withdrawal and they were starting to move their troops but they didn't move them quick enough and by the end of the day of the 12th, the americans reached not only the main objectives for that day but many of the objectives for the following day and so by mid-morning of september 13th, the whole salient had been liberated. >> watch american artifacts sunday at 6:00 p.m. eastern on american history tv. c-span3. "washington post" reporter bob woodward is our washington journal guest monday at 7:00 a.m. eastern talking about his new book, "fear: trump in the white house" and then on tuesday at 8:30 a.m. eastern, former independent counsel ken starr joins us to discuss his book, "contempt: a memoir of the clinton investigation." watch next week on c-span's washington journal. health care industry leaders and

economic scholars testified before the senate health education labor and pensions committee on ways to reduce health care administrative costs. witnesses included the heads of the alaska state hospital and nursing home association and america's health insurance plans. this is about 1 hour 40 minutes. >> senate committee on health education, labor, and pensions will please come to order. senator murray and i will each have an opening statement, then i'll introduce the witnesses. we'll hear from the witnesses and senators will then have five minutes to ask questions. this is our third hearing on reducing health care costs. at our last hearing, dr. brent james testified that a minimum of 30% and as much as 50% of all health care spending is waste. let's pause for a moment and realize what a remarkable statement that is. dr. james has led a major health care system, is a member of the

institute of medicine. we had a panel there that day of equally impressive witnesses, and nobody really disagreed with his estimate. at that hearing, we focused on reducing what we spend on health care by examining two things. one, on reducing unnecessary health care tests, services, procedures, and prescription drugs, and two, how to increase preventive care. this time, today, we're examining the cost of administrative tasks, which includes everything from the time spent filing -- or filling out insurance claims to buying software for an electronic health records system. administrative costs are much higher in the united states than in other countries, according to dr. jah, a witness at our first hearing. administrative costs account for 8% of all health care spending in the u.s., roughly, that is, $264 billion compared to only 1% to 3% for other countries. while many administrative tasks in the health care system come

from outside the federal government, such as insurance company or state requirements, the federal government is clearly at fault for some of this burden. for example, there was a lot of excitement over electronic health care records in washington, d.c. many said these records systems would make it easier for doctors and patients to access a patient's health records and share information with other doctors. since 2011, the federal government has spent $38 billion requiring doctors and hospitals to install electronic health record systems through the meaningful use programs in medicare and medicaid. the federal government provided payments to doctors and hospitals to buy those systems and also created specific requirements for how doctors must use the systems, penalizing doctors who didn't comply. unfortunately, health records systems have ended up being something physicians too often dread rather than a tool that's

useful. for example, dr. reed black welder, a family physician who chairs a residency program with three clinics in the tricities areas of east tennessee is required to have an electronic health records system because he sees medicare and medicaid patients. he initially received payments from the federal government to implement the electronic health records system, but now he has to pay a monthly maintenance fee to electronic health records company as well as paying for periodic upgrades to the systemy all of these costs add up to being far more expensive than the record -- the paper records he used to keep. or the initial payments the government provided. but he still isn't able to see the electronic health record of a patient discharged from a hospital across the street. that's because the hospital doesn't use the same software that dr. blackwelder does so instead, he has to call the hospital and have paper copies of his patient records faxed over to his office.

there is technology that dr. blackwelder could buy to make his technology system community with the local hospital records system so he wouldn't have to have them fax the record to his office. however, he'd have to pay $300 per month to the electronic health records company for each of the 88 doctors and nurses in his practice. what this means is that for his 88 doctors and nurses, dr. black welder would have to spend $26,400 every month, $316,800 a year, just to see his patient's electronic health records from the hospital across the street or other doctors. the electronic health records system which was supposed to make things easier and simpler has instead made recordkeeping more expensive, and dr. black welder still can't see the records of a patient released from the hospital he can see from his office window. so this is just one example of how well intentioned ideas from washington, d.c., can turn out

to add to the administrative burden that doctors face. according to the american hospital association, there are 629 different regulatory requirements from 4 different federal agencies, that doctors, hospitals and other health care providers have to comply with. these requirements range from credentialing doctors and nurses to participate in medicare and maintaining compliance with privacy laws such as hipaa to making sure the right signs are hanging around a doctor's office. the average community hospital needs 23 full-time employees just to keep up with the regulations about what a hospital needs to do to participate in medicare called conditions of participation according to the american hospital association. when the federal government adds just one more question or one more rule, it may not seem like it makes much of a difference, but added together, for doctors like dr. black welder and to

hospitals, those questions and rules add up to more time spent on paperwork, less time actually treating patients and an increase to the cost of health care. the trump administration has taken a look at what administrative tasks are required by the federal government. i'm glad to see that see seema verma, administrator of cms, which oversees medicare and medicaid recently proposed streamlining many of the agency's burdensome reporting requirements. this is one step. i look forward to hearing more about the federal government could do to reduce administrative tasks today as we look at how to reduce health care costs, we should keep in mind that what may seem like a good idea or a magic bullet in washington, d.c., may actually result in something very different for doctors, nurses, and hospitals. senator murray. >> thank you, mr. chairman. i am glad we are continuing our discussion on health care costs, an issue i know that families in my home state of washington and across the country are greatly concerned about as many of them struggle to afford the care they

need, and i look forward to hearing from all of our witnesses today about the way administrative costs fit into the big picture. i believe there are opportunities here to help reduce health care costs by reducing complexity while maintaining quality and safety for patients. we know the current administrative system is fragmented with different federal, state, and private protocols for things like billing and measuring quality of care and more, so i'm interested to hear from our witnesses about ideas to simplify and align requirements while maintaining protections that ensure patients are getting safe quality care and service. unfortunately, instead of costs, inistrative+ cf1 o president trump is pursuing a path of health care sabotage, including ideas that will make this problem actually worse. in fact, the trump administration's office of management and budget is currently reviewing a new sabotage step that will do even more to let insurance companies offer junk plans that not only undermine important protections

for people with preexisting conditions but also ignore requirements that insurers spend most of their money on patients, not on excessive administrative costs or executive bonuses. an analysis from the national association of insurance commissioners shows the most popular short-termgb2no junk pl like the ones president trump wants to expand spend, on average, half of their on things that have nothing to do with patients' health care needs. in other words, president trump wants to make it easier for insurance companies to discriminate against people with preexisting conditions and reward themselves for it with bigger executive bonuses. i think we can all agree we should be looking for steps to reduce administrative costs to make health care more affordable. and this idea from president trump, i believe, moves us in exactly the wrong direction. unfortunately, with this administration's focus on sabotaging families' health care, efforts to raise health care costs have become par for the course. from day one, president trump

hasqé@ focused on rolling back families' health care and protections for people with preexisting conditions, even though the people across the country have utterly rejected that back ward agenda. like a year ago when they stood up and spoke out against the mean-spirited trumpcare bill that tried to spike premiums, gut medicaid, and put families back at the mercy of big insurance companies who could jack up prices for people with preexisting conditions. fortunately, those efforts failed, so president trump now has decided to sabotage health care from the oval office instead. he dramatically cut investments to help people understand their health care options and get covered. he pushed a partisan tax cut bill that meant lower rates for mass i massive insurers and drug companies, higher premiums for families. he handed the reins back to insurance companies by looking for ways to make it easier to sell junk insurance that dodges patient protections like those for people with preexisting conditions, women, seniors.

he abandoned patients in the court of law by having his justice department take the highly unusual step of refusing to defend preexisting conditions protections in court. and now many of us are concerned president trump has nominated a supreme court justice who will strike down health care for millions of americans. judge kavanaugh's history on health care makes clear he is a serious threat to families' health care and protections for feel with preexisting conditions. so i hope republicans join us in rejecting his nomination just like they joined us in rejecting trumpcare when it threatened our families across the country. and i also hope they will come back to the table to work with us on legislation to bring down health care costs, because i know that's what families in my state are counting on us to do, and i have no doubt patients across the country feel the same way.tgc >> thank you, senator murray. we'll now introduce the witnesses and i'll ask senator murkowski to introduce our first witness, who's come a long way. >> thank you, mr. chairman.

and i thank you for including on this distinguished panel this morning becky hultberg. becky has not only been a great friend and an assist to my staff and my office, but she has been a strong leader in alaska. she is currently the president and the ceo of the alaska state hospital and nursing home association. prior to this, she served as the commissioner for administration under governor parnell where she provided business support services to our state government. that department also oversees management of the state's active and retiree health plans for more than 80,000 covered lives. she's also served as the regional director of communication and marketing for providence health services alaska. she has an extraordinary breadth of,hm@ understanding of the

associated health care costs in rural states and recognizing some of the challenges that we have heard before this committee as i have attempted to outline them and the impact to our smaller facilities, our more remote facilities. ms. hultberg brings extraordinary experience to the committee and so i appreciate a great deal that we will have her voice added to this important discussion this morning as to how we can work to decrease the administrative spending when it comes to the overall reduction in health care costs. so, thank you, mr. chairman, and i look forward to the comments that we'll get from becky this morning and appreciate her making the long haul from alaska to be here this morning. >> thank you, senator murkowski. our second witness will be matt eyles, president and chief executive offer of the america's health insurance plans, the national trade association

representing health insurance providers. prae previously he held a number of other positions at fortune 200 countries. congressional budget office. dr. david cutler is our next witness. he's harvard college professor of applied economics. he served on the council of economic advisers and the national economic council during the clinton administration with senior health care adviser to the obama presidential campaign, held a number of positions with health, the academy of sciences, the institute of medicine. dr. robert book is our fourth witness. he's a health economist who advises at the health care and economic expert for the american action forum, senior research director at health systems innovation network, llc. he's had a#b

senior association -- associate of the llewyn group. ms. hultberg, if you'd begin, we'll go right down the row. welcome. >> good morning. my name is becky hultberg. on behalf of my member hospitals and skilled nursing facilities, thank you for having me here to testify today. health care providers face a variety of administrative burdens, from state, local, and federal regulations to billing and insurance related administrative costs, i'll focus my remarks today on the growing number of federal regulations and the impact of this administrative burden on our health care system. regulators share the same goals of improving quality and keeping patients safe. providers recognize the importance of a stable regulatory framework that allows them to focus on patients rather than paperwork and to invest resources in improving health care access, cost, and quality. we appreciate recent work done by cms in addressing regulatory burden but given the amount of federal regulation and the pace

of change, more must be done. close to 24,000 pages of hospital and post acute care federal regulations were published in 2016 alone. the american hospital association quantified the direct cost of compliance for america's hospitals in a recent report. hospitals, health systems, and post acute care providers must comply with 629 discrete regulato regulatory requirements across 9 domains, spending $39 billion annually in administrative activities. for an average size community hospital of about 160 beds, this equates to spending over $7.5 million annually on regulatory compliance. with 59 staff dedicated to this purpose. for skilled nursing facilities, the cost of complying with the requirements of participation issued in october 2016 exceeds $735 million annually or nearly $100,000 per building. this is at a time when all end margins for skilled nursing facilities are less than 1%. we often discuss administrative burden in terms of direct cost but it is important to recognize

the opportunity cost as well. the opportunity cost is the next best thing you could have done with the financial and human resources spent on something or the value of the foregone alternative. it highlights the reality of scarcity, that when a dollar or staff hour is spent on administrative costs, it is not available to spend on something else. financial and human resources spent in regulatory compliance cannot be used for adding services, implementing patient safety initiatives or addressing community needs. there are steps the federal government can take to address the growing mount of federal regulations while ensuring patient safety. for hospitals we recommend better aligning and applying recolle regulatory requirements. regulators should provide clear, concise guidelines and reasonable time lines for the implementation of new rules. conditions of participation for medicare, a significant source of the cost of regulatory compliance, should be evidence based aligned with other laws and industry standards and flexible. requirements for the meaningful

use program should be streamlined and increasingly focus on interoperability. finally, congress, cms and the office of inspector general should revisit law and requirements aimed at combatting fraud to provide the flexibility necessary to support coordinated, high quality, high value care. skilled nursing facilities face new mandates to establish guidelines under the requirements of participation that due to their sheer volume and specificity are difficult if not impossible to implement. we also recommend that the automatic revocation of cna training if a facility receives a significant civil monetary penalty be addressed through changes to federal statute. finally, we urge congress to address the requirement that 5% or a minimum of 5 facilities receive a federal survey each year. this requirement unfairly pen lies few states and i want to thank senator murkowski for her

interest in this issue. rapid improvements are occurring at scale in our nation ice hospita's hospitals. voluntary partnerships between kms and providers to improve quality like the partnership for patients and the american health care association's quality initiative are resulting in measurable improvements in patient care. skilled nursing facilities are improving on 20 of 24 outcomes measured by cms and alaska providers are exceeding national trends. alaska hospitals reduced the rate of death from severe accept sis and septic shock from 20% to just under 5% in two years. behind those statistics are real people. someone's mother, someone's friend, someone's child. alive today because of this collaborative work. we must focus our resources on the quality improvement partnerships yielding real results for patients. the issue of administrative burden comes into sharp focus in rural america. volume of regulation requires scale to implement and rural areas like scale. the nation's small hospitals and

skilled nursing facilities simply cannot continue to eff growing burden of federal regulations. for a large hospital, the opportunity cost of a regulation may mean a program delayed but for a small town, the choice may be much more difficult. the opportunity cost of regulatory burden for rural communities may be the loss of services. i want to thank this committee for your commitment tomimproving the nation's health care system and for having me here today. >> thank you, ms. hultberg. mr. eyles, welcome. >> chairman alexander, ranking member murray and members of the company, i am president and kre of ahip, america's health insurance plans. i appreciate the opportunity to testify on reducing health care costs and administrative spending, and on our industry's leadership in simplifying health care and protecting patients. every american deserves access to comprehensive, affordable coverage choices without regard to preexisting conditions. that help to improve their help and financial security. ahip and our members are strongly committed to this goal.

we invest in a wide range of initiatives to protect patient care and to protect patients from inappropriate or unnecessary treatments. our written testimony focuses on four areas. first, we provide an overview of how consumer premium dollars are invested in the commercial market. our graphic and analyses show that the vast majority of every health care dollar goes to pay directly for medical treatments and services. the rest largely funds programs and services that improve long-term costs, and increase health care choices. second, we review some of the administrative activities carried out by health insurance providers, including medical management, care management, and care coordination, and fraud prevention. these all work together to improve the health care experience and reduce costs for consumers. third, we offer examples of how health insurance providers are working to simplify administration for doctors, hospitals, and nurses. finally, we outline our recommendations on steps that can be taken with help from industry partners and policymakers to address barriers to simplifying processes and

providing more value to patients. health insurance providers have a 360 degree view into how patients use their coverage and care. based on that insight, our members have pioneered many innovative strategies for making health care more effective, efficient, and affordable. for example, several research studies show wasteful spending in health care. about two-thirds of physicians report that at least 15% to 30% of care is unnecessary. health insurance providers use medical management tools to help patients get the right care at the right time in the right setting with a focus on better, smarter care. we work with clinicians to help confirm treatment regiments ahead of time and ensure the use of the most cost effective therapies. prior authorization is one example of an effective medical management tool to ensure better, smarter care. although it is applied to less than 15% of covered services, it effectively addresses overuse and misuse of procedures and commercial and public programs.

with prior authorization, our members analyze whether a treatment is safe and effective for a particular patient based on the best available clinical evidence. insurance providers also ensure the treatment is provided in the most appropriate care setting by a qualified licensed provider and it is provided with other needed services. ahip is working with many others to improve prior authorization processes and by making prior authorization more fully electronic, we can fully improve its effectiveness and efficiency. health insurance providers also have invested billions of dollars to monitor, detect, and eliminate fraud. ahish p ahip is a founding member of a partnership that includes federal government, law enforcement, state agencies and health plans. since 2012, the fhpp has saved hundreds of millions of dollars. we are also working with others to simplify operations and the consumer experience without sacrificing quality. for example, through a partnership with the council for affordable quality health care,

ahip members collaborate with other stakeholders to develop and adopt standard rules for electronic transactions. because of this work, an increasing number of transactions are now electronic. however, there's more work to be done. a 2016 caqh report estimated that more than 3 billion manual transactions occur each year between commercial health plans and providers. insurance providers have also played a leading role in developing web portals to provide easy access for physicians to multiple plans for key eligibility and determination information. such as co-pays, coinsurance and deductibles. also provide access to current information on claim status, reducing time and paperwork. to harmonize performance measures, our industry actively participates in the core quality measures collaborative to reward high quality evidence based care. our industry is working to encourage further improvements, including moving away from paper transactions, achieving interoperability for measuring quality, creating parity in

privacy laws for physical and behavioral health, improving electronic transactions and recognizing fraud detection and prevention expenses. thank you for the opportunity to testify. i look forward to answering the committee's questions. >> thank you. dr. cutler, welcome. >> chairman alexander, ranking member murray, and members of the committee, thank you for inviting me to testify today. my name is david cutler, i'm a professor of economics at harvard where i have been teaching and working in health care for about 25 years. over 25 years. and i'm delighted to talk about the role that the administration, congress and others can play in reducing administrative expenses in u.s. health care. health care administrative expenses are a major drain on the economy. as much as 30% of the health care bill in the u.s., that is about $1 trillion a year, is devoted to administrative expense. that's approximately twice what the united states spends on caring for cardiovascular

disease, and three times what we spend treating cancer. most of the expense is for what are called billing and insurance related services, two-thirds of which are -- occur in providers' offices, hospitals, doctors, skilled nursing facilities and the like. there are several reforms that would reduce administrative costs in the u.s. some of these have been picked up by other witnesses. let me just try and give them a little of a typology. first is simplifying the complexity with which patients are coded. for example, when a patient visits the emergency department, they are one of five different codes that could be put in. the particular code depends on the past history of the patient and other conditions, so as a result an enormousupi] amount o manpower, time, and energy is spent searching through the record and finding every possible condition a patient could have had so that he or she can be put into a higher category for reimbursement. this is wasted time, effort, and money that could be directed to other uses.

second, which is something that has also been mentioned is standardizing preauthorization requirements. a great share of the cost of the administrative burden in the united states is documenting things associated with prior authorization. for example, if one service is going to be provided, what has to be done in advance and proof that what was done in advance actually occurred and had the requisite outcome. i've been in hospitals where they show me the procedures for billing radiology, just radiology services, at one hospital, across all the different payers, and the manuals that they have to comply with are over a foot thick. the reason is that each different insurer will have their own policies and it's not just that. it's that each different payer working with that insurer will have their policies related to preauthorization and the effect is that there's an army of coders and medical records keepers who are kept employed, keeping up to date with that. the third issue is the integration of medical record and billing systems and this is

something that chairman alexander mentioned in his opening comments, which is absolutely right. in most industries, what happens is that computers take over for people, and what happens in health care administration is that people take over for computers. so, you have an electronic medical record system that keeps some information. you have a billing system that keeps separate information. the two don't talk to the each other, so as a result, you have people involved on the one and people involved in the other, and it's extremely costly to do that. as the chairman said, and as ms. hultberg said, the automation -- the requirements with regards to integration have not kept up with where we need to be and that's a serious problem here. the best guess of researchers is that we could eliminate at least half if not more of the administrative cost burden and thus reduce medical spending in the u.s. by about 8% to 15% if we were to simplify the administrative transactions associated with billing and insurance.

the unfortunate circumstance, however, is that these changes will not occur on their own. even the big players in the private sector in health care are not big enough to make these changes occur without additional help from the biggest player, and that is the federal government. in fact, if you look at other industries that have successfully reduced administrative expense, they all have a common theme, which is that the single biggest player in the industry has been intimately involved with this. in the case of retailing, that is selling goods to people, it was to a great extent the product of companies like walmart that standardized billing packaging and coding and all sorts of things so that the transaction which in health care involves several people on the provider's end and several people on the insurer's end involves nobody in retail. the second -- a second example is the federal reserve, which standardized financial transactions in the 1970s and has kept that system up to date over time and that has also saved enormous amount of expense for banks and other financial institutions and it could have

only happened with the federal government being involved so what we see in industry after industry is that the big player has to take part or it doesn't happen. therefore, what i recommend and i will be very explicit because i believe in explicit goals and consequences, is that the department of health and human services working with health care organizations as ms. hultberg and mr. eyles suggested, develop and/ implemt a plan to reduce the administrative burden in health care by 50% within the next 5 years. i believe that such a plan is achievable and attainable. i believe it would have enormous benefits for the economy and unfortunately i don't think it will happen without actions by this congress or the administration. i encourage you to act rapidly. thank you for having me here and i look forward to answers any questions you might have. >> thank you, dr. cutler. following dr. book's testimony, i'm going to step4] out for an appointment and senator murkowski will chair the hearing for a while and i thank her for that. dr. book, welcome >> thank you, chairman alexander

and ranking member murray and members of the committee. thanks for the opportunity to discuss my research on health care administrative costs. so, to summarize costs accrue at three levels as we've heard, at the health plan level, whether it's a private sector health plan or a government health plan inside the health plan and at the provider level in the hospitals, the physician offices and other providers, and also at the patient level, when patients have to schedule appointments and read the bills in the eobs they receive them and cross match them and make sure everything's right and send in a payment. there's a significant amount of research at the health plan level, smaller amount of research at the provider level and as far as i can tell, there's no research at the patient level. which is that that affects every one of us one way or another. so the primary problem that we have in this discussion is most reports give administrative costs as a percentage of total spending, including spending on direct patient care, and this is especially a problem in talking about administrative costs at the plan level. so for example, someone might

claim that medicare's administrative costs are 2% or 5% and those of private insurance are 10% or 20% and it sounds so much higher. it turns out medicare, of course, has mainly patients who are age 65 and over or disables or with end stage renal disease and on average, they need more health care than people covered in private plans so we take administrative costs, divide it by a much larger number, get a smaller percentage and make them look very efficient, but really, their administrative costs percentage is lower not because they're more efficient but because they have sicker patients, which of course has nothing to do with their administrative costs. so, turns out if we look at the correct way to do this is to look at it in terms of how much administrative costs there is per person, because administrative costs don't scale with the dollar value of claims. and they don't even scale that much with the number of claims. if you look at claims processing in medicare, it's only about 0.25% of medicare's entire budget and doing that more efficiently or having fewer claims is not going to affect

their administrative costs very much. so, expressed that way, medicare's administrative costs, last time i did the calculations, averaged $509 per person andadministrative costs that same we're -- year were 453, so they were a lot closer and medicare turned out to be a little higher. this issue occurs also when you compare systems in differing countries and that's either at the health plan level or the provider level. so there was one study that attempted to compare hospital administrative costs, and noted and said this in the article that hospitals employ in some countries employ large numbers of physicians. that's not the way healthcare is organized in the united states, hospital exists and does his job and the physicians are paid separately. so then they proceeded to report administrative costs as a percentage of total hospital expenditures. if the hospital expenditures include payments to physicians, the same administration is going to be much lower percentage, the countries that

did that look so much more efficient. but really they were just being measured differentlyn -- this t about whether administered of costs are higher in one country or another. because we haven't made an appropriate comparison. now, it's also a problem sometimes to identify and collect administrative costs. budget documents were generally dark -- not designed for researchers and it's hard to track down costs and we end up making estimates. so what i can tell you for sure if the answer is a percentage, it's wrong. asking for a percentage in this case is simply asking the wrong question. more recently i have looked into how the aca affected administrative costs of private insurance, the exchanges were supposed to reduce the administrative costs of covering private sector individuals. and it turns out, the insurance companies did save money, administrative costs from the year before, to the rafter, went from $414 per person to $265 a person, but the total

went up $893 because the federal government spent more money setting up the exchanges than they saved in administrative costs for the companies. i'd like to address one story that's been going around, i think it was mentioned at an earlier hearing in this series that says duke university hospital supposedly has 900 beds and 1500 billing clerks. when i heard this i thought that seems like the wrong comparison because they also have a lot of outpatient care which has nothing to do with hospital beds. so we checked on duke's website and, of course, hospital inpatient care represents 2% of the visits in the duke health system and i talked to paul witt, associate vice president, turns out they have a staff of 1500 but in addition to billing, they handle scheduling, registration, chickens, medical records, information, cash management, payment and all sorts of other functions. when we asked how many people actually handle just billing for duke hospital, instead of

the other hospitals in the system, turned out to be 15 full-time equivalents, not 1500, 15. thank you, i think i am out of time so thank you very much. i'll be happy to answer your questions. >> thank you, appreciate what you have contributed this morning. and we will begin with questions. senator young is. but he is not here. senator isaacson? >> thank you, senator murkowski. i want to make sure i heard this right. mr. cutler, you said you thought we ought to have a goal of reducing administrative expenses by 50% within 5 years, is that true? is that a number i heard right? >> that is correct. >> you think that's doable? >> i do. >> was the largest single thing you can do to accomplish reduction in administrator costs? >> i think the three items i gave would be the three and those are, simplifying the

complexity with which we are coding patients, so you don't have to search through for everything with the patient, everything the patient has ever had. second is standardizing preauthorization requirements, you don't have to deal with enormous, enormously different systems for preauthorization from every insurer and every business buying insurance. third is electronically integrating medical records so that you don't have to have people take information from one system and put it in another. those three would go a great deal of the way. >> on the last point, in terms of software, are you -- are you familiar with epic? >> yes. >> those are two of the bigger ones is that not correct? >> that's correct. >> is it true that they are not totally interoperable? >> that's correct. >> doesn't that add tremendously to the cost? >> that's exactly the kind of thing i was thinking of. >> good. you are making me look good, thank you. let me -- but i appreciate you

making me look good too. >> 2 for 2. let me make this point for everybody especially members of the senate on the panel, as chairman of the veterans committee, we have just gone through a process of deciding to make our software interoperable with the department of defense. we have department of defense health services, and veterans health services have been totally separate. different software systems doing everything else, we have just signed what i understand is one of the largest contracts in the history of the federal government to acquire which covers the d.o.d. as well. merge all veterans healthcare, and d.o.d. healthcare into one service. do you think things like that will help reduce the overall cost will emerge the two big systems? >> i do believe so especially if done in a way that you can view across -- seamlessly across the different systems that you can really see what is needed for each particular patient when you need it and

avoid all the integration hassles. >> georgia tech in atlanta has developed a system called fire.ñ are you familiar with that? >> no, i'm not. >> acronym for interoperable software between different i.t. systems for healthcare. so they can talk to each other. i found out after -- i did y2k for the state of georgia with 187 school systems and all for y2k. 20 years later i end up in the senate, had chairman of veterans committee and we are dealing with merging -- the largest software is. what i have come to learn is that all the great sums of kayshon and technology brings to information gets complicated when you have two separate sets of systems operating to talk to each other. so i think one of -- i believe -- i've come to believe one of the most important things we can do to reduce the cost, administration and record- keeping and probably

preauthorization too would be to have as much standardization and interoperability of software as possible so wherever the patient comes from, and whatever hospital or physician is serving them, the system is common so they can -- re- scrambled egg or unscramble the egg all over again. i think that's one of the major costs we've seen. and then the va and hopefully proved to be right at some point in time in the future. lastly, preauthorization, how much preauthorization -- is that primarily on surgeries? >> no, it occurs throughout healthcare, it's on surgeries, it's on radiology, it's on testing, on major -- minor procedures, it happens all over. >> is it designed to reduce the amount of healthcare claims filed? >> it is designed to reduce,

there's nothing wrong with having some differences in policies, some are more generous, some are less generous, the issue is that there's so many different ones that it's virtually impossible to keep up with them. so typical provider might be facing thousands of different preauthorization requirements depending on exactly which company the patient is insured by and which individual employer sponsored that a patient works for because they may have customized their own preauthorization requirements. >> one quick question, i had a case in number of years ago where somebody in my company had -- went to the dermatologist to have a mole removed and was tested, had to have it tested, came back denied and the insurance wouldn't pay for it, would have paid for it had it been malignant. or that the catch-22 seems like to me. does that still go on? >> yes, it does. >> thank you very much. >> thank you, madam chairman.

>> thank you senator isaacson. >> thank you. thank you to all of our witnesses for being here today. let me start with you, in april, your association commented on the centers for medicare and medicaid services' proposal to expand the availability of short-term plans. you wrote that you are, quote, concerned that substantially expanding access to short term limited duration insurance will negatively impact conditions in the individual health insurance market, exacerbating problems with access to affordable conference of coverage. one of the reasons you stated was that short-term plans are, quote, offered to consumers only after submitting information about their health status or prior medical conditions. we spent a lot of time focusing on paperwork burdens that providers and insurers deal with in our healthcare system. one of the problems with the trump administration's sabotage of our healthcare system is the paperwork burden it will impose on patients and families. so can you tell us more about

the information patients are often required to submit to purchase short-term plans? >> sure. thank you, senator murray, just as a basis -- basic starting point it's important to note we have supported access to complaints of coverage including coverage for pre- existing conditions. there are some instances, where short-term plans are in the market, and that they will be asking consumers for a particular medical information, it will vary, based on who the insurance provider is, the types of information that they will ask. could be around pre-existing conditions, could be around use of medical services in the past. it could be around other risk factors. so that is the type of information that would be asked for and within short-term policies and i think when we were talking about the impact on the individual market, that's why we expressed some concern about how this would impact the rest of the market. and we said that they should be short-term, limited duration,

and nonrenewable, most important, we emphasized the need for clear disclosure to consumers. we want to make sure that there's no confusion, as to what policy a consumer's buying, they need to know whether it's cumbrian's of coverage or short- term plan, and in our comments back to the administration, really emphasized the need for clear communication so that people understand what it is they are buying. >> okay. i appreciate that, i'm glad our committee is looking at a bipartisan way to look at administrative costs but i hope we can make sure we don't impose new paperwork burdens for our patients. dr. cutler, i'm worried that in addition to imposing new burdens on patients, junk short- term plans will impose new burdens on providers. that will in turn be passed of course on the patients in the form of higher healthcare costs. talk to us about how the coverage in short-term plans compare to normal individual market coverage and do patients typically have to pay more for

their care out-of-pocket if they use short-term plans? >> thank you, senator, typically the answer is yes, that is the short term policies won't cover as many services or they won't cover them as generously. so it adds to the set of different policies that providers have to be aware of. many times they will have particular limitations on for example, medications they might access or particular services they might access in which case the providers then have to spend much more in the way of resources trying to figure out where to direct the patient. all of this complexity adds to expense without reducing what the needs of the patient, affecting the needs of the patient, not by making the patient healthier. >> and so when hospitals and clinics receive less of their payment from insurers, and more out-of-pocket, does that increase or decrease the amount of time they spend on bill collections from patients? >> much, much greater increase. many hospitals now because of the increase in high cost- sharing health plans are devoting many more resources to

collecting money from patients than they used to. and that's been a very big burden for a number of organizations. >> what is the likelihood patients won't be able to pay leaving hospitals with more uncompensated care? >> that's also very high, senator. typical american family has $600 in its bank account. and so when faced with a deductible, $3,000 or even a service that's not covered entirely, they don't have the resources on hand to pay for it. so either they put it on credit card in which case it goes into general unsecured debt or the provider institution works out some arrangement with them and spend a lot of money collecting the amounts down the road. >> thank you. so i am concerned, if we expand the use of junk insurance plans, hospitals and clinics are going to have to do more work to collect bills, sounds like, when patients are not able to afford the huge bills they are stuck with, hospitals will have more uncompensated care and that increases costs for everyone.

and obviously providers ship those costs back to patients so that is my concern and when i think we should be aware of, so i appreciate your responses. thank you. >> thank you, senator murray. >> dr. cutler, in your testimony you discussed an economic arms race between payers and providers. that causes administrative costs to skyrocket as payers try to prevent unnecessary payments. in short, it works this way, insurers introduce requirements, providers must fulfill before they can get paid and in response, to the new rules put in, providers hire additional personnel to maximize the amount they are reimbursed, it goes on and on, and consumers get stuck with the bill. are there actions that congress can take to incentivize payers and providers to avoid this escalation? question number 1. and then question number 2, is whether federal payers like medicare and medicaid are part of this

problem? >> thank you, senator. on the first question, yes, there's a good deal that could be done on standardization, again i want to go back to the question of senator isaacson, how would one do it? the complexity of coding is a clear example of this where an insurer will require additional codes before it will pay on a higher amount and then the provider system will hire additional peaceful to code those additional codes and then seeing that the codes are still going up, the insurer puts additional requirements and so on. so standardizing or eliminating many of the severity adjustments would make a lot of sense because then you don't have to get in an arms race over that. second is standardizing on the preauthorization requirements. you have the situation where maybe perfectly reasonable for one insurer thinking on its own to say i'm going to have a tougher preauthorization requirements and they don't recognize the enormous burden that's placed on the providers and on the other insurers by

now contributing to the cacophony of different things that a small provider system has to deal with. and third is integrating billing systems and medical records systems which again is an area where standardization, government has responsibility for standardization through the high-tech program. and it has not done so in this 6phas been a lost opportunity so far. so i think in all of those, there are areas where the federal government will have to be in -- meekly involved in it. in terms of the federal payers, i think they vary enormously. the medicare program probably involves less administrative costs for providers and the medicaid program does. the reason is that the preauthorization requirements would be minimal in medicare with the exception of medicare advantage with private insurers will do, what they do, but the preauthorization is relatively small, and other than you still have things associated with complexity but by and large, it

illuminates some of those costs. medicaid is somewhat different in part because patients turn a lot from one plan to another or from one type of system to another. that churn creates difficult is for a lot of providers because it's not entirely clear who is going to be ensuring the patient when that patient comes to use services or even if at all if that patient is going to be insured at all. so it is something where the difficulty getting universal insurance coverage has created havoc on providers not just in terms of lost revenue but in terms of increased expense associated with having to monitor patients, collect based on whatever plan they are in and see through all the other parts of it. >> in your response to me, doctor, you referenced the coding and severity levels. and you have discussed in your testimony, the potential for severity neutral payments. or by providers -- not paid more -- with some exceptions

for more severe cases. would agreements between payers and providers to allow bsome of the savings for agreeing to severity neutral compensation from payers require new legislation or regulation to your knowledge? >> one could have private agreements like this that would not. in order to really be effective, you would have to do it for the vast nsit+part of th healthcare system because it's very difficult to have different payers with different requirements and save a lot on administrative expense. the greatest gains would come from standardization and harmonization which necessarily involves the federal government. the reason why many providers and insurers in the private sector have not gone there, agree or disagree, is because the federal government is acting a different way, it makes no sense to do something different. so it has to be in concert particularly with medicare but also with medicaid, in order to get maximum effectiveness.

>> mr. iles? >> that's a good point, dr. cutler, and i think as we think about standardizing prior authorization, it's also important to note there are a number of private efforts that are within also the congressional purview, so what's happening with the council for affordable quality healthcare is that i have created a committee with over 100 organizations looking at how can you standardize these processes and transactions to get more simplified way of operating so you can do these in realtime? right at the point q1d9yz treat an individual patient or point of prescribing. so there are efforts happening not to say more that can't be done. >> thank you. >> thank you commander senator young. >> thank you, madam chair and thank you, ranking member mary. thank you to all the witnesses for being here today. we are talking a lot this morning about administrative

burdens and healthcare system, how they affect doctors, hospitals insurers and the government. but i think it's important that we remember the most significant part of this whole discussion, which is patients and their families. i am the mother of a son with very complex medical needs. at various times, wonderful young man, 30 years old who happens to have very severe cerebral palsy and medical competitions that go with that. also because he doesn't speak or use his fingers or communicate very clearly to the outside world although he is cognitively understanding everything, he is time- consuming. we've been very fortunate because ben has had some incredible providers and caregivers. but i've experienced firsthand what it's like to be forced to jump through administrative hoops being stuck in the middle between multiple providers, and insurers because we have private insurance but medicaid also covers ben. or sometimes dealing with an insurance company employee who

simply doesn't have the expertise to understand the significance of the medical record he is looking at. i've also been there when the insurance all of a sudden decides to switch him from one medication that works for him that he's been on for years to another medication. ben has had about 10 doctors and 20 medications. and i hear from granite starters who experience frustrations too. it's hard as a patient or family member to spend all day on the phone wondering if a prior authorization went through, particularly hard when you are juggling a job, caring for kids and all the other daily activities that families have. i will also note we have talked about the importance of integrating electronic medical records for purposes of administrative fees, but i can tell you how important it is to patient safety. at three clock in the morning when your hospital owns your physician practice tells you that they can't get access to your son's primary care health record, because they are on

different electronic systems, and all of a sudden the doctor is saying do you remember 15 years ago when your son had that one pneumonia whether we used this or that antibiotic? it's pretty scary. so when we are talking about administrative burdens, i think we really -- what really would make a difference is to eliminate these burdens for patients óñgand families. effort, but also for good patient outcomes. could all of you address and we will go down the line, start with you, ms. halbert, what can congress do to reduce administered of burdens for patients and their families? >> thank you for that excellent question. to echo what some of the other panelists have said, i think more alignment within private payers around things like preauthorization preauthorization, around billing , and to dr. carver's point earlier, not just private

payers, but federal payers as well. from a hospital perspective, the federal government with the many ways it funds healthcare, does not handle all of these things consistently. i think there's a role for the federal government in looking at federal payers, how do federal payers manage pre- authorizations? billing requirements. and there's much more of a role from health insurance plans, in taking ownership of this issue and taking steps to streamline these requirements to make it easier. >> thank you for sharing your story. i think it's really important to recognize the impact on patients and i know as we've been talking about this, that's where we need to start. thinking about the burden on families, and caregivers, i think getting to a truly interoperable system where those medical records are able to be accessed, at any point in time in any place, and being able to do so in an electronic

fashion and tap into them, senator isaacson touched on some of the interoperability challenges. health plans are committed to being part of the solution but we can only be one part because it has to work between plans, has to work between providers and also has to work between federal government. so aligning a lot of those standards and making it simpler, more automated in realtime would alleviate a lot of that burden to have to bring in the patients in the first place and really allow it to happen with the provider. >> thank you. >> i want to echo everything that was said, i also want to make one comment which is that while the federal government has been slow to act in some of these areas, a number of states have made progress in terms of trying to increase the interoperability and particularly around issues of the ownership of the records and your right to access the records everywhere. i know senator smith comes from a state where that's been probably as much as any state on those lines. so i think we can do much more

-- with the sort of technology background but also with personal interactions to make sure that people have access to their records which belong to them. >> thank you. i know i'm running out of time but could i ask dr. book? >> thank you, your story illustrates exactly why i mentioned in my testimony about the administered of burden patients that no one seems to talk about very often. i think i have experienced that myself, a lot of other people have experienced it and it's not just in healthcare, you know, i experienced an issue like this with the irs where one person says i have paid and then i get a letter saying i didn't. so simply putting this under one organization may not solve it, but there's one thing we can do is establish a safe harbor from antitrust concerns that might inhibit different information systems, companies from talking to each other. so they wouldn't be afraid to be prosecuted for collusion

because they talk to each other about a standard data interchange format. also there's a lot of restrictions on patient access to their own data. i have an implanted defibrillator. the company that made it used to have a web portal where patience could get their own data and that was shut down because it was found to violate some regulations. i don't see why there should be a regulation that prevents patients from accessing their own data at 3:00 a.m. or any other time. >> i appreciate that very much. thank you for letting me go over and i will submit a question on transparency and outcomes which i think is as important as cost too, thanks. it is such an important question, we think about the administered of burden, sounds so technical, but at the end of the day, it all comes back to the individual, the patient and their families. i wanted to ask you about the rule that you briefly referenced, minimum rule of five.

with cms requires at least 5% but no fewer than five skilled nursing facilities. in a state every year surveyed. in the state of alaska we've got 17. 17 facilities. so we are in a situation where we get the benefit i guess, of about 30% surveys. cms surveys five each year, so it's about 30%. you put that in, in a state like california, i don't know how many facilities they have, but we all know it's well over 17. you mentioned in your testimony that the rural areas simply lack scale. and with this particular regulation, you can see how the lack of scale forces even greater costs on a facility. because of these requirements.

you've got civil penalties that you have to deal with. and just the reality of undergoing the frequency of these surveys. can you speak just briefly to this issue of scale? in our rural facilities? and how regulations just like this can add to the already heightened costs? >> sure, thank you for the chance to answer that question. so you accurately describe the minimum of five rule. i actually do happen to know that in california, has 1200 skilled nursing facilities, so that means they receive a federal survey once every 20 years, mine received one every three to four years. why? that's important because the federal surveyors have two responsibilities, responsibility is to oversee the state surveyors who conduct annual surveys of our facilities, and to do the

check, to check the facility itself, these surveys tend to have a high number of deficiencies, not all deficiencies are related to patient care and there's a tremendous burden on the facility after a survey, very detailed plans of correction, for each individual item found in the survey. those are resources often clinical staff, nurses or others that could be devoted to patient care. they could be -- >> back to your opportunity cost. >> absolutely, could be devoted to other things. why is it hard in a rural facility? imagine a facility where you have 11 beds and you have five surveyors on yours facility for a week. they are going to find things that you have to right up, and address, it's a tremendous direct cost as you said, tremendous opportunity cost. so we think there should be a one standard framework. for surveys that is consistent across states. again, our facility is welcome, has welcomed the opportunity to

correct things related to patient care but many of these things are not, as an example we had a facility working hard to serve culturally appropriate food to its elders. they received a deficiency for serving too much fish. there is no such thing as too much fish. >> i wasn't aware there was in alaska either. but those are the kinds of things that are costing resources, staff time, dollars and particular burdens on small facilities that have less available. >> let me ask about this rural healthcare strategy, cms announced this several months ago, and wants to focus on this rural healthcare strategy, i sent a letter to the administrator suggesting there is no one rural lens that a rural healthcare strategy needs to be a little bit broader. can you speak to that aspect of

it, that if we think of urban, you've got rural, and you treat them differently that way, but explain to the committee here that -- the challenges you face. >> excellent point. when we think about rural, our definitions are different, rural hospital in colorado might be 100 beds and that's considered rural, and then we look at a community like wrangell where they have an eight vet hospital plus swing beds. the needs of those facilities are going to be different. we appreciate cms's focus on rural and their desire to have a rural lens to look at hospitals and other healthcare providers, but we think it needs to not just be a single rural lens, but it really needs to consider the different geographies, different patient populations, different types of facilities, the operative word is flexibility. our needs are going to be much

different than a state like iowa. so i think there are many examples that i could point to of ways that cms could take that philosophy, develop more flexibility and be more responsive to the needs of our community whether it is electronic health records, direct supervision, or other areas. >> we would welcome that input as they do work forward on this strategy so that there is a full appreciation of that. thank you. senator smith? >> thank you, madam chair and ranking member murray and thank you to our panelists, very interesting. i'm going to brag on minnesota a little bit, we are a national leader when it comes to delivering high quality care, and we also have been an innovator and leader when it comes to reducing administered of costs, one innovation is minnesota's healthcare administrative simplification initiative. what it has done is launch a series of reforms to standardize and automate

healthcare transactions, and itç is saving tens of millions of dollars in minnesota. dr. cutler, i wanted to ask you a little bit more about this, i'm wondering how innovations like this at the state level can inform the kind of changes that we need to make at the federal level. it strikes me that there are so many states have so much to do, with how these programs are implemented, how insurance companies are regulated, they have a vital role to play, could you speak about that a little bit? >> yes. absolutely. so there are a number of areas where states can make enormous progress. you mentioned minnesota which i believe is justifiably proud, should be justifiably proud, also places like utah, nearby, but with a different obviously background have also made progress there. so those are very good in that they provide great examples to work from from, they show concrete savings, satisfaction on the provider system, they

show how insurers and providers and patients locally can come together. they also reach a limit in terms of what they can do. so for example, they can't do things that affect medicare. because that's federal and they can't typically do that. they also can't do things that affect the large firm market where the employees are self- insured because those are not affected by state insurance regulations. so i think they provide significant savings and proof of concept with which we can then use to build both nationally and jtíwin related domains. >> so they could show us ways of demonstrating what works, experimenting, and then that could inform what we do at the federal level? certainly can't solve the issues at federal level. mr. iles, would you like to comment on that? >> i think that's a very good observation that you can learn a lot from the state level but

when you think about how healthcare operates, in different regions of the country, how it's practiced whether it would be in the upper midwest or in california or other places, ji5nto scale a national level, i think that really is informative, in terms of the steps the federal government could take or congress could take to move things forward, but it is hard to sort of replicate exactly what minnesota would have done in every other state. >> thank you for that. i'm quite interested in this as a way of demonstrating what we might be able to do. as we try to figure out how to tackle the big kahuna that we need to tackle here. in this committee and at the federal level. i have actually been working on legislation to figure out how to support these kinds of public-private partnerships at the state level as a way of demonstrating success and i look forward to talking with some of the other members of my committee, this committee, as well. as we move forward. i'd like to go to the question of preauthorization.

that senator hassan was talking about, the impact this has on people and i can't tell you the number of minnesotans that have told me about their frustration getting caught in this catch-22 of trying to get the care they know they are a family member need while at the same time they are hung up getting the documentation together. mr. iles and dr. cutler, both of your testimonies raised this issue as an opportunity for simplification reform. and mr. iles, i would wonder if you would support the kind of standardizing of prior authorization protocols that dr. cutler was talking about across products and payers, do you think something like that could work? >> i think it has potential. i think it's important to look at exactly which population is being served, medicaid is different than medicare, but they are adamant -- elements

that could be standardized and are members working through examples with caqh and others to make it easier for providers to take patients out of it, i think have a lot of potential. >> thank you. dr. cutler, do you see -- where do you see the resistance to this kind of standardization? prior authorization? >> resistance, i'm trying to think of the right word because resistance isn't quite what's going through my mind, it's really more reluctance. and to a great extent, it comes from the insurers because they all have customized their own systems and put them in place. and then they do it for each individual business that they insure and so on and you say we want to have standardization, but what will happen to what i put in place? and so it's sort of cost of change is what is staring them in the face and a little bit perplexed about how to deal with that.

it reminds me a little bit about providers when they were faced with the choice of buying electronic medical rows -- records or not. once it was implement it, they are extremely glad they did so and they believe they provide better patient care and evidence shows that. so it's just a question of getting over the hump that says yes, we can do this. and then we will achieve these benefits. >> there is such an incredible inherent complexity in the way that america uniquely provides health care to people. and most complexity is there for some reason that made sense some time, but the question is, how do you clear all that out and for the benefit of the patients and families? thank you very much, madam chair. >> thank you, senator cassidy? >> thank you, gentleman i've got a bunch of questions, so if i hausle you are wrong -- if i hausle you a long, it's not to be rude. on my website i have a making healthcare preferable again, one of the things we address is

administered of costs. now, cognitive dissonance, dr. cutler, you mentioned how kind of ascribing to the government the role of making things less administratively burdensome, and i'm thinking, i must be dropping acid, not that i have ever dropped acid but for the record i have not -- but one of the briefings we were giving, the american -- 629 different regulatory requirements from four mr. iles could give me the same thing for insurance. having practiced medicine is incredible, how much the federal government loads upon us. and i almost -- my jaw drops when you said most providers are pleased about the electronic health records. actually i read the leading cause for burnout for physicians is electronic health record. i'm not sure who is finding it so -- who is so enamored.

because the electronic health record is just so burdensome. somebody put in their testimony 30 minutes of clicking for every five minutes of seeing a patient. i find it's 30 minutes of clicking for five minutes of seeing a patient. it is just a parallel reality if we say that doctors are in control of this. and i say that not to chide or observe. dr. book, i like your âh we've not looked at the administered of burden upon the patient or the physician, we've looked upon it on the system. yes the physician some but not nearly as much. one model we talk about in our white paper is the direct primary care model. in which a patient pays a monthly fee, and the doctor does not bill insurance companies for those services covered by the monthly fee, and

the patient doesn't have otherwise a deductible or coinsurance, rather it's just the monthly fee. senator cantwell and i have a bill that would promote this. any thoughts about direct primary care? are you familiar with that? >> i'm not familiar with it before but it sounds like it has potential. i think the question -- what percentage of the healthcare system will be affected by that? that could be effective for a large percentage of patients. but the real large dollars are going into very sick patients needing specialty care. >> you mentioned that. the way you would still have catastrophic coverage on top. hence senator cantwell's interest. but for that kind of ambulatory service, i have a headache on friday, i don't go to the e.r., i see the doctor with whom i have a contract. that seems to work for both the patient and the doc. out of the e.r.

>> that sounds like it has potential and i'd be happy to look at it and say something for the record later if you would like. >> got you. dr. cutler, you mentioned the issue with prior authorization. and how medicare doesn't have prior authorization but medicare has an ungodly amount of waste, fraud and abuse. go down to south miami and there's mansions built upon waste, fraud and abuse. there is the tension with the absence of it in medicare, yes but a lot of now -- i like your concept could we standardize? but mr. iles, for you to suggest it's not burdensome upon the patient, i would -- doc, when i would see patients, my nurse would just put the phone on speaker, as she heard over and over again your call is very important to us, please hang on and 45 minutes later that very important call got answered and it would be approved. frankly, doctors receive -- perceive pre-auth they were not prescribed certain therapy even

if it's indicated to say that. why could this not be integrated into the electronic medical record? why does minors have to be on the phone as opposed to the insurance company being able to otherwise access it? >> i think the challenge right now, senator cassidy, is around interoperability of electronic medical records. >> i talk -- i thought they get medical data, they truly download my hbilling data so wh don't they use that? >> that may be for some plans and may not be for all electronic medical record systems. right? that may be a good example of something we can learn from in terms of how we could scale that and apply that more broadly. >> let me stop you. dr. cutler, you mentioned there is an increased overhead associated with dryvit plans. yet what i have read is that in countries such as the netherlands which only use private plans, they still have half of our administrative overhead. it doesn't seem inherent it is going to be the federal

government, because dr. book tells me, the overhead is associated with medicare is actually more costly than private plans. there's something the netherlands does that is different. any comments on that? >> yes. in most countries, the netherlands is an example, germany is another where they have competing private plans. private plans are highly regulated. so they don't impose preauthorization requirements. >> so it goes back to the standardization -- >> back to the standardization and they don't have all the different severity codes and all of that so they have eliminated a lot of the administrative -- >> got you. two more things about that. mr. iles, i've heard of something called a realtime benefit analysis. going to the interchange between senator murray and dr. cutler, the patient doesn't know how much something costs. i will note these horror stories under obamacare policies, not under limited programs, but that said, a realtime benefit analysis where you press a button and the patient automatically knows how much they owe relative to

coinsurance and co-pay. i'm told some insurers have this, it's not yet implement it. why would this not be more broadly available? >> most of these tools are available through our members, the vast majority well over 80% of them have these types of tools, question is are they being used at the point -- but i was told specifically they've not yet been deployed in the sense when i go to my mri, that i can click and it says my coinsurance deductible, i have 200 bucks left, dr. cutler, you're nodding your head, are you familiar? >> yes. in fact, that is true, a number of them -- some of the plans do not have it, a number have it and either they don't make it available or it's only available in very difficult to access circumstances. >> seems like we need to make an app for that. >> i can tell you from my personal experiences, sometimes they get it wrong. there was a provider who told me i had to go -- when i had actually fulfilled my entire out-of-pocket limit for the year so the information they get is not always correct. >> still beta version but they are in -- >> it's a great concept and it

it doesn't seem to work anywhere else. >> i am way over, thank you, matt and check for your indulgence, i have one or two more but i will let it now. >> opportunity for second round. senator warren? >> thank you. the cost of healthcare is to -- is too high and we are focused on administering the costs. i actually want to zero in on how much private insurance companies spent on administration. compared to public programs like medicare. it there's been a lot of debate about how to d -- how to deal with comparisons, the medicare trustees report states that administered costs for medicare are $8.1 billion, that's somewhere between one and 2% of overall expenditures. that's a whole lot lower than the administered of costs in private insurance, which seems to range somewhere between 10 and 12%. depending on who you ask, who paid for the study, and what data you are using. but some people argue that medicare beneficiaries have higher medical costs, than the younger healthier people, who

are on private coverage, which makes administrator costs look artificially small as a share of medicare costs. so we should use dollar amounts instead. dr. book, you've made this argument and you've done an analysis that claims medicare actually spends more dollars per beneficiary, you were quoted by senator cassidy on that. but medicare actually spends more dollar per beneficiary on administrative costs than private insurance, is that right? >> that's correct. >> i want to dig into how you reached that conclusion. you argue that we should add to medicare administered of costs the cost of all the other ways the federal government supposedly subsidizes medicare, by doing things like keeping records, writing laws, collecting revenues at the irs, maintaining federal buildings, paying salaries in congress, the list goes on and on. your analysis specifically says that you want to take a flat percentage of expenses end

quote, the general government function. this is in your work, the general government function part of the federal budget, and relabeling that as medicare administered of costs. in other words, you are saying because we are sitting here today discussing medicare at this hearing we should count as medicare costs, a piece of the salary of every member of this committee, a piece of what it costs to keep the lights and air conditioning on in this hearing room, a piece of what it costs to run the electricity to your microphone, a piece of the salary for the capitol hill police officer at the door, and all as part of medicare's administrator costs? >> i was trying to subdue an apples to apples comparison between the cost of operating medicare and private sector -- >> i'm just looking at what you said. >> i understand that. and the items you mentioned are

included but they are tiny, they are pennies. what's more important is private insurance companies -- >> they are only pennies -- i'm sorry -- i'm just trying to get how you calculate this. they are only pennies because i just picked out a few things -- added up over the range of the entire federal government, look, i'm also trying to use the best data possible. when trying to -- but but i think the better data -- i can tell you -- >> this approach doesn't have any credibility at all, this is just a game to inflate the numbers. so i want to look at some of the numbers that are not in dispute. mr. iles, you work for the trade association for insurance companies? so you are here working today for the insurance companies. the five largest for-profit insurers in the country reported roughly $20 billion in profit last year. can you tell me how does that compare to the prophet the federal government makes on medicare and medicaid? >> i think it's important to look at the context of profits.

>> how does it compare? >> i couldn't say, i don't know. >> let me tell you, it compares to zero. because the federal government -- >> actually medicare loses money. >> or for that matter, on the veterans health administration or the indian health service or tricare. because these programs are about providing healthcare. not raking in money for profit or handing out dividends to shareholders. you know, we can go back and forth, on whether administered of costs in medicare are 2% or 7%. >> not a percentage. >> one thing is perfectly clear. when giant for-profit companies divide up who gets what, out of the premium dollars, that they rake in, they've never forget to set aside a few billion dollars for themselves. and i think that's why it's time to crack down on the shady practices in insurance companies used to juice their profits, at the expense of

families that are struggling to get by, and i think it's time to ramp up the fight for medicare for all. so that everyone is covered, no one goes broke because of a medical bill, and we start treating healthcare like the basic human right that it is. not like a profit center for multibillion-dollar corporations. thank you, madam chair. >> thank you, senator scott? >> thank you, i have decided to pass on my time to dr. cassidy who is in such a fantastic job, i just want to make a quick comment on medicare for all, having spent about 25 years in the insurance industry, one of the things that i think we ought to do i think that dr. book was starting down that path is to understand and appreciate the overall cost that the government bears for every single program that we have. when we are spending $4 trillion of the government bringing in $3 trillion of the government, the taxpayers are the ones that are losing the elasticity in their paychecks because their money is coming to washington

compelled to do so for programs that perhaps could be better provided through the private sector. if we look at the overall cost structure. so you can't not look at every facet of what causes something to cost what it does in the government perspective, you cannot articulate with great specificity the real challenge that the taxpayer has for all of the nuances that the government brings with it. when it provides healthcare or any other service. dr. cassidy? >> thank you, senator scott. i just can't help but in all due respect to senator warren comment on a couple things. your analysis has total credibility with me. and i'll say it because the first time i saw that the doj was doing a major antifraud thing on all the ripoffs in south florida and louisiana on medicare, and i realize that blue cross would have done that on their own ticket, and instead, it is the doj doing it for cms, made me realize that

that was not being included as part of of it, as regards the medicare for all, i can't help but mentioned that the urban institute, pretty liberal, as well as the tax policy center, have all come in with numbers roughly the same, roughly that we would, quite remarkable, medicare for all in conservative estimates would increase federal budget by a proximally $32.6 trillion in the first 10 years of implementation, we would have to double corporate and individual taxes and it would still not be enough to pay for everything. so just to say that there has to be a little bit note of reality as opposed to wishful thinking in all of this. now back to the questions i had kind of on my own. mr. iles, major point, and ms. holtberg, a major part of the administrative overhead associated with all of this is

negotiating prices. somebody pointed out to me that gap policies proliferate even when the obamacare individual markets are very limited and partly is that policies are able to piggyback onto medicare pricing. all that effort to negotiate has been done. to dr. cutler's point. and so you can say i'm going to pay you medicare pricing and then the insurance company can come in and immediately have the provider panel. now, mr. iles, what would you think if on the individual exchanges in a state where you only have one or two insurance companies like louisiana, effectively a monopoly, you could say okay, we're going to allow insurers to come in and to use medicare pricing or multiple 1.2, 1.3 times, medicare pricing, and immediately in business. to provide competition to the stakeholders. why is it important? it's clearly been shown when you have one or two dominant insurers, costs go up.

if you have more competition, cost elwgoes down. that medigap, after what dr. says in -- in the netherlands one of the ways they relate is by pricing. as he is nodding his head. as a provider, ms. holtberg, what would you think of that? have this conversation, whether it is medicare for all or some other variation of medicare pricing, it is really important to note that often medicare does not cover cost and in my state, generally speaking -- >> under -- the amendment we have the medicaid in alaska would have been -- would have had the true cost recognized some reason your governor

opposed this, but that is up to him. >> we support having access to choice and competition within the marketplace bequeathing that is really important. i think right now the knowledge about the medicare schedule about what medicaid is paying is available out there, i think we want to make sure that plans are negotiating with physicians in the most effective way, that we are living the system toward paying for value, not just looking at what medicaid or medicare might be paying, so -- >> the problem is all that requires a heck of a lot of negotiating and putting together provider panels and right now we have whole counties in iowa that don't have a single insurer so i don't want the -- that to be the enemy. any thoughts upon what i just offered? >> i think it is interesting to

note how medicare makes its prices. they do not negotiate with providers they just set prices by regulation. >> they do look at cost reports. >> a look at cost reports and for physician services they survey about 100 physicians for each code they are reviewing and asking to evaluate the service they are reviewing compared to some other service and answered a few questions on multiple-choice five-part scale, where it is more about the same or more difficult or less difficult. >> the physician 5zs)does not h to take medicare and there are some places where they take less medicare. you can pay multiple but the point is -- >> we have insurance companies and they can set rates to physicians and to other providers. and we don't have the insurer. i guess i am looking for a solution. any comments on this? >> yes, so i think getting more firms and insurance and competition is clearly very good and beneficial and i think anything we can do to make it

easy. i don't know -- my sense is that that is less of an issue than some other things are, but let me not states that so assertively. i do think that we ought to be moving medicare payments away from just a fee for service levels. >> so i think -- what i think the transition that says here are the rates you have access to now and here's how we're going to move it over time. >> last question. they use reference pricing very effectively to lower expenses, and as for context, they do a survey of providers, they found the range for hipper placement or knee replacements, $20- $50,000 but the quality is equal so they say that we will give you 20 k. if you want to go someplace else you pay the dell tub in the meantime you are going to get 20 k and that is always going to pay. everybody lowers the prices and we end up paying the same across the board. it seems to have worked.

can we use more of that? -- with sometimes there is an issue of bringing it relevance. what are your thoughts about insurance companies using that mark? i will open it up to the other panelists. >> thank you. i think there is interest in looking at innovative pricing models to make sure that we are getting the most value. the question really will come down to things like participation in networks, and will you have access to an adequate range of providers and can you make it work for the patient and they have real-time transparency? there are a lot of considerations to think about, but i think anything that provides greater transparency to the patient and understanding about what the difference is between quality is a good thing. so i think there is interest in those kinds of activities. >> senator, i would just like to add that in a situation of california you are dealing with a very large market. both covered life and providers and as we have this

conversation, we can't forget the safety net providers that are like hospitals, open 24 hours a day. we need to make sure that as we look at things like competition and price transparency that we are also addressing our safety net and ensure we do not lose our safety net. >> if i can offer one comment which is the reference pricing has been a huge success, a great success there. what they do is very intensive so they call up the patient and they say hey, look, you are scheduled for elective hip replacement. if you go to this institute where it is schedule that, it is $60,000, the other is 20,000 so you're going to pay the 40,000 pic if you don't do that, if you just say look, there is a high deductible policy and so on, then people don't switch where they go. and it goes back to what we were talking about earlier, people do not understand the insurance policies at all so they actually do very little price shopping. in a typical

high deductible policy there is zero price shopping. it is when it is much more intensive that i go to you and say mister cutler, you can either pay 40,000 or pay your standard $200 and i can show you the quality metrics, which one would you like? then you can get people to switch. unfortunately it works well but it is not as easy as we would like it. >> what he is saying is there a measure of costs and plummeting something like that, and in some cases those costs might be well worth it. we tend to think of it as waste, but sometimes those costs are spent on very useful things, and that as an example, where you're calling someone up and explaining the situation, something they may not be able to look at themselves because providers are not posting prices in advance. make more information is costly but it is well worth the. >> -- post in advance. >> thank you. >> senator murray, follow-up.

>> i want to thank all of our witnesses for being here today and for your insightfulness. thank you. >> thank you. very briefly, to wrap up on the prior authorization, because i think senator hoss and spoke to, there is so much frustration that goes on, not only on the patient side, but administratively, and it just seems that it is one of these situations where you -- in order to meet the requirement, you have got to make sure that you are either putting your administrative assistant on speakerphone for 45 minutes, it is kind of this -- not harassment but maybe it is harassment, you just have to stay on and it requires greater burden to provide the authorization that will effectively work to reduce the

cost, but it seems to me that there is a line here, when you are bringing on people to handle this,i$qñ does -- with a standardization that has been suggested by you, doctor cutler, and others have echoed that that will help, is that enough? in other words, are we at a point where we have effectively started secondary business here with just dealing with the insurance companies to get the sign off and get that approval? is it just standardization that will address this or is there more to this, because this is something that everyone is complaining about. doctor cutler.=04

>> you both want to standardize, and you also want to make it easy to transfer the information from the medical record as proof that the preauthorization requirement has been met. so they can be seamless. -- because they are standard -- standardize in indy i.t. systems can provide verification that it was done. and then you don't need the people, so i think you get part of the way there just by standardizing and then another part of the way through easy interchange. >> i understand all of that. i recognize in my mind i still go back to randall, where we ÷rstaff is limited, and the requirements are at significant -- and so back to the issue of scale, and why a rural strategy is going to be important to recognize that we are just not equally

situated and even with the interoperability and the integration of electronic medical records, i don't know if you have additional suggestions that speak to the smaller facilities that are pretty extraordinary. i do inc. to echo doctor color that technology is a piece of this. technology can be a help, but right now, it is sometimes a hindrance. so i think we have to figure out this technology piece. also recognizing that there may be other steps that we need to take to really enable for us to continue to have a rural healthcare infrastructure that is meaningful, but as an example, this little tiny medical center on an island, is going to spend $65,000 this year on upgrading to meet stage iii meaningful use. they are not going to see patient benefits for those

dollars, they're having to purchase a software package with functionality, they don't need. and earlier this year they had less than 10 days cash on hand, so $65,000 in this committee from where you do it billions of dollars may not seem like a lot before this medical center it is really important and for the residents of that community. is really important. so we encourage revisiting the current framework, removing some of those barriers, ensuring that we have an operability which was the promise of electronic medical records that have not been realized. and then i think we may see enough improvement that that could be sufficient. we will meet again on wednesday, august 15 and will hear from doctor francis collins from the national institute of health. so we thank you all for being

with us and providing such great testimony to the committee today and with that we stand adjourned. tonight, chef -- will talk about his experience working to feed the people of puerto rico after hurricane maria. will have live coverage this evening starting at seven eastern.

-- and actress anne hathaway. five coverage begins tomorrow at 7 pm eastern. this weekend, the city tour takes you to lake charles, louisiana. with the help of our sudden link -- cable partners, we will explore the literary life and history of lake charles. saturday at noon eastern, here about how lake charles grew from a lawless home to pirate to one of the country's top manufacturers of petrochemicals. with author -- >> in terms of the exploration and discovery, but it actually really came more to fruition with the actual refining of oil. because we had the ideal

situation, we were ideally suited in terms of where -- where the water was able to be moved in and out easily in lake charles. >> on sunday at 2 pm eastern, on american history tv, a visit to the small and predominantly african-american community of morrisville. >> at one time, this was a beautiful, wonderful, wonderful community. we had everything that there was. and there was family, church, school, grocery stores, and people begin to get better jobs so it showed them that they could be better in the future for the next generation. >> watch our city tour of lake charles, louisiana, saturday at noon eastern. in sunday -- on c-span three. working with our cable affiliates as we explore america.

what does it mean to be american? that is this year's competition question and we are asking middle and high school students to answer it for producing a short documentary about a constitutional right. national characteristic, or historic event. and explain how it defines the american experience. we are awarding $100,000 in total cash prizes. including a grand prize of $5000. busiest deadline is january 20, 2019. for more information, go to our website. national republican congressional committee chair of ohio congressman -- now on the 2018 midterm elections, over the next hour he talks to christian science reporters about whether rates across the country as well as pren