[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE ROLL OUT OF HEALTHCARE.GOV: THE LIMITATIONS OF BIG GOVERNMENT
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HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 4, 2013
__________
Serial No. 113-83
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia PETER WELCH, Vermont
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan Vacancy
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
C O N T E N T S
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Page
Hearing held on December 4, 2013................................. 1
WITNESSES
Ms. Veronique De Rugy, Senior Research Fellow, Mercatus Center,
George Mason University
Oral Statement............................................... 6
Written Statement............................................ 9
Dr. Clifford Winston, Searle Freedom Trust Senior Fellow,
Economic Studies Program, The Brookings Institution
Oral Statement............................................... 14
Written Statement............................................ 16
Mr. Mark A. Calabria, Director of Financial Regulation Studies,
Cato Institute
Oral Statement............................................... 23
Written Statement............................................ 25
Dr. Karen Kruse Thomas, Historian and Communications Associate,
Johns Hopkins Bloomberg School of Public Health, External
Affairs
Oral Statement............................................... 37
Written Statement............................................ 39
APPENDIX
The Hon. Elijah E. Cummings, a Member of Congress from the State
of Maryland, Opening Statement................................. 94
Chairman Issa submitted and article from Wikipedia on Alexander
Fleming........................................................ 96
Rep Connolly submitted for the record an article from the
Washington Monthly called, ``The Best Care Anywhere''.......... 102
Chairman Issa submitted for the record letters sent to 15 Health
Insurance Companies............................................ 117
Chairman Issa sent a letter to Mr. Mark Bertolini, Chairman,
President, and CEO, Aetna, Inc................................. 118
Chairman Issa submitted for the record a NewYorker Article ``GOP
Healthcare.gov Too Fast Now''.................................. 122
Rep. Cartwright submitted for the record article titled ``What
About Social Security's Rollout?''............................. 125
Questions submitted from Rep. Collins to Dr. Calabria, Dr. De
Rugy, Dr. Thomas, and Dr. Winston.............................. 130
THE ROLL OUT OF HEALTHCARE.GOV: THE LIMITATIONS OF BIG GOVERNMENT
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Wednesday, December 4, 2013,
House of Representatives,
Committee on Oversight and Government Reform,
Washington, D.C.
The committee met, pursuant to call, at 9:35 a.m., in Room
2154, Rayburn House Office Building, Hon. Darrell E. Issa
[chairman of the committee] presiding.
Present: Representatives Issa, Mica, Turner, Duncan,
Walberg, Lankford, Amash, Gosar, DesJarlais, Gowdy, Farenthold,
Collins, Meadows, Bentivolio, DeSantis, Cummings, Maloney,
Norton, Tierney, Connolly, Speier, Cartwright, Davis, Cardenas,
Lujan Grisham, and Kelly.
Staff Present: Molly Boyl, Majority Deputy General Counsel
and Parliamentarian; Lawrence J. Brady, Majority Staff
Director; Caitlin Carroll, Majority Deputy Press Secretary;
John Cuaderes, Majority Deputy Staff Director; Brian Daner,
Majority Counsel; Adam P. Fromm, Majority Director of Member
Services and Committee Operations; Linda Good, Majority Chief
Clerk; Tyler Grimm, Senior Professional Staff Member; Frederick
Hill, Majority Deputy Staff Director for Communications and
Strategy; Christopher Hixon, Majority Chief Counsel for
Oversight; Mark D. Marin, Majority Deputy Staff Director for
Oversight; Laura L. Rush, Majority Deputy Chief Clerk; Sarah
Vance, Majority Assistant Clerk; Jedd Bellman, Minority
Counsel; Krista Boyd, Minority Deputy Director of Legislation/
Counsel; Aryele Bradford, Minority Press Secretary; Jennifer
Hoffman, Minority Communications Director; Julia Krieger,
Minority New Media Press Secretary; Juan McCullum, Minority
Clerk; Jason Powell, Minority Senior Counsel; Brian Quinn,
Minority Counsel; Dave Rapallo, Minority Staff Director; Daniel
Roberts, Minority Staff Assistant/Legislative Correspondent;
and Mark Stephenson, Minority Director of Legislation.
Chairman Issa. The committee will come to order.
The Oversight Committee exists to secure two fundamental
principles: first, Americans have a right to know that the
money Washington takes from them is well spent and, second,
Americans deserve an efficient, effective Government that works
for them. Our duty on the Oversight and Government Reform is to
protect these rights. Our solemn responsibility is to hold
Government accountable to taxpayers, because taxpayers have a
right to know what they get from their Government. It is our
job to work tirelessly in partnership with citizen watchdogs to
deliver the facts to the American people and bring genuine
reform to the Federal bureaucracy. It is our mission statement
and it is our calling.
Today, when we discuss, once again Healthcare.gov rollout,
which has undeniably been, and inarguably, a disaster. It is
not a disaster of the making of one man or any one person. In
fact, in many ways it is a sign of a failed system that is
often seen in the Federal Government and very often seen by
this committee.
Nearly two months after the Federal website launched, even
as the Administration declares its vast improvements,
components of the back end are still unfinished. Customers are
told that at least in some cases, many cases, their
applications may not have been correctly forwarded to the
insurance carrier, meaning they have signed up; they are not
going to get the benefit. They may go to the hospital and not
be covered. Or, if they are covered, it will only be after
weeks, months, or years of paperwork. Additionally, it is now
learned that the ability to properly pay insurance companies is
in doubt and, as a result, estimates are likely to occur.
Estimates not how you do business.
The project's failure raises serious questions on what
hindrances Government faces when it intervenes in the private
market. President Obama wisely said that startups, business
startups, often have these sort of problems; that these are the
nature of private sector startups. The difference here is the
private sector wasn't just starting up; the private sector was
fully up. Rather than leveraging the private sector,
Healthcare.gov essentially built a whole new layer, a whole new
decision process on top of it.
Before October 1st, the President told Americans that
purchasing insurance on Healthcare.gov would be as simple as
shopping for airfare at Kayak or Expedia. I have shopped at
Kayak and Expedia. The only difficult thing at those sites is
choosing from many choices, well defined, and making your
decision. In fact, nothing has been more different than Kayak
or Expedia at the site. Just yesterday I logged in to the D.C.
exchange, where members of Congress must go, and got an error.
We do not have either the front end or the back end, not just
in the Federal system, but in systems that feed into it, in
fact ready.
Can anyone honestly imagine what would happen if you went
to buy an airplane ticket on Kayak or Expedia and the site
constantly crashed, losing your information, or in fact if they
told you leave your personal email and we will email you back
in eight or ten hours in order to tell you that it is now a
better time to try to log on and find prices?
Healthcare.gov is a monopoly. Healthcare.gov is a mandated
tax-end location. For members of Congress, they will either go
to Healthcare.gov or they will be without insurance and be
fined.
Yet, today no one has been held accountable for spending
hundreds of millions of taxpayer dollars on a website that
simply didn't serve the President or the American people on his
signature legislation.
As someone who spent many years in the private sector, I
know that if I had ever staked my business on a product that
performed like this, it is unlikely I would have gotten a
second chance. In fact, if a company launched like this, they
would have to go back down, regroup, remarket, and relaunch.
But that is not the case. Most of the laws stay in place; most
of the enforcement stay in place; and, as many of the other
committees are looking into, many of the exceptions are not
ones which are codified in law or within the purview of the
Administration to decide to forgive or delay.
More importantly, the failure of this website, some $640
million invested, will undoubtedly cause a loss of revenue many
times that. The actual exposure to the vendors and the
individuals may be limited, but to the American taxpayer it
will be billions of dollars of lost revenue because of this
failure.
I did not vote for the Affordable Care Act. I do not
believe that it will drive down the cost and up the
availability and affordable to the American people. However,
getting the system under the law to work as well as possible
and then having a discussion about how to improve healthcare
for the American people is our responsibility.
Today we are joined by Dr. Clifford Winston of The
Brookings Institute, who wrote in 2006 that government failures
appear to be explained by a shortsightedness, inflexibility,
conflicting policies of government agencies.
I might note that 2006 was before President Obama was
president. As Senator Obama, this was not about his government,
this was about the government of his predecessor. Healthcare
was broken before President Obama came.
By its very design, the Federal Government may never be
efficient or effective or innovative enough to carry out big
initiatives like Obamacare, nor should it be. Government should
not be picking winners and losers precisely because it has
proven to be so bad at it.
More importantly, America is a free market Country, and the
free market has worked for the American people time and time
again. Americans know that when you close off and create an
artificial monopoly, it costs more. It always costs more not to
have competition. But, in fact, that is what is happening in
healthcare today. Half of healthcare costs to the Federal
Government reflects the entire cost of defense. Defense is not
something we can outsource to the private sector. Healthcare is
something that has always been within the private sector, and
should be. We can hire the best and brightest, as
administrators have boasted, and still end up with a product
that arrives delayed and not working properly.
There are things that are inherently governmental, and this
committee will always be absolutely determined to defend the
responsibility of Government to do what is governmental,
procurement certainly being one of them. Protecting our
homeland, securing property rights are just a few of the
others. But something as complicated, as complex, as
multifaceted as a web portal supposed to rival sites like
Amazon.com for healthcare is something the Federal Government
clearly was not prepared to take on and do properly.
Government inefficiencies are not limited to massive
interventions in the healthcare industry. However, as this
committee, which has voted on a unanimous and bipartisan basis
the reform of IT procurement, has discovered, we need to make
major changes in how we do procurement. We also need to do what
is inherently governmental and leverage the private sector to
the greatest extent possible. The hearing today will go a ways
toward understanding what Government can do, what it cannot do,
what in fact should be expected by our Government and what
should be expected to be innovated in the private sector.
The limitations on big government will never include
preventing waste in a massive scale; it will always happen. And
this committee will do everything it can to reduce it, to
organize it. But I believe that, in fact, we have before us an
example of something that may be too big to swallow even for
the U.S. Federal Government.
With that, I recognize the ranking member for his opening
statement.
Mr. Cummings. Thank you very much, Mr. Chairman, and I
welcome our witnesses here today and I look forward to an
informative and spirited discussion.
I must say that, Dr. Thomas, I had an opportunity to read
your testimony and I think it is appropriate that I start out
by just quoting a little bit of it, because this is reading
that every single American and every member of Congress needs
to read. It is some of the best testimony I have read since I
have been in Congress, 17 years.
It says: In 1900, a newborn American citizen had a life
expectancy of 47 years. A heartbreaking 10 percent of all
infants died before their first birthday, and infant mortality
was far higher among the rural and urban poor, whether on
southern farms or in northern tenements. By contrast, an
American born in 2000 could expect to live 75 years and infant
deaths have been cut by 93 percent. You go on to say in all
these areas of medical and public health progress, the Federal
Government has played a fundamental role as both sponsor and
coordinator of a remarkably concerted effort involving
communities, States, organizations, and institutions across
American society. The Federal Government therefore deserves a
great deal of credit for doubling, doubling life expectancy for
Americans, as well as for tackling a long and ever-changing
list of problems regarded as the worst enemies in the Nation's
health, from tuberculosis and polio to cancer and AIDS.
According to the chairman's invitation letters today, the
committee will examine the institutional limitations on the
efficacy of Government action, and our case study will be the
rollout of the Healthcare.gov website. The fundamental
presumption underlying this hearing is that the Federal
Government is somehow incapable of successfully administering
large-scale programs. In fact, the Republican staff briefing
memo challenges ``Government's ability to effectively design,
implement, and administer large-scale projects and programs.''
The problem with this presumption is that it does not take
into account many extremely successful Government programs that
have helped millions of Americans throughout our history. In
1935, President Roosevelt signed into law the Social Security
Act, the centerpiece of our social security safety network.
When it first launched, critics panned its confusing procedures
and less than half of the labor force participated. Over time,
however, it has reached 90 percent of American workers and has
been expanded to cover the self-employed, to include dependent
and survivor benefits, and to provide for cost-of-living
adjustments.
Thirty years later, in 1965, President Johnson signed
Medicare into law. Like the Social Security rollout, there were
challenges initially and the American Medical Association
called it ``the beginning of socialized medicine.'' The Federal
Government had to negotiate with hospitals, nursing homes, and
insurance companies, and had to coordinate with all 50 States.
Eventually, 93 percent of eligible seniors enrolled in Medicare
and the program has been expanded and improved several times
since then.
Forty years after that, in 2005, President Bush signed into
law the Prescription Drug Program, on Part D of the Medicare
law. Like Social Security and Medicare before this, this drug
program also experienced challenges in its rollout. Newspaper
headlines were dire, stating: ``Confusion Reigns Over Drug
Plans,'' ``Not Ready for Prime Time,'' ``Prescription Drug Plan
Part D Gets an Early F.''
In all of these cases early setbacks were resolved, critics
were proved incorrect, and these programs are now immensely
popular with the American people. But, more importantly, they
prevented our Nation's seniors from dying penniless and
homeless. They provide a basic level of security to the
American people where the private sector failed to do so. But
it also provides something else: it is called dignity.
The same is true of the Affordable Care Act. The private
insurance market discriminated for decades against people with
preexisting conditions. Insurance companies threw people off
existing plans when they discovered evidence of previous
illnesses the patients themselves did not even know about. But
now, thanks to the ACA, millions of Americans who could not get
health insurance in the private market now have access to it.
In terms of today's hearing, I think everyone understands
what is going on. The Republicans want to use the initial
challenges with the Healthcare.gov website to make a broader
argument that the Federal Government cannot administer large-
scale programs effectively and that we are all better off
leaving it to the private sector. But we have tried that, and
it simply does not work.
I believe the premise for today's hearing is fundamentally
flawed. Our Country's experience with Social Security in 1935,
Medicare in 1965, and the Prescription Drug Program in 2005
demonstrates our Government is fully capable of overcoming the
initial problems with the implementation of programs that help
millions of people in their daily lives. I remind all Americans
that we are a can-do Nation. We are a can-do Nation and we are
better than that.
This premise becomes even more absurd when you look at our
Nation's broader history. In the 1940s we mobilized our entire
Country, our people, our industry, and our workers to defeat
the Nazis and the Japanese in World War II. In the 1960s we
tapped the best and brightest minds in government and the
private sector to build a space program that put a man on the
moon for the first time in human history. Our Government does
not always work as well as it should, but it is certainly
capable of great things when there is a strong commitment to
the underlying goals we all share.
In the case of the Affordable Care Act, we know that one
component of the rollout, the Healthcare.gov website, did not
work as it should have. But we also know from testimony before
this committee that another component, the complicated
interagency data hub that most experts worried about, worked
much more smoothly, and that is a testament to the strong work
of the agencies and contractors involved.
As I close, as we go forward, I hope that we can work
together to solve any problems that arise in order to improve
the program so that it works effectively and efficiently. It is
not about who we fight against. It is not even about who we
fight with. It is about what we fight for. What we fight for,
and this moment is greater than this moment; it is about
generations yet unborn. In that way we can honor the commitment
we made in the Affordable Care Act to help people who could not
get health insurance to attain it now.
Mr. Chairman, I look forward to today's hearing and I thank
you for calling it.
Chairman Issa. Thank you.
All members may have seven days to submit opening
statements and other extraneous material for the record.
We now welcome our distinguished panel of witnesses.
Dr. De Rugy, I always get your first name. It is a lovely
name. This is not the first time I have had trouble with it.
Dr. De Rugy is Senior Research Fellow at the Mercatus Center at
George Mason.
Obviously, Dr. Winston. Welcome. Dr. Clifford Winston is a
Trust Senior Fellow at The Brookings Institute.
Dr. Mark Calabria is Director of Financial Regulation
Studies at the Cato Institute.
And Dr. Karen Thomas is a Historian and Communications
Associate at Johns Hopkins Bloomberg School of Public Health.
Welcome.
Pursuant to the rules, would you all please rise and take
the oath, and please raise your right hands?
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
[Witnesses respond in the affirmative.]
Please be seated. Let the record reflect all witnesses
answered in the affirmative.
In order to allow time, without objection, your entire
opening statements will be placed in the record, and I ask you
to observe the lights in front of you and limit your time to
five minutes.
Dr. De Rugy.
WITNESS STATEMENTS
STATEMENT OF VERONIQUE DE RUGY
Ms. De Rugy. Chairman Issa, Member Cummings, members of the
committee, it is an honor to appear before you today.
While the Nation is focused on the day-to-day problems
related to the ACA's rollout, these are only the most recent
and visible signs of the fundamental flaws that plague
Government intervention in general. My testimony will focus on
why Government intervention is often doomed to fail and it will
illustrate this point with the example of a specific loan
guarantee program.
The idea that Government fails shouldn't be a surprise to
anyone who has read the academic work of public choice
economists such as Nobel Laureate James Buchanan, George
Stigler, or Vernon Smith. Their work has explained why, despite
good intention and nearly unlimited resources, top-down
solutions not only fail to address the problem they are trying
to address, but also sometimes and often makes the problem
worse.
There are many reasons for this, but I would like today to
highlight two of them. The first one is that even with the best
of intention, the incentive of elected officials and
bureaucrats to prudently manage taxpayers' money are very weak.
They are not rewarded when they maximize consumer value, nor
are they necessarily punished when they take unnecessary risks
or fail to minimize costs. In fact, no one in Government, so
far as we know, has been fired over the problems with the ACA
website. Meanwhile, private companies that misstep are quickly
replaced by better competitors.
A key reason for these poor incentives is that Government
actors all operate within limited knowledge. While individuals
acting in markets are able to use price signals to guide their
decisions, Government decision-makers have no such guides.
Hence, they have no way of accounting for their value or cost
their decision might create for others.
The second reason why Government often fails is that
interest groups are able to exploit this environment to obtain
their own goal, often at the expense of the public welfare. And
for this you don't have to go to look further than the sugar
lobby and the tariffs and subsidies they are getting and the
increased price of sugar that they impose on all customers.
The bottom line is that in Government intentions do not
equal results. More importantly, this is true no mater who is
in power, and it is true across many Government programs, not
just healthcare.
The Department of Energy's 1705 loan program is a good
example of the gap between what a program's proponents claim it
will achieve and what it actually does. This policy was put in
place under the claim that renewable energy companies do not
have access to sufficient credit to support new projects. These
alleged imperfections of the credit markets, we are told, are
particularly important for small and innovative companies.
However, when you look at the data, what you find is that
nearly 90 percent of the 1705 loans go to projects that are
backed by large and well-connected companies such as NRG Energy
or Goldman Sachs. So in that sense it is very hard to argue
that the loans are going to small innovative companies that
wouldn't have access to credit if indeed their project was
viable.
This program is also a good example of Government favoring
two distinct interest groups: first, the bank, because the
lenders now don't have to face the risk of lending money to a
company that may default; and, second, the companies that are
now benefitting from very good rates and good borrowing
conditions, especially if compared to their competitors.
The taxpayers, on the other hand, bear the risk and
shoulder the burden when companies like Solyndra or Abound
Solar default on their loans and when they go under. The other
losers in this case, of course, are the companies in that same
field who now do not have access to credit, even though they
have viable projects, because all the money tends to go to
companies that are backed by Government guaranteed
independently of the merits of the project.
In addition, like most Government interventions, these
programs and, of course, exponentially larger program
interventions such as the health care law, create serious and
systemic distortion in the market. However, the tragedy is,
despite evidence, lawmakers often don't get rid of inefficient
programs, and that is because they are more likely to respond
to the pressure of vested interest groups than they are to
actually try to protect taxpayers, who very often don't even
realize the cost of these programs, whether it is directly or
indirectly.
Now, there is good news. We have over six decades of
research on Government decision-making to help guide policy
decisions going forward. In many cases a sensible solution is
simply to leave some activities outside of the Government
purview. This is not a loss, but a gain for Government. Not
only will it prevent the type of Government failures that we
have been talking about, but it will also allow the Government
to focus on its core function: the provision of public good and
the protection of property rights.
Thank you.
[Prepared statement of Ms. De Rugy follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Issa. Thank you.
Dr. Winston.
STATEMENT OF CLIFFORD WINSTON
Mr. Winston. Thank you very much. I am very happy to be
here.
Chairman Cummings posed a very challenging question. He
raised the issue about successful Government interventions and
Government projects. And it is challenging because the issue is
how do we determine success. What is the benchmark that we use
for success? And if Government does not achieve that benchmark,
how should we proceed? So my testimony is really trying to
shape that framework and give us some information about what we
know about success, the evidence, and alternative ways to
proceed.
I am an economist, so I am going to follow the way
economists do things: first outlining the theory of why
Government intervenes in economic life, what it is trying to do
and what it should be doing, and what the empirical evidence is
on its interventions; and then given the motivation of this
session by the ACA, I will try to draw some basic implications.
All right, the theory. Government intervenes in economic
life for two reasons: one, to correct a market failure:
monopoly, externalities like collusion. That is what we mean by
market failure. The other is to pursue a social goal. The
market is efficient, all right? There is nothing wrong with the
market in terms of its allocation, but the public doesn't like
the allocation that exists, okay? So we want to do things like
reduce poverty. All right? The third issue is macro. We are not
talking about macro economics here, thankfully.
Market failure involving large projects, where do things go
wrong? One, they are simply not supplied. They are not
privately profitable, even though they are publically, socially
desirable; or there are free riders, so there is an under-
supply of that kind of project. Government's role, then, steps
in and tries to provide the project, but has to do it
efficiently. And when I mean efficiently, I am talking about it
prices it right, makes cost-benefit assessments and
investments, produces the project at minimum cost, and provides
technological advance.
What are social goals? Well, the social goals we are
talking about here are what we call merit goods. These are
goods and services American society believes that everyone
should have, regardless of whether they can afford them. Social
insurance is obviously what we are talking about in this case,
coverage for healthcare. These usually involve some sort of
redistribution. You are going to be taking some resources from
some people, giving them to another. This is something, though,
that is a democratic decision. That is fine, but it should be
done at minimum cost. So there is still an assessment there.
Market failures, you are looking to try to maximize efficiency.
Social goals, you try to minimize costs.
So what is the evidence that we have on how well Government
has done on this? I go through this in detail in my written
testimony. What I can say here, in the areas that I have done a
lot of work in, in transportation, anywhere from highways,
airports, air traffic control, inland waterways, urban transit,
passenger rail. Probably as I even say these things you are
beginning to think of the symptoms: congestion, delays, budget
deficits. So these actually are symptoms, and they are symptoms
of the economic inefficiencies: mispricing, poor investment,
production cost overruns. These are all familiar, but these
things total up the hundreds of billions of dollars of cost.
And, of course, there are other things that we can see as
inefficient.
So the question is how can we improve Government in these
areas. Social policies are not really my area of expertise, but
I think it is pretty much well known that Social Security,
Medicare, and so on, regardless of whether they have certainly
established, and they have, are they achieving their goals at
minimum cost? And obviously that is a high standard, but I
think that is really what we are looking at, how can we do
these things more efficiently.
All right, so faced with evidence of Government failure
trying to correct market failures and pursue social goals, what
is the explanation for this? And it has actually already been
given by the chairman: certainly agency limitations; technical
expertise and a culture where you don't provide the kind of
retro assessments to sort of correct where you are going;
regulatory constraints. What I found interesting about the ACA
matter was actually a provider offered to do the website at no
cost, but was told that he couldn't do it because of regulatory
constraints. Political forces, obviously, stakeholders, and it
is a big part of what public choice is.
So there are well known reasons for failure. What now do we
say, pulling this all together for ACA? I think the lessons are
there were predictable concerns in rolling out the website,
technical issues, lack of ongoing assessment, inflexibility,
and various constraints. I think, obviously, the full story
hasn't been told yet and we will see other explanations, but I
am sure that they will have a familiar ring to it.
The question, though, is the key point of what I am trying
to get at. Too much of the discussion has been attacking ACA
and, indirectly, the social goal of universal coverage. To me,
that is off the table. That has been decided by the democratic
process. The President has been elected and re-elected on that
position. All right? That is how that has to be decided. The
analytical issue and the policy issue, though, is achieving
that goal at minimum cost. That is what we ought to be talking
about; how can we do this more efficiently? We already see ways
that some States are doing it in a better way than others. We
should certainly be open to that. But I would also say, too,
that we can certainly be open to the private sector having
greater involvement.
[Prepared statement of Mr. Winston follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Issa. Thank you, Dr. Winston.
Dr. Calabria.
STATEMENT OF MARK A. CALABRIA
Mr. Calabria. Chairman Issa, Ranking Member Cummings, and
distinguished members of the committee, I thank you for the
invitation to appear at today's hearing. Let me first commend
the chairman for calling today's hearing. All too often in
Washington I think we can sometimes get lost in the details of
policy and forget some of the basic principles, so I do think
that today's hearing offers us that opportunity.
Academics and practitioners have long recognized that
governmental action faces a number of institutional
limitations. I want to be very clear that these limitations
don't change with the party in control, they don't change with
the personalities and competencies of political appointees.
Certainly, I think anybody could look at, for instance, the
response to Hurricane Katrina or the initial rollout of the
Iraq war and say that these things did not go smoothly. This is
not an issue of party. And, of course, these considerations
should always be taken into account, and I think we always
should keep in mind that while Government is capable of great
good, it is also capable of great harm.
I would also say that, unfortunately, it seems to be often
the attitude in Washington is we must do something and leaving
that option to the private sector should always be something
that should be considered.
I also want to be very clear at the beginning of my
comments that nothing I say is meant to imply that markets are
perfect. Quite frankly, I don't know of any human institution
that is not flawed to some degree, so it is always a choice of
flawed institutions. I will note, however, that, to me, the
first limitation that Government lacks is the powerful feedback
mechanisms we find in the marketplace. Private businesses can
rely on a small number of signals, such as sales volume,
prices, to determine their success. By contrast, Government
programs can spend millions, even billions without any clear
signal of success or failure. For instance, few of us would
debate whether the iPod or the iPhone has been a success. I
think we could all agree on that. But economists continue to
debate whether the New Deal actually ended the Great Depression
or not, and economists debate whether the 2009 stimulus created
jobs or not.
In some degree, these are inherent in the nature of these
programs. Certainly, Government programs, social issues have
far greater number of causes and, therefore, do make it harder
to access. That said, given that all action, public or private,
is made in an environment of uncertainty, I do think that the
market allows for a greater level of experimentation that
reduces that uncertainty in a more timely basis.
Veronique touched upon even if we did know the right
solution ahead of time, which, in my opinion, is a big if,
there is a whole bunch of different incentives that Government
actors face that might mean they might not even pursue the
right incentive. For instance, as mentioned, compensation of
Government employees is rarely tied to performance. One doesn't
get paid more for success, nor does one get punished for
failure. Equally important is the fact that few Government
employees suffer in the face of failure. You can look at the
area that I look in, financial regulation. I think it is beyond
question that various bank regulators failed to do their jobs
during the financial crisis. I would go as far as to say there
was probably no bigger regulatory failure than at the New York
Federal Reserve Bank. But its president at that time, Tim
Geithner, rather than being punished, was given a promotion for
his performance.
Again, I would be the first to say that the private sector
has more than its share of problems, but it is hard to think of
any firm or industry that has the Federal Government's track
record of rewarding failure.
I need not remind members of the political considerations
that often come in mind. Veronique touched upon those. You
certainly are very aware of those; you deal with those every
day, so I will just skip past those. I will say one of the
problems often that we see in Government is conflicting
objectives. In general, private businesses have a clear-set
measurable objectives; in contrast, Government programs often
result in attempts to make numerous parties happy, with the
outcome that no party ends up being happy. And while numerous
objectives might seem like an benefit, I think it leaves
Government programs without a clearer mandate and makes those
programs less accountable to both Congress and to the public.
I would say that one of the contrasts between, as the
ranking member mentioned, something like Social Security and
the current healthcare is Social Security has a fairly clear
objective: to raise elderly people out of poverty. You can
measure that; you can determine it; you can see whether it is
working or not. When you have programs that have multiple
objectives, it is far harder to figure out whether those
objectives are being met or not.
Let me spend my last few seconds talking about some of my
examples from banking regulation, which is my area of
expertise, not healthcare. But I do think we need to worry
about any time an insurance program where you provide a
Government guarantee, are you minimizing the incentive of
parties to make responsible choices? We call this moral hazard
in the economics literature. But certainly bailing out banks
encourages them to make bad decisions; you keep the same banks
around. For instance, I am sad to say that I don't think is the
last time we bail out Citibank. We will probably bail them out
a few more times because we continue to keep them around.
So, again, it is important to keep in mind that failure has
to be an important component of the learning process. And just
like in the private sector, you need to let firms that don't
actually do a very good job go away, you need to let programs
that don't do a very good job in the government sector go away
so that you can focus on those programs that actually do a good
job.
Thank you.
[Prepared statement of Mr. Calabria follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Issa. Thank you.
Dr. Thomas.
STATEMENT OF KAREN KRUSE THOMAS
Ms. Thomas. Chairman Issa, thank you for the opportunity to
testify today regarding the past accomplishments and future
potential of Federal intervention in healthcare.
Chairman Issa, during your opening remarks you said that
healthcare has always been in the private sector and should be.
I would respectfully disagree. Healthcare is one of the most
heavily subsidized by government areas of the economy, and if
we want to look at a time when healthcare was still largely in
the private sector, we would need to go back to pre-1935, and
it is a disturbing picture.
Critics of Federal intervention in healthcare, including my
fellow panelists, see intervention as interference, and they
see the healthcare industry as a group of private actors,
health professionals, hospitals, insurance companies, drug
manufacturers, and these private actors, would according to
them, if left to their own unregulated devices, do a far better
job of providing the American people with broad access to
quality healthcare. Let the market do its work, they say.
But these criticisms rely on sharp distinctions between the
public and private sector, and they misapply the same basic
economic principles to all types of markets, whether the
product is houses, handbags, or heart surgery. And I can only
notice that each of my panelists are economists, and no one has
really talked about how the healthcare market operates
specifically, so I will try to do that.
Of all the industries that make up the American economy,
healthcare most defies the classic model of the private market.
Physicians are the quintessential small business owners, and
they have traditionally fiercely defended fee-for-service
practice as the best system for guarding their patients'
health.
Yet, without publicly funded medical education, research,
service delivery systems, and other Government-sponsored
aspects of medical care, the medical profession would still be
the small and struggling band of individualists who began the
twentieth century with little scientific understanding of how
disease spread, much less how to cure it.
I think one of the best examples of the dollar-for-dollar
value of Government investments in medical research were the
wartime trials of antimalarial drugs and penicillin. Penicillin
was brought to you by the Federal Government, essentially. And
I should be very specific to say that the Federal Government
has not interfered with the private market so much as it has
coordinated many public and private actors.
So in the development of synthetic antimalarial drugs that
were very important for protecting the lives of U.S. military
personnel, the malaria research program proved to be the
largest biomedical undertaking to date, at that time, and it
also became the model for post-war scientific medical research
that both private and Government research agencies adopted
after the war. And that model marshaled the resources of
academia, Government, and private industry together to produce
things like cortisone and a variety of other drugs that we now
take for granted and many of us use on a regular basis.
So from 1942 to 1946, the Office for the Survey of
Antimalarial Drugs conducted tests on birds and yielded precise
pharmacological and toxicological data on 14,000 drugs, roughly
10 a day for four years. And the private sector, at that time,
simply was not capable of coordinating such a massive effort,
and the survey decisively identified a drug called chloroquine
as the drug of choice against malaria.
So with my remaining time, the NIH I think is certainly one
of the most successful examples of Federal sponsorship of
medicine, but Medicare and Medicaid now function as much to
preserve the financial status of middle class Americans as to
enable the poor to purchase healthcare. So, really, those
programs have operated to support the private market in
healthcare as much as to undermine it. And I will conclude with
that.
[Prepared statement of Ms. Thomas follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Issa. Thank you. I couldn't disagree with you
more, Doctor. First of all, I wasn't talking about NIH; it is a
small part of the budget compared to the trillion dollars plus
that Medicare and Medicaid consume. The ranking member, in his
opening statement, talked about the buy-in rate of Social
Security and Medicare. With all due respect, the buy-in rate is
mandated by law, and the people who are not in it are in fact
State employees and city employees who have the good fortune to
be out of the system, in most cases to their benefit.
I am from California, which is the largest area of an
alternative to the Social Security system, one in which the
returns are three to four times greater than what Social
Security does, which means for the same amount of dollars in
California State employees, city, county, that participate
receive far better benefits. But we are not here to talk about
Social Security or the NIH.
What we are here, I believe, is to figure out some
questions that Dr. Winston--and, Dr. Winston, Brookings is not
a right-wing conservative bastion, is it? Not a trick question.
Mr. Winston. No.
Chairman Issa. Okay.
Mr. Winston. It is not anything, to the best of my
knowledge.
Chairman Issa. Right. Usually when we look for people on
the left, we often look to Brookings; when we look for people
on the right, Mercatus, Cato, and so on often come in. We try
to have a balance here.
You said some very important things and I am going to use
my time specifically on areas that are more liberal for a
moment. You mentioned monopolies, free rider, market
distortions. Those are all good points and I think you made
some points. And the Affordable Care Act, although I didn't
vote for it, does recognize that the market is dysfunctional.
But, Dr. De Rugy, CMS underpays the prevailing rate, the
cost of healthcare, don't they? So isn't Medicare and Medicaid,
administered by CMS, already distorting the market by taking
private sector doctors and hospitals and underpaying, compared
to what the private sector has been paying, and cost-shifting
then to private sector by statute?
Ms. De Rugy. This is a very good question. I am not a
healthcare expert, but one of the things that we know about
government intervention is that it often distorts pretty widely
the market it operates in. And as Dr. Thomas rightly mentioned,
the healthcare market has been highly subsidized and Government
has intervened quite widely. So yes, of course, we can expect
that providers would be expected to provide a service at a
lower rate than they would otherwise, which creates problems,
and also force people to pay at a higher price than they could
otherwise.
Chairman Issa. Dr. Calabria, similar question. The fact is
that Federal intervention, over a trillion dollars worth of
money taken involuntarily by American workers that are spent on
Medicare, Medicaid, do eligible, the poor, retirees, so on, it
is over a trillion dollars. Is there any case to be made, not
that the money hasn't done good, because people do have
healthcare, but is there any case to be made that it has driven
down the cost of delivery to the American people broadly?
Mr. Calabria. I think this is something we fundamentally
see across a variety of areas, whether it is housing, whether
it is education, whether it is healthcare. If you take
something, and again I am going to apologize for making members
think about their Econ 101 classes, but if you think about
something where the supply is relatively fixed, if you give
people more money to spend on that, you will largely run up
prices. You have to make sure that you are actually doing
something that increases supply in the process, and for the
most part healthcare, like education, like housing, is
relatively inelastic; that is, supply does not increase a lot
in the interim. So we do need to make sure that it isn't simply
captured by providers, but it actually flows through to the
ultimate beneficiaries.
Chairman Issa. One of the areas that I want to bring out
today that is going on today, and it is a little off topic, but
I think it is appropriate, CMS is reimbursing hospitals at a
rate higher than clinics or doctors' offices. And, Dr. Thomas,
you talked about this rugged individual doctor. I haven't met
them, so they must have been before my time, because doctors,
in fact, have joined hospitals, and even when they have clinic
practices they are being bought out by hospitals because CMS
has made a decision that the same procedure they will pay two
to three times more if it is done in a hospital, even if not
clinically necessary, than if it is done in a clinic or
doctor's office.
Is there any question in your mind not that Affordable Care
Act should be scrapped or not scrapped, any of that, is there
any question in your mind that we need serious reform in how we
deliver medicine so that the patient gets the best value?
Ms. Thomas. Yes, and I agree that we do need reform, but
leaving the market to act supposedly independently is not the
way to achieve that.
Chairman Issa. Right. And no one here is suggesting--and I
will close with this, Mr. Ranking Member--no one is suggesting
for a moment that we take Government out of healthcare. I was
with former member Jim Marshall, a dear friend of mine, today
and we were talking about the fact that we have taken the
consumer out of the process. And nothing in the Affordable Care
Act puts the consumer back into it. If anything, health savings
accounts and other areas in which the consumer was making
decisions about best value have been taken away.
So as much as we can rail for or against the Affordable
Care Act, today is one of many hearings that I believe this
committee will have on both how do we get good product for the
Federal Government, like a website, if it is determined to be
there, but also how do we deal with the fact that since
Medicare enactment what we have done is we have inordinately
driven up the cost of healthcare with cost-shifting from the
Government whenever possible to the private sector. It is not
sustainable as the Government becomes a bigger and bigger
buyer.
And I think, Mr. Ranking Member, with the Affordable Care
Act we are going to see that, which is we are telling insurance
companies what is the cost, and we can't tell them to work for
less, so when they give us the cost it is higher. And I think
it is the first time, unlike Medicare, where we just find what
we will pay, it is the first time that we are dealing with the
market force and finding out that we haven't driven down cost,
and that is something that your constituents and my
constituents demand that we figure out how to do.
With that, Mr. Ranking Member, Elijah, I recognize you.
Mr. Cummings. Thank you very much, Mr. Chairman. Mr.
Chairman, I too want a good product for the Federal Government,
and I do believe in effectiveness and efficiency. I also want
to make sure that every single American has healthcare and that
we save lives. So I want to thank our witnesses for being here
today.
Dr. Thomas, the basic idea seems to be, in this hearing,
that the Government is bad and the private sector is good; the
Government should not intervene, it should not try to help
people, it should not distort market forces. I certainly
understand the logic behind free market principles, but I think
we need to recognize that private corporations are not going to
necessarily look out for the poorest, the sickest, and the
least fortunate among us. We have seen people thrown off of
their insurance policies over and over again. We see the
preexisting condition situation, where women had minor ailments
in the past and the next thing you know she doesn't have
insurance because she didn't even know there was a preexisting
condition.
So, Dr. Thomas, I want to ask you, as a historian, to take
us back and describe for us what it was like for our Nation's
seniors 100 years ago, before Social Security, before Medicare,
before they had the social safety net that they have today.
What was it like for poor, elderly Americans heading into their
final years when they were unable to work or to rely on a
family or friends?
Ms. Thomas. Well, before Social Security and before
Medicare and Medicaid, older Americans were the single most
impoverished demographic group in American society and one of
the problems with healthcare markets is that it is not
profitable to provide many types of healthcare that are most
needed. So care for long-term chronic disability, such as that
caused by tuberculosis or cancer or many other diseases that
afflict us in old age, is very expensive to provide, so that
has traditionally been provided, in many cases, by either
nonprofit charitable organizations or by Government hospitals.
In those days, many poor people would end up in poor houses,
and there were no separate health facilities to even care for
them.
Mr. Cummings. Is it safe to say that some of them died?
Ms. Thomas. Absolutely. Yes.
Mr. Cummings. So where did they go for healthcare services
if they had no insurance?
Ms. Thomas. Well, if they were lucky enough to belong to a
fraternal order, they might go to their fellow members for
help, but the resources there were so small and especially in
the rural south and in poorer parts of the Country, even in the
poorer areas of northern cities, the resources were simply not
available, either individually or collectively, to pay for
adequate medical care, and certainly not for preventive care.
And I think one thing we haven't really talked about is the
cost of not preventing disease is much greater than the cost of
preventing it.
Mr. Cummings. Ron Paul stated, during the debate in 2012,
that when he started medicine, he said, ``There was no Medicare
or Medicaid and nobody was out in the streets.'' I don't know
how old he is, but do you agree with that assessment?
Ms. Thomas. I do not. In fact, there has been a very
lively--in the 1930s and 1940s people were riding the rails;
many people were in fact homeless during the Depression. I
don't know how old he is, but certainly there were people on
the streets at that time as well.
Mr. Cummings. There is a New York Times article this
morning that talks about 39 percent of the bank tellers in New
York are getting some type of public assistance, and, of
course, that probably means a lot of them don't have insurance;
they need some assistance. What about that type of population?
And this is in New York, now.
Ms. Thomas. Right. Well, they can go to city, State, and
federally-funded health clinics; they can end up in the
emergency rooms of their local hospitals, who are required by
law to care for them; and in some cases they may get inadequate
care or get care too late, which can end up being even more
costly in the long-run, or they may die.
Mr. Cummings. And that doesn't necessarily include the
follow-up.
Ms. Thomas. Correct.
Mr. Cummings. Right. They might get care right there, but
then the question is what follow-up is there, is that right?
Ms. Thomas. That is right. And if the services are not
coordinated, and that is a function that government agencies
often have, if the services are not coordinated, then it may be
very difficult for individuals to navigate through the system
and get care.
Mr. Cummings. Just a last question. Dr. Thomas, The
Washington Post cited a report issued in 1959 by the United
States Department of Health and Education Welfare, finding that
the elderly faced disproportionate risk of illnesses, yet had
less ability to afford medical care, mostly because of fixed
incomes. It also cited a report issued in 1963 by Social
Security Administration which concluded ``Many aged persons
never recover from economic effects of a single hospital
episode. Unfortunately, the heaviest burden is likely to fall
on those with the least resources, and even for the insured
there is no present guaranty against dependency in old age
caused by catastrophic medical expenses.''
Do you agree with that?
Ms. Thomas. I do, and a major problem with the healthcare
market is the people who are most likely to be able to
participate in the private healthcare market are the least
likely to need extensive and very expensive care. So if we do
not broker a system where everyone is participating and
everyone is covered, then there will be large populations that
are not covered and that create major needs for care.
Mr. Cummings. Thank you, Mr. Chairman.
Chairman Issa. Thank you.
I now ask unanimous consent that the pages from Wikipedia
on Alexander Fleming be placed in the record. Without
objection.
Chairman Issa. Dr. Thomas, do you know who Dr. Fleming was?
Ms. Thomas. Of course I do.
Chairman Issa. So March 7th, 1929 is the date of the
invention and naming of penicillin?
Ms. Thomas. Yes.
Chairman Issa. In Scotland?
Ms. Thomas. Yes.
Chairman Issa. Okay. I just wanted to make sure it was
World War I that caused it to be invented. It was World War II
that it was widely used in and had very little to do with the
U.S. Federal Government except that we were a recipient of
Scottish invention.
Mr. Connolly. Mr. Chairman? Would you yield for a unanimous
consent request?
Chairman Issa. Of course.
Mr. Connolly. I thank the chair.
While we are putting things in the record, I would ask
unanimous consent that an article from The Washington Monthly
called The Best Care Anywhere, by Phillip Longman, be entered
into the record.
Chairman Issa. Without objection, so ordered.
Mr. Connolly. I thank the chair.
Chairman Issa. Dr. Thomas, I put this in, but I went beyond
it. Is there something you wanted to say? I didn't want to cut
you off.
Ms. Thomas. Just that we may have had penicillin before
World War II, but we did not know in what dosage to use it or
how to effectively treat disease with it until we conducted
clinical trials during World War II that were coordinated by
the Federal Government. That is what I meant.
Chairman Issa. By the Department of War, yes.
We now go to the distinguished gentleman from Florida, Mr.
Mica.
Mr. Mica. Thank you, Mr. Distinguished Chairman. Good to be
with you this morning. Thanks for highlighting some of the
issues that we face with the size and scope and reach of
Government.
Probably some fundamental questions. Ever since the
founding of the Republic, to get away from king's distant rule,
taxation without representation, and then the size and scope of
government and their interference in the colonies' affairs,
shifting to the creation of our current government, founding
fathers were always skeptical of government, and again probably
for good reason. The longer I stay here, the longer I am
convinced that government could screw up a two car funeral and,
if given the opportunity, often does.
Big government programs--I saw some of your comments, Dr.
Winston--sometimes are adopted because a need, a social need or
public need, is not met or the public's private sector cannot
meet that need. In looking at this whole mess, wouldn't it have
been possible to--for example, I think there is pretty wide
consensus we need to do something about preexisting conditions,
about people who were in a lower economic scale, maybe not
poverty scale, but couldn't afford healthcare, but these were
some of the deficits that brought about the government and
people stepping in, saying that government had to take a bigger
role. But, honestly, the question I would pose is wouldn't it
have been possible to take and tweak some existing things to
establish a rules that these plans, and then let the public
sector put the plans out there, rather than creating the
exchange, the bureaucracy?
I remember they came to me when I was chairman of
transportation. We oversee public programs. They came and said
we just came to tell you we need a building in Washington that
will house 5,000 people. That is the administrative people
required under the--I am not talking about enforcement people,
just the--I was kind of stunned when they said, well, the bill
mandates this, we just can do it, all we have to do is tell
you. And then they came back later and I think they needed a
building for 7,000. But couldn't it have been done by changing
some of the requirements and then letting competition and the
private sector, existing mechanism rather than big government
take it over?
Dr. Winston, then others.
Mr. Winston. I am not an expert in healthcare, but, to be
honest, I asked the same question. My thinking about this is we
already have an existing insurance program in the Government;
it is quite a large one.
Mr. Mica. Right. We have Medicare and we have Medicaid.
Medicaid, in particular, might be a vehicle. But we could have
also mandated that insurance plans cover some of these or----
Mr. Winston. Or allowed them into the Government's plan.
Mr. Mica. Exactly.
Mr. Winston. That was my sense.
Mr. Mica. Exactly.
Mr. Winston. I think what we are grappling with is, again,
what really would be the ``lowest cost solution.''
Mr. Mica. Exactly.
Mr. Winston. To the extent we want to achieve this goal,
how can we do it at least cost.
Now, my understanding from the experts I know is there is
no magic bullet. No one has ever told me, look, we all know
exactly what would be the least cost solution. I think that is
one of the intellectual challenges in dealing with this. But,
that said, it would have been nice to at least see a set of
alternatives, including the one that you are talking about, one
that intuitively, to me, made sense, and sort of get these
head-to-head and see how we should go forward.
Now, maybe that was out there, but through political
compromises that didn't work. But I think at least it would be
good to separate out the economics and the politics.
Mr. Mica. We have something else.
You wanted to comment?
Ms. De Rugy. Government intervention always creates
distortion, so no matter what it would have done, so the
question is how do you get the Government to do exactly that
social goal at the least cost without introducing too much
distortion. And it is worth noting that one of the goals of the
ACA was to provide universal coverage, which, by the way,
getting insurance is very different from getting improved
health outcome. And when you look at the actual results,
actually not everyone is going to get insurance.
So right there, when you try to measure success and
failures, you see that there is a problem in the way the whole
thing was designed. And, yes, targeting it better could have
achieved it. It would have introduced distortions, because it
always does, but it would have been probably better and maybe
even have achieved the stated goal of the ACA.
Chairman Issa. You can go ahead and answer briefly.
Mr. Calabria. Again, what I will start out with, we know
that the resources have costs, therefore we know that the
market is not going to provide anything at zero cost. Or the
fact that somebody cannot afford something when they have zero
income is not a market failure. It is also important to keep in
mind that somebody who has zero income can't pay taxes, and we
don't consider that a government failure.
So my point is that we confuse, in my opinion, a number of
programs in thinking that this is some market failure to
provide a good, when the problem that we are facing is an issue
of poverty. If rich people don't have this problem, then we
know it is not a market failure. And essentially I think we
would have a much better functioning Government if we gave
people in poverty the dignity of let's cut you a check and make
you non-poor, and let's let you make the decisions for what is
important in your life for you to spend that money on, rather
than us tying assistance to a whole basket of various different
goods, of which, of course, the providers grab most of the
subsidy anyhow.
Mr. Mica. Thank you.
Chairman Issa. I thank you.
We now go to the gentlelady from New York, Mrs. Maloney.
Mrs. Maloney. I want to thank the chairman and the ranking
member for holding this important hearing and all of the
panelists for their testimony, many of whom represent
distinguished institutions of learning and think tanks. I would
like to quote my own distinguished comedic think tank, the
Borowitz Report. Now, Andy Borowitz has pointed out that many
or some of my Republican colleagues have criticized President
Obama and his team for having the audacity to support one of
their own ideas, an idea that came out of The Heritage
Foundation. And I would like to quote the conservative Heritage
Foundation, which had praise for a plan that it described this
way. And this was their report in 2006 on Romneycare, this
statement. They said, ``The cornerstone for this reform is a
personal and responsibility principle. The plan establishes a
health insurance exchange to enable individuals to purchase
health insurance. The plan also focuses on restraining the
growth in healthcare costs by empowering consumers and making
healthcare service and cost information more readily
available.''
The distinguished report went on to criticize some of my
Republican colleagues for plotting to make the Affordable Care
Act work, or criticizing efforts by President Obama and his
team to be flexible, to make adjustments in the plan. Some went
on to criticize the President and his team for having a website
that was far too slow. Then some turned around and criticizes
the President's team for having a website that worked too fast.
So we have some difficulty in working together, but I do
think you raise some important points in your testimony, Dr.
Thomas, and I would like to quote the area where you talked
about how healthcare, not only the improvement in quality of
life and education, but the life expectancy has been improved
by 37 years, and some of this was because of public healthcare
and public healthcare research and standards, and I want to
thank you for pointing that out. But I have some further
questions on healthcare.
I would like to ask you, Dr. Thomas, do you remember how
many Americans were without healthcare insurance before the
passage of the Affordable Care Act? How many Americans were
there? There were many reports. Do you remember how many
Americans did not have healthcare?
Ms. Thomas. I have always gone with the figure of
approximately 40 million.
Mrs. Maloney. Some say 50.7 million in 2010.
Ms. Thomas. Right.
Mrs. Maloney. I also want to cite a very important study in
2009 by the Harvard School of Public Health. Now, this
celebrated study, you may remember it, found that a large
number of early deaths were associated with the lack of health
insurance. And they further pointed out that 45,000 Americans
died yearly, in their report they estimated, because they did
not have health insurance.
Now, do you believe this report, Dr. Thomas, that came from
the Harvard School of Public Health?
Ms. Thomas. Yes, I do.
Mrs. Maloney. You do believe that that many people were
dying. And before the passage of the Affordable Health Care
Act, do you recall the percentage of people without healthcare
by States? There were a lot of reports that showed the
percentage of people who did not have healthcare, and it varied
dramatically, from 4 percent to 24 percent. The 24 percent was
the State of Texas. And the 4 percent, guess what State it was?
What State was it that had the highest number of people with
health insurance? Only 4 percent of their population did not
have it.
Ms. Thomas. I am guessing Connecticut, but I----
Mrs. Maloney. No, it was Massachusetts.
Ms. Thomas. Right.
Mrs. Maloney. Because of Romneycare.
Ms. Thomas. Yes, of course. Yes. Yes.
Mrs. Maloney. Romneycare. And I did my own survey; I called
anyone I know in Massachusetts. They were very happy with their
healthcare coverage.
Do you understand why there was a difference between the 4
percent and the 24 percent? What was the difference?
Ms. Thomas. Because there was Romneycare in Massachusetts.
Mrs. Maloney. Yeah, Romneycare, which President Obama gives
full credit to the distinguished former governor for his work
in supplying healthcare to the vast majority of the people who
live there.
Are you also aware that in the three years since 2010, the
real per capita annual growth rate of national health
expenditure has been just 1.3 percent? And this responds to the
concerns that I think are very legitimate of the chairman to
contain costs. We all agree the costs were out of control, and
the historic average growth rate was 4.5 percent. But now,
because of the Affordable Care Act, we are at 1.3 percent
growth in the cost of medical care.
So I would like to ask any of the panelists are you able to
point to any prior three-year period that saw a lower growth
rate in our national healthcare expenditures ever in history?
Chairman Issa. The gentlelady's time has expired, but
please answer.
Ms. De Rugy. So, actually, the growth in the cost of
healthcare has been going down since 2003, and, in fact, it has
stopped to decline since 2009. So in some ways you could
actually say that maybe the ACA has actually paused that
decline in the cost. And, in fact, CMS has put out a report
which actually one of my colleagues, a trustee for Social
Security and Medicare, charged----
Mrs. Maloney. Reclaiming my time. If you could get your
response in writing, because I think it is very important, and
it is absolutely different from the report that I have seen on
the per capita growth rate that showed a 4.5 annual growth in
expenditures. I think this is an important point and we should
get this in the record.
Chairman Issa. Without objection, that material could be
placed in the record.
Ms. De Rugy. Absolutely.
Chairman Issa. Thank you.
We now go to the gentleman from South Carolina.
Mrs. Maloney. And may I also place in the record my
research on this from the National Institutes of Health on the
growth rate during those periods.
Chairman Issa. Anything from the National Institutes of
Health will be welcome. Without objection.
Mrs. Maloney. Thank you.
Chairman Issa. Mr. Gowdy.
Mr. Gowdy. Thank you, Mr. Chairman. The debate over the
role of Government in our Republic is a fascinating one and
probably outside the boundaries of a five-minute Q&A. What is
not debatable is if Government is going to enter into
something, we have a legitimate expectation that they do so
competently and in a trustworthy fashion.
So, Dr. Thomas, let me start with you. What do you think
the largest avoidable mistake was with respect to the rollout
of the website? The largest avoidable mistake.
Ms. Thomas. I am not qualified to speak to that. I am not
knowledgeable about the technological aspects of the website.
Mr. Gowdy. Neither are the people who designed the website,
apparently. You have no thoughts on what the largest avoidable
mistake was with respect to the website?
Ms. Thomas. I do not.
Mr. Gowdy. Dr. Calabria?
Mr. Calabria. I would preface with saying I am not an IT
expert, I am not an expert on the website, so I certainly would
say the sense you had to have it running by a certain date,
rather than having made sure it was ready before I certainly
think is a mistake, but I would emphasize what Dr. Thomas said,
not an expert on the website.
Mr. Gowdy. Well, let me ask you this, then, if you are not
an expert on the website. It strikes me that if there is a
security issue with Amazon or eBay, the consumer has recourse;
there are consequences for that. What are the consequences if
there are security issues with a Government website? I mean,
you could argue that there would be electoral consequences, but
we had a several hour hearing and I still can't tell you who is
responsible for the website. I can tell you it is not the
President, it is not Kathleen Sebelius, it is not any of the
people that you would think would be responsible for this train
wreck. So what does a consumer do when they are let down by a
Government website?
Mr. Calabria. I think that is an important point, and both
Veronique and myself talked about the role of incentives here,
which is, A, there is often not clear chains of authority, I
mean, the buck should stop somewhere with something; and there
is never any penalty, there is never any punishment. Certainly
not the website. Alone, we have all heard the stories of NSA
spying and going through what we are all looking at on the web,
but I haven't yet heard of any NSA employees being disciplined
for that.
Mr. Gowdy. I have one even worse than that. How about the
GSA? Do you remember the picture of the gentleman with the
glass of wine in the hot tub?
Mr. Calabria. Oh, yes.
Mr. Gowdy. Do you know what consequences came from that?
Mr. Calabria. I believe they rehired him. Of course, I will
also say, as somebody who follows financial services, you have
probably heard of the very large number of SEC employees who
spent the financial crisis looking at porn sites on their
office. None of them were fired. So, again, where is the
accountability? Where does the buck stop is an important part
of this question.
Mr. Gowdy. Dr. Winston?
Mr. Winston. I mentioned in my testimony that story that I
read about an IT supplier who offered to build this website at
no cost. I can't remember exactly now the name of the firm, but
they had a lot of experience doing it. I am sure we can find
that out. But they were told they couldn't do it because of
regulatory constraints, and then the Government went out and
hired another firm. At the very least, one could have brought
them on as a technical consultant or somebody who could provide
guidance, because they certainly were confident enough and
experienced enough to do it. So I think clearly an avoidable
mistake was just the lack of ability to bring in the highest
level of technical advice and competence, which apparently may
have been able to prevent some of the problems that occurred.
Mr. Gowdy. Well, it just strikes me that you can debate the
role of Government, but if Government is going to do something,
you really should not debate whether it ought to be done
competently and in a trustworthy fashion. And there are no
consequences or, if there are, I haven't seen them to date.
With that, I would yield to the chairman.
Chairman Issa. I thank you for yielding.
I just want to get two things in the record quickly. One of
them is because there was the doubling of life expectancy, I
just want to get into the record in 1960 we spent 5 percent of
GDP on healthcare and we had a 69.7 combined life expectancy
age. In 2006 we spent 16 percent, a more than threefold
increase in the percentage of our growing GDP we had. We became
very wealthy during this period, but we exceeded it by triple
and we raised ourselves by eight years, to 77.7.
Dr. Calabria, quite frankly, isn't that what we should be
talking about, is how we spend more than three times the
growing wealth of our Nation on healthcare and, yes, we are
getting an increase in life expectancy, but certainly not
proportional and not when you look at our competitors around
the world, where countries like Canada, to our north, spend a
third to a half less than we do?
Mr. Calabria. I would very much agree. You could certainly
that we are spending a lot of money on these things, but what
are we getting? We are getting a bang for our buck and we could
do a far better job of that and try to get more efficiencies
out of that, which I think gets back particularly to
Congressman Mica's point about having some consumer choice in
this to me is an incredibly important part of it.
Chairman Issa. Dr. Thomas, my colleague said something and
I am taking something because he said it and he is rightfully
so. He said universal healthcare. The debate that we are having
today is on something that is not universal, it is an extension
of Medicaid, effectively, it is a vast expansion of Medicaid
both in literally who gets it and in the subsidy that is
effectively a back-door Medicaid for the working less wealthy
up to over $60,000. From the standpoint of your view of the
good it is doing, it is predicted we will get to 20 percent to
21 percent of GDP as a result of the Affordable Care Act in
total healthcare spending. Would you sit here today and say
that our goal should be to deliver life expectancy beyond 78
years and do it for less than 21 percent of GDP?
Ms. Thomas. I would respond to that by saying that our
healthcare spending, we are living longer than ever before and
much of our healthcare spending is to deal with the chronic
diseases of old age that we used to not have to deal with
because were dying earlier. So those life expectancies----
Chairman Issa. Okay, well, my time has expired, so does
anyone want to answer the question, which is should we have a
goal to live long, live well, and do it at a rate below 21
percent and growing, or likely to be 21 percent and growing,
percentage of GDP, when we are competing against nations that
have 9 percent or less and have life expectancy as long as
ours? Hearing none, I will recognize that my time has expired.
Mr. Gowdy. Mr. Chairman, could I correct one thing very,
very briefly that my friend from Virginia--my friend from
Virginia told me that there were consequences that arose from a
hearing that we had with respect to GSA. If my friend from
Virginia tells me that, I believe him and I will take it upon
myself, Mr. Chairman, to find out the full panoply of the
consequences and report back to you and to my friend from
Virginia.
Chairman Issa. I thank you. And I don't think there is
anyone here that would fail to think there should be
consequences in the case of GSA.
With that, we go to the gentlelady and my friend from the
District of Columbia, Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman. Just to try to respond
to your question about the correlation between the increase in
life expectancy and what we spend, sure it is going to go down,
because we have been spending--and I think Dr. Thomas gave one
answer, but you know the Affordable Healthcare Act is going to
help that because we have been spending this money on sending
these people, up until now, to the emergency room; we have been
spending almost no money on preventative care; we have been
spending disproportionate amounts of money on the very last
years of life, when people are about to die anyway. You have a
lot of factors. But I do want to----
Chairman Issa. Would the gentlelady yield?
Ms. Norton. If you don't take my time for me.
Chairman Issa. I will stop the clock.
Are you saying that there is something in the Affordable
Care Act that is actually going to drive down----
Ms. Norton. I am. I am saying, for example, that the
subsidies, which are a part of the Affordable Healthcare Act,
means that people are going to get their own doctors, they are
going to have preventative care, that you won't get to the
point where the disease is costly, you have to have the most
expensive procedure, you have to have your leg taken off.
Chairman Issa. I hope to see it.
Ms. Norton. I am saying that those things will, in time,
show up. They are not going to show up in the first few weeks
of the rollout.
And I do want to thank a very distinguished panel. One of
them is one of my own constituents. Welcome, Mr. Calabria. But
I want to thank all of you for your testimony.
I do note for the record that only Dr. Thomas is an expert
in healthcare, and I think that must have been deliberate,
because we are talking about the rollout of healthcare. And
that is without casting any dispersion on the very
distinguished witnesses we have here.
But what troubles me, Mr. Chairman----
Chairman Issa. Would the gentlelady accept a friendly----
Ms. Norton. Certainly.
Chairman Issa. Dr. Thomas, according to our information, is
a historian and communications associate at Johns Hopkins. We
were unaware. It is the School of Public Health, so it is
history of health. But I may be wrong. Perhaps she could tell
us what her expertise is in health, because everyone today is a
PhD. None of these are medical doctors.
Ms. Norton. She is an expert on healthcare, Mr. Chairman.
And if she is not, let her tell us.
Ms. Thomas. I spent four years doing a post-doctoral
fellowship in the history of medicine, largely concentrating on
twentieth century health policy in public health at the
Institute of the History of Medicine at Johns Hopkins
University.
Ms. Norton. I was simply drawing a contrast between some
background in healthcare, and I did say, even though I respect
all three of the other witnesses, Mr. Chairman, I hope that
wasn't taken from my time.
But I do want to say that this is an amazing hearing that
the Government of the people, by the people, and for the people
should not provide healthcare for the people is essentially the
theme of this hearing. It is a fundamentally anti-American
message. Fortunately, it is false, and I think the chairman,
with his rollout of the many ways in which the Government has
produced for the people, lays that to rest.
The Affordable Healthcare Act is not a Government program.
Not even single payer. So I don't understand the concept here.
This is a Republican idea which outsources to the private
sector. This is why the insurers bought into the program and
that is why they are so anxious that this website get up and
get right. Yes, they are getting subsidies, but that is to save
the American people money. Nobody is just throwing money at
people.
Mr. Chairman talked about D.C. Health Link. Yes, there are
errors there, but it was cited as one of the four successful
rollouts throughout the United States, and I want to cite it
because it is an example of why this is not a Government
program. You go on D.C. Health Link; 267 options. And when they
insisted that on D.C. Health Link they would put the costs up
front out so anybody could see it, they drove competition and
others came in and lowered their prices. This is a
quintessentially private sector approach. The Government's only
role is to say we are not even refereeing it, we are putting up
a website. That is why we think that website has got to be
gotten right.
The chairman talked about winners and losers. Here we have
267, or whatever the number is in your district. Nobody is
picking anything except the people who go on that website.
Mr. Calabria talked about market feedback. I just cited to
you, Mr. Calabria, what the market feedback was when
competitors saw 267 prices on the link. They never could have
seen it otherwise. The individual never could have gotten that
information if it had not been for D.C. Health Link. My staff
went on there and report, for example, several of them have
reported to me that they have saved $100 already looking on the
site, with comparable healthcare, $100 per month.
Dr. Winston talked about programs in the public sector,
like ACA, do not necessarily drive down costs, and he may be
right. Of course, I have cited an example where, precisely
because the Government put this website out, costs are being
driven down.
One thing that ACA does not have is a mechanism, a
Government mechanism for driving down costs. They are depending
upon this competition to do so.
I want to ask Dr. Thomas about--since what was supposed to
have spurred this was the rollout--about the Medicare rollout.
Now, we would have done Part D in a different way. The last
thing we did, though, when it finally happened, we certainly
didn't say we will just wipe it off the board. We didn't try to
repeal it. Do you recall public and, for that matter, political
sentiment at the time of the Medicare D rollout, whether there
were large problems?
Chairman Issa. The gentlelady's time has expired.
Ms. Norton. My time was taken up, Mr. Chairman, by you,
among others.
Chairman Issa. No, we stopped the clock.
Ms. Norton. You don't even want to let her answer the
question?
Chairman Issa. No, I was saying your time has expired, but
the gentlelady certainly can answer.
Dr. Thomas. At the time of the Part D rollout in 2005 and
2006, there is great concern about how complex the instructions
were for enrollment and people were very concerned that their
existing drug coverage would end and that they would not be
picked up by the new law, and there were great difficulties in
the initial implementation of the law that have since been
fixed, and we now, I think, are in bipartisan agreement that
Medicare Part D is working and is a good program.
Ms. Norton. Thank you, Mr. Chairman.
Chairman Issa. Thank you.
The gentleman from Tennessee, Mr. Duncan.
Mr. Duncan. Well, thank you, Mr. Chairman. I remember
during my first term in Congress, in 1989, I went to a
conference put on by the American Medical Association, and the
man who was then the president of AMA was laughing in a
presentation that he made about the fact that, as the ranking
member mentioned, the AMA had opposed Medicare, because he said
that he knew at the time it was started that the doctors would
get their part, and they certainly have. Many doctors have
gotten wealthy off of it. And I remember reading last year, I
think it was in an Associated Press article, that six of the
ten wealthiest counties in this Country are suburban counties
to Washington, D.C.
What I am getting at is, as Dr. De Rugy has mentioned, all
these Federal programs, they have wonderful motherhood and
apple pie titles and they have good goals, but they end up
benefitting primarily Government contractors, large
corporations, and Government employees. You mentioned Goldman
Sachs and some other companies, and the chairman mentioned that
we have spent $640 million so far on the website. The Canadian
company whose American subsidiary got the bulk of the money on
the website, one of the top officers is a close friend to the
President's family. And all of these Government contracts, when
you go beneath the surface and you find out what is behind it,
almost all these big Federal contracts are some sort of
sweetheart or insider deal. I read several years ago about the
revolving door at the Pentagon, because they hire all the
retired admirals and generals, the defense contractors do.
And the same thing is going to happen, I am afraid, with
Obamacare. It is going to end up benefitting some extremely big
companies. I read just this morning an article that some of the
health insurance companies are now working with the White House
to try to implement the program because they see huge profits
ahead.
And I think back to the mid-1990s, when I went to a
reception in Tennessee, and the doctor who delivered me came
and brought my records, and I asked him how much he charged
back then. He said he charged $60 for nine months of care and
the delivery, if they could afford it. Medical care used to be
cheap and affordable, and doctors even made house calls; and
then the Federal Government got into it. The same thing has
happened. It shocked students at the University of Tennessee
when I tell them that it was $90 a quarter when I went there,
$270 a year. Until that program started, college tuition and
fees went up at just the rate of inflation. Then when the
Federal Government got into it, every year since then it has
gone up three or four or five times the rate of inflation.
It just seems that everything the Federal Government
subsidizes, the costs just explode. And we talk now, already we
are hearing that Obamacare is going to cost three or four times
more than when it was passed. And I remember reading years ago
that Medicare was predicted was going to cost $12 billion after
the first 25 years; instead, it cost almost 10 times that much,
and now it costs four times more than that. So all these
Federal medical programs have been low-balled on the front end.
And what I don't understand is how we are going to add many
millions of people who were previously uninsured and now
millions more receiving notices saying that their premiums are
going out the window so much that they are not going to be able
to afford those premiums, so we are going to add all those
millions.
These costs, it seems to me, are inevitably going to
explode. Dr. De Rugy, what do you say about that?
Ms. De Rugy. I agree with you. A lot of these programs,
independently of the social benefit that we assign them, are
unsustainable, whether we like them or not. Medicare, Social
Security, Medicaid, these are programs that are extremely
expensive. And then you add on top of it the ACA. We already
have a big debt problem, but it is going to explode.
And I wanted to add something about what you said. Yes, the
private insurance industry was extremely supportive because
they were going to benefit immensely from it. When you have a
law that mandates that everyone buys insurance, that means
millions more customers for the insurance industry. And I would
bear to also say that in this instance, because of the way the
law was drafted, the law did pick winners and losers. Because
of the requirement by Obamacare, it meant that younger and
healthier Americans were going to have to face much higher
premiums.
Chairman Issa. The gentleman's time has expired.
Dr. Winston, if you need to answer.
Mr. Winston. I just want to add one point just to round out
what you were saying. I think it is important to keep in mind
that a large source of the increase in medical expenditures is
due to technological change and innovation. Obviously, we are
not getting the same products that we once got. That is a good
thing, and that is coming from the private sector, to a large
extent. The challenge for Government is how is it that they
intervene in ways that spur technological change in innovation
without excessive increases in cost, as opposed to impeding
technological change and innovation. That is really what we
need to do.
Mr. Duncan. Well, I will close just by saying that we are
having great difficulty funding the programs that we already
have.
Thank you, Mr. Chairman.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Massachusetts, Mr. Tierney.
Mr. Tierney. Thank you, Mr. Chairman.
So, Dr. Calabria, I just want to note that you were here
for a hearing on the rollout of healthcare government. Your own
testimony says, ``I am not an expert on healthcare,'' is that
right?
Mr. Calabria. That is correct.
Mr. Tierney. Okay. And in your statement you also say,
``Doing nothing should always be an option or, rather, leaving
the problem to be solved by the voluntary private sector.'' Is
that accurate as well?
Mr. Calabria. Absolutely. You can always make something
worse.
Mr. Tierney. Thank you.
Dr. De Rugy, in your written testimony you focus mostly on
the Department of Energy's loan guarantee program and then you
say, ``Government solutions are not only unlikely to solve most
of our problems, they often make problems worse.'' Is that
fair?
Ms. De Rugy. It is fair.
Mr. Tierney. Okay.
Dr. Winston, you talked mostly about transportation and
infrastructure programs. Let me quote from your testimony: ``I
am much less familiar with empirical assessments of Government
services and programs to pursue social goals.'' Is that an
accurate quote?
Mr. Winston. Yes.
Mr. Tierney. Thank you.
So, Dr. Thomas, you actually work in the public health
field, you have the background that you just stated on that, so
I want to focus a little bit on you and talk about this concept
that the free market always works better. Before Horace Mann,
how was the private sector doing on educating most students in
this Country?
Ms. Thomas. In some parts of the Country, literacy rates
were high, but in many, many parts of the Country there is no
education available to the vast majority of the population.
Mr. Tierney. And before Social Security and Medicare, what
was the poverty rate among seniors?
Ms. Thomas. I do not specifically know, but I know that it
was significant and that health costs were a major part of that
poverty.
Mr. Tierney. And how did Social Security and Medicare's
enactment affect that?
Ms. Thomas. We need to remember Medicare and Medicaid are
parts of the Social Security Act. Together those things lifted
many, many millions of Americans out of poverty. And I think it
is important to add that minority groups, who had been hardest
hit by poverty rates, were also dramatically helped by those
programs.
Mr. Tierney. And I would assume that since the recession,
the fact that 95 percent of all economic gains have gone to the
top one percent is not what you would think is a great symbol
of the private market working effectively for everybody?
Ms. Thomas. No, I would not.
Mr. Tierney. Okay. So the premise by the Majority seems to
be that Government's ability to effectively or inability to
effectively design, implement, and administer large-scale
projects and programs. Let me talk to you a second about the GI
Bill. Is it your understanding that the GI Bill has been a
success?
Ms. Thomas. Absolutely. My own father went to Georgia Tech
on the GI Bill.
Mr. Tierney. And, in fact, on November 8th of this year we
had the one millionth recipient of the GI Bill that was passed
after September 11th, 2001.
Ms. Thomas. Yes.
Mr. Tierney. And basically I would think that the
Government has been administering that program fairly well, in
your opinion?
Ms. Thomas. Yes.
Mr. Tierney. Some $30 billion in new GI Bill benefits have
been awarded to Iraq and Afghanistan veterans since 2009, is
that about right?
Ms. Thomas. Yes.
Mr. Tierney. So you would think that the GI Bill has been
worth the effort of the Federal Government in its expenditures?
Ms. Thomas. Yes. And it helped the overall market to work
better because it brought so many more skilled people into the
workforce.
Mr. Tierney. Now, the intervention of Government in 1966
through Medicare, that saw some problems with the rollout of
that program, similar to what we are hearing today?
Ms. Thomas. Very similar.
Mr. Tierney. And in 1937 we could say the same about Social
Security, correct? People were all sorts of critics about the
program; it was going to cause too much swelling of
bureaucracy, it was going to slow the economy?
Ms. Thomas. Correct.
Mr. Tierney. And Part D, Medicare Part D talked about their
being a marred rollout. Republicans, in fact, at that point in
time, however, were saying, look, it is a marred rollout, but
it has glitches; we should work closely with CMS to get the
problems resolved on that.
Ms. Thomas. Yes.
Mr. Tierney. All right. And I would protest that if we work
closely with the glitches in the Affordable Care Act, we can
get those resolved as well, would you agree?
Ms. Thomas. I agree. I think the Affordable Care Act is
very much in the tradition of these other programs that you
have mentioned and that we are going to look back even a year
from now and see that the Affordable Care Act is a good
investment and is working.
Mr. Tierney. So, historically, are you familiar with any
program that the Republicans proposed during this discussion of
the Affordable Care Act that would cover the 40 million
Americans that were otherwise uncovered?
Ms. Thomas. I am not.
Mr. Tierney. Are you aware of any proposal that would have
affordably allow people to stay on their parents' policy until
they are 26 if they are not otherwise covered?
Ms. Thomas. No.
Mr. Tierney. Are you aware of any Republican suggestions of
how they would affordably make sure that insurance companies
didn't shut off your health insurance with an annual or
lifetime cap on coverage?
Ms. Thomas. No. The insurance companies had done none of
this on their own.
Mr. Tierney. And the same is true with preexisting
conditions, is that correct?
Ms. Thomas. Correct.
Mr. Tierney. I yield back. Thank you.
Chairman Issa. I thank the gentleman.
I now ask unanimous consent that 15 letters sent to health
insurance companies related to broken promises and when did
they know that they were going to be canceling individuals
under the Affordable Care Act be placed in the record. Without
objection, so ordered.
Chairman Issa. We now go to Mr. Meadows, who came back just
in the nick of time.
Mr. Meadows. Thank you, Mr. Chairman.
Dr. Thomas, I know that my friend and colleague was asking
you about Republican proposals, and hopefully this is not
something--how many people do they estimate will still be
uninsured under ACA, do you know?
Ms. Thomas. I do not have an exact figure.
Mr. Meadows. Do you have an approximate figure? You are a
historian.
Ms. Thomas. Yes.
Mr. Meadows. So you don't know trends?
Ms. Thomas. Well----
Mr. Meadows. So, under ACA, how many people will--you were
able to quote how many were going to be covered, so I would
assume that you would know how many are going to be left
uncovered.
Ms. Thomas. I think there will still be approximately 5 to
10 percent uncovered.
Mr. Meadows. Well, according to estimates, some 30 million
people will still be left uninsured, is what the current
estimates have. Some 30 million people would still be without
insurance even under ACA.
Ms. Thomas. And may I ask where those estimates are from?
Mr. Meadows. CBO. So if you look at the CBO, they are
saying almost 30 million people will still not be covered. So
this is not a solution that will have everybody covered.
Ms. Thomas. Mm-hmm.
Mr. Meadows. So I want to ask--you have gone and you have
had a number of options here as we have started to look at
history. Can you speak to the fact that we have trends right
now where, under current Medicaid and Medicare, that the
reimbursements are not covering the costs? Would you agree with
that? To provide those healthcare coverage. Does Medicaid cover
all the costs of actually providing that service, reimbursement
to physicians?
Ms. Thomas. No, it does not.
Mr. Meadows. All right. So does that distort the market?
Ms. Thomas. The rates of----
Mr. Meadows. Of reimbursement.
Ms. Thomas. Well, I can speak from personal experience.
When you get an explanation of benefits from a medical visit--
--
Mr. Meadows. All right, maybe let me change and rephrase
the question. Do you ever hear complaints from physicians where
they don't want to take new patients because the reimbursement
is not adequate to cover their costs? That is an easier
question.
Ms. Thomas. Yes. However, in some cases, over time Medicare
has reimbursed at higher rates than private insurance.
Mr. Meadows. Okay, but let's look at Medicaid. I am in a
rural areas, so we get a lot of Medicaid patients, and what I
am finding is a lot of physicians don't want to take Medicaid
patients because the reimbursement doesn't even cover their
costs, hospitals included. Would you agree with that?
Ms. Thomas. I would, but I would also say that without the
Medicaid program, there would be far more people who wouldn't
get care at all.
Mr. Meadows. All right. Is there not a Federal law that
says everyone has to get care?
Ms. Thomas. There is a Federal law----
Mr. Meadows. Is there a Federal law, yes or no?
Ms. Thomas. Care in the emergency room, yes.
Mr. Meadows. Right. So it is a matter of how we get that
care to them in terms of the efficiency of that. Because right
now there is a law, if I show up, regardless of my ability to
pay, at an emergency room, I can get care, is that correct?
Ms. Thomas. Yes.
Mr. Meadows. That is a Federal law. So what we are talking
about is the efficiency, as Dr. Winston talked about earlier,
is what is the most efficient way to deliver that healthcare,
is that not correct?
Ms. Thomas. Yes.
Mr. Meadows. All right. So in doing that, from a historical
perspective, are there major inefficiencies in Government
delivery of services, whether they be medical or anything else?
Are there inefficiencies there?
Ms. Thomas. Certainly.
Mr. Meadows. All right. So has the private sector
historically done a more efficient job of providing services,
whether they be medical or not? Have they historically done a
better job of providing a more efficient delivery, historically
speaking? You are under oath.
Ms. Thomas. You are talking about all of the private sector
in all parts of the economy?
Mr. Meadows. I am saying historically speaking--you are
talking about trends. Historically speaking, is the private
sector a more efficient mode of delivering goods and services,
whether they be medical or not, historically speaking, have
they been more efficient? You are a historian.
Ms. Thomas. I don't think I can answer that question
because it is so broad.
Mr. Meadows. Okay. Well, my time has expired. I yield back.
Thank you, Mr. Chairman.
Chairman Issa. We now go to the gentleman from Virginia,
Mr. Connolly.
Mr. Connolly.
Mr. Connolly. I thank the chairman. And I am delighted to
hear my friend from North Carolina's concern about uncovered
citizens. Hopefully, North Carolina and Virginia will both come
to their senses and broaden Medicaid so that those people will
have coverage.
By the way, let me follow up on my friend's last question
to you, Dr. Thomas. Historically, since World War II, can you
give us a single industrialized country where the government
has not intervened and provided healthcare to its citizens?
Ms. Thomas. No. There are none.
Mr. Connolly. There are none. So that efficient private
sector somehow just didn't work in any industrialized country.
The United States is actually laying way behind others in the
industrialized world in the comprehensiveness of its coverage
until the passage of the ACA. Would that be an accurate
historical statement?
Ms. Thomas. That is absolutely true.
Mr. Connolly. And you are under oath, as my friend reminded
you.
Ms. Thomas. Yes.
Mr. Connolly. Thank you.
Ms. Thomas. That is absolutely true.
Mr. Connolly. Dr. De Rugy, my friend the chairman
characterized Brookings as a left-of-center organization in
contradistinction to your center, the Mercatus Center, which he
characterized as right-of-center. Would you accept that
characterization?
Ms. De Rugy. No. Actually, we are really independent.
Mr. Connolly. Really independent.
Ms. De Rugy. We spend a great amount of time criticizing
both sides of the aisle.
Mr. Connolly. And lots of donors like the Koch brothers,
for example, is that correct?
Ms. De Rugy. We have lots of individual donors.
Mr. Connolly. Including the Koch brothers?
Ms. De Rugy. Yes. It is well known.
Mr. Connolly. Yes. You don't come here as a healthcare
expert, you come here as an economist, is that correct?
Ms. De Rugy. That is correct.
Mr. Connolly. And your position is, a priori, that any
Government involvement distorts the marketplace.
Ms. De Rugy. It does.
Mr. Connolly. It does. So you consider Medicare a
distortion?
Ms. De Rugy. It does, yes.
Mr. Connolly. Medicaid?
Ms. De Rugy. Medicaid.
Mr. Connolly. Veterans Administration?
Ms. De Rugy. We may be willing to put up with distortion to
achieve some social goal.
Mr. Connolly. No, I am not asking--don't jump ahead. I am
asking the question here. So is TRICARE, medical TRICARE,
military TRICARE healthcare a distortion in the marketplace,
based on your philosophy?
Ms. De Rugy. All Government intervention introduced
distortions.
Mr. Connolly. And that includes the Veterans Administration
healthcare system.
Ms. De Rugy. It does.
Mr. Connolly. It does. And I see Dr. Calabria agreeing with
you. Does the Centers for Disease Control, is that a
distortion? It is a big Government program; monitors public
health.
Ms. De Rugy. It does, but again----
Mr. Connolly. Again, ma'am, I am just trying to see is it
consistent with your philosophy that it represents a
distortion. We will hold off for a minute, normatively, whether
it is good or bad.
Ms. De Rugy. Government intervention introduced
distortions.
Mr. Connolly. And you would include the National Institutes
of Health in that rubric?
Ms. De Rugy. It does.
Mr. Connolly. And the Federal Drug Administration.
Ms. De Rugy. It does, certainly.
Mr. Connolly. Now, all right, are some of those things
necessary, despite their distortive effect?
Ms. De Rugy. Yes.
Mr. Connolly. Which ones do you think are unnecessary?
Ms. De Rugy. So I think there are a lot. For instance, I
don't think the Government should be involved in education;
that is a State and private function. I mean, there are a lot
of things.
Mr. Connolly. No, no. I am talking about the healthcare
system. Would you abolish the CDC and let the private sector
monitor public health?
Ms. De Rugy. I think there is an important role for the
Government to try to prevent epidemics, true epidemics. But the
CDC does a lot of things that actually it shouldn't be doing.
Mr. Connolly. Okay. So there are some things--you would go
granular and pick what functions you like and what you don't.
Ms. De Rugy. Yes.
Mr. Connolly. Even though anything you pick is distortive,
by your definition.
Ms. De Rugy. Yes. Government intervention----
Mr. Connolly. Excuse me, but because of time. Is it your
position that absent the Government, even in functions you
might deign to approve of, the private sector could do it
better, and should?
Ms. De Rugy. Not necessarily.
Mr. Connolly. Not necessarily.
Ms. De Rugy. Because, as I said, there is some function
that we may want the Government to do, even if it introduces
some distortions. And as Dr. Calabria has said, the private
sector doesn't do everything efficiently.
Mr. Connolly. Right. By the way, there was a debate here
earlier about the Government setting prices for Medicare. Do
you actually know how the process is set for which are
recommended and approved procedures? Who does that? Who
recommends that to the Government, do you know?
Ms. De Rugy. I don't know----
Mr. Connolly. It is actually a committee.
Ms. De Rugy. Actually, it is a committee made of doctors.
Mr. Connolly. That is right.
Ms. De Rugy. And I think I remember a report recently that
actually highlighted the fact that a lot of what they were
doing was boosting prices in area where the service could be
delivered at a lower price.
Mr. Connolly. That is the private sector doing that.
Ms. De Rugy. But this is how one of the ways that the
Government introduces distortion, is it gives incentive to the
private sector to try to get as much as it can from the
Government.
Chairman Issa. I would ask unanimous consent the gentleman
have an additional minute. Without objection.
Mr. Connolly. I thank the chair.
Well, of course, philosophically, Dr. De Rugy, there is no
end of that; that is a horse that left the barn a long time
ago. Gosh, if we want to talk about economic distortions and
the Government's role, let's talk about agriculture.
Ms. De Rugy. I agree.
Mr. Connolly. Let's talk about nuclear.
Ms. De Rugy. I agree. I agree.
Mr. Connolly. All nuclear power in the United States came
from Federal research and dollars.
Now, is it your contention that this big Government
distortive effect extends to pharmacological research? Because
it is my understanding that, by and large, all basic research
in the United States, and this is not new, is done by the
Government. It is the commercialization of that basic research
is when the pharmaceutical firms come in, but they do not fund
basic research, nor are they going to.
Ms. De Rugy. Some of the distortions that the Government
introduces by actually picking and choosing which areas are
going to be funded, which areas should be researched while
others may not.
Mr. Connolly. Yes, that is true.
Ms. De Rugy. And the Government has a knowledge problem.
Mr. Connolly. Excuse me. Pharmaceutical companies do that
too, except their motivation is commercial value, as opposed to
the health value.
Ms. De Rugy. Actually, I actually think----
Chairman Issa. This is a wonderful discussion, but I have a
feeling it could go back and forth for a very long time.
Mr. Connolly. Mr. Chairman, I want to thank you for
extending my time. I just wanted to highlight that. I think
this is a really important debate because it is a very
fundamental one in the United States when people say why can't
we all get along? Because we have fundamental differences
philosophically about the role of Government. And while I
respect Dr. De Rugy and I certainly love George Mason
University, which is entirely within my district, I couldn't
disagree with her more, fundamentally. Just as you pointed out
you disagree with Dr. Thomas, I also disagree with Dr. De Rugy
and her philosophy.
Thank you, Mr. Chairman.
Chairman Issa. Thank you. If I can enter a colloquy
quickly, I actually think that all of the panelists have said,
in one way or the other, that Government is necessary. They all
know it causes market distortion and they all have differing
views at the level of Government intervention. It could be that
you disagree with some of the levels. I am sure they disagree
with some of the levels I would achieve.
Mr. Connolly. Yes.
Chairman Issa. By the way, one of my major constituents
produces botox, which was a Government-funded orphan drug that
if not for the Government looking at a very rare disease,
probably would not be the blockbuster success it is in other
areas.
Mr. Connolly. That is right.
Chairman Issa. So I think we all know that basic research
is important. Hopefully here today we are talking about the 16
to 18 to 20 percent of GDP is that is there a better way to
allocate those resources.
Mr. Connolly. Mr. Chairman, I couldn't agree with you more,
and I actually commend you. I think we have actually put
together a panel here that has been very stimulating. It
highlights some of our differences, but it also asks some
provocative questions that need to be asked, and I thank the
chairman for putting it together.
Chairman Issa. Thank you. And then we are going to get back
to FITAR and real IT reform together. Thank you.
We now go to the gentleman from Michigan.
Oh, I am sorry.
Ms. Thomas. I wanted, if I may, to add that it is not
always just the Government that ``distorts'' the market, that
sometimes private actors can also drive up prices. And in
healthcare a very good example of that is competition among
private hospitals, private for-profit hospitals for highly
expensive and complex medical equipment that one hospital buys
the million dollar piece of equipment and they are the only
hospital in town with it until the hospital next door buys it
also, and really there is only enough patients to justify one
such purchase. So that is one way that private healthcare
drives up prices sometimes.
Chairman Issa. The allocation of resources in healthcare is
so complex that, to a great extent, the theme of today is is it
so complex that neither the public nor the private sector have
been able to do it.
I apologize, Dr. Winston, but it have taken too much time
of everyone's.
The gentleman from Michigan.
Mr. Bentivolio. Thank you, Mr. Chairman, and thank you for
holding an important hearing.
The founders of this Nation understood exactly what some of
our witnesses have all expressed: Government makes decisions
poorly because too often politicians and bureaucrats do not
have the same incentives that the citizenry has.
I certainly don't wish to offend my colleagues here, but
our Government is inherently made up of those with at least a
little hubris. After all, it takes some hubris to believe that
you should be the representative of the sovereign people of the
United States. In fact, I have even heard of people campaigning
for office simply to say that they are Congressman, rather from
the hope of protecting people's rights. A hubristic style
trumps substance in service of the people.
Unfortunately, Mr. Chairman, that hubris in our leaders
sometimes gets out of control and leads to disaster. The
President's healthcare reform is the only major reform ever
passed by one party over a bipartisan opposition. And, boy,
Obamacare is certainly turning into a disaster.
I thank the witnesses for their enlightening testimony.
Dr. De Rugy, you talk a lot about special interest groups
and the lack of incentives for politicians to spend taxpayer
money wisely, stemming from the average citizen not really
feeling the pain from having the collective money of the Nation
wasted. Could this come from taxpayers simply not realizing how
much money is being spent on what departments in Government?
Ms. De Rugy. That is one of the reasons. I mean, one of the
ways the Government expands is by concentrating benefits of
Government intervention and spreading the cost thin and wide.
So that is one of the reasons why we don't always see that
cost. We also don't necessarily see the distortions, or even
when we feel them it is hard to track it back to a particular
Government intervention. What is interesting about the ACA--and
I am going to make a prediction and we will see whether I am
correct--is even when the website is completed, it is possible
that the Administration is not going to get the benefit and the
hurray that people are going to feel because actually it is a
program that is designed the opposite way, like the benefits
are spread somewhat widely to an audience who may not actually
be very vocal about how great it is, while the costs are highly
concentrated and visible to some, which will continue to be
vocal.
Mr. Bentivolio. Thank you. Do you think that if every
taxpayer received a receipt explaining where their tax money
went would be useful in granting politicians here in Washington
more incentive to act more wisely?
Ms. De Rugy. More transparency, certainly would be
necessary. For instance, I would be very happy to see which
part of my taxes go to farm subsidies.
Mr. Bentivolio. I couldn't agree with you more.
With that, thank you very much. I yield back.
Chairman Issa. Would the gentleman yield?
Mr. Bentivolio. Yes.
Chairman Issa. We have had a lively discussion, and I am
sure we are going to continue to, but, Dr. Winston, in your
opening remarks you really did touch on the fact that--and I
think it is something that Dr. Thomas also said--monopoly and
monopolistic type behavior, distortions in the market not just
by Government, but the inherent distortions that occur in both
for-profit and not-for-profit hospitals. I happen to have two
not-for-profit hospitals nine miles apart along its a State
highway, but it is built like an interstate, and I can't get
them to put one machine that is not emergency-related in one
and share; they just don't do it. Isn't that part of the
problem--and I will go to Dr. Winston and maybe back to Dr.
Thomas--is that healthcare has built, with a system that has
very little to do with market forces, meaning that market
forces already didn't work well in healthcare before we started
funding a system that didn't work well from a standpoint of
supply and demand? In other words, cash is not king; the
consumer is not educated to make a buy-in; prices are not
transparent; cost-effectiveness is not easy to discover.
Dr. Winston?
Mr. Winston. Yes, that is right. There is not distortions,
but there are wedges, if you will. It is not a simple market,
you go to a store, you buy something. You are going through a
doctor, you are going through insurance, so on and so forth. So
these wedges make efficient, smooth operations----
Chairman Issa. I am going to ask a closing question for all
of you. If this committee, the committee of transparency in
Government spending, if we concentrated our efforts related to
the Affordable Care Act on mandating transparency in healthcare
so the consumer knew more and the public knew more, would we be
well spent in then driving, through market awareness, better
distribution of dollars and, thus, more efficiency? Any
opinion?
Ms. Thomas. Yes.
Chairman Issa. That is Econ 101, so just go ahead.
Mr. Calabria. Certainly, transparency would help, but you
have to get the incentives right, too.
Mr. Winston. Incentives are, I think, the critical thing.
Information is one thing, but still people have to have
incentives and firms have to be able to enter, so on and so
forth.
Chairman Issa. I know people want to buy the best
healthcare. Hopefully we can also create incentives for them to
buy it at the lowest possible price. Thank you.
We now go to the gentleman from Illinois, Mr. Davis.
Mr. Davis. Thank you very much, Mr. Chairman. You know, I
believe that a good way to measure the greatness of a society
is by how well it treats its young, how well it treats its
elderly, and how well after it looks after those who have some
difficulty handling their affairs effectively themselves.
Dr. Thomas, as a historian at Johns Hopkins, I am certain
that you have some insight into the question of whether or not
the Federal Government, as I have heard questioned, is able to
administer large-scale programs effectively.
Ms. Thomas. Yes.
Mr. Davis. I have heard comparisons between the Federal or
the Government and the private sector. So I would like to ask
you about the Medicare program, which was signed into law by
President Johnson in 1965.
Mr. Chairman, I ask unanimous consent to enter into the
record an article that appeared in The Washington Post on May
17th of this year.
Chairman Issa. Without objection, so ordered. I love The
Washington Post.
Mr. Davis. Yes, it is a great paper.
Mr. Davis. The article is entitled, When Medicare launched,
Nobody Had Any Clue Whether It Would Work. Dr. Thomas, I would
like to read an excerpt from this article and then get your
response. Here is what it says: ``Medicare in these days, an
incredibly popular program. Americans overwhelmingly oppose
cutting it. No politician would consider repealing it. Most
think providing health insurance to all Americans over 65 is
worth both the trouble and the cost. That was not always true.
Back in 1966, as Medicare was just about to launch, nobody knew
whether the new program would provide benefits to millions or
fail completely.''
Dr. Thomas, based on this reporting, there was trepidation
in 1966 with the rollout of the Medicare program. Is that
correct?
Ms. Thomas. That is absolutely correct.
Mr. Davis. Well, the article describes how the American
Medical Association ran ads across the Country denouncing the
program as the beginning of socialized medicine, and many
people who were unfamiliar with the program were suspicious of
it. Is that correct?
Ms. Thomas. Certainly.
Mr. Davis. The article also describes the implementation
effort. It says that the Government launched project Medicare
Alert, with thousands of Federal workers charged with educating
people and helping them enroll in the program. Is that correct?
Ms. Thomas. Yes. They had to go door-to-door to try to
reach people, of course, before the Internet, who might not
know about the program and make sure they knew they were
eligible.
Mr. Davis. Means they were serious. One of the biggest
challenges of that era----
Ms. Thomas. They even asked forest rangers to go out in the
rural areas.
Mr. Davis.--was with hospitals in States that did not want
to provide healthcare services to black Americans. I know that
this has been a focus of some of your research and some of your
writing. Can you tell us a little bit about how this problem
was addressed?
Ms. Thomas. Yes. I would say that one of the greatest moral
failures of the private health system and, unfortunately, for a
time of the public system as well was its segregation by race
of patients and outright denial of care to many Americans in
minority groups, so that death rates, disease rates, draft
rejection rates, many measures were dramatically higher among
African-Americans than among whites, and there is racial
disparity in life expectancy and many other health measures
that persist to this day.
Mr. Davis. And yet we have been able to overcome all of
those objections and all of those difficulties where now
Medicare is considered a very popular program. Everybody who
can get it wants it, and I think it just takes a bit of time.
It will take some time with the Affordable Care Act and
ultimately I think that Americans are going to feel the same
way about the Affordable Care Act that we now feel about
Medicare.
Ms. Thomas. I do----
Mr. Davis. And I yield back.
Chairman Issa. I thank the gentleman.
The gentlelady may answer, if you were mid-sentence.
Ms. Thomas. Just that it was the combination of the 1964
Civil Rights Act and the Medicare-Medicaid Act of 1965 that
definitively integrated the American healthcare system, and it
was much more successful in healthcare and has produced some
very good results.
Chairman Issa. I thank you.
I now ask unanimous consent that the New Yorker article
entitled GOP Healthcare.gov Too Fast Now be placed in the
record. Without objection, so ordered.
Chairman Issa. We now go to the gentleman from Arizona, Dr.
Gosar.
Mr. Gosar. Thank you very, very much.
Dr. Thomas, just as a background, I am a dentist for 25
years, okay? This is going to be very important to kind of keep
track of this. Is Medicare financially sustainable as is?
Ms. Thomas. No.
Mr. Gosar. Is Medicaid financially stable as is?
Ms. Thomas. No.
Mr. Gosar. Is Obamacare financially stable as is?
Ms. Thomas. I can't answer that question.
Mr. Gosar. It's a no. Is Romneycare financially viable as
is? No.
Ms. Thomas. I don't know.
Mr. Gosar. No. I mean, you are a historian. You better
know. You are very flippant with the statistics, and I am about
details. And Romneycare isn't financially stable. The only
reason it has lasted so long is it is from a rich State. That
is it. So aren't they very close to go to a single payer?
Ms. Thomas. I am sorry, is Romneycare close to a single
payer?
Mr. Gosar. Massachusetts.
Ms. Thomas. Yes.
Mr. Gosar. Yeah. That is what I thought. That is how they
keep hinting in this way.
I am looking at three problem-solvers here, and that is
what is key about this thing, is that when you have a problem,
you always go to lowest common denominators to figure them out.
Wouldn't you agree?
Ms. Thomas. I am not sure what you mean by lowest common
denominators.
Mr. Gosar. Well, you figure out all the parts that are part
of the problem, you go to the lowest basis and you come up with
core principles and build upon simple simplicity. Wouldn't you
agree?
Ms. Thomas. Okay. Sure.
Mr. Gosar. Would you agree, Dr. De Rugy?
Ms. De Rugy. [Nonverbal response.]
Mr. Gosar. Dr. Winston?
Mr. Winston. [Nonverbal response.]
Mr. Gosar. Dr. Calabria?
Mr. Calabria. [Nonverbal response.]
Is it possible, the three of you, is that actually possible
today in the Federal Government to do that? Quick answer.
Mr. Winston. No.
Ms. De Rugy. No.
Mr. Gosar. I want to agree with you, because we talked
about monopolies, we talked about noncompetitive bids, we
talked about all sorts of things. Is there tort reform in this
bill, Dr. De Rugy?
Ms. De Rugy. No.
Mr. Gosar. Is it part of the problem?
Ms. De Rugy. I guess part of it.
Mr. Gosar. Dr. Winston?
Mr. Winston. Yes.
Mr. Gosar. Dr. Calabria?
Mr. Calabria. [Nonverbal response.]
Mr. Gosar. Hey, how about you, Dr. Thomas?
Ms. Thomas. It is part of the problem, but politically----
Mr. Gosar. No, I don't care about politically.
Ms. Thomas. Okay.
Mr. Gosar. Because you know what? It has to be part of the
solution here, okay?
Number two is we brought up monopolies. Do you think that
we have handled, Dr. Thomas, the monopolies of insurance
industries properly in Obamacare? I'll give you a minute to
catch that answer.
How about you, Dr. De Rugy?
Ms. De Rugy. No, absolutely not.
Mr. Gosar. Actually, the Federal Government is prohibited
from interceding in insurance companies by McCarran-Ferguson,
is it not?
Ms. De Rugy. Yes.
Mr. Gosar. Dr. Winston?
Mr. Winston. Yes.
Mr. Gosar. So do you see a need for actuarial tables? I
mean, 1945 I see actuarial tables being a necessity; we didn't
have good computers back then. But today you have an algorithm,
your own facts, a computer, you should be able to do it on your
own, don't you think Dr. De Rugy?
Ms. De Rugy. [Nonverbal response.]
Mr. Gosar. Dr. Winston?
Mr. Winston. Times change.
Mr. Gosar. Absolutely.
Dr. Calabria?
Mr. Calabria. Yes.
Mr. Gosar. So, I mean, one of the key principles here is
that we have a collusive environment, right?
Ms. De Rugy. Yes.
Mr. Gosar. Oh. Is any part of this bill talking about
repealing McCarran-Ferguson?
Mr. Winston. No.
Mr. Gosar. Let me ask you, Dr. De Rugy, because my
colleague from Virginia asked a question. Government
intervention would be great here, because in this aspect the
Federal Government now intercedes and breaks up the monopoly,
sends it back to the State, would it be, Dr. De Rugy?
Ms. De Rugy. Yes, it would be.
Mr. Gosar. Dr. Winston?
Mr. Winston. A quick point, if I could just say, is we are
looking to Government to correct distortions. There is too much
emphasis on the distortions it ``creates,'' but its main job is
to correct the distortions. That is the problem we are having.
Mr. Gosar. That is exactly, redirect it. So I am getting to
this.
Dr. Calabria, do you want to comment on that?
Mr. Calabria. I would absolutely agree with that. We need
to allow competition, particularly across State lines, in terms
of bringing competition to the insurance market.
Mr. Gosar. Wow. I mean, I want to turn the insurance
industry free because they are harnessed right now.
Ms. De Rugy. Or create a level playing field.
Mr. Gosar. What is that?
Ms. De Rugy. Create also a level playing field between
employer tax credit and individual market.
Mr. Gosar. Thank you.
Dr. Thomas, can we treat out way out of this epidemic of
healthcare?
Ms. Thomas. Can we----
Mr. Gosar. Can we treat our way?
Ms. Thomas. Treat? No. You have to prevent.
Mr. Gosar. Oh, absolutely. So what we have actually done
is, what I have shown you right here through distortions is, we
have actually priced primary care out of the marketplace. From
1965 on, what we started doing is taking the lowest common
denominator, which is the private family doctor, and priced
them out of the market so that you weren't making any money.
And that my good friend highlighted about the committee that
redresses CMS, but CMS redirects the reimbursement rate for
medical.
There is a reason I brought up dentistry. Can you tell me
about the inflationary aspects of dental costs over 30 years
versus medical costs over 30 years? Inflationary. Which one is
higher?
Ms. Thomas. Dental costs have stayed much more in line with
inflation.
Mr. Gosar. That is right. And medical more than 20 times.
What is the thing that is interesting about the two healthcare
models, one has lots of government, almost entirely Federal
Government, and one has very little Federal Government.
Wouldn't you say that, Dr. Thomas?
Ms. Thomas. Yes. But the nature of dental care is largely
preventive and not anywhere near as expensive as the medical
care system, so I don't think you can compare apples to
oranges.
Mr. Gosar. Oh, yes we can. Oh, absolutely. It is paradox
that we do this, because in the dental model there is many more
primary care physicians than there are specialists. Today, what
we have done is reinversed the whole payment model to be a
specialist, not a primary care doctor. That is key.
Mr. Winston. If I could just quickly add one additional
point to what you are getting at. Dental schools and medical
schools. Dental schools are closing, and there is less
availability of dentists. That too is affecting the market. I
would say a similar kind of restriction also exists in medical
care in the sense that you still have an entry barrier and a
license to provide service and I think the combination of those
things are also increasing the costs, and there is another area
where Government could intervene to reduce distortions.
Mr. Gosar. Oh, absolutely.
Chairman Issa. I thank the gentleman. Suffice to say that
the Affordable Care Act does not have preventive dentistry in
it, which perhaps was one of the mistakes.
With that, we go to the gentlelady from New Mexico.
Ms. Lujan Grisham. Thank you, Mr. Chairman. I really
appreciate this hearing. I think it is demonstrating on both
sides of the aisle these principles: one, the healthcare system
is incredibly complicated, so complicated, in fact, that, when
each of us are identifying situations, historical facts,
spending trends, it is very difficult to say whether that is a
private market issue in and of itself or a Government issue.
Some of the best programs that are most cost-effective are
where the Government and the provider system, whether that is
local or Federal, are effective, that partnership is effective.
When it is not effective, you have all kinds of things that we
can point to, and members have done this throughout the
hearing, demonstrated that the private market, the insurance
market on its own certainly hasn't solved any of these problems
and has gotten increasingly more expensive, so has the provider
system. The Government systems we can talk about, they have had
fluctuations in productive outcomes and not so productive. Some
States have great public health outcomes, some States do not.
So, for me, I think that I sort of changed how I want to
approach the panel. One, I agree with the chairman that we need
to do much more in transparency, and being able to, apples to
apples, talk about those effective investments, whether that is
policy, regulatory, oversight, transparency, marketing,
consumer protection; it is all of those.
I do want to point out that in the conversations that we
have had about life expectancy, what we haven't talked about is
what sort of investments public health has gotten at the same
time. Because if you look at sustainable effective, that is
both in terms of amounts and what they are directed at in
public health, because States also make significant public
health policy decisions, although the bulk of their money
largely comes from the Federal Government because States
haven't picked up that role because in the United States we
don't put a lot of credence in public health, which is the
largest effort we could take to do productive, low-cost
preventative care. And while there are incentives to do that in
public and community health in the Affordable Care Act, we will
have to see whether it is, frankly, enough, because like in all
of the things that we have done in the United States, we have
seven, eight, nine, ten independent systems of care that we try
to then roll into one and try to make sense out of it, and I
don't think that you can. And where we go from here I think
this committee and others are going to have to play a much more
significant role in getting that addressed.
So maybe, given that I only have a couple minutes left, I
just want to sort of re-ascertain a couple of things from the
panel. One, that the private market, by itself, in all of those
aspects that I identified, insurance companies, providers,
hospitals, for-profit, not-for-profit, by itself has not been
able, globally, to do any of the things that I just described;
provide access, lower cost, improve outcomes, provide consumer
protection, and affect policy in a way that would be meaningful
from oversight to better regulatory reform. True? Not true?
Ms. Thomas. True.
Mr. Calabria. I would say not true.
Ms. Lujan Grisham. Okay.
Mr. Winston. Not true.
Ms. De Rugy. I would say not true.
Ms. Lujan Grisham. All right. And I believe that it is
true, and I have 30 years. I don't have any of your expertise
from your particular aspects, but I navigate healthcare even in
this job every single day, and no matter what, it is getting
increasingly more complicated. And I would submit that if any
of you have--does anybody on the panel have a family member on
Medicare or Medicaid?
Ms. Thomas. Yes.
Mr. Calabria. Yes.
Ms. De Rugy. My family members are in France.
Ms. Lujan Grisham. So arguably better than Medicare. So the
two that have family members on Medicare, if Medicare was gone,
would you be able to finance that family member's healthcare on
your own?
Ms. Thomas. Absolutely not. Both my parents died of cancer
and their care was subsidized completely by Medicare, and they
would not have been able to have that care without Medicare.
Mr. Winston. I don't think we know what the system would
look like without Medicare. So you are asking me for an
imaginary world that I don't have an option of really choosing.
Ms. Lujan Grisham. Right. And I am almost out of time, but
also the reality is, and that is my point, that we know that
none of these systems are sustainable as they are. We know that
without Medicare the private market rates would be much higher
because we would have to figure out what we would do with all
of those elderly sick people who would also be increasingly
accessing emergency rooms and hospitals without any primary or
preventative or routine care. And that is before you get to
their acute care or chronic care issues that are covered by
Medicare.
We have to start figuring out how all of those systems
impact the private market, or the lack thereof. The sicker
people are in the private market, the higher those costs are.
The higher those costs are, limited access to providers. Rural
and frontier States are a whole different issue.
So now that I am out of time, and I really appreciate the
chairman's support, I would love to see this committee do lots
more in transparency. I would love to talk about the models for
dental care. There is in fact oral healthcare in the Affordable
Care Act; it is pediatric. We are really going to have to talk
about better integration for all of these models, and I would
support the chairman and this committee spending much more time
in healthcare issues such as this hearing than not. So thank
you very much.
Mr. Gosar. [Presiding.] You get no qualm from me at all.
I would like to acknowledge the gentleman from Oklahoma,
Mr. Lankford.
Mr. Lankford. Thank you, Mr. Chairman.
Thank you all for the time and the conversation. Can we
agree on a principle that is economic-wide, I guess, or
economy-wide, and that is fair competition is better for the
consumer than price controls?
Ms. Thomas. Yes.
Ms. De Rugy. Yes.
Mr. Lankford. Can that translate into healthcare?
Ms. Thomas. Yes.
Ms. De Rugy. Yes, it can.
Mr. Lankford. So then the challenge is how does that get
managed. If the goal is the benefit to consumer, the patient at
this point, and to provide fair competition and to provide
multiple voices and as much transparency as you can have in it,
there are some issues that are coming up currently right now
with our system that get in the way of that. For instance, I
know the chairman mentioned earlier this issue of testing
reimbursement. If you do, right now, in our system, according
to CMS, if you do a histology test, a test for skin cancer or
whatever it may be, outside of a hospital, your reimbursement
is 50 percent less than it is inside a hospital. So the
incentive there is is to do all the testing for the hospitals
inside because their rates weren't cut, for the big hospitals;
they were for every small lab all around the Country, by 50
percent. Does that promote fair competition?
Is it cheaper to do that test in a hospital or is it less
expensive to do that test in an outside lab, typically? I would
submit it is probably more expensive to do it in a hospital. I
don't know that anyone would disagree with that. They are also
reimbursed now 50 percent more. So there is this, again,
leaning in to the larger hospitals.
In the Affordable Care Act, it caps the growth of
physician-owned hospitals. It set a date for them and said
however many rooms you have at this point, you have to remain
at that. So physician-owned hospitals are at a permanent
disadvantage to the hospital down the street forever. Is that
fair competition? Does that benefit the consumer? Does that
help us in price and cost and benefit consumers? I don't hear
anyone saying that would benefit the consumers. No?
Ms. Thomas. There have been some problems with physician-
owned hospitals that are part of why that measure was passed,
but I won't----
Mr. Lankford. Was the problem with the patient or--because
seven of the ten top hospitals in the Country are physician-
owned hospitals, even still right now. But all of them will be
capped in the days ahead and refused to grow; they can't
expand. So while patients may choose to do that, the Affordable
Care Act steps in and says, no, I don't want more competition;
I want less competition. To me, that doesn't benefit the
consumer; that doesn't benefit, in this case, the taxpayer,
even, who is now paying the bill on it, where we are going to
pay a higher price at a hospital than we would in the lab. We
are going to pay a higher price in this facility, this one. And
I am not denigrating those, it just is a step into it to say we
want less competition rather than more, and that doesn't seem
to work anywhere else.
Durable medical equipment right now, there was a decision
by CMS to have fewer companies provide durable medical
equipment because it is easier to oversee fewer companies. A
large central government can't oversee thousands of durable
medical equipment companies, so you need to have fewer
companies so the Federal Government can oversee that for fraud.
Right now, our payments out to companies where we can't
verify, or individuals, not fraud, just inaccurate payments, we
are topping $50 billion in inaccurate payments through Medicare
and Medicaid at this point. Can you make that more efficient by
putting the controls for that closer to the payment location,
closer to those individuals? So that may be a State that
oversees that, rather than the Federal Government, instead of
having to track it from Washington, D.C. Does it make it more
efficient to oversee those things from a State or local
municipality, or to try to do it all from a central location?
Ms. De Rugy. The State would make more sense.
Mr. Lankford. So if we are going to go after inaccurate
payments, is it better to make those decisions closer, and
check for fraud and check for inaccuracies closer, rather than
a centralized location? It seems like everybody is onboard with
that. These are some of the challenges that we have.
While we can talk about some of the healthcare issues,
there is a basic principle of economics that we want fair
competition and we want to increase competition, and the
Affordable Care Act is reducing the number of opportunities out
there, reducing the number of places, so we are actually
reducing the amount of competition and we are saying, every
area of the economy, free and fair competition works well
except in healthcare, where we have to have more price
controls, because that is ``different.''
In Oklahoma City right now we have two hospitals that have
all of their prices online for their procedures. It started
with one hospital that did it. And the push to get all your
prices online has now pushed another hospital to say, okay, we
will put all of our prices online as well, and be able to
detail out. What was interesting, the first hospital that did
it, I talked to the gentleman that runs the hospital, he said
we were surprised when we put all of our prices online. Guess
who came first? The Canadians. The Canadians came first to our
hospital. We suddenly became a spot for medical tourism because
they were tired of waiting six months in Canada for a
procedure, so they would fly to Oklahoma City, have the
procedure done there, when they knew exactly what the price was
and to be able to fly home.
It is the same thing that is happening right now in our
Veterans Administration. I have veterans call my office all the
time. It takes six months for them to get a knee replacement or
they could cross the street and go to a fantastic hospital, OU
Medical Center, and get it done on Tuesday. But for some reason
we have this concept that we have to do price controls and have
to do central control because this is healthcare, when in
everything else it seems to work well with free and fair
competition. We have to find a way to do this.
Integris Hospital in Oklahoma City is one of the best
transplant hospitals in the world; fantastic facility,
incredibly well run. People come from all over the place to
come to it because of the quality of the services and the
openness of what they do. We have to be able to push back on
some of this.
With that, I yield back.
Mr. Gosar. I want to take off on that for a second. Could
you explain to me, Dr. Thomas, why a procedure done out in a
family doctor's procedure under Medicare is billed under
Medicare Part A, but then the same procedure by a physician
under a hospital is billed under Medicare Part B? You can't
defend that. And that is what is happening. We are allowing,
willy-nilly, these rules to be unequivocally violated right and
left. It is the same procedure. Buildings, each office has
their own space to have to look at in overhead. So there is no
reason why you have to allow hospitals to get reimbursements
that sometimes double the price of a Medicare Part A aspect.
One other thing that I wanted to highlight in your earlier
testimony. It is not just about emergency rooms, is it, about
access to care? I thought that was under federally qualified
health centers, that your ability to pay could not stem you
from not getting treatment. Is that true? Federally qualified
health centers have a sliding fee scale in which they have to
see you, but not based upon your ability to pay. It is. I mean,
I served kitty-corner from one for many, many years. So there
are more opportunities out there than meets the eye.
The gentleman from California, Mr. Cardenas.
Mr. Cardenas. Thank you very much, Mr. Chairman. I would
like to thank the panel for availing yourselves to this
committee so that we can hopefully improve on our understanding
of what is going on with healthcare in our Country.
But there has been a lot of discussion today, and I guess
rightfully so, because the hearing title is The Limitations of
Big Government, the Rollout of Healthcare.gov. So a lot of
discussion has been about Government and whether or not
Government has a role. But earlier in a discussion, as a result
of a question from one of my colleagues, the three non-
healthcare expert panelists, all of you seemed to agree that
private sector is more efficient than Government when it comes
to providing services and/or systems to Americans. Is that
consistent with what your answers are today?
Mr. Winston. When the goal is to provide an economically
efficient product or service, yes. You have to be very clear on
what you are trying to do. In other words, the market is not
great at necessarily providing some specific targeted service
to a particular individual who can't pay for it. The market may
not do that. So, again, you have to be very clear on what your
objective is. But generally, if you are talking more about the
efficient production and provision of goods and services, yes,
I think the evidence is overwhelming that the market is
superior for Government. In fact, Government rarely corrects
those problems.
Mr. Cardenas. Any of the other panelists want to clarify?
Mr. Calabria. I would pretty much agree with that and
clarify the point that certainly the market, I think, has
proven itself to be of lower cost and have more innovation. I
think it is incredibly important to parse out that a lot of
times what we are talking about is an income problem. And
again, as I said earlier, all resources have cost. If someone
has zero income, that is not a market failure; they can't
afford those goods. You could make the same thing about
Government. If you had a group of people with zero income,
obviously they can't pay taxes to support Government either. We
don't call that a Government failure. So I do think we need to
separate out the difference between are we talking about a
problem that is purely of poverty? Are we talking about a
failure of the healthcare system? And those are two separate
issues and I think we combine them, quite frankly.
Ms. De Rugy. I agree with what has been said, but I would
like to add that Government very often, even when there is,
let's say, we see a role like providing healthcare for low-
income people who couldn't get it on their own, doesn't do that
very well either. I mean, we have been talking about expanding
Medicaid, but there has been no discussion about health outcome
for people who are in Medicaid. And a lot of the things that I
have read, whether it was the Oregon study, it is like it is
not a desirable outcome, or it could be improved; and I think
we need to also talk about outcomes versus just providing
delivery.
Mr. Cardenas. Well, I just wanted to clarify. Fortunately,
all three of you do provide a service when it comes to the
exercise of trying to understand where Government should or
should not be playing a role. However, the fundamental problem
that we have in this Country with the private sector is that
the private sector has the right to ignore who they serve and
where they draw the line at how much they are going to charge
or not serve at all. Yet, in our Government, in this Country,
in many cases the Government has passed legislation and created
laws that say we are not going to ignore. For example, an
extreme case is when somebody shows up to an emergency room in
this Country.
I don't know how they do it in other countries, it is a big
world, but in this Country, if somebody shows up in the
emergency room, that provider of service, private or public, is
required to stop the bleeding, regardless of the cost and
regardless of the ability to pay. And that is the fundamental
difference that I have with having a discussion that tries to
have a purity of discussion about how Government doesn't have a
role in XYZ, yet at the same time the private sector would do a
better job or perhaps would provide better. But the fundamental
problem that we have is, especially when it comes to
healthcare, the private sector has the right, insurance company
A has the right to tell person B if they approach that company
and say I would like to apply for insurance, they have the
right to say, mm-mm, we checked all of what we provide, we
cannot provide service for you, we are not going to insure you.
They have the right to do that.
And fundamentally we have anywhere between 40 to 50-plus
million people in this Country who, some of them, fall into
that category that, no matter how hard they are going to try,
the private industry is not going to provide for them; and that
is where the Affordable Care Act is trying to thread that
needle and saying is there a way in which, in this great
Country, we can actually provide that to some of those 40 to 50
million people, and not all, to some of those 40 to 50 million
people that on the natural, as the system is before the
Affordable Care Act is in full bloom, that those private sector
corporations have the legal right to say, sorry, we don't have
a policy for you, go to the next place or do whatever you wish,
but don't come here.
Dr. Thomas, is that an accurate portrayal of what one of
our dilemmas is right now in this Country, that we are trying
to tackle?
Ms. Thomas. Yes.
Mr. Cardenas. I am out of time, so, Mr. Chairman, they are
welcome to answer.
Mr. Gosar. The witnesses may answer if they would like to
answer.
Mr. Cardenas. Thank you very much.
Mr. Winston. What you are characterizing is something what
we call in economics merit goods. That is, these are goods that
American society believes, goods and services, that people are
entitled to regardless of whether they can afford them or not.
I think what has changed over time is, yes, the Government
can step in and say, given democratic outcomes, we support the
provision of these goods or services. We are now discussing and
thinking about, okay, given that that is the case, what is the
least cost way of providing those goods and services? I think
people might think it is through the Government. So the
question about Medicare is saying if we didn't have Medicare,
what would happen to people? You have to construct what we call
a counterfactual, that is, really construct what would have
happened in the absence of the policy. So increasingly people
are saying, Marty Feldstein is most notably, saying if we had
private health accounts, that might be able to achieve the
goals that Medicare is trying to achieve at lower cost. And I
think the questions we are raising about ACA and I think the
debate will follow, universal coverage, fine. What now is the
least cost way of doing that?
Mr. Cardenas. Mr. Chairman, if I may, I appreciate that
accurate portrayal of arriving at ideal solutions, but
unfortunately we live in a very dynamic, humanistic world where
ideal solutions will perhaps never be attained.
Thank you. I yield back.
Mr. Gosar. I thank the gentleman.
I would like to recognize the gentleman from Pennsylvania,
Mr. Cartwright.
Mr. Cartwright. Thank you, Dr. Gosar. I want to thank the
chairman and Ranking Member Cummings for putting together this
fascinating panel and allowing this interesting philosophical
discussion that we have been having. Also thank you to my
colleague, Mr. Cardenas, for weighing in on that as well.
For my own part, I will say I think the Government of the
United States of America has been responsible for some of the
most innovative and successful programs the world has ever
seen. When we talk about Social Security, we talk about a
program that has lifted people out of poverty, as you have
said, Dr. Thomas. When we talked about Medicare, same thing, a
program that has enabled regular people to avoid medical
bankruptcy, to qualify for treatment, as in the case of your
parents, Dr. Thomas. And so many Americans depend on Social
Security and Medicare. I will be an unceasing advocate for both
of those programs, as well as other Federal programs.
Our interstate highway and rail system transports millions
of people daily, safely. The Environmental Protection Agency
ensures clean drinking water and breathable air for Americans.
Our brave soldiers in the military put together a program that
is the envy of the free world, our American military, our
soldiers and sailors. The Consumer Product Safety Commission
ensures that Americans feel secure in their purchases. The
Federal grants, loans, and work study funds provided to our
students enable higher education to become a reality for
millions of Americans.
And then when we get to this ACA, absolutely it has been a
rocky rollout and, in my view, we are going to have further
work to do on it. We may well be tinkering with the ACA for
years to come, but my view is and my prediction is that history
will look kindly back on the Affordable Care Act as just
another in a long line of examples of American greatness.
Dr. Thomas, I want to follow up with you. I would like to
ask you about Social Security a little bit. You touched on it.
The implementation of that program was hugely controversial at
the time, in the 1930s, and not without its own challenges, but
today, like Medicare, it is obviously an extremely admirable,
successful, and popular program. I have an article here that
was published on October 28, 2013, and it is entitled What
About Social Security's Rollout.
Dr. Gosar, I ask unanimous consent that this article be
inserted into the public record.
Mr. Gosar. So ordered.
Mr. Cartwright. Dr. Thomas, this article describes many of
the problems facing Social Security in its first several years,
and it compares them to what we are seeing now in the ACA. For
example, the article says this: ``After the Nation's major
social program finally became law, critics regularly blamed it
for slowing the economy and a swelling of the Federal
bureaucracy. Fierce congressional opposition led to the
formation of a blue ribbon panel to overhaul Social Security.
Obamacare, in 2013? Not quite. It was Social Security in
1937.''
Dr. Thomas, it seems obvious, but would you agree that the
implementation of a large-scale Federal Government program like
Social Security takes time?
Ms. Thomas. I would agree, and I would also add that
anything that is ambitious that will actually enact real change
is bound to encounter problems.
Mr. Cartwright. Well, I want to go on quoting the article.
``Created in 1935, the Social Security program took 40 years
just to include all working Americans in its basic coverage.
When old-age insurance program launched in 1937, barely more
than half of the labor force participated. A series of
amendments to the Social Security Act gradually expanded the
coverage and by 1979 it finally reached over 90 percent of
American workers.''
Dr. Thomas, the history of Social Security implementation
seems to support the idea that the Government is in fact
capable of effectively administering a large-scale program like
this that helps millions and millions of Americans. Would you
agree with that?
Ms. Thomas. Yes. The administration of the program has
evolved over time, but is certainly working smoothly at this
point, and Social Security has evolved over a period of more
than 70 years. For instance, the amendments to include domestic
and agricultural workers, to make sure that they were covered,
they weren't passed until, I believe, 1950 because there was
such political opposition in the south previous to that, when
the law was passed originally. So over time new priorities are
brought into the law that improve its function.
Mr. Cartwright. And I say let's work together and improve
the ACA and make it work for us over time.
With that, I yield back, Dr. Gosar.
Mr. Gosar. Well, I want to let Dr. De Rugy answer a
question. She wanted to answer one of your questions.
Ms. De Rugy. What I wanted to say about Social Security
was, and that is one of the problems with Government, is like
sometimes Government creates a program because there is an
actual need, and the problem is you then go back 60 years later
and that need may not be there for a majority of the people it
serves, but then the problem stays in place. And that is the
case. Fifteen Federal agencies have run a state of seniors in
America right now and you can see that their conditions have
dramatically improved, and yet this program still serves
everyone as if everyone is in poverty.
The other thing I would add is that if Democrats like
Social Security so much, why not try to reform it? This is a
system that is bankrupt. In 2035, and probably before, when the
trust fund expires, the prediction is that benefits will have
to be cut across the board by 25 percent. The people who will
be hurt the most are the people, the seniors who, at the time,
still actually are poor. So I want to say if we think it is a
program that provides a valuable service to seniors who are
poor, why not reform to make sure that when that time comes
they will not be the ones hurt the most?
Mr. Gosar. Dr. Winston, did you want to make a comment?
Mr. Winston. No.
Mr. Gosar. How about you, Dr. Calabria?
Mr. Calabria. I was going to add. Veronique touched on
this, but I do think we have talked about the benefits of
Medicare, Social Security, and these programs, but again, as
mentioned, I will echo something that the gentleman from
Illinois, Representative Davis, said about the young and the
elderly. Programs that leave trillions of dollars of debt for
the young to pay off, programs that make promises to the
elderly that cannot be kept, that is not compassion, in my
view.
Mr. Gosar. That is creating cripples.
I just want to ask you, Dr. Thomas--I have a few extra
moments and the privilege of sitting in the chair--are we
healthier as a Nation right now?
Ms. Thomas. Healthier than when?
Mr. Gosar. Oh, let's talk about the 1930s. Rising rates of
diabetes? Was diabetes as high then as it is now?
Ms. Thomas. We have dramatically improved life expectancy--
--
Mr. Gosar. So let me ask you another question. Compared to
other industrialized nations, how healthy are we? Let's compare
diabetes.
Ms. Thomas. Well, I can tell you off the top of my head
that the infant mortality----
Mr. Gosar. No, we are not comparing apples to apples here.
Ms. Thomas. I am going to agree with you.
Mr. Gosar. I want to talk to you about obesity.
Ms. Thomas. Okay.
Mr. Gosar. Let's talk about obesity. Let's not change the
subject, let's go directly to apples-to-apples. Obesity.
Ms. Thomas. Fortunately, the obesity epidemic has leveled
off and is beginning to improve, but, yes, that is a major
healthcare problem.
Mr. Gosar. I would disagree on that. Diabetes?
Ms. Thomas. Also a major healthcare problem.
Mr. Gosar. Absolutely. So I want to bring you back to
talking about----
Ms. Thomas. They are diseases of affluence.
Mr. Gosar. What is that?
Ms. Thomas. They are diseases of affluence.
Mr. Gosar. I don't know about that. You know, good eating
policy, I am one of those guys. I am Celiac Sprue, by the way,
so I am allergic to wheat and gluten, so that is why I am kind
of the incredible shrinking guy. But we have to have patient
accountability in this process. For example, for me, as Celiac
Sprue, I have a seven day greater chance of getting any type of
lymphoma. Okay? So what we want to do is have prevention. So
what I want to see is I want an insurance come to me and say,
listen, Dr. Gosar, we know that early detection of lymphoma is
the best way and the cheapest way, so we are going to give you
some incentives to come and have a physical twice during three
years, and if you do that we are going to give you a kickback
for doing that. You reincentivize good behavior. It is like our
eating, our snack program. I have some problems with our snack
program. Don't you? All that sugary stuff on those? I mean, you
are public health. Come on, now.
Ms. Thomas. I would definitely like to improve that, yes.
Mr. Gosar. Okay, so tell me what is on the WIC program that
everybody shouldn't be on? Women, infants, and children;
complex carbohydrates, complex proteins. Why shouldn't we be
all on that?
Ms. Thomas. Well, some of us can't eat that without getting
sick.
Mr. Gosar. Name one. Name one diet that you won't get sick
on. I am cautioning you once again, this is my forte, so if it
is good enough for women, infants, and children----
Ms. Thomas. Give me some specific examples.
Mr. Gosar. I am asking you for specific examples. You
said----
Ms. Thomas. I don't have the WIC formulary in my head, I am
sorry.
Mr. Gosar. Oh, it is complex proteins and complex
carbohydrates, so there are no simple sugars, maybe outside of
a few fruit choices. I think if you are on government
assistance, we should be all on the WIC program. Don't you
think? If it is good enough for women, infants, and children, I
am just telling you, those are one of the groups that was
highlighted today, one of the weakest groups here, that if it
meets a criteria of meeting that formulation for----
Ms. Thomas. But they have different nutritional needs than
everybody else. I am not sure where you are going.
Mr. Gosar. Not necessarily. No, not necessarily. Can you
tell me the public health mantra, was it a success in Indian
Health Services? I mean, you heard about the integration for
African-Americans. Tell me about the Indian Americans. It was a
disaster. It has not been great. In fact, part of the trust
obligations from the Federal Government was to work in concert
with the Tribes, not to dictate to them. Isn't it true that the
Tribes have an option out of ACA because of self-determination,
and they are taking it? They are actually building their own
hospitals. They are doing their own thing because they want to
breed the aspect of prevention and patient accountability.
Ms. Thomas. And you say the Indian Health Service has not
done that?
Mr. Gosar. They haven't. I mean, I am from Indian country.
I can tell you that right now. The Navaho Nation and the San
Carlos Tribe, they are all privatizing, because Government came
in and said these are the services we are going to give you,
regardless of what you want, we are going to do this
accordingly, and it was a failure.
Thirty percent of my patient base in my practice came to me
to pay for my services because they valued them. Because they
could have got it free from the Federal Government and they
refused. There is something to learn from that experience
there, and I hope that you go back and look at your notes,
because some of the things you are citing aren't exactly
factual historically.
Last comments. Dr. De Rugy, from the standpoint of this
hearing, is there anything that you would like to comment in
regards?
Ms. De Rugy. No. I mean, I think that we need to remember
that even when the Government is well intentioned, a lot of the
ways that it intervenes actually goes even against the goal
that they have set of themselves, and we also need to remember
that it always introduces distortion and that Government
officials, unfortunately, have a great incentive to listen to
interest groups.
Mr. Gosar. So it is not about whether the Government is
involved, it is a balance, wouldn't you say?
Ms. De Rugy. Sorry?
Mr. Gosar. Trying to find a balance of Government
involvement.
Ms. De Rugy. Well, I think one of the things that we have
learned is that Government fails, and one of the best ways to
prevent them is to actually limit the purview of Government
intervention.
Mr. Gosar. And maybe hold people accountable for things
poorly done.
Ms. De Rugy. Absolutely.
Mr. Gosar. Dr. Winston, final comments.
Mr. Winston. My final comments are that an awful lot of the
discussion has been looking backward; there has been reference
to history, Medicare, Social Security, things done in the past.
The world changes, and I think it is probably more important to
start looking forward, the future, looking for new ways in
which we want to try to do things, recognizing that, yes, maybe
in a different time Government was effective in doing
something, initiating, doing it, but things change. And if
there are other ways in which we can try to achieve the goal we
are trying to do it, particularly with the market, we should be
experimenting and be more open-minded to the fact that we don't
have to be wedded to the past and look for new ways of doing
things.
Mr. Gosar. I like that aspect. You always have to look at
your past before you go forward, because you are doomed to
repeat the past if you don't.
Dr. Calabria.
Mr. Calabria. I will end with maybe summarizing a few
points. First of all, of course, I think sometimes there is a
bit of a strawman aspect to the market not being perfect, the
Government not being perfect. Of course, as we know, there are
no perfect institutions; they all have their flaws, and I think
we need to find the better that works out of any of those
institutions.
I will reiterate a point I made a couple times before,
which is I do think that there is a confusion between what is
essentially a poverty problem and a failure of various markets.
If you have zero income, you can't afford anything. That
doesn't mean that all of those markets are failing. And, again,
the way to address that is to try to address poverty directly,
which I will say, as an aside, I think the overwhelming
evidence across countries and across history is if you really,
seriously want to reduce poverty, extending the market is the
way to do it, and creating wealth in that regard.
Finally, we often sort of hear a moral argument made. I
will be very clear that my preference oftentimes for markets is
not simply an issue of efficiency. But I believe that markets
are, by and large, based on consensus, where I believe it was
the gentleman from Virginia made the point about us not getting
along. Well, the part of us not getting along is you can use
the Government to force me to do things I don't want to;
whereas, in the marketplace, for me to sell you something, I
have to come to a price in agreement and terms on which you
agree. So my goal as a generality is how do we try to build
society more on consensus and cooperation, rather than
coercion.
Mr. Gosar. And customer service.
Dr. Thomas, your last comments.
Ms. Thomas. Well, I would agree with I believe it was Ms.
Grisham who said that the health system works best when
Government and nonprofits and for-profits all cooperate in the
most efficient way, and that is what I am advocating. I also
agree with Dr. Winston, who said times are changing, and even
as a historian I don't think that we can do things exactly the
way they did in 1935. But I think a sign that things really are
changing is that the American Medical Association, which has
opposed every national health insurance proposal since 1939, in
2010, supported the Affordable Care Act, and, in fact the AMA's
executive vice president, Michael D. Maves, admitted that we
don't believe that maintaining the status quo is an acceptable
option for physicians or the patients we serve. I think that is
a very important turning point that we are at.
Mr. Gosar. I don't think anybody will disagree that what we
have as status quo would work. I am here because of that. I
just don't think the solution that we have on the table works,
because we didn't get everything on the table put on the table.
At that time, the AMA represented about 18 percent of all
physicians across the Country, hardly a vote of acknowledgment.
And I think they are actually rescinding that aspect now; they
don't particularly care about that, if I am not mistaken. So
statistics can be used a certain way.
The last thing I would like to say is that when we look at
problems, problem-solvings, we have to look at where our costs
are spent. You made a comment about we are spending a lot of
money. In Medicaid and Medicare, the dual eligibles are the
ones we are spending the most money on, and these are problem-
solvings that we want the best of the best. And there are two
pools, there are the seniors that are so poor with Medicaid and
Medicare, and there are the youngers that have real chronic
conditions like multiple sclerosis and that aspect. It is
ingenuity that sets us free, and that is why I came back to
McCarron-Ferguson, okay? I want to turn the insurance industry
upside down. I want them to be revolutionized to compete for my
dollars, because I want new incentive programs based on me,
customer service. That is one of the things that we have to get
back to. Not Government dictated, but good customer service;
patient-centered, patient-friendly. When we put all the market
factors working on behalf of people, not making them cripples
but to empower them to make health choices, they win.
Ms. Thomas. But how can you turn that insurance industry
upside down without an outside force?
Mr. Gosar. That is why I said McCarron-Ferguson.
Ms. Thomas. Okay.
Mr. Gosar. I want choice. My choices are very different, as
I elaborated, versus somebody else's. So breaking up the common
denominator, if all of us are physicians here, we can't collude
on prices. Okay? But insurance companies do. Okay? So what I
want to do is I want to see the innovation within the insurance
industry and show me what I don't even know. They are the
experts in that. I am an expert in dentistry. I want them to
show me what is possible, because I haven't dreamed it yet.
Neither have you; neither has anybody here.
What I see at this panel is the people that bring the
building blocks of what you can envision as success, and we
haven't got it. And what I think we saw from this panel is
Government can't do that. When you talk about monopolies,
noncompetitive bidding practices, Davis-Bacon, it goes on and
on and on. I mean, look at the bid process of this website.
There was no competitive bid. Tell me that a Davis-Bacon job is
different than a private sector job. It isn't. But it is 22
percent, on average, higher. It doesn't make any sense today.
So we should be big people today and ask that all the pieces be
put on the table. It is not a Republican, it is not a
Democratic issue; it is an American issue, putting it out there
and having a transparent discussion. We haven't that. And until
we do, we are not going to get a solution.
Thank you very much for this panel and we stand adjourned.
[Whereupon, at 12:26 p.m., the committee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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