[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

THE HEALTH CARE LAW'S IMPACT ON JOBS, EMPLOYERS, AND THE ECONOMY

=======================================================================

HEARING

before the

COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

JANUARY 26, 2011

__________

Serial No. 112-03

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Printed for the use of the Committee on Ways and Means

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COMMITTEE ON WAYS AND MEANS

DAVE CAMP, Michigan, Chairman

WALLY HERGER, California SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas CHARLES B. RANGEL, New York
KEVIN BRADY, Texas FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky XAVIER BECERRA, California
DAVID G. REICHERT, Washington LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana MIKE THOMPSON, California
DEAN HELLER, Nevada JOHN B. LARSON, Connecticut
PETER J. ROSKAM, Illinois EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania RON KIND, Wisconsin
TOM PRICE, Georgia BILL PASCRELL, JR., New Jersey
VERN BUCHANAN, Florida SHELLEY BERKLEY, Nevada
ADRIAN SMITH, Nebraska JOSEPH CROWLEY, New York
AARON SCHOCK, Illinois
CHRIS LEE, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
RICK BERG, North Dakota
DIANE BLACK, Tennessee

Jon Traub, Staff Director

Janice Mays, Minority Staff Director

C O N T E N T S

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Page

Advisory of January 19, 2011, announcing the hearing............. 2

WITNESSES

Austan Goolsbee, Ph.D., Chairman, Council of Economic Advisors... 6
Douglas Holtz-Eakin, Ph.D., President, American Action Forum..... 38
Scott Womack, President, Womack Restaurants...................... 60
Joe Olivo, Owner/CEO, Perfect Printing........................... 67

SUBMISSIONS FOR THE RECORD

Mr. McDermott.................................................... 138
Mr. Pascrell..................................................... 140
Mr. Rangel, NFIB................................................. 166
Campaign to End Obesity Action Fund.............................. 167
James T. Lette................................................... 169
LumaCorp......................................................... 170
Main Street Alliance............................................. 171
National Business Group on Health................................ 174
National Partnership for Women & Families........................ 177
National Private Duty Association................................ 179

THE HEALTH CARE LAW'S IMPACT ON JOBS, EMPLOYERS, AND THE ECONOMY

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WEDNESDAY, JANUARY 26, 2011

U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The committee met, pursuant to notice, at 9:04 a.m., in
Room 1100, Longworth House Office Building, the Honorable Dave
Camp [chairman of the committee] presiding.
[The advisory of the hearing follows:]

HEARING ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

Chairman Camp Announces Hearing on the

Health Care Law's Impact on Jobs, Employers, and the Economy

Ways and Means Hearing to Examine the Impact of

Taxes, Regulations, and Mandates Contained in the Health Care Law on
Economic Growth and Job Creation

January 19, 2011

House Ways and Means Committee Chairman Dave Camp (R-MI) today
announced that the Committee on Ways and Means will hold a hearing on
the impact the ``Patient Protection and Affordable Care Act'' and
``Health Care and Education Reconciliation Act of 2010'' will have on
the U.S. economy and employers' ability to hire new workers and retain
existing employees. The hearing will take place on Wednesday, January
26, 2011, in 1100 Longworth House Office Building, beginning at 9:00
A.M.

In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing. A list of invited
witnesses will follow.

BACKGROUND:

The Democrats' health care overhaul imposes more than one-half
trillion dollars of tax increases and numerous pages of mandates and
onerous regulations on employers. Employers of all sizes are expressing
concern that the new mandates and regulations will deter them from
hiring new employees, threaten their ability to retain existing
workers, and harm their ability to increase wages for existing
employees. The new health care law compounds the uncertainty employers
and entrepreneurs are facing amid the most challenging economic climate
since the Great Depression. Making matters worse, some insurance
companies and employers have already increased their health care
premiums, in part, to comply with the new health care law, exacerbating
the drag on the U.S. economy from rising health care costs.
In announcing this hearing, Chairman Camp said, ``Employers have
repeatedly expressed their concerns about the effects of the Democrats'
health care law. This hearing provides us the opportunity to directly
hear from employers about the higher taxes and new mandates that are in
this law. This will also serve as a basis for how this Committee, and
Congress, can best respond to the concerns of employers and workers and
refocus its energy to develop common sense solutions that prioritize
affordability, job creation, and economic growth.''

FOCUS OF THE HEARING:

The hearing will examine the economic and regulatory burdens
imposed by the enactment and implementation of the ``Patient Protection
and Affordable Care Act'' (P.L. 111-148) and the ``Health Care and
Education Reconciliation Act of 2010'' (P.L. 111-152). It will explore
the impact on jobs stemming from the new taxes and new federal
regulatory requirements. It will also analyze the impact of the
employer mandate on job creation.

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Please Note: Any person(s) and/or organization(s) wishing to submit
for the hearing record must follow the appropriate link on the hearing
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From the Committee homepage, http://waysandmeans.house.gov, select
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and click on the link entitled, ``Click here to provide a submission
for the record.'' Once you have followed the online instructions,
submit all requested information. ATTACH your submission as a Word or
WordPerfect document, in compliance with the formatting requirements
listed below, by the close of business on Wednesday, February 9, 2011.
Finally, please note that due to the change in House mail policy, the
U.S. Capitol Police will refuse sealed-package deliveries to all House
Office Buildings. For questions, or if you encounter technical
problems, please call (202) 225-1721 or (202) 225-3625.

FORMATTING REQUIREMENTS:

The Committee relies on electronic submissions for printing the
official hearing record. As always, submissions will be included in the
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Committee relies on electronic submissions for printing the official
hearing record.

2. Copies of whole documents submitted as exhibit material will not
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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
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noted above.

Note: All Committee advisories and news releases are available on
the World Wide Web at http://www.waysandmeans.house.gov/.

Chairman CAMP. The Committee will come to order. Good
morning. Today's hearing is on the health care law's impact on
jobs, employers, and the economy. We will have two panels
today.
Our first panel will feature Austan Goolsbee, who is
chairman of the Council of Economic Advisors.
I will begin by making an opening statement, and then I
will yield to my friend and ranking member, Mr. Levin.
I want to start by reading the following quote. ``I know
one of the things that's come up is that the 1099 provision in
the health care bill appears to be too burdensome for small
businesses. It just involves too much paperwork, too much
filing. It's probably counter-productive. It was designed to
make sure that revenue was raised to help pay for some of the
other provisions. But if it ends up just being so much trouble
that small businesses find it difficult to manage, that's
something we should take a look at. So there are going to be
examples where I think we can tweak, and make improvements.''
That was President Obama on the day after the November
elections. The President was saying the health care law appears
to be too burdensome for small businesses, that it involves too
much paperwork, too much filing. And last night, in his State
of the Union Address, the President again referred to the 1099
provision, as we have come to call it, as a flaw.
But more importantly, the President asked us to identify
and bring to him items that need to be fixed. And clearly, in a
bill that's over 2,000 pages long, there is more than just the
1099 provision we need to address.
With unemployment rates stuck above 9 percent for the last
20 months, and with my home state's unemployment at nearly 12
percent, I have one simple question today. How is it that
Congress passed a health care bill that is
``counterproductive'' to American employers? Especially at a
time we need to be looking at solutions that encourage, not
impede, job creation.
That's the focus of our hearing today, the health care law,
and its impact on the economy, on employers, and their workers.
If signed into law, the Democrat's health care law imposes more
than a one-half-trillion dollars of tax increases and thousands
of pages of mandates and onerous regulations on employers.
My friends on the other side of the dais have argued that
we shouldn't be debating health care anymore, that we need to
move on, and focus on jobs and the economy. What they need to
recognize is that employers of all sizes are expressing concern
that the new mandates and regulations will deter them from
hiring new employees, threaten their ability to retain existing
workers, and harm their ability to increase wages for existing
employees.
The new health care law compounds the uncertainty employers
and entrepreneurs are facing under the most challenging
economic climate since the Great Depression. Making matters
worse, many insurance companies and employers have already
increased their health care premiums to comply with the new
health care law, exacerbating the drag on the U.S. economy from
rising health care costs.
That's the problem with the health care law that puts
Washington, D.C., the Federal Government, at the center,
instead of patients and doctors. And when you take a
Washington-knows-best approach to legislation, you usually end
up with a bill that only works for Washington, instead of
working for the American people.
At the end of the day, the health care law fails to control
costs, it fails to let Americans keep the insurance they have
and like, despite the President's promise, it fails to protect
jobs, it fails to ensure seniors have access to their doctors
and hospitals, and fails to prevent tax increases from hitting
middle-class families and the small businesses we need to move
our anemic economy forward.
The hearing today is just the first of many with regard to
the health care law. It's my intention to give the American
people and employers, both large and small, the opportunity
they did not have when this law was being written, to testify
in an open hearing about the impact this law will have on them.
We know what the experts have said. We all know that the
non-partisan Congressional Budget Office has estimated the
health care law will increase premiums for millions of families
by up to $2,100 on average by 2016. That's $3,200 more
expensive than the Republican alternative I offered last
congress.
We all know that the Obama Administration's own officials
have predicted that as many as 7 out of 10 employers will have
to change the coverage they offer to their employees because of
the law.
We all know, from the joint committee on taxation, that
there are well over $500 billion in new taxes, many of which
will hit middle-class families and small businesses. That's
what the experts have told us.
Today we will hear something different. We will also hear
from real employers, and what they think about this law, and
what they think the impact will be on their businesses and
their employees. I look forward to hearing this testimony and
getting more of this sort of insight in the future. After all,
these are the very people who have to live with the decisions
that are made here in Washington.
But before we do, I ask unanimous consent that all Members
be allowed to submit an opening statement for the record.
Chairman CAMP. Hearing no objection, I now yield to the
ranking member, Ranking Member Levin, for the purposes of an
opening statement.
Mr. LEVIN. Thank you, Mr. Chairman. Dr. Goolsbee, I
understand, will be here until 10:30. He will have a chance,
Mr. Chairman, to respond to some of your criticisms that I
don't think are valid.
But we want to hear from you, Dr. Goolsbee, so I will be
brief.
Last night, the President said some very clear things about
the health care issue. He said, ``Instead of re-fighting the
battles of the last two years, let's fix what needs fixing, and
move forward.'' My concern about the hearing is that, indeed,
we will be re-fighting the battles of the last two years.
For example, as to 1099, we introduced legislation in the
last session. It passed here. It was opposed by the then
minority because of the pay for. Ironically, much of what is in
the bill was in the pay for is now the law of the land. We
should have acted on 1099 last session.
In his speech, the President also said, ``What I'm not
willing to do is to go back to the days when insurance
companies could deny someone coverage because of a pre-existing
condition.'' He went on to point out that the law is now making
prescription drugs cheaper for seniors, and giving uninsured
students a chance to stay on their parents' coverage. So, I
repeat, he then went on to say, ``Instead of re-fighting the
battles of the last two years, let's fix what needs fixing, and
move forward.''
I think that's exactly what we should do, and I would hope
that would be the tone of the hearing today. I yield back.
Chairman CAMP. Well, thank you. Welcome to the Ways and
Means Committee, Mr. Goolsbee. Under our rules you will have
five minutes. Your written statement will become part of the
record. And so, welcome, and you may begin.

STATEMENT OF AUSTAN GOOLSBEE, PH.D., CHAIRMAN, COUNCIL OF
ECONOMIC ADVISERS, WASHINGTON, D.C.

Mr. GOOLSBEE. Thank you, Mr. Chairman. And I would like to
say good morning to Chairman Camp, Ranking Member Levin, and
all the Members of the Committee. Thank you for inviting me to
testify here today. And I know we were up late, and I saw
several of you last night, and I appreciate your time.
The Affordable Care Act was designed to make sure that
health insurance coverage is affordable for individuals,
families, and businesses. And while millions of people are
benefitting now, much of the impact of that act will begin when
the major coverage provisions take effect in 2014.
The best evidence that we have gathered from outside
experts suggests that, in addition to slowing the growth of
Medicare spending and significantly reducing the deficit over
the next 10 years and the 10 years after that, that the
Affordable Care Act can be a significant benefit to the job
market by easing the burden of health care costs on small
businesses, and by reducing the growth rate of health care
costs for all businesses.
Now, the impact of the Affordable Care Act on the labor
market is an important topic. I applaud you for having this
hearing. I believe there has been a significant amount of
confusion on this issue, and I am happy to have this
opportunity to try to clarify that.
I think the President laid out last night in a way that is
most helpful, and you iterated in your opening statement, Mr.
Chairman, that we should try to work together to improve--
whatever is broken or problematic we should fix together.
Anything that reduces costs is going to help jobs in this
country.
Health care has, for years, been one of the most pressing
cost issues facing the business world. Those costs have been
rising dramatically, long before there ever was an Affordable
Care Act, and the Affordable Care Act's intention is to try to
address that.
I would highlight two basic mechanisms that I think the
Affordable Care Act can have a--has had and will have a
significant positive impact on the job market. The first
mechanism is in the area of small business. Now, the role of
entrepreneurs and small businesses in job creation and in the
economy is well known. Equally well known is the fact that
small businesses have, for years, consistently said that the
cost of health care is one of their most significant problems.
Small businesses that want to provide insurance for their
workers face much higher costs than large firms do for exactly
the same plans. And in many states they also face the risk that
a single sick employee, or even an employee's ill family
member, will send their premiums through the roof for all of
their employees.
The Affordable Care Act has begun to help make small
business more competitive by making health insurance more
accessible and more affordable. One of the first provisions to
take effect is the small business health care tax credit that
helps offset the costs of coverage. That applies to as many as
four million small businesses that may be eligible right now
for that small business tax credit.
In addition, the Affordable Care act can level the playing
field for small businesses by giving these businesses and their
workers access to the same kinds of stable premiums that larger
businesses enjoy. The exchanges pool risk and reduce
administrative costs for small businesses. New insurers will
not be able to raise rates when some individual in the group
becomes sick. And this will allow small firms to offer
competitive health benefits. People can start their own
company, or go work for a fast-growing small business without
worrying to that they would have to give up access to secure
affordable coverage. And that impact on job mobility is
critically important.
The other mechanism that I would highlight are the many
things that the act does to try to reduce costs overall, and
reduce the health care cost inflation rate.
These include the immediate reduction in the implicit tax
from the uninsured. Right now, the uninsured get health care in
emergency departments or in other very high-cost ways. The
estimates suggest that that is a hidden tax passed on to
everyone else of up to $1,000 per worker. And by covering the
uninsured, the Affordable Care Act will reduce that hidden tax
directly.
Second, it makes innovations in the delivery systems in
Medicare and Medicaid that, if we have successful innovations
there that are adopted in the private sector, can reduce costs.
Chairman CAMP. If you could, just sum up very quickly.
Mr. GOOLSBEE. Sum up. Commitment to prevention and
wellness, to patient-oriented outcomes, and to modernizing the
health IT system. Those cost reductions and the small business
credits can have a quite beneficial effect on the job market.
[The prepared statement of Austan Goolsbee, Ph.D.:]

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[GRAPHIC] [TIFF OMITTED] T0870A.005

Chairman CAMP. All right. Thank you. And as I said, your
full statement will be part of the record. And thank you for
that.
Last night the President did say of the ongoing health care
reform debate that, instead of re-fighting the battles of the
last two years, let's fix what needs fixing and move forward.
And he mentioned specifically the 1099 provision. What else
does the President believe needs to be fixed in this new law?
Mr. GOOLSBEE. Well, I would say the 1099 provision, which
was designed to reduce tax evasion, what put this burden on
small business, was identified early as an important one.
You saw the President last night also say he was open to
look at things. I know that there have been people that said we
should have done more on medical malpractice reform, and the
President said he was open to looking at that.
Now, I would highlight that the Affordable Care Act does
create pilots that it funds in states to figure out--different
states have experimented with ways to address medical
malpractice reform, and it authorized examining and creating
pilots to help us figure out what works in that area. But I
would say that's an area that the President is open to ideas,
and we would want to work with you on.
Chairman CAMP. So there is 1099 and medical liability
reform. Those are two items. Are there any other items?
Mr. GOOLSBEE. I would say that the President is open to
working with you if you identify other items. But the basic
thrust of the Act, of trying to get costs down and trying to
help small business to afford care, is fundamentally the right
approach. And so I think that we want to stick with it.
Chairman CAMP. Well, in regard to holding costs down,
which--I appreciate that sentiment and goal--both the CMS
actuary and the Congressional Budget Office say the legislation
that was enacted will likely increase, not decrease national
health expenditures. And if they're right, isn't the health
care law an economic failure that will increase health care
spending and cost jobs? And I'm not asking if you agree with
CMS or CBO, but I'm asking, if they're right, isn't this reform
a failure?
Mr. GOOLSBEE. I don't view it as a failure. I think the key
thing of the Affordable Care Act is trying to get the health
care cost inflation rate down.
If more people are being covered and having their health
improved and have the security to know that they cannot be
denied coverage because of a pre-existing condition, the amount
of total health spending is different than looking at what the
prices are, and trying to control health care cost inflation.
So, in my view, that wouldn't be the right way to evaluate it.
Chairman CAMP. But the expert non-partisan agencies that we
rely on, like the Congressional Budget Office, like the
actuaries at CMS, tell us that overall health spending is
likely to go up under this legislation.
And if the stated claim that holding down health care costs
is really a justification for this bill, and will help the
economy and help businesses, particularly small businesses, and
that isn't going to happen, how is this committee expected to
evaluate this legislation, other than that it doesn't meet the
stated goals, and that the reform that was purported was a
failure?
Mr. GOOLSBEE. Well, I was trying to make the distinction--
and I apologize if I didn't--between the amount of total
spending and the, essentially, spending per person, or the cost
of the same procedure.
So, the Congressional Budget Office and many health
economists out in the country believe that the things that I
have described in my testimony are ways that we can, for any
given business, reduce the health care cost inflation rate, and
make them more competitive for small businesses, giving health
care credits that they can use to help offer health care to
their workers, where they do not now.
That is important. That will facilitate job creation. That
is a different question than the one I think you're asking, Mr.
Chairman, which is what will be the total spending on health
care, overall, not on the prices, but on total spending. And
total spending has been rising quite dramatically for many
years. And I would observe that CMS's data suggested that
health care spending overall rose at the slowest rate this past
year that it has since they have been keeping records.
Chairman CAMP. Well, the Congressional Budget Office also
indicated, as I said in my opening statement--I don't want to
repeat that, though--but that health care premiums for millions
of families will also go up by over $2,000 per family. And,
obviously, in contrast to a reduction in premium, which
occurred with the bill that I offered.
So, whether you--however you slice it, whether you look at
the macro sense or you look at individual families, costs are
going up. And as you said in your opening statement, getting
costs under control in health care is a very important goal,
and absolutely one we should look at.
Well, thank you very much. At this time I will yield to the
ranking member. He has five minutes.
Mr. LEVIN. Thank you, Dr. Goolsbee. You are very polite.
And I think proceeding that way is important.
But I think there needs to be driven home very clearly the
distinction you make. Driving down costs does not mean
necessarily that expenditures will not go up. We have now over
50 million people who have no insurance, whatsoever. And
bringing most of the 50 million people so they have health care
insurance and have health care may increase overall
expenditures while we drive down the cost per patient. And
there is nothing inconsistent.
And John Boehner's proposal has been analyzed. It would add
only three million people to the insured. We are the only
country, industrial country, on this globe that has anything
like 50 million people who have no insurance whatsoever, the
only nation like that.
So, you said it very discreetly, but I think it was clear.
And I think we need to make those distinctions very clear,
indeed.
Now, let me ask you about another argument that's made
about the health care reform. And now that language has been
somewhat moderated, I will use what's been said here, that it's
a job-killing bill--reform. I don't think we should use that
language, whatever language we use. Would you comment on that?
Mr. GOOLSBEE. Well, I would say, as a strictly factual
matter, I think it's an inaccurate statement to say it's job-
killing. I think the evidence suggests that the role of small
business in job creation, and the role of reducing the health
care cost inflation rate in job creation suggests that the two
primary tenets of the Affordable Care Act may have even a
significant positive impact on the job market.
You may have seen a health economist at Harvard, David
Cutler, look at the best evidence we have of the projected
impacts of these various inflation-reducing measures, and ask,
``What would that mean for job creation or destruction,'' and
found it would be job creating, in the nature of hundreds of
thousands of jobs per year.
If you look at the evidence on employers, health care costs
have been rising dramatically every year for many years. And
that has been a tremendous burden on them, and has limited
employment growth.
So, anything that we can do to reduce that inflation rate
will have a positive impact. And I did not mean in any way to
say to the chairman or to anyone else that we should close our
minds and not be open to important ideas of how to improve
this, or how to find other ways to get costs down. We should.
The President has made that clear, and I would like to
reiterate that, that we are open to sensible ways to improve
care, to improve coverage, and to get costs down. I think to
describe it as job-killing is not accurate, based on the
evidence that we have.
Mr. LEVIN. Okay, just briefly in your testimony you refer
to Patient-Centered Outcomes Research Institute as something
that can help make treatments work better. And that means, I
think, it will affect costs and try to get a hold of costs. Do
you want to comment briefly on that? You have about 30 seconds.
Mr. GOOLSBEE. Well, I would say----
Mr. LEVIN. Some have said that Washington is going to
dictate the care patients receive.
Mr. GOOLSBEE. It's not--that institute is not a dictation
machine, it's not meant to do that. It is meant so that we can
share information across the country of what do we find, what
kind of treatments work.
The best analogy is my own. When I was a kid, it was
routine to take everybody's tonsils out. I got my tonsils out,
I was in the hospital three days. And of our own kids--I have
three children--the studies indicated that that was not
effective, except in certain circumstances. Now, our middle son
had--I'm not a doctor, but--some kind of inflamed tonsils, had
his tonsils removed. But our other two kids did not.
And that is a case where looking across the country,
studies showed that it was more effective--that it was, in some
sense, more dangerous to routinely just take all kids' tonsils
out, and it's quite a significant expense to both families and
to the health system that we were routinely doing that.
I would use that as kind of a personal example of what the
intention of this would be, would be to share that information
so doctors----
Chairman CAMP. All right, thank----
Mr. LEVIN. Thank you.
Chairman CAMP. Thank you very much. Mr. Herger is
recognized.
Mr. HERGER. Thank you very much, Mr. Chairman. And, Mr.
Goolsbee, I thank you for appearing before us, and your
testimony.
But as I listen to you, there seems to be, in the
Administration, a night and day difference between what I hear
you saying on lowering of health care costs and what this
Obamacare is doing for our small business and creating jobs,
and what I hear small businesses in my district telling me. And
later this morning we will be hearing from some small business
owners who do know firsthand what it takes to create jobs.
It's one thing to come up with academic arguments for why a
particular policy will be good for job creation. It's another
thing to have those results actually demonstrated in the real
world. What we are going to hear from business owners in my
district, and what I have heard from small businesses, is a
very different story than the one you have presented. Their
near-unanimous opinion is that this health care law is going to
absolutely be devastating to their small businesses, and to
creating jobs.
Let me share with you some of the feedback that I have
received from business owners in my northern California rural
district. Robert Boisey of Burney, California, writes, ``I am a
small businessman who is retired and collecting Social
Security. I started my business in January of 2008, and it
immediately took off. In 2009, I made more money than I ever
have in my life, and I was ready to add 1 or 2 employees when
they started talking about Obamacare. I have now decided not to
expand, and to contain my business at a smaller size.''
And then, from a Charles Watts of Chico, California,
writes, ``I have been a business owner builder/contractor for
35-plus years, and have survived 3 other recessions, this being
the worst. What I don't understand is how our government
figures that business owners can maintain work in an economy
with a collapsed housing market, with no future in sight of
recovery for years. Our company is hanging on by a thread. And
if I have to provide health care for employees, I will have to
close it down, no questions asked. I would have no other
option.''
And then a Mike Mullin in Cottonwood, California, writes,
``As it stands right now, I can't afford to grow or hire new
employees. Currently, the paperwork alone is a nightmare in
labor costs. If Obamacare is not repealed, it will definitely
increase labor costs, which is the most expensive part of
running a business. Also, the 1099 deal definitely needs to go.
If I have to cut a 1099 to every vendor I use, I won't have
time to do my work.''
Mr. Goolsbee, this is just a sample of what I and other
members of this Committee are hearing from small business
owners in the real world. I have double-digit unemployment in
every one of the 10 counties in my district. We cannot afford
this--to get this wrong. Can you explain why the
Administration's claims are so out of touch with what we're
hearing from people who are actually creating jobs?
Mr. GOOLSBEE. Well, Congressman, I respect that question,
and I appreciate you bringing that evidence. I think the one
thing I have noticed when I have talked to many small business
people and large business people is some misunderstanding on
the part of some business people of what's in the law, or what
provisions would apply to them.
So, small businesses are--if you have 50 employees or
fewer, you are not required to provide coverage to your
employees. Second, small businesses, up to four million of them
right now, would qualify for a very substantial tax credit to
help cover their costs
that--they have never had such a credit before. And third, as
we move to the exchanges, for the first time, small businesses
will be able to get insurance coverage at a price that is
comparable to the price that large businesses currently offer.
So, among very small businesses in the country, the
majority do not offer any health care coverage now. And the
surveys of the NFIB and other small business organizations have
shown again and again--before there ever was an Affordable
Coverage Act--that health care costs are one of the most
pressing problems facing small business, that they had very
hard times hiring employees to come work at their businesses,
because the employees that were at large companies would say,
``I would love to work at that start-up, but I can't get
coverage if I move there, it will be too expensive.''
Chairman CAMP. Thank you.
Mr. GOOLSBEE. So, I think----
Chairman CAMP. Your time has expired.
Mr. GOOLSBEE. I apologize, Mr. Chairman.
Chairman CAMP. Mr. Johnson is recognized.
Mr. JOHNSON. Thank you, Mr. Chairman. You know, you have
said a lot of things that don't seem to be true in the real
world. Maybe you better get out there and talk to people.
But, you know, that health care tax credit, for instance,
very few small businesses that I talk to and their employees
will benefit from the credit. In fact, CBO estimated that 88
percent of those who get health insurance from a small business
work for a business that will not receive the credit. There are
different credit amounts and eligibility requirements prior to
2014 than exist after the exchanges are operational. And after
2013, an employer can only claim the credit for 2 years. That's
not giving them much.
One of the purposes of this hearing is to look at the
impact of health reform law on jobs. I think we can all agree
it is critical to pursue policies that create jobs, not
eliminate them. And the health reform law places significant
restrictions on physician ownership of hospitals. You've almost
put it to a complete halt. And yet, my experience with
physician-owned hospitals, they are far above in benefits to
the patients of a regular hospital. They are precise, they know
what they're doing.
Many projects, in planning, had to stop. And expansions
were curtailed. Every one of those decisions had a negative
impact on jobs in states like Texas. Industry experts tell me
at least 30,000 jobs would have been created if this provision
had not been enacted. Can you explain to me how the
Administration could have supported a provision they knew would
negatively impact well-paying health care jobs in many
communities?
Mr. GOOLSBEE. Well, Congressman, I will need to look into
this exact provision, and I will get back to you. I know that
the primary goal of the various provisions in the act are how
do we provide the best possible care at the lowest possible
price, or with the lowest rate of inflation. If there are
things about physician ownership of hospitals or any other
subject that we can get together and work on, and find evidence
that it could improve care and reduce costs, the President is
open to look at any such ideas.
So, I will have to get back to you on this. I am not
familiar with the details.
Mr. JOHNSON. Okay. Well, that's just one area of that bill
that doesn't appear to be beneficial to the industry.
You know, we talked about 1099 reporting requirements, and
I presume now you are in agreement that we need to get rid of
that provision. Is that true?
Mr. GOOLSBEE. That is true.
Mr. JOHNSON. Okay. I'm hearing it from you and the
President, I think.
Mr. GOOLSBEE. Yes.
Mr. JOHNSON. All right. Then let's do it. The health care,
overhaul, provides health plans in existence on the date of the
law's enactment, that they would not be required to meet all
the requirements of the new law. And you all argued that it
would allow individuals to keep the health insurance they have,
and like. The statute did not define grandfathered plans, other
than to ensure that all plans resulting for the length of the
agreement--it's clear that many employer plans will not enjoy
the grandfathered plan protections from the new law. Can you
discuss that a little bit?
Mr. GOOLSBEE. Yes. What I would say is the--clearly, the
intention and the overall impact of the Affordable Care Act is
to--the President believes in the private system, and it is
designed to try to preserve the option that if the employer is
happy with the plan that they have, they can stick with the
plan.
The intention of the grandfathering clause is to make it so
that if there are things in the Act that would have some impact
that the employer or patient doesn't want, they could just
stick with what they have.
Now, you always have to choose the lines of what to draw--
what counts as the same plan. Now, there is flexibility. You
can--if you are getting the same insurance, but you want to
change providers, that's still permissible, and you still keep
the grandfathering. If you fundamentally change the nature of
what health care you're getting, then the point of the
grandfathering would not apply. And so that's why we put----
Mr. JOHNSON. Yes, but isn't that only for two years after
you do that?
Mr. GOOLSBEE. It depends which, but on some of these there
are phase-outs.
Mr. JOHNSON. All right. Thank you, Mr. Chairman.
Chairman CAMP. Thank you. Mr. McDermott is recognized.
Mr. MCDERMOTT. Dr. Goolsbee, I fly across the country 35
times a year for 20 years, and I have been flying with United
Airline attendants who have now gotten a little older. And I
doubt there is a single flight I fly on where there isn't one
flight attendant who is working simply to keep her benefits
because her husband has a job that doesn't have benefits.
And when I read the attack on the job-killing aspects of
this bill, I--they read the report from CBO and it sounds like
they're saying we're going to kill jobs. But, in fact, that
flight attendant would gladly give up her job at age 60 if she
had health care for her family in some other mechanism.
Now, is that killing the job, or is that her choosing to
leave the work force?
Mr. GOOLSBEE. To me, that sounds like a retirement. And the
CBO report that you're citing, they did make clear that there
would be a reduction of total jobs, but that most of those
would be on what they call the labor supply side, of people not
having to work as many years just to keep their medical
benefits. So, to me, that would not be a job killing, that
would be a retirement.
Mr. MCDERMOTT. So it really is political theater,
hyperbole, to make it seem like this bill kills jobs.
Mr. GOOLSBEE. I'm just an economist----
Mr. MCDERMOTT. You're not going to----
Mr. GOOLSBEE. I'm not----
Mr. MCDERMOTT. Okay. Let me ask another question. You know,
I--we're going to have another panel, and they've rounded up
some people who say this doesn't help small business. And I'm
sure that if you go through this country of 300 million people,
you can find some small businessman or woman for whom it
doesn't work.
But my--from reading your testimony, it sounds like more
small businesses are buying insurance today. If I read the
figures you had for United Health and for Kansas City's Blue
Cross Blue Shield program, it sounds like people are actually
getting in because of the small business tax credits.
Mr. GOOLSBEE. I think that's true. I would make three
points. The first is if you don't have insurance, which, the
smaller the employer you get, the greater the share that do not
offer insurance now, because they would have to pay
substantially more for exactly the same policy as large
employers do, this--the small business health care credit gives
them the opportunity to offer insurance for the first time, and
you have seen substantial take-up.
Second, even if you already offer it, the small business
tax credit reduces the cost to you in a way that has never
existed before.
And third, we should not underestimate the importance of
the exchanges that will be coming online, which will allow
small businesses to get insurance at the kinds of prices and
steady levels that large employers have had.
Those three things are critically important to small
business. And for years, before there was an Affordable Care
Act, they have been wanting to have, for some time, these types
of credits and access to this type of insurance.
Mr. MCDERMOTT. And they have also talked about wanting to
pool and--so that small businesses could join a pool----
Mr. GOOLSBEE. Yes.
Mr. MCDERMOTT [continuing]. And they could then buy, like
Boeing or Weyerhaeuser, or one of the large company buys. So
this really gives them the ability to get that kind of benefit,
is what you're saying?
Mr. GOOLSBEE. Yes, that's a better way to say what I was
saying, is it allows them to pool. That's what the exchanges
are for, it allows them to pool and get prices as if they were
a large employer.
Mr. MCDERMOTT. You may not have read the testimony of the
people who are following after you, but I--can you think of any
reason why a small business man or woman could not find a way
for health care, if they're making money? Is there any reason
why, beyond they don't want to do it? I mean is there some
economic reason?
I don't understand, if you're making money in a business,
how you can't put some of that money toward the health care of
your workers. You would certainly care about your workers, I
would guess.
Mr. GOOLSBEE. Well, look. It would be presumptuous of me to
tell other folks. I don't know what the circumstances of
different businesses are. I do know this, that if you take
employers that are employing people without giving them health
care coverage, the reason that there would be a mandate is to
try to get away from the system we have now, which is people
don't have coverage, still get sick, and they go down and they
get medical care at the highest possible expense, and it
doesn't become free just because it was in the emergency
department. That's a cost that gets passed directly on to the
employers who do cover their employees. And that cost is as
high as $1,000 a worker.
So, I don't put any moral judgement of any kind. I know
we've been through a very tough spot in the last few years, and
everybody has been trying to get by, and we're trying to turn
the corner to grow our way out of these problems. I think small
business credits to help them afford to give coverage, as well
as giving them the opportunity to buy at the kind of prices
that larger businesses do, and doing everything we can to slow
the growth rate of health care cost is important.
Chairman CAMP. All right, thank you. The time has expired.
Mr. MCDERMOTT. Thank you.
Chairman CAMP. Mr. Tiberi is recognized.
Mr. TIBERI. Thank you, Mr. Chairman. Dr. Goolsbee, the
President repeatedly mentioned throughout the debate and
afterwards that Americans making less than $200,000 or families
earning less than $250,000 would not see their taxes increased,
with respect to the Democrats' health care bill.
I would like you to tell me whether each of the following--
in a yes or no answer--would suffice that were included in the
health care law constitutes an increase in taxes for
individuals or families making less than $200,000 or $250,000:
a new tax on individuals who did not purchase government-
approved health insurance.
Mr. GOOLSBEE. I don't think that's an accurate way to
describe it, no.
Mr. TIBERI. Not a new tax?
Mr. GOOLSBEE. I don't think that's an accurate way.
Mr. TIBERI. A new ban on the use of flexible savings
accounts, HSAs, HRAs on using pre-tax income to purchase over-
the-counter drugs?
Mr. GOOLSBEE. I don't--that's not a tax increase of a
normal form, and that's part of a broader reform effort,
obviously.
Mr. TIBERI. An increase from 7.5 percent to 10 percent of
income, the threshold after which individuals can deduct out-
of-pocket medical expenses?
Mr. GOOLSBEE. [No response.]
Mr. TIBERI. Not a tax increase?
Mr. GOOLSBEE. I--as I'm saying, if you--I do not consider
the Affordable Care Act, as a whole, to be a tax increase in
people making less than $200,000.
Mr. TIBERI. I've got two more. Impose a new $2,500 cap on
families' ability to use pre-tax dollars to fund an FSA.
Mr. GOOLSBEE. Could you----
Mr. TIBERI. A $2,500 cap----
Mr. GOOLSBEE. $2,500 cap----
Mr. TIBERI [continuing]. On----
Mr. GOOLSBEE. I don't consider that a tax increase.
Mr. TIBERI. A new 10 percent tax on indoor tanning
services.
[Laughter.]
Mr. GOOLSBEE. [No response.]
Mr. TIBERI. Not a tax increase?
Mr. GOOLSBEE. Well, that seems like a strictly voluntary
thing that one could choose.
Mr. TIBERI. But not a tax increase?
Mr. GOOLSBEE. [No response.]
Mr. TIBERI. Here is the point, Dr. Goolsbee. We have, in
this bill--and I'm quoting from the bill--a number of things
that are going to--that's going to impact people, individuals,
who make far less than $200,000.
I had a lady contact me in December who said she had just
found out from her employer and her doctor that she could no
longer manage her kids' health care costs with respect to
prescription drugs, over-the-counter drugs, and now she was
going to have to contact the doctor every time she wanted to
deduct something from her flexible savings account, and had
just found out in December, months after the health care bill
was signed into law, that actually, her tax was going to
increase, her income tax was going to increase, because her FSA
was going to go from $5,000 to $2,500. And thus, her income was
going to go up, with respect to her taxes, which means she was
going to be paying more taxes.
So, two things were occurring in her mind that she had no
idea with respect to the health care debate, that she was going
to be paying more taxes, and her ability to mention her health
care was going to be taken away from her, that she was not
going to have to call her physician's office, which is going to
make, ironically, the physician's office more involved, not
less involved, and there is a cost to that, as well.
So, I know you chuckle about this, but the President was
very, very firm in that nobody making less than $200,000, or
families less than $250,000, would see income taxes go up, any
taxes go up. And now we see a Department of Justice defense
that this bill is constitutional because it's a tax, the
individual mandate is a tax.
So, on one side, we say it's not a tax--or you say it's not
a tax, the Administration. On the other side, you say it is a
tax. So, which is it?
Mr. GOOLSBEE. Well, Congressman, first, let me apologize. I
was only chuckling about the tanning salons. I wasn't meaning
to make light of it.
As I say, we are open to work--if we look at the FSA rules,
all I would say on FSA's is this was part of a broader package,
that it's not picking out one thing in isolation and not taking
into account other benefits. If you are paying for something
with a pay for, but it's going to reduce health care cost
inflation, or we're going to get additional coverage that you
didn't have before, you do have to take it in totality before--
--
Mr. TIBERI. Here is my point, sir. I am just saying if you
are telling the American people, and the President is telling
the American people--if I am advising you, and you repeatedly
say it's not a tax increase, and Mrs. Smith, who sees her FSA
go from $5,000 to $2,500, and now she can't buy baby aspirin at
the store and deduct it from her FSA, she looks at that as a
tax increase.
So, there is a credibility issue. And again, we can chuckle
about it, but this is a tax increase----
Mr. GOOLSBEE. I didn't chuckle about it, and I don't mean
to----
Chairman CAMP. Just respond briefly, and then we will move
on.
Mr. GOOLSBEE. Okay. My only brief response is if it changes
the FSA rule, but simultaneously gives her a significant
reduction in the cost of her health care, that should not be
viewed as a tax increase on her, even though just looking at
one component, you would say, ``I had a disallowed expense on
an FSA.'' But the point is taken in totality, it's not a tax
increase.
Chairman CAMP. All right. Thank you. Mr. Davis is
recognized.
Mr. DAVIS. Thank you, Mr. Chairman. I guess it all depends
on what the meaning of ``is'' is. This is a big of a Back to
the Future moment, when taking it in totality it's a huge tax
increase.
I deal with constituents at all places in the economic
spectrum, and they talk about a lack of purchasing power,
they're seeing their dollars go down. And small business
owners, in particular, contrary to the gentlemen that say this
is not job-killing, I have met with hundreds of business owners
over the last two years, and, really, since this bill
implemented this year, business after business, our Chambers of
Commerce members are telling us, and telling our office and me,
they're not hiring people because they cannot afford to provide
coverage, which leads me to a question.
Since we referred to the tanning tax as a strictly
voluntary thing--I don't think the IRS agents would feel that
way--but I want to ask you about the burdens of the Democratic
health care law on small business.
For example, suppose you own a small business with 50 or
more employees, and that business is not eligible for the small
business tax credit, and can't afford to purchase health care
for your employees. Contrary to the propaganda, rates have gone
up significantly; they're going to continue to go up, because
we didn't go after the cost drivers. The health care law
requires you to provide health insurance or pay a fine.
Now, how would having to afford the cost of health
insurance or paying the fine help your company grow and create
jobs? Because when we get into this pricing issue here, there
is, I think, a faulty assumption that businesses have unlimited
supplies of money. The vast majority deal with vendors that
have fixed costs on materials, as part of a supply chain.
And hence, on the outside, they often--and particularly if
they're dealing with larger, established businesses, price
ceilings that they cannot exceed. So that margin skinnies down.
The average manufacturing company that's considered successful
in this company (sic) might make an eight percent profit margin
at the end of the year. And we're watching health care just go
up at an astronomical rate.
Here is my question. How would having to absorb the cost of
health insurance or paying the fine help you grow jobs? Tell me
that.
Mr. GOOLSBEE. Well----
Mr. DAVIS. That is a tax in your bill.
Mr. GOOLSBEE. Well, here is what I would say, Congressman,
and I appreciate the evidence, and we are open to working and
looking at the evidence.
If you take large employers, more than 95 percent of them
offer health care. If you go to the five percent that do not
and say, ``Isn't it going to hurt those five percent, that they
will be required to provide health care,'' I do think it is
appropriate that we consider what is the cost that they are
applying on to other employers when they aren't offering health
care, and that's the hidden tax that already exists. The growth
of health care costs has been astronomical year after year,
before there ever was an Affordable Care Act. And the
Affordable Care Act is trying to bring that more under control.
So, that there are--that the majority of small businesses
in the country, some four million, would qualify for the credit
is good for those businesses. To try to find an individual
business who did not provide health care before, has over 50
employees, is not planning to use the great benefit of the
exchange to get--so that they would have the opportunity to get
significantly lower prices for their health care, to me feels a
little bit of a selected example, when taken in totality----
Mr. DAVIS. Well, let's take this to a simple--the small
companies, why couldn't they just pool together? Wouldn't that
make sense? And--to be able to handle this issue, and to have
the government stay out of it? Let the private market work.
Mr. GOOLSBEE. Well, they haven't----
Mr. DAVIS. I mean I ran a business for 12 years, and we ran
into this time after time, where costs did go up. And the costs
under this bill are going up dramatically. I know people who
won't hire employees because they're going to go over the 50
threshold. Why should I hire somebody, if I'm going to be
taxed? And you called just a minute ago, that----
Mr. GOOLSBEE. Well, as I say----
Mr. DAVIS [continuing]. Didn't tax----
Mr. GOOLSBEE [continuing]. You're selecting a group of
employers that's at some specific sliver, and I am highlighting
that there are millions of businesses just below that, which
are the majority of small businesses in the country, who are
getting a very significant tax credit----
Mr. DAVIS. Well, let me just point something out. You've
asked us to take it in totality. And, just between Mr. Tiberi
and I, we've probably pointed out 20 individual examples that,
taken in totality, all point to significant increases in costs
on business under this bill.
And I think we come back to the details. We're going to
have to address the cost drivers. And we don't address the cost
drivers, beginning here in Washington, with creating a huge new
bureaucracy that places more overhead--if you ask any business
owner about this bill, they will ask the question, ``How can
you create over 100 new agencies, commissions, and boards,
massively increase the regulatory side of this, and somehow
reduce costs, while raising taxes on businesses and cutting the
direct access to benefits?''
Every doctor that I know calls this a denial of care bill,
when they look at the economic aspects of this. And we are
dealing with very different sets of definitions of terms, and
we can't be fluid about that. I yield back----
Chairman CAMP. All right. His time has expired. Mr. Neal is
recognized.
Mr. NEAL. Thank you, Mr. Chairman. Mr. Chairman, I would
like permission to insert the CBO's preliminary analysis of the
repeal of this health care legislation into the official
record.
Chairman CAMP. Without objection.
[Information as follows: Mr. Neal]

Rep. Charlie Rangel
Statement for the Record
Wednesday, January 26, 2011
1099 Repeal
The House voted on July 30, 2010, on HR 5982, which would have
repealed the expanded 1099 reporting requirements.
One of the revenue provisions in the health care reform law is an
expanded reporting requirement that would have increased business to
business information reporting (using form 1099). Repealing the
provision in 2010 would result in revenue loss of $19.1 billion. The
repeal in HR 5982 was fully paid for through the closing of a number of
tax loopholes, including loopholes that incentivize companies to send
U.S. jobs overseas.
Repealing the provision in 2011 would result in revenue loss of
$21.9 billion.
Because HR 5982 was brought up under suspension of the rules, it
needed support of two-thirds of Members to pass. Unfortunately, it was
defeated by Republican opposition:

Yeas Nays NV

Democratic---------------------------------239------------1-----------14

Republican 2 153 23

Mr. NEAL. Thank you. And, Mr. Goolsbee, if we were to
repeal the health care bill, as some are proposing, that means
eliminating $40 billion worth of tax credits. Doesn't that
represent a tax increase?
Mr. GOOLSBEE. It would be very problematic, and it would be
particularly problematic on small business. But it would be a
major tax increase.
Mr. NEAL. All right. Let me take you to some of the facts
here. One of the difficulties in the discussion of this
legislation is that if our friends on the other side are asked
by the local news media in their respective constituencies
whether or not they favor banning pre-existing condition, they
will say yes. If they are asked, ``Is it not a good idea to
keep your children on your health care plan up until they're
26,'' they will say, ``Yes.'' If they are asked if it's a good
idea to cap out-of-pocket expenses, they will say, ``Yes.''
Carrying insurance from one job to the other? They will say,
``Yes.''
The problem with that argument is, from an actuarial
reality, or from risk analysis, how do you accomplish those
outcomes if you don't require those who can afford insurance to
buy it, and to help those who can afford it to get into the
risk pool through the mandate?
I mean that--by the way, I wanted to say something for the
record. This is very important. The mandate was the compromise
in Massachusetts that was proposed by Governor Romney. That's
how we got there. Senator Kennedy advocated for years, spent a
career talking about health care. The difficulty is that, in
attempting to do it, the compromise became the mandate.
Would you speak to that issue about actuarial reality, risk
analysis, and what insurance companies might do to suggest that
they could accomplish the former, as I've outlined it, to get
us to the latter?
Mr. GOOLSBEE. Well, look. I do think the basic point of the
matter is to get away from the economic problem of cream
skimming and figuring out who is more likely to get sick and
dropping them. And when you have circumstances like that, a lot
of times markets can--the free market can fail when you have
big differences of information like that.
That has plagued the health care system all along, and that
is the point of the Affordable Care Act, is to try to get
everybody into the system, so you can't either free-ride off
your neighbor and, so on the other side, they can have some
assurance that the probability of whatever illness is
approximately the probability in the overall population, as
opposed to everybody that knows they have the--some disease
signing up only once they get sick. I think that's the basis.
Mr. NEAL. I would encourage all the members of this
committee, and others, to visit an emergency room on a Friday
or Saturday night. And if you can't do that, or you live in a
rural area and it's more difficult, then I would encourage
Members to be in touch with their local hospitals to find out
what health care delivery is in the emergency room.
And for that man or woman who walks out of that emergency
room thumbing their nose by suggesting that they beat the
system, they didn't really beat the system. In fact, those
costs are passed on to all of us. That's the whole idea of
spreading risk, which I would have thought the other side would
have paid a great deal of attention to, given their proclivity
for the suggestion that we ought to allow the market to work.
Mr. GOOLSBEE. Look, I think that's the uncompensated care--
--
Mr. NEAL. Precisely.
Mr. GOOLSBEE [continuing]. Is a hidden tax on everybody,
and it's a big one, $1,000 a worker by some estimates. And we
cannot forget that that tax exists. It's very important. And we
can get that cost down. And that is a big cost driver.
Mr. NEAL. Thank you, Mr. Chairman.
Chairman CAMP. Thank you. Mr. Nunes is recognized.
Mr. NUNES. Thank you, Mr. Chairman. Mr. Goolsbee, were you
involved at all in the President's State of the Union address,
in designing it or writing it or reviewing it, previewing it?
Mr. GOOLSBEE. Yes, a little bit.
Mr. NUNES. Okay, so you're familiar with the health care
portions of the speech last night?
Mr. GOOLSBEE. Yes.
Mr. NUNES. Okay. So the new 1099 reporting requirements.
Last night, to paraphrase, the President called it a ``flaw,''
I think. At what point did he have the epiphany that it was a
flaw?
Mr. GOOLSBEE. I don't know the answer to that,
specifically, but the chairman quoted the President from a
significant time ago. It wasn't at the State of the Union that
he had it.
Mr. NUNES. Did the President or White House or anyone
affiliated with the executive branch ever hear from any Members
of Congress that this was a problem, 1099 problem, during the
year-long health care debate?
Mr. GOOLSBEE. I wasn't involved in the legislative
discussion, but I think it's probably fair to say yes.
Mr. NUNES. Okay, thank you. What--so the President has now
admitted that the policy he supported was flawed. He asked for
other creative ideas. Where should this committee start? What
creative ideas should we look at to identify possible
additional flaws, other areas that we could reduce costs,
improve the quality of health care, where should we start?
Mr. GOOLSBEE. Well, I do think that the previous congress
people have identified, hearing from constituents and from
business leaders themselves, if there are ways that we can
reduce administrative costs, reduce regulatory or compliance
burdens of the form.
Mr. NUNES. Any specific ideas? Is there anything like 1099
that we should strip out of the current health care law, or
anything that we should put in?
Mr. GOOLSBEE. Well, I think 1099 is a good one, and the
President outlined that we should look together at the medical
malpractice issues that can lead to defensive medicine and
those things. That strikes me as also a productive place to
look.
Mr. NUNES. So medical malpractice we should look at. Any
other areas----
Mr. GOOLSBEE. I mean----
Mr. NUNES [continuing]. You can think of?
Mr. GOOLSBEE. Those two, plus the general approach of
talking to the small business community strike me as three
important ones to begin with.
Mr. NUNES. I want to focus on the uninsured now, move to
the uninsured. We have heard members of this Committee already
this morning say that there is 50 million uninsured, I think
was the number, and maybe there is more than that. Or
possibly--at least people think there is more than that.
I was under the understanding when we passed this, two new
entitlements adding to the two old entitlements of Medicare and
Medicaid in the health care law, that this would be the Utopia
for health care, and that everyone would now be covered. Is
that happening?
Mr. GOOLSBEE. I would say we are dramatically increasing
the number by tens of millions in who is covered. There
obviously was the issue of undocumented immigrants who are
not--were never intended to be getting covered under the----
Mr. NUNES. So how many new people have we covered since the
law has been implemented that wouldn't have been covered under
the old laws?
Mr. GOOLSBEE. Well, the full coverage provisions don't go
into complete effect until 2014. But the estimates are in
excess of $35 million.
Mr. NUNES. Why did it take so long to--why did we wait
until 2014 to implement this, when we have this health care
crisis and all these folks uninsured?
Mr. GOOLSBEE. I----
Mr. NUNES. I know you didn't write the law, but you look at
the numbers.
Mr. GOOLSBEE. Yes, I look at the numbers. On any
significant change of this nature, usually there is some
transition period. Historically----
Mr. NUNES. Was it possible to hide the budget consequences
of the health care provision?
Mr. GOOLSBEE. No.
Mr. NUNES. So we don't have a debt problem?
Mr. GOOLSBEE. We have a long-run fiscal problem facing the
problem, for sure. But----
Mr. NUNES. Does health care have a part in that?
Mr. GOOLSBEE. In reducing it, yes.
Mr. NUNES. So this health care bill is going to reduce
the----
Mr. GOOLSBEE. The deficit.
Mr. NUNES. The deficit?
Mr. GOOLSBEE. Yes. According to the non-partisan
Congressional Budget Office, to repeal the health care act
would increase the deficit by a quarter trillion dollars over
the next 10 years.
Mr. NUNES. Wow. Thank you, Mr. Chairman.
Chairman CAMP. All right. Mr. Reichert is recognized.
Mr. REICHERT. Thank you, Mr. Chairman. Mr. Goolsbee, I've
been taking some notes while you have been answering questions.
So, this Affordable Health Care Act, you say, was designed
to reduce costs, yes?
Mr. GOOLSBEE. Yes.
Mr. REICHERT. Improve access, increased access for people?
Mr. GOOLSBEE. Yes.
Mr. REICHERT. Slow the growth rate of health care costs?
Mr. GOOLSBEE. That is its intention.
Mr. REICHERT. And reduce the deficit?
Mr. GOOLSBEE. Yes.
Mr. REICHERT. All of those things. I'm just an old retired
cop, so I think--you know, I'm not a doctor. I've not been in
the medical profession. So I'm just trying to understand this,
like every other American across this country.
So, these were the goals. But I really--I want to go back
to what Mr. Nunes and some others have pointed out. I'm really
having a tough time understanding how a provision like the 1099
form gets included in a bill that's supposed to accomplish all
these things, reducing costs, et cetera. Because, if I'm not
mistaken--do you know how the 1099 provision was inserted in
the bill?
Mr. GOOLSBEE. I do not.
Mr. REICHERT. You don't know what Member of Congress, or
who came up with the language? Or was it the Administration
that suggested the----
Mr. GOOLSBEE. It wasn't an Administration proposal, but I
wasn't involved in the----
Mr. REICHERT. So you have no idea? This is your project,
right?
Mr. GOOLSBEE. I'm just--well, it's not my--I'm just an
economist.
Mr. REICHERT. You're just a spokesperson?
Mr. GOOLSBEE. I'm not a spokesperson, I'm an economist.
Mr. REICHERT. So why are you here today?
Mr. GOOLSBEE. I am here to help evaluate the economics of
the Act.
Mr. REICHERT. Well, let me just ask you. The 1099 form----
Mr. GOOLSBEE. Yes.
Mr. REICHERT [continuing]. We don't know how it got in
there. But somehow it increases the cost of the bill by $19.2
billion. You have to hire 16,000 IRS agents. How can that just
be overlooked? I think the American people have a credibility
issue when you say that you're here to reduce costs, then all
the sudden, miraculously, you discover that there is a $19.2
billion cost in there that shouldn't be there. How does that
happen?
Mr. GOOLSBEE. Well, as I say, I wasn't involved when
Congress----
Mr. REICHERT. But how does that happen?
Mr. GOOLSBEE [continuing]. Passed the legislation. But what
I will say is, the people that supported it were trying--the
goal, which has been a bipartisan goal, of reducing the amount
of tax evasion, people who do not pay taxes on income that they
should pay.
Mr. REICHERT. I know what----
Mr. GOOLSBEE. This was designed in a way----
Mr. REICHERT. Excuse me, excuse me----
Mr. GOOLSBEE [continuing]. That was excessively
burdensome----
Mr. REICHERT. Excuse me. Okay. I know what the goal was. My
question was, how did it get into the bill. And your whole
premise is that this was to reduce costs. And $19.2 billion
gets somehow inserted into the bill, and no one knows how.
Mr. GOOLSBEE. My understanding----
Mr. REICHERT. Did I hear you say just a little bit earlier,
too, that you can keep your health care plan if you like it, or
something like that, in one of your answers?
Mr. GOOLSBEE. That is the intention, yes. That's why the
grandfathering clause exists.
Mr. REICHERT. Okay. I remember President Obama visited our
retreat last year, and he was asked that question. And we have
heard that time after time after time. ``You can keep your
health care plan, if you like it.''
However, in his comments to us--and I will paraphrase his
quote--he said, ``Well, there may have been some language snuck
into the bill that runs contrary to that premise.'' How do you
explain that? I mean you're telling me today that you can keep
your health care plan if you like it, but the President says
there is language in the bill that runs contrary to that
premise.
Mr. GOOLSBEE. I apologize, Congressman. I'm not trying to
be coy. I haven't heard the President say that. But I would
like to look at that before I made any comment on it.
Mr. REICHERT. Yes. Well, it's in print.
Mr. GOOLSBEE. Okay. I will----
Mr. REICHERT. Can you see why the American people are
confused about this bill, and whether or not it provides any
benefits at all to them? Whether or not it does all those
things that you laid out earlier, decreases cost, increases
access, and is good for business and reduces the deficit?
I mean I just pointed out two things here that have quite a
bit of controversy around it, and seems to be rather serious
conflicts with the premises that you have laid out in this
bill. Mr. Chairman, I yield back.
Chairman CAMP. Thank you. Mr. Thompson is recognized.
Mr. THOMPSON. Thank you, Mr. Chairman. Dr. Goolsbee, thank
you for being here. My colleague, Mr. Neal, asked that the
independent CBO analysis be read into the record. And I would
like to just ask you on that issue--I'm glad he did that, it's
an important fact that I believe we need to take into
consideration--but that analysis says--and I think you pointed
this out, that this--repeal of this bill would actually drive
the deficit up by about $250 billion over the first 10 years,
over a trillion in change over 20 years.
So, if that were to happen, and it had this upward push on
the deficit, how would that impact business and investment in
this country?
Mr. GOOLSBEE. Well, I believe that the--certainly
addressing our longer-run debt issues is an area of bipartisan
agreement, that we do need to do that, and that to not do it
contributes uncertainty. And so I think repealing this and
making that problem worse would likely add more uncertainty on
that score.
Mr. THOMPSON. And a hit on the businesses that we're trying
to--or hopeful will get going----
Mr. GOOLSBEE. Could be.
Mr. THOMPSON [continuing]. Get the economy up. Thank you.
On the uncompensated care issue, I just want to point out I
think everybody can find this out. I know that I did the run,
and in my rural district in northern California last year the
uncompensated care cost was $70 million. And the uncompensated
care fairy doesn't deliver a check to the hospital when that
happens. That's spread out, and the rest of us pay for that
through higher taxes, higher insurance premiums, et cetera.
On the 1099 issue, I think it's important to point out that
we took up the repeal of that bill last year in congress. And I
think everybody on this side of the dais voted to repeal that.
So this is not a newfound issue. This is something that we
tried to fix in the last congress.
And I also want to point out that when this came up in the
debate, I went out to every one of my counties and asked
business people, chambers of commerce, as to the impact of
that. And there was concern that it was going to be
problematic. A lot of folks said, however, that it's just a
matter of time before the software catches up to it, and the
problems resolve. But everybody, irrespective of their position
on it, noted that it was trying to solve an almost $20 billion
tax evasion problem.
So, as we repeal this, which we will do, we're going to
need to figure out how to solve that problem.
And, Mr. Chairman, on the issue of the cost going up, I
just want to read from a statement by Blue Cross--or by Blue
Shield of California. And I think everybody knows that premiums
have been going up in my home state. But the head of Blue
Shield writes, ``These rates reflect trends that were building
long before health reform. Our individual market medical costs
are rising rapidly, due to higher provider prices, increased
utilization, and the fact that healthier people are dropping
coverage during a bad economy. Health reform will help slow
down this trend by expanding coverage, which will keep
healthier people in the system, and, through quality and cost
containment initiatives, such as the independent payment
advisory board, Center for Medicare and Medicaid Innovation,
Patient Centered Outcomes Research Institute, and other
initiatives for prevention and coordinated health care.''
And I would like to ask that the head of Blue Shield's
statement specifically stating that health care reform has
nothing to do with their increased price be read into the
record.
Chairman CAMP. The statement will be----
Mr. THOMPSON. And I yield back the balance of my time.
Chairman CAMP [continuing]. In the record, without
objection.
[The information follows: Mr. Thompson:]

[GRAPHIC] [TIFF OMITTED] T0870A.006

[GRAPHIC] [TIFF OMITTED] T0870A.007

Chairman CAMP. Dr. Boustany is recognized.
Mr. BOUSTANY. Thank you, Mr. Chairman. To my friend from
Massachusetts, I have spent countless hours in emergency rooms,
and there is a hidden tax, as you suggest. But also, your
solution in expanding Medicaid coverage is also a hidden tax.
And it's basically an unsustainable situation. We can do
better.
Mr. Goolsbee, my medical career spanned 1978 through 2003.
And to put it in perspective for you, in medical school I saw
the first drug to treat peptic ulcer disease, which radically
changed not only the quality of care for folks, but the cost of
care. And since then, of course, we have seen all kinds of
developments in pharmaceuticals and medical devices that have
given patients more than just a hope and a prayer. I remember
dealing with heart attack patients, giving them an aspirin and
a first-generation beta block. And now--you know, in my career
we did complex open heart surgery using all kinds of assist
devices and things that have saved lives, improved the quality
of life.
I can go on and on about all the problems of cost,
coverage, quality, and so forth, but I'm going to focus on one
particular issue. Last night the President talked about
innovation, research and development, American competitiveness.
And one area where we have stood out, as a country, is in our
development of medical devices and pharmaceuticals. We are
first and foremost in the world on this. And we stand to lose
that competitiveness, partly as a result of what's being
proposed here: the innovation tax, a 2.3 percent tax on medical
devices.
Now, let me--why is this not only a danger for innovation?
It's also a danger to job growth, and could potentially lead to
significant job loss. Let me just point out a couple of
statistics.
Sixty-two percent of the companies that develop these
devices, that do the research and development, are very small
businesses. Sixty-two percent have less than twenty employees.
Only 2 percent have greater than 500 employees. These are small
and mid-sized firms that really take on the responsibility of
creating that innovation in research and development.
So, my question is, will this tax on innovation run
contrary to the President's plan to expand research and
development? Secondly, will it hurt job growth, along with
innovation? And, thirdly, how do you reconcile this with, on
one hand, the President wants to extend the R&D tax credit,
and, on the other hand, wants to impose a new innovation tax?
This is just very inconsistent.
So--and then, finally, as we look at tax reform and the big
picture--and the President has talked about fundamental tax
reform, cleaning it up, simplifying it--if you look at this
bill, this law, it has added significant complexity to the Tax
Code, way beyond where we were, just a year ago. And so, I
would like you to address those three points.
Mr. GOOLSBEE. Okay, Congressman. Well, first, let me thank
you for your service to the country, as a medical professional,
as well as a doctor (sic). We need more people in the medical
profession with a commitment like that.
I would say on the issue of medical devices the area of
innovation, medical innovations particularly, are critically
important, both for our health and for our industrial base. In
this case, the medical devices fee is being offset to some
considerable degree by the fact that there will be an expansion
in the demand for those devices by the fact that we are having
35 million-plus new customers----
Mr. BOUSTANY. But, sir, that's debatable, because a lot of
these patients are getting that care. It's just not being
compensated for.
Mr. GOOLSBEE. In----
Mr. BOUSTANY. I can tell you I have operated on patients--
--
Mr. GOOLSBEE. I would like to see----
Mr. BOUSTANY [continuing]. Complex open heart surgery, and
you never saw----
Mr. GOOLSBEE [continuing]. Including advanced devices?
Mr. BOUSTANY. Advanced devices, as well, yes.
Mr. GOOLSBEE. Look, this is an area--if there are areas
that have a negative impact on innovation, we should examine
those.
Now, it had been our data that we first came to the table
with, the suggestion was that the increased demand for the
medical devices would be, in some sense, far in excess of what
impact the charge on the medical devices would be. But we are
open to looking at----
Mr. BOUSTANY. You really need to look back at that
assumption.
Mr. GOOLSBEE. On R&D tax credit and medical innovation,
that's an area the President has put as much or more--dedicated
as much or more resources to medical research as anyone ever
has before.
Chairman CAMP. All right, thank you. Mr. Heller is
recognized.
Mr. HELLER. Thank you, Mr. Chairman. I appreciate holding
this hearing. I know it's a little backwards, to actually hold
hearings after a bill passed, but at least we will have a
hearing on the bill. So, thank you.
Last night--and thank you for being here, Dr. Goolsbee.
Last night the President said, ``If you have ideas about how to
improve this law by making care better or more affordable, I'm
eager to work with you.'' Do you believe he meant that, when he
said it?
Mr. GOOLSBEE. Yes, I do.
Mr. HELLER. Well, he said the same thing in 2010, during
his State of the Union. Do you believe he meant it when he said
it then?
Mr. GOOLSBEE. Yes, I do.
Mr. HELLER. He said it in 2009. Do you believe he meant it
when he said it then?
Mr. GOOLSBEE. Yes. And I hope that we will commence working
together.
Mr. HELLER. Well, I've got a letter here July 23, 2009. I
wrote the President, asking him specific questions about the
health care bill because he wanted input. July 23, 2009. He
didn't reply to the letter. Why didn't he reply to the letter?
Mr. GOOLSBEE. I don't know the answer to that. I apologize,
Congressman.
Mr. HELLER. In September 8, 2009, because I'd received no
reply from the first letter, I wrote him another letter. And I
think it was pretty reasonable. And I'd like to quote some
parts from it. It says, ``I introduced the Step Towards Access
and Reform, the STAR Act, in late July. While this legislation
will not be a silver bullet solution to all the problems facing
our health care system, my bill addresses medical liability
reform, improves access to breast and lung cancer screenings,
takes other important steps towards reform that I think most
Americans would support.''
I never received a response from this letter. Why didn't I
receive a response from this letter?
Mr. GOOLSBEE. Congressman, I don't know the answer to that.
But I will offer to read and respond to the letter, or find
anyone that would. I mean the--if your ideas address medical
liability reform, other forms of screening or preventative
care, that sounds like exactly the kind of thing that we want
to always be on the lookout for, good ideas.
Mr. HELLER. I guess my point is, would a reasonable person
believe that the President had no interest in what the minority
party at the time had to say on this piece of legislation?
Mr. GOOLSBEE. I don't think a reasonable person would
believe that. But I can see that it would be frustrating if he
did not reply to the letter you sent him.
Mr. HELLER. Would a reasonable person believe what he said
last night, again?
Mr. GOOLSBEE. Yes, I think they would, and I think they
did. And I am here to say that we are open to the ideas. And I
would be both open and appreciate to see that or other letters.
Mr. HELLER. Do you think the President--he mentioned TORT
reform. Do you think he is serious about TORT reform?
Mr. GOOLSBEE. Yes, he mentioned the medical malpractice
reform in general. There is some significant pilot projects,
and working through the states in the bill now, and the
President is open to looking beyond that.
Mr. HELLER. Let me ask you a couple of other questions. Do
you agree with the President and CBO's assessment that the
health care bill signed into law last year will reduce
unemployment?
Mr. GOOLSBEE. Yes. I believe that it has the potential to
be a job creator because of these cost-saving measures that I
outlined in my testimony.
Mr. HELLER. When?
Mr. GOOLSBEE. Over the next 10 years and over the next 20
years----
Mr. HELLER. Well, maybe in 2014----
Mr. GOOLSBEE [continuing]. The small business part would
be----
Mr. HELLER. You keep throwing out 2014. Maybe in 2014 we
will reduce unemployment through this bill?
Mr. GOOLSBEE. No, I think it's--the small business credits
can have, and have had, an important impact right away, and
there are other parts that come in in 2014.
Mr. HELLER. Okay. So you're saying that we should at least
have seen some impact on unemployment with the passage of this
bill last year?
Mr. GOOLSBEE. Over what it would otherwise be. That's the--
that's not just my conclusion, that's the conclusion of many
outside experts.
Mr. HELLER. Why is Nevada's unemployment level at 15
percent? And what impact does that have on the unemployment in
Nevada?
Mr. GOOLSBEE. Well, I believe that the reason Nevada's
unemployment rate is high, like the unemployment rate in the
rest of the nation, is because we have gone through the worst
financial crisis since the Great Depression that has had a
devastating impact on the economy, and we are trying to work
our way out of that.
Mr. HELLER. So you don't think----
Mr. GOOLSBEE. I think the Affordable Care Act is not the--
--
Mr. HELLER. Okay.
Mr. GOOLSBEE [continuing]. Cause of----
Mr. HELLER. So you don't think higher taxes, bigger
government, and unreasonable regulations would have anything to
do with the unemployment rate in Nevada?
Mr. GOOLSBEE. The taxes have actually been lower. The
President cut taxes for 95 percent of workers, and has not
raised taxes in that sense.
Mr. HELLER. Thank you, Mr. Chairman.
Chairman CAMP. All right, thank you. And because of our
time limitations, the next questioner will be the last
questioner for this panel. And Mr. Blumenauer is recognized for
five minutes.
Mr. BLUMENAUER. Thank you very much, Mr. Chairman. Dr.
Goolsbee, I would like to go back just where you left off a
moment ago, because this litany of somehow higher taxes and
more regulation--if I understand it correctly in your
testimony, you pointed out that we have had a million private-
sector jobs added in the course of the last year. Is that
correct?
Mr. GOOLSBEE. Yes, 1.3 million, actually.
Mr. BLUMENAUER. And, if memory serves, that's more than the
net job creation of the entire Bush White House years in eight
years.
Mr. GOOLSBEE. I believe that is true.
Mr. BLUMENAUER. And in terms of taxation for the--over the
course of the last year-and-a-half, isn't it true that taxes
were actually lower than they were prior to the President
taking office, because of the 40-some percent of the Recovery
Act that was tax reduction?
Mr. GOOLSBEE. Yes, that's certainly true, and it's
certainly true in the aggregate, as well, that the tax
collections as a share of income are down.
Mr. BLUMENAUER. So, to somehow have the speculative bubble
that burst in Nevada, which is probably worse than any state,
perhaps with the exception of what happened in Florida and
parts of Arizona, to try and blame that on the Administration's
high taxes and health care, isn't that kind of turning the
facts on their head?
Mr. GOOLSBEE. Well, I'm not----
Mr. BLUMENAUER. Don't mean to put words in your mouth,
but----
Mr. GOOLSBEE. I've been to Nevada many times and enjoy it
there. I'm not trying to get anybody mad at anybody else. I
will say the President did not raise taxes; cut taxes, did
everything he could to prevent a depression. And we avoided a
depression.
And now we are to a phase, as the President outlined last
night, that we need to grow and innovate and compete, and he is
open to ideas from both sides of the aisle of how to improve
the health care act, as well as other ways to innovate.
Mr. BLUMENAUER. Terrific. Could you comment for a moment on
the trend line we were on, in terms of affordability of
employer-provided health care, in terms--before we gave the tax
credits that people--actually made it easier, and the health
care plan actually gives an alternative to people if employers
jettison them--under the reform act we have here, people have
an alternative.
But what was the trend line we are on, if the health care
act is repealed?
Mr. GOOLSBEE. I would say before the health care act, I
would summarize the trend line as bad. And so, if we repeal it
and go back to that, I think it would return to bad.
So, I guess what I would say is that the act is attempting
to address a series of cost drivers. It's trying to help small
business. There are things like the 1099 aspect of the bill.
There are other things that may need improvement.
But I fail to see how the correct answer to some flaw is to
get rid of tax credits for four million small businesses, to
allow discrimination against pre-existing conditions, to
reinstate the uncompensated care hidden tax on employers, a
number of things in the bill that are really good, I don't see
why we should get rid of those, rather than just fix the things
that need to be fixed.
Mr. BLUMENAUER. And, of course, for the record, our
committee passed, and the House approved, legislation to fix
the 1099. So that's something that, last congress, we were on.
I want to just conclude on the notion of what impacts there
are for small business. Currently, small business pays more--
our committee has heard--pays more than large business. They
are doing it without the--up until the Affordable Care Act--
without the tax credits. How is small business going to be
affected if some of my friends have their way, and somehow this
bill is repealed?
Mr. GOOLSBEE. If you repeal the bill, I believe it would
have a significantly detrimental impact on small business, that
while you can try to find an individual small business that
fits in some place and say, ``That person would be harmed,'' we
know, overall, four million small businesses qualify for a
health care credit that they never had before and that they
have wanted for decades.
And we know that to set up exchanges that allow the pooling
of risk will allow small businesses to get health care coverage
and insurance at prices that are significantly lower than they
are now, because right now they have to pay significantly more
than large businesses do, and it's a major competitive
disadvantage.
Mr. BLUMENAUER. And you said this last year health care
costs went up at a lower rate than ever before recorded.
Mr. GOOLSBEE. It was overall spending.
Chairman CAMP. All right, thank you.
Mr. BLUMENAUER. I'm sorry.
Chairman CAMP. All time has expired. I want to thank you,
Mr. Goolsbee, for appearing before the Ways and Means
Committee. I appreciate your testimony. And since all Members
have not had a chance to question, I would ask you to allow
Members to submit questions in writing, which will then become
part of the written record of this hearing. Again, thank you
for being here.
Mr. GOOLSBEE. Thank you, Mr. Chairman, for giving me that
opportunity, and I would be happy to accept any questions,
letters, or anything else from Members of the Committee.
Chairman CAMP. Thank you. Thank you very much. Panel one is
concluded, and we will now move to panel two.
While our panel gets seated, I did want to introduce our
panel to the Committee. We have three witnesses on panel two.
Mr. Douglas Holtz-Eakin is currently president of the
American Action Forum, and is a commissioner on the
congressionally-chartered financial crisis inquiry commission.
During 2001 and 2002 he was the chief economist of President's
Council of Economic Advisers. He previously served as the sixth
director of the non-partisan Congressional Budget Office.
Mr. Olivo is the president and co-owner of Perfect
Printing, located in Moorestown, New Jersey. It was established
in 1979. He has been president of the second-generation firm
since 1988. It was originally established as a traditional
retail copy center, and he has grown the business from 10
employees to 45 employees. He co-owns the company along with
his wife, mother, and two brothers.
Mr. Scott Womack is a franchisee. And during his time as an
IHOP franchisee has received numerous sales growth and
performance awards, and was named Midwest franchisee of the
year in 1993 and 2005, and regional franchisee of the year in
2008 of the northern region.
I want to welcome our witnesses to the Ways and Means
Committee. I thank you very much for taking time out of what I
know are busy schedules to be here, and help enlighten the
committee on the health care law's impact on jobs, employers,
and the economy.
Each of you will have five minutes to give your testimony.
There is a green light, and then there will be a yellow light,
which gives you one minute to sum up, and then the red light is
to conclude your testimony. And obviously, with all the people
who want to have a chance to ask you questions, we're going to
try to stick pretty closely to that schedule.
So, why don't I begin with Mr. Douglas Holtz-Eakin? Welcome
to the Committee, and you have five minutes.

STATEMENT OF DOUGLAS HOLTZ-EAKIN, PH.D., PRESIDENT, AMERICAN
ACTION FORUM, WASHINGTON, D.C.

Mr. HOLTZ-EAKIN. Well, thank you, Mr. Chairman, Ranking
Member Levin, and Members of the Committee. It's a great
pleasure to be here today. I appreciate the opportunity to
appear.
In my written testimony I sought to make four points that I
will briefly summarize here. The first is that the mandates and
assorted taxes in the Affordable Care Act are an impediment to
jobs and growth in the United States, particularly at this
moment, that on balance, the Affordable Care Act will raise the
cost of insurance--this will crowd out scarce resources for
hiring and for increasing pay, and directly hurt consumers--
that the Affordable Care Act has strong incentives for
employers to drop their employer-sponsored insurance. To the
extent that they do so more than the CBO anticipates, we will
not only have strong disruption in labor market contractual
relationships, we will also have much large budgetary costs
associated with the act than were anticipated.
And then, finally, even if that doesn't come to pass, the
Affordable Care Act is, indeed, a budgetary danger at a very,
very important moment in the U.S. fiscal history, and is a
strong step in the wrong direction.
Let me begin by elaborating on the latter only briefly. I
think my views on the Affordable Care Act's budgetary
implications are, by now, well known. We are in a situation
where the fiscal outlook is a direct threat to the U.S.
prosperity and freedom, that to undertake this act, which has a
wide array of budgetary gimmicks, relies on unsustainable
assumptions for cuts in Medicare that double-counts particular
receipts, whether they be the class act premiums, receipts into
the Medicare Health Insurance Fund under various taxes, or
Social Security premiums, and to otherwise omit costs from the
legislation itself, gives a very misleading picture of the
budgetary impact, and that any fair reading of it is that it
increases the deficit dramatically by as much as $500 billion
over the first 10 years.
More generally, at the common sense level, we cannot set up
too open-end entitlement programs that grow at eight percent a
year as far as the eye can see, faster than the economy will
grow, faster than revenues will grow, and not fix Medicare and
Medicaid, and expect to improve the budget outlook. And this
act did not.
Turning to the labor market implications, there are many
mandates and taxes, and these will compete for resources for
hiring, and they produce a bias against labor. If you look at
the employer mandate, the best outcome for employers who have
more than 50 employees is that it's a non-event. The best thing
that could happen is nothing; the worst thing that could happen
is they will be subject to penalties and fines, and lead to
drops in coverage.
For those with fewer than 50 employees, this is a barrier
to growth. Adding the 50th employee is a severe tax, and any
small business is going to recognize this. There is in the act,
as has been widely advertised this morning, a small business
tax credit. It's important to recognize that it is temporary,
so there is no permanent fix to this problem. It is very
complicated. And even if someone winds their way into it, it
has negative economic incentives for growth. If you add
employees or pay better, you lose credits. It's a tax on your
success, and should be perceived as such.
There are 700 billion other dollars worth of taxes in the
act. There are taxes, for example, a surtax on payrolls labeled
a Medicare payroll surtax of 9/10ths percent. There is a 3.8
percent investment--net investment tax. These have nothing to
do with health care reform. These are pure taxes. They're
exactly on the same group of small businesses and entrepreneurs
that were at the focus of the recent discussion about the
desirability of raising taxes in a recession. This bill
replicates exactly the mistake that the previous congress
avoided, and they will hurt jobs and growth in the United
States.
There are hundreds of billions of dollars of fees, whether
they be on pharmaceutical companies, medical device
manufacturers, or the health insurers themselves. As I lay out
in my testimony, these can only be perceived as taxes. They
will only show up as higher premiums in insurance. And they
have a dramatic impact, because they are not deductible. So
they are, almost two-for-one, more expensive than they appear.
The upshot is that these $700 billion of taxes and fees
will hurt the economy at a time when it can't afford it. The
impact as well is to raise insurance premiums at a time when
the economy can't afford it, and we have seen that on top of
the additional benefits that the act mandates. If you have to
cover more benefits, you have to raise premiums. There is no
way around it. This is a bill that is going to raise premiums.
And since it doesn't control health care costs, there is no
offset on the basic underlying problem. We have seen that from
CBO and the CMS actuary.
The upshot is we are going to see continued pressure upward
on health care cost, on insurance premiums. The taxes will
contribute to that. And employers may drop coverage. And if
you're a worker who has their coverage dropped, you've
disrupted your labor market bargain. That's a bad thing for the
labor market at a weak time. So, on top of the growth in jobs
incentives, we have the disruption for those lucky enough to
have a job.
So, I would be happy to answer your questions. I am pleased
to be here today. But I think, on balance, it is a fair reading
of this law that it is bad for jobs and growth at a time when
we need both.
[The prepared statement of Douglas Holtz-Eakin, Ph.D.
follows:]

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Chairman CAMP. Thank you very much.
Mr. Womack, you are recognized for five minutes. And your
written statement will be made a permanent part of the record.

STATEMENT OF SCOTT WOMACK, PRESIDENT, WOMACK RESTAURANTS, TERRE
HAUTE, INDIANA

Mr. WOMACK. Thank you, Chairman Camp, Ranking Member Levin,
members of the Ways and Means Committee. Thank you for this
invitation to testify today. My name is Scott Womack, owner and
president of Womack Restaurants, a 12-unit IHOP franchisee in
Indiana and Ohio. I am pleased to be here today to testify on
behalf of the U.S. Chamber of Commerce. I also come before you
today on behalf of my company, my industry, and small
businesses and entrepreneurs.
My first jobs were as a busboy and a cook. After college I
joined the grocery industry. After five years I got fired, and
found myself starting over. I was lucky to land a job at IHOP,
as a manager. And soon, with a $15,000 loan from my parents, I
bought my first IHOP franchise. After 10 years I began building
IHOP restaurants. In 2006 I purchased a development agreement
to expand into Ohio. Now, this would mean jobs in Ohio, not
just in my restaurants, but also in construction, real estate,
and also manufacturing. But thanks to this new law, those are
not going to happen.
The restaurant industry serves an important role in our
economy, employing 12.7 million people. I like to say it's an
industry of first opportunities and second chances. First jobs,
first careers, the first shot at small business ownership, and
also second chances for people starting over, maybe from a
forced career change or re-entering society from incarceration,
or a second job for those people digging out of a financial
hole. Stories like mine are born every day in the restaurant
industry.
The restaurant business is built on a small business model,
with profit margins of five to seven percent. We're the most
labor-intensive of any industry, ranking dead last in revenue
per employee, at $58,000 per employee. This compares to retail
at $170,000, banks at over $400,000, and other industries that
actually bring in millions of dollars per employee in revenue.
Now, for restaurants, this new requirement to provide
health coverage is not just a marginal cost increase. This is a
huge new expense. And at $7,000 annually per employee, it is
beyond our ability to pay. So, let me just be real clear about
that.
Now, I estimate this to be 50 percent greater than my
earnings. So please understand me. That is more than I can
actually pay for the coverage. Our only alternative is to pay
the penalties. Those penalties are not tax deductible. So that
puts my company at risk, and many companies simply will not be
able to pay those penalties, and will not survive.
Restaurants are already facing many challenges, including
rising commodity, fuel and energy prices, rising state and
local taxes, and higher unemployment taxes. Restaurants are
unable to raise prices in this economy. We don't have a way to
replace the lost income. Our only alternative is to cut costs.
Cutting costs means cutting staff. It means reducing hours. It
means pushing people into part-time status.
It also means that we will have to cut outside services,
further hurting small businesses that serve my company. We will
be forced to stop building restaurants and forfeit our
investment. This future development would have amounted to
about $22 million in construction and development spending, and
260 full-time jobs.
Another casualty of this is the restaurant equipment
industry, which is a uniquely American industry. That industry
has already been devastated by this recession.
Furthermore, our lenders require us to maintain certain
levels of profitability. Our mortgages, leases, and franchise
agreements are commonly 15 to 20 years long. They do not go
away in 2014. Those are obligations we cannot walk away from.
Other parts of the law are also causing harm. I may not be
able to continue to offer the coverage that I currently offer
to my management staff, due to the compensation non-
discrimination rules in the law.
Obviously, there are other examples of issues that have
been raised today, issues with the HSA plans, taxes on
investments, tax on the health insurance, and of course, the
Cadillac tax, which will eventually hit everyone.
To that end, we are asking that Congress repeal this health
care law. If that cannot be achieved, we urge you to address
some of the major problems with the law. This bill is a ticking
time bomb that will devastate our industry. A change of course
now could end this uncertainty. Therefore, I am asking you to
introduce and pass legislation that would repeal the employer
mandate. The members of the U.S. Chamber of Commerce will work
tirelessly to help you pass it.
I thank the members of this committee for the opportunity
to testify today, and I look forward to working with you in the
future to fix the problems created by this law, and implement
real market-driven solutions. Thank you.
[The prepared statement of Scott Womack, follows:]

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Chairman CAMP. Thank you very much, Mr. Womack.
Mr. Olivo, you are also recognized for five minutes. And,
likewise, your written statement will be part of the permanent
record.

STATEMENT OF JOE OLIVO, OWNER/CEO, PERFECT PRINTING,
MOORESTOWN, NEW JERSEY

Mr. OLIVO. Thank you, Chairman Camp, and thank you to the
Committee for not just the opportunity, but the honor to
provide my testimony today. My name is Joe Olivo, I am a small
business owner. And I appreciate being able to relate to you
the concerns that I have with the health care legislation, how
it has already begun affecting my company, and some of the
problems I see as the plan becomes fully implemented.
I am the president and co-owner of Perfect Printing in
Moorestown, New Jersey. I own the company, along with my wife,
my two brothers, and my mother. It was started in 1979, as a
literal Mom and Pop copy center. I have run the business for
the past 23 years. We have been very fortunate we have been
able to grow it to a high of 54 employees prior to the economic
downturn, and we currently have 45 employees.
An area which is of great concern to me that's been spoken
about today is the 1099 compliance requirements. Simply put, I
do not have the resources in place to implement this law, to--
the resources that I will have to put in place, as far as
software programs and calculating and managing receipts are
just much more than I have the resources to do.
And I think it's important, when you think of the burdens
that these--the legislation places on a small business, is
thinking in the context of businesses like mine. In a good
year, our profit is $.03 on every dollar we earn. Every time
there is a new regulation that's put in place such as this, it
typically comes out of that profit margin. It leaves me less
resources in which I can grow my business, give my employee
wage increases, and contribute to their benefits.
A key issue for any employer is how and when to grow the
business. My company is currently on the cusp of the 50-
employee mark, which--we were just there 2 years ago. And at
that point I would be legally bound to offer my employees
insurance, or face a penalty for not doing so. Besides being
ridiculously complex, it's my understanding that even at the--
once I go over the 50-employee mark, I can face penalties if
one of my employees is eligible for the government-subsidized
plan, even if I am providing insurance.
I'm still in the process of trying to compute the exact
ramifications of this part of the law, but based on my current
premium rates, the penalty is actually less expensive than the
premium rates. So I find it ironic that the part of the law
that is--mandates me to provide insurance to my employees is
really an incentive not to provide insurance to them at all.
And this takes me to the issue of what we currently offer
our employees. I am able to pay 100 percent of the premium cost
for my individual employees. I pay 56 percent of the family
portion. I am able to do this because we're able to use a high-
deductible health savings account that we instituted six years
ago. Now, this is important, because during the debate prior to
the passage of this legislation we heard time and time again
that my employees would be able to keep their existing
coverage. Within 30 days of the law's passage, I received a
notification from my insurer that my plan would no longer be
offered.
So, my understanding is, because of the preventative care
requirements and how it was treated under a high deductible
plan, it was no longer in compliance with the law. So, after
20-plus years of myself voluntarily providing insurance for my
employees, and paying most of it at my own cost, I am now told
that this is no longer acceptable to the government.
Another area of concern to me is the tax credits that have
been mentioned today that were promised to small business
owners to help us pay for insurance. This point was made over
and over, and even persuaded some in the small business
community to support this plan, because they felt it would be a
net positive for them.
I can say now that I have checked the tax credits for my
company of 45 employees, and we are not eligible for a single
dollar in tax credits. I have learned from fellow small
business owners. I spoke to a woman that owns a bridal salon
with three employees, and she had spoke to her accountant. She,
too, is not eligible for a single dollar in tax credits. So,
these are the issues that I know have already begun affecting
my business.
But it's the unknown that causes me as much or greater
concern. You have to understand. When I grow my business, when
I take financing to buy a new press or increase the investment
in my business, I put my personal assets on the line. I put my
home on the line as collateral, my family's home on the line as
collateral. When you have this much unknown, and unknown cost
certainty in a law--and I challenge anyone on this committee to
tell me what my health care cost will be two years from now--it
creates much less of an incentive for me to take the necessary
risk.
So, I will leave you with this, as I hand over the
microphone. My story is personal, but it is by no means unique.
There are hundreds of thousands, if not millions, of small
business owners across this country facing the same issues. And
how can we ask those businesses to help the economy prosper,
yet put a drag on one of the main engines of economic growth?
Chairman CAMP. All right.
Mr. OLIVO. Thank you.
[The prepared statement of Joe Olivo follows:]

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Chairman CAMP. Thank you all for your testimony. We will
now go to the questioning period. And as I indicated, we will
pick up where we left off. And so, Mr. Roskam is recognized for
five minutes.
Mr. ROSKAM. Thank you, Mr. Chairman. I just want the record
to reflect that I respond promptly to emails and letters from
Dean Heller, and even shoves in the elbow.
Mr. Holtz-Eakin, I'm sure you watched the speech last night
that the President gave. And one of the things that struck me
was his presentation of, really, a straw man argument, and that
is the assertion--we even heard that asserted today from Mr.
Goolsbee--that we don't want to go back to the days of, you
know, folks being pressed out and not included on pre-existing
conditions.
There is really nobody that's proposing that. House
Republicans, Chairman Camp authored, I think, a very thoughtful
piece of legislation that dealt with that through high-risk
pools. Could you comment sort of generally on this whole notion
of two different visions?
Dr. Boustany mentioned this in responding to Mr. Neal when
he said, ``Look, the underlying premise of this new law is to
expand coverage by putting people on Medicaid.'' You alluded to
this in your brief opening statement about entitlements
outpacing the economy in general. Could you just give us a
couple more thoughts on that?
Mr. HOLTZ-EAKIN. Well, certainly, thank you. And with all
due respect to the President, I think it is a straw man
argument. If you roll the clock back to the beginning of the
debate over health care reform, there was a bipartisan
agreement that it would be desirable to control the growth of
health care spending in the United States, and to cover more
Americans with affordable options. That's a bipartisan
objective.
The difficulty is that this law doesn't control costs. And
unless that is done, you will never be able to control
insurance costs. And thus, even someone who has insurance will
find it unaffordable.
The second thing I would say is that there are severe
problems in using Medicaid as a source of coverage expansions.
Having a piece of paper that says, ``I'm a Medicare
beneficiary'' does you no good if you can't see a provider. And
Medicaid beneficiaries are denied providers, you know, at much
higher rates than Medicare or private insurers. About half of
them can't find primary care physicians. So they end up in
emergency rooms at twice the rate of even the uninsured. That's
not a solution to a coverage problem.
The third thing I would say is there is a competing vision.
The other vision is genuinely controlled health care costs.
Give people control of their money, use those resources wisely,
allow them to choose insurance that fits their family
circumstances, their lifestyle, and make insurers compete,
whether it be across state lines, or more vigorously within
states, so that you get decent insurance options and underlying
control of the costs. That's another route to the same two
goals. But it's a shared goal, and it always has been.
Mr. ROSKAM. Thank you. Mr. Olivo, the previous witness, Mr.
Goolsbee, said that there is a great deal of confusion about
the health care law. And I was kind of thinking about that, and
I was listening as he asserted that.
And, in one element, I would agree with that. There is
confusion. There is a great deal of ambiguity, for example,
about who gets exemptions from the Administration. There is
about 200 businesses or unions or other groups that have been
exempted. Apparently it's an exemption program that's only
based on their initiative. In other words, you have to ask for
it, it's not a blanket exemption. And it's not a permanent
exemption, it's a one-time exemption. So there is a great deal
of ambiguity and uncertainty, and you alluded to that.
But at another level, there is a real sense of clarity
about the health care law. For example, you figured out that
the cost pressures on you are making a dynamic such that it
might make more economic sense to your bottom line not to offer
coverage, and to have folks go into the pool. You figured out
that you're knocking on the door with 45 employees. Once you
hit a 50-employee trigger, then your world changes on a whole
host of things.
Could you reflect on how it is that the health care law,
and that sense of clarity that I have articulated, how is that
driving the business decisions for you and your family, as
you're trying to move this company forward?
Mr. OLIVO. Thank you for your question. Yes. I mean the
health care--the problem with the health care, the expenses
have increased so much, especially against any other expense
within my business. And you have to understand, like I had
pointed out, is when we invested and put our personal assets up
for collateral, I don't have the luxury of being wrong in my
assumptions.
So, when there are these costs, and I feel that there is
costs that are unknown in addition to that, I have no choice
but to be reflexively--take much less risk--maybe not buy
another press or hire that extra employee until it's
absolutely--I absolutely have to have them. So it really forces
me to be much more conservative in how I invest in the
business.
Chairman CAMP. Thank you. Mr. Buchanan is recognized.
Mr. BUCHANAN. Thank you, Mr. Chairman. Mr. Eakin, I wanted
to ask you a question, because I get asked this a lot back
home. And I think the ranking member had mentioned it.
How in the world can you add 32 to 52 million people, where
you give either free or highly subsidized health care, and
think, even though there is a third party out there that says
that the deficit--we'll reduce the deficit, where are they
coming up with this information, other than in Washington?
Mr. HOLTZ-EAKIN. Well, on the substance, I believe I've
been very clear. I do not believe that this reduces health care
costs. And if you add that many uninsured people to the pool,
they will use more health care services. And all the evidence
is health care costs will go up.
With regard to the CBO's estimate of the budgetary impacts
of the bill, my gripe is not with the CBO, which does its job
under the rules that the Budget Act imposed. My gripe is with
the drafters of the law, who used the Budget Act rules to make
sure that CBO came up with exactly the answer they wanted, even
though it was in defiance of economic common sense.
Mr. BUCHANAN. Yes, and I just want to say I was chairman of
the Florida Chamber, and chairman of our little Chamber, and we
had about 2,500 businesses, locally. This has been, by far, the
biggest issue in the last 10, 20 years. This isn't something
that's happened the last couple of years. Everybody is
challenged. I get hundreds of stories, but everybody is
challenged.
And that's why I don't understand, if people really get out
and talk to businesses in their community or not. Being in
business 30 years myself, and not a career politician, I can
tell you this is drowning a lot of businesses.
I was in a business this week, one of the largest private
employers in our region. His health care cost, he told me, went
up a million-and-a-half dollars. Now, maybe he has 400
employees or 300 employees. If that's not job killing--that's
his point to me; I know they don't like that term--but when
your premiums are going up, the CBO, I think--no, the CEO
roundtable mentioned that health care costs for a family of 4
are about $10,000 in corporate America. They say in the next 10
years, with this health care bill being considered, it's going
to go from $10,000 to $30,000.
I was at another small business--I wasn't there to talk to
them about--they wanted to talk to me about private pharmacy.
And he said, ``By the way, Mr. Congressman,'' on the way going
out, he said, ``I want to show you this,'' and he brought out
his bill. Just got his increase a couple of weeks ago. Another
23 percent increase. So, everybody is going up 23, 30 percent a
year.
My experience is you get a bill and it's 28 percent, and
you say, ``Oh, my God, and you start working towards trying to
get it down to 18. You cut some benefits, you have the
employees pay a portion of it.
So, again, I don't see--and I think the ranking member
mentioned our expenses are going to go up there--I don't see
the offsets anywhere. I think this is a $1 trillion large
entitlement going forward, and it does little or nothing for
small businesses in the country.
And I think it is--however you want to look at it,
personnel expense used to be 20 percent of the payroll, or
whatever, benefits 20 percent of what you paid someone. Today
there is a general feeling out there, ``Do you want the salary,
or do you want the benefits, but you can't have both.'' And
that's what is driving, I think, a lot of things up here.
Let me mention--you had mentioned about being in the
printing business, and I was in the printing business for a lot
of years. How much has your cost gone up, say, in the last five
years and then the last year, this year and then next year? Do
you see a general trend, or a percentage increase over, let's
say, 6, 10 years? Pick a number.
Mr. OLIVO. I would say the last 10 years the renewal for
our existing policy has never been less than 12 percent, and
has been as high as 49 percent. So every year we are faced
with, as you described, the task of re-evaluating what type of
new policy are we going to have to implement in order to
provide coverage, to the point that we're still able to provide
a plan that we pay 100 percent of the premium cost for our
employees.
Mr. BUCHANAN. And then let me--Mr. Eakin, one other thing I
touched on earlier today--I had to step out. But we have people
that have talked to us about this medical tax. And I think one
of our surgeons mentioned something about that. Many of them
are telling me that they're going to pay more in tax than they
will even make in profit, this 2.3 percent tax.
The fact of the matter is there is--the medical device
industry has about 400,000 employees in the country, and
another--indirectly, about 2.5 million people--2 million jobs
that's being created. And they said if this tax goes into
effect, it's going to really impede their ability to grow their
companies. Do you have a thought on that?
Mr. HOLTZ-EAKIN. Well, as I laid out in the testimony,
there are only a couple of possible outcomes. Number one, they
eat the tax, but they don't have the financial resources to do
it, so they will probably go out of business. Number two, they
take it out of employee costs. That means lower wages, fewer
jobs, bad for struggling labor market. Or, number three, you
pass it on to consumers in the form of higher prices. If
medical devices are more expensive, insurance is going to be
more expensive, and the problems of employers get multiplied.
And, as I mentioned, there is a perverse aspect of these
taxes in the bill, which is that they're not deductible. So, to
just break even, if you have $1 of tax, you have to have $1.54
in additional revenues. So you have to raise prices a lot, and
that's a big pressure upward on premiums in this law.
Chairman CAMP. Thank you. The gentleman's time has expired.
Mr. Pascrell is recognized.
Mr. PASCRELL. Thank you, Mr. Chairman. I want to just
respond first to Mr. Buchanan's remarks. What you have
described is unsustainable, the exact situations which you have
described.
Between 2007 and the passage of health reform, I had many
small businesses--I have a small business advisory committee.
And the increase in their health cost was between, on average,
28 to 40 percent a year. Health care reform, or as some on the
other side would like to refer to it, Obamacare--and they say
it with such love and charity--you can't sustain those numbers.
I don't mean you, personally. We can't.
And those businesses, 60 percent of them, are no longer
doing any business. They're done. The primary cause of those
businesses closing their doors--the primary cause; there are
other causes--is what they have paid in their premiums.
And I want to talk to you, Mr. Olivo, fellow Jersey guy.
What's interesting, I read a little bit about what you said,
because I came in a few minutes late. But I want you to think
about this. Ninety-five percent of businesses are exempt from
employer responsibility requirements. I just wanted to start
with that.
Now, I think there is a possibility--I'm not saying this is
guaranteed or for sure--that it sounds like your carrier might
have pulled a fast one on you, and I will tell you why. When
they raised your rates and lowered your benefits last year--by
the way, that's not unfamiliar to any of us--and we were a good
scapegoat. Obamacare was the perfect scapegoat before it even
went into effect. ``We'll blame this bill, which will become an
act, on whatever we do this year.'' You saw what happened in
California. It's a scapegoat. And we expect that. We're all big
people, we understand what happens in a political debate.
You stated that your insurance carrier informed you that
they would be--not be renewing your high-deductible coverage
due to the preventative health benefits in the new law. Are you
aware of the fact that the new preventative benefits don't
apply to plans such as yours that are grandfathered? I would
ask you--I ask that rhetorically. I just want you to think
about that.
And are you aware that the new--the IRS rules, not the new
IRS rules--permitted high-deductible plans to waive the
deductible for preventative services, even before reform was
enacted?
You know, I get a charge--I get a big charge--out of
listening to folks tear this thing apart. Someone on the panel
made this statement in a magazine that, ``The elimination of
denial of coverage for pre-existing conditions, and the
elimination of the lifetime limit, those things drive up costs.
Premiums are going to go up in the short run if we don't take
into consideration pre-conditions.''
This is a battle. There is no question about it. We battle
civilly here between what the insurance companies want out of
this and what the patient really needs, so we can really drive
down the cost.
We agree over the last 10 years premiums have skyrocketed.
You and I both agree with that, two Jersey guys here. Families
face bankruptcy due to medical bills. We agree.
Mr. OLIVO. Certainly.
Mr. PASCRELL. Okay. And competition decreased--I go through
each state--in the insurance industry. In fact, you know, the
average state, there are two or three people, companies,
writing insurance. That's a good situation. Not for us, but for
somebody else.
I haven't heard any response about those kinds of things.
And why should you? You've got a script. Let's follow the
script. The number of uninsured individuals grew that now, 1 in
5 young Americans under the age of 65 are uninsured. Those are
the numbers from the Kaiser Foundation. These conditions are
not ideal.
Nine months after health care reform, I am proud to say
that change is already underway. And I would conclude my
remarks that if health care reform is bad for business, why
have over 120 businesses in my state, New Jersey, received
grants to support groundbreaking biomedical research on
pancreatic cancer, brain injury, Alzheimer's, and more? This
money supports jobs.
Well, I have 150 employers in my state enrolled in the
early retiree reinsurance program. Cities like Newark,
Paterson, Clifton, all enrolled. And even big businesses, such
as Johnson & Johnson, Mercedes Benz are enrolled in the
program.
Chairman CAMP. The gentleman's time has expired.
Mr. PASCRELL. They see the benefits.
Chairman CAMP. Thank you for concluding.
Mr. PASCRELL. And I thank you, the panel, for telling us--
--
Chairman CAMP. Mr. Smith is recognized for five minutes.
Mr. PASCRELL [continuing]. What you did.
Mr. SMITH. Thank you, Mr. Chairman, and thank you to the
panel for sharing your expertise and insight. Mr. Holtz-Eakin,
if you could reflect a little bit on uncompensated care, is it
conceivable that even Medicaid would fall into a category that
a hospital would perceive to be uncompensated care?
Mr. HOLTZ-EAKIN. Yes, there are two large forms of cost-
shifting in the insurance industry. One is from uncompensated
care, the traditional someone walks into an emergency room
uninsured, gets care, and has to be covered somewhere, and the
second is the shifting from government programs, where Medicare
pays about $.70 on the dollar, relative to private insurers,
and Medicaid pays even less, roughly $.50 to $.55 on the
dollar, depending on where you are. And those gaps have to be
made up elsewhere, as well. So, those are shifted under private
health care costs.
Mr. SMITH. And, I mean, is it your assertion as well that
the health care bill does immensely grow the Medicaid rolls?
Mr. HOLTZ-EAKIN. Half of the coverage expansions come
through Medicaid expansions. Sixteen million Americans will be
put into a system that involves considerable cost shifting on
to private insurance, and which, at present, they are twice as
likely to go to E/R's, instead of having that care on a regular
setting, and where they can't find a--particularly a primary
care provider at anywhere near the rates other people can.
Mr. SMITH. Would it be conceivable that any federally
initiated medical liability reforms, that they might pre-empt
some state medical liability laws?
Mr. HOLTZ-EAKIN. There is the option always for federal
pre-emption. And so it would depend on how the law was written.
But we do know that state-level experience has shown that a
variety of different malpractice reforms have been effective at
controlling some of the costs, and that if you had a strong
federal pre-emption that applied universally, you would have a
much bigger impact.
Mr. SMITH. I say that because I am a little bit nervous
that Nebraska might lose its rather optimal scenario, given its
medical liability----
Mr. HOLTZ-EAKIN. Draft carefully, sir.
Mr. SMITH. Duly noted. And I appreciate the business
perspective shared here this morning, as well, certainly
reflective of many of my constituents, some of whom have said
they have held off hiring new employees, simply because of the
unknowns contained in the health care bill.
So, with that, in the interest of time, I will yield back.
Thank you.
Chairman CAMP. Thank you very much. Mr. Schock is
recognized.
Mr. SCHOCK. Thank you, Mr. Chairman. I too will be brief. I
have questions for the business owners.
You know, last year the President said his major focus in
2010 would be jobs. In 2011, last night in the State of the
Union, he said his major focus will be jobs. So, as two
employers, I'm kind of curious, specifically with regards to
how the health care bill is going to affect jobs, particularly
those opportunities for the young people in America who rely on
part-time employment through their high school and college
years to supplement their income to pay for education, which
the President talked about last night being so important to
America's competitiveness in getting long-term gainful
employment for their futures.
Scott Womack, you mentioned that you have 800 employees.
And I'm wondering if you have studied this bill--which it
sounds like you have--the effect on what this will mean for
your ability to hire part-time employees, considering the bill
really, from what I'm hearing from my employers in my district,
almost incentivizes doing away with part-time employment, and
really consolidation of the number of employees you have.
Is that what you've found? Or how do you see, if this bill
is implemented as it stands now, will affect the employment
opportunities you can provide?
Mr. WOMACK. Well, thanks for the question. Actually, it
incentivizes moving people from full-time status to part-time
status. That part-time and hourly job market right now is
absolutely saturated with people, people who are not working.
So, the reality is that we will be looking to get people
under that 30-hour threshold, wherever we can. So I don't see
it helping at all.
Mr. SCHOCK. And of the 45 employees who are full time that
you offer health insurance to, how many of those 45 take your
health insurance?
Mr. OLIVO. That would be my company. Currently, out of
those 45, I believe it's approximately 30 take the coverage.
Mr. SCHOCK. And do you know the other 15, do they not take
it because their spouse or someone else offers----
Mr. OLIVO. That is correct. No one in my company is
uninsured.
Mr. SCHOCK. So it's not too bad that 30 out of your 45 seem
to think your health care is a preference, and using the term
in the bill, is ``adequate'' coverage.
Mr. OLIVO. Yes. Their biggest complaint would be--is the
cost of the premiums on the family side. But, yes, the coverage
is great. They feel it's very fair.
Mr. SCHOCK. Do you know if your health care coverage that
you offer now is going to meet the minimum standard in the new
law for adequate health care coverage?
Mr. OLIVO. The coverage that we offered in 2010 will not.
We have already been notified of that, because of how
preventative care is treated.
Mr. SCHOCK. And how much do your agents or your third-party
administrators suggest--how much will your insurance premiums
increase to meet the new standard?
Mr. OLIVO. We just got our premium increases in the other
day. It's a 12 percent increase in premium, but also a
significant increase in how emergency room visits are treated.
It's much more costly to go to the emergency room,
significantly more.
Mr. SCHOCK. And so, what will the cost per premium, on the
average, be for you?
Mr. OLIVO. For an individual, the cost per premium in the
coming year will be approximately $280 per month per
individual.
Mr. SCHOCK. Have they looked at what the--when the bill is
fully implemented in four years, what it will cost for you to
be able to provide that minimum adequate health care coverage,
as specified by the law?
Mr. OLIVO. I have no way of computing that at this point.
Mr. SCHOCK. Oh. I would ask your third-party administrator
to do that, because I'm sure they're doing that.
So, thank you very much for your comments here today.
Chairman CAMP. Thank you. Mr. Kind is recognized.
Mr. KIND. Thank you, Mr. Chairman. I want to thank our
panelists for their testimony here today.
Mr. Chairman, from my perspective, I think today's
discussion is very healthy, and I would encourage you to hold
more hearings in regards to the Affordable Care Act, because
there is some belief out there that with the passage of the
Affordable Care Act, that somehow the discussion ends, and it
doesn't, that somehow the work ends, and it shouldn't. I think
we will be judged, ultimately, in this congress and future
congresses, by working hard to find out what's working in the
health care system and what isn't, and making adjustments along
the way.
So, getting testimony like this, and feedback in regards to
the shortfalls which all of us are trying to accomplish, I
think it's going to be helpful.
But there has been a lot of discussion in regards to job
creation, and what the Affordable Care Act means in that
regard. Now, let's just recall. We've had 11 consecutive months
of private sector job growth in this economy, since the passage
of the Affordable Care Act. We have had 1.1 million new private
sector jobs that have been created. Over 207,000 of that is in
the health care industry, alone.
And I don't know how many of you saw a recent Forbes
article that was printed in the Forbes magazine, but a recent
article in Forbes highlights how small business tax credits in
the reform law are already helping small employers deliver
health care coverage to their employees. According to Forbes--
we'll just look at the facts, here--insurance companies are
reporting a significant increase in small businesses offering
health care benefits to their employees.
For example, United Health Group, the nation's largest
health insurer, added 75,000 new customers working in
businesses with fewer than 50 employees within the last year.
Coventry Healthcare, a large provider of health insurance to
small businesses, added 115,000 new workers in 2010,
representing an 8 percent increase. Blue Cross Blue Shield of
Kansas City, the largest health insurer in the Kansas City
area, reports an astounding 58 percent increase in the number
of small businesses purchasing coverage in their area since
April of 2010.
Repeal of the Affordable Care Act, as my colleagues last
week voted for, would entail the largest tax increase on small
businesses in our nation's history--16,000 small businesses in
western Wisconsin alone will see their taxes go up, who are
today benefitting from these tax credits under the Affordable
Care Act. Over four million small businesses nationwide are
taking advantage of the tax credits, so they can better afford
health care coverage for their employees.
And what's ironic--and, Mr. Olivo, I appreciate your
testimony here today--but the health insurance exchange that
we're setting up for small businesses and for family and
individuals was based on the ``shop act'' that I, in a
bipartisan fashion, had introduced in previous years that NFIB
endorsed. The creation of an exchange, so small businesses
finally have a chance to go and shop with complete
transparency, so you know what the costs are and what the
benefits would be, coupled with tax credits, which we did in
the Affordable Care Act, is something that small businesses
have been calling for for years. And it's part of this bill
right now.
But I think, ultimately, we are going to be judged on
whether this works or not, depending on whether we have the
ability to bring costs down.
And here is another bipartisan idea that's in the bill. We
have to change the way we pay for health care in this country.
It's as simple as that. The current fee for service system
under Medicare is all based on volume payments, regardless of
results. This is crazy.
And right now we have an Institute of Medicine study, two-
year study as part of the reform bill, that calls on them to
change the fee-for-service system to a fee-for-value
reimbursement system. They will present an actionable plan to
the Administration, the IPAB Commission, to implement. And this
is something that Newt Gingrich has been talking about for
years, that Dr. Frist is still talking about today. Tommy
Thompson at HHS told me that if we do one thing with health
care reform, change the way we pay for it, starting with
Medicare. Because whatever we do in Medicare is going to drive
the private health insurance market.
But it goes even beyond that. Health insurance companies
from East Coast to West Coast have been calling for payment
reform for years. Large providers, which are models of health
care delivery systems, highly integrated, coordinated, patient-
focused, from Innermountain to Mayo to Geisinger to Cleveland
Clinic to Gundersen to Marshfield have been calling for this
very thing that we finally have the tools in health care reform
to accomplish. We start with accountable care organizations in
the innovation center, telling providers, ``We want you to be
creative, we want you to innovate, we want you to deliver high-
quality care at a better cost.'' This is where we need to drive
the health care system.
But ultimately, if we stick with the fee-for-service system
under Medicare, we will bankrupt our nation, because we will
never be able to keep up with the cost, all based on volume
payments, regardless of quality, regardless of outcome. And
this is crazy. We finally have the ability now to do something
about it, if we play it through. You don't change the way you
pay for one-fifth of the U.S. economy overnight. It's not going
to happen. It's going to have to be transitioned. And we
instituted that in the reform bill, as well.
So, I would hope that we will have a chance to come
together in a bipartisan fashion again, talk about the payment
reform, which can really lead to cost reduction for everyone,
so that health care is something that will be affordable to
businesses large and small, and to individuals throughout this
country.
Chairman CAMP. Thank you.
Mr. KIND. Thank you, Mr.----
Chairman CAMP. Thank you. Mr. Lee is recognized.
Mr. LEVIN. We have to vote, don't we?
Chairman CAMP. Yes.
Mr. LEE. Thank you, Mr. Chairman, and I want to thank our
panelists for being here. I can't help but be a little
skeptical, after hearing the President's State of the Union
Address, as well as the first panelist, Mr. Goolsbee's
testimony, when it comes to the reality of this health care
bill that we're dealing with.
If you remember last night, the President talked about in
his speech with the dysfunctionality of our government when he
used the example of the Interior Department is in charge of
salmon when it's in fresh water, but when it's in salt water
it's the Commerce Department, and if it's smoked, God knows
where.
Ironically--and I would ask this to Mr. Holtz-Eakin--isn't
it true that this new health care bill will, in fact, create
upwards of 160 new agencies, bureaus, and commissions? So, in
effect, he is actually adding to the problem, rather than
fixing it?
Mr. HOLTZ-EAKIN. The exact number has always been hard to
figure out, but that's a safe guess.
Mr. LEE. I agree completely. The other point, too, as you
brought up now, the issue of the 1099. It is very apparent, in
my eyes, that this was more or less a cash grab. This was put
into the bill--if you're a small business owner and you do not
have an accurate tax ID number, you're on the hook, and have to
withhold 28 percent, as the small business owner.
Again, these are huge costs on someone who is trying to get
by day in and day out. And I am learning from both Mr. Womack
and Olivo, that, in your mind, this health care bill, is it
more likely or less likely for you to go out and hire people at
this point?
Mr. WOMACK. Well, without a doubt, it's created a
tremendous amount of uncertainty. And it's frozen credit
markets, as far as restaurants go. Those are just now starting
to loosen up. But as we get closer to this, and the
implications become more clear, credit markets are going to
freeze up, it's going to be harder to borrow money to build new
restaurants.
The other thing is that, as I stated earlier, the only way
to pay for this in our business is to cut costs. And we are a
lean, mean industry now. We don't have a lot of fat. And the
things that we can control are payroll, and to minimize the
impact of these penalties. So that means cutting jobs. It
doesn't mean adding jobs.
Mr. LEE. We're getting to the tipping point where risk
reward no longer makes sense for someone to go out, as a small
business owner, and take his dream and go out and start a
business.
The other--maybe I can bring this back to Mr. Holtz-Eakin,
with regards to Medicaid, I have the luxury of living in New
York State, which has, far and away, the highest Medicaid
expenses. I think if you compare it next to equivalent states
like Florida and Texas, where their economies are doing
relatively better, the same number of citizens living in that
state, but literally twice the Medicaid expenses.
With the passage of this bill, ultimately, is it going to
increase or decrease the Medicaid costs that we're seeing in
New York State?
Mr. HOLTZ-EAKIN. I think the states are at great risk. They
are obligated to honor the expansions under the Affordable Care
Act. They may get additional payments from the Federal
Government for that, but they have to pay full freight on any
current eligibles who now show up and take up benefits. And I
think the real risk is that, in advertising the Affordable Care
Act, we're going to draw out of the woodwork a lot of existing
eligibles, and New York State will have to pick up their full
share of their cost.
Mr. LEE. At a time where to start a small business in New
York State, it is a huge obstacle. And, again, I--as someone
who has run a small business, I just see this as a further
death knell for the creative side of what made this country
great.
And I would say the same thing deals with the medical
device tax. When we are trying to--I come from manufacturing.
When we're--the President spoke again, the contradiction of
talking about in helping businesses thrive, we're going to go
now and add a tax onto a business.
Again, Mr. Holtz-Eakin, in your view, is this going to help
our manufacturers in the health-related device industry
compete? Is it going to help or hurt them?
Mr. HOLTZ-EAKIN. This is an additional cost for our device
manufacturers on the international market. It's going to hurt
their competitiveness.
It's also one of many taxes that, if you just look at pure
macro economics, the evidence is that discretionary tax
increases--of exactly this type, things that have nothing to do
with the business cycle, you just do it for other purposes--the
evidence of Christie Romer, the former chairman of the Council
of Economic Advisors, is that they are three times more
detrimental to the economy than equivalent spending changes.
So, if you look at this act as a whole from that
perspective, the tax increases' negative impacts far outweigh
any possible benefits of the spending.
Mr. LEE. Thank you.
Mr. HERGER. [Presiding.] The gentleman's time has expired.
The gentlelady from Tennessee, Ms. Black, will inquire for five
minutes.
Mrs. BLACK. Thank you. Thank you again, panel, for being
here. It looks like I'm the last one here, but the audience
will still hear this question. And all of you can answer this
question, but I think, Mr. Womack, you particularly talked
about health care savings accounts.
And continuously, the Administration has claimed that the
health care law is giving Americans more freedom in their
health care choices. And, in reality, this law is really going
to force many Americans to buy a product which is a government
defined health care product. In addition to that, he, President
Obama, also promised that the American people, if they liked
their current health care insurance, they would be able to keep
it.
But as we see in the law, it will limit the use of health
care savings accounts. And being in the medical field for a
number of years--40 years now--I think that one of the things
that we have seen that has driven the cost of health care up is
that we have taken the consumer out of the driver's seat, and
they are not making choices.
And I was very excited about maybe expanding this product,
because it would give an opportunity to put somebody back in
the seat that wants to be in the seat, and it would also give
more opportunities for different vehicles, rather than a set
type of insurance that most employers do have and offer to
their employees.
Mr. Womack, I think you're the one that mentioned about
health care savings accounts, and all of you certainly can
respond about where you feel that this might help companies, if
they were given that choice, to use those as compared to being
forced into a certain product or a certain type of care.
Mr. WOMACK. Thank you. And I am a Knoxvillian, believe it
or not.
Mrs. BLACK. Oh, great.
Mr. WOMACK. Yes, nice to see you. We were faced with huge
premium increases last year. And I can't remember the number,
because we were bidding and we saw so many different numbers,
but it was in the neighborhood of 30 percent. And so, we
decided to go ahead and look at an HSA, and we did begin to
offer an HSA as an option to our managers.
And I have my own HSA story. My wife had an MRI ordered
recently by the hospital, at a cost of $1,100. And someone
said, ``You need to shop that around.'' And so we went out and
into a diagnostic facility, literally just down the road, and
got the same procedure for $350. Truthfully, I don't know that
we would have even thought about that, had we not been using an
HSA, where we were spending the money out of our account,
ourselves.
So, it's that type of story that gets told over and over
and over in HSAs. They're just a huge benefit. When you put the
individual more in touch with their own spending, they will
find ways to control it. And they get to keep that money in the
account and roll it forward. And it's just--it's a beautiful
plan that should not be impeded. We shouldn't do anything to
hamper HSAs. Thanks for the question.
Mr. OLIVO. I would say, very quickly, I have a similar
story. We put the health savings accounts in six years ago, and
the first year the employees resisted it, did not like it. But,
over time, they have grown to appreciate. Those that take care
of themselves have seen their savings accounts grow.
And I, too, have seen instances where employees had exams
or scanning type of tests to be done, and were able to go
online and literally save a couple thousand dollars because
they were able to research it themselves, and there was an
incentive there to do so.
Mrs. BLACK. Yes, Mr. Holtz-Eakin.
Mr. HOLTZ-EAKIN. Yes?
Mrs. BLACK. Do you have a comment?
Mr. HOLTZ-EAKIN. Oh. Well I don't have the business
experience of these gentlemen. But certainly in the alternative
reforms that were envisioned in the debate leading up to the
Affordable Care Act, one version is to put consumers at the
centerpiece of this one-fifth of the economy, in the same way
that they have driven the other four-fifths, to be the largest,
strongest, economy on the planet. And then, you know, require
insurers and providers to compete in price and quality. And
that's a very different vision than what we see in this law.
Mrs. BLACK. Thank you. I yield back my time.
Mr. HERGER. The gentlelady yields back. The gentleman from
New York, Mr. Rangel, is recognized for five minutes.
Mr. RANGEL. Thank you, Mr. Chairman. And let me thank this
panel for sharing with us the problems that you're having with
this legislation, especially those of you who work every day in
dealing with employees.
Tell me. Both of you, and certainly the Chamber, advocate
repeal of the law that the President signed. Is that correct?
Mr. WOMACK. Yes, it is.
Mr. RANGEL. And you don't have a plan that you're
recommending. Do you--strike that.
You think that we're better off without any changes in the
law, than to enforce or to amend the existing law?
Mr. OLIVO. I could say from my vantage point, as a small
business owner, that for--I look at it as action/reaction. For
Congress--what Congress has passed, I'm seeing far more
significant reactions to any positive that this will bring to
my employees.
Mr. RANGEL. I can understand that. But my question--and I
don't have any experience at all in hiring employees--is that,
as a business man--and I know you can't speak really on this
issue, Mr. Womack, for the Chamber--but for yourself, with your
businesses, you would rather see the government just stay out
of it, rather than to amend or try to correct the existing law.
Is that your position?
Mr. WOMACK. Oh, I guess I've gotten used to the government
being in the middle of things, and I don't say that
sarcastically. We anticipate some sort of change----
Mr. RANGEL. Do you have--I'm concerned what happens if we
just stop this, and--are all of your employees, one way or the
other, covered by some type of health insurance?
Mr. WOMACK. I don't believe so. And----
Mr. RANGEL. So you do have employees that are uninsured
that you would want to see insured, as anybody would, just--
right?
Mr. WOMACK. Absolutely. But the problem is----
Mr. RANGEL. Do you have any idea as to how you would want
to insure these people that are uninsured, other than what has
been recommended and passed by the Congress?
Mr. WOMACK. No. And the reason is very simple. We're
talking about more money than is available. We don't have the
money.
Mr. RANGEL. And so--listen. The problem we're facing--there
is sharp differences of opinion here. The National Business
Group on Health indicates that they don't think they can get a
better solution to the problem I mentioned during their
lifetime, during our lifetime. If they get repeal, or gut it,
we will have to start all over again, and we'll be worse off.
And so, I think, generally speaking, every nation truly
believes that access to health care is important for the
strength and security of the country, and that our workforces
should be better educated and be exposed to preventative care
and health care. You want that. You're just saying that you
can't afford it.
Mr. WOMACK. Absolutely.
Mr. RANGEL. Well, our job is to say that, one way or the
other, the government is going to make certain that it is
affordable. We consider that as a national obligation and goal.
All industrialized countries do it, not because of compassion,
but even in the question of competition we do believe that an
educated workforce and a healthy workforce is more productive.
I can understand how you cannot afford to do what basically
you would like to do. But you just can't leave those people out
there hanging that have no insurance at all. When we find out
that personal lives and families are shattered, bankruptcies,
not because of you, and not because of the employee that faces
serious illness. So, if you wanted to help them--and I truly
believe you do--it doesn't help the family to say, ``Hey, my
boss is great, he just can't afford to help me out in this
crisis.'' No.
I believe, and a lot of people disagree, but I truly
believe we have an obligation to at least give access to health
care, one way or the other. And if you don't like this way, I
really believe you have some type of an obligation as business
people that have the experience that we don't have, generally
speaking, not just to leave these people out there, hanging.
And to say that no insurance is better than what we have, I
don't really think that's a legitimate--I don't think it's fair
to us to say all the things we've done wrong, and not have any
positive suggestions that we can take care of those employees
that you want to take care of.
Mr. WOMACK. Well, Mr. Rangel--and this is a dilemma that's
been discussed for years. And so, you know, I don't take any
offense to your comments. The problem----
Mr. HERGER. The gentleman's time has expired. If we could
sum up very quickly.
Mr. WOMACK. Okay. The problem is that, in a nutshell, the
only solution--if you ask the employers in our industry--and I
will just speak for my industry--if you ask for employers from
my industry to pick up that burden now, it's a crushing,
complete disruption of our industry, and we can't turn on a
dime.
Mr. HERGER. The gentleman's time has expired.
Mr. WOMACK. Thank you.
Mr. HERGER. I want to thank Mr. Holtz-Eakin for testifying.
I understand you have a previous engagement you need to leave
for.
Mr. HOLTZ-EAKIN. That's correct, Mr. Chairman.
Mr. HERGER. And if any of our members have any further
questions for him, they could submit that in writing, and----
Mr. HOLTZ-EAKIN. I would be delighted, and apologize for
having to excuse myself.
Mr. LEVIN. Mr. Chairman.
Mr. HERGER. Yes? The gentleman is recognized.
Mr. LEVIN. Before you go, Dr. Holtz-Eakin, I am going to
send to you some inquiries about the forum. And I would like
very much if you could respond.
Mr. HOLTZ-EAKIN. I would be happy.
Mr. LEVIN. You're a sister organization, as I understand
it, of the American Action Network.
Mr. HOLTZ-EAKIN. That is correct.
Mr. LEVIN. Let me just finish. I want to tell him what I'm
sending him. I was told he was going to be here until noon.
And so, as I said, I think your website and that of the
network says you're sister organizations.
Mr. HOLTZ-EAKIN. Yes.
Mr. LEVIN. And we know the action of the network.
Mr. HERGER. If the gentleman could conclude----
Mr. LEVIN. I will conclude very quickly.
Mr. HERGER [continuing]. Dr. Holtz-Eakin has indicated that
he will respond by letter, so----
Mr. LEVIN. I want to let him know in advance.
Mr. HERGER [continuing]. The gentleman from Michigan will
have his inquiry answered. So----
Mr. LEVIN. Okay. So I just want you to know, so it doesn't
take you by surprise. I am going to ask you if you will reveal
the sources of the income of the forum. Will you do that?
Mr. HOLTZ-EAKIN. I will comply with the bylaws with the
forum and with the U.S. tax laws. And I----
Mr. LEVIN. I
Mr. HOLTZ-EAKIN [continuing]. And I will get your
questions, look at them, and do----
Mr. HERGER. The gentleman will respond----
Mr. LEVIN. Will you disclose----
Mr. HERGER. The gentleman's time has expired. The gentleman
from Georgia----
Mr. LEVIN. Why don't you let him finish?
Mr. HERGER [continuing]. Mr. Price, will inquire for five
minutes.
Mr. PRICE. Thank you, Mr. Chairman.
Mr. RANGEL. Wow.
Mr. PRICE. And I apologize for not being here earlier. And
I am sorry that Mr. Holtz-Eakin has to leave, but I wanted to
just make a comment about some of the taxes in the provision
that are stifling the innovation.
The medical device tax, as we all know, when you tax
something you get less of it. And the medical device tax, I
believe, and many believe, that that increase in taxation there
will significantly decrease innovation and affect remarkably
high-paying jobs that have wonderful benefits to our society.
And I think that that's a direction that we ought to look at.
The estimates are that a 2.3 percent increase will be passed on
to the consumers, either directly or indirectly, also.
So--but I appreciate Mr. Olivo, Mr. Womack being here, and
I want to talk a little bit about the consequences. Maybe, Mr.
Olivo, if you want to just talk about your business itself,
this bill has all sorts of requirements and stipulations and
mandates that every single business in this country, employer
in this country, has to look at.
What have you--how much time have you spent in trying to
make certain that you are going to be able to comply? What kind
of costs have you expended to try to make certain that you will
be able to comply? And what incentives are--is the bill
providing you that might not be necessarily beneficial to your
business, itself?
Mr. OLIVO. I have personally spent hours of time that I
could better spend managing my business reading the health care
bill. I haven't read it in its entirety, but interpreting it
and using the resources I have with the business organizations
like NFIB, in trying to interpret how it's going to affect me.
Your question was as far as exactly what the----
Mr. PRICE. And what have you determined? How is it going to
affect you?
Mr. OLIVO. Just at every level. Just my concern about
hiring a new employee, the cost that goes into hiring a new
employee is not just his wage. The health care costs are such
an integral component of what it costs me. And when that's
unknown, and when there is all this legislation hanging out
there, it really makes me more conservative and say, ``Maybe I
don't need that employee at this point in time.''
Mr. PRICE. So the continued uncertainty, and the potential
rules and regulations that will be passed on, leave you less
able to expand your business or to hire new employees. Is that
an accurate statement?
Mr. OLIVO. Without a doubt.
Mr. PRICE. Great. Mr. Womack, I know that my sense has
always been that there are some perverse incentives within the
bill itself that make it so that employers look at the
situation and they say, ``It's going to cost me more to provide
health coverage for my employees. Why should I do that?
Shouldn't I just let them fall into the exchange?''
Are you hearing that from your members? And I wonder if you
might expand on whether or not that is an accurate----
Mr. WOMACK. Oh, absolutely. And, of course, again, we can't
afford the coverage. So we are absolutely going to have to look
at the penalties. We have a real concern that our insurance
companies that we've talked to are not going to allow us to
continue to offer the coverage to our salaried staff, based on
rules very similar to 401(k) rules regarding highly-compensated
employees.
So, that means that, really, through a whole other avenue,
we either offer insurance to everyone, or drop it. We have 50
families on health insurance now in our company, and it's an
important part of what we offer as a benefit package.
Mr. PRICE. So the statement that we heard throughout this
whole discussion, ``If you like what you have you can keep
it,'' may not necessarily be true in your business. Is that
accurate?
Mr. WOMACK. Sure, absolutely.
Mr. PRICE. Would you expand, or do you have any thoughts on
the incentives for other businesses, small businesses, to move
individuals, their employees from the coverage that they
currently have to the exchange?
Mr. WOMACK. Well, I measure that penalty, really, at
$2,800, because $2,000 is not tax deductible. You have to
account for the taxes you pay on the income to pay the penalty.
So it's really more like $2,800. I cannot imagine that in the
board rooms across the U.S., that people are looking at, you
know, a $15,000 premium for an employee, or $2,800.
You know, very quickly you do the math, and you're going to
opt to drop that coverage. And it may not be just that simple
math, it may be some sort of an event where, you have an issue
with an insurance company, or you have a 40 percent rate
increase, and finally--enough is enough.
Mr. PRICE. In fact, aren't you almost, in the real world,
obliged to drop that coverage, because your competitors will do
so and then you're at a competitive disadvantage? Is that an
accurate statement?
Mr. WOMACK. I would say that offering insurance is a
significant benefit that helps make us more competitive. So we
always want to offer the insurance, and we just can't afford
it.
Mr. PRICE. Thank you.
Mr. HERGER. The gentleman's time has expired. The
gentlelady from Kansas, Ms. Jenkins, is recognized for five
minutes.
Ms. JENKINS. Thank you, Mr. Chairman. Thank you both for
being here.
On a panel before you we had the chairman of the Council of
Economic Advisors, Dr. Goolsbee, testify. And during his
testimony, I noted that he said this. ``The Affordable Care Act
has already begun to help small business become more
competitive by making health insurance more accessible and more
affordable.''
Mr. Olivo, you're a small-businessman. Could you give me an
example of how the act has helped you--has already begun to
help you become more competitive?
Mr. OLIVO. Unfortunately, I could not give you an example.
All I can tell you is that our existing insurance, which the
employees liked the coverage, is no longer available. And our
insurance premiums have continued to rise in a double-digit
percentage for the coming year.
Ms. JENKINS. Okay. If they haven't, in fact, already begun
to, can you give me an example of how you will see them--how
you expect them, in the future, to cause you to have a more
competitive health insurance and an accessible and affordable
plan?
Mr. OLIVO. I don't see how it's going to be--help us offer
a plan that's more competitive. My concern with the exchange is
that they're not true exchanges in the form of competition.
They're still heavily mandated types of policies. So there is
not real, true competition.
Living and residing and working in New Jersey, we have
the--I believe it's the third highest insurance rates in the
nation. We have had guaranteed access, a community-rated plan
since 1993. And I can tell you from that point, when that law
was instituted--I've been running the company since 1988--I
have seen a direct correlation with our health care cost
beginning to rise from when that guaranteed access was put into
place.
So, I just don't see anything that's going to make the
premiums less expensive.
Ms. JENKINS. Okay. Also in Dr. Goolsbee's testimony he said
this. ``The Affordable Care Act can be a significant benefit to
the job market, by easing the burden of health care costs on
small businesses.''
So, once again, as a small-business man, I was hoping you
could tell us approximately how many jobs that you will be able
to create, thanks to the savings that you will incur.
Mr. OLIVO. And I can say, for my company specifically, at
45 employees, we are not eligible for any sort of tax credit
which I believe he was referring to.
Ms. JENKINS. Okay, thank you. Mr. Womack, I was home in my
district last week, and visited several major employers who
have over 50 employees. And there was a consistent message that
I was receiving this day, that they were frustrated with the
regulations coming about, due to this bill.
And one in particular that they mentioned was that they
were being required to provide lactation rooms if they employed
more than 50 employees. And several of them were concerned,
they had multiple locations, one location only had three men
working at it--if they were required to provide a lactation
room for those three men, because, overall, their employees had
totaled more than 50.
I just wondered if you had any concerns about this
particular regulation, or others within this bill.
Mr. WOMACK. Well, I do now. Thank you for informing me of
that regulation. I wasn't aware of that. And, of course, no
surprise. There are so many things buried in the law that, you
know, we don't seem to be aware of. I don't know how to react
to that one in particular.
But, this layering on of all these little things, I mean,
they just go on and on. It creates a tremendous amount of
uncertainty and, you know, quite frankly, depression amongst
the business community, just wondering how we're going to keep
up with it all.
Ms. JENKINS. Is there any estimated cost for your business
to meet all of these? I guess you probably can't--if you didn't
even know about this one, you probably don't know about others
to really adequately estimate----
Mr. WOMACK. You know, we're looking at that big bill, and
we're not counting the small ones right now. The big bill is
frightening enough.
Ms. JENKINS. Okay. If the Affordable Act isn't getting it
done for you, the Republicans had an alternative bill, and we
had TORT reform, expanded FSAs, HSAs, purchasing across state
lines, access pools. What other ideas do you have for us?
Mr. HERGER. The gentlelady's time has expired.
Ms. JENKINS. Thank you, Mr. Chairman. I yield back.
Mr. HERGER. I recognize the ranking member, Mr. Levin, for
five minutes.
Mr. LEVIN. Thank you very much. And we really appreciate
your coming. I regret that Dr. Holtz-Eakin had to leave, and I
am sending him a letter today. And since this was a public
hearing, I will make that letter public. And I expect him to
give us an expeditious response.
But again, I very much respect your different views.
Everybody brings different experiences, and we need to tap into
them. So, let me ask you, Mr. Womack, how many employees do you
have?
Mr. WOMACK. Approximately 900.
Mr. LEVIN. And how many of them have insurance?
Mr. WOMACK. About 50.
Mr. LEVIN. And all of the 50, are they in a certain
category or two of work?
Mr. WOMACK. They are either salaried management people or
office staff.
Mr. LEVIN. So, none of your employees who aren't in
management or in office staff have health insurance through
their work?
Mr. WOMACK. That's correct.
Mr. LEVIN. You would be required to provide health
insurance under this new law?
Mr. WOMACK. Correct, or pay the penalty.
Mr. LEVIN. Or pay the penalty. So your 800 or so are part
of the 50 million who have no health insurance in this country?
Mr. WOMACK. That's correct.
Mr. LEVIN. Have you inquired into what the cost would be to
insure them?
Mr. WOMACK. Yes, I have run those numbers many times.
Mr. LEVIN. And you find it too expensive?
Mr. WOMACK. It's much more than we earn.
Mr. LEVIN. And so, therefore, trying to get control of
health care costs would be potentially helpful to you, in terms
of having your employees covered?
Mr. WOMACK. Absolutely. The problem is the number has grown
to a size where, even if you cut it in half, which is not going
to happen, but even if you cut that number in half, it's beyond
our ability to pay.
Mr. LEVIN. How many of them, do you know, are covered by
some kind of a public program?
Mr. WOMACK. I have no idea.
Mr. LEVIN. You know what percentage are women?
Mr. WOMACK. Not off the top of my head, no, sir.
Mr. LEVIN. Just roughly?
Mr. WOMACK. I'm going to guess roughly half.
Mr. LEVIN. Do you know what happens when they get ill?
Mr. WOMACK. They go seek treatment, and you know, at a
local provider, and they get treatment.
Mr. LEVIN. How do you know they get treatment?
Mr. WOMACK. Well, we hear the stories.
Mr. LEVIN. You don't have any systematic way of knowing?
Mr. WOMACK. No.
Mr. LEVIN. They go to emergency rooms?
Mr. WOMACK. Probably, or their local doctor.
Mr. LEVIN. And they go to a local doctor who doesn't charge
them anything?
Mr. WOMACK. No, they go to a local doctor that does charge
them something.
Mr. LEVIN. What's the average wage of your non-salaried,
non-office employees?
Mr. WOMACK. It's approximately $9 an hour.
Mr. LEVIN. Okay. Mr. Olivo, you have a high-deductible
plan?
Mr. OLIVO. That is correct.
Mr. LEVIN. What's the deductible?
Mr. OLIVO. Well, it varies. I mean--well, I--roughly,
within $100 I would say. The current deductible for an
individual is $1,500, and for a family it's $3,000.
Mr. LEVIN. So they pay the first $1,500----
Mr. OLIVO. The first----
Mr. LEVIN [continuing]. Or the first----
Mr. OLIVO. That's----
Mr. LEVIN. $3,000?
Mr. OLIVO. Correct.
Mr. LEVIN. I have no further questions.
Mr. HERGER. The gentleman yields back. I now recognize for
five minutes the gentleman from Minnesota, Mr. Paulsen.
Mr. PAULSEN. Thank you, Mr. Chairman. And, first of all,
let me just thank both of you for taking the time to come in
here and share your small business background and experiences,
and go through a pretty lengthy hearing.
I just want to touch on something, because I know Mr.
Holtz-Eakin had to leave, but you know, last night the
President said that we do need to be a nation of innovators and
a nation of leaders. And during this speech he reminded us of
what it takes to compete for jobs and for industries. And, as
entrepreneurs, I'm sure you can appreciate that especially.
But he did say, and I agree, we need to out-innovate, out-
educate, and out-build the rest of the world. We have to make
America the best place on earth to do business. And there is
one American industry I have to mention, because it's a
Minnesota success story as well, and that's the engine of
innovation and growth in the health care field. It's medical
devices.
And we heard from some other Members earlier about that,
and the medical technology industry. And that's an industry
that employs about half-a-million individuals, and routinely
revolutionizes patient care. And, unfortunately, the health
care law does include a new $20 billion tax on this innovative
industry.
I am going to call out one company in particular, because
it's a larger company. Boston Scientific, which employs more
than 5,000 individuals in my home state of Minnesota, has
estimated that that tax is going to cost the company an
additional $100 million a year, and up to 2,000 jobs. It's also
going to cause a substantial cut-back in Boston Scientific's
research and development budget, which is the origin of where
all this innovation comes from that the President talked about
in his speech last night.
And, you know, knowing that 62 percent of the medical
technology industry is small businesses, small businesses like
yourselves, for instance, you took an idea, you took the risk,
you started it out, I'm just really worried that we're killing
an industry that it's going to be very difficult to jump-start
and bring back here. And we can't afford to lose it.
And so, just knowing we have to keep that innovation here,
I had to make that comment, because Mr. Goolsbee had mentioned
earlier that one of the benefits of that tax, as a part of the
legislation, was going to basically allow about millions of
patients now to access these device procedures that would not
normally have had that market before. And I think the reality
is that we look at it now in Massachusetts, which was the model
upon which the legislation was built--there was no increase in
device utilization at all, as was, I think, suggested.
But I want to follow up real quick with both of you, since
you're small business people, and the health care savings
account and the flexible savings account portion, and that's
because, you know, we know the health care law instituted new
caps on popular flexible spending accounts, FSAs, that
individuals use for their health care expenses, and they also
prohibited the use of FSAs and health care savings accounts for
purchases of over-the-counter medications without a doctor's
prescription.
And you mentioned a little earlier about, as an employer,
what some of those results would be, or some of the detriments
of the changes in the law would mean. And knowing that there
are 10 million Americans that use FSAs, and 35 million
Americans using FSAs--HSAs and FSAs--would you explain just--I
mean, give the patient perspective. I mean your employees. As a
small business that wants to have an additional option, I mean
from a patient perspective, what does that--offer some ideas
for your employees, rather than just the employer.
Mr. OLIVO. Well, as I had said before, we have had the
health savings account, the high deductible plan, for six
years. And I have witnessed how it has improved my employees'
incentive to better manage not only their health, but how they
choose to go about obtaining health care.
And as I had said before also, the first year was very
rough, in the sense that it was an HMO--these people were
raised on HMOs, and they did not like having to pay $150
initially to go to a doctor, when before it was $15 at the
time. But over time, as they see their health savings accounts
start to build up, and they see, ``If I take better care of
myself, I could get off this medication and now I save money,''
it has certainly improved how they go about purchasing the
health care.
Mr. PAULSEN. Mr. Womack, you want to comment, as well?
Mr. WOMACK. Well, I think that any time that you allow
people to accumulate money in an account like an HSA for the
purpose of spending on their expenses, it becomes a huge
incentive for them to really manage all those little costs. And
sometimes those little hidden costs can be significant. You
know that when you have the money in your account and you get
to keep it, you have a very big incentive to manage your costs.
Mr. PAULSEN. Well, and Mr. Chairman--and thank you for the
testimony--I just want to comment. I have talked to numerous
small businesses and their employees that feel like they have
had the rug pulled out from under them now, as they have gone
through this adjustment, to take care of their own health care.
And they are going to have to make a huge adjustment now, as
the law has been changed.
And I would rather see us move into the expansion of FSAs
and HSAs, to allow more flexibility and control costs. So I
yield back, Mr. Chairman.
Mr. HERGER. I thank the gentleman. At this point, everyone
has--at least in the Committee--has gone through inquiring
once. As long as we have other Members who would like to
inquire who haven't inquired of this panel, we will leave that
open. Mr.----
Mr. THOMPSON. I have not inquired of this panel. Neither
has Mr.----
Mr. HERGER. Yes, I am aware. And the gentleman from
California will be recognized after I inquire.
Mr. Olivo, you currently indicated you had 45 employees.
And prior to the recession you had 54 employees. And I assume,
like most businesses, that you would like to grow your
business. But under the Democrats' health care law, if you have
less than 50 employees, you are not subject to the employer
mandate tax.
Will that have an impact on your decision to hire more
workers?
Mr. OLIVO. Without a doubt, it will. And it will put me in
the position that--not only questioning whether I should expand
or slow down the rate at which I expand, and make me seriously
consider, but it also puts me in the position that once I reach
that 50 employee mark, and I either need to provide health care
or pay a penalty, as I had mentioned previously, the penalty
currently is less than my premiums. And, unfortunately, that is
a scenario that I will have to look at.
Mr. HERGER. And I might mention I was talking to an
employer in my own district, in Redding, California, who is in
the same situation, that he had about 45 employees, and just
knowing that made a difference of whether he was going to grow
or not.
But you also mentioned in your testimony that you currently
provide health benefits to your employees, and that you pay 100
percent of the premium for employees who choose high deductible
plans. You also contribute to these employees' health savings
accounts. Could you elaborate further on the benefits of
pairing a high deductible plan with a health savings account?
And what would be the impact on you and your employees if
this kind of coverage is no longer available under Obamacare?
Mr. OLIVO. Well, yes. That is something--with the savings
that we have been able to gain with the reduced premiums from
the health savings account, we have been able to contribute in
certain years to our employees' accounts, which really helps
them going towards paying that deductible. So there are some
years, in effect, that not only are we picking up the cost of
the premium, but we are picking up approximately two-thirds of
the cost towards their deductible.
So, for all intents and purposes, their first $1,000 is
covered under the plan. I would just say the health savings
account has just been a huge benefit to us towards managing the
escalating premium cost. I wouldn't sit here and say that it's
the sole answer. But, without a doubt, if we did not have the
ability to offer a health savings account for the past six
years, I would not be able to pay anywhere close to 100 percent
of my employees' premiums.
Mr. HERGER. I thank the gentleman. I now recognize the
gentleman from California, Mr. Thompson, for five minutes to
inquire.
Mr. THOMPSON. Thank you, Mr. Chairman. I just want to point
out a $9 employee, under best case scenario, is making around
$15,000 a year. And I don't care where you go for your health
care on $15,000 a year, chances are you fall into that category
of uncompensated care. So it's not being paid for out of
pocket, it's not being provided for free. It's factored in to
what's driving up the cost for your salaried employees, for
everyone else who buys a policy, or everyone else who pays out
of pocket.
Mr. Chairman, I would like to submit for the record a
letter that I have that's--I just got a copy of it. It's from
275 economists from all over the country, including 3 Nobel
Laureates, 4 Council of Economic Advisors, a former CBO chief,
and 2 John Bates Clark prize winners. And the letter states
that----
Mr. HERGER. Without objection, the letter will be admitted.
Mr. THOMPSON. Thank you.
[The information follows: Mr. Thompson, Economists Letter:]

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Mr. THOMPSON. The letter states--I just want it for the
folks to know--it says that, ``We write to convey our strong
conclusion that leaving in place the Patient Protection and
Affordable Care Act of 2010 will significantly strengthen our
nation's economy over the long haul, and promote more rapid
economic recovery in the immediate years ahead.
Also, Mr. Chairman, I would like to point out a letter that
the Secretary of Health received from an entity that you're
very familiar with, and I believe actually get some benefits
from this, the CalPERS organization in our home state of
California, which is the nation's largest non-Federal
Government purchaser of health care. And in the letter they say
that they believe that ``key elements of the national health
care reform represent a fundamental and positive shift in the
way health care will be purchased and delivered in the United
States. Together, they will dramatically shape the future of
health care in our country, and ultimately benefit everyone.''
They say that, more specifically, that the provisions
regarding retired folks--in 2011, that they will save
approximately $200 million, based on the reimbursement rate to
more than 115,000 early retirees, their spouses, and their
surviving spouses and their dependents.
They have also submitted written testimony, as well, in
which they discuss that this year they will spend $6.7 billion
on health care benefits for 1.3 million active and retired
state and local government employees and their families.
They further testify that the overall structure of the law,
which focuses on constraining the skyrocketing cost of health
care in our country, while providing quality and ensuring
health coverage for tens of millions of uninsured, some of
those, those $9-an-hour employees who can't buy health care,
who fall into the uncompensated health care cost that the rest
of us all pay for, is the right policy prescriptions for this
group, the largest non-Federal Government purchaser of health
care in the country, its members, and our country at large.
I would also ask unanimous consent to submit a copy of this
letter for the record, Mr. Chairman.
Mr. HERGER. Without objection.
Mr. THOMPSON. Thank you. And I yield back the balance of my
time.
Mr. HERGER. The gentleman yields back. The gentleman from
Ohio, Mr. Tiberi, is recognized for five minutes.
Mr. TIBERI. Thank you, Mr. Chairman. And thank you both for
taking time away from your families and your businesses to come
here and provide us with perspective from where you sit.
And your testimony, your verbal testimony earlier, reminded
me of some discussions I had with local constituents, both
small businesses and restaurant owners and retailers. In fact,
a restaurant owner operator said to me, perplexed, ``Where did
30 hours come from? In federal law, full-time is always 40
hours, and suddenly it's 30 hours.''
Mr. Womack, you have 900 employees. I hope that you will
reconsider and come to Ohio, if we can change this piece of
legislation. I'm from central Ohio. My first job was at
McDonald's, so I understand a perspective of the restaurant
business. When I was working at McDonald's, a number of the
people that I worked with were under the age of 21, were on
their parents' policy. I was, as a 16-year-old. And a number of
the adults were women who had coverage through their spouse.
So, my question to you is--and I have two--is how many
employees now do you have that will be impacted by this new
regulatory framework of 30 hours as full-time? If you could,
answer that.
And how many--and I'm sure it's a guess at this point,
since you don't have the figures in front of you--employees do
you have are teenagers at your restaurant, or college-aged
students, who have coverage through their parents, or maybe a
spouse who has coverage through another spouse?
Mr. WOMACK. I think my best guess--and this is purely a
guess, as we've not run the numbers--but my best guess is about
20, 25 percent of our staff are under the age of 20 or 21, and
a substantial number of our employees are people who are second
earners, bringing a second income into the family. And we know,
just anecdotally, especially a lot of our service staff,
they're the second earner, and their spouse has coverage
elsewhere.
Mr. TIBERI. So--and correct me if I'm wrong--so you have a
number of people who are already covered, whether they be
teenagers working their first job, or a spouse with insurance,
and there is a second earner. These costs, additional cost onto
your business, will create a situation where at some point in
time you're going to have to choose whether or not a person
gets a raise, whether or not they get other benefits, or
whether or not you hire somebody?
Mr. WOMACK. Sure, absolutely.
Mr. TIBERI. How many people could you hire in Ohio if this
law hadn't been passed? What was the projection that you had
before this law became--this bill became a law?
Mr. WOMACK. Well, our plan from here is to open 12, 13 more
restaurants in Ohio, in central Ohio.
Mr. TIBERI. In central Ohio.
Mr. WOMACK. And----
Mr. TIBERI. Thanks for the good news.
Mr. WOMACK. Yes. And we think that, if we have to cease
development, if there are no changes and we have to stop
development, you're looking at 260 to 300 full-time jobs, and
hundreds of part-time jobs. And then there is also,
construction and all the other things outside of our company.
Mr. TIBERI. Mr. Olivo, your testimony brought home a call I
got right after the election from a constituent. He was on his
cell phone screaming at me regarding a meeting that he just
came out of with his tax lawyer and his tax accountant. He had
51 employees, and they were giving him a briefing on the new
health care law and some other regulations.
And the gist of the meeting was, ``If you can, figure out
over the next year how to get under 50 to not have to comply
with this new regulation, or our recommendation is to put all
your employees, if you are still over 50, into the government
exchange, rather than continue to provide the health care you
provide today,'' which, obviously, goes against the premise of
the debate, which, if you like what you have, you can keep it.
Or, that this isn't a bill that disincentivizes entrepreneurs
from creating more jobs.
And why he was yelling at me was, with Ohio's unemployment
above 10 percent, he is getting advice from his legal
professional that he should not hire more people, but figure
out how to hire less people. Or, the alternative is to put
people into the government exchange, which he didn't want to
do.
But from a competitiveness perspective, and cost of doing
business, and trying to survive his business--I know you've
talked about it already, but can you share with us, as an
entrepreneur, how frustrating it is for you, whether it's a
state regulation or a federal regulation, inhibits your ability
to project long-term growth, and how to grow your business,
rather than figuring out how to abide by all these new rules,
what that does to your spirit, as an entrepreneur?
Mr. OLIVO. Well, not just spirit. I mean, just to give you
an idea, we purchase a new piece of equipment, they are fixed
payments. I don't have the luxury of going back to my bank and
saying, ``Well, geez, my expenses are a little more, my health
care costs were more than expected.'' I have to make those
payments. So I have to leave myself a margin in which that--my
calculations may not be exact.
When there is this much unknown regarding the health care
law, it really causes me to be much more conservative. And it's
affecting how much I am willing to invest into the company and
grow it----
Mr. TIBERI. All right.
Mr. OLIVO [continuing]. Until I get a better understanding
of what's happening.
Mr. TIBERI. Thank you----
Chairman CAMP. Thank you very much----
Mr. TIBERI. Mr. Chairman, I would like to submit for the
record, if I may----
Chairman CAMP. Yes.
Mr. TIBERI [continuing]. A letter dated January 18, 2011
from 239 economists. And they write, just one sentence, ``We
believe the Patient Protection and Affordable Care Act is a
threat to U.S. businesses, and will place a crushing debt
burden on future generations of Americans.''
Chairman CAMP. All right. Without objection.
[The information follows: Mr. Tiberi, Economist Letter:]
Economist
January 18, 2011

The Honorable John Boehner The Honorable Harry Reid
Speaker of the House Senate Majority Leader
Washington, DC 20515 Washington, DC 20515

The Honorable Nancy Pelosi The Honorable Mitch McConnell
House Minority Leader Senate Minority Leader
Washington, DC 20515 Washington, DC 20515

Dear Speaker Boehner, Minority Leader Pelosi, Majority Leader Reid, and
Minority Leader McConnell:

To promote job growth and help to restore the Federal Government to
fiscal balance, we, the undersigned, feel that it would be beneficial
to repeal and replace the Patient Protection and Affordable Care Act
(P.L. 111-148). Too many Americans remain unemployed and the United
States faces a daunting budgetary outlook. We believe the Patient
Protection and Affordable Care Act is a threat to U.S. businesses and
will place a crushing debt burden on future generations of Americans.
A Barrier to Job Growth: The Patient Protection and Affordable Care
Act contains expensive mandates and penalties that create major
barriers to stronger job growth. The mandates will compete for the
scarce business resources used for hiring and firm expansion. The law
also levies roughly $500 billion in new taxes that will enter the
supply chain for medical services, raising the cost of medical
services. At the same time that businesses juggle the potential for
higher interest rates or higher taxes, these medical costs will
translate to higher insurance premiums, further increasing the cost of
operating a business in the United States.
A Massive Spending Increase and a Crushing Debt Burden: The Patient
Protection and Affordable Care Act is fiscally dangerous at a moment
when the United States is already facing a sea of red ink. It creates a
massive new entitlement at a time when the budget is already buckling
under the weight of existing entitlements. At a minimum, it will add $1
trillion to government spending over the next decade. Assertions that
these costs are paid for are based on omitted costs, budgetary
gimmicks, shifted premiums from other entitlements, and unsustainable
spending cuts and revenue increases. A more comprehensive and realistic
projection suggests that the Affordable Care Act could potentially
raise the federal budget deficit by more than $500 billion during the
first ten years and by nearly $1.5 trillion in the following decade.
The Patient Protection and Affordable Care Act does not constitute
real health care reform. The first step is to remove barriers to
stronger job growth and to help restore fiscal balance to the nation's
budget by protecting taxpayers, American business, seniors, families,
workers, and health care consumers from the damage that the Patient
Protection and Affordable Care Act will cause.
Congress should start with a clean sheet of paper and adopt
initiatives that would encourage providers to offer higher-quality care
at lower costs; reduce the cost pressures that threaten to bankrupt
Medicare and Medicaid; and give every American access to more options
for quality insurance.

Respectfully,
[Affiliations shown for purposes of identification and do not
constitute institutional endorsement.]

Douglas Holtz-Eakin
President, American Action Forum
Former Director, Congressional Budget Office (CBO)

June O'Neill
Professor of Economics, Baruch College
Former Director, Congressional Budget Office (CBO)
First Chair, Board of Scientific Counselors, National Center for Health
Statistics

Joseph Antos
Wilson H. Taylor Scholar in Health Care and Retirement Policy American
Enterprise Institute
Former Assistant Director, Congressional Budget Office (CBO)

Arlene Holen
Senior Fellow, Technology Policy Institute Former Associate Director
Congressional Budget Office (CBO)
Former Associate Director White House Office of Management and Budget
(OMB)

Brian S. Wesbury
Chief Economist, First Trust Portfolios LP
Former Chief Economist, Joint Economic Committee of the U.S. Congress

Arthur B. Laffer
Chairman, Laffer Associates
First Chief Economist, Office of Management and Budget (OMB)
Former Member, Economic Policy Advisory Board

Jim Capretta
Fellow, Ethics and Public Policy Center
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(OMB)

James D. Mietus, Ph.D.
Independent Economist and Policy Adviser
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Michael Boskin
Professor of Economics, Stanford University
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William Niskanen
Former Action Chairman and Member, White House Council of Economic
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Chairman Emeritus, Cato Institute

Earl L. Grinols
Distinguished Professor of Economics, Baylor University Former Senior
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Mark H. Showalter
Professor of Economics, Brigham Young University
Former Senior Economist, White House Council of Economic Advisers (CEA)

Scott Baier
Associate Professor of Economics, Clemson University
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Larry Lindsey
President, The Lindsey Group
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Todd G. Buchholz
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Edward C. Prescott
W.P. Carey Chaired Professor of Economics, Arizona State University
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Nobel Laureate in Economics

William Poole
Distinguished Scholar in Residence, University of Delaware
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Kevin Hassett
Director, Economic Policy Studies, American Enterprise Institute (AEI)
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Mario J. Crucini, Ph.D.
Research Associate, National Bureau of Economic Research (NBER)
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Stephen J. Entin President and Executive Director Institute for
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for Economic Policy, Department of the Treasury

Kathleen B. Cooper, Ph.D.
Senior Fellow at the Tower Center for Political Studies, Southern
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Diana Furchtgott-Roth
Director, Center for Employment Policy
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of Labor

Carl J. Dahlman
Senior Economist, RAND Corporation
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David Malpass
President, Encima Global
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Thomas R. Saving
Jeff Montgomery Professor of Economics, Texas A&M University
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Professor of Economics Appalachian State University

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Professor of Economics
Arizona State University

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Arizona State University

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Ball State University

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Kennedy Chair of Business
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Professor of Economics
Baylor University

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E.F. Stephenson
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Berry College

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Brigham Young University

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Cal Poly

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California State University, Bakersfield

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Graduate Faculty--Economics
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Distinguished Service Professor
Duquesne University
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Davis College of Business
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College

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Professor Emeritus of Economics
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Professor of Economics
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Professor of Economics
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Eldon Smith Professor of Economics, Emeritus
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Professor and Chair, Department of Economics and Business
Randolph-Macon College

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Director, Civil Society Institute
Santa Clara University

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Research Fellow, Hoover Institution
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Gleed Endowed Chair, Seattle University
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Norman Lefton, PhD Adjunct Associate Professor at the School of
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Stetson University

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Associate Professor of Economics
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Larry L. Ross
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Lawrence Southwick
University Research Scholar, Finance and Managerial Economics
Department
University at Buffalo

Leon Wegge
Professor of Economics Emeritus
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Avanidhar Subrahmanyam
Goldyne and Irwin Hearsh Chair in Finance, Anderson School of
Management
University of California, Los Angeles (UCLA)

Lee E. Ohanian
Professor of Economics
University of California, Los Angeles (UCLA)

Richard Roll
Professor of Finance, Anderson School of Management
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Professor Richard L. Smith
Philip L. Boyd Chair and Professor of Finance
University of California, Riverside

A. Edward Day, Ph.D. Associate Professor of Economics (retired)
University of Central Florida

Steven N. Kaplan
Neubauer Family Professor of Entrepreneurship and Finance, Booth School
of Business
University of Chicago

Eugen F. Fama
Robert R. McCormick Distinguished Service Professor of Finance, Booth
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University of Chicago

Robert E. Lucas, Jr.
John Dewey Distinguished Service Professor of Economics, Department of
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University of Chicago

Barry W. Poulson
Professor of Economics (retired)
University of Colorado at Boulder

Jane H. Lillydahl
Professor Emerita, Department of Economics
University of Colorado at Boulder

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Professor of Finance
University of Colorado at Boulder

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Eleanor D. Craig
Associate Chair & Professor of Economics
University of Delaware

Richard Agnello
Associate Professor of Economics
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Stacie E. Beck
Associate Professor of Economics
University of Delaware

James B. O'Neill
Professor of Economics
Director, Center for Economic Education and Entrepreneurship
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C. Thomas Howard, Ph.D.
Professor, Reiman School of Finance
University of Denver

Ronald W. Ward
Emeritus Professor
University of Florida

Jeffrey H. Dorfman
Professor, Department of Agricultural and Applied Economics
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James Moncur Professor Emeritus of Economics
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Cullen Professor of Economics
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William P. Albrecht Professor of Economics
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University of Maine

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Associate Professor of Economics and Public Policy
University of Maine at Machias

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Ronald. L. Promboin, Ph.D. Adjunct Professor University of Maryland--
University College Coldwell Daniel, III
Professor Emeritus
University of Memphis

Michael Connolly
Professor of Economics, University of Miami
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Christopher Douglas, Ph.D.
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University of Michigan-Flint

Mark J. Perry, Ph.D.
Visiting Scholar at the American Enterprise Institute (AEI)
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University of Michigan-Flint

Stephen Parente, Ph.D.
Minnesota Insurance Industry Professor of Healthcare Finance
Director, Medical Industry Leadership Institute (MILI)
University of Minnesota

William F. Shughart II
F.A.P. Barnard Distinguished Professor of Economics
The University of Mississippi

Joseph Haslag
Professor and Kenneth Lay Chair in Economics
University of Missouri-Columbia

Susan Feigenbaum
Professor of Economics
University of Missouri at St. Louis

Arthur M. Diamond, Jr. Professor of Economics University of Nebraska at
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Robert E. Chatfield Professor of Finance University of Nevada--Las
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Evangelos Otto Simos
Professor of Economics, University of New Hampshire
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Jim F. Couch
Professor of Economics
University of North Alabama

Alan C. Shapiro
Ivadelle and Theodore Johnson Professor of Banking and Finance Emeritus
Marshall School of Business
University of Southern California

Joel W. Hay, PhD Professor, Schaeffer Center for Health Policy and
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John G. Matsusaka
Professor of Finance and Business Economics
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University of Southern California

Joseph Zoric
Associate Professor of Economics and MBA Director
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Professor of Economics
University of Texas at Arlington

Barry J. Seldon, Ph.D.
Professor of Economics and Political Economy
University of Texas at Dallas

Nathan J. Ashby
Assistant Professor of Economics
University of Texas at El Paso

Timothy P. Roth, PhD
A.B. Templeton Professor and Chairman, Department of Economics and
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University of Texas at El Paso

Robert Collinge Professor of Economics University of Texas at San
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John E. Murray Professor, Department of Economics University of Toledo
Author, Origins of American Health Insurance

Richard T. Selden
Carter Glass Professor of Economics Emeritus
The University of Virginia

David L. Kendall, Ph.D.
Professor of Economics and Finance
Chair, Department of Business and Economics
University of Virginia's College at Wise

Luke M. Froeb
Associate Professor of Entrepreneurship and Free Enterprise
Vanderbilt University

Larry Van Horn
Associate Professor of Healthcare Management
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Floyd H. Duncan, Ph.D. Roberts Professor of Free Enterprise Economics
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Robert J. Rossana
Professor of Economics
Wayne State University

Glenn MacDonald
Distinguished Professor of Economics and Strategy
Senior Associate Dean, Olin School of Business
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William N. Trumbull, Ph.D.
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Robert D. Seeley
Associate Professor of Economics
Wilkes University

Dr. Jim Clark Associate Dean Associate Professor of Economics Wichita
State University

John McArthur
Professor and Chair of Economics
Wofford College

Lawrence W. Lovik, Ph.D.
Senior Fellow
Alabama Policy Institute

Michael Ramlet
Coordinator--Operation Healthcare Choice
American Action Forum

Aparna Mathur
Resident Scholar
American Enterprise Institute

Philip I. Levy
Resident Scholar
American Enterprise Institute

Judy Shelton
Senior Fellow and Co-Director of the Sound Money Project
Atlas Economic Research Foundation

Warren Coats
Monetary Policy Advisory, Central Banks of Afghanistan, Iraq,
Kazakhstan, Kenya, and Zimbabwe
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Grace-Marie Turner
President
Galen Institute

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Chairman
Institute for Global Economic Growth

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Resident Scholar
Institute for Policy Innovation

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Mike Schuyler Senior Economist Institute for Research on the Economics
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Paul Howard, Ph.D
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Manhattan Institute

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John C. Goodman
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Chairman CAMP. I just want to ask a simple question of both
of you. We have heard a lot of testimony today. There has been,
some of it, very technical.
Just on balance, does this health care legislation help you
create jobs and help you grow your businesses, or does it make
it harder for you to grow jobs and expand your businesses?
Mr. OLIVO. From my point of view, what my concern is, is
that I know many on this committee want to provide health care
coverage for everybody, and would say, ``How would I explain to
somebody that I would not provide health care coverage for
them?''
My fear, as an employer, is going to an employee saying,
``I have to eliminate your position, because not only can I not
afford your health care, I can't afford your position any
more.'' And that's what my concern is.
Chairman CAMP. All right. Mr. Womack.
Mr. WOMACK. Well, the reality is that this just scares
business people to death. And any time you have this level of
fear and uncertainty, we quit growing, we tighten up. We have
to have a reserve. We can't go out to the edge financially, and
then suddenly have $5 gasoline or commodity prices go through
the roof and have no margin, no cushion to survive. So it just
makes us more and more conservative, and that means trimming,
pure and simple.
Chairman CAMP. All right. Thank you. Thank you both. I
think at this time all Members present have had a chance to
inquire of this panel. And I want to thank you both very much
for your thoughtful testimony, and for the efforts you put in
to providing livelihoods and prosperity of the employees that
you have. And I know the difficult responsibility that is that
you carry around every day.
So, I want to thank you for taking the time away from those
endeavors to be here, and help enlighten this committee. And
with that, this hearing is adjourned.
[Whereupon, at 12:10 p.m., the committee was adjourned.]
[Submissions for the Record follow:]

Rep. Jim McDermott
Statement for the House Ways and Means Committee Hearing on the
``Effect of Health Reform on Jobs and the Economy''
January 25, 2011

Mr. Chairman, this hearing is really just a press event for the
Republicans to twist the facts of the health care law and attempt to
further scare and polarize the American public. It won't work, but
we're still going to waste time with this political theater.
I am very sorry to see Doug Holtz-Eakin, the former Director of the
Congressional Budget Office, testifying before our committee today.
He's here to beat up on his former agency whose conclusions he no
longer likes. Railing against the very institution he formerly
directed, one that is so essential to our work, does a disservice to
the Budget Office, the whole Congress and the American people.
Republicans, like Mr. Holtz-Eakin, have taken to dismissing any
non-partisan assessments they don't like. These days, in the eyes of
Republicans, CBO is only right when they release reports that validate
Republican political rhetoric.
As for the other witnesses who are testifying, I am sorry you
believe the new health care law is bad for your businesses. However,
there are countless other small, medium and large businesses that like
the health care law and believe repealing it is an awful idea.
You don't have to take my word for it. The National Business Group
on Health, a collection of nearly 500 big employers, opposes repeal.
Helen Darling, the group's President and a former Republican Senate
Staffer, has said the following about the health care law: ``I don't
think we'll get a better solution in the U.S. in our lifetime. If it
gets repealed or gutted, we'll have to start over and we'll be worse
off.''
As for the impact on small businesses, PolitiFact looked into a
U.S. Chamber of Commerce campaign ad that said the health care law was
bad for small businesses and said the claims were ``perplexing because
small businesses can actually qualify for tax credits under the new
health care law.''
PolitiFact went on to say:

``A vast majority of U.S. firms are smaller than 50 employees
and are exempt from the health insurance requirements. The
chamber's ad is sweeping, and doesn't account for any of the
positive provisions that don't `crush' small business but
actually help them.''

It is my hope that we can move beyond Republicans' political
theatrics and focus on getting the economy back on track.

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Campaign to End Obesity Action Fund
The Campaign to End Obesity Action Fund is dedicated to reversing
one of America's costliest diseases. Today, two-thirds of U.S. adults
and nearly one in three children struggle with overweight or obesity.
Taxpayers, governments and businesses spend billions on obesity-related
conditions, including an estimated $168 billion in medical costs every
year. The trends for obesity--and the costs associated with it--are
ominous: as recently as 1990 not a single state had an obesity rate
greater than 15 percent; today 49 states have obesity rates greater
than 20 percent, with 9 of those topping 30 percent.
Ending the epidemic requires change--in individuals, institutions
and communities. The Campaign convenes leaders from industry, academia,
public health and associations to speak with one voice for federal
policies to reverse the obesity epidemic and promote healthy weight in
children and adults. From changes to nutrition policy, education
policy, health policy, to environment and transportation policy, the
Campaign promotes measures that support and facilitate obesity
prevention and treatment for all Americans.

Spending on Obesity and Chronic Diseases Linked to Obesity is
Unsustainable
From a purely economic standpoint, the cost of addressing the
obesity epidemic is staggering and will only become worse unless quick,
aggressive action is taken to address obesity. The fact is obesity is
one of America's costliest diseases: nearly one of every five dollars
spent on healthcare in the United States will be attributable to
obesity and obesity-related conditions within the next decade.
Without serious efforts to reverse this epidemic, American
taxpayers will incur ever-increasing costs as obesity is linked to a
number of chronic diseases, including diabetes, heart disease,
hypertension and others that require expensive treatments. Currently,
Medicare pays out approximately $45 billion for Medicare patients
suffering from diabetes and its complications. However, given the
dramatic projected growth in diabetes, Medicare's spending on diabetes-
related treatments
is projected to skyrocket to $75 billion by 2019 and $170 billion by
2034 (www.nmqf.org/presentations/10HuangEJCP3.pdf).
According to the Centers for Disease Control and Prevention, ``the
cost of cardiovascular diseases in the United States, including health
care expenditures and lost productivity . . . is estimated to be more
than $503 billion in 2010'' (http://www.cdc.gov/chronicdisease/
resources/publications/AAG/dhdsp.htm). Medicare spending in 2006
totaled $24 billion; Medicaid figures for that year were only slightly
lower, and the projections for Medicare and Medicaid spending on heart
disease are also expected to rise dramatically.
These two examples illustrate that trends in spending for chronic
conditions related to obesity are unsustainable. Taxpayers have a real
stake in addressing_and combating_these chronic diseases before they
occur.

The Obesity Epidemic Threatens our Economic Prosperity
Congress is rightly focused on the economy and jobs. One of the
most effective ways to increase the productivity of Americans and lower
costs to U.S. businesses--both of which would contribute to job
growth--would be to reverse the devastating economic impact obesity has
on the nation's economy. Simply put, healthy workers are more
productive workers and American workers are increasingly unhealthy. The
Centers for Disease Control estimates that medical expenses for obese
employees are 42 percent higher than for a person with a healthy
weight.
In 2005, the cost of the obesity epidemic was estimated to have
cost American private sector businesses an estimated $142 billion,
including $76 billion in medical costs and another $66 billion in lost
productivity. By way of comparison, in 1994, private sector medical
costs associated with obesity were only $13 billion.
Every year, American workers lose more and more time on the job due
to obesity and related conditions: Obesity is associated with 39
million lost work days, 239 million restricted activity days, 90
million bed days and 63 million physical visits. This dramatic level of
lost productivity is a serious drag on the economy and negatively
impacts America's ability to compete in a highly competitive global
marketplace. It is vital to America's economy that the obesity epidemic
is reserved; our Nation's future economic well-being is at stake.

The Obesity Epidemic Threatens our Children's Future and Military
Readiness
For the first time in our nation's history, the current generation
of children faces the likelihood of living shorter life spans than
their parents, due in significant part to the complications they face
from overweight and obesity.
The obesity epidemic has brought other tolls for our children who
suffer from a growing list of emotional disorders associated with
obesity, such as depression, social stigmatization and poor academic
performance. We must work to curtail this troubling trend. Among
minority and underserved populations, the data is even more dire: 23.4
percent of Hispanic children and 23.8 percent of black children have
obesity, compared with 12.9 percent of Caucasian children. (Child and
Adolescent Health Measurement Initiative. 2007 National Survey of
Children's Health, Data Resource Center for Child and Adolescent Health
website. Retrieved 12-14-09 from www.nschdata.org)
The nation's overweight and obesity epidemic even threatens our
military readiness--a 2010 report noted that nearly nine million
potential recruits are too heavy to serve; becoming overweight is one
of the leading causes of medical discharges of active duty personnel.
(http://www.missionreadiness.org)

Health Care Reform Marked a Beginning
The Campaign to End Obesity supported enactment of the Patient
Protection and Affordable Care Act, which made important strides in
bolstering the array of available obesity prevention and treatment
options for adults and children. Broadly speaking, the Affordable Care
Act created the first statutory imperative for measuring and tracking
``body mass index'' (BMI) as a way to prevent obesity. More
specifically, some of the most important anti-obesity provisions of the
Affordable Care Act are:

Section 2713--Coverage of Preventive Health Services.
Section 4004--Education and Outreach Campaign
Regarding Preventive Benefits.
Section 4103--Medicare Coverage of Annual Wellness
Visit Providing a Personalized Prevention Plan, including BMI
Screening.
Section 4106--Improving Access to Preventive
Services, including BMI Screening, for Eligible Adults in
Medicaid.
Section 4306--Funding for Childhood Obesity
Demonstration Project

More is Needed
Given the alarming trends in taxpayer-provided funding of obesity
related chronic diseases and in order to optimize the benefits of the
new policies of the Affordable Care Act, the Campaign urges Members of
the Committee to advance a number of additional policy changes,
including:
1. Recognize Obesity as a Disease
One of the most important steps that federal policymakers--
both in Congress and at the Centers for Medicare and Medicaid
Services (``CMS'')--can take is to recognize obesity as the
disease that it is. Doing so will facilitate needed prevention
and treatment options for children and adults with obesity or
at risk of having obesity. Not only is obesity a disease, but
it is in fact one of America's costliest medical condition.
Until our policies reflect this fact, clinicians will be
discouraged from diagnosing cases in children and adults that
must be recognized in the doctor/patient/family dialogue before
the disease prompts the onset of other, dangerous conditions.
In fact, today there is a perverse disincentive for doctors to
address obesity with their patients since there is no
reimbursement for such services/treatment. Thus, many doctors
wait until their patients become very sick--often with
devastating and costly diseases like diabetes, heart disease,
etc.--because there is no reimbursement for treating a major
contributing factor: the patients' obesity.
2. Expand Medicaid's EPSDT to Cover BMI Screening for Children
As noted above, the Campaign is pleased by the inclusion of
BMI screening in Medicare Annual Wellness visits and for
eligible adults under Medicaid. Coupled with Section 4004's
language, that should provide improvement in one vital area:
education about being overweight or obese. The fact is most
Americans do not know whether they or their children are at a
healthy weight, and thus many do little or nothing to fight the
disease they have or may soon have. The more information
parents and children have early on, the better their chances of
making improvements. That is why every opportunity to conduct a
simple BMI screening should be supported by federal programs.
As noted, minority children are most at risk when it comes to
being overweight or obese. Thus, the Campaign would encourage
Medicaid to also cover BMI screenings for children because the
tragic fact is obese children typically grow into obese adults.
This could be done by adding a BMI screening to the Early
Periodic Screening, Diagnosis and Treatment guidelines issued
by HHS.
3. Expand Coverage for Treatment Options
While the Affordable Care Act made solid progress in
authorizing new obesity education, prevention and treatment
options, the Campaign would urge coverage for a greater number
of treatment options. Obesity is a complex disease that is
caused by many different factors. Given that, there is no
``one-size-fits-all'' treatment solution for obesity. The
Campaign urges Congress to direct Medicare and Medicaid to
cover a broad range of accepted treatment options.
Specifically, upon a diagnosis of a BMI level of 30 (obese) or
a level of 25 (overweight), when accompanied by other chronic
conditions, coverage would be triggered for treatment benefits.
Treatment would include services in medical nutrition therapy
services, physical therapy or exercise training, behavioral
health counseling as determined by a National Coverage
Determination Process and CMS-deemed appropriate medical
interventions, including both pharmacological and surgical
options.
4. Improve CMS Communication to States Concerning Obesity
Prevention and Treatment Options
Currently, CMS issues guidelines to States to inform them of
the existing opportunities for covering child obesity
prevention and treatment services under the Early Periodic
Screening, Diagnosis, and Treatment (EPSDT) guidelines and
offering them model guidance to State providers. As noted
above, the Campaign believes adding a BMI screening for all
children under the EPSDT would be beneficial. CMS has, up to
now, insufficiently communicated to States that the screening
and treatment services proposed in the standard benefit package
can already be provided and reimbursed under EPSDT services.
There is wide variation between States as to the degree to
which they have offered specific guidance to providers on the
coverage and how to bill for these services. The most
successful States have issued provider guidance specifically on
pediatric obesity services.

The Campaign strongly recommends that CMS issue national guidance
clarifying that obesity prevention and treatment services are currently
covered for pediatric populations under Medicaid. CMS should also issue
model guidelines that State Medicaid programs can issue to providers.
Finally within two years of issuance of the CMS national guidance, CMS
should release a list of those States that have and have not issued
their own guidelines to practitioners. These critical actions can be
achieved by CMS without any legislative action by Congress.

5. Fully Fund Anti-Obesity Initiatives Included in the Affordable Care
Act

While Congress is under pressure to cut spending and reduce costs
in the coming months, there is no denying that the cost of America's
obesity epidemic is extremely high and some predict that it will become
much worse. Just a year ago, a comprehensive the UnitedHealth
Foundation, the American Public Health Association and the Partnership
for Prevention (``America's Healthy Rankings'') predicted that if
current trends continue, the nation will spend an estimated $344
billion in obesity-related health care costs by 2018. More needs to be
done in the area of obesity education, prevention and treatment if this
alarming figure is to be rolled back in any meaningful way. Thus, the
Campaign strongly urges Congress to fully fund the key obesity related
programs included in the Affordable Care Act.
The Campaign to End Obesity Action Fund stands ready to work with
the Committee and Congress to advance these and similar efforts that
are designed to help more Americans achieve and remain at a healthy
weight, but also to help reduce the enormous economic, social and
physical toll obesity currently takes on our nation and our
communities. We appreciate the opportunity to share our views and
welcome the opportunity to engage further on this important subject.

James T. Lette

It appears that the 500 billion taken from medicare to fund
Medicaid is wrong and to take away our paid for benefits is wrong.
Please exempt medicare from Obamacare and repeal it and start all
over

Thanks

JAMES T. LETTE

LumaCorp
February 2, 2011

Dear Congressman Johnson;

You have invited employers within your district to ``weigh in'' on
the new healthcare law and I am writing in response to your invitation.
The focus of the reform should be on the development of strategies to
allow for coverage to affordable for employers while at the same time
allowing for quality of care. We all agree the cost of the care is too
high and each year it continues to increase.
While employers struggle to stay competitive in their respective
markets, healthcare costs make up a very large portion of their overall
cost of doing business. Healthcare costs have a direct bearing on the
local, state and national economies. At the same time in our very own
district the quality of medical care can vary widely by provider.
Unfortunately, because our current system is designed to serve the
health care system rather than the end user (the consumer paying for
the service), the system is based on volume versus outcome. We have an
epidemic of lifestyle related chronic diseases being treated by
quantity, not quality.
My consultant often speaks of an example in her enrollment meetings
of how employees purchase their cars. Consumers have access to plenty
of data on the quality and reputation of autos they might purchase. No
one goes out to spend $20,000 to $40,000 without ``shopping around''
and having done their homework up front. Yet when it comes to our own
healthcare, how many of our employees ask how much a surgical procedure
or an office visit is going to cost before the procedure is performed?
This lack of information results in very little competition in the
medical profession based on cost or quality. This is no surprise when
the end consumer is typically so poorly informed.
One of the other issues that we have to face is recognizing that we
have been our own worst enemies as a result of creating ``first dollar
benefits''. Under the healthcare reform package, in order to be
``grandfathered'' an employer plan cannot have a significant change in
its current benefits or it will lose its ``grandfathered'' status. If
an employer currently has doctor office co-pay or an RX co-pay, and he
needs to remove that feature from the plan in order for the plan to
survive economically, he is unable to do so. The new law going forward
will not allow employers' plans to have higher than a $2,000 deductible
in the year beginning 2014! If we had all been better stewards of our
healthcare plans and had not bent to competition, we would have kept
our employees involved in their health care costs by having them share
in smaller medical expenses. This could have been done through employee
participation in ``up front'' deductibles. If properly incented,
employees would make it their business to know exactly what doctors
were charging for doctor office visits and what pharmacies charges for
prescription drugs. We would have a better educated consumer and they
would be more involved in the decision making process. As it stands now
we have to make decisions based on whether or not to stay
``grandfathered'' versus putting our employees in a position to be
better stewards of their benefit dollars. If an employer makes the
decision to remove the upfront doctor office co-pay, the largest
deductible that he can have moving forward beyond 2014 is $2,000. Who
will be able to afford a $2,000 deductible in the year 2014 when we
will have to pay for all of the preventative benefits slated to take
effect if we are not grandfathered at 100% with no co-pay?
The combination of increasing obesity and sedentary lifestyle cause
much of the chronic disease in our country, and it is reaching epidemic
proportions. It is one of the factors driving our costs, and of course
the employees understandable want to have everything covered at little
or no cost to them. When we combine that with the way we have our
system structured we have a perfect storm or escalating costs. Our
doctors and hospitals have to treat based on a defensive medicine
mentality. It is clear this results in unnecessary care and higher
costs. At the same time, it does not guarantee high quality, just more
procedures. It just shields the provider from fiscal responsibility and
increases demand and results in higher delivery of medical care and
continued cost escalation.
What we really need is the flexibility to design our own plans,
suited to our own needs, the needs of each and every group of
employees. It is not relevant what the government thinks is best for
us, but rather what we can afford as employers. Let the free market
system work. Allow us to provide services in the marketplace to our
employees such as patient advocates--services where by the employee can
glean critical information about the cost of a procedure beforehand and
actually have incentives to do so through plan design. Let us give the
empowerment back to the consumer. Put the competition back where it
belongs, and make medical providers compete for patients based on cost
and quality like any other efficient good or service. For a true
transformation to really happen, consumers have to have information
about the services being offered to them. They have to know how much
procedures cost and know the quality of the care being given to them.
There are programs available that deliver just that (knowledge up
front). Using them will create better health care consumers while
promoting cost reductions and improved quality.
Let us truly use the word transparency in our medical plans and
make information available for the employees to use. The only way to
get them involved is to allow for redesigning benefit plans to remove
doctor office co-pays without being penalized. Let us truly have what
was promised. Allow us to have OUR health care plans, not ones run by
the government. All of the health reform legislation you can throw at
us will not work at obtaining better outcomes in the long run if you do
not recognize the actual impediments to those better outcomes. We have
to shift our benefits to reward good outcomes, and to truly do that we
must give individuals the tools to better manage their health and their
care, and make them responsible for each.

Thank you,

Sherry Jordan
Regional Supervisor
sjordan@lumacorp.com

Main Street Alliance
Statement for the Record
J. Kelly Conklin & David Borris
On behalf of the Main Street Alliance

House Committee on Ways & Means
Hearing on Health Law's Impacts on Jobs, Employers, and the Economy
January 26, 2011

Statement for the Record, Committee on Ways & Means Hearing on Health
Law Impacts
J. Kelly Conklin and David Borris, Main Street Alliance Executive
Committee
January 26, 2011

Chairman CAMP. and Members of the Committee,

We appreciate this opportunity to provide written testimony on
behalf of the business owners in the Main Street Alliance network for
the January 26 hearing on the health care law's impact on jobs and the
economy.
The Main Street Alliance is a national network of small businesses
dedicated to ensuring that small business owners have the opportunity
to speak for themselves on issues that impact their businesses, their
employees, and their local economies. In 2009, we both had the
opportunity to testify before the Committee on Ways & Means on the
topic of health care, sharing our personal stories and speaking about
the urgency of reforming health care to make it work for small
businesses.
The January 26 hearing was called to explore the impact of the new
health care law on economic growth and job creation. From our
perspective, this impact is clear and positive: from the new small
business tax credits to new protections like rate review and a value
for premiums requirement, the health law is already throwing a lifeline
to small businesses and creating opportunities for businesses to offer
health coverage, save money on premiums, and plow those savings back
into business investment and job creation.
While some may raise concerns about the employer responsibility
requirement for businesses with more than 50 workers, the fact remains
that 95 percent of our nation's businesses have less than 50 workers
(and so would not be subject to this requirement), and 95 percent of
businesses with more than 50 workers already offer health coverage.
Indeed, this provision only reinforces what the vast majority of larger
employers already do, and ensures that responsible employers who offer
good-paying jobs with health benefits aren't undercut by competitors
who shun these responsibilities.
A much bigger issue--indeed, a true threat to small businesses and
our ability to create jobs--is runaway health insurance rates. For
example, in early 2010 (before the health care law was passed), one of
us received a letter from our insurer offering to renew our current
coverage at an increase of 124 percent. The escalation of health
insurance rate increases is simply not sustainable for small
businesses. Thankfully, the health care law includes a series of
provisions that will begin to rein in these increases and cut costs for
small businesses like ours. These provisions include:

Small Employer Health Premium Tax Credits
Business owners in our network from Portland, Maine to
Portland, Oregon are already benefiting from the new tax
credits effective for tax year 2010. Jim Houser, owner of
Hawthorne Auto Clinic in Portland, Oregon with 15 employees,
expects to receive a credit of over $10,000 on his health
insurance bill. That's serious savings for a small business.
Jim has described the tax credit as a ``time machine,'' turning
the clock back on his insurance rates.
Premium Rate Review
After years of enduring double-digit rate increases with no
recourse, small businesses like ours are encouraged that our
states have new tools and new resources to review insurance
rates and require insurers to provide justification for
unreasonable rate increases. This is one of the most direct
ways to protect small businesses and help us do our part to
create jobs and grow the economy. There is a high level of
market concentration in the health insurance industry and true
competition--competition based on consumer value rather than
competition based on cherry-picking risk pools--is largely
absent. That is why we need robust rate review--to ensure that
we're getting a fair shake.
Medical Loss Ratio Requirements
As small business people, we understand that the most
important thing about a business is the value you provide to
your customers. Yet the insurance industry has lost sight of
that. The new minimum medical loss ratio requirements will
restore a focus on providing us with value for our premium
dollars. And if insurers fail to meet this basic standard,
insurance customers like us will receive cash rebates starting
next year--potentially to the tune of hundreds of millions of
dollars.
State Insurance Exchanges
The state insurance exchanges due to come online in 2014 will
level the playing field for small businesses. By creating a
mechanism whereby we can band together and shop for coverage in
one large pool, the exchanges will give us bargaining power,
risk pooling, and greater choice.

The repeal of the health law or the undermining of its core
provisions would cause serious harm to small businesses (see attached
fact sheet). Certainly, there are improvements that can and must be
made to the law. For example, the 1099 reporting provisions and the
paperwork burden they would create demand immediate attention. We were
heartened that a majority of House members voted to fix this problem
last summer (HR 5982, 7/30/2010), and we are confident that the current
Congress will get this problem fixed with appropriate speed. We are
also confident these types of improvements can be made without
undermining the core cost containment provisions and other protections
contained in the Affordable Care Act.
The year 2010 saw a dramatic uptick in the percentage of small
businesses offering health coverage: among businesses with 3-199
employees, the offer rate increased by 9 percentage points; among those
with 3-9 employees, the offer rate increased 13 points, from 46 percent
to 59 percent. This is a promising trend, and we need to keep forging
ahead, not return to the flawed health care system of the past.
With proper implementation of the health care law, we can truly
level the playing field for small businesses like ours. The law
promises to benefit small businesses and the American economy by
stabilizing our health insurance costs and allowing us to focus on what
we do best: creating jobs and providing important goods and services to
communities across America.

Thank you,

J. Kelly Conklin David Borris
Owner, Foley-Waite Associates, Inc. Owner, Hel's Kitchen Catering
Bloomfield, NJ Northbrook, IL

Bad for the Bottom Line: How Rolling Back the Affordable Care Act Would
Harm Small Businesses
Small Businesses are Moving Forward on Health Care
The percentage of small businesses offering health coverage to
their employees rose significantly in 2010. For businesses with 3-199
employees, the health insurance offer rate increased 9 percentage
points. This increase was driven by an even greater spike among the
smallest businesses: the offer rate among businesses with 3-9 workers
rose 13 percentage points, from 46 percent to 59 percent.
Repeal of the Affordable Care Act Would Harm America's Small Businesses
Attempts to cast repeal of the Affordable Care Act (ACA) as ``good
for small businesses'' obscure what repeal would actually do. Here are
the facts:
Repeal would raise taxes for small businesses that qualify for the
new premium tax credits.
Starting for tax year 2010, small businesses may be eligible for
health premium tax credits valued at $38 billion over a ten year
period. As many as 4 million businesses may qualify for a credit, and
about 1.2 million businesses could qualify for the maximum credit of 35
percent of their insurance contributions (increasing to 50 percent in
2014).
Up to 16.6 million people are employees of small businesses that
will be eligible for the credit between 2010-2013.
Repeal would leave small businesses vulnerable to continuing price
gouging by insurers.
The ACA gives states new tools and resources to require insurers to
justify their rate increases.
Without robust rate review, insurers will continue to raise rates
at their whim. The most recent example: Blue Shield of California,
which recently announced combined rate hikes of up to 59 percent, and
then thumbed its nose at the state's insurance commissioner when he
attempted to delay the hikes.
Repeal would eliminate the guarantee of a basic standard of value
for premium dollars.
Under the ACA, if insurers fail to meet new minimum medical loss
ratios (MLR), they'll owe a rebate to customers.
Projections for the small group market give a mid range estimate of
$226 million in rebates, or about $312 per person receiving a rebate,
for 2011. Individual market estimates add another $521 million.
Repeal would gut consumer protections for small business owners,
employees, and their families.
The ACA puts in place important consumer protections: for example,
a ban on pre-existing condition exclusions, new limits on insurance
caps, and the ability to keep children covered up to age 26. These
protections directly benefit health insurance customers in the small
group and individual markets where small businesses get coverage.
Repeal would renege on the promise of choice, bargaining power, and
risk pooling in insurance exchanges.
Starting in 2014, small businesses with up to 50 employees (100 in
some states) and self-employed people will be able to band together to
shop for coverage in state insurance exchanges, gaining bargaining
power and leveling the playing field with insurers. An estimated 29
million people will get coverage through the exchanges by 2019 (5
million in small businesses that buy in as a group, and 24 million more
buying in on their own).
Repeal would be bad for our national bottom line.
The Congressional Budget Office estimated the repeal bill would add
$230 billion to the federal deficit over 10 years, and much more over
the following decade.
The final word on health care repeal: It's bad business for small
business.

Contact Information

J. Kelly Conklin
Foley-Waite Associates, Inc.
225 Belleville Avenue
Bloomfield, NJ 07003-3666
(973) 743-0700

David Borris
Hel's Kitchen Catering
3027 Commercial Avenue
Northbrook, IL 60062
(847) 205-5125

The Main Street Alliance
3518 S. Edmunds St.
Seattle, WA 98118
(603) 831-1835

The National Business Group on Health

Chairman Camp, Ranking Member Levin and Members of the Committee,
thank you for the opportunity to submit testimony for the record on the
large employers' perspective on the impact that the Patient Protection
and Affordable Care Act (Affordable Care Act) will have on the U.S.
economy and employers' ability to hire new workers and retain existing
employees.
The National Business Group on Health (Business Group) is a member
organization representing 314 mostly large employers--including 65 of
the Fortune 100--that provide coverage to more than 55 million U.S.
workers, retirees and their families. The Business Group is the
nation's only non-profit organization devoted exclusively to finding
innovative and forward-thinking solutions to large employers' most
important health care and related benefits issues.

Employers are Currently Implementing the Employer Provisions of the
Affordable Care Act
Employers are currently implementing provisions of the Affordable
Care Act that take effect now and planning for future provisions as
much as they can given the uncertainty. They have already implemented a
number of the early provisions required under the health care law,
including accounting for retiree drug subsidy (RDS) taxes; deciding
whether or not plans should maintain their grandfathered status;
eliminating lifetime limits; applying for the early retiree reinsurance
program; adding adult dependent coverage; implementing health account
changes for over-the-counter drugs; and providing break times and
accommodations for nursing mothers. The Federal Government has also
begun to implement a number of the health care payment and delivery
reforms. The health care law's big changes--the employer mandate, the
employee vouchers, the exchanges, tax credits, and the ``Cadillac''
tax--don't come on line for several years. Nevertheless, employers are
reviewing the comprehensiveness and affordability of their benefits,
but also assuring that benefits are not too rich so they do not trigger
the 40% excise tax on amounts above specified thresholds in 2018.
More immediately, employers are preparing for a number of upcoming
requirements, including reporting the aggregate value of health
benefits on all employees' W-2 forms, the automatic enrollment of new
full-time employees in health plans, and the new plan summary and
benefits requirements.

Employers Health Care Costs Continue to Increase
U.S. employers continue to face the challenge of the rising cost of
health care for their employees.

National average health care spending for a family of
four in 2010 was $18,074--up 7.8% from 2009.\1\
---------------------------------------------------------------------------
\1\ 2010 Milliman Medical Index. Available at: http://
publications.milliman.com/periodicals/mmi/pdfs/milliman-medical-index-
2010.pdf.
---------------------------------------------------------------------------
Overall employers' health care costs grew an
estimated 6.9% in 2010. Large employers, those with 500 or more
employees, experienced a sharper cost increase than smaller
employers, growing at 8.5%. Self-insured employers experienced
higher growth in costs because of increased utilization and
actual costs that exceeded predicted costs. Employers
attributed roughly 2% of this increase due the recent changes
mandated by the Accountable Care Act in 2010 and 2011.\2\
---------------------------------------------------------------------------
\2\ Mercer. Health benefit cost growth accelerates to 6.9% in 2010.
November 17, 2010.
Available at: http://www.mercer.com/
print.htm?indContentType=100&idContent=1400235&indBo
dyType=D&reference=.
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Employers expect high cost increases again in 2011.
With no changes to their plans and benefits, employers expected
costs to increase 10%. They plan to hold their actual cost
increases to 6.4% by making changes to plan design or changing
plan vendors.\3\
---------------------------------------------------------------------------
\3\ Ibid.

Employers Made a Variety of Changes in Plans and Benefits to Reduce
Costs in 2010
Employers continued to shift away from more traditional plan
offerings to consumer-directed health plans (CHDPs)--increasingly fully
replacing traditional plans with CDHPs. Employers also reduced retiree
medical plan offerings. More employers also provided financial
incentives to employees to take better care of their health. Most
common among these were incentives for taking health risk assessments
(offered by 69% of large employers), enrolling in disease management
programs (73%), and participating in lifestyle modification programs
(50%).\4\
---------------------------------------------------------------------------
\4\ Ibid.
---------------------------------------------------------------------------
Responding to the uncertainty of the impact of the Affordable Care
Act, employers stated a recent Towers Watson survey that if the health
care law increases plan costs:

88% would pass on the increase to employees;
74% would reduce health benefits and programs;
33% would absorb cost into their business;
20% would pass on the increase to consumers;
12% would eliminate or reduce wellness/health
promotion programs;
12% would reduce employment;
11% would reduce employer contributions to retirement
plans; and
7% would reduce salaries/direct compensations.\5\
---------------------------------------------------------------------------
\5\ Towers Watson, Health Care Reform: Looming fears mask
unprecedented employer opportunities to mitigate costs, risks and reset
total rewards, 2010.

Smaller employers are more likely than larger employers to reduce
employment positions or shift employees to part-time positions if the
Affordable Care Act increases their costs because they have fewer
options and less leeway among the options listed.
In our own National Business Group on Health survey of members, 53%
of respondents continued making planned changes to reduce health care
costs and provide effective, affordable coverage to their employees
despite the loss of grandfathered plan status.\6\
---------------------------------------------------------------------------
\6\ National Business Group on Health, Large Employers' 2011 Health
Plan Design Changes, August 2010.
---------------------------------------------------------------------------
In the Towers Watson survey, 88% of employers expected to continue
to offer health care coverage when the free rider assessment takes
effect in 2014 while only 3% are planning to pay the new penalty.\7\
43% (18% very likely, 25% somewhat likely) of plans believe they will
be subject to the ``Cadillac'' tax in 2018, which could force them to
make additional changes to their plans and further delay hiring of
additional employees.\8\
---------------------------------------------------------------------------
\7\ Towers Watson, Health Care Reform: Looming fears mask
unprecedented employer opportunities to mitigate costs, risks and reset
total rewards, 2010.
\8\ Ibid.
---------------------------------------------------------------------------
Clearer ``Rules of the Road'' for Employer Provisions in the Affordable
Care Act Will Reassure Employers Who Want to Resume Hiring
Uncertainty or the lack of clarification regarding ``the rules of
the road'' and the true total costs to implement the law has led many
employers to hold off on hiring new employees and to reduce the amount
of full-time positions. One of the key sources of confusion is the fact
that many of the provisions were designed for the individual and small
group health insurance market, but the law applies them to large
employer and self-funded health plans as well. For example, the law's
rescissions provision created confusion and conflicted with employer
requirements under COBRA. In some cases where COBRA requires
retroactive termination of plan participants who are no longer eligible
for employer coverage, employers were confused about whether or not
they could adhere to COBRA rules without running afoul of the
Affordable Care Act's new prohibition on rescissions of coverage.
Fortunately, the Department of Labor (DoL) later issued clarifications
that plans should follow COBRA rules and the DoL would not consider
plans' retroactive termination of coverage as rescissions. We are
encouraged and pleased that in recent months, the Administration and
the Departments have reached out to employer plans and sought to
address some of the unintended consequences and clarify rules. For
example, we have provided recommendations on the upcoming requirements
to auto-enroll new hires into health plans and to report the value of
health benefits on employees' W-2 forms.

Employers are Concerned the Affordable Care Act Does Not Address Their
Chief Concerns
Going into the health care reform debate and for many years
earlier, employers emphasized the need for us as a nation to radically
change the way we pay for and deliver care. Without fundamentally
changing these, expansion of access will be illusory as we cannot long
sustain the increases in overall costs for care that is often
ineffective and provided inefficiently. A survey by Towers Watson of
650 mid- to senior-level benefit professionals provides an early
snapshot of how employers think the Affordable Care Act will achieve
the goals that are most important to them.
Specifically:

Only 14% of respondents think health care reform will
help contain health care costs;
Only 25% think health care reform will encourage
healthier lifestyles; and
Only 20% believe health care reform will improve the
quality of care.\9\
---------------------------------------------------------------------------
\9\ Towers Watson, Health Care Reform: Looming fears mask
unprecedented employer opportunities to mitigate costs, risks and reset
total rewards, 2010.

The Federal Government Should Aggressively Adopt Fundamental Changes in
the Way We Pay for and Deliver Health Care
In addition to clarifying regulations going forward, employers
believe that it is vitally important for the long-term health of the
economy that the Federal Government aggressively adopt changes in the
way it pays for and delivers health care in Medicare, Medicaid, and
other government programs in ways that do not merely shift costs to the
private sector, but rather take costs out of the system. Reforms should
reward improvements in primary and preventive care, the effectiveness
and quality of care, efficiency of care delivery, and appropriate
utilization. Congress and the Department of Health and Human Services
(HHS) need to build off of the positive developments in the Affordable
Care Act to achieve these goals, including:

Creating effective Accountable Care Organizations
(ACOs) that significantly improve quality and efficiency and
employ payment reforms based on performance, not volume,
without creating undue market power;
Enabling providers, patients and plans to effectively
incorporate the findings of the Patient Centered Outcomes
Research Institute in their decisions to assure that care
reflects the latest medical evidence,
Determining an ``essential health benefits'' package
for the exchange, individual, and small group markets that not
only provides comprehensive coverage, but also promotes
evidence-based, effective care and the triple financial goals
of assuring people affordable coverage, protecting them from
catastrophic financial losses when faced with serious illness
and helping them to avoid unnecessary costs; and
Establishing efficient state health insurance
exchanges that adopt national standards and uniform processes
wherever state-by-state variation would add costs and
complexity without adding significant incremental value in
order to offer affordable health choices to employers and
employees.

Employer Recommendations as the Government Embarks on a Significant
Expansion of Access to Coverage in Medicaid and Subsidized
Exchange Plans
Aggressive cost management, consumerist strategies and attention to
health improvement have had the most successful impact on employers'
bottom line. Health care, unlike most other industries, is too often
driven by perverse financial incentives in which consumers and
physicians decide what health care might be needed or wanted and
totally separate party--the employer, insurer or government agency--
pays for that care after the fact. The health care reform debate has
distracted us from remembering that costs rise because Americans are
using more and more services at ever rising prices.
Unfortunately in the U.S., health care consumers believe that:

More health care is better than less care;
The more expensive, the better it must be;
There are no trade-offs in health care;
Consumers only pay 20% and don't care that other
payers have to pay 80%;
Nor do they understand that all benefits are foregone
wages or other benefits; and
Tax costs are ``hidden''.

There is also substantial evidence over many years that somewhere
around 20-30%, of care, conservatively, is either not clinically
appropriate, not effective, and may even be downright harmful for over
$1.2 trillion in identified waste, including behavioral (obesity/
overweight, smoking non-adherence, alcohol abuse), clinical (defensive
medicine, preventable hospital admissions, poorly managed diabetes,
medical errors, unnecessary emergency room visits, treatment
variations, hospital acquired infections, over-prescribed antibiotics)
and operational (claims processing, ineffective use of IT, staffing
turnover, paper prescriptions).\10\ As a nation, we have to have a
constant process of evidence generation, and feedback to care
management and benefit design to be sure that all patients are
protected from wasteful and some downright harmful practices. A
properly structured learning health care system will enable such
continuous assessment of actual effects on patients.
---------------------------------------------------------------------------
\10\ PricewaterhouseCoopers, 2010
---------------------------------------------------------------------------
The Federal Government and employers have to use all of the tools
and resources available to us to help consumers understand, ``It's all
about what's in it for them.'' To improve quality and control costs, we
must work to ensure that Medicare and the Affordable Care Act's
Medicaid expansion and exchange plans change the health care delivery
system by ensuring:

A culture of quality and patient safety throughout
health care system;
Payment systems that reward outcomes not just
utilization;
Payment systems that support primary care and care
coordination;
Transparency of health care costs and quality
information;
Comparative effectiveness research of health care
interventions (including information garnered from the new
Patient Centered Outcomes Research Institute);
Evidence-based medicine whenever possible, and
patients who make informed decisions with help of their
doctors;
A secure, nationwide electronic health information
network;
Portable, personal health records for all;
Systems that support evidence-based preventive care;
Capital spending only where truly needed;
Personal responsibility for health and engagement in
care decisions; and
Comprehensive reform of the health care legal system.

Conclusion
Thank you again for this opportunity to share the National Business
Group on Health's views for the record on the employers' perspective on
the impact the Affordable Care Act will have on the U.S. economy and
employers' ability to hire new workers and retain existing employees.
Employers look forward to continuing to working with Congress to
clarify the Affordable Care Act's provisions to reduce the
administrative burdens on American employers and aid them as they look
expand their businesses and potentially hire new employees. Our
economic future and prosperity depends upon Congress' focusing on real
health care payment and delivery reforms that take costs out of the
system for all people and all payers and significantly improvement the
quality and effectiveness of care.

National Partnership for Women & Families
Supportive Workplace Policies Are Critical for Nursing Mothers

Written Statement of
Debra L. Ness, President
National Partnership for Women & Families

and

Robin W. Stanton, Chair
United States Breastfeeding Committee

for ``Hearing on Health Care Law's Impact on Jobs, Employers, and the
Economy''

Committee on Ways and Means
U.S. House of Representatives
January 26, 2011

The Affordable Care Act (ACA) gives millions of nursing moms the
support and protection they need. The law is an important step in
making sure the nation's workplaces meet the needs of working women and
their families. The National Partnership for Women & Families and the
United States Breastfeeding Committee would like to clarify the scope
of this important new provision in the law and address some
misconceptions expressed during the Ways and Means Committee hearing.
Every year roughly four million women give birth in the United
States, and more than 75 percent of them choose to breastfeed. Study
after study has shown that breastfeeding has tremendous value in
protecting both mothers and children from a number of acute and chronic
diseases and conditions. And research shows that employer support--
which could include breastfeeding education, counseling, private
lactation rooms, and breast pumps--makes a tremendous difference in a
woman's ability to breastfeed. According to one study, such supports
helped as many as 98 percent of working mothers start breastfeeding,
and 58 percent continued for six months or longer. There is no question
that these policies work.
Unfortunately, a lack of supportive workplace policies and laws has
forced too many nursing mothers to quit breastfeeding (or never start).
Some new mothers have found their employers to be outright hostile,
while others simply face work environments that offer nowhere private
or sanitary to express breast milk.
Congress and the Obama administration have taken a key first step
to improve workplace laws for nursing mothers. For the first time,
federal law now explicitly protects nursing mothers in the workplace.
Section 4207 of the Patient Protection and Affordable Care Act gives
covered female employees the right to reasonable break times and a
private location, other than a bathroom, to express milk at work. This
means that employers must provide nursing mothers a reasonable amount
of break time and functional space to express milk. This provision
applies to employers of all sizes but, in certain limited instances,
those with fewer than 50 total employees may not have to comply with
the law if they face undue hardship in meeting these basic
requirements. The Department of Labor (DOL) is in the process of
developing guidance on this issue and has published a Request for
Information.
Although we cannot know the exact contours of the requirements set
by this provision of the law until that guidance is completed, we
believe that the overwhelming majority of employers will have
absolutely no difficulty complying. Indeed, the provision simply builds
on the laws that several states have already established--laws that are
familiar to employers. Fourteen states and the District of Columbia
already require private employers to provide nursing employees with
reasonable break time and/or a place other than a bathroom to express
milk at work. In addition, employers with FLSA-covered employees should
already have policies in place regarding break times.
Unfortunately, there is a substantial amount of misinformation
about the scope and application of the provision. For example, at the
Ways and Means Committee hearing, Representative Lynn Jenkins expressed
concern that an employer would have to provide a lactation room if it
had only three male employees at a worksite and no nursing mother. The
DOL has already clearly indicated that it does not intend to impose
this requirement on employers. In fact, in the Frequently Asked
Questions the DOL has provided to the public about the law, it
specifically addresses this issue:

Do employers have to provide a lactation space even if they
don't have any nursing mother employees?

ANSWER: No. The statute requires employers to provide a space
for a nursing employee ``each time such employee has need to
express the milk.'' If there is no employee with a need to
express breast milk, then the employer would not have an
obligation to provide a space.

The National Partnership for Women & Families and the United States
Breastfeeding Committee strongly support workplace policies that allow
women to continue breastfeeding, and we applaud Congress and the
President for adopting language in the ACA to promote breastfeeding.
Workplace breastfeeding support is a ``win-win-win'' for employers,
mothers and babies. Employers that support nursing mothers not only
help their employees transition back to work, but also reduce turnover,
absenteeism and health care costs, and increase employee satisfaction,
loyalty and productivity.
When new mothers' needs are met, they are better able to meet the
dual demands of work and motherhood. Those who choose to breastfeed
need break time and a private space to express milk when they return to
work. For the thousands of working mothers who have had to rush to
their cars during a lunch break, hide in a bathroom stall or closet, or
negotiate for break time with an unsympathetic employer, the new
protections are life-changing and long overdue. We hope that
Representative Jenkins and all members of the Ways and Means Committee
will stand up for new mothers who choose to breastfeed and voice their
support for this new provision and all protections like it that make it
easier for mothers to be both good caregivers and family breadwinners.

Contact Information

Debra L. Ness
National Partnership for Women & Families
1875 Connecticut Avenue, NW Suite 650
Washington, DC 20009
Phone: 202.986.2600
Email: rlyons@nationalpartnership.org

Robin Stanton
United States Breastfeeding Committee (USBC)
2025 M Street, NW, Suite 800
Washington, DC 20036-3309
Phone: (202) 367-1132
Email: mrenner@usbreastfeeding.org

National Private Duty Association
Statement of the National Private Duty Association
in connection with Hearing on

Health Care Law's Impact on Jobs, Employers and the Economy
January 26, 2011

Committee on Ways & Means
U.S. House of Representatives
Washington, DC

Submitted By

Sheila McMackin
President
National Private Duty Association
941 East 86th Street, Suite 270
Indianapolis, IN 46240
317 663 3637
sheila@homecarechicago.com

The National Private Duty Association, a trade association
representing over 1,200 companies with 250,000+ employees throughout
the United States, thanks the U.S. House Ways & Means Committee for
holding a hearing on the impact of the Patient Protection and
Affordable Care Act (PPACA) on jobs, employers and the economy. The
PPACA will impose a substantial new cost burden on employers in low-
margin, labor-intensive industries such as private duty home care. It
will likely force NPDA member companies to shift to part-time
employees, raise our clients' costs, and/or, in some cases, cease
operation altogether.
This in turn will give many clients--primarily elderly and/or
people with disabilities--no alternative but to give up their struggles
to remain independent in their own homes for as long as possible.
Instead, they will have to move into institutionalized and far more
expensive care.
Private duty home care may be medical or non-medical care. When
providing non-medical care, caregivers keep their clients company, take
them to doctors' appointments, run errands such as grocery shopping or
pick-up of prescriptions, assist with light housekeeping, prepare and
serve meals, help with personal tasks such as dressing or bathing, and
generally make sure that a senior individual can age in place, at home,
in dignity and comfort. This is crucial to the emotional and often
physical well-being of our older citizens. It is also considerably more
cost-effective than the alternative--institutionalized care often paid
for through Medicaid or some other government program.
NPDA members are companies who employ these caregivers. NPDA
members pay wages, usually above but always at least at the federal
minimum wage level. Our member companies absorb the cost of
employment--they withhold and pay income taxes, pay workers
compensation, and pay FICA taxes for their workers. Often there are
benefits such as vacation and/or sick time. While many home care
agencies provide ``mini-med'' plans for their employees, the PPACA's
benefits package mandates and discrimination rules will invalidate many
of these existing employer-provided health insurance plans.
Our member companies work hard to establish and maintain important
industry standards. NPDA identifies and disseminates information on
``best practices'' within the home care industry. It develops core
training and education programs for caregivers, resulting in caregivers
who are professional, caring and knowledgeable about the specialized
needs of those who are aging or disabled. NPDA also educates the public
about the benefits to seniors who seek in home companion care about
receiving that care through caregivers who are trained as well as
compassionate, and whose work lives are protected by employment laws.
Whether these in-home services are paid for by the seniors
themselves or by their families, the service recipients are the
beneficiaries of a company that can and will provide substitute quality
care when a primary caregiver gets sick or takes vacation. This is very
important because, as you know, a senior citizen's need for help with
the tasks of daily living do not stop when the person who is assisting
the senior needs to take time off.
Private duty home care is a labor-intensive, low-margin industry.
The expense of a companion caregiver is almost always borne in its
entirety by the service recipient and/or his or her family. While there
is no such thing as a ``typical'' rate charged to service recipients--
it varies geographically as well as by whether any live-in or sleep-
over time is required, an illustrative charge for a senior seeking
regular but not full-time assistance is $20/hour, for a three or four
hour minimum service block, plus the cost of traveling to the service
recipient's home. Accordingly, even a minimum service contract can and
often does run into $1000 or more every month. And for many of our
clients, the costs are even higher because the senior citizen in need
of care requires more than the minimum time block, or needs it on a
daily or more frequent basis. Many of our member companies provide
their clients with competent, caring, professional caregivers who are
on premises 24 hours each day. This is a huge expense for the senior.
Most simply cannot afford a significant increase in the cost. The
result will be having to give up hours of help and relying on family
members, friends and neighbors--or worse, sitting alone without the
assistance they need. The alternative--which is anathema to many aging
Americans--is being forced into institutionalized care.
Of course, institutional care may take less from an individual
senior's limited pocketbook, but its cost to society and the U.S.
government is significantly higher. Even without taking into account
the crucially important emotional health and dignity that comes from
finding a way to let a senior citizen age in place in his or her own
home, the cost to society to forcing institutionalization as the only
alternative is very high. Medicaid and other government programs absorb
the bulk of these costs. At these times of State and federal budgets
stretched to and beyond their outer limits, this is a result that is
not good for anyone.
The PPACA, while laudable in its goal--we all support the notion of
affordable health care coverage for all Americans--it will have a
seriously adverse impact on jobs in the private duty sector, and on the
very people--the caregivers themselves--whom it is crafted to help. The
additional cost to either providing health insurance or paying fines
for failure to do so will cripple the industry. It will result in jobs
downsizing to part-time status, and/or jobs lost due to clients no
longer able to afford the services NPDA companies offer.
NPDA does not have empirical data on this, but we do have anecdotal
evidence of the deleterious impact of the PPACA. Our companies--from
Michigan, California, Illinois and other states--tell us uniformly that
they will be forced to raise prices, reduce their employees' hours to
part-time status, and in some cases they project having to go out of
business altogether.
NPDA companies are usually not ``small'' as defined by most ``small
business'' measures. Therefore the small business tax credit and other
small business special rules in the PPACA do not mitigate the situation
for them. Most of our companies have revenue in the millions, with
employee rosters of 100 or more. Typically their profits are less than
$50,000 in any given year. Our member companies are projecting--with
inadequate cost data currently available--that the cost of compliance
with the PPACA will be 10 percent or greater. This of course translates
into the potential for an increase of 10 percent or more in what they
charge their clients. As clients find they cannot afford these
additional costs, they will cease doing business with NPDA member
companies, thus accelerating the job loss that will come as a result of
lost business, and threatening the existence of these low-margin high
labor cost businesses.
There are very specific and difficult problems arising from the
PPACA, as well as the more general concerns described above. Under the
employer responsibility rules of the health reform law, by 2014
employers will have to choose between offering a mandated package of
health insurance benefits or paying a fine. Employers cannot calculate
either the cost of the fines--they are based on whether a worker
qualifies for a federal subsidy, or ``affordability.'' Both the subsidy
and ``affordability'' are calculated by measuring an as yet known cost
of insurance (and employer contribution to that cost) against an
individual's household income. The employer has no way of knowing an
individual's household income--which includes spouse's and children's
income. This is something no employer can know with respect to any
individual employee. And thus no employer can ever know, in advance,
whether it will be liable for fines or whether its contribution to the
cost of employer-provided health care will be enough for the insurance
to be ``affordable'' as defined under the PPACA.
Likewise, at this stage the cost of the mandated package of health
insurance benefits is not only unknown, it is also at this point
unknowable. Insurers are adjusting prices to reflect the cost of new
mandatory benefits and compliance responsibilities. The actual package
of benefits is still under development by relevant federal agencies.
Therefore the actual benefits package--and its consequent cost--cannot
be calculated. As a result, no employer can make plans to meet the cost
of insurance, or is potential liability for assessments for not
offering health insurance at all, or for not offering it on what the
government decides is an ``affordable'' basis.
Given the historical cost of health insurance, it is likely many
employers will simply choose to pay fines. An employer can calculate
its maximum potential exposure to fines, but not its actual exposure,
since it will have no way of knowing whether one of its employees will
qualify for a federal subsidy--the trigger for fine liability. One
resulting option open to an employer that has little to no profit
margin to spare will be to reduce its workforce to minimize the
potential for liability for fines.
Of course, reducing a work force means reducing the ability to
provide services, and that means losing business. This will drive a
private duty company out of business even faster than the significantly
large new cost of health insurance or fines. Accordingly, many
companies will instead shift to hiring employees who will not trigger
assessments. This can be done by restricting an employees work hours to
no more than 29 hours per week (30 hours per week is the hours worked
measure that triggers fine liability). Although ``part time
equivalence'' will assure that companies with part-time workers are
subject to the employer responsibility rules, fines are assessed only
on full-time workers (assuming at least one is eligible for a federal
subsidy for purchasing individual health insurance through an
exchange). This acts as a powerful incentive to companies facing a huge
new cost that its slim profit margins simply cannot absorb to hire
employees to work fewer than 30 hours per week. This will drive up a
company's administrative costs, and it will diminish the jobs available
in the industry. But the cost of using full-time employees will, in
many instances, simply be prohibitive. This loss of full-time jobs with
benefits will hurt caregivers as well as the service recipients we
serve.
Another no doubt unintended consequence of the PPACA's employer
responsibility rules is the fact that they will encourage a shift away
from home care provided by trained, professional caregivers who are
employees of a private duty company to a system of referrals of
individuals who are working on their own--without benefit of training,
supervision or back-up. These ``independent contractors'' frequently
have no idea about how to pay their taxes and they have no protection
from workers compensation, unemployment insurance or paid sick or
vacation time. The seniors and their families who hire them also have
no idea of their responsibilities as employers of these caregivers. The
result is an anticompetitive underground business that ultimately hurts
the U.S. economy as well as the workers and the service recipients they
serve. This could not possibly be a result that is tolerable to those
who crafted the PPACA.
In summary, early indications from NPDA members (and other
employers in other industries) suggest that many employers are
exploring whether to drop or decline to offer health insurance when the
employer responsibility rules take effect in 2014. This is because of
the interaction of two primary factors: (1) individual workers will
have access (often subsidized by the government) to health insurance
through the new law's exchanges, thus relieving employers of their
sense of responsibility for providing coverage to their workers; and
(2) the cost of assessments for not providing coverage may be
significantly lower than the cost of providing health insurance, and
will certainly be more predictable. Predictability of expense is a
serious issue for private sector companies. An equally serious problem
unique to industries like private-pay non-medical in-home companion
care is the fact that the employer responsibility rules may prove to be
an incentive to companies to use a workforce comprised of independent
contractors rather than employees. This will be adverse to the
interests of both workers and the companies that hire them--and
potentially also to the seniors and people with disabilities who are
served by private-pay non-medical in-home companion care companies.
NPDA seeks Congressional help in crafting a solution to the serious
economic and policy-based problems posed by the current employer
responsibility rules. We want to work together with lawmakers to
develop alternative approaches that will result in expanded coverage,
without driving up the cost of in-home companion care to a level that
is unaffordable for our clients, and that threatens our continued
ability to stay in business. An alternative approach is crucial to
prevent severe limitation on jobs growth and possibly even the
continued viability of the private duty industry
In short, the PPACA's employer responsibility rules are likely to
cause significant job loss in the private duty industry. This in turn
will force many service recipients into more costly (and less
emotionally healthy) institutional care. It will cause a shift to use
of part-time employers. It will encourage a caregiver to look at self-
employment, without knowledge of the legal responsibilities such a
choice brings both to the caregiver and to the person who hires that
caregiver. It could drive some private duty companies out of business.
NPDA encourages Congress to revisit the PPACA's employer
responsibility rules. Repeal of those rules, or modification of them to
accommodate low-margin, labor-intensive industries such as ours is
imperative to avoid yet more jobs loss (or jobs diminishment) along
with loss of an important option for aging in place, in dignity and
comfort.
NPDA extends our thanks to the Ways & Means Committee for its
willingness to explore this difficult issue. We are happy to provide
any expertise the committee may seek as it works through this problem.