cost sharing levels. it will be comprised of federal bureaucrats and it, just like the comparative effectiveness research council, will not necessarily have a single actively practicing physician among its members, not one. this the very type of federal health care envisioned by some proponents of a government takeover which would dictate personal medical treatment allowed solely on the basis of cost. having the government define what quality medical care is, this is not what americans view as the right direction or the change they desire. they know what you know, and that is the quality evaluated by patients and their families need to be done by a quality position. the surgical unit has met its quota and a veteran wait a long time. as the senior who cannot find a doctor able to see any more

medicare patients. asked those who utilize the indian health service if they receive the choices necessary to respond and probably to their needs. as the medicaid mom if the system will facilitate their treatment. ask them. asked how the delivery system that responds to their needs. none of these may be printable healthcare we all hold dear comic sensibility, affordability, innovation, choices. there are positive solutions. ones that would improve the situation. that is what we should be doing. we should not be forcing every single american into a system that will betray those principles dear to all. the final analysis, the question becomes, will we allow americans the opportunity to opt out? will we allow three people the right to decide that this is not the system they want for

themselves or for their family? i would hope that the panelists would address that question. this is hardly a step in preserving the patience/doctor relationship. when you go through the pages of this bill, as you will note is not on our does this morning, it is based on the government absolution philosophy. this is more federal supervision and more federal administration. it will come to rely on mandates, rationing, and third- party division making predicted -- decision making. this is hardly a step that is preserving the patience/doctor relationship, the one thing that has allowed american said to have the greatest health care in the world. achieving this type of change only be possible by embracing a fundamental rethinking of our health care delivery system, which champions personal ownership of coverage. there are possible solutions to the challenges we face.

i am hopeful the committee and the house will allow for an open, vibrant, robust debate and delivered of process. i yield back. >> thank you. pursuant to committee rules, all members in a summit opening statement in writing would be a part of the permanent record. our first panel this morning will be made up of dr. romer. she is the chair of the council of economic advisers and president obama's administration. she is the former vice president of the air -- american economic association. she holds a b.a. from the college of william and mary and a ph.d. from the massachusetts institute of technology. welcome to the committee. i know there was a lot scheduling changes over the weekend to get you here. i appreciate your cooperation.

i also know that we a very short leash on your time. dr. romer will be leading pretty close to 1:30 p.m. that means not everybody's going to get to as great question. we will go as rapidly and as quickly as we allow. welcome to the committee. your entire statement will be placed in record. you can proceed in a manner in which you are most comfortable. >> thank you very much. >> you will have 10 minutes. in 9 minutes, an orange light will come on and any concerns summarizing. thank you. >> chairman miller, ranking member klein and members of the committee, it is an honor to be with you today. the president has identified comprehensive health-care reform as a top priority. the administration is grateful

to congress for working so quickly and tire sleep on the issue. in my remarks today, i will discuss the economic imperative of reform that satisfies the president's dual goals of slowing the growth rate of health care costs significantly and providing quality at affordable health insurance coverage for all americans. the figures in the analysis that underlie testimony are contained in the council's economic reports, the case for health care reform. with your permission, i'd like to include a copy of the report in my testimony to the sources and methodology are fully documented for the committee. many of the crucial trends in american health care are well known, but the council of economic advisers worked with others in the administration to develop projections of what will happen in the absence of reform. spelling out these trends may see compelling case that the status quo is simply not an

option. one key fact is that health care expenditures in the united states are about 18% of gdp. that is the highest of any country. we go to the first figure. the figure shows our projections of the likely path of national health care expenditures. these expenditures are projected to rise sharply, by 2014, health expenditures could be roughly 1/3 of total output in the u.s. economy. all right. how about households? rising expenditures will likely show up in rising insurance premiums. even if employers can take to pay the lion's share premium, but economic theory and empirical evidence suggests that this trend will show up in stagnating take-home wages. the next figure shows our projections of total compensation. both of these are inflation.

the wedge shaped area between the two lines shows are predicted levels of insurance premiums. without reform, the non insurance part of compensation will grow very slowly and will likely fall eventually as premiums rise rapidly. all right. rising health care costs also means that government spending on medicare and medicaid will rise sharply over time. we will go to the next figure. this picture -- the dash line shows the projected path of combined federal and state spending on medicare and medicaid. our projections show these expenditures, which are currently about 6% of gdp, will rise to 15% of gdp by 2014. in the absence of tremendous increases in taxes or reductions and other types of government spending, this trend applies a devastating and frankly unsustainable rise in the federal budget deficit.

another trend that is to crucial to be ignored is the rise in the number of americans without health insurers. currently, 46 million people in the united states are uninsured. in the absence of reform, the next picture, this number will rise to 72 million. this is an 24. this is an increase of 26 million people over the next 30 years. the president has emphasized that providing quality insurance for all americans is a key reform. for all those who have insurance, the president has promised that if you like your doctor you can keep it. the president and congress are also proposing methods to make the existing system work better for all families. this is such a simplification of insurance forms and electronic health records that reduce duplication of tests and prevent medical errors. for the millions of americans without insurance, the president

is committed to working with congress to design a sensible cost effective method of coverage expansion. expanding coverage will likely involve the creation of a health insurance of exchange to give individuals and small groups the same benefits of risk pooling and elimination of adverse selection predict election that others enjoy. one feature that the president emphasized that no one should be night -- be denied coverage due to pre-existing conditions. they need the security of knowing that if they change jobs, they will still be able to get health insurance coverage. there are important benefits to the economy and to society of covered expansion. the most important of these involves the health and economic well-being of the uninsured. in our report, we used the best available at best bet to quantify the cost and benefit of expanding coverage to all americans. among the benefits, we attempted to put a dollar value on my

expense unscom improvement in health, and a decrease risk of financial ruin. we find the benefits of expanding coverage to the uninsured are very large. our estimates show the net benefits are roughly $100 billion per year, about 2/3% of gdp. another benefit of expanding coverage is increase labor supply. some people who would not be able to work because of disability would be able to get health care that effectively treat the disability. they would be able to stay in the labor force. similarly, some workers currently in the labor force would be more productive if they have health care. we believe that the net impact on effective labor supply will be positive and will increase in gdp. expanding coverage will also improve the efficiency of the labor market, creating insurance

exchanges would in the phenomenon of job loss, where worries about health insurers make workers stand out even when others are better. this is about 2/10 of gdp each year. small businesses are disadvantaged in the labor market because current employers sponsored insurance is so expensive. it to be beneficial to the competitiveness of the important small business sector of the economy. what the benefits of expanding coverage are substantial, slowing the growth rate of health care costs is an essential to moving the economy off its unsustainable path and securing a better economic future for the american people. in discussing cost containment, i want to focus on the following of the growth rate of cost. this is the so-called curve of venting that can last for decades. slowing cost growth is quite

separate than the efforts that we might take immediately to cut the level of government medical spending. this is crucial for paying for the expansion of coverage and other health care reforms in the short run. if we were thinking about the changes that will save it from the long run trends, and cost growth year after year is essential. many reforms are necessary to slow the growth rate of cost over time. the cea report focused on the importance of reform rather than the mechanics. the report does describe in broad terms the kind of changes that might be implemented. we discuss changes in payment systems, such as bundling of payments or hospital and pose hospital care. these are ways to reduce fragmentation and promote more effective and more efficient care. we emphasize the crucial role that investment and help the

information technology and research on what works and what does not work could play in reining in costs grow. the ama made specific suggestions for reform along the lines that i have described. they also said that they were open to changes that we get the recommendations of the medicare payment advisory commission greater chance of adoption and implementation. the congressional budget office has also outlined a large number of game changing reforms that experts believe could slow cost growth. in our report, we think of the benefits of slowing the growth rate of health care costs, but each of our figures implicitly shows the impact of not slowing cost growth. to help emphasize the importance of doing reform well, i will describe them. what is slowing cost growth does is to free resources. if we were to restrain costs by eliminating waste, we could have

the same amount of health care with the resources left over to produce the other things that we value. this causes standards of living to be higher. in our analysis, we considered varying degree of cost containment, in particular, we look at the slowing the annual growth rate by 1.5 and 0.5%. we also analyze the effect of freeing up resources in a standard framework. our framework includes the effect of slowing cost growth on the deficit and capital formation. we will go to the next year. this shows the crucial importance of slowing cost growth for standards of living. to make these numbers more concrete, which is again in -- we translate into a family of four. the bottom line shows the projected path of a real family income without reform. the higher past shows family income under different degrees of cost containment.

our numbers suggest that failing to slow cost growth result in substantially lower standard of living for american families. without reform, our analysis predicted that the typical family income and 20 to any rigid 2020 will be six under dollars lower if we manage to slow the growth by 1.5%. by 2013, it will be nearly $10,000 lower than if we manage to slow cost growth. given to control the growth of health care costs will condemn american families to lower standards of living than they would experience was successful reform. slowing the growth of health- care costs will also have enormous effect on the budget deficit. this last figure shows the reduction in -- we lost it -- shows the reduction in the federal budget deficit due to different degrees of cost containment. consider the numbers in the middle 42030. they showed a slowing the growth for the costs by 1.5% will

reduce the deficit by 3% of gdp. put another way, failing to slowed by 1.5 percentage points a year will slow the deficit by 3% of gdp. but not slowing costs, we will leave our children in a budget deficit in 2014 that is 6% of gdp higher than it would head the after successful reform. this illustrates the crucial truth. taping together the analysis by the economic advisers, shows that doing nothing on health care reform is simply not an option. expanding coverage will unquestionably have a benefit for economic well-being, efficiency of the labor market, and the competitiveness of small businesses. only undertaking meaningful reform, can we assure american family is rising standards of living and falling rather than increasing budget deficits.

the president has spoken frequently of the need to provide the american economy with the new foundation. his goal is that we not only come through the current economic crisis but emerge stronger, more durable economy. health care reform provide quality affordable coverage for all americans and slows the growth rate significantly. successful reform is fundamental to the long run help of the american economy. thank you. >> thank you for the study of the council did and for your testimony. i would like to return to reduce the a concept levels -- the idea is that the president has put on the tables twice. that is that there are internal savings and cost cutting that need to be made within how we

deliver medicine today, how we deliver health care today. you'd said it is 18% of gross domestic product. when it be said that in your statements. i think that is much higher than almost every other nation, in terms of what we are spending. we are also settled with their health status is not much better. in many indicators, it is worse than nations to spend less. the president has suggested, six under billion dollars in cost- cutting changes and savings and need to take place. some of those will not be adopted by the congress, but they all reflect the understanding that if the current system were paying for utilization, the more you use the more you are getting reimbursed -- wherever you are -- whatever plan your in medicare, medicaid -- private

health insurance plans -- it also suggests that providers of health care, because of consolidation and changes, are becoming more and more powerful and how that is done. when we back up, these costs become fundamental. you talk about bending the curve, but if we are going to get out of this place, most middle-class working people -- any wage increase they made it is taken over by increased shares of their premiums or exclusions or co-payments that had been -- that has been the trend of the last 10-years. they are putting that on to workers. they essentially each of any possible wage increase that she might have. -- that you might have. it is essentially gone. i would like you to expand a little bit on that idea that if

you change from a utilization based system to a system that is based upon outcomes and procedures and efficiencies, that there is an awful lot of studies suggesting that there -- that it would not make a dramatic difference, whether big government program or businesses are families. >> i cannot agree with the more that we absolutely, at the rate we are going with the numbers that we have show, -- most of the rising compensation has come to workers because of productivity changes -- that it will be taken in by bigger health premiums. the take-home wages are going down or flat lining. the important point is that when we talk about curve of bending and slowing the growth rate, where talking about doing it by

improving efficiency. the crucial part is that as good as the american health-care system is, we know it is a table called goal leader, we feel there is a lot of inefficiency. you mention the national evidence. people also talk about the differences in expenditures on medical care across the country, even in the same counties with in a state. researchers say that we cannot explain the differences in health needs are differences in the demographics of the population. the experts tell us there is up to about 30% of health-care expenditures that are just being wasted. that means that we have a lot of fat that we can cut out of the system without having any diminishment of care. with the president is committed to is maintaining and improving the quality of care. i'll give you one other number. we talked a lot about him slow the growth rate of cost by 1.5% a year. the crucial thing is, with the

kind of inefficiency that is there, we can do that for 25 years before we actually use of the existing amount of inefficiencies. the kind of changes that we have mentioned in the prison has talked about, we absolutely can do that. it is absolutely crucial to do. >> they are not without controversy, i might add. they are crucial. the president met with a number of the providers with pharmaceutical groups, insurance groups, and others, and they talked about taking out about 1.5 -- about $2 trillion or the next 10 years. it became more controversial than the discussion. we as policymakers should recognize what they are telling us. we may have to get the courage to make the decision. that kind of money is lying on the table with that kind of a rather small annual changes in

outlays. it is a company with a policy directed toward efficiencies, then a better health care status for american citizens -- a big chunk of this bill should take us in that direction. thank you very much. >> you are absolutely right. the 1.5 percentage points may seem small, but it is enormous with its effect on the economy. you are right that it is going to step on some toes to get any of these. one example, the bundling of care, we often talk about this, your how civilization and the 30 days after -- that is just such a win for patients and for cost effectiveness. it gives hospitals and providers the right incentive to make sure you do not get sent home to early and they do that and get back in the hospital. that is one that is going to be a win/win and should absolutely

not be as controversial as some of the others. >> thank you. >> thank you. thank you for your testimony. i think that there is absolute agreement on both sides of this aisle here, as dr. price mention, that we all recognize that we need health care reform. we could be reducing costs. the need to be part of it. i always cringe a little bit when i think about the government being the one stepping on toes. i also have to say that i'm a little skeptical. getting the government to cut out the fat which seems to defy its history -- i guess hope does spring eternal. we do not know what the cost of this draft is. we have looked at cbo estimates on the version of the senate. we do not know what this is. it will certainly be over $1

trillion. it is a little bit hard for an economist, and that is why you are here, to assess the impact. i suspect that you have looked at the issue of employer mandate and what it might do to job losses. do you know, is there anything in the literature, of some as a man of what the job losses might be with an employer mandate? i might note that this draft has not only an employer mandate, but an individual mandate, thereby solving the debate that has been going on for several months about which way it should be. i will have to be the credit. use of the debate. but in the way i expected. there it is. back to you, have you seen estimate of what job losses might be with an employer mandate?

>> in answering that question, the first thing we have to make clear is