME, getting the dish payments right. We think that it is important to clarify exactly what 

Medicare should be paying, the Medicare and the Medicaid dish 

payments, and how the states handle those dollars. We need to 

avoid gaming the Federal dollar, so that it is clear, it is transparent about who is actually paying for what, and how the states 

account for the dollars that come from Washington. 

I would hesitate to put a dollar savings on it, but I think that 

there is a great need for much more significant transparency and 

accountability in our programs, and that is a very helpful trend, 

from the standpoint of our office. 

Ms. ESHOO. Do I have any time left, Mr. Chairman? 

Mr. PALLONE. No. I am trying not to—— 

Ms. ESHOO. OK. Thank you very much. 

Mr. PALLONE [continuing]. Interrupt now. 

Ms. ESHOO. Thank you. 

Mr. PALLONE. Sure. Next is the gentlewoman from Illinois, Ms. 

Schakowsky. I am going to just tell everybody when the 5 minutes 

are up, just so you know. Thanks. 

Ms. SCHAKOWSKY. Mr. Levinson, one of the biggest single expenditures out of Medicaid is for long term nursing home care, and 

I have been working with Chairman Waxman and Chairman Stark 

on a nursing home quality and transparency legislation, which has 

been included in the draft bill. And I would like to know what you 

have found, in terms of problems with nursing homes, that would 

necessitate more transparency and oversight of them. 

Mr. LEVINSON. Yes. Congresswoman, it has been difficult, actually, to find out who makes the decisions when we investigate substandard care in nursing homes and try to locate exactly who, financially, is in charge. So I think the effort to create greater transparency in terms of ownership, in terms of management, and get 

a clear understanding of actually who is in charge would help our 

investigators and lawyers significantly in being able to both investigate and resolve some of the very serious quality of care cases 

that have emerged in the nursing home area. 

Ms. SCHAKOWSKY. We are going to hear some testimony a bit 

later that disparages the notion that there is any substantial fraud 


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or wasteful spending on the part of some doctors that participate 

in the Medicare program. Would you agree with that assessment? 

Mr. LEVINSON. Well, I can only point to individual cases that we 

have actually worked on. We try not to generalize. Our investigators and auditors are very focused, very anchored on particular instances when it comes to either individual venues or a larger corporate structure, and we do have an existing, and unfortunately a 

growing, case load, work load. 

Ms. SCHAKOWSKY. But let me ask this, though. Would you say 

that some may be fraudulent, some may be wasteful, but that in 

general the decisions about utilization are provider driven, as opposed to the kind of fraud of—or wasteful spending that is generated by individuals in the program? 

Mr. LEVINSON. You know, I would hesitate, again, to make any 

kind of generalizations because these individual cases are very 

much focused on the facts as we find them. But there are certainly 

cases in which we have found that we are frustrated in our ability 

to actually understand who makes the decisions in the nursing 

home chain. 

Ms. SCHAKOWSKY. Let me ask Mr. Hackbarth about the Medicare 

Advantage plans. It is great that, in the Medicare program, consumers can actually go online and find out what Medicare pays for 

health care services. To your knowledge, is there a place where 

consumers can actually access rates that Medicare Advantage 

plans pay providers, or other private insurers? 

Mr. HACKBARTH. The actual payment rates for—— 

Ms. SCHAKOWSKY. Uh-huh. 

Mr. HACKBARTH [continuing]. Providers? Not to my knowledge. I 

think most private plans consider that information proprietary 

business information. 

Ms. SCHAKOWSKY. In your view, will Medicare Advantage plans 

remain in the market if we eliminate overpayments? 

Mr. HACKBARTH. I believe that they will, many will. Some will 

leave the market because they have a model that can’t compete 

with traditional Medicare. But, as I said earlier, we would be sending an important market signal about the type of plan we want to 

participate. We want plans that can help us improve the efficiency 

of the system, not plans that just add more cost to the system. And 

when you send that signal, I believe, in the market, I believe that 

we will get more plans that can compete effectively with traditional 

Medicare. 

Ms. SCHAKOWSKY. What mechanisms will we need to ensure that 

Medicare Advantage plans and private insurers in the exchange 

meet a minimum loss requirement—a minimum loss ration requirement? 

Mr. HACKBARTH. Yes. The minimum loss ratio, I think, is—it is 

a tricky issue. As you may know, I used to work for Harvard Community Health Plan, Harvard Pilgrim Health Care, two very well 

regarded HMOs, and this was a big issue for us sometimes with 

employers, how you calculate loss ratios. Our piece of the organization, the one I ran, is an integrated pre-paid group practice, and 

we have a lot of clinical programs that we believe improve patient 

care that sometimes employers wanted to characterize not as medical care, but as administrative cost, so the—and that works 


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against you, in terms of calculating the loss ratio. So the details of 

this can be pretty tricky, in my personal experience. I am always 

a little uneasy about just having simple rules on loss ratios. How 

you define those loss ratios is very important. 

Ms. SCHAKOWSKY. Thank you. 

Mr. PALLONE. The time is expired. I am sorry. Thank you, and 

next is the gentleman from Maryland, Mr. Sarbanes. 

Mr. SARBANES. Thank you, Mr. Chairman. Thank you all. I have 

got a couple of quick questions at the outset. 

Mr. Levinson, you talked about the—trying to step up efforts to 

curb some of the fraud, and particularly you talked about, in response to one question, the application process for new provider 

numbers, and having that vet properly. Have resources been an 

issue, in terms of the capacity of those people that do the processing and the review? Has resource, in terms of the number of 

folks that can do that, been an issue or not an issue? 

Mr. LEVINSON. Well, that is an important question, Mr. Sarbanes, that, in the first instance, I think needs to be addressed and 

responded to by CMS, which is the agency that runs the program. 

And, as an office that looks to see where the vulnerabilities, where 

the weaknesses are in the administration of a program, we have 

identified for some years now that enrollment standards are too 

lax, especially in specific areas of vulnerability, like DME. And 

whether or not there are resource issues, we find too many of the 

wrong kinds of people are getting into the program, and, therefore, 

we have urged—we have recommended, over the course of the last 

few years, that enrollment standards be strengthened. 

Mr. SARBANES. Well, I would imagine—I mean, I used to do some 

of that work, and I would imagine that the best way to vet it on 

the front end is with a little more intensity of resources applied. 

Actually going out and finding out who is behind these applications 

that are being filed. 

Let me shift gears. I was really intrigued by the discussion on 

the school based health centers, and some of the findings of fraud. 

In that discussion, there was an allusion to the possibility that 

there were services being—that reimbursement was being sought 

for services that were not actually provided, but possibly there 

were other services being provided that might—that one might 

view as important services, they just aren’t services that Medicare 

or Medicaid reimburses. And I wanted to ask the question of 

whether this phenomenon—and this is—in my view, the problem 

is whether you are talking about fee for service or you are talking 

about capitation, either one of those can work OK if you are paying 

for quality, as opposed to paying for quantity, and if you are paying 

for the right things, as opposed to not paying for the right things. 

But maybe both of you could comment on whether the potential for 

fraud is greater when you have a system that pays for quantity 

versus quality, or is paying for the wrong things. 

And while I don’t want to excuse fraud, if somebody is trying to 

find some payment for what they view as a very important service 

that is not covered under Medicare or Medicaid, that is a different 

kind of impulse than seeking to get paid for a service that is not 

being provided at all. And it seems to me the way the system is 

structured right now, and it is so distorted, that it leads to that 


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kind of thing, because people say, this service is valuable, but 

Medicare won’t pay me for it. And if we can move in a direction 

where we are paying smarter for things that make a difference, we 

might actually make some progress on this fraud issue. So maybe 

you could each—— 

Mr. LEVINSON. Well, I do think the facts that you have laid out, 

Mr. Sarbanes, are important ones to focus on. The notion that 

there can be monies spent that are just not appropriately covered 

by the program, and in many instances we are really not talking 

about fraud in terms of the legal definition of fraud. We are talking 

about dollars that Congress—that the program says should be directed in a particular way, and our audit people, not our criminal 

investigators, find have not been spent appropriately, and then we 

make the appropriate findings and recommendations to CMS. 

Not all of our recommendations are acted upon by CMS. There 

unquestionably are judgments. Perhaps some of the kinds of judgments you are talking about here and judgments that, programmatically, are made by CMS over the course of looking of our recommends, because—just by the fact that we make those recommendations doesn’t necessarily mean that the dollars will actually be collected. And I do think that it is important to distinguish, 

you know, between those who have an intent to take advantage of 

the program and those who, unfortunately, are simply not paying 

appropriate attention to our rules. But, of course, given the precious resources, we take the rules as set by Congress and the Department seriously, and we report accordingly. 

Mr. PALLONE. Now the time has expired. I am sorry. Next is Ms. 

DeGette. 

Ms. DEGETTE. Thank you very much, Mr. Chairman, and thanks 

to this Committee. 

I know you have discussed some of the issues in general that I 

want to talk about, I would like to hone in on them a little more. 

My first question is you talked about—actually, Mr. Hackbarth, the 

MedPAC has talked about changing the Medicare payment system 

incentives by basing a portion of provider payment on quality of 

care, and to do this, Congress could establish a quality incentive 

payment policy for physicians and other plans, Medicare Advantage 

plans, health care facilities. I am wondering if you have some specific recommendations you can make as to what kind of quality 

measures people would have to include to be—or to develop to be 

included in a quality incentive payment policy. 

Mr. HACKBARTH. Well, let me focus on a few different areas of 

the program. For example, in the Medicare Advantage program, we 

have long advocated that a piece of the payment be adjusted to reflect the quality, and—— 

Ms. DEGETTE. How do you do that? 

Mr. HACKBARTH. There are well established industry measures 

developed by NCQA that private employers use to assess health 

plans. We believe Medicare should be doing the same and adjusting 

payment accordingly. In the case of dialysis services, again, there 

is a pretty strong consensus about what the critical quality measures are. We have advocated that the dialysis payments be adjusted to reflect those outcomes for patients. 


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Likewise, in hospitals, we think there are some strong consensus 

measures. In fact, Medicare requires, as you know, specific measures be reported. We would like to see payment—— 

Ms. DEGETTE. Do you think that the current—and I do know 

that, because my heroine, Patty Gabow from Denver Health, is 

here on the next panel—— 

Mr. HACKBARTH. Um-hum. 

Ms. DEGETTE [continuing]. But do you think that we could—do 

you think that the—that these quality measures that we have in 

place now are sufficient as we move forward with a comprehensive 

health care plan? Do we need some kind of additional mechanism? 

Do we need additional quality measures? What do we need—— 

Mr. HACKBARTH. Yes, I think the measures need to evolve over 

time. I think we have got starter sets, if you will, for a lot of providers, but we need to invest in developing in the long term. 

Ms. DEGETTE. And who should do that? 

Mr. HACKBARTH. Well, Congress has invested some money now 

in NQF, the National Quality Forum, which I think is a wise investment to build infrastructure for ongoing improvement and 

quality measures. 

Ms. DEGETTE. And do you think some of these quality measures 

that you talk about for Medicare Advantage can also be used for 

physicians in other types of health care facilities, like hospitals and 

community health facilities? 

Mr. HACKBARTH. Well, each provider group presents its own challenges and will require unique measures. I mentioned three areas, 

Medicare Advantage, ESRD and hospitals, but I think there is a 

pretty strong consensus on a starter set of measures. Other areas 

are more challenging. Physicians are more challenging just because 

of the nature of a medical practice. You often have small groups, 

or even solo physicians, so not a lot of numbers to do measurement. 

Ms. DEGETTE. But you know what, though, people like Geisinger 

and Kaiser and others have been able to develop quality measures 

for doctors, that it would seem to me you could develop, and if you 

don’t develop those for physicians, then it is hard to see how you 

can get the improvement in medical care at the same time that you 

get the cost containment in our system. 

Mr. HACKBARTH. And I agree with that, that we do have initial 

measures—they are not comprehensive measures for physicians. 

They tend to be very focused process measures. 

Ms. DEGETTE. Right. 

Mr. HACKBARTH. I think we can do a better job in assessing physician performance as we move to bundle payment systems. Where 

we get groups of physicians working together, we can start to 

measure outcomes, not just—— 

Ms. DEGETTE. That was my next question. So to develop those 

measures, again, what kind of mechanism do you think—would it 

be the same one you talked about that Congress—there is a group 

of us—— 

Mr. HACKBARTH. Yes? 

Ms. DEGETTE [continuing]. Senator Whitehouse and myself and 

others who are very concerned that if we don’t develop quality 

measures throughout the system—— 

Mr. HACKBARTH. Yes. 


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Ms. DEGETTE [continuing]. That we are really not going to 

have—— 

Mr. HACKBARTH. Yes. 

Ms. DEGETTE [continuing]. Improvements in patient outcomes. 

Mr. HACKBARTH. So we need a process for forging consensus and 

establishing a set of measures. 

Ms. DEGETTE. Right. 

Mr. HACKBARTH. You don’t want, you know, 12 different ones—— 

Ms. DEGETTE. Right. 

Mr. HACKBARTH [continuing]. And everybody using different 

measures. 

Ms. DEGETTE. Right. 

Mr. HACKBARTH. That is a burden on providers. 

Ms. DEGETTE. Right. 

Mr. HACKBARTH. And NQF can be that process. It can grow into 

that process, where we have consensus. Then we also have to invest in the research about what works—— 

Ms. DEGETTE. What works. 

Mr. HACKBARTH [continuing]. And that is where comparative effectiveness comes in. That can provide raw material for specialty 

societies and the like to develop guidelines on what constitutes 

good care, and that can also feed, ultimately, into the assessment 

process. 

Ms. DEGETTE. Thank you. Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. Gentleman from Texas, Mr. Gonzalez. 

Mr. GONZALEZ. Thank you very much, Mr. Chairman. This will 

go to the Chairman. 

There are two major components of what we are considering, and 

the experience gleaned from Medicare is going to be used either by 

the proponents or the opponents. Just—again, it will be the performance of Medicare in the eye of the beholder. One is the public 

option, the other is the health insurance exchange. So I am going 

to pose a couple of questions, and then just let you respond, and 

that way the—it will be the Chairman that will be advising you 

that my five minutes are over. 

But first, I haven’t met with a group of doctors in San Antonio 

yet that have agreed with the compensation adequacy. And what 

they are all saying is that you guys are basically working with 

stale data and information, that it is at least two years behind the 

times of what modern medicine, in its practice, entails. That is the 

first question, and I know that we have touched on it more or less, 

but that is going to be very important as we go out there with a 

broader plan that, again, has something that will mimic what we 

have been doing under Medicare. So that is the first complaint that 

we get. 

My colleague, Ms. DeGette, also touched on something, and that 

was how do you establish proper protocols? What is acceptable— 

practices and standards? On the Small Business Committee, we 

had Governor Pawlenty who came up, and I asked him that, because my doctors asked the same thing. Different patient populations may dictate different practices and such. 

Well, Governor Pawlenty told me, he says, we have got Mayo. 

They establish the standards, pretty much, and no one is going to 

argue with them. The question to you is how do we ever really 


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achieve nationwide standards that may address diverse populations 

and such? The last question is somewhat interesting, one, because 

it presents a real dilemma for me back home. Texas has probably 

the greatest number of specialty hospitals. The question really is 

how is modern medicine being delivered in this country, and—to 

keep up with that? 

There are portions of this bill that would discourage, of course, 

specialty hospitals, yet we are looking at what we refer to as bundling, and that is more centralization, more coordination, medical 

home, all that that entails. But in essence, isn’t that what specialty 

hospitals and many of these specialty practices provide? And that 

is, when a patient goes into those settings, that there are many different services that are being provided within that environment 

that otherwise would be separated out to different locales, offices 

and other doctors. And we even have different specialists that 

argue among themselves as to what extent they should be able to 

do that. And I would just like your views on those three points, and 

again, thank you for your service. 

Mr. HACKBARTH. OK. That is a lot of ground to cover in just a 

minute or two. Starting with the stale data, I imagine what your 

physician constituents are referring to is Medicare claims data, 

which, in fact, is a couple years old by the time it is used in the 

policy process. That is a problem. That is an area where I think 

some wise investments in Medicare infrastructure would pay dividends. I am not sure, however, that the age of the data would alter 

any of the recommendations we are talking about for reforming the 

payment system. 

With regard to standard setting, I do believe it is very important 

to have a process that is coherent and credible from the perspective 

of providers. I fear that sometimes we have embarrassment of 

riches. We have a lot of different people saying this is what constitutes quality of care. Some of it is well-founded in research, 

other pieces of it are not. If we want to send clear, consistent, signals to providers, not just from Medicare but from private insurers 

as well, we need to have a coherent standard setting process. 

As I said a minute ago, Congress, I think, wisely has invested 

some money in NQF to start building that infrastructure. 

On the last issue of specialty hospitals, roughly 2 years ago now 

MedPAC at Congress’ request invested a lot of effort in analyzing 

specialty hospitals. Our basic findings were that when physicianowned specialty hospitals enter the market, costs tended to increase, not decrease. More procedures were done. The evidence on 

the quality of care was there was not definitive evidence one way 

or the other that it was better or worse. It seemed to be about the 

same. 

At the time we did our analysis, our big concern, our immediate 

concern was that at least some physician-owned specialty hospitals 

were exploiting flaws in the Medicare payment system. They were 

focused on procedures where the Medicare rates were too high. We 

made recommendations which Congress adopted and CMS has now 

largely implemented to change payment rates so there aren’t those 

gaping opportunities to exploit the system. 

Mr. PALLONE. Thank you. 

Mr. Matheson is next. 


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Mr. MATHESON. Thank you, Mr. Chairman. 

I am sorry I was not able to be here for all your testimony but 

I do appreciate your coming before the committee today. A question 

I wanted to raise is, MedPAC has had the opportunity to make a 

lot of recommendations about how we can achieve greater efficiencies or greater value or good practices, and often when it comes 

to implementation, Congress has not necessarily followed through 

on that. Do you have suggestions if there would be a better structure to help assist in allowing these recommendations to be implemented in a more effective way? 

Mr. HACKBARTH. Well, one of my themes this morning has been 

that I think the Secretary of Health and Human Services and CMS 

need both more discretion and more resources so they need the 

flexibility to refine change, payment systems, overtime to achieve 

goals established by the Congress. For every small change to have 

to come back through the legislative process is a very cumbersome 

process and it makes progress very slow and I am not sure that 

is a luxury we can afford at this point, so more discretion and more 

resources for the Department would be my first recommendation. 

Mr. MATHESON. Do you have—in terms of making that recommendation, is there a specific proposal about what the resource 

needs might be or is that something that we can look to maybe get 

some information? 

Mr. HACKBARTH. I would urge you to go to the Department for 

that information. They are the best judges of exactly what they 

need. 

Mr. MATHESON. Do you feel like the way MedPAC is structured 

right now that you are adequately insulated from having Members 

of Congress come in and tell you here is what we think you really 

ought to be doing? 

Mr. HACKBARTH. Well, we welcome our exchange with Members 

of Congress and the MedPAC staff works very closely with both the 

committee and personal staffs to understand Congressional perspective. I have never felt undue pressure from any Member of 

Congress. 

Mr. MATHESON. Do you feel like you are adequately structured 

to be an independent entity? I guess that is what I am asking. 

Mr. HACKBARTH. Yes. 

Mr. MATHESON. OK. Thanks, Mr. Chairman. That will be it for 

me. 

Mr. PALLONE. Thank you. 

Mr. Barrow. 

Mr. BARROW. Thank you, Mr. Chairman, and thank you gentlemen for being here today. I too along with Jim had several other 

meetings this morning so I apologize for being a little late but I am 

glad to have the chance to visit with you. Thank you for coming 

and offering your testimony. 

You know, fixing what is broke with Medicare Part D is a large 

part of comprehensive health care reform and a lot of attention has 

been given to ways and means of trying to plug the donut hole, 

among other things. I want to focus on a problem with the Medicare Part D program that has bedeviled the people I represent. I 

hear about it at every one of my town hall meetings, and that is 

the excessive degree of discretion and variety in the formularies 


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that all of these various for-profit insurers are paid by the public 

essentially to assume a public risk and the incredible confusion. 

You know, there is such a thing as too much of a good thing. When 

there is too much variety and choice in the marketplace, you have 

a hard time finding what you need and you have to do a lot of 

hunting and trying to find the drug that you want and then with 

a potential for bait and switch that can exist and the formulary 

being changed on you. That just makes things so much worse. 

My question to you is, and I guess Chairman Hackbarth, you are 

probably in the best position to answer this, is any thought being 

given, since this is a public financed plan, to get the for-profit insurance industry to compete with each other to make money trying 

to offer a benefits package to assume a public risk in providing this 

benefit? Any thought given to trying to make more—to have a centralized or more standardized formula that is comprehensive in its 

scope but provides all of the necessary flexibility and variety to 

allow doctors to opt out when there is a medical necessity that they 

know about, a generally good reason to do so, but to make it clear 

that when folks go into this very confusing marketplace with so 

many people competing for the customers’ business that they know 

that they are comparing apples to apples, they know that the benefits package is substantially the same just as the entity that is paying for this is substantially the same, just as what you hope to get 

is substantially the same. Is any effort being made to do that? 

Mr. HACKBARTH. Well, you are absolutely right, that the choices 

that Medicare beneficiaries face are complicated and choosing 

among plans because of, among other things, differences in 

formularies. I would add that it doesn’t stop with the beneficiaries. 

You know, differences in formularies also have a significant impact 

on practicing physicians and how they deal with patients. What 

they prescribe needs to vary according to the plan that the patient 

is covered by, and that can be a real problem for physicians. There 

is a tradeoff here, though. The flexibility around formularies and 

the exact benefit structure, those are tools that private plans can 

use to try to offer a better value for Medicare beneficiaries. Those 

are the tools that they can use to reduce the cost of the plan, and 

so there is a tradeoff to be made. 

Mr. BARROW. If you have a plan that is designed to the health 

profile of the patient, in theory you can get yourself into a much 

smaller risk pool and be shopping for something that is just tailored for you, but the point is, at least the quality of the insurance 

and it takes on the quality of being sort of a revolving loan program. 

Mr. HACKBARTH. And some people have expressed concern in 

particular about specialty drugs, very high-cost drugs for patients 

with serious illnesses. 

Mr. BARROW. Well, there is a medical necessity for that. The 

smaller the risk pool of folks buying into the program, the more expensive that is going to be when it is absolutely necessary to get 

it, so that sort of drives up the cost for those folks who need it 

when they need it I guess what I am getting at is, if you really 

have too much choice, you don’t know what you are choosing and 

the other party on the other side of this deal can change the deal 

on you after you have signed up. We make this thing much more 


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complicated and much user friendly than it has to be, and I want 

to make sure we are not driving up the cost by having exotic stuff 

driving up the cost for the ordinary, everyday stuff but there is a 

profile, there is a comprehensive scope of conditions that we can 

treat effectively, cost-effectively with medication, and it seems to 

me the more we can eliminate the confusion in this, the more—and 

make it genuinely available and comprehensive in its scope, the 

better service we are providing all our customers. Because after all, 

we are paying these folks to assume this public risk and we ought 

to make sure that folks know what they are getting when they go 

into the marketplace. What is MedPAC doing about this? Are you 

all looking into this? 

Mr. HACKBARTH. Well, on the specific issue of the complexity, we 

have looked at the choices that Medicare beneficiaries have to 

make in choosing among plans, and looked at the tools that beneficiaries have available to them. CMS does have some tools, as you 

know, to try to help beneficiaries compare plans and choices. We 

think here again this is another area where some investment could 

pay dividends in helping beneficiaries understand their choices. 

There is no way around, though, the ultimate tradeoff that you are 

going to face between complexity on the one hand and flexibility for 

plans to manage the costs on the other. There is no answer on how 

to strike that balance. 

Mr. BARROW. I think doctors—— 

Mr. PALLONE. Your time is expired, but if you want to say something—— 

Mr. BARROW. I think doctors ought to be able to make those calls. 

Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. 

Unless anyone else has questions, we are going to proceed to the 

next panel, so thank you very much. Your input is obviously very 

important as we proceed on this and we appreciate your being here 

this morning. Thank you. 

I ask the next panel to come forward. Could we ask that everyone be seated and that everyone else clear the room, because we 

do have to get moving. We have three more panels. Those who are 

talking and socializing, please leave the room. 

OK. Our second panel is on doctor, nurse, hospital and other provider views, and as you can see, it is a rather large panel so we 

want to get started, and let me—I don’t think I have seen such a 

large panel. We will start on my left with Dr. Ted Epperly, who is 

president of the American Academy of Family Physicians, and then 

we have Dr. M. Todd Williamson, who is president of the Medical 

Association of Georgia, and then is Dr. Karl Ulrich, who is clinical 

president and CEO of the Marshfield Clinic, and Dr. Janet Wright, 

who is vice president of Science and Quality at the American College of Cardiology, Dr. Kathleen White, who is chair of the Congress on Nursing Practice and Economics at the American Nurses 

Association, Dr. Patricia Gabow, who is chief executive officer of 

the Denver Health and Hospital Authority for the National Association—well, she will be speaking for the National Association of 

Public Hospitals, Dan Hawkins, who is senior vice president of 

public policy of research for the National Association of Community 

Health Centers, and Bruce Roberts, who is executive vice president 


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and CEO of the National Community Pharmacists Association, 

Bruce Yarwood, president and CEO of the American Health Care 

Association, and Alissa Fox, who is senior vice president of the Office of Policy and Representation for the Blue Cross Blue Shield Association. 

Now, before we begin, I just wanted to point something out that 

I believe has been shared with staff but I think needs to be repeated because of the panel. It would touch upon some of the 

things particularly with regard to community health centers. In 

several sections of the draft—well, I should say in several sections 

of that part of the draft that deals with the public health and workforce development, in that division, a sentence that was supposed 

to be an addition to current authorizations was instead drafted to 

take the place of them. So instead of ‘‘in addition’’ it says ‘‘to take 

the place of’’ in that decision, and this is an error. It was caught 

on Friday afternoon shortly after the draft was announced and we 

did notify both Democrat and Republican committee staff of the 

mistake and corrections have been sent to the Office of Legislative 

Counsel, but I did want to point that out before I started here 

today because I wasn’t sure that all of you who are testifying were 

aware of that. The mistake is particularly glaring in the provision 

related to community health centers, and I think Mr. Hawkins 

knows this, but just let me point it out to everyone, that the draft 

is supposed to include an additional $12 billion over 5 years in new 

money and that is over and above the current appropriation. Again, 

that is why we have drafts, I guess. 

But let us start. As you know, we ask you to keep your oral comments to 5 minutes and of course all of your written testimony will 

be included in the record, and we will start with Dr. Epperly. 

STATEMENTS OF TED D. EPPERLY, M.D., PRESIDENT, AMERICAN ACADEMY OF FAMILY PHYSICIANS; M. TODD 

WILLIAMSON, M.D., PRESIDENT, MEDICAL ASSOCIATION OF 

GEORGIA; KARL J. ULRICH, M.D., CLINIC PRESIDENT AND 

CEO, MARSHFIELD CLINIC; JANET WRIGHT, M.D., VICE 

PRESIDENT, SCIENCE AND QUALITY, AMERICAN COLLEGE 

OF CARDIOLOGY; KATHLEEN M. WHITE, PH.D., CHAIR, CONGRESS ON NURSING PRACTICE AND ECONOMICS, AMERICAN 

NURSES ASSOCIATION; PATRICIA GABOW, M.D., CHIEF EXECUTIVE OFFICER, DENVER HEALTH AND HOSPITAL AUTHORITY, NATIONAL ASSOCIATION OF PUBLIC HOSPITALS; DAN 

HAWKINS, SENIOR VICE PRESIDENT, PUBLIC POLICY AND 

RESEARCH, NATIONAL ASSOCIATION OF COMMUNITY 

HEALTH CENTERS; BRUCE T. ROBERTS, RPH, EXECUTIVE 

VICE PRESIDENT AND CEO, NATIONAL COMMUNITY PHARMACISTS ASSOCIATION; BRUCE YARWOOD, PRESIDENT AND 

CEO, AMERICAN HEALTH CARE ASSOCIATION; AND ALISSA 

FOX, SENIOR VICE PRESIDENT, OFFICE OF POLICY AND REPRESENTATION, BLUE CROSS BLUE SHIELD ASSOCIATION 

STATEMENT OF TED D. EPPERLY 

Dr. EPPERLY. Chairman Pallone, Ranking Member Deal and 

members of the Energy and Commerce Health Subcommittee, I am 

Ted Epperly, president of the American Academy of Family Physicians, which represents 94,600 members across the United States. 


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I am a practicing family physician from Boise, Idaho. I am delighted to say that your draft bill goes a long way towards providing quality, affordable health care coverage for everyone in the 

United States. 

The AAFP has called for fundamental reform of our health care 

system for over 2 decades. We commend you for your leadership 

and commitment to find solutions to this complex national priority. 

We appreciate efforts to improve primary care through this draft 

bill. The Academy believes that making primary care the foundation of health care in this country is critical. Primary care is the 

only form of health delivery charged with the long-term care of the 

whole person and has the most effect on health care outcomes. Primary care is performed and managed by a personal physician leading a team, collaborating with other health professionals and using 

consultation or referral as needed. 

Many studies demonstrate that primary care is high quality and 

cost-effective because it includes coordination and integration of 

health care services. The Academy believes the key to designing a 

new health care system is to emphasize the centrality of primary 

care by including the patient-centered medical home where every 

patient has a personal physician, emphasizing cognitive clinical decision making rather than procedures, and ensuring the adequacy 

of our primary care workforce and aligning incentives to embrace 

value over volume. 

Many of these key provisions are contained in your draft legislation. Specifically, we applaud the committee for including a medical 

home pilot program in Medicare as a step towards a primary care 

system. Your definition of the patient-centered medical home is 

consistent with the one established by the AAFP and other primary 

care organizations. We also support the PCMH demonstration 

project in Medicaid. Use of the medical home will achieve savings 

and improve quality. We appreciate the inclusion of a bonus of 5 

percent for primary care services and up to 10 percent for services 

provided in a health profession shortage area. We urge you to make 

this bonus permanent. 

Medicare is a critical component of the U.S. health system and 

must be preserved and protected. With this draft, you take the first 

bold steps needed to remedy the Medicare physician payment system. The AAFP appreciates your recognition of the longstanding 

problems with the dysfunctional formula known as the sustainable 

growth rate, or SGR. We thank you for proposing that it be 

rebased. This is an important, necessary and welcome step. 

We also appreciate the bill’s attention to workforce issues. Numerous studies indicate that more Americans depend on family 

physicians than on any other medical specialty. We are deeply concerned about the decline in the number of medical students pursuing a career in primary care at a time when the demand for primary care services will only be increasing. The majority of health 

care is provided in physicians’ offices now and will be in the future. 

We must revitalize the programs to train the primary care physician workforce that will meet our needs in those locations. 

We thank you for reauthorizing and providing a substantial investment in section 747 of the health professions primary care 

medicine training program. The National Health Care Workforce 


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Commission in the discussion draft is needed to recommend the appropriate numbers and distribution of physicians. 

The AAFP is also pleased that the Medicaid title provides for a 

substantial expansion of coverage to the uninsured. In particular, 

we support increases to the Medicaid primary care payment so that 

it is equal to Medicare by 2012. The AAFP supports a public plan 

option consistent with the principles included in our written testimony. Patients should have a choice of health plans and a public 

plan should be one of them. However, the public plan should not 

be Medicare. We acknowledge that for transition purposes, there 

may be some similarities to the federal program but we urge Congress to delink the public plan from Medicare by a date certain. 

The AAFP strongly supports the inclusion of comparative effectiveness research in the draft bill. We appreciate the establishment 

of a center within the Agency for Health Care Research and Quality. If we wish to improve the patient care and control costs in this 

country, this type of research is crucial. It is only with CER that 

we can provide evidence-based information to patients and physicians for use in making health care decisions. 

Finally, we support a number of insurance market changes that 

will help our patients in regards to the health insurance exchange 

where they can one-stop shop for a health care plan, a sliding-scale 

subsidy so that people can purchase meaningful coverage, guaranteed availability and renewability of coverage, prohibition of preexisting conditions exclusions and denials, and benefit packages 

that allow consumers to select the one that best meets their needs 

as well as a requirement for a core set of benefits. 

In conclusion, the Academy believes that health care should be 

a shared responsibility and applauds the section of the bill that requires all individuals have coverage. Now is the time to provide affordable, high-quality health care coverage. The status quo is not 

working. We urge Congress to invest in the health care system we 

want, not the one we have. Thank you very much, Mr. Chairman. 

[The prepared statement of Dr. Epperly follows:] 


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Mr. PALLONE. Thank you, Dr. Epperly. 

Dr. Williamson. 

STATEMENT OF M. TODD WILLIAMSON 

Dr. WILLIAMSON. Good morning, Chairman Pallone and Mr. Deal. 

My name is Todd Williamson, and I want to thank you for the opportunity to speak to you today. I am a neurologist from Atlanta 

and I serve as the president of the Medical Association of Georgia, 

and I am speaking on behalf of that association. 

I recently had the privilege on speaking on behalf of a coalition 

of 20 State and specialty medical societies representing more than 

100,000 physicians, which is nearly half of the practicing physicians in the United States. This coalition believes that ensuring the 

patient’s right to privately contract with their physician is the single most important step we could take to reform our medical care 

system. 

I would like to begin by addressing three assumptions that underpin the discussion draft. The first relates to geographic disparities in spending. Peter Orszag recently said that nearly 30 percent 

of Medicare’s costs could be saved without negatively affecting 

health outcomes of spending in high- and medium-cost areas could 

be reduced to the level in low-cost areas. We do not agree. This 

flawed claim was first made by the Dartmouth Group, which used 

only Medicare data to analyze spending and quality. Please consider the work of Dr. Richard Cooper, which shows that an examination of total medical spending per capita reveals that quality 

and cost are indeed connected. He also demonstrates that Medicare 

payments are disproportionately higher in States with high poverty 

levels and low overall medical care spending. The suggestion that 

our medical care expenditures are greater than other countries is 

also misleading, countries that account for expenditures such as 

out-of-pocket payments and the cost of long-term care in different 

ways. Some countries drive down costs by rationing care. The cost 

of research and development distorts our expenditures as well. 

A third faulty assumption is that medical care outcomes in the 

United States are worse than in other countries. America’s oftencited infant mortality statistics cannot be directly compared to statistics from other countries that do not record the deaths of low 

birth weight newborns that we try to save. Comparisons of a host 

of specific diseases such as diabetes clearly show our outcomes are 

superior. 

We cannot support and would actively oppose the discussion 

draft. As I noted, we believe that allowing patients and physicians 

to privately contract is the single most important step we can take 

towards reforming the Nation’s medical care system. This will empower patients to choose their physician, spend their own money 

on medical care and make their own medical decisions. Medical expenditures can only be appropriately controlled and allocated 

where there is complete transparency and acknowledgement of necessity and value at the time of the patient-physician interaction. 

Private contracting will enhance access to medical care. Many physicians opt out of government plans because payments do not cover 

costs. If private contracting was allowed, every patient would have 

access to every doctor. This option is currently not available under 


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government plans and is prohibited in the discussion draft. Critics 

cite that private contracting will disadvantage impoverished patients. I would argue that they will benefit from increased access 

and competition in the medical community and their physicians 

will be at liberty to waive copays, which is currently forbidden in 

government plans. 

We applaud the draft sponsors for planning to rebase the SGR 

payment system but we remain concerned that they continue to 

rely on a target-based approach. We support the emphasis on prevention, wellness and claims transparency. We agree that primary 

care should receive greater support and administrative burdens 

should be reduced. We do not believe that the federal government 

should replace current research and development mechanisms or 

the training and judgment of physicians with federally controlled 

comparative effectiveness research. 

While we recognize the need for reform, we believe that the private marketplace should remain the primary means of obtaining 

insurance. A government-sponsored health insurance program for 

working-age adults will invariably eliminate private options. Recall 

that Medicare was originally introduced as an option for seniors 

but today it has essentially become their only choice. 

We can reduce obstacles to individual ownership and control of 

mental illness by adopting new tax policies. This would eliminate 

the phenomenon of preexisting conditions because individuals could 

carry their insurance with them for life independent of their occupation or employer. To those who assert that the private sector has 

failed our patients, I say that our patients have been disadvantaged in the marketplace by a tax system that penalizes individual 

ownership of health insurance. When all Americans own their policies, insurance companies will be forced to compete for the business 

of millions of individuals and they will focus on satisfying the patient, not the patient’s employer. Finally, we can significantly reduce health care expenditures and improve access by enacting 

proven, effective medical liability reform measures. 

I appreciate this opportunity to present the views of practicing 

physicians to you today. Thank you. 

[The prepared statement of Dr. Williamson follows:] 


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Mr. PALLONE. Thank you, Dr. Williamson. 

Dr. Ulrich. 

STATEMENT OF KARL J. ULRICH 

Dr. ULRICH. Mr. Chairman, Ranking Member Deal and members 

of the subcommittee, my name is Karl Ulrich and I am president 

and CEO of Marshfield Clinic in Marshfield, Wisconsin. On behalf 

of myself, our staff and the tens of thousands of patients that we 

care for, we commend you for advancing the national health reform 

debate. 

At our clinic, we continue to follow closely this dialog, especially 

reorienting the system towards quality and efficiency while at the 

same time ensuring that any meaningful reform is not built upon 

the flawed incentives of the current program. Therefore, we strongly urge this committee to be bold and address the problems of affordability, quality and disparities in payment that plague the program, hurting beneficiaries and providers alike. 

As background, Marshfield Clinic is one of the largest medical 

group practices in Wisconsin and indeed the United States with almost 800 physicians, 6,500 additional staff and 3.6 million annual 

patient encounters per year. As a 501(c)(3) not-for-profit organization, our clinic is a public trust serving all who seek care regardless 

of their ability to pay. As part of our commitment, the clinic has 

invested in sophisticated tools that complement and support our 

mission such as an internally developed certified electronic medical 

record, a data warehouse and an immunization registry. With this 

infrastructure, the clinic is presently publicly reporting clinical outcomes and providing quality improvement tools to analyze processes, eliminate waste and improve consistency while still reducing 

unnecessary costs. These initiatives are consistent with the stated 

goals of the national health reform debate. Our clinic has long used 

information to facilitate care redesign and we expanded these efforts after becoming a participant in the federal physician group 

demonstration project. As a result, we have improved care, reduced 

costs and achieved significant savings for the Medicare program. In 

the first 2 years of the demonstration, we have saved taxpayers 

more than $25 million with our redesigns while meeting or exceeding all 27 possible quality metrics. We believe that equivalent or 

even greater results are possible with the creation of the proposed 

accountable care organizations, especially if the subcommittee 

aligns the incentives of the Medicare program reimbursement with 

value and efficiency. 

However, of concern is the current tri-committee mark. The authors have proposed the establishment of a public health insurance 

option. Providers who voluntarily participate in Medicare would be 

required to participate in the public option and would be paid at 

Medicare rates plus some incremental percentage for the first 3 

years of operation. This raises substantial financial and operational 

questions around how the federal government could compel physicians to see those patients. For instance, would this mean that patients must be seen when they present or would providers be compelled to see the patient within a certain time frame? Further, if 

the public plan pays at Medicare rates, the reduction in commercial 

service revenue would compel radical restructuring of our instituVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00725 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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tion, perhaps resulting in our demise. As such and in this current 

form, Marshfield Clinic strongly opposes the public plan alternative 

based on the belief that a true level playing field could never exist 

between public and private providers. In Wisconsin, where commercial rates vary between 180 to 280 percent of Medicare rates, this 

public plan would have such a profound competitive advantage that 

one needs to be concerned that providers would uniformly abandon 

the Medicare program to survive in the practice of medicine. 

Further, there is a significant problem with the Medicare payment rates in Wisconsin as well as the rest of rural America. For 

example, Medicare currently reimburses us at only 51.6 percent of 

our allowable costs. We believe that this is a result of Medicare’s 

failed formulas for reimbursing physician work and practice expense and Medicare’s geographic adjustment. To address these systemic problems, we believe that Congress and CMS must refine 

Medicare payment systems to address the problems of access and 

encourage appropriate care by providing incentives that focus on 

quality and efficiency. Similarly, we are also concerned about the 

practice expense components of the Medicare physician formula. It 

is widely agreed that the data used to estimate non-physician 

wages does not reflect current patterns and practice of medicine. 

As a result, the formula distorts payments, paying some too much 

and others too little. To resolve this disparity, we would like to 

heighten the legislative work of Congressmen Braley and Kind, 

who have each authored legislation to correct this inequity, and we 

urge the subcommittee to include these members’ thoughtful provisions in any health care reform legislation that advances. 

Again, Marshfield Clinic appreciates the opportunity to share our 

views and we look forward to advancing our shared vision of a 

healthy America. Thank you. 

[The prepared statement of Dr. Ulrich follows:] 


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Mr. PALLONE. Thank you, Dr. Ulrich. 

Dr. Wright. 

STATEMENT OF JANET WRIGHT 

Dr. WRIGHT. Chairman Pallone and Ranking Member Deal and 

members of the subcommittee, thank you for the opportunity to appear before the subcommittee today. My name is Janet Wright. I 

am a board-certified cardiologist, having trained in San Francisco 

and practiced in northern California for 25 years. For the last year 

I have been serving as the American College of Cardiology’s senior 

vice president for science and quality here in Washington, and in 

that role I oversee our registries, our scientific documents like 

guidelines and performance measures and appropriate-use criteria 

and also our quality improvement projects and programs. 

On behalf of the 37,000 members of the ACC, I commend you for 

setting out the health care reforms in the current draft bill. We see 

so many improvements and we commend you and applaud your efforts to both attend to and correct the flawed physician payment 

model. We also register concerns about proposed cuts in imaging 

and the effect they may have on patients’ access to care. But in 

broad overview, the ACC is completely committed to comprehensive 

reform and we are very grateful for your attention to the matter. 

Ranking Member Barton invited me to speak today about his 

draft proposal, the Health Care Transparency Commission Act of 

2009, and I am delighted to offer these comments. The American 

College of Cardiology values performance measurements, its analysis and improvement and it demonstrates this commitment 

through a 25-year history of producing guidelines for clinical practice, the more recent generation of a particular kind of guidance 

called appropriate-use criteria, to help clinicians choose the appropriate type of treatment or technology or procedure that best fits 

that patient’s clinical scenario, and in our efforts in what is now 

called implementation science, taking what we know works and 

trying to get that into the practice of medicine in a systematic way. 

Examples of that in recent years are the Door To Balloon project 

of the Alliance for Quality, over 1,100 hospitals here in the United 

States and beyond trying to shorten up that time from diagnosis 

of a myocardial infarction until the balloon opens that artery. And 

more recently we are about to launch a program called Hospital to 

Home, Excellence in Transition, along with key partnerships, particularly with the Institute for Health Care Improvement. And finally, we are beginning to implement our appropriate-use criteria, 

both in imaging and soon in revascularization, to help clinicians, 

their patients and their surgeons make good decisions about 

revascularization. 

In fact, our vision is not just separate projects but a network of 

practices in hospitals. Our registries are in about 2,300 hospitals 

around the country and our ambulatory registry called the Improvement Program is just beginning but we are out into about 600 

practices in the country. Our fully realized vision is to connect 

these practices and hospitals in a quality network. Those individuals practicing in the hospitals and outpatient settings are committed to the systematic delivery of scientifically sound patient-centered care, and fully realize that vision will include a primary care 


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network as well because we understand most of cardiac diseases 

are actually managed by primary care docs and nurses. In order to 

effect this vision to make this come true, obviously payment needs 

to be readjusted from the volume that we have known to the value 

that we treasure. I enlist and again appreciate your efforts to make 

that happen. 

We believe that good data are the foundation for quality improvement and serve to stimulate innovation, very healthy competition 

amongst providers and rapid and continuous learning network. As 

the science of performance measurement improves and the skill of 

all of us at communicating complicated statistics to lay people, as 

that skill is honed, consumers will likewise find great value in 

quality information. The ACC strongly supports the public’s right 

to valid, actionable and current data to help inform and enhance 

decision making. We find Mr. Barton’s proposal to be a laudable 

one and should Congress proceed in this direction, we recommend 

consideration of the following principles. These were published in 

2008 and I am only going to hit the high points. 

But number one, the driving force for performance measurements 

and public reporting should be quality improvement. We acknowledge and support Mr. Barton’s critical inclusion in his draft bill of 

quality ratings along with pricing information. Number two, public 

reporting programs should be based on performance measures with 

scientific validity. Number three, public reporting programs should 

be developed in partnership with health care professionals, those 

being measured. Number four, every effort should be made to use 

standardized data elements to assess and report performance, and 

to make the submission process uniform across all public reporting 

programs. This helps reduce the measurement fatigue and the disengagement that we often see in health care professionals who are 

exhausted with the effort of measuring. Number five, performance 

reporting should occur at the appropriate level of accountability. I 

think this is true in all areas of medicine but certainly in cardiology. The most effective care is delivered by teams. Focusing on 

an individual within that team may skew the measurement and 

the result of that measurement in a way that has adverse consequences. 

Mr. PALLONE. Dr. Wright, you are almost a minute over, so if you 

could just summarize. 

Dr. WRIGHT. Number six is avoiding those unintended consequences. Thank you very much. 

[The prepared statement of Dr. Wright follows:] 


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Mr. PALLONE. Thank you. Sorry. 

Dr. White. 

STATEMENT OF KATHLEEN M. WHITE 

Ms. WHITE. Chairman Pallone, Ranking Member Deal, distinguished committee members and Congressional staff, I am Kathleen White, a registered nurse, speaking today on behalf of the 

American Nurses Association, and we thank you for this opportunity to testify. The ANA is the only full-service national association representing the interests of the Nation’s 2.9 million registered 

nurses in all educational and practice settings. ANA advances the 

nursing profession by fostering high standards of nursing practice. 

ANA comments the committee for its work in the tri-committee’s 

draft legislation which represents a movement toward much-needed comprehensive and meaningful reform for our health care system. We appreciate the committee’s recognition that in order to 

meet our Nation’s health care needs, that we must have an integrated and well-resourced national workforce policy that fully recognizes the vital role of nurses and other health care providers and 

allows each to practice to the fullest extent of their scope. ANA remains committed to the principle that health care is a basic human 

right and all persons are entitled to ready access to affordable, 

quality health care services that are patient centered, comprehensive and accessible. We also support a restructured health care system that ensures universal access to a standard package of essential health care services for all. 

That is why ANA strongly supports the inclusion of a public 

health insurance plan option as an essential component of comprehensive health care reform. We believe that inclusion of a public 

plan option would assure that patient choice is a reality and not 

an empty promise and that a high-quality public plan option will 

above all provide the peace of mind that is missing from our current health care environment. It will guarantee the availability of 

quality, affordable coverage for individuals and families no matter 

what happens and generate needed competition in the insurance 

market. ANA looks forward to partnering with you to make this 

plan a reality. 

There are a wide variety of ideas currently circulating on health 

care reform but all include discussion of prevention and screening, 

health education, chronic-disease management, coordination of care 

and the provision of community-based primary care. As the committee has clearly recognized in its drafts, these are precisely the 

professional skills and services that registered nurses bring to patient care. As the largest group of health care professionals, registered nurses are educated and practice within a holistic framework that views the individual family and committee as an interconnected system. Nurses are the backbone of the health care system and are fundamental to the critical shift needed in health services delivery with the goal of transforming the current sick care 

system into a true health care system. 

ANA deeply appreciates the committee’s recognition of the need 

to expand the nursing workforce and thanks you for your commitment to amend the title VIII nursing workforce development programs under the Public Health Service Act and commend the incluVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00740 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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sion of the definition of nurse-managed health centers under the 

title VIII definitions. We applaud the removal of the 10 percent cap 

on doctoral traineeships under the advanced education nursing 

grant program and the inclusion of special consideration to eligible 

entities that increase diversity among advanced educated nurses. 

Additionally, the expansion of the loan repayment program eligibility to include graduates who commit to serving as nurse faculty 

for 2 years will help address this critical shortage of both bedside 

nurses and nursing faculty. We are also grateful for the funding 

stream created through the public health investment fund and the 

commitment of dollars through 2014 that would offer vital resources and much-needed funding stability for these title VIII programs. 

ANA applauds the use of community-based multidisciplinary 

teams to support primary care through the medical home model. 

ANA is especially pleased that under this proposal nurse practitioners have been recognized as primary care providers and authorized to lead medical homes. Nurse practitioners’ skills and education, which emphasize patient- and family-centered whole person 

care, make them particularly well-suited providers to lead in the 

medical home model, focused on coordinated chronic care management and wellness and prevention. Many recent studies have demonstrated what most health care consumers already know: nursing 

care and quality patient care are inextricably linked in all care settings but particularly in acute and long-term care. 

Because nursing care is fundamental to patient outcomes, we are 

pleased that the legislation places a strong emphasis on reporting 

nurse staffing and long-term care settings, both publicly and to the 

Secretary. The availability of nurse staffing information on the 

nursing home compare Web site would be vital to help consumers 

make informed decisions and the full data reported to the Secretary will ensure staffing accountability and enhance resident 

safety. ANA hopes that in the same vein the committee will look 

toward incorporating public reporting of similar nurse staffing 

measures and nursing-sensitive indicators in acute care through 

the hospital compare Web site as recommended by the National 

Quality Forum. 

Finally, a reformed health care system must value primary care 

and prevention to achieve improved health status of individuals, 

families and the community. ANA supports the renewed focus on 

new and existing community-based programs such as community 

health centers, nurse home visitation programs and school-based 

clinics and applauds the committee’s recognition of the vital importance of addressing health disparities. 

Once again, the American Nurses Association thanks you for the 

opportunity to testify before this committee. We appreciate your 

understanding of the important role nurses play in the lives of our 

patients and the health system at large. Nurses are ready to work 

with you to support and advance meaningful health care reform 

today. Thank you. 

[The prepared statement of Ms. White follows:] 


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Mr. PALLONE. Thank you, Ms. White. 

Dr. Gabow. 

STATEMENT OF PATRICIA GABOW 

Dr. GABOW. Chairman Pallone, Ranking Member Deal and members of the committee, thank you for the opportunity to testify. I 

am Dr. Patricia Gabow and I am speaking for Denver Health and 

National Association of Public Health and Hospital System. Please 

excuse my voice. 

Denver Health is an integrated safety-net institution that includes the State’s busiest hospitals, all Denver federally qualified 

health centers, the public health department, all the school-based 

clinics and more. Since 1991, we have provided $3.4 billion in uninsured care and have been in the black every year. We have stateof-the art facilities and sophisticated HIT. These characteristics 

have enabled amazing quality. Ninety-two percent of our children 

are immunized. Our hospital mortality is one of the lowest in the 

country. Sixty-one percent of our patients have their blood pressure 

controlled compared to 34 percent in the country. This is despite 

the fact that 46 percent of our patients are uninsured, 70 percent 

are minorities and 85 percent are below 185 percent of federal poverty level. 

So you may ask if we are doing so well and meeting patients’ 

needs, why am I here supporting health reform. The answer is 

straightforward. As the safety-net physician leader, I see every day 

that America is failing to meet people’s health care needs in a coordinated, high-quality, low-cost way. The number of uninsured at 

our door and the cost of their care increases every year. In 2007, 

our uninsured care was $275 million. Last year it was $318 million, 

and is projected to be $360 million this year. This is not sustainable. Moreover, not every American city has a Denver Health. As 

a doctor, I ask myself why should where you live in America determine if you live. Why should an uninsured cancer patient get care 

if they live in Denver but not if they live in another Colorado county? 

You have included important reform components in your draft 

bill. We support your goal to ensure affordable, quality care for all. 

I agree that costs must be reduced if we are to cover everyone and 

costs can be reduced by developing integrated systems that get patients to the right place at the right time with the right level of 

care, with the right provider and the right financial incentives. We 

support your continued investment in DSH hospitals, community 

health centers and public health. I would encourage incentives to 

integrated systems. These entities will be important during the 

transition to full coverage and afterwards to vulnerable patients including Medicaid, which will be a building block for much of the 

coverage expansion. Integrated systems are cost efficient. Our 

charges for Medicaid admission are 30 percent below our peer hospitals. 

Your investment in primary care and nurse training and the National Health Service Corps is critical. Without this, we will not be 

able to get patients to the right provider for the right level of care. 

As a public entity, we believe in the power of the public sector to 

meet the needs not only of those patients on public programs but 


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also private patients. We are the major Medicaid provider for our 

State but our HMO also serves private patients including Denver’s 

mayor. We and other safety-net systems would welcome the opportunity to continue to be a plan of choice. 

In summary, as a physician and a GEO of a public safety-net 

system, I urge you to continue this effort to substantially reform 

our delivery system, our payment model and to provide care for all 

Americans. Our current system cannot and should not be sustained. America deserves better. I and NPH are eager to help you 

in this very important task. Thank you. 

[The prepared statement of Dr. Gabow follows:] 


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Mr. PALLONE. Thank you, Doctor. 

Mr. Hawkins. 

STATEMENT OF DAN HAWKINS 

Mr. HAWKINS. Well said, Dr. Gabow. 

Good morning, Mr. Chairman, Ranking Member Deal and distinguished members of the subcommittee, distinguished meaning 

present and accounted for. On behalf of the National Association of 

Community Health Centers, the Nation’s more than 1,200 community health center organizations and the more than 18 million people they serve today, thank you for the opportunity to contribute 

to today’s discussion. In community health centers all across the 

country, we witness the urgent need for fundamental health reform 

every single day in the faces and the struggles of our patients who 

for too long have been left behind by our dysfunctional health care 

system. 

Our 43 years’ experience in caring for America’s medically 

disenfranchised and underserved has taught us three things. First 

and foremost, that health reform must achieve universal coverage 

that is available and affordable for everyone and especially for lowincome individuals and families, second, that that coverage must 

be comprehensive and must emphasize prevention and primary 

care, and third, that it must guarantee that everyone has access to 

a medical or a health care home where they can receive high-quality, cost-effective care for their needs. 

Mr. Chairman, we believe that the plan we have before us today 

meets those principles and also moves our Nation much closer to 

achieving the equity and social justice in health care that has proven so elusive over the past century. Community health centers 

strongly support the draft legislation’s call to expand Medicaid to 

cover everyone with incomes up to 133 percent of poverty without 

restriction. This Medicaid expansion may well be the most important and the most essential feature of this plan, especially for the 

patients we serve. 

At the same time, we urge you to ensure that as these Medicaid 

beneficiaries are potentially moved into the health insurance exchange, they can continue receiving supplemental Medicaid benefits, those key services like outreach, transportation, nutrition and 

health education, screening and case management that will remain 

so vital to their health and well-being but will most likely not be 

covered by their exchange plans. It is also clear that the expansion 

of insurance coverage, while a vital first step, can only take the 

country so far. Most importantly, the increased demand for care 

that comes from expanding coverage must be met with an augmented primary health care system as the people of Massachusetts 

learned in the wake of their State’s reform. Here again, the draft 

legislation delivers a solid response to this challenge and we applaud its call to expand the health center system of care through 

increased funding as part of the new public health investment 

fund. The members of this committee have consistently provided 

broad, bipartisan support for health centers over the years and we 

deeply appreciate that, and I can assure that health centers are repaying your trust and your investment in their every day. 


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For example, a recent national study done in collaboration with 

the Robert Graham Center found that people who use health centers as their usual source of care have 41 percent lower total health 

care costs and expenditures than people who get their care elsewhere. As a result, health centers saved the health care system $18 

billion last year alone, more than nine times the federal appropriation for the program and better than $2 for every dollar they spent 

in care. With the new funding in the draft bill, these savings will 

grow even larger. The National Health Service Corps is a vital tool 

for health centers and underserved communities seeking to recruit 

new clinicians and the draft legislation would bring an historic investment to the program, leading to thousands more primary care 

providers to practice in underserved communities. 

The committee has also historically recognized that it makes 

sense for all insurers to reimburse health centers and other safetynet providers appropriately and predictably for the comprehensive 

primary and preventive care they provide. In order to accomplish 

this goal, we recommend that Congress align health center payments from all insurers, public and private, with the structure currently in place under Medicaid. As you continue deliberations, we 

urge the committee to consider improving the bill further by including language from H.R. 1643, which would align the current Medicare health center payment methodology with the successful Medicaid prospective payment system. 

Finally, as full participants in a reformed health care system, 

America’s health centers stand ready to deliver quality improvement, increased access and cost containment that will be necessary 

to make this reform successful. To that end, we applaud the committee’s inclusion of network adequacy standards for all exchange 

plans to ensure that people living in underserved communities 

have access to the health centers and other essential community 

providers located there. 

Mr. Chairman and members of the committee, we again thank 

you for your leadership and your commitment to make health care 

reform work for all Americans and we pledge ourselves to work 

with you to make that a reality this year. Thank you. 

[The prepared statement of Mr. Hawkins follows:] 


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Mr. PALLONE. Thank you, Mr. Hawkins. 

Mr. Roberts. 

STATEMENT OF BRUCE T. ROBERTS 

Mr. ROBERTS. Chairman Pallone, Congressman Deal and members of the Health Subcommittee, I am Bruce Roberts, the executive vice president and CEO of the National Community Pharmacists Association, NCPA. I am a licensed pharmacist in the 

State of Virginia and I have owned four community pharmacies 

over the last 33 years in Loudon County, Virginia. NCPA represents the owners and operators of 23,000 independent community 

pharmacies in the United States. We appreciate the opportunity to 

testify before you today on the role of pharmacy in health care reform. 

In many communities throughout the United States, especially in 

urban and rural areas, independent community pharmacies are 

often the primary source of a broad range of health care products 

and services, services such as medication therapy management and 

immunization programs for seniors under Medicare Part B and D. 

We believe that a reformed health care system should expand the 

availability of these programs because they can help improve the 

quality of care and reduce health care costs. 

The reality is that for every dollar the health care system spends 

paying for prescription medications, we spend at least another additional dollar on health care services to treat the adverse effects 

of medications that are taken incorrectly or not at all. For example, 

a primary cause for costly hospital readmissions is the lack of patient adherence to medications used to treat chronic medical conditions such as hypertension and high cholesterol. Pharmacists can 

play an important role in the post-acute care and helping patients 

manage their medications through education, training and monitoring. We applaud the fact that the draft House language would 

allow the involvement of non-physician practitioners such as pharmacists in the medical home pilot project. Pharmacists can help improve the use of prescription medications, especially in those individuals that have multiple chronic diseases. 

NCPA is very much appreciative of the fact that the draft House 

legislation includes reform of the average manufacturer’s price, 

AMP, based reimbursement system for Medicaid generic drugs. We 

would like to get this fixed this year. We are concerned that the 

Medicaid generic reimbursement at 130 percent of the weighted average AMP as proposed in the draft House bill combined with low 

dispensing fees paid by States will in total still significantly underpay pharmacies for the dispensing of low-cost generics in the Medicaid program. This could create a disincentive for the use of generic drugs causing a rise in Medicaid costs over the long term. 

NCPA asks the committee to consider a higher FUL reimbursement rate for generic medications, especially for critical access community pharmacies that serve a higher percentage of the Medicaid 

recipients or rural pharmacies. 

With respect to our ability to continue to provide durable medical 

equipment, DME, to Medicare beneficiaries, we believe that requiring State-licensed, State-supervised community retail pharmacies 

to obtain both accreditation and surety bonds to simply sell 


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demipost items such as diabetes testing supplies to Medicare beneficiaries is basically overkill. Thousands of pharmacies across the 

country, mostly small pharmacies, will not be accredited at all or 

not be finished the accreditation process by October 1, which will 

mean that they will not be able to provide diabetes testing supplies 

for Medicare beneficiaries. We applaud the 90 bipartisan members 

of the House and 13 members of the Energy and Commerce Committee who supported H.R. 616, the bill that was introduced by 

Congressman Barry and Congressman Moran that would exempt 

pharmacies from redundant and unnecessary accreditation requirements. We also appreciate the work of Congressman Space in introducing H.R. 1970, which would exempt pharmacies from unnecessary surety bonds. We ask that the provisions from these bills be 

included in the chairman’s mark. If there is willingness to exempt 

pharmacies from these requirements, we ask that Congress consider acting by October 1, which is the deadline for providers to obtain accreditation and surety bonds. 

Finally, I would make a few comments regarding the public plan 

option. Under the House proposal, payment rates for prescription 

drugs under the public plan proposal would be negotiated by the 

Secretary. We would be very concerned giving the Secretary authority to set payment rates for prescription drugs without some 

basic guidance to how these rates should be established and updated. We also ask that the language be clarified such as the administration of any benefit under the public plan would be accomplished by a pharmacy benefit administrator as opposed to a pharmacy benefit manager. We would prefer a model used in the Medicaid program or in the Department of Defense Tri-Care program 

where the administrator is used. Under this model, most, if not all, 

the negotiated drug manufacturer rebates would be passed through 

to the public program. 

In conclusion, we look forward to working with Congress and the 

Administration to reform the health care system and we look forward to the opportunity to work with you to meet that end. 

[The prepared statement of Mr. Roberts follows:] 


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Mr. PALLONE. Thank you, Mr. Roberts. 

Mr. Yarwood. 

STATEMENT OF BRUCE YARWOOD 

Mr. YARWOOD. I should first of all say thank you for including 

me in the distinguished panel. I mean, doctor, doctor, doctor, doctor, pharmacy, and here is old Yarwood sitting right in between 

them all. Thank you very much. I appreciate being here. 

As you know, I am Bruce Yarwood. I am president and CEO of 

American Health Care Association and the National Center for Assisted Living, which we represent about 11,000 facilities across the 

country with a great cross-section of the profession. We have big, 

we have small, we have rural, we have urban, proprietary, non-proprietary. And I would be remiss if I didn’t say we look at ourselves 

as a pretty significant portion of the economy right now. We are 

about 1.1 percent of the gross domestic product when you kind of 

sort it all out. 

Now, having said that, we have taken a look at the 800 pages 

and it is a significant bill, and I must admit one that does not include long-term care reform. At the same time, it includes a whole 

bunch of stuff that has impact on us. And let me try to synthesize 

a little bit of the comments. 

First, as we move forward and try to do a better job in terms of 

quality, it is really important for us to have economic stability, and 

one of the things we find in the bill is we have three pretty big 

problems with it. First of all, the bill has a provision that would 

institutionalize what the CMS is doing to cut 3.3 percent out of our 

Medicare rate based on a formulary mistake that was made by 

them 4 years ago. Secondly, we are concerned about the discussion 

draft that will eliminate a part of the market basket and so what 

we are looking at then is not only a 3.3 percent cut in our rate coming from CMS but then an additional cut coming from the committee that would significantly take resources out in terms of our 

ability to pay, and as you know, we are two-thirds to three-quarters or 75 percent labor based, and so a significant reduction in reimbursement causes us a big problem in terms of our ability to pay 

and keep staff. 

Third, which is not your doing, but Medicare cuts are being considered at the same time we are looking at what we call the unfortunate reality of Medicaid underfunding. What we have seen, the 

stimulus package was a help. However, in response to the recession, we see 46 percent of the States are freezing or cutting nursing 

home rates and that the 75 percent are not keeping up with inflation. So in a short statement, what is occurring is that we are looking down the barrel of a Medicare cut and at the same we are looking across the country at Medicaid rates either staying stable or 

falling in a period of inflation and so we are feeling caught in an 

economic vise, if you will. 

Now, let me talk a little bit about some other stuff that is I 

would say very positive. Regarding Part B, we applaud you for the 

proposal to extend the therapy cap extension process exception 

process. Second, I think in testimony earlier we talked about Medicare re-hospitalization. We have a re-hospitalization problem and 

we need to address that issue. We think there are ways to do that. 


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In a short statement, we find that our re-hospitalization comes on 

day 2, 3 and 4 of admission and typically they go back to the hospital because they come on the weekend or things of that nature. 

So we think we should continue work on that together. Third, we 

think that we should be looking at the whole post-acute setting and 

trying to integrate that much better than it is now and we have 

numbers that would show that if we either on a pilot or demonstration basis, we find that if we would integrate and pay based on diagnosis, not on site, we can save multibillion dollars ranging above 

$50 billion over the next 10 years, and that simply stated is that 

we can take a knee or a hip that is not an IRF but in a nursing 

home and do it for about half the cost. 

I would be remiss if I didn’t respond a little bit to 100 pages of 

your bill that was addressed somewhat earlier by the prior panel 

that talks about transparency in long-term care. Very basically put, 

the question is that what we need to do is take a lot better look 

at who owns places, how they are owned, who makes the decisions. 

We have been in discussions with the staff for about the last 18 

months and frankly we support the concept and the direction of the 

committee and we believe firmly that by continuing to work together, the final legislation that we can parse together, we can absolutely support. 

I would say there are a few specifics though that I would be remiss if I didn’t say that we have a problem with. First, we have 

a difficult time with what a disclosable party, and in the bill itself, 

for example, it mentions that we should be disclosing our bankers’ 

boards of directors. That is something we don’t have or can’t get 

to. Secondly, we would suggest the provisions that you are looking 

at be tailored to talk about exactly who we want to disclose. We 

take a look at the bill and we are in the position of disclosing people like who are landscapers are, painters are and things of that 

nature that don’t have a significant amount so we think we can 

work that out. Third, we heard a lot about compliance programs 

from the Inspector General. We have no problem with compliance 

programs but what we need is to tailor those based on the size of 

the facility. A compliance program for Kindred Health Care, the 

largest in the country, versus the compliance program for a 35-bed 

facility in Oakland are two different things so we just need to be 

sympathetic as to what those are. 

Mr. PALLONE. You are a minute over. 

Mr. YARWOOD. Let me say this. Thank you very much for letting 

us be here. We certainly want to work together and there are great 

things in the workforce area and the transparency stuff. We are 

here to make it work for you. 

[The prepared statement of Mr. Yarwood follows:] 


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Mr. PALLONE. Thank you. Thanks a lot. 

Ms. Fox. 

STATEMENT OF ALISSA FOX 

Ms. FOX. Thank you very much, Chairman Pallone, Ranking 

Member Deal and other members of the committee. I really appreciate the opportunity to be here today. 

Blue Cross Blue Shield plans strongly support enactment of 

health reform. We must rein in costs, improve quality, and importantly we must cover everyone. Today the Blue system provides 

coverage to more than 100 million people in every community and 

every zip code in this country. For the past 2 years we have been 

supporting five key steps to reform our system. 

First, we believe Congress should encourage research on what 

treatments work best by establishing a comparative effectiveness 

research institute. We are very pleased the House draft bill recognizes the importance of this key step. Second, in order to attack rising costs, we must change the incentives in the payment systems 

both private and in Medicare to promote better care instead of just 

more services. The draft bill includes some of the Medicare delivery 

system recommendations we support. We also agree with provisions in the bill to help build an adequate medical workforce to 

care for everyone in the country. Third, consumers and providers 

should be empowered with information and tools to make more-informed decisions. Fourth, we need to promote health and wellness 

and prevention and managed care for those with chronic illnesses. 

Finally, we believe a combination of public and private coverage solutions are needed to make sure everyone is covered. We support 

a new individual responsibility program for all Americans to obtain 

coverage along with subsidies to ensure coverage is affordable. We 

also support expanding Medicaid to cover everyone in poverty. We 

are also supporting major reforms in our own industry including 

new federal rules to require insurers to open the doors, accept everyone regardless of preexisting conditions and eliminate the practice of varying premiums based upon health status, and we also 

support a national system of state exchanges to make it easier for 

individuals and small employers to purchase coverage. I know 

there is a perception that this is a new position for the insurance 

industry. It is not for the Blue system. We had the same position 

in 1993. 

We appreciate this opportunity to comment on the tri-committee 

bill. We support the broad framework of the bill which includes 

many of the critical steps we believe are needed. However, we have 

very strong concerns that specific provisions will have serious unintended consequence that will undermine the committee’s goals. Our 

chief concern is creation of a new government-run health program. 

We believe a government-run health program is unnecessary for reform and will be very problematic for three reasons. First, many 

people are likely to lose the private coverage they like and be shifted into the government plan. This is because the government plan 

will have many price advantages that the private plans won’t including paying much lower Medicare rates than the private sector. 

This is an enormous advantage on its own as Medicare rates are 

already 20 to 30 percent lower than what we pay in the private 


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side, and that is a national average. I think here you heard 

Marshfield Clinic talk about much huger variations in Wisconsin. 

But there are other advantages in the bill as well. I will give you 

two examples. Individuals in the government plan, they can only 

sue in federal court for denied services. However, individuals in 

private plans can sue in State court for punitive, compensatory and 

other damages. In addition, private plans would have to meet 1,800 

separate State benefit and provider requirements while the government plan would not. Second, the draft bill would underpay providers in the government plan. This is likely to lead to major access 

issues in the health care system such as long waits for services. 

And third, the government plan would undermine much-needed delivery system reforms that are critical to controlling costs. We 

agree Medicare needs to be reformed to reward high-quality care. 

We commend the committee for including reforms to modernize 

Medicare. However, history has shown the government can be slow 

to innovate and implement changes through the complex legislative 

and regulatory processes. The private sector, on the other hand, is 

free to innovate, and let me just give you one example from our 

program that is improving outcomes and lowering costs through 

our Blue Distinction Centers of Excellence. Recent data shows that 

readmission rates at our cardiac care centers around the country 

have 26 to 37 percent lower readmission rates than other hospitals. 

In closing, I would like to emphasize the Blue system’s strong 

support for health care reform including major changes in how insurers do business today. We believe the federal government has 

a vital and expanded role to play in reform by expanding Medicaid 

to cover everyone in poverty and enrolling all the people that are 

now eligible for Medicaid coverage, by reforming Medicare to pay 

for quality and assuring Medicare’s long-term solvency and setting 

strict new rules for insurers to assure access to everyone regardless 

of their health. We are committed to working with all of you to 

enact meaningful health care reform this year. Thank you very 

much. 

[The prepared statement of Ms. Fox follows:] 


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Mr. PALLONE. Thank you, Ms. Fox, and now we will have questions starting with me. Obviously I can’t reach everyone so I am 

going to direct my question—I will try to get in three questions 

about primary care, Medicaid and DSH if I could, and I am going 

to start with Dr. Epperly on the primary care promotion issue. 

We have obviously heard a lot of testimony about the primary 

care shortages. We have heard that action on a single front is not 

enough but that concerted action across the health system is going 

to be required, and the discussion draft reflects these calls for action and proposes major investments, and I will list first increasing 

the rate paid by Medicaid for primary care services, second, the 

primary care workforce including increases for the National Health 

Service Corps and scholarship and loan programs, third, payment 

increase in Medicare and the public option for primary care practitioners including an immediate 5 percent in payments and highgrowth allowances under a reformed physician fee schedule, fourth, 

an additional payment incentive for primary care physicians in 

health profession shortage areas, and finally, an expansion of medical home payments and added flexibility for that model of care. 

The draft also proposes a reform to graduate medical education 

programs funded by Medicare and Medicaid. Two questions. First, 

will these proposals help to reverse the decline in interest in primary care among medical students, Dr. Epperly? 

Dr. EPPERLY. Absolutely. 

Mr. PALLONE. OK. 

Dr. EPPERLY. Did you want me to expand on that? 

Mr. PALLONE. Well, let me give you the second one and then you 

can talk. The second is, will the rate increases proposed for primary care services in Medicaid and Medicare help to address problems with access we have seen in those programs over the past several years? So generally will you reverse the decline among medical 

students, and secondly, what will it do for access to Medicaid and 

Medicare? 

Dr. EPPERLY. Thank you, Mr. Pallone. I would say to you that 

the return to a primary care-based system in this country is essential. If you will, it is foundational to building the health care system of our future. To get primary care physicians back into a position where they can integrate and coordinate care, lower costs and 

increase quality, we must do that. Right now, primary care is in 

crisis. A lot of that has to do with the dysfunctional payment system. Primary care practices are barely making it in regards to 

their margins, so what we have to do in terms of the reform measures is, number one, make this viable financially for physicians to 

choose primary care. 

Mr. PALLONE. But tell me whether you think these proposals 

that are in our draft discussion will accomplish that. Will we get 

more medical students to go into primary care and what will it 

mean for access to Medicare and Medicaid specifically with this 

proposal before us? 

Dr. EPPERLY. Right. So medical students now are opting not to 

choose primary care because they can see that incomes can be 

three to five times higher if they choose subspecialties so the payment reform will help narrow that gap in disparity so that they 

choose more to do primary care. The derivative effect of that is that 


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workforce will then be enhanced, access then increases. What we 

must do in the system is not only coverage people but we have got 

to have the right types of physicians and the right communities to 

see them. So it is kind of multifaceted, multilayered. We have got 

to fix payment, which will increase workforce. Workforce will enhance access. That is how it is all linked. What it saves America 

is cost in the long run, increases affordability and access as a derivative. 

Mr. PALLONE. Do you believe that this discussion draft will accomplish that? 

Dr. EPPERLY. Yes. 

Mr. PALLONE. OK. Now, let me just ask my Medicaid and DSH 

question of Dr. Gabow, if I can. Can you talk to us on Medicaid, 

what will it mean to have Medicaid covering up to 133 percent of 

the federal poverty level, having subsidies that help people access 

health care up to 400 percent and to have individuals response to 

encourage all else to make sure that their dependents have health 

insurance. So basically, you know, the increase to the poverty level 

eligibility for Medicaid, the subsidy in the health marketplace and 

the individual mandate. That is a lot. 

Dr. GABOW. Yes. Well, clearly, anything that expands coverage, 

particularly for low-income, vulnerable people, will reduce our $360 

million of uninsured care. But as it relates to Medicaid disproportionate share payment, I think the timing is important. We would 

like to make sure that we see that the patients actually who are 

eligible get enrolled and that they are covered and that our uninsured costs go down before there is any change in disproportionate 

share payments. So we applaud your version of the draft bill regarding DSH. We know that many patients who we hope to get enrolled are the most difficult to enroll, for example, homeless for 

whom we did over $100 million of care last year, the chronically 

mentally ill, illiteracy. These patients have been difficult to enroll 

in Medicaid. So I think expanding Medicaid is terrific. I don’t know 

that immediately it will reduce our need for other coverage. Ultimately it should and I think we have seen in Massachusetts that 

reduction of DSH at the front end has had negative effect on the 

two principal safety-net institutions. So I think the expansion of 

coverage that you are planning will reduce the amount of uninsured care over time and we need to deal with that sequentially as 

regards DSH. 

Mr. PALLONE. Thank you. 

Mr. Deal. 

Mr. DEAL. Thank you. 

I am going to ask for a yes or no answer from a couple of you 

on this first question. We just heard the preceding panel member 

who is chairman of MedPAC say that he felt that Medicare reimbursements were adequate, and I would ask if you concur with 

that. Dr. Williamson? 

Dr. WILLIAMSON. No. 

Mr. DEAL. Dr. Ulrich? 

Dr. ULRICH. No. 

Mr. DEAL. Dr. Wright? 

Dr. WRIGHT. No. 


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Mr. DEAL. Dr. Epperly, I am going to ask you that question in 

the context of the current reimbursements under Medicare, not 

counting the bonuses that are proposed in this legislation. Do you 

consider the current Medicare reimbursements to be adequate? 

Dr. EPPERLY. No, sir, I don’t. 

Mr. DEAL. Have you, Dr. Epperly, as a result of that inadequacy 

seen many of the members of your organization not take Medicare 

patients? 

Dr. EPPERLY. Yes, sir, I have. 

Mr. DEAL. Dr. Williamson, first of all, let me acknowledge that 

he is the president of my Georgia Medical Association and I am 

pleased to have him here. I made those statements yesterday in 

your absence as we began these things yesterday. Dr. Williamson, 

let me ask you what you think the impact would be for the public 

option plan to adopt the Medicare reimbursement plan as its 

model. How would that impact the delivery of health care under 

the public option plan and also as it then migrates, in my opinion, 

to the private insurance market? 

Dr. WILLIAMSON. I think it would have a very adverse impact on 

access for patients and on the delivery of quality medical care. 

Right now, access for Medicare patients I think is really a house 

of cards. A lot of doctors are there simply by inertia, and surveys 

that have been done in Georgia amongst practicing physicians 

show that a large percentage of doctors plan on dropping Medicare 

in the near future, and I think that is just basically a train coming 

down the track, and I think any system that is modeled on that 

premise is really going to fail in the short run, not the long run. 

Mr. DEAL. The doctor-patient relationship has been really the 

cornerstone of the importance of our health care delivery system 

that makes it work. I would ask you, Dr. Williamson, in light of 

this draft legislation, in particular the comparative effectiveness 

portion of it, how do you see that potentially impacting that doctorpatient relationship? 

Dr. WILLIAMSON. I think it is going to push us farther and farther away from it, which is really I think the opposite direction 

that we need to be going. I have serious concerns that bundling 

payments is going to drive a wedge between patients and their 

physicians. I know that in some clinics that we have looked at as 

examples, that type of environment works but those are rare and 

I think they are different than the general practice of medicine 

across the country and they have a different patient population in 

some cases. I have grave concerns about comparative effectiveness 

as well. I think this would essentially give the federal government 

the ability to practice medicine, and I know that is a strong statement but let me say this. Scientific research is not new. It has always been done and it has always been the basis of medical learning and medical treatment but the art of medicine is taking this 

science, these large studies and applying it to an individual patient. When you try to treat the individual from the 30,000-foot 

level, it is very difficult, and I am afraid that this would drastically 

diminish our choice of options for our patients. I can tell you that 

I am well aware as a neurologist of the importance of the last 20 

years in pharmaceutical research. I have a lot of options for my patients now that weren’t available before. And some of these things 


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are found quite by accident, and we take them and we apply them 

and they may be off-label drugs and that sort of thing and they 

may even be therapies that have not been shown to work in large 

randomized controlled trials that take many years and millions of 

dollars to accomplish, and if we are limited by that we are going 

to have a lot of therapies taken off the table for our patients. And 

I will also tell you that I think it is a bit of a conflict of interest 

to have the government deciding what is valuable to patients because they are serving as the largest payer. I think that the physician and the patient ought to be able to decide in the context of 

private contracting what is value and what is appropriate care. 

Mr. DEAL. Thank you. 

Mr. Roberts, you have alluded to the issue with AMP. As you 

know earlier this year, I introduced an amendment that I think 

was more appropriately dealing with this federal upper limit for reimbursement of going to 300 percent of the volume weighted average and also included a minimum prescribing fee for pharmacists, 

or dispensing fee, I should say, for pharmacists. Which of those options do you prefer, what I offered earlier this year versus what is 

in this bill? 

Mr. ROBERTS. Well, I think, Congressman Deal, that your—the 

challenge that we have is that we really don’t know what this 

benchmark is so there are changes made in the current version 

that redefine the benchmark in a way that will make it much better than what it is but the reality of what you are proposing and 

having a minimum dispensing fee I think is absolutely critical. The 

challenge that we have is that, you know, the benchmark is just 

meant to get us to even, to break even on the cost of the product. 

But the reality is, the States set the dispensing fees and the dispensing fees are all over the place from one State to another. And 

so unless the federal government takes some action to say, you 

know, that our costs of dispensing and a small profit are available 

to the pharmacy, it is going to be very difficult to have pharmacies 

remain viable. 

Mr. DEAL. Mr. Chairman, I take that as an endorsement of my 

approach and I will yield back. 

Mr. PALLONE. Thank you. 

Our vice chair, Mrs. Capps. 

Mrs. CAPPS. Thank you, Mr. Chairman, and I want to thank 

again all of the panelists for appearing today. It was a very interesting presentation that each of you made, a lot of linking, which 

I think is really important for us to have a part of this discussion. 

Of course, Dr. White, I want to single you out and thank you for 

being here today to represent the voice of America’s nurses who are 

so important every day in delivery of health care but also in understanding what this crisis is all about. I was very pleased to hear 

that the American Nurses Association has endorsed a public plan 

option. I also support this option and the one that we are developing in this legislation and want to hear your perspective a bit 

more as a nurse on why this is so essential because it is one of the 

crucial parts of the choice that people are going to make whether 

or not they support this reform legislation. I will ask you to do it 

within this framework. I often speak about the role that nurses 

have not only as providers of health care and delivering service but 


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we are also patient advocates, and would you talk about maybe the 

reason you endorse as ANA the public plan option and why you feel 

it is best for patients and perhaps are encouraging patients to advocate for this as well as the choice, to have this choice made available? 

Ms. WHITE. Thank you, Mrs. Capps. I am happy to answer that 

question because I do think it is extremely important, the American Nurses Association endorsing a public option plan because, as 

you said, our role is direct care. We are there 24/7, 24 hours a day, 

7 days a week, 365, you know, depending on how long a patient 

is in there. We don’t like to think it is that long. But we see patients and families and how they are dealing with the catastrophic 

impact of illness whether it is an episode, a single, acute that affects the patient and their family or whether it is a long-term kind 

of chronic condition that, you know, includes, you know, many admissions or many returns. And not being able to have a choice of 

insurance I think is key and unfortunately we have seen employer 

plans rising, the costs of those to patients rising greater than 

wages over the last several years, and so patients are looking for 

other ways of paying for their health care insurance and sometimes 

those plans may not be exactly what they think they are or they 

may have surprises so certainly a public plan that includes some 

type of defined or essential benefit package that the patient, the 

family could be sure will be there when they need it I think it is 

extremely important. 

Mrs. CAPPS. Let me follow this by another aspect of our reform 

legislation. One of the ways—Dr. Epperly mentioned this but he 

wasn’t the only one on the panel, which was interesting, who is 

stressing now on primary care as one of the ways we can lower 

health costs and the ways he discussed on how we can improve our 

primary care workforce and there are many advanced practice 

nurses, nurse practitioners and others who can and do serve as primary care providers and this bill ensures that nurse practitioners 

can be the lead providers in medical home models and increases reimbursements, for example, for certified nurse midwives. Can you 

discuss this a little bit? You mentioned one bill that I coauthored 

on nurse-managed clinics but that is not the only avenue, and you 

might mention a few others for the record. 

Ms. WHITE. Absolutely. Obviously the nurse-managed clinics is 

an extremely important way for many vulnerable populations, 

inner city, rural areas that get primary care and other—even other 

follow-up care in those areas, and as far as nurse practitioners, as 

our advance practice nurses functioning within the primary care 

medical home and being able to lead those teams, we have seen in 

the demonstration projects throughout the country that nurse practitioners have been paneled. They do function to their scope of 

practice in the different states and the different demonstration 

projects and have been able to lead their panel of patients and provide that primary care. I think it is extremely important when we 

are talking about the shortage of primary care that all providers 

be able to be used to the fullest extent of their scope that they can 

provide the care. 

Mrs. CAPPS. Thank you very much. I will yield back. 

Mr. PALLONE. The gentleman from Indiana, Mr. Buyer. 


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Mr. BUYER. The challenge we have with a panel this large is to 

try to get our questions in, so if you can take out a pen and pad, 

I am going to rip through some questions. They won’t apply to all 

of you. First I am going to go to Mr. Yarwood. When you stated 

the provisions in the draft bill would cut Medicare reimbursement 

rates to skilled nursing facilities by $1.05 billion in fiscal year 2010 

alone and ultimately $18 billion from skilled nursing care over 10 

years, I would like to know whether you have calculated the number of jobs that would be lost due to these cuts. 

The next question I have would go to Dr. Ulrich. The draft bill 

provides that physicians who treat both Medicare and the public 

plan, patients would receive Medicare plus 5 percent for treating 

their public plan, really the government plan, patients for the first 

3 years. What is the, quote, magic number, end quote, regarding 

the percent of Medicare that it would take to keep you whole? Is 

it Medicare plus 10, plus 12, plus 13, plus 14? 

The other question I have for Blue Cross Blue Shield, what are 

the advantages that the government plan would have over the private insurers? What about State premium taxes, State solvency 

regulations, State benefit mandate requirements? 

And the last question I have, I am going to go right down the 

line with all of you. Medical liability reform that restricts excess 

compensatory awards, limits on punitive damages and attorney 

fees, should this be part of the public plan option? Let us go right 

down the line. Dr. Epperly? 

Dr. EPPERLY. Yes, we believe that—— 

Mr. BUYER. Dr. Williamson? 

Dr. WILLIAMSON. Absolutely. 

Mr. BUYER. Dr. Ulrich? 

Dr. ULRICH. Yes. 

Mr. BUYER. Dr. Wright? 

Dr. WRIGHT. Yes. 

Mr. BUYER. Dr. White? 

Ms. WHITE. Yes. 

Dr. GABOW. Yes. 

Mr. HAWKINS. We have FTCA coverage so I can’t really comment. 

Mr. BUYER. All right. One equivocator. 

Mr. ROBERTS. Yes. 

Mr. HAWKINS. Yes. 

Ms. FOX. Yes. 

Mr. BUYER. All but one except Mr. Hawkins testified in the affirmative that it should be included. The other is, would everyone 

on this panel agree that individual liberty is a cornerstone of our 

society as an inalienable right? Would everyone on this panel 

agree? OK. Mr. Hawkins, are you in? 

Mr. HAWKINS. Yes, I am in. 

Mr. BUYER. He is in. All right. Awesome. Now, an individual 

right, if in this scheme we are moving people into the government 

plan, what about an individual’s right to contract with a physician 

of their choice? Should an individual in America have the right to 

contract with an individual doctor of their choice? Yes or no. Dr. 

Epperly? 

Dr. EPPERLY. Yes. 


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Mr. BUYER. Oh, let me—without penalty from their government. 

Dr. Epperly? 

Dr. EPPERLY. Yes. 

Mr. BUYER. Dr. Williamson? 

Dr. WILLIAMSON. Yes. 

Dr. ULRICH. Yes. 

Dr. WRIGHT. Yes. 

Ms. WHITE. Individual provider, yes. 

Mr. BUYER. Thatta girl. 

Dr. GABOW. Yes. 

Mr. HAWKINS. With their own money, yes. 

Mr. BUYER. Thatta boy. 

Mr. ROBERTS. Yes. 

Mr. HAWKINS. Yes. 

Mr. YARWOOD. Yes. 

Ms. FOX. Yes. 

Mr. BUYER. We are on a roll. Now, does everyone agree that in 

the capital economic system that we have, even though we may 

have a public option plan, that the marketplace should be able to 

create some type of an instrument that would be a supplement, a 

potential medical insurance supplement plan? Should that be some 

type of an option that the marketplace could create? Dr. Epperly? 

Dr. EPPERLY. Yes. 

Dr. WILLIAMSON. Yes. 

Dr. ULRICH. Yes. 

Dr. WRIGHT. Yes. 

Ms. WHITE. I am not sure. 

Mr. BUYER. OK. Dr. White is an unsure. 

Dr. GABOW. No. 

Mr. BUYER. A no. 

Mr. HAWKINS. I am not sure I understand—— 

Mr. BUYER. I am not sure. 

Mr. ROBERTS. I am not sure I do either. 

Mr. BUYER. Two I am not—— 

Mr. YARWOOD. I am number three not sure. 

Ms. FOX. Well, we are hoping that there is no public plan. 

Mr. BUYER. Pardon? 

Ms. FOX. We are hopeful there will be no public plan in the program. 

Mr. BUYER. All right. But if there is a public plan, should individuals in the marketplace be able to create supplemental coverage? 

Ms. FOX. Yes. 

Mr. BUYER. Yes? 

Ms. FOX. Yes, like Medicare. 

Mr. BUYER. All right. Thank you. Now I will rest and allow those 

individuals to answer the questions that I had asked. 

Dr. ULRICH. The answer is Medicare plus 100, and I can expound 

as to why if you would prefer. I think in my testimony I cited the 

fact that we currently in Wisconsin from the private sector get anywhere from 180 to 280 percent of Medicare in payment. Medicine 

is changing, and this is what is really interesting, is that we have 

gone from kind of being a cottage industry to now much more high 

tech. Our costs are very different than what Medicare allocates to 


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us now. We now employ, for example, systems engineers. Why? 

Trying to understand efficiency of work flow. We also in our clinic 

and others as well employ many people in information technology. 

We developed our own electronic medical record. We have close to 

350 employees now, software engineers, et cetera. Our cost structure has shifted dramatically from what the traditional concept of 

what medical practice is, you know, a nurse practitioner, physician, 

a nurse, a technician, et cetera, and so the costs keep changing. 

The other thing I would ask this committee to keep in mind is that 

medicine as an entity is an ever-evolving one in the sense that we 

have come from—— 

Mrs. CHRISTENSEN [presiding]. Dr. Ulrich, could you—— 

Dr. ULRICH. Yes? 

Mrs. CHRISTENSEN. We are way over time. Could you wrap up 

your response, please? 

Dr. ULRICH. I will just stop there, if my initial answer satisfied 

you. 

Mr. BUYER. Mr. Yarwood, do you have an answer? 

Mr. YARWOOD. Thirty thousand jobs. 

Mr. BUYER. Thirty thousand jobs would be lost? 

Mr. YARWOOD. Over 10 years, yes. 

Mrs. CHRISTENSEN. Thank you. The gentleman’s time has expired. The chair now recognizes Ms. Castor for 5 minutes. 

Ms. CASTOR. Thank you, Madam Chair, very much, and I would 

like to return to the workforce issues. 

This bill rightfully targets workforce incentives because we must 

bolster the primary care workforce especially. Fifty years ago, half 

of the doctors in America practiced family medicine and pediatrics. 

Today, 63 percent are specialists and only 37 percent are family 

doctors, and it is those family doctors and the nurses on the front 

lines and the pediatricians that really help us contain costs over 

time. I do not know what I would do if I did not have the ability 

to call the nurse in my daughter’s pediatrician’s office and ask a 

question and they have had a consistent medical home over time 

and yet millions of American families do not have that type of medical home and relationship with their primary care providers. 

So I think our bill does take important steps to bolster primary 

care workforce but one place that I think it falls short, and I would 

be very interested in your opinions, is that we are not increasing 

the residency slots for our medical school graduates, these doctors 

in training. The discussion draft provides a redistribution of unused residency slots to emphasize primary care, which is a good 

first step because we are going to hopefully send them to community health centers and other hospitals in need and other communities in need. But we have got to enact the second step, the complementary step, to even out the residency slots because, for example, in my home State of Florida, the fourth largest State in the 

country, we rank 44th in the number of residency slots and most 

folks do not understand that those slots are governed by an old, 

outdated, arbitrary formula that assigned distribution many years 

ago and has not changed, even though the population of the country has shifted. So I would like to know, do you agree—Dr. 

Epperly, you might be the one most in tune but I think many of 

you would have an opinion on that. Do you agree we need to alter 


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the residency in toto? And then are there sections in the bill—the 

sections in the bill related to scholarships and loan repayments, are 

they adequate? Are we doing enough? 

Dr. EPPERLY. Yes, ma’am. Can I expand for just a second? 

Ms. CASTOR. Yes. 

Dr. EPPERLY. In my day job, I am a residency program director 

of a family medicine program in Boise, Idaho, and you are right on. 

In fact, the workforce numbers are about 70/30 subspecialists to 

generalists. We must increase residency training, especially for primary care, and what are we trying to build, what system are we 

after. We think there should be some regulation of what kind of 

physicians medical schools are producing. It needs to meet community needs and so we are in agreement with some sort of workforce 

policy center to kind of take a look at this and what it is we are 

trying to accomplish. I totally agree with you in terms of scholarships and loan repayment. Scholarships on the front end will be 

more effective than loan repayment on the back end because it 

helps shape the types of physicians you are trying to train. 

Ms. CASTOR. Does anyone else want to comment quickly? OK. 

Then I will move on. 

Ms. Fox, thank you so much. It is great to hear that Blue Cross 

is supportive of health care reform. What I wanted to share with 

you, I had a great meeting last week with the Florida CEO, president and CEO of Blue Cross, and you all are a very important provider in the State of Florida. You have about 32 percent of the market share in the State of Florida. Four million Floridians are enrolled in Blue Cross and depend on you all every day. It was interesting that the CEO from Florida had a slightly different take and 

spoke much more favorably of the public option because while Blue 

Cross in Florida has 30 percent of the market share and over 4 million folks enrolled, you know, in Florida we have 5.8 million people 

who do not have access to health insurance because it is so expensive, and I think that in the discussion we had, he saw it as an 

opportunity, that you all are so effective that you wouldn’t have 

any trouble competing against a startup public option, and I 

thought we had a great discussion and exchange and I was heartened to hear that maybe it is not—maybe while big Blue Cross has 

a certain position, the folks on the ground in my State are not 

daunted by the challenge ahead. 

Ms. FOX. Well, I would respond that I think people are looking 

at, can you create a level playing field and I think it is very difficult to imagine how you can. I mean, I look at the House draft 

bill, I just see huge advantages for the government plan ranging 

from, you know, big advantages in the payment levels to lawsuits 

to covering different—the government plan would cover a lot fewer 

benefits than private plans would be required to do. There is just 

a long list. For example, if the government plan didn’t estimate 

their premiums correctly, would the government step and—— 

Ms. CASTOR. But where do these 5, almost 6 million residents of 

my State go now? How do they—we can’t afford—America can’t pay 

for all of them to go into subsidized Medicaid. We have got to provide a level playing field and real opportunity for them to access 

affordable care. 


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Ms. FOX. We agree we need to cover everyone and we are recommending covering everyone in poverty under Medicaid and then 

above that having subsidies as you do in your bill for private insurance to help people afford coverage. We think that is absolutely 

critical. You know, I have been doing health care issues for over 

25 years, and it used to be that everybody believed that if you have 

individual mandate, employer mandate, alliances, insurance reforms, that really would cover everyone. It has only been the past 

year—— 

Mrs. CHRISTENSEN. Ms. Fox. 

Ms. FOX. —we talked about a public plan. We think it is totally 

unnecessary and very problematic. 

Mrs. CHRISTENSEN. Thank you. The gentlelady’s time has expired. I now recognize Mr. Burgess for 5 minutes. 

Mr. BURGESS. Thank you, Madam Chairman. 

Ms. Fox, let us continue on that and maybe if I could, I think 

Mr. Buyer was asking a question or you were answering a question 

when time ran out and maybe we could just get the answer to the 

question that Mr. Buyer posed about the advantages of a public 

plan would have over private insurance in premium taxes, State 

solvency regulations, State benefit mandates. 

Ms. FOX. Yes. I mean, private plans have to pay a wide range 

of premium taxes, assessments, federal taxes. The government 

would be exempt from that. We have actually prepared a little 

chart that we would love to submit that actually walks through 

what are the rules private plans have to abide by. 

Mr. BURGESS. If you will suspend for a moment, I would ask 

unanimous consent that that chart be made available to the members and made part of the record. 

Ms. FOX. And raises questions, would the public plan abide by 

that, and when we look at the draft bill, we see there is a huge 

unlevel playing field where the government would have so many 

advantages that you could see why people will estimate that millions of people will leave private coverage that they like today and 

go into the public plan. 

Mr. BURGESS. OK. Great. I appreciate that answer very much. 

Dr. Ulrich, let me just address you for a second. I really appreciate—well, I appreciate all of you being here. I know that many 

of you are taking time off of your private individual practices and 

it is with great expense and inconvenience to your families, and we 

have had a long day and appreciate your willingness to be part of 

the panel here. The physician group practice demonstration project 

that you referenced at your clinic, I am somewhat familiar with 

that. I think that does hold a lot of promise. In fact, you may have 

heard me question Mr. Hackbarth from MedPAC about the feasibility of using the Federal Tort Claims Act for Medicare providers 

under a physician group practice model, the accountable care model 

if you comport with all of the requirements, disease management, 

care coordination, the IT, the e-prescribing, if you do all of those 

things, getting some relief from liability under the Federal Tort 

Claims Act. Do you think that is—is that a reasonable thing to look 

at? 

Dr. ULRICH. Absolutely. 


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Mr. BURGESS. Thank you. I appreciate your brevity. Let me ask 

you this, since we are in agreement. One of the things about the 

physician group practice demonstration project was you were going 

to actually benefit financially by doing things better, faster, cheaper, smarter, and in fact there are some great lessons for us that 

have come out of that, those management techniques. But there is 

a barrier to entry. Do you think the bar to that has been set too 

high? You have got to make a lot of initial investment when you 

get into that and then your return for your doctors, for the people 

in your practice is a little slow in coming. Is that not correct? 

Dr. ULRICH. Dr. Burgess, you show keen insight here into this, 

and if I can just take a second to explain this? 

Mr. BURGESS. Sure. 

Dr. ULRICH. As part of the group demonstration project, what we 

are finding is that it is not just trying to strive for quality outcomes. There are operational changes that you need to make in 

how you deliver care. For example, we have consolidated all of our 

anticoagulation patients into one entity. Rather than being in each 

physician’s practice, we now share that coordinated care under one 

entity, and what we found is that our capacity to have bleeding 

times, for example, are much better within the therapeutic range. 

We also are consolidating care of congestive heart failure rather 

than being in a particular individual physician’s office, whether it 

be a cardiologist or a primary care physician into a congestive 

heart failure clinic. Physicians craft the criteria we want. Our 

nurses watch those. We are proactive in working with the patients. 

The problem with doing all that is no one pays us, you know, to 

undertake those operational changes at first. What we are hoping 

and why we partnered with the federal government through the 

CMS PGP project is that we are trying to prove that yes, by undertaking these, ultimately there are cost savings. Lastly, I would just 

make the point that we are just beginning the process of understanding the cost of care in chronic illness over time. We understand what the costs are to provide care on an individual visit but 

not over time. 

Mr. BURGESS. One of the things that concerns me about our approach to things and what little I know of the great successes you 

have shown, for example, like bringing a hospitalized CHF patient 

back to the doctor’s office within 5 days, not just you make an appointment in 2 weeks, you get that patient back to the office in 5 

days and you really reduce the re-hospitalization rate significantly 

and yet you have got CMS now writing a rule that says well, if 

that is the case and you can do that, we are just going to pay for 

one hospitalization every 30 days and that will cut our costs down. 

It is absolutely backward way of looking at what the data that you 

all are generating, and instead of building on your successes in fact 

we are going to make things punitive then for Dr. Williamson in 

Georgia who may have an entirely different type of practice. Again, 

that is one of the things that concerns me about this. Do you have 

a concept? You mentioned about the rate of reimbursement on the 

Medicare side. What would that multiplier have to be in your accountable care organization or physician group practice? What 

would that Medicare multiplier have to be in a public plan? 

Dr. ULRICH. We would say Medicare plus 100. 


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Mr. BURGESS. Medicare plus 100 percent? 

Dr. ULRICH. Yes. 

Mr. BURGESS. So double what the Medicare rates are? 

Dr. ULRICH. Exactly. 

Mr. BURGESS. That is fairly significant. 

Dr. ULRICH. That is significant, but it is also a realistic significantly—— 

Mr. BURGESS. And do you have data to back that up that you can 

share with the committee? 

Dr. ULRICH. I would be happy to provide information to you in 

written form relative to that, yes. 

Mr. BURGESS. That would be tremendous. 

Dr. Williamson, in words of one syllable, we heard Glenn 

Hackbarth say that no doctors are not seeing Medicare patients 

now because of the reimbursement rate. Is that your sense? Do you 

think doctors are restricting their practice because of the reimbursement rates in Medicare? 

Dr. WILLIAMSON. Yes. 

Mr. BURGESS. Thank you. 

Mrs. CHRISTENSEN. Thank you. The gentleman’s time has expired. I now recognize myself for 5 minutes. 

Let me just welcome everyone. It is great to have such a diverse 

panel of witnesses here and we thank you for all of the good work 

that all of you have been doing in this dysfunctional system that 

really doesn’t always give you the kind of support that you need, 

and I want to particularly welcome Dr. Epperly, president of the 

American Academy of Family Physicians. I want to direct my first 

question to you, Dr. Epperly. In meetings, for example, with the 

tri-caucus, we are on record as supporting a public plan, and I do 

support a public plan but also a public plan that is linked to Medicare. I have raised concerns about that in our meetings and I 

would like you to elaborate on your concerns about linking the public plan to Medicare. 

Dr. EPPERLY. Yes, ma’am. Thank you. First, we are definitely in 

support of a public plan option but we do have a couple caveats. 

One of them is linked to Medicare, just as you are saying. We recognize there is going to be a huge infrastructure cost in getting this 

thing up and running so our position is that it can be the Medicare 

rate for the first 2 years but with a date certain then to elevate 

that. More of just Medicare rates won’t cut it for the physicians 

across America. It is already a problem. But we recognize that 

there is going to be a transition period. We recognize that flexibility. So what we would say is yes, we are in favor of a public 

plan. Medicare rates could be what it would be aimed at for the 

first 2 years but by a date certain that has to elevate. 

Mrs. CHRISTENSEN. Thank you. And I guess I can’t ask everyone 

this question, so Dr. Epperly, Dr. Gabow and Mr. Hawkins, you 

have heard reference to bundling of payments by Mr. Hackbarth of 

MedPAC and I wanted to know if you are in support of the proposal to bundle payments to providers. Dr. Epperly? 

Dr. EPPERLY. Yes, ma’am. We are in favor of bundling in terms 

of a team approach. We do have concerns that we would want to 

make sure that primary care and the patient-centered medical 

home is a very important part of that bundling was not denigrated 


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nor belittled into its importance. For instance, with the heart failure example, we are talking about heart failure patients and readmissions. Let us prevent it in the first place. So with a bundling 

model, which looks at already this has occurred, it is in the hospital, how do we pay for this, why don’t we take a better approach 

and look at what it takes to prevent that in the first place. So 

therefore the patient-centered medical home, primary care is critical in that. Bundling could be a very interesting option if the primary care is reincorporated into that in a big way. 

Mrs. CHRISTENSEN. Dr. Gabow? 

Dr. GABOW. As an integrated system that deploys physicians, we 

favor moving away from fee for service to a more global payment, 

and we would favor the ultimate bundle, capitation, and think that 

capitation or more global bundling would have less administrative 

costs than if you bundle small things. I would encourage it to be 

global but we favor it given a big, integrated system. 

Mr. HAWKINS. Congresswoman, or—— 

Mrs. CHRISTENSEN. Would it affect—— 

Mr. HAWKINS. Madam Chair—— 

Mrs. CHRISTENSEN. Would it affect community health centers? 

Mr. HAWKINS. Really, there are some important points to make 

here. On today’s panel, we are very fortunate to be joined by Dr. 

Epperly, who runs a family medicine residency program, Dr. 

Ulrich, who runs the Marshfield Clinic, and Dr. Gabow, who runs 

Denver Health, unique and especially with the last two, fully integrated health care systems. What may not be known generally but 

should be is that all three are community health centers or have 

community health centers embedded in them. As such, two examples, Denver Health and Marshfield Clinic, are good examples of 

integrated health systems that include community health centers, 

but I am sure, as Dr. Gabow and Dr. Ulrich would agree, the primary care component, the very issue that Dr. Epperly expressed 

concern, appropriate concern over, is identified and, I am not going 

to say separate but it is able to function on a sort of co-equal basis 

with the specialty and inpatient care components of their institutions. To the extent that that is done, I think that is what Dr. 

Epperly was relating to when he said primary care needs to be recognized and appropriately integrated. We would agree. The notion 

of integrated care systems, accountable care organizations and the 

like and rewarding results is something that we all absolutely support. What should not be lost, however, in the integration of care, 

the vertical integration of care across primary, secondary, tertiary 

care is the small ambulatory care practice, be it independent practice, private practice physicians, health centers or other forms of 

ambulatory care within the context of a large, multilevel institution 

like Denver Health, and I am sure Dr. Gabow would agree with 

that. 

Mrs. CHRISTENSEN. Thank you. To be a good example, my time 

is up but I want to also without objection accept the chart from 

Blue Cross Blue Shield into the record that was brought to us by 

Dr. Burgess. 

[The information appears at the conclusion of the hearing.] 

Mrs. CHRISTENSEN. The Chair now recognizes Dr. Gingrey for 5 

minutes. 


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Mr. GINGREY. Madam Chair, thank you so much. I want to direct 

my first questioning to my colleague from Georgia, Gainesville, 

Georgia, and the president of the Medical Association of Georgia. 

Glad to see you, Dr. Williamson. And I have a series of questions 

that I would like to ask you. First off, do you support a government-run plan? 

Dr. WILLIAMSON. No, the Medical Association of Georgia does not 

support a public option or a government-run plan in addition to the 

public plans that already exist, Medicare and Medicaid. 

Mr. GINGREY. Right. We are talking about the government option 

plan that would be competing with the private insurance plans 

that—— 

Dr. WILLIAMSON. Right. We do not support a public option. 

Mr. GINGREY. What would a government-run health plan that I 

just described do to your ability and those of your colleagues to 

treat your patients? What do you fear the most about that type of 

a government-run option? 

Dr. WILLIAMSON. My biggest concern is that it like Medicare will 

become the only option, and I think over time I think the plan as 

it is set up in the discussion draft already has the framework for 

that, for basically all private plans to have to conform to certain 

rules over time, and my fear, and I think it is a very real concern, 

is that over time other plans will disappear and the public option 

will become the only option and we will be left with a single-payer 

system which I think if you look at what has happened across the 

planet, single-payer systems basically save money by rationing care 

and I see that as an inevitable consequence of the creation of a 

public option, no matter how benign it looks at first glance. 

Mr. GINGREY. Well, that was going to be my next question. You 

pretty much answered my question, which would be, Dr. 

Williamson, do you support a government-run health care system 

with the ability to ration care based on cost? 

Dr. WILLIAMSON. I absolutely do not support that. I think that 

care decisions should be made on an individual basis when the patient sits down in the physician’s office and I don’t think that the 

government can substitute for the training that a physician has 

and the opportunity that a physician has to look the patient in the 

eye and decide what that patient needs. 

Mr. GINGREY. Let us see, I am going to skip over number four. 

My fifth question, fourth actually, we have heard testimony in this 

committee recently regarding the Massachusetts health care system and the fact that those with public health insurance in the 

State are twice as likely as those who choose private health insurance to be turned away from a desired physician. As a physician, 

practicing physician, what are your thoughts on the reasons behind 

that kind of disparity in access between a public and a private insurance plan? 

Dr. WILLIAMSON. Well, public plans in general, and I am speaking in general now, are associated with quite a lot of paperwork. 

They are associated with the hand of government and, you know, 

right now in Georgia we are looking at these recovery auditor contractors that are moving across the Nation and coming back and 

recouping money, saying that you coded something wrong 20 years 

ago or 10 years ago and coming after those dollars. These sorts of 


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things that the federal government has the power to do makes 

dealing with them as a payer a very daunting prospect, and traditionally, government payers have been at the bottom of the barrel 

in terms of covering costs and so physicians feel like they can’t deliver to patients what they have been trained to do and the 

downsides associated with the government as a payer are daunting, 

and, you know, I recently had the opportunity to go to the AMA 

and one of my colleagues from Massachusetts stood and spoke loudly in support of a national public option, but I believe that the folks 

from Massachusetts probably want a public option nationally so 

they don’t have to pay for their own anymore. 

Mr. GINGREY. Well, Doctor, I appreciated that response and the 

reason I asked you the question is because what we are talking 

about here is something very, very similar to the Massachusetts 

model, and we have even heard suggestions from the majority that 

it may be that physicians who are treating people within this exchange would absolutely have to accept the public option plan or 

they would be ruled ineligible to participate in Medicare or Medicaid. So they would have their arm twisted behind their back and 

have no choice, which is pretty frightening. 

I have got just a little bit of time left and I wanted to go to Dr. 

Ulrich and also Dr. Gabow if we have a chance. If time permits, 

Madam Chair, I hope you will let me get this in. If health reform 

were to include a requirement that all Americans purchase health 

insurance, do you think that hospitals would need continued federal funding to offset cases of uncompensated or charity care and 

why? And basically I am talking about DSH hospitals and the suggestion that we are going to save money by eliminating all DSH 

payments when we pass this bill. 

Dr. ULRICH. Well, my sense is, the answer to that is yes, you 

would still need to have some supplemental dollars rolling in, simply because the reality is that there still are things as bad debt, 

you know, people who need care get it and then can’t pay for it because of competing priorities of their own pocketbook and plus the 

fact that, you know, we really haven’t gotten to the point of having 

fair practice expense accountability within the remunerative system yet and that is absolutely critical to any kind of a public plan. 

If we are going to go that way, then we have to have fair practice 

expenses covered before we can go forward. 

Mr. GINGREY. That would be a pretty painful pay-for for your—— 

Dr. ULRICH. That is correct. 

Mr. GINGREY. Dr. Gabow? 

Mr. GABOW. My understanding, Congressman, is that this bill 

does not cut disproportionate share payments and I think that that 

will be necessary to be sustained at least in the foreseeable future 

because we know that many of the patients that we serve, the 

homeless, the chronically mentally ill, are traditionally difficult to 

enroll and so I think if we got to full coverage, certainly we may 

be able to decrease it but I doubt that it will ever go away. So we 

support the preservation of DSH as outlined in the draft bill. 

Mr. GINGREY. You support the elimination of DSH payment? Is 

that what you said? 

Dr. GABOW. We support the maintenance of DSH payments—— 


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Mr. GINGREY. Oh, absolutely, as I expected you would, Dr. 

Gabow, and as Dr. Ulrich and hospitals all across the 11th Congressional district of Georgia support the continuation of those 

DSH payments. Thank you for your patience, Madam Chair. I yield 

back. 

Mrs. CHRISTENSEN. Thank you. The Chair now recognizes Congresswoman Baldwin for 5 minutes. 

Ms. BALDWIN. Thank you, Madam Chairwoman. 

I want to welcome a fellow Wisconsinite, Dr. Ulrich. I am pleased 

to have you on the panel. I wanted to probe into an area—I stepped 

out for a little while so I don’t know if anyone else has raised this, 

but in your testimony on page 7, you talk a little bit about care 

issues at the end of life and make some recommendations, and it 

is one of those very challenging topics because we certainly hear 

from much research that much of our health care dollar goes to 

treat people at that stage of their lives. But that is one thing much 

more disturbingly that that often doesn’t align with the wishes of 

the person being treated. Could you elaborate a little bit more 

about both your recommendations to this committee in that arena 

but also the practices at the Marshfield Clinic, what you have implemented in this regard? 

Dr. ULRICH. Yes. Thank you, Congresswoman. I appreciate the 

question. At Marshfield Clinic, we do have in conjunction with St. 

Joseph’s Hospital, who is our hospital partner, developed palliative 

care. We have palliative care fellowships where we train young 

physicians who are interested in that. We work with families, the 

patient, obviously, et cetera, really try to do two things. One, there 

is a humanistic process that occurs under palliative care and that 

is taking care of people in comfortable surroundings in their last 

few weeks or days of life, and that really is a throwback, if you 

will, to the way medicine used to be practiced before we were very 

fancy with technology, et cetera, and it is not something that we 

should ever forget. It is something that we need to continue. So we 

are committed to doing that and will, and I think most medical organizations throughout the country would be in sync with that 

kind of concept. 

The question you raise about the cost of care at the end of life 

is obviously an important one, and if you think about the cost of 

medical care in our country, there are really two main things we 

need to understand. One, as you point out, the costs escalate rather 

dramatically as life is ebbing away from us because it is an emotional decision for families and patients to keep mom or dad or 

grandma or grandpa alive for a little while longer, et cetera. It is 

very difficult for families to say it is time to say goodbye to someone. So we continue then to provide medical care under those very 

difficult circumstances. There is a cost to providing that care. The 

other thing that I would like the subcommittee to understand is 

that not all costs within the system are the same so that we know 

from the Commonwealth Fund, for example, that really it is only 

about 20 percent of patients that are costing about 75 to 80 percent 

of care in this country so that if we can manage these chronic illnesses and in particular patients who have more than one or two 

chronic illnesses concomitantly, that is where the cost savings will 

come as we get better in managing folks with complicated chronic 


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illnesses who concurrently are suffering from several of them at the 

same time. 

Ms. BALDWIN. Your testimony specifically points to things that 

we could do earlier in life to talk about having people think about 

advanced directives or other documents. I would offer you to elaborate on that, but also I see some other nodding heads and I would 

open this up to any of the panelists who would like to make a contribution on this point. 

Dr. EPPERLY. Thank you. What Dr. Ulrich just described is the 

value of primary care. It is having that relationship of trust with 

people over time in which you can have that type of dialog, and I 

would say that those sorts of decisions are so important, so critical 

to the family as a whole and many of those decisions can take place 

outside of a hospital in terms of where those final days and weeks 

are. In fact, I would submit that most people would like to have 

a very dignified death in the place where they can be surrounded 

by most of their loved ones. And so again, we return right squarely 

back to what primary care brings to the system. It is what Dr. 

Ulrich said. It used to be part of medicine. That is kind of gone 

now. We need to re-create that kind of system. It is in that system 

that savings are made, quality goes up, cost goes down. 

Ms. BALDWIN. Please, Dr. Wright. 

Dr. WRIGHT. Yes. I just would like to agree that what needs to 

take place and is often missing is the conversation, which begins 

with the relationship. So I completely agree and would support recognition of the value of the cognitive services, not to say that folks 

who do procedures for a living are not thinking them, they certainly are, but the importance—I have seen it over and over in my 

practice that while someone does indeed benefit from a procedure, 

what is wrapped around that procedure, the informed consent process, the education about the disease process and right now the 

aftercare to try to prevent that from ever happening again is incredibly valuable to that individual and that family and our economy at this point. 

Ms. BALDWIN. Dr. White, did you have a comment? 

Ms. WHITE. Yes, I would just like to add that I think as Congresswoman Capps had mentioned earlier that patient advocate 

role that nurses provide is absolutely important and I think the 

emphasis on primary care medical home, nurse practitioners being 

involved in that who have the skills for those conversations, discussions and the relationships I think would be an important consideration for it all. 

Dr. WILLIAMSON. Thank you. I would like to briefly add, I think 

that resources spent on time with the doctor saves money in the 

long run. If you look at the percentage of medical expenditures, 

physicians’ services constitute a small fraction of that. By concentrating on that whether it be for primary care or for a specialist, 

you are going to have money in other areas whether it is the end 

of life, very sick patients. So funds, resources that are concentrated 

on giving the patient or the patient’s family face time with their 

doctor is going to save you lots of money across the system. 

Mrs. CHRISTENSEN. Thank you. The gentlelady’s time has expired, and I now recognize Congresswoman Blackburn for 5 minutes. 


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Mrs. BLACKBURN. Thank you, Madam Chairman, and thank you 

to all of you. 

I want to do a yes and no and show of hands to get where you 

all are on some issues, and by the way, thank you for your patience 

with us today. As you know, we have another hearing that has 

been going on upstairs. OK. Show of hands, how many of you favor 

a single-payer system? OK. Nobody on the panel favors a singlepayer system. OK. How many of you favor a strategy, putting in 

place a strategy that would eventually move us to a single-payer 

system? So nobody favors doing that. That is really interesting because there are some of us that fully believe that this bill that is 

before us, whether it is the House version, the Senate version or 

the Kennedy plan would move us to a single-payer system and we 

make that determination based on experience that we have had 

from pilot projects and from programs that have taken place in the 

States, my State of Tennessee being one of those. OK. How many 

of you favor having government-controlled comparative research? 

Nobody favors government-controlled comparative research. OK. 

How many of you—OK. We have got some takers on that one. All 

right. Just show of hands, the comparative research board that 

they are talking about having, that this bill would put in place, 

how many of you want to see that? OK. So we have Epperly, 

Ulrich, Wright, White and Gabow. OK. And then how many of you 

favor having that comparative research board make medical decisions for patients? Nobody. OK. All right. 

Dr. Epperly, you know, it makes it kind of a head scratcher to 

me and I appreciate having your views on this because we know 

that the comparative research results board would end up making 

a lot of the medical decisions for patients and it would move that 

away from the doctor-patient relationship. I wanted to ask you, you 

had mentioned in your testimony that you felt that a public plan 

would be actuarially sound. What I would like for you to do is cite 

for me the research upon which you base that assessment and that 

decision. How did you arrive at that? 

Dr. EPPERLY. You know, I would say that I don’t—I am not 

aware of anything I said that said that it would be actuarially 

sound. 

Mrs. BLACKBURN. Well, I think that that is a statement in your 

testimony. 

Dr. EPPERLY. What I will say as you look that up, though, is that 

we believe that expanding coverage to people and giving them 

choice is a sound decision for America in regards to helping people 

get health care coverage. We are in agreement with that. As it 

presently stands, this would have to be at an enhanced rate above 

Medicare. That is why we say that, you know, if the model is Medicare, that is not going to work, but anything that starts to promote 

primary care as being a solution to that, that will work and 

that—— 

Mrs. BLACKBURN. OK. Let me interrupt you with that. You say 

that it would be at an enhanced model above the rate of Medicare. 

So in other words, it is going to cost more? 

Dr. EPPERLY. Yes, but the—— 

Mrs. BLACKBURN. OK. Now, yesterday, if I may interrupt you 

again, Secretary Sebelius said that this would be deficit neutral. So 


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I am trying to figure out, and I asked her yesterday how she could 

say it was deficit neutral. We have not had one witness out of all 

the hearings we have done that has said they felt like this would 

be deficit neutral or would be a money saver. Everybody has said 

it is going to cost more. 

Dr. EPPERLY. I would say that it would be beyond deficit neutral 

in a positive way because where the savings will come from the 

system is in regards to reduced hospitalizations, reduced readmissions, more efficient—— 

Mrs. BLACKBURN. OK. If I may interrupt you again, do you have 

any kind of model that shows that actually happens because you 

can look at TennCare in Tennessee, you can look at Massachusetts 

and you can see that that does not happen. 

Dr. EPPERLY. Yes, Community Care of North Carolina proved 

that. Other international studies have proven that as well. That is 

why when we talk about the value of primary care, we are saying 

that there are systems savings from across the existing system that 

will save the entire system money. 

Mrs. BLACKBURN. All right, but I can tell you that in Tennessee 

we found that did not happen, and so I appreciate your input. 

Dr. Williamson, I have got 15 seconds left. Medicare patients, 

senior citizens are just up in arms. They see that their care is 

going to be diminished somewhat, that savings from Medicare are 

going to go to pay for care for younger enrollees in this public plan. 

My seniors are coming to me and saying we are scared to death. 

What do I say to them? What is Medicare going to look like after 

this public plan goes in place? 

Dr. WILLIAMSON. I don’t see anything in the discussion draft that 

gives me hope that we are moving in the right direction in terms 

of payment. I think that private contacting and empowering patients to buy their own health care. I don’t think we should ever 

take away a patient’s right to pay for their own health care, and 

if we do that, we are committing a colossal mistake. 

Mrs. BLACKBURN. Thank you. I yield back. 

Mrs. CHRISTENSEN. Thank you. The Chair now recognizes Congresswoman Harman for 5 minutes. 

Ms. HARMAN. I thank you, Dr. Christensen, and point out that 

our committee benefits a lot from the fact that many members are 

medical doctors and nurses and have extensive medical backgrounds. I hope the panel is impressed that we actually, some of 

us, others here know a great deal about this. In my case, I don’t 

have either of those but I am the daughter of a general practitioner 

who actually made house calls to three generations of patients before he retired in Los Angeles and I am the sister of an oncologist/ 

hematologist who was the head of that practice at Kaiser in San 

Rafael, California, before he semi-retired. He is younger than I am, 

so go figure. But he did win the healer of the year award in Marin 

County for his compassionate treatment of patients, so I love listening to a bunch of docs and experts who put that on the front 

burner. 

I come from Los Angeles County, as you just heard. We are extremely concerned, if not panicked, about the President’s proposed 

cuts in DSH payments. Listening to this panel and listening to you, 

is it Dr. Gabow or—— 


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Dr. GABOW. Yes. 

Ms. HARMAN. And reading your excellent testimony, I think your 

bottom line is, you don’t want cuts on the front end, you want to 

see how all this works and phase in cuts later once the efficiencies 

take hold. Is that what you are saying? 

Dr. GABOW. That is correct. 

Ms. HARMAN. Thank you. And on this point, Madam Chair, I 

would like permission to put a letter in the record from the board 

of supervisors of the county of Los Angeles talking about the 

DSH—— 

Mrs. CHRISTENSEN. Without objection, it will be admitted into 

the record. 

[The information appears at the conclusion of the hearing.] 

Ms. HARMAN. Thank you. Well, I would just like to invite the 

panel on this subject to address, and starting with you, Dr. Gabow, 

and it seems like you may have a bit of laryngitis. Am I right? 

Dr. GABOW. Congresswoman, I have a chronic voice problem—— 

Ms. HARMAN. Oh, my goodness. 

Dr. GABOW [continuing]. Spastic dysphonia, and the treatment 

for it is Botox but it doesn’t do anything for my wrinkles. 

Ms. HARMAN. As my kids would say, I think that is more information than we need. But I appreciate this. I hope I am not stressing you, but I would really like the record to be more complete on 

this subject because I think it is an urgent subject for at least our 

large metropolitan areas and one this committee has to take very 

seriously, and based on the comments I heard from the minority 

side, I think everyone here generally agrees about this. Yes? 

Dr. GABOW. Congresswoman, I think all of the safety-net institutions would be very concerned if disproportionate share funding 

were cut at the front end of this process. We rely heavily on disproportionate share funding to cover not only our uninsured patients but also the gap between what Medicaid pays us and our 

costs. So I think that the timing of this issue is really critical, and 

as I said earlier, I think what we have learned from expansions in 

the past with Medicaid and SCHIP is that it takes a long time to 

enroll certainly highly vulnerable populations. They are vulnerable 

in so many ways that enrollment is not an easy process so it is 

going to take a period of time to really get to full coverage even 

with this bill so I don’t think we can cut DSH at the front. 

Ms. HARMAN. I realize I only have 48 seconds left, so let me just 

expand the question in case anyone else wants to answer it as well. 

One of my personal issues, since I focus on Homeland Security 

issues generally, is surge capacity in our hospitals in the event of 

a terror attack or a large natural disaster, and so my question is, 

what is the relationship between the ability of our level I trauma 

centers which are located in many of our DSH hospitals, what is 

the relationship between the ability of our level I trauma centers 

to be available in the event of terror attack or a natural disaster 

and the proposed cuts in DSH? 

Dr. GABOW. Congresswoman, I think you are right, that these 

are related in that many of the trauma centers are at the disproportionate share hospitals and also many of the pre-hospital 

care services and burn units so that much that you would need in 

disaster are located in these safety-net institutions so they need to 


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be preserved and you can’t destabilize them financially at the beginning of the process and still preserve those critical resources. 

Ms. HARMAN. Thank you very much. 

Mrs. CHRISTENSEN. Thank you. The Chair now recognizes Mr. 

Pitts for 5 minutes. 

Mr. PITTS. Thank you, Madam Chairman. 

Dr. Ulrich, if a large number of private-payer patients were to 

shift into the public plan and the public plan is paid based on 

Medicare rates, what would be the effect on your ability to continue 

to offer the same level of services that you provide today? 

Dr. ULRICH. Well, it would be impacted extremely negatively and 

probably fairly rapidly. It would be beyond my capacity to give you 

an exact timeframe but it would be disastrous, I think, is a fair 

word to use. 

Mr. PITTS. Now, are you treating a large number of Medicare- or 

Medicaid-eligible patients in your part of Wisconsin? 

Dr. ULRICH. Absolutely. If I can enlarge on that just a second, 

there already is a problem as you are describing. In certain parts 

of the service area that we provide, we comprise about 33 percent 

of the physicians. We are caring, however, for 70 percent of what 

we call fixed payer, which is Medicare or Medicaid patients. Why? 

Because other providers are not choosing to take care of those patients. So this is already happening. This is not—— 

Mr. PITTS. So how are you surviving now if you—— 

Dr. ULRICH. Well, you know, we try to watch our costs as closely 

as we can. I found it necessary to try to branch into ancillary revenue streams, try to sell the electronic medical record. We do food 

safety with Cargill, with Hormel, et cetera because I am not confident that just providing health care is going to be a way to sustain our organization. 

Mr. PITTS. Dr. Williamson, each year fewer and fewer physicians 

are willing to accept Medicare and Medicaid patients. From your 

perspective as a practicing physician, could you tell us why you 

think this is? 

Dr. WILLIAMSON. I think as has been said, it is becoming more 

and more impractical to do that. I think inertia plays a large role 

here. Doctors have done it for a long time. It is becoming less and 

less practical because the Medicare and the Medicaid payment systems have not kept pace with the cost of providing care, and physicians want to keep taking care of these patients, we want to keep 

doing that, and so what you are seeing across the Nation are doctors basically doing the very best they can to control costs and keep 

functioning in this environment, but as I said, it is a house of 

cards. Some doctors are retiring early. They are getting out of medicine. They are going into other ancillary revenue streams because 

these payment systems simply are not adequate to cover the costs 

of providing care and moving more patients onto those types of 

payment schedules is going to adversely impact everybody’s health 

care in this country, not just those patients that are taking—that 

are enrolled in the public option. 

Mr. PITTS. Now, if we allowed more people to purchase health 

care services with untaxed dollars instead of relying so heavily on 

third-party payers for routine health care services, do you think 


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that we could solve many of our problems faced today by consumers or providers of health care services? 

Dr. WILLIAMSON. Congressman, I think you just hit the nail on 

the head. Right now what we are trying to do is solve a problem 

for uninsured patients. That is what all this is about. We wouldn’t 

be sitting here if we weren’t dealing with this issue. I think that 

by making it feasible for every person to own and control their own 

insurance policy is the way to solve this problem, and I know that 

we can do that with the tax system, with tax credits, tax subsidies. 

We can put the control back into the hands of the patients so that 

the government doesn’t have to orchestrate this massive machine 

that we are looking at right now that is going to not attend adequately to the needs of the individual patient. I believe by restructuring the tax system, we can take care of the uninsured patients 

and we can solve this problem without putting private insurance 

companies out of business and taking away the ability of individuals to purchase their own health care. 

Mr. PITTS. Dr. Wright, if you could respond, polling has suggested that over 95 percent of the American people support the 

right to know the price of health care services before they go in for 

treatment. What do you view as the major barriers to the American 

people getting the price and quality information that they want 

and they need? 

Dr. WRIGHT. I think there has just not been enough transparency 

in the pricing structures. It is Byzantine at the very least. It is difficult to figure out. Even within a practice often most of us have 

no idea what an individual patient is paying for a service, so I 

think the system would clearly benefit from additional transparency. 

Mr. PITTS. And how would the patients, the providers, the taxpayers benefit by public disclosure price and risk adjusted quality? 

Dr. WRIGHT. Well, I think it lends to the—it is one component 

of their decision-making process. I would not uncouple pricing information from quality information because cheap care may not 

necessarily be the best care. On the other hand, the best care can 

be less expensive than we are delivering it now. 

Mr. PITTS. What about the agency that reports price and risk adjusted quality information to be completely separate from the Department of Health and Human Services? Do you see any conflicts 

of interest with HHS reporting on their own programs? 

Dr. WRIGHT. No, I don’t. 

Mr. PITTS. My time is up. Thank you very much, Madam Chair. 

Mrs. CHRISTENSEN. Thank you, Mr. Pitts. The Chair now recognizes Mr. Gordon for 5 minutes. 

Mr. GORDON. Thank you, Madam Chair. 

Last week the President put forth a challenge to find ways to reduce the number of medical liability suits without capping malpractice awards. I agree with the President. I think if you are going 

to be able to try to reduce the cost of health care, you have got to 

get all the inefficiencies out and this is certainly one area. 

PriceWaterhouseCooper estimates there is $280 billion spent in defensive medicine. We can’t wrench all that out but surely there is 

some savings that can be made there. That is why I am drafting 

medical malpractice reform alternative legislation responding to 


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the President’s challenge. The bill encourages States to step outside the box and test so-called alternatives like health courts and 

‘‘I am sorry’’ methods. Also, I think that this will help lower the 

cost of defensive medicine and I think it will compensate patients 

faster and be more fair. In my home State of Tennessee, we enacted a certificate of merit requirement last October that has already proven that there has been a 4 percent reduction in malpractice premiums. Earlier you were all asked about whether you 

would think that malpractice reform should be a part of the overall 

reform, and you agreed. So I want to quickly ask you to say why 

and what savings you think we might be able to achieve. Dr. 

Epperly, why don’t we start with you? 

Dr. EPPERLY. First, I applaud you for doing this. I think it is the 

right step in the right direction. 

Mr. GORDON. Don’t applaud me. Let us just move on and tell me 

why it is good. 

Dr. EPPERLY. Oh, oK. 

Mr. GORDON. No, no, no, no, tell me why. Please tell me why it 

is good. 

Dr. EPPERLY. Oh, oK. I think it is a step in the right direction. 

If there is not a relationship with patients, the default is to do 

more to patients, not less so that you cover yourself. That is why 

the relationship is critical. If we don’t get reform in place, then people that don’t have that relationship will continue to order every 

test known to man to try to diagnose the problem. 

Dr. WILLIAMSON. I agree completely. I think the costs are hidden 

but they are very, very real and I think they are gigantic. Physicians order expensive tests to rule out conditions that they don’t 

suspect but might occur randomly in one in several thousand, and 

if someone gets $10 million from a lawsuit and it occurs in an incidence of one in 10,000, if you don’t screen for that you are statistically going to lose money. And so you are exactly on target here. 

We must have real medical liability reform. I will tell you in Georgia in 2005, we enacted a very effective tort package. The number 

of suits in Georgia are down by 40 percent now. We only had three 

professional liability carriers in Georgia. We now have something 

like in the teens, and we have a cap on non-economic damages, not 

total damages but only non-economic damages so that economic—— 

Mr. GORDON. We are not talking about caps here. We are thinking about things less than that. 

Dr. Ulrich? 

Dr. ULRICH. I would agree with what both gentlemen before me 

said. The reality is that, you know, having to pay some dollars out 

in those unfortunate circumstances is an actual cost and without 

some relief from that we will continue to bear those costs. 

Mr. GORDON. Dr. Wright? 

Dr. WRIGHT. I also agree. I think the burden of this is quite large 

and I particularly like the idea that you would test various options, 

various approaches to controlling the tort problem. 

Mr. GORDON. What we want to do is give incentives for States 

to experiment and let us find out what might work. 

Dr. White? 


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Ms. WHITE. The American Nurses Association does have some 

concerns about caps. They have a position statement that—— 

Mr. GORDON. OK. We are not talking about caps. I said practices 

short of caps. 

Ms. WHITE. OK. Well, they have a position statement that they 

can make available to the committee. 

Mr. GORDON. But they would support malpractice reform short 

of caps? You raised your hand earlier. 

Ms. WHITE. Yes. I mean, it—— 

Mr. GORDON. Dr. Gabow? 

Dr. GABOW. As a governmental entity, we have governmental immunity. In the broader discussion, I think that it is very important 

to do malpractice reform and I think your idea of experimenting 

with health courts is a very good one. 

Mr. GORDON. Mr. Hawkins, earlier you said you weren’t personally affected but that is not the question, it is for the system overall. 

Mr. HAWKINS. Yes, and as a matter of fact, if I can, one important thing that—a couple of members of the committee here have 

sponsored legislation to extend the Federal Tort Claims Act, FTCA 

coverage, that health center clinicians get today to clinicians who 

volunteer at health centers. 

Mr. GORDON. Well, that will be a part of the bill in terms of 

emergency rooms. I think they should be considered as first responders. 

Mr. HAWKINS. Yes, I would just say we know for a fact—— 

Mr. GORDON. And Mr. Yarwood—oh, I am sorry. OK. You are 

saying you know for a fact that it helps? 

Mr. HAWKINS. That many local physicians and clinicians would 

volunteer time at a health center if this issue were addressed. 

Mr. GORDON. Mr. Roberts? 

Mr. ROBERTS. I think from a pharmacy’s perspective, it is not as 

large an issue but still we would be supportive. 

Mr. GORDON. Mr. Yarwood? 

Mr. YARWOOD. It is a huge issue. We talked about this before. 

Mr. GORDON. Ms. Fox? 

Ms. FOX. We absolutely agree. 

Mr. GORDON. And if I could go back, since I have a little more 

time, concerning those individuals that have the hospitals. Are you 

finding it a problem now to get specialists to come into the emergency room because of the medical malpractice problem? Yes, 

ma’am, go ahead. 

Dr. GABOW. Because of medical malpractice, we aren’t because 

we have governmental immunity and our physicians are employed 

so we have no problem getting coverage and we don’t pay extra for 

that coverage. 

Mr. GORDON. But it is because they are already covered? Yes. 

OK. My time is up and I thank you for your advice. 

Mrs. CAPPS [presiding]. The Chair now recognizes Mr. Shadegg 

for questions. 

Mr. SHADEGG. Thank you, Madam Chair. 

Dr. Wright, I want to begin with you. I also want to follow up 

with Dr. Ulrich because he mentioned a word that I think is very 

important. He talked about the incentives in the current policy or 


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health care system. Under the tax code in America today, businesses can buy health insurance tax-free. Individuals have to buy 

it with after-tax dollars, making it at least 30 percent more expensive. You were just asked, and I want to follow up, a question by 

Mr. Pitts about transparency. I guess my concern about transparency is that until we enable consumers, individual people, to 

buy health insurance on the same tax-free basis that businesses 

can do it, I don’t see how a consumer has the motivation to look 

at transparency, that is, to say if my employer provides me with 

health care and he or she pays for it, I don’t see what the motivation is for me to go research the cost of a particular procedure at 

one hospital versus another or one doctor for another or the quality 

outcomes. Because I agree with you, I think that both cost and 

quality are things consumers want to know but only if they are a 

part of a marketplace where those factors can make a difference to 

them. Would you agree? 

Dr. WRIGHT. I am not a pricing expert. I am barely a quality-ofcare expert. I understand your point. I am greatly concerned about 

the number of people who are not covered at this point in time. 

Mr. SHADEGG. Me too. 

Dr. WRIGHT. I know you are, and so I guess most of my priority 

in terms of getting this fixed has been directed at them. 

Mr. SHADEGG. Dr. Ulrich, is that one of the incentives that concerns you? 

Dr. ULRICH. Yes, certainly, and if I can expand on that just briefly? 

Mr. SHADEGG. Please. 

Dr. ULRICH. If we look at the quality equation, that is the outcomes of patient care and the patient-physician interaction being 

the numerator, costs being the denominator, quality being the end 

product of that, the concern I have is this, is that currently we 

don’t pay for that. We absolutely need to move to that model, but 

what hinders us now is the fact that patients don’t understand necessarily what quality is. We did some market research, and what 

patients tell us is that look, you guys are all the same. You all 

went to medical school, you all did residencies so there is really 

very little to pick between you. When in fact for those of that work 

in the industry, there are differences, so the question before us, 

how do we now educate our patients so that they can make fully 

informed decisions relative to that quality equation. 

Mr. SHADEGG. Dr. Williamson, I think if I gather your testimony 

correctly, you think that is exactly the point. If we empowered or 

allowed, just permitted people to buy their own health insurance 

policy and therefore to shop for it and to be involved in the selection of the plan and the selection of the doctor, they would be motivated to use transparency, cost data, quality data, and make the 

market much more competitive, bringing down costs and causing 

quality to go up? 

Dr. WILLIAMSON. Absolutely, and I think it would raise quality 

on two levels. It would raise quality on the national level in terms 

of saving money in the entire system and it would raise the quality 

that the individual patient perceives. Even though patients may 

not be able to judge scientific quality, they do vote with their feet, 

and I think if we had transparency, I think doctors are going to 


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have to compete with each other, and if we can do what you have 

suggested which is to empower patients to buy with the same tax 

advantage that employers have now, their own health insurance 

policies and control that, they then control their medical decision 

making and that is the best way to keep costs down and ensure 

good patient care. 

Mr. SHADEGG. The health care policy I have advocated says that 

we should tell every American that has employer-provided health 

care that they can keep it and they can keep the exclusion, but 

every American that doesn’t have employer-provided health care 

would get a tax credit. Those Americans who can’t afford to buy 

their own health care would get a refundable and advancable tax 

credit to go out in the market and buy what they want. We would 

then bring consumer choice to the entire health care industry. 

I would like every member of the panel to tell me what other 

thing in our society somebody else buys for us. I mean, I struggle 

with this question, and I don’t understand it. Our employers buy 

our health care insurance. They don’t buy our auto insurance, they 

don’t buy our homeowners insurance, they don’t buy our suits. I 

don’t buy my employees lunch. But why in health care do we decide 

that only employers can buy it? Is there something else that somebody on the panel can remember or can think of that is of that dimension where your employer buys it for you and you are just kind 

of a pawn in the whole system? Dr. Williamson? 

Dr. WILLIAMSON. I can’t answer the question but I can tell you 

where it came from, and it came from the notion of pooling risk. 

Patients realize that if I get really sick, I am going to need a lot 

of money, and so they went together and they pooled their money 

and then what happened is, over time they have lost control of that 

pool of money and that is where all this is coming from. The patients have turned over to others the ability to make their health 

care decisions for them by allowing them to pay for it. 

Mr. SHADEGG. So if we empower them to be able to buy their own 

health care if choose it from their employer or out on the market 

and we empower poor people to do that who can’t afford it by giving them a refundable tax credit, we would also need to create new 

pooling mechanisms, would we not? 

Dr. WILLIAMSON. I completely agree with you. 

Mr. SHADEGG. Thank you very much. 

Mrs. CAPPS. Thank you very much, and we will turn to Mr. 

Green for his questions, and I will just say probably this is our last 

series of questions because the vote has been called and your panel 

can be excused. You really set a record for endurance. I have to 

thank each of you. 

Mr. GREEN. Madam Chairman, some of us were here last night 

at 7:00. Well, you were too, I think, and we started at 9:30 yesterday morning and finished some time after 7:00. 

Mrs. CAPPS. Be thankful you weren’t on that last panel. 

Mr. GREEN. Yes, you will at least get out before dark. 

Mr. Hawkins, you and I have been working with Representative 

Tim Murphy since we reauthorized community health centers program last year on a bill we introduced, the Family Health Care Accessibility Act of 2009. The bill would extend Federal Tort Claim 

Act coverage to volunteers by deeming these volunteer practitioners 


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at health centers as employees of the federal government. These 

volunteers would have to be licensed physician or licensed clinical 

psychologists and unpaid in order to qualify. This seems like an 

easy solution to the lack of primary care physicians in some areas, 

especially in medically underserved areas where community health 

centers are located. Yesterday the GAO released a report stating 

that the lack of Federal Tort Claims Act coverage for volunteer 

practitioners can be a barrier for volunteers who wish to dedicate 

their time at a federally qualified health center. Can you elaborate 

on how the extension of the FTCA coverage to licensed physicians 

or other licensed practitioners would help increase the number of 

volunteers at federally qualified health centers? 

Mr. HAWKINS. Sure, Mr. Green, and thank you for raising that 

issue. In fact, just a couple of minutes ago we were discussing the 

issue of malpractice and I—— 

Mr. GREEN. I thank my colleague, Congressman Murphy, for 

bringing it up. 

Mr. HAWKINS. That is oK. I specifically alluded to this legislation 

which you and Mr. Murphy have collaborated on in the past and 

continue to collaborate on. I can’t tell you not only for primary care, 

Mr. Green, but even for urologists, dermatologists. You know, the 

biggest frustration that health center clinicians who are virtually 

all primary care today express is the barriers and difficulty they 

face getting specialty care, diagnostics, even hospital admits for the 

7.5 million uninsured people we serve in particular, not exclusively 

but in particular. Allowing FTCA coverage to extend to individuals 

who, as you note, come into the health center and donate their 

time, do not charge the patient, don’t charge the health center, 

would be a phenomenal benefit and boon and would provide for 

much more fully integrated care and better health outcomes. 

Mr. GREEN. And we discovered this problem in Texas with Hurricane Katrina with all the evacuees. In our federally qualified 

health centers, we had medical professionals who couldn’t volunteer in Texas because they weren’t covered, and we realize now 

that it is a way we can provide for our federally qualified health 

centers. 

The discussion draft also addresses the issue of residency training in offsite locations like FQHCs, but it still allocates the funds 

to the hospitals and not to the offsite locations. Do you believe the 

language in the draft should make it easier for federally qualified 

health centers and other offsite residency training programs to 

start up and operate residency programs? And again, we have an 

example in my district of a federally qualified health center has a 

partnership with Baylor College of Medicine in Houston, and they 

do it, and what I would like to do is see if we can get a number 

of medical schools, because I want primary care physicians to know 

they can make a living at a federally qualified health center in a 

community-based setting. 

Mr. HAWKINS. Not only that, Mr. Green, but I am honored to be 

part of a panel today that includes Denver Health, a community 

health center, as well as a public hospital—— 

Mr. GREEN. Congresswoman DeGette has preached to me for 

years about Denver Health. 


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Mr. HAWKINS. And the great work that Dr. Gabow has done. 

Also, residency training program, Marshfield Clinic, which has a 

community health center embedded in it, doing residency training 

and Ted Epperly, Dr. Epperly, whose family medicine residency 

training program in Boise, Idaho, is also a federally qualified 

health center. Perfect examples. Now, all are working locally with 

their medical schools and with teaching hospitals to ensure, because those residents, even family medicine, have to have med-surg 

residency inpatient based so it can’t be done independently. At the 

same time, the vast bulk of family medicine residency training, pediatric residency training, even general internal medicine residency 

training can be done in an ambulatory care site. More than 300 

health centers today across the country are engaged in residency 

training programs. They have rotations of residents through them 

and everyone is willing to step up and do more. All that is needed 

is the resources to be able to do so. 

Mr. GREEN. And if we know we have chronic need for primary 

care doctors, then this is a way we can do that and hopefully expand it. 

One last question in my last 6 seconds. The discussion draft includes additional funding through the Public Health Investment 

Fund, and as many on the committee know, we have been asking 

for additional funds for federally qualified health clinics for years. 

How do you intend to use the new funds when you provide more 

services like dental and mental health and would it also help build 

more FQHCs? Because we know we need that in our country. 

Mr. HAWKINS. I think there are two or three quick points to 

make on that. Just last month, the Government Accountability Office, GAO, issued a report that pointed out that almost half of federally designated medically underserved areas in this country have 

no health centers, not a one. There are 60 million people out there 

today across this country, some of whom have insurance and yet 

do not have a regular source of preventive and primary care, no 

family doctor, no medical or health care home. So the need is great. 

It runs in tandem with the extension of coverage that this bill 

would provide but takes it that one step further, turning the promise of coverage into the reality of care through providing a health 

care home. The expansion of coverage to serve more people as you 

noted very importantly the expansion of medical care to include 

oral health and mental health services so crucially important, all 

of that will be afforded through the new resources in this bill. 

Mr. GREEN. Thank you. 

Mrs. CAPPS. Thank you again to the panelists, and we are in recess for the next panel to begin after this series of votes. It is eight 

votes, but after the first one apparently is 2 minutes per vote so 

it should go fairly quickly hopefully. Thank you very much. 

[Recess.] 

Mr. PALLONE. The Subcommittee on Health will reconvene, and 

our next panel is on employer and employee views. Let me introduce the panel, from my left is Kelly Conklin, Mr. Conklin, who is 

the owner of Foley-Waite Custom Woodworking, Main Street Alliance, and then we have John Arensmeyer, who is founder and CEO 

of Small Business Majority. We have Gerald M. Shea, who is the 

assistant to the president of the AFL–CIO, Dennis Rivera, who is 


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the health care chair for the SEIU, John Castellani, who is president of the Business Roundtable Institute for Corporate Ethics, 

John Sheils, who is senior vice president for the Lewin Group, and 

Martin Reiser, who is manager of government policy for Xerox Corporation, I guess representing the National Coalition on Benefits. 

And you know, we ask you to speak for about 5 minutes, your written testimony becomes part of the record and then we will have 

questions from the panel. 

So I will start with Mr. Conklin. Thank you for being here. 

STATEMENTS OF KELLY CONKLIN, OWNER, FOLEY-WAITE CUSTOM WOODWORKING, MAIN STREET ALLIANCE; JOHN 

ARENSMEYER, FOUNDER AND CEO, SMALL BUSINESS MAJORITY; GERALD M. SHEA, ASSISTANT TO THE PRESIDENT, 

AFL-CIO; DENNIS RIVERA, HEALTH CARE CHAIR, SEIU; JOHN 

CASTELLANI, PRESIDENT, BUSINESS ROUNDTABLE; JOHN 

SHEILS, SENIOR VICE PRESIDENT, THE LEWIN GROUP; AND 

MARTIN REISER, MANAGER OF GOVERNMENT POLICY, 

XEROX CORPORATION, NATIONAL COALITION ON BENEFITS 

STATEMENT OF KELLY CONKLIN 

Mr. CONKLIN. Thank you, Chairman Pallone, Ranking Member 

Deal and other members of the committee for inviting me to appear 

today. My name is Kelly Conklin and I co-own with my wife, Kit, 

an architectural woodworking business in Bloomfield, New Jersey. 

My purpose today is to explain how the House tri-committee’s 

health reform proposals might affect small companies like ours. 

To start, I think the draft legislation is right on target. I believe 

it will receive broad support in the small business community. Before I go any further, let me provide some background. My wife and 

I opened Foley-Waite in 1978 in a 700-square foot shop in 

Montclair, New Jersey. In 1985 we expanded, hired four employees 

and started offering health insurance. The premiums were about 5 

percent of payroll and we paid it all. Today we employ 13 people, 

occupy 12,000 square feet of space and serve some of the most influential people in the world, and we fork over $5,000 a month in 

health insurance premiums, close to 10 percent of payroll and one 

of the largest single expenses in our budget. Practically speaking, 

we offer coverage to attract and retain skilled employees but like 

the majority of small companies, we do so because it is the right 

thing to do for our workers and if we don’t offer coverage, we are 

just passing our obligation and our share of the cost on to someone 

else. 

Cost is by far the single most important driver in making basic 

decisions regarding health care. That applies whether it is a small 

firm like mine or the United States Congress, and no system that 

tends to dance around the cost issue can succeed. 

April is the month I dread, not for taxes but for health insurance 

renewal nightmares. Every year is worse—unpredictable rate 

hikes, unaffordable premiums, an administrative tangle that is our 

system. In 3 years, we have had three different insurance companies. Most recently, Horizon Blue Cross Blue Shield raised our 

rates 25 percent. Now we have Health Net. That means new primary care physicians, and for my wife, who has a chronic illness, 


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a new doctor who knows nothing of her medical history. It is very 

frustrating. There are no quality, affordable health care options 

available for small businesses. 

In reading the discussion draft, it is apparent the committee is 

determined to control cost. Responsible employers understand we 

will all be better off in a system where employers and individuals 

contribute a reasonable amount toward assuring our common 

health and well-being. That is why I support the draft provisions 

requiring employees and individuals to pay their fair share. For too 

long, the small business community has paid too much for too little. We sacrifice growth, financial security and the peace of mind 

of our employees and their families in the name of protecting private insurers from meaningful competition. The private health insurance market has failed to contain costs, enhance efficiency or 

improve outcomes. It fails to provide coverage to millions. Half 

measures warmed over, more of the same second chances for the 

health insurance industry won’t fill the yawning gaps in our patchwork coverage. We need a guarantee that individuals and small 

companies will have real choices and affordable coverage options. 

I commend the committee for including a strong public health insurance option in this legislation. With a public option, small businesses will have leverage, real bargaining power and guaranteed 

backup and greater transparency. Most importantly, by creating 

genuine competition and restoring vitality to the market dynamic, 

this proposal will bring about the kind of broad-based changes in 

the private insurance industry Main Street is clamoring for. For a 

small business like mine, bringing down health insurance premiums can be the difference between growth and sitting tight. Two 

years ago we were interested in buying a building. It represented 

growth potential, financial security and long-term equity. We were 

looking at around $5,000 a month in mortgage payments as opposed to our rent of around $3,500. If our health insurance premiums had been closer to our rent and not the future mortgage, 

we might be in that building today. We work in a competitive marketplace. All the time there are new competitors looking to take 

business away. We find savings, improve efficiency, invest in equipment and personnel. That is how it is for us and that is how it will 

be for the health insurers if a public option is available. 

Transparency is critical. It is time for the insurance companies 

to come clean and in plain English explain where our premium 

money goes, to say up front what is covered and what is not. It is 

time to put a halt to cost containment by denial, copays and hidden 

charges. The draft discussion addresses this need by creating a 

health insurance exchange to offer real coverage choices to allow us 

to actually know where our premium dollars are being spent. We 

can provide access to both preventive and therapeutic care for everyone. We are encouraged by the provisions reforming common 

practices in the current insurance market. Ending lifetime and annual benefit limits, discriminatory coverage and rating policies and 

creation of a basic benefit are all important and necessary parts of 

a complete reform package. These are full measures designed to 

provide real relief. If enacted, they will represent a watershed for 

American health care and a godsend to the small business community. 


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This committee working with its counterparts to develop the tricommittee proposal has done yeoman’s work taking on and meeting 

an extremely complex set of issues. I will not be alone in supporting this extraordinary effort. I am a member of the New Jersey 

Main Street Alliance, a coalition of over 450 small businesses working for health reform that will finally give us access to quality 

health care we can afford. I have canvassed small businesses, and 

when I say ‘‘and we support a public option,’’ they take the pen out 

of my hand and the New Jersey MSA has a new member. Small 

businesses have seen your leadership and with this document you 

have delivered. Now the real fight begins. We need you to enact 

this proposed legislation and bring about health reform that works 

for us and our employees this year so we can do our part for economic recovery. Thank you, Mr. Chair. 

[The prepared statement of Mr. Conklin follows:] 


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Mr. PALLONE. Thank you, Mr. Conklin. 

Mr. Arensmeyer. 

STATEMENT OF JOHN ARENSMEYER 

Mr. ARENSMEYER. Thank you, Chairman Pallone, Ranking Member Deal and members of the committee. Small Business Majority 

appreciates this opportunity to present the small business perspective on the House tri-committee draft health care reform plan. We 

support the effort to move this legislation through Congress expeditiously, and thank you for bringing a proposal forward in such a 

timely manner. 

Small Business Majority is a nonprofit, nonpartisan organization 

founded and run by small business owners and focused on solving 

the biggest single problem facing small businesses today, the skyrocketing cost of health care. We represent the 27 million Americans who are self-employed or own businesses of up to 100 employees. Our organization uses scientific research to understand and 

represent the interests of all small businesses. I have been an entrepreneur for more than 20 years including 12 years owning and 

managing an Internet communications company. Together with the 

other senior managers in our organization, we have a total of 70 

years running successful small businesses ranging from high tech 

to food production to retail. We hear stories every day from small 

business owners who can’t get affordable coverage and for whom 

health care is a scary, unpredictable expense. Louise Hardaway, a 

would-be entrepreneur in Nashville, Tennessee, had to abandon 

her business stream after just a few months because she couldn’t 

get decent coverage. One company quoted her a $13,000 monthly 

premium for her and one other employee. Others such as Larry 

Pearson, owner of a mail order bakery in Santa Cruz, California, 

struggle to do the right thing and provide health care coverage. 

Larry notes that, ‘‘The tremendous downside to being uninsured 

can be instant poverty and bankruptcy, and that is not something 

my employees deserve.’’ Our polling confirms that controlling 

health care costs is small business owners’ number one concern. Indeed, on average, we pay 18 percent more than big businesses do 

for health care coverage. 

An economic study that we released earlier this month based on 

research by noted M.I.T. economist Jonathan Gruber found that 

without reform, health care will cost small businesses $24 trillion 

over the next 10 years. As such, we are pleased to see that the 

House bill addresses key cost containment measures such as expanded use of health IT, transparency, prevention, primary care 

and chronic disease management. 

Our polling shows that 80 percent of small business owners believe that the key to controlling costs is a marketplace where there 

is healthy competition. To this end, there must be an insurance exchange that is well designed and robust. We are very pleased that 

the committee’s bill proposes a national insurance marketplace 

with the option for state or regional exchanges that adhere to national rules. Moreover, we were encouraged by the committee’s proposal that there be standardized benefit packages along with guaranteed coverage without regard to preexisting conditions or health 


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status, a cap on premiums and out-of-pocket costs and marketplace 

transparency. 

We understand that a balanced set of reforms will require everyone to participate. Sixty-six percent of small business owners in our 

recent polls in 16 States for which we released preliminary data 

this week support the idea that the responsibility for financing a 

health care system should be shared among individuals, employers, 

providers and government. It should be noted that respondents to 

our surveys included an average of 17 percent more Republicans at 

40 percent than Democrats at 23 percent while 28 percent identified as independent. 

According to the results of the economic modeling done for us by 

Professor Gruber, comprehensive reform that includes even modest 

cost containment measures and a well-designed structure for employer responsibility will offer vast improvement over the status 

quo. A system with appropriate levels of tax credits, sliding scales 

and exclusions will give small businesses the relief they need, potentially saving us as much as $855 billion over the next 10 years, 

reducing lost wages by up to $339 billion and restoring job losses 

by up to 72 percent. We are very pleased that the committees have 

addressed some of the affordability concerns of the smallest businesses. Professor Gruber has modeled specific scenarios described 

in detail in our report and we look forward to working with you to 

ensure the best balance between the need to finance the system 

and our ability to pay. 

Finally, another issue of great concern to us is the unfair tax 

treatment of the 21 million self-employed Americans. Under the 

current tax code, self-employed individuals are unable to deduct 

premiums as a business expense and are required to pay an additional 15.3 percent self-employment tax on their health care costs. 

We encourage that this inequity be rectified in the final bill passed 

by the House. 

In closing, health care premiums have spiraled out of control, 

placing our economy and the fortunes of small business in peril. 

Health care reform is not an ideological issue, it is an economic and 

practical one. We are encouraged by the overall approach of this 

bill and look forward to working with you to make it a reality this 

year. Thank you. 

[The prepared statement of Mr. Arensmeyer follows:] 


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Mr. PALLONE. Thank you, Mr. Arensmeyer. 

Mr. Shea. 

STATEMENT OF GERALD M. SHEA 

Mr. SHEA. Good afternoon, Chairman Pallone and Congresswoman Capps. I really appreciate the opportunity to share the 

views of the AFL–CIO on this critically important issue. 

I want to start by saying a hearty congratulations on producing 

a very good draft bill. I think you really responded to what the 

American people have asked for, and we look forward to working 

with you over the coming weeks to get that bill enacted. 

You have decided to build health reform based on the current 

system, therefore based largely on the employment-based system, 

since that is the backbone of our health coverage and health financing, and I want to direct my remarks to that today, and I hope 

that the experience I bring, which is the experience of unions that 

bargain benefits for 50 million workers each year, will be of some 

benefit to you. And the main thing I have to say is, if you are going 

to proceed down this path, and we certainly support it, then job 

number one is stabilizing employment-based coverage. It has 

proved remarkably resilient in the face of high cost pressures but 

it is in fragile shape today. From 2000 to 2007, we lost five full percentage points on the number of 18- to 64-year-old working Americans who were covered, and the underinsured rate, people who 

have insurance but really can’t afford to get care under it, shot up 

from 16 percent to 25 percent in the last 4 years. So despite the 

fact that it is still hanging on, employment-based coverage is really 

eroding very rapidly, and to stabilize that coverage, we would suggest that you focus first of all on cost, secondly on having everyone 

involved in coverage and in the system, and thirdly, and I don’t 

mean these in rank order, they are really all important, thirdly, reform of the delivery system. 

Let me start with participation because in some ways that is the 

simplest. If you are going to base this on employment-based coverage, we think it makes simple sense, as you have done in your 

bill, to require that everyone, every individual participate and take 

responsibility to some extent, certainly responsibility for their own 

health status, and every employer to participate, and that is included in your bill, and the benefits of this are simple. It helps 

bring people into the system, it does stabilize the employmentbased coverage, it helps reduce the amount of federal tax dollars 

that you have to spend because everybody who is covered by an 

employer plan will not be dependent on monies that you have to 

raise and put into this bill for subsidies. It levels the playing field 

between employers who now do provide and those who don’t. And 

there really are just three categories of workers in terms of their 

insurance coverage. The vast majority, as you know, get insurance 

coverage at work, some 92 percent of the employers of 50 or above 

workers provide health insurance. There are some employers who 

don’t provide insurance but certainly are well enough off to do that. 

The example of the Lobby Shop in Washington comes to mind. And 

then there are a group of low-wage, small employers who really 

need a lot of help to do this. Our suggestion is that everyone be 

included in this, no exemptions, because once you start exempting 


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people, we think you are going to run into distortions in the marketplace as now exist, but we do think it is appropriate, as you 

have done, to provide tax subsidies for employers with low wage 

and small numbers of employees and I would emphasize that we 

don’t think there are just small numbers of employees, it actually 

it is some measure of the financial stability or success of the firm 

that should be taken into account. 

Secondly, in terms of controlling costs, the most important thing 

we can do is to change the delivery system. If the Institute of Medicine estimate of 30 percent waste in the system is anywhere near 

correct, we could easily pay for health reform and cover all of the 

uninsured if we can get a substantial amount, not all of that but 

a substantial amount of that waste out of the system. So that is 

the most important thing, and your bill includes a number of good 

provisions on that. We are working with your staff because we 

think they could be strengthened in a number of areas but we 

think you have made a very good start. However, in the short term, 

that is really not going to do the job. You are going to need to do 

something else, and there are only two options in our view as to 

how to do this in the short term. One is to do it by regulation. You 

could do global budgets or set rates, and the other is to introduce 

competition into the marketplace that now doesn’t exist, and you 

have chosen the idea of competition through a public health insurance plan and we strongly support that. I would just point out that 

there is an additional advantage of a public health insurance program in that it can be a leader in reform of the system as Medicare 

is now. I deal with a lot of employers and a lot of unions who have 

wanted to change the delivery system for the better over the past 

few years but it wasn’t until Medicare started to change their payment rates that this really started to happen. 

And then lastly, looking at the delivery system, I think, as I said, 

that there is plenty of money in it to pay for reform, but we are 

not going to get that money back very quickly and some people are 

talking about having to pay for reform totally out of the current 

money in the system, which we think is just very unrealistic. We 

think you have to look outside for additional monies, and if you 

take the view that you have to look inside, you may well get to the 

very dangerous territory of the Senate Finance Committee talking 

about taxation of benefits, which we think would be a disastrous 

approach. It is unfair to the people involved since they already pay 

an arm and a leg, many of them, for health coverage, and it is unfair in terms of the inequities built into this, workers who are 

older, groups that have families, groups that have more retirees 

will have much higher costs. And then there is the simple political 

dynamic of this. If you want to throw a monkey wrench into public 

support to health reform, this would be the perfect way to do it because in the process you would really, really turn the apple cart 

upside down in employment-based coverage. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Shea follows:] 


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861 


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862 


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Mr. PALLONE. Thank you, Mr. Shea. 

Mr. Rivera. 

STATEMENT OF DENNIS RIVERA 

Mr. RIVERA. Thank you. I am chair of SEIU Health Care, the 1.2 

million health care workers who are committed to reforming our 

Nation’s broken health care system. We represent members like 

Pat DeJong of Libby, Montana, who works as a home care aide. Pat 

and her husband Dan were ranchers but had a hard time finding 

affordable coverage and were uninsured when he was diagnosed 

with Hodgkin’s lymphoma in the year 2000. The medical bills piled 

up for Pat and Dan, eventually forcing them to sell the land they 

loved and that has been in Dan’s family for generations. Dan succumbed to cancer and Pat remains uninsured. This is America. We 

can and we must do better for hardworking families like the 

DeJongs. Americans are ready to fix health care and they know 

that this is the year it must happen. Now it is up to you to deliver 

Pat and the millions who face the consequences of our broken 

health care system with a real choice of affordable, quality, private 

and public health care coverage. SEIU’s 1.2 million health care 

workers in hospitals, clinics, nursing homes and in homes in communities are at the bedside every day witnessing high-price families pay for the delay and skip medical treatments. The uninsured 

are not just a statistic. They are hardworking people, people such 

as Pat, who despite caring for those who cannot care for themselves, cannot afford health care coverage for herself. 

The discussion draft includes many essential elements that 

would promote coverage and access, cost containment and improve 

quality and value for American families. A strong public health insurance option is vital to ensuring consumer choice and access. The 

public plan will drive down the cost of insurance by competing with 

private insurance and lowering overall costs. 

Medicaid expansion—we support increase in Medicaid eligibility 

for families up to 133 percent of federal poverty. The discussion 

draft will also improve Medicaid payments to primary care practitioners to address concerns about access to needed services by Medicaid beneficiaries. We caution the committee that safety-net providers and systems must be protected to provide access and support 

to low-income communities and to maintain a mission that includes 

trauma care and disaster preparedness. Special payment to these 

facilities such as the disproportionate share payments must be 

maintained as coverage expands. In addition, essential community 

providers must be included in insurance plans that serve Medicaid 

beneficiaries and individuals eligible for health care credits. 

Health care reform needs to work for everyone including the 4 

million American citizens who reside in Puerto Rico, and we urge 

Congress to include Puerto Rico and all the territories in all parts 

of health care reform. SEIU is pleased to see that the committee 

has recognized the need to improve the treatment of Puerto Rico 

and the territories under Medicaid by increasing the caps and federal matching rates. While this is an important step in the right 

direction, it falls short of resolving the longstanding inequities in 

federal health care programs that have been hurting the people of 

Puerto Rico for decades. 


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Shared responsibility. Employers, individuals and government 

must all do their part to make sure we have a sustainable and affordable system that covers everybody. For employers that do not 

provide meaningful coverage to their employees, they must pay into 

a fund. This pay-or-play requirement is necessary to ensure individuals can meet their responsibility to obtain affordable coverage 

with special support provisions to provide small businesses with 

tax credits and access to an insurance exchange to help them purchase coverage for their employees. 

Affordability. Individuals’ responsibility must be augmented by 

measures to ensure affordability. We commend the committee for 

offering federal financial assistance to individuals and families 

with low and moderate income and those with high health care 

costs relative to their income to guarantee affordability. 

Eliminating disparities—We congratulate the committee for recognizing disparities in access to quality health care. No one should 

be discriminated for preexisting conditions. No one should be discriminated for being low income, minority, disabled or aged. 

Workforce. As coverage grows, so much the health care workforce. Today there are chronic shortages in almost every area of 

health care from primary care physicians to nurses to long-termcare workers. Health care reform to be effective must include a diverse, well-trained workforce that is working in the appropriate 

setting across the delivery system and is well distributed in both 

urban and rural areas. 

This is your moment, your moment to ensure that Pat DeJong 

and millions of other hardworking Americans do not have to wait 

any longer in America for quality, affordable health care coverage. 

The time is now. We cannot wait. 

[The prepared statement of Mr. Rivera follows:] 


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Mr. PALLONE. Thank you, Mr. Rivera. 

I wanted to apologize to Mr. Castellani because I said that you 

represented the Business Roundtable Institute for Corporate Ethics, and apparently it is just the Business Roundtable. 

Mr. CASTELLANI. I am president of the Business Roundtable. I 

am a member of the board of directors of the Business Roundtable 

Institute for Corporate Ethics. That is probably—— 

Mr. PALLONE. Oh, I see. OK. Well, thanks for clarifying that. 

STATEMENT OF JOHN CASTELLANI 

Mr. CASTELLANI. Thank you, Mr. Chairman. I am here on behalf 

of the members of the Business Roundtable who are the chief executive officers of America’s leading corporations. Collectively, they 

count for more than $5 trillion in annual revenues and 10 million 

employees but most importantly they provide health care for 35 

million Americans. I appreciate the invitation to testify and I share 

the urgency of this committee and the fellow panelists that health 

care reform must be addressed now. 

Today I want to focus on key three messages. First, we need to 

get health care costs under control. Second, we must preserve the 

coverage for those 132 million Americans who receive that coverage 

from their employer. And third, we need a reformed insurance marketplace so that individuals and small employers can afford and 

find affordable coverage. 

Let me address the draft legislation that you have before the 

committee. First, let me thank you and the committee of moving 

forward on health care reform. We view that as very positive and 

necessary and we want to be constructive in what we believe will 

work and what we believe will not. We support the provisions that 

reform the insurance market so that there are more affordable coverage options. The bill also includes a requirement that all Americans get health insurance coverage and includes auto-enrolling for 

individuals into SCHIP or Medicaid if indeed they are eligible. We 

support both of those provisions and also support offering subsidies 

to low-income Americans who cannot afford coverage. The changes 

that you have included in the Medicare programs and other efforts 

to make our health care system more efficient are very positive. 

Medicare payments do need to be adjusted and we will provide the 

committee with comments on these and other issues. 

We do, however, have significant concerns about two major 

issues in the draft legislation and hope that the committee will consider some revisions. First, ERISA should not be changed if reforms are to be built on the employer-based system. The proposal 

before you would change some of the ERISA rules. For example, it 

would impose minimum benefit packages on our employees. Large 

employers design innovative plans including wellness and prevention initiatives that have been tremendously successful in helping 

employees take greater control over their own health and yet such 

programs which we believe are critical to the success of health care 

reform would be jeopardized by a new federally mandated benefit 

law. 

Second, we are very concerned about public plan proposals that 

would compete in the private marketplace. As large employers, we 

are concerned that our employees will suffer from additional cost 


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shifting that come from inadequate government repayment to the 

providers. For that reason, we are concerned that the kind of cost 

shifting that we are dealing with now would be exacerbated. Further, the government plan could erode existing worker coverage if 

employees seek subsidized lower priced public option that would diminish the people in our plans and would leave employer-sponsored 

coverage with more expenses, most cost for both employers and employees. 

Innovation, which we think is the key to modernizing our health 

care system and getting our costs under control, benefits improvements and how best to care for patients, we believe come best from 

the private marketplace. We need to preserve the energy and the 

commitment to improve our health care market and we are concerned that government plans cannot do that as well as the private 

sector. We urge the committee to instead create even stronger rules 

to make the private insurance marketplace more competitive and 

we want to help in that effort. 

Business Roundtable believes that the search for bipartisan consensus can begin by honoring the principles that we have outlined 

in our written testimony and by crafting reform that is consistent 

with the uniquely American principles that drive our economy: 

competition, innovation, choice and a marketplace that serves everyone. On behalf of our members, we pledge to work with you and 

all the members of the committee to find workable solutions that 

let people keep what they have today in a reformed health care 

system that works better for everyone. Thank you. 

[The prepared statement of Mr. Castellani follows:] 


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Mr. PALLONE. Thank you. 

Mr. Sheils. 

STATEMENT OF JOHN SHEILS 

Mr. SHEILS. Hello. Good afternoon, Mr. Chairman. My name is 

John Sheils. I am with the Lewin Group, and I have specialized 

over the years in estimating the financial impact of health reform 

proposals. We got your bill on Friday and immediately went about 

doing some preliminary estimates on coverage and the impact on 

provider incomes. Allison is going to help me with some slides. 

[Slide.] 

The first slide, the system that the bill would establish begins 

with, we have new health insurance exchange. The exchange would 

provide a selection of coverage opportunities. Most of them are private coverage that we are familiar with but it would also offer a 

new public plan. The impact that this program will have on coverage is going to be drive by the groups that you are permitted to 

enroll. The program would allow individuals, self-employed and 

small firms, at least in the first year, to go through the exchange 

to obtain their coverage. In the third year, the newly established 

commissioner would have the authority to open the exchange to 

firms of all sizes. The new public plan, we predict, will attract a 

great many people because the premiums in the public plan will be 

much lower than for private insurance, and because of that, we 

think that a great many people are going to be attracted to it. Let 

us discuss that a little bit. 

[Slide.] 

On the next slide, we summarize some of the payment rates on 

the left side. You are using the Medicare hospital reimbursement 

methodology, and under Medicare, payments are equal to about 68 

percent of what private payers have to pay for the same services. 

For physicians’ care, you pay about—well, Medicare pays about 81 

percent of what private insurance pays. You are going to be adding 

another 5 percent to that, so we are looking at about 85 percent 

of private payers. And we also have some information here on what 

happens to insurance administrative costs in the exchange. The 

public plan will not have to worry—need an allowance for profits 

and it will not pay commissions for brokers and agents. 

[Slide.] 

The next chart shows what happens to premiums. For family 

coverage for the enhanced benefits package described in your legislation, in the private sector it would cost about $917 per family per 

month. Under the public plan, it would cost about $738 per family 

per month. That is savings of about $2,200 a year, and we think 

that is going to draw a lot of people into the public plan. Next page. 

[Slide.] 

On the right-hand side, we illustrate what happens to coverage 

when the plan is open to all firms. The program would reduce the 

number of uninsured by about 25 million people. There would be 

an increase in Medicaid enrollment of about 16 million people but 

we find 123 million people going into the public plan. That is a reduction in private coverage of about 113.5 million people. That is 

about 66 percent of all privately insured persons. This of course is 

if and when the plan is opened up to firms of all sizes. If it is limVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00894 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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ited to just firms less than 10 workers as in the first year, you still 

get a reduction of about 25 million people uninsured, still 16 million people with Medicaid coverage but private coverage would drop 

by about 20 million people. The public plan coverage would be 29 

million people. Next chart, please. 

[Slide.] 

This chart summarizes what happens to provider incomes under 

the plan. On the right-hand side, we have the scenario where all 

firms are eligible to participate in the program. Hospital margin, 

which is hospital profit, net income basically, would be reduced by 

about $31 billion because of that. That is about a 70 percent reduction in hospital margin. Physician net income would go down by 

about $11 billion. That comes to, in terms of net income, that is an 

average of about $16,000 per year reduction in net income per physician. On the left-hand side, we show what is happening in the 

small firms, and this is really interesting because under this scenario provider incomes actually go up. For instance, hospital margin goes up by about $17 billion. Much of this has to do with the 

fact that we will have reduced uncompensated care and they will 

be paid for services they were providing for free before, and there 

will be new services they will provide to newly insured people. The 

physician net income would go up by about $10 billion, and the increase in income there is largely driven by the fact that you are 

going to increase payments for primary care under the Medicaid 

program. 

That sums it up, and I am out of time so I will turn it over to 

my colleague here. 

[The prepared statement of Mr. Sheils follows:] 


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STATEMENT OF MARTIN REISER 

Mr. REISER. Mr. Chairman and members of the committee, I 

want to thank you for the opportunity to testify about proposals to 

reform the U.S. health care system. I am here today on behalf of 

the National Coalition on Benefits, a coalition of 185 business trade 

associations and employers that have joined together to work with 

Congress to strengthen the employment-based system. 

The NCB supports health care reform that improves health care 

quality and reduces costs. The NCB recently wrote President 

Obama applauding his commitment to comprehensive, bipartisan 

health care reform. We expressed our shared view that a strategy 

to control costs must be the foundation of any effort to improve the 

health care system. I have included that letter in my written testimony. 

For many years, the American people have sent two clear messages to elected officials. First, Americans want to see change and 

improvements in both cost and access to health care, and second, 

Americans like the health benefits they receive through their employer. The NCB believes the American people are right on both 

points. We do need change, however, such change should not erode 

the part of the health care system that is working. The employersponsored model works well because it allows the pooling of risks 

and because group purchasing lowers health care costs, enabling 

those who are less healthy to secure affordable coverage for themselves and their families. ERISA and its federal framework allows 

employers to offer equal, affordable and manageable benefits regardless of where the employees live and work and without being 

subject to the confusing patchwork of mandates, restrictions and 

rules that vary from State to State. 

Yet as good as it is, the system is increasingly at great risk. As 

President Obama has said, soaring health care costs make our current course unsustainable. The National Coalition on Benefits completely agrees. Unfortunately, we are concerned that the legislative 

proposal released last week does not provide meaningful cost savings for the overall system. In an effort to expand coverage, cost 

containment has not received the priority it demands. For several 

years, employers have worked to make clear the issues that health 

care reform must properly address to preserve the employmentbased system, control costs and lead to our support. To date, we 

have not seen legislative proposals where each of these core issues 

have been adequately resolved. I will briefly discuss our concerns 

on ERISA, the employer mandate and the public plan. 

If the objective is to build upon the employer-based system that 

successfully covers more than 170 million Americans, then employers must have the ability to determine how best to meet the needs 

of their employees. Legislation should not include changes to 

ERISA or other laws that would risk hurting those who are highly 

satisfied with the health care coverage they currently receive. The 

NCB opposes provisions that alter the federal ERISA law remedy 

regime. The existing structure encourages early out-of-court resolution of disputes and provides a national uniform legal framework 

to provide both employers and employees with consistency and certainty. The draft of the legislation would replace the successful 

structure with differing remedy regimes depending on where the 


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employers and employees attain health coverage. All these differing 

bodies of law are likely to result in contradictory decisions about 

plan determination and would expose employers who obtain coverage to the exchange to unlimited state law liability. In other 

words, these legislative provisions would weaken the employerbased system. 

We are also concerned about proposals that would limit the flexibility of employers at a time when our country needs employers to 

create jobs and invest in future growth. Employer mandates including requirements to pay or play are not the answer to the health 

care problem because they undermine our ability to address 2 key 

goals of health care reform, coverage and affordability. On the public plan, we do not believe a public plan can operate on a level playing field and compete fairly if it acts as both a payer and a regulator. A public plan that would use government-mandated prices 

would result directly in a cost shift to other payers and thus would 

do nothing to address the underlying problems that make health 

coverage unaffordable for many. We already experience that cost 

shift today as Medicare, the largest payer in the United States, 

consistently underpays providers. 

In summary, we remain concerned about any provisions that 

would make health care more costly for employers and employees, 

to stabilize our employer-based system of health coverage or restrict the flexibility of employers to provide innovative health plans 

that meet the needs of their employees. As Congress moves forward 

to formal consideration of the legislation, we want to continue to 

work with all members of Congress to enact reforms that not only 

allow Americans to keep the coverage they have today if they like 

it, and for most Americans that means their employer-based coverage, but make it possible for them to count on it being there tomorrow when they need it. 

[The prepared statement of Mr. Reiser follows:] 


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Mr. PALLONE. Thank you, and thank you all. I am going to start, 

and I am going to try to get a lot in in my 5 minutes here so bear 

with me if you don’t mind. Mr. Shea, you expressed concern about 

taxing health care benefits. And you know, and you acknowledge 

in your testimony, this came from the Senate, not from the President, not from the House, needless to say. My concern is that, you 

know, a stated purpose of this reform is to let people keep what 

they have, and of course that implies employer, not only for employer benefits, but whoever has an insurance policy that they 

have. So I mean if you just want to tell me briefly what the consequences would be. I mean I know everything is on the table, but 

this is something that I am concerned about. Just briefly. 

Mr. SHEA. What was it that somebody said about some things 

are moving off the table, but we hope this is in that category. The 

main thing that would happen is destabilized employment coverage 

which, as I said, is exactly the opposite direction for where we need 

to go because it would change the relationship between employees 

and employers around this very important part of their compensation. Some employees who are younger might say, well, gee, I really 

don’t need to be part of the group plan. I am going to go off since 

it is now taxed money. Secondly, it would penalize certain groups 

of workers because of their health status essentially. We looked at 

health funds—— 

Mr. PALLONE. I am going to stop you because, you know, I appreciate what you are saying but I have got to ask Mr. Rivera a question. He stressed the pay to play requirements for businesses and, 

of course, we get criticisms of this, and, you know, a suggestion 

that, you know, it is going to hurt business. Why do you think the 

pay to play requirement is necessary for, you know—why do you 

think it is a good idea basically? 

Mr. RIVERA. Because we believe at this moment some of the employers—the employers who basically are providing health care are 

basically subsidizing those who are not providing health care. For 

example, on average health insurance is about between $1,300 to 

$1,500 more for the cost of a family insurance, and those who don’t 

provide health care coverage to their employees are basically on the 

free ride here. That is basically it. 

Mr. PALLONE. OK. And what about the public option? You know, 

you said you are supportive of it. Obviously, it is in the discussion 

draft. Are insurance market performance enough to drive down 

costs and ensure coverage for all or do you think the public option 

is an essential piece of the reform? 

Mr. RIVERA. We believe that it is an essential part of the reform, 

sir, and we believe that it will be a very important contribution to 

lowering the cost of health care. And basically this is America 

where we all can compete and this is another way of competing to 

lower the cost, sir. 

Mr. PALLONE. OK. Mr. Sheils, I am going to you last here. I have 

about 2 minutes left. You criticize the public option and just for 

purposes of full disclosure the study you mentioned, my understanding, and tell me if I am wrong, is it was completely funded 

by an insurance company. You said in your written testimony you 

are the senior vice president of the Lewin Group and your group 

is—my understanding is your group is 100 percent funded by 


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United Health Group, one of the largest insurance companies in 

the country. Is that accurate? 

Mr. SHEILS. We are owned by United Health. We have a 36-year 

tradition of doing—— 

Mr. PALLONE. But it is 100 percent owned by United Health. 

Mr. SHEILS. I would like to finish. 

Mr. PALLONE. Well, let me get to the next thing and you probably 

can respond to it—— 

Mr. SHEILS. Anyway, about 2 years ago and at that point we 

were—but our work is completely independent. We have complete 

editorial control over our work. 

Mr. PALLONE. But I mean the group is 100 percent funded by 

United Health, right? 

Mr. SHEILS. Well, we are a consulting firm. We are funded by the 

work we negotiate with the clients, so I work for the Commonwealth Fund, I work for Families, USA, I work for Blue Cross/Blue 

Shield. 

Mr. PALLONE. Well, what about this study? 

Mr. SHEILS. This study? 

Mr. PALLONE. Yes. 

Mr. SHEILS. This study was done on our own nickel. 

Mr. PALLONE. But who funded it? 

Mr. SHEILS. Well, we just did our own nickel. We did it out of 

our firm’s overhead. 

Mr. PALLONE. Did United Health directly or indirectly pay for it 

because they are funding you? I am just trying to get an answer 

to that. 

Mr. SHEILS. You could say it that way but United Health did not 

review any of our materials. 

Mr. PALLONE. OK. The only reason I mentioned it is our committee conducted an investigation of United Health and we found 

that the company had incredible profitability. In 2004 their net income was $2.6 billion, 2005 it grew to $3.3 billion, 2007 it went up 

to $4.7 billion. Even last year at the height of the financial collapse, the company’s net income was $3 billion. And then in 2005 

the CEO of United Health, William McGuire, was the third highest 

paid CEO in the country according to Forbes magazine. He resigned in 2006 after the SEC launched an investigation involving 

the back dating of stock options, but United Health gave him a severance pay of $1.1 billion, which was stunning to me. I mean do 

you think it is appropriate for United Health to pay the CEO more 

than a billion dollars severance? 

Mr. SHEILS. I don’t have—if I were at the pay level where I 

would even know this stuff, it would be a much different spot. We 

were a firm that was bought by Genex which is owned by United 

Health. We don’t get involved in anything like that and there is nobody in our firm who ever sees income of that type. You can only 

imagine how surprised we were when 2 years ago we were bought. 

They quickly assured us that they wanted us to maintain editorial 

control of our work to continue our 36-year tradition of non-biased, 

objective, non-partisan work. 

Mr. PALLONE. All right. Thank you. 

Mr. SHEILS. That is all I am about. 

Mr. PALLONE. I appreciate that. Thank you. Mr. Whitfield. 


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Mr. WHITFIELD. Thank you, Mr. Chairman. And I want to thank 

all of you on the witness panel for being with us today. We genuinely appreciate your testimony as all of us attempt to get through 

this legislation and understand as best we can what the ramifications and implications of the legislation will be. We hear a lot of 

discussion about the public plan, the public option, and I know 

some of you are opposed to it, some of you support it. What I hear 

most of all from members of the committee the concern is that if 

you have a public plan many people will leave the private plan, 

their employer plan, and go join that plan because the costs are 

lower, which is certainly understandable. But eventually you can 

basically destroy the employer plans because everyone is going to 

leave and then you will end up with one big government plan. 

And maybe that is OK except the Medicare system can be criticized in many ways, particularly because of the cost escalations 

and I am saying that because Medicare is basically a U.S. government plan and if this public option goes the way some people will 

say that is going to be a big government plan. And I will make one 

comment. In 1965 when they started the Medicare program the 

Congressional Budget Office did a forecast that in 1990 that plan 

would cost $9 billion. It turned out to be almost $200 billion by 

1990, so that is an astronomical miscalculation. So, Mr. Shea, you 

represent the AFL-CIO? 

Mr. SHEA. Yes, sir. 

Mr. WHITFIELD. OK. Well, tell me, the argument that I made 

that if it is less expensive more people are going to move over there 

and it is going to weaken the private system. Does that concern 

you or do you think that that argument has merit? 

Mr. SHEA. Well, as I said, Congressman, we start out saying that 

we need to address cost containment just like others on the panel 

said that is job number 1. If we don’t control these costs nothing 

else is going to be done in health care. So how do you do that? 

Well, there is several ways to do it but the public health insurance 

plan is one. You can calibrate the rates in the public insurance 

plan. This plan proposes Medicare rates. You could do Medicare 

plus 10 percent or you could do halfway between private. That 

would all affect this. But the notion is to put some competition in 

the insurance market that now doesn’t display any competition. 

What we have are really close relationships in my view between insurers and providers, and that is the problem that we have to 

change. It was what Mr. Conklin was talking about. We are just 

trapped by this. So there are other ways to do it but this is what 

the competitive model is—— 

Mr. WHITFIELD. OK. Thank you. There are other ways to do it. 

Mr. Reiser, will you make a comment on the argument that I put 

out there that people are making? 

Mr. REISER. The concern that we have about the public plan option is Medicare currently underpays, and there is a significant 

cost shift onto the private employers which is a big problem in the 

current system. A public plan option, we believe, would exacerbate 

that, particularly a public plan option as outlined in the proposal 

that would pay Medicare rates so that would just exacerbate the 

system. The second problem that we see with it is if people do 

leave the employer pool, that is going to weaken our risk pool and 


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lead to higher costs for the remaining employees, and over time 

will weaken and potentially destroy the employment-based system. 

Mr. WHITFIELD. Yes, sir, Mr. Rivera. 

Mr. RIVERA. One of the things that we have in New York State 

is a health care plan which provides health care for health care 

workers in the greater New York metropolitan area, and we pay 

about $8,500 for family insurance. Upstate New York where only 

one of the insurance companies basically dominates the market, we 

pay close to $17,000 so basically the idea of the public plan is to 

come into markets where basically are concentrated by only one insurance company, and there is a case of Maine, New Hampshire, 

and you can see high cost areas where basically the lack of competition that basically insurance companies don’t come into those 

areas and the cost of health care goes up. 

Mr. WHITFIELD. Mr. Castellani, I know the Business Roundtable 

is comprised of very large companies but what are your views on 

the pay or play provisions of this bill? 

Mr. CASTELLANI. Well, pay or play is almost an academic issue 

for us because indeed on the surface all of our members provide 

health care, and we want to continue providing it. The problem 

that we see with the concept of pay or play is that we need to bring 

into the healthcare system all those people who are currently not 

covered or can’t afford to be covered because we are paying for 

them through the kind of cross subsidies that Mr. Reiser referred 

to. We do not see the merit of forcing companies to buy something 

that they cannot afford, particularly the small businesses. And so 

pay or play we think can be dealt with if we provide the kind of 

competition that both Mr. Rivera and I think all of us would agree 

on but we think it is best provided through reforms in the insurance market because in addition to what Mr. Reiser said, that is, 

the public option plan exacerbates the cost shift. It potentially 

erodes our risk pool and causes younger, healthier people to leave, 

quite frankly, and get a lower premium. 

But it also does something else that hurts what we all want and 

we all talk about, and that is we see much more innovation in 

terms of delivery, in terms of wellness, in terms of prevention, in 

terms of quality, in terms of information technology, the kinds of 

things that will reduce costs and increase quality coming out of the 

private sector. We are concerned that a government run program 

as we see now in Medicare and Medicaid just doesn’t have the ability to innovate, so we also lose out on the ability to gain from those 

innovations. 

Mr. WHITFIELD. Thank you. I think my time has expired. 

Mr. PALLONE. Mrs. Capps, our vice chair. 

Mrs. CAPPS. Thank each of you for your presentations. It has 

been a good panel. You waited a long time, many of you, because 

it has been a very long day of presentation and different panels on 

this topic of health care reform. I have questions for two of you because there is not enough time, only 5 minutes, and my first question will be for Mr. Rivera with SEIU. In your testimony, Mr. Rivera, you expressed that individual responsibility must be augmented by measures to ensure affordability. It seems fair to think 

that our health care system should meet hard-working Americans 

halfway. For this reason, SCIU supports affordability credit for 


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families between 133 percent and 400 percent of the federal poverty line. Why do you believe it is necessary to offer these credits 

for families up to 400 percent of the poverty level? 

Mr. RIVERA. Part of the problem that we have is the incredible 

cost of health care these days. For example, in the case of SEIU 

almost 50 percent of the members of our union basically live on 

very meager means, less than $35,000, so when you take into account on one hand the high cost of health care and the disposable 

income you can see that basically in order to make it meaningful 

you have to have subsidies. 

Mrs. CAPPS. So you are talking about your work force, hardworking men and women with raising a family and trying to have 

a quality of life in this country, not at all luxurious, but still they 

are doing essential work in their communities and they should 

have a decent health care system, and so you are wanting to provide—— 

Mr. RIVERA. As a matter of fact, the overwhelming majority of 

Americans who don’t have health care coverage are working people 

who make more money than to qualify for Medicaid and are not 

enough to qualify for Medicare and then the question that they 

have—— 

Mrs. CAPPS. Which shows you one of the disparities that the premiums are so expensive that you really—if you are going to have 

your own private insurance plan, self-employed or whatever, you 

have to be upper middle class or wealthy in order to pay for it, and 

that is one of the major challenges that we face in this country 

right now. I am sure you would say that. Are there some other protections? We are talking about middle class, right, or at least what 

we want to consider as the middle class, the working class, the 

hard-working people who keep this country going whether in small 

businesses or in large companies providing labor or providing management. What other projections do you believe are necessary to 

make health care more affordable for the middle class? This is a 

big question, but I want to also move on to another subject. 

Mr. RIVERA. I think the fundamental question that we have is 

that we are spending 171⁄2 percent of our gross domestic product 

on health care, and if we do not—and I think my colleague, Mr. 

Shea, was talking about it, if we don’t resolve the problem of the 

cost controls we are not going—— 

Mrs. CAPPS. I see other people nodding your heads. Is this sort 

of a given that this is one of the major challenges that—and one 

of the reasons that you are participating is because we need reform 

to deal with this in some aspect. I appreciate that. You are a very 

diverse group, I might add. I think there is quite a cross section 

here. That is interesting. I would like to now turn for the last couple minutes to you, Mr. Sheils, just some particular questions 

about what you were talking about. Your analysis suggested a public option can get lower premiums than private plans. Some of our 

colleagues are making the—come to the conclusion that this disparity—that a private plan is not even going to be able to compete 

with the public option. Does your model assume that private insurers and large employer purchases are simply price takers with no 

ability to add value or change behavior in a competitive market? 


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In other words, it is so monolithic in that private world that there 

is no ability to compete? 

Mr. SHEILS. Well, we don’t conclude that they cannot compete. 

We conclude that there are only certain types of plans that could 

survive, and those would be integrated delivery systems like some 

of the better HMO type models. I would like to explain that though 

because there are some key issues here. Right now a lot of the insurers get price discounts with providers. 

Mrs. CAPPS. Right. 

Mr. SHEILS. Having to do with the fact that they make volume 

discounts. They say to a hospital I will bring you all 100,000 of my 

people for their hospital care if you will give me a break. Now if 

everybody goes to the public plan and the private health plan only 

has 10,000 people left in it—— 

Mrs. CAPPS. The public plan is not going to be able to offer that, 

is it? That is pretty competitive. 

Mr. SHEILS. I wanted to finish my—my point is if there is only 

10,000 people left in the private insurance plan then they are not 

going to be able to negotiate discounts that are as deep as what 

they can get today. 

Mrs. CAPPS. And that is the only way they can be competitive. 

Mr. SHEILS. Right. 

Mrs. CAPPS. I would hope that there would be a lot more creativity within the private sector. I will get to you but—but you said 

I could have a little more time because of that terribly disruptive 

moment there. Anyway, maybe you or someone else would comment about some of the larger markets like Los Angeles, New York 

City, private plans sitting below Medicare fee for service levels. 

How do you factor that into it and then I will open it up if there 

is time? 

Mr. SHEILS. Well, there are places where there are smaller disparities between Medicare and private, and then there are places 

where there is much larger disparity. In those areas where you 

have large disparities, we get quite a bit of shake up. In areas 

where there is little disparity it doesn’t really show us very much 

of a change. 

Mrs. CAPPS. Another comment on this with the other—— 

Mr. SHEA. Just on the whole dynamic. I think what is important 

to bear in mind about the Lewin analysis is that it is based on the 

prices. Your point is just price taking. Employers, and you could 

ask people on this panel, employers make decisions based on more 

than price in health care. This is a very—— 

Mrs. CAPPS. Is that a valid point? May I ask for corroboration? 

Mr. PALLONE. One more and then I think we got to move on. 

Mrs. CAPPS. OK. I would hope so because I would hope that we 

would have a little more creativity in the private market. We actually need that competition because this is too big for anyone’s response. Many of us feel that way, and I think that is a feature of 

the public option is that it will be competition and it will be a competitive market place. In my congressional district it isn’t competitive at all. It is rural and there is only one private provider. So, 

you know, this is a thoroughly needed situation. I will yield back, 

Mr. Chairman. 

Mr. PALLONE. Mr. Gingrey. 


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Mr. GINGREY. Mr. Chairman, thank you. Let me direct my question to Mr. Castellani of the Business Roundtable. Mr. Castellani, 

could you explain to us how the public plan proposals would undermine the private insurance industry that many Americans are very 

happy with, and I am not—quite honestly, I have read some of 

your testimony, and I am not sure where you are on this public 

plan proposal. In the interest of full disclosure, I am concerned 

about it so that is the reason for my question. 

Mr. CASTELLANI. Yes, sir. What we are concerned about is not 

that it would undermine although it would the private insurance 

but it would undermine our ability as employers to provide health 

care for our employees through the private insurance market. And 

it is for the reasons that we have discussed here and it is primarily 

three. We do agree with competition. What Congresswoman Capps 

was addressing is what we think is part of the solution. We need 

greater competition, but that competition has to be on a level playing field. If a government plan exists and it has all the elements 

of a private plan except it is not required to pay its investors back 

a fair return on their investment, the taxpayers in this case, then 

it can and will by definition have a lower premium cost. So the first 

effect is we would lose people who could qualify and would move 

to that lower premium from our plan. 

As a result of that, they will tend to be younger and tend to be 

healthier employees. Our costs go up because we would lose that 

spectrum of our risk pool that allows us to provide an affordable 

product for all of our employees. 

Mr. GINGREY. Now, Mr. Castellani, you are speaking from the 

perspective of the Business Roundtable? 

Mr. CASTELLANI. From the payers, yes. 

Mr. GINGREY. From the Business Roundtable? 

Mr. CASTELLANI. Correct. 

Mr. GINGREY. And we are talking about the payers and there are 

probably 270 million lives covered through employer-provided 

health insurance. My numbers here say most of the 177 million 

Americans who have employer-based coverage say they are happy 

with the coverage they receive. President Obama, God bless him, 

has promised to ensure that those folks can keep what they have. 

I think that is almost a quote. He likes the word folks. Those folks 

can keep what they have. I have heard him say it many times. Do 

you think that the public plan could lead to Americans losing their 

current coverage because of an unfair playing field that would be 

established by a public plan? 

Mr. CASTELLANI. Yes, I think it runs that risk. 

Mr. GINGREY. All right. Well, I tend to agree with you. Now describe for the committee and for everyone in the room what are 

some of the unfair aspects that could be attributed to a public plan 

that we are concerned about, that you are concerned about, that 

the Business Roundtable is concerned about? 

Mr. CASTELLANI. Well, as I had answered previously, a lower premium cost would be attractive to some of our own employees for 

which we provide coverage now. If they leave the system, we have 

a reduced risk pool and the nature of that risk pool, the nature of 

our employees could leave us with a more costly and fewer number 

of lives to cover. The second thing that it does is by its design in 


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this draft legislation it does not fully reimburse for cost, so another 

large player in addition to Medicare and Medicaid that does not 

fully reimburse for cost because it is a situation, for example, you 

are a hospital. The government is not going to pay any more, Medicare and Medicaid is not going to pay any more, the uninsured 

can’t pay any more. There is only one person left paying and that 

is the employers, so it exacerbates the cost shift, makes our cost 

potentially greater rather than what we are all trying to achieve 

which is more affordable health care at lower cost trajectories than 

we have now. 

The third thing it does is it hurts us in the long term and that 

is that fundamentally government programs are not able to innovate at the kind of rates and with the kind of creativity that we 

see in the private sector with competition, and we need that kind 

of innovation to bring down the trajectory of cost so it hits us 3 

ways in raising our—— 

Mr. GINGREY. I had one more, Mr. Chairman. I can’t see the 

clock. 

Mr. PALLONE. It keeps going off. Go ahead. 

Mr. GINGREY. OK. Thank you, Mr. Chairman. I appreciate your 

indulgence. Just one more question, Mr. Castellani. Under this 

draft proposal, a tri-committee draft proposal, did you see anywhere that describes what would happen if the public plan did not 

set the premiums and the cost-sharing high enough to cover its 

cost? Was there a provision that described what happens if the 

public plan—if their reserves are not high enough, for example, 

and indeed was there anything in the draft that describes where 

those reserves would come from and how they would compare with 

the reserves that were required of the private insurance, health insurance plans, that they are competing with. 

Mr. CASTELLANI. I don’t believe they were—at least in my reading of it and analysis of it, they weren’t specified. They say there 

are reserves. Reserves would be provided for. But the one thing 

that is missing even whatever levels they would be provided at and 

the networks would be provided at in the public plan the one thing 

that is missing is a fair return on the people who invest in the capital that allows that public option to exist. If you don’t have that, 

you always have accost advantage. 

Mr. GINGREY. Well, I thank you very much, and I am sure my 

time has probably already expired. Mr. Chairman, thank you for 

your indulgence. I appreciate it, and I yield back. 

Mr. PALLONE. Thank you. I think that is the end of our questions. Thank you very much. We appreciate it. I know it keeps getting later. We have one more panel. You may get, as I think you 

know, you may get some additional written questions within the 

next 10 days and we would ask you to get back to us on those. 

Thank you very much. And we will ask the next panel to come forward. I think our panel is seated. And I know the hour is late, but 

we do appreciate you being here, and I am told we may also have 

another vote so we will see. We will try to get through your testimony. This is the panel on insurer views. And beginning on my left 

is Howard A. Kahn, who is Chief Executive Officer for L.A., I assume that is Los Angeles, Care Health Plan. L.A. OK. Karen L. 

Pollitz, who is Project Director for the Health Policy Institute at 


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Georgetown Public Policy Institute, Karen Ignagni, who is President and CEO of America’s Health Insurance Plans, and Janet 

Trautwein, who is Executive Vice President and CEO of the National Association of Health Underwriters. I don’t think I have to 

tell anyone here that we try to keep it to 5 minutes, and your written testimony will be included complete in the record. I will start 

with Mr. Kahn. 

STATEMENTS OF HOWARD A. KAHN, CHIEF EXECUTIVE OFFICER, L.A. CARE HEALH PLAN; KAREN L. POLLITZ, PROJECT 

DIRECTOR, HEALTH POLICY INSTITUTE, GEORGETOWN PUBLIC POLICY INSTITUTE; KAREN IGNAGNI, PRESIDENT AND 

CEO, AMERICA’S HEALTH INSURANCE PLANS; AND JANET 

TRAUTWEIN, EXECUTIVE VICE PRESIDENT AND CEO, NATIONAL ASSOCIATION OF HEALTH UNDERWRITERS 

STATEMENT OF HOWARD A. KAHN 

Mr. KAHN. Thank you, Chairman Pallone, members of the committee. Thank you. The need for national health care reform has 

never been greater. As the CEO of L.A. Care Health Plan, America’s largest public health plan, I am here to provide information 

about our model and how a public health option has worked in 

California for more than a decade. L.A. Care is a local public agency and health plan that provides Medicaid managed care services. 

We opened our doors in 1997 as the local public plan competing 

against a private health plan, Health Net of California, Inc. L.A. 

Care strongly supports the concept that public plans can provide 

choice, transparency, quality, and competition. L.A. Care competes 

on a level playing field against our private competitor. Plans must 

have enough funding to endure provider payments and operate 

under the same set of rules. 

L.A. Care has always been financially self-sustaining and has 

never received any government bailout or special subsidy. L.A. 

Care serves over 750,000 Medicaid beneficiaries and has 64 percent 

of the Medicaid market share in Los Angeles. The competition between L.A. Care and Health Net has resulted in better quality and 

system efficiencies. For example, as part of our efforts to distinguish ourselves in the market place, L.A. Care attained an excellent accreditation from NCQA, validation that it is possible to provide quality care to the poorest and most vulnerable in our communities. There are 7 other public plans like L.A. Care in California 

providing health coverage to Medicaid beneficiaries. In all of these 

counties, the public plans compete against private competitors. 

Two and a half million Medicaid beneficiaries are provided 

health services through this model. California has other public plan 

models as well. Congresswoman Eshoo, a member of this subcommittee, is very familiar with the enormously successful county 

organized health system which she and I helped create within her 

district. Our provider network includes private and public hospitals 

and physician groups, non-profits, for-profits, federally qualified 

health centers, and community clinics. Our subcontracted health 

plan partners include some of the biggest private health plans, Anthem Blue Cross and Kaiser Permanente, as well as smaller local 

plans. In addition to Medicaid, L.A. Care operates a CHIP proVerDate Mar 15 2010 05:28 Aug 15, 2012 Jkt 074088 PO 00000 Frm 00946 Fmt 6601 Sfmt 6601 E:\HR\OC\A088.XXX A088

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gram, Medicare Advantage special needs program, and a subsidized 

product for low income children. 

What makes L.A. Care, a public health plan, different? L.A. Care 

conducts business transparently. We are subject to California’s 

public meeting laws so all board and committee meetings are open 

to the public. L.A. Care answers to stakeholders, not stockholders. 

Its 13-member board includes public and private hospitals, community clinics, FQHCs, private doctors, Los Angeles County officials 

and enrollees. Our enrollees actually elect 2 of our board members 

resulting in a strong consumer voice. Part of our mission is to protect the safety net. When Medicaid managed care began there was 

fear that FQHCs and public hospitals would lose out. Through several strategies over 20 percent of L.A. Care’s enrollees have safety 

net providers as their primary care home. In Los Angeles large 

numbers of people will remain uninsured under even the most ambitious health care reform proposals, and the safety net will continue to need our support. 

Local public plans like L.A. Care protect consumer choice. Since 

we started, 3 private health plans serving this population in Los 

Angeles have gone out of business. L.A. Care’s stability has ensured that Medicaid beneficiaries continue to have continuity and 

choice. Local public plans raise the bar on performance and quality 

in their local communities. L.A. Care offers a steady calendar of 

provider education, opportunities that improve provider practices 

and the quality of care. Our family resource center serves over 

1,200 people, most of whom are not our plan members. While defining a public plan option is still underway, we recommend against 

creating a monolithic national public plan. Health care is, and will 

continue to be, delivered to local markets which vary in terms of 

population and competition, infrastructure, community need, and 

medical culture. 

California recognized years ago the need to lower cost and improve quality and develop local plan options for Medicaid that have 

been supported by each successive Administration, both Democrat 

and Republican. With regard to the health insurance exchange, 

L.A. Care supports allowing states to create their own exchange. 

We appreciate the recognition that Medicaid beneficiaries have special needs and so are not included at first. However, we strongly 

recommend excluding Medicaid beneficiaries completely as they are 

among the most vulnerable to care for and present unique challenges. California’s local public plans are successful local models 

that should be considered. Let us build on what is working in 

health care and focus on fixing what is broken. Thank you. 

[The prepared statement of Mr. Kahn follows:] 


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Mr. PALLONE. Thank you. Now let me mention that we do have 

votes, but I would at least like to get one or possibly two of the testimony in, so let us see how it goes. Ms. Pollitz next. 

STATEMENT OF KAREN L. POLLITZ 

Ms. POLLITZ. All right. Thank you, Mr. Chairman, members of 

the committee. First, I would like to congratulate you on the tricommittee draft proposal. It contains the key elements necessary 

for effective health care reform and at this time I am sure you are 

going to get the job done. The proposal establishes strong new market reforms for private health insurance with important consumer 

protections, a minimum benefit package, guaranteed issue, modified community rating, elimination of pre-existing condition exclusion periods. These rules apply to all qualified health benefit plans 

including those purchased by mid-size employers with more than 

50 employees. Today, mid-size firms have virtually no protection 

against discrimination. When a group member gets sick premiums 

can be hiked dramatically at renewal forcing them to drop coverage 

and with no guaranteed issue protection finding new coverage is 

not an option. 

I commend you for not including in the bill exceptions to the employer non-discrimination rule that would allow employers and insurers to substantially vary premiums and benefits for workers 

through the use of so-called wellness programs. Clearly, wellness is 

an important goal but ill-advised regulations issued by the Bush 

Administration cynically hid behind it to allow discrimination 

against employees who are sick through the use of non-bona fide 

wellness programs that penalize sick people but do nothing else to 

promote good health. Another good feature of the tri-committee bill 

is the requirement of minimum loss ratios of 85 percent, which will 

promote better value in health insurance. The bill grants broad authority to regulators to demand data from health plans in order to 

monitor and enforce compliance with the rule, and it creates a 

health insurance ombudsman that will help consumers with complaints and report annually to the Congress and insurance regulators on those complaints. 

Another key feature in the bill is the creation of a health insurance exchange and organized insurance market with critical support services for consumers. The exchange will provide comparative 

information about plan choices and help with enrollment appeals 

and applications for subsidies. The exchange will negotiate with insurers over premiums to get the best possible bargain and importantly consumers and employers who buy coverage in the exchange 

will also have that choice of a new public plan option. I know you 

have talked today about the cost containment potential of such an 

option. It is all important that a public option would offer consumers an alternative to private health plans that for years have 

competed on the basis of discrimination against people when they 

are sick. Just last week, your committee held a hearing on health 

insurance rescissions that discussed people who lost their coverage 

just as they started to make claims. 

At the Senate Commerce Committee hearing yesterday, a former 

officer of Cigna Insurance Company testified on common industry 

practices of purging employer groups from enrollment when claims 


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costs get too high. I would like to submit his testimony for your 

hearing record today. When consumers are required to buy coverage having a public option that doesn’t have a track record of behaving in this way will give many peace of mind. And I left the rest 

of my statement in the folder. Isn’t that terrible? There we are. I 

got it. I got it. I am so sorry. Second, a public plan will promote 

transparency in health insurance market practices. In addition to 

data reporting requirements on all plans, with a public plan option 

you will be able to see directly and in complete detail how one plan 

operates, and if private insurers continue to dump risk after reform 

it will be much easier to detect and sick people will have a secure 

coverage option while corrective action is taken. 

Mr. Chairman, in my written statement I offer several recommendations regarding the draft bill and will briefly describe just 

a few of them for you now. First, the benefit package, the benefit 

standard in your bill does not require a cap on patient cost sharing 

for care that is received out of network and it really needs one. 

Also, the benefit standard does not specifically reference as a 

benchmark that Blue Cross/Blue Shield’s plan that most members 

of Congress enjoy. Many have called on health reform to give all 

Americans coverage at least as good as what you have. It is not 

clear whether your essential benefits package meets that standard 

but if it doesn’t, it should, and if that raises the cost of your reform 

bill, it will be a worthwhile investment to raise that standard. 

Over the next decade, our economy will generate more than $187 

trillion in gross domestic product and we will spend a projected $33 

trillion on medical care. The stakes are high and it is important to 

get this right. The second rules governing health insurance must 

be applied equally to all health insurance. As drafted in your bill, 

some of the rules that will apply in the exchange might not apply 

outside of the exchange. Further, there is no requirement that insurers who sell both in and out of the exchange to offer identical 

products at identical prices. If the rules aren’t parallel risk segmentation can continue. As an extra measure of protection, the tricommittee bill provides for added sanction on employers if they 

dump risks into the exchange and similar added sanctions should 

apply to insurers. 

Another problem with non-parallel rules is the exemption for 

non-qualified health benefit plans and limited benefit policies 

called accepted benefits. Health care reform is your opportunity to 

end the sale of junk health insurance and you should do it. And, 

finally, Mr. Chairman, with regard to subsidies, the bill creates 

sliding scale assistance so that middle income Americans with incomes up to 400 percent of the poverty level won’t have to pay 

more than 10 percent of income towards their premiums. But as 

charts in my written statements show, some consumers with income above that level could still face affordability problems, especially those who buy family coverage and baby boomers who would 

face much higher premiums under the 2 to 1 A trading. I hope you 

will consider phasing out the A trading and also setting affordability premium cap so that no one has to spend more than 10 percent of income on health insurance. Thank you. 

[The prepared statement of Ms. Pollitz follows:] 


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Mr. PALLONE. Thank you. I don’t want to cut you short, Ms. 

Ignagni, so you can all wait until we come back. Hopefully, we 

won’t be too long. I would say 20 minutes or so. Thank you. 

[Recess.] 

Mr. PALLONE. The hearing will reconvene, and we left off with 

Ms. Ignagni. Thank you for waiting. 

STATEMENT OF KAREN IGNAGNI 

Ms. IGNAGNI. Thank you, Mr. Chairman, members of the committee. It is a pleasure to be here, and having watched the hearing 

all day I just want to congratulate you. It is a wonderfully diverse 

group of people that you have assembled and you all should be congratulated. It was terrific to watch it. I think in the interest of time 

recognizing you have been here all day, I want to make just a couple of points. First, on behalf of our industry, we believe that the 

nation needs to pass health reform this year. We don’t believe that 

the passionate debate on which direction or form that should take 

in any way should deter getting this done. It needs to happen. And 

to that end, I think it is somewhat disappointing that the focus 

generally in the press and here in Washington had been almost exclusively on the question of whether to have a government-sponsored plan or not. And I think in many ways one could say that 

it is obscuring the broad consensus that exists and indeed that I 

believe you built on in the legislation in several important areas. 

First, we see several important areas. First, we see a consensus 

on improving the safety net and making it stronger. Second, providing a helping hand for working families. Third, a complete overhaul of the market rules. We have proposed an overhaul. You have 

imbedded it in this legislation. We firmly support it and congratulations for it. We think it is time to move in a new direction and 

we are delighted you are doing that. Next, a responsibility to have 

coverage. We think that is very important because, in fact, the 

market and many of the questions today about how the market 

works today really can be answered because until Massachusetts 

passed legislation requiring everybody to participate the industry 

grew up with the rules that are no longer satisfactory to the American people, and the opportunity to get everyone in and participating is an opportunity to charge a new course. 

Next, the concept of one-stop shopping for individuals and small 

employers. Next, investments in prevention and chronic care coordination. Next, addressing disparities. Bending the cost curve. A 

number of the witnesses have talked about that today. We believe 

it is integral to moving forward. And, finally, improving the work 

force creating new opportunities and looking at where we have 

deficits and attending to them. The committee’s draft contains 

many and all—actually all of these elements, and we commend you 

for it. Moreover, we feel that we have to seize the moment as a 

country and build on this consensus that will accomplish what has 

eluded the nation for more than 100 years and that is to pass 

health care reform. 

The government-sponsored plan shouldn’t be a roadblock to reform, and the key concept of introducing a government-run plan is 

that it would compete on a level playing field, but that is not what 

would happen. And, Mr. Chairman, as I sat here today, I thought 


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of an analogy, and just to reduce it to a clear and hopefully very 

direct way to explain our concerns, I want to make an analogy to 

a race between 2 people, one that makes the rules and at the same 

time says to the other competitor this is my 50-pound backpack 

and I want you to carry it. Cost-shifting for Medicare and Medicaid 

is that backpack for our health plans and we can’t take it off in 

this race. The government plan will run without that encumbrance. 

Moreover, it will add weight to the backpack. We now pay hospitals 

132 percent on average nationally of costs about 46 percent above 

Medicare rates. That has implications for preserving the employerbased system. We believe you cannot under those circumstances 

implications for hospitals and physicians who have long expressed 

concerns about Medicare rates and the adequacy or not adequacy— 

not being adequate, and the implications for the deficit which are 

not being taken into account. 

We believe that the most important message we can convey is 

that we have tools and skills to provide. Indeed, we have pioneered 

disease management and care coordination. We pioneered opportunities for individuals to be encouraged when their physician finds 

it acceptable to substitute generic drugs. We are recognizing high 

quality performance in hospitals and physicians, and we are moving down a path of showing results. Imbedded in our testimony are 

some of those results, which are very specific and very measurable 

about what we are doing and how we are doing a better job. We 

can help with traditional Medicare. We can bring more of those 

tools, but we hope that you will recognize the 50-pound backpack 

and the weight as we explain our concerns with a governmentsponsored program. 

The most important message I can convey to you today is not to 

let what people disagree on threaten the ability to pass reform this 

year. Our members have proposed and are committed to a comprehensive overhaul of the current system. We have appreciated 

the opportunity to discuss key features of the bill with your staff, 

and we pledge our support to work to achieve legislation that protects consumers and provides health security to patients. Thank 

you very much. 

[The prepared statement of Ms. Ignagni follows:] 


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Mr. PALLONE. Thank you. Ms. Trautwein. 

STATEMENT OF JANET TRAUTWEIN 

Ms. TRAUTWEIN. Thank you very much. And being the last witness of the day, I will try to not repeat everything that everyone 

else has said. What I would like to do is I agree with everything 

Ms. Ignagni has just said except that I do want to say one thing, 

and that is that the details matter. And one of the things that our 

members do for a living is we look at a lot of the details, and I feel 

it incumbent to bring up a couple of those because I think we do 

need to make sure that we get these things straightened out before 

we move forward. I do want to stress that we don’t want to not 

move forward. We want health reform and we want it done correctly. I do want to mention a couple of things to illustrate to you 

that we have got to get some of these things that may appear to 

be small straight because they could have huge implications. 

First of all, I want to mention the rating provisions in the bill, 

and I want to stress I am not talking about the no pre-existing conditions. I am not talking about the no health status rating. I am 

not talking about anything like that. I am talking about specifically 

the modified community rating provisions. Currently the bill uses 

something called an age band of 2 to 1. I am not going to go into 

details about that except to tell you that it is too narrow. And, Mr. 

Chairman, I would like to use your own state for an example of it 

being too narrow. New Jersey recently went to 31⁄2 to 1 age bands 

because what they had was too narrow already and it wasn’t affordable for people. The gentleman on the last panel that talked 

about New Jersey rates of $13,000, they are in a situation of 2 to 

1 age bands, and that is one of the reasons why it is too expensive. 

So we want to make sure that we establish bands that allow wide 

enough adjustments to make it affordable for more people so that 

we don’t end up losing a lot of the young person participation. 

In addition, one of our very specific concerns has to do with the 

fact that this bill tends to lump all groups that are what we call 

fully insured together, whether they are a group of 10 people, 50 

people, or 200 people, and the modified community rating provisions apply to all of them. Today, groups of over 50 on a gradual 

basis use their own claims experience, and when I talk about 

claims experience, I don’t mean perspective health status ratings 

where they fill out a health statement in advance. I mean that the 

group develops community rates based on the experience of their 

own group of employees. It is very cost effective. It allows them to 

keep their rates low over time, and I would point out this is not 

a market that has problems today. These are not the people that 

are knocking on your doors telling you that they have a problem. 

And I would encourage you to not eliminate that ability for them 

to do that because the rate shock to the employers in that category 

will be fairly significant. I would also like to point out that the 

grandfathering provisions really need to be improved, and there are 

a couple of areas that I am thinking are probably just mistakes, 

it is a draft, inside the bill that ought to be changed. The provision, 

first of all, is too strict for individuals. It only allows them to add 

family members and frequently these policies are reviewed on an 

annual basis and other minor adjustments need to be made. For 


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example, a person that has an HAS qualified plan has a legal adjustment to be made relative to the deductible on an annual basis, 

and the bill doesn’t really allow for that. And then groups, of 

course, are not really grandfathered. They have a phase-in period 

over 5 years, and we would be hopeful that groups could keep their 

coverage longer than that period of time. 

The one thing I want to talk about that I don’t think anyone else 

has mentioned has to do with risk adjustment. This is something 

that we look at a lot. We are very involved with risk adjustment 

and reinsurance plans to make sure that they are stable. I am very 

concerned that the risk adjustment that is suggested is not adequate for starting up this program. 

The risk adjustment suggested is more something you would do 

once your exchange had been in effect for a period of time and it 

would adjust risks among the plans inside the exchange. It doesn’t 

account for what is going to happen initially when we have lots of 

people entering the system, many of whom may have serious 

health conditions. For example, the way that your bill is written 

today on day one of guarantee issue every single person in this 

country that is in a high risk pool will come immediately into that 

pool, so we got to have something to mitigate the cost of those high 

risks coming in so that you don’t end up with something you don’t 

want which is a pool that results in costs that are higher instead 

of lower, so again these details are important that we get them 

straightened out correctly. 

I would be remiss if I didn’t say something else about the public 

program. Like many of the people that have talked here today, we 

are very worried about a government run public program. I want 

to talk specifically about the cost shifting. There are a lot of things 

that we have concerns about but we do definitely see the impact 

of cost shifting. We all have heard the statistic but I think it bears 

repeating again. Almost $1,800 a year for the average family of 4 

is a direct result of today’s cost shifting without a new public program. And I want to mention one other thing. I see that I am out 

of time but I want to mention this very quickly. We have heard 

state premium taxes mentioned here many times today, but I want 

to kind of put a face on that because in New Jersey alone state premium taxes are $503 million annually to the state and they are not 

dedicated to insurance. They have gone to other programs. 

We have programs in North Carolina, Connecticut, Kentucky, 

Pennsylvania, North Dakota that were state premium taxes from 

firefighter programs. They buy equipment to fight fires and so 

these funds, I don’t think the states can do without this revenue 

source. It is another example of how we are not going to have a 

level playing field and we need to think this through a little bit 

more carefully. And I have additional information but I am out of 

time so I will go ahead and stop now. 

[The prepared statement of Ms. Trautwein follows:] 


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Mr. PALLONE. Thank you. And, as I mentioned earlier, I think I 

did, that whatever your written testimony is or data that is attached to it, we will put in the record in its entirety. I wanted to— 

let me start with Ms. Pollitz. The discussion draft takes the step 

of prohibiting discrimination in insurance based on a person’s 

health status, things such as disability, illness or medication history. However, you know, as we are trying to close the door on that 

with this bill, some are proposing others, and I am not entirely 

sure what you said, but I know that you said that, or at least in 

your written testimony, that insurers should—I am talking about 

Ms. Trautwein now, that insurers should continue to be able to 

alter premiums based on a person’s past claims experience, and the 

way I understand it that employers would be permitted to change 

a person’s premium not necessarily on their health status but on 

certain activities like wellness programs and those kind of things. 

I don’t want to put words in your mouth. 

Ms. TRAUTWEIN. What I meant is not what I—— 

Mr. PALLONE. Sure. Go ahead. 

Ms. TRAUTWEIN. We want health status rating to go away for individuals. 

Mr. PALLONE. Right, but you said that the employers—— 

Ms. TRAUTWEIN. But we are talking about employer groups there 

they look at all of their employees, de-identified information, and 

they calculate what their anticipated claims are for the next year. 

This is done all the time. And then they figure out how much they 

need for reserves and things like that and they develop a rate 

based on their particular group and it is a very, very cost effective 

way of doing it. It results in lower rates for the employees, not 

higher. That is why we were asking for that. 

Mr. PALLONE. I just want to make sure, and I am not trying to 

put words in your mouth, Ms. Trautwein. I am just trying to understand that I want, you know, employers be able to have 

wellness programs certainly but it just seems to me we have to insure the persons who are, you know, unable to achieve a specific 

physical or other goal and not penalize and therefore somehow 

health status comes back again. But I am not just talking about 

Ms. Trautwein’s testimony. I am just talking about in general that 

we are trying to eliminate a lot of these things. Let me just ask 

you this, Ms. Pollitz. Can you discuss the role of employer wellness 

program and what sort of protections we can be sure to include to 

promote the positives without allowing this discrimination and 

what it would mean for people if insurers were able to use claims 

experience and ratings. Again, I am not entirely clear on what Ms. 

Trautwein was saying so maybe this is not fair, but hopefully between the two of you, you can answer my question. 

Ms. POLLITZ. I think those are 2 separate things. 

Mr. PALLONE. OK. 

Ms. POLLITZ. Just very quickly on the wellness programs. You 

are right. I think there is a lot of interest. At Georgetown there are 

a lot of great programs, sponsored walks, time off, free exercise 

classes in the building, stuff like that, so I think there is a great 

deal of creativity and good intentions and good results in a lot of 

employer-sponsored wellness programs. But there are other programs that even take on the name incenta care that all they do is 


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just apply health screenings, make you take certain health tests, 

and if you flunk them, that is it. Your benefits get cut, your deductible gets raised, or your premium gets hiked by a lot, and there is 

nothing else. There is no classes. There is no help. There is no 

nothing. So I think a return to the original notion under the old 

Clinton Administration regs for non-discrimination establish some 

standards for bona fide wellness programs, you know, some indication that there actually is wellness promotion, disease prevention 

activities going on, opportunities to participate, giving employees 

opportunities to participate that doesn’t kind of come out of their 

hide. 

Privacy considerations, employers are not covered entities under 

HIPA privacy rules. All that health screen information that goes in, 

people are very worried about that. And so that is the first thing, 

and then whatever rewards there are, I think it is important to 

just keep that separate from the health plan because otherwise 

it—— 

Mr. PALLONE. Do you agree with her, Ms. Trautwein, because if 

you do then I don’t need to pursue this any longer. 

Ms. TRAUTWEIN. Well, I sort of agree with her. The plan that she 

talked about that is not a real wellness program, we are not in 

favor of those. That is not what we are talking about. 

Mr. PALLONE. OK. 

Ms. TRAUTWEIN. We are talking about very unique programs 

where each person designs their own goals. Somebody might be in 

a wheelchair and the other person might be a marathon runner. 

Mr. PALLONE. OK. 

Ms. TRAUTWEIN. That would be silly. 

Mr. PALLONE. I don’t want to prolong it. I think we have—— 

Ms. TRAUTWEIN. I think we agree. I do think you could have 

some incentives relative to people meeting the goals that they have 

established for themselves though. 

Mr. PALLONE. OK. Now let me ask Karen the second question, 

and then I will quit. Mr. Shadegg, he is not here, I hate to mention 

him with his not being here, but I am, Mr. Shadegg and others 

have suggested that it would make sense to allow insurers to get 

licensed in one state and sell those license products and others. I 

have always been worried about that, and I know insurance commissioners don’t like it. Can you tell me under this new national 

market place what would your thoughts be on a proposal like that? 

Did I say Karen? Either one of you. I meant Ms. Pollitz but you 

can answer it too, Ms. Ignagni. 

Ms. IGNAGNI. Thank you, Mr. Chairman. I didn’t mean to step 

in. I thought you were directing—— 

Mr. PALLONE. No, go ahead. 

Ms. IGNAGNI. Actually just on the last question, I do think there 

is a combination as you are suggesting. I do think it makes a great 

deal of sense to have a permissible corridor of activities that could 

be done in the context of wellness and I think you are right to pursue it. There have been some major advances in the employer context that I think we could take advantage of and if you would like, 

Ms. Pollitz—— 

Mr. PALLONE. No, go ahead. Why don’t you start with Ms. Pollitz 

and then we will come back to you. 


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Ms. POLLITZ. I will be happy to answer. 

Mr. PALLONE. All right. This idea that you allow insurers to get 

licensed in one state and sell the products in another, I have always thought that was a dangerous thing, you know. 

Ms. POLLITZ. The experience has been that that is a dangerous 

thing in association health plans. This is where you see this happening a lot and it is very dangerous and it creates opportunities 

for fraud. 

Mr. PALLONE. But in addition now we have this national proposal in the draft so how does that all fit in with that? 

Ms. POLLITZ. Well, now you have got a national proposal, but in 

your proposal a requirement to sell anywhere outside or inside of 

the exchange the first requirement that is listed is that you have 

to be state licensed, so you still need to—you have to have a license. You need to work with licensed agents. You need to meet 

solvency standards. All of those things are established at the state 

level. You don’t need to replace those at the federal level and you 

haven’t in your bill, but I think you need that close accountability 

so someone need to be watching the health plans all the time, otherwise, there is great nervousness about selling back and forth. 

Just the last thing I would mention, and I think it was mentioned 

in some of the written testimony, I think there may be a little bit 

of drafting imprecision about sort of what are the federal rules that 

apply across the board and then what other sort of state rules or 

rules under the old HIPAA structure that apply and that you probably need to straighten out a little bit in the next draft, but you 

don’t want a situation where a health plan can be licensed in one 

state and operate under one set of rules but then be able to sell 

somewhere else under a different set of rules. If your national rules 

become completely across the board always the same, you still need 

to be state licensed but then this whole notion of selling across 

state laws I think won’t matter. 

Mr. PALLONE. And if you want to comment on—— 

Ms. IGNAGNI. Thank you, Mr. Chairman. I think this is a tremendous opportunity to look very carefully at the regulatory structure 

and take a major leap forward. Having everyone in allows the complete overhaul that is baked into the proposal now, guarantee 

issue, no pre-existing conditions, no health status rating. We ought 

to specify those guidelines at the federal level, have uniformity and 

consistency, not re-regulate them at the state level, which is causing a great deal of confusion now in the market with same function 

regulated at different levels by different entities. We should take 

this opportunity to make it clear so that consumers can feel protected and know that the health plans will be accountable. We are 

very comfortable with that. We would have this enforced at the 

state level. States have done a very good job at maintaining solvency standards, consumer protections, et cetera. We think that is 

the right balance. 

We don’t believe that—and we have some advice in our testimony 

but the drafting of the legislation in terms of these regulatory responsibilities. We think it is absolutely clear and key for consumers 

to understand how they will be protected, where they will be protected, and what the standards are. And we have such duplication 

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sumers to feel protected, so I think this is an opportunity to take 

a major step forward and really respond to that. 

Mr. PALLONE. OK. Thank you. Mr. Burgess is next. 

Mr. BURGESS. Let me just be sure I understand something now. 

The new public government run program is going to have to be licensed in all 50 states? I guess that is a maybe. This new public 

plan, this new government plan—— 

Ms. POLLITZ. I would defer to your own staff on that. It is a federal program. 

Mr. BURGESS. Right. Medicare is a federal program. It is sold 

across state lines and it is not licensed individually to every state. 

Ms. POLLITZ. I don’t see the requirement that it has to be licensed by states. It is a federal program. 

Mr. BURGESS. Right. So it seems to me that if Ms. Ignagni’s 

group wants to develop something that meets certain criteria that 

it ought to be afforded the same courtesy to be sold in every state. 

Ms. POLLITZ. Well, I don’t know that that is a courtesy. I think 

it is just an administrative faculty. 

Mr. BURGESS. The same administrative faculty then, but we will 

not call it a courtesy. It just strikes me as we have got 2 sets of 

rules here, one for the public sector and one for the private. That 

seems inherently unfair. This is not what I intended to talk about 

but I am not following. Where is the inherent fairness in the—Ms. 

Ignagni has already talked about carrying a 50-pound weight on 

her back because she has got to carry the freight, the cross subsidization from the federal programs, the freight they are not paying in the first place and then on the other hand are we creating 

a product that is just by definition she can’t compete with it because it is something that could be sold without regard to state insurance regulation. Ms. Ignagni, is that your understanding? Is 

that your understanding of this new public plan? 

Ms. IGNAGNI. I know the remedies. I would yield to counsel but 

I understand that the remedies are federal remedies, and I think 

the entity is charted at the federal level but I wouldn’t want to be 

presumptuous in that regard. 

Mr. BURGESS. Ms. Trautwein, you are the national organization. 

Do you have an opinion about this? 

Ms. TRAUTWEIN. Oh, yes, sir. We have a very—that is what I 

said in my testimony that we are very concerned about the fact 

that a playing field would never be level. On one is the payment, 

which I spoke about in my oral testimony. The other is the rules. 

Its regulation at the state level is what we have to meet. Having 

state premium taxes, state regulation, state remedy. That is not 

the way the bill reads at present. 

Mr. BURGESS. Maybe I will figure out a way to say this more 

clearly and submit it in writing. Ms. Ignagni, I just have to say 

maybe I am a little bit disappointed after the group of six met 

down at the White House, and I know my own professional organization was part of that. And we came out of there with, what was 

it, a trillion dollars, 2 trillion dollars in saving over 10 years, and 

part of those savings was administrative streamlining, which presumably is one claim form instead of 50 or 60, which we have to 

deal with now. I did see it reported, but I am also going to assume 

that perhaps there is one credential form rather than filling out 50 


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different credentialing forms every January and taking 2 or 3 fulltime equivalents to have them do that in a 5-doctor practice. Why 

the hell didn’t we do that a long time ago? 

Ms. IGNAGNI. Well, sir, that is a fair point, and we have been 

working now over a 4-year period. As you probably know, we set 

up a separate entity to actually take on this issue of simplification 

in the ways the banks took on the ATM technology. We have 

worked with physicians. We have worked with all the specialty societies. We have worked with hospitals, the different types of hospitals to make sure that we were going to get the language right. 

We have taken our time doing it to make sure we had that language right in a way that physicians, physician groups, and hospitals felt satisfied that we are actually solving the problem. So 

now that we did that, we were able to step forward and say we are 

not only taking the responsibility of moving forward, we are not 

going to be doing it voluntarily. We are very committed to legislation. We have said that. We want to make sure it is uniform across 

our industry. We are comfortable with that, and we will help you 

draft it. 

Mr. BURGESS. Let me ask you because you have been up here a 

long time and you know the rules we live under with the Congressional Budget Office, and a $2 trillion score, whatever it is, over 

10 years, the Congressional Budget Office is going to look at that 

and say if this is something you were supposed to be doing anyway 

then we just calculate it into the base line and there in fact is no 

new money to spend. How are you going to deal with that? 

Ms. IGNAGNI. This is a very important question you are asking. 

First, until we made the announcement no one said from our industry that we were going to be regulated for this, that it would 

be not only committed to legislation, we would support it and help 

draft it, so that is a material difference, number 1. Number 2, for 

the $2 trillion goal to be achieved, as you know well, it is going to 

take an interdependence among all the stakeholders to achieve 

that. There are 4 key areas of savings if we are going to bend the 

curve as a nation, we have to take seriously. One is administrative 

simplification. We need to make sure that not only everything we 

have committed to, but where we go in the future is the right direction for hospitals and physicians that they can achieve—— 

Mr. BURGESS. You have no argument from me about that. I do 

wonder how we are actually going to get the dollars savings scored 

by—we all know, we talked about the Medicare prescription drugs. 

It is much more cost effective to treat something at the front end. 

Then when the target is destroyed and yet the Congressional Budget Office is never going to score that as an actual savings. It actually scores it as an expense because you are going to be treating 

more people by virtue of the fact you are treating disease at an earlier point. 

Ms. IGNAGNI. Well, we have some ideas on both. Let me just 

quickly—— 

Mr. BURGESS. We are about out of time. I am going to submit 

some other questions in writing. I would just say this. You see 

what a fluid situation this is, and please forgive me, Mr. Chairman, 

just close your ears for a minute. Pay no attention to the man behind the curtain. Things are in such flux. Don’t be quick to give 


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things up. By all means, work with us, but don’t go to the White 

House waving the white flag as the first volley. In fact, it can be 

counterproductive. It is just my opinion. I will return it to the 

chairman. 

Ms. IGNAGNI. Sir, if you will allow me to just—Mr. Chairman, 

just a quick point. 

Mr. PALLONE. Sure. 

Ms. IGNAGNI. I will be delighted to—you have some very important technical questions. I will be delighted to submit that for the 

record, but you ask now, the last point you have made is more in 

the category of right road, wrong road, so let me give you a very 

direct answer. If you look at the Council of Economic Advisors report unless we truly bend the cost curve in a sustainable way not 

only will we not be able to afford the new advances we want to 

make in getting everybody covered, we won’t be able to afford the 

current system. We participated in an effort with the hospitals, the 

physicians, as you know, with the SEIU, farm and the device companies to take our seat at the table to say as stakeholders, as private sector entities, we could take part of the responsibility of stepping up and saying we have skills we can bring to the table to get 

this problem solved. 

That is what our plans do. That is the point that we are making 

here. Mrs. Capps had asked a question earlier to Mr. Castellani 

about what is the legacy of the private sector. The legacy of the private sector is that we have brought disease management care coordination. We are now recognizing physicians and hospitals, as 

you know, recognizing high quality performance. We brought the 

skills to do that. Patient decision support, personal health records, 

helping physicians not have to sort through loads of paperwork. We 

are proud of that. We pioneered those tools. We are implementing 

it. And similarly with administrative simplification, we are the key 

domino to make that happen. We have taken that very seriously, 

which is why we participated in this effort to try to contribute to 

this major goal. 

Mr. PALLONE. That sounds like a good—— 

Mr. BURGESS. Briefly reclaiming my time. 

Mr. PALLONE. You don’t have any left. 

Mr. BURGESS. It is obvious that there have not been people willing to work with you on that for the last 7 years that I have been 

here. I just cannot tell you how distressed I am that there was 

never this willingness to work when our side was in power, when 

a different president was in the White House. I feel personally affronted by this, and it is ironic that you were just at the point now 

where your industry is going to be delivering on the promise that 

we all knew it could do, and I don’t know what the future holds 

for you, because there are many people, we have heard it over and 

over again in this committee this week, that a single payer system 

is what is down the road for the United States of America. 

Mr. PALLONE. All right, let us get moving. 

Mr. BURGESS. And all of the things that you have done with care 

and coordination disease management, that may be something you 

have developed only to find it is never really fully implemented to 

use in the private sector. 

Mr. PALLONE. All right, Dr. Burgess. 


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Mr. BURGESS. We could have done a much better job with this. 

I yield back. 

Mr. PALLONE. I don’t want to be tough because I kind of like the 

dialogue, but we need to move on. Mrs. Capps. 

Mrs. CAPPS. I find it interesting too, but I really want to commend you all for the last panel of the day and think there ought 

to be some kind of medal. Do we design medals for the last panel? 

This is our fourth day of hearings too so if we seem a little kind 

of flat you will understand, I hope. But this is one I wanted to state 

in particular because you are so key in what you represent to us 

getting this right, and that is the goal and that is exactly where 

we all are. And, Ms. Ignagni, I appreciate you taking us down saying we have got so much we can agree on unless at least agree we 

don’t agree. I don’t agree with you on many things, and you know 

that, but that is OK. We can talk. I want to tell you, Ms. Pollitz, 

you hold the bar very high, and we are going to try to get as close 

as we can to the standards you are giving us. And, believe me, I 

have constituents who are reminding me of that every single day 

when I go home, which is a good thing. This is all across the map. 

But everybody’s attention is now focused on health care, and I salute that. It is about time. 

Mr. Kahn, I have suburban counties north of your region but I 

am a big fan, as you know, because now I can boast that each of 

the 3 counties, I represent part of the 3, now has a county operated 

program, and that yesterday we were able to get Mr. Freeland, who 

speaks very highly of you, to testify as a provider. It is now called 

CenCal. And they were one of the first to get a waiver and there 

are some really exciting options that can be brought to the table 

now. Call them what you want but they are going to help us deliver care. I have a tough—I want to share what it is like to be a 

member of Congress and have the phone ring and hear a story, and 

you know this. But I just want to bring it out and make sure that 

it is on the record. This panel gives me the chance to relay the 

story of the constituent whose situation really illustrates why we 

need to bring honest competition into the insurance market. I represent a little town called Carpinteria, a rural part of Santa Barbara County. 

A young woman is a good member of part of a non-profit community organization. She has a 12-year-old daughter who was born 

with spina bifida and needs surgery to replace a stent in her brain. 

Her mother’s income places her mother just over the threshold to— 

she is not able to qualify for Medicaid. We call it the Healthy Families, the SCHIP expansion, in California. Though her mother’s employer does provide coverage the young girl is covered under the 

plan but this plan specifically states that it will not cover the surgery she needs for her life because spina bifida is a pre-existing 

condition. Ms. Ignagni, I am going to start with you. I would like 

to have comment for as much time as I have, and I don’t want to 

go over time, but this plan that this mother has in rural—parts of 

my district there is one option in much of it, one private plan, and 

there are at most in Santa Barbara County, I think 2, maybe 3, 

at the moment, so she can’t shop around very much. 

She called my office because she is beside herself. This denial is 

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gery is needed to relieve the pressure of fluid on her brain. People 

have been talking about pre-existing conditions in the private sector for a very long time. This is real time. This is happening today 

in my constituency. 

Ms. IGNAGNI. And, Mrs. Capps, I think there is no legitimate answer to your question but to say this is why we have worked so 

hard to propose change in the comprehensive proposal—— 

Mrs. CAPPS. It hasn’t happened yet. 

Ms. IGNAGNI. It has not happened yet because we have a system 

now where people purchase insurance if they are doing it individually when—— 

Mrs. CAPPS. No, this is part of her employment, but let me—— 

Ms. IGNAGNI. If it is part of an employer then guarantee 

issue—— 

Mrs. CAPPS. A non-profit organization with very minimal amount 

that they can spend for employee-covered care but let me see what 

some other comment is. Maybe, Mr. Kahn, if this young mom was 

working for this non-profit which abounds in Los Angeles as well, 

what option might she have? 

Mr. KAHN. Well, Congresswoman, and, by the way, you have a 

beautiful area that you cover. Your district is beautiful and you did 

have the first of all the country organized health systems there. 

The problem is a structural one which is the way our regulations 

and our markets are set up right now that an individual or if they 

are in a very small group perhaps because usually pre-existing conditions are not excluded from group coverage. It may be such a 

small group, however, that it is. That could be—— 

Mrs. CAPPS. Less than 10 employees. 

Mr. KAHN. So knowing the situation, that could be the case. And 

under the current system, to be perfectly honest with you, there is 

no good answer for that situation for the individual or in a small 

group like that. That is the problem with the system right now and 

why I think we all agree we have to change the system. Now depending on our income level, it is—— 

Mrs. CAPPS. It is not very high. 

Mr. KAHN. Not very high. They could actually become eligible for 

Medicaid if they spend down enough depending on what her income level is. 

Mrs. CAPPS. Pretty big price to pay. 

Mr. KAHN. And it is a very big price to pay, but that is the problem is that we have a broken system right now that needs to be 

fixed, and that is why we are all here because of those kinds of situations covered and not covered. 

Mrs. CAPPS. Our reform legislation being a remedy? 

Mr. KAHN. Absolutely. I think that the solutions that are being 

addressed—— 

Mrs. CAPPS. From both the private sector and this public option 

of course. 

Mr. KAHN. Well, I think what we are talking about is reform of 

the rules around coverage, and indeed you would accomplish that 

because once everyone is covered then the pre-existing conditions 

issue should really go away. The problem right now is that—and 

we don’t do individual coverage. We serve only low income people. 

Mrs. CAPPS. Right. Right. 


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Mr. KAHN. But the problem with the system right now is that 

where people are not covered, they decide once they get sick they 

need coverage and that is why there is underwriting. I am not defining it. It is just—there are no bad guys in this play. Unfortunately, it is bad structures. It is a bad system. 

Mrs. CAPPS. Right, which is why it calls for intervention from us. 

I am not looking for support for that, and I applaud this is finally 

the moment that all the stars are aligned. I think we would all 

agree that we are going to—not everybody is going to be maybe 

pleased with the outcome, but we are going to make progress. And 

I am just so hopeful that we can do it in a very bipartisan way. 

Ms. IGNAGNI. And, Mrs. Capps, I would be happy if you think it 

is appropriate to help with your office and see if we can look into 

the case and see if there is anything that can be done. As a mother, 

I would be delighted to do that. 

Mr. PALLONE. Thank you. Mr. Whitfield. 

Mr. WHITFIELD. Thank you, Mr. Chairman, and thank you all for 

your testimony. One of the common reasons given for having a public option is the fact that there is not competition particularly in 

rural areas, and there is probably an obvious reason for this that 

I don’t understand but in the prescription drug benefit under Part 

D of Medicare in my rural district of Kentucky there were like 42 

different plans offered to Medicare beneficiaries, so why are there 

so many plans offered as a prescription drug benefit but not plans 

competing with each other on the other sector. Would someone answer that for me? 

Ms. POLLITZ. Prescriptions are a little different just because you 

don’t need the provider network. I mean if there are pharmacies 

nearby or even mail order pharmacy it is easier to ensure the costs 

of prescriptions. 

Mr. WHITFIELD. So it is the fact that there is a lack of a provider 

network and putting that together? 

Ms. POLLITZ. I would expect. I am not familiar with your district 

but prescriptions are a more kind of national market than other 

health care. 

Mr. WHITFIELD. OK. 

Ms. IGNAGNI. I think, Mr. Whitfield, one of the things that we 

have observed is that often there are products available but in particularly rural areas if individuals don’t have a broker, for example, 

they haven’t been presented with the information, they don’t know 

where to go, which is why one of the first things that we suggested 

is this concept of having an organized display on a site, it could be 

a state site, of the health plans that are available in every part of 

every state and organized it so people can understand what is 

available. That would be, I think, a major step forward. 

Mr. WHITFIELD. Mr. Kahn, would you want to say something? 

Mr. KAHN. Thank you, Congressman. I would just add that the 

challenge in rural communities beyond the pharmacy situation is 

that if you are the one hospital in town, you probably don’t have 

to negotiate so it is not very attractive for a health plan. That is 

why you don’t have competition. Now I will say though that in 

California we have a number of our public plans that compete with 

private plans, and some of those are in rural areas as well, Kern 

County, for example, and so there is competition but again by the 


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nature of that market because all health care is local still and it 

probably will be for the most part under the reform, so it depends 

on that market. Ms. Ignagni and Mr. Trautwein, you all are both 

involved in associations that represent companies that I am sure 

provide a lot of group insurance plans to rather large employers. 

Are you at all concerned that employers because of this public option being available might just say, you know, to save money we 

are just not going to provide health insurance anymore? 

Ms. IGNAGNI. We are concerned about that, sir, and we are also 

concerned about employers seeing the differences in the numbers. 

As I indicated in my oral testimony there would be very little available or left in the private sector because the incentives are so compelling, and I think there is a strong value in having the best of 

both, doing a better job in the safety net and then doing a better 

job as we have talked about in proving the—— 

Mr. WHITFIELD. Does this draft bill provide the protection that 

is necessary to protect the private sector? 

Ms. IGNAGNI. Well, I think that it is not—we were very concerned, as we indicated, that we would not see a private sector sustained because the playing field isn’t level. If you pay at Medicare 

rates, it is such a major differential that that there is no way to 

sustain a private sector. 

Mr. WHITFIELD. OK. 

Ms. POLLITZ. But, Congressman, just to add, under the bill if an 

employer buys through the exchange they have to agree to let their 

employees pick the plan and if they elect not to offer coverage and 

to pay the fee then the employees still get to pick the plan so there 

is no way that employers can opt to put people in any of the plans 

available in the exchange. It is always up to the individuals. 

Mr. WHITFIELD. Are you saying that employers cannot just decide 

to refuse to offer a plan? 

Ms. POLLITZ. Employers first make an election are they going to 

play or pay. Are they going to offer a plan or are they going to pay, 

and if they are outside of the exchange they could offer a plan and 

they would only have the choice of buying private plans, and then 

if they come into the exchange it becomes kind of a defined contribution but the employees get to pick the plan that are offered 

between public and private. 

Mr. WHITFIELD. Ms. Trautwein. 

Ms. TRAUTWEIN. I just wanted to add to that there is language 

in the bill that after a period of time even employees that are a 

part of a program where there is an employer-sponsored plan can 

elect to spin off of that plan to go into the exchange. This is a direct threat to employer-sponsored coverage. We are very concerned 

about this because you have to maintain a decent participation 

level inside an employer group to have that balance of risk that I 

was talking about earlier. So I think that that is something that 

we should really look at whether that is a good idea to keep that 

in the bill language. 

Mr. WHITFIELD. I guess my time has expired. Can I just ask one 

other question? I know you have been here for hours but just one 

other question. Ms. Trautwein, in your testimony you talked about 

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forms of the individual and group insurance markets, and I was curious what do you mean precisely by backstop? 

Ms. TRAUTWEIN. Well, it could take many different forms. It is 

kind of what I talked about earlier, this idea of reinsurance. You 

know, some states today use a high risk pool to backstop their individual market but it doesn’t have to be that. It is just something 

to make sure that we address the cost of high risk individuals. This 

is a particular problem during the first 5 years, I am guesstimating 

that amount, because it is going to take us a while to get the hang 

of this individual mandate and enforcing it. We won’t have everybody in overnight and so there will still be initially adverse selection, the same that we have today in this market, and we have got 

to do something to make sure that those high cost cases don’t make 

the cost of coverage go up for everybody else so we are not trying 

to wreck the proposal. We are saying you need to have this thing 

in here to stabilize your proposal so you will not have these unintended consequences. 

Mr. WHITFIELD. Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you. And I know different members mentioned that they are going to submit written questions and we ask 

them to get them to you within the next 10 days or so and get back 

to us as soon as you can. 

Mr. BURGESS. Mr. Chairman, I was also supposed to ask unanimous consent that the Blue Cross/Blue Shield data be made part 

of the record. 

Mr. PALLONE. Yes, let me see. I have something too here. I am 

glad you mentioned it. I almost forgot. So you have, what is this, 

Blue Cross/Blue Shield, you called it? 

Mr. BURGESS. Yes. Ms. Fox testified—as part of her testimony 

she—— 

Mr. PALLONE. I am told that it already has been but if it hasn’t, 

then we will do it. And I also have to submit for the record this 

study by Health Care for America Now showing that 94 percent of 

the country has a highly concentrated insurance market. This is 

from the American Medical Association so without objection we will 

enter both of these in the record. 

[The information appears at the conclusion of the hearing.] 

Mr. PALLONE. Thank you very much. I thought this was very 

worthwhile. It is a complex issue but we appreciate your input and 

your optimism as well. It is very important so thank you very 

much. And the 3-day marathon of the subcommittee is now adjourned, without objection is adjourned. 

[Whereupon, at 6:45 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 


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