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   REP. MICHAEL BILIRAKIS (R-FL): The hearing will come to order.

I am pleased to call this hearing to order. This is the second in the most recent series of hearings focusing on the state of our nation's health care system and proposals for reform. As we consider changes to improve protections for insured individuals, we must also recognize that millions of Americans have no health coverage at all.

Each year the Census Bureau measures the levels and types of health coverage for Americans in the previous calendar year. Its most recent survey concluded that 43.4 million Americans, about 16 percent of the population, lacked health coverage for the entire year 1997. Clearly, access to affordable health care is a considerable problem in our nation. Last year the House considered and approved legislation to increase protections for patients through managed care plans while expanding health care access to the uninsured. Unfortunately, the Senate failed to approve similar legislation. This year, however, Congress again has a tremendous opportunity to improve the quality and availability of health care for all American's. A number of measures have been proposed to address problems faced by individuals and small employers in obtaining affordable health coverage. These include the formation of community health organizations, the creation of health marts and federal subsidies for state high-risk pools. None of these proposals will solve the problem of the uninsured, but they do represent a responsible, and I underline that, a responsible starting point in this debate. Together they have the potential to expand access to care for a significant number of Americans without busting the budget or expanding government regulation of the health care system.

Before we begin, I would note that our colleagues on the subcommittee on employer and employee relations of the committee on education in the workforce, are voting today on a number of individual reform proposals. Contrary to some recent reports, rumors I should say, it is my intention and my goal that this subcommittee will also act in a bipartisan, again I underline that, provided that there's a willingness to work on a bipartisan basis, and I bipartisan basis to consider and approve health care legislation.

Tomorrow, majority and minority committee staff will begin meeting to discuss the development of a legislative vehicle, a time has already been established, discussions have taken place. In the mean time, today's hearing, and our hearing next week on internal and external appeals, will increase members' understanding of these issues and preparation for legislative action.

Our witnesses today represent a range of diverse perspectives on the problems facing the uninsured as well as some possible solutions. I want to thank them in advance for joining us. I look forward to hearing their views on this key issue and now yield to the ranking member Mr. Brown of Ohio.

REP. SHERROD BROWN (D-OH): Mr. Chairman, thank you, and thank you for doing this hearing today, and we on this side of the aisle appreciate that. I'd like to thank today's witnesses, especially extend a special welcome to Ray Arth who runs a successful (business ?) not far from my home in Loraine, Ohio.

There are three ways to respond to the uninsured. One way, is we can ignore them, second, we can take incremental steps that may help some of them, or we can establish guarantee universal coverage that eliminates the problem once and for all. Today's hearing will focus on incremental strategies like health marts and association plans, community health centers and centers in state high-risk pools. I'm sure tax credits will enter the discussion at some point also.

So, let's talk about incremental steps. They can make the situation better or they can make it worse, unless every individual in every small and large business have equal access to coverage at affordable rates, incremental solutions like health marts can be a double edged sword. They can increase coverage for certain small businesses, but by segmenting the market, they can erode the broad pooling of risks that makes insurance work. Fewer plans in privately insured pool means more volatility and cost and higher rates, which will drive more plans out of the pool, leading to even more volatility and even higher rates and on, and on, and on. The insurance industry calls it the death spiral when it's a function of segmenting the insurance pool. The price of increasing access to coverage for small businesses would be a decrease in access for many others. The purpose of an insurance is to share risks, not to avoid it.

As our system has strayed further and further from this basic tenant, the gaps in coverage have grown wider. And if Congress condones the attempts of certain plans to by-pass state insurance laws, we're effectively saying these laws serve no purpose. In fact, these laws are critical and have been critical for some time. Before state insurance laws, health plans could deny pregnant women health benefits, they could operate without solvency standards, they could target certain small businesses forcing them to drop coverage by imposing unlimited rate increases. State insurance laws obviously, over the years, have been there for a reason.

Let's talk for a moment about high-risk pools. Theoretically the United States could channel all high-risk individuals into a separate pool leaving healthy individuals and groups in the private insurance market. But why should a low-risk individual or group buy insurance when the minute they need it, they would be transferred into the high- risk pool. They might as well pay for their care out of pocket until they become sick and enter the high-risk pool. You can see where that goes; publicly funded health care for the sick, private health care for those healthy individuals who can afford it, and who knows what for those in between. Different classes of medicine for the sick and the well, the rich and the poor, I don't think that we want to go down that road.

One more point about these approaches. If we pursue expanded coverage to more individuals without establishing fundamental patient protections, we're perpetuating insurance that can disintegrate the moment it's actually needed. That is the critical length between managed care reform and access to insurance. The insurance industry has tried to convince us that patient protection will have such a dramatic effect on cost that employers will drop their coverage. Not only is there no reason to expect this result, but it's incredible that insurers would try to convince American's, especially American businesses, to pay less for Russian roulette coverage, rather than more for coverage that actually delivers on its promises.

It makes no sense to ignore a fundamental weakness in insurance coverage while seeking to expand that coverage to more individuals. Coverage that may of may not pay for needed care is not coverage no matter how many individuals are enrolled. Whether you look at tax credits or health marts or high-risk pools or insurance through community health centers, unless coverage is inclusive, affordable and meaningful, the uninsured problem will persist.

There's one incremental step, Mr. Chairman, we can take that meets all of these criteria and helps a particularly vulnerable population. We can pass the Medicare Early Access Act. This self- funded proposal enables insured individuals ages 55 to 64 to buy into Medicare and extends COBRA coverage for retirees who's employer reneges on retiree benefits. Whether covered under Medicare or COBRA, individuals would pay their own way and secure coverage in a time in their life when health care protection is particularly important as they reach the age of 55, 60, 62.

This proposal makes sense. Unlike tax credits and health marts and high pool risks, it guarantees access to coverage and treats all individuals equally. Still even though this proposal was on the table last year and part of the President's budget this year, the majority has chosen to ignore it for the purposes of this hearing and for the purposes of moving this bill through the process.

It's disappointing, because unlike other incremental proposals, this one would actually help a particularly vulnerable group of individuals, people between 55 and 64 who have lost their health insurance for a variety of reasons without hindering access for others. But the fact that this proposal wasn't on today's agenda, and I understand not on the Ways and Means agenda today also, does not mean that this bill is a nonstarter. No one thought in this Congress we'd achieve expanded coverage for children. No one thought this Congress would pass Kennedy-Kassenbaum. No one thought we'd win an increase in the minimum wage two or three years ago. In all these cases, the publics demand for positive action ultimately won out over self-serving partisanship. This initiative -- this buy in for Medicare should be bipartisan, we should pass it this year. Unlike many other Medicare proposals, the Early Access Act will not take us one step forward and two back. It's an unambiguous step in the right direction.

Thank you, Mr. Chairman.

REP. BILIRAKIS: I think I thank the gentleman.


Mr. Ganske for an opening statement.

REP. GREG GANSKE (R-IA): Thank you, Mr. Chairman.

I'm glad we're having this hearing. I think the issue of the uninsured is important. It's also important that Congress do it right and not make things worse. In order to talk about these 43 million people who don't have insurance, I think rather than looking at sort of a global number, you need to look at who they are. Well, who are the uninsured in the country for health insurance?

Twenty-five percent of them are under the age of 19. Twenty-five percent are Hispanic. Twenty-five percent are poor, below the poverty line. Now the number of figures I'm giving you, some of these groups are in more than one category. Twenty-five percent are non-citizens and about 43 percent have incomes two times poverty, but who are they. They are largely those who are aged 19 to 24. So if you start looking at the groups who aren't insured, then you need to start thinking about. And if you understand who those groups are, you need to start thinking about what could be possibly effective strategies to reduce the insurance.

Okay, if you're looking at the poor, roughly speaking, half of those poor qualify for Medicaid and are not on Medicaid. They should be. Why aren't they? Well, it's because a number of states have very complicated requirements for signing up.

My own State of Iowa for instance requires a monthly certification. I don't think that's right. I think if we're looking at providing insurance for the poor, this Congress ought to make a commitment to getting those who qualify into Medicaid, into Medicaid, and start holding some oversight hearings with the states about doing that.

Well, what about the Hispanic population that doesn't have insurance? Well, many of them are not citizens. That doesn't mean they're illegal. We ought to look at ways to encourage insurance in them. Many of them are below the poverty line. This government ought to reach out to make sure that they who are legal can take advantage the health care systems that we've got. Medicaid is one of them.

What about those who are young, the 19 to 24 group, many of them are in college. Some in college are still covered by their parents. Many are not. Why aren't they? You know, you can buy a catastrophic coverage for a college student for about $500 a year. What can this Congress do to encourage that, short of a $60 billion commitment to the insurance industry?

Well, some of the things that we could do that could be very harmful as we look at this situation have been mentioned by my colleague, Mr. Brown. I'm not the only one who has concerns about association health plans and health marts. When they were proposed as part of the Patient Protection Bill
last year, they drew significant opposition from Blue Cross/Blue Shield Plans and the National Association of Insurance Commissioners. Blue Cross has traditionally been the insurer of last resort in many states. They have the legitimate fear that multiple employer welfare associations and association health plans and health marts will undermine the state programs that many of those Blue Cross/Blue Shields and state legislatures have worked on to try to keep health insurance affordable in those states.

Joined by the Health Insurance Association of America, a group that sometimes I disagree with, they wrote, Association health plans, MIWAs (sp), health marts, would undermine the most volatile segments of the insurance market, the individual and small group markets. "The combination of these with health marts would lead to a massive market segmentation on regulatory confusion."

Rod Turner, a constituent of mine and an
insurance industry professional wrote to address concerns about MIWAs. He wondered why these plans can sell whatever level of benefits they want and can provide coverage for any type of benefit the plan might want to cover. Some say that these concerns might reflect a self-interest of industry insiders. But before buying into that argument, consider the editorial in the Washington Post a year ago criticizing multiple employer welfare association.

Mr. Chairman, I'd ask for one additional minute.

REP. BILIRAKIS: A very strict one additional minute, without objection.

REP. GANSKE: Thank you Mr. Chairman.

The Post pointed out "If you free MIWAs, you create a further split in the insurance market, which will likely end up helping mainly healthy people at the expense of the sick."

I could
go on, Mr. Chairman. We have a big potential for enacting legislation that could have the opposite effect that could actually increase the number of uninsured. Some states, in trying to do good, passed bills that were community writing bills. I have opposed those. Those have had the opposite effect. They've increased the number of insured.

Mr. Chairman, if we pass legislation that moves large groups of healthy patients out of state insurance risk pools and into a largely unregulated ERISA pool, then I guarantee you, you're going to see more uninsured, because the prices of the premiums for those who are left in that state insurance risk pool will go up.

REP. BILIRAKIS: The gentleman's time has expired.

REP. GANSKE: And they will drop their insurance.

REP. BILIRAKIS: Mr. Pallone, for an opening statement.

REP. FRANK PALLONE, JR. (D-NJ): Thank you, Mr. Chairman.

Increasing access to health insurance is perhaps the most important health issue confronting Congress. Today, with 43 million Americans lacking health insurance and despite the passage of some well-intentioned and good legislation over the last two Congress', the problem is getting worse. The ranks of the uninsured continue to grow and the lack of affordable health insurance in this country, in my opinion, is truly a crisis.

Now you may not agree with the President and Mrs. Clinton's approach from six years ago, but I have to stress today that he had the right idea. The federal government needs to develop a system that will ensure every individual in the country has access to health insurance. We need universal coverage. The cost of ignoring the problem will be staggeringly in both human and financial terms if a solution is not developed.

In the wake of the failure of the
President's plan, Congress has been trying to address the problem in a piece mill fashion. In '96, we passed the Kennedy-Kassenbaum bill. In '97, we created the State Child Health Insurance Program. And I and my colleagues on this committee all worked hard on these bills. Unfortunately, even these bills have fallen short in some respects. Kennedy-Kassenbaum has failed to stop price gouging in the individual market. Insurance companies are getting around the bill's requirement that coverage be offered to individuals losing group coverage, by pricing individual policies so high that virtually no one can afford to purchase them.

Premiums range from 140 percent to 600 percent of the standard rate or $
10,000 to $15,000 a year and this practice was detailed in a well documented GAO report released last year.

recognized this potential problem in '96, but Republican opposition blocked efforts to draft a bill in a manner that would prevent such abuse. And to that end in the 105th Congress, I introduced legislation to fix this problem, the Affordable Health Insurance Act, which limits what insurance companies can charge eligible individuals to no more than 150 percent the rate charged to individuals in good health. And I'd like to see that bill passed.

There are also problems with the State Child Health Insurance Initiative. Many states, including New Jersey, are having problems with outreach, leading to the under utilization of an excellent federal program. Another problem that has emerged with the State Child Health Insurance Program in my home state is an overly restrictive waiting period for enrollment. But in the absence of any commitment by the Republicans to develop
a system that provides for coverage of all Americans, we have to continue to forge ahead with efforts to make insurance more accessible for key sectors of society. And Democrats have been crafting proposals to accomplish this goal.

My colleague, Mr. Brown, mentioned the bill that was reintroduced yesterday to make insurance more accessible to individuals in the 55 to 64 age group and I strongly support this plan. I've introduced similar legislation that would also help individuals meet the cost of the premiums, which I think is an important aspect of that as well.

As important as the buy-in legislation is though, and I do want to stress it is really crucial, it doesn't get to the real heart of the problem. The ranks of the uninsured continue to grow today because of the lack of health insurance on the job. People depended on their employer and an employer sponsored plan in the past to make sure that they had health
insurance. And the key to reducing the ranks of the uninsured is making insurance available through the workplace.

In short, I think what we need is a mandate for employers to offer insurance to their employees. Last year I introduced legislation to accomplish this goal called The Health Care for Working Families Act. It would cover approximately 15 of the nation's 43 million uninsured by requiring employees with 50 or more employees to provide health insurance to their employees.

Now I just want to say, Mr. Chairman, I know this is very partisan, but I believe that time and time again, the Republicans have shown that they're not serious about addressing the nation's most pressing healthcare reforms in any meaningful way.

You mentioned that the Education and Workforce Committee is marking up eight separate managed care reform bills today. I
think, to me, that's nothing more than an effort to deny Democrats a full, fair and open debate on the comprehensive Patient's Bill of Rights.

You mentioned that this committee is going to take up the issue of internal or external appeals next week. This piece meal approach is not going to work. We need to bring up the Patients Bill of Rights. The Democrats now are forced to actually have a discharge petition signed, which ripened today, which we're going to move forward in.

In order to bring a comprehensive Patient Bill of Rights to the floor. The committee, when I listen to what this committee has done it seems to me if I look at last year or this year the example is the same. Six months we do nothing, then we move to some piece-mill approach and say we're going to try to solve the problem by dealing with a piece-mill approach. And then in the
final end run rather than allowing us to bring up the Patients Bill of Rights and pass that bill we get signed some king of muddling by throwing in health marts or malpractice reform or medical savings accounts. And that's what's going on again here today. Society of health marts is being pushed in this hearing. All it's going to do is drive up costs for everyone making it more difficult and more expensive for the sick and the injured to get any coverage.

REP. BILIRAKIS: The gentleman's time has expired.

REP. PALLONE: Thank you, Mr. Chairman.

REP. BILIRAKIS: I thank you.

Dr. Norwood.

REP. CHARLES NORWOOD (R-GA): Thank you, Mr. Chairman. Good morning to you. I appreciate very much you holding this hearing on the uninsured in America. And I look forward to the testimony of our witnesses and thank our
witnesses for coming. I'll place most of my testimony in the record, but suffice it to say that a lot of people think that we should pass meaningful bipartisan legislation regarding health care, protection of patients as well as the uninsured. And my personal belief is that it adds nothing to the argument for the other side to make such partisan statements to the point that it makes it more difficult for us to even work together in any way.

Now, if you want to passed laws that actually do help patients insured and uninsured we need to work together and quit demagoguing the issue. And that is all I've heard from the other side. It is high time we work together on this and quit trying to make political hay. It is hard for me to believe that you want to help patients when it sounds from the opening statements thus far you're
more interested in trying to obtain votes. With that, Mr. Chairman, I'll submit the balance for the record. And I thank you.

REP. BILIRAKIS: I thank the gentleman. By the way the opening statement of all members of the subcommittee will be made a part of the record without objection. And Ms. Capps for an opening statement.

REP. LOIS CAPPS (D-CA): Good morning. I want to thank the chairman for holding this hearing and the panelists for testifying before us today. These 43 million non-elderly Americans who go without health insurance comprise 18.3 percent of our population. Compare that with 17.3 of the population in 1993, 14.8 percent in 1987. Clearly this problem is not getting any better. As a school nurse in school distract in my community for over
20 years I dealt on a daily basis with children without health insurance. In fact the bulk of my professional life I've been working with families struggling to meet the needs of children without health care. I can see clearly in front of me children coming to school with swollen cheeks from abscesses and no place to go for treatment.

I have literally picked up children off the playground with fractured arms, taken them to the emergency room, had emergency services done, their arm put in a splint and the family told to come back in six days to the county clinic when the bone specialist can be there to set this child's arm. It's expensive, it's terrifying for families, it's not a small deal. It means when children get sick families reach a crisis
point. Out of pocket expenses that they can't afford, lack of treatment and oftentimes poor treatment, poor quality treatment as these children's are shuttled from one waiting room to another.

Now, the good news is that many of our 11 million uninsured children are now covered under the Children's Health Insurance Program, $
24 billion over five years, expects to increase children's coverage. And most states have implemented this. In my state I know we've had a lot of trouble getting it of the ground and getting children actually enrolled. But we also need to keep in mind that as we begin to insure more children we have to include the whole family. If children have health insurance and their parents have none this is unacceptable as well. And the truth is that most of the growth in the uninsured has been among adults, particularly those who work for smaller companies, who are forced into early retirement or who are self-employed.

According to the Kaiser Family Foundation about half of working uninsured Americans experience problems with access to care with paying their medical bill. These people are slipping through the cracks. It is costly to have this happening. Preventive early care is much less expensive than delayed treatment resulting in emergency care later on.

Today we're going to hear about several approaches to dealing with the uninsured such as health marts, association health plans, high risk pools and tax credits. Our goal is to ascertain whether these approaches will result in new individuals obtaining access to insurance. The concern is that these approaches could encourage employers to drop health insurance as a benefit or enable them to circumvent state or federal protections and undermine the concept of pooling that is fundamental to a health insurance market.

Finally, Mr. Chairman, I would like to state that health coverage of the uninsured is
a critical issue, which I know first hand. And I genuinely do appreciate your holding this hearing, but I want to express my disappointment that this subcommittee has not continued its hearings on managed care reform. The two should go together. Our only hearing on this issue was in March. I believe we are losing our opportunity to make quality health care reality for the millions who have insurance that is not working for them by delaying action on managed care reform. I urge the majority to bring this legislation before the committee for a hearing, both the Patients Bill of Rights and the Norwood-Coburn Bill so that we can have a thorough discussion of this matter. And I yield back the balance of my time.

REP. TAUZIN: I thank the gentle lady.

Mr. Bryant for an opening statement.

REP. ED BRYANT (R-TN): Thank you, Mr. Chairman. Good morning. I want to commend the committee for holding this hearing today, which is the second on the subject of America's health. I know the subcommittee also intends to hold additional hearings in the next two weeks. I am pleased to be a part of this effort and take our responsibility as legislators to address the problems within our nation's health care system seriously.

As Ms. Capps has mentioned this morning with personal experiences she has had, I agree and that's why I think we ought to move as this committee is moving in a cautious way to make sure that we get this right. I know a couple of well several years ago some talked about a government based universal care, which I think we all learned was genuinely an unpopular idea and something that we do not want.
But I am particularly pleased today that the focus of the hearing is on the problem of the uninsured.

Current estimates as has been said many times today put the number at some 43 million and to me it seems only logical that this issue should be addressed simultaneously with this issue of managed care reform. Finding ways to get these people health coverage is at least as important as addressing the problems that some people have had with health insurance they already have and HMOs. And I think a reasonable argument can be made that the issue of the uninsured should be even given a priority.

Others this morning have indicated that perhaps Medicare expansion would be a solution to this uninsured problem. CBO has estimated that Medicare expansion would cover only 768,000 people age 55 to 64, this by the year 2009. That's less than 2 percent of the uninsured. The vast majority as we've heard too, particularly from Dr. Ganske of the uninsured are
under the age of 55 years old. Even health marts as we've talked about today are estimated to expand coverage by as much as 10 to 20 percent, much more so than the Medicare expansion would. That's four to 8 million people and I think we'll hear testimony from Dr. Nichols on that today. But in any event I'm looking forward this morning to examining the barriers which keep people from getting health insurance and to exploring several innovative proposed solutions. I want to thank the witnesses for taking time to be here. I'm eager to listen to your comments on these issues and I thank the chair and yield back the balance of my time.

REP. BILIRAKIS: I thank the gentleman.

Mr. Green for opening statement.

REP. GREEN: Thank you, Mr. Chairman. And just to follow up briefly before
I talk about my opening statement Mr. Norwood concerned about the partisanship that he's hearing from the Democratic side kind of reminds me of Harry Truman saying one time, he said the Republicans are tell them I'm giving them hell, but I'm just telling the truth they just think it's hell. I think the frustration we have is that this is our second hearing and both a number of uninsured, I'm glad we're doing this hearing. I' glad we're going to continue them, but also the managed care issue is important.

I first want to apologize Mr. Chairman for not being able to stay here for the whole hearing because there's a markup now in the Telecom Subcommittee going on and I'm going to have to leave. But I want to thank you for calling this hearing on how to get affordable and quality health care coverage to
over 40 million growing Americans who currently have no health coverage. Over the past three years this body has taken several important steps to help improve access to key groups including workers who change jobs, individuals have preexisting conditions and low income children. Two key groups that have been left out though are low and middle-income workers who employers offer no health insurance and the near elderly, the 55 to 64.

Tax credits and deductions have been proposed by several members to help offset the bills. I have offset the cost. In fact, I've introduced HR 145, the Health Insurance Tax Deduction, which would allow individuals to deduct from their federal taxes the amount they pay for health and long-term care.

This Congress over the last few years have increased the deductions for the sole proprietor of the
person buying their own, but we haven't provided any assistance for a person who works for a company, and the employer may only pay for that individuals, but not for the dependent care. So, the employee pays for that dependent care on their own without providing any tax incentives like we do for the sole proprietorship or the self-employed.

While this proposal is not the perfect solution, it would be an important step to deal with that segment of the market who would, with the incentive of the tax deduction, to buy health insurance or to provide it for their family. Other proposals, like I mentioned Congressman Stark's early Medicare buy in would give people over 55 to 62 the option of purchasing the quality health care.

And again, my colleague from Tennessee, talked about 700,000. Well that 700,000 more then we would have
coverage now and hopefully it would be even more than that. When this Congress considers different options to expand access to health coverage, which we have to be sure not to do so at the expense of quality. Proposals that would preempt state insurance laws in favor of limited or inadequate protections under ERISA are simply inadequate. You don't get what you pay for. That's why this committee needs to honor its commitment to the rest of Congress, especially the American people and pass meaningful managed care reform like the Patient's Bill of Rights.

If this bill was passed, every American with health insurance would be guaranteed quality health care coverage. Without it, a growing number of Americans will spend their hard-earned money on insurance that continually falls short of their expectations and their family needs.

And again thank you, Mr. Chairman, for holding this hearing.

REP. BILIRAKIS: Mr. Bilbray for an opening

REP. BRIAN P. BILBRAY (R-CA): Thank you, Mr. Chairman.

Mr. Chairman, I'd like to first compliment my colleague from Texas, Mr. Green for talking about ways that we can sort of rethink our participation in the health care formula and looking at our health structure.

I think the biggest problem we have, too often for those of us in Washington, is that we're always talking about how to mandate that somebody else change their ways, rather than taking a look at what we can do as government. And a lot of times, it happens to be much like Mr. Green would say, we just need to get out of the way sometimes. Quit requiring that we get our pound of flesh in taxes and start looking at the fact that sometimes the best way to be able to use money is to leave it in the consumer's
pocket long enough so they can buy their own services directly in the most efficient way, and that is individually.

I would like to say, Mr. Chairman, in following that up, there are things that my background working in county health and providing services to the working class. I was very frustrated with the fact that those who tend to want to demagogue health issues are a lot of times are the last ones who are willing to get government out of the way as an obstruction. And that's why I wanted to point out Mr. Green's proposal.

I think that when we talk about how we handle this issue, we need to look at where the problems are that we've allowed historically to exist. One of the things that in California we've tried to address is the fact that the huge overhead that physicians and hospitals have to carry just because there are those in our society who would love to make a fortune in lawsuits,
based on somebody else's tragedies, has been a huge problem. And I say that as somebody who was trying to provide health care to working class women and make sure their children were born healthy.

Our physicians have to carry insurance policies of $
60,000 to $80,000 and this was way back in the olden days during the '70s and early '80s. That's $60,000, or $70,000, or $80,000 that could have been providing public health services. But the trouble is that traditionally, and especially in this town, there are people that basically say that the right to sue and the right for punitive damages supersede everything else, even if it means being born healthy.

The State of California just went through a real testing period and we maintained our tort limitations and that is going to help the working class people get their health care. I know that makes some people around here just cringe to hear me say that.
I think we've got to recognize that expanding Medicare will only expand maybe 2 percent. We're talking about the health marts themselves go out 10 percent to 20 percent, but all these things can't be looked at in isolation.

I think, Mr. Chairman, that I would just ask, as we talk about this, we're going to have representatives from the Hispanic Business Roundtable. And when you have an under served community like the Latino community, like I have in my district and my county, but at the same time have 41 percent of the public health finance burst in the State of California, being to illegal immigrants, the federal government ought to recognize that 40 percent of the cost is being borne by the State of California, should be paid for by the federal government.

That means that that money could be then used by the state and the
local governments at providing health care for those who are legally in the country, that are not insured today. And we can expand our services in our state to those who legally are there and asking just for help in providing their health care system.

The system is so convoluted right now that those of us in California get frustrated with the fact that we're spending billions on federal mandates and the federal government is still saying we're not doing enough. I think that this hearing ought to bring up that issue that the whole big picture should be, what is the federal government doing wrong that can help physicians, health care systems, and yes, insurance companies provide the type of comprehensive health care that we all claim that we want for our constituents.

Mr. Chairman, thank you for having this hearing and thank you for this member to be able to express his frustration with the history of the
past and hopefully, we'll learn from our mistakes. And in a bipartisan way work together to provide services for the next generation.

Thank you Mr. Chairman. I yield back.

REP. BILIRAKIS: I thank the gentleman for that opening statement.

Mr. Dingell, for an opening statement.

REP. JOHN D. DINGELL (D-MI): Mr. Chairman, thank you. I want to commend you for your comments in your opening statement announcing that the majority and the minority staff are meeting to discuss the Patient's Bill of Rights. That is a desirable step. It's one, which I applaud. I note that it comes six months into the Congress.

I would observe, Mr. Chairman, that I would applaud with greater fervor if the chair could announce that we had a firm mark up date so that we could begin to provide our constituents with the protections that they want and deserve
within the framework of the Patient's Bill of Rights. That would afford the Congress a fine opportunity to work its will, to afford all members an opportunity to come up with an amendment within the rules which would allow them to express their particular thoughts and concerns. And would allow us to finally report some kind of bill upon which the committee had worked its will through the House so that this subcommittee, the full committee, and ultimately the House of Representatives could pass a bill of some sort and send it to the Senate.

I happen to think that we would pass something very close to that which I have sponsored. But I am willing to cast the throw of the dice to permit any and all colleagues to have their opportunity to have their say. And to allow the committee to, after listening to the concerns of our people in proper hearing process, to write the necessary piece of legislation to accomplish the purpose of moving the process forward.

In any event, I
thank you. I commend you. I certainly hope that the announcement will be forthcoming at an early time and I ask with that that I have opportunity to extend my full remarks into the record. They're excellent. I know everyone will enjoy reading them.


And I yield back the balance of my time.

REP. BILIRAKIS: Without objection.

Mr. Whitfield.

REP. EDWARD WHITFIELD (R-KY): Mr. Chairman, thank you very much.

I can't think of any more important issue to have a hearing on than this issue because we do have such a large number of people who are uninsured. As a matter of fact, I think it's even more important than the Patient Protection Act because those people are generally covered with some insurance. And we're talking about a problem here where people are uninsured.

I must say that I'm sorry that the gentleman from New
Jersey left because he, more than any other member on the other side that I'm aware of, always like to try to make this a partisan issue.

And I think he talks about it as partisan because we have philosophical differences on the way you solve the problem. But the mere fact that we may differ on the way you solve the problem does not mean in any stretch of the imagination that we're not interested in trying to solve the problem.

Now, people who are 65 and above, they have the Medicare program and we recognize that there are a lot of problems with the Medicare program, but at least they have a basic health coverage. If your income is below a certain level, you have Medicaid, which is a very good program. It provides almost all the health care needs that the person has.

I noticed in the testimony of the Hispanic Business Roundtable. They're talking about
not the legal immigrant here who may be unemployed, who may not have any income because he's even covered by Medicaid. But we're talking about people who are making just over, just enough money that they don't qualify for the government programs and that's the sector where we have a significant problem.

And I think that one thing that's been shown clearly throughout America today are that the mandates, state mandated benefits are not the answer. There are already over 1,000 state mandated benefits in America and we still have this huge segment that's unemployed.

Now, in my home State of Kentucky, became one of the most aggressive states on mandating health care coverage. They had a guarantee issue clause. They had community rating. You cannot exclude someone if they had a preexisting condition. And as a result of that, we have 107,500 people uninsured today who were insured in
1990. So, the mandated benefits are not always the answer.

And contrary to my friend from Iowa who seems to be opposed to health marts, the one thing that I do like about health marts that it starts removing the decision making and the control of health care from employers to give employees the opportunity to make some decisions on their own. And I think that's the kind of step that we need to make. And I'm delighted that the gentleman from Texas talked about incentives that we need to provide people to provide health coverage for their employees, tax benefits, tax deductions. We need to explore all of those things. So, I'm delighted that we're having this hearing. I'm delighted that we have so many excellent witnesses who can shed some light on how we can hopefully start solving the problem.

REP. BILIRAKIS: I thank the gentleman from Kentucky.

Mr. Waxman,
for an opening statement.

REP. HENRY A. WAXMAN (D-CA): Thank you very much, Mr. Chairman. Nobody on this committee or Democrats or Republicans can find it acceptable that in this country we have some 43 million people without health insurance coverage and that's a number that continues to grow.

This shouldn't take us by surprise. It's a situation that's been with us for years. In fact, some 25 years ago, both the Carter and the Nixon Administration proposed comprehensive national health insurance plans. It was clear even then that we had a serious problem and it would only get worse if we did nothing.

President Clinton, to his credit, tried to remedy the situation with a proposal that would have assured all Americans comprehensive quality coverage, but the concerted efforts of special interest groups stopped that bill dead in its tracks.

Today we see the result. We have more uncovered and that number of uninsured continues to grow. We face an even higher price tag to try to remedy the situation for the uninsured. Additionally, there's a real and growing dissatisfaction among many people who have coverage, particularly in managed care plans who are not getting the medical care they need. We need to address both issues. Clearly we need to take action on the Patient Bill of Rights. We have to give people the tools to assure that they are treated fairly by their plans and receive the medically necessary care they need.

I would make two observations as we enter into this debate. First, we must not use a continuing problem of millions of Americans without coverage as a rationale to fail to act to protect the rights of persons with coverage. To do that would be cynical in the extreme.

Secondly, we must be sure that the actions we do take to provide
coverage are effective. We cannot adopt proposals, which in fact only help those with a relatively high income or simply provide fiscal relief to people who are already covered. And we cannot adopt solutions that fail to reform the insurance market or make the situation worse by fragmenting the risk pool and leaving the older and sicker without affordable coverage.

And perhaps most importantly, we need to be sure that the actions we take do not have the result of exacerbating the already troublesome trend of reductions in the provisions of health care coverage by employers for their employees.

And finally I would note that one fact about the uninsured is very clear. Older people who lose their employment based coverage are one group clearly in need of help. We have legislation that could help here introduced yesterday by Congressman Stark, Brown, Dingell, and myself, among others, to allow early buy
in into Medicare. We should also act on that in the legislation.

The Breaux-Thomas Commission proposal to raise the age of eligibility for Medicare to 67 surely would only add to the problem of the uninsured and I hope that would find little support in this committee.

Mr. Chairman, I look forward to hearing from our witnesses and if not being here because of conflict to having a chance to review their testimony and their answers to questions. And I look forward to this committee exercising its jurisdiction and its responsibility to mark up a Patient Bill of Rights. And to address these very difficult issues, that left unaddressed will only lead to hearings next year, the year after, five years or 10 years from now, talking about the growing problem of the uninsured, which at that point won't be 43 million, but maybe 50 million. And effect on the rest of the health care system will be so dramatically negative.

Thank you
for calling this hearing. I yield back the time.

REP. BILIRAKIS: Thank you.

Mr. Shadegg.

REP. JOHN SHADEGG (R-AZ): Thank you, Mr. Chairman, for holding this extremely important hearing today, the subject of health care quality, health care access, and health care affordability is an extremely important one and one on which I spent considerable time during the last several years.

Mr. Chairman, there are very serious problems which need to be addressed in how health plans administer and provide service. In addition, many plans are protected by federal legislation, which provides minimal regulatory oversight and virtual complete immunity from lawsuits for consequential damages, even when the plans are clearly at fault.

Congress and many state legislatures, including my own home State of Arizona, have dealt with managed care
reform, liability and other types of patient protection legislation. As we consider the myriad proposals that will come before us today, I would urge us to remember the Hippocratic oath and first do no harm. We must recognize, I believe, that some of the most important protections we can give patients are individual choice and improved access.

Providing choice and providing improved incentives for better consumption of health care and helping the uninsured, the subject of today's hearing, obtain coverage will do more to improve quality and affordability of health care than congressional directives, which do not address the causes of our country's health care problems. For these reasons, as many of the members of the committee know, I've introduced HR 1687, the Patient's Health Care Choice Act.

While some groups oppose any congressional action in the area of health care, I vehemently
disagree. Congress has a significant responsibility to reduce the problems in the health care market because it is federal law that has led to reduced choice, has led to declining quality and has led to more uninsured and a lack of accountability.

But true with health care reform, we must change the way we view the system. People should have the ability to choose their own health care based on their individual needs and priorities. Until Congress removes the current tax burdens and hurdles, which discourage individual ownership and control of health care coverage, we will never truly reform health care in America. We will only build a bigger, more complicated bureaucracy and further regulate a fundamentally flawed system.

My own legislation, HR 1687, responds to the lack of choice and the problem with tax equity that Americans have when purchasing health care. One of the most
egregious problems created by our current health care laws is the unintended consequence of our tax policy, creating 43 million Americans excluded from the ability of having health insurance.

The tax code is biased against these millions of uninsured Americans. Because their employers do not offer them taxpayer subsidized, employer based health care, they are punished. We say to those in the employment market, we'll subsidize your health care by giving your employer a deduction for the amount he spends on your health care. But to the other side of the coin, to those not fortunate to get employer based health care, we say to them as a matter of public policy, we think you should be insured.

Indeed I would argue that as a nation, we came to a conclusion long ago that no one in this country should go without health care. Having said that they should be insured, Mr. Chairman, and having said that they
shouldn't go without health care, we give them the back of our hand because we tell them they must go out and buy coverage on their own, but we punish them. We don't subsidize them. We punish them by saying they must use after tax dollars to buy that health care coverage. What that means is that for America's uninsured, the people we will talk about today, the cost of obtaining insurance is anywhere between 30 and 50 percent higher than the cost for those who just happen to be lucky enough to get their health care coverage through their employer.

The Patient's Health Care Choice Act addresses this current inequity in our tax code, which excludes the 43 million Americans from health insurance by giving them a refundable tax credit for the purchase of health insurance. This tax credit provides tax equity to those Americans who receive their health insurance
without help from their employer. Someone who doesn't have insurance through their employer would simply have to go out and buy health insurance and they would get the tax credit. For low income Americans where many people are concerned, the tax credit is fully refundable and functions through the withholding system so that even if they do not have a tax liability, they can receive the credit.

It is high time that we made the tax code fair and equitable for both those who are employed and getting employer based insurance and those who are unemployed.

Mr. Chairman, let me tell you the story of Sabrina Roberts, a single mom living in Chandler, Arizona. Like Mary Horsley whose testimony we'll hear today, Ms. Roberts is just barely getting by, trying to provide for all the needs of herself and her four children. Right now she pays for private
health insurance for her children with after tax dollars, 30 to 50 percent more than the rest of us. Unfortunately, she is not eligible for the Arizona program set up under SKP (ph) a program called Kid Care because that program says that she must allow her children to go six months uninsured before they are eligible for the SKP's program. She refuses to allow her children to go uninsured.

Mr. Chairman, we can do better. We must provide tax equity and I urge my colleagues to support this legislation and I commend the committee for moving forward and I commend the committee for considering the two bills, which myself, Congressman Coburn, and Congressman Norwood have put before the committee to address these issues.

REP. BILIRAKIS: I thank the gentleman.

Ms. DeGette.

REP. DIANA DEGETTE (D-CO): Thank you, Mr. Chairman.

I'd like to submit my statement for the record.

REP. BILIRAKIS: Without objection.

REP. DEGETTE: And just to note that one of my neighbors, not my direct constituent, but my neighbor to the south in Englewood, Bob Morehead and I know that his testimony is going to be very illuminating. And thank the committee for inviting him and I'll go back.

REP. BILIRAKIS: Well, thank you.

Mr. Burr, no opening statement.

Mr. Greenwood, no opening statement.

Dr. Coburn.

REP. TOM COBURN (R-OK): Well thank you, Mr. Chairman, for having the hearing. You know, we do have 43 million Americans that are uninsured, but half of them don't want insurance. So, let's talk about --

REP. BILIRAKIS: Is your mike on, Tom?

REP. COBURN: Mr. Chairman, I don't know that I control whether my mike's
on or not.

So, we really ought to talk about those who don't have insurance who want insurance.

The other thing, the latest numbers that we have, really good numbers, are 1996, we spent $
1 trillion, $36 billion on health care in this country and $180 billion of that didn't go to help anybody get well. And we're going to hear all sorts of ways about addressing the unmet needs of those that are uninsured.

One of the first things we ought to do as a Congress is to open up this $
180 billion by lessening the stranglehold of government agencies, neutralizing the tax effects that we don't have now and clearing the way so that the market can have some impact. Congressman Shadegg's bill on access is designed to eventually do that, to eventually allow individuals to own ultimately, that's where we ought to be, to own their health insurance product. Then allow them to make the choices that fit them, rather than a group of people deciding what's best for them without their choice.

We don't need more government. We don't need more HCFA. Matter of fact, the last two HCFA's administrators, including the one I think is the best we've ever had, Nancy Ann Min DeParle, who said nobody understands HCFA completely. And we are as a Congress responsible for that. And so anything that we do in terms of improving access ought to have something to do with cleaning up HCFA and making the regulations understandable, usable and efficient.

I often wonder if a Martian came to earth and said you're going to have health care, how would you design it. They would look at us and say, this is exactly the opposite way you would design it. And I think there's some just criticism in what we've done in terms of government agencies and the amount of dollars that are consumed in our health care budgets each year that
don't go to help people get well.

If you take $
180 billion -- and I have personal experience. I have 33 employees in my medical practice with four other doctors and eight of those people don't do anything to help people get well and that's a crime because that's money that's being spent to not improve somebody's health care or to treat their disease. And we continue to want to ignore those facts, but health care is too important for this Congress to ignore the inefficiencies that we've mandated through government regulation and the tort system into the health care system.

So, I'm happy that you're having this hearing. I'm extremely pleased with the work Mr. Shadegg has done. I don't know what's going to happen with those bills, but I'll tell you one thing. We have to start down the road to increasing access and restoring individual freedom about choosing.

I want to say
one last thing. We're never going to let the free enterprise model work as long as we have a middleman between the employer and the patient. And we have all these health care firms who supposedly care for patients. But their number one goal is making money and that's why they're in business. Otherwise they wouldn't be there. We need to keep that in our minds, that we have a profit center between the person buying the health care for somebody and the person getting the health care. And that deserves a good, long, hard look at whether or not that's a legitimate way to deliver health care in this country. And I yield back.

REP. BILIRAKIS: I thank the gentleman.

I think that completes the opening statements. And as I said earlier, those who wish to submit their opening statement in writing, without objection, be made a part of the record.

We'll call the first panel, Ms. Grace-Marie Arnett, president of The Galen Institute; Ms. Terry Neese, past president and public policy advisor of the National Association of Women business owners; Mr. Roberto Garcia de Posada, executive director of the Hispanic Business Roundtable; Ms. Diane Rowland, executive director of the Kaiser Family Foundation; and Ms. Mary Horsley, consumer, on behalf of Families, USA.

Welcome to all of you. Thank you for being here, for your patience. Your submitted, written statement is a part of the record and the chair will give you five minutes to expand upon that in any way that you wish. Obviously remember that there will be a lot of questions coming from the panel up here. So, there may be a lot of points you may wish to make that you'll have an opportunity to make even if you don't have time
in your opening statement.

We'll kick it off with Ms. Mary Horsley. Mary, please proceed.

MS. MARY HORSLEY: Mr. Chairman and members of the committee. My name is Mary Horsley and I am from Cape Charles, Virginia. Thank you so much for inviting me to testify this morning about my family. I hope that our story will help convince you that families need health insurance.

My husband is Kenny Horsley. He has lived on the Eastern Shore his whole life. He could not join me today because he did not want to take a day off from work. We have been married for almost 15 years and we have one daughter, Laura, who is 10 years old.

We are a classic uninsured family. My husband is employed full- time at Ewell (sp) Furniture Store in Cape Charles where he sells
new and used furniture, appliances and other odd and ends. He makes $250 a week gross and gets no benefits through his job. The owner of the store employees two other people and cannot afford to give his employees health insurance.

I do sporadic contract work, teaching in arts programs when I can get it. Health insurance has never been offered to me by any of my employers. Our annual income is about $
13,000 t $14,000. We live very conservatively. We do not take vacations or go out to eat. I sew and therefore we do not spend a lot of money on clothes. We have an old car. We have some bills, including a loan we needed to pay for a new furnace that we must pay on a monthly basis. I'm not complaining. I just want you to know we're doing okay, but just barely.

My husband had a small skin cancer about 20 years, but by the time we were married, we were both healthy. At that time, my husband ran a family small restaurant and we could not afford to buy coverage. Shortly after my daughter was born, I learned that health insurance is essential if someone in your family gets sick. At that time, Laura was not getting enough milk. It took a while for the doctors to figure out what was wrong. The problem was corrected, but we wound up with a lot of bills. We learned that one health problem can be very expensive and devastating to a family's budget. I was told that Laura was eligible for Medicaid and she has been on the program since them. As it turned out, we have had to use Medicaid for a couple of
eye surgeries for Laura.

She has an inherited disease, which causes one eye to move out.

We are very grateful for the help Medicaid gave us because without it we would be in significant debt. Unfortunately, Medicaid does not cover adults. About two to three years ago, my husband's cancer started growing back. When my husband suspected his cancer had returned, he knew we could not afford to pay the medical bills, so he put off getting care. He did not tell me about it until last fall.

In February, he had surgery. Because he delayed getting care, the damage was much worse than it might have been if he'd seen a doctor earlier. The care was much more expensive also. He had part of a cheekbone, one eye, and a part of his skull removed. He is now facing two more surgeries, including plastic surgery and five
weeks of radiation therapy.

We are struggling to pay the remaining medical bills. We are very fortunate that so far, we've had some help, the doctors wrote off part of their bills for the first surgery and our church and the Lions Club helped out. I'm also applying to the Lions Club for additional help.

Our income and resources are low enough so that we qualify for the Virginia State and Local Hospital Plan, called the SLH Plan, which pays the hospital bills. And of course, I'm very worried about the future. I don't know how long the doctors will be willing to write off some of their bills or how much other help I will be able to get. I also don't know if my husband will still gets paid when he takes off more and more time from work. I would try to get more contract, but if I make
much more than I do now, then we'll not qualify for SLH, and our bills will be overwhelming.

I feel very stuck and frustrated. Sometimes I feel like I'm spinning in circles. I know that we should have health insurance, but we cannot get it. I called around to many insurance companies. They told me that my husband had a preexisting condition and they would not sell me insurance. Even if he was not sick and they would sell it to me, I was told it was cost around $
400 a month. We do not have money left over each month to pay premiums of this magnitude. We cannot afford to pay about $5,000 out of our annual income of around $13,000.

I know we are not the only family in this predicament. My sister and her husband, who has recently been ill, are facing the same questions about how to keep the family going and
pay large medical bills. We are hard working families. It seems to us that in a country like ours, hard working families should not have to go without health insurance. I hope you can figure out a way to get insurance to families that need it.

Thank you.

REP. BILIRAKIS: Thank you very much, Ms. Horsley.

Ms. Arnett.

MS. GRACE-MARIE ARNETT: Thank you, Mr. Chairman, and the distinguished members of the committee for inviting me to testify today. I also commend you for inviting Mrs. Horsley to come to present a really poignant and real life story that makes this work very real for all of us.

As you say, I'm president of The Galen Institute, a not for profit health and tax policy research organization based in Alexandria, Virginia.

It's frustrating to all of us and it's even
more frustrating to the American people. Despite years of effort by lawmakers at all levels of government and especially during a strong and sustained period of economic growth that the problem of the uninsured, not only persists, but continues to get worse.

At the state level, lawmakers have been doing, passing thousands of laws with the very good intent of trying to force health insurers to offer good coverage that contained decent benefits at reasonable costs and with protection for policyholders. Additional insurance regulations, as you well now and passed at the federal level with many of the same intent. The data, however, increasingly show that despite this good intent, the effect of these laws is having an increased effect in increasing the cost of health insurance and is in fact driving up the number of people who are uninsured.

People who are on the tightest budgets, must make the hardest
choices in deciding how to allocate their resources. After paying the rent and the mortgage as we've heard from Mrs. Horsley and putting food on the table, millions of Americans simply can't afford to buy health insurance. Some are faced with a choice between sending their children to a good school and buying health coverage and we increasingly see the choices that they're forced to make.

When asked by the Kaiser Commonwealth Fund survey recently, a majority of Americans cite cost as a reason for not having health benefits. In fact, the cost of health insurance has grown dramatically faster than the overall consumer price index, 111 percent increase in the cost of health insurance between 1988 and 1996, as opposed to a 33 percent increase in overall prices.

The Congressional Budget Office estimates that every 1 percent
increase in the cost of health insurance throws 200,000 more people off the insurance rolls. The uninsured are disproportionately young, minority, lower income and either work for small companies or their dependents.

The research that I have done, which is validated by numerous other experts, has convinced me there is a causal connection. The growing burden of mandates and regulations in the health sector leads to higher costs for health insurance and in turn drives more people into the ranks of the uninsured.

I would invite you to look at my testimony for specifics on the studies that I cite there. For example, Gail Jensen (sp) of (Wayne ?) State University, and Michael Morrisey (sp) of the University of Alabama, Birmingham found that as many as one in four Americans lack health insurance because of benefit mandates and yet the number of mandates has increased 25 fold in the
last quarter century.

Mandates and insurance regulations don't show up on the federal ledger but they are not without cost to the American people. They're paid for by workers and their dependents who receive lower wages or lose coverage altogether. Each mandate may increase cost by only a percentage or two, but others add much more. And every one of these benefit mandates can be justified by its constituency as a legitimate item for coverage. But cumulatively, they're condemning more and more people to being without health insurance. Small businesses, and individuals attempting to purchase health insurance on their own are most vulnerable to these mandates because they do not have the opportunity to escape by self-insuring through the provision of ERISA.

The Galen Institute conducted a study last year to determine the effects of its
data to regulate their health insurance markets and shape coverage to help their citizens get affordable coverage. Using GAO studies, we determined that between 1990 and 1994, 16 states were most aggressive in passing health laws, regulating their health insurance market, with the intent of helping their citizens get better health insurance.

We found that by 1996, these 16 states were seeing their uninsured populations grow an average of eight times faster than the 34 states that did little or less. Before the health care reform legislation began, the two groups of states have been virtually equal. One of the biggest regulators was Kentucky. The governor said, in spite of good intentions and noble purposes our project didn't work. The entire cost to the system went up.

Just to conclude, Mr. Chairman, the fact that regulation has failed at the state level does not mean that federal
action is unneeded. But in the battle over patient protection legislation, the insured may very well be shoved aside in favor of a small percentage of those who are with health insurance who are unhappy with it.

Instead of helping the 43 million Americans with no health insurance, the data strongly suggests that patient's right legislation will hurt them by driving up the coverage and throwing even more people off the insurance rolls.

I commend you to look at the ideas of tax credits for the uninsured. I can think of no better example than Mrs. Horsley, of someone who could benefit from a directly targeted tax credit to an individual who does not have the option of job based health insurance to get affordable coverage.

Thank you.

REP. BILIRAKIS: Thank you very much, Ms. Arnett.

Ms. Neese.

NEESE: Good morning, Mr. Chairman, and members of the committee, thank you very much for holding this hearing. My name is Terry Neese and I am a small business owner in Oklahoma. I'm also a past national president of the National Association of Women Business Owners, and serve as a consultant to them on public policy issues.

NAWBO represents this country's 9 million women business owners. We're employing about 27.4 million workers today and generating about $
3.2 trillion in annual revenues.

Today I want to discuss access to health care and ways Congress can assist small business owners with their health care needs. The Employee Benefit Research Institute, EBRI, has reported that about 80 percent of the 40 million uninsured Americans live in families with an employed worker who is
likely to work for a small employer or be self- employed.

Over 80 percent of all uninsured children are in families with working parents. Clearly the problem of the uninsured, both children and adults is predominantly a problem of small businesses lacking access to affordable coverage. For example, at Terry Neese Personnel Services in Oklahoma City our insurance was recently cancelled. I employ 12 people and 1,000 temporaries on an annual basis. In 1998, we carried health insurance with a large national insurer. Our monthly insurance premiums for 12 employees were extremely high, for one employee over $
800 a month.

Terry Neese Personnel Services covered 80 percent of all costs. We have been insured by a national insurance company for about three years with no
claims being filed on the insurer. Pretty remarkable. One day out of the clear blue we received a call from the insurer that they were canceling our insurance due to the small number of people employed in the firm. We were pretty devastated.

Spent three months trying to find a firm that would insure the staff. This incident made it clear to me and my employees that something had to be done to assist small business owners in making insurance available at a reasonable cost without unfair and unjust cancellation.

The most egregious of the inequities in the system is the fact that incorporated businesses can deduct 100 percent of their health care premiums while the self employed business owners can only deduct 60 percent. The solution, allow self-employed individuals to deduct 100 percent of the costs of their health insurance premiums now. Allow small
business access to association health plans. New insurance coverage options for both the self-employed and those workers in small businesses will also promote competition and greater choice in the health insurance market by giving workers new sources of coverage through trade and professional associations. It will make it easier and cost effective for many Americans to continue coverage under the same plan when changing jobs. And last, preempt costly state benefit mandates. Mandating health benefits raises costs. Mandates therefore, defeat the very purpose of health care reform, which is to lower health care costs and to insure more people.

I couldn't help but think when Congressman Coburn talked about the middleman between the patient and the doctor, but it was just a short, short, very short 30 years ago when
I could go see my doctor and there was not a middleman between me and the doctor. And I had no problems with medical care. So, we might digress just 30 years and look at what has really happened in this 30 year periods of time that has brought us to where we are today.

Women owned businesses want to recruit the best talent on the market. And with the unemployment rate at 4.2 percent excellent benefit packages are key to attracting and retaining employees. Thank you very much for allowing me the opportunity to present ideas to the committee, NAWBO members stand ready to assist you in finding the tools necessary to ensure the workers that care about, have the insurance that they deserve. This Congress can help provide those tools. Thank you very much.

REP. BILIRAKIS: Thank you very much Ms. Neese.

Mr. Garcia de Posada.

Chairman and members of the committee. I want to thank you for including and highlighting the problem in the Hispanic community and particularly Dr. Ganske and Mr. Bilbray on this issue. I'm Robert Garcia de Posada and I am the Executive Director of the Hispanic Business Roundtable. And we were created to establish in 1995 to address the policy issues that affect the well being of Hispanics in the US.

When it comes to health insurance according to a US census the highest uninsured rate in the US is among people of Hispanic origin. Thirty four point two percent of Hispanics were uninsured compared to only 12 percent for non-Hispanic whites. US Hispanics also have the largest percentage over the working uninsured at 37.9 percent compared to only 14.9 percent for non-Hispanic whites.

The main reason why so many Hispanic's do
not have health insurance is because they have lower incomes and they work for smaller firms. At the new employment and income level are the leading sources of health insurance coverage in this country. And the lower the income the more likely the worker does not have coverage simply because he or she can not afford it. Also workers employed by small firms were the least likely to provide employment based health insurance coverage.

Hispanic per capita income is $
10,773. And also Hispanic's in the US disproportionately work in the service or small business. An overwhelming majority of the uninsured in the Hispanic community are working poor. They're not poor enough to qualify for Medicaid, but too poor to afford health insurance. In addition, there's a high degree of mobility in the Hispanic work force. And the current system of employment based health insurance is simply leaving too many people behind.

At the Hispanic Business Roundtable we strongly support policies to promote equality and equity between employer based health insurance coverage and consumer based coverage. We're here to call on Congress to end the discrimination that exists against people who buy health insurance outside the place of business. Low skilled workers often do not command the wage that enables them to buy health insurance and they get little if any government assistance in purchasing it. if a worker decides to purchase individual coverage they will soon realize it is prohibitively expensive.

Think of it from a small business perspective. Once you hire an employee before you consider paying health insurance you gave to pay general liability insurance, worker's compensation, unemployment insurance, Social Security reform, et cetera. After paying all of this,
most small businesses can not afford top provide health insurance to their employees.

From the employees side, Let me use Martha Sanchez as an example. She's a mother of two in Miami who works as a receptionist for a small law firm, earning approximately $
10 per hour, Her employer does not provide health insurance, and she cannot afford to buy an individual health insurance policy. So what can Congress do to help someone like Ms. Sanchez get health insurance?

First, enhance tax incentives for individuals without access to employer sponsored coverage. You can enact refundable tax credits or vouchers to help low income workers purchase health insurance. In order to make these tax credits truly accessible to low- income workers and small businesses, we believe that these tax
credits or tax breaks could be blended into the withholding system.

Second, Congress could equalize the tax laws so that associations and community-based organizations have the same tax breaks as large businesses, when they provide health insurance. This would promote a more community-based insurance system that would have a better understanding of the community they serve.

Congress and the administration should work closely with the with Hispanic health organizations to develop a public education campaign that promotes the importance that promotes the importance of having health insurance. As Dr. Ganske just said, I mean many just simply do not know of the concept, do not know that they could be covered by Medicaid and some other programs.

Third, Congress should eliminate the obstacles to pooling. This will help promote more affordable, accessible and accountable coverage to consumers. Congress can promote changes in our tax laws to help low-income workers in
small businesses have access to affordable health care. For example, small businesses could get a tax credit that could be phased-in beginning with the smallest firms of fewer than 10 employees. Individual purchasers of health insurance and the self-employed should be able to fully deduct the cost of premiums. Employee contributions for health insurance should not be considered taxable income.

Finally, we cannot ignore the fact that reducing the regulatory burden and government mandates, reforming liability laws, and promoting personal responsibility are also key components of any solution to this problem. Access to affordable heath insurance is a problem that disproportionately affects the U.S. Hispanic community. The Hispanic Business Roundtable strongly commends this committee for addressing this issue, and we look forward to working with you to break down some of the barriers and build the necessary bridges to improve the access to affordable health coverage for the uninsured.

last thing, most Hispanic's in this country live in districts represented by Democratic members. And I was very disappointed that not one Democratic member highlighted Hispanic's in this committee. And I hope that's going to change in the near future. Thank you.

REP. BILIRAKIS: Thank you very much, sir.

Ms. Rowland.

MS. DIANE ROWLAND: Thank you, Mr. Chairman and members of the committee. I'm pleased to be here today. I'm Diane Rowland executive vice president of the Kaiser Family Foundation and director of the Kaiser Commission of Medicaid and the uninsured. I'm also an associate professor at Johns Hopkins University. I'm very pleased that you're focusing today on the 43 million Americans without insurance. We know all too well that it's not just a matter of being without insurance, but that going without insurance makes a difference
in how you receive care and when you receive care and your ultimate health outcomes and financial burdens.

I think Ms. Horsley has clearly pointed that out. But she also points out dramatically to us who our uninsured population is and why it's such a struggle to figure out ways to provide coverage. Sixty percent of the uninsured comes from families with incomes below 200 percent of the poverty level. That's an income of about $
26,000 for a family of three. There are largely working families as you've heard, 84 percent come from families with a full or part time worker, 72 percent are from families with full time, full year workers. What's happening in our insurance system is that the employer-based system that we have depended on for so long to provide basic coverage is falling short. And it's falling short especially for some of the lowest wage workers.

Today, if you look at the uninsured population 70 percent of the workers without insurance are not offered coverage in the work place. So for them, the only options are either to qualify for the Medicaid Program, or to turn to the individual insurance market, which is often extremely expensive, and often has a lot of restrictive underwriting policies that may not even enable them to obtain coverage. So affordability has become a very critical issue in our health insurance percentage, $
5,000 for family coverage, rather you're in regulated or a non regulated state, it is not going to be an affordable thing for a family earning less than $26,000 a year to purchase such coverage.

In the work place today, only 55 percent of workers earning $
7.00 or less have access to insurance through their employer, in contrast to 96 percent of higher wage workers earning $15.00 or more per hour. So we're clearly not making insurance available at the lower end of the income spectrum. When we look at trends and insurance coverage, what we see in our robust economy is that there has been some improvement in employer offerings at the higher income levels and a continued decline in offerings at the lower income level.

Moreover, in this economy that we live in the new jobs are being created not in the large firms and manufacturing base, where insurance generally came with the job, but increasingly among the self-employed and among small businesses.

Really leading to the fact that our employment base system is failing not because of employers are not willing to offer insurance, but because we are seeing employment in different parts of that sector. These trends are troubling. But there even
more troubling because our safety net providing coverage for the lowest income Medicaid, is seemingly now beginning to erode (ph) its own coverage.

In the last two years we've seen a decline of almost 2 million people covered by the Medicaid Program. I'd also point out as Mrs. Horsley did, that while Medicaid has made many advances, along with the Chip Program in the last few years to cover more and more children, we have not made similar progress in extending coverage to the parents of those children, or to other low-income adults. The reason that half of the poverty population is not covered by Medicaid, largely reflects the fact that single adults and childless couples are ineligible for Medicaid under almost all circumstances, except for disability or pregnancy. And most children who are in the 13 to 18 year-
old age group, are not covered up to the poverty level yet.

So we need to really look both at whose eligible for Medicaid, and how to extend coverage to the poorest population, including low- income adults. As you've all pointed out, we also need to look at why people don't participate in the Medicaid Program? Why they don't know about the program? Why they can't get through the barriers to eligibility for the program, and increasingly need to look at that for TIF.

In the absence of Medicaid, and in the fall back of employer coverage, we also need to look at what is available through the individual health insurance market. A lot of the proposals on the table today would ask people to go out and buy insurance in the individual market, that market really has been a very limited market, it's extremely expensive and very variable across the states.

So I
think in looking at the future one ought to look at how to improve our coverage through the programs we have in place today. Build on the Chip Program make it and the Medicaid Program more effectively able to reach out to low-income children, consider how to expand that coverage to their parents. No single incremental approach to restructuring and broadening health insurance coverage is likely to address the diverse needs of the 43 million uninsured American's, but we can began to build on the programs in place by making them more effective and trying to do better outreach.

Thank you.

REP. BILIRAKIS: Thank you, Ms. Rowland.

The chair yields to Dr. Ganske to start the inquirers.

REP. GREG GANSKE (R-IA): I thank the panel. I appreciated the comments of all of you, but particularly Ms. Rowland, on your
comments on Medicare and Chip -- Medicaid and Chip, because it ties in with my comments at the beginning, and yours Mr. Garcia de Posada. I would add another reason why I think that there are a large number of people who qualify for Medicaid that are not in it, and that is bureaucratic government red tape.

For example, in California, you have to fill out a 25-page application for Medicaid, and that's for people who can barely read many times. In fact, frequently English is their second language. So look, why can't we simplify that? In Texas you have to apply in person at the Department of Health of (sic) Human Services, which is usually not very easily accessible, it's usually well off the beaten track. And if you show up and you don't have all of your papers, you come back another day.

Just to show that I can be fair, as I mentioned in my statements, in Iowa my own state, to add insult to injury, the application isn't only long, but it's difficult to understand, and you have to report your income each month. I think those are all things Mr. Chairman, that we ought to be looking at, in addition too, I think we ought to hold a hearing in conjunction with Oversight with Mr. Upton, and look at why isn't Chip being implemented better? Why do we have such large percentages of the poor, who qualify for Medicaid not getting the message? Why are they out there without it? And I would like to work with you and Mr. Upton in organizing that. Maybe sometime we could also look at why insurance companies haven't pushed Medical saving accounts a little bit as well?

But you know I have to go back to
some comments that I made originally, and that has to do with the factor of risk selection, and ideas such as association health plans and multiple employer working associations. The American Academy of Actuaries had this to say about MEWAs in a letter to Congress, June of 1997, they wrote; "While the intent of the bill is to promote health association plans as a mechanism for improving small employers access to affordable health care, it may only succeed in doing so for employees with certain favorable risk characteristics. Furthermore, this bill in reference to the Republican bill, contains features which may actually lead to higher insurance cost."

And just to expand on this, you know in any year about 10 percent of any large population group accounts for about 70 percent of the medical expenses of that group. If you over simplify that means that if and insurer that is contemplating
insuring 100 people can avoid covering just one of the 10 people that will be the sickest, the insurer can save approximately seven percent in total medical claims. If the insurer can identify and exclude half of the people who will be sick -- that is five, the insurer can further reduce claims cost by 35 percent.

That's the easiest way, insurers have to keep their premiums down, to attract new business, to make profits. And any small groups with below average risk have then strong incentives to seek out an insurer that will group them with other below risk groups, and charge them a lower premium. The problem is that, when those healthier people leave that larger insurance pool, the rates remaining for those in the pool will rise. And although those remaining in the pool have higher risk there will still be differences then those with lower risk. You're
going to end up in my opinion with a potential to do harm, rather than good.

Mr. Chairman, I just have to use my time to make this comment, and that is that those, there's an old saying; Those who don't know history are bound to repeat it. Look at what happened, under court interpretations of ERISA in 1974 --

REP. BILIRAKIS: Please finish your point.

REP. GANSKE: State insurance officials can't regulate health coverage, provided by self-insurer employers. That regulatory loophole created a lot of problems with association health plans. In the 1970's and 80's hundreds of thousands of people Mr. Chairman, was stranded without coverage and providers with unpaid fees, because of unscrupulous entrepreneurs whose only incentive was to make a quick buck. If you don't believe me read Carl Posers (sp) article Preempting
State Authority to Regulate Association Plans, it's in National Health Policy Forum, 1997.

And Mr. Chairman, those rash of failures led in 1983 to an amendment to ERISA which gave state authority to regulate those self- insured MEWAs. That has helped prevent some of the problems. I'm afraid that we're looking at legislation that is going to go back to the problems that we solved in the 70s and 80s with those association health plans. I don't know if anyone on the panel has any comment on that --

REP. BILIRAKIS: Well, the gentleman's time has expired and I'd rather yield now to Mr. Brown.

REP. BROWN: Thank you, Mr. Chairman.

Ms. Arnett, I apologize, I've never heard of The Galen Institute, can you tell me who funds you?

MS. ARNETT: We have a number of donors. We have individual contributors, we have some foundation funding and we have some
companies support. It's very diverse. We're a new think tank -- REP. BROWN: What's your annual budget?

MS. ARNETT: About $

REP. BROWN: Do you get more than 50,000 (dollars) from any one think tank or individual company?

MS. ARNETT: We have a large grant from the Rob Roy (ph) Johnson Foundation to produce a book. So, yes we do.

We've produced a book called Empowering Health Care Consumer through Tax Reform. It's a publication composed of articles and chapters by members of the consensus group, which is a free-market think tank community, market base reform, all the way from the Heritage Foundation to the Profession (ph) Policy Institute and the Urban Institute.

REP. BROWN: Could you give to this committee, or at least to me, you're funding sources --

MS. ARNETT: Sure, of course, yes,

REP. BROWN: Thank you.

Ms. Arnett, in the absence of regulation you seem to think that the cost of health insurance, overwhelmingly -- the overwhelming part of the increases because of mandates and regulations. In the absence of regulations, if there were not regulations that prevented insurers from dropping individuals when they became especially ill, do you think insurers would voluntarily keep those individuals on the role?

MS. ARNETT: I think that we need to rethink the whole system of how people get health insurance. If people think in terms of being insured for periods of months, then I think the likelihood of this game plan --

REP. BROWN: Wait, wait, wait, I only have five minutes.

MS. ARNETT: I understand.

REP. BROWN: Do you think -- if there were not regulations saying that insurance companies could not drop people when they were sick, if we could get all of the burdensome, onerous regulations off the backs of the American people that you
suggest, do you think those insurance companies would act that way?

MS. ARNETT: I think that the insurance companies should have to abide by contract enforcement, and I believe that individuals should have the opportunity to contract with their insurers for a coverage that would not be dropped when --

REP. BROWN: Insurance companies -- very expensive lawyers and individuals buying insurance that does not read contracts quite as well and probably can't afford to hire lawyers quite as good as the big insurance company have, and that's still and even match? You want to put that into the marketplace with no government involved?

MS. ARNETT: Contract enforcement or government rules and regulations, those are really two choices. Right now we see what happens with Medicare when we have 111,000 pages of regulation governing the Medicare system in order to get people to do the right thing. If we had contract enforcement that was much more effective, and people had health insurance that they owned and kept over a long period of
time, that they owned themselves, I believe that there would be more market discipline on those companies to provide continuity of care and not to lose the public relations war that they would have if they saw that that insurance company dropped people when they got sick, they wouldn't get anymore business.

REP. BROWN: Ms. Rowland, do you want to comment on that?

MS. ROWLAND: Well, the problem with insurance is that it's not a permanent thing that you can own or purchase like an automobile or anything else. It's something that's offered on an annual basis by a company. And as my own small business, that the Kaiser Family Foundation experiences is that every year, we have different companies pulling in and out of the market. And so we have some regulation of insurance in California, but we have no guarantee that that our policy, in any given year, will cover the same benefits for the same
premium. So, I think clearly you need some protection for consumers in any market in which the insurer has the ability to pull out.

And just as Mr. Ganske talked about, if you can pull out when there's a high-risk person in the pool, or you can change the premiums there, and we really have system in which instead of insuring people for illness, we take the sick out of our insurance market.

REP. BROWN: I would contend that it's really not insurance then.

Ms. Arnett, you mentioned government regulation over and over, that that's the problem. No mention of insurance company executive salaries, not mention of the drug company profits, the hugest profits of any industry in America, I believe. Again, it's all government regulation. Yet, one of the most unregulated industries in America, unregulated in terms of price is the drug companies; $
22 billion in profits last year. That's what's driving a big part of health care inflation, what am I missing?

With no government regulation there doesn't seem to be -- I mean, can you blame huge drug company profits, huge company price increases, can you blame that on government regulation?


REP. BROWN: Okay, so --

MS. ARNETT: This hearing is not about drug company prices. I'm not an expert on this issue. It's a very large industry. I do think that there is an awful a lot of invisibility of cost in the system and a lot of undisciplined cost because the market is so connected. Because consumers are isolated from the full cost of the purchases, because there is so many -- there's such a shell game with cost me passed from one person to another, from employers to insurance companies, to the taxpayer to uncompensated care --

REP. BROWN: Except ironically -- I'm sorry to interrupt and I know the time has run out and I will finish with this. Except ironically in the place where consumers are most connected with the industry without any insurance company between them or any place else, is drug pricing. And the consumers in the free-market have no real ability to say no to this drug, I'll get something else, unless it's a generic drug, and that's where prices have gotten so out of control.

MS. ARNETT: I would hope that that would be a subject for a hearing of another day.

REP. BROWN: Thank you.

Thank you, Mr. Chairman.


MR. BRYANT: Thank you, Mr. Chairman.

I want to thank the panel, and especially Ms. Horsely for your testimony. Let me just ask a couple of questions, and I
guess, Mr. Garcia de Posada, it's been discussed that the Hispanic segment of our population is uninsured for a number of reasons. I think there are other people out there too that are uninsured for the reasons that you highlighted in addition to Hispanic people, and that is the income and small employers.

I know that it has been suggested that we changed the tax laws and give complete 100 percent deductibility to self-employed individuals. And I know Mr. Shadegg has provisioned in his bill that he suggests a tax credit to individuals for their health insurance coverage, would that be beneficial?

MR. GARICA DE POSADA: Absolutely, because part of the problem -- I think -- aside from the issue of understanding public information and outreach to this committee, (ph) you know, you cannot ask, and I'm a big supporter of tax credit, but you cannot ask an individual making $
12,000 do wait 'til the end of the year to collect the money to be able to pay because you have to pay it as time goes on. And I think whether it's a refundable tax credit or whether you allow the individual, if they're self-employed or people who are buying insurance outside of the market, to be able to deduct it 100 percent, you're going to be giving them an incentive for them to actually get in the process.

In preparations for this testimony, I've talked to a lot of our members who have small businesses, and many of them do provide insurance, but they have a hard time providing it. And they're trying to encourage ways of -- identifying ways where their employees can get access to it in an affordable way. So, I think definitley Mr. Shadegg's bill would definitely be very helpful.

REP. BRYANT: Let me ask the panel in general, quick comments on this argument about health
marts and the argument about risk segmentation occurring. Anyone have a response to that as a problem to help health marts?

No one wants to jump in on that one.

Ms. Arnett.

MS. ARNETT: My understanding is that the next panel is going to be talking about that more. I think we were more prepared to talk about access and the uninsured.


REP. COBURN: Would the gentleman yield?

REP. BRYANT: I certainly would yield.

REP. COBURN: A statement was made a minute ago and I just can't let it go. To say that the federal government hadn't created and inducement for high-priced drugs is just ludicrous. It cost $
400 million to get through the bureaucracy and the testing, on average, for a drug in this country, about twice of what it should cost. Because of the FDA, in spite of the FDA, we still have the best drugs. And I'm not defending the profits, don't get me wrong, I think there's tremendous greed in the drug industry, but to not recognize that we have created a false non-market to FDA rules and regulations is ludicrous. And if we had --

REP. BROWN: Would the gentleman yield just a moment.

REP. COBURN: I don't have -- it's not my time to yield. I'd like to finish my point.

The fact is, is we do have great drugs and we do have safe drugs, but we could have more of them and we could have them less costly. There's a drug out there right now, a Primaryn (sp) substitute that the FDA won't allow approval, not on any good scientific basis, but on some type of political favor basis. And so therefore, we have women paying two and three and four times what they should be for estrogen supplementation simply because of some bureaucratic
decision to do a power plan a favor for someone.

Don't tell me that drugs don't cost more because of the bureaucracy in this country. It's not true. And I yield back and I thank the gentleman.

REP. BRYANT: I would yield.

REP. BROWN: Thank you I appreciate that very much. I would not dispute that totally that the cost of -- that the FDA in protecting the public had tends to keep for a while keep the drug companies drug off the market for some period while the research is done to protect the public. But I would also remind the gentleman that some of us went to the NIH last week and you can see the kind of research that government does with our tax dollars. And we all support doubling the NIH budget the chairman has shown great leadership on that issue in the last couple of years, the last three or four years. and
a good bit of the research that's done for those drug -- ultimately for those drug companies is done by taxpayers.

So, the subsidy there or the costs there work both ways. That we clearly as a Congress have decided as public policy that we should spend taxpayer dollars to do a lot of the basic research that these drug companies then can turn around and use to help the public and to make profits.

And I think we've made that decision, but let's not let the drug companies off the hook and say that we're not helping them in that way too. And I know the gentleman from Oklahoma also has said that in the past.

REP. COBURN: If the gentleman would yield? I'd be happy to work with you to make sure some of those dollars come back to the taxpayers.

REP. BILIRAKIS: Mr. Dingell to inquire.

REP. DINGELL: Thank you, Mr. Chairman. These questions first for Ms. Rowland. Ms. Rowland, the
study with regard to the --that was referenced here by The Galen Institute, isn't it fair to say that some of the states they used could be significantly affected by another event like a large employer pulling out of the market?

MS. ROWLAND: In general, in reviewing the study that was done by heritage and The Galen Institute one would have to look at the fact that in these studies we typically do what we call multi-varied analysis where we control for a variety of factors. This is just looking really at one variable. Whether or not the state had regulations. And you're' exactly right there could be a number of other factors that explain the difference between the states and a study should really take into account all of those factors. I could make an association between the number of Republican versus Democratically controlled legislatures and the number of uninsured and that would be an equally flawed study.

REP. DINGELL: I would think you could also for
example, deal with weather too.


Am I fair?

MS. ROWLAND: The other thing I think that should be pointed out is that actually the insurance rate, the rate of uninsurance in the states with regulation was somewhat lower than in the states without reform, although they experienced a somewhat greater increase over the time. And I think it really points out how complex what shapes any states uninsurance rate is. It depends at any given time on the economy, on the nature of the jobs in the economy. I mean, Motorola as you said can pull out of one state and take with it a large part of the insured base.

REP. DINGELL: Now, let's go to another thing. Would it be fair to inquire, is the study examine the effect of specific reforms on the population? And what those reforms were intended to address? Did the study examine
specific reforms compared to coverage rates in the larger market, which include markets that these insurance reforms did not affect?

MS. ROWLAND: Well, my understanding of the study, and I'm not the author of the study, was that it really looked at the changes in the rate of uninsurance in the state in contrast to the implementation of a number of legislative reforms, some of which may have had little to do with the insurance changes. Some of them may have very well been directed almost exclusively at getting coverage for people with prior existing conditions through insurance pools and you would not have picked up those kinds of changes in the broad aggregate statistics being used in the study.

REP. DINGELL: Was there any effort to relate the questions to the events that of that first study?

MS. ROWLAND: In my reading of the study it was looking at it state by state. But it was not
looking at some of these other events or really categorizing the nature of the legislative changes.

REP. DINGELL: Now, I gather that the study then considered data on covered populations which state reforms can not and do not reach, is that correct?

MS. ROWLAND: Well, it would be on the broad -- it included both those in ERISA plans as well as those in general plans. And obviously state regulation at this point does not reach people with ERISA coverage.

REP. DINGELL: I was going to come to the question of ERISA plans as well as the large group market, would you want to comment on that?

MS. ROWLAND: I think my major comment is being that I think there are more intensive ways of examining the questions that the study proposed and that future work should really look at a wide variety of the variables that influence whether or not a state has an increase or decrease
in the number of uninsured --

REP. DINGELL: Then, would you want to define your opinion of this study? Would you rely on it then as a piece of accurate academic research?

MS. ROWLAND: I would say it needs a lot more work to be a piece of academic research.

REP. DINGELL: So, in your estimation what kind of effect have market reforms had on coverage?

MS. ROWLAND: I think the effect of market reforms on coverage have been extremely mixed I think in many places they have helped to increase the number of people with preexisting conditions who have access to an insurance pool and I think in other places we have seen in New York and other places community rating has cause some increase in premiums so, I think you really need to look at really very carefully the effects in individual states.
Overall, market reforms have helped to protect people from some of the abuses identified especially in the individual insurance market , but they have also come with some cost associated.

REP. DINGELL: I think my time is expired. Thank you very much.

Thank you, Mr. Chairman.

REP. BILIRAKIS: Thank you.

Ms. Arnett, would you care to follow up on the ranking members questioning regarding your study, which you did not have an opportunity to speak to?

MS. ARNETT: Thank you, Mr. Chairman. We looked at the six variables identified by the General Accounting Office in two different studies as the most common insurance regulations that were being enacted by the states, including community rating, guaranteed issue, guarantee renewable, portability et cetera. To look at the impact of those six provisions that were so generally accepted as being able to help people getting access to
affordable health insurance.

So, we looked at the states that had done the majority of those provisions. Every state was different. Every state implemented them differently to look in aggregate to begin to see what is the overall effect had. And when we saw that in the first year after all of those provisions were in effect, in the 16 states that doing the analysis had passed the majority of them, we found that their uninsured rates were rising eight times faster than other states. That told us that perhaps there is evidence that we need to look further at the impact of those.

REP. BILIRAKSI: Absolutely

MS. ARNETT: Absolutely, we should look further at the impact of those regulations whether or not they really are in fact helping people as they were designed to do. Thank you.

REP. BILIRAKIS: I thank you Ms. Arnett.

Mr. Garcia de Posada, I don't have any doubt that among Hispanic's there's a disproportionate share of the uninsured. A lot of reasons for that
I suppose. You know one of the things has been thrown out there and I'd like to get your comments on that is because of the reluctance of many to seek out government assistant programs which they may be eligible for. You've heard that mentioned by people up here and those people in your panel. Any comment on that?

MR. GARCIA DE POSADA: Well, I think that you're dealing with particularly with the very poor. You're dealing with possibly a foreign born immigrant population that does not understand the concept of health insurance or the concept of government helping you in these areas. So, you're starting from there and that's why Mr. Ganske's comments about trying to reach out are so critical. And I think that's one of the ways there that associations and community-based could be very helpful in trying to reach out cause they have much closer ties to these communities. Aside from that, I think the whole debate last
year over legal, illegal, et cetera I think scared a lot of people. And they don't understand what they can apply for, what they can not apply for. And fair to say the whole issue of immigration was demagogued to be on belief in a way that legals do not understand that they do have access to a lot of these programs. But once again, whether you use language, whether you use how hard it is to reach out to these programs, I think those are things that need to be addressed because they are critical --

REP. BILIRAKIS: Well, let me ask you Roberto you know there's only so much that government can do. Don't you think that much of that, much of that can be done and should be done and with maybe some assistance from us if you need it. And I'm not really sure that you've passed on to us in what way we can directly help through your Hispanic coalitions or organizations and what not --


REP. BILIRAKIS: I know that for instance years ago when God rest his soul, former Florida governor who was also a United States Senator we worked together on the infant mortality questions. And with all the frustrations that we had and all the meetings we held we really came to the conclusion that yes, it was just terrible in the United States. No question about it. But much of the problem was we had the resources, we came to the conclusion we had the resources, but we couldn't get the resources to the people that needed them, that they were just not making themselves available for those resources. And so, you know that was, and so on, and we came up with ways of mobile vans being able to bring the resources there.

MR. GARCIA DE POSADA: I mean, I completely agree with you. I think that there needs to be -- the honor (ph) should be placed on associations like groups
like mine to be able to go to these communities and to promote this effort and it should not be government.

However, I think government has a role maybe in starting to provide that first assistance or that little push so that associations and groups do go out there and start promoting this.

REP. BILIRAKIS: Well, will you communicate with us, this committee ideas that you may have, because whatever we might be able to do along with you and it can't be done without your group is also going to be available to other minority groups out there and whatnot. So, I know what you're saying about ethnic's coming over, the language problem and everything in that nature. I'm Greek-American and certainly we've experienced the same.

MR. GARCIA DE POSADA: And the institutions are in place, so it's not -- we don't have to reinvent the wheel the organizations and the community-based organizations are there.

REP. BILIRAKIS: But any ideas that you might have
please communicate them with us so that we can take those into consideration ands maybe work with you on them.

Ms. DeGette.

REP. DEGETTE: Thank you, Mr. Chairman. Ms. Horsely, I especially appreciate you coming to talk to us today about your family situation. I know it's always hard for individuals. I have relatives myself who have had these struggles with health insurance. So, I appreciate it. I don't mean to pry but if I can ask you just one more question. You said that you and your husband made, I think about $
13,000 last year. Do you recall how much you paid in federal income tax?

MS. HORSELY: Well, actually every year it changes a little bit as far as our income.

REP. DEGETTE: We change the tax laws.

MS. HORSELY: Also every year
it changes according to what we're making too. Last year we may have earned just a little bot more. This year we will earn -- we may earn that much. Last year I was working say six weeks in the summer also we had a brief separation and I worked two months in Richmond.

REP. DEGETTE: Do you have any idea roughly?

MS. HORSELY: We don't pay much tax. We get pretty much all of our tax refund back where we have the earned income credit.

REP. DEGETTE: Um huh, so you really aren't paying any federal tax that you could get back.

MS. HORSELY: Not really. I think we're getting most of our tax back.

REP. DEGETTE: Mr. Garcia de Posada, your testimony you said that what would help low-income working Latino's and others like Ms. Horsely would be a
tax incentives for individuals, either tax credits or vouchers and I certainly think that's a tool we could use, but the concern I have is for people who are working with low-incomes they just don't pay that much tax and therefore there's not that much you could give back to them. I'm wondering what real -- for someone like Ms. Horsely whose paying $5,000 -- who would have to pay $5,000 a year in insurance premiums how is that tax voucher system going to work exactly?

MR. GARCIA DE POSADA: Well, I mean, from her check there's money being taken into withholding.

REP. DEGETTE: Yeah, but she gets that back at the end of the year because her income is not high enough. So, what's the added benefit to her for the $
5,000 in premiums that she's going to have to pay to get private insurance?

people, maybe government should look at people like her and there should be that extra incentive.

REP.: Will the gentle lady yield?

REP. DEGETTE: But what would it be? Not right now. Let me finish. Thank you.

MR. GARCIA DE POSADA: Well, then there should be a voucher whether it's a voucher program, whether it's --

REP. DEGETTE: But she's not, she's not losing that money to the government now. She gets all that back.

MR. GARCIA DE POSADA: Maybe she should get the money.

REP. DEGETTE: She does get the money. She doesn't pay taxes.

MR. GARCIA DE POSADA: Then she should get additional money for it.

REP. JOHN SHADEGG (R-AZ): Would the gentle lady yield?

REP. DEGETTE: Just a minute. Now I guess my problem is I have been struggling for a long time particularly with uninsured kids. And I think we should
eliminate government red tape. And I think we should do tax credits if they work, but I think for someone who make s$13,000 a year and would have to pay $5,000 in insurance premiums I just don't see how this would work.

MR. GARCIA DE POSADA: Well, I'm sure that you could not pay at all, because the level of --

REP.?: Then what are you going to do about it?

MR. GARCIA DE POSADA: I think that if we start instituting some kind of assistance, specific programs where they can get some additional benefit or some additional source of income to do that through the government tax system maybe it's worth looking at.

REP. DEGETTE: Let me make one more comment to you sir, which is I'm always saddened and dismayed when a witness or another member of Congress makes a purely partisan comment as you did
in this hearing today, because many of us do not believe that providing insurance benefits for lower income Americans is a partisan issue. And in fact, I've got a bill HR 2827, which I would ask Dr. Ganske to look at because of his concerns about CHIP and Medicaid.

This is a bill I introduced on a bipartisan basis. We have Democrats and Republicans on the bill. The goal of the bill is to get the states to look at more streamlined administration of the CHIP Bill and Medicaid Bill so we could get the 9 million kids in this country into some kind of insurance program. And I think all of us on this committee we might think of different approaches, but I think all of us believe that low-income Latino's of which I represent many low- income African-Americans, Anglo's, everyone in this
country regardless of race or ethnic background ought to have health insurance.

MR. GARCIA DE POSADA: But it's a problem that is disproportionately affecting my community. And I think it's -- people like Mr. Green and like yourself who have very large community constituency within your district, I mean this is something that should be highlighted.

REP. DEGETTE: Sir, believe me we do. And it's not helpful to make partisan remarks.

REP. SHADEGG: Mr. Chairman, I'd like unanimous --

REP. BILIRAKIS: Well, you're up next.

REP. SHADEGG: I'd first like to ask unanimous consent to the extend the lady one additional moment so I can just --

REP. BILIRAKIS: Well, I'd rather not do that, cause unfortunately we have a large panel coming up, but you'll have an opportunity that -- we do have votes on the floor too as
a matter of fact, but the chair will yield to you now for your time John.

REP. SHADEGG: Thank you, Mr. Chairman. I just would begin by pointing out to my colleague from Colorado that under a refundable tax credit as in my legislation, which is currently being looked at by the committee as perhaps a committee mark. A refundable tax credit means the taxpayer would get cash back even if they owed no tax. So, for example, in Ms. Horsely's case if she had no income tax liability she and her family would none the less get dollars from the government affirmative dollars out of the government to go buy a health insurance policy.

REP. DEGETTE: Will the gentleman yield?

REP. SHADEGG: No, I will not, because you didn't yield to me and I've got a
lot of points I'd like to make.


REP. DEGETTE: Fair enough.

REP. SHADEGG: I'd like to begin with Ms. Horsely and just talk about her particular situation. Ms. Horsely with her husband and her one child is right at the federal poverty level with a three-person family. The total poverty level is $
13,650 for a family of three. She indicates in her testimony that her health care coverage she was quoted would cost her about $400 a month. I simply want to point out some aspects of the legislation we are considering, which would be a value to you.

The first one is it provides tax equity. And that is a refundable tax credit, which would mean dollars in your pocket to go buy health insurance coverage. We think you should have that. And we think it's very important that it is unjust that the government today subsidizes someone who does the same job as
your husband, but whose employer offers him health care coverage. We subsidize that by allowing the employer to deduct the cost of the coverage and to saying to the employee that it's not income. But for you, again we force you to go out and use after tax dollars, which you obviously do not have to go buy your own health care. So a refundable tax credit like is in our legislation, I think, would give money in your pocket to go buy health insurance.

I would like to point out that the alternatives discussed on the other side of the aisle, for example, expanding Medicare clearly will not help you. There's no one in your family eligible for Medicare. And while extending Medicaid might help because your income level is such that if it were to rise to simply 1.2 times the federal poverty level, you would not be
eligible for Medicaid assistance either.

So that wouldn't do you a lot of good.

I do believe that we can help you by, for example, getting you some coverage through this refundable tax credit by association health plans, health marts, or individual memberships associations. For example, right now you can't join a health insurance plan sponsored by your church or by some other organization that you belong to. When you don't get employer coverage, you don't have the chance to do that. And as the testimony indicated from the gentleman from the Hispanic Business Roundtable, we ought to make it possible for your church to sponsor a plan for you or for any other voluntary association that you belong to.

I guess I would also like to point out that the legislation the committee is looking at and that the committee chairman is considering, at least as he looks at his mark, would include
high risk pools. That would put you in a position where your husband, even if you were excluded as a result of a prior condition, would be able to participate.

But I do want to tell you that last night, after looking at your testimony, we went on the Internet and went out to look for some policies that might be available to you. We found two categories of policies on an Internet Web site set up by Dr. Koop, the former surgeon general. Looking at high deductible policies, we found 16 different policies that would cover you and your family. And would have been able for you to get coverage at prices as low as $
78 a month, which would have meant the refundable tax credit in our legislation would have fully covered the cost of your health care, other than the high deductible and the co-pay, which you might have to pay.

We also looked at
lower deductible in the range of $1,000 to $1,500 deductible and we found 48 different policies in a range of $76 to say $180. You would not be able to afford the higher end of those. But when I listened to your testimony with regard to the question of your husband's preexisting condition, we looked back at those policies. And we found, for example, in the high deductible policies, there was one available from, I believe it's Fidelity Security Life Insurance Company, currently available with a premium of $88 a month. And while they do exclude preexisting conditions, they specifically exclude cancer. However, they specifically do not exclude a preexisting condition of skin cancer. So, that would be a policy that you may want to look at and you might want to talk to my staff about when we finish this hearing.

Mr. Garcia de Posada, I want to thank you for your
testimony. In Arizona, I have a significant Hispanic proportion throughout the state and I'm very concerned about them being able to get coverage. I certainly agree with the points in your testimony and want to just point out that our legislation, the legislation the chairman is looking at, first of all we do, do equality and equity between employer based health care insurance and consumer based health care coverage. We create the tax incentives so that employer sponsored coverage doesn't have the only subsidy. And I think we can work that into the system. I also appreciate your support of health marts. I think health marts would help Mrs. Horsley quite extensively.

Mr. Chairman, obviously I have a series of other questions and points to make, which perhaps I'll get a chance to in the second round.

not sure whether we are going to have a second round or not. We're going to play that by ear, but we do have a vote on the floor, so we're going to break for a half an hour, maybe give us a chance to grab a fast sandwich on the run.

The panel is unfortunately not discharged though. I'd appreciate your patience. There will be people returning who I know will want to ask questions.

Thank you.

(Break for vote.)

REP. BILIRAKIS: The hearing will come to order. Our apologies to the panel and to the audience, we appreciate your patience.

Let's see, we finished up just before the break of Mr. Shadegg. So Mr. Barrett, you are on, sir.

REP. BARRETT: Thank you, Mr. Chairman, and I thank you for allowing the panel to return and I apologize to the panel also
for the inconvenience of having to sit through that vote.

I'm going to sort of follow up on some of the questions pertaining to the tax credit notion, to make sure that I have an understanding of where we are on it because it certainly is an intriguing proposition.

Again, Ms. Horsley, my understanding is that your family income is in the $
13,000 to $14,000 range. You do benefit from the earned income tax credit. So, I'm frankly assuming that you might have, in essence, a negative income tax that you might in fact be receiving money from the federal government. Is that correct, do you recall?

MS. HORSLEY: I think we have some income taxes, just what's taken out. And the income credit is above that. So, we do get a pretty good refund back. I think we got $
1,100 back.

REP. BARRETT: Okay. Okay. And Mr. Garcia de Posada, if I
pronouncing your name correctly, your testimony or at least some of your questions and answers, answers to Ms. DeGette's questions indicated to me that you support a refundable tax credit. Is that correct?

MR. GARCIA DE POSADA: Correct. REP. BARRETT: At what level, in other words, we have a situation here where Ms. Horsley pays little if any in federal income tax. She might have a negative income tax in terms of getting a refund under the earned income tax credit. Would you tack this directly on top of that?

MR. GARCIA DE POSADA: Absolutely. I think we need to figure out -- I couldn't come here and tell you specific what level or what amount. But I think this is something that is worth looking at because it is something that is very much needed and it's something that if we're going to be looking at cost
effectiveness from a government investment, this is definitely in an area worth doing.

REP. BARRETT: And Ms. Rowland, I think that you have some misgivings about this approach. Can you share those misgivings with me please?

MS. ROWLAND: Well, I think that a tax credit approach works the best for those who are able to pay out for the purchase of the insurance policy and then get assistance at the end of the year through the withholding system. My concern is for the lowest income part of the population, those like Mrs. Horsley. They may not have the cash on hand to purchase the insurance policy in the first place and therefore the tax credit would have to be very, very substantial for them to be able to afford $
5,000. So a $1,000 tax credit against a $5,000 insurance policy would not provide the level of assistance that she would need to be able to purchase that kind of coverage.

BARRETT: So your opposition, if I can use that phrase, that word, is not philosophical as much as it is logistic.

MS. ROWLAND: My concern is that it's not as workable an approach for people with lower incomes as it is for people with higher incomes.

REP. BARRETT: And what would you propose instead?

MS. ROWLAND: I currently think we have in place for people, especially children, at the low income of the economic spectrum, the Medicaid program which we need to make more affordable and more workable. We need to reach more children through that approach. And I think for some of their parents, like Mrs. Horsley, it may make more sense to extend coverage through that vehicle than through a tax credit where she would have to go purchase insurance in the individual market.

REP. BARRETT: Okay. So you would build off the CHIP (
sp) program, the CHIPs program.

MS. ROWLAND: The CHIP and Medicaid program.

REP. BARRETT: What are your comments?

MS. ARNETT: Oh thank you, Mr. Barrett.

The chart over here actually is, I think, a depiction of exactly this problem where if you look at the vertical axis, it's on page eight of my testimony, the taxpayer subsidies for health coverage and that the horizontal axis is income. It really does show the two choices we have. If someone is poor enough, the likelihood of being on some sort of federally supported --

REP. BARRETT: I understand the graph. So, what's your point?

MS. ARNETT: It is that either we can move toward expanding that -- filling that gap for 43 million uninsured, disproportionately $
20,000 to $40,000 income, by expanding more government programs, or we can look at the right side of that chart to where so many people that have job based health insurance gets very generous tax breaks for that coverage.

REP. BARRETT: So what's your proposal.

MS. ARNETT: So, my proposal is to say that let's look it, provide them direct tax assistance to those who completely are shut out of the equation right now. They make too much to qualify for public programs and they make too little to get good job by coverage.

REP. BARRETT: How do you respond to Ms. Rowland who says it's a logistic problem with --

MS. ARNETT: Well, the National Health Underwriters Association actually has done a lot of work. They have been studying this problem for about 10 years to figure out how you actually deliver assistance to people so that they can purchase the health insurance in real time and they've done some excellent work on that issue.
But the refundability of the tax credit and getting it to people in time in order to be able to purchase health insurance then and to make it generous enough so that it really does provide a big enough part of the premium.

REP. BARRETT: But you're still not saying how we deal with the logistic problem of a person who has a very low income, giving them $
5,000 in April or May of the year 2000, doesn't help them with their health care needs in 1999.

MS. ARNETT: But it could be done. It doesn't have to be just done annually. It could be done, either it could be advanced so the premium could be paid all at once. It could be done over monthly. There are a lot of different ways. It is complicated to how you deliver it, but it's no more complicated than Medicaid. And the National Association of
Health Underwriters has done a lot of really good work about the delivery mechanism so that it doesn't have to be refunded at the end of the year, but it could be provided in real time.

REP. BILIRAKIS: Well, the gentleman's time has expired. But it's a point that has been made by others and I think it's a very meritorious point.

As my understanding is, that as Ms. Arnett says, refundable tax credit doesn't necessarily mean lump sum the following year, that it can be done in an incremental basis.

And Mr. Shadegg may or may not be returning, but I believe that that's his intent.

Mr. Greenwood, I believe you were here first.

REP. GREENWOOD: Everybody up here wants to solve the Horsley family problem. And it's a real problem. We want to solve it. And what we don't want to do is pass the law that we pass
most often, which is the law of unintended consequences and make matters worse for other folks.

And I think that the hardest part of this and I hope some of the panelists would have some suggestions is, the only way to get her family, Mrs. Horsley's family insurance is that somebody's got to pay for it because they don't have the income to pay for it. And you can deregulate it as much as you want, it still isn't going to be free. It still isn't going to be affordable, so somebody has to pay for it.

Now, if the taxpayers pay for it, whether they pay for it with, as Mr. Shadegg would, with a refundable tax credit. Or whether we pay for it by raising the level of Medicaid, the unintended consequence we haven't figured out how to deal with is that somewhere down the road there's another shop employing other people at the same wages who is paying
health care benefits. And the guy down the street who is paying health benefits is going to say to himself, when we take care of the Horsley family, well that ought to take that burden off my shoulders then. Because if the taxpayers will pay for it, one way or another, through a tax credit or Medicaid, then why am I doing it. I'll just dump that on them.

So, it becomes a slippery slope and I think we're sort of afraid to pull that brick out for fear of the consequences. So, do any of you have any comments about how we fill the gap without creating more of an incentive for employers to drop coverage or disincentive if you will to provide coverage, thereby making the burden suddenly double or triple or quadruple?

And if you can answer that question, you win.


MS. ROWLAND: Well, in the world of mandates,
one of the ways you prevent that from happening is you impose an employer mandate, where employers are required to provide coverage to certain individuals or to maintain coverage, but that's in the world of mandates.

REP. GREENWOOD: It's convenient that the woman from the center -- witness is not here because she would probably disagree with that.

MR. GARCIA DE POSADA: I do. Imposing more mandates on small businesses is not the way to do it. But I think that you do have some incentives in the tax system for an employer who can afford to provide health insurance. In some cases not quite as convenient for that employer to provide it and I don't think that employer would automatically drop somebody because it's also partly a tax benefit.

So, that could happen in some instances, but it's not overwhelmingly the pattern that's going to continue. However, I think that ultimately if we're looking
at the, that with the mobility that we have in the workforce that the idea of allowing self-employed or individuals to buy outside of the workforce, to be considered at the same -- be able to fully deduct their wages. That's going to be also --

REP. GANSKE: Would the gentleman yield?


REP. GANSKE: I think that another situation frequently occurs, and that is that an employer will offer insurance, but for the employees who are at the lower income scale in terms of his or her business, the employee then makes a choice that I am not going to take that benefit, because I don't want pay my share-- my cost share of it, I think that Mr. Shadegg if he where here, would probably make the argument that his tax credit would there -- could actually be considered a help to that individual. To help them then manage their cost share of that individual insurance.

MS. HORSLEY: Well I just -- something I just -- I
think I got it on the e-mail through Families USA, I think, somewhere on the Internet. But there are programs that just came about in California, where they've raised the minimum wage to seven or eight dollars an hour. And then enabled them to help pay for a state program, in order for the individual to have -- I mean you know if my husband wage was raised, and I know down in Newport News where they've been striking for like -- you know they want to be paid like $20.00 an hour at the ship yards, and think my gosh, $20.00 an hour and he makes a five something an hour or six somewhere around that. You know -- just even a raise of seven or eight dollars an hour would give him that much extra to be able to pay some on health insurance.

REP. GANSKE: Okay, thank you.

MS. ARNETT: It really is a cost issue. Now if people have money -- to some percentage of them, and I think it depends on how much money it is, we'll have to the demographics, will purchase health insurance. And one of the most important things about health insurance is pooling risk and having large pools. And if the tax credits were directly targeted to individuals then a large percentage of them are going to use that to purchase health insurance. So their buying insurance, rather than gaming the system, as many do when they don't have any subsidies and they just wait till they get sick now and then purchase health insurance and then the premiums go up.

So it's getting the money to people so they buy it, it's a critical factor.

REP. GANSKE: Thank you.

REP. BILIRAKIS: I thank the gentle lady.

Dr. Coburn.

REP. COBURN: I'm reminded of President Clinton's statement talking about taxes, we can't give it back to you, cause you may not spend it right. And the philosophy is we can't give you tax credit for your health, because you may not make the right choice that we think you should make with your money.

Isn't that ironic?

Dr. Rowland, what is the Kaiser Commission on the Future of Medicaid? And what's its mission statement?

MS. ROWLAND: The Kaiser Commission on the future of Medicaid was established in 1991, to do research and analysis on the Medicaid Program and covered the low-income population. And in 1996, the commission was reestablished as the Kaiser Commission on Medicaid in the uninsured, it is a 15-membered national commission chaired by James Helen of New York, and the commission membership meets reviews and discusses the analysis prepared by the commission
staff, and then they're (beliefs ?).

REP. COBURN: What's it's mission statement?

MS. ROWLAND: It's mission is really to look at health care coverage for the low-income population, the role Medicaid plays in covering the low-income population, in the extent to which Medicaid is meeting health needs and long term care needs, for both low-income families, the elderly, and the disabled. So it really is a policy institute and its mission statement, is to look at how adequately low- income populations are covered today.

REP. COBURN: And it's not a federally funded commission?

MS. ROWLAND: It is not federally funded, no.

REP. COBURN: Okay. So part of it is to make sure Medicaid meeting the needs that are out there for those that do not have health care, and cannot get health care?

MS. ROWLAND: Correct,
it is to analyzes the way in which the Medicaid Program is operating in the 50 states, and its jurisdiction.

REP. COBURN: In your history you know you heard me make my statement about HCFA, which I make a every opportunity I get, you having being employed at HCFA, what's your thought of HCFA?

MS. ROWLAND: I was employed at HCFA at its creation, at the time I thought the health care financing administration had an important role to play in trying to set standards for the previsions of services under Medicare, as it was charged by federal legislation's to try to implement the Medicaid Program. I think today it is struggling under a lot of different charges and different burdens, and it could do a lot of thing better and it could do a lot of things worse.

REP. COBURN: And you also work
for this committee?

MS. ROWLAND: I work for this committee, until 1991.

REP. COBURN: What years did you work for this committee?

MS. ROWLAND: I believe it was 1987 or 86' to 1991.

REP. COBURN: Okay, all right.

I'm sorry that Terry Neese isn't here, and had to leave. She should have been the lieutenant governor of the state of Oklahoma, and lost in a very close primary. But she's done great work, for women business owners in terms of raising their issues. But as the gentleman from Puerto Rico has stated, it's not just women business owners, it's small business. We are innately unfair in how we treat them, especially if they're unincorporated, because we say you don't have any tax benefit that's equal to what we're going to give somebody who is incorporated.

I wonder if any of you all would offer any suggestions on things that we've
asked a lot of questions about what the study's have shown, and I tend to agree with most of what I heard, especially from Ms. Arnett. Having -- knowing -- with the knowledge that I continue to practice in a small community that has a ton of small businesses who cannot afford insurance for their employees, what else could we be doing? What else could we be doing?

Yes, ma'am.

MS. HORSLEY: Well, I did want to say that, so much of what we have problem with is trying to get coverage for hospital and specialized care. I do want to point out, that the care that we have on the Eastern Shore as far as basic care and you know, just going to the doctor for you know -- a check up, we have the Eastern Shore Rural Health System, which I'm very pleased with. You know as far as it provides my family -- we can go to the doctor and get a basic check up at a
sliding scale, and I don' t know you know how and what the state and federal -- REP. COBURN: It reminds me of a question, I was going to ask you, so basically you're getting preventive care if you need it. Is that correct?


REP. COBURN: Okay, and when you delivered your baby, did you have Title 19 or Medicaid to assist with your delivery?

MS. HORSLEY: I did at that time, I did have some insurance with Nationwide.

REP. COBURN: Okay, okay. Well I guess I'll yield back, thank you chairman.

REP. BILIRAKIS: Mr. Burr. I know that you're on a role there Tom and I was kind of interested in some of the responses, but I really think we ought to -- we have a panel of seven people coming up. Go ahead, Richard.

REP. BURR: All right let me thank
all of you, and I'm going to be very brief, cause there's one thing that I do understand from today. Even if you dropped health insurance and you capped drug cost, health care is not free. I mean that's a reality. And that in American society, businesses strive everyday for new devices, Pharmaceutical companies along with the help of NIH and many research teaching hospitals around the country, strive to try to find the breakthrough for terminal and chronic illness, that we've made a tremendous amount of progress in. But somebody has to pay the cost of that and that the American people want the best, they want the absolute best. I watched a show last night that talked about new 32nd Cat scan, I think General Electric is the manufacture, and it was used in trauma cases. And when that trauma victim comes in 30 seconds, they have scanned the entire body, have a three dimensional view, they know exactly where to go for what the problem is. Dr. Coburn told me that in some cases it's eliminating angioplasty because or excuse me catheterization because of the option that exist. This is a good thing, but it cost something, it will make the cost of health care increase, but it also makes the quality increase. And I think the reason that we're here is that a lot of members feel there's a disconnect between the cost and quality. And I think that, in fact, it is something that we should question. It is something we should look at; we should strive for new efficiencies if in fact they're available. And yes we should get the federal government out of the way, if in fact it's a hurdle or a contributor to that cost increase.

I was looking, Mr. Garcia -- is he still here? I was looking at North Carolina, the
Hispanic population of uninsured since 1998, 1999 has gone from 23.8 percent to 52.7 percent at a time where coverage, by most definitions, has doubled if not tripled for the population. And I think one of the questions that we should of you, how much of it is a communication breakdown?

MR. GARCIA DE POSDA: I think a good chunk of it. I think that a good part of it is a communications breakdown and the fact that a lot of these people, first don't know about -- are not familiar with the concept, or the fact that they just don't understand the process. I think a lot of people can not comprehend the access of government giving them some services when you're very poor. And they do not understand the concept of health insurance when you're a low-income worker. I think once we begin the process of communicating to them, that's why we're such
strong supporters of the idea of equalizing the employer base and the individual purchase because I think that way we'll start putting a lot of more responsibility on the individual. If we start working in some of the community based organizations or some of the associations to start participating and be responsible.

I don't think that the government should be providing this all himself, I think there has to be a strong component into this program, there has to be personal responsibility. And the individual working, poor or middle-income, should be paying part of their cost because it's to their benefit. But I think the communication part is critical.

REP. BURR: Ms. Rowland, how much of the cost of health care is the threat of litigation today? Have you looked at that?

MS. ROWLAND: We haven't looked specifically at that. It is a share of the cost but a lot of the cost of health care is also, as you pointed, our advances in technology, and drugs and devices today are the
two largest contributors to most of the cost increases facing hospitals and a lot of the physician offices.

REP. BURR: There is an interesting study done by the University of Indiana that compares -- if I could just take a second, I think this is very insightful for everybody to know. They compared doctors who said, I don't do any test, based on the threat of litigation, to those who say, man I'm scared to death. What they found is there's no difference. They all do a bunch of test because they're afraid they're going to get sued.

The cost in 1989, in 1989 dollars, was $
33 billion, just in unneeded test on the basis of trying to document something that they knew that they didn't document. Now you can extrapolate that that's about $100 billion right now in terms of 1989 dollars -- (bell sounds) -- so it's significant.

Just one last question, Mr. Chairman, to Ms Horsley. And if I don't state your position right, correct me. You don't want something for free; you'd just like to have a choice of something that fills the need at a price that's affordable. Is that an accurate statement?

MS. HORSLEY: I'd like to be able to afford something, yeah. I mean, you know, yeah, I would like too. But, right now, we're in the situation that the only choice there is, is the SLH and we, in order to get by, we depend on my little bit that I bring and if I bring anymore, we won't get SLH again in July. I mean, that's how it is. I have to reapply in July.

REP. BURR: You see your position as SLH, I see it as SOL, and I won't define that
for you.


MS. HORSLEY: That's the other thing in Virginia, so, I mean -- you know.

REP. BURR: Thank you, Mr. Chairman.

REP. BILIRAKIS: Ms. Horsley you -- just very quickly. You mentioned Rural of Health Care, was that a community health center?

MS. HORSLEY: It's Eastern Shore Rural Health System Incorporated.


MS. HORSLEY: And it's a series of clinics up and down in North Hampton and Accomac County going from Bay View Medical Center all the way up to, I believe, Metomkin is the furthest north, I'm not sure. But, you know, in each little area on the shore on those two counties, there's a clinic. Now, I know I think they do have one x-ray machine and only -- although my doctor sent me to Shore
Memorial, which means it cost $223 for an x-ray, but --

REP. BILIRAKIS: Did you have to pay that?

MS. HORSLEY: I do, out of my pocket.

And I believe from the their Web site, they are looking for a dentist, currently, so that they can include a dentist in their system. But as far as basic care though, you know, the do very well, (maybe not enough (ph)) doctors. They provide a place for doctors to work at after they come out of medical school so that some of their -- you know.

REP. BILIRAKIS: Okay, so you get the basic care there.

Did you want -- I'm doing what I should be.

MS. ARNETT: Just this one last point. And also to answer Dr. Coburn's question, all health care is local. And there is so many opportunities at the local level to provide access to care that are unique to those communities.

But the federal
government, by providing tax credits to the uninsured -- refundable tax credits, and also perhaps allowing some of the kid care money to be able to be -- that is not being used now -- to be able to be targeted through vouchers and through tax credits that's supplemented at the state level, would provide many more resources for people to be able to get access to the system and then allow the communities to supplement as well.

REP. BILIRAKIS: All right. Well, we --

(Conferring off mike.)

REP. BROWN: I'm not going to ask a question, I just want to have consent -- request -- (off mike.)

Thank you, Mr. Chairman.

I have two letters and I would like to submit one -- Congressman Norwood from the CBO about the issue of health insurance, private premiums going up, is there any impact on the amount of coverage. And there seems to be no real evidence, there is, according to these two
things I'd like to enter into the record.

REP. BILIRAKIS: Without objection.

REP. BROWN: The third, Mr. Chairman, is a couple of people on the panel cited the Commonwealth Fund Study and I want to just point out one page that I would like to enter into the record and that is that Medicare beneficiaries of all of the providers of health care; employer, Medicaid and uninsured for that matter, the question of the number of people satisfied with health care services, Medicare had the highest percentage of satisfaction. And I think that's significant light of the sort of the tilt of this subcommittee hearing today.

REP. BILIRAKIS: Without objection.

It's interesting that Medicare even had a higher degree of satisfaction that Medicaid, and Medicaid is considered to be a much higher quality, really, particularly in terms of the benefits plan that Medicare.

Well, all right. Thank you so much. I think you can see
how much help you have been. You've been very patient. There will be questions from the panel to you in writing. I know Dr. Coburn and others didn't get the opportunity to go into it any deeper. So, we would appreciate your responding to those in very quick time because we're on a quick path here.

(Switching panels.)

REP. BILIRAKIS: I would ask panel two to come forward.

Dr. Daniel H. Johnson, president of the World Medical Association; Mr. Raymond Arth, Phoenix Products, Inc., on behalf of the Counsel of Smaller Enterprises; Mr. Robert N. Morehead, area president of Gallagher Byerly, Inc., of Englewood, Colorado; Mr. Richard Carlson, executive director of the Illinois Comprehensive Health Insurance Program from Springfield, Illinois; Ms. Christine Baumgardner, executive director of the Alcona Health Center, Lincoln, Michigan; Mr. Len Nichols, principal
research associate of the Urban Institute and Mr. Jack Meyer, president of the Economic and Social Research Institute based here in Washington, DC.

Ms. Baumgardner and gentleman, welcome. We again appreciate your patience sitting there for what, three plus hours. Your written states, which have already been turned into us, are apart of the record. And the chair will give you five minutes to compliment those as you supplement those or read them if you wish, whatever the case might be.

We'll kick it off with Dr. Johnson, president of the World Medical Association.

MR. DANIEL JOHNSON: Thank you very much, Mr. Chairman.

My name is Daniel H. Johnson Jr., MD. I am a practicing diagnostic radiologist from Metairie, Louisana and I'd like to express my appreciation for the opportunity to testify. I would like to summarize the written testimony that I have submitted as follows. We have three things, a
significant problem, a need for change, and in my view, a remarkable opportunity.

I'd like to emphasize, Mr. Chairman that I am testifying as an individual, but not representing any organization despite the current and previous activities that are listed.

REP. BILIRAKIS: So you are not testifying on behalf of the World Medical Association.

MR. JOHNSON: No, I am not.

REP. BILIRAKIS: Thank you.

MR. JOHNSON: Thank you. I'm here as an individual testifying from the perspective of a practicing physician and from the perspective of a small business person with 12 full-time employees in my medical practice.

With respect to the significant problem, nearly everyone is miserable. The patients are angry and are terrified. The business is worried about the return of double- digit escalation of costs. Insurance companies are complaining about the loss of profit in the provision of their
products. And physicians, I'll list them last, because no one seems to care about us. But physicians are angry about the disruption of the patient-physician relationship, which has occurred over the last several years as we seek to solve a cost problem. And now, in an era of unprecedented prosperity, we have an ever increasing number of uninsured. If that system is not broken, Mr. Chairman, I don't know what is.

The need for change is clear and as a physician, in my view, I'd like to see all patients be able to get the appropriate care in the appropriate setting at the appropriate time in their illness or injury. And I believe that every individual ought to have some mechanism of financing his or her health care to get that appropriate care.

As a small business person, I want my employees to be able to choose their own doctors, whichever
doctors they feel are desirable for them to see. And be able to choose their own insurance plan and to be able to change if they don't like the choice that they made. I want my employees to own and control their own insurance. And I would like to continue to provide the benefit for them, but it's very important to me to know how much it's going to cost next year and in the years that I look ahead for providing that benefit. And those things don't necessarily exist in the environment that we have today. And the result is that those patients who have insurance are insulated from the cost of their care by third party payment so we have a disconnect that doesn't occur anywhere else in our economy.

As one of my colleagues from St. Louis pointed out, employees in this country have become commodities to be auctioned off to the lowest bidder. This is not a desirable situation for them, in my judgement. And the
cost of insurance, nevertheless are again beginning to increase at unacceptable rates. And once more, the number of uninsured is increasing.

Now, Mr. Chairman, I spoke earlier about having a remarkable opportunity for solution. I believe that opportunity is there and that it's real. It's been my experience that there is widespread understanding of the potential of expanding choice, creating a better marketplace by having a competition between imperfect financing mechanisms, of taking advantage of individual selection and ownership of insurance with a periodic right to change if dissatisfied, and with the notion of defined contribution and to private sector having the employer put up the same amount of money no matter which plan the individual picks. And the same thing is true in the government programs, to have the government provide that individual with a defined contribution, no matter which plan the person takes.

The discussion about how to accomplish those things has revolved
around a variety of subjects, one of which has been discussed at some length earlier in the first panel, the notion of tax credits. I support tax credits, and it's not the subject of this panel and would answer questions about, but I'm not going to go there unless you ask me to. What I do want to emphasize is the notion of voluntary choice cooperatives. I'd like to explain that term a little. Voluntary means that for those employers or others who want to use it, that they would be able to. No one would be forced to. Choice, the name is implicit there, some mechanism of giving people the opportunity to choose between these different kinds of plans. And the cooperative term refers to pooling people together so that they can take advantage of the rule of large numbers. The pooling concept has been addressed in the earlier panel and it's very important.

I make the distinction in my own
thinking about this between voluntary choice cooperatives and voluntary purchasing cooperative. To me, a purchasing cooperative entails micro-management by the employers who come together to put that together. A choice cooperative would function simply as a clearinghouse, qualifying the plans much as is described in Congressman's Shadegg's plan as I understand it for health marts. And it certainly is my opinion, Mr. Chairman, that health marts should be adopted, but that they should look more like voluntary choice cooperatives than voluntary purchasing cooperatives.

REP. BILIRAKIS: Well, just finish your point.

MR. JOHNSON: Simply the only other point I wanted to make, Mr. Chairman, was a personal plea to you. I've had the opportunity in my experience as in organized medicine to see you and your colleagues on the committee at work. And I'm aware of
your interest in these issues. And I'm also aware that there are unbelievable conversations going on in these halls between very diverse members, without respect to partisanship, toward crafting solutions.

And my plea to all of you is to take advantage of that opportunity and to realize them.

Thank you.

REP. BILIRAKIS: Thank you so much, doctor.

Mr. Arth.

MR. RAYMOND ARTH: Thank you, Mr. Chairman and members of the committee. I'm glad to be here today.

I am Raymond Arth. I'm the president of Phoenix Products, located in Congressman Brown's district in Ohio. We are a manufacturer of plumbing faucets and employ about 100 people.

As a volunteer I serve as the chairman of Group Services, Inc., which manages the benefit plans offered by the Council of Smaller Enterprises, or COSE in the Greater Cleveland are. I also serve as a member of the board of National Small Business United, the
country's oldest small business advocacy organization.

We're very pleased that you're trying to review options to expand coverage for the uninsured. And quite frankly, I'm pleased to be able to talk about a model that really works. We think that the health marts might be a good solution if they're done right and looked more like our plan. But we're presently concerned about the federal regulation composition of the boards and some other things.

Before I describe COSE's plans, let me make two points. What we've accomplished in Cleveland did not require any federal legislation. And one of the things that makes our organization unique is that the board members who govern our plans are actually the consumers, small business owners who get their own health insurance through the COSE plans.

Let me tell you about the COSE success story. Today, we have
16,000 members in a seven county area that we serve near Greater Cleveland. This is a tribute to our 25 years of hard work to deliver small business insurance. As evidence of that success, 13,000 of our members and over 200,000 lives are covered under the COSE health plans. And I should mention that 2,500 of those companies did not offer insurance to their employees before they joined COSE. We also manage health benefit plans for several other chambers in Northern Ohio. And all totaled, we have over 15,000 companies and almost 250,000 covered lives in northern Ohio.

The COSE plan provides up to 18 plan options, everything from fee-for-service to PPOs, triple option plans, HMOs and MSA. Any individual employer can offer more than one option to their employees and we focus on companies typically with 150 employees, down to
an including one. Sole proprietors would be covered.

What makes GSI, Group Services, Inc., and the COSE plan different is that GSI is actually the customer. We negotiate on behalf of our members. We manage the administration. We buy the insurance from our providers. We are not a multiple employer trust, a Taft-Hartley Trust, a VEBA or a MEWA. We are basically a not for profit purchasing coop and we are negotiating on behalf of ourselves for a product that we are buying and using.

We believe our program works because first of all we know our customers. We are them and we also poll them regularly. We track the utilization and cost of services that are used by our members. We have centralized the administration function. We do the billing. We remit payment to carriers. Our administrative costs are about 13.5 percent in an industry where rates as high as 30 percent are common.

Our members get one bill regardless of how many benefit plans they
offer. They pay us with one check. We've standardized paperwork and forms across our carriers to try to take out inefficiencies and unnecessary costs. We've also taken a long-term look at our objectives, have long-term commitments with our carriers and this has produced more stable and predictable rates for all of our members. They can get better prices than they can get on their own and we have had a history of providing very stable pricing and rate increases that typically are about half what the industry averages are.

As you consider the health marts, I'd like to identify six factors that have made us successful. Today, we have the benefit of size, which is the result of 13,000 companies and all those lives and we leverage that size into purchasing power where we sit down and negotiate with our carriers. We have two primary health insurance carriers. We are the largest customer for both. So, when we sit down to negotiate, we've got a
lot of clout.

We have made long-term commitments with these carriers. We have a proactive management approach. We've got a very active board, again of volunteers and consumers who are very aware of the problems that may exist, and opportunities to improve our product. In addition to that long-term commitment to our carriers, we also try to maintain a decent and working relationship with them. When we sit down to negotiate, we know where the numbers are. They need to make money. We need to pay as little as possible and it's worked well in the long- term.

And finally I want to emphasize again the importance of a board that is comprised solely of the consumers and the interested parties at the buying end and not every stakeholder who has a say in the proposition.

It's been said before that health care is a local issue. We have addressed it in Cleveland as a local issue. We have brought health care in the
Cleveland area down across the board and we've built a very successful plan that serves the small business community in particular.

I should mention in closing that our average member employs six and a half employees, so this is a product that's really targeted at those smaller companies where we have identified a large proportion of the uninsured population being employed.

Thank you very much.

REP. BILIRAKIS: Thank you very much, sir. I'm glad that there are at least five of us to have heard your testimony.

Mr. Morehead.

MR. ROBERT N. MOREHEAD: I wish to thank the committee for this opportunity present testimony on health marts. I'm the area president of Gallagher Byerly, Inc., and I'm also a small businessman.

Gallagher Byerly is an employee benefits consulting firm that's been actively involved in multiple small employer health plans
for more than 20 years all across the country. We currently administer consumer choice, health care purchasing cooperatives in four states: Washington, Oregon, Colorado and Montana. In total, these cooperatives include 2,150 employers and over 23,000 employees. And I might mention that the oldest of these, the Colorado Purchasing Cooperative is three years old. So they're fairly recent developments.

The purchasing cooperatives we administer include both large and small employers, but the primary focus is aimed at giving small employers and their employees, additional clout in choice in obtaining health care or health insurance coverage. With this concept, employers are able to make more choices of plans and coverage available to their employees and they're relieved of the burden of having to administer the coverage. You might think of this as a 401K health plan. In addition, the employer is not placed
in a bind of having to seek out new health insurance carriers, often every year in order to cope with sharply rising premiums. Cooperative handles that problem and the availability of a number of plans up to mitigate premium increases on the part of any one plan.

Does the purchasing cooperative concept expand access to health insurance coverage? Well, we don't have figures for all of the states that we cover. We do know that in the State of Washington, 17 percent of the sales are with companies that didn't previously offer health insurance coverage. In Colorado, that figure is over 30 percent. The information from Oregon indicates that it's 20 percent in Oregon.

Equally important, we are in most cases, able to tailor plans to meet the coverage needs of the employee. These cooperatives have telephonic customer service that's available to all employees to assist them in selecting the proper
benefit plan and also to determine the health plan that contracts with their own family doctors.

In Washington, 90 percent of Washington physicians are participating in one or more of the plans offered to consumers through the cooperative. Because of that 90 percent figure, employees are virtually assured of the opportunity to retain their family physicians when enrolling in the cooperative.

Do purchasing cooperatives reduce the cost of insurance coverage? We think they have a positive impact on overall costs and coverage, even if actual premium costs in a number of cases may stay the same. We're finding out the availability of a much wider range of choices is viewed as a positive factor. With the employee have the ability to participate in plans where their family physicians are participating providers, the employees out of pocket claim costs are reduced, even if the premiums are not.

It should also be noted that the coverage we administer is still subject to state
benefit mandates. We estimate that dropping the state benefit mandate requirements as is provided for in at least one of the plans under health marts, could save 15 to 20 percent. The administrator of the purchasing cooperative, such as Gallagher Byerly can also help to limit costs in several ways. With large numbers of participants, we have more clout in dealing with insurance carriers than does the individual small employer. In administering the daily activities of the cooperative, we have the benefit of experience, volume, and sophisticated computer systems that the employer does not have, thus allowing us to operate more efficiently and provide a more efficient expense component.

We also act as a patient advocate to help the patient navigate through complex health care issues. It's important that this service be provided by experienced, impartial persons that are not affiliated with the health plans. It's another benefit of health marts.

on our experience, we think that the purchasing cooperative concept represents an important way to expand access and choice. Establishing broad national standards as the health mart proposal would do, would make it easier to expand the concept nationwide. Often these programs have been blocked by state laws passed for other purposes that have unintended consequences. And establishing national standards, however, it's important to allow reasonable flexibility or to permit innovation and the adaptation of purchasing cooperatives to meet local needs.

I think it's important to keep in mind that we believe purchasing cooperatives have a potentially bright future, but they're still in their infancy and we need the flexibility to experiment in order to fully determine what works best. Legislation that provides too many specific requirements at the outset will make this experimentation more difficult.

REP. BILIRAKIS: Please summarize if you will.

ARTH: Okay.

Just run a couple of points on the design of the bill itself. A revised version of the health mart proposal requires at least four plans be offered, including a non-network plan and two of those plans providing state mandated benefits. We think this goes too far. It will tie the hands of those who may be interested in organizing a health mart, and I want to emphasize this. Frequently, the number of plans that a carrier can offer might differ based on a lot of factors further requiring the same level of benefits statewide, will not allow for adaptation within the state such as in counties where there may not be a hospital, may not be a doctor, may not be any networks that we can work with. So we have to provide the best coverage that we can
in each geographic location, but it may not be identical to the coverage that's available in urban areas.

So, we think purchasing cooperatives or health marts are viable programs. We think they should subject to the competitive pressures of the marketplace and we think the competitive marketplace allows the ideas to grow. And we think this is a proposal worthy of adoption by the committee with a few changes.

REP. BILIRAKIS: Thanks so much.

Mr. Meyer.

MR. JACK MEYER: Thank you, Mr. Chairman. I'll just summarize my remarks. And I've submitted for the record a longer study on health marts and association plans that my colleague Elliott Wicks and I have done.

Imagine that this pitcher were filled with water and that the water in this pitcher was all the 43 million uninsured. As background for what I want to say about these health marts and association plans,
I want to point out that what complicates the problem is that everyday more water is going into that pitcher. And it's coming from the employer sector where people, particularly employees are turning down employer's offer because they can't afford the premium. People with incomes like the woman on the previous panel of $13,000, can't afford a $2,300 premium contribution, which I note in my testimony is the average for people in small business, so they say, no thank you.

In addition only 49 percent of small firms under 10 employees offers health insurance. So more people are coming into this pitcher. And they're also coming from Medicaid because of Welfare Reform, which has done a lot of good things. The welfare rolls are down by 4 million, but a lot of people come off welfare or divert and they can't get Medicaid anymore
after a period and they don't qualify for private health insurance. So they're all coming into this pitcher and we haven't seen anything yet because most people haven't hit their time limit.

Now proposals like the ones we're here to discuss today in my view, are likely to maybe drain five to10 percent of the water out of this pitcher. I say that. There are some estimates that show there's likely to be no effect. There are some estimates as high as 15 to 20 percent, but I think the bulk of the range would be fair to say is in about a five to 10 percent range as a result of getting rid of mandates. I'm not a fan of mandates. I don't think the government should load up the insurance package with a lot of requirements. But I'm realistic and I believe that in eliminating those mandates, which would have
some hardship for some people when some of those mandates cover mental health or substance abuse and so on.

The likely effect is to maybe offset the new water coming in with the five to 10 percent reduction of water drained out. So we will be meeting in this room two years from now and we'll still have a water pitcher that's full. And so I don't come up to ridicule or severely criticize these proposals, but to be realistic about what they are likely to be able to achieve and also to point out a few side effects that could be troublesome.

I have to say that in fact to really drain half or most or all of the water out of this pitcher, we're going to have to revisit the terribly difficult and controversial options that have been considered by this Congress in the past. Those include, whether to take that family with $
13,000 of income, and as the gentleman from Arizona pointed out, really help them, not just waive their federal taxes. She doesn't pay any federal taxes. But to really help her and her husband buy health insurance and that costs money, and whether to require an employer to at least make an insurance vehicle available, perhaps to contribute to it. That's controversial. It could lead to some layoffs. Perhaps require people to accept that offer and certainly to have more insurance market reforms so we don't get all the risk selection. Those are the options we need to consider. Now, let me just comment very briefly on these two proposals, health marts and association plans and I want to underscore the point made by Mr. Arth, about the health marts. It's nice to have everybody in the same room from a point of view of cooperation. I don't believe in confrontation, but the real progress -- we've been studying business coalitions like COSE and others, large businesses for 15 years. And the real progress comes when buyers are on one side of the table and sellers are on the other side of the table. Yes, they work cooperatively, but the buyers establish standards and they hold the sellers accountable for cost and quality.

So, I'm concerned about having all the stakeholders as he is, under the same umbrella. As I've indicated, I also think the ability of the mandate waiver to increase the number of the uninsured is quite limited. I want to say a few words about association plans. I'll be happy to comment further in a question period if you want. What concerns me with these association plans is that unlike health marts, which do require entities to offer to all employers, association plans, some employers can be offered, some can be excluded. And you can bet that the ones that are going to be attractive to the insurers out there are ones that have aerobic
instructors who can bench press 300 pounds. That's going to be a very attractive risk group. And a group of older workers or sicker workers is not going to be attractive.

So my concern about that proposal is that it will undermine some of the reforms that have been passed by states and the federal government for that matter to try to broaden the risk pool. We ought to be putting more people in groups like COSE and business coalitions and not enticing them like the 16 million people that are already in the individual market into that market. And so, I would just close. I see my time is up.

One comment on the tax subsidy, it's $
125 billion in forgone revenue. There's a lot of money there if you wanted to help these families like this one that could be re-targeted. And my concern about some of the tax proposals on the table is that they're either insufficient to allow people to buy coverage or they would further undermine the employer group market.

Thank you.

REP. BILIRAKIS: Thank you, Mr. Meyer.

Ms. Baumgardner.

MS. CHRISTINE BAUMGARDNER: Thank you, Chairman Bilirakis, ranking member Brown, members of the subcommittee. I want to thank you for the opportunity to testify today on legislation to improve the ability of community health centers to provide our brand of high quality cost effective care to greater numbers of privately insured Americans.

My name is Chris Baumgardner, and for the last 15 years, I've been the executive director of Alcona Health Center in Lincoln, Michigan. Alcona Health Center is located in northeastern Michigan, in the lower peninsula, a rural area. And our service delivery area is roughly the size of the state of Rhode Island. In the center of that service area is
Alcona County, about 700 square miles and in that county, we are the sole provider of health care. I am also a member of the Board of Directors of Community Choice, Michigan, which is a licensed not for profit HMO that is owned and was developed by 17 federally qualified health centers in the State of Michigan.

Before I begin my testimony, I would like to thank Chairman Bilirakis, ranking member Brown and the other members of the subcommittee for their leadership and the efforts to secure sufficient funding to help health centers continue their mission for the uninsured. Believe me when I say that without your leadership, health centers would not be able to fulfill our safety net role.

In addition, I would like to thank Representatives Burr and Towns for their upcoming efforts to secure health centers a prospective payment system for
Medicaid in Michigan, for a brief period of time, one year in 1998. Community health centers actually operated on something very similar to this proposed prospective payment system and it was quite effective.

Again, this kind of a commitment is what we need to keep our safety net strong in community health centers. But today, what I want to do is I want to give you the perspective of a health center managed care plan that has already successfully entered the managed care market and argue that the efforts and the creation of community responsive managed care entities will yield real benefits to patients and employers.

We developed Community Choice Michigan because the state was rapidly moving to mandated Medicaid managed care. It was our best opportunity to use the power of collaboration to facilitate information sharing and develop best practices. CCM also gives health
centers the opportunity to build vertical health system relationships and clinical networks to support and enhance the center's positions in their communities. It has allowed Medicaid and other patients in medically under served areas to continue receiving care at health centers. And perhaps most importantly, it has allowed Michigan health centers to become successful in the managed care market, thereby ensuring that we'll be able to continue our core mission and that is to make health care affordable and accessible to everyone, regardless of the ability to pay.

Efforts to expand private insurance into medically under served areas can build on the expertise of health centers in serving under served communities. Health centers can do this by bringing together different providers to form comprehensive coordinated care plan that is uniquely tailored to the needs of the community.

I believe that a plan,
organized by a health center can attract a different kind of customer than would a traditional insurance plan. Small employers, such as grocers and coffee shops, restaurants, et cetera, in medically under served areas that are looking for a product that is cost efficient and is oriented towards primary preventive care.

As entry points into the health care system for the uninsured, as well as cost effective managers of primary care services, health centers are the natural access points for a different type of coverage. In our efforts to create Community Choice Michigan, we encountered financial and bureaucratic hurdles that seemed to be overwhelming. In our case the state's financial requirements were exceedingly burdensome, the solvency requirements that you have to have cash on hand for health centers to meet. And if it had not been for some extraordinary action and assistance, we would not have been able to
form CCM. This is because by and large health centers do not have access resources to attempt such an endeavor. Resources that are earned from the health center are reinvested back into the communities they serve, either through expanded services or expanded delivery sites.

Even if we're in the black, we still may not have the cash on hand for these efforts. Strong financial standards are needed to protect enrollees, but should take into account the financial realities of medically under served communities. And the community health organization legislation would have been very helpful to the efforts of the health centers to create an HMO in Michigan. Had we been able to waive the state HMO requirements, we would have avoided excessive delays in the processing of the license, discrimination against health plans and inappropriate financial requirements.

REP. BILIRAKIS: Please summarize if you will, Ms. Baumgardner.

MS. BAUMGARDNER: I guess what I want to say and finally is that we
feel that this waiver of these requirements is an excellent beginning and is an excellent idea. It is not the cure all we do not believe for the problems in delivering health care to the uninsured, but it certainly is a start. We would hope that we can continue to have support for community health centers to help us remedy our problems with the Balanced Budget Act, Medicaid issues and hopefully get some support for additional federal funds to serve the uninsured.

Those are topics that I would happily entertain questions on. Thank you very much.

REP. BILIRAKIS: Mr. Carlson, you're on, sir.

MR. RICHARD CARLSON: Thank you very much, Mr. Chairman, and members of the committee.

My name is Richard Carlson. I'm the executive director of the Illinois Comprehensive Health Insurance Plan. On behalf of the board of directors of the Illinois Comprehensive Insurance Plan. On behalf of the
Board of Directors of the Illinois CHIP program, and the more than 7,200 Illinois residents who are currently participating in this state program, I want to thank you for the opportunity, to testify today before your Committee.

My testimony today will focus on how Illinois has used its highly successful state health benefits risk pool, commonly known as CHIP, to comply with the individual requirements of the Health Insurance Portability and Accountability Act of 1996 or HIPAA. While other states have reported serious disruptions and large premium increases resulting from guaranteed issue in their individual health insurance markets, Illinois has not experienced any such problems.

CHIP has been designated as Illinois' alternative mechanism for implementing these individual portability requirements. As thousands of eligible Illinois residents who have exhausted their right to continue prior group coverage and have run out of options
for securing their own individual policy are now obtaining comprehensive medical coverage with CHIP with no exclusions for pre-existing conditions. Deficits for the coverage afforded to these federally eligible individuals are covered by a broad-based assessment levied against all health insurers and health maintenance organizations doing business in Illinois.

For the first two years, assessments for this new HIPAA-CHIP pool have been $
7.5 million and $6.7 million respectively. These assessments have been levied against the nearly $10 billion in premium base in Illinois that's collected by all health insurers and HMOs doing business in Illinois. And has amounted to less than eight one hundredth of 1 percent of total direct Illinois premium.

As of the end of May of this year or 23 months into this new program, a total of 2,685 federally
eligible individuals who had enrolled in one of two alternative health benefit plans that are offered by this program. Total in force enrollment for these two plans as of the end of May is 2,099. And I think it's important to point out that of the 586 people who have enrolled in the program and subsequently terminated many of them have written us and advised us that they have been able to obtain other coverage in the private market, but were very grateful for having the opportunity to access CHIP in the interim.

The use of CHIP to comply with the individual requirements of HIPAA clearly has been the right decision for Illinois. By using a broad- based assessment, it has been possible to spread the cost of insurance for these high-risk individuals across the entire health insurance industry in our state. As a result, the Illinois individual health insurance market, which is very price sensitive and
amounts to approximately $800 million in annual premiums, has not been forced to fully absorb and subsidize these costs.

This has allowed the individual health insurance market in Illinois to remain stable and not experience the significant increases in premiums that have occurred in many of the "federal fall-back" states that chose to implement the guarantee issue requirements in HIPAA. With few exceptions, the same insurers continue to offer individual health insurance policies in Illinois without significant increases in the premiums, which are being charged for those policies.

The broad-based assessment feature of our alternative mechanism has resulted in considerable cost sharing and risk spreading for the new HIPAA-CHIP pool without being disruptive to Illinois' viable individual health insurance market. Based on other states' experiences, Illinois residents whom this federal law was designed to
serve are also being provided coverage at a cost that, in all likelihood, is lower than it would be if the individual health insurance market were accessed directly.

Illinois' original CHIP program is now 10 years old and continues to be funded in part by an annual appropriation, which the CHIP Board receives from the State's General Revenue Fund. Since its first policies were issued in 1989, CHIP has served more than 17,000 Illinois residents from all 102 counties who have qualified for this coverage.

We've also paid out a total of $
330 million in benefits on behalf of these CHIP participants. The average paid by participants in our program is currently about $3800. And these premiums these premiums cover approximately 45 percent of the total cost for CHIP providing this coverage these participants.

A state health benefits risk
pool like CHIP would do relatively little to increase access to health insurance for the medically uninsurable if premiums for this program were priced according to each individual's actual risk based on his or her health status. Premiums in that case would have to be approximately twice their current level. Therefore, the premiums have to be subsidized by either the state or an industry assessment.

Chips story in conclusion is one of people and of a classic public/private partnership that directly improves the lives of the individuals it provides coverage for. And the impact of this program has gone well beyond those that it's directly served.

Mr. Chairman, I would offer to the committee if you'd like for the record our state has produced an educational video about our program and about HIPAA that's mentioned in a GAO report that was just released. And I would offer that for the record as well as --

objection that will be offered for the record. I'm not sure how we handle it from the standpoint of publicizing it of you will, publishing it. Thank you very much Mr. Carlson.

Let's see Mr. Nichols.

MR. LEN NICHOLS: Thank you Mr. Chairman My name is Len Nichols. I'm a health economist and a principal research associate at the Urban Institute. Everything I will say today is my opinion alone, which is not necessarily shared by the Urban Institute, its trustees, its sponsors or any known person living or dead.


Much of the research I will describe was co-authored with my colleague, Linda J. Blumberg, who is with us in case I falter later in the question period.

As you have heard today it is true that health insurance market reforms have disappointed some of their
advocates. As luck would have it I just completed an extensive review of that literature for a conference I attended last week in Holland. And I think it is fair to conclude that there has been precious little if any coverage expansion as a result of those reforms.

Now, this does not mean I would offer that reforms are necessarily a failure. They may have increased access for the sick, while decreasing coverage for the low risk. This is the hypothesis and a tradeoff that needs careful testing in the future. But it is clear that coverage was not expanded and I think that's what lead to the kinds of reforms we're talking about today. Let me just say I applaud your committee for taking on this issue in such a serious way.

Health marts and association health plans would, I think, take a step
back from regulation and allow more market freedom and more market segmentation among risk pools in different ways than current market rules allow. And while appealing in some ways these new proposals do raise the recurrent question in my view the fundamental question of health insurance policy. What kind of risk pools do we really want?

Now there are two polar answers to this question, homogeneous and purely voluntary versus heterogeneous and partially coerced.

Homogeneous pools of course have the virtue of not forcing anyone to pay for someone else's expected cost. They serve the healthy well with low premium, but they also leave the unhealthy uninsured. Heterogeneous pools subsidize access to care for the unhealthy, but they discourage coverage by the healthy who may prefer the risk of being uninsured to the burden of that implicit tax.

Now, all, all health
insurance market reforms essentially force more risk pooling than the market would achieve on it's own. So, the hard question before us today is with introducing AHPs in health marts into the current mix of force risk pooling lead t increased coverage and if so who would gain? Who would lose the most from such policy changes? My colleagues and I have built a model an empirical model to address these questions by focusing on the issues faced by employers making these choices.

Our findings at this point must be characterized as preliminary, for they're not yet published, but we would be glad to discuss the details of the model and our assumptions with your staff if you find that useful as we have with other researchers around town. The overarching lesson of our simulation results is that the composition of the risk pool is much more important than the marginal effects of benefit mandates
premium taxes and administrative loads.

Premium differences associated with different risk pools are much greater. And the variance and benefit packages in the real world. We find that small firms do appear to prefer more risk pooling than insuring alone and self-insurance mechanisms would allow. Thus, AHPs and health marts are attracted cause they offer those employment groups a way to achieve an intermediate degree of pooling between none and self insurance and that that is sometimes required by state regulations.

However, there's cost to this freedom to select into the AHPs and health marts. And that is as Jack pointed out the risk pool of commercial products and of existing MEWAs could deteriorate since AHPs and health marts are likely to be most attractive to the lowest risk groups. On net, our model suggests there's going to be very little net overall change in offer rates. And thus we tentatively conclude there would be little effect on net
coverage. This is because those few who are enticed to offer as a result of the new plans are almost exactly offset by those who find that premiums go up when their particular risk pool deteriorates both in commercial and in MEWAs.

We also find that health marts are likely to be less attractive to most firms than in AHPs, because AHPs have lower premium, they're exempt from premium taxes. They have lower solvency requirements and they also we think would have lower administrative lows. But the real world price responsiveness, which we built into our model led us to conclude there's not going to be or not likely to be a wholesale land rush to AHPs. Rather, we think after four years that AHPs would cover at most 10 percent of workers who are currently offered health insurance.

Furthermore, we predict that those who would chose AHPs would come mostly for self-insured arrangements and most of the workers would
actually come from medium and large firms, those with more than 100 workers as opposed to the specific target group of small employer workers. We intend to continue this line of research that tests the results against alternative assumptions and to adapt this model to address the implications of the tax credits that are now being discussed. We expect to have results on this new model by September.

I'd like to devote the last seconds of my oral testimony to a comment on high risk pools, because some of the empirical work I've reviewed and some that I've done has found a very interesting finding, which supports almost everything Mr. Carlson just said. And that is those states with high-risk pools without enroll caps do appear to have higher rates of private coverage.

Now, we don't think the household surveys that we used to do these studies are picking up 300 people that are actually in them. We think what's gong
on is that the insurance industry behaves in a different way when that high risk valve is there, if I could just finish, cause the high risk valve fundamentally says to the insurers you don't have to worry as much about adverse selection. The truly, truly sick are already taken care of. When they're out we think the evidence suggests it's clear they're offering lower premiums and therefore the private market works better. So a well-structured high- risk pool could be a nice compliment to any other coverage expansion policy. Thank you very much.

REP. BILIRAKIS: Thank you so much, Mr. Nichols.

Well, if we've gotten anything at all out of this hearing it's that it's a tough question. It's something that I think everybody wants to accomplish. It's amazing to me that there are two or three members of this subcommittee who just
think, just waive a magic wand almost and solve the problem, but you experts out there, you in the prior panel don't see it quite that easily done. We've heard that some of the solution is expanding Medicare down to the age 55 and yet the administration itself only forecasts that about 300,000 people would be covered there. And over 10 years CBO says maybe you might reach 700 and some thousand.

That's certainly far from much of a solution. We've heard that health marts depending I guess on who is testified anywhere from maybe five, 10 percent to 20 percent might be covered. Well that's pretty good. But it's still fairly low percentage in so far as the overall uninsured are concerned. Tax credits we've all heard I guess for the most part everybody
agrees. I guess most people agree anyhow that they're going to be helpful. We don't know how many that would help. It certainly would help with the young lady who was in here telling us the sad story of her family, but would that be enough? Probably not.

And so, you know, I go back to a few years ago. I am not sure it might have been before Mr. Brown was here. I think it was certainly before Mr. Barrett was here when we had the bipartisan plan, was it 1995, when we had truly a bipartisan plan where we spent hours and hours starting about 4:00 in the afternoon to all hours of the night practically every day in the week trying to knock this thing out. And we came up with some pretty darn good uninsured coverage there. Would that have covered all 43 million, I'm not sure, but
certainly a large portion of them. But politics entered the picture and that did unfortunately didn't go anywhere.

So, I guess my concern, I mean in an ideal world should everyone in a country such as ours have insurance? I would say yes. I don't hesitate to say that. But it's not an ideal world. And I guess my biggest concern is should everyone in a country such as ours at least have adequate accessible health care whether it be covered y insurance or not? And I feel very, very strongly about that.

I think that should be our immediate goal. Now, some would say if that's your immediate goal do you feel like you've solved that then you're not going to be concerned with the insurance aspect. Well, maybe we should or shouldn't be. Although I know that we talk about community health centers and there are a few people in the
room that know that I'm thinking community health centers when I say that, rural health centers that Ms. Horsely mentioned. But they only go of course so far. Cause they don't cover the specialized care, if you will, but they go pretty darn far in terms of basics.

So, I guess I would raise the questions, Ms. Baumgardner, I suppose all of your patients, clients, whatever the proper terms would be are uninsured.

MS. BAUMGARDNER: All of ours are?

REP. BILIRAKIS: Yeah, are they?

MS. BAUMGARDNER: No sir, not all of ours are uninsured. We have a large Medicaid population in our patient base. We also have a lot of --

REP. BILIRAKIS: Would those Medicaid population be a part of this 43 million? They don't have insurance, but they're covered.

MS. BAUMGARDNER: They're covered by Medicaid.

REP. BILIRAKIS: They're probably not part of the
43 millions.

MS. BAUMGARDNER: They are not considered part of the 43 million. No, sir. We have a lot of people just like Ms. Horsely who by the way is getting her primary care from a community health center. We have an awful lot of people who we call the working class poor who simply just are working as hard as they possibly can for very, very little wages and just don't have access to care.

REP. BILIRAKIS: But they're uninsured?

MS. BAUMGARDNER: But they are absolutely uninsured. That is correct. And they come to the community health center and they are able to get reduced cost health care at our community health center. And since we have developed our Medicaid HMO we have developed stronger ties and relationships to specialty practices and to hospitals. And we've been able to work out a number of arrangements with those larger facilities, those more expensive levels of care where they are also
offering reduced rate care for our uninsured patients.

REP. BILIRAKIS: Can you and I suppose in a way you're responding to this, can health centers retain their mission to make health care services available to everyone and still actively compete in the managed care market?

MS. BAUMGARDNER: I think we're doing it. I think actually if you look back at the legislation that enables community health centers what you will see is that we really are managed care organizations. We attack health care issues at the front end, at the least expensive end where the problems can be fixed much more easily.

If you heard what Ms. Horsely said they let her husband's second bought of cancer go too long, which happens frequently with uninsured people. They think it's something minor and it's going to go away. And then they come in
much later and the problem is much worse than it would have been had they sought care early on. But we are successful in our Medicaid HMO. In the state of Michigan we're ranked as one of the top four out of the 26 participating plans in Michigan. So, we are able to, we understand management of health care services and we do it.

REP. BILIRAKIS: Well, let me ask you just very quickly and I'll finish up. Approximately what percentage of the uninsured you feel are covered by rural community health centers? Rural and community health centers.

MS. BAUMGARDNER: I believe that the national data is like one out of 10, every 10th person being --

REP. BILIRAKIS: About 10 percent of the uninsured are covered.

MS. BAUMGARDNER: I believe that's it. Am I accurate there friends? Okay, yes. It's about one in 10.

can be improved?

MS. BAUMGARDNER: Oh, yes it can be.


Certainly can be. Right now we are using our federal grant dollars to cover our uninsured population. And to give you some idea of how much money that is we're a $
3 million project with four delivery sites and of that $3 million budget annually we receive $400,000, just a little under $400,000 in federal funds. And that's what we use to help cover our uninsured. And it's not entirely adequate, certainly.

REP. BILIRAKIS: Thank you so much.

Mr. Barrett.

REP. BARRETT: Thank you, Mr. Chairman. When I first got involved in this debate as a member of Congress several years ago the figure that was bandied about at that time was that there were 36 million people in this country without health insurance. And then the next time it came up, the next
bill that came up the figure was I think 39 million. Following that was 41 million and now, I think the figure we hear is 43 million. So, clearly either the figures are incorrect or the approach that we have taken thus far has not addressed the problem. And I just want to touch on a couple of the different little approaches that have been used to address it to see where the problem is. And we heard testimony today for example, that the big problem is we've got all of these state imposed mandates, because that we've got all of these mandates employer's won't purchase the plan. So the states respond and the state pass bills that provide for bare bones policies.

Mr. Meyer, I think you've done some work in this area, what's been your experience or what is your studying have showed you in terms of how successfully these bare bones policies have been at the state

MR. MEYER: Bare bone policies have been very unsuccessful, for two reasons. First, people have difficulty affording even bare bones policies, small employers are living on the edge, so even when the cost comes down they have difficulty affording there contribution, which might be half or 80 percent. Employees have an awful lot of trouble affording their share and often in the small employer market that share maybe 50 percent. And finally, people like comprehensive health coverage in this country. They don't like bare bones, it's a tough sale, and a colleague of mine Professor Mark Hall, at Wake Forest University has done a lot of work on this. And my colleague Elliot Wicks, they've been around the country, state after state, and interviewed and they found very low numbers of people that have taken these up for those

REP. BARRETT: So clearly, you don't think that making these more widespread is going to lower the number of uninsured?

MR. MEYERS: Well, I think it would lower it a little, as I said before, I think it would take a little bit of water out of this picture. But I'm not against experimentation with some marginal changes and mandates, or giving some relief to small business. I just think it would be a mistake given the magnitude of the problem and the upward march of the numbers that you've cited, to think that it would make a major dent in the problem. I think it would probably be a small positive contribution. And then remember when you don't have those mandated benefits as unpleasant as mandates are, somebody's not getting something that otherwise they would get such as, mental health coverage, substance abuse coverage, or other
services. Some of which maybe viewed by the margin by society at large, but if you're the one that needs them there would be some give up there.


Mr. Nichols, you've I think have done some work on health markets and association health plans, again these are devices that have been introduced to lower the number of uninsured. How effective have those been?

MR. NICHOLS: Well, we don't have association health plans, and health markets as proposed in the legislation. We do have a number of examples around the country some of which you've heard some today, of different creatures that are like them. And it's certainly true -- as you've heard, some of them have been very successful.

What we tried to model in our work, was what will happen to both the small employer market that exist today, the commercial sector, the self insured sector, and the existing (me ?) was, and how attractive would these new vehicles be? And what we found fundamentally was they would offer an
appealing product to a certain group of small and surprisingly to us, medium to large firms, who are looking for a little more pooling than they can get a loan in the self insurance market, that is they don't like going at it alone, but they don't want as much pooling, as some state regulations do indeed force today. I think it's -- you know we're American's we always go to far one way and two far the other way. We probably went a little too far in some of the state regulations we probably could scale that back. But I certainly would echo the comments of Jack, it doesn't follow that you therefore repeal the entire thing and go back. I would point out before we had state insurance market regulations, we had some uninsured in this country, I think 37 was the number you were starting with and your soldier in there, and the number was rising then at least as rapidly as its rising now, without the benefit of health insurance regulations.

So I think it's important to think about, go back to Jack's picture, these kinds of reforms on the margin are not going to get at the core of it. It's going to have effects on the margin and I would certainly submit that we think about health insurance regulations as effecting the midst of the pool more than the size of the pool, because it determines who does have access to, it and who does not.


I'm going to go right down the line very quickly cause I don't think I don't have enough time. But we've seen this increase seven to eight million increase - (bell ringing) -- if I can have another minute?

REP. COBURN (?): Without objection.

BARRETT: -- of increase. And I'm going to ask each of you to give me one factor or two factors in about 10 seconds, as to why we see this continued increase?

Dr. Johnson.

MR. JOHNSON: A dilemma is that is one of cost, and I think we made the wrong diagnosis with respect to cost.


MR. JOHNSON: Why we have an increase of cost, I suggested in both my written testimony an in my oral testimony that there's a disconnect, between the person consuming the services and the price of those services.

REP. BARRETT: Okay, Mr. Arth.

MR. ARTH: I would agree with cost, but I think in some cases it's just access that the products aren't out there and available.

REP. BARRETT: Mr. Morehead.

MR. MOREHEAD: The main is cost. And it's not that people can't afford it, a lot of the
health care reform has made it easier for people to wait, and not sign up until they actually needed the coverage, the deterrent is cost.


MR. MEYER: I decide two factors, first the erosion of employer base coverage, particularly because people are turning down the employer's offer because they can't afford it. And secondly the changing labor force away from the so called good jobs with benefits, toward part time temp and contract work.

MS. BAUMGARDNER: I would agree that if cost is one of the first factors, and then the second factor, is that the infrastructure, the health care infrastructure, the accessibility is not there, you can bring a low cost plan out, but if you don't have providers to provide the care, the services to where the people are, you aren't going to have any use of it.

REP. BARRETT: Mr. Carlson.

MR. CARLSON: I would
act (with ?) everyone else's, it's cost. The number one reason for people being uninsured or dropping out, is that they can't afford the premium. And if you want to talk about Mr. Greenwoods law of unintended consequences, if some of these reforms -- there well intended and in fact, they're directed at the population I serve. But one of the side effects of that, is as they raise cost premiums for the other 99 percent of the population, the young healthy's (ph) drop out.

REP. BARRETT: Mr. Nichols, finally.

MR. NICHOLS: Cost is number one, I think it's driven largely by technology, not so much the cost sharing. We get a very good health care product we like it's the best health care system in the world. That cost now is too expensive for an increasing fraction of our population and that -


Thank you Mr. Chairman.

REP. COBURN (?): You're welcome. I'm going to recognize Mr. Burr because he has another meeting, for five minutes.

REP. BURR: Thank you Mr. Chairman.

The answer is you're all right.

Mr. Nichols I want to compliment you on your presentation, it's one of the best I've ever heard. I didn't understand much of it, -- (laughter) -- but it was one of the best I ever heard. I look forward to reading it, so I'll understand it just a little bit better.

Dr. Johnson let me just ask you, and I feeling the answers is going to be the same. You said that patients have become and commodity, why?

MR. JOHNSON: The colleague of mine from St. Louis who came up with that sound bite, I think was right on point. Because employer's in an effort to get
a handle on cost, they've gone out and negotiated the best insurance they could for the amount of money that they could afford and the employees don't have a choice. And sometimes the employer has shifted from one insurance plan to another for 25 cents per member, per month, in order to save the money. It comes back again to cost. With wholesale disruption of the patient, physician relationships that are intrinsic to that kind of shift.

REP. BURR: So cost has driven us into a commodity market to some degree?

MR. JOHNSON: That's my view, yes.

REP. BURR: Cost has increased the number of uninsured as Mr. Barrett asked? Would anybody disagree with Dr. Coburn's statement that half of the uninsured today choose to be uninsured? Anybody disagree with it?

MR. (?): I'm not sure it's so much a disagreement, but I would like to question the
interpretation a little bit, cause I think I would think what you're citing are reports that people turn it down when they're offered, we certainly agree with that. The question is, are they choosing to be uninsured, are they choosing to be uninsured at that price?

There is a price that which they would pay for health insurance, it's lower than what they're being offered. And so I just mean to say, we should not -- REP. COBURN (?): If the gentlemen would yield.

REP. BURR: I would be happy to yield.

REP. COBURN (?): We had a great example, if somebody here that makes $
12,000 a year, who has Internet access in her home. And she chooses to have that, but chooses not to have health care coverage. So the question is what are their priorities? And do we not essentially move in a direction that says we're going to subsidize you to make priorities that aren't for your health, by some of our programs. And I'll yield back, and then I'll get my chance to go around with you.

REP BURR: Okay. I think if we looked a statistics, wouldn't we find that the majority of those individuals would be in the 19 to 30- year age group? I mean you can look at it with an age group and see a large block that probably are employed, but uninsured by definition.

MR. CARLSON: I'd like to support what Dr. Nichols has talked about in that, and I don't know what the percentage is that you've talked about in terms of 50 percent declining. But insurance's are transfer risk, and people making judgements about whether the premium they pay for is going to be less than what their medical expenses are. And there's a lot of people that you're talking about, what I call the young healthy's, that should believe that their just not vulnerable, and not going to have any medical expenses, and they believe
it's cheaper for them to go uninsured, than it is to pay the premium.

REP. BURR: Until the Harley Davidson hit a tree.

MR. MEYER: I would just like to comment that it is not anywhere half the people that turn down an employers offer of coverage, it's about 20 percent. Now, that's much higher than it was. The proportion of people who were offered an employer plan, according to a study by the Agency for Health Care Policy Research, fail from -- and declined it -- I mean, and accepted, fail from 88 percent 10 years ago to 80 percent today. So, that's disturbing, but that still means four out of five people who are offered employer plans take them.

REP. BURR: But, would you agree that there are a large number of self-employed individuals who choose not to be
covered because of age. They are employed, they make a good income, they don't get picked up in that group you just talked about.

MR. MEYER: Well, yeah, I agree with that, but they're a minority of the uninsured and the majority of the uninsured have incomes under 200 percent of poverty.

REP. BURR: Doctor Johnson.

MR. JOHNSON: I just quickly wanted to say that those employed who turn down the insurance might not do so it there was an expanded array of choices and they had a defined contribution from the employer that they could use towards the purchase of some different models than the ones that we currently think of today.

REP. BURR: Thank you, because that's where I was heading and I think I want to got Mr. Nichols because that was the part that I did understand about what you said.

Nobody knows today how many people get covered when you expand the choices. I
mean, you've got some methodologies that you follow. But I think that where the committee falls short is if we don't allow the creation of as many new choices out there; if we don't explore ways that might bring one percent here or three percent there, it's almost customizing a product for a population that has -- (bell sounds) -- chosen either not to be insured or could not afford it.

Let me ask just one last question of Ms. Baumgardner.

REP. COBURN: Fast one.

REP. BURR: What is unique about the health centers that enable you to succeed in a managed care market?

MS. BAUMGARDNER: Well sir, as I said before, I think, in one of the other questions that I had answered. If you look at the legislation that enables community health centers, we are designed to manage care. Our whole mission, our whole focus is to go
in at the front end of health care services, to deal with prevention and education and primary care health services.

And what we have learned in the last two years now that we have been operating in Medicaid HMO, is that in fact, we are pretty good at it in the state of Michigan. We manage our patient's health care problems at the lowest possible cost level. We keep them out of emergency rooms. We keep them out of the very expensive levels of care, unless it is absolutely essential. And as a result, our front- end costs may look a little high, our capitations, our prevention services are a little high, but relative to the expenses that you run into in terms of hospitalizations and other high cost health care issues, we're very good at that. It's our mission, it's our specialty, if you will, and that's what we do best.

REP. BURR: I thank this panel and I
thank the chair for his indulgence, and I yield back.

REP. COBURN: If Doctor Ganske doesn't mind, I think I'll recognize myself, if I might, since we're going to be here for a little bit.

REP. GANSKE: Well, Mr. Chairman, you've got the gavel so.

REP. COBURN: That's right. And I'm going to give you something to add to yours.

Doctor Meyer, you talked about a changing workforce temping, people turning down employer policies simply because of the cost differential, they can't -- doesn't that suggest trying something new in the market. I mean, you know, from the testimony that we've heard and what I've read, is if people are making that choice now, either because they are not employed and they're in a temporary work or -- and they're choosing, wouldn't that suggest that something like an IMA or something similar; a
new product, let the market work and let them try it?

By the way, nobody says this is going to work. Nobody is claiming that it is going to work. They're just claiming, let's give it a chance to see what the market will do with it.

MR. MEYER: Well, I'm certainly in favor of market innovation. In fact, we study employer market innovation all the time, but I think realistically, you mentioned individual medical accounts, the story has been the same. You know, Congress put a cap on those in its experiment a couple years of go, we're no where near the cap.

REP. COBURN: Let me interrupt you for a minute.

Having tried to get medical savings accounts for everyone of my employees, what Congress did was a disaster, because you can't get through the loops to get one. And so, what they did was very
cleverly make the regulation so difficult that you're just very fortunate and lucky if you happen to get one. And I tried. And I tried with all three people in the United States that offer it, all right.

MR. MEYER: All right.

REP. COBURN: So, we limited it so that nobody would come in and offer it, and so therefor nobody is offering it so they don't have to have a variety of a product. So, that is not a good excuse, because we didn't give it -- we're not giving it a fair trial. We're not giving it an open shot in the market and say, let's try medical savings. Let's lower the bar; let's let people try it. So, you know, that doesn't hold water in terms of the fact of what's happening out there in the
market on medical savings account.

MR. MEYER: I understand. I think you'll find that given that the majority, over 60 percent of the people who are uninsured, have incomes under 200 percent of poverty and very limited means. That unless you really enable them to buy in with significant amounts of money on a sliding scale basis, that you probably won't make a major dent in the problem. It doesn't mean that you won't improve the lives of some. Of course, you know, health marts, individual savings accounts, association plans might help some. The only thing that I point out is that they might help some, and Len mentioned this too, at the expense of others.

And that's a --

REP. COBURN: So, you would support, then, a sliding scale voucher system for our poorest people --

MR. MEYER: Yes, I would.

REP. COBURN: -- so that we
can allow them to go purchase private health insurance.

MR. MEYER: Right. And one way to do that would be --

REP. COBURN: And not mandate that they have to go anywhere, they can go where they want.

MR. MEYER: Right. In fact, one way to do that, and some proposals are on the table in Congress now, would be have a refundable income tax credit that you get money back if you're very low income that would help you buy into a health insurance program.

REP. COBURN: Kind of like what Congressman Shadegg has proposed.

MR. MEYER: Yes, what he was talking about.

We may find that these proposals under consideration that add a $
1000 to the family isn't enough, and maybe you need $2000 or something like that. But, I think he's moving in the right direction. So, I'm all for this innovation, but I think it will be difficult to purchase it at the margin or on the cheap, I think we'll have to put real money into it.

REP. COBURN: But, is there anybody on the panel that disagrees that we ought to try every market innovation we can to see if we can use market forces to help allocate this scarce resource? Do you disagree with that? Is the demand supply curve to inelastic that we can't trust market forces to work in this area? Does anybody disagree with that?

MR. (?): I don't disagree, Congressman. I certainly think though, that you want to be careful about the innovations that you say -- REP. COBURN: So, that you don't harm something that's existent.

MR. (?): Exactly, as you stated about the medical savings account example, it did turn out to have features that people found unattractive. And I think your point about only three insurers that are willing to offer it is the (Telling One ?)

REP. COBURN: Well, but,
it's not the concept of medical savings account that they find unattractive, it's the rules, regulations, and bureaucracy that's been applied to it.

MR. (?): And what I'm suggesting, sir, simply, is that we need to think carefully about the rules that go into place for the association health plans, for the health marts, et cetera.


MR. (?): Because one of the things I was going to say when we talked about the purchasing cooperatives before, is that I think some of the more successful ones in the country today, have found it quite useful to have the same rules about guarantee issue and rules about rating restrictions inside the pool as is the case outside the pool. You set up different rules in a state; you set yourself up for adverse selection. So, that's what I'm talking about with being careful.

REP. COBURN: Well, I will
reserve the balance of my time at this time, and recognize congressman Ganske, five minutes.

REP. GANSKE: It is my opinion that association plans raise two general categories of problems, and I'll seek your comments on this. Number one, if they bring together people who have below average risks and exclude others and are not subject to state, small group rating rules, they draw off people from the larger insurance pool, and thereby they raise premiums for those who remain in the larger pool. Would anyone disagree with that?

So, let it be recorded that everyone on this panel agreed with that statement.

REP. COBURN: Would the gentleman yield for a minute?

REP. GANSKE: Let me finish.

REP. COBURN: All right, then I'll take --

REP. GANSKE: Second point --

MR. NICHOLS: Yeah, I might just say it.
I don't hold myself out to be an expert on the subject, so, I'll be happy to respond to questions about high-risk pools, but -- I suspect your statement is true and then the rhetorical question -- the follow up needs to be, is that bad?


MR. NICHOLS: That would offer the disclaimer.

REP. GANSKE: The second general category of problems. If they're not subject to appropriate insurance regulation to prevent fraud and to ensure solvency and long run financial liability. I think many of you were here when I talked about what the experience we had in the '70s or early '80s that resulted in Congress coming back and reestablishing insurance regulation, because of problems that we had on that.

So if they're not subject to appropriate insurance regulation to prevent fraud and ensure solvency and long run financial liability, they may leave enrollees with unpaid medical claims and no
coverage for future medical expenses.

MR. NICHOLS: Congressman, on that point I can absolutely, I'm with you 100 percent because I was the assistant commissioner of insurance during that period and worked with our Congressman Earlenborn (sp) at the time that the solvency problems that developed as a result with the MEWAs. And the problem was, even though you had a lot of very good, well run MEWAs, the law the way it was written allowed for the good entrepreneurs, but fast buck artists to come in and just skim off. I mean, what they would do, is they worried about the fees they were getting paid. And a year later, the claims started rolling in and couldn't get paid and they just walked. And then the insurance departments around the country were left to try to clean up the mess. And that is the number one underlying reason -- that absolutely supports what you're saying. You have to be concerned about that.

Now, this is not to say, I'm not saying that all association health plans had that problem. I mean, by all reports, COSE, for example is a well run plan that's doing pretty well.

MR. ARTH: But we don't self-insure.

REP. GANSKE: I understand. But, and I want to get to another point. It has to deal with COSE. Basically, my understanding and it's -- I don't know exactly if you would characterize COSE as an AHP or whether you would characterize it as a health purchasing coalition or coop, but it's somewhere in that range. But basically, health purchasing coops are collective purchasing efforts where the only written criteria for eligibility to participate is in some cases being below a certain firm size and that people are willing to pay the premium.

So, pretty open enrollment.

MR. ARTH: And you need to join our association.

REP. GANSKE: Right. Okay.

Now, correct me if I'm wrong, but when that was set up, weren't there concerns that unless you had some type of modified community rating that if you were required to accept anyone that then the private insurers could skim off the healthy and then leave the larger insurance pool with a sicker group. Wasn't that a concern?

MR. ARTH: Yes. We have always been concerned about adverse selection and being the insurer of last resort if you will.

REP. GANSKE: So, my concern on this is extending ERISA protection, getting those groups out of those state insurance pools, not necessarily whether you have pooling like you've got with COSE, so I would finish with one question. Just because you're for association health plans, that doesn't necessarily mean that you would be or that some of them have worked okay. They doesn't necessarily mean that we would want to exempt them from state
oversight, would it, Mr. Meyer?

MR. MEYER: I agree with you. No, I don't think we would and I think you can compare them to the many purchasing coops that we have around the country such as in California where the coop is required to take all employers that want to join. The fundamental feature of concern about the AHPs is that unlike the health marts, they can pick and choose among employers.

The framers of these proposals have been careful to build in certain protections against fraud and against some of the concerns. Like for example a three year waiting period and you can't just form an association for health insurance. It must have some other purpose. So, they've put a lot of thought into mitigating those problems. But the ingenuity of this industry to cherry pick and find the good risks is very great. And it isn't that you haven't had well meaning legislators trying to
build in, but once you drop that kind of requirement that all comers can participate, they're going to find those aerobic instructors.

REP. GANSKE: Mr. Chairman, I ask unanimous consent for one additional moment.

REP. COBURN I'm going to deny the unanimous consent because I wasn't yielded time. And if we have time I'd be happy to offer it.

REP. GANSKE: Mr. Chairman, I was kind enough to yield to you, so you could go first before me.

REP. COBURN: That's a prerogative of the chair.

I want to make a couple of points.

Number one, the assumption that AHP patients are going to take patients from plans are goal. The goal with an AHP is to take people who are aren't insured, not necessarily draw on. There's no assumption in anybody's study that I know that all AHP provided patients are
going to come from previously insured products. So the assumption of the gentleman's statement is erroneous. As a matter of fact, the greatest estimate I've seen is maybe 20, 22 percent. So it's not the thing that we're going to see.

The other thing is -- Dr. Meyer, can you not write into things to offer the protections in the AHPs that are necessary out there. Can this legislation that's been proposed not be improved to address your concerns?

MR. MEYER: Yes it can. And I think I made it clear that a lot of thought has already been put into that, but I still think that one feature that I highlighted is a pretty big loophole. But I don't mean to say that these problems can't be fixed.

REP. COBURN: Wonderful. And I guess Mr. Arth, I'd ask you, have you really experience adverse selection.

Well, Mr. Chairman, I do get the yes from my sidekicks here, but I can't give you examples. I will say with respect to the ERISA exemption, our position on that is either give it to everybody or don't give it to everybody, but let us all complete on a level playing field.

REP. COBURN: I would agree with that.

Dr. Ganske, if the panel would not mind staying for few --

Dr. Ganske, you're recognized.

REP. GANSKE: Thank you, Mr. Chairman.

Dr. Johnson, are you testifying in favor of your voluntary purchasing coops being exempted from state regulation? Is that your position?

MR. JOHNSON: No, and I hasten to emphasize it that what I'm testifying in favor of is the concept of voluntary choice cooperatives. That is a clearinghouse function as opposed to the micro-management negotiation function. And I don't
think they should be exempted from state oversight. As a matter of fact the typical insurance commissioner type of role of the determination of the solvency of the plan, the determination of the truth in advertising, whether or not the plan is providing the benefits that it says its going to provide are all very important functions.

Also, the notion of dealing with adverse selection within the plans that elect to participate, and the opportunity of a voluntary choice cooperative is a very significant one. I want to comment on what Mr. Meyer said, that buyers hold sellers accountable. He was referring to employers buying the insurance. I suggest the same statement can be made for individuals buying insurance and my testimony was with respect to having a marketplace for individuals to buy insurance to take advantage of pooling risks, but for buyers to hold sellers accountable. Have the accountability flow to the person whose using the plan i.e. the patient. The way I've said it,
Dr. Ganske, as a physician is put the patient in the driver's seat.

REP. GANSKE: I thank you. And I thank you, Mr. Chairman.

REP. COBURN: Mr. Barrett.

REP. BARRETT: Thank you, Mr. Chairman.

My last question to each of you pertains to what the major factor was and most of you said cost. I bring that up because I just want to respond a little bit to a statement that Mr. Coburn said with respect to the young woman who was here this morning. I didn't hear her say that she owned a computer and that she was online at home. She may have been in a library. But even if she did have it at home, I think it's important to point out I don't know exactly how much it cost. But if America Online is $
12 a month, if she made that choice rather than going to a movie once a month with her husband, I don't know that it makes her a bad person or --

REP. COBURN: Would the gentleman yield?

REP. BARRETT: I'd be happy to yield.

REP. COBURN: I wasn't criticizing the individual. What I was doing was making the point is we all have discretion with the money that we have. Some discretion is used to buy certain things. Others have the discretion to buy health care.

REP. BARRETT: And I totally agree with that. I'm someone, when I'm in the grocery store and I'm looking at someone ahead of me who has food stamps, I'm wondering why they're buying cheerios and I'm buying generic cereal. But my point is if you have an individual who's looking at maybe spending $
150 a year on America Online versus $5,000 a year on health care she might feel overwhelmed. And this is assuming that she has it at home.

And again what we heard from this panel is that cost is the real issue. That's the issue and I just want to make sure the record reflects that.

The other issue that again I think we've talked a lot about today that's important is the whole notion of a refundable credit. And Mr. Meyer you showed your support for it. And I think even on the first panel the democratic witness was not philosophically opposed to them.

At what point is it going to work? In other words, if you've got an individual who makes $
13,000 dollars a year, is it going to have to be a $1,000, $2,000, $3,000, $9,000? Where do we make sure that the person will buy the policy and that it will be a policy that we'll offer for example OB-GYN care? Where do you see that --?

MR. NICHOLS: I think,
I hate to say this, but I think for a very low-income people living below poverty, and half of them are uninsured, you're probably going to have to pick up most of that $5,000 cost. If their income is $8,000 or $10,000 or $12,000, they just can't afford it. It should then -- their contribution should then rise in steps as you get up to the $12,000 -- $15,000. I don't think $1,000 would be nearly enough for a family with eight or $10,000 in income, remember they may have some childcare, they got to pay rent.

A person like this witness this morning, out of that $
13,000, if she has a young child, she's working to make that $13,000, she may need some childcare, that's $5,000 dollars a year if she gets a bare bone child care.

So I think, you have to be realistic and pick up most or all of the cost for the very poor and then graduate
it down. Now were will that money come from? We give away -- the federal government excuses $125 billion in taxes. Well, let me amend that, the federal and state together, but the federal government, the overwhelming majority, over 110 billion, because you and I don't have to count his income when our employer contributes to our health care. If they give us wages we pay taxes on them, if they give us health care we don't. If some of that money -- if a portion of that money, and I mentioned in my testimony that the value of that tax subsidy for people over $100,000 a year, is $25,037, the value of that tax subsidy for people under $15,000, the target we're talking about is $71.00 a person instead of ($2500 ?).

So that's really a big subsidy going to upper-middle, and upper- class people. If we could redirect some of that, it's very difficult to do politically, that could pay
for the kind of thing I'm talking about.

REP. BARRETT: Okay, one final question and I'm shifting gears here a little bit. Vouchers, if we have a voucher system were individuals can choose and leave their group plan, let's say I'm a young guy works for a employer, I see everybody else who works for this employer has kids, or their sick, I'm out of there. So then the next person sees, well wait a minute, everybody has a family plan, I'm out of here, so all the single people leave. And then somebody notices that someone has a serious health problem, so the healthy people leave. Are we creating a program with such adverse selection that employers are going to be left with the people who are basically -- I don't want to say uninsurable, but the ones that make the insurance
pool work, because of the higher risk.

MR. MEYER: That's why I would not limit the subsidy only to people that leave or do not qualify for employer coverage. There are a lot of people that have employer coverage that need a lot of help with their third or half of premium. (Bell sounds.) -- So I think you could limit it by making it available to people who are financially burden, whether they leave the plan or not, but that is a concern.

REP. BARRETT: Thank you.

REP. COBURN: I'll just make one comment, if you really let the market work you can't make any assumptions that it would be $
5,000, if you truly had a market force working. We don't have health insurance in this country today. We have prepaid expense, and we pay 18 percent of that for somebody to manage it for us.

So, you know, it is a forest to say we have health insurance
in this country. We don't. And it's cherry picked, and you all know it's cherry picked. And what you're saying is, the status quo of letting the insurance industry continue to cherry pick is better than letting the market allocate the cost of those people who are truly going to consume it. And so, you know, you can't have it both ways. And so, we need to do something.

And we do know that if we allow market forces -- and I'm not married to anyone of these plans, but if we don't reconnect, as Dr. Johnson said, the patient and the provider -- Do you realize how much where losing because there is no accountability felt by the physician back to the patient when they spend their money? And how much over utilization that creates? That doesn't have anything to do with liability scare. That has to do with natural human tendencies that are not checked by an obligation of the doctor/patient relationship, because the patient isn't paying me anymore.

And if we don't reconnect that doctor/patient relationship,
we're never going to do anything here. And we're also going to lose the quality of care that our country has been known to know.

And so, I want to make a couple -- we're going to leave the record open for questions. I also would like, Ms. Baumgardner, if you would supply the records of your community health center for the last year in terms of financial records so we can -- you seem to have really have demonstrated a lot of efficiency.

I'd like to use that to compare that on some of the others if you wouldn't mind doing that.

And the record will remain open until such time -- what 48 hours to submit questions? (Conferring off mike.) -- if we have no objection I'll do that. And I want to thank the panel.

MR. NICHOLS: Mr. Chairman?


MR. NICHOLS: I might just make one follow up comment to Mr. Brown's question, cause
I was going to comment for Dr. Ganske. Had Mrs. Horsley lived in Illinois? And I don't represent myself as an expert on our public AIDS system, but my best understand is that we have a program through public aid called Medical Assistance - No Grant. And I was surprised when she said she didn't qualify for medical assistance as an adult. If her husband came to our program, we would refer them to our Department of Public Aid. They'd be subject to a spend down and we would probably would have to pay about a $100 a month, but the rest of his medical expenses would get paid through our medical assistance program. And the no grant means that their not eligible for subsistence and their not on welfare, but it -- you know, and Public Aid doesn't like me to call it, but we tend to in our office refer it to as medical assistance for the middle-class. And then our program is set up that somebody like her husband who now has a serious medical problem, if their income goes up and they transition off of MANG, they can come into our program and afford the premiums. And it's working very well for us.

REP. COBURN: He obviously has a disability now, surgically secondary -- but that's the classic case with HIV patients.


REP. COBURN: They've became disabled, become full blown AIDS and they die before they can get there disability because they haven't been sick long enough.--

MR. NICHOLS: That is now changing with the --

REP. COBURN: I know it is, but that's exactly the same kind of problem we're talking about.

REP. COBURN: Dr. Ganske, did you have comment.

REP. GANSKE: Mr. Chairman, I know the Kaiser Family Foundation is doing a study
right now on people who are uninsured, and they're doing focus groups and other things on why they are uninsured, both. And maybe the committee can make a request for some preliminary data from them on that. It sounds like it's kind of interesting material.

REP. COBURN: Any objections for the request?

So ordered.

We thank you again.

The committee is adjourned.


LOAD-DATE: July 14, 1999

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