i know it is controversial, and do not get me wrong, but at the same time if you have disclosure as an idea of making space so you do not wish to go in space. host: mark matthews, you have the last word. guest: the search for anyone else is out there is really another driving mission for nasa. one of the goals of the agency is to try to find water on other planets thinking that life will be up there. to go back to something i said at the top of the program how nasa is facing its most difficult point in its 50-year history is not limited to only its space flight program. the hubble space telescope, which i would argue is probably one of the other marquee projects that nasa does, they just found the most distant cluster of stars in the known

universe, which is fantastic, but it will start to fail in a couple of years. the telescope they want to replace the hubble with is running into some of the same problems. the james webb is over budget, coming into problems for mismanagement, and right now is looking at being at least $3 billion over budget and maybe three or four years late. this is a very, very difficult time for nasa for sites and exploration. host: mark matthews from "the orlando sentinel," thank you for being on "washington journal. a program note regarding tamara's "q&a," you can see that on 8:00 p.m.. our guest is former president george w. bush. he will be talking about his best selling memoir, "decision points peacoat it takes place at southern methodist university in

dallas where his presidential library will be located. 19 students will asking questions about his future plans and others. you can see that at 8:00 p.m. on "q&a" on c-span. also tomorrow on "washington journal," economist with cq roll call to discuss the issue in egypt and the broader middle east complications that could be coming up regarding the president's legislative agenda. also the former homeland security secretary tom ridge will be here to talk to us about global terrorism. then we will wrap up the program with john cage from the american federation of government employees to talk about proposals to cut the size of the federal government. that is tomorrow's "washington journal. thank you for joining us on today's edition and we will see you again tomorrow at 7:00 a.m. eastern.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> c-span is a private nonprofit company established in 1979 as a private -- as a public service. coming up, a hearing on the 2010 health-care law. after that, a house hearing on the law's impact on job creation and the economy. later, homeland security secretary, janet napolitano, gives a security address.

on january 28, 1986, seven astronauts were killed when the space shuttle challenger exploded on launch from the kennedy space center. at 8:00 p.m., a ceremony honoring the crew of the space shuttle challenger. >> this sunday, we will spend an hour talking to former president george w. bush. here is a portion of the interview. >> you do not mention your longest serving press secretary. he wrote a book that was somewhat critical. >> he was not a part of major decisions. this is a book about decisions, not about personalities or gossip or seven scores. i did not think he was relevant. >> see the entire interview sunday night at 8 -- at 8:00 p.m. eastern on c-span's "q & a

." >> kathleen sebelius talked about the impact of the health care law during a senate hearing. a look at that senate hearing on health care law and consumers. the hearing is about two hours and 30 minutes. >> the senate committee on health, education and pensions will please come to order. today, we meet for the first in a series of hearings that this committee will hold on the affordable care act, hearings that will focus not only on the politics of health care reform but on the tangible, positive impact the reform is having on americans' lives. we can all agree that what this

debate needs more light and less heat. today's hearing will focus on the benefits of health reform that americans are experiencing right now, specifically the bundle of significant consumer protections that went into effect last september, known as the patients' bill of rights. these protections are a historic long awaited improvement in the quality and scope of health coverage for all americans. everyone who pays a premium is protected against some of the most egregious and abusive practices of the health insurance industry. thanks to health reform, americans now have protections that every senator on this dais has had for many years. before the affordable care act, many americans had lifetime limits and it was estimated tha as many as 20,000 people annually could be denied coverage for care due to those limits. surprisingly, people in danger of hitting a lifetime limit are

seriously ill and their benefits run out. the affordable care act phases out annual limits by 2014. providing economic and health security for those who need coverage the most at critical times. one of those folks, lisa grasshoff is here and willalk about her care for her son and her financial future. as i'm sure the sretary will discuss in her testimony, last week the department of health and human services released a report analyzing preexisting health conditions. the findings of strikinging. 129 million americans have preexisting conditions and millions more are much likely to develop such a condition over the next eight years. before the affordable care act, these americans faced denial of coverage, restriction of benefits or higher premiums as a result of their preexisting condition. their ability to take a new job, start their own business or make other important life changes was

limited. they were in effect locked into their original insurance coverage. because of health reform, insurance companies are now prohibited from restricting or denying coverage to children under 19 because of a preexisting condition. in 2014, this production will be extended to all americans. between now and 2014, the law establishes and insurance plan in every state taylored to adults with preexisting conditions who are currently uninsurable offering coverage at standard rates. another element of the patient's bill of rights a requirement for every insurance plan to cover evidence based preventive services that will hea off many illnesses, that will address them in the nurse's office rather than the emergency room. this consumes 75% of health care spending annually. dollars that could be used to build roads, create jobs.

the prevention investments in the law are down payments on the project of transforming our sick care system into a genuine health care system, and first dollar coverage of preventive services like mammograms and immunizations are a vital part of that. before the affordable care act, millions of adults went without insurance because their jobs didn't offer it or they were ineligible for coverage on their parents' policy. these people had to largely fend for themselves in an unregulated market for individual coverage, the charges high preem yims for moddette benefits. health reform allows youn people, more than 2 million of them to stay on their parents' policy until age 26. this reform relieves young people the burden of high health insurance costs. we'll learn more about this from one of our witnesses today, a university of nebraska student. finally the affordable care act

puts an end to one of the most outrageous insurance company abuses, canceling coverage when someone gets sick, and based on technical paperwork area. a califora insurer using computer programs cancelled policies of pregnant women and chronically ill because they submitted expensive claims. another insurance company that submitted clms reaching a certain cost level looking for reasons to cancel the policy. insurance companies paying bonuses on how many policies they cancelled. health reform puts an end to that sorry state of affairs. we'll hear from public officials from state and federal levels, as well as private citizens who will talk about how this has affected them. our first panel, of course, we welcome secretary of health and human services, kathleen

sebelius to her first hearing of this new congress. in addition to experting implementing th private insurance market reforms, i want to applaud the secretary for her relentless work in eliminating the abuse in medicare and medicaid. we recovered more than $4 billion of fraud last year, the highest annual recovery ever. thank you very much. the department released new rules authorized by the affordable care act giving it more effective tools to detect and gatd fraud. our second panel is composed of three government witnes as always, i'm pleased to be joined by senator mckenzie, and before i turn to an opening statement, i have one administrative matter. i request the record to stay open for statements to be

submitted. >> thank you, mr. chairman. i appreciate the secretary being here today. i was very pleased at the state of the union that the president mentioned that there are flaws in the health care bill that need fixing. he specifically mentioned tort reform. of course a year and a half ago at the american medical association convention, he promised that the health care bill would have tort reform and a permanent doc fix. neither one of those things wod up in there. today's hearing is designed as another marketing tool for the health care plan. i don't think we can fault the millions that have been spent on the marketing. it's been voluminous, but it's the policy that's flawed, not the marketing plan. it's easy to pick a few paragraphs out of a 2700 page law to find a fewrovisions that are popular. apparently the purpose of the hearing today is to identify those few ises in the law law that enjoy support. that's often from both sides of the aisle.

usually a hearing is to seek solutions. unfortunately, the reality is americans won't have the luxury of only abiding by their favorite paragraphs of the new law. americans will be forced to comply with the entire law. that means, as a direct result of the new law, millions of americans will see their health insurance premiums increase. plans like blue shield of california have announced premium increases of 59%, a portion of which they directly attribute to the mandates in the new law. as a result of new law, children in many states are not able to get child only health plans. i got a letter from a disabled veteran in wyoming he wrote to me because of the new law he can't get health insurance from his kids. he gets his from the va. he doesn't need a family policy. he needs a pocy for his two kids. because of drafting errors in the new law, he's out of luck. no health insurance plans in wyoming are writing new child only policies. i asked my staff to look into this, they found that to be the

case in at least 19 other states. because of the new law, kids are not able to get health insurance. another problem that millions of seniors on medicare will see their out-of-pocket costs go up and benefits go down because more than $500 billion was cut from medicare and used to pay for a new entitlement program. cause of the new law employers across the country will be forced to lay off workers and reduce wes at as their health care costs continue to increase as a result of all the new taxes in the law that will increase their health care costs. the new law forces 16 million americans into the medicaid program, one of the worst health care programs in the country that provides some of the lowest quality care. while at the same time, forcing cash strapped states to pay an additional 20 billion over the next ten years to expand the program. this is the reality that we face as a result of the new health care law. nothing in the testimony we will hear today is going to change it. that's why survey after survey shows that the american people

reject the policies set forth in this new law. we recognize there are individuals who will benefit from a few of the provisions in the law. many of those provisions do enjoy bipartisan support. there are manysenators, both democrat and republican that support policies like prohibiting recisions and making it easier for parents to cover their children on their plans up to age 26. we could have enacted a plan last year that would have afforded those protections. instead the new law will force americans to buy the typef health insurance that washington thinks th should have. employers will be required to offer health insurance or pay $52 billion in new taxes. americans will not have the luxury of picking which parts of the new law apply to them but instead will have to comply with the 2700 pages of new mandates, taxes and limitations on their freedoms. that couldn't count the pages of new regulation. there is a sign in tside of a

building that says as regulations grow, freedoms die. madam secretary, you have the job of writing the health care law. with each page you publish, you will be limiting the freedom of individuals, for example whether they pay their mortgage or health insurance premiums. americans have to pick health insurance, if you don'tave insurance, you are backe breaking the law. >> businesses that have more than 51 employ es will not have the freedom whether to increase a employ epay. if you don't provide health insurance, you have to pay 52 billion in new taxes. the freedoms of businesses to make decisions about how to run their companies are disappearing. americans who wish to pay lower health insurance premiums by cking a plan that has a higher deductible will no longer have this freedom.

the new law decrees that washington knows best. the administration will soon be publishing regulations capping the amount of out-of-pocket costs and limiting the deductible amount small businesses can offer their employees. madam secretary, i don't envy your job i do appreciate you are here today and you have been workinon those regulations and meeting a lot of the deadlines. we will have the opportunity to ask some tough questions about the new law. i do believe this is your first time to appear before this committee nce your nomination hearing roughly two years ago to perform proper oversight, this committee will need to hear more from you. i will ask you to reaffirm that commitment today. i'm glad this committee will have the opportunity to ask you questions about the implementation of the new health care law, which impacts 1/6 of our nation's economy. i'm always interested in the doughnut hole provision, 60%

through the doughnut hole will get 100% from taxpayers once it gets through the doughnut hole because we no longer give incentive for people to go to generics. i have people from wyoming talking about medicare advantage because their rates have gone up so much or completely been eliminated that they're losing a part of what they considered to be health care and invaluable health care and there's some animosity towards the aarp because they helped to do that and are the ones splng the med gap policy. i believe we can and should do better. i intend to focus on ways to eliminate the provisions in this law that limit our eedoms. i will work to enact reforms focusing on increasing consumer choices and decreasing health care costs. we must make health care more affordable for bot consumers and the federal taxpayer. thank you, mr. chairman.

>> thank you, senator enzi. we have an exceptional group of witnesses today. i would like to thank all of you for taking the time and energy for being here on our first panel, of course, secretary of health and human services, kathleen sbe kathleen intel sebelius. she was a leading voice in the passage of the affordableare act. she's responsible for implementing many of the key provisions. prior to joining the cabinet, she served as the kansas insurance commissioner. she has a great deal of knowledge in that area and later of course as the honorable governor of the state of kansas where she worked to expand access to quality, affordable health care and fought to protect consumers. madam secretary, thank you for your hard work. thank you for sharing your knowledge with the committee today. i commends you for your work on this important issue. your statement will be made a

part of the record in its entirety. please proceed as you so desire. >> thank you very much, mr. chairman. it's nice to have a chance to visit with the health committee on this important issue and i want to thank chairman harken and senator enzi for the opportunity to discuss the implementation of the affordable care act and talk a little bit about the enormous difference it's already making in the lives of americans sie it was passed. as you know in the framework of the bill over the last ten months, our department has worked closely with two other departments, with treasury and seetary tim geithner and with labor and secretary hillda so lease, but we've been working with governors across the country, with my former colleague, state insurance commissioners, health care providers, doctors, nurses, consumer advocates, employers and other stake holders to

deliver the key benefits that have already become available to the people of america. we've met deadlines. we've established strong working partnerships and begun laying the groundwork for the additional reforms that take place in the years to come. in that time, i've had the chance to see the new law through the eyes of people it helps every day. mr. chairman, you've already referenced the new patients's bill of rights. because of the enactment of those provisions, millions of americans don't have to worry about losing their health insurance when they need it most. many of the worst abuses of the insurance industry, like unfair and arbitrary recision pctices and lifetime dollar limits on benefits have now been brought to an end. in addition, the new law begins to free as many as 129 million americans with preexisting health conditions, from the fear

of discrimination by insurance companies. starting this year, it did prevent insurers from denying coverage to children because of adisabily or illness. in 2014, all americans will be free from discrimination by companies based on their health status. the law is also beginning to slow down the rising health insurance costs for families and all business owners. there are new resources for states to review questionable premium hikes and new regulations that limit the amount of premium dollars that insurers can spend on marketing and ceo bonuses. beginning in 2014, individuals, families and small businesses will be able to pool their purchasing power and negotiate lower ratesin new health insurance exchanges, which many states are already working on to design and implement. i've also seenhow the new law is impacting america's business

owners. over 5,000 businesses, state and local governments and unions are already using new funds to help maintain coverage for a very vulnerable population, folks between the age of 55 and 64 and their families, the so called early retirees, 4 million small business owners are eligible for tax credits to help them provide insurance for their employees. thanks to the new law, seniors and those americans with disabilities enjoy stronger and more sustainable medicare. we've sent over 3 million checks to those who fell into the doughnut hole last year. they've received a one time $250 rebate check. this year, for those who reach the doughnut hole coverage in 2011, they will begin to receive a 50% discount on the covered name brand prescription drugs.

at the time the doughnut hole closes altogether. medicare beneficiaries are receiving critical preventive services and an annual wellness visit which has been added to their guaranteed benefits. in addition to giving americans more control over their health re, the new law is strengthening our economy. just recently, the congressional budget office reirated their numbers that the new law will reduce the federal deficit by $230 billion over the nxt decade and over a trillion dollars in the following decade. tuesday night, president obama laid out a vision to how america can inwin the fute by building a foundation for long term growth that allows families and business owners to thrive. improving our health care system is vital to making that vision a reality. the affordable care act is an essential component to this goal. by freeing family frs the worst insurance company abuses,

freeing entrepreneurs to start new businesses without worrying about losing their coverage and freeing all of us from the burden of skyrocketing health care costs that make it hard for families to pay their bills, the law allows american companies to compete and allows the federal government to bring down the deficit. since march of last year, our department has focused on working with congress and our partners across the country to implement the law quickly and effectively. in the coming months, i look forward to working with all of you to continue all of those efforts and make sure americans can take full advantage of all that the law has to offer. i again thank you for this opportunity and look forward to our discussion. >> thank you, madam secretary. we'll start our round of questions per agreement between the ranking member and myself. earlier on, the order will be the chair, ranking member and senators in order of appearance,

and my staff, so it would be senator mcca, franke bennett, roberts, reid, ice akson and sanders in that order. madam secretary, could you descri describe, getting to this child only issue, can you describe the new protections that the health reform bill provides to children in the private market and how it differs from the status quo before the affordable care act was passed? >> mr. chairman, before the affordable care act, what a number of companies did is offer child only policies, but eliminated any child with a preexisting health condition. so the rents who really desperately needed coverage for theichildren with anything from asthma to diabetes to cancer survivor were blocked from getting coverage. the affordable care act says that if you are going to offer child only policies, they must

be open to all children. no longer can you only offer policies to children who don't have a health condition that may require them to have health insurance. what we have found companies doing is some companies may be changing the kind of policy offerings. what most companies are doing are keeping in place their coverage for children like those referred to by senator enzi and selecting whether or not to offer policies going forward, prospective policies. a number of states have taken action, i think 19 or 20 so far, to say companies who want to offer policies to children must offer them across the board. feeling that the discrimination against children with preexisting health condition is the worst of all worlds for

parents, and particularly, when you have a sick child, to not be able to find affordable coverage is just untenable. children are also available -- eligible for the new high risk insurance pools that are run in states across the country, in addition to the private health market. >> so it's kind of a situation sang we experienced in other areas of insurance, that if you are really healthy, you can get a health insurance plan. >> the promise not to get sick. >> that's right, if you have no preexisting conditions. one other thing that i wanted to just ask is the first dollar coverage for proven cost effective preventive services. as you know, that's something i worked very hard on, with others to get into this bill. senator byrd was also very active on that also, to focus on preventive measures. that has also started. i just waed to again ask you

how the mandated coverage of these services are affecting american health and how the provision is being implemented on the preventive end right now? how is that being implemented right now? >> mr. chairman, i know that prevention efforts are an area where you have spent a lot of time and energy over the years and one that i think has the potential of yielng huge results in terms of not only lowering overall health costs, as you say 75 cents of every dollar is spent on chronic diseases, most of which are preventible, but also on a healthier workforce. the new law has a couple of provisions. medicare beneficiaries have eligibility for mammograms, cancer screenings, varty of preventive coverage without co-pays. that's a big step forward in terms of taking down a cost

barrier. in new plans offered, beginning after january 1st of 2011, the private insurers will also offer preventive services that are covering a wide range of care without co-pays to encourage, again, people to have regular checkups, get screenings, find problems mh before they get to be acute issues and deal with them in a muchore cost effective and frankly life saving strategy before people get acutely ill and spend that time in hospitalsr in a condition where their lifespan is reduced and their health costs skyrocket. >> verysimply, do you feel the department has the wherewithal to implement this right now? in oth words, to really implement these provisions? >> we're finding that, yes, as we go forward, we are moving ahead and those polies are

becoming effective. >> i appreciate that. thank you, madam secretary. senator enzi. >> thank you, mr. chairman. i want to go back to the child only plans question a little bit, because we did take a look and found that there are at least 20 states where you can't buy child only insurance anymore. if they already have it, they can keep it, but there's not any new policies being issued. consequently, they're getting out of that market. for parents like the disabled veteran in wyoming that i mentioned in my opening statement who need to buy a plan, it's absolutely devastating. the outcomes unfortunately predictable as a result the drafting, one of which things would allow a person to buy a policy on the way tothe emergency room. so there's some incorrect drafting and incorrect implementation. doou have any specific steps that you're going to take to fix

the problem in those 20 states? does congress need to change the law? >> well, senator, we have done a lot of outreach with insurers across the country, and while there was an initial flurry of announcements, many insurance companies are reconsider iing their initial plans to leave the marketplace. i would suggest it was, in some cases, a pretty cynical notion that you would only insure as a health insurer, children without a preexisting health condition. and keep those policies in place. parents' coverage is often available to many of the children who had child only policies. we are finding that a lot of children are being insured again through their parents' coverage, which has now been extended as you know to the age of 26, which has been a huge boon to a lot of

families. number of children are also eligible for chip coverage and the new high risk plan, so there are a variety of strategies in place to make sure that children have coverage. we are continuing to work closely with insurance companies to help rethink the strategies between now and 2014. 2014 there won't any longer be any ma barriers for anyone with preexisting condition to have coverage. the child only provisions kicked in initially this year. >> you're saying there is no need for changes? well, senator, we will continue to lo at the situation, partilarly in states like wyoming, if all the companies have moved out. i think it's untenable for parents not to have coverage, but i would suggest, i would hope that we could call on the companies who have made ample profit selling child only policy s to children who were not ill or had any preexisting condition to reconsider their efforts to

leave the market and a whole series of companies have indeed done that. >> i would hope that we could make a fix in the law as well so that people don't buy their insurance on the way to the emergency ro. yesterday, before the house budget committee, your department's chief medicare actuary, richard foster testified that the new health care law will not hold down health care costs and will not allow everyone to keep their current coverage. specifically when asked about the claim that the law reduces cost, mr. cofoster described its falsmore so than true, regarding the claim people would be allowed to keep their current coverage, mr. foster described that claim as not true in all cases. is mr. foster wrong in his analysis? what information do you have to counter the detailed analysis he's done of the new law? >> well, senator, i have not had ray chance to thoroughly analyze mr. foster's testimony. i know in the past, when he has

testified about the quarter of a trillion dollars in deficit reduction, he has speculated that if indeed the laws change somewhere in the next ten years and if indeed congress does not implement the law as is, then the quarter of a trillion dollar savings would not be realized. we are standing by the congressional budget office analysis, your budget office analysis which has had a series of numbers about not only the impact on families and says the cost will go down, the impact on individual business owner's premiums that says the cost will go down, but the impact on the deficit. the budget office says the costs will go down. >> you and i know that the congressional budget office is limited by what documents we give them to make their maanalys on. the doc fix alone creates a substantial loss but they weren't allowed to consider that

in the testimony. in your testimony, you noted the new laws strengthen the economy. my time has expired. i will be submitting some questions if we don't go additional rounds. >> thank you. >> senator mccain? >> thank you, mr. chairman. madam secretary, the president said on tuesday night that he was in favor of repeal of 1099 and also believes that medical maractice should be an issue that we should be addressing. do you agree with the president? >> yes, sir. >> would you submit perhaps for the record some idea of what the parameters of medical malpractice reform might be that suggestions the department might have? >> well, senator, as you know, the department has had authority -- >> would you -- the question is

uld you submit for the record? >> would i submit them? sure. >> thank you very much, since we tried repeatedly over a year to get some kind of addressing in the 2,700 some page document some action on what most experts agree contributes sometime 20, 30% to the additional costs of health care. you have granted over 700 waivers. now for employers and union plans from the "annual benefit limit restrictions in health reform bill." why not make those permanent? >> senator, the goal of the law in the area of the annual limit benefit granted our department the discretion to look at situations which would cause not only market disruption but a

dramatic increase in premiums. what we have done on a case by case basis is receive information, particularly about the so called mini med plans that are employer based coverage throughout the country. grant waivers where the employer indicated that there would be an enormous rate increase. >> i understand how it works. i'm asking why you wouldn't make them permanent. i appreciate if you make your answer short. >> why wouldn't we want to make them permanent? >> yes. >> we're taking a look at the marketplace. they assured us they could gradually phase into -- >> they've assured you of that? >> that's my understanding, yes, sir. >> as you know, the states are having great difficulty with their budgets and there is some conversations about some states even having to go into some kind of bankrupt, et cetera.

there are a number of states that have great difficulty in complying with the act, as you know. in my home state of arizona, we are facing a serious budget crisis. our governor has written you a letter asking for a waiver. she believes she's asking for your assistance in providing arizona with a wver from the maintenance of effort requirements of the patient protection and affordable care act. she goes on to say "i'm respectfully requesting that arizona be allowed to reduce its medicaid eligibility for certain nondisabled adults in order to preserve its underlying medicaid program." would you give serious consideration to the governor and i'm sure other governors' requests that states be able to exercise the flexibility that they need to meet their

compelling budget requirements and probably know best in the view of many of us, how to provide the best health care at the least possible cost for our constituents? >> senator, we're working very closely with governors across the country. i just received yesterday governor brewer's request, which we are taking a very careful look at and also taking a very careful look at the law. i can tell you that we are actively working with states around the country with new governors particularly about the flexibility that they have many of them aren't aware of the wide range of flexibility that they have to have cost savings in their medicaid programs and we are actively working to provide teams of folks to go through the potential cost savings that other states have already implemented. >> i'm told that you have given a full waiver to three states. is that correct? >> not of the maintenance of

effort, no, sir. that has not ever been raised before. >> thank you. again, senator enziaised this, but something we all knew about cbo garbage in, garbage out, but the people we give the responsibilities to, medical expert said both assertions that the cost will be brought down and let people keep their current health insurance if they like it, he strongly disagrees. i of course disagree, since there's 300,000 citizens in my state on medicare advantage. there's no doubt that their benefits under that program will be significantly changed, if not eliminated. i see my time has expired. i look forward, secretary -- madam secretary, on this issue of medical malpractice reform. president told the american

people tuesday night that he recognizes that this is an issue that needs to be addressed. we're going to find out whether the trial lawyers run this place or whether the american people and affordable health care is reachable for them, because withoumedical malpractice reform it makes that issue, if not impossible, certainly tremely difficult. we look forward to hearing your proposals as to how we can implement, such as been implented in the ate of texas. i thank you. >> i next will turn to senator franken. >> thank you, mr. chairman. speaking of the state taxes, just to pick up from senator mccain. my understanding is that the state of texas has this pretty dramatic tort reform, health care there is much, much more expensive than it is in my stat? >> i think that is correct, senator.

>> i want to address the ranking member who said that there's just like a few paragraphs that people like in the bill. that's what we keep talking about. and -- no, that is what i heard from the ranking member. if you go back and look at your opening statement, you'll see that, that that's what you said was in the marketing. is one of those paragraphs, i would think that people do like is getting rid of preexisting conditions is a reason to discriminate against a child or patient, ght? that's pretty popular, isn't it? >> i think it's very popular with the american public, yes, sir. >> then the ranking member talked about the ability to buy the policy on the way to the emergency room. now, i've heard that and what that is about is, well, if you have preexisting condition, you don't have to buy a policy until you get sick.

that's what that characterization is, isn't it? i mean, is that your understanding of it? >> i think that's what the senator is referring to, that you can opt in and out of the market and only purchase coverage when you were sick. >> so isn't that the reason for the mandate? so in other words, when i he hear -- when i hear my friends who are opposed to this reform say people like -- we really like the nondiscrimination against people with preexisting conditions, but you can -- then you can buy a halth policy on the way to the emergency room. well that's why you have the mandate, isn't it? >> well, the idea is to have a stable insurance pool and to pool risk. as a former regulator, that's important to have folks who have coverage and some use it and

some are not using it simultaneously. it would be like buying car insurance after you've had the wreck. >> right. so if you think of health care rerm as a three legged stool tell me if you agree with this analysis. first leg is you can't discriminate against people with preexisting conditions. i hear everyone say that they want that. the second part is, since that means that you could buy an insurance policy on the way to the emergency room, if -- you need a mandate so that everyone has insurance, so you can't buy insurance policy on the way to the emergency room, everyone would have it, right? the third part is subsidizing people who can't afford it. that's why we have a sliding scale?

is that a good analysis of what comprehensive health care reform is? >> i think if you look at the parts of the market that don't function very well right now, for individuals buying coverage and for a lot of the small business owners, having a much larger purchasing pool, having more people involved eliminating the preexisting condition limitation and then having everybody in is certainly the way to stabilize the private insurance market. as you know, tt was a discussion that the insurers had and since this plan is built around the private insurer's market, it adopts that strategy. you can get rid of the preexisting condition if everyone is in the pool. >> exactly. i think this is really a discussion about a comprehensive health care reform and not just erry picking certain paragraphs. i wa to ask you about the medical loss ratio and the implementation of that. as you know, i fought forthat, which basically says that insurance companies that have

large group policies have to use 85% of the premiums that they get on actual health care. 15% can go to marketing and administration and profits and 80% if it's an individual or small group. can you tell me a little bit about the implementation of this provision? >> senator, the provision has just been outlid. as you know, the congress and the affordable care act directed the nation's insurance commissioners who are elected and appointmented across the country and who regulate the private mark to recommend a policy to us about the medical loss ratio provision which you've just outlined. they had a unanimous recommendation about what were the categories of health costs that should be included as medical costs, what should be outside and how it should be implemented. we turned around and adopted their recommendations and that

is really the policy that's in place. and this year, for 2011, data will be collected by our department about companies meeting that ratio and at the end of the day, companies who fail to meet the ratio will owe their policyholders a rebate, but the rebates do not start until 2012, unt data has been collected. >> thank you. my time is finished. thk you, mr. chairman. >> thank you very much. madam secretary, thank you for being here. let me ask about an issue that is a little bit off the subject of your direct testimony here, but is a very important part of the bill that i would like to see us move ahead with. relates to implementation of the

workforce provisions that are contained in title v. central part of the reform, as i saw it, was creation of a new independent and nonpartisan natial workforce commission. this is somethg which is not under your department directly. it's an independent commission. it's tasked with providing congress and providing congress and the administration with clear information and guidance on how to align our federal resources to meet the health care workforce needs of the nation, based on recommendations at the institute of medicine made, and modeled after med pac, which, of course, provides us with expert guidance on medicare payment issues. it had strong support, i believe, bipartisan support when we included it in the bill. it is my understanding that the commission members were selected

by gao. dr. peter burhouse is the chair. commission may provide a report as early as october 1, but the commission cannot begin its work until it gets funding to do its work. the appropriations bill that came out of the labor hhs subcommittee and that came -- we tried to pass on the smenate floor included $3 million for operation of the commission. it is unclear now what the funding status is. and so i wanted to just flag this issue for you. i know as i say this is not your responsibity, directly, but i think it is very important, a very important part of health care reform is dealing with the problem of how to -- how to -- how to channel federal funds to

use the most effectively to meet our health care workforce needs. so i wanted to just flag it for you. i don't know if you are familiar with the issue, if you have any comments you would like to make, but glad to hear those. >> well, senator, i think that the issue of the health care workforce is an enormous issue whether or not we had passed an affordable care act is an issue that's been looming on the horizon and frankly for decades where are the providers that we need for the future what is the pipeline, how do we get there in an expedited fashion and what is an accurate snapshot in t? the workforce commission, i have seen the members' names and bios and is a stellar group and one that we look forward to working with. the health care act also expanded the national health

service core, which allows in exchange for scholarship and loan payment, providers who servin underserved areas which is a significant step forward. it increases thanks to the prevention and wellness fund. there was $250 million investment and, again, additional primary care providerwhic will train about 16,000 new providers over the course of the next five years. we have, as part of the act, some nurse-led community health centers, increasing nurse practitioners and providers, but i think that the challenge of making sure that all americans have access to health care providers and particularly primary care gerontology, mental health providers, if we're shifting to a wellness system, we need the providers on the ground who are able to deliver that care and that is certainly part of the effort that you all have begun with the affordable

care act and accelerated what has been a long-standing challenge, but one that we are paying very careful attention to. and the president has, as a high personal priority, to make sure we have the workforce needed by the american public. >> could i just ask that you maybe have someone on your staff look into the issue of how we can get the funding for this commission to do its work? as i say, i ink they're up and ready to go, they obviously need some staff to assist them, and they need to pay that staff, so it is not a substantialmount of money, but i do think it is a very important task that we have given them and if you could look into that, i sure would appreciate it. thank you. >> be glad to. >> thank you, senator. senator bennet? >> thank you, mr. chairman. i would like to thank you and the ranking member to hefor hol this hearing. madam secretar thank you for coming back. if i had to sum up the lastwo years of the town hall meeting

in colorado on this issue, i would say that what people are ying is we hated this system as it existed, the health insurance system, and we also believe deeply in your capacity, my capacity, not yours, to make it even worse than it is now. and i think the rancor of the debate on health care didn't do much to create a level of confidence in all of this. and one of the things i talked about was that when people said -- we don't believe government can do a good job here, look at what government has done before, i said, you have a point. at the heart of this reform in many ways is an attempt, a rare attempt, to actually change the incentive structures so that we can deliver higher quality at lower cost, someing that we ve historically not done, but something we have to do, not just for the health of our citizens, but for the qlity of the care that we have got, and so we don't bankrupt the united

states of america. so one of the things i learned during the health care debate was because of the way the incentive structure worked, one out of every five medicare beneficiaries that went to the hospital were readmitted within a month for conditions that were completely preventable and medicare, as a result, was spending $17 billion a year on these hospital readmissions that could have prevented. it is one of the reasons why i work so hard on something called the community-based care transitions program, this innovative model ensures each medicare beneficiary at risk of being readmitted is assigned a coach to make sure they go in and out of the hospital, nursing home, and even their own home, and that they do the follow-up care and take their medications. this practice known as transitional care has showa reduction of up to 50% in places with high readmission elivery ml

to create higr quality at a lower price and what can we do to accelerate that work? >> well, senator, i think that's a great question. the earlier discussion really focused on some of the market insurance market changes, but i think the underlying health costs and the amount that is spent on things that may not lend themselves to the health of anyone are areas that providers and employers and others are eager to work on. and the case of this, you know, coordinated care strategy, once someone leaves the hospital, we know it works. it is pockets around the cotry, but never really taken to scale. it is better for tients.

it is better for their families. it is better for their health and certainly lower costs of unnecessary readmission. so having an opportunity to employ those best practices across the country, deploy those tactics, that bundle of care, the medical home model which we know is, again, very successful, the kind of early intervention, a lot of those strategies are incorporated into the affordable care act. and give direction to our agencies to implement those across the board. and i think that will be very good for the american public's health and for our health care costs. >> i agree. and i will say, i think it has been lost in the debate, which is why i raise it here today. and the providers in my state that are working on these things, and in many ways have some of the most forward-leaning approaches to this are really excited about the possibilities here. and that really brings me to my second point, which is that we have heard discussion on both sides today and throughout the debate about the cbo numbers.

does this really save money? is it going to save money over time? i think the honest answer to that question is it depends on how well we execute. it depends on how well you execute. it depends on how well the states execute it. it is one of the reasons why i work with senator hagan and senator warner on a fail-safe amendment that would have said, look, if we don't save the money that we are committed to saving, that we said we would save, that we will look at it again as a congress and make sure we have those savings because we want to keep faith with the american people who reasonably are saying, we're not sure what to believe. we're not sure which side, you know, is right. since it is a projection, we don't really know. my own view is that if we put more of these transitional care models in, we may save even more money than we're talking -- we have talked about. i wonder whether you would be willing to work with me and senator hagan, senator warner and other members of the committee to see whether we might be able to write a piece of legislation that could give the american people confidence that when we say we're going to

save the money, we mean we're going to save the money. >> i would be delighted to do that. >> thank you. thank you, mr. chairman. >> thank you, senator bennet. senator roberts. >> seems to me that i wan to ask richard foster to join that group, save a lot of talking back and forth. madam secretary, thank you for coming. i should inform my colleagues that the secretary and i go back quite a ways from a family standpoint, and also from servg at the same time with the distinguished secretary when she was governor of kansas. i work for her father-in-law when he was in the congress and worked with her husband, gary who is now a very prominent judge when he was a rather rowdy student. >> just say he was younger. >> when he was younger at kansas

state university, home of the ever optimistic and fighting and losing wildcats. and -- >> i wore my purple for you. >> thank you. appreciate that. thank you. we have a mutual friend who has a precondition that we all know about, and rudy verdesco called and indicated he would like to talk with you, talked with me for about an hour. so i transferred him over to your office, so you can -- >> thank you. >> you can visit with him. i understand that dr. bere wick is back, he's not parachuted in, he's going to be recommended by the president or has been recommended by the president to again be the head of cms. is that correct? >> he's beenrenominated. >> he's been renominated. g good. i hope in the finance committee we can get to the challenges we face. dr. berwick has unfortunately been tagged with the title of the chief rationer with all of

the regulations that are pouring out of your department. i understand a couple of weeks ago that some boxes were moved and he is now in charge of oversight of the regulations. they would have to be approved by you, but it was in the secretary's office and now it is under dr. berwick, is that correct? >> the office of -- >> cms. >> yes. yes, sir. >> so that's a recent development. i don't know that gives me pause or what, but at any rate -- >> senator, we did that to maximize, i think, efficiencies. it was going to be an independent office and once we looked at overhead costs of duplicating everything from front office help to legal, staff, it was seen as an expedited way to maximize and leverage our assets. >> maximizing dr. berwick does give me pause but let's go on to another subject. as former governor of kansas, i

know you're very well aware that we have 83 critical access hospitals out in our state, most of any state, fully two-thirds of our hospitals and you also know that the critical access hospitals are not, not part of the five-year exemption from the ipap review, the independent -- >> payment advisory board. >> yes. very independent to say the least. i'm not happy with that. i think we are obligated our reonsibility as dividual members to set the medicare reimbursement rates as best we know them. that is a battle we lost in the health care reform and so we have ipab. but the critical access hospitals of which there are many in wyoming, iowa, everywhere here, are not part of that five-year exempt, from the ipab review. should the ipab recommend reductions that take funds away from these rural community hospitals, i can assure you congress will act. it is a rather zantine kind of

way to do it. i'm sure the house would do it. if you did it. the president would veto it. ash lean abilene is a good example. you know these folks and they know you. would you support such a recommendation to at least include the 83 critical access hospitals? >> well, senator -- >> i don't know why this happened. and max bachus doesn't either, pardon me for interrupting you. even on reconciliation i tried an amendment th would at least make them consistent with other hospitals and that was during the time that, you know, all those in favor, aye, aye, all those in favor no and there was a resounding no and that's the way it went. so what do you think? >> well, i share your belief that critical access hospitals

are incredibly important in states across the country. and i would just say that i'm committed to working with you to take a look at what the gap is and what can be done about it, short-term and i think it is portant that those hospitals not be jeopardized or the care they deliver be cut off from citizens around the country, including in kansas. >> most of us were very pleased to hear about the president issuing an executive order and applying the principles that each agency is directed, using best available techniques to quantify tests and costs as accurate as possible. but as we later found out, each agency, as they put up the yardstick to figure out the cost benefit ratio or situation with any regulation, there is another -- there is more language and it says, and this is the part that i have the most concern. also to be considered are values that are difficult or impossible

to quantify clueing equity, human dignity, fairness and distributive impacts. are you anticipatg you'll be able to determine which regulations including the ones recently released from the health care regulations that hhs would fall under this exemption? are you exempt, are you not exempt, are there regulations you're taking a look at? where are we here? >> well, we certainly don't consider hhs exempt from the directive by the president and we have already launched a process to examine the whole host of regulations with parameters that he utlined. so, no, we are definitely not exempt from that regulatory review. >> thank you, senator. >> i have a list that i would like to share with her, not now, but, hey, i will send you a list and i look forward to working with you. thank you. >> thank you, sir. >> senator. senator reed. >> thank you, madam secretary. thank you, mr. chairman.

recalling some of the discussions in the health care debate, one of the issues around the elimination of pre-existing conditions was the need to have essentially mandatory coverage. i think that was an issue that was pushed very aggressively by the insurance industry. >> that's correct. >> and in fact their view basically was that if we provide this benefit, which is -- could be the most popular, frankly, the popular -- most popular aspect of the health care reform, if you have the resources, you can buy insurance regardless of your health care condition. it was, again, just a little -- to put it in context, it was as much the insistence of the insurance industry than it is any sort of policymaker here in washington that mandatory coverage has to be part of it

now. >> i think, senator, it was brought to the table by the insurance industry, by the association of health insurance plans a others to guard against anned aversionly selected market place if only the sick are in an insurance pool, it is immediately unaffordable. >> so, you know, looking at sort of -- turning it around and the logic of this is that this provision, which people say is -- we really like that, i don't know if u've seen the polling data, i assume it is in the 80s, 90%. you've got to keep his. it would require that this universal approach to coverage through private markets has to be maintained also, is that your view? >> to have a viable private market, you have to have a pool of sharing the risk, yes, sir. >> but, i mean, again, there has been lots of discussion about what is popular, we'll keep what's popular, we'll eliminate what's unpopular and that

popularity is in the eye of the beholder, but inrder to have a comprehensive system, where everyone can receive coverage, can buy it through the private markets with assistance if necessary, you have to have essentially the framework you've set up that the interchanges and the requirements to participate fully. >> it is part of a market strategy that keeps a market solvent. >> one of the issues that senator enzi brought up which is very important is the issue of child only plans and there is some states where there is actual departure of companies with these policies or threatened departures. i'm wondering if there is anything the states can do. we passed significant reform, but you are a former insurance commissioner. and up until the passage of this act, most of the action of insurance health care and otherwise at the state level, the other aspect of this question wld be what about the 40 states ere some, i know,

don't have the child only policies but have done things to ensure that children are protected? >> well, senator, you're absolutely right. again, the affordable care act doesn't change the facthat states have the leadership position in this framework, so whether it is setting up the insurance exchanges or the high risk pool or regulating their marketpla marketplace, it is a state-based strategy and we're working closely with those state regulators. and many states, since the passage of the affordable care act, and many of them before had taken action to say that it will -- if you want to sell insurance in our state, you must offer policies across the board. and a number of states have actually passed that legislation nce the affordable care act and the companies threatening to leave the markplace, feeling that that is a very discriminatory position for insurance companies to take. so that is, indeed, being contemplated. and as i said earlier to senator

enzi, there also are a number of companies who immediately said that they would likely not stay in the market w have reconsidered that position and are indeed vy much in the market. >> madam secretary, again, thank you. i think you've been given one of the most challenging assignments in washington. and you have been working tirelessly to get it done and i appreciate very much what you and your colleagues are doing. and i anticipate that the challenges will continue to appear along the road. but thank you so much. >> thank you. >> thank you, senator reed. senator burris. >> welcome, madam secretary. when senator enzi asked you a question about cms' projections, specifically they were that this would bend the cost curve up $251 billion and the national health spending would increase

$311 billion. i heard you say, i think, that you disagreed with the analysis that came out of cms. >> again, richard foster, yes, is an independent actuary. >> what is the administration's position on fixing the sgr? >> the president has said sin elected he would like to see a permanent fix of the sgr. >> you used to make your case to senator enzi, cbo. now, cbo says in their estimates they failed to take into account a $250 billion that would be necessary to fix sgr. if the president's commitment is to fix sgr, then, in fact, that eats up all the savings you've talked about. is that correct? all the savings that come from health care reform will be eaten up by the addition of a fixed sgr, just by your numbers. >> it would cost -- yes, i don't know what the cost is, but, yes. >> the health care bill create

cretes s a new tax on medical devices. would you be supportive of repealing that tax? >> no, sir. >> well, let me ask you, does that not fly in the face of what the president said tuesday night to congress and to the country, where he talked about winning the future, and outinnovating the rest of the world. does that not make us uncompetitive and force innovation out of the country by taxing innovation? >> sir, i think there are tax on a lot of innovative products that actually don't deter the innovation from moving forward. i don't necessarily think that you have to remove all tax payments. as you know, the medical device equipment initially the congress looked at a significantly higher tax and in the course of discussion, and input they decided to significantly lower

that tax and not to -- to not impede progress. >> this is a new tax, on medical devices, that are being used by patients, which is one of the contributing reasons that the actuary says health care costs is going to go up because we have begun to increase the cost, not just of the delivery, if we fix sgr, but the actual cost of the products that are in the health care system. so let me ask you, nih is just talked about a new program where nih is going to get involved in some degree of drug development. isn't that something you're supportive of? >> well, senator, i have been involved in accelerating drug development. >> they have been involved in research, of promising compounds and directions >> that's correct. >> but i sense a distinct difference between that and drug development which is something that the private sector or

academia has been engaged in almost 100%. >> well, senator, i know that you are -- come from a state, as does senator hagan, who has a lot of knowledge and expertise in drug development. i think what dr. colins has identified is that there are still way too many promising ideas that die somewhere on the vine between the microscope and the marketpce and is trying to mobile i mobilize teams, activities, any incentives that can make sure we can actually get the patients those breakthrough drug developments. and too many of them never make it to the market. >> clearly i think that will have a cost involved in it. but it will also hav a cost on the private sector's inability to chase those promising things if we choose to do it as government. madam secretary, i think we can all agree that there are many things that if we sat down today, we could tick off in this

bill that we could all support. we could eliminate pre-existing conditions. we could make sure that every state had a risk pool. we could agree that children should stay on their parents health care plan until age 26. now, i lived it. i'm a federal employee. i'm a participant on the largest employer in the country. my kids were kicked off my insurance at 22. i guess i would ask you, for those members that were here until this plan was passed that are critical of the private sector having their insurance that limited childn's inclusion to 22 or 23 or 24, but not 26, are they hypocritical in questioning that when they had the opportunity to change the opm guidelines and change the largest employer in the country to age 26 before this massive health care reform plan was passed? >> well, senator, i don't think it was hypocritical. i think it is an uortunate

oversight and we found that the contracts precluded us from changing as rapidly as some of the private market plans could change, but that change will be made and federal employees acrosshe country including mbers of congress can look forward to keeping their children on their plan. >> in conclusion, mr. chairman, we have over a thousand employers who have applied for a waver. 700 plus have been approved. 50 plus have been denied. in addition to that, cms estimates that the grandfather -- inhe grandfather of regulation, it is estimated -- your own estimates, 80% of small business could lose their grandfather status. i'm not sure what happened, if you like it, you get to keep it, but you said, and i quote, americans will have more control over their health care. my conclusion, after reading the plan numerous times, what we have done is the federal

government has more control over health care, not the american people. i thank the chair. >> i thank the senator. senator akson is gone. senator sanders. >> thank you, mr. chairman. madam secretary, thank you for being here. thank you r excellent work you've been doing on the very difficult circumstances. just two lines of thought that i want to pursue. in the health care reform bill, some of us, including senator harkin and many others on this committee work to expand community health centers. we believe one ofhe great crises in this country and one of the reasons that 45,000 americans die every single year is they don't have access to health care and in fact some of those people have health insurance. so we saw a crisis in primary health care as a result of this legislation we doubled the number of community health centers, opening up an opportunity for 20 million more americans to get good quality health care, dental care, mental health counseling and low cost prescription drugs. can you give us maybe an update

as to how progress is coming along in terms of community health center programs? >> certainly, senator. again, i applaud your leadership on this issue. it is an incredibly important framework for health care improvements across the country. and i try to visit health centers every trip i make and they are impressive neighborhood community organizations, delivering high quality, lower cost care to millions of americans. we are working very quickly to implement the strategy that is laid out over the next five years. the first step was to put money in the pipeline for important improvements and additional services, additional dental care, mental health care. we have been putting out the new access point grant proposals that will be released this year and over the next several years. and also important feature of

the community planning proposals are going out the door in 2011. so those communities which haven'tuite gotten the wherewithal to actually make the full blown proposal will have an opportunity to bring together providers and community groups. but certainly that footprint of community health centers expanding across the country and new sites. it will be both new access sites and mobile sites connected to existing health centers, schools, vans or other -- >> i should tell you, madam secretary, vermont would make a real success. if you're really nice to us in the next couple of years and grant a few more requests, every part of the state of vermont, every county, every area in the state of vermont will enable its people to have access to community health centers, which we think is a real step forward. would you be in agreement with the study coming out of george washington university which says that the investment that we made in fact is going to save substantially more money than we spent because we're going to

keep people out of emergency rooms, we're going let them get to a doctor when they should, not get very sick and end up in a hospital at great cost. >> i haven't seen the study. but i certainly have seen that practice in plac and in fact, some of the most creative and i think beneficial work going on around the country is health care -- health community health centers working in collaboration with community hospitals. and appropriately sort of reassigning folks to care that -- >> other than utilizing an emergency -- >> you bet. you bet. >> let me switch gear and pick up on a point that senator mccain a moment ago and i'm sorry he's not here. as you may know, the state of vermont is giving serious thought to moving forward to a medicare for all singer payer program. our approach and our request for waver may be different than arizona's. we do not want to throw people off of health insurance, we want to makeure every person in our state is covered.

we believe that that approach, and it was a study that just came out by dr. shout, who you may know as an economist at harvard, developed the health care prom in taiwan, we believe we can save many, many hundreds of millions of dollars through medicare for all single payer program. and i know that we have to work on that waver legislatively. that's not something you can give us on your own. but would you be prepared to work with us as we walk down that road saying that in a federalist nation, we have 50 different states, that maybe the nation can learn from what vermont or other states are doing with increased flexibility? >> well, senator, i was appreciative of the meeting that you attended with your newly elected governor. and applaud the work that vermont has done. states across the country oft have been well aheadf the federal government in terms of creative health strategies to expand coverage to citizens and

we very much encourage the kind of flexibility, the state-based approaches which this bill is built around and i look forward to working with you. >> our goal there is to maintain the high standards of the national legislation, but to give states flexibility to show how in their particular areas they may be able to do it better, in a more cost effective way. we would appreciate working with you. with that, mr. chairman, thank you. >> thank you, senator. senator hagan. >> thank you, mr. chairman and madam secretary i want to thank you for all the hard work you've put in to date. i want to talk for a minute about having the young adults on the parents' policies until they're aged 26. the state of north carolina actually has done that for years for state employees.

if the students were still in school. and i know that when i switched and became a federal employee, that i had to find -- children had to find health insurance. and one son and one daughter and it was incredibly more eensive for the young woman to buy health insurance than it was for thman. so i'm very pleased that when you think of two young people going out into the workforce, getting the same pay, the young woman was drastically affected in a different way month to month because of her higher crease in just purchasing health insurance. i'm pleased that that has been changed. in your testimony, you mentioned that the new benefit impacting hundreds of thousands of families from across the country allowing these young children to remain on their parents' insurance until age 26. and we do have about 37,000 of them that continue to be insured under their parents' health plans, and i know in the next pal we'll hearing about the impact of this new benefit, but

i understand that it is so popular that congress extended that benefit to military families last year. and with that, i'm wondering if you could elaborate on the impact of this benefit and how many adult children do you kow that might be participating across the country and could you provide some thoughts on what would happen if this benefit happened to be repealed? >> well, senator, i think the situation you described in north carolina was in place, again, in a number of states, but often was tied to school, full time school. so if kids aged out of their policy at 22, and were notn school, they, again, lost their coverage. this is impacting lots of families, lots of different ages, and a very beneficial way. and, again, i think it is a great illustration of putting back together a larger pool of folks and bringing them back into thearketplace because the number of young americans was

the second highest category of uninsured americans, the highest was those 55 to 64 often who were really priced out of the market, but young americans were the second highest category of uninsured in this couny. so this family strategy, i think, goes a long way. i can't give you exact numbers today. we would be happy to try and collect those for you. but i think clearly this is impacting millions of young adults around the country and a very positive way. and allows those young adults to think about being an entrepreneur, start their own business, or strategies that, again, were impeding their ability to really launch into a professional career if it did not come attached with health insurance. like you, senator, i have two 20 somethings who lost their coverage once they got out of school. and we were lucky because both my boys were healthy, but they

had friends who were not so lucky and not so healthy who had a terrible time finding and purchasing health surance. >> and on a whole, young adults are typically very healthy individuals so it helps from an actuarial standpoint to have more of those on policies. but also in your testimony, you mentioned the pre-existing condition insurance plans. and the inclusive healt is running that -- the north carolina plan and has currently right now over 800 participants to date which i understand is one of the highest in the country. however, i know one of their challenges has been raising the awareness and gting those who are uninsured enrolled. and my question is, could you talk about some of the challenges that sates are having in getting people enrolled and some of the other efforts that they are making to raise awareness among the uninsured population. and does hhs offer guidance to states on ways to increase this

awareness? >> great question, senator. i think one of the challenges is -- as you say, that a lot of people weren't aware that these even existed. so we are certainly trying to help amplify that message that in every state, in the country, there is now a new option for adults who still are locked out of the market with pre-existing health conditions and we'll continue to do that. we have also done a loot in conjunction with states with outreach tdisease groups, to faith-based communities, to community leaders, to, again, make them aware that these are new and many states, the benefits just became available late this fall, so we're talking about the early couple of startup months. but we don't miss an opportunity to remind people that this is one of the benefits of the no affordable care act that did not exist before.

and actually because the rates are pegged to market rates can be a much more affordable option for those who have been uninsured for the last six months. >> i will say north carolina, we had -- we put that in place earlier, though it is still a pretty expensive policy. >> right, right. >> thank you, madam secretary. >> yes. >> thank you, senator. senator murray. >> thank you very much, mr. chairman, for having this hearing. madam secretary, thank you for e tremendous job that you and the folks at hhs are doing of implementing this law and helping people get access as we had envisioned. i know we have another panel. so i'll ask one question and go back to your testimony. you talked about the new resources that the affordable health care act is now providing to states to help prevent unreasonable premium increases. and you mentioned that grants have already started going out to our states to help strengthen their ability to review and reject unreasonable rate hikes. can you talk a little bit about

how this process will -- how this will make the process of premium increases more transparent for all of health care consumers? certainly, senator. this is ather area where the bill that you all helped to put in place contemplates that states are the leaders in the health insurance market and states are the regulators of their own health insurance market. but also recognizes that often those resources are not adequate to do a robust job of rate review, particularly tough budget times, a lot of states have cut back. and so there are additional resources available, and taken advantage of by virtually every state in the country, to increase and enhance the oversight provided by those state regulators. what we are doing right now with health care.gov is publicizing

rates for the first time. consumers can go on a website and get an overview of what rates are being charged by what plans in their particular jurisdiction. but two other ry important pieces of information, how many people are denied at that rate, what percentage are not offered a policy at that rate, and how many times the rate deviates from that. so that, again, is available and updated on a regular basis. and insurance commissioners are also committed to now, on websites, and their plans, making the rate review process far more transpant, asking for underlying actuarial information from companies, holding hearings, having available to the public what has often been a very opaque, very misunderstood system, much more transparency, much more openness, much more oversight, and the combination of consumers being able to pick

and choose finally, line up plans side by side and choose what is best for them and much more rigorous review has already yielded results where excessive rates have been turned down and w rates have been submitted that are far less impactful on the consumers with those policies. >> well, i applaud you in that because we always hear about competition is what drives the cost down. if you don't know, it is pretty hard to know how you can impact that. but i think this open transparent way that people can now view insurance policies is what we envisioned helping to bring those costs down. so i really appreciate your work on that. >> one could argue you could get more information on the toaster you bought than the health insurance plan for yourselves and your families and we're trying to work very closely with our partners at the state level and give a very transparent, very open system and just lining the prices up side by side really does begin to change strategies of companies. they don't want to be the top

price in the marketplace. so that in and of itself has been very helpful. >> grt. thank you very much. thank you, mr. chairman. >> thank you, senator. madam secretary, thank you very much for your aappearanppearanc and answering questions in great order. as i said, we leave the record open for tendays. some senators may want to submit questions in writing. i want to personally also thank you for your great leadership in all areas of health care and human services. but especially in the area of implementation of the affordable health care act. >> thank you, mr. chairman. i look forward to working with you and the committee. >> thank you, madam secretary. next we'll call our next panel.

>> you are looking at live video from the streets of cairo has anti-government protests continue today. president goes to the mubarak -- president mubarak named a new vice president of egypt. he ordered his cabinet to resign yesterday. this hour, he is announcing a new prime minister, the former head of the country's air force. he is the first a new vice president to be named since president mubarak came to power 30 years ago, according to the ap, and analysts say the appointment is a step toward setting up a new successor. more than 100 people are dead across egypt. we will continue to track events across egypt as they unfold. if you can follow the event is -- you can follow the event on our website, c-span.org.

>> back in the u.s., president obama announced he is open to changing the new health care law, but not willing to fight the battles of the last two years over again. now, a house hearing on the economic impact of the health care law. if you will hear remarks from former congressional budget office director douglas holtz- eakin and small-business owners. this hearing is a little over three hours. oóoóooooooooóooóoo >> we will have to devote panels today. our first will feature austan goolsbee. i'll begin by making and opens -- opening statement, and then i

will yield to my friend and ranking member, mr. levin. i want to read the following. i know one of the things that has come up is the 1099 provision appears to be too burdensome for small businesses. it involves too much paperwork and to much filing. it is probably counterproductive. if it was designed to make sure that revenue was raised to help pay for some of the other provisions, but if it ends up being so much trouble that small businesses find it difficult to manage, that is something which should take a look at. there are going to be examples where i think we could week and make improvements. that was president obama on the day after the november election. the president was saying the health care law appears to be too burdensome for small businesses, that and involved too much paperwork and to much filing. last night, in his state of the union address, the president again referred to the 1099 provision as a flop.

more importantly, the president asked us to identify and bring to him items that need to be fixed. clearly, in a bill that is over 2000 pages long, there is more than just the 1099 provision. with unemployment rate stuck above 9% for the last 20 months, and my home state's unemployment at nearly 12%, i have one simple question -- how is it congress passed a healthcare bill that is a "counter-productive" to american employers, especially at a time when we need to look at solutions to encourage, and not impede job creation. if that is the focus of our panel today. the health care law imposes more than one-half trillion dollars of regulations. my friends on the other side have argued that we should not debate health care and we need

to move on and focus on jobs in the economy. what they need to recognize is that employers of all sides are expressing concern that the new mandates and regulations will deter them from hiring new employees, threaten their ability to retain existing workers, and harm their ability to increase wages. the new health care law compounds the uncertainty employers are facing under the most challenging economic climate since the great depression. making matters worse, many insurance companies and employers have already increased premiums to comply with the law, exacerbating the drag in the u.s. economy from rising health- care costs. that is a problem with health care law that puts washington, d.c., the federal government at the center, instead of patients and doctors. when you put washington at the chance of a bill, the bill works for washington instead of the american people. it failed to control costs and let americans keep the

insurance of the have and the like. it fails to protect jobs. it fails to make sure seniors have access to their doctors and hospitals, and sales from having tax increases hit middle-class families and the small businesses we need to move our in anemic economy forward. this is the first hearing in many with regard to the health care law. it is my intention to give the american people and employers the opportunity they did not have won this law was written to testify in an open hearing on the impact this law will have on them we all know that the nonpartisan congressional budget office will increase premiums for millions of families by up to $2,100 on average by 2016. that is $3,200 more expensive than the republican alternative i offered last congress. we all know that the obama administration's officials have predicted that as many as seven out of 10 employers will have to change the carnage they offer. we know from the joint committee

on taxation that there are well over $500 billion in taxes, many of which will hit small businesses and middle-class families. today, we will hear from employers and what they'd think about the law. i look forward to hearing the testimony and getting more of this insight in the future. after all, these are the people that have to live with the decisions made here, in washington. before we do, i ask unanimous consent that all members be allowed to submit an opening statement for the record. hearing no objection, i now yield to the ranking member levin for an opening statement. >> thank you, mr. chairman. dr. goolsbee will be here until 10:30. he will have a chance to respond to some of your criticisms, that i do not think are valid. we want to hear from you, dr. goolsbee. i will be brief.

last night, the president said some very clear things about the health-care issue. he said, "instead of three-fight in the battles of the last two years, let's fix what needs fixing, and move forward." my concern about the hearing is that indeed, it will be fighting the battles of the last two years. for example, as to 1099, we introduced legislation in the last session. it passed here. it was opposed by the then the minority because of the pay-for. ironically, much of what is in the paid-for is now the law of the land, and we should have acted on 1099 last session. in his speech, the president

also said "what i am not willing to do is go back to the days when insurance companies could deny someone coverage because of a pre-existing condition. he went on to point out that the law is now making prescription drugs cheaper for seniors, and giving uninsured students the chance to stay on their parents coverage. so, i repeat, he then went on to say "instead of fighting the battles of the last two years, let's fix what needs fixing, and move forward." i think that is exactly what we should do, and i would hope that would be the tone of the hearing today. i yield back. >> thank you. welcome to the ways and means committee, mr. goolsbee. under our rules, you have five minutes per your written statement will become part of the record.

welcome, and you may have begin. >> thank you, mr. chairman. i would like to say good morning to chairman dave camp, mr. levin, and all the members of the committee. thank you for inviting me today. no we were up late for the saw several of the left might, and i appreciate -- i know we were up late. i saw several of the last night. i appreciate your time. the affordable care act was designed to make sure health insurance was affordable. while millions of people are now benefiting, much of that impact will begin when the major covet -- coverage provisions will take effect in 2014. the best evidence we have gathered from exports suggest that in addition to slowing medicare spending and significantly reducing the deficit in the next 10 years and that 10 years after that, that the affordable care at candy a

benefit to -- can be a benefit to small businesses by reducing the gross rate of health-care costs for all business. the impact of the labor market is an important topic. i applaud you for having this hearing. i believe there has been significant amount of confusion on this issue. i am happy to have this opportunity to try to clarify that. i think the president laid out last night, in no way that is most helpful, and you reiterated in your opening statement, mr. chairman, that we should try to work together to win prove what ever is broken, or problematic. we should fix together anything that reduces costs. healthcare has for years been one of the most prevalent cost issues facing the business

world. those costs have been rising dramatically, long before there are was an affordable care at, and the intention is to try to address that. i would highlight two basic mechanisms that i think the has and canare act have a positive impact. the first mechanism is in the area of small business. the role of contra and doers and small-business owners in job creation is well-known. equally well known is the fact that small businesses have for years consistently said that the health -- the cost of health care is one of their consistent problems. small businesses that want to provide insurance face much higher costs than large firms do for exactly the same plan. in many states, they also faced the risk of one single employee

or even an employees still family member said in their premiums through the roof for all employees. the affordable care act has begun to make small businesses more competitive, by making the health insurance more accessible and affordable. one of the first provisions to take effect is a tax credit that helps offset the cost of coverage. if that applies to as many as 4 million small businesses that might be eligible right now for that small business tax credit. in addition, it can level the playing field for small businesses by giving these businesses and their workers access to the same kind of stable premiums that larger businesses enjoy it. the exchange's pool risk and reducing the district cost for small businesses. new insurers will not be able to raise rates when some individuals in the group becomes

sick. this will allow small firms to offer competitive benefits. people can start their own company, or go work for a faster-growing small business, without worrying that they would have to give up access to secure affordable coverage. the impact on job mobility is important. the other mechanisms i would highlight are the many things the act to reduce cost overall and the health-care cost inflation rate. this includes the immediate reduction in the implicit tax from the uninsured. right now, the uninsured get health care in emergency departments, or other very high cost ways. the estimate suggests that that is a hidden tax passed on to everyone else, of up to $1,000 per worker. the affordable care act will reduce that hit in tax directly.

secondly, it makes innovations in the delivery systems of medicare and medicaid. successful indication -- innovations have reduced crop -- costs in the private sector. >> if you could sum up quickly. >> those cost reductions and small-business credits could have quite a beneficial effect on the job market. >> thank you. your full statement will be part of the record. thank you for that. last night the president did say the ongoing health care reform debate, instead of battling the fights of the last two years, let's fix what needs fixing and move forward. he mentioned specifically the 1099 provision. what else does the president believe needs to be fixed in this new law? >> i would say that 1099 provision, which was designed to reduce tax evasion, but put this burden on small business, was

identified as an important one. he saw the president said he was open to look at things. i know people have said we should of the more on medical malpractice reform. if the president said he was open to looking at that. i would highlight the affordable care act does create pilots that it funds in states to figure out ways to address medical malpractice reform, and authorized examining and creating pilots to help us figure out what works in that area. i would say that is an area the president is open to ideas, and we would want to work with you on. >> there is 1099 and medical liability reform. are there any other items? >> i would say the president is open to working with you if you identify other a items.

but, the basic approach is fundamentally the right approach toward >> with regard to holding costs down, -- approach. with regard to hold costs down, folks at the congressional budget office say the legislation will likely increase, not decrease in national health expenditures. if they are right, isn't the law a health -- a fell year that will increase jobs? -- a failure that will increase jobs? >> i do not view it as a failure. the key thing is trying to get the health-care cost inflation rate down. if more people are being covered, and having their health improved, and have the security to know that they cannot be denied coverage because of a

pre-existing condition, the amount of total health spending is different than looking at what the prices are, and trying to control health-care cost inflation. so, in my view, that would not be the right way to evaluate it. >> but, the expert, non-partisan to agencies that we rely on like the congressional budget office and the actuaries said cms tell us that overall health-care spending is likely to go up. is the stated claim of holding down health care costs is really a justification for this bill, and will help the economy, and small businesses, and that is not going to happen, how is this committee expected to evaluate this legislation other than it does not need the stated goals and a reform that was purported is a failure? >> i was trying to make the distinction, and i apologize if i did not.

the amount of total spending, and the spending per person, or the cost of the same procedures -- to the congressional budget office, and many health economists out in the country believe that the things i have described in my testimony are ways that we can, for any given business, reduce the health-care cost inflation rate, and make them more competitive for small businesses, giving health care credits they could use to offer health care for their workers where they do not now. that is important. that will facilitate job creation. that is a different question than the one i think you are asking, mr. chairman, which is what would be the total spending on health care overhaul. total spending has been rising quite dramatically for many years, and i would observe that

cms data suggested that health- care spending rose at the slowest rate this past year since they have been keeping records. >> well, the congressional budget office has indicated as i said in my opening statement, that health-care premiums for millions of families will also go up by over two thousand dollars per family. obviously, in contrast to a reduction in premiums that. with a bill that i authored. -- that happened with a bill that i offered. whatever way you slice it, costs are going up. as you said in your opening statement, and getting costs under control in health care is a very important goal, and one we should look at. thank you very much. at this point, i will yield to the ranking member. he has five minutes. >> thank you, dr. goolsbee. you are very polite, and proceeding that way it is important i think.

but, i think there needs to be driven home very clearly the distinction you make. driving down costs does not mean necessarily that expenditures will not go up. we have now over 50 million people who have no insurance whatsoever. bringing most of the 50 million people so they have health care insurance and health-care, may increase overall expenditures, while we drive down the cost per patient. >> there is nothing inconsistent. john boehner's plan has been

analyzed. it would add 3 million people to the uninsured. we are the only industrialized nation that has anything like 50 million people with no insurance whatsoever. the only nation like that. so, you said it very discreetly, but i think it was clear, and i think we need to make those distinctions very clear indeed. now, let me ask you about another argument that is made about health-care reform, and how that language has been somewhat moderated. i will use what has been said here -- that it is a job- killing bill reform. i do not think we should use that language. whatever language we use, would you comment on that? >> i would say, as a strictly factual matter, i think it is inaccurate to say that it is

job-killing. evidence suggests the the role of small business in job creation and the role of reducing the health-care cost inflation rate in job creation suggests that the two primary tenants of the affordable care act may have even a significant positive impact on the job market. you may have seen the health economist at harvard, david cutler, look at the best evidence we have of the projected impact of these various inflation-reducing th measures, and found that it would be jobs-creating, in the nature of hundreds of thousands of jobs per year. if you look at the evidence on employers, health care costs have been rising dramatically every year for many years. that has been a tremendous burden on them, and has limited employment growth.

anything we could do to win -- reduce that inflation rate will have a positive impact. i did not mean in any way to say to the chairman or anyone else that we should close our mind, and not be open to important ideas on how to improve this or find other ways to get costs down. we should. the president has made that clear. i would like to reiterate that we are open to sensible ways to improve care, improved coverage, and get costs down. to describe it as job-killing is not accurate based on the evidence that we have. >> just briefly, my time will end soon -- in your testimony, you referred to the patient? center outcomes research institute as something that could help make treatments work better, and that could effect cost, and try to get a hold of costs. do you want to comment briefly?

you have about 30 seconds. now that washington is going to dictate the care that patients receive. >> that institute is not a dictation machine. it is not meant to do that. he is meant to share information across the country of what we find, what kind of treatments work. the best analogy -- when i was a kid, it was routine to take everybody's tonsils out. i got my tonsils out. i was in the hospital for three days. of our own kids, i have three children, and the studies indicated that that was not effective, except in certain circumstances. now, our middle son, i'm not a doctor, but some kind of inflamed tonsils. he had his tonsils removed. our other two kids did not. that is a case where looking across the country, studies showed that it was more effective, and in some sense more dangerous to routinely just

take all kids tonsils out, and it is quite a significant expense to both families and to the health-care system that we were right to meet -- routinely doing that. i would use that as a personal example of what the intention would be to share that information. >> thank you very much. mr. herger is recognized. >> thank you, mr. chairman, and mr. goolsbee, by thank you for appearing before us in your testimony. as i listen to you, there seems to be in the administration had a night and day difference between what i hear you saying, on the lowering of health-care costs and what this obama-care is doing for our small businesses and creating jobs, and what i hear small businesses in my district telling me. later this morning, we will hear from some -- from some small- business owners who do know firsthand what it takes to

create jobs. it is one thing to come up with academic arguments for why a particular policy would be good for job creation. it is another thing to have those results actually demonstrated in the real world. what we are going to hear from business owners in my district, and what i've heard from small businesses, is a very different story than the one you have presented. they are -- their near unanimous opinion is that this health care law will be absolutely devastating to their small businesses, and to creating jobs. let me share with you some of the feedback that i have received from business owners in my northern california rural district. robert boise rights "i am a small businessman who has retired and am collecting social security.

i started my business in january, 2008, and it immediately took off. in 2009, i made more money than i ever have in my life, and i was ready to add one or two employees when they started talking about obama-care. i have now decided not to expand, and to contain my business at a smaller size caraco." then, charles watts of chico, california rights "i have been a business owner for 35 years, and i have survived three recessions, this being the worst. what i do not understand is how our government figures that business owners can maintain worked in an economy with a collapsed housing market with no future in sight of recovery for years. our company is hanging on by a thread, and if i have to

provide health care for employees, i will have to close it down, no questions asked. i would have no other option." . .

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it will be too expensive. >> your time has expired. >> i apologize. >> mr. johnson is recognized. >> thank you, mr. chairman. you have said a lot of things that don't seem to be true in the real world. maybe you ought to get out there and talk to people. but, you know, that health care tax credit, for instance, very few small businesses that i talk to and their employees will benefit from the credit. in fact, cbo estimated that 88% of those who get health insurance from a small business or from a business will not receive the credit. there are different credit amounts and eligibility requirements prior to 2014 that exist prior to the exchanges are operational. and after 2013 an employer can

only claim for two years. that's not giving them much. one of the purposes of this hearing is to look at the impact of relts reform law on jobs. i think we can all agree it is critical to pursue policies that create jobs, not eliminate them. and the health reform law places significant restrictions on physician ownership of hospitals. you've almost put it to a complete halt and yet my experience with physician-owned hospitals, they are far above and the benefits to the patients of a regular hospital there. they are precise and know what they're doing. many projects in planning had to stop and expansions were curtailed. every one of those decisions had a negative impact on jobs in

can you explain to me how the administration could have supported a decision they knew could negatively impacted many jobs in many communities? >> well, congressman, i will need to look into this exact provision, and i will get back to you. i know that the primary goal of the various provisions in the act are how do we provide the best possible care at the lowest possible price or with the lowest rate of inflation. if there are things about physician ownership of hospitals or any other subject that we can get together and work on and find evidence that it could improve care and reduce costs, the president is open to look at any such ideas. so i will have to get back to you on this. i'm not familiar with the details. >> ok.

well, that's just one area that of that bill that doesn't appear to be beneficial to the industry. you know, we talked about 1099 reporting requirements and i presume now you are in agreement that we need to get rid of that provision. is that true? >> that is true. ok. i'm hearing it from you and the president. >> yes. >> all right. well, then let's do it. the health care overhaul provides health plans in existence on the date of the law's enactment. that they would not be required to meet all the requirements of the new law. and you all argued that it would allow individuals to keep the health insurance they have and like. the statute did not define grandfathered plans other than to ensure that all plans resulting for the length of the agreement. it's clear that many employer plans will not enjoy the grandfather plan protections from the new law.

can you discuss that a little bit. >> yes. what i would say is the clearly the intention in the overall impact of the affordable care act is to -- the president believes in the private system and it is designed to try to preserve the option that if the employer is happy with the plan that they have, they can stick with the plan. the intention of the grandfathers clause is to make it so that if there are things in the act that would have some impact that the employer or patient doesn't want they could just stick with what they have. now, you always have to choose the lines of what to draw what counts as the same plan. now, there is flexibility. if you're getting the same insurance but you want to change providers, that's still

permissible and you still keep the grandfatsdzering. if you fundamentally change the nature of the health care you're getting, then the point of the grandfathering would not apply. >> but isn't that only for two years when you do that? >> it depends which but on some of these there are phaseouts. >> thank you mr. chairman. >> thank you. mr. mcdermt is recognized. >> i fly across the country 35 times a year for 20 years and i've been flying with united airline attendents who have now gotten a little older. and i doubt there's a single flight i fly on where there isn't one flight attendant who is working simply to keep her benefits because her husband has a job that doesn't have

benefits. and when i read the attack on the job-killing aspects of this bill, they read the report from cbo and it sounds like they're saying we're going to kill jobs. but in fact, that flight attendant would gladly give up her job at age 60 if she had health care for her family in some other mechanism. now, is that killing the job or is that her choosing to leave the workforce? >> to me that sounds like a retirement. and the cbo report that you're citing, they did make clear that there would be a reduction of total jobs but that most of those would be on what they call the labor supply side of people not having to work as many years just to keep their medical benefits. so, to me, that would not be a

job-killing, that would be a retirement. >> so really is political theater, hyper pole to make it seem like this bill kills jobs. >> i'm just -- >> i'm not -- >> let me ask another question. we're going to have another panel and they rounded up some people who say this doesn't help small business. and i'm sure that if you go through this country of 300 million people you can find some small businessman or woman for whom it doesn't work. but from reading your testimony it sounds like more small businesses are buying insurance today if i read the figures you had for united health and for kansas city's blue cross/blue shield program, it sounds like people are actually getting in because of the small business tax credits. >> i think that's true. i would make three points. the first is if you don't have insurance, which the smaller the employer you get, the

greater the share do not offer insurance now, because they would have to pay substantially more for exactly the same policy as large employers do. the small business health care credit gives them the opportunity to offer insurance for the first time, and you have seen substantial takeup. second, even if you already offer it, the small business credit reduces the cost to you in a way that has never existed before. and, third, we should not underestimate the importance of the exchanges that will be coming on line which will allow small businesses to get insurance at the kinds of prices and steady lels that large employers have had. those three things are critically important to small business and for years before there was a -- an affordable care act they have been wanting to have for some time these

types of credits and access to this type of insurance. >> and they've also talked about wanting to pool and so that small businesses could join a pool and they could then buy like boeing or warehouser or one of the large companies buys. so that this really gives them the ability to get that kind of benefit, is what you're saying. >> that's beater way to say what i was saying. that's what the exchanges are for. allows them to pool and get prices as if they were a large employer. >> you may not have read the testimony of the people who are following after but. but can you think of any reason why a small businessman or woman could not find a way for health care if they're making money? is there any reason why beyond they don't want to do it? i mean, is there some economic reason? i don't understand. if you're making money in a business how you can't put some of that money toward the health care of your workers.

you would certainly care about your workers i would guess. >> well, look, it would be presumption for me to tell other folks. i don't know what the circumstances of different businesses are. i do know this. that if you take employers that are employing people without giving them health care coverage, the reason that there would be a mandate is to try to get away from the system we have now, which is people don't have coverage still get sick and they go do you know and they get medical care at the highest possible expense and it doesn't become free just because it was in the emergency department. that's a cost that gets passed directly on to the employers who do cover their employees. and that cost is as high as $1,000 a worker. so i don't put any moral judgment of any kind. i know we've been through a very tough spot in the last few

years and everybody's trying to get by and we're trying to turn the corner to grow our way out of these problems. i think small business credits to help them afford to give coverage as well as giving them the opportunity to buy at the kind of prices that larger businesses do and doing everything we can to slow the growth rate of health care costs is important. >> thank you. the time has expired. mr. tee bri is recognized. >> thank you mr. chairman. doctor, the president repeatedly mentioned throughout the debate and afterwards that americans making less than $200,000 or families earning less than $250,000 would not see their taxes increased with respect to the democrat's health care bill. i'd like you to tell me whether each of the following in a yes or no answer would suffice, that were included in the health care law constitutes an increase in taxes for individuals or families making less than $200,000 or $250,000.

a new tax on individuals who didn't purchase government-approved health insurance. >> i don't think that's an accurate way to describe it. no. >> not a new tax? >> i don't think that's an accurate way. >> a new ban on the use of flexible savings accounts, hsas, hras on using pre-tax incomes to purchase over-the-counter drugs. >> that's not a tax increase of a normal form. and that's part of a broader reform effort, obviously. >> an increase from 7.5% to 10% of income, the threshhold after which individuals can deduct out-of-pocket medical expenses. not a tax increase? >> i -- as i'm saying, if you -- i do not consider the

affordable care act as a whole to be a tax increase on people earning less than $200,000. >> imposing ability to fund an fsa. >> could you? >> $2500 cap. >> i don't consider that a tax increase. >> a new 10% tax on indoor tanning services. not a tax increase? >> well, that seems like a strictly voluntary thing that one could choose. >> but not a tax increase? >> here's the point. we have in this bill -- and i'm quoting from the bill -- a number of things that's going to impact people, individuals who make far less than $200,000. i had a lady contact me in dessber who said she just found out from her employer and her

doctor that she could no longer manage her kids health care costs with respect to prescription drugs, over-the-counter drugs. and now she was going to have to contact the doctor every time she wanted to deduct something from her flexible savings account. and had just found out in december months after the health care bill was signed into law that actually her tax was going to increase, her income tax was going to increase because her fsa was going to go from $5,000 to $12, 500 and -- $2,000 500 which means she was going to be paying more taxes. so two things were occurring in her mind. that she was going to be paying more toosms and her ability to manage her health care was going to be taken away from her. that she was now going to have to call her physician's office which is going to make ironically the office more

involved, not less involved. and there's a cost to that as well. so i know you chuckle about this, but is the president was very, very firm in that nobody making less than $200,000 or families less than $200,000 would see income taxes go up. any taxes go up. and now we see a department of justice defense that this bill is constitutional because it's a tax. the individual mandate is a tax. so on one side we say it's not a tax or you say it's not a tax, the administration. on the other side you say it is a tax. so which is it? >> well, congressman, first let me -- i was only chuckling about the tanning salons. i wasn't meaning to make light of it. as i say, we are open to work. if we look at the fsa rules, alled i would say on fsas is this was part of a broader package that it's -- picking

out one thing in isolation and not taking into account other benefits. if you are paying for something with a pay-for but it's going to reduce health care costs inflation or we're going to get additional coverage that you didn't have before, you do have to take it into totality. >> here's my point, sir. if you were telling the american people and the president is telling american people, if i'm advising you and you repeatedly say it's not a tax increase, and mrs. smith who sees her fsa go from 5,000 to 2500 and now she can't buy baby aspirin at the store and deduct that, she looks at that as a tax increase. and so there's a credibility issue. and again we can chuckle about it. >> i didn't mean to chuckle. >> if you can respond briefly. >> if it changes the fsa rule but simultaneously gives her a significant reduction in the cost of heir health care, that

should not be viewed as a tax increase on her even though just looking at one component you would say i would to digs allow an expense on an f sanch. but the point is taken in totality. it's not a tax increase. >> thank you mr. chairman. i guess it all depends on what the meaninging of "is" is. this is a sort of back to the future moment. it's a huge tax increase. i deal with constituents at all places of the economic spectrum and they talk about a lack of purchasing power. they're seeing their dollars go do you know. and contrary to the gentlemen who say this is not job killing, i have met with hundreds of business ornse over the last ownerers over the last two years, since this bill implemented this year. business after business, members are telling us and telling our office and me they're not hiring people because they cannot afford to buy coverage. which leads me to a qui.

since we refer to the tanning tax as a strictly voluntary thing, i don't know the i.r.s. agents would feel that way. but i would to ask you about the burdens about the health care law on small business. for example, suppose you own a small business with 50 or more employees and that business is not eligible for the small business dasm credit and can't afford to purchase health care for your employees, contrary to the propaganda, rates have gone up, and are going to continue to go up because we didn't go after the cost drivers. the health care law requires you to pay health insurance or pay a fine. now, how would having to afford the cost of health insurance or paying a fine help your company grow an create jobs? because when we get into this price increase, there's a faulty assumption that businesses have a vast supply of money. the majority have a vendor who has fixed cost of materials. and particularly if they're dealing with larger established businesses, price ceilings that

they cannot exceed. so that margin skinnies do you know down. the average manufacturing company might make an 8% profit margin at the end of the year. and we're watching health care just go up. here's my question. how would having to absorb the cost of health insurance or paying the fine help you grow jobs? that is a tax in your bill. >> well, here's what i would say, congressman. and i appreciate the evidence and we're open to working and looking at the evidence. if you take large employers, more than 95% of them offer health care. if you go to the 5% that do not, and say, isn't it going to hurt those 5% that they will be required to provide health care, i do think it is appropriate that we consider what is the cost that they are applying on to other employers

when they aren't offering health care. and that's the hidden tax that already exists. the growth of health care costs has been astronomical. year after year before there was an affordable care act, the affordable care act is trying to bring that more under control. so that the majority of small businesses is in the country some 4 million would quafl for the credit is good for those businesses. to try to find an individual business that did not provide health care before, is over 50 employees is not planning to use the great benefit of the exchange to get so that they would have the opportunity to get significantly lower prices for their health care, to me, fields a little bit of a selected example when taken in the -- >> let's take the small companies. why couldn't they just pool together?

wouldn't that make sense to be able to handle this issue and to have the government stay out of it? let the private market work. i mean, i ran a business for 12 years and we ran into this time after time where costs did go up. and the costs under this bill are going up dramatically. i know people who won't hire employees because they're going to go over the 50 threshhold. why should i hire somebody if i'm going to be taxed? and you called just a minute ago that it's not a hidden tax. >> you're selecting a group of employers that some specific sliver. and i'm highlighting that there are millions of businesses just below that which are the majority of small businesses in the country who are getting a very significant tax break. >> you've asked us to take it in totality. and just between mr. tee bri and i we probably pointed out 20 individual examples that take into totality the significant increases in costs

under this bill and i think we come back to the details. we're going to have to address the cost drivers and we don't address the cost drivers here in washington with creating a huge new bureaucracy that places more overhead if you ask any business owner about this bill thile ask the question, how can you create over 100 new agencies commisses and boards, mazz illinois increase the regulatory side of this and somehow reduce costs? while raises taxes on businesses and cutting the direct access to benefits. er doctor that i know called this a denial of care bill when they look at the economic aspects of this and we're dealing with very different sets of definitions of terms and we can't be fluid about that. >> the time has expired. mr. kneel is recognized. >> thank you, mr. chairman. mr. chairman, i would like permission to insert the cbo's preliminary analysis of the repeal of the health care legislation to the official record. >> without objection. >> thank you. and if we were to repeal the health care bill as some are proposing, that means eliminating $40 billion worth

of tax credits. >> it would be very problematic and it would be particularly problematic on small businesses. but it would be a major tax increase. >> let me take you to some of the facts here. one of the difficulties in the discussion is that if our friends on the other side are asked by the local news media in their respective constituencies whether or not they favor banning preexisting condition, they will say yes. if they're asked, is it not a good idea to keep your children on your health care plan up until they're 26, they will say yes. if they are asked if it's a good idea to cap out-of-pocket expenses, they will say yes. carrying insurance from one job to the other, they will say yes. the problem with that argument is, from an actuarial reality or from risk analysis, how do you accomplish those outcomes if you don't require those who can afford insurance to buy it and to help those who can't

afford it to get into the risk pool? through the mandate? i mean, that by the way i want to say something for the record. this is very important. the mandate was the compromise in massachusetts that was proposed by governor romney. that's how we got there. senator kennedy advocated for years talking about health care. the difficulty is that in attempting to do it the compromise became the mandate. would you speak to that issue about actuarial reality, risk analysis, and what insurance companies might do to suggest that they could accomplish the former as i've outlined it to get us to the latter. >> i do think that the basic point of the matter is to get away from the economic problems of cream-skimming and figuring out who is more likely to get sick and dropping them. and when you have circumstances like that, a lot of times

markets can tsh -- the free market can fail when you have big differences of information like that. that has plagued the health care system all along and that is the point of the affordable care act is to try to get everybody into the system so you can't either free-ride off your neighbor and so on the other side they can have some assurance that the probability of whatever illness is approximately the probably in the overall population as opposed to everybody that knows they have some disease signing up only after they get sick. >> i would encourage all the members of this committee and others to visit an emergency room on a friday or saturday night. if you can't do that or if you live in a rural area, then i would encourage members to be in touch with their local hospitals to find out what

health care delivery is in the emergency room. and for that man or woman who walks out of that emergency room thumbing their nose by suggesting that they beat the system, they really didn't beat the system. in fact, those costs are passed on to all of us. that's the whole idea of spreading risk. which i would have thought the other side would have paid a great deal of attention to given their proclivety for the suggestion that we ought to allow the market to work. >> look, i think that the uncompensated care is a hidden tax on everyone and it's a big one, a thousand dollars a worker by some estimates. and we cannot forget that that tax exists. it's very important. and we can get that cost down. and that's a big cost driver. >> thank you, mr. chairman. >> thank you. mr. nunez is recognized. >> thank you, mr. chairman. were you involved at all in the

president's state of the union address in designing it or writing it or reviewing it, previewing it? >> a little bit. >> ok. so you're familiar with the health care portions of the speech? >> yes. >> so the new 1099 reporting requirements, last night to paraphrase the president called it a flaw, i think. at what point did he have the epiphany that it was a flaw? >> i don't know the answer to that specifically. but the chairman quoted the president from a significant time ago. it wasn't at the state of union that he had it. >> did the president or white house or anyone with the executive branch ever hear from any members of congress that this was a problem during the year-long health care debate? >> i wasn't involved in the legislative discussion but i think it's probably fair to say yes. >> thank you.

what -- so the president has now admitted that the policy he supported was flawed. he asked for other creative ideas. where should this committee start? what creative ideas should we look at to identify possible additional flaws, other areas that we could reduce costs, improve the quality of health care? where should we start? >> well, i do think that the previous congress people have identified hearing from constituents and from business leaders themselves. if there are ways that we can reduce administrative costs, reduce regulatory or compliance burdens of the form. >> any specific ideas? is there anything like 1099 that we should strip out of the current health care law or anything we should put in? >> well, i think 1099 is a good one and the president outlined

we should look together at the medical malpractice issues that can lead to defensive medicine and those thing that is strike me as also a price to look. >> so medical malpractice we should look at. any other years? >> those two plus the general approach of talking to the small business community strike me as three important ones to begin with. >> i want to focus on the uninsured now and move to the uninsured. we've heard members of this committee already this morning say that there's 50 million uninsured. i think was the number. maybe there's more than that. or possibly at least people think there's more than that. i was under the understanding when we passed this two new entitlements adding to the two old timets of medicare and medicaid and health care law that this would be the utopia

for health care. and that everyone would now be covered. is that happening? >> i would say we are dramatically increasing the number by tens of millions in who is covered. there obviously is the issue of undocumented immigrants who are not, were never intended to be getting covered. >> so how many new people have we covered since the laws been implemented that wouldn't have been covered under the old laws? >> well, the full coverage provisions don't go into complete effect until 2014 but the estimates are in excess of 35 million. >> why did it take so long? why do we wait until 2014 to implement this when we have this health care crisis and all these folks uninsured? >> i -- >> i know you didn't write the law but you look at the

numbers. >> i look at the numbers on any significant change of this nature usually there is some transition period historically. >> was it possible to hide the budget consequences of the health care provision? >> no. >> so we don't have a debt problem? >> we have a long-run fiscal problem facing the country for sure. >> does health care have a part of that? >> in reducing it. yes. >> so this health care bill is going to reduce the deficit? >> yes. according to the non-partisan congressional budget office to repeal the health care act would increase the deficit by a quarter trillion dollars over the next ten years. >> wow. thank you mr. chairman. >> all right. mr. reich ert is recognized. >> thank you, mr. chairman. mr. gools by, so i've been taking some notes while you've

been answering questions. so the affordable health care act you say was designed to reduce costs. >> yes. >> improve access, increase access for people? >> yes. slow the growth rate of health care costs? >> that is its intention. >> and reduce the deficit. >> yes. >> all of those things. i'm just an old retired cop. so i'm not a doctor, i've not been in the medical profession, so i'm just trying to understand this like every other american across this country. so these were the goals. but i really want to go back to whether or not mr. nunes and some others have pointed out. i'm really having a tough time understanding how a provision like the 1099 form gets included in a bill that's

supposed to accomplish all these things, reducing costs et cetera. because if i'm not mistaken, do you know how the 1099 provision was inserted in the bill? >> i do not. >> you don't know what member of congress or who came up with the language? was it the administration? >> it wasn't an administration proposal but i wasn't involved. >> so you have no idea. this is your project. right? >> well, i'm just an economist. >> you're just the spokesperson? >> i'm not a spokesperson. i'm an economist. >> why are you here today? >> i am here to help evaluate the economics of the act. >> let me just ask you. the 1099 form. we don't know how it got in there. but somehow it increases the cost of the bill by 19.2 billion. you have to hire 16,000 i.r.s.

agents. how can that just be overlooked? >> i think the american people have a credibility issue when you say that you're here to reduce costs and all of a sudden you miraculously discover that there's a $19.2 billion cost in here that shouldn't be there. how does that happen? >> well, as i say, i wasn't involved when -- >> but how does that -- >> when congress passed the legislation. but what i will say is that the people who supported it were trying, the goal which has been a bipartisan goal of reducing the amount of tax evasion, people who do not pay taxes on income that they should pay. this -- excuse me. ok. i know what the goal was. my question was how did it get into the bill. and your whole premise is that this was to reduce costs. and $19.2 billion gets somehow inserted into the bill and no one knows how. did i hair you say earlier too

that -- hear you earlier say that you can keep your health care plan if you like it or something like that? in one of your answers? >> that is the intention. yes. that's why the grand feathsdzering clause existing. >> i remember president obama visited our retreat last year and he was asked that question. and we've heard that. time after time and time. you can keep your health care plan if you like it. however, in his comments to us, and i'll paraphrase his quote, he said, well, there may have been some language snuck into the bill that runs contrary to that premise. how do you explain that? i mean, you're telling me today that you can keep your health care plan but the president says there's language in the bill that runs contrary to that premise. >> i apologize, congressman. i'm not trying to be coy. i haven't heard the president say that.

but i can -- i would like to look at that before i made any comments. >> well, it's in print. >> ok. >> can you see why the american people are confused about this bill and whether or not it provides any benefits at all to them, whether or not it does all those things that you laid out earlier, decreases cost, increases access and is good for business and reduces the deficit? i mean, i just pointed out two things here that have quite a bit of controversy around it and seems to be rather serious conflicts with the premises that you've laid out in this bill. mr. chairman, i yield back. >> thank you. mr. thompson is recognized. >> thank you, mr. chairman. doctor, thank you for being here. my colleague mr. neil asked that the independent cbo analysis be read into the record. and i would like to just ask you on that issue, i'm glad he did that, it's important fact that i believe we need to take into conversation. but that analysis says, and i

think you pointed this out, that this repeal of the bill would drive the deficit up by about $250 billion over the first 10 years over $1 trillion and change over 20 years. so if that were to happen and had this upward push on the deficit, how would that impact business and investment in this country? >> well, i believe that certainly addressing our longer run debt issues is a bipartisan -- is an area of bipartisan agreement that we do need to do that and to not do it contributes uncertainty. and so i think repealing this and making that problem worse would likely add more uncertainty on that. >> and a hit on the businesses that we're trying to or hopeful will get going. >> could be. >> to get the economy up. thank you. on the uncompensated care issue, i just want to point out. i think everybody can find this out. i know that i did the run.

and in my rural district in northern california, last year the uncompensated care costs were $70 million. and the uncompensated care fairy doesn't deliver a check to the hospital when that happens. that's spread out and the rest of us pay for that through higher taxes, higher insurance premiums, et cetera. on the 1099 issue, i think it's important to point out that we took up the repeal of that bill last year in congress. and i think everybody on this side of the dais voted to repeal that. so this is not a new-found issue. this is something that we tried to fix in the last congress. and i also want to point out that when this came up in the debate, i went out to everyone of my counties and asked businesspeople, chambers of commerce as to the impact of that. and there was concern that it was going to be problematic.

a lot of folks said, however, that it's just a matter of time before the software catches up to it and the problems resolve. but everybody irrespective of this po -- position on it was noting that it was trying to solve almost $20 billion tax evasion problem. so as we repeal this, which we will do, we're going to need to figure out how to solve that problem. and, mr. chairman, on the issue of the costs going up, i just want to read from a statement by blue cross or by blue shield of california. and i think everybody knows that the premiums have been going up in my home state. but the head of blue shield, and i'll quote, writes, these rates reflect trends that were building long before health reform. our individual market medical costs are rising rapidly due to higher provider prices, increased utilization, and the fact that healthier people are

dropping coverage during a bad economy. health reform, health reform will help slow down this trend by expanding coverage which will keep healthier people in the system and through quality and cost containment initiatives such as the independent payment advisory board, center for medicare and medicaid innovation, patient-centered outcomes research institute, and other initiatives for prevention and coordinated health care. and i would like to ask that the head of blue shield's statement specifically stating that health care reform has nothing to do with their increased price be read into the record. >> the statement will be in the record without objection. dr. boustany. >> to my friend from massachusetts, i have spent countless hours in emergency rooms and there is a hidden tax as you suggest. but also, your solution in

expanding medicaid coverage is also a hidden tax. and it's basically an unsustainable situation. we can do better. my medical career spanned 1978 through 2003. and to put it into perspective for you, in medical school i saw the first drug to treat peptic ulcer disease which radically changed not only the quality of care for folks but the cost of care. and since then of course we've seen all kinds of developments in pharmaceuticals and medical devices that have given patients more than just the hope and a prayer. i remember dealing with heart attack patients giving them an aspirin and a first generation beta blocker. and now in my career we did complex open-heart surgery using all kinds of devices and things that have saved lives, improved the quality of life. i can go on and on about all the problems with cost

coverage, quality, and so forth. but i want to focus on one particular issue. last night, the president talked about innovation. research and development. american competitiveness. and one area where we have stood out as a country is in our development of medical devices and pharmaceuticals. we are first and foremost in the world on this. and we stand to lose that competitiveness partly as a result of what's being proposed here. the innovation tax. a 2.3% tax on medical devices. that will make -- why is this not only a danger for innovation but it's also a danger to job growth and potentially lead to significant job loss. let me just point out a couple of statistics. 62% of the companies, 62%, that develop these devices that do the research and development

are very small businesses. 62% have less than 20 employees. only 2% have greater than 500 employees. these are small and mid-sized firms that really take on the responsibility of creating that innovation and research and development. so my question is, will this tax on innovation run contrary to the president's plan to expand research and development? secondly, will it hurt job growth along with innovation? and thirdly, how do you reconcile this with on one hand the president wants to extend the r and d tax credit and on the other hand wants to impose a new innovation tax? you know, this is just very inconsistent. so, and finally, as we look at tax reform and the big picture, and the president has talked

about fundamental tax reform, cleaning it up, simplifying it, if you look at this law it has added significant complexity to the tax code way beyond where we were just a year ago. and so i would like you to address those three points. >> ok. congressman, first let me thank you for your service to the country as a medical professional as well as a doctor. we need more people in the medical profession with a commitment like that. i would say on the issue of medical devices, the area of innovation, medical innovations particularly are critically important both for our health and for our industrial base. in this case, the medical devices fee is being offset to some considerable degree by the fact that there will be an expansion in the demand for

those devices by the fact that we're having 35 million plus new customers. >> sir, that's debatable, because a lot of these patients are getting that care. it's just not being compensated for. i could tell you, i've operated on patients that complex open heart surblingry. >> including advanced devices. >> advanced devices as well. yes. >> look, this is an area, if there are areas that have a negative impact on innovation, we should examine those. now, it had been our data that we first came to the table with. the suggestion was that the increased demand for the medical devices would be in some sense far in excess of what impact the charge on the medical dices would be. but we are open to looking at -- >> you really need to look back at that assumption. on r and d tax credit and

medical -- >> that's an area that the president has put as much or more dedicated as much or more resources to medical research as anyone ever has before. >> thank you. mr. he willer is recognized. >> thank you, mr. chairman. i appreciate you holding this hearing. i know it's a little backwards to actually hold hearings after a bill passed. but at least we'll hold a hearing on the bill. so thank you. last night -- and thank you for being here. last night the president said if you have ideas about how to improve this law by making care better or more affordable, i'm eager to work with you. do you believe he meant that when he said that? >> yes, i do. >> well, he said the same thing in 2010 during his state of the union. do you believe he meant it when he said it then? >> yes, i do. >> he said it in 2009.

do you believe he meant it when he said it then? >> yes. and i hope that we will commence working together. >> well, i got a letter here july 23, 2009 i wrote the president. asking specific questions about the health care bill because he wanted input. july 23, 2009 he didn't reply to the letter. why didn't he reply to the letter? >> i don't know the answer to that. i apologize, congressman. >> in september 8, 2009, because i received no reply from the first letter, i wrote him another letter. and i think it was pretty reasonable and i would like to quote some parts from it. it says i introduced the step towards access and reform, the star act, in late july. while this legislation will not be a silver bullet solution to all the problems facing our health care system, my bill addresses medical liability reform, improves access to breast and lung cancer screenings, takes other important steps toward reform

that i think most americans would support. i never received a response from this letter. why didn't i receive a response from this letter? >> congressman, i don't know the answer to that. but i will after uffer -- offer to read or respond to the letter or find anyone that would. i mean, if your ideas address medical liability reform, other forms of screening or preventive care, that sounds like exactly the kind of thing that we want to always be on the lookout for good ideas. >> i guess my point is, would a reasonable person believe that the president had no interest in what the minority party at the time had to say on this piece of legislation? >> i don't think a reasonnable person would believe that. but i can see that it would be frustrating if he did not reply to the letter. >> would a reason yanl person believe what he said last night sf >> yes, i think they would and i think they did. and i'm here to say that we are

open to the ideas and i would be both open and appreciate to see that or other letters. >> do you think the president, he mentioned tort reform. do you think he's serious about tort reform? >> yes. he mentioned the medical malpractice form in general. there is some significant pilot projects and working through the states in the bill now. and the president is open to looking at beyond that. >> let me ask you a couple other questions. do you agree with the president's and cbo's assessment that the health care bill signed into law last year will reduce unemployment? >> yes. i believe that it has the potential to be a job creator because of the cost-saving measures that i outlined in my testimony. >> when? >> over the next ten years and over the next 20 years. >> you keep throwing out 2014. maybe in 2014 we'll reduce unemployment through this bill? >> no.

i think the small business credits can have and have had an important impact right away. and there are other parts that come in in 2014. >> so you're saying that we should at least have seen some impact on unemployment with the passage of this bill last year. >> over what it would otherwise be. that's the conclusion. that's not just my conclusion. that's the conclusion of many outside experts. >> why is nevada's unemployment level at 15%? >> well. >> and what impact has that had on the unemployment in nevada? >> i believe that the reason the unemployment rate is high is because we have gone through the worst financial crisis since the great depression that has had a devastating impact on the economy, and we are trying to work our way out of that. i think the affordable care act is not the cause of that. >> so you don't think higher taxes, bigger government and unreasonable regulations would

have anything to do with the unemployment rate? >> the taxes have been lower. the president cut taxes for 95% 06 workers and had not raised taxes in that sense. >> thank you, mr. chairman. >> thank you. and because of our time limitations, the next questioner will be the last questioner for this panel. and mr. blum an hour is recognized for 5 minutes. >> thank you very much, mr. chairman. doctor, i would like to go back just where you left off a moment ago. because this litany of somehow higher taxes and more regulation, if i understand it correctly in your testimony you pointed out that we've had a million jobs, private sector jobs added in the course of the last year. is that correct? >> 1.3 million. >> and if memory serves, that's more than the net job creation of the entire bush white house

years. in the eight years. >> i believe that is true. >> and in terms of taxation, for over the course of the last year and a half, isn't it true that taxes were actually lowor than they were prior to the president taking office because of the 40-some percent of the recovery act that was tax reduction? >> that's certainly true and it's certainly true in the aggregate as well that the tax collections as a share of income are down. >> so to somehow have the speculative bubble that burst in nevada, which is probably worst than any state and perhaps with the exception of what happened in florida and in parts of arizona, to try to blame that on the administration's high taxes and

health care, isn't that kind of turning the facts on their head? >> well, i'm not -- >> don't mean to put words in your mouth. >> i'm not trying to get anybody mad at anybody else. i will say that the president did not raise taxes, cut taxes, did everything he could to prevent a depression and we avoided a depression. and now we are to a phase, as the president outlined last night, that we need to grow and innovate and compete, and he's open to ideas from both sides of the aisle to how to improve the health care act as well as other ways to innovate. >> terrific. could you comment for a moment on the trend line we were on in terms of affordability of employer provided health care in terms of before we gave the tax credits that people actually made it easier and the health care plan actually gives

an alternative to people if the employers jetsen them under the reform act we have here, people will have an alternative. but what was the trend line we are on if the health care act is repealed? >> i would say before the health care act, i would sum rise a trend line as bad. and so if we repeal it and go back to that, i think it would return to bad. so i guess i would say that the act is attempting to address the series of cost drivers. it's trying to help small business. there are things like the 1099 aspect of the bill. there are other things that may need improvement. but i fail to see how the correct answer to some flaw is to get rid of tax credits for 4 million small businesses to allow discrimination against preexisting conditions to

reinstate the uncompensated care, hidden tax on employers. a number of things in the bill that are really good i don't see why we should get rid of those rather than just fix the things that need to be fixed. >> but of course for the record our committee passed and the house approved legislation to fix the 1099. so that's something that last congress we were on. i want to just conclude on the notion of what impacts there are for small business. currently, small business pays more, our committee has heard pays more than large business. they are doing it without, up until the affordable care act without the tax credits. how is small business going to be affected if some of my friends have their way and somehow this bill is repealed? >> if you repealed the bill, i believe it would be a significantly detrimental impact on small business. that while you can try to find an individual small business

that fits in some place and say that person would be harmed, we know overall 4 million small businesses qualify for a health care credit that they never had before that they wanted for decades. and we know that to set up exchanges that allow if pooling of risk would allow small businesses to get health care coverage and insurance at prices that are significantly lower than they are now. because right now they have to pay significantly more than large businesses do and that's a major competitive disadvantage. >> and you said last year health care costs went up at a lower rate than ever before recorded. >> it was overall spending. >> thank you. all time has expired. i want to thank, mr. gools by for appearing before the ways and means committee. i appreciate your testimony. and since all members have not had a chance to question, i would ask you to allow members to submit questions in writing which will then become part of the written record of the

hearing. again, thank you for being here. >> thank you mr. chairman for your -- for giving me that opportunity. and i would be happy to accept any questions, letters or anything else from members of the committee. >> thank you. thank you very much. the panel is concluded and we'll now move to panel two. . . ççñóç??w???w

>> thank you for taking time out of your busy schedules to be here and in light in the committee on the health care

law's impact on jobs, employers, and the economy. each of you will have five minutes to give your testimony. there is a green light and a red light. the red light is to conclude your testimony. we are going to try to stick closely to the schedule. douglast i begin with holtz-eakin? >> thank you. it is a great opportunity to appear here. the mandates and taxes in the affordable care act are an impediment to jobs at this moment. it will crowd out scarce resources for hiring an increase in pay. we heard this from consumers. the affordable care act has

strong incentives for employers to drop their employees' health insurance. we will have a much larger budgetary cost associated with the act than we anticipated. even if that does not come to pass, the affordable care act is a budgetary danger at an important moment in the u.s. fiscal history and is in strong step in the wrong direction. let me begin by elaborating on the ladder. i think my views on the affordable care at are by now well known. we are in a situation where the fiscal outlook is a direct threat to the u.s. prosperity and freedom. to undertake this act, which has a wide array of budgetary gimmicks, relies on an unsustainable assumptions for cuts in medicare, that double

count receipts, whether they be the class at premiums into the medicare insurance fund or a social security premiums or omit kos, gives a misleading picture of the -- -- omit costs, gives a misleading picture of the budgetary impact. more generally, at the common- sense level, we cannot set up to two open entitlement programs and not fix medicare and medicaid and expect to improve the budget outlook. this act did not. turning to the labor market implications, there are many mandates and taxes. these will compete for sources for hiring. they are a bias against hiring.

for those with fewer than 15 employees, adding the 50th employee is tax. the small business tax credit is temporary. there is no small -- there is no permanent fix for this problem. even if someone winds their way into it, it is a negative increase for -- negative incentive for growth. there are $700 billion in taxes in the act. there is a surtax on payrolls. there is a 3.8% investment tax. these have nothing to do with health care reform. these are pure taxes.

this bill replicated the mistake that the previous congress avoided and will hurt job growth in the united states. there are hundreds of billions of dollars in fees when they be on pharmaceutical companies or the health insurers themselves. these can only be perceived as taxes. they will only show up at higher premiums in insurance. they have a dramatic impact because they are not deductible. they are almost two for one more expensive than they appear. these taxes will hurt the economy when we cannot afford it. we have seen this on top of the additional benefits that the act mandates. if you have to cover more benefits, you have to raise premiums. there is no way around them. this is an act that is going to raise premiums.

the upshot is we are going to see continuing pressure up work on health care costs, insurance premiums, and taxes. employers are going to drop coverage. that is a bad thing for the labor market at a week time period we have the discussion -- that is a bad thing for the labor market at a weak time. >

>> my first jobs were as a busboy and a cook. after five years i got fired. i found myself starting over. i was lucky to land a job at ihop as a manager. after 10 years, i have been building on ihop restaurants. i purchased a development agreement to expand to ohio. thanks to this new law, that is not going to happen. the restaurant industry serves an important role in our economy, employing 12.6 million people. i like to say it is an industry of first opportunities and second chances. first jobs, first careers, first

shot at small-business ownership and first chances for people starting over from a forced career change or re-entering society from incarceration. stories like mine are born every day in the restaurant industry. the restaurant business is built on a small business model which profit margins of 5% to 7%. we rank deadline -- we rank dead last in businesses per employee. for restaurants, this new requirement to provide health coverage is not just a marginal cost increase. this is a huge new expense. at $7,000 annually per employee, it is beyond our ability to pay. let me be really clear about that. i estimate this to be 50%

greater than my earnings. please understand me. that is more than i can actually pay for the coverage. our only alternative is to pay the penalties. many companies will not be able to pay the penalties. restaurants are unable to raise prices in this economy. we do not have a way to replace the lost income. this future development would have amounted to about $22

million in destruction of the ball misspending. another casualty of this is the restaurant's equipment industry. this is a uniquely american industry. that industry has already been devastated by this recession. our lenders require us to maintain certain levels of profitability. obviously, there are other examples of issues that have been raised today, taxes on investments, taxes on the health insurance and the cadillac tax that will hit everyone. to add in, we are asking the

congress to repeal its health- care law. if that cannot be achieved, we ask you to address some major problems with the law. this bill is a ticking time bomb that will devastate our industry. therefore, i am asking you to introduce passed legislation that will repeal the employer mandate. the members of the camera of congress will work tirelessly to help you pass it. i look -- members of the chamber of congress will work tirelessly to help you pass it. thank you. >> thank you. your written statement will be part of the permanent record. >> my name is jo olvio.

i have run the business for the past 23 years. we have been able to throw it to 54 employees. we currently have 45 employees. an area that is of great concern to me is the 1099 compliance requirements. simply put, i do not have the resources in place to implement this law and the resources that have to be put in place. it is more than i have the resources to do.

it is important. when you think of the burden that the legislation places on the business, it is thinking in the context of businesses like mine. in a good year, our profit is 3 cents on every dollar we earn. every time there is a new regulation like this, it comes out of that profit margin. it costs resources that i can use to contribute to benefits and give my employees raises. the key is how to grow the business. my company was at the 15 employee mark two years ago. at that level, i would be legally bound to offer my employees' insurance. it is my it is -- it is my understanding that i can face penalties if my employee is

eligible for the government plan even if i am providing insurance. as my current premium rates, the penalty is less expensive than the present -- and the premium rates. the part of the law that mandates me to provide insurance to my employees is an incentive not to provide insurance to them at all. this speaks to that issue we currently offer our employees. i say -- i pay 50% of the family portion of my employees' insurance. prior to the passage of this legislation, we heard time and time again that my employees would be able to keep their in

16 -- keep their existing coverage. i was told by my ensure that my plan would no longer be offered. it was no longer in compliance with the law. after 20 years of voluntarily providing insurance to my employees and paying most of it at my own costs, i am told that this is no longer acceptable to the government. another area that concerns me is the tax credit that is promised to small business owners. this point was made over and over and persuaded some in the small business community to support this plan because they felt there would be a net positive for them. i can say that i have checked the tax credit for my employees. we are not eligible for a single dollar in tax credits. i have learned from fellow small

business owners that i have spoken to -- one small business owner is not eligible to a single -- eligible for a single tax credit. when i grow my business and take financing to buy a new press or increase investment in my business, i put my personal assets on the line. i put my home on the line for collateral. when you have this much cost certainty in a lot -- and i challenge anyone on this committee to tell me what my health care costs will be two years from now -- it gives me incentives to take the necessary risks. my story is personal. it is by no means unique. there are hundreds of thousands if not millions of small- business owners across the

country facing the same issues. how can we ask those businesses to help the economy prospered and put a drag on one of the main engines of economic growth. >> thank you for your testimony. we will go to the question. period. >congressman roskam is next. >> douglas holtz-eakin, i am sure you watch the speech that the president days. it was a strong man argument. the assertion in the speech that we heard asserted today that we do not want to go back to the days of folks being pressed out for pre-existing conditions. there is nobody who is proposing that.

chairman camp offered a good piece of legislation that dealt with that through higher risk pools. can you comment on that generally on this whole notion of two different visions? it was said that the underlying premise of the new law was to expand coverage by putting people on medicaid. you alluded to this in your opening statement about entitlement outpacing the economy in general. can you give us a couple more thoughts on that? >> certainly. thank you. with all due respect to the president, i think it is a strong man argument. there was a bipartisan agreement that it would be desirable to control health-care spending in the united states and to give affordable options. the difficulty is that this law does not control costs. unless that is done, you will

never be able to control insurance costs. even someone who has insurance will not find it affordable. having a piece of paper that says you are a medicare beneficiary does no good if you cannot see a provider. medicaid beneficiaries are denied provided at higher rates than medicare and private insurers. that is not a solution to a coverage problem. the other vision is generally controlled health care costs give people control of the money. allow them to choose insurance that it's their family circumstances, their lifestyle -- that fits their family circumstances, their lifestyle so that you get decent insurance options and control the underlying costs. it is a shared goal.

>> mr. olivo. austan goolsbee said there is a great deal of confusion about the health care law. i would agree with that. there is a great deal of ambiguity about who gets exemptions from the administration. there are about 200 businesses or unions or other groups that have been exempted. it is an exemption program that is only based on their initiative. you have to ask for it. it is not a blanket exemption. it is not a permanent exemption. it is a temporary exemption. there is a real sense of clarity about the health care law. for example, you figured out that the cost pressures on you are making a dynamic such that it might make more economic sense to your bottom line not to offer coverage and to have folks go into the pool.

you figured out that you are knocking on the door with 45 employees. once you hit the 50 employee trigger, your world changes on a whole host of things. can you talk about how it is that the health care law driving the business decisions for you and your family as you are trying to move his company for? >> thank you for your question. the problem with the health care is that the expensive have increased so much against any other expense within my business. -- the expenses have increased so much against any other expense in my business. i do not have the luxury of being wrong in my assumption. when there are these costs and i feel that there are costs that are on now in addition to that, i have no choice than to be reflexively take much less risk.

maybe not by a another presser or higher the next employee until i absolutely have to have them. it really forces me to be much more conservative in how i invest in the business. >> thank you. congressman buchanan is recognized. >> thank you, mr. chairman. i want to ask you a question because i get asked this back home. 32 to 50you add 3 million people, even if there is a third party that says it will reduce the deficit, where they come up with this information other than in washington? >> on the substance, i have been cleared. i do not believe this reduces health care costs.

if you add that many people to the pool, they will use more health-care services. with regard to the cbo estimates of the budgetary impact of the bill, my gripe is with the drafters of the law to make sure cbo came up with the answer they wanted even though it defies economic common sense. >> been in business 30 years myself and not be -- being in business for 30 years myself and an accountant myself

-- when your premiums are going up, the cbo round table mentioned that health-care costs for a family of four is about $10,000 in corporate america. in the next 10 years, with this health care bill being considered, it will go from 10,000 to $30,000. i was talking about private pharmacy and someone said he wanted to show me something. he brought out his bill. he had a 23% increase. everybody is going up 20% or 30% per year. if you get a bill that is 28%, you start working toward getting

it down to 18%. you get the employees to pay a portion of it. the ranking member mentioned that our expenses are going to go up. i do not see the offset. this is a large entitlement: 4. it does little or nothing for small businesses in the country. personnel expense used to be 20% of the payroll. 20% for benefits. there is a feeling, do you want the salary or the benefits? you cannot have both. that is what is driving a lot of things up here. you mentioned being in the printing business. i was in the printing business for a lot of years. how much that your costs got up in the last five years and last year and this year? do you see a general trend or a

percentage increase over the next 10 years? >> i would say, the last 10 years, the renewal for existing policies has never been less than 12%. as an high as 49%. every year, we are faced with the task of revaluating what type of new policy we are going to have to implement. we pay 100% of the premium costs of our employees. >> we have people who have talked to us about this medical tax. one of our surgeons mentioned something about that. many of them are telling me they are going to pay more in tax than they are making in profit. it is a 2.3% tax. the fact of the matter is, the medical device industry has about 400,000 employees in the country and another 2 million

jobs that are being created. they say if this tax goes into effect, it is going to impede their ability to grow their companies. do you have a thought on that? >> as i laid out in my testimony, there is only a couple of options. it will have to keep the tax. if so, they will go out of business. they take it out of employee costs or they pass it on to consumers in the form of higher prices. >> thank you. the gentleman's time has expired. >> i want to respond to congressman buchanan remarks. what you describe is unsustainable. in 2007, and the passage of health reform -- i had many small businesses. i had a small business advisory

committee. the increase in their health care was 28% or 40% per year. you cannot sustain those numbers. i did not mean you personally. we can. in those businesses, 60% of them are no longer doing any business. they are done. the primary cause of those businesses closing their doors is what they have paid in their premiums. i want to talk to you, mr. olivo, fellow jersey guy. i came in a few minutes late, but i want you to think about this. 95% of businesses are exempt

from employer responsibility requirements. i want to start with that. i think there is a possibility. i am not saying this is guaranteed or for sure. it sounds like your carrier might have pulled a fast one on you. i will tell you why. when they raise your rates and lower your benefits last year -- by the way, that is not unfamiliar to any of us. obamacare was the perfect scapegoat before it went into effect. we will blame this bill, which will become a enacted on whatever we do this year. you saw what happened in california. the scapegoat. we expect that. we are all big people. we understand what happens in the political debate. you stated that your insurance

carrier informs you they would not be renewing your deductible coverage due to the preventive health benefits in the new law. are you aware of the that that the new preventive benefits don't apply to plans such as yours that are [unintelligible] ? i asked that rhetorically. i just wanted to ask that. are you aware that the irs rules, not the new irs rules, created the double plans to waive the deductible for preventive services even before reform was enacted. i get a big charge out of listening to folks tear this thing apart. someone on the panel made the statement in a magazine that the elimination of denial of

coverage for pre-existing conditions and the elimination of the lifetime limit drives up costs. print ads are going to go up in the short run if we do not -- premiums are going to go up in the short run if we do not take into account premium -- take into account pre-existing conditions. over the last 10 years, premiums have skyrocketed. you and i both agree with that, too jersey guys here. -- two jersey guys here. competition increase in the insurance industry.

one in 5 young americans under the age of 65 are uninsured. those are the numbers from the pfizer foundation. these conditions are not ideal. nine months after health care reform, i am proud to say that change is already under way. i will conclude my remarks that if health-care reform is bad for business, why have over 120 businesses in my state, new jersey, received grants to support ground-breaking biomedical research on pancreatic cancer, brain in this -- crane in the-street- brain in -- brain injury?

why have small businesses in my state and big businesses like johnson and johnson, mercedes benz -- they see the benefits. >> the gentleman's time has expired. congressman smith is recognized for five minutes. >> thank you, mr. chairman. douglas holtz-eakin, if you can comment on uncompensated care? could medicare fall into the category of on compensate the care? >> they are shifting from

government programs where medicare pays about 70 cents on the dollar and medicaid pays even less, 55 cents on the dollar depending on where you are. those gaps have to be made up elsewhere. >> is it your assertion that the health care bill immensely grows the medicare rolls? >> we put 16 million americans into a system that at present are twice as likely to go to emergency rooms rather than having that care on regular -- in regular settings. >> would it be conceivable that any federally initiated medical liability reforms that they might preempt some state medical

liability laws? >> there is always the option of pre-emption. it would depend on how the law was written. we know that state level experience has shown that malpractice reforms have been effective in controlling some of the costs. if you have a strong federal pre-emption that applied universally, you have [unintelligible] >> i say that because i am never is that nebraska may lose its rather optimal scenario. i appreciate the business perspective share here this morning, which is reflective of many of my constituents, some of whom have said they have held off hiring new employees simply because of the unknowns contained in the health-care bill. in the interest of time, i will yield back.

>> thank you. congressman schock is recognized. >> thank you. i will be brief. last night in the state of the union, the president said his major focus would be jobs. as to employers, -- as two employees, is also a curious how the health care bill will affect jobs. there are college students who -- scott womack, you mentioned you have a hundred employees. i am wondering if you study this bill. it shows -- it sounds like you

have. what does it mean for your ability to hire part-time employees? from what i am hearing from my employers in my district, incentivizes doing away with part-time employment and consolidation of the number of employees you have. is that what you have on? how do you see this bill affecting the opportunities you can provide? >> thanks for the question. it incentivizes moving people from full-time status to part- time status. the part-time and hourly job market right now is saturated with people who are not working. we are looking to get people under the 30 hour threshold where we can. i do not see in helping at all. >> of the 35 employees who are

full-time that you offer health insurance to, how many of those 35 take your health insurance? >> that would be my company. out of those 35, i believe it is approximately 30 who take the covers. >> the other 15, do they not take it because their spouse or someone else offers it? >> that is correct. no one in my company is uninsured. >> 30 out of your 35 think your health care is a preference. using the term in the bill is adequate coverage? >> yes. their biggest coverage -- their biggest complaint with because of the premiums on the family's side. the coverage is great. but it is better. --- it is very fair.

>> how much will your insurance premiums increase to meet the new standards? >> we just got our premium increases the other day. there is a 12% increase in premiums and a significant increase in how this is are treated. it cost significantly more to go to the emergency room. but what would be increased in -- it will be $280 per month per individual. >> have they look at what it will cost for you to provide the minimum average health care coverage when the bill is fully implemented? >> i have no way of computing that at this point. >> i would ask you a third-party administrator to do that, but i am sure they are doing that.

thank you for your commentary. >> thank you. congressman kind is recognized. >> mr. chairman, from my perspective i thank today's discussion is helpful. i would encourage you to hold more hearings with regard to the affordable care act. there is some belief that after the hearing, the work ends. we will be judged by working hard to find out what is working in the health-care system and what isis not. i think it is going to be helpful. there has been a lot of discussion with regard to job creation and what the afford care act means in that regard. we have had 11 consecutive months of private sector job growth since the passage of the accountable here act. we have that 1.1 million private

sector jobs created. to 1000 of those are in the health-care industry alone. -- 200,000 of those are in the health industry alone. small employers are delivering health care coverage to their employees. coventry health care at 115,000 new workers, representing an 8% increase. blue cross/blue shield up a 58% increase in businesses

purchasing health care. the repeal of the affordable care at would until the largest tax increase on small business in our nation's history. many businesses in western wisconsin will see their taxes go up. more than 4 billion -- more than 4 million businesses are taking advantage of the tax credits. the health-care exchange we are setting up was based on the shop that i introduced. the creation of an exchange. small businesses have a chance to go and shop.

ultimately, we will be judged on whether this works or not and whether we have the ability to bring costs down. here is another bipartisan i get in the bill. we have to change how we pay for health care in this country. the fee-for-service system under medicare is based on volume regardless of results. this is crazy. we have a two year study that calls on them to change the fee- for-service system to a before value reimbursement system. they will present a plan to the administration to implement it. this is something that newt gingrich has been talking about for years. tommy thompson told me that if we do one thing for health care reform, change the way we pay for it starting with medicare. whenever we do in medicare is going to drive the private health insurance market. it goes beyond that.

health insurance companies have been calling for payment reform for years. they have been calling for this very thing. we finally have the tools in health care reform to accomplish it. we start with the innovation centers telling providers, we want you to be created. we want you to innovate. we want you to develop -- want you to deliver high-quality care at an affordable cost. if we insist on continuing the doing with medicare, we will bankrupt our nation. this is crazy. finally have the ability to it if we play it through. not change the way you pay for 1/5 of the u.s. economy overnight. not going to happen.

will have to be a transition. instituted that in the reform bill as well. will have the chance together and talk about the payment reform that can lead reduction for every one that health care is something be affordable to small and to businesses throughout this country. >> thank you. congressman lee is recognized. >> thank you, mr. chairman. i want to thank our panelists for being here. i cannot help but be a little skeptical after hearing the president's state of the union address as well as the first panelist, austan goolsbee's testimony. the president talked about the this functionality of our government when he used -- dis functionality of our government

when he talked about salmon when it is in freshwater and when it is and fresh water, it belongs to the commerce department. this health-care law will create bureaus and commissions. he is adding to the problem by the and it -- he is adding to the problem rather than fixing it. he brought up the issue of the 1099. it is apparent in my eyes that this was a cash grab. this was put into the bill. if you are a small business owner and you do not have an accurate tax id #, you are on the look and have to withhold 28% -- and you did not have a tax id number, you are on the look and have to withhold 28%.

i am sure that mr. womack and mr. olivo, with this health care bill, is it more or less likely that you will go out and hire people. >> there is a lot of uncertainty. it has frozen credit markets. as we get closer, the implications become more clear. credit markets are pointing freeze up. it will be hard to borrow money to build new restaurants. as i stated earlier, the only way to pay for this and our business is to cut costs. we are a lean, mean industry. we do not have a lot of that. the things -- we do not have a lot of fat. are think that we control ou

personnel and health care. >> back to douglas holtz-eakin. with regard to medicare, i live in the state that has the largest medicare expenses. florida and texas have economies that are doing relatively better. the same number of citizens living in that states have twice the medicaid expenses. with the passage of this bill, is it a point to increase or decrease the medicaid costs we are seeing in new york state? >> the states are at great risk. they are obligated under the expansion of the accord will care act. they may get additional payments from the federal government for that. they have to pay full freight on any current eligible to show up and take benefits.

in advertising the affordable care at, we will draw out of the woodwork some existing eligible. new york state will have to pick up people rate of their costs. >> it is a huge obstacle. i am someone who has run a small business. i see this as a further death knell for the creative side that made this country great. the same thing deals with the medical device tax. i come from manufacturing. the president spoke of the contradiction. talking about helping businesses thrive and now we are going to add a tax on businesses. in your view, this is going to help our manufacturers and the health related device industries compete? is it going to help or hurt them? >> it is going to hurt their competitiveness. it is also one of many taxes.

if you look at to a macroeconomics, the evidence is that discretionary tax increases that have nothing to do with the business -- the evidence of christina romer is that they are three times more detrimental to the economy and equivalent spending changes. if you look at this act as a whole from that perspective, the make impact far outweigh the impact on spending. >> the gentleman's time has expired. >> thank you. all of you can answer this question. rmr. womack, you talked about medical savings accounts. the image and has claimed that the health-care law will give

people -- the administration has claimed that the health care law will give people more options. president obama promised the american people that if they like their health care insurance, they will be able to keep it. as we see in the law, it will limit the use of health care savings accounts. been in the medical field for a number of years -- being in the medical field for a number of years, we have taken consumers out of the driver's seat. i was concerned about expanding this product. it would give the opportunity for somebody to get back into the seat. it would also give more opportunities for different vehicles rather than a set type of insurance that most employers do have an offer to their employees. mr. womack, you are the one who

mentioned health care savings accounts. where do you feel this would help companies if they were given the choice to use those as compared to be forced into a certain product or a certain type of care? >> thank you. i am a knoxvillian, believe it or not. it was in the nebula of 30%. hsa.cided to look at an i have my own hsa story. my wife had an mri at a cost of $3,000. we went to a diagnostic facility and got the same procedure for

$350. truthfully, i do not know if we would have even thought about that if we had not been using an hsa where we are spending the money out our count ourselves. that kind of story is told over and over in hsa's. when you put the individual more in touch with their own spending, they will find ways to control it. it gets to keep that money in the account and roll it forward. it is a beautiful plan. we should not do anything to hamper hsa's. thanks for the question. >> i have a similar story. we put the health savings accounts in six years ago. the first year, the employees resisted and did not like it. over time, they have grown to appreciate those who take care of themselves. they have seen their accounts

grow. i have seen instances where employees had exams or test being done and were able to go on line and save $2,000 because they were able to research it themselves. there was an incentive there to do so. >> douglas holtz-eakin, do you have a common? >> i do not have the business experience of these gentlemen. one person was to put consumers at the centerpiece. the-one person was to put the consumers at the centerpiece -- one version was to put the consumer at the centerpiece. >> thank you. i yield back my time. >> let me thank this panel for

sharing with us the problems that you are having with this legislation, especially those of you who work every day in dealing with employees. tell me, both of you and the chamber advocating repeal of the law that the president signed, is that correct? >> yes, it is. >> and you do not have a plan that you are recommending. strike that. do you think we are better off without any changes in the law than to enforce or amend the existing law? >> from my vantage point as a small business owner, i look at it as action, reaction. what congress has passed, i am

seemed far more significant negative reaction to any positive that this will blaine -- that this will bring to my employees. >> i have no experience at all in hiring employees. as a businessman -- i know you cannot speak on this issue for the chamber. but for your business is, you would rather see the government stay out of its rapid that a man or try to correct the existing law. is that your position? >> i guess i have gotten used to the government being in the middle of things. i do not say that sarcastically. we anticipate some sort of change. >> i am concerned what happens if we stop this. all of your employees, are they covered one way or another by some type of health insurance? >> i believe so.

>> you have employees who are insurers who you would like to see a short as anybody would? >> absolutely. >> do you have any idea as to how you would want to ensure these people that are uninsured other than what has been recommended and passed by the congress? >> no. the reason is simple. we are talking about more money than is available. we do not have the money. >> listen. the problem we are facing is there are sharp differences of opinion here. the national business group on health indicate that they do not think they can get a better solution to the problem during our lifetime. if they get repeal, we will have to start all overin