[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE EFFECTIVENESS OF THE
INDIVIDUAL MANDATE UNDER THE
AFFORDABLE CARE ACT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON OVERSIGHT
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
JANUARY 24, 2017
__________
Serial No. 115-OS01
__________
Printed for the use of the Committee on Ways and Means
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PUBLISHING OFFICE
33-361 WASHINGTON : 2019
COMMITTEE ON WAYS AND MEANS
KEVIN BRADY, Texas, Chairman
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
DEVIN NUNES, California SANDER M. LEVIN, Michigan
PATRICK J. TIBERI, Ohio JOHN LEWIS, Georgia
DAVID G. REICHERT, Washington LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
TOM PRICE, Georgia JOHN B. LARSON, Connecticut
VERN BUCHANAN, Florida EARL BLUMENAUER, Oregon
ADRIAN SMITH, Nebraska RON KIND, Wisconsin
LYNN JENKINS, Kansas BILL PASCRELL, JR., New Jersey
ERIK PAULSEN, Minnesota JOSEPH CROWLEY, New York
KENNY MARCHANT, Texas DANNY DAVIS, Illinois
DIANE BLACK, Tennessee LINDA SANCHEZ, California
TOM REED, New York BRIAN HIGGINS, New York
MIKE KELLY, Pennsylvania TERRI SEWELL, Alabama
JIM RENACCI, Ohio SUZAN DELBENE, Washington
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
TOM RICE, South Carolina
DAVID SCHWEIKERT, Arizona
JACKIE WALORSKI, Indiana
CARLOS CURBELO, Florida
David Stewart, Staff Director
Brandon Casey, Minority Chief Counsel
______
SUBCOMMITTEE ON OVERSIGHT
VERN BUCHANAN, Florida, Chairman
PAT MEEHAN, Pennsylvania JOHN LEWIS, Georgia
JASON SMITH, Missouri JOSEPH CROWLEY, New York
DAVID SCHWEIKERT, Arizona SUZAN DELBENE, Washington
JACKIE WALORSKI, Indiana EARL BLUMENAUER, Oregon
CARLOS CURBELO, Florida
GEORGE HOLDING, North Carolina
C O N T E N T S
__________
Page
Advisory of January 24, 2017, announcing the hearing............. 2
WITNESSES
John R. Graham, Senior Fellow, The National Center for Policy
Analysis....................................................... 5
Thomas Miller, Resident Fellow, American Enterprise Institute.... 14
Dr. John E McDonough, DrPH, MPA, Professor of Practice,
Department of Health Policy & Management, Harvard TH Chan
School of Public Health........................................ 28
SUBMISSIONS FOR THE RECORD
AHIP, statement.................................................. 58
EXAMINING THE EFFECTIVENESS OF THE
INDIVIDUAL MANDATE UNDER THE
AFFORDABLE CARE ACT
----------
TUESDAY, JANUARY 24, 2017
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Oversight,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:26 p.m., in
Room 1100, Longworth House Office Building, Hon. Vern Buchanan
[Chairman of the Subcommittee] presiding.
[The advisory announcing the hearing follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BUCHANAN. The Subcommittee will come to order.
Welcome to the Ways and Means Subcommittee Oversight
hearing on Examining the Effectiveness of the Individual
Mandate Under the Affordable Care Act. My focus today is on
affordability.
In Florida, 65 percent of our counties only have one
carrier offering insurance to individuals in 2017. The State
went from eight carriers in 2014. Today, we have five carriers,
almost half, in 2017. In Manatee and Sarasota Counties, two
counties I represent in my district, individuals went from
being able to choose from among three different providers down
to two. This happened in just a single year. In addition to
less options to choose from, the average monthly premium
Floridians enjoyed under the ACA increased by 19 percent this
past year, according to the Florida Office of Insurance
Regulation.
Let me pause and look back 4 years ago when the Affordable
Care Act was just beginning to be implemented in 2013. Then,
the HHS secretary released a report stating the goal of
Affordable Healthcare Act is to increase competition and
transparency in the markets for individuals and small group
insurance leading to higher quality, more affordable products.
Fast forward 4 years later, 2017, what we are seeing not only
in Florida but across the country is a decrease in competition,
an increase in premium costs. This increase cannot continue. It
is not sustainable.
We are here today to understand why the individual mandate,
which today I think those fees that we are paying in over $3
billion was a key component. The ACA is failing to stabilize
the health insurance marketplace. This discussion is important
not so that members on our side of the aisle or the other side
of the aisle can score political points, but that, so we can
focus on the facts. We need facts because there are real
people's lives that are being impacted.
When I talk to people in my district, it is clear to me
that they are struggling. Although I mentioned some statewide
and county-level statistics, those numbers touch the lives of
real people in Florida in terms of Florida families. We cannot
stand idly by as health insurance under the Affordable Care Act
becomes less and less affordable for our constituents. I hope
this hearing serves as the first step to fixing what is broken.
I look forward to listening to our witnesses and learning from
the past so that we can develop better solutions for the
future.
I now yield to the distinguished Ranking Member Mr. Lewis
for the purpose of an opening statement.
Mr. LEWIS. Again, Mr. Chairman, thank you. I want to thank
you again and congratulate you on your new role as chairman of
the Oversight Subcommittee.
The two Democratic Members of the Subcommittee have now
arrived. They didn't get lost in the tunnel. So they are here.
Joe Crowley of New York and Danny Davis of Illinois.
Mr. Chairman, I hope we can continue our tradition of
strong oversight of the Administration as we have in past
Congresses. I would also like to thank each witness for being
here this afternoon.
Let me begin by saying what I have said at countless other
hearings. The Affordable Care Act works. It works. Now, I want
to be crystal clear for the record. The topic of today's
hearing is a Republican idea. In fact, Governor Romney called
it the ultimate conservative idea because it was based in
personal responsibility. The individual mandate became a core
part of the health care law. There is not a family in this
country that has not been touched by sickness or injury. By
sickness or injury.
I have said it before and I will say it again. I believe in
my heart of hearts that health care is a basic human right. It
is not a privilege for the wealthy. It should not be reserved
for the people that insurance companies have decided worthy of
the risk.
This Committee has a mission, an obligation, and a mandate
to think of those that have been left out and left behind. We
cannot forget the 100 million Americans with preexisting
conditions. We cannot forget the struggle of those people whose
care costs more than the insurance limit. We cannot forget the
seniors in the doughnut hole who were unable to afford their
medicine.
I know that we can come together to make health care more
affordable, more accessible for every person in our great
country. I speak for the members on this side of the aisle who
are ready to do the good work, the people's work.
We must be mindful not to harm the marketplaces where
Americans buy insurance. We must protect children from being
kicked off of their parents' plan. We must ensure that a woman
is not charged more simply because she is a woman.
Mr. Chairman, today we face a moral issue. In the coming
weeks and months, we should come together to improve the law
and not destroy it. At stake are not just the detail of policy
but the fundamental principles of justice and the very
character like our great Nation.
Thank you, Mr. Chairman. And I yield back.
Chairman BUCHANAN. Thank you, Mr. Lewis.
Without objection, other Members' opening statements will
be made part of the record.
Today's witness panel includes three experts. First, John
Graham is a senior fellow at the National Center for Policy
Analysis. Tom Miller is a resident fellow at the American
Enterprise Institute. And finally, Dr. John E. McDonough is a
professor of practice at the Department of Health Policy and
Management at Harvard TH Chan School of Public Health.
The Subcommittee has received your written statements and
they will be all made part of the formal hearing record. You
will each have 5 minutes to deliver your oral remarks. We will
begin with Mr. Graham. You may begin when you are ready.
STATEMENT OF JOHN R. GRAHAM, SENIOR FELLOW AT THE NATIONAL
CENTER FOR POLICY ANALYSIS
Mr. GRAHAM. Thank you, sir.
Chairman Buchanan, Ranking Member Lewis, my name is John R.
Graham of the National Center for Policy Analysis. I will take
my short time today to emphasize some of the commentary I
brought up in my written comments, which I have already
submitted to you and which I drafted before President Trump
issued his executive order, which I think makes the individual
mandate of even more pressing concern.
Will it be enforced by the next HHS secretary? If it is not
enforced, will it cause ObamaCare to collapse? Or perhaps some
of us might say collapse more or faster than we have seen it
collapsing already.
Politically, it is very easy to go after the individual
mandate. It is the least popular part of ObamaCare. However, it
counterbalances the most popular part of ObamaCare, the
protection against being underwritten for preexisting
conditions.
I think my message today could be worry not. Although the
individual mandate is also--is bad politics, I would also
assert it is bad economics or at least weak economics. Now,
this is a very different message than we have heard for many,
many years. It is true that it can properly be characterized as
a conservative idea. And the high water mark of that was what
we call RomneyCare in the Massachusetts health reform. The idea
which is meant to appeal to conservatives is that this is--
demonstrates individual responsibility. We have a problem that
hospitals' emergency rooms are jammed with patients who are not
paying their bills, and so we have an uncompensated care
crisis. Fair enough.
Further, if people are encouraged to buy more insurance,
they are more likely to get preventative and timely care and
not have to go to the emergency room in the first place. Well,
that would be fine. But the reality on the ground is it would
only work if the mandate or the uninsured crisis was
concentrated among high-income households. If it was folks like
Bill Gates or Warren Buffett who were crowding the emergency
rooms. I am sorry. I should update that given the current
Administration. Peter Thiel or Sheldon Adelson were crowding
the emergency rooms. But they are not. It is low-income people
who are largely uninsured. They cannot bear to pay the fee or
tax or penalty or whatever we want to call it for violating the
mandate.
So although it is appealing to conservatives to think that
this imposes individual responsibility, in fact what its real
effect is to give cover to significant growth in government
spending and government programs, which is fine in some
people's minds but not for conservative minds, I would suggest.
Now, whatever we want to call it--the law, as you know,
calls it a penalty. CMS healthcare.gov now calls it a fee. But
whatever we want to call it, it is inefficient in a very
mechanical sense. A recent memo from the Internal Revenue
Service points out that 6-1/2 million people paid the fine in
2015, but 12.7 million were exempted for various reasons.
Again, emphasizing the point that most people whom you think
you are affecting with a mandate cannot afford to pay it.
How much was raised from the mandate? $3 billion. Now, to
me that sounds like a lot of money. But as you know, in the
health care system that is nothing. We spent $3.2 trillion on
health care in this country in 2015. If we compare the
Congressional Budget Office score to--about ObamaCare, the
Affordable Care Act in 2010 versus the update in March 2016, it
shows there is a slight reduction in anticipated revenue from
the tax or penalty from the people who do not obey the mandate.
But this is not because more people are getting private
coverage and exercising their responsibility.
In the original CBO score, the CBO estimated, this is back
in 2010, that the Affordable Care Act would leave 22 million
uninsured in 2016 through 2019. Recently, that has been upped
to 27 million. Those with employer-based coverage, according to
the original estimate, was 163 million. In the new estimate, it
is down to 159 million. Sorry. Down to 152 million.
In 2010, the Congressional Budget Office estimated
ObamaCare exchanges would enroll 21 million people in 2016, and
we know where that has gone, increasing to 24 million in 2019.
It is down to an estimate of 20 million people in 2019 under
the current law, according to the latest CBO estimate.
Who is getting insured? It is Medicaid. And the Medicaid
dependency, the estimates according to the CBO, have gone up by
about one-third. So the coverage through ObamaCare is not
through enforcing any kind of individual mandate. It is through
more government dependency on Medicaid, which is costing us far
more than we are getting from an individual mandate.
Chairman BUCHANAN. Thank you.
[The prepared statement of Mr. Graham follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BUCHANAN. Mr. Miller, you are up next.
STATEMENT OF THOMAS MILLER, RESIDENT FELLOW, AMERICAN
ENTERPRISE INSTITUTE
Mr. MILLER. Thank you, Chairman Buchanan, Ranking Member
Lewis, Members of the Subcommittee, for the opportunity to
testify today to examine the effectiveness of the individual
mandate under the Affordable Care Act.
The shaky case for the individual mandate is based on
mistaken premises, faulty economic analysis, shortsighted
politics, and flawed health policy. Opponents have found the
mandate to be administratively challenging, politically
unsustainable, economically unnecessary, beyond the scope of a
proper role of government, and constitutionally questionable.
Most arguments in favor of the individual mandate usually
present it as a necessary, though far less popular, means to
more laudable ends. Well, they certainly got the last part
right. The individual mandate touches exposed nerves and
offends core principles in ways that other elements of the
modern regulatory state do not. The individual mandate has
consistently remained the most intensely unpopular provision of
the new health care law since it first took shape.
One of strongest driving forces behind officeholders
resorting to the individual mandate is the desire to substitute
off-budget mandated private funds in place of more visible
taxes that they would otherwise find hard to impose to meet
their insurance coverage goals and finance additional health
care spending. But shifting costs less transparently is not the
same as actually reducing them.
The type of mandate that the U.S. political economy and
health care system is likely to deliver in practice is very
different and more complicated than what might be assumed under
best case theories. Trying to force people to buy insurance
they cannot afford or pay much more for such coverage than it
actually appears worth to them remains politically and
economically difficult.
As a consequence, the individual mandate continues to face
significant political limits on how large the mandate's
penalties can be, how aggressively they can be enforced, and
how much compliance the mandate will produce. Hence, the
mandate's best future for continued survival involves operating
much more as a gentle suggestion or nudge rather than a more
polarizing command. Because the penalties for failing to comply
with the mandate are rather modest in proportion to the
average--likely average premium cost of required coverage,
millions of individuals have calculated that it is much less
expensive to pay the penalty than to purchase mandatory
insurance.
Projections for compliance versus penalty payment under the
individual mandate by the Congressional Budget Office
consistently have overestimated the degree of compliance. In
practice, the Internal Revenue Service has reported noticeably
higher numbers of individual mandate penalty payers despite
lower amounts of actual revenue collected. CBO also has tended
to be on the high side of claims that the Affordable Care Act
would rapidly and substantially increase coverage in the new
law's exchanges for individual coverage as well.
Rather than reexamine the flawed foundations of its
previous assumptions, CBO appears to have recently doubled down
on them. The CBO estimates are flawed in overstating baseline
assumptions for future growth in the ACA's version of
individual market coverage, exaggerating the response rate of
those subject to the mandate before and after its possible
repeal, misestimating Medicaid coverage effects, and setting
unrealistic parameters for future health policy changes. In
fact, the most significant force behind the size and shape of
insurance coverage gains has been large taxpayer subsidies
primarily through the expanded Medicaid program.
Enrollment rates for the ACA exchanges are highly sensitive
to one's income and premium tax subsidy level. Enrollment by
younger and healthier risks, which is supposed to be the
primary target of the individual mandate, has failed to reach
expected levels. There are a variety of alternative policy
remedies that could be pursued if the individual mandate is
either limited further or repealed. They include extension of
HIPAA-like protection against health status risk rating to
individuals in the nongroup market who maintain continuous
qualified insurance coverage while switching between health
plans. Or imposing penalties in the form of higher insurance
premium surcharges when eligible individuals fail to obtain or
maintain minimum qualified coverage during annual open
enrollment periods. Or tightening eligibility verification
further for special enrollment periods between annual open
seasons in ACA exchanges. Or enabling default enrollment in
minimum qualified coverage costing no more than the value of
applicable Federal taxpayer subsidies for insurance. Or
providing a different mix of taxpayer subsidies for obtaining
and maintaining qualified insurance coverage in the individual
market that are more generous to younger and healthier
individuals who have declined coverage thus far. Or as a last
resort for some and a first resort for others, actually
enabling and incentivizing insurers to offer coverage that is
less expensive and more attractive to potential uninsured
customers.
Thank you, Mr. Chairman. I look forward to your questions.
Chairman BUCHANAN. Thank you, Mr. Miller.
[The prepared statement of Mr. Miller follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BUCHANAN. Dr. McDonough, it is your testimony.
STATEMENT OF JOHN E. MCDONOUGH, DRPH, MPA, PROFESSOR OF
PRACTICE, DEPARTMENT OF HEALTH POLICY AND MANAGEMENT, HARVARD
TH CHAN SCHOOL OF PUBLIC HEALTH
Mr. MCDONOUGH. Thank you, Chairman Buchanan and Ranking
Member Lewis and Members of the Committee.
Chairman BUCHANAN. Turn your mike on.
Mr. MCDONOUGH. Pardon me. Thank you.
Thank you, Chairman Buchanan, Ranking Member Lewis, Members
of the Committee. I am John McDonough from the Harvard Chan
School of Public Health. I would just note from my bio in my
statement that I, between 2008 and 2010, was a staff person for
the Senate Committee on Health, Education, Labor, and Pensions,
and worked on the writing and passage of the Affordable Care
Act. So I am a former Senate staff person in recovery. And I
think most of you will understand that that is unfortunately a
terminal, lifelong preexisting condition that I just can't
shake as much as I might try.
So thank you for the honor of speaking before you. I have a
written statement, and I will just highlight my six main points
in it and then engage in conversation on whatever matters you
find of value talking with me about.
First, the individual mandate, so-called the individual
responsibility requirement of the ACA, is a core mechanism to
ensure a healthy risk pool and more stable premiums in a
guaranteed issue market that bans the practice of medical
underwriting and preexisting condition exclusions in the
individual health insurance market. It is core and it is
recognized, and is not the only way to address it, but it is an
essential component of the law. What we in Massachusetts where
I was involved in the passage of the Massachusetts health
reform law refer to as the three-legged stool.
Secondly, to eliminate the mandate and to leave in place
guaranteed issue is a sure and proven formula for major
disruption in the individual health insurance market
nationally. And that is a concern that I think is neither
speculative nor hypothetical. We have seen it played out in a
number of States over the past 25 years.
Thirdly, I would mention, as Dr. Graham has also mentioned,
that between the late 1980s and the latter part of the last
decade, the individual mandate was largely a policy idea that
was championed by conservatives, starting with Professor Mark
Pauly and Stuart Butler in the late 1980s. And only in the
latter part of the last decade was it embraced and accepted by
Democrats. Its roots are entirely based on the notion of
individual responsibility and shared responsibility as Governor
Mitt Romney stated repeatedly during the Massachusetts health
reform experience.
Fourthly, there are other ways to get at the intent and
purpose of the individual mandate. It is not that mechanism or
anything else. One mechanism is in late enrollment penalties.
Another mechanism is referenced in Speaker Ryan's Better Way
plan in terms of continuous coverage requirements. I would
caution that I think that if you compare the individual mandate
and continuous coverage requirements, I would regard the
continuous coverage requirements as far more onerous and
punitive in terms of consumers and would urge caution before
you go too far down that path.
Fifthly, I find no empirical evidence that suggests that
the individual mandate has anything to do with the stresses
that have been experienced in the State and Federal health
insurance exchanges over the 2007 enrollment and now carrying-
out period. There are other causes that I think more
effectively explain those problems that are going on in those
markets and be happy to talk with you about those.
And finally, I would only suggest that the suggestion that
the size of the individual mandate penalty should be increased
to enhance the uptake of individual health insurance is a
mistaken notion. I think far more at the core in terms of
enhancing enrollment would be to address the lack of adequate
affordability in the health insurance exchanges right now,
particularly for consumers between 250 and 400 percent of the
Federal poverty level.
Those are my main points, and I look forward to further
conversation. Thank you.
Chairman BUCHANAN. Thank you, Doctor.
[The prepared statement of Dr. John E McDonough, DrPH, MPA
follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman BUCHANAN. I want to thank all of you. It is
excellent testimony. We now proceed to questions and answer
session. For the purposes of today's hearing, I will hold my
question until the end.
I will now recognize the gentleman from Pennsylvania, Mr.
Meehan.
Mr. MEEHAN. Thank you, Mr. Chairman and the Ranking Member.
And I am going to look forward to working with both of you and
the full Committee on this important agenda before us. And
there couldn't be a more appropriate place to start than with
this particular issue.
One of the concerns that I hear back in my district
frequently is the frustration of everyday Americans with
Federal Government mandates telling people this is the way you
are going to live your lives. It would be bad enough if that
was all that there was to it. But the fact of the matter is we
are talking about something which, notwithstanding the opening
statement of my good friend the Ranking Member, the ACA does
not work. And I was pleased to see Mr. Miller talk about the
concept of exposed nerves from the Federal mandates that are
happening. And we hear words about mandate, coercion. Those are
the kinds of things that I think are affecting people.
And then you look at the facts. We have had this program.
Premiums have been rising by double digits for the very people
that Mr. McDonough talked about in the hardest places to be
able to pay. One-third of the counties now have only a single
insurer. The exchanges are consisting largely now of older and
less healthy people.
And I look at my own district in Pennsylvania. And we have
taken the time to ask people to weigh in. Premiums for
ObamaCare plans of Pennsylvania are up 33 percent in 2017. Each
year there is fewer to choose from. In 2016, there were 13
plans. Next year, there will be eight. Now listen to the
individuals in their own words. Mike from Boyertown shared with
me his concern, the cost of our health care insurance. ``We
have coverage from healthcare.gov and our rates are increasing
from $1,600 to $2,600 a month.'' These are working class
people. ``Only six plans are available, and the lowest cost one
is still over $2,000 per month just for my wife and I.'' Fred
from Lansdale wrote, ``I received my annual health insurance
rate increase for 2017 yesterday. My rates went up from $2,500
to over $3,750 per month. Per month. Last year's increase was
devastating. This year's increase is even more overwhelming. I
am self-employed. I only had a few short years ago. This news
is devastating to my family.''
People are voting with their feet in this. The CBO just
came out and released its most recent, just this week. Expects
a sharply lower number of participants in the Affordable Care
Act for exchanges in 2017. CBO said the number of participants
in the exchange was expected to be 10 million in 2017. So
clearly, we have been sold a bill of goods. It isn't working.
Mr. Miller, what conclusions can you draw from this kind of
revised estimate?
Mr. MILLER. Well, it is not working according to plan is
the short answer. To connect this up with the subject of
today's hearing, one of this--this reflects, in effect, an
overinvestment in a set of policies that did not come together
and work as promised. And part of what you are seeing in the
higher premiums and the restricted availability of plans, the
losses in plans, is everybody was supposedly saying it is all
going to work like clockwork. Everybody is going to go into the
exchanges. That is what CBO projected. They weren't talking to
the people on the ground. And so we have got a different
experience in practice than the one that was proposed to us in
theory.
Now, we can keep trying to implement that theory saying
sooner later it will work out. That seems to be what CBO is
mostly projecting. On the other hand, we can try to say we need
to take this into the shop and change the mix around. And we
need to get back to having health care coverage that actually
matches what people are willing to pay for and can pay for.
Mr. MEEHAN. I am so glad you said that about taking it into
the shop. Because here is the big misnomer in this whole
discussion. This idea that somehow there is this Republican
effort to just drop the thing and leave everybody on the
street, instead of the real genuine effort which is to take
something that isn't working and try to get it to work better.
We only get 40 percent of the people who are eligible for
these exchanges into it. And yet we need about 72 percent to
make them work. So how do we incent that other 30 percent to
get in? Is it by mandates or is it by working on the kinds of
things which are being put in place to lower the cost, to make
better availability, to make their--allow the programs to be
the kinds of things in which they have a choice to find the
insurance that fits them? Isn't that the better way to get that
remaining 30 percent so we can get the kind of exchanges that
can actually work?
Mr. MILLER. We have tried the weak punitive approach or we
know what is best. We might want to try some positive
incentives to find out what in fact--where the market is.
Mr. MEEHAN. Mr. Chairman, thank you. I yield back.
Chairman BUCHANAN. I now want to recognize the
distinguished Ranking Member, Mr. Lewis, for any question he
might have.
Mr. LEWIS. Thank you very much, Mr. Chairman.
Dr. McDonough, one of the things I am most proud of in
today's law is that because of the ACA, Americans with
preexisting conditions are able to get insurance. Can you
discuss why the individual mandate is so necessary?
Mr. MCDONOUGH. So thank you for the question,
Representative. The concept of guaranteed issue, which means
that insurers must issue coverage to applicants regardless of
their prior medical history, regardless of their current
medical status, is one of the most popular features of the
Affordable Care Act. It is a policy that was implemented in
various States starting in the 1990s. About eight States in
particular. Five States implemented it. All eight States
implemented it without an individual mandate. And all States,
when they did it, saw significant substantial disruption in
their individual health insurance market because people were
going in and purchasing coverage when they felt they need it
and then dropping out of the market when they got whatever
services they needed.
And so it was a damaging risk pool that created what some
refer to as an insurance death spiral where premiums go up, and
as premiums go up, more people drop out. We saw that in
Massachusetts, New York, New Jersey, Vermont, and other States.
Kentucky, New Hampshire. Some States did guaranteed issue
without a mandate. And when they saw the impact, they withdrew
and they stopped guaranteed issue. Other States, like
Massachusetts and New York, did it and had damaging impacts in
the market and kept the policy in place.
But guaranteed issue is one of the most popular features of
the law. Americans don't like the idea that to get coverage you
can only get it if you don't have any adverse medical history
that would disqualify you from coverage. And they don't like
the individual mandate. And they usually don't understand that
there is a link between the two of them. And that guaranteed
issue can't function effectively in an environment without some
kind of coverage responsibility, some kind of shared
responsibility on the part of individuals. So that is where it
comes from, and so--the linking together.
And so Massachusetts, in 2006, in its Health Insurance
Reform Law, for the first time put together and actually
implemented an individual mandate and guaranteed issue
together. We saw a dramatic drop in our rate of uninsurance. We
saw a stabilization, a stabilization of premiums in the
individual market. And it was a strikingly successful
experiment in terms of the intended influence on the individual
health insurance marketplace. So we saw it at work.
And it was then the design feature that people thought made
sense in terms of coming up with the national reform that is
the Affordable Care Act. So that's where it came from and that
is why it is in there. It is an essential piece. So Americans
love guaranteed issue and don't want to lose that. But
guaranteed issue without some kind of coverage requirement
creates a serious market disruption which people would not want
to see.
Mr. LEWIS. Thank you very much, Doctor. Would you talk
about the best ways to get people enrolled in insurance and
engaged in their health care? Is it better to increase
financial assistance or to follow the Republican suggestion
such as the Better Way health proposal?
Mr. MCDONOUGH. So the concern that I have with the Better
Way health proposal and with some of the other plans that are
forward is that, you know, the United States in January 1,
2014, banished medical underwriting from our health insurance
market for the first time in our history. And overwhelmingly
Americans like that reform. Don't want to go back. And that
seems to be fairly bipartisan.
The concern that I see in terms of the suggestion to have
guaranteed issue but only for people who can maintain
continuous coverage is that there will literally be, in a very
short period of time, tens of millions of Americans who will
then fall back into the circle of people who will be newly
subject to medical underwriting and have their insurance-
ability, their ability to buy insurance, rated based upon their
medical history. I think that would be a terribly unfortunate
step backward that Americans would not appreciate and have
rejected that approach.
Mr. LEWIS. And thank you very much, Doctor.
I yield back.
Chairman BUCHANAN. I now recognize Mr. Smith from Missouri.
Mr. SMITH. Thank you, Mr. Chairman.
Back in December, I held health care roundtables throughout
our congressional district in southeast and south central
Missouri to just hear from farmers, small business owners,
families of the experiences that they have had under ObamaCare.
And the message was very consistent. Forcing citizens to buy a
product they simply didn't want or suffer a tax penalty is un-
American, especially when in many cases that product is too
expensive and not adequate.
As the gentleman from Pennsylvania mentioned briefly of the
exchanges in his State going from 13 to 8 I think were the
numbers, out of the 30 counties in the Eighth Congressional
District of Missouri, individuals who are forced under the
individual mandate, you know what their options are? Out of 30
counties, 26 of those 30 counties has one choice. Looks like
adequate options. Absolutely not. Take the case of Doug from
southeast Missouri. He is a 61-year-old divorced cabinetmaker
who helps his 20-year-old daughter and ex-wife pay for their
health insurance. Doug started a small business just over 3
years ago. He wrote me. This is what he wrote: ``My business is
beginning to be profitable. However, with startup costs and
normal business costs, cash flow, et cetera, there is nothing
left of the budget for my personal health insurance. I have
been without coverage for 2-1/2 years. I make too much to
qualify for subsidies, not that I would take advantage anyway,
and do not make enough to pay the premiums after paying for
everyone else. The ACA penalty adds injury to insult. Insult
because the whole mandated mess is unconstitutional. And injury
because I usually have to take out yet another business loan to
pay my income taxes after the ACA penalty.''
I checked prices for insurance for a 61-year-old man in his
county of Missouri, and it is somewhere in the neighborhood of
$900 a month. That is more than the typical rent payment in
southeast Missouri and would likely represent one of the
largest expenses he would be paying. So who is the policy
really helping, I ask? It is definitely not the lower and
middle class in southeast Missouri. The mandate targets
individuals, but it also hurts the health care facilities and
hospitals who help serve them.
During one of our roundtables, the Chief Executive Officer
of one of the federally qualified health centers testified that
in their area, 37.3 percent of the population they serve are
uninsured. But yet everyone is required to have health
insurance under the individual mandate.
The mandate was designed to address uncompensated care, but
it didn't. Here is the bottom line. ObamaCare's individual
mandate has failed. Special enrollment periods and exemptions
by the Obama Administration created an environment that goes
completely against the idea of a mandate that created an unfair
burden on facilities in my district that offer care to low-
income individuals.
My question is to Mr. Miller. Your testimony highlighted
weak enforcement and weak compliance as challenges with the
individual mandate. Can you explain in more detail how the
individual mandate harms the low- and middle-income people it
was supposedly designed to help?
Mr. MILLER. Well, I am trying to go backwards from where
you are talking about. Part of it is because it didn't deliver
what it said it was going to do. In terms of the coverage
effects you saw, where those people went was primarily into
Medicaid to the extent they were lower income. That is what
they ended up choosing rather than the exchange-based coverage.
And that is where they have ended up. However, insurers along
the way have incurred some substantial losses within these
exchange markets because their original business plans assumed
a different set of enrollment and a different level of
compliance with a mandate which was never enforced in that
manner. So that the mismatch has created, in effect, a
compression of plans and the rising premiums. There are other
distinctions along the way.
Some of the statements that have been made about the scope
of uncompensated care costs, if you look at the vast historical
record, vastly exaggerated. Now, this law has a lot of moving
parts. We took away some of the funding for that uncompensated
care as--on the assumption it was going to be made up for by
the increased enrollment. That didn't match up. We have had
behavioral changes which indicate that people who are nominally
insured are still going to emergency rooms anyway.
So it is hard to isolate the mandate alone along this
broader mosaic of basically a floundering law which has many
different theories behind it that don't work out in practice.
Mr. SMITH. Thank you, Mr. Chairman.
Chairman BUCHANAN. I now recognize the gentleman from New
York, Mr. Crowley.
Mr. CROWLEY. Thank you, Mr. Chairman. Thanks very much. I
appreciate this hearing today.
If I can, I just want to--my good friend, I mean this with
all sincerity, from Pennsylvania. I think the world of Pat
Meehan and he knows it. He made the reference at the end of his
comments where this notion or idea come from that Republicans
want to repeal without replacing. And I would just note for the
record that we have had 65 attempts to repeal the Affordable
Care Act, or ObamaCare, over the last 6 or so years without
ever once offering a replacement. Maybe that is where we might
get the idea that you simply want--you all simply want to
repeal the bill without replacing it. That is just an
observation.
Mr. McDonough, my home State of New York provides a
valuable example of how the requirement to buy insurance is a
critically important aspect of the ACA to provide stability in
the individual insurance market. Before the ACA, New York's
individual market did not include an individual mandate. So the
market did not have enough healthy individuals. As a result,
monthly individual premiums reached over $1,500 and less than
20,000 people had enrolled.
Now as a result of the Affordable Care Act, premiums for
individuals are 50 percent lower than they would have been
without the ACA. The number of New Yorkers in the individual
market has grown by 270 percent. And plan participation in
more--is more robust. Sixteen insurers offer coverage in the
individual market and 21 serve the small group market.
Mr. McDonough, would you say that New York's experience
with the mandate illustrates just why it is so critical and the
dangers that could happen if it is repealed or undermined?
Mr. MCDONOUGH. So thank you, Representative, for that
question. I think it is important to recognize that the issues
with the Federal and State health insurance exchanges from New
York, from Pennsylvania, from Missouri, from all of the
different States vary. So there are some States that are going
through very significant disruption and very critically high
rises in premiums. There are other States like, for example,
New York and California, that are doing very well actually in
terms of a moderate rate of growth.
There is the striking example that we have of the State of
Alaska. Alaska last spring had projections that the premiums in
their individual market were going to go up by over 40 percent.
In the summer, the Alaska legislature with their governor
agreed to create a reinsurance pool within the State individual
health insurance market just in Alaska. When they did that,
that single act, they brought their projected premium increases
from 40 percent down to 7 percent.
So part of the difference, and it is not exclusively this,
but it is very much a factor, part of the difference is that
States that have aggressively grabbed and worked to take a
leadership role in helping this new health insurance market to
work and succeed have seen strikingly better results in terms
of premium growth and in terms of plan participation than
States that have, for their own legitimate reasons, been very
hostile to the implementation and have had not only nothing
that they wanted to do to help it, but actually worked
consciously and proactively to try to undermine the
implementation of the law.
So there is a real difference there. And I think it is
worth understanding that you can make differences happen here.
States need to be part of the solution. And the States that
have done that have made a real difference. Sorry for too much
time in that answer.
Mr. CROWLEY. That is all right.
Mr. Chairman, I have a letter from the Department of
Financial Services in New York State which oversees the
insurance industry in the State. I would just ask that we
include that for the record to the Committee.
Chairman BUCHANAN. Yeah, that is fine.
Mr. CROWLEY. I just wanted to say, listen, this is
incredibly complicated, all the parts that go into making the
Affordable Care Act work itself. We talked about, you know, the
mandates. We haven't talked about other aspects that have--in
the whole, that make it actually work or in theory work. So,
listen, I understand the frustration. We have been frustrated
for the last 6 years. We haven't found any partners to actually
improve the Act as opposed to just repealing it.
I think my colleagues on the other side of the aisle
realize now, as does the new President, how difficult it is to
take away the sweets. It is the vegetables, I think, my
colleagues have had a difficult time swallowing in order to get
to the sweets first. But I think they are learning that. And I
yield back.
Chairman BUCHANAN. I now recognize the gentleman from
Arizona, Mr. Schweikert.
Mr. SCHWEIKERT. Thank you, Mr. Chairman. And those of us
with a sweet tooth, we will work on that. And, Mr. Chairman and
fellow Members and obviously the panel, being from Arizona,
when you use the term ``disruption,'' we're one of the
epicenters of it. You know, if it wasn't for almost a
charitable gift by I think our Blue Cross Blue Shield going
into a couple counties, I would have had counties--remember, my
State has only 15 counties. So our counties are huge. They
would have had no offering.
So could I beg of you, and this is going to be a little
different, but this is something staff and I have been trying
to hunt for years. Could we do a little math together? I need
some help on something. What I am hunting for is--and we have
even had researchers from Kaiser and other people try to help
us. And the Administration has been willfully difficult, and
maybe it is because the way the data sets are collected. Maybe
it is obfuscation. Maybe it is perfectly innocent.
If I go back at the end of fiscal year 2016, we
functionally have had what? Three years out there where there
was product offered. How many of our brothers and sisters
gained coverage that either did not have coverage before or who
were not Medicaid eligible? And when I say did not have
coverage before, truly had gone long term. Not where they had 3
days between jobs and we called them uncovered. But how many--I
mean, what is the real number? How many folks now have coverage
by the end of fiscal year 2016 that did not have any either
access to coverage or weren't Medicaid eligible? And can anyone
give me an honest number? This is an open--I mean, this is a
fly ball for whoever can pitch it back.
Mr. MILLER. I don't usually like to do this in a hearing. I
may have to quote Jon Gruber. And I only do that every couple
of years. Because even a stopped clock may be right a couple of
times a day.
Based on those recent calculations, approximately 60
percent of the coverage gains came from Medicaid. There is a
little bit of a dispute as to how much of that is expansion
Medicaid and how much of that is old Medicaid.
Mr. SCHWEIKERT. Look, we have 2 minutes and 30 seconds to
play here. So, okay, let's say it is 60 percent of the
population gained it through Medicaid. Then of the remaining
40, I have seen some numbers out there that say a substantial
portion of that had either access to or had coverage at some
time before. And my----
Mr. MILLER. Some of that is old Medicaid. There is a
provision where if you go into the hospital, you can get signed
up for Medicaid. That is under old Medicaid as well as new
Medicaid. There were States who were already expanding before
2014. It makes that old Medicaid.
Mr. SCHWEIKERT. So is it----
Mr. MILLER. Some of it came from the individual exchanges,
though. That is a fact.
Mr. SCHWEIKERT. Okay. So who----
Mr. MILLER. But probably about only about half of the
exchange coverage more or less are actually net uninsured
getting coverage. Some of them were people who got pushed out
of the other part of the individual market.
Mr. SCHWEIKERT. And, look, I understand this is a little
difficult and there is a lot of moving parts here. As someone
just said, it is complicated. So are we now down to 7 million?
Mr. MILLER. We could be down to 6 or 7 million. And, again,
these are fuzzy numbers because we pretend that our data is
excellent and you can raise four or five different surveys and
get different numbers and make different assumptions.
Mr. SCHWEIKERT. In the next minute and 30 seconds, let's
pretend we are accountants. Okay. So over the beginning of this
law till the end of 2016, how much has been spent? And when I
say ``spent,'' I mean by the Federal Government, the State
government, individual premiums, losses from insurance
companies, others. What is my total dollar amount? Because I
have seen numbers at, you know, $500 billion. I mean, I have
seen some really interesting numbers that if you do a true all-
in math, and I am--you see where I am going. For 3 years of
coverage, my all-in cost to help 7 million, I could almost do
that in the top of my head. Someone is going to correct me
later. $68,000 per life? I mean, I am buying their health
coverage, and I could have probably bought them a really nice
car.
So something's wrong. And just if we take a step backwards,
whether it be the individual mandate or just the basic math of
if we all agreed we want to help our brothers and sisters out
there, our total dollars per total life coverage, something is
horribly wrong in what we are doing. Am I being unfair?
Mr. MCDONOUGH. I would just respond, Mr. Schweikert, by
saying that I think that 6 million is a significant
understatement. And I don't want to put out a number that I
can't defend.
Mr. SCHWEIKERT. Okay. I would be elated if you could do me
one of the grandest favors of all. Because we really--and my
staff is back there laughing at me. I have spent a couple years
of my life looking for this number, and talking to really smart
people like yourself. Help me find real math. Because I come
from a world of the math is the math is the math. But right now
I am looking at numbers where I could have bought their
coverage and bought them a nice car. Something's horribly wrong
in what we're doing.
Thank you. And I yield back, Mr. Chairman.
Mr. MCDONOUGH. Happy to do that, sir.
Chairman BUCHANAN. I now recognize the gentlewoman from
Indiana, Mrs. Walorski.
Mrs. WALORSKI. Thank you, Mr. Chairman.
President Obama promised over and over again, if you like
your doctor, you can keep your doctor. If you like your health
plan, you can keep your health plan. And despite these repeated
pledges, we know now that these statements were completely
untrue. In fact, in the fall of 2013, millions of Americans
started receiving plan cancellation notices. PolitiFact ranked
President Obama's statement as its lie of the year in 2013. But
it wasn't just the immediate loss of plans. People are still
losing them. For example, in Indiana last year, four insurers
left the exchange, leaving Hoosiers with fewer options. That is
50 percent loss of our own plans. Recently, I heard from a
constituent of mine from Starke County in Indiana. He has had
two open heart surgeries at Mayo Clinic that requires him to be
on blood thinning and other medications, as well as periodic
checkups. He had a private health insurance plan that he liked.
Covered his medical needs. But in 2015, it was knocked out by
ObamaCare. He was forced to buy a health care policy on the
marketplace, but unfortunately discovered at an annual checkup
at Mayo Clinic that his doctors were not in the network. And
because of that and because they were out of State, they were
out. He was forced to pay thousands of dollars out of pocket
for the visit, in addition to thousands more out of pocket for
the prescriptions. When he appealed to the Indiana Department
of Insurance, he was told there was no marketplace insurance
plan that would cover his doctors at Mayo Clinic as a Hoosier
living in the State of Indiana.
He recently learned that his marketplace plan through
UnitedHealthcare won't offer individual market plans for his
area in 2017. He was forced back into the marketplace again to
find a new health care plan that still will not cover his out-
of-state doctors. It reinforces to me that for many Americans,
this law is not working as promised.
And Mr. Miller and Mr. Graham, I wanted to direct this to
you. Isn't it true that the individual mandate was supposed to
increase competition on the exchanges by ensuring that people
sign up, thereby encouraging insurance carriers to offer more
choices and broaden those networks?
Mr. GRAHAM. That was the stated objective. And as you have
described it, it has not been the case. So I agree, I guess,
would be my answer.
Mrs. WALORSKI. Mr. Miller.
Mr. MILLER. As I like to say, it seemed like a good idea at
the time. Although, unlike Mr. McDonough's testimony, it has
been a bad idea for many of us for a long period of time on the
conservative Republican side of the aisle, just to rewrite
history a little bit, going back to the 1990s.
What was proposed wasn't executed. And it wasn't going to
work that way because of the grand design, in theory, did not
reflect the reality on the ground. Some people gained under
this arrangement. There is no question about that. If you were
a low-income person suddenly getting substantial subsidies for
coverage, you might not be crazy about that coverage, but you
will say you came out ahead. There are other people in that
market, though, who had something that they were comfortable
with or at least were ready to settle for. They were told that
is not good enough. These are the folks who got moved out of
other parts of the individual market and ended up with less
effective choices and ones they didn't want. And that is what
you are mostly hearing from among your constituents.
Mr. GRAHAM. And that is not going to turn around on its
own. I think President Obama's Council of Economic Advisers
just before they left asserted that the insurers have now got
it figured out, everything is under control. The first 3 years
you had the training wheels on board and--but now we are good
to go. That doesn't make any sense. You know, the last year,
from 2016 to 2017, you had by far the worst premium increase,
25 percent nationwide average. It is not getting better, it is
getting worse. It is like the insurers are having more and more
trouble every year they stay in the exchange.
Mrs. WALORSKI. Well, I guess my follow-up is, when
insurance networks have become so narrow that individuals like
my constituent, and there is many of those in Indiana, I just
talked about one. When they lose access to their doctors, what
does that say about the individual mandate's effectiveness to
begin with?
Mr. GRAHAM. I think it says you are on the route to
Medicaid for everybody where there is very poor access to care
in many cases. So folks like--I know some of the Members have
given testimony from their constituents. The whole structure is
so terrible. You know, you earn an income that is--you are not
Medicaid eligible so you can't even get the poor access to care
that Medicaid offers. You might get some tax credit in the
ObamaCare. Maybe you make too much money for that. Hard work to
figure all that out, you know. And then the IRS comes after you
next year and says you owe money back. So the complexity is far
too complex. And I think when you go from one insurer to no
insurer, as in Arizona, you were very lucky. I mean, what is a
market where there is no insurance offered? It is not a market.
Mrs. WALORSKI. Right. I appreciate it.
Mr. Chairman, I yield back.
Chairman BUCHANAN. I now recognize the gentleman from
Illinois, Mr. Davis.
Mr. DAVIS. Thank you very much, Mr. Chairman. And I want to
thank all of our witnesses who are being very helpful as we
deal with one of the most complex issues and problems that I
think we face today as it relates to health care.
I represent the State of Illinois in the seventh district,
which contains more hospital beds than any other congressional
district in the country. The Affordable Care Act, which also
has been beneficial to the four major medical center
operations, medical schools that we are all so fortunate to
have, the Affordable Care Act has greatly improved access to
care for tens of millions of Americans. Enrollees now have
access to medical homes, in general no longer have to rely
solely on hospital emergency rooms, and have the comfortability
of knowing that when they need care, it is available there for
them.
Today, more than 1 million Illinoians have health insurance
coverage as a result of ACA, either due to the law's Medicaid
expansion or its health insurance marketplace, and the majority
of whom were uninsured prior to September 2013 when the ACA's
coverage expansions were first implemented. Because of ACA the
Nation's insurance uninsured population has dropped
dramatically to less than 11 percent currently from nearly 17
percent in 2013.
If Congress repeals health insurance coverage, Illinois
would sustain a potential loss of $11.6 billion, $13.1 billion
in annual economic activity, and about 95,000 jobs lost.
Ultimately, any attempt to repeal the ACA should be accompanied
with an appropriate and responsible replacement plan that, at a
minimum, ensures access to coverage for the more than 20
million U.S. residents who now have coverage as a result of the
law.
If Congress does not make repeal of coverage contingent on
adoption of an ACA replacement plan, then lawmakers should also
correspondingly repeal the significant hospital payment cuts
that help pay for ACA's coverage expansions. This is important
for Illinois's hospitals and health systems which, to date,
have had to absorb the more than $1 billion in Medicare
reimbursement cuts to pay for the cost of the law's coverage
expansion. For example, Northwestern Medical has seven
hospitals alone, including Northwestern Memorial Hospital. They
have absorbed more than $273 million in Medicare cuts since
2011.
Mr. McDonough, can you see institutions sustaining those
kind of cuts and expenditures and continue to provide the level
of care and service that they currently provide?
Mr. MCDONOUGH. Thank you, Mr. Davis. And no, I don't see
that. I think there is a real difference across the country
right now in terms of the financial health of hospitals,
frankly between States that have expanded Medicaid under the
ACA and States that have not. The States that have expanded
along with the robust expansions through the marketplace have
seen much greater financial health. And in States that have not
expanded, there has been a far higher rate of hospital closure
and of serious financial dilemma facing hospitals and other
medical providers in those States. So it is a real difference
and an indicator of what may come were there to be total
repeal. Sorry.
Mr. DAVIS. Thank you.
Thank you, Mr. Chairman.
Chairman BUCHANAN. I now recognize the gentleman from
Florida, Mr. Curbelo.
Mr. CURBELO. Mr. Chairman, thank you very much for holding
this hearing. It will be my honor to serve under you in this
Congress and with my colleagues here, especially Ranking Member
Mr. Lewis, who I was proud to welcome to my community recently
to celebrate Dr. Martin Luther King Day. And I also want to
thank the witnesses for their testimony today.
Dr. McDonough, we share someone in common, Dr. Julio Frenk
was the dean at your school. He has since moved up in the
world, transferring to the University of Miami where he serves
as president, which happens to be my alma mater.
Mr. Chairman, although enrollment in the ACA is relatively
high in Florida, particularly in the Miami-Dade metropolitan
area, choices continue to decrease and premiums continue to
rise. This year, the counties in my district have lost
insurance carriers. Monroe County lost one carrier and Miami-
Dade lost two carriers participating on the exchange. I have
heard people in my district about how the current system has
reduced their choices and increased their out-of-pocket costs.
Emily, my constituent, explained that she is paying over
$700 per month for a plan with a deductible that is over
$6,000. But still she has been unable to find a doctor in her
area who will accept her insurance. Even though she has
insurance, her options are severely limited and premiums
continue to increase.
Mr. Miller, I have a question for you. These examples that
you have heard here today, and I think it is important that we
raise them because statistics are fundamental to understanding
what is happening in the world, but these real life human
examples matter also. Do you believe that these examples are
isolated, unique to our districts or are these the types of
things that are happening all over the country?
Mr. MILLER. Well, there is a battle of warring anecdotes
and everybody has to have their respective horror story, and
you can get them on both sides. In the aggregate, though, we
know that this is not working out in reaching its residual
level. I comment somewhat in light of some of the discussions
here that I am surprised that this embrace by folks who are
more favorable to the Affordable Care Act of what you might
think of as trickle-down economics. Let's first take care of
the hospitals, let's first take care of the insurers, and maybe
some people on the ground might eventually get some benefit
from this.
This was a very interesting academic study of the Medicare
expansion population, one showing that it had grown quite
larger in terms of the cost per capita for the new adult, newly
eligible able-bodied adults, but it hasn't necessarily
delivered any more services. There is another study that
indicated the Medicaid beneficiaries actually valued the
coverage they received at about 20 to 40 cents on the dollar.
So we are pumping more money into the system, but it isn't
necessarily getting down to the ground level where it is
actually improving people's care. And that is because the
system is designed not for the beneficiaries at the end of it
to be calling the shots, but somewhere along the line we
determined what is good for them and what they should receive.
And it works for other people in the system; doesn't
necessarily deliver that value at the bottom line for the
consumers we supposedly care about.
Mr. CURBELO. So, Mr. Miller, are you suggesting that
perhaps major health care special interests such as hospital
chains, insurance companies and pharmaceuticals were too
influential in the drafting of the last health care reform
legislation?
Mr. MILLER. The previous Administration had to cut a deal
and in some cases they had to give as well as take. And part of
that deal was to make sure that they had placated those
interests first in order to get the legislation passed.
Mr. CURBELO. Mr. Graham, with regards to the individual
mandate, some suggest, well, this is, as we have kind of
concluded here, not working very well, perhaps the solution is
to raise the penalty and coerce more people into signing up for
health insurance. I don't think that would be a very popular
measure, and I assume most Members of this Committee and in
this House would probably not be predisposed to supporting that
kind of measure. What are some alternatives?
Mr. GRAHAM. I think Mr. Miller proposed some good
alternatives. I think Professor McDonough's criticisms of those
alternatives is also valid. There is a certain population, if
you are just going to say you have got to maintain continuous
coverage, you have got to--or pay a fine or whatever, there is
some level of population that will not pay that. This is just a
reality.
You know, when you lose your job, your mortgage payment or
your rent comes first and you are going to drop your health
insurance premiums. So there will always be some population
that has to--you know, I hate to say it--be taken care of, but
the social safety net. And I know on your side of the aisle you
have talked about high risk pools, things like that.
I would just like to point out that, you know,
Massachusetts had a reform that had some good things, some bad
some things, the gentleman from New York who has left, every
State had all these tools at their disposal. So what I would
like to say is if we don't know the perfect answer, the magic
bullet, let's let 50 States try and figure it out and learn
from them.
Mr. CURBELO. Thank you. I yield back.
Chairman BUCHANAN. I now recognize the gentleman from North
Carolina, Mr. Holding.
Mr. HOLDING. Thank you, Mr. Chairman.
I am going to pick up where my colleague, Mr. Meehan, left
off. He listed some good testimony regarding the mandate not
panning out, producing the numbers. We have got a slide, if we
could put up there, of ACA exchange enrollment expectations
versus reality. There. And you have done a good job of talking
about some of the problems with the mandate. But it is clear
that the economic modeling that the Obama Administration was
using, they overestimated the strength of the mandate.
So perhaps, Mr. Miller, you could pick up here. Why would
the models overestimate the mandate strengths so pretty
dramatically there?
Mr. MILLER. I would say the first reason is they relied
upon evidence from Massachusetts and Massachusetts' experts,
which was unique to Massachusetts as opposed to the rest of the
country. And that was built into a lot of the over assumptions
of the high yield from the mandate. They also assumed they
would have larger effects further up the scale. And the reality
is if you subsidize people heavily, as turned out to be the
case for basically those below 200 percent of Federal poverty
level, you will get a lot of people, even though they are not
crazy about the coverage, they will take it because it doesn't
cost them much of anything when you add in the cost-sharing
subsidies. You've got a lot of complaints about high
deductibles. That has differential effects because of the way
in which those cost-sharing subsidies in the exchanges tend to
mute those out.
So when you were trying to get more people to come into
this market who are either younger or had a little bit more
money or were healthier, it turned out it was a bad deal for
them. There's plenty of work done by some economists at the
University of Pennsylvania, Wharton School, which talked about
why you just didn't pay for people to take this coverage
compared to either paying a penalty or dodging it in one form
or another.
So all of this idea that new revenue was going to come in
to pay for what we wanted didn't work out that way. And some of
that is reflected in the reduced enrollment that was assumed
but never materialized because you run out of subsidies to pay
for people. And when it turns out that people have to pay for
something they don't want, they don't buy it.
Mr. HOLDING. Right. Well, you know, speaking of subsidies,
I find it kind of remarkable that according to some estimates
that we have seen, that only about 40 percent of the subsidy
eligible population signed up on the exchange. Now, this is
concerning. I mean, do you find it concerning and why do you
think it is?
Mr. MILLER. Well, that reflects the fact that as you move
further up the ladder beyond what I just cited, which is about
60 to 65 percent, those subsidies aren't particularly generous.
They are there, but they begin to phase out. This is a highly
skewed, very progressive, if you want to use that term,
approach to subsidizing very low-income individuals, even more
so in the Medicaid-eligible population.
So mission accomplished in terms of getting that target
population, but it didn't fit into the larger economic model
which assumed that somewhere there was something else to pay
for this. They tried a lot of other gimmicks in order to do
this, but it didn't actually materialize in the way in which it
was originally designed. And part of that is because it was a
built-in ceiling on how much the individual mandate could ever
produce, despite all the theories to the contrary, and also how
much money that was actually there to subsidize people. And we
found out that we are going to have come up with some other
solutions.
Mr. HOLDING. Well, you know, you have got the benefit now
of some history; you know, you have got a graph, we have got
some real numbers in. And, you know, you mentioned at the top
of the hearing in your prepared remarks, you know, the CBO is
doubling down on these flawed estimates. I mean, what would the
rationale be behind that?
Mr. MILLER. Well, people when they do models have
assumptions and they tend to not want to let go of them. There
are some things external to what originally started out that
are moved around. Certainly, the Supreme Court decision changed
some of the projections in terms of Medicaid enrollment. But
the ingrained view that somehow the individual mandate was
going to draw in all these people and they were going to comply
and was going to be enforced didn't work out that way.
Potentially by some, you know, standard you could have
about--you know, at one time they had a 30-million target
population, and it turned out that only 3 million of those
people were actually--you know, were paying into the individual
mandate as opposed to staying uninsured. It is the difference
between theory and practice. We have learned a lot about
theories. We need to go back to reexamining what will work in
practice.
Mr. HOLDING. Thank you very much.
Mr. Chairman, I yield back.
Chairman BUCHANAN. We have been joined at this hearing by
our fellow Ways and Means Committee Member, Mr. Kelly. As is
our custom, he will be permitted to ask witnesses questions.
Now that the Members of the Subcommittee have concluded their
questioning, Mr. Kelly from Pennsylvania, you are now
recognized for 5 minutes.
Mr. KELLY. Thank you, Chairman. And again, thank you for
allowing me to participate today.
All three of you are here for a reason. We talked today the
purpose of the hearing is to examine if the individual mandate
penalty is actually stabilizing health markets. Okay? And we
talked about a lot of different things. I have got so many
constituents back home that now have a policy, but don't have
any health care.
So between premiums being where they are, deductibles being
where they are, copays being where they are, I know there is
reference made to Medicaid. The question is who all accepts
Medicaid as payment? How many actual providers of health care
say, no thanks, it doesn't begin to cover my cost of delivery?
So here is what it comes down to. If we are talking about
this and if a big part of the individual mandate was going to
cover the cost of all these things, the question is did it
work? Is there anybody of the three of you that could say this
was--it was well intended? I am going to say it wasn't well
intended.
And, Mr. Miller, I love the fact it is three versus
practice. Again, it is assuming things without looking at
reality. People usually don't buy things they don't want and
they certainly don't overpay. It is okay if they are being
subsidized, but they--out of their own pocket, will say, you
know what, thanks, but no thanks. Has this worked at all? Go
ahead. I mean, if we are trying to get to an end here, what has
it done?
Mr. MILLER. Well, I always try to be a little more balanced
in this approach. We had a lot of bad policies incorporated
into the Affordable Care Act, not the individual mandate alone.
The way I would first put it is the individual mandate, not
only did it not work, it didn't save those other bad policies.
So we need to reexamine more than just the individual mandate
itself.
The reason why coverage may not be attractive to people may
be a part of the way in which we tried to standardize coverage
in certain ways, which meant that suddenly it no longer
appealed to people in the same manner when they were paying
more of the cost than they did before and weren't highly
subsidized. So we have got a lot of different things to take
out of the bottle and reassemble. But the individual mandate
itself did not provide some extra boost.
And you can't keep subsidizing people to basically say,
come on. Instead, what we got were limited networks, lower
actuarial values, and higher deductibles for people who saw the
cost and they didn't want that coverage and they are
complaining to you about it. That is how we created a new
distortion to deal with the old distortions.
Mr. MCDONOUGH. Can I address?
Mr. KELLY. Oh, yes. Please. Sure.
Mr. MCDONOUGH. Thank you for the question. So just the
question, does this work? Well, work is obviously in the eye of
the beholder. But just let me give you some responses to does
this law work.
Mr. KELLY. Can you do that, Mr. McDonough, if it is in the
eye of the beholder? Yeah, I have got two or three pages of
people back home in my district, they are saying it doesn't
work. So in the eyes of a lot of beholders, including the
majority of this country, it doesn't work.
Mr. MCDONOUGH. Okay. So lowest rate of uninsurance in the
history of the United States. Drop the----
Mr. KELLY. But, sir, listen, I don't want to equate having
an insurance policy with having health care. Huge difference.
Mr. MCDONOUGH. Rates of satisfaction among people who have
been enrolled in Medicaid and people who have been enrolled in
exchange policies, around 80 percent satisfaction. Drop in the
rate of uninsurance among America's children, by 50 percent
over the past several years. The rate of financial security and
the drop in medical debt experienced by Americans across the
country, a substantial drop. Rate of increase in per enrollee
Medicare spending is the lowest it has been in the history of
the program since it was created in 1965. Those are just five
things. We can go on and on.
Mr. KELLY. Where is this study from?
Mr. MCDONOUGH. These are all different studies, sir. I
would be happy to share the sources of all of those with you.
Mr. KELLY. Okay. I would like to see that information. And
I appreciate that.
Mr. MCDONOUGH. Happy to do that.
Mr. KELLY. Mr. Graham.
Mr. GRAHAM. I think what Professor McDonough stated, those
facts are certainly cohere with what I understand of a lot of
things, but very little of that has to do with the individual
mandate. You know, there has been some Medicare changes going
on. Most of the effect of the Affordable Care Act in terms of
coverage is Medicaid. And I know I am going to provoke some
folks here, but I don't like to include Medicaid as insurance
because Medicaid is a welfare program. So as long as we include
more Medicaid enrollment as insured, that is like saying more
TANF with having a job, it doesn't make any sense, you know.
So if we are going to be coherent or whatever, giving
people more welfare benefits, that's fine. If that is what you
all want to do, that is your prerogative as the folks who tax
and spend, that's what you are going to do. But let's not
pretend that we are making people more individually responsible
through this mandate. And as you say, for very many people, the
small business owner, the self-employed person, it is just
driving them crazy, as we have heard from you and so many of
your colleagues, trying to figure out what the heck is going
on, how to get an affordable plan and----
Mr. KELLY. I know. We are going to continue to work,
Chairman, and I appreciate, again, being included. We are going
to continue to try to work to make sure that the American
people understand. They are not going to lose, by the way,
their insurance. I mean, Mr. Trump was sworn in last Friday. I
don't think anybody is walking around the country right now and
had their insurance pulled away from them, so that is kind of a
false narrative. But we have got to find something that makes
sense. None of this makes sense to me economically. Why would
anybody stay in the insurance business to lose money?
Thank you.
Chairman BUCHANAN. I now recognize myself. We spent a lot
of time on the mandate. I want to shift gears a little bit and
talk about affordability and access.
My background before I got here, I have been here about 10
years, but before that, 30 years. And I think back 30, 40 years
ago, companies paid or people had access to low cost, high
quality health care. I thought back a few days ago and I was
thinking back 20 years ago when I was chairman of the chamber
in our area, we had 2,500 businesses, most of them 15 employees
or less. The number one issue, 20 years ago--and this before
the ACA to give them--you know, we can talk about that a little
bit.
But 20 years ago, the number one issue, we surveyed all our
members, was access and affordable health care. And it just
seems like it has accelerated to the point of being absurd that
typical individuals--it is not unusual in my area in Florida,
Sarasota Florida, a couple could be paying $2,000 a month for
health care. That is outrageous. That is more than a car
payment and a house payment.
I read the other day, and I shared this with our people, in
the front page of I think it was USA Today, 62 percent of
Americans don't have $1,000 in the bank. I thought to myself
when I looked back, you know, you can talk about wages and
everything else, that one of the things that is gutting the
middle class I think is health care cost. You get the subsidy.
You know, maybe it works for you, but people just outside the
subsidy, because small businesses and everybody else, they
can't afford to provide it. It's $1,400 for a family of four,
$1,600. So the small business might pick up $600, $700. It is
getting passed to the workers. And that is why nobody has
anything.
So my thought when I first heard about the ACA, I was
concerned back then about the cost of health care and I was
open-minded, if it bent a curve on health care. But I heard
what you said, Doctor. But I can just tell you in our region in
Florida, it is not unusual to hear every single day rates going
up 20 and 30 percent for small businesses and individuals. That
is the reality.
So I guess I would ask any of you, Mr. Miller, Mr. Graham,
let's start there, what are we going to do about, or your
thoughts, in bending the curve? It is just--and I know it is a
big discussion, but I would like to just have maybe 30 seconds
each of you just to give me your point.
Mr. MILLER. All right. That is a bigger discussion.
Chairman BUCHANAN. I know it is a big discussion.
Mr. MILLER. So let me simplify. This may not be the
politically astute answer.
Chairman BUCHANAN. No. I just want----
Mr. MILLER. If we keep pumping more money into health care,
it is going to cost more. Now, if we want to do that, we need
to think about that a little bit more surgically. So the
approach might be to actually have the individuals supposedly
benefiting from this to control those dollars and decide how
they want to spend it. That will be a different type of result
in terms of better quality health care at a lower price over
time. We have tried subsidizing it, we have tried regulating
it, we have tried placating everybody in between. We need to
get it down to the ground level and decide what people actually
want to spend their money on. And that includes trading off
health care with better wages. And we need to stimulate
economic growth and we need a healthier population. We need a
better health care delivery system.
Those are all things well beyond the little games we play
with individual mandates and insurance subsidies. That is a
bigger discussion, but we need to focus more on that.
Mr. GRAHAM. I would agree with Mr. Miller. And I would
point out that all this money going into the ObamaCare
exchanges, it really goes to insurance companies, you know. We
advocate consumer-driven health care. We don't give any tax
credits to individuals that they can spend directly. And I know
one of the Members talked about the premium is more than the
rent. Well, when I pay my rent, I move in that day and I start
living there, you know. I pay for these insurance policies and
they don't kick in until I go to the hospital. So if we are
going to help people, let's help them pay directly for care.
And we had some good experience that that can help reduce some
cost.
Chairman BUCHANAN. Doctor, I will give you an opportunity.
Take a few seconds and wrap up.
Mr. MCDONOUGH. The major challenge, it seems to me and to
many other experts with whom I work, is to change the
underlying incentives in terms of the delivery of medical care
to move away from a system that rewards providers to do more
and more through fee-for-service and, instead, to move toward a
system that rewards providers when they actually provide
quality, value service. And we have a number of important
directions that we are going in.
The Nation is moving in this direction, regardless of what
happens to the fate of the ACA. You saw it in the MACRA law,
the bipartisan bill that passed the House and the Senate in
2015. That is not a rejection of the direction that the ACA
started, it is an enhancement and an acceleration of it. That
is going to continue. And I think that is really probably the
most important dynamic that is going on right now in terms of
moving our system to a different place.
Chairman BUCHANAN. Let me just conclude. In Florida--I was
chairman actually in the floor of the chamber down there too--
it is the biggest issue. The cost of health care keeps going.
It is not just the last 8 years. It has been the last 20 years.
It is out of control, out of hand. We have got to find a way we
can work together for the betterment of everybody in the
country.
I would like to thank our witnesses for appearing before us
today. Please be advised that Members have 2 weeks to submit
written questions to be answered later in writing. Those
questions and your answers will be part of the formal hearing
record.
With that, the Subcommittee stands adjourned.
[Whereupon, at 3:45 p.m., the Subcommittee was adjourned.]
[Public Submissions for the Record follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[all]