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+
+ - THE UNINSURED
+
+[House Hearing, 108 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+
+ THE UNINSURED
+
+=======================================================================
+
+ HEARING
+
+ before the
+
+ SUBCOMMITTEE ON HEALTH
+
+ of the
+
+ COMMITTEE ON WAYS AND MEANS
+ U.S. HOUSE OF REPRESENTATIVES
+
+ ONE HUNDRED EIGHTH CONGRESS
+
+ SECOND SESSION
+
+ __________
+
+ MARCH 9, 2004
+
+ __________
+
+ Serial No. 108-50
+
+ __________
+
+ Printed for the use of the Committee on Ways and Means
+
+ U.S. GOVERNMENT PRINTING OFFICE
+23-794 WASHINGTON : 2005
+_____________________________________________________________________________
+For Sale by the Superintendent of Documents, U.S. Government Printing Office
+Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
+Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
+
+
+ COMMITTEE ON WAYS AND MEANS
+
+ BILL THOMAS, California, Chairman
+
+PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
+E. CLAY SHAW, JR., Florida FORTNEY PETE STARK, California
+NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
+AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
+WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
+JIM MCCRERY, Louisiana JIM MCDERMOTT, Washington
+DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
+JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
+JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
+SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
+JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
+MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
+ROB PORTMAN, Ohio XAVIER BECERRA, California
+PHIL ENGLISH, Pennsylvania LLOYD DOGGETT, Texas
+J.D. HAYWORTH, Arizona EARL POMEROY, North Dakota
+JERRY WELLER, Illinois MAX SANDLIN, Texas
+KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
+SCOTT MCINNIS, Colorado
+RON LEWIS, Kentucky
+MARK FOLEY, Florida
+KEVIN BRADY, Texas
+PAUL RYAN, Wisconsin
+ERIC CANTOR, Virginia
+
+ Allison H. Giles, Chief of Staff
+
+ Janice Mays, Minority Chief Counsel
+
+ ______
+
+ SUBCOMMITTEE ON HEALTH
+
+ NANCY L. JOHNSON, Connecticut, Chairman
+
+JIM MCCRERY, Louisiana FORTNEY PETE STARK, California
+PHILIP M. CRANE, Illinois GERALD D. KLECZKA, Wisconsin
+SAM JOHNSON, Texas JOHN LEWIS, Georgia
+DAVE CAMP, Michigan JIM MCDERMOTT, Washington
+JIM RAMSTAD, Minnesota LLOYD DOGGETT, Texas
+PHIL ENGLISH, Pennsylvania
+JENNIFER DUNN, Washington
+
+Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
+hearing records of the Committee on Ways and Means are also published
+in electronic form. The printed hearing record remains the official
+version. Because electronic submissions are used to prepare both
+printed and electronic versions of the hearing record, the process of
+converting between various electronic formats may introduce
+unintentional errors or omissions. Such occurrences are inherent in the
+current publication process and should diminish as the process is
+further refined.
+
+
+ C O N T E N T S
+
+ __________
+
+ Page
+
+Advisory of March 2, 2004, announcing the hearing................ 2
+
+ WITNESSES
+
+Congressional Budget Office, Douglas Holtz-Eakin, Director....... 6
+
+ ______
+
+Center for Consumer Driven Health Care, Galen Institute, Greg
+ Scandlen....................................................... 56
+Center for Studying Health System Change, Len M. Nichols......... 41
+Kaiser Commission on Medicaid and the Uninsured, Diane Rowland... 23
+University of southern California, Center for Health Financing,
+ Policy and Management, Glenn Melnick........................... 49
+
+ SUBMISSIONS FOR THE RECORD
+
+AdvaMed, statement............................................... 85
+American Academy of Actuaries, statement......................... 86
+American College of Physicians, statement........................ 92
+Associated Builders and Contractors, Arlington, VA, statement.... 96
+Catholic Health Association of the United States, Michael, D.
+ Place, statement............................................... 98
+Communicating for Agriculture and the Self-Employed, Fergus
+ Falls, MN, Wayne Nelson, letter................................ 101
+March of Dimes, Marina L. Weiss, statement....................... 102
+National Conference for Community and Justice, Sanford Cloud Jr.,
+ statement...................................................... 105
+National Federation of Independent Business, statement........... 106
+Neltner Billing and Consulting, Independence, KY, Martin E.
+ Neltner, statement............................................. 108
+
+
+ THE UNINSURED
+
+ ----------
+
+
+ TUESDAY, MARCH 9, 2004
+
+ U.S. House of Representatives,
+ Committee on Ways and Means,
+ Subcommittee on Health,
+ Washington, DC.
+
+ The Subcommittee met, pursuant to notice, at 2:25 p.m., in
+room 1100, Longworth House Office Building, Hon. Nancy L.
+Johnson (Chairman of the Subcommittee) presiding.
+ [The advisory announcing the hearing follows:]
+
+ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
+SUBCOMMITTEE ON HEALTH
+ CONTACT: (202) 225-3943
+FOR IMMEDIATE RELEASE
+March 02, 2004
+HL-5
+
+ Johnson Announces Hearing on the Uninsured
+
+ Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on
+Health of the Committee on Ways and Means, today announced that the
+Subcommittee will hold a hearing on the uninsured. The hearing will
+take place on Tuesday, March 9, 2004, in the main Committee hearing
+room, 1100 Longworth House Office Building, beginning at 2:00 p.m.
+ In view of the limited time available to hear witnesses, oral
+testimony at this hearing will be from invited witnesses only.
+Witnesses will include Douglas Holtz-Eakin, Director of the
+Congressional Budget Office, and experts on the uninsured population
+and health insurance. However, any individual or organization not
+scheduled for an oral appearance may submit a written statement for
+consideration by the Committee and for inclusion in the printed record
+of the hearing.
+
+
+BACKGROUND:
+
+
+ This hearing will focus on Americans who lack health insurance
+coverage--a constantly changing group as some gain and others lose
+coverage. Estimates of the number of uninsured range from 20 to 60
+million, depending upon the definition of uninsured, and the length of
+time considered. For example, the Congressional Budget Office estimates
+that between 21 and 31 million people were uninsured for all of 1998,
+about 40 million were uninsured at any point in time during 1998, and
+nearly 60 million were uninsured at some point in 1998. According to
+analysis by the Census Bureau, the number of non-elderly who were
+uninsured increased each year from 2000 to 2002, after falling the
+previous two years.
+ The uninsured are not all alike: they encompass a wide range of
+characteristics. While some uninsured tend to have lower than average
+income, and tend to be in poorer health, others are young and healthy.
+Over 50 percent of the non-elderly who were uninsured at any time
+during 1998 had incomes over 200 percent of the poverty level. In 1998,
+90 percent of those who were uninsured all year were in working
+families.
+ In announcing the hearing, Chairman Johnson stated, ``When
+Americans who lack health insurance coverage get ill, many suffer lower
+access to care and higher costs. We must understand who lacks coverage
+and why, before we can identify solutions to the problems the uninsured
+face when they need health care.''
+
+
+FOCUS OF THE HEARING:
+
+
+ The hearing continues the Subcommittee's consideration of the
+issues concerning Americans who lack access to affordable health
+insurance. The first panel will discuss the identification of
+individuals without health insurance and changes in the number
+uninsured over time. The second panel will help Members understand the
+causes and consequences of lack of health insurance, tax and regulatory
+policies that affect access to health insurance, and consequences faced
+by some of the uninsured who are hospitalized. This hearing will lay
+the groundwork for future hearings on options to address the problems
+of the uninsured.
+
+
+DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
+
+
+ Please note: Due to the change in House mail policy, any person or
+organization wishing to submit a written statement for the printed
+record of the hearing should send it electronically to
+[email protected], along with a fax copy to
+(202) 225-2610, by the close of business, Tuesday March 23, 2004. Those
+filing written statements who wish to have their statements distributed
+to the press and interested public at the hearing should deliver their
+200 copies to the Subcommittee on Health in room 1136 Longworth House
+Office Building, in an open and searchable package 48 hours before the
+hearing. The U.S. Capitol Police will refuse unopened and unsearchable
+deliveries to all House Office Buildings.
+
+
+FORMATTING REQUIREMENTS:
+
+
+ Each statement presented for printing to the Committee by a
+witness, any written statement or exhibit submitted for the printed
+record or any written comments in response to a request for written
+comments must conform to the guidelines listed below. Any statement or
+exhibit not in compliance with these guidelines will not be printed,
+but will be maintained in the Committee files for review and use by the
+Committee.
+
+ 1. Due to the change in House mail policy, all statements and any
+accompanying exhibits for printing must be submitted electronically to
+[email protected], along with a fax copy to
+(202) 225-2610, in WordPerfect or MS Word format and MUST NOT exceed a
+total of 10 pages including attachments. Witnesses are advised that the
+Committee will rely on electronic submissions for printing the official
+hearing record.
+
+ 2. Copies of whole documents submitted as exhibit material will not
+be accepted for printing. Instead, exhibit material should be
+referenced and quoted or paraphrased. All exhibit material not meeting
+these specifications will be maintained in the Committee files for
+review and use by the Committee.
+
+ 3. Any statements must include a list of all clients, persons, or
+organizations on whose behalf the witness appears. A supplemental sheet
+must accompany each statement listing the name, company, address,
+telephone and fax numbers of each witness.
+
+ Note: All Committee advisories and news releases are available on
+the World Wide Web at http://waysandmeans.house.gov.
+
+ The Committee seeks to make its facilities accessible to persons
+with disabilities. If you are in need of special accommodations, please
+call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
+business days notice is requested). Questions with regard to special
+accommodation needs in general (including availability of Committee
+materials in alternative formats) may be directed to the Committee as
+noted above.
+
+
+
+ Chairman JOHNSON. Good afternoon. The hearing will come to
+order. Today's hearing focuses on uninsured Americans, who they
+are, and why they are uninsured. Since the Subcommittee on
+Health last held a hearing on the uninsured in 2001, the number
+of Americans without coverage has increased. Over 43 million
+Americans, more than 1 in 7, are uninsured on any given day. In
+my home State of Connecticut, more than a quarter million
+residents live and work without health insurance. As we develop
+legislative solutions, we need to understand the latest
+research on the uninsured and the barriers they face in
+purchasing coverage.
+ We will hear from our expert panelists that the uninsured
+are a dynamic group which is constantly changing as people gain
+and others lose coverage. The number of Americans who are
+uninsured depends on the definition of the uninsured,
+especially how long a person is uninsured and whom you count.
+Analysis by the Congressional Budget Office (CBO) shows that if
+you look at people who are uninsured for an entire year or
+longer, you find between 21 million and 31 million uninsured.
+If you look at any given day in a year, about 40 million are
+uninsured. If you consider those who are uninsured at any point
+during a year, nearly 60 million are uninsured.
+ The uninsured are a diverse and divergent group
+demographically as well. Among the non-elderly who are
+uninsured all year, one-quarter are under age 18, but one-fifth
+are over 45. Three-quarters have income less than two times the
+poverty level, but 5 percent have income four times the poverty
+level. One-quarter lack a high school diploma, but one-third
+attended college.
+ One characteristic may come as a surprise to many. About 90
+percent of the uninsured live in working families, and 40
+percent live in families with a full-time worker. Over 60
+percent of uninsured individuals do not have access to
+insurance through their employer, often a small business. In
+Connecticut, for example, 59 percent of the uninsured adults
+work for companies with fewer than 100 employees and 30
+percent, or 76,000 people in Connecticut, work at a company
+with fewer than 10 employees.
+ Finally, some of the uninsured are eligible for public
+programs but fail to enroll. For example, one-third of
+uninsured children were eligible for Medicaid. Others are
+eligible for the Children's Health Insurance Program (CHIP).
+The presence of the uninsured is a significant problem in our
+Nation's health care system. The Subcommittee understands the
+importance of addressing this problem, both because those
+without health coverage often go without health care and
+because the payment structure supporting our providers no
+longer accommodates the cost shifting that used to absorb the
+cost of care of the uninsured. Indeed, for the individual
+uninsured person, he or she is more than three times likely to
+delay care, more than three times likely to leave a
+prescription unfilled, and far more likely to face financial
+ruin as a result of health care costs than an insured
+individual.
+ From the point of view of the provider network, emergency
+rooms are closing and doctors are being forced to limit the
+number of nonpayers they accept for care as costs rise and
+payments fall. So, both for the sake of the individual
+uninsured people in America and to preserve our health care
+delivery capability for all, we must assure that every American
+has access to affordable health care. Today our experts will
+help us review the who, when, and why questions about the
+uninsured so that we may turn at a later date to the question
+of how to fix the problem.
+ First we will hear testimony from the director of the CBO,
+Douglas Holtz-Eakin, who will focus on the diversity of the
+uninsured, and, given that diversity, the multiple approaches
+in the future we will have to consider. Actually he is not
+going to consider the multiple approaches. I sort of misread my
+punctuation there. I say that, given that diversity, I believe
+we will be required to approach this problem from many
+different points of view. Our second panel will turn to further
+examination of the uninsured population and our experts will
+discuss barriers to affordable coverage and myths about the
+uninsured. I would like to recognize Mr. Stark, the Ranking
+Member, for an opening statement.
+ Mr. STARK. Thank you, Madam Chair. I appreciate your
+calling this hearing. I must admit it feels a little bit like
+Ground Hog Day. Year after year we hold hearings and report on
+the uninsured and year after year we hear that the numbers
+continue to rise. Year after year we fail to take any action. I
+say that through a series of various Administrations and
+political control. We know who the uninsured are and we know
+why they are uninsured and we could fix it.
+ Even President Bush knows how to get there, and that is why
+he is promoting national health insurance for the people in
+Iraq. It may sound strange that I agree with the President on
+something, but in this case his idea that a system of national
+insurance is the most equitable, efficient means of insuring
+all people is right. I only wish that he would decide to extend
+that same generosity to his folks here at home so that everyone
+in our great country could have the benefits of a national
+health insurance program.
+ My friend and our own Secretary of Health and Human
+Services has basically said that Americans deserve less than
+national insurance. A week ago, when he was asked about our
+policy in Iraq, he said, well, and I am quoting him: ``Even if
+you don't have health insurance in America, you get taken care
+of.'' I am not sure what that means, ``taken care of.'' That
+could be defined as universal health care. I find it alarming
+that our Administration would equate eventual treatment in an
+emergency room or a charity clinic, often too late to avoid
+serious damage or death, as universal health care.
+ We know better than that. The Institute of Medicine will
+tell us that 18,000 Americans die prematurely each year due to
+the effects of lack of health insurance coverage. The Kaiser
+Family Foundation in their 2003 health insurance survey found
+that half of uninsured adults postpone seeking medical care,
+and over a third say they need it but did not get medical care
+in the last year. Their survey also found that a third of the
+uninsured had a serious problem paying their medical bills in
+the past year and a quarter were contacted by a collection
+agency, if not having homes foreclosed or threatened with
+bankruptcy.
+ The uninsured are more likely than those with insurance to
+be hospitalized for conditions that could have been avoided.
+``Sicker and Poorer: The Consequences of Being Uninsured,'' a
+report by the Kaiser Commission on Medicaid and the Uninsured,
+found that better health would improve annual earnings by 10 to
+30 percent for private companies.
+ The statistics go on. We know how to solve the problem. We
+have programs that work in this country. They work in the State
+of Hawaii. They are up above 95 percent covered, which is far
+better than we are able to do. We have employer-sponsored
+insurance for workers. We have got public programs such as
+Medicare, Medicaid, State Children's Health Insurance Program
+(SCHIP), Consolidated Omnibus Budget Reconciliation Act
+(COBRA). We could build on those programs. All we need is
+somebody in the White House and their adherence here and in the
+Senate to roll up our sleeves and say, let's do it. We could go
+to work tomorrow and require some kind of, I don't care what it
+is, pay or play. We could do it, there is nothing new in this
+world of providing medical care to all Americans. It ought to
+start right here and I would love to join with the Chair and
+introduce a bill next week and let's see how far we can go.
+Thank you.
+ Chairman JOHNSON. Thank you, Mr. Stark. I hope that our
+testimony today will create a better factual basis for
+legislative action. Dr. Holtz-Eakin.
+
+ STATEMENT OF DOUGLAS HOLTZ-EAKIN, PH.D., DIRECTOR,
+ CONGRESSIONAL BUDGET OFFICE
+
+ Dr. HOLTZ-EAKIN. Chairman Johnson, Mr. Stark, Members of
+the Committee, thank you for the chance for CBO to be here
+today and present some of the work we have done on the
+uninsured. I have a written statement which I will submit for
+the record and I will instead use this time to touch briefly on
+the highlights, some of which the Chairman has introduced in
+her opening remarks.
+ Probably the easiest way to do this is through the use of
+the four charts that we brought along. The first chart is
+focused on the question of how many people are uninsured. The
+answer really depends on how one asks the question. One could
+ask the question, How many people are uninsured for an entire
+year, for a full year? If the question is asked that way, using
+data from three different surveys--and these data are from 1998
+but recent research suggests the basic patterns are unchanged--
+you would have an answer of roughly 20 to 30 million
+individuals who are uninsured for the entire year.
+ In contrast, you could ask the question, How many people
+experience some spell of uninsurance during a year, however
+short or long? If one asked the question in that way, you get a
+much larger number, about 60 million individuals. Those are the
+bars on the right-hand side of the chart. Instead what you
+typically hear is the number 40 million. That is the answer to
+the question, if you walked out on the street and asked how
+many people are uninsured in this week or on this day, there
+would be a mixture of those two groups: those who have short
+spells and long spells, and that number is about 40 million
+individuals.
+ As these numbers suggest and as we show in Chart 2, there
+are radically different experiences in terms of the duration of
+spells of uninsurance. For some individuals, about 45 percent,
+the duration of such a spell would be under 4 months. That is
+shown as the large wedge in the pie chart on the left. In
+contrast, about 29 percent, nearly 30 percent of individuals
+experience a spell of uninsurance that exceeds 1 year in
+length. The remainder lie in between.
+ As a result of this mixture of individuals with short and
+long spells, if you walk out on the street again and find a
+person who is not insured and ask the question, How long would
+this person be uninsured, you are more likely to find somebody
+who has a long spell of uninsurance because of their prevalence
+in the population and that is displayed on the right-hand pie
+chart. The policy implications of this, I think, are fairly
+straightforward. One size evidently does not fit all and it
+suggests that there are really broadly two different kinds of
+problems of uninsurance: those with short spells perhaps driven
+by labor market dislocations and job transitions; and those
+with longer spells which exceed a year in length.
+ The next question is, What do the individuals look like in
+these different spells? This is laid out in Tables 1 and 2 in
+the testimony. The highlights of that are that adults are more
+likely to suffer uninsurance in large part because the children
+are more likely to be covered by Medicaid and SCHIP programs in
+the United States. Those who are uninsured tend to be of lower
+income and lower education and, as the Chairman noticed in her
+opening remarks, in working families, but there is not a large
+difference by health status. There appears to be no like
+defining characteristic on that dimension.
+ Among those with longer spells, again we find those who are
+poorer, lower income, and lower education. This suggests that
+these are individuals who are in jobs without employer-
+sponsored insurance. There was also the case that among
+different ethnic groups, Hispanics are more likely to suffer
+long spells; and among the age distribution, younger
+individuals are more likely to be represented there as well.
+ A moral that comes out of looking at the vast array of
+statistics that characterize the uninsured and the duration of
+spells of uninsured is that it is a very multidimensional
+problem and it will not be simple to target a single
+characteristic to identify those who would be likely to be
+uninsured or even uninsured for a great length of time. All of
+this diversity and dynamics occurs within longer term trends in
+the top line number, the fraction of individuals without
+insurance.
+ We show in the next chart some of the patterns over the
+past two decades in the level of uninsurance in the population.
+Out of the 160 million Americans with insurance, about 64
+percent receive their insurance through their employer. That is
+down about 6 percentage points from the beginning of the chart
+in 1997. If you look, the large move occurred between 1987 and
+1993 when there was about a 6 percentage point drop in the
+total level of employer-sponsored insurance. Since then, we
+have seen a modest rise and then a reversal during the most
+recent time period.
+ The Medicaid pattern in the green bar roughly offsets the
+trend in employer-sponsored insurance. This suggests that one
+concern may be that variations in new sources of insurance,
+such as Medicaid or expansions of other types, may offset
+existing employer-sponsored insurance or crowd it out to some
+extent, a topic to which I will return before I close.
+ The topic of the hearing itself, the dotted red line, is
+the rise in uninsurance, which is now about 17 percent overall,
+up about 3 and one-half percentage points. One lesson I think
+that is easy to draw from that chart is that the uninsured
+problem is not new; indeed it is a chronic condition in the
+United States and needs to be revisited in all its forms.
+ The final chart examines more carefully the link between
+health insurance premiums and uninsurance. I want to say at the
+outset that the link between these two is far from simple. One
+could imagine a situation in which premiums rose in the absence
+of any change in the underlying benefit from being insured, and
+in those circumstances it is quite rational for individuals to
+choose to purchase less insurance, and we might see uninsurance
+rise.
+ On the other hand, to the extent that health care costs per
+se simply go up, the value of insurance rises and one might
+expect more individuals to choose to purchase insurance and to
+negotiate with their employers to get coverage. So, there is
+not an absolute relationship between premiums which may be
+driven by benefit increases and premiums which are not and the
+rate of uninsurance.
+ Nevertheless, a casual inspection of the historical record
+suggests some relationship between rising health insurance
+premiums, an episode in the late eighties and early nineties,
+and more recently have both coincided with declines in the
+overall level of the rate of insurance. That may come in
+roughly two kinds of categories, those which are related to
+business cycles. We discuss in the testimony the notion that
+COBRA coverage may also come with not only the opportunity to
+buy but the obligation to pay a much higher premium in the face
+of diminished income--that would be difficult--but also for
+longer term movements in the crowd-out between the enhanced
+Medicaid programs and the acquisition of private insurance.
+Some estimates in the literature suggest that expansions in
+Medicaid are offset by as much as 10 to 25 percent in reduced
+private insurance. With that overview of the testimony, I would
+like to close and be happy to answer your questions.
+ [The prepared statement of Dr. Holtz-Eakin follows:]
+
+Statement of Douglas Holtz-Eakin, Ph.D., Director, Congressional Budget
+ Office
+
+ Chairman Johnson and Members of the Subcommittee, I appreciate the
+opportunity to be here today to discuss the characteristics of people
+without health insurance and the relationship between health insurance
+premiums and insurance coverage. Although more than 240 million people
+in the United States have health insurance today through a variety of
+private and public sources, millions of others do not; and the
+percentage of Americans who are uninsured has risen in each of the last
+two years for which information is available.
+ In my testimony today, I will discuss some important
+characteristics of the uninsured population that have received
+relatively little attention but that have important implications for
+federal policies to expand insurance coverage. I will also discuss the
+implications of rising health insurance premiums for insurance coverage
+rates and the potential costs of federal programs to expand coverage.
+Characteristics of the Uninsured Population
+ In recent years, it has been frequently stated that about 40
+million Americans lack health insurance coverage. That estimate, by
+itself, presents an incomplete and potentially misleading picture of
+the uninsured population. The uninsured population is constantly
+changing as people gain coverage and lose coverage. Furthermore, people
+vary greatly in the length of time that they remain uninsured. Some
+people are uninsured for long periods of time, but more are uninsured
+for shorter periods.
+ There are several alternative measures of the number of people who
+lack insurance coverage. One describes those people who do not have
+coverage for a sustained period (say, one year)--the long-term
+uninsured. Alternatively, another identifies how many individuals have
+experienced any spell without insurance during a particular period.
+Finally, the most commonly used measure (a mixture of those two others)
+counts the number of individuals without insurance on any particular
+day or in a certain week. Those different approaches yield different
+numbers because of the continual movement of people into and out of the
+uninsured population. The Congressional Budget Office's (CBO's) recent
+analysis \1\ found that in 1998:
+---------------------------------------------------------------------------
+ \1\ Congressional Budget Office, How Many People Lack Health
+Insurance and for How Long? (May 2003).
+
+ Between 21 million and 31 million people were uninsured
+all year;
+ At any point in time during the year, about 40 million
+people were uninsured; and
+ Nearly 60 million people were uninsured at some point
+during the year (see Figure 1).
+Figure 1. Estimated Number of Nonelderly People Without Health
+ Insurance in 1998
+
+ [GRAPHIC] [TIFF OMITTED] T3794A.001
+
+ Source: Congressional Budget Office.
+
+ Note: The Survey of Income and Program Participation is conducted by
+the Census Bureau. The Medical Expenditure Panel Survey is conducted by
+ the Agency for Healthcare Research and Quality. The National Health
+ Interview Survey, which reports only the point-in-time estimate, is
+ sponsored by the Centers for Disease Control and Prevention.
+
+ CBO conducted the analysis for 1998 because that was the most
+recent year for which suitable data were available to construct all
+three measures. More recent analyses by researchers at the Agency for
+Healthcare Research and Quality indicate that those three measures of
+the uninsured remained fairly stable in the subsequent period from 1998
+to 2001.\2\
+---------------------------------------------------------------------------
+ \2\ Agency for Health Care Research and Quality, The Uninsured in
+America--1996-2002, Statistical Brief No. 24, available at
+www.ahrq.gov.
+---------------------------------------------------------------------------
+ Nearly 30 percent of Americans under age 65 who become uninsured in
+a given year remain so for more than 12 months, while 45 percent obtain
+coverage within four months (see Figure 2).\3\ Those estimates were
+obtained by CBO using data from the Census Bureau's Survey of Income
+and Program Participation for 1996 through 1999. They are very similar
+to the findings of previous studies that have examined earlier time
+periods.
+---------------------------------------------------------------------------
+ \3\ Congressional Budget Office, How Many People Lack Health
+Insurance Coverage and for How Long?
+---------------------------------------------------------------------------
+ Those estimates of the duration of uninsured spells describe the
+experiences of people who become uninsured in a given year. However,
+almost 80 percent of the people who lack health insurance at a
+particular time end up being uninsured for more than 12 months (see
+Figure 2). Although long uninsured spells occur less frequently than
+short spells, they are more likely to be under way at any given time.
+Figure 2. Distribution of Uninsured Spells Among Nonelderly People in a
+ Given Year and at a Given Point in Time, by Duration
+
+ [GRAPHIC] [TIFF OMITTED] T3794A.002
+
+ Source: Congressional Budget Office based on data from the first 11
+ waves of the 1996 panel of the Census Bureau's Survey of Income and
+ Program Participation, which followed respondents over a period of 41
+ months (from March 1996 through July 1999).
+
+ People with less education, those with low income, and Hispanics
+are more likely than others to be uninsured (see Table 1). They are
+also somewhat more likely to remain uninsured for long periods. For
+example, people in families in which no one attended college account
+for 64 percent of uninsured spells of more than 12 months but only 49
+percent of uninsured spells that end within four months (see Table 2).
+That difference probably reflects, at least in part, the fact that
+people who did not attend college are less likely than others to have
+access to employment-based insurance.
+
+ Table 1. Nonelderly People Without Health Insurance in 1998, by Selected Characteristics
+----------------------------------------------------------------------------------------------------------------
+ Nonelderly People
+ -------------------------------------------------------------------- Distribution
+ Uninsured at of the
+ Any Time Uninsured Uninsured
+ Characteristic During the All Year Population
+ Year (Percent) (Percent)
+ (Percent)
+----------------------------------------------------------------------------------------------------------------
+Age Less than 19 26.8 7.3 24.9
+ 19-24 41.9 14.4 13.7
+ 25-34 31.1 12.3 21.9
+ 35-44 20.2 9.3 19.7
+ 45-54 15.1 7.6 12.6
+ 55-64 14 6.7 7.2
+
+Race/Ethnicity White, Non-Hispanic 18.4 6.3 48.4
+ Black, Non-Hispanic 33.4 10.7 15.3
+ Hispanic 47.4 22.5 30.8
+ Other 31.1 10.9 5.5
+
+Family Income Less than 200 percent 47.9 19.5 74.9
+ Relative to the 200 percent to 399 percent 17.4 5.3 19.8
+ Poverty Level a 400 percent or more 6 1.6 5.3
+
+Education a, b No high school diploma 50.4 24.6 28.4
+ High school graduate 33.1 12.7 36.4
+ Some college course work 22.1 7.3 26.6
+ Bachelor's degree or higher 9.9 2.6 8.7
+
+Family Employment Status a At least one full-time worker all year 15 5.9 42.9
+ Part-time or part-year work only 46.1 16.1 46.6
+ No work 32.8 13.1 10.6
+
+Health Status c Excellent 23.7 8.9 28.8
+ Very good 25.1 9.3 32.8
+ Good 24.6 9.1 24.5
+ Fair 25.1 8.7 8.9
+ Poor 25.3 10.3 5.1
+
+Memorandum:
+ Total Nonelderly 24.5 9.1 100
+ Population
+----------------------------------------------------------------------------------------------------------------
+Source: Congressional Budget Office based on an analysis of data from the 1996 panel of the Survey of Income and
+ Program Participation.
+a For family-level variables, families are defined as health insurance eligibility units, which are composed of
+ individuals who could be covered as a family under most private health insurance plans.
+b Education measures the highest education level among the adults in the family.
+c Information on health status was collected only for survey respondents who were at least 15 years of age.
+
+
+ Table 2. Comparison of the Characteristics of Nonelderly People with Short Uninsured Spells and Long Uninsured
+ Spells
+----------------------------------------------------------------------------------------------------------------
+ Duration of Uninsured Spell
+ ---------------------------------------
+ Characteristic Four Months or DMore Than 12
+ Less (Percent) Months (Percent)
+----------------------------------------------------------------------------------------------
+ Total 100 100
+
+Agea Children 47.3 37.5
+ Adults 52.7 62.5
+
+Race/Ethnicity White, Non-Hispanic 56.7 48.8
+ Black, Non-Hispanic 19.7 18.2
+ Hispanic 18.4 27.6
+ Other 5.2 5.4
+
+Family Income Rela- Less than 200 percent 61.6 77
+ tive to the Poverty 200 percent to 399 per
+ Level b, c -cent 26.7 21
+ 400 percent or more 11.7 7
+
+Education a, c No high school diploma 17.8 26.6
+ High school graduate only 31 37.6
+ Some college 35.5 26.8
+ Bachelor's degree or 15.6 9
+ higher
+----------------------------------------------------------------------------------------------------------------
+
+ Adults are somewhat more likely than children to remain uninsured
+for long periods. The availability of Medicaid coverage may explain
+some of that discrepancy: coverage is available to many children in
+low-income families, but the majority of low-income adults are not
+eligible for the program. In addition, evidence suggests that single
+adults without children may be less inclined to seek insurance, on
+average, than adults with children, which may cause them to experience
+long spells without insurance.
+ The vast majority of the uninsured are in working families. Some 43
+percent of the people who were uninsured all year in 1998 were in
+families in which at least one person worked full time all year, and 47
+percent were in families in which at least one person worked part time
+or for a portion of the year (see Table 1, column 3). Studies have
+found that over three-quarters of uninsured workers are not offered
+insurance by their employer.\4\ Low-wage workers are less likely to be
+offered insurance by their employer and are less likely to accept it if
+it is offered.
+---------------------------------------------------------------------------
+ \4\ See, for example, Bowen Garrett, Len M. Nichols, and Emily K.
+Greenman, Workers Without Health Insurance: Who Are They and How Can
+Policy Reach Them? (Washington, D.C.: Urban Institute, 2001).
+---------------------------------------------------------------------------
+ Medicaid is an important source of coverage for children and
+parents in low-income families, the disabled, and the low-income
+elderly. However, the number of people who report in population surveys
+that they have Medicaid coverage is smaller than the number indicated
+by the program's administrative data. Survey estimates could therefore
+overstate the number of people who are uninsured. But some evidence,
+albeit limited, indicates that many of the Medicaid enrollees who do
+not report being covered by Medicaid mistakenly report another type of
+coverage, so the bias in estimates of the uninsured may be small.
+ About half of all uninsured children in 2002 were eligible for
+Medicaid or the State Children's Health Insurance Program (SCHIP),
+according to one study.\5\ For uninsured people who are eligible but
+not enrolled, Medicaid provides a form of conditional coverage. Such
+people can apply for Medicaid at the time that they obtain care and
+then receive retroactive coverage for their expenses.\6\ Because of
+that provision, some policymakers view those people as insured. Others
+view them as uninsured because they may not realize that they are
+eligible for Medicaid and therefore may delay or avoid seeking medical
+care.
+---------------------------------------------------------------------------
+ \5\ Genevieve Kenney, Jennifer Haley, and Alexandra Tebay,
+``Children's Insurance Coverage and Service Use Improve,'' Snapshots of
+America's Families, vol. 3, no. 1 (Washington, D.C.: Urban Institute,
+July 2003).
+ \6\ In principle, that provision also applies to SCHIP. However,
+seven states have placed caps on their enrollments in SCHIP because of
+budget shortfalls. See Vernon K. Smith and David M. Rousseau, ``SCHIP
+Program Enrollment: June 2003 Update,'' Kaiser Commission on Medicaid
+and the Uninsured (Washington, D.C.: Henry J. Kaiser Family Foundation,
+December 2003).
+---------------------------------------------------------------------------
+Trends in Insurance Coverage
+ The vast majority of nonelderly Americans who have health insurance
+are covered through their own or a family member's employer. According
+to the Census Bureau's Current Population Survey (CPS), 161 million
+nonelderly Americans (or 64 percent of the nonelderly population) had
+employment-based insurance in 2002.\7\
+---------------------------------------------------------------------------
+ \7\ Researchers disagree about how the CPS estimates of the insured
+and uninsured should be interpreted. Like many health care analysts,
+CBO believes that those estimates provide a close approximation of the
+numbers at a specific point in time. See Congressional Budget Office,
+How Many People Lack Health Insurance and for How Long?
+---------------------------------------------------------------------------
+ A smaller proportion of Americans have employment-based insurance
+today than in 1987 (see Figure 3).\8\ The decline in coverage occurred
+primarily from 1987 to 1993, when the share of the nonelderly
+population with employment-based coverage fell by nearly 6 percentage
+points. From 1993 to 2000, the percentage with employment-based
+coverage stabilized and then increased, before falling in 2001 and
+2002. The percentage with employment-based coverage in 2002 stood at
+about the same level as in 1993.
+---------------------------------------------------------------------------
+ \8\ The CPS estimates for 1987 to 2002 have been adjusted to
+account for changes that were made in the survey design during that
+period. The estimates are from Paul Fronstin, Sources of Health
+Insurance Coverage and Characteristics of the Uninsured: Analysis of
+the March 2003 Current Population Survey, Issue Brief No. 264
+(Washington, D.C.: Employee Benefit Research Institute, December 2003).
+---------------------------------------------------------------------------
+ The percentage of nonelderly Americans without health insurance
+coverage rose gradually during most of the period from 1987 to 2002,
+although it fell in 1999 and 2000 (see Figure 3). The uninsurance rate
+did not increase by as much as employment-based coverage fell because
+of offsetting changes in the percentage of people who were covered by
+Medicaid and SCHIP. The share of the nonelderly population that was
+covered by private nongroup insurance remained relatively stable at
+about 7 percent. In 2002, about 17 percent of the nonelderly population
+was uninsured--about 3.5 percentage points higher than in 1987.
+Figure 3. Percentage of Nonelderly Americans With Employment-Based
+ Health Insurance, Medicaid, and Private Nongroup Insurance and
+ Those Without Insurance, 1987 to 2002
+
+ [GRAPHIC] [TIFF OMITTED] T3794A.003
+
+Health Insurance Premiums and Insurance Coverage
+ Rapidly rising health insurance premiums are a source of concern
+first because they are likely to reduce the percentage of people who
+have health insurance. They also increase the amount of federal subsidy
+that must be extended to individuals or firms to achieve a specified
+reduction in the number of people who are uninsured, and the associated
+growth in health care spending raises the cost of expanding public
+programs such as Medicaid and SCHIP.
+ Just how much of the change in insurance coverage rates that has
+occurred over the past 15 years results from changes in premiums,
+changes in unemployment rates, and other factors is unknown. But in the
+two periods in which employment-based coverage dropped (from 1987 to
+1993 and from 2000 to the present), health insurance premiums rose
+rapidly. Private health insurance premiums grew much more rapidly than
+wages and the prices of other goods and services from 1987 to 1993 and
+then grew at a more moderate pace until accelerating again in 1999 (see
+Figure 4). Thus, employment-based coverage rates fell during periods of
+rapidly rising premiums and stabilized (and even increased) when the
+growth of premiums slowed. Those simple correlations suggest that
+rising premiums contributed to the decline in coverage. Other factors,
+such as cyclical changes in employment, changes in the characteristics
+of the health plans offered, expansions in public coverage, and
+demographic changes probably also contributed.
+
+Figure 4. Annual Percentage Change in Private Health Insurance
+ Premiums, Wages, and the Consumer Price Index, 1987 to 2002
+
+ [GRAPHIC] [TIFF OMITTED] T3794A.004
+
+ In discussing the effect of increases in premiums on coverage,
+distinguishing among different causes of such increases is important.
+Clearly, an increase in premiums having nothing to do with the quality
+of the insurance benefit (a tax on premiums, for example) would lead to
+a reduction in the number of people with health insurance since the
+price increase would lead some people to drop their coverage. However,
+the growth in health care spending that has driven the increase in
+premiums in recent decades has been largely caused by the advancing
+capabilities of modern medicine. Increases in premiums therefore have
+reflected, at least in part, changes in the product itself, leaving the
+effect of premiums on decisions to purchase coverage less clear-cut.
+ Determining how increases in premiums affect insurance coverage
+rates is also complicated by the fact that a general upward trend in
+the cost of medical services can make insurance more appealing, because
+covering potentially costly medical needs without insurance is more
+difficult. Although that argument applies to many individuals, others--
+particularly those with limited financial resources--are more likely to
+drop coverage when faced with rising premiums and to then rely on care
+furnished by safety net providers such as community health centers,
+local health departments, and public hospitals.\9\
+---------------------------------------------------------------------------
+ \9\ David M. Cutler, Employee Costs and the Decline in Health
+Insurance Coverage, Working Paper No. 9036 (Cambridge, Mass.: National
+Bureau of Economic Research, July 2002).
+---------------------------------------------------------------------------
+ The rapid growth in premiums from 1987 to 1993 may have contributed
+to the reported decline in the rates at which employees take up the
+offer of employment-based coverage. According to one study, the
+reduction in the insurance coverage rate among workers from 1979 to
+1997 resulted from two factors: a decline in the rate at which full-
+time workers accepted an offer of insurance from their employer and a
+decrease in the proportion of part-time and new full-time workers who
+were eligible for the insurance that their employer offered.\10\ There
+was no decline in the proportion of workers whose employer offered
+insurance.
+---------------------------------------------------------------------------
+ \10\ Henry S. Farber and Helen Levy, ``Recent Trends in Employer-
+Sponsored Health Insurance Coverage: Are Bad Jobs Getting Worse?''
+Journal of Health Economics, vol. 19, no. 1 (January 2000), pp. 93-119.
+---------------------------------------------------------------------------
+ As noted, increasing unemployment rates, too, reduce insurance
+coverage, because losing a job sometimes puts a worker's employment-
+based health insurance at risk. In a recent analysis, CBO found that
+health insurance coverage rates declined significantly among people who
+received unemployment insurance (UI) benefits for at least four
+consecutive months in 2001 or early 2002.\11\ Some 82 percent of such
+workers had health insurance coverage (from any source) before they
+began receiving UI benefits, but only 58 percent had coverage by the
+final month of those benefits.
+---------------------------------------------------------------------------
+ \11\ Congressional Budget Office, Family Income of Unemployment
+Insurance Recipients (March 2004).
+---------------------------------------------------------------------------
+ Federal legislation (the Consolidated Omnibus Budget Reconciliation
+Act of 1985, known as COBRA) requires firms with 20 or more employees
+to continue offering health coverage to workers who separate from their
+firm. However, firms may charge former employees up to 102 percent of
+the full (group) premiums for that coverage. Therefore, unemployed
+workers may face a large increase in their out-of-pocket premiums under
+COBRA. The reduction in coverage estimated for recipients of
+unemployment insurance probably stems, in part, from many of those
+people opting not to purchase coverage under that law.
+
+Policy Implications
+ Policies aimed at increasing insurance coverage will be more
+effective if designed in light of the characteristics of the uninsured
+population. In particular, policymakers should be mindful of the
+dynamic nature of the uninsured population as well as the distinction
+between the short-term and long-term uninsured. For people with short
+spells of being uninsured, policies might have the goal of filling the
+temporary gap in coverage or of preventing such a gap from occurring.
+For people with longer periods without insurance, policies might seek
+to provide or facilitate an ongoing source of coverage.
+ An issue that complicates any policy initiative to expand health
+insurance is the crowding out of existing sources of coverage. ``Crowd-
+out,'' which results when coverage through a new government policy
+initiative replaces private coverage that people would have otherwise
+had, can occur in various ways. Some employees may drop their
+employment-based coverage if a government program provides health
+insurance at a lower premium. Or employers may reduce or drop coverage
+if the demand from their employees lessens because a government program
+provides an alternative source of coverage. A related issue concerns
+health insurance tax credits or similar subsidy programs. Some
+proposals would extend credits or subsidies to people who would have
+been insured even without them. Through both phenomena, federal aid is
+extended to people who otherwise would have been insured. As a result,
+the federal cost per newly insured person could be substantially
+greater than the cost for each person who uses the federal program or
+who receives the tax credit.
+ Information on the amount of crowd-out associated with policies to
+expand insurance coverage comes primarily from analyses of occasions
+during the late 1980s and early 1990s when states extended Medicaid
+coverage to pregnant women and children with income above the federal
+poverty line.\12\ According to those analyses, an estimated 10 percent
+to 25 percent of the people who were enrolled in Medicaid when
+eligibility expanded would have otherwise been covered by private
+insurance.\13\ The variation in the estimates arises to some extent
+from the use of different methods in measuring the effect. Such
+estimates may also vary because of differences in the types of people
+eligible for the public programs being measured. In particular, crowd-
+out rates increase as programs extend the level of income that
+enrollees may have, as the eligible population includes an increasing
+share of people who have private insurance instead of no insurance.
+---------------------------------------------------------------------------
+ \12\ No estimates of the crowd-out associated with tax inducements
+for insurance coverage are available.
+ \13\ For a review of the literature on crowd-out, see Understanding
+the Dynamics of ``Crowd-out'': Defining Public/Private Coverage
+Substitution for Policy and Research (report prepared by the Academy
+for Health Services Research and Health Policy under The Robert Wood
+Johnson Foundation's Changes in Health Care Financing and Organization
+Program, June 2001).
+---------------------------------------------------------------------------
+ Finally, incremental reforms probably cannot provide insurance for
+everyone, and attempting to achieve 100 percent coverage would be very
+expensive. As an alternative, policymakers could consider policies
+aimed at expanding insurance coverage in conjunction with policies to
+strengthen the system through which the uninsured receive medical
+care--for example, through increased funding of community health
+centers and public hospitals.
+
+
+
+ Chairman JOHNSON. Thank you. Thank you very much. On this
+issue of crowd-out, which is perhaps the most difficult aspect
+of doing something about the uninsured, States have done
+different things in terms of coverage. Have you done any work
+on States that have tried universal coverage to see what the
+crowd-out impact, particularly on small business, was?
+ Dr. HOLTZ-EAKIN. We haven't done any work at CBO on that
+particular issue. We have relied on our surveys of the
+literature in looking at, particularly Medicaid expansions
+which have given the best body of evidence, to look at impacts
+with respect to different income levels as the expansions took
+place at different parts of the income distribution. We can go
+back and look at the literature and see if it gives us more
+evidence at the State level evidence and will be happy to work
+with you to get that back to you.
+ Chairman JOHNSON. I should think it would be interesting to
+look at TennCare in Tennessee and see whether the change in the
+public coverage affected employer-provided insurance,
+particularly for small businesses. What were the other
+ramifications?
+ Dr. HOLTZ-EAKIN. We can go back and look at the Tennessee
+experience. Most of the academic literature tries to aggregate
+many different State experiences into a summary statistic on
+crowd-out without itemizing State-by-State experiences but it
+is certainly within the data.
+ Chairman JOHNSON. I don't know whether you can look at
+whether those States have taken up all the options under
+Medicaid, so they cover a much larger population, much higher
+up the income ladder, what the sort of comparison is between
+willingness to provide insurance in the small business sector
+in States with low Medicaid definitions versus States with high
+Medicaid definitions. I mention that because during the
+Medicare debate, one of the things that surprised me absolutely
+the most and one of the reasons I think the benefits in that
+bill are being grossly underestimated is that 38 States define
+Medicaid eligibility as 75 percent of the Federal poverty
+level.
+ So, for us to cover people basically up to 150 percent does
+make a huge difference for many seniors throughout the country.
+If that is what States are doing, then in those States, the
+small businesses may be finding a way to participate in their
+employees' health care at a higher rate than, for example, in a
+State like Connecticut that has generous Medicaid coverage. So,
+if there is any way we could look at those two things I would
+appreciate it. I have two specific questions and then I will
+turn it over to Mr. Stark. In your charts and your testimony,
+you mentioned that there is somewhere between 21 million and 31
+million, approximately, uninsured all year. That is a huge
+swing. That is a 50 percent swing. Why can't you do better than
+that?
+ Dr. HOLTZ-EAKIN. The range of estimates comes from looking
+at different data sources for information about the uninsured.
+To track completely a spell of uninsurance requires the kind of
+data that follows individuals through time. Such data sets are
+relatively rare. To the extent that they ask good questions
+about the nature of individuals' health insurance coverage is
+even rarer.
+ So, we have a restricted amount of data, quite frankly,
+that are available to answer this question. I guess it is in
+the eye of the beholder. From the point of view of someone who
+has looked at data on many problems in economics for a long
+period of time, I was less unhappy with that swing than you
+might have been. I think the key message is that out of the
+whole population of the uninsured, there is a smaller subset
+which is uninsured for a sustained period of time, and if one
+wanted to target that audience more carefully it might be
+useful to peel back more layers, look at those individuals who
+perhaps had not declined employer coverage. If they declined
+employer coverage, it is hard to argue that they were uninsured
+involuntarily. You could look at the degree to which they might
+be eligible for Medicaid and not take it up.
+ Chairman JOHNSON. Two things. First of all, I think it
+would be very useful to know more about the difference between
+21 million and 31 million because what you are really saying is
+either half of the uninsured are uninsured for 12 months or
+more or three-quarters. So, I would like to know more about
+that figure.
+ Dr. HOLTZ-EAKIN. We can certainly provide that.
+ Chairman JOHNSON. I would appreciate that.
+ [The information was not received at the time of printing]
+ Chairman JOHNSON. Then in your other chart, about spells in
+progress and spells that began. On one chart you have 45
+percent uninsured for less than 4 months, 26 percent for 5 to
+12 months, and about 30 percent for more than 12 months. So,
+about 30 percent for more than a year. Then, in the chart
+beside it, 78 percent were uninsured for more than 12 months.
+You explained that with some man-in-the-street question. I
+didn't get that. If only 30 percent are actually uninsured for
+more than 12 months, why do 78 percent think they are?
+ Dr. HOLTZ-EAKIN. It represents the difference between
+watching someone progress through an entire spell, from
+beginning to end and seeing how long it is, versus walking out
+and finding people perhaps in the middle of a spell of
+uninsurance. There are a smaller fraction, 30 percent, who have
+very long spells, so you are more likely to run into that
+person when you survey. As a result, in the right panel, what
+you see is the answer to the question when we find somebody in
+the survey then and say are you uninsured, they say yes, they
+are more likely to be the kind of person who has a long spell
+because they are more likely to be found in such a survey.
+ Chairman JOHNSON. Do we ask them how long have you been
+uninsured or do we ask them how long do you think you will be
+uninsured?
+ Dr. HOLTZ-EAKIN. We ask the first question. The latter we
+can only track by following them for a long period of time. The
+data are fairly limited.
+ Chairman JOHNSON. It seems to me that the former number is
+the one that we as policymakers should be more concerned with.
+That is the number who actually are uninsured for more than a
+year. Is that the correct interpretation?
+ Dr. HOLTZ-EAKIN. Yes.
+ Chairman JOHNSON. Thank you very much, Dr. Holtz-Eakin. Mr.
+Stark.
+ Mr. STARK. I gather that this is sort of like labor
+statistics, and are you talking to the people at home or are
+you talking to the employers to get different employment
+figures? I don't think it makes a whole hell of a lot of
+difference. You still only had 21,000 jobs last month and when
+you need 300,000 or 400,000 jobs a month, we aren't doing very
+well, as we are not in taking care of people who aren't
+insured. I guess the real question is, How many people get sick
+when they don't have insurance? I don't know as we know that,
+do we?
+ Dr. HOLTZ-EAKIN. The onset of----
+ Mr. STARK. The onset of an expensive medical encounter. How
+many people have a heart attack or get diagnosed with diabetes?
+I don't think we know that. Maybe somebody does, but I don't
+know as we know. That is the key. If somebody makes it through
+the year, they are home free, and then they get insurance next
+year. Where they are going to get it, I don't know. The other
+thing that I don't believe you define, or anybody else that I
+know of, is what do you consider as insured. If they have the
+American Family Life Assurance Company (AFLAC), they get a
+hundred bucks a day if they get sick because they've got some
+kind of a hospital policy. Is that insured?
+ Dr. HOLTZ-EAKIN. In the longer paper that underlies this
+testimony, the data sources have different classifications.
+Basically they include employer-sponsored insurance. Not all
+the details about the policy are available, but these are
+standard insurance measures.
+ Mr. STARK. At the low end of the scale with some of the
+associated health plans, as we have been reading in the press
+lately about these plans that have cropped up that are phony.
+People think they have bought health insurance and the
+insurance company has gone south. We don't have, outside of,
+say, Medicare, a definition--maybe we do in the Federal
+Employee Health Benefit Plan (FEHBP). I don't know as the
+benefits are--if there is a minimum level of benefits there--
+but we really don't have a definition as to what is, quote,
+``insured,'' do we?
+ Dr. HOLTZ-EAKIN. The definitions will differ by the survey.
+It is often self-reported.
+ Mr. STARK. Particularly if somebody is on the margin, if
+they have high blood pressure or a host of things where they
+have been excluded as a preexisting condition, they are really
+not insured for the things they need most. I don't know how I
+could define that in a way that a scientific researcher could
+use it. I do think that with the vast difference in benefits
+and what is covered and what isn't, we would have a better
+understanding of how well we are dealing with this problem if
+we could define where we put somebody in the winner category.
+We just don't take them and give them some kind of schlocky
+insurance company that may not pay benefits, may not pay
+hospital benefits, may not have mental health.
+ We say, look, here is a standard of what a person ought to
+have; and then the question is, if they have a holdover when--
+as you say in your testimony--they move from job to job, but
+really do you count the time between when the new insurance
+goes into effect, which often is 60 days, 90 days? Yes, they
+may be insured, but the benefits don't start if you get sick in
+that trial period, and there may be preexisting conditions
+which have been precluded, all of which I think makes no
+difference. I am just suggesting that we could argue all day
+whether there are 30 million or 40 million, and nobody has
+brought up children. I keep hearing the number 12 million. What
+would you say is the number of children? How would you define
+that?
+ Dr. HOLTZ-EAKIN. Depending on the definition, we show in
+Table 1 some of the fraction of those individuals less than 19
+who are uninsured at any point during the year. It is about a
+quarter in our data.
+ Mr. STARK. About 25 percent of the uninsured are kids?
+ Dr. HOLTZ-EAKIN. Yes. Of the kids are uninsured at some
+point during the year.
+ Mr. STARK. Again, I think this is all very interesting, but
+what does General Accounting Office (GAO) suggest we do to get
+all these people insured?
+ Dr. HOLTZ-EAKIN. I am not familiar with what the GAO folks
+would suggest, sir.
+ Mr. STARK. Okay. What do you think we should do? You are
+studying this. You say you think we have trouble affording it.
+What about the social costs? General Motors tells us they lose
+$1,300 by making a car here as opposed to making it in Canada.
+That may be an incentive to not have jobs here or there. In
+your opinion, is that something we should take into account
+when we think about Federal costs of insuring everybody?
+ Dr. HOLTZ-EAKIN. On the job location, I think the key thing
+to focus on is not any particular part of the benefit package,
+but labor costs in any location here versus Canada. I am not
+familiar with the particular number you quoted. Certainly if
+you want to look at the decision to locate a facility or a job
+in one place or another, the typical standard is unit labor
+cost relative to the productivity of labor, not a benefit in
+isolation.
+ The broader question, the intent of my remarks was not to
+tee up specific policy solutions but to identify the fact that
+there are many different features to the issue of uninsurance.
+There is the time series pattern of the total uninsurance, and
+then there is the fact that within the population, there appear
+to be different kinds of experience with spells of uninsurance.
+It wasn't meant to offer specific solutions but to frame up the
+issues.
+ Mr. STARK. So, you don't have a suggestion for us?
+ Chairman JOHNSON. Mr. Stark, we actually didn't ask them to
+come to talk about that. They are not prepared for that.
+ Mr. STARK. As a person who has a lot of knowledge about
+this, as an economist approach to what it will cost, I think
+you did say it would be expensive, didn't you?
+ Chairman JOHNSON. Let me go on to Mr. Crane.
+ Mr. STARK. Sure.
+ Mr. CRANE. Thank you, Madam Chairman, and thank you, Dr.
+Holtz-Eakin, for coming today. As you know, H.R. 1, the
+Medicare prescription Drug and Modernization Act, included
+language that created Health Savings Accounts (HSAs) for all
+Americans. Do you recall CBO's estimation for the number of
+individuals who would purchase a new HSA based on the new law?
+ Dr. HOLTZ-EAKIN. I don't know the number of individuals who
+would purchase them. I know the Joint Committee on Taxation
+scored the budget costs of it. We could certainly discuss with
+them the underlying mechanics of the estimate.
+ Mr. CRANE. According to the last Department of the Treasury
+report, 73 percent of people who had a medical savings account
+were previously uninsured, is that correct?
+ Dr. HOLTZ-EAKIN. I am not familiar with that number again.
+We can work with you to make sure that that is right.
+ Mr. CRANE. One of the arguments against HSAs is that this
+type of savings account drives people out of employer-sponsored
+health care coverage, but based on the Treasury Department's
+report, it seems that most people were not driven out of the
+system. They had no insurance at all. Based on factual data, it
+seems that these types of accounts are not undermining the
+employer-based health care system. Would you agree?
+ Dr. HOLTZ-EAKIN. I think it is important to look at the
+evidence. Certainly if you look at the incentives in an HSA,
+they will differ on both the dimension for insurance and the
+incentives for efficient use of health care. For some
+individuals who are already purchasing insurance to get a tax
+subsidy and take on the HSA is clearly to their advantage, it
+doesn't change insurance coverage at all. For other individuals
+who do not have insurance, there is an obvious incentive,
+lowering the cost. It will be an empirical issue as to which of
+those things dominates on the insurance front.
+ Mr. CRANE. You stated in your testimony that the vast
+majority of the uninsured are in working families and that over
+three-quarters of uninsured workers are not offered insurance
+by their employer and that low-income workers are less likely
+to be offered insurance by their employer and are less likely
+to accept it if it is offered. It seems to me that if we are
+going to find a way to help uninsured individuals, the first
+place we need to start is to make health care more affordable
+for individuals and small businesses. Would you agree?
+ Dr. HOLTZ-EAKIN. It certainly appears that the employer-
+sponsored part of this is an important part of it, especially
+the transitory spells of uninsurance.
+ Mr. CRANE. Thank you.
+ Chairman JOHNSON. Mr. McDermott.
+ Mr. MCDERMOTT. Thank you, Madam Chairman. There is a
+fascinating article in today's Washington Post entitled
+``Rising Costs of Health Care in the U.S. Give Other Developed
+Countries an Edge in Keeping Jobs.'' Some guy named Jim
+Stanford, an economist with the Canadian Auto Workers, said
+employers who operate in either country, meaning Canada or the
+United States, can save $4 an hour per worker by choosing
+Canada. He says that is a significant differential. It's one of
+the reasons the Canadian auto industry has done a lot better.
+ Officials from Ford Motor, General Motors, and
+DaimlerChrysler sent out a letter that said the Canadian public
+health system significantly reduces total labor costs compared
+to the costs of equivalent private health insurance services
+purchased by the U.S.-based auto makers. Then, finally, the
+Vice Chairman of the Ford company said, high health care costs
+have created a competitive gap that is driving investment
+decisions away from the United States.
+ My question to you is the Institute of Medicine did a study
+last year, a 3-year study on the uninsured and said that the
+U.S. economy loses between $65 and $130 billion each year
+because we don't have a system of universal coverage. Have you
+done any kind of look at that at all? Did you look at their
+study?
+ Dr. HOLTZ-EAKIN. I read the study briefly. I won't pretend
+to be intimately familiar with the research underneath it. At
+CBO we haven't done any estimate of losses of that sort.
+ Mr. MCDERMOTT. In a country where these things are true
+about Canada--presumably they are true. I remember that in 1994
+we had a lot of people going around beating on their chests and
+very proudly saying we defeated the Clinton program and that
+the private sector would take care of it. Is there any evidence
+whatsoever that you can show me since 1994 that the private
+sector has done one thing to deal with the measure of
+uninsurance in this country?
+ Dr. HOLTZ-EAKIN. The evidence on uninsurance, we have
+presented in my opening remarks and in our testimony. I guess I
+would go back to----
+ Mr. MCDERMOTT. You think since 1994 it has gotten better?
+ Dr. HOLTZ-EAKIN. In the overall insurance rate, we saw a
+sharp drop between 1987 and 1993. Then it rose during the
+nineties and has declined more recently. We are at 64 percent
+overall in employer-sponsored insurance. I guess I would repeat
+what I offered to Mr. Stark, which is that, with all due
+respect to the individuals involved in the auto companies, I am
+not familiar with their numbers, it is not the full calculation
+to look only at health care costs in the two countries,
+especially at the employer level. It is the total cost of labor
+compensation relative to how productive those workers are that
+will be the key issue.
+ If health care costs rose and nothing else changed,
+certainly that is a competitive disadvantage. The evidence,
+however, over a long period of time in the United States and
+elsewhere is that if one part of the benefit package rises, it
+is usually offset to some extent by another part of the benefit
+package or wages. So, the total compensation package does not--
+--
+ Mr. MCDERMOTT. So, workers wind up really worse off because
+more of their pay goes into their benefit package than it does
+into their pocket.
+ Dr. HOLTZ-EAKIN. Obviously they value the benefit. So, it
+is a mix that offsets one value of compensation with another.
+ Mr. MCDERMOTT. Are you testifying that from your research,
+that there is really no problem, then, with the health
+insurance? Eight years in a row of double-digit inflation. The
+private sector was going to take care of that, they told us in
+1994, because they were scared that the--that the health
+providers would be scared and the insurers could get a better
+deal. We have had 8 years of double-digit inflation. What is
+happening here? Why does it continue to go up? We leave more
+and more people by the side of the road, even if for 3 or 4
+months.
+ If you are uninsured and you get sick, it doesn't make any
+difference whether you haven't been insured for a week or 12
+months and 25 days. It really is a question of what you do.
+Where is the control that is supposed to come out of the
+private sector? I am a free enterpriser. I believe in free
+enterprise, but I don't see them functioning at all. They put
+down the government system. So, where is the evidence that they
+control costs?
+ Dr. HOLTZ-EAKIN. I think the underlying question with the
+rising cost of health care in the United States, not insurance
+per se, starts with care. Then I think there is broad consensus
+that it is associated with technology adoption and the
+enhancement of technologies in the medical sector. They have
+not in the United States and elsewhere proven to be cost
+savers. The question is whether the difference in quality is
+worth the money.
+ Mr. MCDERMOTT. All this technology has not proven to be a
+cost saver. Why does the health care industry continue to do it
+then? Why does the insurance pay for it? If it doesn't save
+costs, why do they pay for it?
+ Dr. HOLTZ-EAKIN. As an economist, I would answer that if
+quality is higher, you would be willing to pay more for
+something. What remains the outstanding question is whether we
+are getting quality per dollar with the technology
+enhancements. That is the question for the United States in
+looking at the efficient provision of health care. Insurance is
+layered on top of that to spread the financial risk of
+providing that care. The underlying issue of the rising cost of
+health care is one in which it may be the case that quality is
+rising and as this Nation becomes older and wealthier it may
+choose to buy more health care. It may also be the case that at
+the margin, some of these enhancements do not provide the
+quality enough to offset their dollar cost. That is the key
+issue I think in terms of the cost.
+ Mr. MCDERMOTT. Did you do any cost-benefit analysis at all?
+Did you look at the cost-benefit analysis at all in terms of
+our system versus any of these other systems?
+ Dr. HOLTZ-EAKIN. We don't have a study on that. One of the
+questions that would be difficult is measuring benefits. As you
+can imagine just by introspection, valuing the benefits of
+additional medical technology is a very difficult task, both in
+economic and social terms.
+ Mr. MCDERMOTT. I yield back the balance of my time. We
+don't need another study, Madam Chairman.
+ Chairman JOHNSON. I don't know that I have ever seen a
+study that I thought was useful on that. At the time this issue
+first came up in the eighties, we had more computerized axial
+tomography (CAT) scanners in Connecticut than all of Canada.
+That says a lot about access to quality care. I don't know how
+you would deal with that in a comparative analysis of health
+care costs. That has been one of the difficulties.
+ I just wanted to put on the record one issue that I talked
+with you about that you did not mention in your testimony so I
+didn't talk--bring it up earlier. You don't mention the
+variation in the uninsured geographically. You talk about it
+demographically and in terms of income and age, but not
+geographically. I think we need to know that, because these
+sort of generic fixes end up having an enormous number of
+ramifications.
+ For instance, if you go to a policy that provides tax
+credits, even if they are refundable and they go to 100 percent
+at certain wages, that will certainly displace a lot of
+employer-provided plans. There are other problems with it. If
+we understood the geographic structure of the uninsured
+population, we would have a lot more levers to pull.
+ I just want to comment that the Health Resources and
+Services Administration is handing out grants to community
+health centers that will do two things, and they are 3-year
+grants. They will search out the underinsured and the uninsured
+in their region and bring them into the system and implant
+electronic technology so that any place they enter the system,
+whether it is the hospital, the doctor's office or their
+community health center, a home health agency, an optometrist,
+wherever, they can be brought into the system by electronic
+record so that then wherever they come again, their records
+will be available. It is a very exciting, big effort. I hope to
+get some report on where they are on that in some of the older
+demonstration areas as some portion of the guidance that this
+Committee will need. If you could talk with Census and search
+out and see what do we know about the geographic distribution,
+that would be something of interest to, I think, this
+Committee. Thank you.
+ Dr. HOLTZ-EAKIN. Certainly.
+ Chairman JOHNSON. We now will ask our second panel to come
+forward. As they are coming forward, I will just introduce them
+very briefly. Diane Rowland is the executive vice president of
+the Henry J. Kaiser Family Foundation and executive director of
+the Kaiser Commission on Medicaid and the uninsured. I won't go
+through her whole biography but she has done a lot of very
+important work on Medicaid and long-term care issues, cost
+containment issues and so on.
+ I am very pleased to have Dr. Rowland with us. Dr. Nichols
+is from the Center for Studying Health System Change, a
+nonpartisan health policy research organization in Washington.
+He is an expert on private insurance markets, market-based
+reforms and the Medicare Program. Dr. Glenn Melnick is the Blue
+Cross of California Professor of Health Care Finance at the
+University of southern California and a senior economist and
+resident consultant at RAND Corporation in Santa Monica. He has
+focused a lot of time and effort on areas such as pricing of
+hospital services, health insurance and health care markets. We
+appreciate him being with us here today. Greg Scandlen is with
+the Galen Institute and is an expert on financing, insurance
+regulation, and employee benefits and has written extensively
+on consumer choice and publishes a weekly newsletter, Consumer
+Choice Matters.
+ We welcome you all here today. We thank you for your input
+and your help as we embark on this effort to take some action
+on the uninsured. I know it is an old issue as Pete has
+mentioned. It has been with us for a long time, through
+Republican Administrations and Democratic Administrations. It
+is a hard problem, which is one of the reasons we haven't
+solved it. Also our system has a peculiar way of ultimately
+providing health care. At this point, it is not only the
+uninsured, we can't afford for people to be uninsured as a
+matter of principle, but also the caring system can no longer
+sustain the costs of nonpayers. Dr. Rowland, if you would
+proceed.
+
+ STATEMENT OF DIANE ROWLAND, EXECUTIVE DIRECTOR, KAISER
+ COMMISSION ON MEDICAID AND THE UNINSURED
+
+ Ms. ROWLAND. Thank you, Madam Chairman and Members of the
+Committee, for this opportunity to be with you today to discuss
+the Nation's uninsured problem and population. While surveys
+differ in their count of the uninsured and the time period
+without health insurance, all tell us that millions of
+Americans go without coverage each year, and many for long
+periods of time. The census data we use to monitor health
+insurance coverage that gives us in 2002 the number 43 million
+Americans at any given point without health insurance also
+helps us to understand how this number changes over time. In
+2002, we saw an increase of 2.4 million without insurance over
+the previous year. The size of our uninsured population, in
+fact, is comparable to the number of beneficiaries you deal
+with in other legislation who are Members of the Medicare
+Program.
+ While the composition of the uninsured population includes
+Americans of all ages and incomes, the problem, especially for
+the long-term uninsured, is particularly focused on low-income
+families. Health insurance coverage in America is very much a
+patchwork. Having insurance depends on where you live, where
+you work, and what you earn. In fact, as you pointed out, Madam
+Chair, the geographic variations in the rate of insurance
+coverage are very significant. Those States with large firms
+and more affluent economies are more likely to have lower rates
+of uninsurance than those States with large poverty
+populations, small businesses and especially rural interests.
+ There are also many misperceptions about our uninsured
+population. They are, as you said, hardworking families that do
+not obtain health coverage through their jobs. Eight in ten of
+the uninsured come from a working family, but I think most
+important to remember is that for the most part, they are not
+affluent. Two out of every three come from low-wage families
+earning less than $30,000 for a family of three, families
+hardly able to afford $9,000 for a family policy on their own,
+and in most cases families who work for employers that don't
+offer coverage. In the few cases where the employer offers
+coverage to these low-income families, their share of the
+premium, averaging $2,400 last year for family coverage, is
+often too high a price to pay when the family budget is
+extremely limited.
+ The uninsured, of course, are predominantly adults because
+our public programs have actually helped to extend coverage to
+1 in 4 American children. Today Medicaid and SCHIP provide
+coverage to over 25 million low-income children and have
+dropped the uninsured rate among low-income children from a
+high of 23 percent in 1997 to 14 percent at the beginning of
+2003.
+ Indeed, a success story in our efforts of extending
+coverage. This drop in the number of children without insurance
+has helped to counteract the rise in the uninsured as a result
+of loss of employer-based coverage. I don't believe it is all
+crowd-outs. For the most part, you have provided coverage
+through Medicaid and SCHIP to millions of children previously
+uninsured, not those who were in the employer-based market.
+However, limited eligibility for parents and restrictions on
+coverage of childless adults and Medicaid leave over 20 million
+low-income adults, half of America's uninsured population on
+any given day, outside of Medicaid's reach. Unfortunately, in
+today's economy with weak job growth, the number of Americans
+without health insurance is likely to grow, not shrink.
+ Rising health insurance costs are compromising employer-
+based coverage as more and more employers shift increased costs
+for premiums and additional cost-sharing burdens onto their
+employees, making coverage ever more unaffordable for the
+lowest-wage employees. Meanwhile, State fiscal constraints are putting
+Medicaid and SCHIP coverage at risk. Fiscal relief in the tax
+bill really did help stave off deeper cuts and reductions in
+Medicaid and reductions in eligibility during the last year,
+but the matching rate increase will expire this June putting
+the State's fiscal considerations back on the table.
+ It is hard to see how we will be able to make progress
+extending coverage to the uninsured or maintaining the coverage
+Medicaid now provides without a commitment of additional
+Federal resources. Addressing the uninsured is, as you have
+said, a national priority. People without health insurance
+often go without appropriate care and get sicker and die sooner
+than they should because of it.
+ Leaving millions uninsured and coverage of millions more at
+risk in Medicaid is a poor prescription for our Nation's
+health. So, I look forward to working with the Committee to
+find ways to secure the coverage we have and extend coverage to
+the millions of uninsured who need assistance in meeting their
+health care needs. Thank you. Dr. Nichols.
+ [The prepared statement of Ms. Rowland follows:]
+
+ Statement of Diane Rowland, Sc.D., Executive Director, Kaiser
+ Commission on Medicaid and the Uninsured
+
+ Today, over 43 million Americans are without health
+insurance. The uninsured are predominantly low-income working
+families--nearly two-thirds (64%) have incomes below 200 percent of the
+poverty level (or less than $30,000 per year for a family of three in
+2002).
+ Eight in ten of the uninsured come from working families
+but do not obtain coverage in the workplace. Low-wage workers are
+particularly disadvantaged--they are less likely to be offered coverage
+through the workplace and unable to afford coverage on their own.
+ The rising cost of health insurance is a major problem
+for both employers and employees; in 2003, the average premium cost was
+$3,383 for single coverage and $9,068 for family coverage. On average,
+employers contributed 84 percent of premium costs for single and 73
+percent for family coverage; however, the employee share remains a
+substantial burden for many low-wage workers.
+ Medicaid helps fill in the gap by providing health
+insurance coverage with limited cost sharing and comprehensive benefits
+to 38 million low-income children and parents, the large majority being
+children. Medicaid's reach for low-income adults, however, is severely
+limited--income levels for parents in 35 states are below poverty and
+childless adults are generally excluded from coverage, no matter how
+poor.
+ The recent economic downturn and return of escalating
+health costs now place health insurance coverage for working families
+in jeopardy from increased premium costs and loss of employer-sponsored
+coverage, combined with limits on the availability and scope of
+Medicaid due to state fiscal constraints. We face the prospect of
+seeing coverage erode, not expand, for millions of Americans.
+ The combination of rising health care costs and state
+fiscal constraints puts the low-income population relying on Medicaid
+and SCHIP particularly at risk. Maintaining the gains in public
+coverage over the last decade, especially for children, may require
+continuing federal fiscal relief to the states in return for a
+commitment to maintain coverage.
+ Health insurance matters for the millions of Americans
+who lack coverage--it influences when and whether they get necessary
+medical care, the financial burdens they face in obtaining care, and,
+ultimately, their health and health outcomes. Extending coverage to the
+millions of Americans without health insurance is both an important
+policy and health objective.
+
+ Thank you for the opportunity to offer testimony this afternoon on
+the nation's growing uninsured population and the consequences of
+leaving 43 million Americans without health insurance coverage. I am
+Diane Rowland, Executive Vice President of the Henry J. Kaiser Family
+Foundation and Executive Director of the Kaiser Commission on Medicaid
+and the Uninsured.
+ Health insurance coverage remains one of the nation's most pressing
+and persistent health care challenges. The most recent data from the
+Census Bureau show that more than one in every seven Americans--43.6
+million adults and children--were without health insurance in 2002.
+This is not only a large problem, but a growing problem for millions of
+Americans. From 2001 to 2002, the number of Americans lacking health
+insurance increased by 2.4 million (Figure 1). Public coverage
+expansions through Medicaid helped to moderate the growth in the
+uninsured, most notably by providing coverage to children in low-income
+families, but were not enough to offset the decline in private
+coverage. Lack of coverage compromises not only access to care and the
+health of the uninsured, but also the health and economic well-being of
+our nation.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.005
+
+The Uninsured Population
+ Who are America's 43 million people without health insurance
+coverage? The uninsured are predominantly adults from low-income
+working families--three-quarters of the uninsured are between age 18
+and 65; two-thirds have incomes below 200 percent of the federal
+poverty level or $28,696 for a family of three in 2002; and the
+majority (eight in 10) come from working families (Figure 2). The
+complexities of coverage through the workplace combined with gaps in
+public coverage through Medicaid and the State Children's Health
+Insurance Program (SCHIP) mean millions of Americans are outside of the
+reach of health insurance coverage. Health coverage in America is very
+much a patchwork--having health insurance depends on where you live,
+where you work, and too often what you earn.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.006
+
+ Two out of three nonelderly Americans receive their health
+insurance coverage through an employer-sponsored health plan offered
+through the workplace, but for millions of working families such
+coverage is either not offered or is financially out of reach. Among
+the 43 million uninsured, eight in ten come from working families--
+nearly 70 percent come from families where at least one person works
+full-time and another 12 percent from families with part-time
+employment.
+ Most uninsured workers, and consequently their dependents, are not
+offered job-based coverage either through their own or a family members
+job. The likelihood of obtaining coverage through the workplace depends
+largely on where one works and what one earns. Most large firms offer
+coverage, but many smaller firms do not. Low-wage workers are often
+employed in small businesses, particularly in the retail and service
+industries, where health insurance is not widely offered as a fringe
+benefit.
+ The cost of health insurance in the workplace is a substantial
+financial burden for both the employer and employee, but remains a key
+fringe benefit, especially in large or unionized firms. When health
+insurance is offered in the workplace, most employees opt for coverage
+even though the share of premium they must pay often represents a
+substantial share of their income. In 2003, the Kaiser/HRET national
+survey of employers found the average annual premium for employer-
+sponsored group insurance for a family was $9,068 with the employer
+contributing 73 percent of the premium ($6,656) and the employee
+contributing 27 percent of the premium or $2,412 per year (Figure 3).
+For single individuals, the premiums averaged $3,383 per year with the
+employer covering 84 percent of the premium cost ($2,875 per year).
+
+[GRAPHIC] [TIFF OMITTED] T3794A.007
+
+ If health insurance coverage is not available through a group
+policy from an employer, families are hard pressed to be able to find
+and pay for a policy in the individual insurance market. Most directly
+purchased policies are expensive and have more limited benefits and
+more out-of-pocket costs than group coverage plans. Moreover, the cost
+of these policies is based on age and health risk, and any preexisting
+health conditions are generally excluded from coverage. For the average
+low-income family, a $9,000 family policy in the individual market
+would consume a third or more of their income, provide only limited
+protection, and could exclude coverage for any family members with
+health problems. Most notably, in many states, private plans
+individually marketed do not provide routine maternity benefits or, if
+they do, they are offered as a very costly add-on.
+ Medicaid and SCHIP help fill in the gaps for some of the lowest
+income people, but this publicly sponsored coverage is directed
+primarily at children and pregnant women and varies in availability
+across the states. Most low-income children are eligible for assistance
+through Medicaid or SCHIP, but in most states parents' eligibility lags
+far behind that of their children. While eligibility levels for
+children are at 200 percent of the federal poverty level ($30,520 for a
+family of three in 2003) in 39 states, parents' eligibility levels are
+much lower (Figure 4). A parent working full-time at minimum wage
+(approximately $9,300 per year at 35 hours per week) earns too much to
+be eligible for Medicaid in 19 states (Figure 5). For childless adults,
+Medicaid funds are not available unless the individual is disabled or
+lives in one of the few states with a waiver to permit coverage of
+childless adults. As a result, in 2002, Medicaid provided health
+insurance coverage to over half of all poor children, and a third of
+their parents, but only 22 percent of poor childless adults. Over 40
+percent of poor adults and a third of near-poor adults were uninsured.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.008
+
+[GRAPHIC] [TIFF OMITTED] T3794A.009
+
+ Low-income individuals are disproportionately represented among the
+uninsured--nearly two-thirds (64%) of the uninsured come from low-
+income families earning less than 200 percent of the poverty level and
+over a third (36%) come from families living below the poverty level.
+Employer-sponsored coverage is extremely limited for the low-income
+population; only 15 percent of the poor and 42 percent of the near-poor
+receive coverage through their employer (Figure 6). Medicaid helps to
+offset the lower levels of private insurance for over a third (38%) of
+the poor and 20 percent of the near-poor, but many parents of low-
+income children as well as childless adults do not qualify for Medicaid
+assistance.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.010
+
+ The chances of experiencing a long spell without health coverage
+(12 months or longer) are not equal. Individuals with low incomes and
+those in fair or poor health status are significantly more likely than
+others to be uninsured for long periods. Young adults (19-34 years old)
+are at greater risk of being uninsured for 12 months or longer than
+other age groups (Figure 7).
+
+[GRAPHIC] [TIFF OMITTED] T3794A.011
+
+ This confluence of factors relating to the characteristics of the
+uninsured places low-income adults at the center of the nation's
+uninsured problem and the group most likely to have long periods
+without coverage. In 2002, 48 percent of the 43 million uninsured
+Americans were low-income adults--16 percent parents of low-income
+children and 32 percent low-income adults without children (Figure 8).
+Assuring coverage for this group, as well as extending coverage to the
+parents of the low-income children who are now largely eligible for
+public coverage, poses the next challenge in coverage expansions.
+Focusing attention on the lack of coverage for low-income adults and
+continuing to push for better enrollment of low-income children offers
+the potential to reach two in three uninsured Americans.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.012
+
+THE CONSEQUENCES OF LACK OF INSURANCE
+ The growing number of uninsured Americans should be of concern to
+all of us because health insurance makes a difference in how people
+access the health care system and, ultimately, their health. Leaving a
+substantial share of our population without health insurance affects
+not only those who are uninsured, but also the health and economic
+well-being of our nation.
+ There is now a substantial body of research documenting disparities
+in access to care between those with and without insurance. Survey
+after survey finds the uninsured are more likely than those with
+insurance to postpone seeking care; forgo needed care; and not get
+needed prescription medications (Figure 9). Many fear that obtaining
+care will be too costly. Over a third of the uninsured report needing
+care and not getting it, and nearly half (47%) say they have postponed
+seeking care due to cost. Over a third (36%) of the uninsured compared
+to 16 percent of the insured report having problems paying medical
+bills, and nearly a quarter (23%) report being contacted by a
+collection agency about medical bills compared to eight percent of the
+insured. The uninsured are also less likely to have a regular source of
+care than the insured, and when they seek care, are more likely to use
+a health clinic or emergency room. Lack of insurance thus takes a toll
+on both access to care and the financial well-being of the uninsured.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.013
+
+ Moreover, there is a growing body of evidence showing that access
+and financial well-being are not all that is at stake for the
+uninsured. There are often serious consequences for those who forgo
+care. Among the uninsured surveyed, half report a significant loss of
+time at important life activities, and over half (57%) report a painful
+temporary disability, while 19 percent report long-term disability as a
+result. Lack of insurance compromises the health of the uninsured
+because they receive less preventive care, are diagnosed at more
+advanced disease stages, and once diagnosed, tend to receive less
+therapeutic care and have higher mortality rates than the insured
+(Figure 10). Uninsured adults are less likely to receive preventive
+health services such as regular mammograms, clinical breast exams, pap
+tests, and colorectal screening. They have higher cancer mortality
+rates, in part, because when cancer is diagnosed late in its
+progression, the survival chances are greatly reduced. Similarly,
+uninsured persons with heart disease are less likely to undergo
+diagnostic and revascularization procedures, less likely to be admitted
+to hospitals with cardiac services, more likely to delay care for chest
+pain, and have a 25 percent higher in-hospital mortality.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.014
+
+ Urban Institute researchers Jack Hadley and John Holahan, drawing
+from a wide range of studies, conservatively estimate that a reduction
+in mortality of five to 15 percent could be achieved if the uninsured
+were to gain continuous health coverage. The Institute of Medicine
+(IOM) in its analysis of the consequences of lack of insurance
+estimates that 18,000 Americans die prematurely each year due to the
+effects of lack of health insurance coverage.
+ Beyond the direct effects on health, lack of insurance also can
+compromise earnings of workers and educational attainment of their
+children. Poor health among adults leads to lower labor force
+participation, lower work effort in the labor force, and lower
+earnings. For children, poor health leads to poorer school attendance
+with both lower school achievement and cognitive development.
+ These insurance gaps do not solely affect the uninsured themselves,
+but also affect our communities and society. In 2001, it is estimated
+that $35 billion in uncompensated care was provided in the health
+system with government funding accounting for 75 to 80 percent of all
+uncompensated care funding (Figure 11). The poorer health of the
+uninsured adds to the health burden of communities because those
+without insurance often forgo preventive services, putting them at
+greater risk of communicable diseases. Communities with high rates of
+the uninsured face increased pressure on their public health and
+medical resources.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.015
+
+ A recent IOM report estimates that in the aggregate the diminished
+health and shorter life spans of Americans who lack insurance is worth
+between $65 and $130 billion for each year spent without health
+insurance (Figure 12). Although they could not quantify the dollar
+impact, the IOM committee concluded that public programs such as Social
+Security Disability Insurance and the criminal justice system are
+likely to have higher budgetary costs than they would if the U.S.
+population under age 65 were fully insured. A new study by Hadley and
+Holahan of the Urban Institute suggests that lack of insurance during
+late middle age leads to significantly poorer health at age 65 and that
+continuous coverage in middle age could lead to a $10 billion per year
+savings to Medicare and Medicaid.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.016
+
+PROSPECTS FOR THE FUTURE
+ Given the growing consensus that lack of insurance is negatively
+affecting not only the health of the uninsured, but also the health of
+the nation, one would expect extending coverage to the uninsured to be
+a national priority. All indicators point to significant growth in our
+uninsured population if action is not taken to both broaden and secure
+coverage.
+ With the poor economy and rising health care costs, employer-based
+coverage--the mainstay of our health insurance system--is under
+increased strain. Health insurance premiums rose nearly 14 percent this
+year--the third consecutive year of double-digit increases--and a
+marked contrast to only marginal increases in workers' wages (Figure
+13). As a result, workers can expect to pay more for their share of
+premiums and more out-of-pocket when they obtain care, putting
+additional stress on limited family budgets. With average family
+premiums now exceeding $9,000 per year and the workers' contribution to
+premiums averaging $2,400, the cost of coverage is likely to be
+increasingly unaffordable for many families, especially low-wage
+workers. However, for most low-wage workers, especially those in small
+firms, it is a question of availability, not affordability--because the
+firms they work in do not offer coverage.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.017
+
+ In recent years, with SCHIP enactment and Medicaid expansions,
+states have made notable progress in broadening outreach, simplifying
+enrollment processes, and extending coverage to more low-income
+families (Figure 14). Participation in public programs has helped to
+reduce the number of uninsured children and demonstrated that outreach
+and streamlined enrollment can improve the reach of public programs.
+However, the combination of the current fiscal situation of states and
+the downward turn in our economy are beginning to undo the progress we
+have seen.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.018
+
+ From 2001 to 2002, employer-based health insurance coverage
+declined for low-income adults and children while Medicaid and SCHIP
+enrollment increased, muting a sharper climb in the number of
+uninsured. Most notably, while the number of uninsured adults
+increased, the number of uninsured children remained stable because
+public coverage helped fill in the gaps resulting from loss of employer
+coverage (Figure 15). Recent reports of enrollment freezes in SCHIP
+programs and reductions in Medicaid coverage are troubling.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.019
+
+ With the recent economic downturn, states have experienced the
+worst fiscal situation they have faced since the end of World War II.
+State revenues fell faster and further than anyone predicted, creating
+substantial shortfalls in state budgets. In 2002, after accounting for
+the effect of legislative changes, real state revenue collections
+declined for the first time in a decade--falling 6.8 percent that year
+followed by a 3.3 percent decline in 2003. Although states predict
+slight growth for 2004, it is not sufficient to meet rising program
+costs. Medicaid spending has been increasing as health care costs for
+both the public and private markets have grown and enrollment in
+Medicaid has increased, largely as a result of the weak economy and
+loss of jobs and income. However, even with Medicaid spending pressure,
+it is the state revenue shortfalls--not Medicaid--that remain the
+primary cause of the state budget crisis.
+ The state revenue falloff is, however, placing enormous pressure on
+state budgets and endangering states' ability to provide the funds
+necessary to sustain Medicaid coverage. Turning first to ``rainy day''
+and tobacco settlement funds, states have tried to preserve Medicaid
+and keep the associated federal dollars in their programs and state
+economies. But, as the sources of state funds become depleted, states
+face a daunting challenge in trying to forestall new or deeper cuts in
+Medicaid spending growth. In the Jobs and Growth Tax Relief
+Reconciliation Act enacted in May 2003, Congress provided $20 billion
+in state fiscal relief, including an estimated $10 billion through a
+temporary increase in the federal Medicaid matching rate. This helped
+states avoid making deeper reductions in their Medicaid spending
+growth, but this fiscal relief will expire in June of this year. It
+seems unlikely that states' fiscal conditions will substantially
+improve by then, so the absence of continued fiscal assistance from the
+federal government will likely result in additional cutbacks in
+Medicaid coverage in many states.
+ Because Medicaid is the second largest item in most state budgets
+after education, cuts in the program appear inevitable--in the absence
+of new revenue sources--as states seek to balance their budgets and the
+fiscal relief expires. Indeed, survey data the Kaiser Commission on
+Medicaid and the Uninsured released in January indicates that 49 states
+and the District of Columbia put new Medicaid cost containment
+strategies in place in fiscal year 2004. This cost containment activity
+follows two previous years of Medicaid cost containment action in many
+states (Figure 16).
+
+[GRAPHIC] [TIFF OMITTED] T3794A.020
+
+ States have continued to aggressively pursue a variety of cost
+containment strategies, including reducing provider payments, placing
+new limits on prescription drug use and payments, and adopting disease
+management strategies and trying to better manage high-cost cases. The
+pressure to reduce Medicaid spending growth further has also led many
+states to turn to eligibility and benefit reductions as well as
+increased cost-sharing for beneficiaries, although, reflecting the
+requirements of the federal fiscal relief, no states have made
+additional Medicaid eligibility reductions since the fiscal relief took
+effect last year. Although in many cases these reductions have been
+targeted fairly narrowly, some states have found it necessary to make
+deeper reductions, affecting tens of thousands of people.
+ The fiscal situation in the states jeopardizes not only Medicaid's
+role as the health insurer of low-income families, but also its broader
+role as the health and long-term assistance program for the elderly and
+people with disabilities. Although children account for half of
+Medicaid's 51 million enrollees, they account for only 18 percent of
+Medicaid spending. The low-income elderly and disabled population
+represents a quarter of Medicaid beneficiaries, but 70 percent of all
+spending because of their greater health needs and dependence on
+Medicaid for assistance with long-term care. Facing their budget
+shortfalls, states will find it difficult to achieve painless
+reductions and understandably are seeking more direct federal
+assistance, especially with the costs associated with the elderly and
+disabled who are covered through both Medicare and Medicaid (the dual
+eligibles) and account for 42 percent of Medicaid spending.
+
+CONCLUSION
+ Looking ahead, it is hard to see how we will be able to continue to
+make progress in expanding coverage to the uninsured or even
+maintaining the coverage Medicaid now provides. Lack of health coverage
+is a growing problem for millions of American families. The poor
+economy combined with rising health care costs make further declines in
+employer-sponsored coverage likely. The state fiscal situation combined
+with rising federal deficits complicate any efforts at reform. In the
+absence of additional federal assistance, the fiscal crisis at the
+state level is likely to compromise even the ability to maintain
+coverage through public programs. Although Medicaid has demonstrated
+success as a source of health coverage for low-income Americans and a
+critical resource for those with serious health and long-term care
+needs, that role is now in jeopardy.
+ Assuring the stability and adequacy of financing to meet the needs
+of America's most vulnerable and addressing our growing uninsured
+population ought to be among the nation's highest priorities.
+Maintaining the coverage now provided through Medicaid and SCHIP and
+building on that foundation to extend coverage to more of the low-
+income uninsured population provides both a tested and cost-effective
+approach to reducing the number of uninsured Americans. But, like all
+solutions to the uninsured, this too requires additional resources and
+given the fiscal straits of the states, undoubtedly means a greater
+commitment of federal support to address this national problem.
+ I commend your efforts to highlight the plight of the 43 million
+Americans without health insurance coverage and to identify options
+that could help address this growing problem. I look forward to working
+with you to meet the challenge of making health care coverage a reality
+for all Americans.
+ Thank you for the opportunity to testify today. I welcome any
+questions.
+
+
+
+ STATEMENT OF LEN M. NICHOLS, VICE PRESIDENT, CENTER FOR
+ STUDYING HEALTH SYSTEM CHANGE
+
+ Mr. NICHOLS. Madam Chair, Representative Stark, and Members
+of the Subcommittee, I am honored to testify before you today
+on a topic of such importance to our Nation. My name is Len
+Nichols, and I am the vice president of the Center for Studying
+Health System Change. I am also a participant in the Economic
+Research Initiative on the Uninsured (ERIU), a project that
+convened a group of health and labor economists from around the
+country to sort out what we do and do not know about the
+uninsured. ERIU recently published a book entitled Health
+Policy and the Uninsured, and my written testimony is organized
+around 10 myths about the uninsured which are implicitly
+debunked in different chapters of the book, one of which I
+coauthored. My remarks today shall highlight four of these
+myths.
+ Myth number 3: Coverage is coverage is coverage. As
+Representative Stark alluded to, the punch line is that head
+counts in coverage are not enough. Insurance differs in terms
+of the kind of financial protection it offers, the potential
+for improvement in health, and the humanity of the treatment
+when you enter the delivery system. To put it slightly
+differently, imagine a policy that gave every American as much
+insurance as $100 could buy. We would then have zero uninsured,
+but we wouldn't be very much better off than we are now.
+ Myth number 4: Health insurance would improve the health of
+all the uninsured. This is among the more complicated and
+emotional disputes in health policy analysis. It turns out that
+standards of proof about causation in this area have not been
+as high as they should have been. Researchers have come to
+realize there may be important but unobservable differences in
+people that make different choices about things like insurance,
+diet, exercise, and education. If we merely observe what people
+do without proper research controls, it is hard to be sure what
+caused and what was merely associated with health outcomes.
+When appropriate standards of proof have been met, the evidence
+suggests that health insurance does indeed have positive
+effects on the health of certain key populations: the poor, the
+elderly, the truly sick, and children. What has not been proven
+by this standard is that universal coverage would improve the
+health of all of the uninsured, and this leads economists to
+the following three inferences: We cannot say with certainty
+that more public subsidies for health insurance for the general
+population would be the best way to improve health. The second
+thing, understanding more about the complex relations between
+health status, health services, health insurance, personal
+behaviors and information would help us improve our policy
+advice. Third, there are many reasons to support universal
+coverage, but the analytic case for the general short-run
+positive health effects is not the strongest one.
+ Myth number 9, one of my favorites: Economists don't know
+anything about why people are uninsured. Sometimes it seems
+that a normal person might listen to economists argue among
+themselves and conclude that nothing has ever been
+satisfactorily proved. That is not the case. This issue is so
+important, I devote the last two myths to embellishing the
+point. There are three things most economists actually do
+believe about the lack of insurance coverage, and this one is
+key. The single most important reason people are uninsured in
+this country is they are not willing to pay what it costs to
+insure themselves. This unwillingness to pay is highly, but not
+perfectly, correlated with low income. Thus, if policymakers
+really want to increase coverage, they are going to have to
+provide substantial subsidies since most of the uninsureds have
+incomes below twice times poverty.
+ Finally myth number 10: The combined research evidence
+supports doing nothing to address the problems of the uninsured
+today. Now, I want to be clear. Economists and health policy
+analysts cannot tell you as a scientific matter that you should
+implement new subsidies and other policies designed to reduce
+the number of uninsureds. We can, when we are at our best
+behavior, articulate and help you see the tradeoffs involved,
+but only you who have been entrusted with the power of the
+people can decide if the opportunity cost is worth it; that is,
+which competing priorities will and should get less attention
+and fewer resources. A politically neutral observer might
+conclude from our relative inaction on behalf of the adults in
+the last 35 years that the case for doing something substantial
+about the uninsured must be weak. I believe this is the wrong
+conclusion to draw from the evidence I have reported on today
+as well as some other recent empirical work.
+ The case for some kind of significant coverage expansion
+seems persuasive to many health economists and health policy
+researchers today, but perhaps the best proof of the value of
+health insurance lies not in statistics or econometrics, but
+rather in the fact that all of the health policy analysts I
+know--and I have lived long enough to know quite a few of
+them--actually seek out and keep health insurance even when
+self-employed. They even buy for their recalcitrant adult
+children when the latter emerge from college feeling immortal
+but also stunned at the rental price of nice apartments in our
+great cities.
+ The choice is less funny for two working parents who make,
+say, $7.50 an hour and therefore earn $30,000 a year. Their
+children would in most States, as Diane pointed out, be
+eligible for SCHIP, but they would not likely be offered health
+insurance at their jobs, and they make far more than most
+States' Medicaid income cut-off for adults. They are also not
+likely to spend a third or more of their income on family
+health insurance than the nongroup market. To add one final
+touch of realism, you may assume they are healthy today.
+ Are we willing to require them to obtain health insurance?
+If they do get sick, they will use resources that will impose
+costs on the rest of us, and thus a requirement to purchase
+would be responsive to the free rider justification for
+universal coverage. Of course, at $30,000 a year, they can't
+afford it, so we would also have to subsidize their purchase of
+insurance or impose an inequitable burden upon them. At the
+same time, they are healthy now, so the Nation would be
+essentially buying for them true insurance with no necessary
+immediate health benefits; that is, we would be buying
+protection from risk, a risk of potentially devastating
+financial, emotional, and health consequences of unforeseen
+health problems which could strike any of us this very
+afternoon.
+ The question comes down to, are we willing as a nation of
+communities to pay to protect these parents from living with
+this risk that we all pay to avoid for ourselves and to protect
+us all from free rider costs? These are the ultimate questions
+that only you and your colleagues can answer, but we would be
+glad to help. Thank you very much.
+ [The prepared statement of Mr. Nichols follows:]
+
+Statement of Len M. Nichols, Ph.D., Vice President, Center for Studying
+ Health System
+
+ Myths about the Uninsured
+
+ Madame Chair, Representative Stark and members of the Subcommittee,
+I am honored to have been invited to testify before you today on a
+topic of such importance to our nation, facts about those who live
+without health insurance. My name is Len M. Nichols and I am an
+economist and the vice president of the Center for Studying Health
+System Change (HSC). HSC is an independent, nonpartisan health policy
+research organization that is principally funded by The Robert Wood
+Johnson Foundation and is affiliated with Mathematica Policy Research.
+We conduct nationally representative surveys of households and
+physicians, site visits to monitor ongoing changes in the local health
+systems of 12 U.S. communities, and we monitor secondary data and
+general health system trends. Our goal is to provide members of
+Congress and other policy makers with unique insights on developments
+in health care markets and their impacts on people. Our various
+research and communication activities may be found at www.hschange.org.
+ I am also a member of the Policy Advisory and Research Review
+Committees of the Economic Research Initiative on the Uninsured (ERIU),
+a project of The Robert Wood Johnson Foundation that convened a group
+of health and labor economists to sort out what we do and do not know
+about the uninsured in our country. The ultimate goal was to inform
+policy makers who may consider specific policy responses. The project
+was directed by Catherine McLaughlin, a professor of economics at the
+University of Michigan. I was a co-author of a chapter in a recently
+published book that grew out of this project, Health Policy and the
+Uninsured (Urban Institute Press, 2004). My chapter was titled, ``Why
+Are So Many Americans Uninsured?''
+ My testimony today is organized around a theme called ``Myths About
+the Uninsured.'' This theme was also the one used at a recent press
+briefing, which Mark Pauly--professor of economics and health care
+systems at the Wharton School of the University of Pennsylvania--and I
+did together to report on the research contained in the ERIU book. Dr.
+Pauly and I took turns clarifying the research pertinent to each myth,
+and we both essentially agreed with what the other said. Dr. Pauly has
+kindly allowed me to use some of his logic and words in my written
+testimony. I take sole responsibility for any remaining errors or
+ambiguity, however. In this testimony I have combined and rephrased
+some of the myths we used that day, and I have added one more that
+grows out of the spirit of the research but is wholly my contribution
+to your deliberations. The 10 myths about the uninsured my written
+testimony will highlight are:
+
+ 1. We know how many uninsured there are.
+ 2. The uninsured are all alike.
+ 3. Coverage is coverage is coverage.
+ 4. Health insurance would improve the health of all the
+uninsured.
+ 5. The uninsured choose to be so.
+ 6. Employers pay $400 billion for health insurance today.
+ 7. The decision to remain uninsured has no effect on anyone else.
+ 8. Until HIPAA, workers were afraid to switch jobs because of
+health insurance.
+ 9. Economists don't know anything about why people are uninsured.
+ 10. The combined research evidence supports doing nothing to
+address the problems of the uninsured today.
+
+ Below I explain why economists think all these myths are misleading
+to an important degree.
+ Myth #1: We know how many people are uninsured. Forty-four million
+is the ``official'' number from the most recent Current Population
+Survey, but the truth could be (and is) on either side. The CPS asks:
+did you have health insurance at any time in the 12 months ending two
+months ago? Penn State Professor Pamela Farley Short's chapter
+clarifies the overwhelming evidence that many respondents answer the
+CPS insurance questions incorrectly. Even if answered perfectly, this
+concept omits quite a large number of people who lack insurance for a
+period shorter than 12 months or the interval in which they lacked
+insurance did not match the particular window asked about. So the truth
+is that far more than 44 million are uninsured for a period shorter
+than 12 months in a given year.
+ On the other hand, other surveys make clear that the 44 million
+number overstates by as much as a factor of two the people who were
+uninsured for all of the prior 12 months. The Census Bureau's Survey of
+Income and Program Participation, HSC's Community Tracking Household
+Survey, and AHRQ's Medical Expenditure Panel Survey, as well as the
+Urban Institute's National Survey of America's Families, all have
+probed survey respondents for years and said, now, are you really sure
+that you didn't have any insurance for that time period?
+ The subtle lesson here is to pay attention to time frame. The
+longer the period of time, the smaller the number of people who are
+always without health insurance and the larger the number of people who
+are without insurance for some of the relevant time period.
+ Perhaps the most important thing to establish from a policy
+perspective is not the precise number, as long as we are confident that
+the number of uninsured for an entire year is in the tens of millions,
+and researchers are confident of this. The most important analytic
+measurement may be the time trend in the percentage of non-elderly
+Americans who are uninsured, which has recently been quite adverse.
+Trends are more reliably calculated, assuming that the same kinds of
+respondent errors and measurement imperfections are present each year,
+which is a reasonable assumption.
+ Myth #2: The uninsured are all alike. This is manifestly false. The
+uninsured tend to be somewhat lower-income and in somewhat poorer
+health, but because there are so many of them and because they do span
+various dimensions of American life, there are many who are young and
+healthy but there are many who are not; there are many who are
+reasonably well off, including a sizable fraction above the median
+income. And then, as is also important to note, there is a sizable
+fraction below the poverty line who are also sick and in a very bad
+way. The message of this diversity for policy design in a world of
+public budget constraints is that you probably want to be careful and
+clever in making limited funds go as far as they can toward expanding
+coverage. Of course, policies that are target efficient are also more
+complex. In addition, there are inherent trade-offs in choosing a
+target population, for example, in extending lower cost coverage to a
+larger number of relatively healthy uninsured vs. extending higher cost
+overage to a smaller number who are likely to have more health risks.
+Value judgments are unavoidable when making actual policy choices in
+this case.
+ Myth #3: Coverage is Coverage is Coverage. Designs of insurance
+policies really do matter. Insurance is not insurance. Insurance
+differs in terms of the kind of financial protection it offers, in the
+potential for improvement in health it offers, and the humanity of the
+treatment when you contact the healthcare system. To put it slightly
+differently, imagine a policy that gave every American as much
+insurance as $100 could buy. Every American would then have insurance,
+we'd have zero uninsured, but we wouldn't really be in that much better
+of a situation than we are now.
+ But the punch line is that the head counts of coverage are not
+enough, that the actuarial value \1\ of insurance may vary, and even
+given the same number of dollars spent on insurance, the consequences
+of insurance may be different, depending on the form that insurance
+takes. Furthermore, the harm of not having insurance may vary with the
+length of time coverage is lost, as well as with nature of the people
+without coverage.
+---------------------------------------------------------------------------
+ \1\ Actuarial value can be thought of as the percentage of expected
+health-related costs for an average risk person that the policy is
+designed to cover. It is thus a measure of generosity of a health
+insurance policy.
+---------------------------------------------------------------------------
+ Moreover, the kind of insurance that people get depends very
+strongly on where they get it. If they work for a large Fortune-500
+firm whose benefits department is run by professionals, they will get
+very good and well-designed coverage. If they get it from Gus and
+Otto's Garage, and neither Gus nor Otto was trained as an actuary, it
+may not be such great coverage. And if they get it in the individual
+market, it depends on how good the consumers are at searching through
+the wide range of possibilities available to find the best buys out
+there compared to other less satisfying policies that are also
+available and may be easier to find.
+ Myth #4: Health insurance would improve the health of all the
+uninsured. This is among the more complicated and emotional disputes in
+health policy analysis. I will clarify how the literature may be
+correctly interpreted on what is accepted as proven now, and take some
+care to distinguish this from what we would like to know and from what
+we might think policy should do in the face of real-world imperfect
+knowledge.
+ Helen Levy and David Meltzer, both professors at the University of
+Chicago, were asked to review the literature to assess this question:
+``Does health insurance really affect health status?'' They were
+rightly concerned that standards of proof about causation in this area
+have often been lower than they should have been in many published
+papers, even in many prestigious journals over the years. And they
+chose to use a standard of proof that is quite high, but is nonetheless
+becoming increasingly common in the social sciences, that causation is
+not likely to be appropriately inferred unless there has been an
+adequate natural experiment or a true experiment in which a
+representative sample of people are assigned to have or not have
+insurance for the duration of the experiment. This standard of proof
+for causation has become more widely shared as researchers have
+realized that there may be important but unobservable differences in
+people that make different choices about things like insurance, diet,
+exercise and education. If we merely observe what people do, it is hard
+to be sure what caused and what merely reflected health outcomes. For
+example, if some people (for whatever reason) have a low value for
+their health, it is likely that they will not obtain health insurance
+but also will not take steps (like preventive care and better health
+habits) that are known to affect health. We can easily observe the
+association of lack of insurance and low health, but it will be their
+low demand for health that causes the poor health, not lack of
+insurance per se.
+ Now, this standard of proof has rarely been met in the research
+literature, but when it has, the bulk of the evidence suggests that
+health insurance does indeed have positive effects on the health of
+certain populations, and indeed, those most often at the center of a
+policy debate: the poor, the elderly, the truly sick and children. What
+has not been proven by this standard is that universal coverage would
+improve the health of all of the uninsured, and this leads economists
+to the following three inferences. (1) Because we do not have an
+unbiased measure of the effect of health insurance on health in
+general, we cannot say with certainty that more public subsidies for
+health insurance for the general population would improve health status
+more than would an increase in the capacity of public health centers or
+public hospitals, better education about diet and exercise, or a more
+equal income distribution for that matter; (2) Understanding more about
+the complicated pathways that different types of people traverse from
+coverage to health status through health services, and indeed, health
+insurance and health education, would help us make far better
+calibrated recommendations to policymakers; (3) There are many reasons
+to support universal coverage, but the analytic case for the short-run
+positive health effects is not the strongest one, at least for the
+higher income and basically healthy uninsured who comprise roughly 40
+percent of the uninsured today.
+ Another element of this generalized myth is that universal coverage
+would eliminate poor health status among vulnerable populations.
+Despite considerable policy attention and focus, rather large
+disparities in health care outcomes among different population
+subgroups persist in our country. At least part--and perhaps a very
+large part--of the reason lies in differential access to health
+insurance. Harold Pollack and Karl Kronebusch, from the Universities of
+Chicago and Yale, respectively, have written a chapter that focuses on
+access to health insurance by six subgroups that are often considered
+vulnerable for one or more reasons. The groups are the low-income
+population, children, racial and ethnic minorities, people living with
+chronic conditions, the near-elderly, and people suffering from
+psychiatric and substance use disorders.
+ Each group raises distinct concerns for public policy, health
+insurance and the healthcare delivery system. Pollack and Kronebusch
+conclude there are four basic reasons vulnerable populations often lack
+health insurance: (1) they have medical and social needs that hinder
+their access to good jobs and to private health insurance markets; (2)
+they have general economic disadvantages, including lower incomes,
+which impede their ability to pay for health insurance when it is
+available and less access to jobs with employer-sponsored insurance,
+which makes it cheaper; (3) they sometimes face discrimination based on
+race, ethnicity or language; and (4) they sometimes suffer from
+impaired decision-making and rather imperfect proxy decision-making.
+And unfortunately, many people in vulnerable populations face multiple
+barriers at the same time.
+ As an example of troubling disparities, taken from AHRQ's recent
+healthcare disparities report,\2\ black women have lower rates than
+white women of cancer screening and higher rates of diagnosis in late
+stage and consequently higher death rates. These death rates apparently
+persist even after controlling for education and income. They also
+appear to persist after controlling for insurance. This suggests that
+insurance alone cannot solve the problems faced by vulnerable
+populations. Pollack and Kronebusch wrote: ``The data provide ample
+warning that one should not oversell the possibilities of improving
+health status and individual well-being through expanded health
+coverage. Expanded coverage is unlikely to eliminate the high rates of
+death and illness that arise from multiple causes and require
+multifaceted interventions.'' In other words, insurance will help these
+populations and reduce gaps,\3\ but eliminating the disparities gap
+will require multiple policy changes.
+---------------------------------------------------------------------------
+ \2\ http://qualitytools.ahrq.gov/disparitiesReport/
+download_report.aspx
+ \3\ Hargraves, L. and J. Hadley. ``The Contribution of Insurance
+Coverage and Community Resources to reducing Racial and Ethnic
+Disparities in Access to Health Care,'' Health Services Research 38:3
+(June 2003).
+---------------------------------------------------------------------------
+ Myth #5: Individuals without insurance choose to be so. In some
+general sense this is true. No law prohibits people from buying
+insurance, and most could buy individual insurance, although if you are
+a very high-risk person you might find the price quoted to exceed what
+you expect to get back in benefits, and a small fraction of people are
+outright denied access to insurance at any price. But, more generally,
+if we think of realistic choice or reasonable choice for low-income
+people or for people at high levels of risk, if they don't have
+insurance now, obtaining insurance voluntarily without further
+subsidies is probably not a realistic option.
+ We also know--especially from some of the studies described in the
+chapter that Linda Blumberg of the Urban Institute and I wrote--that
+job matching is not perfect and there are some people who probably want
+insurance who can only find a job in firms that do not offer insurance.
+Now, they do not want it so much they are willing to pay whatever it
+may take in the non-group market, but they do want insurance and can
+not get it. There are also some other people who would rather have
+higher wages than health insurance but can only find a job in a firm
+that offers health insurance to them along with an acceptable wage. The
+out-of-pocket premium required of them may even be low enough to induce
+them to take-up this employer offer, but maybe not, and thus this low
+relative demand--or willingness to pay--for health insurance may be the
+core reason roughly 20% of workers do not accept their employer's
+offer.
+ Myth #6: U.S. employers spend $400 billion a year for workers'
+health care. This issue reveals how differently economists think from
+most people. Imagine that somebody could wave a magic wand and end $400
+billion of employer payments for health insurance. First, the
+definition of ``pay'' in economics is not who writes a check, but the
+definition is wrapped up in the question, would employers then get to
+keep $400 billion more of profits that they could distribute to
+stockholders on to increase compensation of their senior executives, or
+to do whatever they wanted to do with it?
+ And the answer that economics gives--well summarized in a couple of
+chapters in the ERIU volume--is no. One way to think about why the
+answer is no is to think about why employers offer health insurance.
+Now maybe some of them do it out of the goodness of their heart, and
+some of them do it because they think insurance makes employees
+healthier and therefore more productive, and under certain
+circumstances there may be a business case for doing that. But most
+employers, at least if you locked them in a room and asked them, ``Why
+are you doing this if you whine and complain about it all the time, why
+don't you just stop offering health insurance?'' And their answer is,
+``Well, we need to offer health benefits to be competitive in the
+market for workers, to be able to attract and retain high-quality
+workers,'' which is another way of saying they offer health insurance
+to obtain a given quality of worker for less total compensation outlay
+than they would have to expend in the absence of health insurance.
+ And so the punch line is that if somehow employers were not allowed
+to spend $400 billion on health insurance, then in order to attract the
+workers that they were formerly attracting with this benefit, they
+would have to use money or some other benefit that could well eat up or
+even exceed all of the savings. So that's at least one way to think of
+why economists are out of step with the rest of the world. Our
+theoretical logic--and some careful empirical work--tells us that
+(most) employers actually do not pay for health insurance (and by the
+way, then, health insurance costs are not what makes U.S. products
+noncompetitive internationally). Economists believe that ultimately
+most workers end up paying for health insurance in the form of lower
+wages.
+ This argument also works in reverse, which may be more germane for
+the current situation. Imagine that employers are mandated to provide
+health insurance, as has been passed in some states and introduced at
+the federal level from time to time. Who's going to actually end up
+paying for that? Well, the story is just the same as above but in
+reverse. Initially of course employers will do most of the complaining
+about it, as they have, and threaten to lay off workers, but that will,
+at least over time, soften the labor market, cause raises to be smaller
+than they otherwise would have been, and sooner or later, the bulk of
+workers will end up paying for the health insurance that policy makers
+gave them with the best of intentions. They'll end up paying for it
+themselves through reduced wages and fewer jobs unless they receive a
+subsidy. Of course, if they receive a generous subsidy or their
+employer does, that subsidy will ultimately go to workers.
+ Myth #7: The decision to remain uninsured has no effect on anyone
+else. An overarching feature of modern labor markets is worker
+heterogeneity; we all differ in many important dimensions, including
+our preferences for health insurance arrangements. One consequence of
+heterogeneity is that different kinds of compensation packages may
+exist in equilibrium, some with a broad array of health insurance
+choices attached, some with one health insurance option embedded, and
+some with only cash wages to entice a prospective employee to give up
+their leisure time. Michael Chernew and Richard Hirth of the University
+of Michigan focus their critical review essay on the connections
+between decisions made by different people in the nexus of labor and
+health insurance markets. This myth was chosen to highlight the reality
+that some workers' willingness to work at jobs without health
+insurance--while this may be a minority of workers today--has important
+consequences for the rest of us.
+ First and foremost, it means employers have a choice about whether
+to offer health insurance, and they will make this decision largely
+based on the preferences, expectations and productivity of the dominant
+type of worker they need to produce their products and services, as
+well as on their own unique costs of delivering health insurance to
+their workforce. For example, higher-wage workers are likely to be
+willing to pay more for health insurance in the form of reduced wages,
+and so employers of highly productive high-wage workers are more likely
+to offer than are employers who can get by with mostly lower-wage
+workers. This effect is amplified by our current tax subsidy for
+premiums nominally paid by the employer, a subsidy that works out to be
+roughly proportional to the marginal income tax rate of the worker. It
+is also amplified for large firm employers of high wage workers, since
+they have the lowest costs of providing health insurance, for they can
+take advantage of various economies of scale.
+ But worker heterogeneity also means that local labor market
+conditions can significantly affect offer rates, since firms offer only
+when they must to compete for the workers they want, and we do observe
+offer rates differ by as much as 20 percentage points across the United
+States. This variation in offer rates also affects ultimate coverage
+rates, of course. Differential offer rates and employer-sponsored
+insurance (ESI) coverage rates also affect the contours of the coverage
+problem faced by policy makers. For example, states with high offer
+rates find it cheaper and easier to be more generous with Medicaid and
+SCHIP eligibility--Minnesota and Wisconsin come to mind--than do states
+with very low employer offer rates, like Arkansas and Mississippi.
+ Myth #8: Workers used to be afraid to switch jobs because of health
+insurance, and HIPAA fixed that. ``Job lock'' is the shorthand term
+economists applied to the phenomenon of workers remaining with less
+productive jobs than they could get because they fear losing health
+insurance if they were to switch. This was originally investigated with
+some vigor in the early 1990s during the debates over the Clinton
+Health Security Act, for it was argued that if the aggregate amount of
+lost productivity was large enough, there could be a very large
+hitherto uncounted gain to universal coverage, and thus the net cost to
+society might be much lower than simple budgetary cost estimates.
+ Since then, much research was done, and HIPAA was passed, which
+among other things, was designed to make the portability of insurance
+more real and reduce job lock. Jonathan Gruber of MIT and Bridget
+Madrian of the University of Pennsylvania reviewed the complex research
+evidence and concluded that the studies with the most defensible
+methods do indeed find some pre-HIPAA job-lock, though the welfare cost
+from this job lock is essentially impossible to quantify. This means
+economists cannot tell, at the moment, if additional policy
+interventions are justified.
+ Gruber and Madrian also highlight two broad reasons to believe that
+many workers are still reluctant to switch jobs for health insurance-
+related reasons, even after HIPAA: They stem from Myth #3, coverage is
+coverage is coverage. First, workers could have more generous coverage
+on their current job than HIPAA requires, in terms of pre-existing
+condition waiting periods, actuarial value or access to preferred
+providers. Second, insurance in the individual market costs more per
+dollar of coverage, so that higher wages--exactly equal to what the
+previous employer ``paid'' toward health insurance, for example--may
+not be able to make one whole. Thus, workers are often reluctant to
+leave a job with health insurance for a job that might pay higher wages
+but does not have health insurance attached. The cost advantages of
+group purchase are large.
+ Myth #9: Economists don't know anything about why people are
+uninsured. Sometimes it seems that a normal person might listen to
+economists argue among themselves or read a whole book devoted to
+methodological flaws in prior work and reasonably conclude that
+economists actually think we know exactly nothing, that nothing has
+been satisfactorily proved, and we therefore need millions of dollars
+and years more to study and argue before we will be able to say
+anything at all that is useful to policymakers. This is not the case,
+and this idea is so important, I will devote the last two ``myths'' to
+embellishing the point. There are three things I think most economists
+actually do believe about the lack of insurance coverage. And I think
+the chapter by Linda Blumberg and myself make these fairly clear, even,
+and maybe especially, to non-economists.
+
+ 1. The single most important reason people are uninsured in this
+country is they are not willing to pay what it costs to insure
+themselves. This unwillingness to pay is highly but not perfectly
+correlated with low income. Thus, if policy makers really want to
+increase coverage, they're going to have to subsidize people, probably
+quite substantially, since most of the uninsured have incomes below
+twice-times poverty.
+ 2. The prices people are required to pay for health insurance vary
+a lot across different circumstances and insurance markets. Workers at
+large firms probably face the lowest prices, and they, correspondingly,
+have the highest offer rates and the most generous policies on average.
+Thus, to economists, price really, really matters.
+ 3. Even though price really, really matters, most people and firms
+have fairly inelastic demands for health care and health insurance.
+That is to say, those of us who can pay quite a bit more would pay more
+than we have to now before we would go uninsured, and those who do not
+buy it now will require substantial subsidy before they will buy it
+voluntarily.
+
+ Myth #10: The combined research evidence supports doing nothing to
+address the problems of the uninsured today. Economists and health
+policy analysts cannot tell you--as a scientific matter--that you
+should implement new subsidies and other policies designed to reduce
+the number of the uninsured. We can--when we're at our best--articulate
+and help you see the tradeoffs involved, but only you who have been
+entrusted with the power of our people can decide if the opportunity
+cost is worth it, i.e., which competing priorities will and should get
+less attention and fewer resources. For let there be no doubt, if you
+really want to make a serious dent in the uninsured problem, you're
+going to have to be willing to claim and redirect a considerable amount
+of public resources.
+ But at the same time, a politically neutral observer might
+reasonably conclude, from the decades we have been discussing this
+issue as a nation even while the number and percentage of uninsured
+keeps trending upward, that the case for doing something substantial
+about the uninsured must be widely perceived to be weak. I believe this
+is the wrong conclusion to draw from the evidence I've reported on
+today, as well as form the empirical work my colleagues at HSC and
+others around the nation have done these last few years.\4\ Perhaps the
+best evidence of the value of health insurance is not in statistics or
+econometrics, however, but rather lies in the fact that all the health
+policy analysts I know--and I know quite a few around the country--
+actively seek out and keep health insurance at all times, even when
+self-employed, and they even buy it for their recalcitrant adult
+children when the latter emerge from college feeling immortal but also
+stunned at the rental price of nice apartments in our great cities
+these days.
+---------------------------------------------------------------------------
+ \4\ B. Strunk and P. Cunningham. ``Treading Water: Americans'
+Access to Needed Medical Care,'' Tracking Report No. 1. Center for
+Studying Health System Change. March 2002. http://www.hschange.org/
+CONTENT/421/; Care Without Coverage: Too Little, Too Late. Institute of
+Medicine, National Academy Press, May 2002; J. Hadley. ``Sicker and
+Poorer--The Consequences of Being Uninsured: A Review of the Research
+on the Relationship between Health Insurance, Medical Care Use, Health,
+Work, and Income,'' Medical Care Research and Review Supplement to Vol.
+60, No.2 (June 2003).
+---------------------------------------------------------------------------
+ The choice is less funny for two working parents who make say $7.50
+an hour each--that's more than $2 above the minimum wage--and if they
+work full time as most do, they therefore earn $30,000 a year. Their
+children would in most but not all states be eligible for SCHIP, but
+you can know they would not likely be offered health insurance at their
+jobs, and they make far more than Medicaid income cutoffs in the vast
+majority of states in our country. They are also not very likely to
+feel like they can afford to spend a third or more of their gross
+income on family health insurance in the non-group market. To add one
+final touch of realism, you may assume they are healthy today.
+ Are we willing to require them to obtain health insurance? If they
+do get sick, they will most likely access health resources that will
+impose costs on the rest of us in various ways, and a requirement to
+purchase then would be responsive to the so called ``free rider''
+justification for universal coverage. But of course they cannot afford
+it, so we would also have to subsidize their purchase of it, or impose
+an inequitable burden upon them. At the same time, they are healthy
+now, so the nation would be partially buying for them true insurance
+with no necessary immediate health benefit, that is, we would be buying
+protection from risk, a risk of potentially devastating financial,
+emotional and health consequences of unforeseen health problems which
+could strike any of us this very afternoon. The question comes down to,
+are we willing as a society to pay to protect these parents from living
+with this risk that we all pay to avoid for ourselves, and to protect
+us all from living with their free-rider risk? These are the ultimate
+questions that only you and your colleagues can answer.
+ I devoutly wish it were otherwise, but we economists cannot tell
+you with certainty the best particular way to expand health insurance
+coverage,\5\ but I can say the case for some kind of significant
+coverage expansion seems strong to many health economists and health
+policy researchers today. The prudent strategy in the event you do move
+in that direction would be to monitor the outcomes quite closely and be
+prepared to alter details of the program or change course altogether if
+credible evidence warrants it. We at the Center for Studying Health
+System Change and in the economics and health services research
+professions more generally will undertake to try and keep you well
+informed.
+---------------------------------------------------------------------------
+ \5\ For a range of coverage proposals developed by thinkers with
+many different perspectives, see the Covering America Web page at
+www.esresearch.org. This Robert Wood Johnson Foundation project was
+directed by Jack Meyer of the Economic and Social Research Institute.
+---------------------------------------------------------------------------
+ I would now be glad to answer any questions my testimony today
+might have provoked.
+
+
+
+ Chairman JOHNSON. Thank you very much, Dr. Nichols. Dr.
+Melnick.
+
+STATEMENT OF GLENN MELNICK, PH.D., DIRECTOR, CENTER FOR HEALTH
+ FINANCING, POLICY AND MANAGEMENT, UNIVERSITY OF SOUTHERN
+ CALIFORNIA, LOS ANGELES, CALIFORNIA
+
+ Mr. MELNICK. Good afternoon, Chairwoman Johnson and Members
+of the Subcommittee. I am privileged to have this opportunity
+to share with you my recommendations on what Congress might do
+to improve the pricing information in the health care
+marketplace. Such improvements can be a first step in helping
+to protect the uninsured from arbitrary and excessive prices
+and to lay a foundation for serving individuals under the HSA
+insurance option.
+ I am a professor of health care finance at the University
+of Southern California, where I direct our Center For Health
+Financing, Policy and Management. We have been conducting
+analyses of hospital pricing for many years using data from
+California and other States. In my short time today, I hope to
+leave you with a better understanding of how hospital pricing
+as currently practiced impacts the uninsured and what might be
+done to improve it. My written information supplements my
+testimony.
+ I first began with two powerful trends of hospital pricing
+that I am afraid worsen the problem of the uninsured in America
+and may stifle the market for HSAs. I will then present
+recommendations designed to limit the negative effects of these
+trends. Hospital pricing as currently practiced negatively
+impacts the uninsured. We have witnessed a very significant and
+rapid increase in hospital prices over the--list prices over
+the last 8 years. Hospitals have two sets of prices, list
+prices and net prices. Hospital list prices are the standard
+set of prices established by hospitals each year for all their
+services. The list price is more or less equivalent to the rack
+rate that hospitals display--that hotels display for their
+rooms.
+ All patients are charged the same list price for the same
+service; however, very few patients actually pay the list
+price. Insurance companies and other third-party payers
+generally have contracts with hospitals which allow them to pay
+a discounted price that is significantly below list price.
+Uninsured patients, referred to in most hospital accounting
+systems as self-pay, are charged the list price and then,
+depending on the individual hospital's policies, may be offered
+a discount.
+ To illustrate how this affects the uninsured, I turn your
+attention to Exhibit 1 in the handout. This exhibit shows list
+and net prices for patients admitted to California hospitals
+for an appendectomy in 2002. The list price is $18,229, the
+same to all patients. However, as you can see, the net price
+differs depending on the patient's insurance status. Managed
+care plans paid about $6,000, a 66 percent discount. Medicare
+paid about $4,800, a 73 percent discount from list prices. The
+uninsured self-pay patients are divided into two groups, those
+that qualify for hospital indigent programs and all other
+uninsured. The indigents end up paying the lowest net price,
+about $1,700. Nonindigent self-pay patients paid the highest
+net price, about $8,000. They did receive a discount, but it
+was the smallest one.
+ Please note that these numbers are not exact, but they do
+accurately portray the pattern of pricing out there. Hospital
+pricing strategies are driven by a complex mix of contracting
+arrangements as well as market forces, and as a result,
+hospitals have focused largely on net prices. However, since
+most hospitals can continue to increase their revenue from
+insured patients by raising list prices, there is a strong
+incentive for them to continue to increase list prices. The
+data in the attached exhibits show that list prices have
+increased rapidly and substantially in recent years throughout
+the United States. An indirect and largely, I believe,
+unintended affect of these trends is that they have created
+hardship for the uninsured patients. In fact, hospital prices
+that the uninsured population pay are increasing more than any
+other group.
+ Given the incentives in the system, I believe that hospital
+list prices will continue to rise faster than costs and net
+prices, and will further exacerbate the problems facing the
+uninsured. In some cases hospitals do discount from list prices
+for self-pay patients; however, the practice of granting
+discounts to self-pay patients is ad hoc at best right now. The
+net price that an uninsured patient will pay depends on too
+many arbitrary factors, such as the patient's level of
+education, their negotiation skills, where the patient lives,
+the hospital they are admitted to, their ability to pay, and
+which collection agency their unpaid bills are sent to.
+Furthermore, the lack of a rational and transparent pricing
+system for self-pay patients may hinder development and
+adoption of the HSA reforms.
+ In closing, I have two sets of recommendations: Form a
+national task force to study the current patterns and practice
+of pricing to the uninsured; and, two, charge the task force to
+do the following: Develop guidelines and policies regarding
+pricing and payment options for the uninsured; mandate that
+hospitals report both the policies for discounting charges to
+the self-pay patients and the procedures used to ensure that
+all patients are aware of those policies and procedures; and,
+finally, mandate that hospitals annually report their actual
+experience publicly vis-a-vis the uninsured in terms of
+charges, discounts, and collections. Through mandated public
+disclosure and media attention, social pressure will be brought
+to bear on hospitals to develop fair and reasonable pricing for
+the uninsured. These explicit policies and better reporting can
+serve to moderate the negative and arbitrary effects of rising
+hospital charges until we have a more systematic solution to
+covering the uninsured and could lay the groundwork for the
+emerging HSA market. Thank you.
+ [The prepared statement of Dr. Melnick follows:]
+
+ Statement of Glenn Melnick, Ph.D., Director, Center for Health
+ Financing, Policy and Management, University of Southern California,
+ School of Policy, Planning and Development, Los Angeles, California
+
+ Hospital Pricing and the Uninsured
+
+ I will first discuss powerful trends in hospital pricing that I am
+afraid will worsen the problem of the uninsured in America and stifle
+the market for HSAs. I will then present a set of recommendations
+designed to limit the negative effects of these trends.
+Hospital pricing as currently practiced negatively impacts the
+ uninsured
+ We have witnessed a very significant and rapid increase in hospital
+list prices over the past 8 years in the U.S.
+Hospital Pricing Terminology and Practices
+ To better understand hospital pricing, some terminology is
+required. Hospitals have two sets of prices: list prices and net
+prices.
+ Hospital list prices (more commonly referred to as gross charges)
+are a standard set of prices established by hospitals each year
+(generally) for all their services. The list price is more or less
+equivalent to the ``rack rate'' that hotels display for their rooms.
+All patients are charged the same list price for the same service.
+ However, very few patients actually pay the list price (see Exhibit
+1). Insurance companies and other third party payors generally have
+contracts with hospitals, either directly or indirectly through rented
+provider networks, which allow them to pay a discounted price that is
+significantly below the list price. Uninsured patients (referred to in
+most hospital accounting systems as self-pay) are charged the list
+price and then depending on the individual hospital's pricing policy,
+may be offered a discount. The actual amount a hospital receives from
+the patient will be based on this discounted price less any portion of
+the bill that turns out to be un-collectible.
+ Hospital pricing strategies are driven by a complex mix of
+differing payment schemes and contracting arrangements as well as
+market forces.
+ With the advent of selective contracting and the growth of managed
+care in the U.S., the practice of negotiating discounts with hospitals
+has become widespread. In this environment the gap between list and net
+prices has widened. Contracting, combined with market forces, largely
+drives hospital net prices. Consequently, most insurers, policymakers,
+and researchers have focused on net prices. However, there are a number
+of factors that have kept hospital list prices important in overall
+hospital pricing and which have contributed to the rapid run-up in list
+prices. These factors include:
+
+ Not all third party payors have contracts with all
+providers (i.e., Some third parties pay list prices or charges).
+ Many third party contracts include payment formulae where
+the discount is applied to list prices (or charges).
+ Many third party contracts (including Medicare) have
+stop-loss provisions that pay on the basis of list prices (charges)
+above a certain threshold.
+ In many cases the stop loss threshold is based on list
+prices (charges).
+ Not all insured patients are covered by a third party at
+every hospital (e.g, for out-of-network use).
+ Some patients have no insurance coverage (self-pay
+patients) and do not have access to negotiated discounted prices at any
+hospital.
+
+ Since most hospitals can increase their net revenue (from private
+insurers, Medicare, and workers comp plans) by raising their list
+prices, there is a strong incentive to keep increasing list prices.
+Indeed, data show that list prices have increased rapidly and
+substantially in recent years.
+ The following data provide a picture of what has happened to
+hospital list prices in recent years:
+
+ Hospitals have increased their list prices much faster
+than their costs have gone up and much faster than their net prices
+(see Exhibits 2 and 3 for California data and Exhibit 4 for national
+data).
+ The difference between hospital list prices and costs
+varies substantially from state to state across the U.S. (see Exhibit
+5).
+ The difference between hospital list prices and net
+prices varies substantially across hospitals within the same state
+(data can be obtained from the author)
+
+ An indirect and largely unintended effect of these trends is that
+they have created hardship for uninsured patients--the hospital prices
+they face are increasing more than for any other group.
+ Not only do the uninsured pay for all their care out-of-pocket, but
+they face higher fees for the same procedure than the insured since
+they do not benefit from the bargaining clout of an insurance company.
+In the current environment, self-pay patients are much more likely to
+be asked to pay the list price than insured patients. An example of
+this is illustrated by the data previously presented in Exhibit 1. This
+exhibit compares the average list price for an appendectomy in
+California hospitals in 2002 with the amount actually paid based on the
+insurance status of the patient. Uninsured patients who do not qualify
+as indigent (according to each hospital's criteria) pay far more than
+patients who have insurance coverage.
+ Hospital list prices will continue to rise faster than cost and net
+prices, further exacerbating the hardship on the uninsured.
+ With continuing managed care push back by hospitals, we will see
+more hospitals terminating their capitated contracts with third party
+payers. This will move more hospital volume into fee-for-service
+contracts that generally include list prices in the payment formulae,
+either in terms of discounts from list price or as part of stop-loss
+provisions. This will increase the reward to hospitals gained by
+raising their list prices. Under this scenario, the uninsured will
+continue to face higher price increases than insured patients.
+ In some cases, hospitals do discount from list prices for self-pay
+patients. However, this policy may not be uniformly applied to all
+self-pay patients within a hospital and discounts vary substantially
+across hospitals and across the country.
+ The practice of granting discounts to self-pay patients is ad hoc
+at best. It varies both across hospitals and within hospitals. As a
+result, the net price that an uninsured patient pays for hospital care
+depends not only upon his ability to pay, but also upon his level of
+education, negotiation skills, where he lives, the hospital he is
+admitted to, and which if any collection agency is retained by the
+hospital.
+ One reason for the wide variation in pricing services for self-pay
+patients is that hospitals have not really focused on developing an
+analytical capacity for retail pricing. List prices have grown very
+quickly and so have only recently become an important element of
+pricing to hospitals.
+ Moreover, most hospitals do not have the necessary data systems
+that allow them to accurately calculate how much they charge or receive
+from the self-pay population. Self-pay patients often start out in and
+are billed to a third party payor category and then end up as self-pay.
+Often the charge is not reclassified while any payments would be
+credited to the self-pay category. This could understate gross charges
+to self-pay patients and make it appear that hospitals are collecting a
+higher percentage of gross charges to self-pay patients than is the
+case.
+ Furthermore, the lack of a rational and transparent pricing system
+for self-pay patients may hinder development and adoption of the health
+savings account (HSA) reforms.
+ Individuals choosing an HSA as their primary insurance mechanism
+may face the same rapidly increasing list prices that the uninsured
+face since they will be seeking care with their own funds. Moreover,
+the nascent state of analytical pricing models in hospitals and the
+absence of management tools that I've already noted could hinder the
+development and growth of the retail market envisioned under health
+savings accounts.
+Recommendations
+ 1. Form a national Task Force to study current patterns and
+practices of pricing to the uninsured.
+ 2. Charge the Task Force to:
+
+ a. Develop guidelines for policies and procedures regarding
+pricing and payment options for the uninsured.
+ b. Mandate hospital reporting of both the policies for
+discounting charges to self-pay patients and the procedures used to
+ensure that all patients are aware of the discounted payment options.
+ c. Mandate that hospitals annually report their actual
+experience vis-a-vis the uninsured in terms of charges, discounts and
+collections.
+Rationale
+ Through mandated public disclosure and media attention, social
+pressure will be brought to bear on hospitals to develop fair and
+reasonable pricing policies for the uninsured in their communities. As
+a first step in easing access for the uninsured, hospitals should be
+required to develop explicit policies and procedures for discounting
+list prices or charges to self-pay patients. Ideally, the discounting
+schedule would be a sliding scale based on income.
+ These policies and procedures should be included in all mailings to
+patients. When patients receive their first bill, it should clearly
+state that they may not be required to pay the charge listed. Rather,
+it should inform them that they are eligible to apply for a reduced fee
+under the hospitals' discounting program based on specific guidelines.
+ These policies and procedures should also be posted at the hospital
+registration area and should be reported to state health departments or
+other relevant agencies so that the public and media have easy access
+to this information.
+ In addition to developing and publicizing policies for charging the
+uninsured, hospitals should be required to report their experience each
+year in terms of how the uninsured were billed and the final
+disposition of their bills. The annual reporting could be incorporated
+into the recent CMS rule requiring hospitals to report uncompensated
+care on the Medicare cost report form. Explicit policies and better
+reporting could serve to moderate the negative and arbitrary effects of
+rising hospital charges until we have a more systematic solution to
+covering the uninsured in the United States.
+
+ Glenn Melnick
+
+ Dr. Melnick is Professor and Blue Cross of California Chair in
+Health Care Finance at the University of Southern California (USC).
+ Dr. Melnick has worked extensively in the area of health care
+insurance and health care market competition. Dr. Melnick's research
+has focused on the areas of pricing of hospital services, health
+insurance and health care markets and he has numerous publications in
+the scientific literature, including journals such as Health Economics,
+JAMA, Health Affairs and many others. He is frequently called upon to
+provide expert advice to the Federal Trade Commission, States'
+Attorneys General and others. His editorials have appeared in the Wall
+Street Journal and the Los Angeles Times.
+ In addition to his work in the U.S., Professor Melnick works in
+Pacific Rim countries (including China, Taiwan, and Indonesia)
+providing technical assistance and training to assist countries in the
+development of formal health insurance systems and social programs. Dr.
+Melnick is also the Director of USC's International Public Policy and
+Management Program (IPPAM). [email protected]
+
+[GRAPHIC] [TIFF OMITTED] T3794A.021
+
+[GRAPHIC] [TIFF OMITTED] T3794A.022
+
+[GRAPHIC] [TIFF OMITTED] T3794A.023
+
+[GRAPHIC] [TIFF OMITTED] T3794A.024
+
+[GRAPHIC] [TIFF OMITTED] T3794A.025
+
+
+
+
+ Chairman JOHNSON. Thank you very much, Dr. Melnick. Mr.
+Scandlen.
+
+ STATEMENT OF GREG SCANDLEN, DIRECTOR, CENTER FOR CONSUMER
+ DRIVEN HEALTH CARE, GALEN INSTITUTE, ALEXANDRIA, VIRGINIA
+
+ Mr. SCANDLEN. Thank you, Madam Chairman, for the
+opportunity to share some thoughts with you. I think it is
+worth stepping back a few paces and looking at how we got here
+if we are looking at the underlying causes of noninsurance in
+this country. I think my perspective will be different than
+most of what you have heard in the past several years.
+ Generally people will cite the growth of technology, the
+aging population, labor market effects in looking at what is
+behind the uninsured. I think these things, perhaps with the
+exception of the aging population, are more symptom than cause,
+and I think the technology--for instance, in most industries
+technology will actually save money, but only in health care
+does technology actually add to overall costs. I would suggest
+this is because only in health care are we subject to a system
+of third-party payment. Third-party payment distorts the market
+so that economizing technologies are given short shrift while
+revenue enhancing technologies are highly valued.
+ Third-party payment itself is also not the ultimate cause,
+I don't believe. We have adopted a system of third-party
+payment largely because of State and Federal policy that has
+been adopted over the years. There are two things that I would
+like to focus on particularly today, although these are only
+two of many. It is Federal tax policy dating back to 1943, and
+the Employee Retirement Income Security Act (ERISA) that goes
+back to 1974.
+ Starting with the tax situation. As you know, the Internal
+Revenue Service ruled that employer-sponsored health insurance
+benefits would be free of taxes, excluded from income for
+workers, and Congress codified that ruling in 1954. It was
+seen, and I think it was, a good way to encourage more
+coverage. The numbers of Americans with health insurance grew
+from about 12 million in 1940 to 80 million in 1950 to 132
+million in 1960, and the coverage became more generous and more
+comprehensive, switching from basic hospitalization services to
+major medical-type approaches.
+ It has also had two substantial, I think, negative
+consequences. First of all, it advantaged only those with
+access to employer-sponsored health insurance. It did not
+advantage people that bought their own coverage or people that
+paid directly for services. The large amount of new money that
+was put into the system as a result of this incentive raised
+prices for everybody, including those not associated with an
+employer, with employer-based coverage. Now, that includes the
+aged and the poor, but it also includes the self-employed and
+people whose employers simply did not choose to provide
+coverage. These people found it increasingly hard to pay for
+their services.
+ In 1965, Congress addressed part of this problem by
+enacting Medicare and Medicaid, but the rest of the affected
+population, the self-employed and people without employer-based
+coverage, were not helped. These days, the cost of these
+subsidies are enormous, $250 billion in Federal money for
+Medicare in 2003, $160 billion for Federal spending on Medicaid
+and SCHIP, and $180 billion for employer-sponsored coverage in
+2004.
+ There is another consequence of this subsidy as well. The
+extraordinary amount of the subsidy causes that anyone who
+could possibly get employer-sponsored coverage will do so,
+leaving behind only those people who are unable to. That
+includes lower income workers, people too sick to work, people
+who are semiretired, and people in seasonal employment. This is
+the pool that is available for the individual insurance market,
+so their costs are considerably higher than the employer-
+sponsored pool, and coverage is ever less accessible for them.
+ I think ERISA has had a similar story. The primary result
+of ERISA was to divide the employer-based market into very
+large employers, influential employers who are completely
+unconcerned about State regulation, and small, powerless
+employers that were subject to State regulation. With the
+absence of the larger employers from the political scene, State
+legislators went on a feeding frenzy of regulation that raised
+costs for smaller employers and for individuals and made--and
+in some States destroyed the insurance market, and in all
+States making coverage much less affordable for people not in
+the employer-based system.
+ I would be happy to share additional information with you
+sourcing these assertions, but also discussing some of the
+other provisions in Federal law that have been problematic.
+ [The prepared statement of Mr. Scandlen follows:]
+
+Statement of Greg Scandlen, Director, Center for Consumer Driven Health
+ Care, Galen Institute
+Madam Chairman and Members of the Committee,
+
+ Thank you for the opportunity to share some thoughts with you about
+the underlying reasons for uninsurance. I think you will find my
+perspective rather different than most of what you have heard in the
+past few years. Most commentators will discuss the aging population,
+the growth of technology, labor market effects, and the like.
+ These all contribute, of course. But they are actually more
+symptoms than causes. Take technology. In most industries technology
+saves money. Only in health care does technology add to costs. Why
+should this be? Because we have a system of third-party payment that is
+unique to health care. Third-party payment distorts the market so that
+economizing technologies are dismissed in favor of revenue-enhancing
+technologies. Hospitals are encouraged to buy the latest whiz-bang MRI
+machine, but do not equip physicians with PDAs that would reduce
+medication errors.
+ But third-party payment is not the ultimate cause, either. Our
+system of third-party payment is the direct result of many decades of
+well-intentioned, but short-sighted and ultimately misguided state and
+federal policies. These policies have had far-reaching and negative
+consequences that were unforeseen (but not unforeseeable) when they
+were enacted.
+ I will deal today with two--federal tax policy and ERISA--but these
+are only two of the more prominent examples. Other federal laws that
+have contributed to the problems we face include the Hill-Burton Act of
+1946, the McCarran-Ferguson Act of 1947, price controls in the early
+1970s, the HMO Act of 1973, the Health Planning Act of 1974, various
+aspects of Medicare and Medicaid, COBRA, HIPAA, and a range of state
+and federal mandates.
+ In each case, the law was passed with high hopes and good
+intentions, but without adequate consideration of the long-term
+consequences. Some of those consequences include creating the
+conditions that made health coverage unaffordable for many, and
+preventing the market from being able to respond appropriately.
+Oftentimes the problems are compounded because of the way several of
+the laws interact, as we will see with the combination of federal tax
+policy and ERISA.
+ Let's start with tax policy. As you know, in 1943 the Internal
+Revenue Service ruled that employer-sponsored benefits would be
+excluded from income, and Congress codified that ruling in 1954. Health
+insurance at the time was not very expensive and relatively few
+Americans had any coverage at all, so the revenue effect was small. The
+measure was seen as a good way to encourage more coverage, and in that
+it was very successful. The numbers of Americans with health insurance
+coverage grew from about 12 million in 1940 to 80 million in 1950 to
+132 million by 1960 and the kind of coverage became more generous,
+moving from basic hospitalization coverage to more comprehensive major
+medical plans.
+ But this growth in employer-sponsored coverage had two negative
+consequences:
+
+ 1. Tax policy advantaged only those with employer-sponsored health
+insurance coverage, not people who bought their own or who paid
+directly for services, and
+ 2. The large amount of new money in the system raised prices for
+everybody--including those with no coverage. People not associated with
+an employer--especially the aged and the poor, but also the self-
+employed and people whose employers didn't offer coverage--found it
+increasingly difficult to pay for medical care.
+
+ In 1965, Congress addressed part of these concerns by enacting
+Medicare and Medicaid for the aged and the poor, respectively. But
+predictably, the infusion of large new amounts of federal money on the
+demand side of health care resulted in even greater increases in the
+cost of care. In 1960, 56% of total national health spending was paid
+directly out-of-pocket by consumers, and only 21% was paid by state and
+federal governments. In just seven years, in 1967, that changed to 36%
+OOP and 37% by government payers. The total amount of money spent on
+health care rose dramatically, tripling from 1965 to 1977, and rising
+from 5.9% of Gross National Product to 8.3%. These demand-induced cost
+increases further disadvantaged people remaining outside of the
+subsidized system.
+ [As an aside, alarm over rising health care costs induced by all
+this new money in the system resulted in a panic to ``do something''
+about costs in the early 1970s. What was done included the imposition
+of price controls and health planning activities aimed at limiting the
+supply of services. These were precisely the wrong responses to dealing
+with demand-induced inflation. The basic theory of supply and demand
+says that prices go up when demand outstrips supply. The way to deal
+with rising prices is to increase--not reduce--supply.]
+ Since 1965 we have had a system that generously subsidizes the
+elderly, the poor and people who get coverage on the job. Federal
+expenditures alone equaled $250 billion for Medicare in 2003, $160
+billion for Medicaid and SCHIP, and $180 billion in 2004 for employer-
+sponsored coverage. This subsidized spending clearly results in higher
+prices for everyone, including those who get no subsidies at all.
+ Some of the uninsured, perhaps one quarter of the total, are
+already eligible for Medicaid or employer-sponsored coverage, but have
+not taken advantage of the coverage. But the overwhelming majority are
+people who are not eligible for public programs and whose employers do
+not offer coverage. These people might be willing to purchase their own
+coverage, but there is no subsidy available to them to do so.
+ Someone getting coverage on the job has to earn $4,000 in
+compensation to get $4,000 in benefits. The same person who does not
+get coverage from an employer may have to earn $8,000 in wages to have
+enough left over after taxes to pay for a $4,000 insurance policy.
+Members of Congress, corporate executives, members of labor unions, all
+are well subsidized. But someone who is laid off from a job, a waitress
+in a diner, a stock clerk in a small retail store--people whose
+employers don't provide coverage get no help with their health premium
+at all. Their only choice is to buy individual coverage with after-tax
+dollars or go uninsured.
+ There is another consequence, as well. Because of the extraordinary
+tax subsidy provided solely to employer-sponsored coverage, anyone who
+can get an employer-based plan will do so. This leaves only those who
+cannot in the individual market. These people may be lower-income
+workers, people too sick to work or semi-retired, people who change
+jobs frequently, and people with seasonal employment. They are older,
+sicker and poorer than people with employer-sponsored coverage. Because
+they tend to be older and sicker and financially less stable, the cost
+of the coverage is higher than it would be for an employer-sponsored
+pool. There are higher claims costs because they are sicker and there
+are higher administrative costs because premium collection, marketing
+and retention are difficult. Yet these people get no help from their
+employers and they get no tax advantage from the government.
+ Some employers might be willing to contribute to the costs of
+coverage for these employees, but here the Employee Retirement Income
+Security Act (ERISA) gets in the way. The employer may not want to
+commit to purchasing a full-scale benefit plan with all the added
+regulatory reports and responsibilities. They would prefer to simply
+contribute money to the cost of an individual policy chosen and owned
+by the employee.
+ The tax code actually allows them to do this. As far as the IRS is
+concerned, employers are free to make such a contribution on a tax-
+favored basis. But ERISA forbids it. Under ERISA, an employer's
+contribution means the coverage is an ``employee welfare benefits
+plan:'' ergo, a ``group'' plan subject to all the requirements of any
+other group plan, including the HIPAA guaranteed issue requirement.
+Plus, state insurance law makes a clear distinction between group and
+non-group coverage. The two are regulated and priced separately,
+controlled by different sets of laws, usually offered by different
+insurance companies. A worker who buys his own health coverage in the
+non-group market must forfeit any tax advantage if the employer
+contributes to the cost of the policy--not due to any tax code
+regulation, but because of ERISA.
+ This is only the tip of the iceberg when it comes to problems
+created by ERISA. ERISA was enacted in 1974 to give employers a safe
+harbor from state regulations and protect the assets of a benefit plan
+from unreasonable costs. It was particularly important to multi-state
+employers who wanted to provide consistent benefits in all of their
+locations. But ERISA applies to all employer-sponsored plans (except
+those offered by churches and governments), not just multi-state plans,
+and not just to large employers. ERISA pre-empts all state laws
+``relating to an employee welfare benefits plan.'' But ERISA ``saves''
+from pre-emption state laws that regulate insurance companies. The
+states are allowed to continue regulating insurance companies.
+ Unfortunately, this results in a division of the employer
+community. All are ERISA plans, but those who purchase coverage from an
+insurance company are indirectly subject to all the regulations that
+apply to that insurer. Those employers who ``self-insure'' their
+benefits are exempt from the state insurance laws. Large employers are
+able to self-insure and are thus exempt from state law. Smaller
+employers must buy coverage from insurers and are thus subject to state
+law.
+ This division affects the uninsured by disrupting the political
+equilibrium in the states. Large influential employers don't care what
+the state legislatures do, because they are completely unaffected by
+it. That leaves only small, powerless employers to complain when a new
+mandate is proposed, or new restrictions are placed on their coverage.
+As a consequence, advocates of more regulations and more mandates
+encounter little effective resistance.
+ In 1974, before ERISA was enacted, there were very few mandated
+benefits. Since that time, over 1,500 separate laws have been enacted
+by state legislatures mandating coverage of somebody's favorite little
+service. The states have also passed limits on underwriting, community
+rating laws, price controls, and a vast number of other laws and
+regulations that have destroyed the insurance market in some states.
+Whatever their seeming merit, all of these laws add costs and
+complications to the process of a small employer providing coverage to
+its workers.
+ Not surprisingly, the cost of small group coverage has gone up
+faster than that of large, self-insured employers for many years. Also,
+not surprisingly nearly half of uninsured workers work for small
+companies. The ``irrational exuberance'' of state legislatures for
+onerous regulations has virtually destroyed the small group market
+across the country.
+ Let me summarize these two issues so the point doesn't get lost.
+First on tax policy:
+
+ Congress allowed-employer sponsored health insurance to
+be free of all taxes, state and federal, income and payroll.
+ The exclusion from income encouraged virtually all health
+care services to be paid through a third-party mechanism.
+ Third-party payment created unlimited demand for health
+care services.
+ Unlimited demand causes ever-higher prices.
+ Higher prices made it difficult for people not associated
+with an employer to pay for their care.
+ Congress responded by enacting Medicare and Medicaid to
+help the elderly and the poor to pay for coverage that was otherwise no
+longer affordable
+ Medicare and Medicaid further increased demand, raising
+prices even further.
+ The people not associated with any of these programs--
+especially people whose employers do not provide coverage--found it
+even harder to pay for health care.
+ These same people had access only to individual insurance
+policies, but the individual market had become a ``residual pool'' made
+up largely of those people too sick or too unstable to access employer
+plans.
+ Not only are costs higher in the individual market, but
+tax policy requires these people to earn up to twice as much in wages
+to pay for their coverage.
+
+ Next on ERISA:
+
+ Congress allowed all employer health plans to be exempt
+from all state laws.
+ But Congress also allowed the states to continue to
+regulate health insurance companies.Only those employers large enough
+to self-fund their benefits actually escaped state regulation.
+ That left only those smaller employers who could only buy
+fully-insured benefits subject to state regulations.
+ This eliminated the largest and most influential
+corporations from being concerned about state laws and regulations.
+ State legislators now found little political resistance
+to piling on regulations.
+ State legislators went on a feeding frenzy of mandates
+and other regulations that substantially raised the cost of coverage
+for small employers.
+ Small employers found it ever-harder to afford coverage.
+ Ever-fewer small employers provide coverage to their
+employees.
+
+ These are the kinds of underlying conditions that make it difficult
+for the uninsured to access coverage. We are not supposed to discuss
+solutions here, but I do want to add a cautionary note. The American
+people, the American health care system, and the American economy are
+all entrenched in this system. Even if we wanted to un-do it, it would
+be enormously disruptive to do it quickly. Change should be made
+carefully and thoughtfully. But having an understanding of this history
+and the consequences of well-intentioned policies should make it more
+feasible to tailor changes that can work.
+
+
+
+ Chairman JOHNSON. I thank the panel very much. You have
+brought out a number of different things that create barriers
+for people getting access to health insurance. Dr. Melnick, in
+your charts you demonstrate how rapidly gross patient charges
+have grown, particularly disparate to patient costs. To what do
+you attribute this? Since raising their charges, I appreciate
+that raising their charges also has an impact on raising what
+they actually get for their services. Nonetheless, the
+difference between the publicly announced charge and the
+received payment is extraordinarily large. If you were to do
+the bar chart on the bottom of page 8 where you talk about
+trends in hospital charges and costs in California, if you were
+to do that for any other product sector, would you see as big a
+difference, for instance, in retail clothing between the marked
+price and the discounted price at Marshall's?
+ Mr. MELNICK. I can't think of any example outside of health
+care. I think the peculiar aspect of the way health care
+financing payment has evolved over the last 10 or 15 years with
+contracting, and the fact that embedded in many contracts is a
+formula which includes charges on which some payments are made.
+So, what happened is hospitals figured this out and said, well,
+wait a second, we can raise our charges and get a higher
+revenue. Even if it is only a small fraction, a half of a
+percent, why not do it? I think that is how we got to where we
+are today.
+ Chairman JOHNSON. I think behind that lies the complexity
+of the Medicare payment system and there are points at which
+raising your charges will reap you very big benefits for small
+groups of patients. So, there are factors that drive this
+behavior. In my experience, Medicaid is the worst actor in this
+in the sense that the managed care plans tend to bargain across
+the board; Medicaid tends to have a fixed price. So, if you
+want to comment on that, I would be happy to hear that.
+ Mr. MELNICK. Well, I think, in preparing my testimony for
+today, one thing I am struck by is we know very little about
+actually this side of the whole pricing and how hospitals
+operate in their data systems. I think one of the things we
+need to do is improve that side of the hospital industry in
+order to understand it better and prepare for other products. I
+think third-party private sector contracts also many times have
+charges built into the contracts so hospitals are rewarded both
+through the Medicare side as well as through the commercial
+side.
+ Chairman JOHNSON. Thank you. Dr. Rowland, in your research,
+since you have done quite a lot of research, we all agree that
+the most disadvantaged under this system are the people who
+aren't poor enough to be on Medicaid or aren't signed up for
+Medicaid whether they are poor or not, and those who work for
+an employer that has a good plan or who can afford a plan
+themselves. What do we know, outside of the demographics, about
+where these people are? If they are mostly in the cities, do we
+know why they are not signed up for Medicaid? It is astounding
+that CBO could say that we have 25 percent of the children
+uninsured when we have two different policies to cover
+children. So, we need to understand more why those policies
+don't reach.
+ One of the things about SCHIP is it discovered an awful lot
+of Medicaid kids who were eligible for Medicaid and hadn't
+signed up. How big a problem is that really? How many of the
+uninsured live in a reasonable circumference of our community
+health centers which will provide them with care according to
+their income? So, we need to know more about who is using the
+resources we have out there for people under 200 or 300 percent
+of poverty income, and why do people who are eligible and
+nearby don't use it? Has any of your research led you down
+these particular trails?
+ Ms. ROWLAND. Well, our research has clearly shown that the
+kinds of rules and eligibility requirements in place for
+Medicaid prior to SCHIP, the documentation required when you
+apply for coverage, the face-to-face interview, the enrollment
+forms that were 24 pages long and asked numerous questions, the
+requirement to bring in birth certificates and all kinds of
+documentation helps to impede families from coming in to apply.
+So, with SCHIP, the streamlined eligibility that came in for
+SCHIP and then has been implemented in many States for the
+Medicaid population as well; the fact that a working family
+doesn't need to take the day off to come in and sign up.
+ Chairman JOHNSON. How much has that helped? Can you see
+that in the data?
+ Ms. ROWLAND. We can clearly see. We have almost doubled the
+number of children on Medicaid as a result of some of these
+practices in the States that have streamlined it, and we can
+show you the increased enrollment State by State from some of
+the statistics that we collect. So, the children's story is
+that when you simplify eligibility, you begin to increase
+participation. What we see in a State like Wisconsin is that
+when you cover the parents as well as the children, you have an
+even higher participation rate.
+ So, some of the lack of coverage now is that in a State
+like, for example, Louisiana, children are covered up to 200
+percent of the poverty level, that is about $30,000 per family
+of three, whereas a parent in that State is only covered up to
+about $3,000 per year, so that this gap between covering the
+parents and the children has really resulted in some lag in
+enrollment.
+ Chairman JOHNSON. If you could provide us with that State
+by State data, that would be helpful.
+ Ms. ROWLAND. I will certainly do that.
+ Chairman JOHNSON. Both for children and for adults.
+ Ms. ROWLAND. The other issue is that the uninsured children
+live throughout the country, and they are often in rural areas.
+So, really looking at access to facilities like community
+health centers can help and really does help in many of the
+urban areas, but has been a much less available source in the
+rural areas.
+ Chairman JOHNSON. The same kind of studies about community
+health centers and who they serve and how that has grown and
+changed that you have around SCHIP.
+ Ms. ROWLAND. We have some studies that have looked at the
+number of people served by community health centers and how
+many of those are actually on Medicaid. About one-third of the
+revenue today to community health centers comes from providing
+services to people already on Medicaid and that helps to
+supplement the direct core funding of community health centers.
+I think that is an important thing to remember when you are
+looking at trying to make that access more available.
+ Many community health centers have also become part of the
+managed care plans that States contract with for their Medicaid
+plans. We really need to look at both the delivery side of care
+as well as the insurance card, because we know a Medicaid
+insurance card can be fairly empty if it doesn't connect you
+into a network of physicians. The low payments rates
+historically have really made access to care for some
+specialists especially difficult for Medicaid patients.
+ Chairman JOHNSON. Of course, the access to care with the
+community health centers is less of a problem since community
+health center doctors don't have malpractice costs, and the
+community health centers are reimbursed on costs. They are only
+one of the few actors in the systems that are reimbursed that
+way. So, any information you can give us about---SCHIP and
+children and adults, but also about community health centers
+and any ways in which you see them participating more
+aggressively in the uninsured and serving the uninsured
+population.
+ Chairman JOHNSON. Now, Connecticut lost a large, very
+large, number of jobs when a big insurance company went under
+and regardless of their income, I told them to go, there was an
+excellent facility. It was a great boon to the community health
+center because all those people were full pay. Full pay at that
+time was $27 for an annual physical. Now, this is 10 or 12
+years ago. So, that was $27, but at that time that was about
+$60 normally. So, they are very affordable. It is mysterious to
+me that people of higher incomes when they are unemployed don't
+use these facilities.
+ So, I think we need to know more about who uses them,
+whether the unemployed go there, and so on and so forth. So,
+how can we use the resources we have in the system better is
+one of the most rapid avenues to reaching out that we would
+have. Then, of course, what else do we need to do. So, anyone
+who wants to offer on that. My time is up, and I don't want to
+take much more, but I do thank you, Mr. Scandlen, for your
+insight into current law, and, Dr. Nichols, for your work. Mr.
+Stark.
+ Mr. STARK. Thank you, Madam Chair and the panel, for your
+efforts in trying to enlighten us. I guess, however, there are
+two questions for Dr. Nichols and Dr. Rowland in particular. We
+talk about the diversity of the uninsured, but it is my sense
+that perhaps two-thirds, just to pick a number, of the
+uninsured come out of the lower-income population. Now, they
+may be lower income because they lost their employment and
+thereby their insurance. I don't know as there is any cause and
+effect here.
+ What would be the low income--if it is systemic, if they
+have been in low-paying jobs in the service sector, in jobs
+that are part time, in jobs that have multiple employers in the
+service sector, and they are unapt to have--they work for Wal-
+Mart, what would be your recommendation, just briefly for each
+of you, of reaching that 60 percent or two-thirds of the
+uninsured, however many there are out there? I think we would
+all agree that a substantial majority of the uninsured are low
+income. What is the best way to provide them coverage? Diane?
+ Ms. ROWLAND. Well, certainly I think building on the
+experience of Medicaid and SCHIP with children and to try to
+continue some of the outreach and enrollment simplification to
+get those children that are already eligible for coverage but
+are not enrolled, enrolled and into coverage.
+ Mr. STARK. Okay. In that, do you think you could find some
+studies that you could send on to me that would show that that
+is economically efficient, as opposed to individual policies
+with a tax subsidy or other alternatives that are mentioned?
+ Ms. ROWLAND. We have done some recent work in conjunction
+with Jack Hadley and John Holohan at the Urban Institute that
+looks at the low-income population, the coverage received
+within Medicaid versus comparable coverage through private
+insurance. In fact, Medicaid treats, because of the nature of
+the population it enrolls, a sicker population than those
+privately insured in the low-income groups, but does so at a
+much lower cost per person when you adjust for the differences
+in health status. The reason for that is partially the low
+payment rates that Medicaid pays to providers, but it is also
+that Medicaid operates fairly efficiently for that population.
+We can make that study available to you for the record.
+ Mr. STARK. I would appreciate it.
+ [The information follows:]
+
+Medicaid: A Lower-Cost Approach to Serving a High-Cost Population
+ Medicaid is our Nation's principal provider of health insurance
+coverage for low-income Americans. The program is generally the only
+source of health coverage available to the 38 million low-income
+children and adults who are enrolled. Discussions about Medicaid
+spending and financing are a perennial feature of policy, legislative,
+and budget deliberations at both the Federal and state level. Some
+contend that Medicaid is excessively costly and argue that the private
+sector could provide coverage more efficiently. Others maintain that,
+for the population covered and the services provided, Medicaid is, in
+fact, an effective vehicle for providing coverage.
+ New research conducted by Jack Hadley and John Holahan of the Urban
+Institute examines this issue and shows that Medicaid is a lower-cost
+approach to providing coverage when compared with private insurance--
+once the poor health status of Medicaid's beneficiaries is taken into
+account.\1\ The study brings new empirical evidence to bear in the
+debate concerning the efficiency of Medicaid versus private health
+insurance as a mechanism for covering low-income children and adults.
+---------------------------------------------------------------------------
+ \1\ For more details on the findings and methodology described in
+this issue paper, see Jack Hadley and John Holahan, ``Is Health Care
+Spending Higher under Medicaid or Private Insurance?'' Inquiry, Vol.
+40, No. 4, Winter 2003/2004. This research was supported by the Kaiser
+Commission on Medicaid and the Uninsured.
+---------------------------------------------------------------------------
+ The researchers sought to assess whether, for non-elderly adults
+and children with incomes below 200 percent of the Federal poverty
+level, Medicaid is a high-cost program relative to private health
+insurance. Using statistical methods to control for differences between
+the demographic, socio-economic and health characteristics of those
+with Medicaid and those with private insurance, the investigators
+examined whether health care spending would be lower under private
+coverage than through Medicaid.\2\ This policy brief highlights the key
+findings from this study.
+---------------------------------------------------------------------------
+ \1\ For more details on the findings and methodology described in
+this issue paper, see Jack Hadley and John Holahan, ``Is Health Care
+Spending Higher under Medicaid or Private Insurance?'' Inquiry, Vol.
+40, No. 4, Winter 2003/2004. This research was supported by the Kaiser
+Commission on Medicaid and the Uninsured.
+ \2\ Hadley and Holahan based their analysis on pooled data from the
+Medical Expenditure Panel Surveys (MEPS) conducted in 1996, 1997, 1998,
+and 1999. The expenditure data were inflated to 2001 dollars using the
+annual percentage increase in the National Health Accounts.
+---------------------------------------------------------------------------
+Study Highlights
+
+The Medicaid Population is Much Poorer and Sicker than the Low-Income
+ Privately Insured Population
+ Income. The Medicaid population is much poorer than the low-income
+privately insured population.\3\ The analysis by Hadley and Holahan
+indicates that the average family income for adults with Medicaid was
+only $18,614--56% of the average family income for low-income adults
+with private insurance. Similarly, average family income for children
+with Medicaid was 58% of average family income for low-income children
+with private coverage.
+---------------------------------------------------------------------------
+ \1\ For more details on the findings and methodology described in
+this issue paper, see Jack Hadley and John Holahan, ``Is Health Care
+Spending Higher under Medicaid or Private Insurance?'' Inquiry, Vol.
+40, No. 4, Winter 2003/2004. This research was supported by the Kaiser
+Commission on Medicaid and the Uninsured.
+ \2\ Hadley and Holahan based their analysis on pooled data from the
+Medical Expenditure Panel Surveys (MEPS) conducted in 1996, 1997, 1998,
+and 1999. The expenditure data were inflated to 2001 dollars using the
+annual percentage increase in the National Health Accounts.
+ \3\ ``Low-income'' is defined as income below 200% of the Federal
+Poverty Level (FPL).
+
+[GRAPHIC] [TIFF OMITTED] T3794A.026
+
+ The much lower average income of the Medicaid population reflects
+the extremely high concentration of poverty among Medicaid enrollees.
+Among low-income adults, over 70 percent of those with Medicaid had
+incomes below the poverty level, compared with only 20 percent of the
+privately insured (Figure 1). Likewise, 73% of Medicaid children came
+from families below poverty, compared with only 21% of privately
+insured children.
+ Health. Health status is markedly worse among both adults and
+children in Medicaid than among their privately insured counterparts.
+Among adults, the disparity is dramatic. In particular, over one-third
+of adults with Medicaid report that they are in fair or poor health,
+compared with only 11 percent of the privately insured. Nearly 60
+percent of low-income adults with private coverage reported that they
+were in excellent or very good health, compared with only 34 percent
+with Medicaid (Figure 2, Table 1).\4\ The health status differentials
+for children are similar, though not as dramatic.
+---------------------------------------------------------------------------
+ \4\ Tables 1 and 2 appear at the end of the brief.
+---------------------------------------------------------------------------
+ Disability is also much more prevalent in Medicaid. Nearly half of
+adults with Medicaid report physical or cognitive limitations--a
+proportion over four times greater than among low-income adults with
+private insurance (Figure 3, Table 1). Among children, the disability
+rate is 20 percent in Medicaid, but 13 percent among the privately
+insured.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.027
+
+Health Status Explains Medicaid's Higher Per Capita Spending
+ Driven largely by health status, per capita expenditures for adults
+with Medicaid were higher than the corresponding amounts for low-income
+adults with private coverage. However, when health status differences
+were adjusted by excluding disabled adults \5\ from the analytic
+sample, per capita expenditures were significantly lower for Medicaid
+adults than for the privately insured. This result suggests that the
+higher per capita spending associated with Medicaid adults was due to
+the much poorer health of the Medicaid population.When all sample
+adults were included in the analysis, per capita spending was $4,877
+for those with Medicaid, compared with $2,843 for the privately
+insured. When only non-disabled adults were included, spending per
+Medicaid adult dropped by nearly two-thirds, to $1,752--about 78
+percent of the corresponding private insurance level of $2,253 (Figure
+4, Table 2).
+---------------------------------------------------------------------------
+ \5\ For purposes of this analysis, ``disabled'' individuals are
+defined as those reporting any physical or cognitive limitation (see
+Table 1).
+
+[GRAPHIC] [TIFF OMITTED] T3794A.028
+
+[GRAPHIC] [TIFF OMITTED] T3794A.029
+
+ Among children, per capita expenditures were significantly lower
+(p^.10) for those with Medicaid than for those with private coverage--
+even when children with disabilities, who are more prevalent in the
+Medicaid population, were included in the analysis (Figure 5, Table 2).
+ Benefits Often Cited as ``Overly Generous'' Account for Small Share
+of Medicaid Spending and a Larger Share of Private Insurance Spending
+
+[GRAPHIC] [TIFF OMITTED] T3794A.030
+
+ Dental and other services that states are not required by Federal
+law to provide under Medicaid were found to account for less than 10
+percent of per capita spending for non-disabled adults in Medicaid. In
+fact, per capita spending for these services was higher for the
+privately insured than it was for the non-disabled in Medicaid (Figure
+6).
+Medicaid Protects against the High Out-of-Pocket Spending Faced by the
+ Low-Income Privately Insured
+
+ [GRAPHIC] [TIFF OMITTED] T3794A.031
+
+ Low-income people with private insurance incur much higher out-of-
+pocket costs than do those covered by Medicaid. Presumably, the higher
+out-of-pocket costs they bear are attributable to cost-sharing charges
+and spending for non-covered benefits.
+ Privately insured adults below 200% FPL had out-of-pocket costs
+more than twice those of Medicaid adults, $585 versus $266 (Figure 7,
+Table 2). When disabled adults were excluded from the sample to
+increase comparability between the Medicaid and privately insured
+groups with respect to health status, the out-of-pocket gap widened to
+nearly a sixfold difference--$508 for the privately insured versus $91
+for those in Medicaid (Figure 8). In the case of children, the
+privately insured spent roughly seven times more than those with
+Medicaid--whether children with disabilities were included or not. The
+limits on cost-sharing in Medicaid appear to protect its beneficiaries
+from large out-of-pocket obligations.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.032
+
+ The higher out-of-pocket health care costs incurred under private
+coverage would be difficult for the sicker and poorer Medicaid
+enrollees to afford if they were enrolled in private plans unless
+states provided comprehensive ``wrap around'' or supplemental
+protection to cover these costs.
+Simulation Results: Estimates of Spending per Person under Medicaid and
+ Private Insurance
+ If the average person enrolled in Medicaid were shifted to private
+insurance, simulation models indicate that per capita spending would
+increase by $1,265 for an adult and by $76 for a child (Figure 9).\6\
+---------------------------------------------------------------------------
+ \6\ See Hadley and Holahan, 2004, for more details on the
+simulation models used.
+---------------------------------------------------------------------------
+ Per capita spending for an adult Medicaid beneficiary in poor
+health would rise from $9,615 to $14,785 if the person were insured
+privately and received services consistent with private utilization
+levels and private provider payment rates. For an adult in excellent
+health, a shift from Medicaid to private coverage would increase per
+capita spending by $675 (Figure 10). The results for children are
+generally similar, but less dramatic because the spending per person is
+so much lower.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.033
+
+[GRAPHIC] [TIFF OMITTED] T3794A.034
+
+ Medicaid's low per capita spending levels are due, in part, to
+lower provider payment rates under Medicaid than in private insurance.
+Inadequate payment rates have affected some providers' willingness to
+participate in the Medicaid program and have impeded access to care.
+But, as discussed below, this research indicates that utilization of
+basic services among Medicaid beneficiaries is generally the same as or
+higher than the utilization of these services by the low-income
+privately insured.
+
+Utilization of Services
+ When controlling for income, health and other characteristics,
+adults in Medicaid appear no more or less likely than those with
+private coverage to have a medical expense (i.e., use a service). Among
+the adults who did have an expense, total spending was significantly
+lower for those with Medicaid than for the privately insured, largely
+reflecting Medicaid's lower provider payment rates. Unlike adults,
+children with Medicaid were found to be more likely than their
+privately insured peers to use a service. However, among children with
+any expense, total expenditures were also lower for those covered by
+Medicaid.
+
+[GRAPHIC] [TIFF OMITTED] T3794A.035
+
+ Using simulation techniques, the predicted utilization of Medicaid
+adults shifted to private insurance is not significantly different from
+their actual utilization under Medicaid (Figure 11). However, the
+findings for children are different--children in Medicaid have more
+doctor and office visits under Medicaid than they would be expected to
+have if their utilization followed private insurance patterns (Figure
+11). This may reflect Medicaid's emphasis on well-child care, and the
+deterrent effect on utilization of the much higher cost-sharing
+requirements of many private plans.
+ It should be noted that while utilization of broad categories of
+service was examined, possible differences in the detailed content of
+the care (e.g., specialist services, surgical procedures, diagnostic
+tests, and so forth.) between the Medicaid and privately insured low-
+income populations were not analyzed.
+
+Discussion
+ When the poorer health status of Medicaid beneficiaries is taken
+into account, Medicaid provides coverage at a lower per capita cost
+than private insurance. The study findings highlight the distinctive
+profile of the Medicaid population, compared with other low-income
+people, and the special role that Medicaid plays as an insurer. Neither
+higher utilization in Medicaid nor the program's more comprehensive
+benefit structure are key factors driving Medicaid spending.
+ The results of this research suggest that using public funds to
+purchase private coverage would cost considerably more than building on
+Medicaid. However, any reform based on a broad expansion of Medicaid
+would need to address the low provider payment rates long associated
+with the program. Additionally, the prospect of much higher out-of-
+pocket costs for the Medicaid population if they were moved to private
+coverage could limit their access to needed care, particularly
+considering their poverty and extensive health care needs.
+ As policymakers evaluate Medicaid's performance as an insurer for
+low-income non-elderly adults and children, and private-market coverage
+as a potential alternative, these key study findings and implications
+warrant consideration:
+
+ The high per capita spending associated with non-elderly
+adults and children with Medicaid, as compared with the privately
+insured low-income population, is due to the much poorer health of
+those with Medicaid. The Medicaid population differs significantly from
+the privately insured low-income population. Comparisons between the
+two groups need to account for their different income and health
+profiles. Medicaid plays a critical role in our health insurance system
+as the source of coverage for many of the sickest and poorest
+Americans, whom private insurance does not reach.
+ Out-of-pocket spending for the low-income privately
+insured is six to seven times greater than that faced by low-income
+Medicaid beneficiaries. These much higher out-of-pocket costs would
+represent a heavier financial burden for the much sicker and mostly
+poor population in Medicaid. If Medicaid beneficiaries were moved into
+private coverage without the financial protection of ``wrap around'' or
+supplemental coverage, access to care could be diminished for those
+most in need.
+ Medicaid's comprehensive coverage of dental care and
+other optional services accounts for less than 10 percent of per capita
+spending for individuals with Medicaid; per capita spending for these
+services is higher for individuals with private coverage.
+ Lower per capita spending in Medicaid (adjusted for
+differences in health status) reflects, in part, Medicaid's lower
+provider payment rates, raising concerns about access to care in the
+program. Although this study indicates that expected utilization of
+basic services by Medicaid beneficiaries is comparable to what would be
+expected for the privately insured, further analysis is needed to
+examine whether less access to medical specialists, advanced diagnostic
+and therapeutic procedures, and high cost drugs contribute to
+Medicaid's lower costs.
+ Moving those who are now on Medicaid into private
+coverage could significantly increase health care spending and might
+not improve access if cost-sharing proved to be a barrier. Better
+access to specialty care or better quality of care through market-based
+coverage would need to be balanced against budget concerns, and against
+the risk that higher cost-sharing might diminish access to care and
+increase financial hardship for very low-income people.
+
+ This brief was prepared by Julia Paradise and David Rousseau of the
+Kaiser Commission on Medicaid and the Uninsured and is based on
+research conducted for the Commission by Jack Hadley and John Holahan
+of the Urban Institute. For more details on this research see Jack
+Hadley and John Holahan, ``Is Health Care Spending Higher Under
+Medicaid or Private Insurance?'' Inquiry, Vol. 40, No. 4, Winter 2003/
+2004.''
+
+[GRAPHIC] [TIFF OMITTED] T3794A.036
+
+ ------
+
+ Mr. STARK. Dr. Nichols, which way would you go to handle
+this group?
+ Mr. NICHOLS. Well, sir, I would want us to remember that
+the picture here is quite diverse even among the lower income
+uninsured. Some work for firms that actually do offer now, and
+they feel like they can't afford it. So, you might think about
+low-hanging fruit, including subsidies to people to pay their
+employees' share. That will end up being expensive because a
+lot of low-income workers who are offered today do take.
+ So, you have got this diversity problem which will lead to
+an equity problem. So, in some ways it really does depend, sir,
+on how much you want to spend. If you want to pay for equity,
+that is expensive. If you want to target the money just for
+those who are currently uninsured, then you might think, well,
+the best thing to do would be to focus on those who don't have
+employer offers, who don't have any other alternative. Like
+Diane said, you might insure them efficiently through Medicaid,
+but you might also give them tax credits; you might also give
+them access to maybe let them buy into the State employee plan.
+That is a big umbrella plan; it ends up being--it is like FEHBP
+on the State level. It ends up being an avenue that you can
+enroll people in every county; it ends up being a way you can
+guarantee choice.
+ So, I would submit, it depends--you have got to tell me a
+little bit more about which way--what your values are, what
+your choices are. Tell me that, and I can design a system. I
+would say at this point, do something, because we are looking
+at 40-something million. I would submit, if there is one thing
+I could say today that would be my main point on all of, it is
+we are now in a dynamic system where health care costs are
+growing faster than wages, and they have for 30 years. No
+matter what we do, that seems to be the reality and what that
+means at a personal level is that an increasing fraction of our
+workforce cannot afford health care as we know it. Thus, if we
+don't intervene---
+ Mr. STARK. Let me toss this in. Just think about it, and
+send me a letter if you are concerned. Half of--more than half
+of personal individual bankruptcies are related to medical
+expenses, but 80 percent of those people filing had health
+insurance. Now, what does that tell you? Does it begin to tell
+you that the health coverage or quality of their insurance is
+inadequate, or they wouldn't be going bankrupt? Generally they
+can't get the check and spend it on a new car and not give it
+to the insurance. Most of the health insurance goes right to
+the provider. So, the bankruptcy has got to be for the extra
+charges that the insurance didn't cover.
+ So, again, that is something--it is one of those little
+factoids that troubles me when we are dealing with--we are
+saying, well, we can't--Holtz-Eakin said we don't know. What is
+insurance? It sure wasn't good enough for the people who went
+bankrupt who had insurance. Let me just--one more question, if
+I may, Madam Chairwoman, to Dr. Melnick. Maybe you know her,
+maybe you don't, but missing, at least conspicuous to me but
+not to most people, from your testimony and your charts was
+Maryland, where I suspect your problems are all solved.
+ Mr. MELNICK. You have a good eye.
+ Mr. STARK. I happen to be a fan of the all-payer system,
+and all of your testimony wouldn't apply in Maryland, would it?
+ Mr. MELNICK. To tell you the truth, I didn't know it was
+missing, so I am not sure.
+ Mr. STARK. Maryland has a State-set all-payer system. So,
+between cost, they charge everybody the same.
+ Mr. MELNICK. Right.
+ Mr. STARK. So, there is no pricing strategy there because
+the prices are set. They can't offer every person who walks
+into any particular hospital pays the same rate no matter how
+they are insured. That would solve your problem, wouldn't it?
+ Mr. MELNICK. That would solve this problem.
+ Mr. STARK. Thank you. Thank you.
+ Chairman JOHNSON. Mr. Camp.
+ Mr. CAMP. I thank the Chairman. I want to thank all the
+panelists for your testimony today. I think it has been very
+helpful. What I take away from what you have been saying is
+that the uninsured are a diverse population that is constantly
+changing as some lose coverage and some gain coverage. That may
+mean that different solutions might be required depending on
+the group of people that we are trying to help.
+ It seems that estimates of the number of uninsured vary
+depending on what timeframe is used. Dr. Rowland, you testified
+that there were 43 million uninsured in 2002, and you gave some
+of their characteristics in your testimony. We have heard from
+CBO and others that obviously that timeframe is important when
+you look at this number of uninsured, and that there are more
+uninsured if you consider people who lacked coverage at a
+particular time. I think you stated that 43 million are
+uninsured, which is similar to CBO's number of those uninsured
+at particular times.
+ So, are your conclusions based on that same premise, that
+those are people who are uninsured at a particular time? If
+not, would those conclusions differ? Or would that change your
+analysis; if you considered the uninsured for an extended
+period of time, would you come up with a different number of
+uninsured people?
+ Ms. ROWLAND. I certainly agree with the analysis that CBO
+presented to you. We tend to use the snapshot of the uninsured
+that comes from the current population survey so that we can
+measure how that snapshot changes from year to year. That is
+where the 43 million comes from, from the latest numbers for
+2002. If you look at people who have a bout of uninsurance
+during the course of the year, that would increase that number
+much higher.
+ One of the other surveys that we have worked with, the
+National Survey of American Families conducted by the Urban
+Institute, showed, for example, in 2002 that there were some 49
+million people who were uninsured at some point during a 12-
+month period, and that of those, half, or 26 million, were
+uninsured for the whole 12 months. I think what really is
+important here is that there are lots of people who move in and
+out of coverage when they are between jobs, when they are young
+and move off of their family's health insurance policy, or when
+they are on Medicaid and their income changes and they lose
+coverage.
+ I think what really is important in looking at solutions is
+that we have to look at that short-term set of people with
+perhaps a different set of solutions than the very hardcore,
+long-term uninsured. That group remains primarily a very low-
+income population and one which tends to have bouts of
+uninsurance that are 12 months or longer. So, the chronically
+uninsured, I think, is a different problem than those who are
+between jobs or certainly family situations.
+ Mr. CAMP. So, that your analysis of those for an extended
+period of time, more than a year, is similar, falls into the
+same range as CBO?
+ Ms. ROWLAND. Right.
+ Mr. CAMP. I appreciate that.
+ Dr. Melnick, you mentioned that the uninsured paid more,
+and they are more likely to pay above the list price. It does
+seem to me that lack of transparency is a real problem, because
+it is hard to find out what something costs around the country.
+You make a series of recommendations. What do you think is the
+most significant thing we could do with regard to that?
+ Mr. MELNICK. Well, I think we need to shine a light on the
+policies and procedures at the hospital level. We need
+hospitals to, first of all, look at what they are doing. A lot
+of hospitals, because it is kind of an artifact of their main
+line of business, which is insure patients, this problem has
+emerged--a lot of them may not even know that they are imposing
+a hardship on uninsured self-pay patients. They get the bills,
+they send the bills out, and then they turn it over to
+collections. So, a lot of hospitals may not know and plus, they
+pay the collection agency anywhere from 20 to 80 percent of the
+revenue that the collection agency collects. So, a lot of
+hospitals may not even know the hardship they are imposing on
+their patients. So, I think the first thing I would do is shine
+a light on this, force hospitals to look at it; publish their
+policies and procedures; make it clear to patients that when
+they get this giant bill in the mail, they are not responsible
+for that. There is a procedure to go through to get a discount.
+ Mr. CAMP. Thank you.
+ Dr. Nichols, I know my time is almost expired, but I
+realize we are dealing with a diverse group of people in terms
+of the uninsured. What is the one thing that we could do to
+help the uninsured? I realize that is a varied group, but what
+is the one thing that Congress might be able to do that you
+think would be most helpful?
+ Mr. NICHOLS. Well, it seems to me that the evidence is most
+clear on the low-income population being the target and would
+most benefit from some kind of health insurance, and their
+health status would be improved the most. We cover today about
+half of the population below poverty in various ways, mostly
+through Medicaid and about 10 or 12 percent or so through
+employer-sponsored coverage. I would submit, commit yourselves
+to making sure that all of the people who are below poverty are
+covered somehow. There are lots of different subsidy mechanisms
+that could get us there, but that would be a goal you should
+set, because you know you would do good.
+ Mr. CAMP. Thank you.
+ Chairman JOHNSON. Thank you. Mr. McDermott.
+ Mr. MCDERMOTT. Thank you, Madam Chairman.
+ I don't know quite what to ask you, because I have sat here
+for years and years and years and heard the same stuff go round
+and round and round. People ask, well, what little thing could
+we do here; one little thing we can do there? It is pretty
+obvious nobody wants to have a universal system, so we are
+going to continue to tinker with it.
+ I noted, Mr. Scandlen, you didn't like what State
+legislators did. You kind of gave a kind of an off-hand slap to
+the fact that legislators insure things that don't get covered
+by insurance companies, like Dr. Melnick. I think the States
+are really hamstrung in this whole business and what is
+fascinating about the two proposals that are floating around
+here, this Association Health Plan (AHP) business and HSAs, the
+AHP is deliberately set up to get rid of that problem with
+State legislatures, just knock them out of the box. Knock them
+out, knock out insurance commissioners, and leave the insurance
+industry with no regulation at all except a two-man operation
+over at the Department of Labor.
+ Now, I can't see any evidence from any--either of those
+proposals, either the AHP which allows small businesses to get
+together--they can do that now. They could do it before this
+bill passed. They have been--they have had that open to them
+for a long time. Didn't reduce costs anywhere, it didn't get
+any more people covered. Now we have HSAs and the idea that you
+would have $5,000 to put into an account that you could start
+drawing out over the year for anybody making less than $40,000
+a year sounds like pretty much pie in the sky. I would like to
+hear from either Dr. Rowland or Dr. Nichols. Do you think
+either of those proposals will significantly improve the number
+of covered people in this country, reduce the number of covered
+people in this country?
+ Mr. NICHOLS. Well, sir, I actually testified on AHPs a year
+ago before the Senate Small Business Committee, and I think it
+is fair to say that there is a lot of passion on this issue and
+relatively little light. I will tell you what I believe. I
+believe that benefit mandates are real. They do add to costs.
+They don't add as much to costs as the advocates of AHPs
+believe.
+ If you look at the study done by the Department of
+Insurance in the State of Texas, which is not known to be a
+left-wing bastion, they concluded that their benefit mandates,
+which include inpatient mental, which, as you know, is one of
+the more expensive--the full month thing for alcohol and
+substance abuse. They concluded their benefit mandates added
+about 3 percent to the premium. Now, 3 percent is no small
+number when you are talking about premiums that are $9,000,
+$10,000. I don't want to imply it is trivial and if you are a
+small business on the cusp. That can make a difference, but
+that is not the kind of belief that I think a lot of people who
+advocate AHPs hold.
+ So, I think there is kind of a search, if you will, with
+all due respect, for fool's gold there. They are looking for
+savings that aren't really there, because at the end of the day
+they are going to have to pay the same costs everybody else
+does. What is driving cost is technology.
+ Mr. MCDERMOTT. It is the waste, fraud, and abuse sort of
+argument. That is what they are looking for.
+ Mr. NICHOLS. Well, sir, I believe that they are sincere. In
+some cases I think they do think that it is that nasty
+insurance company middleman that somehow thinks there are costs
+there to be taken that are not.
+ Mr. MCDERMOTT. Well, but when a State legislature requires
+that supplies for the diabetic patient be paid for, the number
+one chronic disease in the United States, the hospitalization
+costs, all the problems that come, all the disability costs
+that come out of uncontrolled diabetes, do you think that that
+is a wasteful effort on the part of the State legislature?
+ Mr. NICHOLS. No. I believe a number of studies have found
+that even if you didn't have specific things mandated, as you
+know, most physicians who are going to try to get their
+patients the right care, which is true everywhere, are going to
+find a way to make what is needed covered. So, that is part of
+the reason, by the way, the benefit mandates studies don't find
+all that much of a cost increase, because the reality is they
+are getting that stuff anyway, and they are going to get it.
+What you don't get if you don't have mandates are things like
+in-vitro fertilization and in some cases maternity care, which
+is not sold in the nongroup market as a matter of course.
+ Ms. ROWLAND. I would also point out that while we have
+talked about the diversity in uninsured, the diversity of small
+businesses in America is also something that you have to take
+into account. The majority of the small businesses that don't
+offer health insurance coverage tend to have a very low-wage
+work force where I think some of these efforts would be far
+less effective than in areas where the work force has a higher
+income. We have begun to start doing some modeling of the HSAs
+to see what the take-up rate might be and hope to have those
+results in a few weeks.
+ Mr. MCDERMOTT. I would like to see them when you have them
+done. Thank you, Madam Chair.
+ Chairman JOHNSON. I hope you will also model the HSAs,
+because the----
+ Ms. ROWLAND. Actually, it is the HSAs that we are modeling.
+ Chairman JOHNSON. The other proposals do get small business
+out from under State mandates the very way big business is out
+from under State mandates. The fact that big business offers
+roughly the same spectrum of benefits indicates that mandates
+aren't the key difference. On the other hand, all the little
+different mandates in high-mandate States do mean that you have
+to insure to a higher standard. In Connecticut, which is a
+high-mandate State, I am being told over and over again we
+could cut premiums 10 percent if we could choose of the
+mandates the basic ones that everybody offers.
+ So, while we don't know exactly what it will cost, the idea
+that I am bound by what the legislature does--and the
+legislature is going to do what is politically useful--is a
+problem. Then don't underestimate the power of bargaining. The
+big difference between these associated health plans or the
+HSAs is that you are going to have an employer group bargaining
+price, and your charts say loud and clear what a big difference
+that makes.
+ So, as you look at HSAs, one of the things about HSAs that
+could make a huge difference is employer creativity and being
+able to add more in a good year and less in a poor year so that
+they are not obliged. With a rollover capability, they can even
+have some variation of benefit depending on catastrophic
+problems or big health problems.
+ So, there are a lot of permutations of HSAs. People will
+have a lot more control over what they look like, both the
+employees and the employers. So, it is hard to model, but I
+think we do need to think about it. What I want to ask you is
+do we know anything at all about how many of the--what
+percentage of the uninsured have a health problem during their
+spell of uninsurance by group; the under 4 months, 4 months to
+12? Obviously, people who are uninsured for 12 months, of
+course, will access the system.
+ Mr. MELNICK. The Institute of Medicine study reported
+statistics of 62 percent of the uninsured use health services
+while they are uninsured, about 1 in 30 use inpatient care, and
+about 1 in 15 use the emergency room, and a higher percent use
+physician services as well.
+ Chairman JOHNSON. This includes the long-term uninsured as
+well?
+ Mr. MELNICK. Correct.
+ Chairman JOHNSON. Do we have any breakdown?
+ Mr. MELNICK. I can get you that.
+ Chairman JOHNSON. If you will get that to me, I would be
+interested in that.
+ [The information follows:]
+
+Health Services Utilization and Spending by the Uninsured
+ The uninsured, while they use fewer services than the uninsured,
+still use health services during periods without health insurance
+coverage. Several researchers 1,}2 have utilized the Medical
+Expenditure Panel Survey (MEPS) to study and compare utilization
+patterns for the uninsured and insured populations. Provided below are
+three tables based on 1996 data from this prior research to provide a
+picture of utilization and spending patterns of the uninsured (for
+different time periods) compared to the insured.
+
+Probability of Using Health Services
+ Table 1 presents data comparing the probability of using different
+kinds of health services depending on whether an individual is insured
+or uninsured for a full year. In general, the insured have a higher
+probability of using all health services, except for hospital emergency
+care. A number of other key findings include:
+ For under-65 population, 89% of the people who were privately
+insured for the full year in 1996 used at least one health service,
+compared to 62% of the people who were uninsured for the full year in
+1996.
+ 4.6% of privately insured population used inpatient hospital
+services compared to 2.9% of the uninsured.
+ The percentage of privately insured population was more than double
+compared to the percent of uninsured population using services such as
+Outpatient hospital (13.4% vs. 6.2%) and Dental (53.1% vs. 20.4%).
+ A larger portion of privately insured population used preventive
+care services compared to the uninsured.
+
+Total Spending and Out of Pocket Spending
+ Table 2 presents data on total spending from all sources on behalf
+of the insured and uninsured and out of pocket spending by the insured
+and uninsured. The estimates of per capita medical care spending are
+for the under-65 population and include estimates of the uninsured for
+an entire year or part of a year. A number of key findings include:
+ Total per-capita spending for the uninsured (for the entire year)
+was about $923 per person compared to $2,484 per person for privately
+insured and $2,435 per person for publicly insured.
+ Total per capita spending on behalf of the uninsured (for the
+entire year) was substantially below the insured population--about 38%
+of the total spending by an insured person.
+ For the uninsured population (including those uninsured for the
+entire year or part of the year), total per-capita spending on medical
+was about $1,335 per person
+ This represents about 54% of total per-capita spending compared to
+an insured person.
+ Average per capita out-of-pocket spending for an uninsured (for a
+full year) person was $426 compared to $402 for a privately insured for
+the entire year.
+ Out of pocket spending by the uninsured was not substantially
+different from the insured population in 1996.
+
+Financial Burden
+ A final measure of the effects of being uninsured is the financial
+burden of out-of-pocket spending on uninsured families. Table 3
+presents estimates of the percent of privately insured and uninsured
+families that spent greater than 20% of their annual income on health
+care in 1996. A number of key findings include:
+ Overall, about 4% of the uninsured families and about 1.1% of the
+privately insured families spent greater than 20% of their family
+annual income on health care.
+ For poor families (income less than or equal to Federal poverty
+line), and for low income families (125-200 percent for Federal poverty
+line), a greater portion of the privately insured families spent more
+than 20% of their annual income compared to those that were uninsured.
+References
+ \1\ Taylor, Amy K., Joel W. Cohen, and Steven R. Machlin. 2001.
+Being Uninsured in 1996 Compared to 1987: How Has the Experience of the
+Uninsured Changed Over Time? Health Services Research 36(6, Pt. II):
+16-31.
+ \2\ Hadley, Jack and John Holahan. 2003a. How Much Medical Care Do
+the Uninsured Use and Who Pays for It? Health Affairs Web Exclusive
+(1): W66-W81
+
+Tables
+
+[GRAPHIC] [TIFF OMITTED] T3794A.037
+
+[GRAPHIC] [TIFF OMITTED] T3794A.038
+
+[GRAPHIC] [TIFF OMITTED] T3794A.039
+
+
+
+
+ Chairman JOHNSON. Then the other thing that does continue
+to frustrate me, How much do you know about--there is money in
+the system now for the uninsured, and you have talked about
+Medicaid money and SCHIP money. States are cutting back on
+Medicaid, in case you didn't notice. The Federal government's
+budget is stressed. I believe budgets are going to be stressed
+at both the local and the State level, no matter which party is
+in power, for at least a decade, if not for 20 years. So, I am
+not optimistic about solving this through annually appropriated
+programs.
+ I am interested that the President put 70 billion dollars
+in over 10, even in this year's budget for the uninsured. So,
+there is some money allocated to this. In none of this
+conversation--this is exactly the same hearing we had 2 years
+ago, and yet this Administration has committed itself to and is
+methodically doubling the number of community health centers,
+and they expect that next year, with the additional allocation
+they are putting in, that they will be providing total coverage
+for 15 million uninsured and underserved individuals. About 7
+million of these are in rural areas.
+ We need to know what is happening as these expand. Who is
+being served? Are they Medicaid people? Are they SCHIP people?
+Are they uninsured? Are they underinsured? Not to know that
+does really weaken our ability to move forward. There are so
+many urban areas in which there are outstanding multiservice
+clinics, and they do mental health, and they do dental. So, why
+is it we have completely neglected in our study of the
+uninsured who is going there?
+ Now, what do we know about disproportionate share hospital
+(DSH) payments? How effective are DSH payments? Are they just
+actually covering overhead for some of these people that you
+charge who it turns out are paying more than any average bloke,
+more than any other payer? So, what do we know about DSH money?
+It is big, and we give it to a hospital in ways unrelated to
+the burden they carry. So, what do we know about that money?
+What do we know about indirect medical education money and its
+relationship to uninsured?
+ So, I hope that, given your resources, you will help us
+narrow this problem beyond the kind of definition we have given
+it today, because the debates to this point have covered
+exactly the kinds of things we have talked about today. Clinton
+laid down the challenge to the Congress to provide universal
+health care to all Americans. There was a bipartisan bill,
+Rowland and Michel, that met that challenge and had a majority
+vote, and that is why it was not allowed to come to the floor
+of the House. It covered everybody. That last segment it
+covered through means tested premiums so everyone would have
+access, but it did a number of other things.
+ So, it isn't that we haven't thought about this a lot at
+the Federal level. We have. It is hard, because nobody
+understands the interactions of what happens at the end if we
+subsidize premiums. I have been amazed at how many small
+companies I represent, small manufacturers, where the employee
+pays 50 percent of the premium. That is tough. So, we need to
+be thinking more clearly about how do we reach and how do we do
+it in an affordable way, and how do we do it to encourage
+modest use of our resources.
+ I am surprised that you haven't talked more about consumer
+involvement. One of the things that is dramatic about disease
+management--and I want to commend the Administration right here
+and now for offering to pay half the cost of implementing
+disease management programs in Medicaid because they pay back
+so fast. It will be budget neutral for the States in a year or
+two. It is just astounding for people with chronic illness. We
+need to think about this problem: Who is it that is uncovered
+that needs help, where do they live, who could they go to? Do
+we need a combination of community health center expansion and
+special payments for physicians in rural areas who just take
+all the people who are uncovered?
+ We need to think more specifically about the nature of this
+problem. I appreciate your input. It has been very good. It has
+been broad, and it has brought back to the table the basic
+research and state of knowledge about this issue in America. It
+isn't exactly the information that can drive specific
+solutions. If we are going to do specific solutions, we need to
+think about the next step. I hope to have your help in doing
+that. Thank you very much for being here. The hearing is
+adjourned.
+ [Whereupon, at 4:00 p.m., the hearing was adjourned.]
+ [Submissions for the record follow:]
+
+ Statement of AdvaMed
+
+ AdvaMed is pleased to provide this testimony on behalf of our
+member companies and the patients and health care systems we serve
+around the world. AdvaMed is the largest medical technology trade
+association in the world, representing more than 1100 medical device,
+diagnostic products, and health information systems manufacturers of
+all sizes. AdvaMed member firms provide nearly 90 percent of the $71
+billion of health care technology products purchased annually in the
+U.S. and nearly 50 percent of the $169 billion purchased annually
+around the world.
+ AdvaMed shares the concerns of the Members of Congress, the
+Administration and millions of working Americans about the number of
+people in our country lacking access to affordable health insurance
+today. Our nation enjoys the best health care system in the world, and
+everyone should have full access to it. While today's market-based
+system provides insurance coverage to the majority of Americans, and
+along with it access to most of the latest, breakthrough technologies,
+some 43 million Americans are currently uninsured.
+The Benefits of Access to Health Care Insurance and Advanced Treatment
+ In addition to the personal benefits to securing individual
+insurance, there are also larger benefits to the health care system and
+society for reducing the number of uninsured. An Institute of Medicine
+(IOM) report published in June 2003 estimated that the benefits from
+health years of life gained by providing continuous insurance coverage
+are greater than the social costs of providing it. Specifically, the
+report estimated the potential economic value from better health
+outcomes from uninterrupted coverage is between $65 and $130 billion
+each year.
+ A paper published by David Cutler and now FDA Commissioner Mark
+McClellan in the Sept/Oct 2001 Health Affairs noted the net benefits of
+new technology for several conditions, including cataracts, depression
+and heart attacks. A review of the findings estimates that more than
+$1.1 billion is lost annually from lack of access to new technologies
+for treatment of the three specific conditions--an annual loss of
+around $350 in excess morbidity and mortality per uninsured person in
+the age group studied.
+
+Incentives to Help Make Insurance Coverage More Affordable
+ To bridge the current gaps in insurance coverage, AdvaMed has
+consistently supported maintaining tax incentives to encourage
+companies to offer health benefits to their employees--including
+refundable tax credits similar to Trade Adjustment Assistance (TAA)--as
+well as expanding tax incentives to allow individuals to more
+affordably purchase coverage. As supporters of market-based health care
+and competition, AdvaMed also believes consumers should have a wide
+choice of health plans and coverage options that allow them to select
+those that best fit their needs.
+ To expand the number of choices available, AdvaMed supports the
+creation of Individual Membership Associations or Association Health
+Plans to allow groups to leverage size for more affordable health
+options, as well as the expansion of Health Savings Accounts, which
+have already helped address the insurance needs of a select group of
+previously uninsured Americans. To address the many problems facing
+individuals with uninsurable medical conditions, AdvaMed also supports
+efforts to encourage states to offer ``risk pools'' that help them
+access insurance that will meet their complex and costly health care
+needs.
+
+Innovation Also Helps Reduce Health Care Costs and Makes Coverage More
+ Affordable
+ America is undergoing a revolution in medical technology. Through
+advances in technology we can detect diseases earlier when they are
+easier and less costly to treat, provide more effective and less
+invasive treatment options, reduce recovery times and enable people to
+return to work much more quickly. Medical technology has advanced to
+the point where it is fundamentally transforming our health care system
+in ways that improve quality and reduce costs. For example:
+
+ Three types of laparoscopic surgery have generated
+approximately $1.9 billion annually in increased productivity by
+enabling people to return to work more quickly, according to a study by
+DRI-McGraw Hill.
+ Angioplasty and other minimally invasive heart
+procedures, for example, have greatly reduced the need for riskier,
+more expensive heart bypass procedures. An angioplasty procedure costs
+$20,960 on average, compared to $49,160 for open-heart surgery.
+Surgeons can complete an angioplasty procedure in 90 minutes compared
+to 2-4 hours for open bypass surgery. Patients can leave the hospital
+in one day instead of 5-6 days, and recovery only takes one week rather
+than 4-6 weeks for bypass.
+ Total knee replacement produces an average one-time
+health care cost savings of $50,000 per patient; a savings of $11.5
+billion in 1994 alone, according to the American Academy of Orthopedic
+Surgeon (AAOS).
+
+ An article in the Washington Post highlights another of the many
+advances transforming health care delivery: a health care information
+system that alerts doctors at Brigham and Women's hospital to
+potentially dangerous medical decisions. The system has cut the
+medication error rate at Brigham by 86% compared to 10 years ago.
+ Information systems like these can dramatically improve the safety
+and efficiency of health care delivery and help reduce health care
+costs. Automation in the insurance industry alone could save an
+estimated $20 billion. That is why both the President's Information
+Technology Advisory Committee and the Institute of Medicine report on
+health care quality have stressed the need for a new health information
+infrastructure.
+ Steady declines in mortality rates, medical procedure times,
+hospital stays and patient recovery times all illustrate the emergence
+of the New Health Economy. Gains in workforce productivity and
+accelerating declines in disability rates point to this shift as well.
+ In order to reap these benefits, advanced medical technologies must
+be rapidly assimilated into the health care system. The Institute of
+Medicine's report, ``Crossing the Quality Chasm,'' underscored this
+point, stating: ``Narrowing the quality chasm will make it possible to
+bring the benefits of medical science and technology to all Americans
+in every community--and this in turn will mean less pain and suffering,
+less disability, greater longevity, and a more productive workforce.''
+Conclusion
+ Again, AdvaMed applauds Congress for addressing the many needs of
+the uninsured in America. We look forward to working with the Congress
+and the Administration on efforts to help increase access to affordable
+coverage, as well as improve the quality, efficiency and cost
+effectiveness of the health care system through innovative medical
+technology.
+
+
+
+ Statement of Catherine M. Murphy-Barron, American Academy of Actuaries
+
+ The American Academy of Actuaries' Uninsured Work Group appreciates
+the opportunity to provide comments on issues concerning Americans
+without health insurance. The Academy is the non-partisan public policy
+organization for actuaries of all specialties in the United States.
+ The U.S. Census Bureau estimates that more than 43 million non-
+elderly Americans did not have health insurance in 2002, an increase of
+more than 2 million from 2001. A solution to the uninsured problem has
+so far been elusive, but the issue is again moving to center stage. The
+actuarial profession has extensive experience designing, pricing, and
+managing health insurance coverage for individuals, employers, and
+public programs, including Medicare and Medicaid. As the actuarial
+profession's voice on public policy issues, the American Academy of
+Actuaries has many insights that may benefit members of Congress as
+they design proposals to provide health coverage to the uninsured.
+ This document identifies many, but not all, of the myriad issues
+that should be considered when designing and evaluating proposals to
+expand health insurance coverage. Addressing these and other issues
+should help minimize any unintended consequences and increase the
+chances for success of any such proposal. This document does not cover
+implementation or administration, both of which will be critical to the
+success of any new initiative. Rather, in the sections that follow, we
+identify issues related to: the target population(s); the benefit
+packages; the costs to individuals, employers, and states; the impact
+on the health insurance market; the impact on regulation; and the
+impact on overall health costs.
+Who Is the Target Population?
+
+ The uninsured population is not a homogeneous group. It includes,
+among others, low-income workers who do not have access to or cannot
+afford employer-sponsored coverage, early retirees not yet eligible for
+Medicare, adults who do not feel that insurance is a good way to spend
+their money (these people are often young, but not always), individuals
+ineligible for or unaware that they are eligible for public programs,
+and unhealthy individuals who cannot obtain insurance at any price.\1\
+A proposal could use a single approach to increase coverage among the
+uninsured, or it could use different strategies for different segments
+of the uninsured.
+---------------------------------------------------------------------------
+ \1\ For more information on who the uninsured are, see the American
+Academy of Actuaries issue brief Health Coverage Issues: The Uninsured
+and the Insured, which is available on the web at http://
+www.actuary.org/pdf/health/uninsured_0903.pdf.
+---------------------------------------------------------------------------
+Who is the target population?
+ What uninsured population subgroup(s) does the proposal
+target?
+ How well does the proposal target the intended group(s)?
+
+What is the expected participation among the intended group(s)?
+ Will other groups also participate? If so, are they
+currently insured or uninsured?
+ How will the eligible population be contacted and
+enrolled?
+
+What are the conditions of eligibility?
+ A proposal may offer direct insurance coverage through a public
+program such as Medicaid, a premium subsidy for use in the private
+insurance market, or some other approach.
+ Under what conditions does an individual or family member
+become eligible for coverage or premium subsidy under the proposal?
+ Is there a requirement to be uninsured for a certain
+period in order to be eligible for coverage?
+ How long will an individual or family member be eligible?
+ Is the proposed coverage meant to be permanent or
+transitional? For example, is eligibility tied to being unemployed? Is
+eligibility tied to ineligibility for other private coverage,
+regardless of cost?
+ If the proposal relies on public program expansions, how
+will the eligibility rules differ by state?
+ If the proposal relies on private coverage expansions,
+will plans be widely available, regardless of state or rural/urban
+location?
+
+What are the conditions of issue and is coverage portable?
+ The Federal Health Insurance Portability and
+Accessibility Act (HIPAA) provided Americans with increased access to
+health insurance.
+ Will the coverage offered under the proposal change an
+individual's HIPAA right to insurance without a pre-existing condition
+exclusion?
+ Does the proposal contain open enrollment periods with
+guaranteed issue?
+ What conditions, such as pre-existing condition
+exclusions, waiting periods, etc. will apply to uninsured individuals
+who wish to obtain coverage under the program?
+ Will those who are already insured but want to move into
+the new program be subject to any pre-existing condition exclusions,
+waiting periods, etc.?
+ If coverage eligibility is tied to certain requirements,
+such as being unemployed, are there any portability opportunities so
+coverage can be retained?
+
+What Is the Benefit Package?
+
+ The benefit package must be considered when evaluating proposals to
+provide health insurance coverage for the uninsured. Most insurance
+typically protects against catastrophic losses that occur with low
+probability. Employer-provided health insurance, however, has usually
+covered not only the expenses associated with high-severity, low-
+incidence health services, such as hospitalization, but also high-
+incidence, low-severity health services, such as office visits. One
+recent trend has been to move toward higher deductibles, thus reducing
+or eliminating coverage for more predictable health expenses. Another
+trend has been for some states to allow ``bare bones'' policies, thus
+avoiding state coverage mandates that can increase premium costs.
+
+What is the benefit design?
+ Does the proposal provide comprehensive coverage with
+relatively low deductibles similar to traditional health insurance, or
+does it provide benefits more closely associated with catastrophic
+coverage?
+ Will coverage abide by state-mandated benefit
+requirements or are ``bare bones'' policies allowed?
+ Is any required provider network adequate to meet the
+health care needs of plan enrollees?
+ How flexible is the benefit package to advances in
+medicine?
+ Does the benefit design include cost-sharing provisions
+designed to encourage efficient use of health care?
+ Will the benefit design allow an individual to pre-fund
+future insurance expenses (e.g., health reimbursement accounts)?
+
+What Are the Costs to Individuals/Families?
+
+ Many proposals to increase insurance coverage rely, at least in
+part, on the private insurance market. To make coverage in this market
+more affordable, proposals often provide subsidies that cover all or
+part of an individual's insurance premiums.
+
+Are premium subsidies proposed?
+ What are the premium subsidy levels? Are they expressed
+as a percentage of premiums or as a flat amount?
+ How do the subsidies vary by income or age? Do subsidies
+vary by income levels of the individuals within a state, or nationwide?
+ Will they reflect state premium variations?
+ How will the subsidies be distributed?
+ Will they be provided in advance, as a refund of costs,
+or both?
+ Where can individuals use their subsidies? Can they be
+used toward only one coverage plan, or toward any appropriate coverage
+the person may be eligible for?
+
+What are the net costs payable by individuals/families?
+ The cost of participating in an insurance plan includes
+not only the premium, but also any cost-sharing requirements. On one
+hand, high cost-sharing requirements will reduce premiums, all else
+being equal. On the other hand, some individuals, especially those with
+low incomes, may choose not to enroll in plans with high cost-sharing
+requirements, even if the premium would otherwise be affordable.
+ What is the premium required, net of any subsidies?
+ What is the deductible and are there any other cost-
+sharing requirements? Are there any cost-sharing subsidies for low-
+income individuals/families? Is alternative care available at no, or
+low, cost?
+ Is there an out-of-pocket maximum that limits the amount
+of cost sharing?
+ Are there any lifetime or annual benefit maximums? Are
+there any financial penalties imposed for not having coverage in place?
+
+Will insureds know the true costs of their health care?
+ Insurance shields most Americans from the true costs of their
+health care. Workers who obtain insurance through their employer
+typically pay only part of the premium, and may not know the total
+premium costs, including the employer premium share. Perhaps even more
+important, when receiving health care services, insured Americans
+typically see only their out-of-pocket costs, not the total costs
+billed or paid. Some data suggest that the lack of understanding
+regarding the total costs of care provides insureds with incentives to
+over utilize health services.
+
+ Will the proposal make insureds more aware of the total
+costs of their health care?
+ Does the proposal include incentives intended to
+encourage insureds to be more efficient users of health care services?
+
+What Is the Cost to Employers?
+
+ Although most insured Americans obtain their coverage through the
+workplace, the majority of the uninsured are in working families. Some
+employers, especially small employers, do not offer insurance.
+Moreover, many employers who do offer and subsidize coverage are
+responding to growing coverage costs by shifting more costs to workers
+through increased premiums or cost sharing, thus making it more
+expensive for workers. Many proposals aim to increase the share of
+employers offering coverage as well as increase the affordability of
+that coverage. Such proposals may include providing additional tax
+subsidies to employers offering coverage, mandating that employers
+offer coverage, providing reinsurance to employers to lower the costs
+of coverage, and facilitating the formation of purchasing pools for
+small employers. Whether such provisions would be successful at
+increasing the availability of employer-sponsored coverage and,
+ultimately, whether they will reduce the number of uninsured depends on
+several issues:
+
+Are tax subsidies available to employers who sponsor coverage?
+ Currently, employers who offer insurance coverage are allowed to
+deduct their premium contributions as a business expense.
+
+ Would any additional subsidies be available for employers
+who offer coverage?
+ Would employers be required to pay a minimum share of the
+premiums to qualify for the subsidies?
+ Would the subsidies apply to the costs for all workers,
+or would they be limited to those with low incomes, or other targeted
+populations?
+ What conditions, if any, are placed on the availability
+of additional subsidies? For instance, are certain benefits required?
+Are minimum enrollment targets included? Are employers required to pass
+along any premium savings due to subsidies to the employees?
+
+Does the proposal include other provisions designed to make it easier
+ for employers to offer coverage?
+ Does the proposal allow collective employer actions, such
+as purchasing pools or association health plans (AHPs)? \2\
+---------------------------------------------------------------------------
+ \2\ For more information on AHPs, please refer to the Academy's
+April 28, 2003 letter to Congress regarding the Small Business Fairness
+Act of 2003 (H.R. 660 and S. 545), which is available on the Academy's
+website at http://www.actuary.org/pdf/health/ahp_042803.pdf.
+---------------------------------------------------------------------------
+ Will reinsurance be made available to reimburse employer
+plans for high-cost individuals?
+ Does the proposal include some form of coverage sharing
+that would form a partnership among the employer, the government, and
+the insured?
+ Note that the potential impact of some of these types of
+provisions on the insurance market is discussed in the next section.
+
+What are the estimated net costs to employers and are they predictable
+ over time?
+ What are the premium costs to an employer affected by the
+proposal, net of any subsidies? Are they higher or lower than those
+currently available?
+ What are the associated administrative costs? Are they
+higher or lower than current administrative costs?
+ Are premium costs more predictable over time?
+ Are there any costs for employers who do not offer
+coverage, or otherwise do not participate in the proposal?
+
+Are new subsidies available for insurance outside the employer group
+ market?
+ Proposals that increase the availability or affordability of
+insurance outside the employer group market could also impact whether
+some employers continue to sponsor coverage, regardless of whether any
+changes are made to the employer market. For instance, if subsidized
+insurance is available in the individual market, some employers may be
+less inclined to offer coverage to their workers.
+
+ Does the proposal increase the availability or
+affordability of coverage outside the employer group market?
+ Could the proposal prompt some employers to discontinue
+offering coverage for workers and/or their dependents? Is this
+consistent with the long-term goals of the proposal?
+ Does the proposal include any incentives for employers to
+continue offering coverage?
+ If workers can use individual tax credits to pay for
+their share of employer-sponsored coverage premiums, will employers
+shift more of the premium costs to workers?
+How Will the Proposal Impact the Health Insurance Market?
+
+How will the proposal affect the different private insurance market
+ segments (small group, large group, and the individual market)?
+ There is not a single unified market for private health insurance.
+The three main segments are: large (employer) group, small (employer)
+group, and individual. There are major differences in the underwriting
+and pricing of the coverage in these three markets. These differences
+are due to competition, the regulatory environment (primarily state),
+and to the fundamental purchasing decisions made in the different
+markets.
+ Large-group insurance (generally over 50 employees) is driven more
+by competition than by regulation, at least in the underwriting and
+pricing functions. Insurers generally accept any employer and provide
+coverage to any enrolled employee or family. Prices are set at the
+group level and typically are based in whole or in part on the prior
+and expected medical costs of the specific group. An average price is
+charged for each employee and family unit, without variation for age,
+gender, or health status. Larger employers often self-insure the
+underwriting risk. State benefit and coverage mandates apply to the
+insured groups but not to the self-insured groups due to exemption
+under the Employee Retirement Income Security Act of 1974 (ERISA).
+ Small-group insurance (2 to 50 employees) is subject to
+significantly more state regulation of the rating and underwriting
+practices. All groups and eligible employees must be offered coverage
+regardless of health status. Surcharges based on health status for
+individual employees are not permitted. Premiums charged for each
+employee may be either the average of the group or based on the age and
+gender of the specific employee. Some states mandate community rating,
+whereby an insurer is required to pool the medical cost experience of
+all small groups in determining the expected average medical costs and
+premiums. The average rates serve as the basis of the rates charged to
+a specific employer. State variations often set limits on the maximum
+or minimum difference from this average, and also on the percentage
+rate increase an employer must pay in a given year due to experience.
+For example, the minimum may be 75% of the average, the maximum may be
+150%, and the rate increase limit is the increase in the average plus
+15%.
+ The individual insurance market is tightly regulated. Rating
+practices permitted by the states vary from community rating to full
+age/gender rating with initial underwriting loads (extra premiums)
+permitted. Many states permit individuals to be denied coverage due to
+poor health, or to have specific pre-existing conditions excluded for
+the life of the policy. Other states require that all applicants be
+accepted and all conditions covered. In most states, renewal rate
+change to reflect the change in an individual's health status is not
+permitted. However, the rates for the entire pool, both new and renewal
+business, may be increased to reflect the experience of the pool. A
+sub-segment of the individual market is composed of those who are
+guaranteed coverage regardless of health. In some states the entire
+market is guaranteed issue. This guaranteed issue right comes under the
+state group conversion regulations or under the federal HIPAA
+portability provisions. Although coverage must be offered to these
+individuals, the premium rates charged are typically higher than the
+rates for underwritten individuals. The excess premium charges may or
+may not be regulated by the state.
+
+ Does the proposal change the underwriting methodology
+allowed in the different markets?
+ Does the proposal increase or decrease the risks to be
+borne by any of the private market pools?
+ Does the proposal change any ERISA exemptions for
+employers that self-insure coverage?
+ Does the proposal give flexibility to both the insured
+and the insurer to provide products appropriate to the risk the insured
+wants to cover?
+ Will the proposal allow insureds to move between markets?
+
+Will the proposal affect the risk composition of the insured
+ population?
+ Different insurance expansions can affect the insured-risk
+composition of the market differently. Proposals that remove the high-
+cost or otherwise uninsurable population from the individual and group
+markets and put them into a high-risk pool will reduce the coverage
+costs of the remaining population. The resultant lower premiums could
+make insurance more affordable among some of the currently uninsured.
+Similarly, if reinsurance is provided to insurers to cover the costs of
+high-cost enrollees, premiums could be reduced. Note, however, that
+such high-risk pools and reinsurance arrangements are mechanisms to
+spread cost, not eliminate it, and will reduce premiums only to the
+extent they are financed by a population broader than the privately
+insured population.
+ On the other hand, if healthy individuals are more likely to drop
+one type of coverage for another, premiums for those remaining with the
+original coverage will increase. Some may find the higher premiums
+unaffordable, and drop coverage as a result. Insurance plans that are
+left with a disproportionate share of unhealthy individuals are much
+less likely to be viable in the long term, which could ultimately
+result in more uninsured individuals if those dropping coverage are
+unable to find more affordable coverage elsewhere.
+
+ Does the proposal include high-risk pools, and if so, how
+are they financed?
+ Does the proposal provide reinsurance to cover the costs
+of high-cost enrollees, and if so, how is it financed?
+ Other than into high-risk pools, will the proposal result
+in healthier individuals opting for one type of plan and unhealthy
+individuals opting for another? If so, is this the desired result?
+
+Is adverse selection manageable?
+ Sustaining a viable private health plan typically requires
+minimizing adverse selection, which occurs when relatively fewer
+healthy individuals enroll in a plan. However, this adverse selection
+is the norm in a high-risk pool. Therefore, it is important to consider
+the health characteristics of those who will become newly insured. In
+particular, will only the unhealthy choose to participate, or will the
+healthy participate as well? If this segmentation occurs, is it planned
+for in the proposal? Under a private group type plan the key to
+minimizing adverse selection is to increase participation, especially
+among healthy individuals. This can be accomplished through various
+means, including high premium subsidies, automatically enrolling
+eligible participants, and requiring higher premiums and/or other
+penalties for those who delay enrollment.
+
+ Do insurance subsidies or other incentives encourage
+enrollment among not only the unhealthy but also the healthy?
+ Does the proposal require the individual to obtain
+coverage?
+ Does the proposal require an employer to provide
+coverage?
+
+Are risk-sharing provisions included?
+ In the absence of universal coverage, some degree of adverse
+selection is inevitable and should be planned for. Risk adjustment and/
+or other types of reinsurance arrangements can reduce the incentives an
+insurer might have to avoid enrolling high-risk individuals. For
+instance, risk adjustment would adjust the payments to insurance plans
+to account for the health status of plan participants. As mentioned
+above, reinsurance is another option to limit insurers' downside risk.
+Under aggregate reinsurance, all or a percentage of a plan's total
+claims exceeding a predetermined threshold would be reimbursed.
+Individual reinsurance can reimburse a plan for high claims from
+individual plan participants.
+
+ Does the proposal include risk adjustment to reduce the
+incentives among insurers to avoid high-risk individuals?
+ Are reinsurance provisions included?
+
+What Are the Costs to States?
+
+ Medicaid and coverage under the State Children's Health Insurance
+Program (SCHIP) are not reaching all the people they are designed to
+serve for many reasons. With state budget deficits increasing, states
+may have modified their Medicaid and SCHIP programs to reduce costs.
+These cost reductions have been in the form of increased eligibility
+requirements or the termination of eligibility categories, decreased
+benefits or provider fee schedules, and more aggressive contract
+negotiations with managed care plans that may administer a state's
+Medicaid or SCHIP program. Managed care plans may in turn withdraw from
+providing Medicaid or SCHIP coverage.
+
+ Will the proposal increase Medicaid or SCHIP coverage
+through increased benefits, provider fee schedules, decreased
+eligibility requirements, or new eligibility categories?
+ Will the proposal increase or decrease the financial
+burden to states and the federal government?
+
+Will enrollment in public programs increase?
+ Implementing broader outreach programs to reach those who are
+eligible for public programs but do not know it may decrease the
+current number of uninsureds.
+
+ How does the proposal address bringing greater awareness
+of Medicaid and SCHIP programs to those who are eligible?
+ Will administrative language and cultural barriers be
+reduced so that Medicaid and SCHIP enrollment will be more efficient
+and effective?
+What Is the Impact on Regulation?
+ Individual states are responsible for regulating the individual,
+small--and large-group insurance markets and monitoring the financial
+solvency of insurance companies. ERISA controls many aspects of self-
+funded programs provided by larger employers.
+
+ Will the proposal affect each state's ability to regulate
+its local insurance market?
+ Will the proposal reduce or increase an individual
+state's regulatory burden?
+ Which states will have to increase/decrease their
+regulatory activities as a result of the proposal?
+ Will ERISA need to be modified to allow any changes
+required under the proposal?
+ Can the federal government handle any new requirements?
+
+How Will the Proposal Be Funded?
+ Proposals that include public program expansions or subsidies for
+private insurance coverage will need to be funded by state and/or
+federal revenues. Consideration of funding sources should also include
+an analysis of the sustainability of the funding over a relevant period
+of years and the proposal's impact on administrative costs.
+
+How will funding be provided?
+ Federal government
+ State governments
+ Individuals (e.g., taxpayers, program participants,
+uninsured, etc.)
+ Employers (e.g., insured, self-insured, not currently
+offering insurance, etc.)
+
+Will funding be on an annualized basis or will it include long-term
+ funding mechanisms?
+
+What Is the Impact on Overall Health Costs?
+ According to the Centers for Medicare and Medicaid Services (CMS),
+the United States spent $1.6 trillion on health care in 2002 or 14.9
+percent of gross domestic product (GDP). CMS projects spending to
+increase to $3.4 trillion, or 18 percent of GDP, by 2013. Because
+rising health expenditures have contributed to insurance being less
+affordable and less available, managing the growth in health care costs
+is key to long-term solutions for reducing the number of uninsured.
+Medical malpractice reform, better contract negotiations with health
+care providers, more consumer awareness of the cost of healthcare, and
+others have all been suggested as potential ways to stem this growth.
+
+ How will the proposal address the rising costs of health
+care?
+
+Conclusion
+ Whether a proposal to reduce the number of uninsured is successful
+depends on many factors. We have tried to present many, but by no means
+all, of the issues that need to be considered as Congress drafts and
+evaluates proposals to extend health insurance coverage to the
+uninsured. Addressing these issues will improve the likelihood that
+such proposals will have a significant affect on reducing the growing
+number of Americans who lack health insurance coverage.
+
+
+
+ Statement of the American College of Physicians
+
+ The American College of Physicians (ACP), representing more than
+115,000 internal medicine physicians and medical students, is the
+nation's largest medical specialty organization and second largest
+medical association. The ACP commends Chairwoman Nancy Johnson for
+addressing the causes and consequences of lack of health insurance.
+Understanding who the uninsured are and why they lack health insurance
+is a critical first step to formulating policies that ensure this
+increasing segment of the population can access quality health care.
+ The advanced science, technology, and practice of American medicine
+is admired throughout the world. Americans with access to health care
+benefit from widely available preventive care, state-of-the-art
+equipment, and accomplished practitioners. However, the benefits of
+American medicine are less available to those who lack health insurance
+coverage. Individuals without health insurance coverage are less likely
+to have a regular source of care, more likely to delay obtaining needed
+medical care until a later and more advanced stage of disease, and more
+likely to obtain care in more costly emergency centers rather than in a
+physician's offices. For these patients, the benefits of the best
+medical services in the world are not fully realized.
+
+Rising Numbers of Uninsured Americans
+ Tough economic times and soaring health care costs have compromised
+access to the health system. As unemployment rises, states cut back on
+the number of people eligible for public insurance programs. At the
+same time, employers reduce benefits, shifting a larger share of health
+care costs to employees, or simply discontinue offering health
+insurance coverage. After increasing by roughly a million people each
+year throughout most of the 1990s, the number of uninsured now exceeds
+43 million persons, representing more than 17 percent of the U.S.
+population under age 65.\1\ Those most likely to lack health insurance
+continue to include young adults in the 18-to-24-year-old age group,
+people with lower levels of education, people of Hispanic origin, those
+who work part-time, and the foreign born.
+---------------------------------------------------------------------------
+ \1\ U.S. Census Bureau. Current Population Reports: Health
+Insurance Coverage in the United States: 2002. September 2003.
+---------------------------------------------------------------------------
+Health Consequences of Being Uninsured
+ A popular myth exists that not having health insurance is merely an
+inconvenience. The myth asserts that anyone can go to an emergency room
+or free clinic and get care. To help dispel this myth and prove that
+lack of health insurance is a serious health threat, ACP conducted a
+literature review of over 1,000 documents published over the last ten
+years linking health insurance coverage with the utilization of health
+care services and individual health outcomes. The College's 2000
+report, No Health Insurance? It's Enough to Make You Sick, verified
+that the uninsured experience reduced access to health care and tend to
+live sicker and die younger than people with health insurance. Evidence
+from the available medical and scientific literature indicates that:
+
+ Uninsured Americans experience reduced access to health
+care;
+ Uninsured Americans are less likely to have a regular
+source of care;
+ Uninsured Americans are less likely to have had a recent
+physician visit;
+ Uninsured Americans are more likely to delay seeking
+care;
+ Uninsured individuals are more likely to report they have
+not received needed care;
+ Uninsured Americans are less likely to use preventive
+services;
+ Uninsured Americans experience poorer medical outcomes;
+ Uninsured Americans experience a generally higher
+mortality and a specifically higher in-hospital mortality;
+ There is a disproportionate representation of racial and
+ethnic groups among the uninsured;
+ Uninsured Americans may be up to three times more likely
+than privately insured individuals to experience adverse health
+outcomes;
+ Uninsured patients are up to four times as likely as
+insured patients to require both avoidable hospitalizations and
+emergency hospital care.
+
+ More specifically, ACP found that uninsured working-age adults are:
+
+ More likely to go without care that meets professionally
+recommended standards for managing chronic diseases, such as timely eye
+exams to prevent blindness in persons with diabetes;
+ Less able to access medications needed to manage
+conditions like hypertension or HIV;
+ Less likely to receive appropriate cancer screening,
+resulting in delayed diagnosis, delayed treatment, and premature
+mortality; and
+ More likely to have avoidable medical crises and
+emergency hospitalizations from untreated conditions.
+
+ A separate study, funded by ACP to raise awareness about the
+uninsured found that high proportions of uninsured adults were not
+receiving needed medical care. The study examined 1997 and 1998 survey
+data for more than 220,000 adults between the ages of 18 and 64 from
+the Centers for Disease Control and Prevention's Behavioral Task Force.
+Highlights from this study, which was published in the Journal of the
+American Medical Association,\2\ include:
+---------------------------------------------------------------------------
+ \2\ Ayanian J, Weissman J, Schneider E, Ginsburg J, and Zaslavsky
+A. Unmet Health Needs of Uninsured Adults in the United States. JAMA.
+October 2000; 284 (16): 2061--2069.
+
+ About 14 percent of respondents lacked health insurance
+and 10 percent had gone without health insurance for an entire year.
+ Nearly two-fifths of long-term uninsured and one-third of
+short-term uninsured adults reported they were unable to see a
+physician within the last year due to costs.
+ Of the long-term uninsured, nearly 70 percent of those in
+poor health and nearly 50 percent of those in fair health reported
+being unable to see a physician in the previous year due to cost.
+ Those who reported excellent or very good health were two
+to three times more likely to have health insurance.
+ For highly recommended preventive services, long-term
+uninsured adults (those that were without health insurance for more
+than one year) were three and a half times less likely to receive
+cardiovascular risk reduction services such as hypertension and
+cholesterol screening; 25 percent less likely to have had a mammogram;
+and three to four times less likely to have had a screening for breast
+cancer.
+ Clinical risk groups for the long-term uninsured reported
+being unable to see a doctor when they needed due to cost during the
+past year including: 37 percent of smokers, one-third of the obese, 40
+percent for hypertension, 46 percent of diabetics, and 37 percent with
+elevated cholesterol.
+ One in five of the short-term uninsured in these same
+risk groups reported encountering the same obstacles.
+ One quarter of the long-term uninsured had not received a
+routine check up in the last two years in high-risk groups reporting
+hypertension, diabetes and elevated cholesterol.
+ Nearly half of the long-term uninsured women and 40
+percent of short-term uninsured women reported being unable to see a
+doctor when needed during the last year (versus 30 percent and 22
+percent of men.)
+ Long-term uninsured women aged 50-64 were three times
+less likely than insured women of the same age to have received a
+mammography or clinical breast exam; long-term uninsured women between
+ages 18 and 64 were three times as likely not to have obtained a pap
+smear within the last three years.
+ Nearly 20 percent of the self-employed had been uninsured
+for greater than one year; another 5 percent had been without insurance
+for some period within the last year.
+ Nearly 40 percent of the employed long-term uninsured and
+30 percent of the employed short-term uninsured reported being unable
+to see a doctor when needed during the last year.
+ In contrast to federal and state government efforts to
+extend affordable health care coverage to children, nearly 33 million
+adults continued to lack a cohesive plan to address their needs.
+Economic Costs of Being Uninsured
+ One of the principal obstacles to enactment of legislation to
+expand health insurance coverage to all Americans is the belief that
+the cost would be enormous and unaffordable. In a forthcoming paper,
+The Cost of the Lack of Health Insurance, ACP documents the extent of
+what is known about the aggregate economic costs to the United States
+of maintaining a considerable uninsured population. By illustrating
+that the United States already spends an enormous amount on health care
+for the uninsured, both in terms of the direct costs of services
+provided and the indirect costs to society of having individuals forego
+or delay receipt of needed health care, the paper counters the claim
+that the cost of extending coverage to the uninsured is prohibitive.
+ Following an extensive review of the current literature, ACP found
+that the most integral cost estimate of the uninsured takes into
+account multiple factors, some more quantifiable than others. There are
+the direct costs borne by the health care system for treating the
+uninsured, whose care is often more expensive than the insured since
+the uninsured tend to receive treatment in the emergency department and
+lack preventive care. These costs must be absorbed by providers as free
+care, passed on to the uninsured via cost shifting and higher health
+insurance premiums, or paid by taxpayers through higher taxes to
+finance public hospitals and public insurance programs. Estimates of
+the direct costs of the uninsured found in the literature include:
+
+ The uninsured receive as much as $98 billion in medical
+care, $35 billion of which is considered uncompensated, a year.
+ Total government spending in the name of the uninsured is
+about $30 billion a year.
+ Hospitals provide about $24 billion worth of
+uncompensated care a year.
+ Physicians spend about $5.1 billion a year caring for
+those who cannot pay their bills.
+ Employers and managed care companies spend $1.5-$3
+billion through higher rates to cover part of the amount hospitals
+spend caring for the uninsured.\3\
+---------------------------------------------------------------------------
+ \3\ Hadley J, Holahan J. How Much Medical Care Do the Uninsured
+Use, and Who Pays For It? Health Affairs Web Exclusive. 12 February
+2003.
+
+ Although the indirect costs associated with lack of insurance are
+more difficult to calculate, a discussion of the consequences of not
+extending coverage to the uninsured would be incomplete without their
+consideration. Inadequate preventive care and delayed treatment among
+the uninsured yields substantial societal costs in terms of reduced
+life expectancy, lower workforce productivity, diminished educational
+attainment, imperiled public health, and the financial burden
+shouldered by uninsured individuals and communities. Making preventive
+medicine and existing treatment therapies available to uninsured
+persons will not only increase overall access to health care but may
+also substantially contribute to a reduction in the total burden of
+illness facing the United States.
+ The Institute of Medicine (IOM) report, Hidden Costs, Value Lost,
+estimates the aggregate, annualized cost of diminished health and
+shorter life span to be between $65 billion and $130 billion for each
+year of health insurance forgone. This figure does not include the
+increased financial risk and uncertainty borne by the uninsured and
+their families, which is estimated to cost between $1.6 billion and
+$3.2 billion, nor does it account for the wide range of societal costs
+to which a price tag cannot be assigned.\4\
+---------------------------------------------------------------------------
+ \4\ Institute of Medicine. Hidden Costs, Value Lost. Consequences
+of Uninsurance Series, No. 5. Washington, DC: National Academies Press;
+17 June 2003.
+---------------------------------------------------------------------------
+ Critics of proposals to expand health insurance coverage point to
+the high cost of the additional medical care that would be used by
+newly insured Americans if coverage were expanded. However, a report
+published in Health Affairs in June 2003, found that this amount may
+not be as high as critics claim. The authors estimated that the
+uninsured would use about $34-$69 billion (in 2001 dollars) in
+additional medical care if they were fully insured, accounting for
+about 3-6 percent of total health care spending. While this amount may
+seem large in absolute dollars, an increase in medical spending of this
+range would increase health care's share of gross domestic product
+(GDP) by less than one percentage point.\5\
+---------------------------------------------------------------------------
+ \5\ Hadley J, Holahan J. Covering the Uninsured: How Much Would It
+Cost? Health Affairs Web Exclusive. 4 June 2003.
+---------------------------------------------------------------------------
+ In a related analysis, the IOM found the estimated benefit that the
+uninsured would experience from incremental health coverage ($1,645 to
+$3,280) to be higher than the estimated incremental cost of providing
+that service to the uninsured ($1,004 to $1,866), resulting in a
+benefits-cost ratio of at least one for most values within each
+range.\4\ Given the positive effects health insurance has on life
+expectancy, public health, educational attainment, production, and the
+economy in general, the benefits of extending coverage to the uninsured
+appear to be greater than the costs of not insuring them.
+ The value of extending health insurance coverage to all Americans
+requires an understanding of the alternative--the cost of leaving over
+17 percent of the population under age 65 uninsured for all or part of
+the year. When millions of Americans are unable to receive the care
+they need, the health and lives of all patients are endangered, costs
+are added to the health care system, and productivity is reduced. In
+the debate of how to extend coverage to the uninsured, it is critical
+that both short and long-term benefits are fully considered, since the
+latter may offset what many critics fear are the direct costs
+associated with such an expansion.
+
+Proposals to Expand Health Insurance Coverage
+ Given that the rising number of uninsured are imposing huge
+economic and social costs on our country, ACP believes that it is
+essential that Congress enact legislation to expand health insurance
+coverage to all Americans by the end of the decade, starting with the
+working poor and near poor who do not qualify for coverage under public
+safety net programs and those who do not have access to affordable
+employer-provided and individual insurance In April 2002, ACP proposed
+a plan, entitled ``Achieving Affordable Health Insurance Coverage for
+All Within Seven Years: A Proposal from America's Internists,'' which
+offers a framework for policies that would enable all Americans to
+obtain affordable health insurance within seven years. The College's
+plan calls on Congress to take the following steps:
+ Enacting legislation to make affordable coverage available to all
+people with incomes up to 200 percent of the Federal Poverty Level
+(FPL), including: creating a national income eligibility for Medicaid
+at 100 percent of FPL; converting the State Children's Health Insurance
+Program (SCHIP) to a federal-state entitlement program; and creating a
+tax credit/premium-subsidy program for individuals from 100-200 percent
+of FPL that would apply to Medicaid or SCHIP ``buy-ins'' or toward the
+purchase of private insurance.
+
+ Expanding the premium subsidy program to uninsured people
+with incomes above 200 percent of FPL, while authorizing the creation
+of purchasing groups and conditions for health plan participation,
+modeled after the Federal Employees Health Benefit Program.
+ Enacting legislation to authorize states to request a
+waiver to opt-out of the national framework for coverage. States that
+meet federal guidelines would be able to use federal funding for state
+programs.
+ Establishing a national commission that would report
+annually to Congress on progress, develop a basic benefits package, and
+recommend mechanisms to discourage individuals from voluntarily opting
+out of insurance coverage.
+
+ Key elements of the College's seven year plan subsequently have
+been incorporated into the bipartisan Health Coverage, Affordability,
+Responsibility and Equity Act of 2003 (HealthCARE Act of 2003), H.R.
+2402, introduced by Rep. Steve LaTourette (OH) and Marcy Kaptur (OH). A
+companion bill, S. 1030, has been introduced in the Senate.
+ We believe that the policy framework proposed in the HealthCARE Act
+of 2003 provides a realistic basis for a bipartisan consensus in
+Congress on expansion of health insurance coverage. The legislation
+provides for a program of tax credits combined with state purchasing
+pools, to provide uninsured low-income Americans with the same dollar
+subsidies and choice of health plans available to members of Congress
+and other federal employees through the Federal Employee Health
+Benefits Program. It provides a means for small businesses to band
+together to purchase coverage comparable to that available under the
+FEHBP. It also provides states with new options to expand and simplify
+enrollment on Medicaid, without imposing new unfunded mandates on the
+states. Finally, it provides an innovative structure to encourage
+health plans to offer essential health benefits without imposing
+unrealistic benefit mandates. The ACP would welcome the opportunity to
+provide additional information to the Committee on the HealthCARE Act
+of 2003 and on initial steps that could be taken this year, based on
+elements in this legislation, to expand health insurance coverage to
+the working poor.
+
+Conclusion
+ The American College of Physicians appreciates the opportunity to
+provide the Ways and Means Committee's Subcommittee on Health with this
+summary of our views on the economic and health costs of not providing
+health insurance coverage to 44 million Americans, as well as our
+recommendations for expanding coverage to all Americans. Additional
+information on ACP's analysis and proposals can be found on our
+website:
+
+ No Health Insurance? It's Enough to Make You Sick: http:/
+/www.acponline.org/uninsured/lack-contents.htm
+ Unmet Health Needs of Uninsured Adults in the United
+States: Ayanian J, Weissman J, Schneider E, Ginsburg J, and Zaslavsky
+A. Unmet Health Needs of Uninsured Adults in the United States. JAMA.
+October 2000; 284 (16):2061-2069.
+ Achieving Affordable Health Insurance Coverage for All
+Within Seven Years: A Proposal from America's Internists: http://
+www.acponline.org/hpp/afford_7years.pdf
+ The Cost of the Lack of Health Insurance: http://
+www.acponline.org
+ Highlights of the HealthCARE Act of 2003, H.R. 2402, S.
+1030: http://www.acponline.org/uninsured/bing_highlights.pdf
+ Section by Section Summary of the HealthCARE Act of 2003,
+http://www.acponline.org/uninsured/bing_sectsum.pdf
+
+
+
+ Statement of Associated Builders and Contractors, Arlington, Virginia
+
+ SPEAKING FOR THE MERIT SHOP
+
+ Associated Builders and Contractors (ABC) appreciates the
+opportunity to submit the following statement for the official record.
+We thank Chairwoman Nancy Johnson (R-CT), Ranking Member Fortney
+``Pete'' Stark (D-CA) and members of the Health Subcommittee of the
+House Ways and Means Committee for addressing the crisis of the
+uninsured in America. ABC urges the committee to follow up on this
+important hearing with an additional hearing to examine possible
+solutions to this growing epidemic.
+ ABC is a national trade association representing 23,000 general
+contractors, subcontractors, material suppliers, and construction-
+related firms from across the country within a network of 80 state
+chapters. Our member companies represent over one million craft
+professionals and administrative employees. As the nation's second-
+largest employer, with over 6 million workers, the construction
+industry continues to create new and beneficial jobs each year.
+Construction spending has a stimulative effect on the economy. For
+every $1 million spent in construction, $3 million in economic activity
+is generated and 13 new permanent jobs are created.
+ To remain at the present level of activity, the construction
+industry needs an additional quarter of a million (250,000) workers per
+year to replace an aging and retiring workforce. One of the key
+elements to attracting and retaining workers and remaining competitive
+in any industry is to provide high quality, flexible health benefit
+plans. Providing quality health care benefits is a top priority for ABC
+and its members, and maintaining cost effective health insurance plans
+is a key ingredient in achieving this objective.
+ Currently, there are more than 43 million uninsured Americans, and
+60 percent of them are employed by (or family members are employed by)
+small businesses. Therefore, the problem of the uninsured does not
+solely lie with the unemployed, but also with the small businesses
+across the country who are unable to provide quality health care
+coverage due to skyrocketing costs. In fact, a new study by the Robert
+Wood Johnson Foundation found that more than one in three Americans
+under 65 was uninsured at some point over the past two years.
+ In 2002, the Census Bureau released a study that showed that the
+share of the population covered by employer-sponsored health care
+coverage declined from 63 to 61 percent. The rising cost of health
+insurance premiums is the biggest factor in this decline and number one
+problem facing small business in this country. Faced with 15, 20 and
+even 50 percent premium increases annually for the past several years,
+many small businesses have been forced to reduce or even drop coverage.
+ Many factors have contributed to the cost increase of health
+insurance. Hospital costs, frivolous medical malpractice lawsuits, lack
+of competition and increased state regulation have all led to increased
+premiums. However, it is important to note that while health insurance
+costs have gone up at twice the rate of inflation, a vast majority of
+small businesses's productivity and profits have failed to grow at the
+same rate. One sector though, has enjoyed its greatest profit margins
+ever. The insurance industry, namely large health insurance companies,
+have experienced record-setting profits over the past few years.
+ A number of state reforms have actually led to increased rates,
+thus forcing employers to reduce benefits through higher deductibles
+and co-pays or eventually to drop coverage in order to comply with the
+law. State health insurance reforms and community rating laws have
+forced some insurance carriers to completely withdraw from the small
+group market for employers with less than 50 employees. When these and
+other state reforms occur, small employers are left with fewer
+alternatives for health insurance coverage for themselves and their
+employees.
+ Recent mergers of health insurance companies have also reduced
+competition and alternatives for employers who seek access to quality
+and affordable health insurance. Today, there is a great need to bring
+more competition back into the system rather than continually reducing
+it.
+ While there is no single solution to the problem of the uninsured,
+ABC feels that it is vital for Congress to examine the current market
+and to consider proposals that will provide market-based reforms. We
+believe that our current health insurance system, while flawed, is
+still the best in the world. Any solutions should help provide working
+families the best opportunity to obtain the quality, affordable health
+coverage they both need and deserve. Increasing competition within the
+small group market will help lower costs to employers struggling to
+continue to offer health insurance to their employees today.
+ The House of Representatives has already passed The Small Business
+Health Fairness Act (H.R. 660), which represents one common-sense
+proposal to address the uninsured problem plaguing small businesses.
+President Bush, a strong proponent of this legislation, called on the
+Senate to pass this same measure in his State of the Union Address. ABC
+recognizes the need for this legislation and commends the House for
+approving it last summer.
+ ABC appreciates this opportunity to submit comments on such a vital
+issue. We look forward to continuing a constructive dialogue on how to
+increase access to affordable and competitive health insurance for
+small businesses and thus reducing the number of uninsured Americans.
+
+
+
+ Statement of Michael D. Place, Catholic Health Association of the
+ United States
+
+ THE NATIONAL TRAGEDY OF THE NEARLY 44 MILLION UNINSURED
+
+INTRODUCTION
+ Clearly, a disease that infects nearly 44 million individuals in
+this country would quickly command resources from every possible
+governing agency and public health entity. But this country faces an
+epidemic of uninsured individuals, and many in our nation seem willing
+to ignore this epidemic.
+ While researchers and economists may disagree on exactly how many
+are uninsured, their income levels, and the reasons that they are
+uninsured, no one can deny the fact that by default a ``silent''
+national policy excludes 1 in 7 individuals from fully participating in
+and enjoying the benefits of our health care system.
+ The recent IOM Study, Insuring America's Health: Principles and
+Recommendations,and numerous other research reports clearly state that
+being uninsured presents a formidable barrier to obtaining necessary
+medical care with a multitude of health consequences. For the
+individual, treatment delayed can mean serious complications, even
+death. For society, it means the potential spread of disease, rising
+medical costs, and the inefficient expenditure of health care
+resources.
+ As the Catholic health ministry, whose history began over 275 years
+ago, we continue to serve uninsured and underinsured individuals every
+day in our hospitals and clinics. We have seen the unraveling of our
+nation's safety net due to a downturn in our nation's economy;
+decreasing resources at the local, state, and federal level; and
+increasing demands for services. The strains on our health care system
+must be addressed.
+ As employers, health care providers, and above all as a community
+of faith, our values are the basis for our commitment to addressing
+these issues and presenting our recommendations.
+OUR VALUES
+ The perspective of the Catholic health ministry is founded in
+social justice teachings. The following are our ``operating
+principles,'' derived from a faith-based tradition of caring for the
+poor, healing the sick, and speaking for those who often go unheard.
+
+ Every person is the subject of human dignity. This
+dignity must be honored, preserved, and protected from conception to
+death, whether one is disabled or aged. Flowing from this dignity is
+the right to basic and continuing health care.
+ Health care is a service to people in need. Health care
+is an essential social good. It should never be reduced to a mere
+commodity exchanged for profit.
+ Health care must serve the common good. The health care
+needs of each individual must be balanced by the needs of the larger
+society.
+ There is a special duty to care for the poor and
+vulnerable. The well and the wealthy should care for the poor, the
+sick, and the frail.
+ There must be responsible stewardship of resources. The
+resources needed for health care must be balanced with the needs of
+other essential social services.
+ Subsidiarity. To the greatest degree practicable,
+administration must be carried out at the level of organization closest
+to those to be served.
+
+ Our ministry's approach to health care rests in these values. As a
+result, we believe there is a human right to basic health care and that
+society has a special duty to care for the poor and vulnerable. These
+are commitments that many Americans, regardless of their denomination
+or faith, also share.
+ Today, turning a blind eye to discrimination, denying any child a
+public education, or allowing a defendant in a criminal proceeding to
+stand trial without legal assistance would be unacceptable to us as a
+nation.
+ We believe that if more individuals understood the suffering that
+millions among us endure, the apathy that now shrouds the issue of
+helping the nation's uninsured could be remedied. After all, any one of
+us among the over 160 million privately insured could very quickly and
+unexpectedly join the ranks of the uninsured.
+ As a ministry, we continue to take steps to educate and raise
+awareness among our associates, our community leaders, and the general
+public about this critical issue. We are committed to partnerships with
+other organizations such as the Robert Wood Johnson Foundation to
+prepare this country for a serious dialogue about the nearly 44 million
+who are uninsured. We also are looking at innovative ways to provide
+coverage for low-wage earners in our own ministry, and to assist in
+identifying and facilitating enrollment of those populations who are
+eligible but not enrolled in public programs. Our ministry is motivated
+by our mission and underlying values to do the right thing, as
+evidenced through our commitment to broader community benefit efforts.
+ As we prepare for this national dialogue, the Catholic health
+ministry has articulated the following guiding principles for a broader
+approach to health care reform and remains committed, both in the short
+and long term, to achieving the necessary changes in our current
+system. The guiding principles include:
+
+ A reformed system should provide health care for all
+ A defined set of basic benefits should be available to
+all
+ Responsibility for health should be shared by all
+ Spending on health care should be based on the
+appropriate and efficient use of resources
+ Financing of the delivery of health care should be
+adequate and based upon a pluralistic model, with shared responsibility
+by government, employers, and individuals
+ A reformed system should provide quality health care
+services
+ The effective participation of patients and families in
+decision making should be encouraged and enhanced
+
+ In light of our values and our guiding principals, we offer the
+following recommendations for your consideration.
+RECOMMENDATIONS
+ There are tough moral, ethical, and policy questions surrounding
+the uninsured that must be discussed and debated in an open forum where
+all sides are heard. We thank the committee for addressing these very
+important policy questions.
+ Without abandoning the goal of accessible and affordable health
+care for all, but in recognition of the valuable lessons learned from
+previous efforts, CHA has chosen to pursue a strategy that works toward
+our goal in intentional and sequential steps.
+ Our proposal, crafted in collaboration with the American Hospital
+Association, is both an acknowledgment of today's political realities
+and an example of the policy choices and strategy we intend to follow
+in building an infrastructure for accessible and affordable health care
+for all. This proposal is consistent with our sense of societal
+responsibility and guiding principles. We are well aware of the current
+fiscal constraints at the local, state, and federal level, but we also
+believe that this issue demands significant resources in the near term.
+ While we acknowledge that this proposal is not the ultimate
+solution, and that accessible and affordable health care for all cannot
+be achieved overnight, we do believe that this proposal provides
+additional ideas and consideration for the committee as it looks for
+ways to craft bipartisan legislation that achieves coverage for our
+nation's children, the future of our country, and those most in need of
+care.
+ The AHA/CHA proposal would expand insurance coverage through a
+combination of approaches. The proposal mandates that all children have
+health insurance coverage, and expands eligibility under the Medicaid
+and State Children's Health Insurance Program (SCHIP) for those
+children not otherwise covered by other sources. The plan also would
+provide tax credits and premium subsidies to assist small employers and
+individuals in the purchase of private health insurance for their
+workers and families. The three key components to the AHA/CHA proposal
+to expand health insurance coverage are briefly described below.
+ 1. Mandatory Children's Coverage: All children under the age of 19
+would have coverage. Accessible and affordable health care for all
+children, without reducing employer coverage for dependents, would be
+accomplished by structuring the programs so that financial incentives
+remain for people to cover their children through private insurance
+whenever possible. Children would be enrolled at birth. Subsequently,
+coverage would be required as a condition of enrolling in school.
+
+ Premium Structure: States would be required to expand
+eligibility under their Medicaid and/or SCHIP programs to provide
+subsidized coverage for all children living below 250 percent of the
+federal poverty level (FPL). Children below 150 percent of the FPL
+would be covered without premium contribution, while premiums would be
+phased in on a sliding scale for those between 150 and 250 percent of
+the FPL, subject to a premium cap equal to 5 percent of family income.
+Children above 250 percent of the FPL would pay full actuarial costs in
+premiums to ``buy into'' the Medicaid/SCHIP coverage.
+ Benefits Package: States would have the choice of
+offering the Medicaid benefits package or an alternative benefits
+package (similar to SCHIP).
+ FMAP: State spending would be matched at the current
+SCHIP enhanced Federal Medical Assistance Percentage (FMAP) rate.
+ Eligibility: States would be required to maintain their
+current income eligibility levels and covered services throughout the
+Medicaid/SCHIP programs.
+
+ 2. Small Employer Premium Subsidies/Tax Credits: The plan includes
+premium subsidies to small employers for the purchase of insurance for
+low-wage workers below 200 percent of the FPL. The premium support
+would be administered by the United States Treasury Department.
+
+ Employer Eligibility: Firms with between 1 and 50 workers
+would be eligible for the subsidies, provided the employer's workforce
+is paid less than an average of $10.00 per hour, or 60 percent of
+employees in the firm are earning less than $10.00 per hour. In
+addition, the employer must be paying at least 70 percent of the
+premium for single-only coverage, and 60 percent of the premium for
+family coverage. The subsidies would be available to both for-profit
+and not-for-profit employers.
+ Subsidy Amount: The maximum subsidy would be 50 percent
+of the employer's share of the premium, up to a maximum premium amount
+based on a benchmark health plan (i.e., Blue Cross Blue Shield's
+``Basic Plan'' offered through the Federal Employees Health Benefits
+Plan). The premium percentage subsidy is phased down with firm size
+from 50 percent for the smallest firms to 30 percent for firms with 50
+workers.
+ Additional Provisions: The subsidy would be refundable
+(the amount of the subsidy could exceed the amount of taxes owed by the
+employer), and would be advance fundable so that subsidies are
+available throughout the year as the employer's premium payments are
+due. In addition, employers taking the subsidy would be required to
+offset the employer premium payment by the amount of the subsidy
+received in determining the employer's allowable deduction for employee
+health benefits costs.
+
+ 3. Premium Subsidies/Tax Credits for Individuals: The program would
+provide a subsidy for the purchase of non-group insurance for people
+below 300 percent of the FPL, or help pay the worker's share of
+premiums for people with employer-sponsored insurance (ESI).
+
+ Subsidy for individual non-group coverage: The subsidy
+would be equal to two-thirds of the insurance payments for qualified
+coverage through an FEHBP plan, and would be phased out for persons
+over 150 percent of the FPL reaching $0 at 300 percent of the FPL.
+ Subsidy for employee share of ESI: The premium subsidy
+amount is capped not to exceed $1,000 for single coverage and $3,000
+for family coverage for the employee share of the ESI.
+CONCLUSIONS
+ As provider, employer, advocate, citizen, bringing together people
+of diverse faiths and backgrounds, our ministry is an enduring sign of
+health care rooted in the belief that every person is a treasure, every
+life a sacred gift, and every human being a unity of body, mind, and
+spirit.
+ As the Catholic health ministry, our faith tradition calls us to
+collaborate with others to be both a voice for the voiceless--the
+millions of uninsured--and agents for change. CHA has been, is, and
+will continue to be a strong advocate for accessible and affordable
+health care for all in a reformed health care system. We stand ready
+and willing to work with the committee this year and as long as it
+takes to craft an equitable solution to this national tragedy.
+
+
+
+ Communicating for Agriculture and the Self-Employed
+ Fergus Falls, MN 56537
+ March 9, 2004
+The Honorable Nancy Johnson
+Chair, Subcommittee on Health
+House Ways and Means Committee
+Washington, DC 20515
+
+Dear Chairman Johnson:
+
+ Communicating for Agriculture and the Self-Employed (CA) is a
+national, non-profit rural association made up of farmers, ranchers and
+rural small business members throughout the country. Throughout CA's
+32-year history, we have been active on health care affordability and
+access issues and we applaud your efforts to address, through a series
+of hearings, this pressing problem for millions of Americans.
+ While much of the discussion on this issue has centered around the
+employer-based health insurance market, our members bring a different
+perspective to the issue, a perspective I would be happy to discuss at
+a future hearing. Many of our members are self-employed, do not have
+access to employer-based insurance and must rely on the individual
+health insurance marketplace.
+ Solutions that we have found that would help these individuals
+obtain affordable health insurance, and solutions I would be happy to
+discuss with the Subcommittee in future hearings, include:
+State Health Insurance High Risk Pools
+ High risk pools are special state created and overseen health
+insurance programs that serve people in the individual market who have
+been denied coverage, or who can only access coverage at very high
+rates due to a pre-existing health condition such as cancer, congestive
+health failure, diabetes, AIDS and other chronic illnesses.
+ Federal legislation recently provided $40 million a year for two
+years to help existing risk pools and another $20 million to help
+states form new pools. (CA was called in by the Department of Health
+and Human Services to suggest language for the new regulations
+governing this program.) CA is now supporting legislation that would
+increase the funding per year and extend the program through 2009.
+Advanceable, Refundable Tax Credits to Purchase Health Insurance
+ As you know, there are several proposals in Congress to create an
+advanceable, refundable income tax credit for the cost of health
+insurance purchased by individuals under 65 years of age.
+ Depending on income and other factors, this tax credit would be
+available in advance of the time the insurance is purchased.
+Individuals would reduce their premium payment by the amount of the
+credit and the health insurer would be reimbursed by the Department of
+Treasury for the amount of the advance credit. Eligibility for the
+advance credit would be based on an individual's prior year tax return.
+Individual Tax Deductions
+ In addition the refundable tax credits, CA supports 100 percent
+deduction for health insurance for all individuals and there are
+several bills now in Congress to address this issue. Businesses and the
+self-employed can deduct 100 percent of health insurance costs, but not
+individuals. If General Motors can deduct its insurance costs, why
+can't a woman who holds two part time jobs and is not eligible for
+health insurance at either job, deduct the cost of her individual
+policy?
+ We believe that there is no one silver bullet that will immediately
+solve the problem for our uninsured. However, we also believe that a
+combination of programs, such as those I have outlined, will go a long
+way to enable a great many more Americans to have access to health
+insurance.
+ Our members support your efforts to deal with this very serious and
+very complex problem and if we can ever be of service, please don't
+hesitate to call.
+ Thank you.
+ Sincerely yours,
+ Wayne Nelson
+ President
+
+
+
+ Statement of Marina L. Weiss, March of Dimes
+ The March of Dimes Birth Defects Foundation is pleased to submit
+for the hearing record the following statement on ``The Uninsured.''
+ President Franklin Roosevelt established the March of Dimes in 1938
+to fight polio. The March of Dimes committed funds for research and
+within 20 years Foundation grantees were successful in developing a
+vaccine to prevent polio. The March of Dimes then turned its attention
+to improving the health of children through the prevention of birth
+defects, prematurity and infant mortality. As you might expect,
+providing coverage to women of childbearing age, especially those who
+are pregnant, infants and children are policy priorities for the
+Foundation.
+ Today, access to health insurance is especially pertinent to the
+advancement of the March of Dimes mission. In January 2003, the
+Foundation embarked upon a 5-year, $75 million campaign to address the
+growing problem of preterm birth. The Prematurity Campaign is designed
+to increase awareness of the problem of preterm birth; to expand
+research on the causes of preterm birth and the care of babies born
+preterm; and to improve access to health coverage for women of
+childbearing age and their children.
+ The March of Dimes includes millions of volunteers and 1,400 staff
+members who work through chapters in every state, the District of
+Columbia and Puerto Rico. The Foundation is a unique partnership of
+scientists, clinicians, parents, business leaders and other volunteers,
+who work to advance the mission by supporting programs of research,
+community services, education and advocacy.
+ At the March of Dimes, the overarching goal is to improve the
+health of women and children. This is why we are so concerned about
+improving access to health coverage for women of childbearing age,
+especially those who are pregnant, as well as to their infants and
+children.
+The Problem of the Uninsured
+ Lack of health coverage continues to be a significant problem for
+millions of Americans. The Census Bureau reported in September 2003
+that 43.6 million Americans were uninsured in 2002. Census Bureau data
+commissioned by the March of Dimes show that in 2002, 12.1 million
+women (19.6 percent) or nearly one in five women of childbearing age
+(15-44) went without health insurance--a higher rate than other
+Americans under age 65 (17.2 percent). In other words, approximately 28
+percent of uninsured Americans are women of childbearing age. Hispanic
+women in this age group are more than 2.5 times as likely as whites to
+be uninsured--37 percent compared to 14 percent respectively. Native
+American (29 percent), African-American (24 percent) and Asian (24
+percent) women were also likelier than whites to be uninsured.
+ Compared with a U.S. average of 19%, New Mexico (31 percent) and
+Texas (30 percent) had the highest rates of uninsured women of
+childbearing age for the 2000-2002 period according to the U.S. Census
+Bureau.\1\ Since the mid-1980's expanded Medicaid eligibility for
+pregnant women has resulted in better rates of coverage for this group
+than for women in general. The Congressional Budget Office, citing in
+part March of Dimes supported research, estimates that about 1.7
+million pregnancies are covered each year through Medicaid.\2\ But as
+the data indicate, considerable room for improvement remains.
+---------------------------------------------------------------------------
+ \1\ U.S. Census Bureau, March 2003 Current Population Survey. Data
+prepared for the March of Dimes. October 2003. http://
+www.marchofdimes.com/files/census2003.pdf
+ \2\ Congressional Budget Office. ``Cost Estimate: S. 724 Mothers
+and Newborns Health Insurance Act of 2002.'' October 11, 2002.
+---------------------------------------------------------------------------
+Health Insurance Makes a Difference
+ Numerous studies have shown that having insurance coverage affects
+how people use health care services.\3\ Particularly important is the
+finding that the uninsured are less likely to have a usual source of
+medical care and are more likely to delay or forgo needed health care
+services.
+---------------------------------------------------------------------------
+ \3\ Kaiser Commission on Medicaid and the Uninsured. Sicker and
+Poorer: The Consequences of Being Uninsured. February 2003.
+---------------------------------------------------------------------------
+ In a report issued in 2002 by the Institute of Medicine,
+researchers concluded that ``[L]ike Americans in general, pregnant
+women's use of health services varies by insurance status. Uninsured
+women receive fewer prenatal care services than their insured
+counterparts and report greater difficulty in obtaining the care they
+believe they need.'' \4\
+---------------------------------------------------------------------------
+ \4\ Institute of Medicine. Health Insurance Is A Family Matter.
+National Academies Press. 2002.
+---------------------------------------------------------------------------
+ A study funded by the March of Dimes and cited by the Institute of
+Medicine in its report shows that, in 1996, some 18.1 percent of
+uninsured pregnant women reported going without needed medical care
+during the year in which they gave birth. That compares with 7.6
+percent of privately insured pregnant women and 8.1 percent of pregnant
+women covered through the Medicaid program.\5\
+---------------------------------------------------------------------------
+ \5\ Amy B. Bernstein. ``Insurance Status and Use of Health Services
+by Pregnant Women.'' AlphaCenter prepared for the March of Dimes.
+October 1999. http://www.marchofdimes.com/files/bernstein_paper.pdf
+---------------------------------------------------------------------------
+ Pregnancy represents a significant cost to young parents without
+insurance, even in the healthiest pregnancies. For families with a
+problem pregnancy, the financial impact can be devastating. Without
+access to health insurance, many pregnant women delay seeing a doctor
+and getting the prenatal care they need. As the report that accompanied
+legislation passed by the Senate Committee on Finance in the last
+Congress stated, ``[R]ecent studies have shown that infants born to
+mothers receiving late or no prenatal care are more likely to face
+complications which can result in hospitalization, expensive medical
+treatments, and increased costs to public programs. Closing the gap in
+coverage between mothers and their children will improve the health of
+both, while reducing costs for taxpayers.'' \6\
+---------------------------------------------------------------------------
+ \6\ Report 107-233. ``Mothers and Newborns Health Insurance Act of
+2002.'' Committee on Finance, United States Senate. August 1, 2002.
+---------------------------------------------------------------------------
+Maternity Coverage is Often Not Available in the Individual Insurance
+ Market
+ In accordance with its mission, the March of Dimes seeks to reduce
+the number of uninsured women, infants and children and to improve
+access to medical care. It is for this reason that the Foundation is
+concerned about certain aspects of Administration and Congressional
+proposals to address the problem of the uninsured by providing a health
+insurance tax credit for use in the individual market. A recent study
+by Ed Neuschler of the Institute for Health Policy Solutions,
+commissioned by the March of Dimes, found that using tax credits to
+subsidize the purchase of individual (non-group) health insurance would
+do little to expand access to maternity coverage.\7\ Services related
+to normal pregnancy and childbirth typically are not covered under
+health insurance policies sold in the individual market--except in a
+few states where such coverage is mandated. In some cases, maternity
+coverage for individuals is offered as a separate rider with an
+additional premium. Coverage under such riders is typically very
+expensive and limited in scope, with separate higher deductibles or low
+dollar limits on benefits, and special waiting periods. Private
+individual coverage for women who are already pregnant is simply not
+available, at any price. In fact, to the extent that tax credits
+promote a shift from employer-based coverage to individual coverage, as
+some researcher predict, widespread use of such credits could increase
+the number of young families lacking coverage for maternity care,
+according to Neuschler's report.
+---------------------------------------------------------------------------
+ \7\ Ed Neuschler. Policy Brief on Tax Credits for the Uninsured and
+Maternity Care. Institute for Health Policy Solutions prepared for the
+March of Dimes. January 2004.
+---------------------------------------------------------------------------
+ Maternity care is offered in most employer plans. Under the federal
+Pregnancy Discrimination Act, employers with 15 or more workers may not
+offer health insurance that excludes maternity care. Some researchers
+have estimated that, while providing tax credits for non-employment-
+based coverage would reduce the number of uninsured, there would be
+considerable shifting in source of coverage. That is, the number of
+individuals with employment-based coverage and associated maternity
+benefits would decline, mostly due to employers' elimination of health
+coverage as a fringe benefit, with the result that some employees would
+switch to individual insurance and others would become uninsured. Thus,
+the number of people with individual coverage (and, therefore, without
+maternity coverage in most cases) could increase significantly. None of
+the individual health insurance tax credit proposals introduced in the
+108th Congress would specifically require qualifying health plans to
+cover maternity benefits.
+ While several approaches to improve the availability of maternity
+coverage might be considered in the context of designing a tax credit,
+there appears to be no easy way to assure that a policy of subsidizing
+individual health insurance plans will also expand coverage of
+maternity care. Simply requiring health insurers to include maternity
+coverage in individual insurance policies could cause carriers to
+increase premiums dramatically--diluting whatever effectiveness tax
+credits might have in helping the uninsured afford coverage--or
+withdraw from the market altogether, according to Neuschler.
+ Should the Committee elect to approve creation of a tax credit
+targeted at subsidizing individual health insurance coverage, it is
+important that the overlap between eligibility for the credit and
+Medicaid or State Children's Health Insurance Program (SCHIP) coverage
+for pregnant women be addressed. Tax credit proposals introduced in
+Congress and proposed by the Administration in 2003 deny eligibility to
+individuals enrolled in Medicaid. Because Medicaid income eligibility
+for pregnant women is more generous than for women who are not
+pregnant, some tax-credit eligible women will qualify for Medicaid
+coverage of pregnancy-related services. Under the proposals currently
+pending before the Committee, these women would be forced to forgo
+prenatal coverage while covered in the individual market and enroll in
+Medicaid for coverage of delivery and postpartum care, or to decline
+private coverage and enroll in Medicaid only for the duration of their
+pregnancy. If she chose the latter course, the woman would then be
+forced to re-apply for private coverage--and face possible denial due
+to underwriting--once her pregnancy is over and she is no longer
+eligible for Medicaid.
+ At the very least, pregnant women who become eligible for Medicaid
+only because of pregnancy should be able to retain their tax credit for
+individual coverage. The normal third-party liability provisions of
+Medicaid can assure that Medicaid does not pay for services that the
+woman's private insurance ought to cover, thus avoiding any risk of
+duplicative federal costs.
+Alternative Approaches
+ The March of Dimes urges Members of the Committee to consider the
+needs of women, especially those who are pregnant, as you tackle the
+problem of the uninsured. In addition, we offer for your consideration
+some `best coverage' suggestions from both the public and private
+sectors.
+
+ 1. If tax credits are considered as a vehicle to help the
+uninsured, encourage use of the credits for purchase of employer-based
+or group health insurance, rather than coverage in the individual
+market. Because of the difficulties inherent in trying to integrate
+maternity benefits into individual insurance coverage, it would be
+preferable if health insurance tax credits were used to expand access
+to and participation by low-income workers in employment-based coverage
+and other group plans that cover maternity services. In addition,
+allowing tax credits to be used for purchase of COBRA continuation
+coverage through a former employer--as with the Trade Adjustment
+Assistance health insurance tax credits--would protect some individuals
+and families from losing coverage that includes maternity care.
+ 2. Allow states the flexibility to extend SCHIP coverage to
+pregnant women 19 and older. Although outside the direct jurisdiction
+of the Ways and Means Committee, extending the State Children's Health
+Insurance Program (SCHIP) to income eligible pregnant women is a
+modest, incremental step that would provide access to maternity
+services for thousands of women.\8\ In 1999, 80 percent of uninsured
+pregnant women (about 340,000) were eligible for Medicaid or SCHIP but
+were not enrolled. If SCHIP were expanded as described, and women
+already eligible for Medicaid were enrolled, nearly 90 percent of all
+uninsured pregnant women would have health insurance coverage.\9\
+---------------------------------------------------------------------------
+ \8\ The provision to expand SCHIP to cover pregnant women is a
+component of H.R. 3293, ``The Prevent Prematurity and Improve Child
+Health Act'' introduced by Representative DeGette on October 15, 2003.
+ \9\ Kenneth E. Thorpe, Jennifer Flome, Peter Joski. ``The
+Distribution of Health Insurance Coverage Among Pregnant Women, 1999.''
+Emory University prepared for the March of Dimes. April 2001. http://
+www.marchofdimes.com/files/2001FinalThorpeReport.pdf
+---------------------------------------------------------------------------
+ 3. Automatically enroll newborns whose mothers are enrolled in
+SCHIP and provide 12 month continuous coverage. To avoid gaps in
+coverage for medically vulnerable newborns, enrollment of infants born
+to mothers eligible for SCHIP should begin on the child's date of birth
+and continue uninterrupted for at least one year.
+Conclusion
+ The March of Dimes supports improving access to health coverage for
+the 12.1 million women of childbearing age and 9.3 million children who
+are uninsured.\10\ As the Committee considers alternative ways of
+addressing this complex but urgent problem, we ask that you keep the
+needs of women, especially those who are pregnant, infants and children
+uppermost in mind.
+---------------------------------------------------------------------------
+ \10\ U.S. Census Bureau, March 2003 Current Population Survey. Data
+prepared for the March of Dimes. October 2003. http://
+www.marchofdimes.com/files/census2003.pdf
+
+---------------------------------------------------------------------------
+
+
+Statement of Sanford Cloud, Jr., National Conference for Community and
+ Justice
+
+ Madam Chairperson and Members of the Committee, my name is Sanford
+Cloud, Jr., President and CEO of the National Conference for Community
+and Justice (NCCJ). The NCCJ, founded in 1927 as the National
+Conference for Christians and Jews, is a human relations organization
+dedicated to fighting bias, bigotry and racism in America. With 55
+regional offices in 32 states and the District of Columbia, NCCJ
+promotes understanding and respect for all races, religions and
+cultures through advocacy, conflict resolution and education. On behalf
+of NCCJ, I am pleased to submit this testimony to the House of
+Representatives Subcommittee on Health of the Committee on Ways and
+Means hearing on the uninsured.
+ NCCJ has identified racial and ethnic disparities in healthcare as
+one of our core public policy issues. Looking at healthcare in America,
+one can see there is a racial and ethnic divide at the most basic level
+by examining major differences in health insurance coverage by group.
+Some facts to consider when discussing the uninsured include the
+following:
+
+ According to the report Going Without Health Insurance:
+Nearly One In Three Non-Elderly Americans (March 2003) released by the
+Robert Wood Johnson Foundation (RWJ), historically underrepresented
+racial and ethnic groups are significantly more likely to be uninsured
+as compared to White non-Hispanic Americans. During the period 2001-
+2002, 52.2% of Hispanics and 39.3% of African Americans were uninsured,
+compared to 23.3% of White non-Hispanics for the same period. Among
+Asian Americans and Pacific Islanders, 17% of children and 24% of
+adults are uninsured. According to the U.S Census Bureau, 25.5% of
+American Indian and Alaskan Natives reported that they did not have
+health insurance.
+ According to the same RWJ report, there were an estimated
+39.8 million people in the U.S. population without health insurance in
+year 2000. However, that number increased to 41.2 million in 2001, and
+at least 50% of those are people of color. The problem is compounded
+because those who do have insurance tend be in lower-end plans, forcing
+them to pay greater out-of-pocket expenses and reducing their access to
+medical specialists.
+ The disparities in health insurance coverage even exist
+among those who receive insurance through their employers. The report
+by the Henry J. Kaiser Family Foundation entitled Racial and Ethnic
+Disparities in Access to Health Insurance and Health Care (August 2000)
+found that only 51% of American Indians and 43% of Hispanic Americans
+have health insurance through jobs, compared with 73% for White
+Americans.
+
+ NCCJ is addressing this issue through our research, programming and
+advocacy work. Studies, such as the 2002 Institute of Medicine report
+Unequal Treatment: Confronting Racial and Ethnic Disparities in
+Healthcare, show that the many factors contributing to the disparities,
+but can be grouped into three main categories:
+
+ Socioeconomic disparities--It is a fact that
+underrepresented ethnic groups and people of color are
+disproportionately represented in lower socioeconomic ranks, lower
+quality schools, and poorer-paying jobs. These factors lead these
+groups to experience lower rates of insurance coverage and an inability
+to pay for rising costs of health care.
+ Cultural differences and bias--The lack of diversity and
+cultural understanding among health care workers contributes to
+stereotypes and bias in our health care providers. Increasing the
+proportion of underrepresented racial and ethnic professionals and
+integrating cross-cultural curricula will assist caregivers to increase
+understanding of diversity and background of their patients and
+increase the trust of the patients in the care and caregiver.
+ Education and language barriers--Education and language
+barriers affect the delivery of adequate care through ineffective
+exchanges of information, misunderstanding of physician instructions,
+or poor shared decision making. Language difficulties may also result
+in decreased adherence to medical regimes, low appointment attendance
+and decreased satisfaction with services.
+
+ While much of our work focuses on the non-socioeconomic factors, we
+understand and agree that part of the solution to eliminating
+healthcare disparities is based on increasing access to insurance or
+other affordable healthcare in our communities of color.
+ Historically underrepresented racial and ethnic populations
+continue to experience disproportionate rates of morbidity and
+mortality. Reduced access to quality, affordable and culturally
+competent healthcare services are critical factors that impact the
+health of underrepresented ethnic groups and communities of color
+across our nation.
+ Public perceptions of the shape, depth and dimension of healthcare
+problems vary dramatically depending on one's own background. NCCJ, in
+partnership with Aetna Inc., conducted a survey that documents the
+public opinion and perceptions of the problem of racism in healthcare.
+The report, Racial and Ethnic Disparities in Healthcare: A Public
+Opinion Update, discusses the results.
+
+ Americans do not see racism as an isolated phenomenon:
+they see it appearing in many aspects of daily life. In healthcare, 64%
+view racism as a problem, with 20% saying it is a major problem.
+ 41% of African Americans see racism in healthcare as a
+major problem, as do 25% of Hispanics. Only 16% of White Americans say
+it is a major problem.
+ Most Americans say difficulty getting healthcare because
+of one's racial or ethnic background is not a problem for people like
+themselves. While only one in five White Americans (21%) see this as a
+problem, fully 45% of African Americans and 34 % of Hispanics do.
+ The public is split on how often a person's race or
+ethnic background has an impact on whether one can get routine medical
+care. 40% say it happens very often or somewhat often, while 49% say it
+is an obstacle less frequently.
+ A majority of Americans (55%) say people of color receive
+the same quality of medical care as White Americans do. Less than a
+third (28%) disagree; saying African Americans, Hispanics, and other
+racial and ethnic groups receive a lower quality of care. A substantial
+majority of White Americans (63%) see no differences in the quality of
+healthcare, while an almost equally strong majority of African
+Americans (59%) see lower quality care for people of color. Hispanics
+are divided on the issue.
+
+ NCCJ expresses its high hopes and expectations for the 108th
+Congress to address the issue of healthcare disparities. Two bills
+introduced recently, Healthcare Equality and Accountability Act of 2003
+(S. 1833 and H.R. 3459) and Closing the Health Care Gap Act of 2004 (S.
+2091), have the lofty goal of expanding access of quality healthcare
+through increasing access of affordable health insurance and expanding
+the health care safety net. With work we can rid our healthcare system
+of bias, bigotry and racism, and create a system that is more inclusive
+and just.
+ Thank you.
+
+
+
+ Statement of the National Federation of Independent Business
+
+ On behalf of the 600,000 members of NFIB, we thank you for allowing
+us to submit testimony today about the worsening health care crisis
+that faces our country, as the small business community is among the
+hardest hit. Since 1986, NFIB members have ranked the cost of health
+insurance as their top concern.
+ America's small-business owners, whose businesses create two out of
+every three new jobs in this country, continue to struggle with the
+high cost of offering health insurance to their employees. Because of
+the current structure of the health care industry, too many small-
+business owners and their employees do not have access to affordable
+health insurance.
+ A recent Census Bureau report showed that over 43 million Americans
+lack health coverage. That is an increase of almost 2.5 million people
+over the previous year and the largest annual increase in more than a
+decade. In 2002, more than 8 out of 10 uninsured Americans came from
+working families, with nearly 70% coming from families with one or more
+full-time workers. It is no coincidence that the uninsured figures
+continue to rise as the cost of insurance continues to skyrocket--
+small-business owners face double-digit increases year after year,
+pricing more of them out of the marketplace.
+ Many factors contribute to the overall cost of healthcare. Lack of
+competition in the small group market, litigation, and mandates are
+just some of the many cost drivers that have led us to where we are
+today.
+ Small employers are forced to purchase in the over-regulated small
+group market, and consequently, workers in the smallest businesses that
+do provide health insurance pay 17 percent more on average for health
+benefits than workers at large companies. There is inadequate
+competition among insurance carriers. A recent GAO survey found
+dangerously high levels of market concentration among large insurance
+companies in the states' small group markets. This concentration
+reduces competition and enhances insurers' underwriting gains; as
+competition decreases, prices increase.
+ We must also address the growing cost of benefit mandates.
+Requiring health insurance to pay for every medical treatment and
+service covered by state mandates drives the cost so high that the
+coverage is unaffordable, and therefore, unrealistic. More mandates
+mean higher costs. The Council for Affordable Health Insurance says
+that since January 1970, mandates have increased 25-fold.
+ Something must be done on the front of medical malpractice
+litigation. The cost of malpractice lawsuits has soared in recent
+years, pushing up insurance premiums and forcing physicians out of
+business.
+ A government run healthcare system is not the solution, however, it
+is still very much on the minds of some in Congress. The devil is in
+the details, whether it comes in the form of government-run health care
+or mandates and minimum benefit packages forced on the backs of small
+employers.
+ The problems facing small-business owners, their employees, and
+families must be addressed as part of the debate. We understand that no
+one solution will help all of the 43 million uninsured, and, therefore,
+we propose a multi-faceted approach that will help move countless
+numbers of Americans off the rolls of those without health care
+coverage. We are aggressively urging enactment of legislation to permit
+Association Health Plans--AHPs--to operate nationwide. We support the
+recently enacted Health Savings Accounts (HSAs), coupled with a high
+deductible health care plan, as a way for small businesses and
+individuals to lower their health care premiums. Along with HSAs,
+individuals should be allowed to deduct 100 percent of their high
+deductible health plan premiums, if they are not subsidized by an
+employer plan already. Representative Crane's newly introduced bill,
+H.R. 3901, would allow for this. Lastly, NFIB supports allowing
+individuals to rollover Flexible Spending Account (FSA) money from year
+to year as well as allowing individuals to use tax credits for the
+purchase of health insurance or toward lowing the cost of their
+employer-sponsored health insurance plan premiums.
+ Association Health Plans would allow small-business owners to band
+together across state lines through their membership in bona fide trade
+and professional associations to purchase health care for their
+families and employees. Organizations such as NFIB, the U.S. Chamber of
+Commerce, Associated Builders and Contractors, and the National
+Restaurant Association would be able to offer insurance to their
+members.
+ Association Health Plans will make health insurance more affordable
+for small businesses. The Congressional Budget Office has estimated
+that small firms obtaining health insurance through AHPs will realize
+premium reductions of 13 percent on average. In fact, reductions range
+from 9 percent to 25 percent. It is estimated that as many as 2.1 and
+up to 8.5 million individuals--employees and their dependents--will
+obtain employer-sponsored health care insurance for the first time due
+to enacting AHP legislation.
+ HSAs will also help reduce the number of uninsured Americans by
+allowing small businesses more choice in the current small group
+market. For example, some small businesses have saved up to 42 percent
+when they have chosen a Medical Savings Account (MSA) over traditional
+insurance products; others have saved up to 60 percent using a Health
+Reimbursement Account (HRA). Additionally, individuals who have
+catastrophic health care coverage with a health savings account should
+be allowed to deduct 100 percent of the premiums from their taxes.
+HSAs, along with 100 percent deductibility, will provide small
+businesses with more accessible, affordable options in the health
+insurance market.
+ According to a 2001 survey, 80 percent of NFIB members believe that
+individuals who contribute to tax-free savings accounts for health care
+should be allowed to carry over any unused portion. Individuals should
+be allowed to rollover any unspent funds tax-free from year to year.
+The current limitation of ``use it or lose it'' needs to be changed to
+allow workers to take control of health care costs and prepare for the
+future.
+ Lastly, small business owners have told us they support tax credits
+for individuals. With tax credits, small business owners and employees
+without insurance currently would be more likely to purchase coverage,
+leaving fewer people without insurance. The credit should be created in
+a manner that it can be used toward either an individual policy or an
+employer-sponsored policy. This would provide an opportunity for
+choice--an employee can purchase a policy based upon his/her individual
+health care needs. Health insurance policies purchased with the
+proposed tax credit would also be portable, meaning employees could
+have the benefit to carry the policy with them to another job and keep
+the same providers of care through many years, rather than changing
+providers with each new job.
+ We cannot afford to wait for the ``perfect'' solution. There is
+none. The longer we delay, the more we will hear the calls for
+government-provided health care, and certainly, that is not the perfect
+solution.
+ Thank you for holding this hearing that continues the discussion on
+how to solve the problem of the uninsured.
+
+
+
+ Statement of Martin E. Neltner, Neltner Billing and Consulting,
+ Independence, Kentucky
+
+ Focus on Americans Who Lack Health Insurance Coverage
+
+EXECUTIVE SUMMARY
+
+Circle of Life and the ``Scars'' of the Health Care System
+ One can sum up the health care crises relating to the uninsured as
+told by a story where one day my friend the farmer went to see his
+doctor for a physical. Now this person was never sick a day in 60
+years. The farmer noticed that everyone was so busy that he felt bad
+when they called him back. After all he felt good with the exception of
+a small tingle in his arm. Because the clinic was busy no one would
+take the time to ask the pertinent questions about his health. After
+all he looked healthily so why waste time to ask questions. Two days
+later my friend the farmer had a stroke that ended up costing the
+system over $100,000. So instead of the doctor spending 40 minutes and
+billing $ 150 he spent 10 minutes and billed $60. So the circle of life
+was broken because now my friend is laid up and he cannot work. His
+wife can't work because he needs someone to care for him. No taxes were
+collected on wages and he could not afford his health insurance.
+ The insurance company hassle factor of putting up roadblocks to pay
+appropriately backfired and now we have another person who is
+uninsured. My friend will never be insured again because now he has a
+pre-existing condition. So if he is able to purchase health insurance
+it will be costly and it will not cover this chronic condition that was
+caused by to busy a doctor who is not paid appropriately for the
+service that in the end cost everyone unnecessary costly health care.
+Had the doctor spent the time, they would have asked the question ``do
+you have any tingling'' the answer of yes would have prompted testing
+and discover of his risk. Preventive measures would have occurred and
+my friend would have return to work and continue paying his fair share
+of being a productive citizen.
+ There are many ``Scars'' in the health care system that is causing
+the uninsured problem. All which are easily repaired. What is needed is
+for the ``Lion King'' to return to restore confidence, accountability
+and responsibility. We need to invoke the principles of the
+
+ ``OZ Principle''
+
+ The recent major increases in the premiums by the insurance
+companies are unjustified. 35% in the past two years alone suggests an
+out of control system. Health care is the only industry where there is
+no accountability and everyone has lost his or her focus. Hospitals are
+still inefficient. Doctors have lost confidence and don't care anymore.
+It's all about the money. After all they just spent 15 years in school
+and residency, fellowship and paid dearly with long hours of work with
+little pay. Now they are strapped with school debt, raising families
+etc. The average mean salary for a primary care doctor is $90,000. That
+is an insult to the time they spent learning to care for the sick.
+ West Virginia along with other states experience a major crises in
+malpractice. In Cincinnati, Ohio physicians closing up their practices
+leaving town because the managed care companies would not increase the
+pay to doctors or hospitals. A large settlement by one insurance
+company will pay Cincinnati doctors their increases. The other two
+payers are doing nothing and the suits continue. Charges against
+insurance companies for Racketeering, low pay, timely payments are
+increasing all over the country. CLEAN CLAIMS ACT. In the last five
+years virtually every state has had to enact legislation to force
+insurance companies to pay promptly. The legislation is called ``Clean
+Claims Act''. The problem is the insurance companies have figured out
+how to get around the term ``clean claim so the state legislatures had
+to return to put teeth into the legislation.
+ ______
+
+
+ The Problem Summarized
+
+ 1. Physicians have lost confidence in the system. I don't care and
+the attitude is ``they cheat me so I will cheat back''
+ 2. Hospitals should stay with core business and learn to manage
+their resources well. Stop the kickbacks and striking deals in secret
+joint ventures that cause unnecessary increases in health care cost.
+ 3. Patients take health care for granted. Give me a pill to fix my
+problem. The emergency room rotation of crime, drug addicts, etc. is
+killing our resources.
+ 4. Every one is sue happy. We need tort reform desperately.
+ 5. The coding system that is used to pay providers invites abuse.
+It is complex and is designed to send in a 5-digit number and a
+paycheck appears with no monitoring. Medicare is the only insurance
+payer that has instituted audits to verify services provided.
+ 6. If hospitals and doctors would collect the small dollar
+balances health insurance cost could be reduced by 10% to 20% alone.
+Most providers collect only 50% of what they charge.
+ 7. Stop this nonsense of the doctor dictating a note that creates
+worthless points to judge the level of care. Ask a doctor and he will
+tell you 90% of the documentation created in the chart is meaningless.
+The national coding guidelines managed by the AMA to describe physician
+complexity in the visit service called the ``Evaluation and
+Management'' is causing worthless documentation that cannot tell you
+much about the patients symptoms and outcome.
+ 8. Resolve the problem of allowing aliens or illegal residents to
+tax our health care system. The attitude is if you are sick come to
+America and they will care for you for free.
+ 9. Pushing pill on TV is out of control. I don't need the V drug
+ ______
+
+
+ The Solution
+
+ Accountability and Responsibility
+
+Practicing the OZ Principle ``Getting Results Through Individual and
+ Organizational Accountability \1\
+---------------------------------------------------------------------------
+ \1\ The OZ Principle, Roger Connors, Tom Smith, Craig Hickman.
+
+ 1. Restore confidence in the providers who control the spending
+of the health care dollars by paying more to evaluate the patient
+symptoms. Make the providers justify their care in a simple
+documentation process that promotes positive outcomes. I can show you
+how this would work.
+ 2. Patients must be held accountable for their health. Employers
+and employees should work together to reduce health care risk.
+ 3. Counter the pushing of pills on TV with more how to care for
+your health in a natural way.
+ 4. Use Medicare as a model for insurance companies to follow in
+claims processing. Their system is the best.
+ 5. Better tort reform.
+ 6. Medicare should go into the claims processing business.
+Insurance companies could contract with Medicare to use their system.
+Here is an approach based on fact and outcomes. This will offset
+Medicare administrative cost.
+ 7. Berlin Wall Theory. Require insurance companies to justify
+their cost. Require meaningful audits of insurance company books. Open
+the door to hearing about complaints from providers and allow
+meaningful dialogue to stop abuse, pay promptly and restore confidence
+between the two parties looking over the Berlin Wall.
+ 8. Allow a simple process for providers to report health care
+payment abuse. The state department of insurance is worthless.
+ 9. Encourage employers to install wellness programs for their
+employees.
+ 10. Encourage employers to take positive action and for God's sake
+we should not wait for the government to solve our health care problem.
+
+ The only way to insure those with out insurance is to lower the
+premium and spread the risk among a lot of people. This is how the
+system worked before 1984. Ask several insurance companies to pull
+their resources, and insure those with out insurance. Work with
+providers to install meaningful systems that reward for symptom
+management.
+ ______
+
+
+ Other Comments
+
+ 1. The physician's pen can be the best tool to curtail health
+care cost.
+ 2. Pay the physician appropriately for spending time evaluating
+the patient symptom and developing a plan of action.
+ 3. Stop these foolish audits that derive no benefit. Physicians
+are scared to code appropriately.
+ 4. The system encourages doctors to see more patients in volume.
+Its all about quantity and not quality. Refer to graph below.
+ 5. Profiteers in the industry that built small insurance plans
+100,000 or less that were purchased and repurchased causing more cost
+in the system.
+ 6. The charge for the service commonly referred to as the single
+fee schedule. The phony dollar of what the service is worth. The
+average industry collection rate.
+
+ a. Hospitals are paid 30% to 50% of gross charge.
+ b. Doctors are paid 30% to 60% of the single fee schedule.
+
+ 7. NO ONE IN THE HEALTH CARE SYSTEM KNOWS WHAT IT COST TO PROVIDE
+THE SERVICE. NO ONE KNOW S WHAT THEIR PROFIT MARGIN SHOULD BE?
+ 8. Insurance company claims processing is a shamble.
+
+ a. More insurance companies over pay than what you can
+imagine. Doctors and hospitals play catch me if you can.
+ b. Referrals and authorizations. This system created by the
+insurance companies is become a legal way to steal from the health care
+provider.
+ c. THE AMA CODING SYSTEM INVITES ABUSE.
+
+ 9. Patients demanding more but will not take care of themselves.
+ 10. As an employer every time I try to create a system that
+promotes healthily life styles I get bomb bared with obstacles by the
+government employees rules that say I cannot do this or that because it
+discriminates against some one else in the organization.
+
+ a. As an employer of 84 staff here are my stats.
+
+ i. 40% are over weigh.
+ ii. 40% eat and drink.
+ iii. 10% drink excessively after work.
+ iv. 10% are chronic depressed.
+ v. 5% have worthless spouses who milk the health care system
+ vi. 65% of my employee smoke
+ vii. There are approximately 10 healthy people in the
+organization.
+ viii. Absentee is very high, kids are always sick or employee is
+sick. I have ten employees to cover for the 80 employees who call in
+sick.
+
+ Office Visit
+----------------------------------------------------------------------------------------------------------------
+ AMA
+ recommended Visits per Physician Consider
+ time per hour 60 time per Compared to this the
+ visit visit range
+----------------------------------------------------------------------------------------------------------------
+Level one 5 12 3 2.4 ok
+Level two 10 6 5 4.8 ok
+Level three 15 4 8 7.2 ok
+Level four 20 3 10 9.6 ok
+Level Five 40 1.5 15 19.2 ??
+----------------------------------------------------------------------------------------------------------------
+
+
+ As it relates to the RVU of each visit
+----------------------------------------------------------------------------------------------------------------
+ AMA recommended
+ time per visit Physician time 48% Staff time 52%
+----------------------------------------------------------------------------------------------------------------
+Level one 5 2.4 2.6
+Level two 10 4.8 5.2
+Level three 15 7.2 7.8
+Level four 20 9.6 10.4
+Level Five 40 19.2 20.8
+----------------------------------------------------------------------------------------------------------------
+
+ So it appears that a physician could see double the number of
+patients as recommended by the AMA guidelines since in reality his
+staff is assisting with the evaluation to the degree his efficiency is
+improved and more billable patients per day are realized.
+
+----------------------------------------------------------------------------------------------------------------
+ Level II Level III
+ Hours phy time 5 Phy 7 Level IV 10 Level V 15
+----------------------------------------------------------------------------------------------------------------
+Patients per hour 12 9 6 4
+ 8 till 12 4 48 34 24 16
+ 1 till 5 4 48 34 24 16
+ Total patients per day 96 69 48 32
+Payment per service 34 48 75 91
+Payment per day $3,264.00 $3,291.43 $3,600.00 $2,912.00
+Works 4 days a week 4 4 4 4
+ $13,056.00 $13,165.71 $14,400.00 $11,648.00
+Weeks worked 48 48 48 48
+ $626,688.00 $631,954.29 $691,200.00 $559,104.00
+Take home rate 0.52 0.52 0.52 0.52
+Take home $325,877.76 $328,616.23 $359,424.00 $290,734.08
+----------------------------------------------------------------------------------------------------------------
+
+
+
+
+