Copyright 1999 Federal News Service, Inc.
Federal News Service
JUNE 16, 1999, WEDNESDAY
SECTION: CAPITOL HILL HEARING
LENGTH: 39486 words
HEARING OF THE HEALTH AND ENVIRONMENT SUBCOMMITTEE OF THE HOUSE
SUBJECT: HEALTH CARE FOR THE UNINSURED
CHAIRED BY: REPRESENTATIVE MICHAEL BILIRAKIS
GRACE MARIE-ARNETT, PRESIDENT, THE GALEN INSTITUTE
TERY NEESE, PAST PRESIDENT, NATIONAL ASSOCIATION OF WOMEN
ROBERTO GARCIA DE-POSADA, EXECUTIVE DIRECTOR,
HISPANIC BUSINESS ROUNDTABLE
DIANE ROWLAND, EXECUTIVE DIRECTOR,
KAIRSER FAMILY FOUNDATION
DR. DANIEL JOHNSON, PRESIDENT, WORLD
RAYMOND ARTH, COUNCIL OF SMALLER ENTERPRISES
ROBERT MOREHEAD, AREA PRESIDENT, GALLAGHER BYERLY, INC.
2322 RAYBURN HOUSE OFFICE BUILDING WASHINGTON,
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
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
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.
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.
you, Mr. Chairman.
REP. BILIRAKIS: I think I thank the gentleman.
Mr. Ganske for an opening statement.
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.
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
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
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
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.
Chairman, I'd ask for one additional minute.
REP. BILIRAKIS: A very
strict one additional minute, without objection.
REP. GANSKE: Thank you
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
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
Democrats 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
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
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
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
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.
BILIRAKIS: The gentleman's time has expired.
REP. PALLONE: Thank you,
REP. BILIRAKIS: I thank you.
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.
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.
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.
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.
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.
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.
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
And again thank you, Mr. Chairman, for holding this hearing.
REP. BILIRAKIS: Mr. Bilbray for an opening statement.
REP. BRIAN P. BILBRAY (R-CA): Thank you, Mr. Chairman.
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.
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.
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
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
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
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.
EDWARD WHITFIELD (R-KY): Mr. Chairman, thank you very much.
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
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
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.
BILIRAKIS: I thank the gentleman from Kentucky.
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
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
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.
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.
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
Thank you for calling this
hearing. I yield back the time.
REP. BILIRAKIS: Thank you.
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
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.
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
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
REP. DIANA DEGETTE (D-CO): Thank you,
I'd like to submit my statement for the
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
Mr. Greenwood, no opening statement.
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 --
BILIRAKIS: Is your mike on, Tom?
REP. COBURN: Mr. Chairman, I don't know
that I control whether my mike's on or not.
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
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
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.
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
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
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.
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
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
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
REP. BILIRAKIS: Thank you very much, Ms.
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
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.
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.
REP. BILIRAKIS: Thank you very much, Ms. Arnett.
MS. TERRY 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.
this country's 9 million women business owners. We're employing about 27.4
million workers today and generating about $3.2 trillion in
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.
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
MR. ROBERTO GARCIA DE POSADA: Thank you, Mr.
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
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
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
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.
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.
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. 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
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.
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.
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
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
REP. BILIRAKIS: Thank you, Ms. Rowland.
The chair yields to Dr. Ganske to start the inquirers.
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."
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.
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
MS. ARNETT: About $178.
BROWN: Do you get more than 50,000 (dollars) from any one think tank or
MS. ARNETT: We have a large grant from the Rob Roy
(ph) Johnson Foundation to produce a book. So, yes we do.
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
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 --
BROWN: Wait, wait, wait, I only have five minutes.
MS. ARNETT: I
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?
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
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
MS. ARNETT: No.
REP. BROWN: Okay, so --
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.
I would hope that that would be a subject for a hearing of another day.
REP. BROWN: Thank you.
Thank you, Mr. Chairman.
BILIRAKIS: Mr. Bryant?
MR. BRYANT: Thank you, Mr. Chairman.
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
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
No one wants to jump in on that one.
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
REP. BRYANT: Okay.
REP. COBURN: Would the
REP. BRYANT: I certainly would yield.
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
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
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.
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.
Now, I gather that the study then considered data on covered populations which
state reforms can not and do not reach, is that correct?
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.
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
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 --
MR. GARCIA DE POSADA: Absolutely.
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
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.
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.
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?
MR. GARCIA DE POSADA: Well, maybe
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
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.
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
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
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.
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
REP. BILIRAKIS: Well, you're up next.
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
REP. DEGETTE: Will the gentleman yield?
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
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.
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.
BILIRAKIS: Well, I'm 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.
REP. BILIRAKIS: The hearing will come to order. Our apologies to
the panel and to the audience, we appreciate your patience.
we finished up just before the break of Mr. Shadegg. So Mr. Barrett, you are on,
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
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?
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?
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
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.
REP. 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
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
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?
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
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 --
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
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.
Shadegg may or may not be returning, but I believe that that's his intent.
Mr. Greenwood, I believe you were here first.
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.
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.
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
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 ?).
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
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?
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
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?
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?
MS. HORSLEY: Yes.
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
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
REP. BILIRAKIS: Okay.
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?
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.
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.
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
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.
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.
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.
REP. BILIRAKIS: I would ask panel two to come forward.
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.
it off with Dr. Johnson, president of the World Medical Association.
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
REP. BILIRAKIS: So you are not testifying on behalf of the
World Medical Association.
MR. JOHNSON: No, I am not.
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
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.
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.
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.
my plea to all of you is to take advantage of that opportunity and to realize
REP. BILIRAKIS: Thank you so much, doctor.
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
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.
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
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.
Thank you very much, sir. I'm glad that there are at least five of us to have
heard your testimony.
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
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.
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
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
REP. BILIRAKIS: Please summarize if you will.
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
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
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.
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
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.
REP. BILIRAKIS: Thank you, Mr.
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.
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
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.
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
REP. BILIRAKIS: Please summarize if you will,
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
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
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
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.
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
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 --
REP. BILIRAKIS: Without 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.
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.
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
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
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
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.
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.
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.
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.
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.
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
MS. BAUMGARDNER: They're covered by Medicaid.
REP. BILIRAKIS: They're probably not part of the 43
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
REP. BILIRAKIS: But they're uninsured?
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.
REP. BILIRAKIS: And that can
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.
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 level?
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 reasons.
REP. BARRETT: So clearly,
you don't think that making these more widespread is going to lower the number
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.
REP. BARRETT: Okay.
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?
COBURN (?): Without objection.
REP. 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?
MR. JOHNSON: A dilemma is that is one of cost, and I think we
made the wrong diagnosis with respect to cost.
REP. BARRETT: Okay.
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.
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.
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.
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
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.
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
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
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
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.
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?
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.
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.
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
And that's a --
REP. COBURN: So, you would support,
then, a sliding scale voucher system for our poorest people --
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
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
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.
REP. COBURN: Sure.
(?): 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.
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.
Would the gentleman yield for a minute?
REP. GANSKE: Let me finish.
REP. COBURN: All right, then I'll take --
REP. GANSKE: Second
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?
REP. GANSKE: Okay
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.
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.
REP. GANSKE: 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.
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?
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
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.
GANSKE: Mr. Chairman, I was kind enough to yield to you, so you could go first
REP. COBURN: That's a prerogative of the chair.
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
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.
COBURN: I would agree with that.
Dr. Ganske, if the panel would not mind
staying for few --
Dr. Ganske, you're recognized.
Thank you, Mr. Chairman.
Dr. Johnson, are you testifying in favor of
your voluntary purchasing coops being exempted from state regulation? Is that
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.
REP. COBURN: Mr. Barrett.
REP. BARRETT: Thank you, Mr.
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.
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
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
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.
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
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.
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
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.
NICHOLS: Mr. Chairman?
REP. NICHOLS: Yes.
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.
MR. NICHOLS: Right.
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
MR. NICHOLS: That is now changing with the --
COBURN: I know it is, but that's exactly the same kind of problem we're talking
REP. COBURN: Dr. Ganske, did you have comment.
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
We thank you again.
LOAD-DATE: July 14,