[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
HEALTH REFORM IN THE 21ST CENTURY:
EXPANDING COVERAGE, IMPROVING QUALITY
AND CONTROLLING COSTS
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
MARCH 11, 2009
__________
Serial No. 111-5
__________
Printed for the use of the Committee on Ways and Means
----------
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COMMITTEE ON WAYS AND MEANS
CHARLES B. RANGEL, New York, Chairman
FORTNEY PETE STARK, California DAVE CAMP, Michigan
SANDER M. LEVIN, Michigan WALLY HERGER, California
JIM MCDERMOTT, Washington SAM JOHNSON, Texas
JOHN LEWIS, Georgia KEVIN BRADY, Texas
RICHARD E. NEAL, Massachusetts PAUL RYAN, Wisconsin
JOHN S. TANNER, Tennessee ERIC CANTOR, Virginia
XAVIER BECERRA, California JOHN LINDER, Georgia
LLOYD DOGGETT, Texas DEVIN NUNES, California
EARL POMEROY, North Dakota PATRICK J. TIBERI, Ohio
MIKE THOMPSON, California GINNY BROWN-WAITE, Florida
JOHN B. LARSON, Connecticut GEOFF DAVIS, Kentucky
EARL BLUMENAUER, Oregon DAVID G. REICHERT, Washington
RON KIND, Wisconsin CHARLES W. BOUSTANY, JR.,
BILL PASCRELL, JR., New Jersey Louisiana
SHELLEY BERKLEY, Nevada DEAN HELLER, Nevada
JOSEPH CROWLEY, New York PETER J. ROSKAM, Illinois
CHRIS VAN HOLLEN, Maryland
KENDRICK B. MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
DANNY K. DAVIS, Illinois
BOB ETHERIDGE, North Carolina
LINDA T. SANCHEZ, California
BRIAN HIGGINS, New York
JOHN A. YARMUTH, Kentucky
Janice Mays, Chief Counsel and Staff Director
Jon Traub, Minority Staff Director
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
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C O N T E N T S
__________
Page
WITNESSES
John Z. Ayanian, M.D., MPP, on behalf of the Institute of
Medicine Committee on Health Insurance Status and Its
Consequences................................................... 10
Karen Davis, Ph.D., President, The Commonwealth Fund, New York,
New York....................................................... 23
John M. Pickering, FSA, MAAA, Principal, Consulting Actuary,
Milliman, Inc, Seattle, Washington............................. 70
SUBMISSIONS FOR THE RECORD
America Health Care Association and National Center for Assisted
Living, Statement.............................................. 131
American Academy of Physician Assistants, Statement.............. 134
American College of Obstetricians and Gynecologists, Statement... 138
American Federation of State, County and Municipal Employees,
Statement...................................................... 143
American Health Quality Association, Statement................... 144
American Society of Association Executives, Statement............ 149
Argus Health Systems, Inc., Letter............................... 151
Families, USA, Statement......................................... 153
J. Kirk Peffers, Statement....................................... 154
National Association of Professional Employer Organizations,
Statement...................................................... 154
National Association of Realtors, Statement...................... 156
Newbery, Ungerer & Hickert LLP, Statement........................ 157
HEALTH REFORM IN THE 21ST CENTURY:
EXPANDING COVERAGE, IMPROVING QUALITY AND CONTROLLING COSTS
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WEDNESDAY, MARCH 11, 2009
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 10:18 a.m. in
1100 Longworth House Office Building, Honorable Charles B.
Rangel, (Chairman of the Committee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
March 04, 2009
FC-4
Health Reform in the 21st Century:
Expanding Coverage, Improving Quality
and Controlling Costs
House Ways and Means Chairman Charles B. Rangel (D-NY) announced
today that the Committee will hold its first health reform hearing in
the 111th Congress. The hearing will take place at 10:30 a.m. on
Wednesday, March 11, 2009, in the main committee hearing room, 1100
Longworth House Office Building.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing.
BACKGROUND:
Healthcare spending is expected to consume 17.6 percent of Gross
Domestic Product (GDP) in 2009, and it is projected to rise to 20.3
percent by 2018 if current trends continue.\1\ Since 2000, healthcare
premiums have grown four times faster than wages.\2\ The U.S. spends
twice as much per person for healthcare as any other country in the
world, and yet continues to lag behind other countries in terms of
coverage and quality. There are nearly 46 million uninsured people in
America, and millions more have inadequate coverage. The U.S. has lower
life expectancy rates than all other high-income countries, including
Japan, Germany, Australia and Switzerland. These premature deaths might
be prevented through timely, effective healthcare or early efforts to
screen and prevent diseases from progressing.\3\
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\1\ Sisko, Andrea, et al, ``Health Spending Projections Through
2018: Recession Effects Add Uncertainty to the Outlook.'' Health
Affairs. February 24, 2009 Web Exclusive: w346-357
\2\ Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-
2008. Bureau of Labor Statistics, Consumer Price Index, U.S. City
Average of Annual Inflation (April to April), 2000-2008; Bureau of
Labor Statistics, Seasonally Adjusted Data from the Current Employment
Statistics Survey, 2000-2008 (April to April).
\3\ C. Schoen, R. Osborn, S.K.H. How, M.M. Doty, and J. Peugh, In
Chronic Condition: Experiences of Patients with Complex Health Care
Needs, in Eight Countries, 2008, Health Affairs Web Exclusive, Nov. 13,
2008, w1-w16.
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Lack of health insurance coverage, rising costs and lower quality
are intimately intertwined. The uninsured crisis is not just affecting
those families without coverage; it affects costs and quality for
everyone. A recent report from the Institute of Medicine found negative
``spillover'' effects that occur for people with health insurance who
are in communities with a large uninsured population. These effects for
the insured include decreased access to both primary care physicians
and specialists, strained emergency services, and less access to state-
of-the-art treatments.\4\ Widespread lack of coverage also increases
healthcare costs for providers, plans, and those with health insurance
through cost-shifting.
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\4\ Institute of Medicine, ``America's Uninsured Crisis:
Consequences for Health and Health Care'', February 24th, 2009.
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The flaws in the U.S. health system have contributed to the
economic downtown by putting enormous pressures on the Federal budget
and making it harder for businesses to provide coverage for their
employees. In addition, medical debt threatens the health and economic
security of millions of Americans families. As the President said on
Monday, March 2, ``If we're going to help families, save businesses,
and improve the long-term economic health of our nation, we must
realize that fixing what's wrong with our healthcare system is no
longer just a moral imperative but a fiscal imperative.''
Reform will require a comprehensive approach that addresses
coverage, cost and quality. The Commonwealth Fund's Commission on a
High Performance Health System recently released a report that details
key elements of a reform plan that could guarantee coverage for all,
reduce health spending and improve quality.\5\ The Commonwealth
Commission proposes a series of insurance, payment and delivery system
reforms designed to change the way the nation pays for care, invest in
information systems to improve quality and safety, and promote better
health. These changes could yield higher value and substantial savings
for families, businesses, and the Federal and state Governments.
---------------------------------------------------------------------------
\5\ The Commonwealth Fund Commission on a High Performing Health
System, ``The Path to a High Performance U.S. Health System: A 2020
Vision and The Policies to Pave the Way'', February 2009.
---------------------------------------------------------------------------
In announcing this hearing, Chairman Rangel said,``Health reform
cannot wait any longer. President Obama made a significant investment
in health reform in his budget and this Committee is eager to continue
working with the Administration to ensure success in our shared goal of
improving the health system.''
FOCUS OF THE HEARING:
The hearing will focus on the need for comprehensive health reform
and key features of a reformed health system.
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Chairman RANGEL. The Committee will come to order, and I
cannot tell you how proud I and Mr. Camp are in terms of being
one of the lead Committees in tackling a very serious and
national problem.
It is the hope of our new President that all of the people,
not just the patients and potential people in need of
healthcare, could come together, insurance companies,
Government, local and state, unions, and management. He brought
us together at the White House to see how at the end of the day
we can make this country more healthy.
It involves our workforce, international trade,
competition, cost, prevention, reimbursement, universality, and
I really believe on the House side that we can do it,
notwithstanding the fact that more than one Committee has
jurisdiction.
We will be working with the Committee on Energy and
Commerce and Education and Labor, not only in informal
hearings, but informal Republicans and Democrats to see if at
the end of the day we can get a bipartisan piece of
legislation.
This gives us an opportunity to reform the system, to deal
with reimbursements, to deal with a variety of things, because
there is no question that the healthcare system in our country
has broken down.
It is not just the question of the 46 billion people that
are not covered, it is also the cost to other people who have
coverage, because these people are getting healthcare, and the
Government and private companies are paying for it.
Most all of the work on this has been done by Mr. Stark,
Chairman Stark and his Subcommittee. I would like to now yield
to him to get his views for the direction which the Full
Committee will be taking.
Chairman Stark.
Mr. STARK. Thank you, Mr. Chairman, and thank all of you,
our witnesses.
We made some moves toward what President Obama has talked
about as a moral and economic imperative for our economy. As we
will hear today, the quality of our healthcare is based on
geography, health insurance status, the number of uninsured in
our community, a whole lot of things that are not really
relevant.
We did deal with health IT and made a step toward
comparative effectiveness research, but with those
advancements, our healthcare system will still be inefficient
and unfair unless we do what virtually every other nation in
the world has done, and that is extend coverage to everyone.
You have got cost shifting, a fractured system, and unless
we have a system where everybody is a part of the program, we
will not have achieved our goals. We can improve a lot of
things in Medicare and Medicaid and SCHIP, but when we talk
about reform, I guess I think of coverage for everyone.
It is interesting that more than two-thirds of the public,
in the polls at least that we have seen, believe that they want
an option to choose between a public plan or a private plan.
That seems to be at least the direction in which the Committees
are going in and following the President's request.
We are going to hear from three witnesses this morning. We
are going to hear from the Institute of Medicine, who is going
to tell us about the cost of being uninsured, and it has a lot
of ramifications other than bankruptcy.
We will hear from The Commonwealth Fund, and they have
spent a lot of time designing an outline--I guess they call it
a framework. They have reviewed--my only disappointment was
once they reviewed all the health plans that were available,
mine came in first, so, I think they did not like that, so they
wrote their own. That is okay with me.
Then we will hear from an actuary with Milliman
Incorporated, and I do want to note that their analysis was
conducted on behalf of the health insurance plans and the
hospital association, and MedPAC takes exception to the
analysis, and I would ask that MedPAC's statement prepared for
the record for today be made part of the record.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman RANGEL. I wanted to say to Mr. Camp that it
appears as though the other body is attempting to proceed in a
bipartisan way. I do not know whether we will have that
flexibility, but I hope after we listen to the witnesses, we
can determine whether there are serious differences in the
approaches that we are going to take. But if indeed they are
not serious, then whatever can be worked out, I would hope we
would at least try to work it out.
I yield to you whatever time that you would like.
Mr. CAMP. Well, thank you, Mr. Chairman.
As you have said, this is an important hearing following a
historic meeting at the White House last week. I first want to
thank the Chairman for so readily turning over the microphone
this time.
[Laughter.]
Mr. CAMP. I know if we cooperate with this, I think there
is really no limit on what we can accomplish together, but too
many families are struggling to pay for their healthcare. Too
many employers are being forced to reduce or eliminate
coverage, and, yes, too many Americans are uninsured.
These are facts that we all agree on. As I told the
President last week, I think there is broad agreement on the
principles of any successful healthcare reform: lowering costs,
increasing access, ensuring portability, having a strong
prevention and wellness component among others.
The difficulty is how do we get there, and that is why I
want to begin my remarks by highlighting one fact, that 61
percent of Americans have their health insurance through their
employer for those 65 years and under. Let me also say that 65
percent of Americans less than 65 are covered with some form of
private insurance.
The reason I wanted to highlight those numbers is just for
one specific reason. It is clear a majority of Americans
receive their healthcare through their employer or other
private means. I think the first principle we must follow in
healthcare reform is protecting the coverage Americans already
have, and that is the coverage they receive through their
workplace.
Increasing the Government's role in healthcare has a cost
for taxpayers, and as Mr. Pickering will testify, for employers
providing coverage and the workers they cover.
This Government to employer and employee cost shift will
eliminate the manner in which about 120 million Americans
receive their healthcare, and that runs the risk of violating
the Hippocratic Oath, which is first, do no harm.
Sometimes on television you see an ad for new medicine and
the latest cure-all, and as usual, at the very end of the
commercial, you hear what the side effects are. You might hear
``mild nausea,'' and you think, well, okay. An occasional
headache, that might be worth it, but a fatal stroke, that is
obviously not a chance.
That, I fear, is exactly what some witnesses today are
asking us to risk, a fatal stroke that will eliminate the
ability of employers to offer affordable healthcare to their
workers and their families.
Mr. Chairman, you well know that employers are already
having enough difficulty maintaining coverage for their
employees, and I think you would agree with me that they
deserve to be commended for giving millions of Americans access
to critical care.
Let us make sure that we continue to support them and their
employees.
I look forward to working together to make sure healthcare
remains a benefit provided by employers while driving down the
high cost of care that every single American faces, and I look
forward to working with you on trying to see if there is a path
forward to ensure that more Americans have access to
healthcare, more Americans have insurance, and the reforms of
wellness and prevention are incorporated into any plan that
might move forward.
With that, I yield back the balance of my time. Thank you.
Chairman RANGEL. Thank you. We have three witnesses today,
John Ayanian, Karen Davis, and John Pickering.
John Ayanian is a doctor from the Institute of Medicine,
the Committee on Health Insurance Status and its Consequences,
and a Professor of Medicine and Healthcare Policy at Harvard
Medical School.
He will be testifying on behalf of the Institute of
Medicine Committee about the recently commissioned report
summarizing the research on effects of un-insurance We look
forward to your testimony.
The procedure is that you would have 5 minutes, but you
will be allowed to finish your thought on that. So, welcome,
and we welcome your testimony this morning.
STATEMENT OF JOHN Z. AYANIAN, M.D. ON BEHALF OF THE INSTITUTE
OF MEDICINE, COMMITTEE ON HEALTH INSURANCE STATUS AND ITS
CONSEQUENCES
Dr. AYANIAN. Thank you, Chairman Rangel, Representative
Camp, and Members of the Committee on Ways and Means.
My name is Dr. John Ayanian. I am a Professor of Medicine
and Healthcare Policy at Harvard, a practicing physician at
Brigham and Women's Hospital in Boston, and member of the
Institute of Medicine Committee on Health Insurance Status and
Its Consequences.
I am honored to present to you today the Institute of
Medicine's most recent report, ``America's Uninsured Crisis:
Consequences For Health Health Care.''
Our report addressed three key questions. First, what are
the dynamics driving downward trends in health insurance
coverage? Second, is being uninsured harmful to the health of
children and adults? Third, are insured people affected by high
rates of un-insurance in their community?
The first topic of our report assessed the continuing
decline in health insurance coverage. With eroding private
coverage and expanded public programs from 2000 to 2007, the
proportion of uninsured children remained steady at about 11
percent, while the proportion of uninsured adults increased
from 17 to 20 percent.
The principal cause of declining private insurance coverage
has been the rising cost of healthcare. Between 1999 and 2008,
family health insurance premiums rose nearly 120 percent, more
than triple the increase in workers' earnings.
Employers are less able to sponsor coverage, and employees
are less able to afford the premiums if coverage is offered.
Our Committee concluded that these trends will not reverse
without concerted action.
Current economic conditions and rising unemployment will
only exacerbate the problem as more individuals and families
lose employment based coverage.
The second major topic of our report focused on the health
consequences of being uninsured for children and adults.
Based on nearly 100 new and generally stronger studies that
we reviewed, we found that uninsured Americans frequently delay
or forego doctors' visits, medications, and other effective
treatments, even when they have serious or life threatening
conditions.
Uninsured children receive fewer immunizations and basic
dental services. When they have serious conditions such as
asthma or diabetes, they have more unmet healthcare needs.
Uninsured children are also more likely than insured children
to miss school due to health problems.
Among uninsured adults, 40 percent have one or more chronic
condition, such as high blood pressure, diabetes or depression.
Many of them receive little or no medical care, and their
health declines more rapidly than for insured adults with these
conditions.
Uninsured adults are also more often diagnosed with later
stage cancers. As a result, they are more likely to die more
prematurely than insured adults, and with serious conditions
such as heart disease, cancer or trauma, the risk of death can
be 40 to 50 percent higher.
Fortunately, our Committee also found good news to report
about the benefits of gaining coverage. When uninsured children
gain coverage, they have serious health problems identified
sooner, better preventive services, fewer hospital stays,
improved asthma outcomes, and fewer missed days of school.
When uninsured adults enroll in Medicare, they receive more
appropriate tests and treatments that improve their health and
prevent costly complications. The risk of death is also reduced
when they are hospitalized for heart disease and other serious
conditions, such as strokes or hip fractures.
Therefore, our Committee concluded that lacking health
insurance is hazardous to the health of children and adults.
More importantly, gaining health insurance provides substantial
health benefits to uninsured Americans.
The third and final topic of our report focused on the
affects of high rates of un-insurance for Americans who have
health insurance.
When rates of un-insurance in communities are relatively
high, insured adults report more difficulty obtaining needed
healthcare and less satisfaction with the care they receive.
Furthermore, weaknesses in local healthcare systems are
intensified by high rates of un-insurance, and these problems
have potentially grave consequences for the quality and
timeliness of emergency services and trauma care for everyone
in the community, both insured and uninsured.
In conclusion, we determined that the evidence on the
adverse health consequences of being uninsured is stronger than
ever before.
This evidence makes a compelling case for urgent action,
because insurance coverage matters for the health of children,
adults and communities.
Given the harms of lacking health insurance and the
benefits of gaining coverage, the Institute of Medicine
recommends that the Congress and President work with other
public and private sector leaders on an urgent basis to achieve
health insurance coverage for everyone and to reduce the
escalating costs of healthcare to make coverage for all
sustainable for the nation.
Thank you.
[The prepared statement of Dr. Ayanian follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman RANGEL. I would like to have Mr. Stark introduce
our next witness who is a friend of the Congress and has been
so helpful to us even when she thought we were wrong.
Mr. Stark.
Mr. STARK. Well, I am pleased to introduce a person for
this Committee who needs no introduction, Karen Davis, who is
President of The Commonwealth Fund in New York, and has spent
much of her career and directed untold resources from The
Commonwealth Fund toward studying the ways we can improve the
delivery of healthcare in this country.
They have come up with this as suggested in the eleventh
hour, and I think we all have a copy of it with us, a plan, a
scheme.
She, too, has hired an actuary, but I think it is important
to note that whatever the exact numbers in your report are,
they are less important than the direction that the curve
moves. I do not think at this point it is worth arguing about
the exact hours.
It is the fact that we have trends which will get us over a
period of years to savings, and those savings will allow us to
provide quality care to more people.
Karen, I look forward to you enlightening us this morning.
Thank you.
STATEMENT OF KAREN DAVIS, PRESIDENT, THE COMMONWEALTH FUND
Ms. DAVIS. Thank you, Representative Stark, for that
gracious introduction.
Mr. Chairman, Mr. Camp, Members of the Committee, really it
is a great opportunity to be here on this very important
hearing on health reform in the 21st Century.
With the economy in crisis, healthcare costs rising as
Representative Camp said, too many families are struggling with
the cost of healthcare and the cost of health insurance
premiums, and too many employers are cutting back on coverage.
We can certainly do much better than we are currently
doing, and we cannot afford to continue on our current course.
It is urgent to start now.
In fact, the longer we wait, the worse these problems will
get, and the more difficult they are to confront. As
Representative Stark said, The Commonwealth Fund Board of
Directors established a commission on a high performance health
system in 2005.
They have recently released the report they were pleased to
share with you on ``The Path to a High Performance U.S. Health
System, a 20-20 Vision and the Policies to Pave the Way.''
There are five key strategies in the commission's report:
affordable coverage for all including an insurance exchange
that gives employers and individuals choices of private plans
and a new public health insurance plan that would change the
way the insurance markets work, fostering competition, enhanced
choice, while preserving, as Representative Camp stressed,
employment-sponsored insurance.
The second strategy is aligning incentives to reward
physicians, hospitals, and other providers for the results we
would like to achieve and enhance value moving away from fee-
for-service payment.
The third strategy is changing the healthcare delivery
system to reward accountable, patient-centered, coordinated
care. The four step strategy, which the Congress has already
moved forward on with the American Recovery and Reinvestment
Act, is to provide the support to hospitals and physicians that
they need to provide benchmark levels of high quality care by
investing in infrastructure and information, promoting health
and disease prevention.
The fifth strategy is leadership and collaboration among
private and public stakeholders to achieve these goals.
As Representative Stark stressed, the exact numbers can
differ depending upon whose models are being used, but The
Lewin Group estimated for the commission the following effects
of this set of strategies.
It would lower the annual rate of increase from 6.7 percent
a year to 5.5 percent a year.
The effect of slowing the growth and health spending would
be a cumulative $3 trillion in savings to the health system
from 2010 to 2020. Employers would share in this savings.
Employees would share in this savings. Employers would save
$321 billion over that period, which would provide needed
relief to struggling businesses.
State and local governments that are hard hit by the
economic crisis would save $1 trillion over that period of
time, and families would save $2.3 trillion or $2300 per family
in 2020 alone.
As the central source of financing for coverage, the
Federal Government's cost would increase during early years--
the net cumulative cost to the Federal Government of the PATH
framework over the 2010 to 2020 period would be $593 billion.
Most of the Federal expenses would occur in the early years
as a result of initial investments. These up front investments
yield a substantial return for the nation, resulting in nearly
offsetting all of the increased annual Federal spending,
compared to baseline projections by 2020.
Most importantly, the PATH framework would benefit patients
achieving near universal coverage, improving choices. It would
increase those covered by employer coverage from 164 million to
196 million. It would improve coverage or make more affordable
coverage for over 130 million individuals.
The U.S. needs to find its own unique path forward building
on the strengths of our public and private health insurance
system, fostering competitive market forces in the public
interest, aligning incentives to reward value.
The result of this would be bold change on behalf of the
entire population. The President has called for such bold
change, has advocated the creation of a health reform reserve
fund, which if included in budget resolution, would provide the
essential start for reform.
Medicare can innovate, but it cannot go it alone. Reforms
to bend the cost curve and improve coverage for those under 65
must be a part of an overall system approach to change. The
cost of inaction is high. We really have a historic opportunity
and a clear path forward to a high performance health system.
Thank you very much.
[The prepared statement of Ms. Davis follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman RANGEL. We have with us an expert in healthcare. I
will ask Congressman Reichert to tell us more about him.
Mr. REICHERT. Thank you, Mr. Chairman.
I am very pleased to be able to introduce a constituent of
mine today, John Pickering. Mr. Pickering is a principal and
consulting actuary with the Seattle Office of Milliman.
He has a Bachelor of Science Degree in Mathematics from
Central Washington University, and just to take a moment to
boast a little bit, the same university my son received his
mathematics degree from.
He also has a BA in Communications from the University of
Washington, more than 10 years of health actuarial experience,
and he currently resides in Sammamish, Washington, grew up in
North Bend, Washington, all within the Eighth District of
Washington State.
I am very much looking forward to hearing his ideas on how
we can improve and reform our current healthcare system.
Welcome, Mr. Pickering.
STATEMENT OF JOHN M. PICKERING, FSA, MAAA, PRINCIPAL AND
CONSULTING ACTUARY, MILLIMAN, INC.
Mr. PICKERING. Thank you, Representative Reichert, for the
introduction, and thank you, Chairman Rangel, Ranking Member
Camp, for the invitation to testify this morning.
I am John Pickering, a principal and consulting actuary
with Milliman in Seattle, and I appreciate the opportunity to
contribute to the healthcare reform dialog.
Milliman is the largest actuarial employer in the country,
with offices in approximately 30 U.S. cities. In healthcare, we
work with health plans, providers, employer groups, and
Government entities nationwide.
We recently conducted a study of hospital and physician
payment rates among Medicare, Medicaid, and commercial payers
at the request of AHIP, the American Hospital Association, the
Blue Cross Blue Shield Association, and primarily Blue Cross.
I will summarize the findings of our study in my testimony
today. My goal is not to advocate for or against any specific
reform proposal, but rather to help inform the debate.
We measure the cost shift as the change in provider payment
that would be required by Medicare, Medicaid, and commercial
payers, such that all three would pay equivalent rates.
Together, these three main payer types must also cover the
unpaid costs for services for the uninsured.
Chart 1 presents our findings for hospitals. This is based
on 2006 data.
We estimate that on average, hospitals had a negative 9.4
percent margin on Medicare patients, a negative 14.7 percent
margin on Medicaid patients, a 23.1 percent margin on
commercial patients, and a negative 25.1 percent margin on
uninsured and other Government patients.
These combine for an overall operating margin of 3.8, with
the Medicare, Medicaid, commercial subtotal operating margin of
6.4.
In order for each hospital to achieve consistent margins on
Medicare, Medicaid and commercial business, we estimate
Medicare and Medicaid combined would have needed to pay an
additional $51 billion, and commercial payers would have paid
$51 billion less.
This would amount to an 18-percent reduction in commercial
payment rates.
Table 2 presents our findings for physicians. This is based
on 2007 data.
The values in Chart 2 represent relative payment levels.
1.0 represents the weighted average of all three payers. We
estimate that Medicare paid 11 percent less than the average,
Medicaid paid 40 percent less than the average, and commercial
payers paid 14 percent more than the average.
In order for each to pay the average rate, Medicare and
Medicaid would have needed to pay an additional $38 billion and
commercial payers would have paid $38 billion less. This would
represent a 12-percent reduction in commercial payment rates.
Chart 3 summarizes our cost shift estimates. In total, we
estimate the cost shift burden on commercial payers is
approximately $89 billion. This calculation of the cost shift
is revenue neutral to hospitals and physicians.
We have held the total payment to providers constant, but
reallocated the source.
These cost shift estimates are not based on our opinions of
an appropriate payment level, but rather our measurement of the
magnitude of the current differences in rates.
The impact of the cost shift varies geographically and by
provider. Hospitals vary in their patient mix. Those with
higher percentages of Medicare, Medicaid and uninsured patients
face a bigger burden.
Hospitals also vary in their cost efficiency. Some
hospitals are able to make a positive margin on Medicare.
The payment rate differential puts pressure on commercial
premiums. Chart 4 presents our estimates of the cost shift
impact on a typical family of four in an employer sponsored PPO
plan.
The left side of the chart presents the total annual
healthcare cost for this family, including premium and cost
sharing, such as deductibles, co-pays and co-insurance, and
split between amounts paid by the employer and the family.
The right side of the chart represents the amount that is
due to the cost shift. In total, we estimate that if the cost
shift were eliminated, healthcare spending for this family of
four would be reduced by almost $1,800 per year or 10.7
percent.
We were able to evaluate hospitals' margins going back to
1995. Chart 5 presents the results.
Commercial margins bottomed in 1999 and have increased
since. Medicare margins peaked in 1997 and have since declined.
Medicaid margins began declining in 2003.
The rising commercial margin indicates that the trends in
payment from commercial payers have exceeded the trends in
hospital operating costs. This excess trend has been one
component in commercial premium trends in recent years.
While my comments today are focused on the financing of
healthcare, I also want to acknowledge the importance of
improving the efficiency in the delivery system.
To be successful in the long term, reform must address both
the financing of care and the cost efficiency in quality of
care delivery.
Thank you.
[The prepared statement of John M. Pickering follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman RANGEL. Mr. Pickering, you have heard the
testimony of Karen Davis, and most everybody that I have talked
with believes there should be an option for the potential
patient for a public plan.
I think your position is that a public plan would increase
the premiums and the cost of the private plans. Is that your
position?
Mr. PICKERING. It could. I believe it could.
Chairman RANGEL. You do not believe there is any room for
compatibility and competition and wider choice for the
potential enrollee in healthcare?
Shelley Berkley said at a meeting we had today, our people
out there, they do not care whether it is Medicare, Medicaid,
private, public. All they want is the assurances that if
something happens to them or their loved ones, that they can
get affordable healthcare, quality healthcare.
That is what most, not Republicans, not Democrats, not
people from rural areas, that is what the average human being
want.
Do you believe that you could draft if commissioned a plan
that would include the public option?
Mr. PICKERING. That would be a challenge.
Chairman RANGEL. Well, you are a professional. If you knew
that it was going to happen, and you can say I do not think it
is a good idea, and we say that is nice, but it is going to
happen, do you believe you could have one that would be fair
and equitable to the private providers?
Mr. PICKERING. Let me outline what I think one main concern
would be. If the public plan paid at Medicare payment rates,
which are significantly below, in most geographic areas, what
commercial payers pay, and it varies geographically across the
country, but in areas where commercial payers currently pay
much higher rates, and if a public plan came in at Medicare
rates, I think it would be very difficult for the commercial
plans to compete.
Could we devise a way around that?
Chairman RANGEL. Yes--no. That is the question; yes.
Mr. PICKERING. I hope so. I do not know the answer to that,
but I hope so.
Chairman RANGEL. I do not understand why you would assume
that the private companies would be asking for more, or that a
public company would be asking for less.
One, the public plan would be under serving the Government
taxpayer if they were asking for less than what they should.
Two, it is possible that the private plan would be
overcharging.
If we had this type of thing, you and I would want the
providers to know that they are getting an equitable
reimbursement where they monitor each other, public and
private.
Mr. PICKERING. I think one issue is we do not have price
competition at the provider level. We only have price
competition at the plan level.
For example, consumers are shielded from making choices of
providers on price, such that if the public plan paid a lower
rate to providers than the commercial plans could, it would be
very difficult for the commercial plans to compete on premium
with the public plan.
Chairman RANGEL. If the insurance markets were reformed
such that plans could no longer underwrite, would that help
plans lower their administrative costs?
Mr. PICKERING. It potentially could. Any insurance reform
we would hope would be based on sound insurance and actuarial
principles. Right now in the market, if we look at the
individual market, plans need to medically underwrite so they
do not get selected against.
If a plan gets too much adverse selection, its claims costs
will grow and it could face what we call a death spiral, where
they retain only their sickest members and their premium
becomes unaffordable.
It is a challenge to payer availability with affordability.
Chairman RANGEL. It seems that with your reputation and
that of your firm as you were introduced, that you welcome
challenges.
Mr. PICKERING. Certainly.
Chairman RANGEL. You believe it could be handled if it had
to be?
Mr. PICKERING. Yes.
Chairman RANGEL. I yield to Mr. Camp.
Mr. CAMP. Well, thank you, Mr. Chairman.
Your report really talks about the fact or explains that
every American with private insurance is really paying a hidden
cost or hidden tax on their health insurance because healthcare
providers shift some of their financial losses onto them.
The Lewin Group did a study and said that as a percentage
of private payments for services, Medicare, Medicaid under paid
hospitals 71 to 67 percent, and under paid physicians 81 to 56
percent.
Can you explain why this cost shift occurs?
Mr. PICKERING. Yes, and let me very briefly outline by
``cost shift'' what I am talking about. It is not just losses
on the public programs.
In our program, when we are talking about cost shift, we
are looking at the difference in payment rates from the overall
combined average of commercial, Medicare, and Medicaid.
In those terms, when you think of why the cost shift
exists, you need to think of why are payment rates different
for Medicaid, Medicare and commercial plans.
There are several reasons. First off, commercial plans are
the only entities that need to negotiate rates with providers.
The Medicaid fee schedule is administratively set as is the
Medicare fee schedule, for the most part. The managed Medicaid
and Medicare will negotiate.
Medicare and Medicaid are obviously very large programs.
Negotiating power between hospitals and physicians and health
plans will come into play in terms of raising commercial
payment rates.
Also, providers' attitudes toward participating in Medicare
and Medicaid. Many providers have as part of their mission to
serve the whole community, so regardless of low payments, they
do want to serve these individuals.
For Medicaid and SCHIP, many providers consider that as a
replacement for uninsured, such that they will accept low rates
on Medicaid because if Medicaid were not there, there would be
the uninsured.
There are legitimate reasons for price differences between
Medicare, Medicaid and commercial plans. What employer groups
have been concerned about in recent years is those rates have
been widening, putting more pressure on employer premiums.
Mr. CAMP. Assuming we all want to have people keep their
coverage if they like it, I do not see how the introduction of
a Government run health plan actually lends itself to that
assumption.
You point out that Government run health programs, like
Medicare and Medicaid, under pay providers, and then providers
charge more for their services to those with private insurance
to make up for the lost revenue.
Will not the introduction of a Government run plan using
similar payment policies make it more difficult for employers
to continue to offer health insurance and will not employees
find it more difficult to pay for or afford their current
coverage if we expand Government run care?
Mr. PICKERING. I believe that could be the case. I think
there are a few dynamics that could happen. If we consider a
public plan in direct competition with the commercial plan,
again, in an area where right now commercial payers pay higher
rates to providers then the public plan would, when the public
plan comes in, it will have a large advantage because its
premiums would be lower.
People shift from the commercial plan to the public plan.
The providers are now paid the lower public plan rates. There
are a few options that could happen.
One is those providers could then shift the costs to the
remaining commercial population. They could try to. Those
providers could become more cost efficient to make a margin
under the lower rate, or those providers could simply make less
money than they had been making, potentially a loss.
In the market today, we do believe that many providers and
many health plans do shift those costs onto the commercial
market.
The dynamic may be different if the commercial market were
competing directly with the public plan. The commercial payers
then may be less willing to pick up that excess cost, because
the dynamic then would be they would be raising their premiums
or their costs and therefore their premiums even higher above
the public plan, making them even less competitive.
It may raise premiums. It may squeeze providers.
Mr. CAMP. Thank you. Thank you, Mr. Chairman.
Chairman RANGEL. The Chair would like to recognize the
Chairman of the Subcommittee on Health for the remainder of the
hearing. Chairman Stark?
Mr. STARK [presiding]. Thank you, Mr. Chairman.
Two things. First, I wanted to go back to Mr. Camp's
concern earlier on in his opening remarks about the 160 million
or however many people get their insurance currently through
their place of employment.
You have an illustrative list of financing mechanisms, and
one of them is capping the employer tax exclusion. I caution
and I think join with Mr. Camp, about doing anything that
undermines the existing coverage for the individuals who
receive their health coverage through their employer, and I
would hope as we work to work on reform and finance it, we
could build on what works.
Should we be concerned about the effects of capping the
employer exclusion on existing coverage and then what happens
to employer sponsored insurance under the plan you have
suggested?
Ms. DAVIS. The commission did not endorse specific revenue
measures, so it provided for the Congress' and the public's
information estimates of what revenues would be generated.
I think your concern that any cap on employer benefits
might well lead employers to drop coverage and to erode, in
fact, the employment based coverage that we would like to
preserve as one of the essential strengths in our system.
By offering competition and choices, by letting employers
either directly purchase coverage or bring their employees into
a national health insurance exchange with many more private
plans, and a public health insurance alternative, employers
could in fact find more affordable choices. Employees could
find more affordable choices.
Our estimates are that the number with employer sponsored
coverage would increase from 164 million to 196 million.
On the other hand, private plans could compete with that
and hold onto much of that business.
The first point I think it is really important that the
Committee understand is this is in the context of health
insurance for everyone.
The Urban Institute estimates there is $122 billion more
revenue that would flow to providers as a result of covering
the uninsured.
In addition, the commission's PATH framework recommends
bringing Medicaid rates up to Medicare levels. That is another
20 to $30 billion.
If one really believes in the cost shift argument that we
have heard from Mr. Pickering, then providers should be
reducing their prices to commercial insurers, and that will
bring commercial insurers down because they do not have to
cross subsidize the care of the uninsured. They do not have to
cross subsidize lower payment rates from Medicaid.
The second point, private insurance administrative costs go
down when they offer plans through the national health
insurance exchange. They do not have the high administrative
costs that they have when they have to market individually to
small businesses and individuals.
Private insurers can compete more effectively by
eliminating the cost shift of the uninsured, if it exists, the
cost shift from lower Medicaid payments, and the lower
administrative costs.
Private insurers bring to the table many inherent
strengths. We need to tap into those. Yes, a public health
insurance plan has the advantages of being a single set of
benefits available nationwide, will never go away, and having
leverage over provider payments, but private insurers can
innovate. They can use utilization management. They can have
variable benefit designs. They can select certain groups of
hospitals or doctors that have higher quality or are more
efficient.
Mr. STARK. Thank you. I appreciate that [continuing]. I
recognize Mr. McDermott to inquire.
Dr. MCDERMOTT. Thank you, Mr. Chairman.
Dr. Shaw from Harvard described a single payer plan as a
single set of benefits with a single source of funding. I
understand that has been sort of discarded in many minds in
this Congress.
What is hard to understand is the French for 8 percent of
GDP provide the best healthcare in the world, but we spend 16
percent of GDP and have worse results than they have in France.
That is according to the World Health Organization.
It is hard to see why we step away from that. Let us talk
about the plan that The Commonwealth Fund has put on the table.
Is it possible to control costs without a robust public
program, to compete with the private sector that has been
unable to control costs over the last 50 years?
Ms. DAVIS. Mr. McDermott, that is a very important point.
We are at 16 percent of GDP. Actually, almost 17 percent now
and headed to 21 percent. Other countries cover everyone at
about half the per capita cost of the U.S.
We need an uniquely American solution, and this building on
the best of public health insurance and private insurance,
giving employers and individuals that choice to tap into it.
What our estimates show is if you do not have a public
health insurance plan offered to really create this competitive
dynamic, instead of saving $3 trillion over this period, one
would save three-quarters of a trillion. That is real money. It
is markedly less.
Employers would pay much more without the option of this
dynamic change in the insurance market, so instead of saving
$231 billion, they would spend $900 billion. It is in an
employer's advantage to have access to premiums that take
advantage of innovative payment methods, that take advantage of
lower administrative costs.
Dr. MCDERMOTT. Can I then explore the public option? My
biggest fear is that the public option will become the dumping
ground for the expensive patients while the insurance industry
continues to siphon off those who are not sick or ill or in
certain categories, that will make it possible for them to be
profitable, leaving the Government with all the sick patients,
the chronic patients with diabetes, the chronic patients with
asthma, all those cases, all the deliveries. Let us get those
out so we do no have to worry about any high cost deliveries.
How do we prevent that from happening in the exchange that
you are creating here? I think that is the real crux of what is
going to happen.
Industry wants to off load their costs. They do not care
where they off load it. If they can off load it to a private
company, that is fine, or if they off load to the public, that
is fine.
We are going to get stuck, I think, with the high cost
patients. It is part of the reason why we have the cost shift
in Medicare. The private sector did not want old people, so the
Government took them. The private sector did not want poor
people, so the Government took them.
We have had all the high cost patients and we are heading
for another trench of them, it seems to me, unless we design
this very carefully.
Ms. DAVIS. That is a very important point. There are two
things that are essential to do. The first is to set rules on
the sale of private insurance inside the exchange and outside
the exchange.
Dr. MCDERMOTT. Nationwide insurance rules?
Ms. DAVIS. Nationwide. They must take everyone and they
must charge the same premium regardless of the health status,
so not charge the sick more. It is called a community rating,
guaranteed issue in the insurance industry.
Those rules are absolutely important to prevent the kind of
risk selection dumping that you are talking about.
The second thing that is important to do is what is called
risk adjustment. If chronically ill people prefer a public
health insurance plan because it is more innovative about
rewarding medical homes, rewarding hospitals for controlling
chronic conditions, then we want to make sure premiums are not
higher as a result and they are risk adjusted.
Those two protections are very important.
Dr. MCDERMOTT. Does this imply that we are going to take
health insurance regulation away from the states and we will do
it at the Federal level?
Ms. DAVIS. In this framework, there needs to be national
rules that set a minimum standard on the conduct and sale of
insurance, and particularly, the key ones are exactly what you
have pointed to.
Same premium for everyone regardless of health status. It
can vary by age, if you want to have age bands. That you have
to take all comers. It has to be open enrollment, guaranteed
renewal. You cannot get rid of people because they got cancer.
Those protections are very important.
Dr. MCDERMOTT. The patient bill of rights is basically what
you are saying has to be built into this?
Ms. DAVIS. We will never have security and affordability
for American families if we let discrimination against the sick
continue in insurance markets.
Dr. MCDERMOTT. Thank you.
Mr. STARK. Mr. Herger?
Mr. HERGER. Thank you, Mr. Chairman.
One principle the President has repeatedly stated and that
I fully agree with is that people who like the coverage they
have should be able to keep it.
Mr. Pickering, I think it is very important that we are
hearing your testimony on the cost shifting that occurs as a
result of inaccurate payments by Government run plans.
The 22.7 million Californians who have employment based or
individual coverage are paying a hidden tax, probably even
higher than the 1,788 average you cited, since California has
the lowest Medicaid payment rates in the country.
I am afraid there is a real danger of making this hidden
tax higher when we talk about placing more people in Government
run programs.
Mr. Pickering, The Lewin Group has estimated that if a
Government run health plan which reimbursed providers at
Medicare rates were created, nearly 120 million individuals
would be forced out of their current health insurance and into
the Government plan.
If this new Government run health plan was created, would
not the current cost shift be made worse, leading to even
higher costs for those who wanted to remain in their current
private health plan, and what effect would this have on
employers who want to continue offering health insurance?
Mr. PICKERING. The one thing we know for sure from our
study is that right now, the commercial plans are paying higher
provider payment rates.
If we assume 120 million people shift from those higher
commercial rates to lower Medicare rates, we are putting
tremendous pressure on the providers who accept those new
patients at Medicare rates. Obviously, their revenue is way
down.
What options do they have? Try to raise more revenue from
the one source where they can negotiate more revenue, which is
the remaining commercial population.
Become more efficient, if they can, or lose money.
A change of this magnitude, 120 million people, I would
worry that shifting the cost onto the remaining commercial
population may not be tenable, just because it would be too
large of an amount.
I think in this scenario, it is difficult to know what the
outcome would be, but I think there would be tremendous
pressure on these providers.
Mr. HERGER. Your last two options, that they are going to
lose money or skimp, is that not really unrealistic that they
would do this? You cannot lose money. The Government, we know,
can continue losing money. That is why we deficit spend. A
private company cannot continue doing that very long, or if you
skimp, people are going to move away from your plan.
Is that not in reality correct?
Mr. PICKERING. Yes, I agree. The hope is that they could
improve their efficiency of delivery of care. Is that feasible?
Maybe, maybe not. Right now, a lot of physicians balance their
caseloads with Medicare, Medicaid and commercial with the
commercial to offset the low payments.
Hospitals will try to attract higher paying commercial
patients for the same reason. If that higher paying segment
goes away, those providers need a new strategy or they need to
readjust to lower revenue expectations, which may mean losses.
I agree you cannot have losses forever.
Mr. HERGER. With that in mind, does it not seem totally
unrealistic that somehow these independent companies and health
plans, private, can compete with the Government who can go
indefinitely losing money, as we have been doing in the past?
Just on the surface, is this not just completely out of the
realm of reality?
Mr. PICKERING. In this case, I do not think it would be the
Government that would be losing money. It would be the
providers who are accepting that Government payment rate.
Mr. HERGER. I guess I am switching the question a little
bit here. The whole idea is that we are going to have
competition from the Government. In reality, it is impossible
for the private sector to ever compete with the Government
because the Government does not have to show a profit. They can
indefinitely, as we have shown we are doing, run a deficit,
where a company cannot.
Mr. PICKERING. I agree. Even if the Government does run a
break-even on the plan, I think it would be very difficult in
many geographic areas for commercial plans to compete, just
because in many geographic areas, it is not feasible for a
commercial plan to try to negotiate rates at 100 percent of
Medicare. They just cannot do it.
Mr. HERGER. Difficult, but I would even say impossible.
Thank you very much.Thank you, Mr. Chairman.
Mr. STARK. Thank you. Mr. Lewis, would you like to inquire?
Mr. LEWIS. Thank you very much, Mr. Chairman. Let me thank
each of you for being here this morning.
It is no secret and I have said it last week and I will say
it again today, I believe healthcare is a right and it is not a
privilege. As a nation, we have a moral obligation to provide
healthcare for all of our citizens.
Today, many of our citizens are one illness away from
losing everything. Every day people put off going to a doctor.
Even when they know they are in pain, they know they cannot
afford to see the doctor. They cannot afford the treatment for
whatever is wrong.
This should never happen in our country; never.
This hearing is an important first step as we start the
process of making healthcare available to all Americans.
I want to thank you for your studies, your reports. I think
when historians pick up their pens and write about this period,
they would have to say that the studies and the reports made a
lasting contribution to moving us down the road toward
comprehensive healthcare for all of our citizens.
Dr. Davis, why is having a public plan so important? Can we
actually change the way healthcare is delivered and save money,
save dollars without a public plan?
Ms. DAVIS. It absolutely is essential to getting the kind
of performance we want. If we do not, we are going to continue
the way we are. I think what we have heard from Mr. Pickering
is the insurance companies do not think they can change the way
they pay providers, do not think they can achieve efficiencies.
We have to have a different kind of system. We are talking
about slowing the increase from 6.7 percent to 5.5 percent.
Providers have more revenue. Every year, they have more
revenue. They get paid for the uninsured. They do not get paid
now. They get paid decent rates for Medicaid.
Most importantly, they get rewarded for providing better
care. They get medical home fees under Medicare, Medicaid, the
public health insurance plan, for all the patients that sign up
with their practice. They get rewarded. They get additional
payments if those patients are up to date with preventive care,
if they have their chronic conditions controlled.
Hospitals get rewarded if they have fewer re-admissions,
fewer complications, patients going back into the emergency
room or back into the hospital after they have been discharged
because they did not know what to expect and how to take care
of them.
Unless we change fundamentally the way we pay providers, as
would happen under Medicare, Medicaid, the public health
insurance plan, private insurers are going to continue the way
they are now.
If they see the light as they did sometimes with Medicare's
physician payment methods in the past, and adopt those methods,
then we can have even bigger change. Otherwise, we are just
going to continue.
Who is going to pay? Families are going to continue to pay.
Businesses are going to continue to pay. We are going to have
higher Federal budget cuts.
The Federal budget cost of covering the uninsured would
double without a public insurance plan. You do not want to
bring the uninsured in at high commercial premiums and at high
provider payment rates.
It is a very important option, a plan, a choice, to have
available in the insurance exchange to make sure that their
scheduled dollars are used efficiently to cover the uninsured
and improve coverage for the under insured.
Mr. LEWIS. Dr. Davis, in Mr. Pickering's testimony, he
talked about a cost shift from public payers to a private plan.
Maybe, Mr. Pickering, you can correct me. I believe your report
was financed and commissioned by the insurance companies.
Do you have any reaction to that? It seems like that may be
a little vested interest there.
Ms. DAVIS. I think there are three concerns I have about
Mr. Pickering's report. The first is it does not assume we
cover the uninsured or improve Medicaid rates. If we did that,
most of this cost shift goes away.
If providers get $122 billion for the uninsured, if they
get 30 or $40 billion more from Medicaid, the $80 billion they
have in their study is wrong.
The second problem is they assume the current levels of
payment of providers are right. In fact, if you look over a
longer historical period, from 1980 through the current period,
hospital margins are higher than they have been historically.
What the MedPAC study shows, that the Chairman referred to,
is that hospitals that are under some economic pressure find
ways of being more efficient. When money is rolling in where
commercial payers are paying at high rates, then they can find
ways for using that revenue. You need some economic pressure to
promote efficiency.
The third point that I would say is that this is an
arithmetic study. It is not a behavioral study. It does not
look at what would commercial insurers do. Would they cut
premiums if Medicare were to pay more. Would they cut premiums
if Medicaid were to pay more, or would they pocket the
difference.
The truth of the matter is the insurance industry is very
concentrated in many geographic areas. Sometimes you have one
company selling most of the business, over half of the business
in a state.
In fact, in nearly every state in the U.S., three companies
or fewer control over half of the enrollment.
One important reason to have a public health insurance plan
available in the exchange to employers is that it is a
counterbalance to undue market power by insurance companies or
by providers that may be the only system that is available in a
geographic area.
By setting a price mark with this public health insurance
plan, we can foster competition and real choice.
Mr. LEWIS. Dr. Davis, my time has expired. The Chairman has
been quite liberal for me. I do not know if Mr. Pickering wants
to respond.
Mr. STARK. We will have lots of time. I recognize Mr. Neal.
I am going to ask some of my colleagues on the other side, Dr.
Ayanian has raised this issue also in his testimony about how
the under insured exacerbate the cost for the insured in many
communities. I hope we will not overlook that.
Mr. Neal, would you like to inquire?
Mr. NEAL. Thank you, Mr. Chairman.
Dr. Ayanian, the Massachusetts' model has drawn a
considerable amount of attention everywhere. The end result is
97 percent, I think, of the citizens of Massachusetts are now
covered under the Pioneering plan.
What are the lessons learned, what are the legitimate
criticisms of the initiative?
Dr. AYANIAN. You raised an important point about the
Massachusetts' health reform being a potential model for the
nation.
Our Committee was commissioned to look at the consequences
of un-insurance. We were not asked to look at specific
approaches.
I think the conclusions we drew by consensus from the
evidence that we have in front of us is that regardless of the
way we choose to extend coverage and finance coverage for all
members of the population, what is critically important is that
we make that coverage available to everyone.
Our Committee followed an important landmark report that
was issued by the Institute of Medicine in 2004 titled
``Insuring America's Health, Principles and Recommendations.''
Our work endorsed the findings of that previous Institute
of Medicine Committee, which asserted and endorsed that
coverage should be universal, it should be continuous, it needs
to be affordable to individuals and families, affordable and
sustainable to society, and promote health and well-being
through access to high quality care.
To the extent that any solution or approach is developed to
this problem of large numbers of uninsured we have in our
country and the severe health consequences that we find when we
have looked at the medical evidence and the scientific
evidence, it really needs to address these principles.
The Massachusetts' model is one important example where we
are moving very close to universal coverage, and we hope to
learn much more from that experience going forward.
Mr. NEAL. Thank you. Dr. Davis, would you like to comment?
Ms. DAVIS. I agree completely.
Mr. NEAL. Mr. Pickering, would you like to comment on the
Massachusetts' model?
Mr. PICKERING. I agree. It seems like a great success in
reducing un-insurance.
Mr. NEAL. Just a thought. The success at least initially of
the plan, it largely is a reflection of the fact that the
business community and the labor community as well as the
consumer, they all came together to find some common ground on
the way forward.
In the end, everybody accepted something they did not like.
Mr. STARK. A mandate?
Mr. NEAL. A mandate. In that instance, I think you could
make the argument that after a lot of careful negotiations, a
lot of pretty hot rhetoric, there still was an opportunity to
go forward.
Mr. STARK. How did the costs come out in the Massachusetts'
plan?
Mr. NEAL. Maybe Dr. Ayanian would give a better response to
that.
Mr. STARK. If the gentleman would yield. I am sorry.
Ms. DAVIS. Mr. Kingsdale, the head of the Commonwealth
Connector, made a presentation to our commission, and in fact,
premiums went down for many of the people who had this greater
variety of plans available through their connector.
Obviously, the total costs went up because far more people
got covered than they ever thought they would reach, but if you
look at the premiums, if you look at the cost per person, that
was in fact in many cases lower.
Mr. NEAL. Mr. Chairman, during the year, you receive a
statement and a reminder from the Department of Revenue. All
you have to do is indicate if you have private insurance, where
you have it.
Ms. DAVIS. That is a very important way in which a national
plan could be administered, something like a 1099-G form, like
they use in Massachusetts, to document they have coverage, and
if you do not have coverage, get enrolled in automatically
using the tax system to help facilitate that, and facilitate
income related premium assistance to make premiums affordable
for lower income taxpayers.
Mr. NEAL. Thank you, Mr. Chairman.
Mr. STARK. Thank you. Mr. Johnson, would you like to
inquire?
Mr. JOHNSON. Thank you, Mr. Chairman. I appreciate that.
My understanding was that the premiums in Massachusetts
went way up and then they dropped, but not below what they were
before. I question that statement.
I think all my colleagues on this side of the aisle want to
have every American in the country have access, get them access
to healthcare, health insurance.
However, I would also think that everyone would agree that
not all health insurance is created equal.
How many people in this room would trade their current
health insurance policy to enroll in a Government run program
like Medicaid?
While I am at it, I might add that you have not talked
about CMS at all. They have not done their job very well. They
are always two or three years behind on their statistics.
Probably under your Government insurance idea, they are going
to have to increase their oversight.
While we can listen and talk about studies that show health
insurance helps people be healthier, I think we need to talk
about what kind of coverage is Congress going to decide is the
type of coverage that is good enough for all Americans.
Dr. Ayanian, when the Institute of Medicine did their
review of the literature, did they distinguish whether an
insured person had private insurance, Medicare or Medicaid when
you looked at the health outcomes?
Dr. AYANIAN. We reviewed nearly 100 studies on this topic
that have been published in the last 5 to 7 years. Many of
those studies included both public and privately insured
people, comparing them to the uninsured.
Some studies focused particularly on the privately insured
population relative to the uninsured.
What we found, and I think you raise an important point, it
is not just having an insurance card but it is what that
insurance card covers, what it gives you access to.
It is very important, for example, for the people with
chronic conditions, what we might think of as the silent
killers in the American population, high blood pressure,
diabetes, or unrecognized heart disease, there are many things
that medical care can do very effectively to identify health
risks early on, to treat those risks and reduce the chance of
costly complications like heart attacks, strokes, kidney
failure.
For the most part, the research literature that we
identified was comparing people who had any insurance to no
insurance. There was a clear message there, that no insurance
is the wrong level of coverage, and there is no doubt about
that from a health perspective.
We also learned from the studies that as medical care has
made more progress, in fact, we run the risk of the gap between
the uninsured getting larger in terms of the health
consequences. As we get better at treating depression,
diabetes, and heart disease, or detecting cancer at an early
stage when we can cure it, that is the kind of coverage that we
need to give people access to.
In the existing studies, sometimes that coverage is
available through public programs, sometimes through private
programs. In either case, it is better than being without
insurance at all.
Mr. JOHNSON. Thank you. I do not think we have to look very
far to see there is a difference in health outcomes as you
indicate based on what kind of insurance you have.
In this area alone, there have been children who have
literally died from a toothache because even though they had
health insurance, Medicaid, in these examples, they did not
have access to a doctor.
The Medicare Program is showing similar signs. I have heard
of seniors who have become eligible for the Medicare Program
and cannot find a doctor who will take new Medicare patients.
That is a problem across the country, I think.
I think this Committee will be doing a disservice to our
constituents if we did not just talk about getting people
insurance without discussing what type of insurance we are
going to be offering.
Ms. Davis, The Commonwealth Fund included a Government run
plan in their reform proposal; is that right?
Ms. DAVIS. The framework, it creates a national health
insurance exchange. It does offer private plans and a public
health insurance plan. People can keep what they have if they
want to keep what they have.
Mr. JOHNSON. After your proposal is fully implemented, how
many Americans would be enrolled in some sort of Government run
healthcare program?
Ms. DAVIS. It depends on whether the private insurance
industry continues premiums going up the way they are, but if
they respond to the competition, they could hold onto market
share.
In the worse case, 105 million would still have private
coverage, largely sponsored by employers, either purchased
directly by employers or choices that they pick once they are
involved through the national health insurance plan.
Mr. JOHNSON. That is private plans. How many in Government
plans?
Ms. DAVIS. The balance of the working age population,
setting Medicare and Medicaid aside, about 35 percent of the
population would be in a private plan, 34 percent in the public
health insurance plan. That is the worse case scenario.
That assumes insurance companies do not respond to the
competition, do not take advantage of some of their inherent
strengths. So, roughly equal.
Mr. JOHNSON. Thank you. I do not know. I think 188 million
is what you said earlier, which includes Medicare, Medicaid and
SCHIP that would be insured under a Government plan.
Ms. DAVIS. About a fourth of the population are covered by
Medicare and Medicaid. Some of those now covered by Medicaid
actually go into the employer plans because they have premium
assistance to help afford their share of the coverage. Others,
of the uninsured, about 26 million would get coverage through
the national health insurance exchange, have these various
plans available to them, about 13 million would go into
Medicaid.
Medicaid stays at about the same, going from 42 million to
49 million on balance. Medicare stays at about the same, going
from about 39 million to 42 million.
The public programs, the current programs, stay about the
same. Private insurance, again, this is assuming they do not
respond to competition, continue business as usual, premiums
continue to go up the way they have been going up, then private
insurance would have about 105 million of the working
population market, public plans would have just a little bit
less. Private would have 109 million and the public health
insurance plan would have 105 million.
Mr. JOHNSON. Okay. My time has expired. Thank you, Mr.
Chairman.
Mr. STARK. Thank you, Mr. Johnson. Mr. Becerra, would you
like to inquire?
Mr. BECERRA. Thank you, Mr. Chairman. Thank you for your
testimony. We appreciate you helping us kick off what we hope
will be a series of great hearings to try to take us to a place
where we really do reform this healthcare system and make it
far better.
It sounds to me like from what I am hearing more and more,
that we should rest reform of our system, not someone else's
system, not some other country's system, but our American
healthcare system.
We should rest it on a few fundamental pillars. One is
consumer choice. All of us as Americans who seek out healthcare
should have a choice. If you like who you have, you like your
health insurance, you should get to keep it. Maybe we will even
make it cheaper for you because we will make it more efficient.
No free riders. We should all share in this responsibility,
and everyone should participate. You have some that say I do
not need to, I am still young and healthy. You may get hit all
of a sudden by a car and all of a sudden, you are our
responsibility.
Everyone should participate, no free riders. Of course, no
lemons. None of us wants to find out that we are paying $5.00
for an aspirin tablet when we go to the hospital. No one should
be asked to pay for anything less than quality healthcare.
Those seem to be three very fundamental pillars that we
should all really seek to achieve when we talk about healthcare
reform.
On the issue of choice, which also includes the issue of
competition, we want to make it robust. Consumers should be the
ones that choose who their doctor or provider is. It should not
be the other way around.
In that regard, I would like to ask Mr. Pickering a
question. You talk about this cost shifting and why we should
not have a public health insurance option. Most Americans would
say I want to have as many options as I can, I will select. Do
not tell me I cannot have this option. Let me decide if I want
that option or not.
It sounds like you are saying, no, let us not give folks
that particular option. Do you believe that today we should
eliminate Medicare?
Mr. PICKERING. No.
Mr. BECERRA. No. That is a public health insurance plan
that seniors get today. Some 48 million seniors rely on
Medicare. That is a public health insurance plan.
Do you think the Veterans' healthcare services through the
Veterans' Administration that our men and women of uniform who
are now veterans receive should be eliminated?
Mr. PICKERING. No.
Mr. BECERRA. That is also a public health insurance plan,
is it not?
Mr. PICKERING. Yes.
Mr. BECERRA. You would want to tell veterans, you can
choose, there is a private health insurance plan out here, you
can choose that, or if you happen to have access to the
Veterans' Administration's hospitals and doctors, you can
choose that. We leave it to the veterans to decide where they
go; right?
Mr. PICKERING. Yes.
Mr. BECERRA. To seniors, a senior can collect--use their
money to buy a private health insurance policy today or can
choose to use the Medicare Program that is available to a
senior today, some 48 million seniors.
That is a choice they should get to make versus any of us;
right?
Mr. PICKERING. Agreed.
Mr. BECERRA. My question is why is it okay for seniors to
have all that choice, why is it okay for veterans to have that
choice, but not to decide to allow all those Americans who we
are trying to bring into the system so we can make it far more
efficient and cost less, that they get to have that choice of
deciding whether it is a private health insurance plan or some
public health insurance plan that might be an option to them as
well, something similar to Medicare, and Medicare for middle
aged Americans.
Why would you want to limit an American's choice to a
Medicare type health insurance plan?
Mr. PICKERING. It is not that I would want to limit the
choice, but I fear that with the current payment structures of
private plans versus a public plan, that the private plans
could not compete against those rates.
Mr. BECERRA. Because of what you call the ``cost shift?''
Mr. PICKERING. Could I draw one distinction? It is
interesting, in the Medicare Advantage program, you have the
Government plan, traditional Medicare, competing against the
managed care plans. Most of those managed care plans are able
to contract at approximately 100 percent of Medicare with
providers because providers will accept that from Medicare
patients.
It is not the same situation on the commercial side right
now in the country.
Mr. BECERRA. Actually, it is interesting you would bring up
the private for profit health insurance plans that participate
through the Medicare Advantage program within Medicare because
in a way, you have a private plan within a public health
insurance program, Medicare.
Everything I have seen shows that those private for profit
health insurance plans within the Medicare system actually get
reimbursed at higher rates than those doctors and hospitals
that are going through traditional public health insurance plan
options within Medicare.
That would seem to me to actually show the cost shift going
in the opposite direction of where you are saying that right
now, we are shifting cost from the public sector, the public
health insurance plans, to the private plans, when in fact you
have the Medicare Advantage program, which actually shifts the
costs from taxpayers--from the Medicare private for profit
plans to the taxpayers.
I know, Mr. Chairman, my time has expired, if I could make
this last point.
I should take you down to Los Angeles where I live. In my
County of Los Angeles, the County hospitals take care of any
number of people. Only 8 percent of the people that come in
through the doors of the County hospitals in Los Angeles are
covered by private for profit health insurance plans in
combination with Medicare.
What I see, at least in Los Angeles, is that public health
insurance plans and options are subsidizing private for profit
health insurance plans that are unwilling to offer plans to the
poor or the sicker Americans, and as a result, the public
hospitals and these public health insurance plans are having to
take the burden of the fact that the private for profit health
insurance plans are not yet willing to take all these millions
of Americans.
I would actually say you should take a closer look at your
study. It looks to me like the cost shift is occurring in the
private for profit health insurance plans, shifting costs onto
the taxpayers who end up paying through these public hospitals
or through programs, public health insurance programs like
Medicare and Medicaid.
Thank you. I thank the Chairman for the time.
Mr. STARK. Thank you. Mr. Doggett, would you like to
inquire?
Mr. DOGGETT. Thank you very much, Mr. Chairman, and thanks
to all our witnesses for your testimony this morning, although
I believe my questions will be directed just to Dr. Davis.
We have focused this morning on the millions, but I think
it is important to keep remembering the way this crisis is
affecting the lives of people across the country. I was
reminded about that again last week when I had communications
that I received from neighbors in Austin, Texas, and the
stories of two women.
One, a younger woman, Lisa Elmore, wrote me about her
experiences as an employee at a small business in Austin that
had several employees that were of child bearing age. Because
of the high cost of premiums, the small business could not
afford insurance.
The first time that she got ill on that job, she said she
just toughed it out, missed some days of work, but could not
afford to see a doctor. The second time, she went to several
clinics because her problems were so severe, and finally was
able to go to a local clinic, a wonderful facility called
People's Clinic in Austin, that tries to serve the uninsured,
and does a really good job at it.
She said but then the prescriptions that she had to buy,
since she was uninsured, she had to pay the highest price for
prescriptions. It took most of her income.
It really set her back significantly to have to delay care
and then to have so much of her income taken by healthcare.
The other woman is an older woman, and her son, John Mason
from Austin, wrote me about his 62 year old mother who like so
many others in this terrible economy we inherited from the last
Administration, lost her job after 29 years.
She had a heart attack and subsequent bypass surgery, and
she has never smoked. She followed her doctor's dietary
suggestions. She is without insurance to cover the problems
that she has, and now if she is able this late in life to get
another job, her preexisting heart condition will weigh against
her.
He says it is truly sad that after three decades of service
to one company, my mother is now frightened that she will no
longer be insurable since she had this heart attack and a
stroke, these kind of problems.
I think, Dr. Davis, that your study confirms, does it not,
the urgency of addressing this issue not next year but this
year as President Obama has fortunately indicated he wants to
do?
Ms. DAVIS. Absolutely. President Obama said it was these
kinds of stories that he heard on the campaign trail that broke
his heart. I think they illustrate much of what is wrong with
the current system.
When people work for a small business and that small
business cannot afford to provide insurance or has to drop the
coverage or has very limited coverage, the uninsured pay a
higher price than anybody else for prescription drugs, for
physician visits, for hospital care, because they do not get
the discounts that people who are covered by either a public
health insurance plan or by Medicare.
Older adults, a woman 62 years old with a heart condition,
has very few affordable options available to her. She is not
going to qualify for insurance on the individual market, and
Mr. Becerra is absolutely right, that is a cost shift from the
private sector to the public sector.
They are the only ones that will take the disabled. They
are the only ones who will take children who have developmental
disabilities. The sickest tend to eventually find themselves
onto Medicare or Medicaid, but for the disabled, this woman
would have to wait 2 years, really two and a half years to
qualify for Medicare as a disabled person.
She cannot find a plan that will take her at all, she
certainly cannot find a plan at an affordable premium.
We must act and must act now.
Mr. DOGGETT. Mr. Becerra just pointed out when John Mason's
mother is three years older, she will be eligible for a public
option. If she were a veteran, she would be eligible for a
public option.
It is difficult to understand the resistance of some
people. I think it is based more on ideology than reality to
providing a public alternative.
You responded to Dr. McDermott and his questions earlier,
but if the goal is to contain costs and assure coverage options
for everybody in America, is not having a public option, a
public plan, essential for reform of our healthcare system?
Ms. DAVIS. Absolutely. It really goes right to the heart of
it when you consider disabled and older adults. Let them buy
into Medicare early. Eliminate the 2 year waiting period for
the coverage of the disabled when they need coverage the most
to treat their cancer, to recover from a heart attack.
Mr. DOGGETT. Mr. Chairman, you have had an excellent bill
to do just that. Let me just say in conclusion that I think
adding to what Mr. Becerra said, we have already excellent
evidence on the importance of the public health option under
Medicare, under Medicare Part C, we have the public option.
Under Medicare Part D, we have not had it. Medicare Part D
began with many plans. It is now consolidating, the rates are
going up. The Subcommittee on Health that you chair has studied
the many problems with Medicare Part D.
I think it is amazing that anyone would look at the Part C
experience versus the Part D experience on prescription drugs
and not feel that any plan that omits the public option is just
not much of a plan.
I yield back. Thank you.
Mr. STARK. Thank you. If you want to talk more about my
great bills, I will yield to you for some more time.
[Laughter.]
Mr. STARK. Mr. Linder, would you like to inquire?
Mr. LINDER. Thank you, Mr. Chairman.
Mr. Pickering, we have heard a lot about options today.
Consumer choice, let the individuals make their choice, give
them options and let them make their choice.
For the last 40 or 50 years in the private healthcare
market, who made the choice? The consumer or their employer?
Mr. PICKERING. The employer.
Mr. LINDER. With all the choices in the world, that
consumer is still going to go with what their employer decides
to pay for?
Mr. PICKERING. Yes.
Mr. LINDER. Kaufman Rand has done a study on how much it
cost businesses to provide healthcare for their employees.
Among all firms, it is 7 to 10 percent of the payroll costs.
Among smaller firms, it is 11 percent of payroll costs. Among
half of all small businesses, they pay 10 percent plus of their
payroll costs to provide health insurance for their employees.
This proposal suggests, that Dr. Davis has put forth, that
the penalty for those companies not providing health insurance
will be 7 percent of their payroll costs.
If you were the owner of that business and you are paying
10 percent now and you could get out of it for 7 percent and
let the taxpayers pick it up with a Government run program,
what would you do?
Mr. PICKERING. You will tend to find employers dumping
their plans.
Mr. LINDER. In large numbers, right now, about 120 million
people say they are satisfied, but of those 120 million people,
a very small percent are going to get any choices at all; is
that not correct?
Mr. PICKERING. I believe so.
Mr. LINDER. The employers are going to make that choice for
them.
Mr. PICKERING. Yes.
Mr. LINDER. Dr. Davis, you said under the worse case
scenario, one-third of Americans would be in private plans and
two-thirds would be in Government plans. You said that is only
if the private plans do not respond to competition.
They do respond to competition in the private sector today,
but if you are suggesting they have to respond to competition
in a Government program that is subsidized by taxpayers and
mandates, how can they compete?
Ms. DAVIS. First of all, the private plan administrative
costs go down through the exchange. For this small business you
are talking about, now they are paying for firms under 50
employees, 22 percent in administrative overhead. For those
under ten employees, 31 to 36 percent of the premium goes for
administrative overhead.
If they buy even a private plan through the exchange, that
will drop to 12 or 13 percent.
Mr. LINDER. Or they can go to 7 percent and dump it on the
taxpayers.
Ms. DAVIS. They are required to either provide coverage----
Mr. LINDER. Let me talk about another worse case scenario.
Ms. DAVIS. Or contribute to a fund.
Mr. LINDER. Another worse case scenario was in 1965.
President Johnson was proposing both Medicare and Medicaid.
There were questions as to the cost of those programs down the
road. He said using easily quantifiable user statistics, I can
tell you that by 1990, Medicare will cost $9 billion and
Medicaid will cost $1 billion, and we are a wealthy nation and
we can afford that.
Those easily quantifiable user statistics disappeared when
other people were paying the bills. Medicare cost about $100
billion plus and Medicaid costs about $76 billion.
How comfortable are you with these worse case scenario's
and your user statistics?
Ms. DAVIS. I think one lesson from Medicare and Medicaid is
that we cannot accept the delivery system the way it is now. We
need to change away from fee-for-service payments that was the
basis of Medicare, which was built on the private insurance
methods when Medicare came in, to new methods that really
reward physicians for controlling chronic conditions, new
methods that reward hospitals for keeping people well after
they leave the hospital.
We know what trend we are on now. That is why we cannot
afford to continue. There are potential savings from these new
models of payments. There are potential savings from new
methods of care where people enroll with a physician practice,
and really hold providers accountable for both giving good
care, great outcomes, but prudent use of resources.
Mr. LINDER. What you are talking about is potential savings
in a variety of areas as long as the Government has enough
people to oversee the doctors and tell them how to do it, but
none of that adds to the options or choices of consumers.
This program is going to drive people out of the private
markets and into Government run healthcare, and you and I both
know it.
I yield back, Mr. Chairman.
Mr. STARK. Thank you, Mr. Linder. Mr. Pomeroy, would you
like to inquire?
Mr. POMEROY. Mr. Chairman, I would, and I thank you for the
opportunity.
I used to be a state insurance commissioner. I have spent a
lot of time thinking about these options. I believe that a
public plan option within the exchange is a very important part
of the program.
As outlined by The Commonwealth report, there is a very
important relationship to whether a public plan is available
within the exchange and our ability to get coverage to those
who do not have it, so we can get coverage to those who do not
have it, allow people to keep what they have if they want, give
them another option if they want, and that is how it all hangs
together.
I really do believe that failure to have the public plan is
going to raise real questions about whether we can do the job
we want to do in getting coverage to those who need it and do
not have it.
There are some other things where I believe we could all
agree, and I would hope my friends on the other side as well,
and that is incentive reform within medical care delivery to
improve outcomes and achieve some cost efficiencies.
Mr. Pickering, I noticed in your last line of testimony,
you seem to allude to this possibly being an area of common
ground. ``To be successful in the long term, reform must
address both the financing of care and the cost efficiency and
quality of care delivered.''
What do you mean by that?
Mr. PICKERING. I believe in the country today, our
healthcare system is very fragmented, when you look at some of
the best practice private plans out there, there are integrated
delivery systems that deliver the best care for the lowest
cost.
I think we need to try to model reforms to integrate the
rest of our delivery system.
Mr. POMEROY. I am very proud to represent an area that has
largely integrated systems, five of the six large medical
centers in the state I represent are integrated, the primary
care focus. You are absolutely right.
The Medicare data is showing we are achieving high outcomes
from the lowest costs in the country.
Dr. Davis, what can we do to evolve our care delivery
systems along this way?
Ms. DAVIS. Absolutely. One of the main thrusts would be to
encourage the growth of private integrated delivery systems. We
took our commission, as you know, to North Dakota, looked at
the very fine results that you are getting with many of the
integrated delivery systems in North Dakota.
In fact, our estimates are that if 50 million people would
enroll in these private integrated delivery systems, and they
have the ability to both improve care by the way they control
chronic conditions in your state and have lower costs--right
now, a small business often does not offer these community
health plans that are aligned with integrated delivery systems.
They can only offer one choice. Once the employer decides
to take their employees into the exchange, they have access to
all of these community integrated delivery systems.
Those systems do not have to invest in marketing, sales
people to go out and visit all these small businesses. All of a
sudden, they have access to a much broader enrollment market
and they are the ones that are going to thrive in this kind of
competition.
Mr. POMEROY. One question I have involves the evolution of
our reimbursement system. It literally is a stunning disparity
in reimbursements. I am not just talking about under payment in
certain parts of the country, but just the cost for which
Medicare pays for care on a per capita basis.
2005 data shows that a Medicare enrollee in Miami, Florida
involved $14,000 in healthcare costs. In Rapid City, South
Dakota, it was $5,000.
This is a program for the country, but basically we feel
like we are surely not reaping the kind of support that goes to
other parts of the country. There must be something going on
that is driving this differential in cost that is not related
to quality of care delivered.
In fact, from an outcome analysis, if I can make any sense
of it at all, it is the more it cost, the worse it gets. The
lower it cost, the better it gets.
Dr. Davis, how does Commonwealth try to address this over
payment? How do we ever get this straightened out?
Ms. DAVIS. Absolutely. We have a map of the United States
that shows those areas, that over 125 percent of the median in
Miami shows up in red. For North Dakota, you will be pleased,
all of North Dakota is white and under 105 percent of the
median.
I think we have to look at things like our update policy in
Medicare and look at how we reward areas that have done a good
job of integrating care, controlling chronic conditions, and
apply some economic pressure in these areas that as you say are
two, almost three times as high in terms of Medicare spending.
Mr. POMEROY. Thank you, Mr. Chairman.
Mr. STARK. Thank you, Mr. Pomeroy. Mr. Thompson, would you
like to inquire?
Mr. THOMPSON. Yes, thank you, Mr. Chairman. Thank you for
holding the hearing.
I would like to thank Mr. Pickering for his comments about
the VA medical system and the importance of keeping that. As a
disabled war veteran, I have used their services in the past,
and sometimes use them currently. It is an outstanding public
system. I think everybody recognizes the importance of
maintaining a public component to our delivery of healthcare.
I also recognize that we need to change the way that
medical care is delivered in this country if we are ever going
to get our arms around this enormous problem.
I appreciate the commitment that this Administration has
made to doing just that.
Dr. Davis, your study also speaks to this. I would like to
just focus on one aspect of that needed change, and that is the
expansion of preventive healthcare in healthcare today.
I think it is extremely important to do a lot more to
provide preventive healthcare for children, to make sure we can
detect problems before they become acute and more harmful and
more expensive, but also an expansion of preventive healthcare
for adults.
The good example is ``The Welcome to Medicare'' program and
how we really need to grow that and make sure folks get the
screening necessary that go into that.
The IOM report talks about the access to preventive
healthcare without healthcare insurance and how that is
impacted.
Dr. Davis, I would like to hear what your recommendations
are to ensure that we can implement a much more comprehensive
preventive healthcare system here in this country.
Ms. DAVIS. Absolutely. That has to be a very key part, as
Dr. Ayanian said, and research has shown investing in
preventive care can have payoff's in terms of better health. It
can also improve the health of older adults as they go onto
Medicare.
In terms of the framework that is set forth here, there are
a couple of things that try to focus on prevention. First, the
public health insurance plan would lower any cost sharing for
preventive services. Just as you have done with Medicare, to
make sure people are getting colon cancer screening, getting
breast cancer screening, the cost sharing for that would be
eliminated.
The second thing it does is this emphasis on a medical
home. North Carolina has shown that if you pay physician
practices the medical home fee and you provide support from
nurses to work with families, that you can reduce pediatric
asthma hospitalization rates.
That type of intervention, the medical home investment,
nurses to work with families, can work.
In addition, we include in our plan moneys that would go to
state and local government to work with schools on childhood
obesity, to work on smoking cessation programs, make it easier
for employees to participate in those kinds of programs.
Mr. THOMPSON. Thank you. Dr. Ayanian, the IOM study talks
about the effects of the un-insurance and communities that are
impacted differently in regard to--I think you say small
communities.
I represent a rural district. We have, I think, the same
barriers to access to expensive and specialty type care.
How do we address that issue in rural and small
communities, I guess?
Dr. AYANIAN. What we find based on the available research
is that communities, large or small, rural or urban with high
rates----
Mr. THOMPSON. Under served.
Dr. AYANIAN. Under served, basically, with high rates of
un-insurance, the insured population in those communities can
be adversely affected.
There are strains on the healthcare system, particularly
for services that require a high initial investment, such as
trauma care, cancer care, and advanced cardiac services for
people with heart disease.
When those fixed costs are high and there is a lower rate
of insurance in the community, the hospitals in those
communities are less able to invest in the services for the
whole community, both uninsured and insured. Doctors are less
willing to locate to those communities.
That can play out in trauma care, for example, if a
hospital is the trauma center for a region, and there is a
large proportion of uninsured individuals in that area, it is
harder to obtain the types of specialists, such as
neurosurgeons or orthopedic surgeons that we all need when
someone is in a severe motor vehicle accident, for example.
In short, people can be affected in those communities with
high rates of un-insurance. We also find that insured people in
survey data are less satisfied with the care they are getting.
We commissioned some research by Mark Pauly, a health
economist at the University of Pennsylvania, and Jose Pagan at
the University of Texas. Their work shows that insured people
in those communities are less satisfied with their access to
care and their quality of care because of these financial
strains in the system.
Mr. THOMPSON. The greater the expansion of the risk pool,
the better the services and the lower the costs?
Dr. AYANIAN. That is right.
Mr. THOMPSON. Thank you very much. I yield back.
Mr. STARK. Thank you. Mr. Tiberi, would you like to
inquire?
Mr. TIBERI. Yes, Mr. Chairman.
Dr. Davis, I represent a district in central Ohio. For
years, I have had hospital officials and docs complain to me
about Medicare reimbursement rates, Medicaid reimbursement
rates. Your plan appears to acknowledge a portion of this by
increasing Medicaid reimbursement rates to the Medicare rates.
Why did you do that in your plan?
Ms. DAVIS. Thank you. Obviously, Medicaid has been a
problem, as we have seen from the study that Mr. Pickering has
talked about. It has underpaid to the point that doctors don't
participate. We think it's very important to bring Medicaid
payment rates up to the Medicare level.
It is also important to address the imbalance in the
Medicare Program. I think it's clear we underpay for primary
care.
So, what this proposal would do would be to have a 5
percent increase in primary care, office visits, called
evaluation and management services. It would also provide a
medical home fee to primary care physicians.
Nonetheless, having said that, the MedPAC study shows that
nearly all doctors now participate in Medicare, and it's easier
for a Medicare beneficiary to get a specialist appointment, and
even----
Mr. TIBERI. Did you just acknowledge, though, that you--did
you say that primary care docs are under-reimbursed for----
Ms. DAVIS. Primary care physicians are underpaid, in my
view, by Medicare, as well as by commercial insurers that
follow Medicare payments. But they pay a bit more than
Medicare. They pay a lot more than Medicare for specialists.
So, they kind of perpetuate that imbalance between primary care
compensation.
Mr. TIBERI. Dr. Pickering, isn't that essentially what you
have testified to, that--the fact that Medicare and Medicaid
reimburse less, and therefore there is a cost shifting to help
the hospitals and providers recoup some of that loss?
Mr. PICKERING. Yes, that's exactly the cost shift.
Mr. TIBERI. Can you expand on it, what's happening out
there?
Mr. PICKERING. Yes. In many communities--take my hometown
of Seattle--public--or, excuse me, commercial plans would pay a
doctor around a, I don't know, $52, $53 conversion factor. What
that means is that, for an office visit, maybe they pay $70,
whereas Medicare might pay $50.
Now, different health plans will pay primary care and
specialist care potentially different rates. But, across the
board, commercial plans will pay both primary care and
specialty care at--significantly higher than Medicare.
Now, I do want to stress it will vary, geographically.
There are some areas in the country where commercial plans pay
on par with----
Mr. TIBERI. So, if I run a hospital, a non-profit hospital
in Columbus, Ohio, today, and essentially I am losing money on
Medicaid and Medicare reimbursements--which I have been told
happens--and I am making up for that with private insurance
reimbursement, under--and I don't want to put words in your
mouth--but under your thought or study, you're saying that if
we expand public options, Government options, the more
Government options crowd out the private options, the more
difficulty it is going to be for the private options to
continue, and the more difficulty it's going to be for
hospitals and certain providers to survive.
Mr. PICKERING. That's right, that's right. As they have
less people enrolled in the commercial plans that are
effectively subsidizing the public plans, you have less money
going to the providers. As providers face more financial
pressure, they need to either become more efficient, or put an
even higher burden on their remaining commercial membership.
Mr. TIBERI. Or, we could substantially increase
reimbursement rates for Medicaid and Medicare to providers,
hospitals, docs.
Mr. PICKERING. Yes. For example, like an FEP plan pays much
higher rates than Medicare.
Mr. TIBERI. How much higher?
Mr. PICKERING. FEP pays commercial rates. It's administered
by Booz and other plans around the country.
Mr. TIBERI. That would go to both hospitals and primary
care and specialty docs?
Mr. PICKERING. That's correct.
Mr. TIBERI. Across the board?
Mr. PICKERING. Mm-hmm.
Mr. TIBERI. One final question across the board. I just
want to see if you guys acknowledge this number. I got a U.S.
Census stat that says in 2006 20 percent--nearly 20 percent--of
the uninsured in America--this is a U.S. Census Bureau stat--
lived in-households that had an income, IRS income limit, of
$75,000 or above.
So, nearly 20 percent of the uninsured Americans lived in a
household where the income was $75,000 or above. Can you
comment?
Ms. DAVIS. That's roughly right. About a third have incomes
below the poverty level, about another third below twice the
poverty level, which, for a family, would be about $45,000. So,
yes, there are about 10, or maybe it's as high as 20, who have
incomes above $75,000.
But with premiums now being $15,000 a year, or $13,000, for
a family, even a family with $75,000 income, they would have to
pay----
Mr. TIBERI. I don't want to have a debate with you about
it, I just wanted to know if you thought that number was right.
I have run out of time. Mr. Chairman, thank you.
Mr. STARK. Thank you. The Committee will recess for 45
minutes. My understanding, there are three votes. Give the
witnesses a chance to stretch. We could have some more, but we
will come back at 12:45.
In the meantime, if Mr. Larson would like to inquire, he
can proceed.
Mr. LARSON. Thank you, Mr. Chairman. Let me thank you and
the panelists for their very thoughtful presentation, and their
responses to Members' questions.
My question, sir, for Dr. Karen Davis, Dr. Davis, in my
state of Connecticut, we have lost more than 40,000 jobs this
last year, and have already lost over 3,500 this January. When
we talk about portability in healthcare----
Mr. STARK. If our guests could--if they are rushing for
lunch, if they could do so quietly, so that our witnesses and
the Members could hear, we would appreciate it. Thank you very
much.
Mr. LARSON. Usually, when we're talking about portability,
we are talking about people moving from one job to another.
What are some of the ways that you would propose to make sure
that someone who has lost their job, especially in this kind of
economy, can maintain their insurance coverage at a rate that
they can afford? The stories about COBRA coverage being just
out of reach for so many begs this question.
Secondly, one of the biggest causes of bankruptcy in this
country is medical debt. For many of my constituents, having a
serious health condition that has led to financial ruin, even
if they had health insurance, how would this new system be
designed to deal with catastrophic health events, and how much
of the burden of paying for catastrophic healthcare costs would
fall to the Government or the private sector?
Ms. DAVIS. Well, I think your district is feeling the pain
that a lot of American communities are feeling with the severe
economic crisis, unemployment over 8 percent, and we don't know
where it's going.
So, portability of coverage is very important. Under the
PATH framework that we put forward today, eventually about 70
percent of the workforce, the employers would buy the coverage
through the exchange, and so people in those kinds of
employment situations could hold on to their coverage, and
wouldn't have to change because they've lost their job.
But you are pointing to the affordability of the premium,
and that----
Mr. LARSON. Also to the fact that if you don't--if you are
unfortunate enough not to have another job, but you still have
a family, and you're existing under COBRA payments, how do you
envision those payments being affordable payments, as we go
forward?
Ms. DAVIS. So, what this does is set a ceiling on the
premium as a percent of income. So, in the lowest two tax
brackets, you would never pay more than 5 percent of your
income toward the premium. The rest would be provided through
general tax revenues.
For the other tax brackets, it would be--10 percent of
income would be the maximum you would have to pay for premiums.
The benefits would be based on what Members of Congress have,
the standard option Blue Cross Blue Shield, Federal employees
benefit. So, it's comprehensive, doesn't make you bankrupt when
you have a serious illness. So, it's both comprehensive
benefits, and premium assistance that guarantees that you're
not paying more than a reasonable share of your income.
Mr. LARSON. Now, for those, how does this plan envision
dealing with catastrophic health occurrences, and
catastrophic----
Ms. DAVIS. There is a ceiling on out-of-pocket expenses,
again, modeled on the standard option Blue Cross Blue Shield.
So, it's roughly $5,000 for an individual, $7,000 for a family.
The deductible is $250 a person, $500 for a family, basically
about 25 percent coinsurance for drugs, 10 percent for
physician services, but a ceiling on out-of-pocket costs on
something like $7,000 per family, and a ceiling on your premium
obligation as a share of your income.
Mr. LARSON. Dr. Ayanian, I--what are some of the
proposals--of your proposals--to create incentives, in terms of
prevention and wellness?
Dr. AYANIAN. Our Committee reviewed the evidence on the
types of preventive services that make a difference for
children and adults. So, for children, for example,
immunizations, basic dental care, well child screenings,
preventive asthma care to keep kids healthy at home, as opposed
to getting sick and ending up in emergency rooms and hospitals.
We know that those problems are much more common for
children when they're uninsured. When coverage is expanded to
uninsured children, their risk of those problems goes down.
Similarly, for adults, we know that there are a number of
very important medical services: cancer screenings, screening
for cardiovascular risk factors, and diabetes----
Mr. LARSON. Is there a cost benefit analysis to that, in
terms of the direct correlation between prevention, wellness,
and preventative care, and what the cost savings is, or----
Dr. AYANIAN. I can't put an exact number on it for you, but
we know, from a number of studies, that when children or adults
get effective preventive services, particularly those with
chronic conditions, we're preventing more immediate
complications. There is primary prevention for the long term,
and there is secondary prevention for people who already have
an established condition, such as diabetes or heart disease.
We know that when we provide them with the right preventive
services, their risk of complications goes down, and their risk
of the costs associated with those complications also goes
down.
Mr. LARSON. Thank you, Doctor.
Mr. STARK. Mr. Blumenauer, would you like to wind up this
part----
Mr. BLUMENAUER. Thank you. Thank you very much, Mr.
Chairman, and I do appreciate that--the testimony that has been
advanced. I think we are getting the context here that is going
to be extraordinarily useful.
I have two questions that I would put. There may not be
time for you to elaborate, but there seems to be a straw person
reflexive challenge that is being posed to this, in terms of
the threat to the private insurance system that we have now
through employers.
Dr. Davis, can you just summarize the downward trajectory
that this current system faces for the threats to private
employer-provided insurance if we don't have a comprehensive
approach like you're describing?
Ms. DAVIS. Absolutely. If we stay on our current course, we
are going to go from 46 million uninsured to 61 million
uninsured. Nearly all of that is the erosion of employer
coverage.
So, businesses need effective competition that will slow
the growth of private insurance. It's not an option, to
continue on our current path.
Mr. BLUMENAUER. Okay. I appreciate your saying it again,
but that is something that seems to--needs to be like a beacon.
We are in a downward spiral now. The status quo is no longer
the status quo. It's higher copayments, it's worse service, and
it's less coverage.
Ms. DAVIS. Absolutely.
Mr. BLUMENAUER. The other straw man that seems to be
established is this fear that--the comparative effectiveness
research. Somehow, if we find out and document what works, that
that's going to lead to unacceptable intrusion into the
practice of medicine.
I am reintroducing legislation on end-of-life treatment,
where right now Medicare doesn't even pay a doctor to talk to
families about the choices they face. Too often, people are
steered to intensive, invasive, disruptive, expensive treatment
that doesn't add to the quality of life, doesn't even extend
life, at great expense.
Can you speak for a moment to the benefits of our actually
doing this comparative research, so that we know what we're
getting into?
Dr. AYANIAN. Certainly I can address your question, as a
practicing physician, myself. My colleagues and I--I practice
in the Boston area, and have colleagues around the country--we
want the best possible evidence to serve our patients. It's
difficult for any individual physician to know what the best
way is. We learn from studies of many patients, and comparing
different treatments.
Personal experience of a talented physician is obviously
important, but the best medical care comes from blending that
clinical experience with effective evidence, scientific
evidence, about what works, and the relative pros and cons of
different treatment options.
So, I think, in terms of developing a more efficient and
equitable healthcare system, anything we can do to improve the
quality of the evidence for making medical decisions will
benefit our patients.
Mr. BLUMENAUER. Mr. Chairman, I appreciate the hard work
that you have been doing. I am hopeful that we are going to be
able to actually do a little evidence-based research ourselves,
look at what is happening to the system, look at realistic
options, give people more choices, more ammunition.
I am convinced that we can meet our goals, save money,
improve the quality of healthcare in this country, in a way
that's entirely consistent with what the stated goals are. But
somehow people talk past each other. I appreciate your
courtesy.
Mr. STARK. Well, thank you. I look forward to your
assistance. We will now recess. It will probably be closer to
1:00 before we get back. I will see if the staff can find the
witnesses some refreshments, and we will see you in about 45
minutes.
[Recess.]
Mr. STARK. We will resume. I guess I--it would be Mr.
Pascrell's turn to inquire on our list, here. If you would
like, Bill? Would you like to?
Mr. PASCRELL. Thank you, Mr. Chairman. Thank you to the
panel. You did an exquisite job this morning. I have some
questions.
Just very briefly, Dr. Davis, where does chronic illness--
you know, asthma, be it diabetes--there is 133 million
Americans have at least 1 chronic disease. Where does it fit
into your plan of trying to find meaningful health reform? Very
briefly do this, because there is only a certain amount of time
that we have.
Ms. DAVIS. I think chronic care, and improving chronic
care, is really at the heart of health reform. I think it's the
real potential for savings, and the real potential for better
care.
Only 40 percent of people with hypertension have their
hypertension detected and controlled. What we would build into
the payment reform is accountability for working with patients
on those conditions. They would get a medical home fee, they
would get bonuses if they have a high proportion of their
patients with those chronic conditions controlled. So, a----
Mr. PASCRELL. So, chronic disease is at the very heart? If
we don't address that, we're not really going to get to
meaningful health reform.
Ms. DAVIS. Absolutely.
Mr. PASCRELL. I'd like to--you know, we could spend a whole
many hours on that subject, alone. Let me move on to my second
subject, here.
The--I want to ask this question of Mr. Pickering. Some of
the Members have referred to the area, already. I want to bring
the example of Medicare part D into this. I find it a
fascinating subject. It's providing a vital benefit to our
Nation's seniors, but I still believe it has some serious
flaws.
So, choice is a good thing, but we may have too much of it
in part D. Each region has at least 45 plans to choose from,
and as many--there is a couple of regions--one of the regions
goes up to 57 plans. So, an issue brief created by the
Commonwealth Fund last year found that the complexity and
variation in Medicare part D may prevent people from finding
the plan that best fits their needs. Please follow me.
I firmly believe that we must have a minimum set of
benefits to make our promise to cover even the sickest
individuals. But the term ``actual equivalence'' leaves a bad
taste in my mouth. I can only speak for myself. So, it leaves
the door open for insurance plans to tweak their benefit
structures to attract a healthier mix of people, and leave
behind the sick ones.
So, here is my question. In providing individuals with a
choice of private insurance plans, we want to avoid some of the
design flaws of Medicare part D, the prescription drug plan.
How can we make a large number of plan choices transparent and
easy to understand? Are there any mechanisms we can use to
remove the incentives for insurance companies to cherry-pick
the system? I want to ask you that question.
Mr. PICKERING. Okay. Yes, let me first address part D.
It's--I do want to work on Medicare Advantage bids. The
actuarial equivalent is a very real standard. It's very
confusing, but it's real. Let me go to the meat of your
question.
When--how do we have a large range of plans, and avoid
cherry-picking? I think we need sound insurance principles. We
need to avoid adverse selection.
Mr. PASCRELL. We need to avoid what?
Mr. PICKERING. Adverse selection. So, for example, now, in
the individual market, if we don't have an individual mandate,
and sick people can sign up for coverage, they will tend to
sign up, healthy people will tend to not sign up, and then you
spiral the premium. So, you know, we just need to make sure
that we get our insurance principles accurate.
In terms of interpreting the benefit, you know, I think
that's something that plans should always strive to offer. The
Medicare part D certainly can be difficult. I know I've helped
my parents get through it, and it hasn't been the easiest thing
in the world, but----
Mr. PASCRELL. It hasn't been the easiest thing in the
world, but I want to avoid those flaws.
How would you answer that question, Dr. Davis?
Ms. DAVIS. First of all, I think a public health insurance
plan should have a defined benefit, as I suggested, modeled
out. It doesn't--well, it's clear, so every--in every place
people know what it is, and know what it covers. So, having a
comprehensive benefit package that's guaranteed.
The second would be information that lets people compare
plans. We found, in the Medicare part C, that some of the plans
were charging $40 a day for radiation treatment. Well, you
didn't know you were going to--you didn't know that provision
was in there, and that you could pay more in a Medicare
Advantage plan, than you were paying in Medicare, itself.
So, I think some standardization is going to be required on
the benefits, and clear information, so that people can
compare----
Mr. PASCRELL. Finally, do you agree that the major core of
debate around reform of the health system will--is going to
center around the question of defined benefit?
Ms. DAVIS. I think there are many issues, but I do think
having a standard benefit that applies everywhere as a minimum
is important. We have suggested the standard option Blue Cross
Blue Shield package and the Federal employees plan.
Mr. PASCRELL. Thank you, Mr. Chairman.
Mr. STARK. Thank you. Ms. Brown-Waite, would you like to
inquire?
Ms. BROWN-WAITE. Thank you very much, Mr. Chairman. I would
like to hear from all three of you on this issue. I have the
highest number of people on Medicare, not just in Florida, but
of any Member of Congress.
So, many of my constituents are very happy with Medicare
Advantage, and they tend to, very often, be the poor seniors,
the disabled. The reason why they are happy is either it pays
part B for them, which is over $80 a month savings, and/or
offer gym plans, silver sneakers, you name it. They have all
sorts of benefits for the seniors, certainly part of any well
care plan of preventative illness that we would want to have.
What do you say to the--those currently on Medicare
Advantage, and well over--approaching 30 percent of my seniors
are on Medicare Advantage. What do you say to them when those
benefits of being on Medicare Advantage may not be there
through a Government plan? Because they are saving upward--
almost $90 a month, right now. So, how do you break the news to
people who--my, how times have changed, people are really happy
in the Medicare Advantage plans.
So, if we can start, anybody want to jump in here?
Ms. DAVIS. Well, certainly, I think we need to address the
fact that Medicare benefits really aren't adequate for all
Medicare beneficiaries. So, what the PATH framework does is
improve Medicare benefits for all Medicare beneficiaries,
again, up to this standard Blue Cross Blue Shield option, and
the Federal employees plan.
So, the fact that now we have a very high deductible in
Medicare for hospital services, that would be eliminated. You
would get a single, consolidated deductible that was more
affordable. So, improving benefits for all Medicare
beneficiaries is the first step.
The second is to----
Ms. BROWN-WAITE. But, ma'am, first of all, I don't have the
Federal plan. Second of all, it doesn't offer to have any kind
of reimbursement for part B. In addition, you know, the
wellness plan of, for example, being able to go to the Y for a
senior, YMCA, use their pool, all their exercise equipment, et
cetera, and/or saving $80 a month on part B, that means a lot.
So, those benefits aren't available in the traditional Blue
Cross Blue Shield plan.
Ms. DAVIS. Right. Now, we need better premium protection.
So, that part B would be $100 a month, in addition. For those
who buy Medigap, they might be paying over $2,000 a year for
that supplemental coverage.
What this does is to say for any low-income senior, they
wouldn't pay more than 5 percent of their income for their
premium, for a middle-income senior, no more than 10 percent of
their income for the premium.
Certainly if a plan wants to go beyond the standard
benefits to include fitness incentives, and they do that on a
level playingfield because they're more efficient, or they've
got a more innovative way of controlling a chronic condition,
then they could use those efficiencies to improve benefits.
Ms. BROWN-WAITE. Could I hear from the other members?
Mr. PICKERING. Yes. I think you have seen seniors vote with
their feet. Medicare Advantage plan has had tremendous
membership growth. I think plans have done a nice job of
recognizing benefits that seniors want, and delivering them in
an efficient manner.
One element of the program that enables them to do so are
the risk-adjusted payments, such that the sicker people have a
risk score, and the plan is paid based on the risk score. So,
it's paid on a true expected value of that person's cost.
That's--also affects a lot of dual-eligible beneficiaries,
people who are eligible for both Medicaid and Medicare.
Now you ask, you know, what happens if we take those
benefits away? You know, one way that plans have been
delivering those additional benefits, which are great for the
seniors, is that the payment rates to the plans have been
higher than fee-for-service payment rates, based on MedPAC. So,
it's--you know, I think it's a fair policy question. Do we want
to pay that extra amount over the fee-for-service benchmarks,
or do we not?
Ms. BROWN-WAITE. Well, would the question also be fair to
ask, do we want to have healthy seniors, and seniors who are
able to--and people on Medicare, not just seniors, but everyone
on Medicare--able to save the part B premium cost? You know,
that's an offset that I think that we need to address.
I can just tell you that the--and there are about--there
are a lot of Members of Congress who have a high number of
people on Medicare Advantage. You know, it's going to be a
very, very difficult sell to say, ``Oh, by the way, we're no
longer going to be having the plans be able to pay part B for
you and/or an exercise plan, which is going to keep you healthy
and perhaps out of the hospital, and your diabetes under
control, and your weight, et cetera.'' So, that's not going to
be a real easy sell.
Mr. STARK. Thank you. Mr. Kind?
Mr. KIND. Thank you, sir [continuing]. It's good to have
you back in the seat again. I want to thank the witnesses for
your testimony today.
Dr. Davis, let me start with you. First of all, I want to
thank you for the work that the Commonwealth Fund--to lay out a
kind of a road map on what healthcare reform should look like.
I enjoyed the conversation that we shared at the White House
during the fiscal responsibility summit that we both went to
just a couple of weeks ago.
But let me just get back to an issue that Mr. Pomeroy
raised a little bit earlier with you all. Here is my concern.
You know, when we discuss healthcare reform, different people,
different groups, hear different things. For some, it means
getting universal coverage. For others, it means cost
containment.
Here is my concern. I don't think we can do coverage
without also doing cost at the same time, or it will become
unaffordable very, very quickly. I think for too long--Mr.
Pickering, I want you to address this issue, as well--but for
too long, we have had a healthcare incentive-based system, a
reimbursement system, that's been focused on quantity, instead
of quality. I think that's the real dynamic that we have to
change.
The golden grail of any healthcare reform is, yes,
coverage, making sure everyone has access to affordable plans.
But it's also improving quality and saving costs at the same
time. If we can't do that working together and moving forward,
it's going to be very tough to pull this off at the end of the
day.
That gets me back to the geographic variation issue, where
I come, too, from an area where we have had high quality of
care, based on any standard of measure throughout the country,
yet it's one of the most lowest reimbursed areas in the entire
nation, too. I hear some of the same concerns with private
payers and private plans, about the cost shifting that's going
on.
But, Mr. Pickering, isn't it--your theory is that, because
Medicare under-reimburses, that cost gets shifted onto the
private plans, and that's why having some type of public health
plan option out there is very dangerous, because, with the
current payment rates, that cost is just going to continue to
be shifted to private plans.
But the very premise of that is assuming that, at the end
of the day, we're going to have the same payment rates, we're
going to have the same type of reimburse incentives that exist
today. I refuse to accept that premise, as we move forward with
healthcare reform.
So, would you then agree that, if we can change the
incentive, move to an outcome or performance-based, quality-
based system, as opposed to the one that's based on utilization
and consumption, as it is today, that that would change the
dynamic, then, when it comes to private health plans, as well?
Mr. PICKERING. I think we definitely need to change the
payment methodology. I think you would still have a problem
of--let's say we move away from fee-for-service, and move to
bundled payments.
Well, when we do that, quite often when we make a
transition like that, we will do revenue neutral, right? So, in
the first year----
Mr. KIND. Right.
Mr. PICKERING [continuing]. It's an amount of money to the
providers.
In that scenario, then, if we had a commercial plan that
was paying the provider 150 percent of Medicare to start with,
they're still going to be paying Medicare, you know, 150
percent of Medicare, in the new system. So, somehow we need to
figure out, if we put a public plan up against a private plan,
how to level that playingfield.
Mr. KIND. Right, and I would agree with that. When I'm
talking about the reimbursement, I'm not just talking about
Medicare and Medicaid reimbursement, but private reimbursement,
as well. Because if we're going to do this, we're all going to
have to do this together. You can't have one system of
reimbursement in the public sphere, and then an entirely
separate one in the private sphere.
Dr. Davis, you are shaking your head.
Ms. DAVIS. Absolutely. I think it's imperative that we
address coverage, quality, and cost simultaneously, and not
just do one.
We need to get--move away from fee-for-service volume
payment to value for what we're paying. There is nothing to
trigger that in the private insurance market, unless there is
this alternative of the public health insurance plan. I mean,
private insurers have had the option all along to move to these
methods. So, I think Medicare needs to lead.
But the main point that I want to just stress is that
provider payment goes up. It goes up 73 percent over this
period from 2010 to 2020. It goes up 5\1/2\ percent every year.
Granted, that's lower than the 6----
Mr. KIND. But the rate of growth would be different.
Ms. DAVIS. But we eliminate uncompensated care. We
eliminate underpayment by Medicaid. That's a tremendous boost--
--
Mr. KIND. Right.
Ms. DAVIS [continuing]. To providers. It gives them time
to----
Mr. KIND. Here is the rub, and here is my additional
concern. You know, in order to get to a quality-based incentive
system, as opposed to quantity right now, you've got to get the
HIT built out, it's got to be interoperable, you've got to do
the comparative effectiveness studies. That's going to take
time.
So, are we going to be getting too far out ahead with
reform, dealing with coverage before the rest has a chance to
catch up?
Ms. DAVIS. Well, we do have a gradual phased-in schedule
for the Congress to consider.
First of all, this opened up initially the exchange and a
public health insurance plan to just small firms with 100 or
fewer employees, in the third year 500 employees. That really
gives providers a time when they're getting extra revenue from
coverage of the uninsured, Medicaid reforms, to really position
themselves.
On the payment reforms, the bundled payment for hospital is
also phased in gradually. It starts with just the hospital
piece, then adds post-acute care, and then, eventually, in
2016, adds the physicians' inpatient services.
So, yes, we need time. But we need to get started, and we
need to start now.
Mr. KIND. Great. Thank you all. Thank you, Mr. Chairman.
Mr. STARK. Ms. Berkley, would you like to inquire?
Ms. BERKLEY. Yes, I would, Mr. Chairman.
Mr. STARK. Okay.
Ms. BERKLEY. Thank you very much for staying. I am not
addressing--I have some random musings, and then I have a
couple of questions. Whoever would like to answer them is very
welcome.
I think we have a wonderful opportunity to expand coverage,
slow the growth of health expenditures, and improve quality. We
have a system now that the hospitals hate, the doctors hate,
and the patients hate. In addition to all of that hate, it's
unsustainable. We spend a fortune in healthcare, and we don't
get the best bang for the buck, certainly, in the
industrialized world.
In the State of Nevada, I represent Las Vegas, where 70
percent of the state population is--we have one of the highest
uninsured rates in the country. I think we're ninth highest.
That doesn't give me a great feeling, to be in that position.
The state budget is in a mess, so Medicaid is kaput. The
reimbursement is so low, you know, you can't make it up--you
can't see a lot of patients and lose money on each patient and
make it up in volume. It just doesn't work that way. So, many
of my doctors just are no longer accepting Medicaid patients.
Before the cut, the physician reimbursement cut that we
reversed several months ago, I had people in the medical
community calling me and saying, ``Look, I--if you cut this by
10 percent, I can't take any more Medicare patients. I'm not
going to cut the ones I have, or stop seeing them, I just can't
take any more.'' If I've got the highest senior--growing senior
population in the United States, short of going to medical
school myself so when I go home on weekends I could care for my
constituents, there is no one that is going to be able to take
care of them.
Now, in the interest of full disclosure, my husband is a
nephrologist, my daughter is a family practitioner. She does
not make enough money, and he is not real anxious to give up
some of his to supplement hers. I think that's a problem, when
you're coming up with how you're going to take care of the
family physicians. You can't keep robbing Peter to pay Paul. It
doesn't work that way.
Having said all that, we need to do something about the
SGR. If we don't fix this, we have a 20 percent cut coming up,
and that is impossible to lay on the doctors. We are going to
need to do something about that.
The other thing is--and I said this in the library before
we got started--the way we do healthcare in this country, in my
opinion, is ``bass ackward''. We put a fortune into end-of-life
care, keeping people alive with extraordinary means. We should
be changing the paradigm, and putting our healthcare resources
into early detection and prevention of diseases. We will keep
people healthier, they will live longer, and we will save
billions of dollars of taxpayers' money if we can change the
paradigm.
Having said that, it makes no sense to me--and I'm just
about to reintroduce legislation--let me give you an example. I
have osteoporosis. My husband had a machine, a bone density
machine, a DEXA machine, that I tried. That's how I discovered
that I had the osteoporosis. Now I'm taking Fosamax, I'm taking
hormones. I'm never going to have a straight back, but I'm not
going to have the broken bones that both my grandmothers
suffered, because they didn't even know they had osteoporosis.
However, the cuts--reimbursement cuts to doctors for their
bone density test was cut in half. The result of that is many
doctors have taken out their machine. Now, the cost of treating
osteoporosis patients that break bones and have other side
issues is astronomical, and this is something that we can stop
with the proper early detection of the disease.
Do you think, one, what are we going to--the two questions:
what are we going to do at the SGR, and what are we going to do
to ensure that doctors get ample reimbursement so they can
continue doing tests like the DEXA test to identify problems
before they get out of hand?
Ms. DAVIS. Well, that's a great question. Certainly, as I
understand it, the President is trying to address the SGR in
his budget, realizing that it's really accounting gimmicks, and
that we might as well be honest, that we weren't really going
to be able to enforce that provision.
I think your point about osteoporosis prevention is very
well taken. I just heard yesterday about Kaiser Permanente in
southern California having had an aggressive osteoporosis
identification and management program, having resulted in
reduced broken bones. So, they've got studies that now document
that effect.
So, one can do that either by rewarding integrated delivery
systems that participate in a national health insurance
exchange. One can do it by rewarding patients--for what
proportion of their patients do they really screen for, get
extra money if they do that.
I do think we are probably going to have to pit your
daughter against your husband, and improve primary care
compensation. On average, primary care physicians in this
country make about $180,000 a year. Most of the specialists,
you know, are averaging around $300,000 to $400,000 a year.
That's the differential that exists.
Mr. PICKERING. May I add one thing on there? The other
thing we can do on the machine, if we put the choice back in
the patient's hands, as opposed to the plan level, if we let
the patient choose what was valuable to them, you want to pay,
you know, $20 for a copay to use the osteoporosis machine, it
should be available to you. You should be able to vote with
your feet, that you want that.
I think if we put pricing in plans where members are--have
cost sharing that reflects price differences that providers can
set, you know, a doctor can choose to be paid more with the
member bearing that extra cost. So, if you want to go see that
doctor, that's available to you.
Right now, the plan pays--Medicare will pay all the doctors
the one set fee schedule, and then there is no consumer choice.
Mr. STARK. Thank you all. Mr. Davis, Kentucky, would you
like to inquire?
Mr. DAVIS of Kentucky. Thank you, Mr. Chairman. Two things
I might highlight that have not been mentioned in this dialog
at all that kind of underpin where I'm going to go with my
question is when we talk about qualities, or quality outcomes,
I have a lot of professional experience in that arena--not in
medicine, certainly, but out in industry.
But the--we have--get into this idea that somehow
compensation is unjust if it is dealing with high-risk
specialties.
The other area related to this is we haven't addressed
liability reform, which is at the core of many of the reactive
procedures that are driven by Medicare. I have lived this with
my mother for a year-and-a-half of her life at the end, and saw
the incredible procedures that were unnecessary that were done
to her, so doctors could get paid, and also avoid liability.
But here is the problem you run into. If you go into a
quality situation--and what we haven't talked about is,
unlike--or not unlike what happened in New York in the 1990s,
where cardiac surgeons, to be top-rated, had to turn away high-
risk patients. So what you saw were--the people being downrated
were those who were actually practicing their Hippocratic oath,
and trying to treat people.
There are--I think some premises I want to get a little
explanation on from you all, and I would appreciate that, just
being a simple manufacturing guy here--but nobody remotely has
mentioned the gross inefficiencies of the CMS, which runs on a
1960 system architecture. There is no way that they can
implement a system for which they are not now equipped. The
regional RIOs can do it at a local level, but the state can't.
You know, we're dealing with high fixed costs and overhead that
are imposed on the delivery system, no matter what.
Secondly, Mr. McDermott made a statement that I have to
disagree with, saying that France has the highest healthcare
quality in the world at less than half of the GDP contribution,
or impact, than the United States does. But what France doesn't
have is the R&B and exportable job creation capability and
technology that we have had, nor the speed of delivery, and
they have a rationed care system. I think their cancer patients
would probably rather be treated in the United States, with the
unlimited potential.
The concern--I think a lot of our Members here are
disdaining actuarial rules. It's kind of like a pilot who
decides not to trust the instruments in a storm. Eventually
there is going to be a sensory illusion about the system that
you're part of, and you're going to crash, which leads me to
one real question here.
For the commercial sector to work, they've got to be able
to market. To not market is not--it guarantees that eventually
they're going to be consumed by the state which holds this,
because those 61 percent of people who have private pay
insurance also happen to make up more than the number of people
who actually pay taxes in this country, the overwhelming
majority of whom pay for their coverage.
They also underpin and subsidize the public sector
healthcare delivery. That can't be denied. To say it's the
inverse, as one of my colleagues suggested, doesn't fly with
just simple math.
I guess this is the question that I come down to. If any of
the premises that I have shared are correct in this--and
virtually everything is coming just from historical fact here--
how do you justify these conclusions, that going to this public
system will, in fact, reduce cost?
I don't see that, because what we're actually doing is
heaping a burden on--at the same time, saying we're going to
compensate the providers for a quality outcome that, in many
treatment modalities, is guaranteed not to happen by dealing
with this high-risk aspect. I want to see how the Government
can do a more efficient job at the provision of healthcare than
the private sector can, once you remove the economic incentives
for individuals.
Ms. DAVIS. You know, the two strong advantages of the
public health insurance plan are lower administrative costs,
so----
Mr. DAVIS of Kentucky. Reclaiming my time, as somebody who
has dealt with the computer systems on healthcare in the large
corporate world, how do you reduce that cost without changing
the CMS system itself, which is flawed?
Ms. DAVIS. Medicare doesn't advertise, it doesn't pay
commissions. It doesn't pay, I grant, a profit to----
Mr. DAVIS of Kentucky. Okay. Reclaiming my time, again,
you're right. They don't pay commissions, they don't pay--they
don't advertise. But the one thing they do do is impose a
percentage cost on the cost of operations of a medical office.
Each medical practitioner that I know of that ran an
independent practice had to hire one more staff member to do
HIPAA compliance when that was put into force by the CMS in
April of 2003. So, no, they don't advertise, but they have
imposed increased costs on the medical practices and on an
exponential order of magnitude on the hospitals. Now, tell me
how that reduces costs for compliance.
Ms. DAVIS. I think we do have to worry about administrative
costs on physicians. We funded a study, and the biggest single
cost on physicians are all the different formularies they have
to deal with in private plans. They have pharmacists calling
them up, saying, ``Your patient is not covered for this drug,
can you prescribe a different drug?''
So, there are high administrative costs. But a lot of that
comes because we're not willing to standardize. If we can
standardize, we can strip out a lot of that administrative
cost.
Mr. DAVIS of Kentucky. Based on that, would you say that
two things have to happen? Would you agree that the CMS needs
to be dramatically reformed in its process, and we need to
impose realistic liability protections for our providers?
Ms. DAVIS. I am very supportive of both. I think we need
liability for providers. That's recommended in our plan. I
think we need to give CMS the resources it needs to do the job.
Mr. DAVIS of Kentucky. Would you agree CMS could be better
performed if it were downsized?
Ms. DAVIS. I think, in fact, they are understaffed. To take
on the responsibilities that we need them to take on, they need
to be modernized with their information systems. They need to
recruit top talent. But I wouldn't do that by downsizing them.
Mr. DAVIS of Kentucky. Just as a closing statement--you
don't need to reply to this--but while I would suggest that the
use of modern technologies would, in fact, not require a lot of
the redundant non-value-adding procedures that our providers
are forced to go through, to comply with, that are generated
from this end.
I think every sector of private industry has demonstrated
that you can actually redirect those personnel to actual value-
adding services, instead of non-value-adding compliance.
Thank you. I yield back.
Mr. STARK. Thank the gentleman. Ms. Schwartz, would you
like to inquire?
Ms. SCHWARTZ. Thank you, Mr. Chairman. I appreciate this
first hearing. We're going to hopefully be engaged in serious
dialog about how we're going to accomplish about our--what we
talked about, our dual goals here, which is to contain costs
for everyone.
We have heard the President say, and we have said, that
cost to the Federal Government, to families, and to businesses,
both financial and personal ones, are serious and they're
unsustainable. We could do better. We know we can.
I would say that we have actually made some really good
progress in just the last few weeks. In the last 6 weeks, we
have done more on healthcare than the last 8 years, and we
should be extremely proud of that.
But what we do know is that we--and I will mention an
expansion of CHIP to four million more children in this
country, so what you talked about, getting children health
coverage, is extremely important. Health IT, enormously
important to getting the efficiencies and duplications out of
the system, and being able to make sure we're more efficient.
Better quality care is extremely important, and what I think
you mentioned, Dr. Davis, certainly the very fragmented health
system that many of us live with.
I represent a part of Philadelphia and a part of the
suburbs of Philadelphia. We are extremely proud of our
hospitals and our physicians. Yet, I know there are strong--
well, in too many sectors of the city that lack primary care
providers, lack OB/GYNs, that people are not getting the
primary care they need. It's pretty inefficient. We're all
paying for that.
So, the first step that--I wanted to ask you about just two
things. If we were going to expand coverage, we have to contain
cost, and we have to really change the incentives in our
delivery system. That's the first thing.
We had already talked a bit about health IT, talked about
some of the other--folks had mentioned about primary care
physicians. I would like you to just elaborate a little bit on
other efficiencies. How do we get more primary care physicians?
It's--payment is part of it, but incentivizing them, making
sure we incentivize, medical homes are more integrated, systems
of care, interoperability of information is extremely
important. But so is the way we manage chronic diseases, and
how physicians relate to patients. You might want to mention
patient responsibility in all of this, too, and the ability to
do that.
If we have time--and I'm just going to just put this out
there, it's a second question--is to--the fact that our
insurance system now has been really quite--well, I hope that
Mr. Pickering is wrong, and that our commercial insurance
providers, in fact, can step up to the plate and make real
changes.
I think if I was an insurance company--and I am not--I
would be extremely upset and disappointed about your testimony
that they are unable to respond to changes in the medical
system, the efficiencies, reformulating how they reimburse,
really dealing with changes that we would hope they can.
I hope you're wrong. I think that we can see a competitive
private-public partnership, and I hope that we will.
But there are clear problems with coverage, and I don't
think this has come up at all in this hearing yet. Waiting
periods, pre-existing condition exclusions, lack of portability
of coverage I think was mentioned, just about the 2-year wait
to get on a public plan for disability. This really--the
increasing number of patients who have to pay out of pocket for
preventative services, so they delay it, particularly in a
downturned economy. They don't have the money to do that, and
they wait to be able to provide--to get the kind of care they
need.
So, with that, if you could just specifically--and I guess
I will just start with Dr. Davis, and then I would ask you,
Doctor, to talk as well about the need for delivery system
reform, about the need for insurance reform, so that: we can
get the coverage we need; when we get insurance it means
something to people, it's useful; and that, when we have
insurance coverage, there are actually providers there that can
help us be able to stay healthy, stay well, and reduce the
duplications and expenses that we know exist in the system.
Ms. DAVIS. Absolutely. I think we need both insurance
reform and delivery system reform, and you have ticked them
off.
I think the design of insurance, so that there are such
high deductibles people can't afford preventative care, we've
been going in the wrong direction. As you said, lack of
portability. HIPAA provides some protection, but that's
certain-sized firms.
We need to make sure that people can keep their coverage
when they change jobs----
Ms. SCHWARTZ. So, is that Federal conditions?
Ms. DAVIS. Yes.
Ms. SCHWARTZ. We have to make some Federal rules about
this, so that everyone is--actually knows--they can expect
certain protections?
Ms. DAVIS. Absolutely.
Ms. SCHWARTZ. Okay.
Ms. DAVIS. That they will not be discriminated against
because of their health problems.
On the delivery system reform, I think everything you've
said about--primary care physicians need time to do care
management, care coordination, work with patients with chronic
conditions. We need to reform the payment to reward that.
Ms. SCHWARTZ. So, in other words, we should actually pay
them for that?
Ms. DAVIS. Pay them for that. As well as a team approach to
care--and I think doctors can't do it alone, they need to be
able to hire nurses, pharmacists can play a role.
Basically, primary care works best if it's part of a larger
system. Some people call it a medical neighborhood, but
certainly an integrated delivery system that can provide
support to those practices, provide them with IT, provide them
with care redesign, make sure that those specialty referrals
happen easily and smoothly. That's all part of the broader
system reform.
Mr. STARK. Thank you.
Ms. SCHWARTZ. Thank you.
Mr. STARK. Mr. Davis of Illinois may inquire.
Mr. DAVIS of Illinois. Thank you very much, Mr. Chairman.
Let me just say that I think, first of all, that the best and
most effective way to deal with the issues we've been
discussing is to have a national health plan, one that
everybody is in, and nobody is out. I think, once we do that,
and make it seamless, we will find that many of the problems
we're discussing will actually go away.
Let me also say it's my belief that the most effective
things that we have seen that have helped provide healthcare to
low-income people in this country has been Medicare and
Medicaid.
It is also my belief that community health centers are the
most effective instruments that we currently have to provide
cost-effective quality healthcare to large numbers of low-
income and poor people.
My question, actually, is to you, Dr. Davis. Would you see
the expansion of this network of clinics throughout the country
fitting into a plan that would increase access seriously, and
thereby reduce the numbers of people who are uninsured in this
country?
Ms. DAVIS. Absolutely. I think our network of community
health centers is a vital care delivery system in many low-
income neighborhoods. I think they need the support to upgrade
their services to this level that we call a patient-centered
medical home. We are funding community health centers to do
exactly that, enabling them to take a team approach to care, to
have services available. But it's a very important part of
this, and we would certainly see in a plan, designing payment
systems that reward community health centers for taking on that
responsibility.
You also stressed the importance of Medicaid. We have
talked a little bit about Medicaid--maybe doesn't pay as well
as Medicare. But it is the safety net for our Nation's most
vulnerable, sickest, poorest people, and it's vital that that
program be maintained for those who are the poorest of the
poor.
Mr. DAVIS of Illinois. Thank you very much. Let me ask you,
Mr. Pickering, many people feel that there is a great deal of
waste and inefficiency in our current healthcare delivery
system.
If you had to pinpoint some of the places where some of
that waste might be, where would you look?
Mr. PICKERING. I think the biggest amount of waste is in
overutilization. As actuaries, we create what we call cost
models, where we have a very detailed snapshot of delivery of
care, breaking out inpatient hospital, outpatient hospital,
various physician services. We look at utilization per
thousand, average cost per service. It gives us the total cost.
What we see when we look at the best managed health plans
out there, comparing them to loosely managed health plans, is a
dramatic difference in utilization. That's directly a cost
savings, if you can achieve that lower utilization. Usually you
see quality scores correlated with the lower utilization from
those organizations that are able to deliver it.
So, I think that's the biggest opportunity, is to optimize
utilization.
Mr. DAVIS of Illinois. I hope I get a chance to get back to
that in a second.
But let me ask you, Dr. Ayanian, obviously Massachusetts
has the highest number or percentage of its population that has
health insurance. Are you aware of any studies that have
compared the health status of the population there, or the cost
with what's being paid overall for healthcare in other places?
Dr. AYANIAN. In our Committee's work, we completed our
review before some of the newer evidence was available from
Massachusetts.
What we did find, though, was from a whole series of
studies, and much stronger studies of what happens, for
instance, when Medicaid and CHIP coverage has been expanded for
children, that access to care improves, as well as some
important health outcomes, like avoiding hospitalizations for
asthma. Those hospitalizations are reduced among kids with
asthma who were previously uninsured.
So, I think there are clear indications that bringing
everybody into the insurance system and providing good
preventive and primary care can avoid some of these costly
complications that are not good for patients and their
families, and they're not good for us as a society, and as a
nation, especially when they're avoidable.
Mr. DAVIS of Illinois. Do you think that might reduce cost?
I mean, we talk a great deal about cost, and we talk about cost
containment. Do you think that might, in a real sense, when we
get to the real bottom line, reduce costs?
Dr. AYANIAN. It's a very important question. What we strive
for in healthcare is cost-effective care. Are we getting good
value for the money we're spending?
There are occasions where we can prevent complications, and
it may actually be cost saving. Most of the time, what we're
striving for, though, is to achieve cost-effective care,
meaning that, for the dollars that we're spending, we're
getting good value, in terms of the health outcomes.
We know, from a series of studies, that extending insurance
coverage, and covering effective primary and preventive
services gets us that good value. We may have to pay a little
bit more, but we get much more, in terms of a return in
improved health outcomes for children that can be lifelong, and
then improved health outcomes for the working-age population
that can help them to be more productive and have a higher
quality of life.
Mr. DAVIS of Illinois. Longer life. Thank you so much. I
appreciate your answers, all of you.
Mr. STARK. Thank you. Mr. Reichert, would you like to
inquire?
Mr. REICHERT. Yes, sir, Mr. Chairman. Thank you. First of
all, all of here on this Committee come from all different
walks of life, so we come at the questions in a little bit
different way. My background was in law enforcement for 33
years, and I saw a lot of things. I certainly agree with the
statement that, Doctor, you made in your study, ``Lacking in
healthcare is hazardous to your health.'' I have seen it over
and over and over again in my past profession.
So, I have some questions that center around the--your IOM
report. It doesn't make any specific recommendations about the
shape healthcare reform should have. But you recommend to the
President and Congress that we need to do something now. It's
urgent that we do something now.
I really have a concern--and I'm going back to someone's
earlier question about waste, fraud, and abuse--and
overutilization is one of the things mentioned already. How do
you propose--and maybe all three of you could respond to this--
to address the issue of overutilization, or waste, fraud, and
abuse?
In my opinion, if we get the Government more involved, we
have more waste, fraud, and abuse.
Dr. AYANIAN. From the standpoint of an effective healthcare
system, the theme has already been emphasized. But I would just
echo it, that coordination of care is where we can achieve
greater efficiency.
So, when we have a fragmented healthcare system, when
people are moving in and out of insurance, or unsure what's
covered, or needing to stop in the middle of a treatment
process when they reach financial barriers, that's when we have
an inefficient and fragmented system.
So, in order to achieve the health benefits that our report
outlines that can come with expanded coverage, that coverage
has to emphasize doing what's effective and doing it in an
efficient manner. We do that by having primary care and
specialty care working together, by having team-based care,
using nurse practitioners, nurses, nutritionists, pharmacists.
We have a great deal of expertise in our healthcare system; we
don't always piece it together well----
Mr. REICHERT. Just to interrupt, so coordinated care, I get
that, and all three--I think all of us would agree with that.
Health IT plays into that, right? So, we've got $20 billion
we want to spend in the stimulus package on health IT, but
we're going to do that by September and October, and we don't
have a plan. We don't even know if it's going to be
interoperable, but we're going to spend $20 billion. Can anyone
address that issue?
Ms. DAVIS. Well, I think it's very important that Congress
has designated those funds in the American Recovery and
Reinvestment Act. I think----
Mr. REICHERT. Do you think October is too early, though, to
allocate those funds, those $20 billion?
Ms. DAVIS. I think it's----
Mr. REICHERT. Are we ready for that much money out there?
Ms. DAVIS. I think it is going to take that kind of
investment to----
Mr. REICHERT. I do, too. But the timing----
Ms. DAVIS. But you're right, you're right about the
strings----
Mr. REICHERT. Yes, ma'am. Thank you.
Ms. DAVIS. It's got to have decision support, so that
physicians know what the latest evidence is, as they are
prescribing a treatment, and it has to have a health
information exchange network that pulls data from all the
different----
Mr. REICHERT. How long do you think that might take? Could
we do that in the next 10 months, 8 months?
Ms. DAVIS. I think we can set out the standards for what we
want in----
Mr. REICHERT. Should we have a national standard?
Ms. DAVIS. In terms of the characteristics of the systems,
I think what you've charged the office of the national
coordinator for information technology, to have those standards
by 2010, is a realistic goal.
I have certainly seen these systems in countries as small
as Denmark, where they have 98 percent of their physicians on
these systems. All of a patient's tests, hospital records,
specialist consults are all right there. They are able to do
disease registries, they know their diabetic patients who are
out of control, and can bring them in.
So, there are models out there that we can learn from. So,
I think it's very definitely a step in the right direction.
Mr. REICHERT. I know a lot about interoperability, coming
from the law enforcement world, and I know we weren't ready for
some of the money that came out. I saw cities, police
departments purchase systems for a million dollars, and a year
later not work, and that's what I am concerned about.
I agree with you, that we need health IT, and it needs to
be interoperable, and we need to be talking with each other. I
also agree that it would help coordinate care, it would help
eliminate some of the waste, fraud, and abuse. But I just--I
feel very strongly that we don't have a system in place yet to
spend that $20 billion. I am very concerned about that.
I also want to touch on, Dr. Davis, your proposal would
require every American to purchase a health insurance plan.
There is, for all intents and purposes, a mandate to carry car
insurance in this country, but yet 16 percent of Americans
don't carry car insurance.
How, when I was a cop, you know what I would do, is when a
person got into an accident, I would write them a ticket for
not having car insurance, or you know, in the event of another
stop, I might be able to get that information and write a
citation. How do you enforce that, that mandate, that every
person have health insurance?
Ms. DAVIS. Some countries, again, we can learn from.
Netherlands and Switzerland have a mandate. They get all but 1
percent enrolled, so they do have problems with not everyone.
We can use the tax system, so people verify their insurance
coverage every year, when they file their personal income
taxes. It may still not catch some non-tax filers.
Certainly in Massachusetts, where they have had the
individual responsibility, they have gotten the rates up to 97,
98 percent insured. So, I don't think we're actually going to
get to 100, but I think we can get to 99 percent, by building
on some administrative----
Mr. REICHERT. Thank you for your answer. Thank you, Mr.
Chairman.
Mr. STARK. Thank you, Mr. Reichert. Mr. Davis of Alabama,
would you like to inquire?
Mr. DAVIS of Alabama. Thank you. Thank you, Mr. Chairman.
Let me, if I can, Dr. Davis, start with you, and ask you to
react to a couple of points.
I don't, by any means, want to adopt the ideology or the
theology of my friends on the other side of the aisle, who I
think are skeptical at the notion of a public plan for
ideological reasons. But I do want to pick up on some practical
concerns they have raised that I think are actually worthy of
some examination.
Let me lay out one real-world political scenario that I
think is likely to happen here. Let's assume that your plan, or
something like it, were to pass the Congress. There would be
intense political debate around it. As a practical matter, the
opposition would beat up this public plan. They would talk
about it as something that wasn't providing the highest kind of
quality, something that wasn't providing the highest levels of
efficiency. That would be the lines of political debate that
would go in this city, and, I suspect, around the country.
So, as you lay out, and as we think about the incentive
structure for someone to opt into the public plan, as opposed
to opting into a private plan, I almost think that we have to
factor how people are going to think about the public plan
after the political debate, and after there has been a
systematic effort to discredit it. That strikes me as
problematic.
Would either you or Mr. Pickering like to comment on that
very practical political aspect of this?
Ms. DAVIS. Well, I think we heard at this hearing that
Americans want choices. They would appreciate having the choice
of a public health insurance plan. Medicare is very highly
rated by its beneficiaries. We have done surveys of older
adults. They would like to be given the choice of buying into
Medicare early.
I think our whole experience with Medicare, that, yes,
physicians expressed some concern about were they going to be
paid enough, and it turned out they did very well under these
plans.
So, I think that people are satisfied with the quality of
coverage, with their access to services through public health
insurance. We have got a lot to build on. But I think what we
want is the best of both, we want----
Mr. DAVIS of Alabama. Let me interrupt you for 1 second,
and make sure I'm driving this point home. There has not been a
public attack on Medicare for 43 years in this country. So,
that's why Medicare enjoys a certain political sustainability
and durability; it's not under public attack.
As a practical matter, even if this plan or something like
it were to pass, it would be, I suspect, with an enormous
amount of political baggage around it that doesn't exist. It's
not tied around the ankles of Medicare right now. I do think we
have to think about that, because I think everyone on the panel
agrees that we have to have an incentive structure for a
diverse group of people, in terms of their healthcare going
into a public plan, so it doesn't simply become a receptacle
for people who have chronic diseases, or are low-income.
I would submit that, if we do anything like this, we have
to wrestle with what the public plan will look like after it's
been represented, or misrepresented, in the public debate. Will
it be less attractive? Will certain kinds of people be less
drawn to it? Will the public debate and the advertising around
it create perverse incentives for certain healthy, wealthy,
affluent people to opt into a private plan? All of those are
factors that I think may alter the incentive structure in ways
beyond cost.
Now, there is one other factor that we would focus on. It's
not just critical and important to have a level playingfield,
in terms of regulations, and in terms of cost structure. I
think we're also going to have to grapple with the preemption
issues.
Hypothetically, if there was a Federal standard that
obviously covered the public plan, and if some of these private
plans were more governed by state standards, that seems to be
another thing that we would have to grapple with, to make sure
that you didn't have an incentive structure for certain kinds
of plans, to not participate in this consortium or network you
described.
Do any of you want to speak to that issue, how we level out
the preemption issues, and the whole question of Federal versus
state law?
Ms. DAVIS. Well, you raise good points. But what we know
isn't working, and that's the system now. So, universally, the
polls show that people want change.
In Massachusetts, which moved to their system in 2006,
polls are very high. People are very satisfied with what
they've done there. I think it does require an ongoing
education campaign, so people know what the truth is about the
program. But those who now see that they have economic
security, they have choices, they have good benefits, you're
going to see much higher levels of satisfaction than we find
today.
Mr. DAVIS of Alabama. Well, my time is up, Dr. Davis, but I
would just summarize with this observation. I am not quite as
sanguine as you are about comparing this to Medicare, because
Medicare is an accepted, established, entrenched plan that has
not come under attack in the public debate since 1965.
As a practical matter, there would be an enormously
contentious political debate around this plan. Whatever we
passed would already be discredited in the eyes of significant
numbers of people in the country. I think, as we think through
the whole incentive structure, that's a really, really big
problem, how we deal with the potential baggage that would have
attached to a public plan. But my time is up.
Mr. PICKERING. May I just--just one thing? You mentioned we
don't want the public plan to become a dumping ground for the
sick, and the private plans to become a place where the healthy
go.
I definitely agree with that. I don't know if, in the plan,
we have risk-based funding, like we have in Medicare Advantage
where, you know, a chronically ill person who is going to use a
lot of healthcare resources, their health plan gets more money
for them. They don't pay more premium, but their health plan
gets more money. I think you would definitely want to consider
something like that, so that plans could focus on carrying for
the sickest without being penalized.
Mr. STARK. Thank you. Mr. Etheridge, would you like to
inquire?
Mr. ETHERIDGE. Thank you, Mr. Chairman. Let me thank each
of you for being here. You know, we come to this place after
the issue has been raised during a Presidential campaign to a
high level at a time when the economy was in a different place
than it is today.
I say that because, even then, the public was engaged in
either one of two things. They neither had healthcare and
wanted it, or what they had was so expensive, and the copays
and deductibles are so high, they felt they still weren't
getting the benefit of any insurance.
Well, today we find ourselves in a little different place.
The economy is in a different situation. For instance, in my
home state of North Carolina, they have just released the new
unemployment rates today in North Carolina. Our jobless rate
has now jumped to a 26-year high of 9.7 percent. In the last
month, it was--it became one of the highest top six in the
country, in terms of unemployment. In the last 12 months, it is
number 1 in the nation, in terms of the amount of job loss from
January of 2008 to January of 2009.
I say that in context, because I think this is sort of
where we are in a lot of other places. As Mr. Reichert said,
from having been in education and state superintendent, and so
many times we talk about children having healthcare and the
need for it, and that is absolutely true, but the last time I
checked, most children come from homes somewhere. If the
families don't have the health insurance, it's awful hard, even
when it's made available through state, local, Federal,
wherever, for children to be able to engage in it, because if
parents don't have it, they may not get the attention they
need.
So, my question is they get hit twice. They've lost their
job, and in a lot of cases now, they've lost their healthcare.
We are helping in the recovery package with COBRA, but for some
of these families COBRA is very difficult because they've lost
their job and, in some cases, they may not have unemployment
insurance.
So, Doctor, let me ask a question to you this way, because
I think the issue currently--and I think we have to deal with
where we are, so we can get to where we want to get to,
wherever that place may be.
Can you describe to us some of the issues that individuals
face when they're trying to buy a policy today in the
marketplace? I think it's helpful for us to sort of be reminded
of that one more time.
Dr. AYANIAN. Our report addressed a number of those issues.
For example, we heard the story earlier about a 62-year-old
constituent who had had a heart attack and had lost her
insurance, and she was essentially counting the days until she
could qualify for Medicare at age 65.
So, people with any sort of acute or chronic condition, if
they aren't eligible for employer-sponsored coverage, and don't
have a low-enough income to qualify for a current public
program, they are really very much on their own and adrift. And
if they try to buy insurance on their own in the non-group
market, it may not be available to them, or may not cover the
pre-existing conditions for which they most need the insurance.
Or, if it is available, the premium may be so expensive that
they can't afford it, that it just crowds out the rest of their
income.
There are clear examples where people are losing coverage
when they lose jobs, unless, for example, low-income children
can qualify for the children's health insurance program. We
know from previous Institute of Medicine work, that when
parents and children are covered together--I think that you
were referencing this--that parents use the system more
effectively, both for themselves and for their children. So,
there is a positive spillover effect there across the family,
when the whole family is covered.
So, these are just some of the ways in which a weakening
economy is going to make the health insurance crisis worse for
families and people losing their jobs.
Mr. ETHERIDGE. Dr. Davis, I represent an area that is
probably representative of America. We have urban and rural.
One of the real problems we face is that, as we try to
address--we have in the past, I think, with Medicare Plus
Choice, it became Medicare Advantage, et cetera. Insurers sort
of rushed in to sign up beneficiaries, and then sort of backed
out of that market when the margins really didn't--were high
enough to be where they wanted to be.
In some regions of the country they have only one option in
a plan, which creates some problems.
My question to you is how would the Commonwealth Plan serve
rural communities, and ensure access? Because access is
critical, as well as containing that cost. If you don't have
access, you don't have to worry about the cost.
Ms. DAVIS. Absolutely. You couldn't be more right. One of
the advantages of having the public health insurance plan is
that you've got a guaranteed, secure, stable option that is
available everywhere.
As you say, private insurers will move in and out of
markets, depending upon whether they calculate they can make
the kind of return for their shareholders they want to make.
So, it's very important to have a public health insurance
choice that's available, particularly in the kind of rural area
that you've mentioned.
Mr. ETHERIDGE. Thank you, Mr. Chairman. I yield back.
Mr. STARK. Mr. Boustany, would you like to inquire, sir?
Dr. BOUSTANY. Thank you, Mr. Chairman. You know, as a
cardiac surgeon with over 20 years experience in an academic
center, public hospitals, and a very successful private
practice, I would talk at length about the problems with the
healthcare system, both in the private and the public sector.
My friend earlier--from Alabama--mentioned that he thought
that those of us on our side have an ideological skepticism. I
would submit that I have a very deep skepticism of having a
Government plan competing with private plans, for a simple
reason, and that is, what's in the interest of the patient, in
terms of high-quality medicine?
Now, a couple of things I want to point out. One, we have a
significant longstanding and extensive liability with Medicare
and Medicaid, and that has to be addressed. There are no plans
to do that.
So, as we look at a plan that will potentially push more
people from the private sector into the public sector--and, Dr.
Davis, the Lewin Group that contributed to your research has
concerns that 120 million Americans would lose their current
private coverage under your plan--there is a real problem here.
We need to be careful with this, in the interest of real
quality patient care.
Secondly, access to a doctor-patient relationship is very
different than coverage. I know Dr. Ayanian knows that, as a
practitioner. There is a profound difference. One of the things
that is missing in all of our Government plans to a large
degree right now--in Medicare, Medicaid, and SCHIP--is a
difficulty in developing the doctor/patient relationship. There
are access problems to the doctor, and the development of that
kind of relationship, in all three of those programs. It's
worse in some than others, but it's there in all of them.
One of the things that we know, in addition to this, is
we've got a significant shortage of healthcare providers
looming, and getting worse. Dr. Ayanian, if you would speak to
Dr. John Mayer at the Brigham Hospital, a cardiac surgeon, he
would be the first to tell you that half of the cardiothoracic
surgery spots in the country did not fill last year. That's
half of 139 training spots. If we don't have cardiac surgeons,
cardiology programs go away, pulmonology programs go away,
intensive care units tend to disappear.
We also, at the base, are losing our primary care and our
general surgeons. Rural care is going to suffer. If we don't
have the providers, we've got a problem. That's another major
issue that relates to reimbursement.
Currently, the healthcare system is basically a price-
controlled system across the board. Medicare rates are
determined very arbitrarily. In the private sector, they are
pegged at some multiple of Medicare. This is creating a severe
distortion throughout the healthcare system that is hurting
access to developing a doctor/patient relationship.
So, I guess my question would be that if we shift patients
from the private sector into Government-run healthcare, which
is going to happen, what are we going to do about the longer
waiting lines, and the difficulty in gaining access to
developing a doctor-patient relationship, which is the essence
of quality, where prevention and screening and early detection
really take place?
Dr. AYANIAN. I will speak to the importance of the
healthcare provider community: the physicians, the nurses, the
people on the front lines. You and I have experience in
practicing ourselves, and collaborating with our colleagues.
While this debate, for most of today, has been about
insurance----
Mr. BOUSTANY. Coverage.
Dr. AYANIAN [continuing]. And coverage, and that's
critically important, I think it's clear that the provider
community--the doctors, the hospital leaders, the nursing
leaders--need to be brought into this, and we need--and we have
had some discussion today about not just reforming the
insurance system, but reforming the delivery system. Ideally,
our healthcare system works best when those two systems work
together, as opposed to in opposition to each other.
So, it's clear from the work that we've done at the
Institute of Medicine, that we need both pieces. We need the
coverage, because without coverage it's very, very difficult to
even have a chance at getting that effective doctor-patient
relationship that you're highlighting----
Mr. BOUSTANY. But what I'm pointing out is that, as we work
on coverage, we have to keep our eye on the ball, and make sure
that the access to doctor-patient relationship is also given at
least equal treatment, if not more, because some of these
coverage decisions, I am fearful, are going to lead to severe
access problems, which we are already seeing today in the
current healthcare system.
Dr. AYANIAN. So, I think that just underscores that we need
a very thoughtful approach. It can't just be expanding
coverage, and then sort of into----
Mr. BOUSTANY. That is what----
Dr. AYANIAN. A system that is malfunctioning.
Mr. BOUSTANY. That's what I find missing in much of the
debate we have had, and in the proposal put forth by the
Commonwealth Fund. It's a very deep concern to somebody who has
had extensive experience with this at the ground level.
The other thing is there was some mention of alignment of
incentives, which is critically important. There are so many
legal impediments to doing this in healthcare today, that this
is another issue that I think needs to be addressed if we're
going to actually get to that point of quality. I see that my
time has expired, and I----
Mr. STARK. I thank the gentleman, and I would ask if Mr.
Levin wants to inquire.
Mr. LEVIN. Thank you very much. Welcome. A long day for
you.
By the way, I haven't been able to be here the entire
hearing, but I did hear some discussion about IT, and I just
wanted to indicate, based on what I've heard from across the
board in the health field, as well as my own family's
experience, I think there is a thirst for information
technology. I do believe that the money that was appropriated
is an absolutely essential break-through. I have confidence it
will be administered effectively.
So, let me just ask, and Dr. Davis, I will start with you,
and others may want to comment. There has been some--a lot of
discussion about a public plan. I heard it suggested that maybe
its nose may be bloodied so much that people won't be attracted
to it.
I don't think that's true. I remember when I was first
here, or a few years after that, there was some discussion
about Medicare, and some complaint about the new system. Some
seniors were not entirely happy with it. But those problems
were straightened out, and the DRG turned out to be workable.
So, I really think one of the basic issues is not whether
there will be public support for a public ingredient, but
whether the support might sooner or later be so strong that
there wouldn't be private competition, that it would become
essentially the only option, or the main option that was
exercised. I think we need to get right at that, because I
think, underlying the arguments against this plan, in part, is
the belief that what we're starting with here is what we would
necessarily end up with, alone.
So, Dr. Davis, do you want to start talking about the whole
relationship between the public and private sector under this
plan?
Ms. DAVIS. Well, I think the most important point to stress
is that nobody loses coverage. People have choices, and they
only change coverage if they feel that what they're changing to
is better or more affordable.
I think that having a public health insurance plan provides
a challenge to change business as usual in the private
insurance industry. I met last week with the executives of the
Wellmark Blue Cross Blue Shield plan of Iowa and South Dakota.
Their board has given them a charge to have their premium trend
be equal to the consumer price index. So, they are on a journey
to get premium increases down to the same as general inflation.
I think we're not suggesting something as tight as that, or
as ambitious as that, but certainly a plan like that would fare
very well in a national health insurance exchange, where the
goal is to slow spending to five-and-a-half percent a year,
substantially above the consumer price index.
Private insurers have strengths. There are ways that they
can adapt to this. First of all, they can pay according to
these innovative methods, so it can't just be Medicare,
Medicaid, and a public health insurance plan.
In addition, if something better comes along, they can be
very quick to innovate and test that. They can modify benefit
designs if there is a change that attracts individuals to their
plans. They can have effective utilization management.
So, some think it means the demise of private coverage, and
we will just march toward public coverage. I think we will have
a healthy balance between the two, and they will both find the
kinds of patients, the kinds of enrollees, that are attracted
to the strengths that they bring to the table.
The main thing is to change competition in the insurance
market, so that everybody is bringing value-added, they're
bringing what they do best that winds up getting us better
value for the dollars we're spending.
Mr. LEVIN. Well, put. I have less than a minute, too. Mr.
Pickering or Dr. Ayanian, either of you want to quickly
comment?
Mr. PICKERING. I will quickly comment. If it happens that
the public plan is so good that everyone wants in, well, that's
a good problem to have. I guess you lose the value of
competition to drive future efficiency, but you have succeeded
in creating a good public health plan.
Mr. LEVIN. Gee, I hope your message is heard. I think Dr.
Davis indicates that the competition is likely to continue, and
would be healthy for health.
Dr. Ayanian, do you want to--I have 15 seconds, less than
that.
Dr. AYANIAN. Just to echo that the important issue here is
to get people covered, from the Institute of Medicine's
perspective, that the longer we wait to achieve that goal, the
more negative health consequences that we're going to
experience among Americans. And for the country as a whole, and
that has a real human cost that we need to keep our eyes on,
and keep as a motivation, going forward.
Mr. LEVIN. Thank you for this excellent hearing.
Mr. STARK. Thank you. Mr. Meek, would you like to inquire?
Mr. MEEK. Thank you so very much, Mr. Chairman. I thank our
witnesses for being here, and monitoring the hearing. I must
say, from Florida, as you know, we are almost ground zero, as
it relates to healthcare. I think it will be a big part of
healthcare reform.
I wanted to ask a question about doctors, and how you think
we will be able to meet the demanding needs of doctors right
now.
In Florida, the average age of the doctors that are there
that are what you may call general docs that deal with issues,
primary doctors that are dealing with a number of individuals
in Florida that are getting older and older--we had physicians
in teaching hospitals, to allow more of those physicians to be
authorized in the future to be able to meet the growing needs
of Florida.
I will tell you, in 15 years, many of our docs would have
aged out. A number of them, as it relates to this healthcare
reform, as we look at cost, will they be properly incentivized
to be a part of any reform that we want to--we are trying to
carry out right now, and also be willing to go into the medical
profession in Florida or in other parts of the country?
So, my question is mainly going down the line of how do we
address the issue of the failing recruitment, I think, in
getting more young doctors involved in the healthcare arena?
Maybe you can answer that question.
Dr. AYANIAN. Speaking from my perspective as a physician
working in a teaching hospital--and, this is not directly
addressed by the Institute of Medicine report--but I think we
need to recognize that physicians are attracted to the field
for the opportunity to be healers. Most physicians want to
focus their energy and attention on taking care of patients.
So, to the extent that health reform can reduce the
administrative burdens on physicians, and free them up to focus
more on what the calling of medicine is, there is, I think, an
opportunity to make medicine and other health professions even
more attractive to young people considering different career
options.
So, that is, a perspective that I have, that if we can
reduce some of the administrative hassles, and the
fragmentation in the healthcare system, and develop a sense
that everyone is a part of this, that all Americans are part of
the system and can gain coverage, that makes the calling of
medicine much more attractive.
Mr. MEEK. When we talk about docs in Florida, we talk
about--of course, in your report, you talk about the quality
of--improving the quality of care. Many of the docs who I've
spoken to are saying, ``Kendrick, I don't know who is going to
come behind me to do this job under this environment.''
As we look at opening this book of healthcare reform
throughout the country, especially as it relates to coverage,
as it relates to docs that are practicing outside of--you know,
by themselves, will they be able to still be in the profession
of providing medical care?
Many rural areas, not only in Florida, but throughout the
country, are finding themselves in a situation where they're
traveling for miles and miles and miles, because no one wants
to come to their community.
So, I am--that's where I am trying to go. It's a broad
question, but I'm just trying to go there, and how we can deal
with it as a Committee, because sometimes we may lift the hood
of a car, and may not necessarily twist a sparkplug the way
it's supposed to be twisted to get, you know, the kind of fire
you need to start the engine.
So, that's a concern, and probably will be a--some dialog,
because when you start talking about first controlling costs,
and then trying to improve healthcare, you have to think about
those that are in the healthcare profession, if they are going
to be able to meet the requirements, or the threshold that we
call ourselves, you know, reforming on behalf of the many.
Insurance is another issue for many doctors, and something
that we have been trying to address.
So, I'm just trying to figure that out, because I feel that
we have a lot of folks that are finding areas, and in this
report, how we can do it. But those professionals that are
there, especially the docs, it's important. We know nurses,
shortages and all of that, but how do we incentivize them?
Dr. AYANIAN. Well, and our report speaks directly to this,
in terms of spillover effects.
Mr. MEEK. Yes.
Dr. AYANIAN. So, communities that have high rates of
uninsurance are less able to attract physicians, and less able
to attract high-quality providers to their communities, or to
retain the ones that they already have. When healthcare systems
or hospitals look to make investments, it's less attractive to
them to make those investments in communities where there are
high rates of charity care, and uninsured patients who may just
not be able to seek care when they need it, and use those
services to their benefit.
So, clearly, there are these spillover effects that we
could use in a positive direction, if we raised rates of
insurance. Communities that currently have high rates of
uninsurance would be better positioned to attract and retain
the healthcare professionals and the medical services that they
need.
Mr. MEEK. Thank you so very much. Looking forward to
working with you. Thank you, Mr. Chairman.
Mr. STARK. Mr. Roskam. Finally, sir, your patience and--
thank you for--would you like to inquire?
Mr. ROSKAM. Yes, sir.
Mr. STARK. Be our wrap-up?
Mr. ROSKAM. Thank you, Mr. Chairman.
Mr. STARK. Thank you.
Mr. ROSKAM. To all the witnesses, thank you very much. It's
clear to me that you are thoughtful people that are taking on a
very serious, complicated issue. I, for one--and I know I
speak, I think, for everyone--really appreciate the depth of
thought that you have given to this.
You know, I was reflecting, Dr. Davis, in your conversation
with the gentleman from Kentucky a couple of minutes ago. You
talked about the liability reform side of things.
We had OMB director Peter Orszag here last week, who shared
with us a story of his own personal experience. It was kind of
interesting. It's not often that people come before a House
Committee and disclose medical information, but he said that he
was a runner, and had recently had some sort of an episode with
his leg or his knee, went to the physician, and the physician
said, ``Yes, there is something going on, and let's do an x-
ray.'' The x-ray came back positive.
My memory is that Director Orszag sort of resisted the
physician's next line of diagnosis, which was an MRI. The
director said, ``Well, what is that going to show me?''
According to him, the physician said, ``Nothing, really, but
it's kind of what we do.'' The director was a little bit proud
of himself, I must say, and he said, ``Well, I don't want that
test. I will be okay,'' and off he goes.
I thought about that a little bit, and I thought, you know,
that's great. But what if it hadn't worked out well, right?
What if the director had actually had some subsequent injury
that got worse and worse and worse? You know, memory may fade
about what that visit was actually like.
So, I got to thinking, what would it be like if Marcus
Welby, MD, was Dr. Orszag's physician, and it didn't work out
well, and Dr. Orszag filed a malpractice case against Dr.
Welby? I think this is a couple of lines in a cross examination
that I would do, if I was the plaintiff's lawyer against Dr.
Welby.
You can just imagine Marcus Welby on the stand, and you
would say, ``Dr. Welby, Peter Orszag was your patient. Isn't
that right?'' ``Yes.'' ``He came in, complaining of problems
with his knee, isn't that right?'' ``Yes.'' ``They were enough
complaints, Dr. Welby, that you thought it was wise to get an
x-ray, correct?'' ``Yes.'' ``There were positive indications of
trauma, isn't that right, Dr. Welby?'' ``Yes, there were.''
"Your first instinct was to order him an MRI, isn't that
right, Doctor?'' ``Yes.'' ``The reason it was your first
instinct, Doctor, is because you have had the training, and
it's the standard of care for reasonable and prudent physicians
who are in your ordinary area of practice, isn't that right?''
``Yes. But he talked me out of it.''
"Well, Dr. Welby, Peter Orszag never went to medical
school, right?'' ``Right.'' ``He never had any residency
training, correct? He has never seen a patient. He has never
read the medical literature. So, you let yourself be talked out
of a reasonable and prudent''--you see where I'm going with
this? Okay.
So, Dr. Davis, when you said that you were in favor of
liability reform, I heartened a little, and I thought, oh
great, you know, that's sort of an unconventional thing, coming
from a Majority witness. I read the liability that you're
proposing, and it's really not what the normal conversation
about medical liability is.
In other words, what you are doing is recrafting, in your
words, ``enterprise liability to create an interlocking
liability relationship between physicians and other entities,''
presumably hospitals and so forth. But you're not really--I
mean, this plan is silent as to the duplication of testing, the
defense of medicine that is sort of inherent in things. I just
think it's important.
Would you acknowledge that defensive medicine is driving
costs up, and that that is something that has to be dealt with?
Or--and just tell me if it's true--is the orthodoxy, from your
philosophical point of view, is it impossible to contemplate
that caps on non-economic damages makes sense in a system, when
we're trying to control costs?
Ms. DAVIS. Yes. Truthfully, I have never seen a good study
on defensive medicine. People toss out numbers--a billion
dollars--but when you look into them, the good data aren't
there.
What I would recommend, and what we're funding to evaluate
in the State of Washington, was legislation that gave
protection to physicians in liability cases if they had
systematically given their patients what is called shared
decisionmaking, which is not just some advice that Dr. Orszag
got, but, say, a video that explains very carefully the risk
and benefits of getting surgery, not getting surgery, getting
an MRI, not getting an MRI.
If the physician has the patient be educated about their
treatment options, the risks and benefits, then they are
protected in liability situations, because they have at least
informed the patient, the patient decided they didn't want the
surgery, they didn't want that test.
So, we are funding an evaluation of the effect of that on
quality, on outcomes, on cost. But I think that is a very
intriguing way--I certainly would favor that over something
very crude, like caps on damages for pain and suffering.
Mr. ROSKAM. My time is expired, but I am interested in
following up with you, particularly about the definition of--
well, the nature of that protection, from a liability point of
view, because, as you know, the devil is in the details on
that. But thank you for your testimony today. Thank you, Mr.
Chairman.
Mr. STARK. I thank the gentleman. I would just point out
that, in California, when we did cap it, they didn't lower the
premiums to the doctors. The insurance companies charged more,
but there was no real savings to the docs. So, a lot of that is
how these caps are carried out.
Mr. Camp.
Mr. CAMP. I would just say, first of all, thank you all for
being here. I think one of the concerns that many of us have
with a Government option competing against private plans is
that the private plans would all be required to meet the
criteria set forth in the Government option, but wouldn't have
the subsidy of the Government option. Therefore, over time,
there wouldn't be any competition.
I mean, there are no private plans for people over 65 for a
reason. They can't do it. Yet, we know Medicare isn't always
adequate, because 42 percent of seniors have Medigap insurance.
The other concern is, I think, one that--the Government
plan causes private plans to charge more. As more people would
be eroding off private insurance and into the Government
program, because there is cost shifting--and we have all
agreed, at least certainly in Medicaid we can agree there is
cost shifting, and there are seniors on Medicaid, and
physicians certainly have that issue as well--then that further
erodes, again, private insurance.
For this--for us to really continue to have people have the
insurance, that they not lose what they have, we cannot see the
erosion of the private side.
Now, I don't really see a way around that, frankly. Maybe
it is that--and I guess I would like to hear you comment on
that particular part--and maybe it is that the Government sets
some basic criteria for plans, as opposed to being in the
insurance business themselves, for those that are not on
Medicare or Medicaid.
I guess I would like to hear any comments that you might
have on that. Anybody?
Ms. DAVIS. It's late----
Mr. CAMP. Yes, and thank you for all of the time you have
spent this afternoon.
Ms. DAVIS. It is late in the afternoon for an economic
theory on cost shifting. What I use as a test is what does a
payer pay enough to get the providers to participate? What
Medicare pays is enough to get hospitals to participate. It's
enough to get nearly all doctors to participate. It's not
enough to get them to participate in Medicaid. So, that, to me,
is a problem. I am comfortable with that kind of evidence.
I personally don't think there is a strong empirical
database that says if Medicare pays a lot more, if we pay for
the uninsured, if we raise rates for Medicaid, that commercial
insurers will cut rates, or that providers will be happy taking
less money, because now they're getting a lot more money from
Medicaid patients and from uninsured patients.
But if you believe it, then private premiums should come
down, not go up, because there is a huge infusion of funds for
covering the uninsured, you know, $100 billion, and a huge
infusion of funds for bringing Medicaid up to at least Medicare
level.
Mr. CAMP. We have seen premiums go down in part D from
where they were projected to be.
Ms. DAVIS. Yes. So, unfortunately, in economics we never
know what would have been the case if we hadn't done it, but
you're right----
Mr. CAMP. We had a potential amendment that the premium
should be $35. Clearly, you can get a Medicare part D plan for
much less than a $35 premium. So, that would have been the
wrong approach.
Ms. DAVIS. Right. My friends who are actuaries are very
good at extrapolating trends. They sometimes miss turning
points. Prescription drugs peaked at about the time the
Medicare prescription drug law came in. So, they were
projecting part D plans on the basis of that upward trend.
So, whether they overestimated what the premium would be,
and it came in lower, or whether it was the market working, I
think they will never be able to----
Mr. CAMP. Well, and some of that is the, you know, more
extensive use of generics. I understand that. It's not all
competition. In a sense it is, but there are other alternatives
that have helped contribute to that. I will freely admit that.
Ms. DAVIS. But I think the basic argument is that private
plans should be able to participate with a public health
insurance plan that pays fair rates, that they can adopt those
rates if they want to in private plans, they can do something
better than that if they want to, they can use all the other
tools that are available to them that are unlikely to be
adopted by a public health insurance plan, like selective
networks, like utilization reviews, like benefit designs.
So, certainly I think the worst case scenario is what you
see in this report, that they just keep on charging what
they're charging. But, even with that, they would still have
over 100 million who are privately insured. Plus, they would
have the business of paying the claims on all of those people
covered through the public health insurance plan, just as they
pay the claims under the Medicare Program.
Mr. STARK. If everybody has inquired, I want to, first of
all, ask the witnesses to raise their right hand and take a
pledge that they won't tell any future witnesses how long you
have to sit there on those hard chairs when you're a witness,
but to thank all three of you for participating with us today.
I think it has been a useful hearing, and I really thank
you for your patience, your indulgence. I have enjoyed working
with all of you. I hope we can have you back. Thank you very
much, and----
Chairman RANGEL. Hold it.
Mr. STARK. Mr. Chairman?
Chairman RANGEL. Pete had an idea that I hope might be
receptive to you, and that is that if we get close to resolving
this issue, whether we could have an informal roundtable
without the mics and the testimony, including Republicans, to
be able to, not in 5 minutes, but to get normal conversations
about problems that all of you know that we're going to have.
You, Karen, you have dedicated your life to this, and so
we're going to staple you to the bill, and just send it to the
floor. But we really want to thank you for sticking with us
today. This is the first, I am convinced that we are going to
work this out. Thank you so much.
[Whereupon, at 2:41 p.m., the hearing was adjourned.]
[Submissions for the Record follow:]
Statement of America Health Care Association and
National Center for Assisted Living
On behalf of the millions of caring employees within the long term
care sector, and the millions of Americans who rely on these
compassionate caregivers for essential care and services, the American
Health Care Association and National Center for Assisted Living (AHCA/
NCAL), commend Chairman Charles Rangel (D-NY) and Ranking Member Dave
Camp (R-MI) and the members of this committee for today's hearing on
health reform in the 21st Century. As you consider expert testimony and
review options regarding the reforms our nation must implement in order
to expand coverage, improve quality and control cots, we ask that you
keep one fact in mind--the majority of Americans will require long term
care services at some point in their lives, which is why any national
health reform plan must address long term care.
The long term care sector is a significant contributor to the
economic health of communities nationwide, and its stability is vital
to stimulate economic growth, especially as the demand for long term
care services continues to grow.
Presently, long term care accounts for 1.1 percent of the nation's
Gross Domestic Product (GDP)--$153.8 billion annually--with substantial
economic impact in nearly every community across the country. With long
term care facilities contributing to the employment of more than 4.4
million individuals, the long term care sector represents one of the
few growth areas in the U.S. economy. As a major driver of economic
activity, the sector further supports more than $160 billion annually
in labor income, and generated $56 billion in tax revenue in 2007
alone.
Long Term Care--A Crucial Component of Healthcare Reform
Americans are living longer and our nation's aging population is
growing. Each year, more than 3 million Americans are cared for one of
the nearly 16,000 nursing facilities in the United States with nearly
80 percent relying on Medicare or Medicaid to pay for the care they
need. Millions more of America's seniors depend upon care and services
offered by assisted living communities or in their own homes. The
demand for this kind of care is projected to more than double with as
many as 9.3 million older Americans expected to rely on paid long term
care services every year--either in a nursing facility or with paid
home care--by 2040.
Given this growing demand, it is imperative that all of us--
Government, providers, and consumers--work together to ensure that
America's healthcare system can both meet the care needs of our frail
and elderly while preserving individual choice, and be cost-effective
and sustainable when demand for long term care and services will
dramatically increase in the coming years. Nearly two-thirds of frail,
elderly, and disabled residents who require nursing facility care--
about a million individuals on any given day--rely on Medicaid to pay
for the care they need. Another 115,000 assisted living residents have
their care services paid through Medicaid waivers. Yet, many states are
finding it difficult to keep pace with those needs as Medicaid spending
often consumes the largest share of a state's budget.
Medicaid is the single largest purchaser of nursing home and other
long term care services, a fact of great concern as future growth could
mean state Medicaid programs may not be able to meet the care needs of
patients in the years ahead. In 2004, nearly 1.7 million individuals
relied on Medicaid to cover their nursing facility care. That year,
Medicaid payments for nursing facility services exceeded $47 billion,
which falls an estimated $4.6 billion shy of the actual cost of
providing that care. Such disparity highlights the ongoing struggle
that exists for Federal and state Governments to commit adequate
resources to meet today's needs and tomorrow's expectations.
Home and community-based services (HCBS) address the long term care
needs of millions of Americans annually. Certainly, we believe that
individual choice in the type and setting of long term care and
services must be preserved, to include the availability of HCBS for all
consumers. In fact, HCBS and facility-based long term care should be
complementary to one another, as both fulfill unique needs for the
consumer. Our concern is not about expanding the HCBS option to all
Medicaid beneficiaries who meet the requirements for receiving
facility-based care, but rather that such an expansion would come at a
significant cost for state and Federal Governments that can ill-afford
it. The Congressional Budget Office's Budget Options that was released
in December 2008 analyzed this very proposal stating that, ``this
option would increase Medicaid spending by approximately $20 billion
over the 2010-2014 periods and by about $90 billion over the 2010-2019
periods. That estimate incorporates a reduction in nursing home
spending as a result of a modest decline--compared with current law--in
the number of Medicaid beneficiaries who receive care in nursing homes
and a subsequent increase in the number of individuals receiving
HCBS.'' In short, according to CBO, expansion of HCBS would further
contribute to the financial crisis facing the entire long term care
sector and our nation at this time.
Person-Focused, Cost-Effective Reform Proposal
In an effort to bring thoughtful ideas and potential solutions to
the table, AHCA/NCAL and the Alliance for Quality Nursing Care have
engaged Avalere Health to develop a comprehensive healthcare reform
plan. Our proposal addresses the need for change--both in the financing
and delivery of long term and post-acute care. Highlights of our
proposal include replacing the current patchwork of financing with a
voluntary Federal system; developing a new, Federal, catastrophic long
term care benefit; enhancing private long term care financing; and
streamlining our post-acute care delivery system. We believe that our
plan would provide a single, unified method for maximizing individual
preferences and program value, which ensures people are cared for in
the most clinically appropriate, high-quality setting.
In the coming weeks, Avalere Health will release an updated long
term and post-acute care financing and coverage reform model that
expands upon our existing proposal and includes conservative cost-
estimates that illustrate how this comprehensive reform plan would
provide budgetary savings over time. We look forward to sharing that
update with Chairman Rangel, Ranking Member Camp, and the members of
this committee.
Quality--AHCA/NCAL's First Priority
Long before the words quality and transparency were the catch words
of the Federal Government and their oversight of healthcare, they were
truly the compass for AHCA/NCAL and our member facilities.
We have been working diligently to change the debate regarding long
term care to focus on quality--quality of life for patients, residents
and staff; and quality of care for the millions of frail, elderly and
disabled individuals who require our services. We have been actively
engaged in a broad range of activities which seek to enhance the
overall performance and excellence of the entire long term care sector.
While keeping patients and their care needs at the center of our
collective efforts, we keep challenging ourselves to do better, and
enhance quality.
Quality & Outcomes Are Improving
The Online Survey, Certification and Reporting (OSCAR) data tracked
by the Centers for Medicare and Medicaid Services (CMS) clearly points
to improvements in patient outcomes, increases in overall direct care
staffing levels, and significant decreases in quality of care survey
deficiencies in our nation's skilled nursing facilities.
A few examples which highlight some of the positive trends in
nursing facility care according to data tracked by CMS:
Nationally, direct care staffing levels (which include
all levels of nursing care: Registered Nurses (RNs), Licensed Practical
Nurses (LPNs) and Certified Nursing Assistants (CNAs)) have increased
8.7 percent between 2000 and 2007--from 3.12 hours per patient day in
2000 to 3.39 hours in 2007;
The Quality Measure \1\ tracking pain for long term stay
residents vastly improved from a rate of 10.7 percent in 2002 to 4.6
percent in 2007--more than a 50 percent decrease;
---------------------------------------------------------------------------
\1\ Quality Measures track nursing facility residents who have and
are at risk for specific functional problems needing further
evaluation. Improvements in these measures indicate positive trends in
patient outcomes, but it is important to clarify that the quality
measures do not reflect a percentage of the entire population, rather
the percentage of those who are at risk and have the condition.
---------------------------------------------------------------------------
The Quality Measure tracking the use of physical
restraints for long stay residents dropped from 9.7 percent in 2002 to
5.6 percent in 2007;
The Quality Measure tracking pressure ulcers for post-
acute skilled nursing facility patients (many of whom are admitted to
the nursing facility with a pre-existing pressure ulcer) improved by 23
percent over the course of four years, from 20.4 percent in 2003 to
15.8 percent in 2007; and
Substandard Quality of Care Citations as tracked by CMS
surveys were reduced by 30 percent in five years--from 4.4 percent in
2001 to 3.1 percent in 2006.
In January 2006, the Government Accountability Office
stated that from 1999-2005 there was a nearly 50 percent decrease in
the ``proportion of nursing homes with serious quality problems.''
Satisfaction of patients and family members is a critical measure
of quality. AHCA has recognized this vital link between satisfaction
and performance, and has urged facilities to conduct such assessments
for more than a decade. In recent years, we have encouraged facilities
to use a nationally-recognized company, My InnerView, to conduct
consumer and staff satisfaction surveys to establish a national
database for benchmarking and trend analysis. Last year's independent
survey of nursing home patients and their families indicates that a
vast majority (82%) of consumers nationwide are very satisfied with the
care provided at our nation's nursing homes and would rate the care as
either good or excellent.
The long term care sector remain committed to sustaining--and
building upon--these quality improvements for the future.
Culture of Cooperation--Leading to Continued Improvement
Positive trends related to quality are also evidenced by
profession-based initiatives including Quality First and the Advancing
Excellence in America's Nursing Homes campaign--both of which are
having a significant impact on the quality of care and quality of life
for the frail, elderly and disabled citizens who require nursing
facility care.
Quality First, which was established in 2002, set forth seven core
principles that reflect long term care providers' commitment to
continuous quality improvement, leadership and transparency. This
profession-based initiative led not only to improvements in care and
processes, but to the development of the National Commission for
Quality Long-Term Care. In December 2007, the Commission released its
final report which addressed four critical components of long term
care--quality, workforce, information technology & financing. We
encourage Congress to take the recommendations of this commission under
consideration--and further investigate their feasibility.
Quality First and other initiatives have been recognized by former
Secretary of Health & Human Services Tommy Thompson, by former
Administrator of CMS Dr. Mark McClellan, and by former CMS Acting
Administrator Leslie Norwalk when she stated in a 2007 column she wrote
for Provider magazine: ``Nursing home providers have been on the
leading edge of this quality movement. Long before hospitals, doctors,
home health providers, pharmacies, dialysis facilities and others came
to the table, the nursing home industry was out front with Quality
First--a volunteer effort to elevate quality and accountability . . .
Quality measurement has worked in nursing homes Collaborating to
measure quality of long-term care, report it, support it, and improve
it--that's the best path to a high-quality, patient-centered, provider-
friendly system that everyone can afford.''
AHCA is a founding partner of the Advancing Excellence in America's
Nursing Homes campaign--a coordinated initiative among providers,
caregivers, consumers, Government and others that promote quality
around eight measurable goals. This campaign takes a step further than
previous initiatives. It not only measures outcomes, but it establishes
numerical targets and benchmarks. It also promotes best practices and
evidence-based processes that have been proven to enhance patient care
and quality of life.
This voluntary initiative is working--and outcomes and processes
are improving in the more than 7,000 participating facilities. Since
the onset of the campaign, there has been progress among participants
in reducing the incidence of pressure ulcers in nursing homes, reducing
use of physical restraints, managing pain for long term nursing home
residents, and managing pain for short stay, post-acute nursing home
residents. Our association is diligently working to increase the number
of facilities that actively participate in this program and embrace the
concepts embodied in the Advancing Excellence in America's Nursing
Homes campaign.
Reforming an Oversight System to Reward and Encourage Quality
As well as including long term care in any dialogue addressing
national healthcare reform, if we are truly going to be able to create
a high performing long term care system, Congress must address
regulatory reform. Today's regulatory and oversight system does little
to recognize or reward quality outcomes. In fact, it defines
``success'' and quality in a context that is often measured by the
level of fines levied and the violations tallied--not by the quality of
care, or quality of life, as was Congress' original intent in
implementing the Nursing Home Reform Act.
In fact, a January 2006 GAO report on nursing home oversight
indicates that the nation's Survey and Enforcement System for nursing
homes is consistently inconsistent, with significant variations from
state to state. AHCA and our members have long maintained that a one-
dimensional, punitive approach does not get to the overall goal of
achieving quality care.
We believe that achieving a sustained level of quality care will
only be fully realized when there is a collaborative effort to
recognize and implement improved healthcare technologies and best
clinical practices that are designed to improve and enhance patient
outcomes. This type of culture change is essential to appropriately
address the needs of a growing and changing patient population and a
shrinking pool of caregivers.
We believe that such a reformed, fair, and effective survey process
should embody three guiding principles:
Surveys should be fair, accurate, and consistent;
Surveys should protect the health and safety of
residents; and
Surveys should focus on areas requiring improvement.
Today, we know far more about promoting quality, and we have better
tools with which to measure it than we did twenty years ago when the
Nursing Home Reform Act was enacted. We need to intelligently change
the regulatory process to allow and encourage us to use what we have
learned--to place quality over process, care over procedure, and most
importantly, put patients at the forefront.
The fact is healthcare reform has been delayed--and long term care
has been left on the sidelines--for far too long. Now is the time to
change that fact. As you and your colleagues in Congress and the
Administration take on the tough task of healthcare reform, the
American Health Care Association and National Center for Assisted
Living stand ready to work with you to achieve person-centered, cost-
effective, and sustainable long term care that is part of our nation's
overall healthcare system.
Statement of American Academy of Physician Assistants
Physician assistants (PAs) are an important part of the solution to
the health care workforce shortage.
The physician assistant profession was created barely 40
years ago in response to health care workforce shortage issues very
similar to those being forecast today.
PAs represent one of the fastest growing health
professions. Today, there are nearly 75,000 PAs in clinical practice;
40 percent (30,000) practice primary care medicine.
The number of PAs practicing as part of a physician-PA
team will soon exceed 100,000. We believe this to be a strong
indication of the utility and attractiveness of such a young
profession.
The educational pipeline for physician assistants is
shorter than for physicians. Graduate PAs can be in the field in less
than three years.
Accredited PA programs in universities and academic
health centers produce close to 6000 graduates a year.
Studies show that in a primary care setting, PAs can
execute at least 80 percent of the responsibilities of a physician with
no diminution of quality and equivalent patient care satisfaction.
By virtue of PA education in primary care and the ability
of PAs to work in all medical and surgical specialties, PAs expand
access to care in medically underserved rural and urban communities.
By design, the physician assistant profession extends the
reach of medicine and the promise of health to the most remote and in-
need communities of our nation.
In addition to the need to produce more primary care physicians, it
is critical that Congress support expansion of PA programs as they
develop strategies for addressing health care workforce challenges.
Funds should be made available to PA educational programs
to increase the PA workforce, which in turn, will extend physicians'
ability to provide.
The Title VII, Public Health Service Act's, Health
Professions Program is successful in training health care professionals
for practice in medically underserved communities. Funding for PA
educational programs is woefully underfunded and must be increased.
The single largest barrier to PA educational programs
educating more PAs is a lack of clinical training sites. Attention must
be directed to investing in the number of these sites, including loan
repayment for preceptors in primary care medical practices and/or the
increased use of VA facilities as clinical training sites for PA
educational programs.
Funds must be made available to increase the number of
faculty at PA educational programs. Eligible PA students are being
turned away because of the lack of faculty and clinical sites.
Faculty loan repayment, including funding to attract
faculty from diverse backgrounds, is also critical for PA educational
programs.
Federally supported student loans and increased
opportunities through the National Health Service Corps are key to
attracting PA students and clinicians to primary care.
Graduate medical education funding should be used to
support the educational preparation of physician assistants in
hospitals and outpatient, community-based settings.
Physician assistants are key to health care reform. However, to be
fully utilized, current barriers to care that exist in Federal law must
be addressed.
The Medicare statute must be amended to allow PAs to
order home health, hospice, and skilled nursing facility care, as
welled to provide hospice care for Medicare beneficiaries.
Medicaid should be updated to require states to reimburse
all covered services provided by PAs under the fee-for-service plan.
Additionally, Medicaid should recognize PAs as primary care case
managers through managed care plans.
The Federal Employee Compensation Act needs to be updated
to allow PAs to diagnose and treat Federal employees who are injured on
the job.
Physician assistants must be fully integrated into new models of
care, such as the primary care medical home and chronic care
coordination.
Their orientation to team practice, their broad medical
education, and orientation toward primary care make PAs a perfect
addition to the management of patients in a primary care medical home,
offering continuity, comprehensiveness, and coordination of care. In
many rural communities, a PA is the only health professional available
and is the primary care medical home.
Likewise, PAs provide medical care to elderly populations
and manage chronic medical conditions. PAs must be recognized in
chronic care medical management and must be allowed to develop
treatment plans for patients with multiple chronic care needs.
Unless PAs are fully integrated into the primary care
medical home and chronic care management models, health care reform is
likely to pose new, unintended barriers to care for patients treated by
PAs.
Additionally, the AAPA believes that a long range solution to the
Medicare physician payment system must be part of health care reform.
On behalf of the nearly 75,000 clinically practicing physician
assistants (PAs) represented by the American Academy of Physician
Assistants (AAPA), thank you for the opportunity to submit written
testimony for the March 11 Hearing Record of the Ways & Means Committee
on Health Care Reform.
AAPA Principles for Health Care Reform
AAPA has a longstanding history of support for universal health
care coverage. Among the Academy's key principles for health care
reform
The AAPA believes the primary goal of a comprehensive
health care system reform is to ensure access to quality, affordable,
and cost efficient health care for all residents of the United States.
The AAPA supports a health care system that will provide
basic services to all residents.
The AAPA supports health care that is delivered by
qualified providers in physician-directed teams.
The AAPA supports reform that confronts the limits of
care and resources.
The AAPA believes that fair and comprehensive reform of
the medical liability insurance system is needed.
The AAPA endorses system reform that enhances the
relationship between the patient and the clinician.
Physician Assistants
Physician assistants are licensed health professionals, or in the
case of those employed by the Federal Government, credentialed health
professionals, who
practice medicine as a team with their supervising
physicians
exercise autonomy in medical decision making
provide a comprehensive range of diagnostic and
therapeutic services, including performing physical exams, taking
patient histories, ordering and interpreting
Laboratory tests, diagnosing and treating illnesses, assisting in
surgery, writing prescriptions, and providing patient education and
counseling
may also work in educational, research, and
administrative settings.
PAs always work with physicians. However, this does not mean that
the physician is necessarily on site, nor does it suggest that PAs do
not make autonomous medical decisions. PAs employed by the State
Department, for example, may work with a physician who is a continent
away and available for consultation by telecommunication.
PAs are located in almost all health care settings and in every
medical and surgical specialty. Nineteen percent of all PAs practice in
non-metropolitan areas where they may be the only full-time providers
of care (state laws stipulate the conditions for remote supervision by
a physician). Approximately 41 percent of PAs work in urban and inner
city areas. Approximately 44 percent of PAs are in primary care. Nearly
one-quarter of clinically practicing PAs practice in surgical
specialties. Roughly 80 percent of PAs practice in outpatient settings.
PAs are covered providers within Medicare, Medicaid, Tri-Care, and
most private insurance plans. Additionally, PAs are employed by the
Federal Government to provide medical care, including the Department of
Defense, the Department of Veterans Affairs, the Public and Indian
Health Services, the State Department, and the Peace Corps.
AAPA estimates that in 2008, over 257 patient visits were made to
PAs and approximately 332 million medications were written by PAs.
Overview of Physician Assistant Education
Physician assistant programs provide students with a primary care
education that prepares them to practice medicine with physician
supervision. PA programs are located at schools of medicine or health
sciences, universities, teaching hospitals, and the Armed Services. All
PA educational programs are accredited by the Accreditation Review
Commission on Education for the Physician Assistant, an organization
composed of representatives from national physician groups and PAs.
The average PA program is 26 months and is characterized by a
rigorous, competency-based curriculum with both didactic and clinical
components. The first phase of the program consists of intensive
classroom and laboratory study, providing students with an in-depth
understanding of the medical sciences. More than 400 hours in classroom
and laboratory instruction are devoted to the basic sciences, with over
70 hours in pharmacology, more than 149 hours in behavioral sciences,
and more than 535 hours of clinical medicine.
The second year of PA education consists of clinical rotations. On
average, students devote more than 2,000 hours or 50-55 weeks to
clinical education, divided between primary care medicine and various
specialties, including family medicine, internal medicine, pediatrics,
obstetrics and gynecology, surgery and surgical specialties, internal
medicine subspecialties, emergency medicine, and psychiatry. During
clinical rotations, PA students work directly under the supervision of
physician preceptors, participating in the full range of patient care
activities, including patient assessment and diagnosis, development of
treatment plans, patient education, and counseling.
After graduation from an accredited PA program, the physician
assistant must pass a national certifying examination jointly developed
by the National Board of Medical Examiners and the independent National
Commission on Certification of Physician Assistants. To maintain
certification, PAs must log 100 continuing medical education credits
over a two-year cycle and reregister every two years. Also to maintain
certification, PAs must take a recertification exam every six years.
The majority of PA educational programs offer master's degrees, and
the overwhelming majority of recent graduates hold a master's degree.
Title VII Support of PA Education Programs
The Title VII support for PA educational programs is the only
Federal funding available, on a competitive application basis, to PA
programs. Unfortunately, the level of support has eroded from the
highest level of $7.5 million in FY 2005 to $2.6 million in FY 2007.
Targeted Federal support for PA educational programs is authorized
through Section 747 of the Public Health Service Act. The funds are
used to encourage PA students, upon graduation, to practice in
underserved communities. These goals are accomplished by funding PA
education programs that have a demonstrated track record of: placing PA
students in health professional shortage areas; exposing PA students to
medically underserved communities during the clinical rotation portion
of their training; and recruiting and retaining students who are
indigenous to communities with unmet health care needs.
The Title VII program works.
A review of PA graduates from 1990--2006 demonstrates
that PAs who have graduated from PA educational programs supported by
Title VII are 59% more likely to be from underrepresented minority
populations and 46% more likely to work in a rural health clinic than
graduates of programs that were not supported by Title VII.
A study by the UCSF Center for California Health
Workforce Studies found a strong association between physician
assistants exposed to Title VII during their PA educational preparation
and those who ever reported working in a federally qualified health
center or other community health center.
The PA programs' success in recruiting underrepresented minority
and disadvantaged students is linked to their ability to creatively use
Title VII funds to enhance existing educational programs. Without Title
VII funding, many special PA training initiatives would be eliminated.
Institutional budgets and student tuition fees are not sufficient to
meet the special, unmet needs of medically underserved areas or
disadvantaged students. The need is very real, and Title VII is
critical in leveraging innovations in PA training.
Need for Increased Targeted Support for PA Education
Federal support must be directed to PA educational programs to
stimulate growth in the PA profession to meet the needs of universal
health care coverage. Targeted funding should be directed to----
The use of Title VII funds for recruitment and loan
repayment for faculty in PA educational programs.
Incentives to increase clinical training sites for PA
education.
Federally backed loans and loan repayment programs for PA
students.
Eliminating Barriers to Care in Federal Law
Eliminating current barriers to medical care provided by PAs that
exist in the Medicare, Medicaid, and the Federal Employees Compensation
Act (FECA) laws would do much to expand access to needed medical care,
particularly for patients living in rural and other medically
underserved areas.
AAPA believes that the intent of the 1997 Balanced Budget
Act was to cover all physician services provided by PAs at a uniform
rate. However, PAs are still not allowed to order home health, hospice,
skilled nursing facility care, or provide the hospice benefit for
Medicare beneficiaries. At best, this creates a misuse of the patient's
physician's, and PA's time to find a physician signature for an order
or form. At worst, it causes delayed access to care and inappropriate
more costly utilization of care, such as longer stays in hospitals. For
patients at end-of-life, it creates an unconscionable disruption of
care.
Although most States recognize services provided by PAs
in their Medicaid Programs, it is not required by law. Consequently,
some State Medicaid Directors pick and choose which services provided
by PAs they will cover. Others impose coverage limitations not required
by State law, such as direct supervision by a physician.
Although nearly all State workers' compensation programs
recognize the ability of PAs to diagnose and treat State employees who
are injured on the job, the Federal program does not. As a result,
Federal workers who are injured on the job may be rerouted to emergency
rooms for workers' compensation-related care, rather than to go to a
practice where the PA is the only available health care professional.
The Medicare, Medicaid, and FECA statutes create Federal barriers
to care that do not exist in State law. The barriers need to be
eliminated to promote increases access to the quality, affordable
medical care provided by PAs.
Integrate PAs into New Models of Care
AAPA is concerned that health care reform could create new,
unintended barriers to care provided by PAs unless special attention is
devoted to ensuring that PAs are fully integrated into the medical home
and chronic care coordination models of care.
PAs always work with physicians, but in many rural and other
underserved areas, the PA is the face of health care. The PA is the
medical professional who develops the care plan and coordinates the
care. PAs also own and/or provide care in rural health clinics and
others settings that may serve as the patient's primary medical home.
It is critical that the medical home and chronic care management models
of care recognize the ability of PAs to develop and manage medical care
plans, without unnecessary limitations. And, it is important that PA-
run clinics and practices be eligible for reimbursement from the new
models of care.
Medicare Physician Payment Reform
It is critically important that health care reform legislation
contains a long term solution to Medicare's physician payment system.
The current system is simply not sustainable, nor is it fair to the
health care professionals who provide medical care for Medicare
beneficiaries.
Statement of American College of Obstetricians and Gynecologists
On behalf of the American College of Obstetricians and
Gynecologists (ACOG), representing over 53,000 physicians and partners
in women's health, thank you for holding this hearing on health care
reform. Women, the health care decision-makers of their families, are
also health care purchasers, providers and patients, making them
uniquely affected by our broken health care system. We look forward to
working with the Committee to reform the health care system, and
ensuring that health reform addresses the needs of women.
ACOG applauds Representative Schakowsky for introducing, and
Subcommittee on Health Chair Stark and Committee Member McDermott for
being original cosponsors of H. Con. Res. 48, which calls on Congress
to pass legislation within 18 months that recognizes women's health as
an integral part of the health care reform puzzle. ACOG supports this
goal through our Health Care for Women, Health Care for All Campaign.
As women's health care physicians, we see first-hand why our Nation
needs health care reform. We fight with insurers to ensure that our
patients are covered for the care they need. We treat women without
coverage and know that too many women with serious medical problems go
without needed care. We see the effects of no prenatal care and the
risks women face who have no screening or treatment for cancers. We're
small businesses, too, and experience the problems of many others, in
trying to cope with the rising cost of health insurance for our
employees, and our families.
The Challenges:
Women and Health Care Use & Outcomes
Women have distinct health care needs and use more health
care than men throughout their lives, including regular visits
for reproductive health care. Women are more likely to seek
preventive and routine care, are more likely to have a chronic
illness that necessitates continuous health care, and are more
likely to take a prescription drug on a daily basis than men.
Uninsured women receive less preventive care,
are diagnosed at more advanced disease stages, receive
less therapeutic care, have higher mortality rates, and
are less likely to have a regular source of care.
Uninsured women are three times less likely
to have had a Pap test in the last three years and have
a 60% greater risk of late-stage cervical cancer.
Uninsured women with breast cancer are 30-50%
more likely to die from the disease.
13% of all pregnant women are uninsured,
making them less likely to seek prenatal care in the
first trimester of their pregnancies, less likely to
receive the optimal number of prenatal health care
visits during their pregnancies, and 31% more likely to
experience an adverse health outcome after giving
birth. Lack of prenatal care increases the risk of
preterm birth. In 2005, preterm birth-related costs in
the U.S. totaled over $26.2 billion; $51,600 for every
infant born prematurely.
Black women have higher fetal and infant
mortality rates than white women. In 2004, the fetal
mortality rate for black women was twice the rate for
white women (11.25 compared to 4.98 per 1,000 live
births and fetal deaths). Infant deaths in the first
month of life were 2.5 times more likely for black
mothers than white mothers (9.12 compared to 3.69 per
1,000 live births and fetal deaths).
Women with disabilities are less likely to
receive breast and cervical cancer screening than non-
disabled women, and their reproductive health care
needs are often overlooked.
Employer-based insurance hampers lesbians
from accessing health coverage through their partners
since many companies do not recognize domestic
partners.
Women and Health Care Costs
Affordability is a key issue for women
because, on average, they have greater annual health
expenditures, but lower incomes than men. In 2007, the
median income for women was $35,100 to $10,000 less
than the median income for men.
Insured or not, women have greater out-of-
pocket costs and face greater medical debt than men. In
2004, 1 in 6 women with individual health care coverage
reported that they postponed, or went without, needed
health care because they could not afford such health
care.
As a result, women are disproportionately
affected by higher medical costs that eat up more of
their wages. And, since women already pay 68% more than
men for out-of-pocket health care costs, due in large
part to reproductive health care needs, higher cost-
sharing adds to an already serious financial burden.
64% of uninsured women are in families with
at least 1 adult working full-time. Health care costs
are increasingly unaffordable for working families and
employers, with employer-sponsored health insurance
premiums having increased 87% between 2000 and 2006.
Women also are financially vulnerable because
they are more likely to obtain coverage through their
spouse--putting them at risk in the case of divorce or
death of a husband or their husband's employer cutting
dependent coverage. Also, when a husband moves from
job-based coverage to Medicare, his wife, if not
Medicare-eligible herself, may lose her coverage at the
same time.
Women are more likely to find that maternity
and other services they need are not covered by their
insurers.
High-deductible health plans, so-called
``consumer-directed health plans'' (CDHPs), offer lower
premiums than traditional insurance but with higher
cost-sharing requirements. These plans are often an
attractive option for young, healthy individuals who
are enticed by low monthly premiums, but maternity care
is rarely covered. While many CDHPs advertise first-
dollar coverage for preventive services, a recent study
found that prenatal care was usually not considered a
preventive service, requiring considerable out-of-
pocket expense. In addition, because pregnancy usually
spans 2 plan years, women often must satisfy two annual
deductibles before any costs are covered.
Women without group insurance face enormous
problems in obtaining and affording coverage in the
individual insurance market. Underwriting laws in most
states allow women seeking insurance coverage in the
individual market to be subject to higher costs because
of their gender or health status or face pre-existing
condition exclusions that limit their coverage for the
services they most need.
Exempted from the requirements of the Federal
Pregnancy Discrimination Act, small groups and
individuals may be denied coverage for maternity care,
or require the purchase of expensive riders for this
coverage, often more than a year in advance. Women who
are already pregnant or are in less-than-perfect health
may be denied coverage altogether.
The Solution:
ACOG's Health Care for Women, Health Care for All Campaign,
describes reforms needed to give all women access to meaningful
and affordable coverage.
Elements of Reform
Cover everyone: Health coverage should be accessible and
affordable to everyone in the U.S., regardless of citizenship or
residency status. If reforms are phased-in, universal coverage of
pregnant women and infants should be the first priority.
Guarantee Essential Benefits for All Women. Coverage
Should Be Uniform and Affordable under All Insurance Nationwide: An
insurance card does not guarantee access to needed services. Without
coverage for the services they most use, underinsured women could face
the same cost burdens as those without any insurance, with predictable
results: delayed or missed care leading to worse health outcomes.
Defining a core set of benefits will guarantee that no woman with
insurance is denied basic care or burdened with the unaffordable out-
of-pocket or catastrophic health care expenses that drive millions of
Americans into bankruptcy every year. A core benefit package will cover
preventable and primary care services to keep women healthy and keep
health care affordable. Coverage must include:
Primary and preventive services, including
family planning;
Pregnancy-related and infant care;
Medically and surgically necessary and
appropriate services in all health care settings,
including outpatient, hospital, nursing facility,
hospice, and at-home care;
Prescription drugs; and
Catastrophic care
Engage employers, individuals and Governments: Build on
the strengths of our private-public financing and delivery system with
coverage requirements for employers and individuals and improved public
coverage. Large employers should be required to offer insurance to
employees who work more 17.5 hours per week and their dependants. Small
employers would have a choice of providing insurance or paying a
percentage of payroll to the public plan. All individuals would be
required to have insurance, either through their employer or through a
public plan.
Make coverage affordable: Small businesses should be
eligible to receive tax credits or subsidies to make insurance
affordable. Self-employed and low-income families who are currently
priced out of the health care market should be guaranteed an affordable
Federal plan. Low-income employees should pay no more than 20% of their
plan's premium cost. Private insurance market reforms should include
guaranteed issue and renewability and community rating. Coverage should
not be denied due to preexisting conditions and annual premium
increases should be limited. Discrimination based on health status,
gender and other factors must be eliminated. Emphasizing prevention,
reducing administrative costs, and fixing our broken medical liability
system can lower health care costs for everyone.
Invest in Primary and Preventive Care: ACOG supports
benefits that emphasize and promote prevention--especially prenatal
care and contraception. Prenatal care and risk-assessment are critical
preventive services for all pregnant women and contraception is a
medical necessity for women during three decades of their life span and
should be covered to the same extent as other prescription drugs and
services. Costly and burdensome ``gatekeeper'' rules that deny or delay
women's direct access to obstetric, gynecologic, primary care services
must not be permitted.
Support Continuity of Care and Pilot-Test a Women's
Medical Home: A woman's initial contact with an ob-gyn typically begins
a long-term physician-patient relationship in which the ob-gyn provides
continuity of care from adolescence through the reproductive years and
pregnancy, to menopause and beyond. Continuity of care--seeing the same
health care provider over time--enhances quality of care and patient
satisfaction. It has been associated with greater use of preventive
care, improved communication between the patient and physician,
improved adherence to medication instructions, and improved physician
recognition of medical problems. A woman discusses some of her most
personal and important health care concerns with her ob-gyn: what a
family history of breast cancer means for her own health, her risk of
cardiovascular disease, how to manage her weight, where to seek mental
health counseling, how to have a healthy baby. A majority of women see
an ob-gyn annually, and sometimes an ob-gyn is the only physician
routinely visited. Young women ages 18 to 34 who see an ob-gyn for all
their primary care needs report greater satisfaction with their care
than women seeing only a generalist or both an ob-gyn and a generalist.
Numerous legislative proposals were introduced in 2008 advancing
the adoption of medical homes, but none explicitly refer to ob-gyns or
women's health care. The Centers for Medicare and Medicaid Services
(CMS) are beginning medical home demonstrations in 2010, with results
expected in 2013. While ACOG believes that the medical home concept
shows great promise in improving care coordination and health outcomes,
wholesale adoption should be delayed until the results of current and
future demonstration projects are evaluated.
In the meantime, we urge the Committee to approve a women's medical
home demonstration, to specifically test how and how well a medical
home can addressing women's unique health care needs, using the
principles below:
A seamless continuum of care for women across their life
spans: A medical home for women links wellness and preconception care
with prenatal care and family planning; these are linked with medical
care, screening and follow-up care for health needs later in life.
Patient choice, affordability and access: Every woman
should have open access to a medical home with a choice of qualified
providers and in a variety of settings. Comprehensive integrated care
is especially important for low-income women who are uninsured and
underinsured.
Accountable to women: Care is patient and family
centered, culturally appropriate, structured to ensure women receive
complete and accurate health information to make their own health care
decisions, and structured to assure confidentiality so that teens and
women seek needed care in a timely way.
Team care led by a physician: The patient's personal
physician leads a team that collectively takes responsibility for
ongoing care. For many women, their obstetrician-gynecologist serves as
their personal physician and is the only provider that women see
regularly during their reproductive years.
Care is evidence-based with continuous quality
improvement: A medical home for women is structured to encourage health
care providers to pursue practices that achieve evidence-based outcomes
so that women will enter their reproductive years healthy, maintain
their reproductive health, and age well.
Investment in interdisciplinary health education and
training of providers: To understand and fulfill the functions of a
medical home, innovative models of interdisciplinary education are
essential.
Reimbursement that reflects the added value of a women's
medical home: Reimbursement must reflect the costs of HIT, care
coordination, additional staffing and other requirements needed to
fully develop a women's medical home, and allow practices to share in
any potential cost savings from the medical home practice model.
Eliminate Health Disparities: Health system reform should
recognize and eliminate disparities in health care coverage, treatment
and outcomes related to a patient's culture, race, ethnicity,
socioeconomic status, disability and sexual orientation. Ensuring
comprehensive coverage for everyone will minimize but not eliminate
health disparities, which often result from a complex mix of factors
related to income, housing, personal safety, education, and job
opportunities. All health care providers should provide high quality,
compassionate and ethically sound health care services to all patients
in need of care. Services should be culturally appropriate and based on
specialty-developed best practice guidelines to eliminate variations in
health care treatment. Further, the health care workforce should
reflect our country's diversity, and disparities research should be
funded and analyzed.
Enhance quality and patient safety. Our health system
should strive for continual quality improvement--through medical
education, physician-driven quality programs, health information
technology, and research to determine the most effective evidence-based
treatments. Quality and safety reforms should always put our patients'
welfare and best interests first.
All health care facilities should operate internal
quality assurance programs and health professionals should be licensed.
Health care professionals and facilities should attend
patient safety training in order to keep professional liability
insurance.
State medical boards should strengthen their reviews and
discipline low-quality providers.
ACOG supports and agrees with the need for research to
determine effective evidence-based interventions. Following are key
principles to make sure that comparative effectiveness research (CER)
results are useful in enhancing health-care quality and patient safety:
CER must address the specific and changing
needs of women throughout their lives.
CER findings must not lead to cook-book
approaches to coverage and payment, recognizing that
individual patients may need different care,
individualization that is best determined by the
patient's physician.
CER must promote the best clinical value of
treatment interventions, rather than restricting
payment to only the cheapest procedures.
Population differences--co-morbidities, sex,
race and ethnicity, and sub-populations, including
pregnant women and the elderly--must be incorporated in
the research design.
ACOG appreciates provisions within the
American Economic Recovery and Investment Act that help
usher in the widespread use of health information
technology. As long as interoperability and specialty-
specific standards are developed and financial support
is provided to offset the large expense of acquiring a
system, adoption of health information technology has
the potential to reduce costs and improve patient care.
Ensure Fair Reimbursement for Physician Services:
Medicare pays physicians based on a complicated and flawed formula that
threatens to slash physician payment by nearly 22% next year. The
Sustainable Growth Rate (SGR), reduces physician payment when Medicare
volume grows or for other factors over which physicians have no
control, including the Gross Domestic Product and the high cost of
physician-administered drugs. While each year Congress has stopped the
pending cuts, the cost of permanently fixing the formula grows as well.
Inadequate payment may cause doctors to stop accepting or to limit the
number of Medicare patients they serve. Seniors and disabled
beneficiaries may find it harder to find physicians in their areas or
may have to wait longer for appointments. Congress must stop the cuts
and include elimination of the payment formula in the overall health
care reform plan. Physician payment should reflect the true cost of
providing care to Medicare beneficiaries. Low reimbursement for
services furnished to Medicaid beneficiaries also has the potential to
hamper patient access to high-quality care. With Medicaid covering
nearly 40% of all births and playing a critical role in pregnancy-
related care it is vital that physicians are reimbursed at a fair rate
for their services.
Medical Liability Reform: America's broken medical
liability system fails both injured patients and their physicians. Many
patients with legitimate injury claims never enter the civil justice
system, while as many as half of the claims that do enter the system
are without merit. The system fails to do what it is supposed to do:
accurately and efficiently identify cases of negligence, fairly
compensate injured patients, and promote patient safety. The current
medical liability system is random, unpredictable and ineffective, and
threatens women's access to health care.
Good doctors who have been so important to their patients and their
communities are dropping obstetrics, ending their surgical practice, or
closing their medical practices completely. Medical students who love
the idea of ushering tiny lives into this world are turning away from
the litigious culture that surrounds ob-gyn. And America's women are
left asking, ``Who will deliver my baby?''
ACOG strongly supports comprehensive Federal legislation such as S.
45, the Medical Care Access and Protection Act of 2009, to reform the
system, including placing a reasonable cap on noneconomic damage
awards, as has been accomplished in California and Texas. At the same
time, we believe there is enormous benefit in exploring promising
alternatives that would more fundamentally fix America's broken
liability system, including health care courts and early offers
demonstration programs. ACOG has supported health care courts and early
offers for many years. These alternatives would help guarantee that
injured patients are fairly, quickly, and fully compensated for their
economic and noneconomic damages by taking claims out of the
adversarial tort system and putting them into the hands of experts
whose goals are fairness and patient safety.
Thank you for holding this hearing on the importance of health
reform which expands coverage, improves quality and controls costs. We
look forward to working with you to reform the health care system in
order to ensure comprehensive and affordable coverage for all.
Statement of American Federation of
State, County and Municipal Employees
We submit this testimony on behalf of the 1.6 million members of
the American Federation of State, County and Municipal Employees
(AFSCME) for the official record of the House Ways and Means
Committee's hearing on Health Reform in the 21st Century: Expanding
Coverage, Improving Quality and Controlling Costs.
The time for health care reform is now. President Obama delivered
this message at the White House health care summit on March 5, as he
has consistently throughout his presidential campaign and since taking
the oath of office. We cannot wait while 46 million Americans lack
health coverage, health care costs continue to spiral out of control,
too many health plans do not provide comprehensive benefits, and our
health care system often fails to deliver the high-quality care that we
need. We must build on what works, including employer-sponsored
coverage and public programs, and make the policy changes that are
needed to reach our goal of quality, affordable health care for all.
Support Public Health Insurance Plan Option
One key component of a reformed health care system is inclusion of
a widely available public health insurance plan. Today, consolidation
in the private insurance industry has greatly narrowed price and
quality competition. The addition of a public health insurance plan
would play an important role in broadening consumer choice. When either
a public or private plan does not meet a family's needs, they can vote
with their feet, the measure of true competition.
A public health insurance plan option would also promote stability
in the insurance market. Private plans often contract with new
providers while dropping others, change benefits and cost-sharing, and
sometimes move in and out of markets completely. This has the effect of
disrupting care as well as results in unexpected increases in out-of-
pocket expenses. A public health insurance option will provide a
guarantee to families that a high quality plan will be available no
matter what happens to their private coverage.
A public health insurance plan option alongside private insurance
options would promote efficiency in the private market. Between 1997
and 2006, per enrollee spending in private insurance grew 59% faster
than spending in the traditional, Government-administered Medicare
program. A comparison of administrative costs shows that Medicare
spends about 2% for overhead, while administrative costs (including
profits) in private group coverage runs 12% to 15% of cost. To curb the
unsustainable growth in health care costs, private insurers must find
efficiencies, and competition with a public health insurance plan would
provide a strong incentive for them to do so.
A public health insurance plan option would also improve health
care quality and advance innovations. Currently, private health
insurers have scant motivation to implement or improve disease
management programs since they might become a magnet for sicker
subscribers. Moreover, a financial disincentive exists to share best
practices with those outside their network given competition for plan
members. A new public health insurance plan would be well situated to
be a leader in the adoption of evidence-based medical protocols,
expansion of quality incentives, and development of innovative and
transparent payment mechanisms. And, a public health insurance plan
would help advance electronic medical records and the adoption of best
practices.
Extensive support exists for including a public health insurance
plan as one option in an insurance exchange. President Obama has
consistently expressed his support for a new public health insurance
option as have health care leaders in Congress and respected
researchers and academics.
Karen Davis, President of The Commonwealth Fund, offered compelling
testimony on this point at the March 11 hearing. She expressed her
strong support for an insurance exchange with a choice of private plans
and a new public health insurance plan, noting many of the same
advantages we have expressed in this statement. In response to
questioning, she also allayed the ``crowd out'' fear, citing the
Commonwealth Fund's prediction that private insurance would continue to
have a substantial share of an expanded market. Davis also noted that
with a public health insurance plan option, our country would save $3
trillion in health care costs by 2020, whereas without that option,
cost savings would be $800 billion, less than one third of those
savings.
Further research demonstrates that the general public strongly
supports a public health insurance option in health care reform. In
fact, polling shows that three-quarters of voters supported a public
health insurance plan option. This support crosses all political lines
as well as among both urban and rural voters.
Build on Employer-Provided Health Care
Any health care reform legislation must build upon the foundation
of employer-sponsored coverage. Employers provide a ready-made, stable
risk pooling mechanism, coverage with lower administrative costs than
individual coverage, and the institutional skills and expertise to
carry out complex negotiations with insurers that the average family is
not equipped to perform.
According to Government figures from 2007, 70% of the 253 million
people with health insurance received at least some of their coverage
through employers. Employment-based insurance covers three-fifths of
the population under age 65. To ensure that individuals can keep their
current coverage if they are satisfied with it, it is vitally important
to adopt policies that do not cause erosion in employer-provided
insurance.
Eliminating or weakening the tax exclusion for employer health
coverage contributions would dismantle the employer-based system. The
tax exclusion for health benefits has been in the Tax Code for over 50
years.
The Commonwealth Fund's Davis warned in her testimony that capping
the health benefits tax exclusion could result in employers dropping
coverage entirely. As Subcommittee Chairman Stark noted at the hearing,
we do not want to undermine employer coverage but rather build on what
works when reforming the system.
During his presidential campaign, President Obama called taxing
employee health benefits ``the largest middle-class tax increase in
history.'' Many employers also support retaining nontaxable health
insurance benefits, viewing it as a valuable way to recruit and retain
workers. The U.S. Chamber of Commerce opposes eliminating the tax
exclusion of health benefits.
Employers' Responsibility to Contribute to the New Health Care System
The ultimate goal of health care reform is quality, affordable
coverage for all. Families, employers and the Government should share
in the responsibility of contributing to the system through progressive
financing. While our health care system is based on employer-provided
coverage, some employers are shirking their responsibility. The fact
that some employers do not provide health benefits creates an uneven
playing field that puts responsible employers at a competitive
disadvantage. In addition, the cost-shifting that occurs to pay for
uncompensated care means that those employers who provide coverage to
their workers are also helping to pay for the health care received by
those working for employers who do not provide coverage. In 2005 it was
estimated that this cost added $900 to the average annual premium for
family coverage. No doubt the cost is much higher today.
AFSCME urges Congress to support a ``pay or play'' approach where
employers either provide a comprehensive set of benefits or make a
substantial payment towards the cost of those benefits so their workers
can obtain coverage.
Conclusion
In conclusion, AFSCME very much appreciates that the Ways and Means
Committee is focusing its attention on health care reform as an
absolute priority this year. We look forward to working with you to
enact legislation that will establish affordable coverage for everyone
in a system that is adequately financed through shared responsibility,
protects our employer-based system, provides comprehensive benefits
that cover what people need, and includes the choice of a public health
insurance plan.
Statement of American Health Quality Association
This statement is submitted to the Ways and Means Committee for its
hearing, ``Health Reform in the 21st Century: Expanding Coverage,
Improving Quality and Controlling Costs.'' The American Health Quality
Association (AHQA) represents the national network of state-based
Quality Improvement Organizations (QIOs). QIOs serve as contractors to
the Centers for Medicare and Medicaid Services (CMS) and other public
and private payers, purchasers, and providers seeking to improve
outcomes across the continuum of health care delivery settings.
Reforming the Health Care Delivery System: Change Must be Built From
the Ground Up
Health care in the United States is often justly criticized for its
high cost and suboptimal performance in meeting the needs of the public
and the expectations of health care professionals. Dramatic
improvements in quality and efficiency are needed in daily health care
operations. The change must take place at the ground level, where care
is delivered. Health care reform must emphasize and support
improvements in the quality and efficiency of care delivered across the
range of settings, as well as transitions between those settings.
Payment reform provides motivation and capital to encourage greater
quality and efficiency among providers. However, payment reform alone
cannot speed the pace of learning and implementation of best practices
among competing providers. We believe the promise of health care reform
will not be fully realized without a field force working with providers
to accelerate the pace of learning and improvement in care.
The QIOs are that field force of change management expediters. The
national network of QIOs is a valuable public infrastructure, trusted
by key stakeholders, experienced in responding to Federal direction,
and effective in quality performance measurement, public education, and
improvement.
Overview: QIO Contributions to Reforming the Health Care Delivery
System
We propose five ways this field force of QIOs can speed the pace of
improvement in the health care delivery system. The Medicare scope of
work for the QIO program, and the Medicaid program's quality oversight
system, should be expanded to satisfy the following aims:
Ensure payment incentives do not unintentionally widen
the quality gap between ``have'' and ``have not'' providers and
practitioners.
Assist health professionals in planning for, purchasing,
and using health IT in daily practice to promote wellness, timely
preventive care, and manage patients' chronic care needs.
Support providers' incorporation of evidence-based
comparative effectiveness findings into daily care practices.
Link hospitals and providers of ambulatory care in
community-based initiatives to improve the safety and reliability of
transitions between care settings, reducing costly hospital
readmissions.
Analyze, report and explain how to use data on providers'
quality performance to providers, practitioners, purchasers, and the
public.
Safeguard Against Inequitable Outcomes Resulting from Payment
Incentives
Payment reforms have been widely discussed as a method to encourage
providers to self-assess and publicly report quality performance. These
are useful tools for bringing about awareness of clinical shortcomings
and stimulating improvement. Providers serving patient populations that
are well-insured, healthier, better-educated, or from a higher
socioeconomic stratum are well-positioned to hire consultants or draw
on shared corporate resources to respond to financial incentives for
reporting and improvement. However, many providers are less able to
compete for lucrative partnerships, academic affiliations, or attract
better educated, well-insured customers seeking elective procedures.
These providers include safety net providers, providers
disproportionately serving vulnerable patient populations, small
community hospitals and rural providers.
These providers are likely to struggle to hire and retain the
experienced staff and commercial consultants needed to lead
implementation of cutting-edge, high-performance practices. Without
special assistance, incentive payments are likely to widen the quality
gap between the ``have'' and ``have not'' health care providers \1\
This problem will worsen if Congress finds it is necessary to enact
budget-neutral incentive programs in which the cost of payments to
those who qualify for incentives are offset by reductions in payment to
those who do not.
---------------------------------------------------------------------------
\1\ Vladeck. If Paying for Quality is Such a Bad Idea, Why is
Everyone for It? 60 Wash. & Lee Law Rev. 1345, 2004; Cunningham et al.
Caught in the Competitive Crossfire: Safety-Net Providers Balance
Margin and Mission In a Profit-Driven Health Care Market. Health
Affairs, August 2008; Chien et al. Medicare Care Research and Review,
2007; Lewin and Baxter. Health Affairs, Sept/Oct 2007; Felt-Lisk.
Making Pay-For-Performance Work In Medicaid. Health Affairs, June 2007;
Casalino. Will Pay-For-Performance And Quality Reporting Affect Health
Care Disparities? Health Affairs April 2007.
Recommendation: Special assistance should be offered to these
providers by focusing Medicare QIO assistance on meeting their needs.
In the area of public reporting, QIOs have been successfully providing
assistance to Critical Access Hospitals (CAHs) for several years,
resulting in steady growth in the number of CAHs reporting quality
performance even in the absence of payment incentives offered to PPS
hospitals. A number of studies strongly suggest that QIOs have
effectively assisted providers in improving care (see appended summary
---------------------------------------------------------------------------
of studies).
While AHQA recommends making substantial QIO assistance available
to providers and practitioners least able to qualify for incentive
payments because of their size, funding, or service to vulnerable
populations, we caution against unduly restricting QIO assistance so
that it is available only to these providers. Both to improve equity
and to permit effective learning techniques, it is important to permit
QIOs to recruit significant numbers of high-performing providers to
participate in quality improvement initiatives. This will ensure QIOs
can engage both higher performing and lower-performing hospitals in
learning collaboratives to share improvement strategies. This method
aims to accomplish community-based quality improvement in which a large
number of health care providers work together to offer patients the
best possible care, raising the quality of care across the board and
minimizing the likelihood that a consumer will choose or be referred to
a low quality provider.
Implementing Health Information Technology and Health Information
Exchange
Public policy debate about health information technology (HIT) has
focused on the slow pace of adoption in the United States; a positive
impact on the quality of care is generally assumed. While HIT been
shown in several studies to improve processes of care where it is in
place and used by clinicians,\2\ some studies have not confirmed this
finding.\3\ Others note that while care processes may improve with use
of HIT, there is still little evidence that HIT improves patient
outcomes (other than in the care of end stage renal disease
patients).\4\ In their recent study, Linder and colleagues found no
association between ambulatory care quality and possession of EHR
technology, cautioning that ``as EHR use broadens, one should not
assume an automatic diffusion of improved quality of care--Policy
makers should consider steps to increase the likelihood that further
diffusion of EHR has the desired effect of improving quality of care.''
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\2\ Kawamoto et al. Improving clinical practice using clinical
decision support systems: a systematic review of trials to identify
features critical to success. BMJ Online, March 2005; Garg et al,
Effects of Computerized Clinical Decision Support Systems on
Practitioner Performance and Patient Outcomes. JAMA, 2005; 293:1223-
1238
\3\ Linder et al. Electronic Health Record Use and the Quality of
Ambulatory Care in the United States. Archives of Internal Medicine.
2007;167(13):1400-1405
\4\ Pollak. Effect of electronic patient record use on mortality in
End Stage Renal Disease, a model chronic disease: retrospective
analysis of 9 years of prospectively collected data. BMC Medical
Informatics and Decision Making. 2007; 7:38
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The slow pace of HIT adoption is unquestionably a problem that
calls for action. The American Recovery and Reinvestment Act (ARRA)
took an important step in assisting providers afford the cost of EHR
adoption. But physicians and health professionals lack training and
experience in the process of evaluating their current care processes,
conceiving a better way to organize their care teams, and retraining
themselves to take advantage of the capabilities of new information
systems. There is evidence many providers and office practices have
purchased inadequate clinical decision support software (CDSS), or are
not using their CDSS to improve care management despite having
purchased a fully functional system.\5\
---------------------------------------------------------------------------
\5\ Eccles et al. Effect of computerised evidence based guidelines
on management of asthma and angina in adults in primary care: cluster
randomised controlled trial. BMJ, 2002;325:941
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While the ARRA does contain technical assistance provisions for
small physician offices, it will be vital for that technical assistance
to be competent to aid physicians and medical practice staff through
the entire change management process. Using the full capability of
EHRs, including care management and improved health outcomes, requires
a redesign of a practice's entire clinical workflow. There has been
little in the way of technical assistance for small physician
practices. Commercial consultancy firms have had little interest in
serving typical office practices and small providers, even if those
practices and providers could afford to hire them. This is unfortunate,
because the majority of ambulatory care physicians work in practices of
three or fewer physicians. Health care reform must ensure not only that
EHRs are being purchased by small physician practices, but that their
full implementation and use is being used to transform the quality and
efficiency of care provided by the practice.
QIOs worked with hundreds of hospitals and 3,600 physician offices
from August 2005-July 2008, assisting them in re-designing their
clinical workflow to incorporate HIT into daily practice. The QIO-
assisted practices exceeded expectations in using their EHRs for care
management, and the QIO program influenced HIT vendors to make
significant changes in their programming to enable physicians to
generate care management reports. Demand was so strong that QIOs had to
turn providers away. An independent evaluation found three-quarters of
practices were satisfied with the QIOs' knowledge of technology
options, their ability to appropriately assess the practice's
technology needs, and their assistance in improving the quality and
efficiency of care.6, 7
---------------------------------------------------------------------------
\6\ Narayanan et al. 2007 Provider Satisfaction Survey Analytic
Report to CMS. Westat, March 2008.
\7\ Terry. EHRs: The feds get something right. Medical Economics,
March 16, 2007.
Recommendation: Medicare should build on the success of the QIO
program helping providers and practices plan for adoption of HIT,
select software and hardware, and modify daily clinical workflow to
incorporate technology into their caregiving. QIOs also help providers
report their performance, supporting public accountability. QIO
assistance should not be limited only to practices that already possess
EHRs, as it is today, but should once again be made available to speed
the pace of adoption and reduce the number of providers that fail in
their implementation efforts.
Ensuring Implementation of Comparative Effectiveness Research Findings
The Congressional Budget Office has reported that ``hard evidence
is often unavailable about which treatments work best for which
patients and whether the added benefits of more effective but more
expensive services are sufficient to warrant their added costs'' and
suggested that ``generating additional information comparing treatments
would tend to reduce Federal health spending somewhat in the near
term,'' though perhaps not enough to offset the costs of research in
the short term.\8\ The Medicare Payment Advisory Commission (MedPAC)
concluded that ``the Congress should establish an independent entity
whose sole mission is to produce and provide information about the
comparative effectiveness of health care services.'' \9\
---------------------------------------------------------------------------
\8\ Research on the Comparative Effectiveness of Medical Treatment:
Issues and Options for an Expanded Federal Role. Congressional Budget
Office, December 2007.
\9\ Report to Congress: Promoting Greater Efficiency in Medicare.
Medicare Payment Advisory Commission, June 2007.
---------------------------------------------------------------------------
However, most studies trace the poor performance of the current
system to failures by health care organizations, providers,
practitioners and even patients to routinely implement, day-in and day-
out, what is already known. The nation's continuing challenge is to
move new research findings from the bookshelf to the bedside.
Dissemination of comparative effectiveness research, too, is likely to
languish on the bookshelf without a sustained national effort at
incorporating that knowledge into the local, day-to-day clinical
workflow.
QIOs are perfectly situated to accomplish this mission. Fostering
integration of evidence-based medicine in everyday clinical care has
been a primary purpose of the QIOs ever since the multi-state
Cooperative Cardiovascular Project demonstrated in 1995 that QIOs
improved use of evidence-based heart attack treatments and reduced
mortality. Studies document that QIOs combine clinical expertise with
change management to speed adoption of evidence-based medicine (see
Appendix A).
Recommendation: The Medicare program should task QIOs to help
physicians implement Comparative Effectiveness findings that the
Secretary determines would yield clinically significant improvements in
the safety or effectiveness of health care. The Secretary would be
required to evaluate QIO work using measures that have been endorsed by
the National Quality Forum.
Improving Transitions of Care and Reducing Readmissions
MedPAC reported to Congress in 2007 that unsafe and poor quality
care occurs with disturbing frequency as patients transition between
care settings. One result is that about 18% of Medicare patients
discharged from a hospital are readmitted within 30 days; MedPAC
estimated three-quarters of those readmissions are preventable, adding
$12 billion to Medicare costs.\10\ A similar proportion of patients
discharged from a hospital experience an adverse event within 3 weeks
of discharge from a hospital, with two-thirds of the problems being
adverse drug events--most of them preventable.\11\
---------------------------------------------------------------------------
\10\ Ibid
\11\ Forster et al, The Incidence and Severity of Adverse Events
Affecting Patients After Discharge from the Hospital. Annals of
Internal Medicine, 2003; 138:161-167.
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Systems to follow up hospitalizations and assure that patients
receive safe and effective care after being sent home or to a nursing
home are generally lacking. Following up with these patients after
discharge is currently no one's job; patients and families must manage
these transitions for themselves. The skilled health professionals
working in hospitals, nursing homes, home health agencies and in
physician offices are isolated from one another in care ``silos'' and
often don't understand what the ``downstream'' providers need in the
way of information and follow up. ``Bundling'' payments to providers
and practitioners could encourage a shared financial as well as
professional interest in better linkage of care between settings.
However, bundling methodologies are not yet ready; when they are,
providers will implement them faster with assistance.
For many years, QIO initiatives have focused on the hospital
discharge component of care transitions. QIOs have helped hospitals
more reliably give patients written discharge medication orders after
hospitalization for heart attack, heart failure and community acquired
pneumonia--to reduce the risk for readmission due to missing needed
long-term drug therapy. Quality measures for these important hospital
functions have steadily improved during this period. However, little
has been done by QIOs or others to ensure that caregivers in the
community have the information they need and are working together to
provide timely follow up after a patient transitions from a hospital.
In 2008, CMS launched 14 QIO pilots to improve critical aspects of
care transitions. These projects include discharge instructions for
hospital patients; follow up ``coaching'' phone calls after discharge;
and convening of community-based workgroups of hospital, physician, and
post-acute care provider staff who have informal referral relationships
that result in them often treating the same patients. The QIOs
introduce practices to ensure the timely flow of information between
the providers and practitioners, and trigger timely follow-up, such as
physician visits within a few days of discharge. Results from the
initial pilot suggest dramatic reductions in rehospitalizations are
being achieved. These initial results bode well for saving Medicare
money through safer and better quality care.
Recommendation: Medicare should expand the current 14-state QIO
project nationally to improve coordination and follow up of patient
care as patients transition from one care setting to another.
Publicize and Promote Reliance on Quality and Cost Performance Data
Currently, QIOs are founding members of twenty out of twenty-four
chartered value exchanges (CVEs), entities designated by HHS Secretary
Leavitt as community based partnerships to promote transparency in
health care cost and quality. In several cases, QIOs are co-convenors
of their local CVE organization.
QIOs currently have extensive access to Medicare claims data, but
operate under strong confidentiality requirements that prohibit the
release of that data to the public or to other providers. The
restrictions in current law exceed those governing private third party
payers, which commonly share clinical data with physicians and others
when needed to improve care or hold providers accountable. The QIO
statute should be amended to allow QIOs to release aggregated de-
identified quality and cost data for hospitals, nursing homes, home
health agencies and physician practices. Standards must set limits on
this authority to ensure that only valid and reliable data is
published.
Likewise, transparency data that is not explained or provided in a
user-friendly manner will have little influence on patient decision-
making. QIOs can analyze and explain complex data to the public in a
format tailored to their communities, while respecting the limitations
of the data. QIOs should also ensure that providers have an opportunity
to review their data first in order to validate it and learn from QIOs
how to interpret and appropriately respond to quality performance
feedback reports.
Recommendation: Include in the Medicare QIO contracts the
responsibility to conduct claims data analysis on cost and quality
performance, educate the public (working with CVEs and local partners)
about what the findings mean, and work directly with providers and
purchasers to improve care.
Studies of the Effectiveness of the QIOs in Promoting Population-based
Quality Improvement:
An Annotated Bibliography
In addition to targeted, case-based quality improvement,
since the launch of the Cooperative Cardiovascular Project in
the mid-1990s, QIOs have implemented community-wide and
statewide improvement initiatives to reduce the gap between
scientific evidence and daily clinical care.
Although the IOM could not find national studies
published by late 2005 that proved QIO effectiveness to a
scientific certainty, a number of state and multi-state studies
published before and after the IOM review strongly suggest that
QIO technical assistance to providers is valuable in improving
the quality of care. 89% of respondents reported in a survey of
462 hospitals weighted to be representative that QIOs'
influence on their quality improvement activities were ``very
positive'' (59%) or ``somewhat positive'' (30%). (Medical Care
and Review, June 2008)
Nationwide, physicians, nursing homes, and home
health agencies working intensively with QIOs achieved greater
improvement on 18 of 20 clinical quality measures than
providers that did not work intensively with a QIO. (Annals of
Internal Medicine, September 2006)
33 hospitals reduced patient heart attack mortality
by 21% to 26% working with the American College of Cardiology,
the Michigan QIO, and supported by a local business coalition.
(Journal of the American College of Cardiology, October 2005)
A national QIO project reduced hospital post-surgical
infections by 27%. The publication's editor called the outcome
``a critical accomplishment in the surgical world, showing
measurable and consistent improvement in performance.''
(American Journal of Surgery, June 2005)
A QIO intervention improved the quality of
cardiovascular care for patients in 24 Massachusetts hospitals,
leading to ``enhanced adherence to prevention guidelines''
associated with better patient outcomes. (Archives of Internal
Medicine, January 2004)
QIO assistance to small rural hospitals substantially
improved pneumonia care in 20 rural Oklahoma hospitals compared
to a control group of 16 similar hospitals. Midway through the
project, the QIO brought their intervention to the control
hospitals, which improved to a similar degree. (Archives of
Internal Medicine, February 2003)
QIO interventions improved quality of bypass surgery
in 20 Alabama hospitals over a two-year period, compared to
control hospitals. (JAMA, June 2001)
QIO quality measurement and assistance to hospitals
improved adherence to evidence-based practice guidelines,
significantly reducing heart attack mortality in four states
compared to hospitals without QIO support. (JAMA, May 1998)
Statement of American Society of Association Executives
American Society of Association Executives. The American Society
of Association Executives (``ASAE'') is a Section 501(c)(6) individual
membership organization of more than 22,000 association executives and
industry partners representing nearly 12,000 tax-exempt organizations.
Its members manage leading trade associations, individual membership
societies, and voluntary organizations across the United States and in
50 countries around the globe. We advocate for voluntary organizations
so that they may continue to improve the quality of life in the United
States.
Importance of Associations in Health Care Coverage. From early on
in America's history, associations have been key vehicles for
delivering services and benefits such as health care. The belief that
joining a membership organization enhances the personal and
professional development of individuals and businesses and enhances
access to a vast array of resources is at the core of all associations.
Because of this, associations well positioned to play a critical role
in providing health care insurance to millions of Americans.
Because of the common interests of their members, associations are
organized for greater purposes than merely selling insurance, a
critical distinction in the debate over the underlying motivation in
providing access to health insurance. Associations are not affinity
groups or businesses with the goal of profiting from the insurance
market. They are, however, structured to represent their members, and
possess the infrastructure, administrative and communication
mechanisms, and experience necessary to unify employers and employees
into stalwart providers of health services.
Despite these inherent advantages to associations as conduits for
providing health care, very few associations currently provide health
insurance to their members. This is due, in large part, to the myriad
of Federal regulations surrounding the insurance market. In a 2006 ASAE
health care survey, only 24% of over 1,000 association CEOs said that
their association provides health insurance to members. However, 61% of
respondents said that if Federal regulations that limited their ability
to offer some insurance to members were removed, they would consider
offering insurance to their members.
The Small Business CHOICE Act of 2009. The committee today is
examining the best way to expand coverage and address the cost of
providing health insurance. The small business sector is particularly
affected by reality of high medical costs. Often, it takes only one
employee's increased cost of medical care to send a business' insurance
cost skyrocketing or, in some cases, to have their entire plan
cancelled. To address the issues of coverage and cost, Congress must
include specific relief for small businesses in any health care reform
legislation.
ASAE supports the Small Business CHOICE Act of 2009 (HR 859),
bipartisan legislation introduced February 4th by Representatives Nydia
Velazquez, Sam Graves, and nine other cosponsors. ASAE is joined in
supporting the legislation by the American Medical Association, the
National Association of Realtors, the National Association for the
Self-Employed, and the National Restaurant Association, among other
groups.
The Small Business CHOICE Act allows small businesses who belong to
the same association or membership organization to form a
``cooperative'' in the catastrophic health insurance market to provide
excess claims insurance for the employees of the small business. The
cooperative (whose standards will be established by the National
Association of Insurance Commissioners) creates a captive insurance
company in one state that pays benefits when the annual maximum for the
primary care policy has been exceeded.
Belonging to a cooperative would allow a small business to avoid
sudden rate hikes in their insurance premiums, making the cost of
providing insurance to their employees more affordable and readily
available. With the cooperative assuming the costs that exceed the
primary care limit, one high risk employee no longer makes providing
insurance for employees an unaffordable benefit. Additionally, with the
creation of a captive insurance company based in one state, the
cooperative would not federally preempt state mandates and would still
require primary care insurance to abide by state requirements.
Supporters of this legislation recognize that this is not
comprehensive health reform and that, if this legislation were passed,
it would not solve all of the issues in the health care debate. The
advantage of this bill is that it would provide immediate cost and
coverage relief to a major segment of the business community.
Catastrophic insurance companies exist and currently offer plans for
associations; however, one small business or association buying
coverage drastically increases their primary health insurance rates.
Allowing for pooling in the reinsurance market levels the market with
large corporations and gives small businesses better access to the
health care options available to their larger competitors.
Conclusion. The ``Small Business CHOICE Act of 2009,'' introduced
in the House in the 111th Congress by a bipartisan group of
Representatives, would reduce the cost for providing employee health
care for small businesses through pooling in the reinsurance market.
The bill would create a captive insurance company whereby participants
in the ``cooperative pool'' would abide by that state's mandates.
Although the legislation is not comprehensive health care reform, it
would provide immediate relief for small businesses in insurance costs
that will help make health care coverage affordable and universal.
Argus Health Systems, Inc.
Kansas City, Missouri
March 25, 2009
The Honorable Charles B. Rangel, Chairman
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington D.C. 20515
Dear Chairman Rangel,
I am writing on behalf of Argus Health Systems, Inc. in response to
the March 11, 2009, hearing held by the House Ways and Means Committee,
Subcommittee on Health titled, ``Health Reform in the 21st Century:
Expanding Coverage, Improving Quality and Controlling Costs.'' The
hearing reviewed the need for comprehensive health care reform to
improve coverage, reduce health spending and improve quality of care.
Argus is a pharmacy benefit administrator that prides itself in
providing independent pharmacy benefit services and aligning our goals
with those of our health plan customers to better serve their plan
members. Incorporated in 1988, the company is a subsidiary of DST
Systems, Inc., the largest provider of third-party shareholder record
keeping services in the United States today.
Since January 1, 2006, Argus has been successfully processing
Medicare Part D. Currently, we support approximately five million
beneficiaries for 26 Medicare Part D accounts through our
infrastructure programs with Part D plan sponsors. In 2008, Argus
processed 310 million Part D claims on behalf of Medicare
beneficiaries. Over 90 percent of our business is supporting large
managed care plans.
As President of Argus Health Systems, Inc., I would like to offer
Argus' perspective regarding the importance of the pharmacy benefit in
reducing costs and improving the quality of care when coverage is
extended to all Americans. From my review of information available in
the public domain, it appears that limited attention has been given to
the ongoing role that prescription drugs play in contributing to
healthier beneficiaries while containing costs elsewhere in the health
system.
This apparent lack of inclusion may, in fact, be due to recent
advances health plans and their pharmacy benefit administrators and
managers have made in helping to contain prescription costs. As a
result, this has not necessarily been a hot topic given all the
competing issues in the health care reform debate. According to
American Health Insurance Plan's (AHIP) analysis of
PricewaterhouseCoopers' Factors Fueling Rising Healthcare Costs,
prescription drugs account for 14 cents of each premium dollar while
physician services consume 33 cents.
Despite the lower contribution to premium costs, prescription drugs
should not be discounted as a potential area for controlling costs. The
pharmacy benefit drives the most frequent interaction people have with
the health care system--at their neighborhood pharmacy. Its effective
management is important to help control costs, whether through
interoperable health care information technology integration, or
through medication therapy management provided by the pharmacist.
I am confident there are opportunities in a reformed health care
system to manage prescription costs, while obtaining appropriate health
outcomes.
Using PBAs and Transparency to Control Costs
To align incentives with value and effective cost control, it is
important to understand the differences between pharmacy benefit
managers (PBMs) and pharmacy benefit administrators (PBAs) and to
ensure that all pharmacy benefit vendors are acting transparently and
without conflicts of interest. When considering reforms to implement in
our health care system, I ask that Congress undertake a thorough review
of the pharmacy benefit business practices prevalent today to
understand how lack of transparency as well as conflicts of interest
can drive up the cost of prescriptions for the beneficiary.
One of the best definitions of transparency in the pharmacy benefit
sector was provided by David Calabrese in Managed Care Executive, dated
May 1, 2006.
``Transparency is a form of business practice involving full
disclosure of costs and revenues, allowing the customer to make
more well-informed decisions regarding purchases. In the PBM
industry, transparency lays the groundwork for more simplified
PBM-client business relations, more accurate financial modeling
and performance metrics and a greater comfort level among PBM
consumers. `Transparency,' however, is a relative term used
freely in the marketing efforts of many PBMs. The genuine
commitment to transparency lies in the actual business
practices the PBM invokes to support this claim. `True
transparency' is a model in which all PBM revenue streams
[drug-level rebates, funding of clinical programs,
administrative fees, service fees, management fees, research/
educational grants, etc.] are fully disclosed to the payer; the
full value of retail and mail-order pharmacy discounts is
passed onto the client; data is shared with the client; and the
client is given ultimate decision-making control over its drug
benefit design and formulary management. It is this commitment
to true transparency which has begun to differentiate newer
PBMs.''
``Newer'' PBMs identify themselves as pharmacy benefit
administrators and provide full disclosure of all fees and allow health
plans to audit them. They pass through rebates to the beneficiary and
share data with their health plan customers. PBAs work as
administrative and advisory partners with their health plan customers,
acting under their direction, and do not enforce a formulary or drive
beneficiaries to mail order regardless of whether this is appropriate
for them or not. The PBA value is proven and is less costly than
services offered by PBMs where other conflicts between managing costs
and managing profits might otherwise exist.
Improving Health Care Delivery through Health Information Technology
To provide ``accountable, accessible, patient-centered and
coordinated care'', the health care delivery system needs to be
organized and redesigned to improve the patient experiences end-to-end,
including via health information technology (HIT). Pharmacy benefit
administration is a valuable tool in supporting these efforts with data
exchange for medical and pharmacy claims integration. Pharmacy benefit
administration provides one the best examples of how standards and
standard processes have led to the use of advanced cost management
techniques and data management and review that promote greater quality
of care. Such standards have also provided a platform and foundation
for pharmacists and prescribers to better serve beneficiaries through
the use of readily available information. In addition to real-time
point-of-sale prescription claims processing, several PBAs currently
support the continued integration of functionality via batch and/or
near-real time across all segments of the health benefit field.
Additionally, PBAs support efficient medical care through use of
medication history and by having diagnosis codes available at point-of-
sale, enabling pharmacists to provide additional and comprehensive care
to the patient. Recent experiences in Medicare Part D with vaccine
administration and Medication Therapy Management have also been
successful and can be expanded to the general population.
Strengthen Decision-Making with Comparative Effectiveness Assessment
To ``aim high to improve quality, health outcomes, and
efficiency'', comparative effectiveness assessment is an important tool
for improving clinical decision-making on behalf of patients, as well
as to reduce costs. Argus supports funding for rigorous and independent
(non-pharmaceutical manufacturer-based) research for prescription
drugs, which will enable beneficiaries to receive the medication
therapy they need. This type of research will allow for outcomes/
effectiveness research to be conducted by academic institutions without
fear of reprisal or liability from pharmaceutical manufacturers. It
will also ensure health care providers have solid evidence available,
rather than marketing information, for delivering optimal care in their
practice.
Containing Growth in Specialty Medications
The utilization of specialty drugs continues to drive health-care
costs. In 2007, CMS added the Part D specialty drug tier. According to
information released by CMS in conjunction with the Symposium conducted
on October 30, 2008:
``Specialty tier medications represent a limited number of
drugs that are used by a small proportion of enrollees. Overall
only 4.4 percent of enrollees used specialty tier drugs in
2007. Of those enrollees, 61 percent were LIS beneficiaries.
Expenditures for specialty tier drugs in 2007 accounted for 10
percent of total gross drug costs. Non-LIS enrollees pay
approximately 20 percent of the medication cost for specialty
tier medications, when all Medicare enrollees are included the
average amount paid is much less.''
Due to the importance of these drugs for beneficiaries, as well as
the contribution they provide to total Part D drug costs, Argus
recommends that serious considerations, be undertaken to determine how
to best manage costs in this class of drugs while taking advantage of
the value these drugs may have in providing quality outcomes for
beneficiaries.
Thank you for taking the time to review these recommendations on
how the pharmacy benefit can play an integral role with other steps
being considered as part of overall health care reform. I commend the
House Ways and Means Committee, Subcommittee on Health for holding this
hearing.
Sincerely,
Jonathan Boehm
Statement of Families, USA
According to the U.S. Census Bureau, an estimated 45.7 million
Americans were uninsured in 2007. This widely quoted number, which was
derived from the Census Bureau's annual Current Population Survey
(CPS), is designed to be an estimate of how many people did not have
any type of health insurance for the entire previous calendar year.
Although the CPS numbers provide a useful annual estimate of coverage
and a tool that can be used to track trends in coverage from year to
year, they are limited in their ability to paint a complete picture of
the insurance crisis.
Families USA conducted a study in order to take a closer look at
the uninsured in America and to improve our understanding of how many
people experience significant gaps in coverage. The Families USA study
measured the number of uninsured people over a longer period of time
than the CPS (two years in contrast to one). The Families USA study
also measured people who were uninsured for different lengths of time.
Our analysis yielded disturbing results: We found that 86.7 million
people under the age of 65--one out of every three non-elderly
Americans (33.1 percent)--went without health insurance for all or part
of 2007-2008.
By taking this closer look, we found that many more people were
touched by a significant gap in health insurance than is reported by
the CPS. These people are at risk, both in terms of their physical and
their economic well-being, and they may be profoundly affected by being
uninsured. No picture of the causes and consequences of being uninsured
is complete unless it includes all people who experience a significant
gap in health insurance coverage.
This study's findings are based exclusively on data projections
from the CPS as well as the Census Bureau's Survey of Income and
Program Participation (SIPP) and the Medical Expenditure Panel Survey
(MEPS) from the Agency for Healthcare Research and Quality.
Key Findings
One in Three Uninsured: 2007-2008
86.7 million people under the age of 65 went without
health insurance for some or all of the two-year period from 2007 to
2008.
One out of three people (33.1 percent) under the age of
65 were uninsured for some or all of 2007 to 2008.
Number of Months Uninsured
Of the 86.7 million uninsured individuals, three in five
(60.2 percent) were uninsured for nine months or more. Nearly three-
quarters (74.5 percent) were uninsured for six months or more.
Among all people under the age of 65 who were uninsured
in 2007-2008, one quarter (25.3 percent) were uninsured for the full 24
months during 2007-2008; 19.5 percent were uninsured for 13 to 23
months; 15.4 percent were uninsured for nine to 12 months; 14.3 percent
were uninsured for 6 to 8 months; and 20.1 percent were uninsured for
three to five months. Only 5.4 percent were uninsured for two months or
less.
Work Status of the Uninsured
Four out of five individuals (79.2 percent) who went
without health insurance during 2007-2008 were from working families:
69.7 percent were in families with a worker who was employed full-time,
and 9.5 percent were in families with a worker who was employed part-
time.
In addition, 4.6 percent were looking for work.
Of the people who were uninsured during 2007-2008, only
16.2 percent were not in the labor force--because they were either
disabled, chronically ill, family caregivers, or not looking for
employment for other reasons.
Income Level of the Uninsured
Three out of five individuals (58.7 percent) in families
with incomes below the Federal poverty level ($21,200 a year for a
family of four in 2008) went without health insurance in 2007-2008.
More than half (52.0 percent) of individuals in families
with incomes between 100 and 199 percent of the Federal poverty level
(between $21,200 and $42,400 a year for a family of three in 2008) went
without health insurance in 2007-2008.
The likelihood of being uninsured decreases considerably
with increased income, but nearly one in five (17.9 percent) people in
families with incomes at four times the poverty level or above went
without health insurance in 2007-2008.
Every Racial and Ethnic Group Is Affected
Hispanics/Latinos, African Americans, and people of other
racial or ethnic minorities were much more likely to be uninsured than
whites: 55.1 percent of Hispanics/Latinos, 40.3 percent of African
Americans, and 34.0 percent of other racial and ethnic minorities went
without health insurance in 2007-2008, compared to 25.1 percent of
whites.
Although racial and ethnic minorities are more likely to
be uninsured, whites accounted for nearly half (49.8 percent) of the
uninsured in 2007-2008.
Every Age Group Is Affected
Of the total 86.7 million uninsured people in 2007-2008,
60.1 million were uninsured adults (between 19 and 64 years of age).
The likelihood of being uninsured declined among adults
as they grew older. The percentage who were uninsured was highest among
19- to 24-year-olds (49.5 percent) and 25- to 44-year-olds (36.3
percent). The percentage who were uninsured declined for 45- to 54-
year-olds and 55- to 64-year-olds, to 25.5 percent and 21.2 percent,
respectively.
Statement of J. Kirk Peffers
Please bear in mind that the insurance industry has never healed
anyone. It just takes 30% of health care dollars out of health care and
denies permission for select health care to occur. It's an utterly
useless middleman.
Statement of National Association of Professional Employer
Organizations
The National Association of Professional Employer Organizations
(NAPEO) thanks the Committee on Ways and Means for the opportunity to
submit this statement for the hearing ``Health Reform in the 21st
Century: Expanding Coverage, Improving Quality and Controlling Costs''.
NAPEO is the largest trade association for professional employer
organizations (PEOs) nationwide, with nearly 400 PEO members operating
in all 50 states, representing approximately 90 percent of the revenues
of the $64 billion industry.
PEOs Help Small Business
PEOs provide human resource services to their small business
clients--paying wages and taxes and assuming responsibility and
liability for compliance with myriad state and Federal laws. PEOs also
provide worksite employees with access to 401(k) plans, health
insurance, dental coverage, life insurance, dependent care and other
benefits, which for many of these workers is the first opportunity that
they have had to obtain these benefits through employment. The cost to
small- or mid-sized businesses for individually establishing and
administering this range of employee benefits is prohibitive. However,
due to economies of scale and efficiency of administration, PEOs can
make available diverse and improved employee benefit offerings.
Between 1980 and 2000, the number of labor laws and regulations
grew by almost two thirds, according to the Small Business
Administration, which estimated that owners of small- or mid-sized
business spend up to a quarter of their time on employment-related
paperwork. PEOs offer their clients and worksite employees the services
and expertise of a personnel department comparable to that found in a
large corporation. Few, if any, small businesses can afford a full-time
staff consisting of an accountant, a human resource professional, a
legal compliance officer, a risk manager, a benefits manager, and a
manager of information services. PEOs offer this expertise to their
clients. While the owners of these small- and mid-sized businesses
focus on the ``business of their business,'' PEOs assume the
responsibilities and liabilities of the ``business of employment.'' Not
only is the client company free to concentrate on its core business and
increase profits, but it is better able to remain competitive by
attracting and keeping the best employees with a benefit package
comparable to a large employer. These advantages have led to a
substantial growth in the PEO industry over the past two decades.
Today, between 2 and 3 million workers are covered by a PEO
arrangement.
PEOs Are Part of the Solution to Health Care Coverage
NAPEO supports innovations in Federal policy that enhance the
ability of small businesses to offer health benefits to workers.
Working Americans deserve comprehensive, affordable health care,
retirement savings plans, and other employee benefits for themselves
and their families and many small businesses struggle to meet these
needs.
PEOs are part of the solution to healthcare access. PEOs are highly
experienced in providing healthcare benefits for employees working at
their small business clients. PEOs know the complex administrative
tasks associated with providing health care to workers.
The PEO business model is one innovation that should be part of any
health care reform legislation. A recent NAPEO member survey
demonstrated that PEOs have substantially improved the health benefits
offerings at their small business clients. About half of surveyed PEOs
indicated that 50% or more of their small business clients have access
to a more extensive health care offering as result of the PEO
engagement. Almost a third of PEOs indicated that 20% or more of their
new clients did not provide health benefits prior to engaging the PEO.
Among other benefits, PEO relationships serve to further an
important policy goal of expanding access to quality affordable health
care coverage. The average client of a PEO is a small business
employing just 19 workers with an average salary of approximately
$37,000 annually. Health care reform legislation must avoid unintended
negative consequences to small businesses--such as limiting their
ability to secure and offer health benefits to workers through a PEO,
placing current coverage at risk or increasing insurance costs for
small businesses.
Policy Issues
The Committee will undoubtedly consider a number of policy
proposals, including employer mandates, tax credits, association or
regional health plans, and plan benefit design. NAPEO believes that a
``one size'' fits all solution'' is probably not the best model. It is
important to maintain the viability of existing successful models
including the PEO model for providing health benefits to workers.
This was accomplished successfully in Massachusetts, for example,
when implementing regulations for that state's health care reform law
were adopted recognizing the role of PEOs in worker health benefits.
The intent was to ensure that small businesses that proactively covered
workers in a health plan through a PEO relationship would not be
penalized or receive disparate treatment. It is important that Federal
legislation do the same--by making clear that if there is any employer
mandate for coverage then it is the responsibility of the small
business clients of the PEO to meet that mandate and also ensuring that
workers in a PEO co-employment arrangement are appropriately attributed
to the client for purposes of tax credits and any size of workforce
thresholds.
On the other hand, many PEOs sponsor a fully-insured health plan as
part of the employee benefit package provided to small business
clients. The application of any national small group plan design
principles to these large PEO plans would negate the efficiencies of
PEO health plan sponsorship. The result could be less rather than more
coverage. PEOs bring essential benefits to worksite employees by
aggregating a large number of workers from many small businesses. This
is consistent with one objective of health care reform--to improve
health insurance coverage of employees of small businesses. To
undermine the successful PEO health arrangement works against these
goals and would have the unintended consequence of leaving large
numbers of employees searching for new health plan coverage.
Improving health care access is an urgent national priority. For
the small businesses that work with PEOs, clearly defining the relative
roles and responsibilities of the PEOs and their small business clients
will be critical to sustaining important health care coverage for
millions of Americans. This balance was achieved in crafting rules for
the 401(k) plans maintained by PEOs and we urge that analogous
approaches be adopted as you consider a reformed health care system.
NAPEO and its member companies are prepared to assist the Committee in
exploring all options and innovations, including the PEO model as one
path to maintaining and expanding health insurance coverage.
Statement of the NATIONAL ASSOCIATION OF REALTORS
The debate on health insurance in recent years has focused almost
exclusively on the relationship between employers and employees, the
deduction that employers receive for providing health insurance
coverage and the exclusion from employees' income of health insurance
benefits. A fair amount of attention has also been given to the
challenges of small businesses that would like to provide health
insurance, but are unable to do so. A third group in the workforce,
however, has been consistently overlooked: the self-employed.
The needs of the self-employed are particularly acute, as those
workers must fend for themselves in the individual insurance market. We
believe that the plague of uninsured workers will persist unless and
until there are corrections to the dysfunctions in both the individual
and small-group health insurance markets. That market presents itself
as one in which there is no negotiating, no leverage, no economies of
scale and absolutely no efficiency.
Since 2003, self-employed individuals have been permitted to deduct
from gross income the cost of their health insurance premiums.
Regrettably, this provision benefits only those who can actually find
and afford the insurance offered in the small group and/or individuals
markets. We note, however, that tax benefits, no matter how
thoughtfully crafted and designed cannot provide access to affordable
insurance. A deduction is helpful, but only if insurance is available.
Real estate agents, realty firm owners, their employees and other
self-employed individuals will struggle to find health insurance
coverage unless there are significant reforms to the individual and
small group insurance markets. We do believe, however, that tax
incentives for this segment of workers, coupled with mechanisms that
would create insurance coverage gateways and/or additional pooling
mechanisms would create a far more rational and effective system than
current law.
Research Findings
While NAR is currently in the process of updating our survey of the
health insurance coverage of NAR's REALTOR members, our 2006 survey
showed that 28% of our members have had no health insurance coverage
from any source.\1\ By contrast, in 1996, only 13% of our membership
had no coverage. In 1996 and in 2006, more than three-quarters of our
members who had no health insurance reported that they were simply
unable to afford what coverage they could find.
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\1\ As soon as the 2009 survey data are compiled, we will share it
with the Committee
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A real estate brokerage firm is built on a model of a broker/owner
and sales agents. Under Code Section 3508, the broker/owner may treat
the sales agents as independent contractors, so long as certain tests
are satisfied. Thus, the broker/owner is often a self-employed person
whose business is conducted by other self-employed persons.
To underscore the challenges our members who own realty firms have
with finding health insurance, note that in 1996, 34% of real estate
firms offered health insurance to their salaried employees. By 2006,
this number had declined to only 13% of real estate firms. For these
small businesses, as with individuals, the primary barrier to providing
health insurance has been its cost.
The Government Accountability Office estimated that independent
contractors and self-employed workers comprised 30 percent of the
American workforce in 2000. Some experts estimate that by 2010, 41
percent of the U.S. workforce will be so-called ``free agent'' workers.
We fear this shift in the composition of the workforce will be
accompanied by increases in the number of the uninsured. Finding a
solution to the insurance problem must become a top priority.
Recommendations
NAR does not have the particular expertise that would enable us to
provide a full-blown individual market reform model. The work we have
done over the past six years and the reports our members have provided
about their experience in the individual and small group health
insurance markets do, however, furnish a basis for several
recommendations.
The self-employed must be able to enjoy the benefits of pooled
risks, much as large group plans provide. Downsizing, changes in the
economy and increases to the cost of coverage will likely deprive more
and more workers any benefit of employer-provided insurance, thus
forcing them into the individual market. Today, employer-provided group
coverage is extended to groups of people whose sole common denominator
is their employer. Enhanced risk-pooling opportunities in the
individual market would facilitate greater market efficiency by
combining groups of people whose sole common denominator is that they
work for themselves. Pooled risk for individuals will also enhance
economies of scale as insurance providers are able to consolidate and
manage the expenses of administration, marketing and advertising.
Whatever the name used--gateway, coordinator, connector, etc.--a
mechanism is needed to bring insurers and self-employed workers and
small businesses together. We believe that a private, public or joint
private/public venture must be developed to put self-employed persons
in a position where they can compare apples to apples in their analysis
of a more complete range of insurers and insurance products.
We do not seek a single-payer insurance system, nor do we seek a
new entitlement. We do seek an official, reliable, regulated,
information source (or sources) that will facilitate insurance market
access for self-employed individuals. These workers need some sort of
menu that could include information such as comparisons of available
coverage options, identification of vendors that can provide various
options and where to find those vendors, as well as some sort of
approximate cost comparison data (current and/or historic).
Stakeholders including (but not limited to) insurers, regulators,
legislators, health policy advocates and consumers must grapple with
the question of essential coverage. No single policy or list of
mandates can satisfy the competing tensions between (a) assuring all
desired (or desirable) coverage and (b) creating affordable products.
We believe that it is difficult, but not impossible, for the
stakeholders to come up with categories or guidelines that might
distinguish among an array of coverage options. Such a drive toward
consensus may provide consumers, including self-employed individuals,
with the information necessary to make informed judgments and leverage
to encourage insurers and regulators to provide or require an effective
array of benefit coverage choices.
Conclusion
Congress must address the challenges that the self-employed face in
finding access to affordable health insurance. Maintaining a sensible
tax regime for health insurance must remain an integral part of health
insurance policy, but the only lasting resolution for health care
access will come through reforming the individual and small firm
insurance markets.
Thank you for your attention, time and efforts on this most
important issue. NAR and its members stand ready to work with you in
the coming months to enact meaningful health care reform.
Statement of Newbery, Ungerer & Hickert LLP
I've taught health law and policy as an adjunct professor at
Washburn University School of Law for five years, and before my first
retirement last year, served as General Counsel and Senior Vice
President of Blue Cross and Blue Shield of Kansas for 30 years. I am
now engaged in the private practice of law, continue to teach, but do
not represent any entity in the health insurance industry.
I write the Committee today primarily with regard to the issue of
making available a public option.
Considering the utility of a public option--the reasons for
interest in a public option program to be offered alongside employer-
sponsored or commercially-available nongroup health insurance--isn't as
simple as it might seem, since it introduces different dynamics in the
health insurance market.
Without significant changes in state and Federal law, a public
option (whether that public option is a Medicare-like program or a
something that looks like the Federal employee health benefits program
with coverage available from several private insurers) necessarily
creates a circumstance of having two markets subject to different
pricing rules and offering rules, and introduces dynamics that require
significant attention to how insurance markets behave. It isn't as
simple as letting people opt for a separate public program.
A good starting point for thinking that through is the nongroup
market. In most states today that is characterized by age rating and
health underwriting, with insurers either rejecting or rating up
persons with existing health conditions. If the public option is an
alternative for all citizens, it is unlikely that it will involve age
rating, and it will certainly involve guaranteed issuance of coverage.
The natural result would be that younger or healthier persons would
remain in the commercial market, while older or less healthy people
likely would find the public plan more attractive (not incidentally, in
some states that rely on risk pools for the uninsurable currently
subsidized by assessments on insurers, the raison d' etre for such
pools disappears and insurers might have an incentive to make their
underwriting more strict than is currently the case, or to increase the
slope of their age rating tables).
The same effect would occur in most states for small groups. Most
states, following the NAIC model, allow use of age, industrial
classification and group size among other characteristics in developing
rates for small groups. This results in enormous differences in
premiums among small groups (and can result in enormous volatility in
premiums for very small groups when, for example, a younger worker
leaves and an older worker takes her place, or vice versa). Again, the
incentive would be for employees in groups composed largely of older
employees to seek coverage through the public plan.
Those impacts would be magnified if health insurance remained a
voluntary matter. That is, if there is no requirement to hold
insurance, and the public option is a program involving flat community
rating and guaranteed issuance of coverage, persons today in groups
with high premiums, persons holding coverage through high risk pools,
and uninsured persons who become aware of a condition creating a need
for health services would move to the public option.
It is difficult to fool markets. While having two differently
regulated markets might not result in the paradigmatical death spiral,
the risk sorting that would occur absent fundamental changes in rules
applicable in the private market would result in significantly higher
average claims expenses in the public market, and significantly lower
average claims expenses in the private market, meaning higher premiums
in the former, and increasingly higher as the effects of adverse
selection are felt in the claims costs.
To avoid that would require applying the same rules in all markets,
displacing current state regulation with Federal regulation of rating
and underwriting, particularly in the nongroup and small group markets.
Guaranteed issuance of coverage in the nongroup market, a requirement
in a few states, would be obligatory in all states. Age rating would
have to be prohibited in the nongroup and small group markets (large
groups might be a separate subject, although there are significant
enough differences in the impact of age and health status among some to
not disregard them): that is, one would have to be able to acquire the
same coverage at the same rate, whether one did so through employer-
sponsored coverage or on an individual basis, just as one would have to
be able to do so under the public option.
But if that were the case--if all insurers were no longer sorting
risks by health and age, were pooling claims costs among all insureds
and creating a single flat community rate of the same kind a public
option would involve--then what advantage would a public option
provide? Would it reside in lower administrative costs? I suspect that
in an environment in which insurers were not competing based on ability
to select risks or on who could tailor their age slopes or industrial
factors to get the best block of insureds, the basis for competition
would be only administrative costs and the cost to the insurer of
health care services. One would think that in such an environment,
insurers would have strong incentives to become as lean as possible and
to negotiate the best possible pricing mechanisms with health care
providers (and perhaps not on per unit price alone).
In the end, what is the purpose of a public option? Health
insurance is available universally today, although in some cases, only
through a high risk pool at a significant premium. If a public option
is desirable as a mechanism to make coverage more affordable to persons
whose rates appear unaffordable because they are older or sicker
individuals or in an older, less healthy group, the same result can be
obtained by changing the rules applicable to rating and underwriting by
private insurers (which concomitantly requires elimination of separate
rating and tax treatment of employer-sponsored coverage). If a public
option is desirable to achieve lower administrative costs, changing the
rules of competition among insurers by eliminating risk segmentation as
a means of competition (which again requires elimination of separate
rating and tax treatment of employer-sponsored coverage) achieves that
end.
To avoid the effect of antiselection--of persons obtaining coverage
under a guarantee issue circumstance, whether under a system relying
solely on private coverage or one involving a public option--a mandate
is obligatory, which carries with it the need for income-sensitive
premium supports.
If the purpose of a public option is to lower the primary input in
the cost of health insurance--the cost of health care services--
eliminating risk segmentation as a means of competition among private
insurers would cause them to focus more strongly on how they pay health
care providers and what they pay for. Of course, if a public option
relied on Medicare-style pricing for health care services, it would
have an insurmountable competitive advantage over private coverage.
That is, if the same rating and enrollment rules apply to the private
market as apply to a public option (as they should, to prevent the
public option from becoming a dumping ground for the old and the ill),
that advantage in the cost of care would result in the public option
having a significantly lower price for the same benefits as private
insurance. But if that is either the desired or the practical outcome,
there is no logical reason not to move directly to a single-payer
system.
The reason not to move to a single payer system is the same reason
to be wary about a public option: the country does not need to see the
promise of universal coverage vanish again, as it did in 1993, under an
onslaught of advertising and lobbying from those whose oxen would be
gored, health insurers and health care providers.
As is apparent from an article I published last year, ``The Pool of
Bethesda: Equity, Political Problems and Reinsurance Solutions in
Mandated Individual Health Insurance,'' 11 Quinnipiac University Health
Law Journal 145 (2008), I find the rationalization of the insurance
market and the Tax Code and the equitable approach to financing of
health care in the Health Americans Act an attractive alternative.