Which reimbursement methodology does Super payer use to reimburse Dr Jones?

[House Hearing, 111 Congress] [From the U.S. Government Publishing Office] 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 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. 111-54Printed for the use of the Committee on Energy and Commerce energycommerce.house.gov _____ U.S. GOVERNMENT PRINTING OFFICE 74-088 PDF WASHINGTON : 2012 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 COMMITTEE ON ENERGY AND COMMERCE HENRY A. WAXMAN, California, Chairman JOHN D. DINGELL, Michigan JOE BARTON, Texas Chairman Emeritus Ranking Member EDWARD J. MARKEY, Massachusetts RALPH M. HALL, Texas RICK BOUCHER, Virginia FRED UPTON, Michigan FRANK PALLONE, Jr., New Jersey CLIFF STEARNS, Florida BART GORDON, Tennessee NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois ED WHITFIELD, Kentucky ANNA G. ESHOO, California JOHN SHIMKUS, Illinois BART STUPAK, Michigan JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York ROY BLUNT, Missouri GENE GREEN, Texas STEVE BUYER, Indiana DIANA DeGETTE, Colorado GEORGE RADANOVICH, California Vice Chairman JOSEPH R. PITTS, Pennsylvania LOIS CAPPS, California MARY BONO MACK, California MICHAEL F. DOYLE, Pennsylvania GREG WALDEN, Oregon JANE HARMAN, California LEE TERRY, Nebraska TOM ALLEN, Maine MIKE ROGERS, Michigan JANICE D. SCHAKOWSKY, Illinois SUE WILKINS MYRICK, North Carolina CHARLES A. GONZALEZ, Texas JOHN SULLIVAN, Oklahoma JAY INSLEE, Washington TIM MURPHY, Pennsylvania TAMMY BALDWIN, Wisconsin MICHAEL C. BURGESS, Texas MIKE ROSS, Arkansas MARSHA BLACKBURN, Tennessee ANTHONY D. WEINER, New York PHIL GINGREY, Georgia JIM MATHESON, Utah STEVE SCALISE, Louisiana 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 (ii) Subcommittee on Health FRANK PALLONE, Jr., New Jersey, Chairman JOHN D. DINGELL, Michigan NATHAN DEAL, Georgia, BART GORDON, Tennessee Ranking Member ANNA G. ESHOO, California RALPH M. HALL, Texas ELIOT L. ENGEL, New York BARBARA CUBIN, Wyoming GENE GREEN, Texas HEATHER WILSON, New Mexico DIANA DeGETTE, Colorado JOHN B. SHADEGG, Arizona LOIS CAPPS, California STEVE BUYER, Indiana JAN SCHAKOWSKY, Illinois JOSEPH R. PITTS, Pennsylvania TAMMY BALDWIN, Wisconsin MARY BONO MACK, California MIKE ROSS, Arkansas MIKE FERGUSON, New Jersey ANTHONY D. WEINER, New York MIKE ROGERS, Michigan JIM MATHESON, Utah SUE WILKINS MYRICK, North Carolina JANE HARMAN, California JOHN SULLIVAN, Oklahoma CHARLES A. GONZALEZ, Texas TIM MURPHY, Pennsylvania JOHN BARROW, Georgia MICHAEL C. BURGESS, Texas 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 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 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 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 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 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 continued 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. 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 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 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 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 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 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. 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 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. 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 overhaul 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. 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:]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. 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 sky-high 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 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:]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. 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 medium-sized 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. 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:]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 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 publicly-traded 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? Mr. Parente. Simply to say that there should be a CMS administrator 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 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 crowd-out 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 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, 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 price-fix 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? 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 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. 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 level playing field, that the public option isn't a government-subsidized 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? Mrs. Blackburn. Do you have any program that was a public- private 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 administration. $2.5 trillion a year in health care spending, approximately 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. 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. 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 long-term 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 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 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. 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 pay-fors 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. 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 only businesses exempt from antitrust laws, from McCarran- Ferguson. 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 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 better 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 budget-neutral, 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 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. 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 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 cost-saving 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? 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. 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 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 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 between? 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 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 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. 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 cost-containment 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 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? 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. 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. 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 wherever 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 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:]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. 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:]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. 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. 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:]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. 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. [The prepared statement of Dr. Novack follows:]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. 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:]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 single-payer. 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 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, 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. I had to go back for surgery and I had to return for follow-up because I couldn't get any of those things done in Canada. 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 chronically 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 single-payer 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. 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---- 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. 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? 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 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 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 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 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. Treatment often does not begin until as long as 10 years after diagnosis. 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 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. 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 gone on since they seem to go with whoever has the biggest megaphone. 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 re-enrollment 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 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 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 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 to be treated more like--they are feeling they are going to be treated more like Medicaid than Medicare and they are very, very concerned 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 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 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 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 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. 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 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 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. 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:]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 Program, expanding scholarships and loans for individuals in needed 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:]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 benefit plan. First, preventive care is free. This ranges from services like annual physicals and mammography to childhood immunizations 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 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:]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 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 community-based 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 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. 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 side in terms of what the evidence shows, we could see a $5.60 return for every dollar we invested. 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? 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. 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 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 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 insured 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 government-run 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 what is recommended in this 800-page draft document from the tri-committees 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 cost-effective 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 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 patient-driven, 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 provider-driven 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. 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 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 obesity, 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. First, solid coverage there are no copayments of the evidence-based 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. 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 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. 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 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:]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 Secretary 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 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:]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 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 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 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 one-size-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. 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. 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 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:]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 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 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. 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. 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. 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 employer-provided 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? 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. 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 cost-sharing 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 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. 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 time-in 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---- 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-of-life 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 then-Congressman 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? 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. 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 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. 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 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. 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? 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 additional 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 things and often both simultaneously: Costs can be dramatically increased 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. 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 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 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. 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.'' 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, private-sector 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. 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 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 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 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 government-run 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 lower-cost, 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. 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 low-income 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 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---- 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. 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 devalued and finding out now it is all going to be a one-size-fits-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. 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. 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:]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. 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? 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 for-profit health insurance industry is allowed to exist, is more incremental reform, not national health insurance. 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:]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 tri-committee 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. 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:]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 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:]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 single-payer 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 tri-committee report, it is going to be an identical clone of private health insurance with a public label on it. And that still might be 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 program. 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 crowd-out? 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 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? 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-size-fits-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 would affect innovation in health care, which I think is so important 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 government-run 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. 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 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, 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 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 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? 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. 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. 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. 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 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 tri-committee 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. 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 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 single-payer system. Is that your opinion also? Mr. Goodman. No. No. No, it is not. I think in general third-party 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. 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 that Medicare has been run as efficiently as it could be. The administrative 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. 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. 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 operation 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. [The information follows:]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 2\1/2\ 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 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:]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 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. [The information follows:]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 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:]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. 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:]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. 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:]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. 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:]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, for- profit 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 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. 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 due to these reforms undercutting their ability to underwrite effectively 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. 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 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. 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 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? 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 income-based 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 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? 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 middle- and 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 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 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. 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. 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. 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. 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 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 long-term 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. 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. 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 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 Medicare, 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. [The information follows:]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 intermediate-risk 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: 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. [The information follows:]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. 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. [The information follows:]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 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. [The information follows:]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. 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. [The information follows:]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 backwards 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 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. 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. 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. 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 physician-created 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. 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 quantum-step 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 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 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. 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? 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 cutting-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. 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 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 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:]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. 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 coordination 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:]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, 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 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:]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 that they are too low. We don't believe that they should be increased. 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. 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 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 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 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. 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 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. 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. 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. 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---- 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. 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 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. 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 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---- 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 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 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 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 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 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? 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. 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 reform 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---- 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 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 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 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. 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. 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 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 physician-owned 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. 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 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 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 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. 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 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:]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 often-cited 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 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:]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 institution, 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:]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 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:]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 inclusion 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:]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 state-of-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 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:]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 low-income 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. 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 safety-net 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:]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 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:]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. 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:]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 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:]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 high-growth 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 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. 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 doctor-patient 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 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 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. 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. 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 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 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. 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. 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. 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 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. 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 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---- 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 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. 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 single-payer 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 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---- 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 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 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 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? 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 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-of-care 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 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 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. 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 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, 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. This committee working with its counterparts to develop the tri-committee 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:]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 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:]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 employment-based 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 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:]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. 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-term-care 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:]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 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:]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 limited 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:]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 employer-sponsored 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 employment-based 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 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 employer-based 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:]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 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. 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 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 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, hard- working 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 17\1/2\ 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? 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. 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 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 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 program, 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:]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 tri-committee 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 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 tri-committee 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:]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 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 employer-based 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 government-sponsored 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:]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 3\1/2\ 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 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:]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 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. 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 and confusion now in the system it is very, very difficult for consumers 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 different credentialing forms every January and taking 2 or 3 full-time 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 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. 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 for a condition that this young woman was born with, and this surgery 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. 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 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 it is critical that there be a financial backstop to accompany reforms 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:]

What is the most common type of healthcare services reimbursement?

What is the oldest method of reimbursement?

Which KPI measures the health of the claims generation process?

Which code set is utilized by physicians to report services and procedures?