House Hearing, 110TH Congress - Full Committee Hearing On State Strategies To Expand Health Insurance For Small Businesses

FULL COMMITTEE HEARING ON
STATE STRATEGIES TO EXPAND

HEALTH INSURANCE FOR SMALL
BUSINESSES
COMMITTEE ON SMALL BUSINESS

UNITED STATES HOUSE OF
REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
FEBRUARY 26, 2008
Serial Number 110-72

Printed for the use of the Committee on Small Business
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2008
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HOUSE COMMITTEE ON SMALL BUSINESS

ZQUEZ, New York, Chairwoman
NYDIA M. VELA
STEVE CHABOT, Ohio, Ranking Member
ROSCOE BARTLETT, Maryland
SAM GRAVES, Missouri
TODD AKIN, Missouri
BILL SHUSTER, Pennsylvania
MARILYN MUSGRAVE, Colorado
STEVE KING, Iowa
JEFF FORTENBERRY, Nebraska
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
DEAN HELLER, Nevada
DAVID DAVIS, Tennessee
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
JIM JORDAN, Ohio
HEATH SHULER, North Carolina

LEZ, Texas
CHARLIE GONZA
RICK LARSEN, Washington
RAUL GRIJALVA, Arizona
MICHAEL MICHAUD, Maine
MELISSA BEAN, Illinois
HENRY CUELLAR, Texas
DAN LIPINSKI, Illinois
GWEN MOORE, Wisconsin
JASON ALTMIRE, Pennsylvania
BRUCE BRALEY, Iowa
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii
MICHAEL DAY, Majority Staff Director

ADAM MINEHARDT, Deputy Staff Director
TIM SLATTERY, Chief Counsel
KEVIN FITZPATRICK, Minority Staff Director
STANDING SUBCOMMITTEES
Subcommittee on Finance and Tax
MELISSA BEAN, Illinois, Chairwoman
DEAN HELLER, Nevada, Ranking

STEVE KING, Iowa
JIM JORDAN, Ohio
Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman
HENRY CUELLAR, Texas
DAVID DAVIS, Tennessee, Ranking

SAM GRAVES, Missouri
TODD AKIN, Missouri
(II)
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Subcommittee on Regulations, Health Care and Trade

LEZ, Texas, Chairman
CHARLES GONZA
DAN LIPINSKI, Illinois
MELISSA BEAN, Illinois
JASON ALTMIRE, Pennsylvania
LYNN WESTMORELAND, Georgia, Ranking

STEVE KING, Iowa
JIM JORDAN, Ohio
Subcommittee on Urban and Rural Entrepreneurship

HEATH SHULER, North Carolina, Chairman
JEFF FORTENBERRY, Nebraska, Ranking

DEAN HELLER, Nevada
DAVID DAVIS, Tennessee
Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman
LEZ, Texas
CHARLIE GONZA
VACANT, Ranking
LYNN WESTMORELAND, Georgia
(III)
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CONTENTS
OPENING STATEMENTS
Page
Velazquez, Hon. Nydia M. .......................................................................................

Chabot, Hon. Steve ..................................................................................................
1
2
WITNESSES
PANEL I:
Pawlenty, Honorable Tim, Governor of Minnesota, St. Paul, MN .......................

Rendell, Honorable Edward G., Governor of Pennsylvania, Harrisburg, PA .....
4
18
APPENDIX
Prepared Statements:
Velazquez, Hon. Nydia M. .......................................................................................

Chabot, Hon. Steve ..................................................................................................
Pawlenty, Honorable Tim, Governor of Minnesota, St. Paul, MN .......................
Rendell, Honorable Edward G., Governor of Pennsylvania, Harrisburg, PA .....
35
37
38
45
(V)
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FULL COMMITTEE HEARING ON STATE

STRATEGIES TO EXPAND HEALTH
INSURANCE COVERAGE FOR SMALL
BUSINESSES
Tuesday, February 26, 2008
U.S. HOUSE OF REPRESENTATIVES,

COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
2360 Rayburn House Office Building, Hon. Nydia Velazquez [chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Shuler, Gonzalez, Altmire,
Clarke, Ellsworth, Sestak, Chabot, Bartlett, Akin, Fortenberry,
Westmoreland, Davis, Fallin, and Buchanan.
ZQUEZ
OPENING STATEMENT OF CHAIRWOMAN VELA
Chairwoman VELA ZQUEZ. This hearing on state strategies to expand health insurance coverage for small businesses is now called
to order.
The Committee is honored to have before us today Governor Tim
Pawlenty of Minnesota and Governor Edward Rendell of Pennsylvania. These leaders have been at the forefront of the health care
debate that has implications for the entire nation. While I understand their approaches to reform may be very different, we hope
to gain insight on how their proposals can improve health coverage
for the citizens of their states.
This is the fifth hearing that the Small Business Committee has
held on the issue of access to health insurance for small businesses.
It is a problem that threatens to undermine our entire health care
system. It is for that reason we are continuing to work with the
small business community and stakeholders to identify ways that
Congress can address this crisis. While major change may be a
year away, the Committee is attempting to identify consensus reforms that can either be enacted this year or as part of any health
care reforms made in the future.
The Governors here today are fully away of the obstacles that
meaningful health care reform presents. With any efforts to increase coverage that impacts our nations health system, it will invariably create some form of opposition. Governor Pawlenty and
Governor Rendell are responding to the harsh reality of rising
health care costs and declining coverage in their states.
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This Committee is particularly interested in the steps that Minnesota and Pennsylvania are considering to ensure small firms
have access to affordable health insurance coverage.
More than a year ago, Governor Pawlenty laid out his Health
Connections platform that has set the stage for reforming his
State. Governor Rendell is also in the midst of a major debate on
comprehensive changes to the health care system in Pennsylvania.
He is now working with the legislature to advance his prescription
for a Pennsylvania plan.
Both of these plans make small businesses a critical component
of expanding coverage. I believe it is becoming increasingly clear
that addressing the problem of the uninsured requires a focus on
encouraging small businesses to offer health insurance coverage.
Todays discussion will hopefully allow the Committee to gain
new perspective on approaches to improving health care choices for
small businesses. In the past year, this Committee has examined
how competition among insurers and risk are cost drivers for small
businesses seeking health insurance. These are problems that I believe can and must be addressed by changes at both the State and
federal level.
While demographics and localized issues may shape the solutions
that you are proposing, it is clear that you both agree that the current system needs to change. The matter of affordable coverage for
small businesses is something that every state is facing across this
nation. Given the challenges, it comes as no surprise that 6 out of
10 uninsured Americans, including more than 10 million children,
are in households headed by self-employed workers or small business employers.
I look forward to todays testimony, and again thank you for
being here to discuss this important issue. I will now yield to the
Ranking Member, Mr. Chabot, for his opening statement.
OPENING STATEMENT OF MR. CHABOT
Mr. CHABOT. Thank you, Madam Chairwoman, and good morning. Thank you for holding this hearing on state initiatives to expand health insurance. And special thanks to our distinguished
witnesses who are taking time from their National Governors Association winter meeting here in Washington to be with us today.
Governors Pawlenty and Rendell, we really do appreciate your
participation here this morning. We will stop talking shortly, so we
can get to you.
Forty-seven million Americans are uninsured, and for those who
are uninsured, and for those who are insured, costs continue to
skyrocket. For small businesses, health care is continually ranked
as one of the top concerns. And as we have heard expressed by witnesses throughout this Committees 10 health hearings so far this
Congress, it continues to be a problem in this country.
With premiums escalating, small companies face limited choices
of health insurance providers. Many operate within margins so thin
that they cannot provide health insurance for themselves or their
employees. According to the Government Accountability Office,
health care spending is a chief culprit of our national debt. The
structural debt, at the current rate of growth and spending in federal entitlements, is $53 trillion$53 trillion with a Tassuming
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future promise and funded benefits of Medicare, Social Security,
veterans health care, and other programs are kept.
These figures are nothing short of astonishing, not to mention
disturbing. The cost of health care has outstripped inflation by two
percentage points per year each year for the past 40 years, and
costs are expected to continue to rise. Health care costs for individuals and small businesses must be addressed at present, and they
must be curtailed for our children and grandchildren.
These are tough problems with many facets and no easy answers.
Clearly, entitlement spending must be addressed, and I believe
there are important steps Congress can take to bring down the cost
of health care and make it more accessible. For example, I introduced the Health Insurance Affordability Act, which would allow
every American to deduct 100 percent of the cost of their health insurance premiums when calculating their federal income tax.
It is also important to eliminate frivolous lawsuits, which drive
up health care costs. To that end, many of us support The Health
Act, which would cap non-economic damages and ensure that only
those with legitimate claims can proceed to a lawsuit. And many
of us also support legislation that would allow small businesses to
join together with national associations to purchase health insurance for their employees.
The increased purchasing power and lower premium costs would
encourage small companies to offer health insurance to their employees if they dont already. The House has passed this legislation
many times in previous Congresses only to be stalled in the Senate.
Because Congress has not addressed these issues, many states
have become incubators of health care reform proposals. Some have
proposed innovative programs to expand health insurance coverage.
The Governors who are with us today have been at the forefront
in offering imaginative health insurance solutions in their states.
We are eager to hear your ideas for reform.
Madam Chairwoman, thank you again for holding this important
hearing, and I think we all look forward to both Governors testimony here this morning.
And thank you for being here, Governors.
Chairwoman VELA ZQUEZ. Thank you.
It gives me great pleasure to welcome Governor Tim Pawlenty,
who was elected to his first term as Governor in 2002, and was reelected in 2006. He is the 39th Governor of Minnesota, and currently serves as Chair of the National Governors Association. The
State of Minnesota has one of the lowest uninsured rates in the
country.
In 2005, Governor Pawlenty signed into law a health care reform
bill that creates small employer flexible benefit plans which are designed to assist small entrepreneurs purchase health insurance. He
is continuing to work on health care reforms to improve access to
coverage.
Governor, we always allow for a five-minute presentation. We
will give you more latitude, but we would love to be able to ask
some questions.
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STATEMENT OF THE HONORABLE TIM PAWLENTY, GOVERNOR
OF MINNESOTA, ST. PAUL, MINNESOTA
Governor PAWLENTY. Madam Chair and members, thank you so

much for the opportunity to be here. We sincerely apologize. We
were expecting only a brief meeting with the Speaker and the leader, and they were very generous with their time. So we are sorry
for our lateness in arriving here today.
We recognizeGovernor Rendell and all Governorsthe importance of small businesses. It is the main engine of our economy in
Minnesota and across the nation. Seventy percent or so of all of the
new jobs created in the country are created by these small and
early stage companies. It is vital to our future economic picture and
health in this country to make sure our small business sector is
healthy, and a key variable, as you well know, Madam Chair and
members, is the ability to contain health care costs for small businesses, not only as a way to help them provide health insurance
coverage to their employees, but to allow them to even remain viable.
I am the Governor of one of the I think best states from a health
standpoint in the country. We had the healthiest State in the nation seven years in a row. Vermont just beat us out this last year,
so we are second this year. But we are going to get them back next
year, Madam Chair. But for seven years in a row, the healthiest
State in the nation by a number of wide measurements on health.
And we have the second longest rate of living or longevity in the
country, second only to Hawaii. I think they have us beat out on
tropical fruit digestion and eating there, but that helps them.
We have one of the lowest health care costs in the country. And
as you mentioned, we have the lowest rate of uninsured in the
country at about 7 percent. It fluctuates up and down a little bit.
Many states define full insurancein fact, Massachusetts I think
is defining universal coverage at 95 percent. We are already at 93
percent, and we still have a ways to go with respect to our reforms.
The reason I share all of that with you is not to brag about Minnesota, but to tell you that even with all of that nation-leading status, home of the Mayo Clinic, home of the University of Minnesota,
even with all of that, we cant make the current system work and
have it be affordable and accessible and high quality, the way it
is currently configured. And so that is how high the bar has become for our citizens and for our small business leaders and job
providers across the country.
The costs of this health care system are killing us economically.
The current system is not sustainable for individuals, for families,
for small businesses, for local units of governments, for school districts, for counties, for state governments, for the Federal Government. It is the thing that is driving us further towards insolvency,
financially and economically, and we hope that you will join us
and I know you willin trying to find ways to make it more affordable and available.
We have seen in Minnesota, as the nation has seen, an erosion
of employer-sponsored/employer-provided health care coverage that
is very concerning. As that displacement occurs, those individuals
either are on their own or they fall through the cracks or look in-
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creasingly to government programs. And that has its own limitations and concerns associated with it as well.
As to my comments that the current system is flawed and what
we could do about it, Madam Chair, right now we have a system
where what we pay for is not aligned with the outcomes that we
desire. And we have a system where we pay for procedures, volumes of procedures, and as largely disassociated with whether
those procedures are leading in an efficient and impactful manner
to better health, or whether the health care being provided is of a
high quality. And the pricing around that is quite mysterious to
most consumers, and even to some third-party payers of those bills.
In short, and in oversimplified terms, we have a health care system where all of us get to go to a health care provider as consumers, consume goods and services, being largely ignorant of price
or quality, and then we send the bill to a third-party payer, namely
an insurance company, an HMO, or a government, and they pay
the bill.
There is no system that I am aware of where that is going to
work. It defies what we know about human nature. It defies what
we know about markets, and all of the flaws and warts of that are
now being visited upon us in terms of what we see and the deficiencies in this system.
Madam Chair and members, if we invited you to go purchase a
televisionand I hope you would purchase it at one of our great
Minnesota companies like Target or Best Buy that are
headquartered in Minnesotaand we said, No consideration about
price or quality, just go pick out a television, I doubt that many
members or citizens would go pick out a, you know, 12-inch television. I think probably most of the people would go get the big flat
screen.
And so we need to connect consumers and payers and providers
as it relates to how we pay for the desired outcomes that we have.
With that in mind, we note that even in Minnesota, with all of our
nation-leading health care quality and delivery systems, until recently only 1 in 10 people were getting optimal care in diabetes.
We know what optimal care in diabetes is. We can define it at
Mayo Clinic levels. We can define it at world-class leading levels.
And 1 in 10 people were getting that kind of care. And if you dont
get optimal care in diabetes, it leads to very expensive, worsening,
problematic, chronic conditions that get even more expensive.
So paying for providers, as one example of many, to move their
patient loads towards optimal care, and putting benchmarks
around that and pain premiums, pain incentives for that, seems to
me like it makes a lot of sense. And you know most of the money
goes into the five big chronic conditions. It is diabetes, obesity,
heart disease, cardiac care, end of life issues.
And, you know, setting best of class expectations on quality and
pain for that, rather than paying for volumes of procedures, seems
like a movement that we need to take with respect to our payment
systems.
I also think there is a lot of back room costs that can be taken
out, and we are requiring in Minnesota in our public health programs, if you want to be paid by the State government and be a
participating provider in our State programs, you have got to e-pre-
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scribe. Now, there is some legacy problems with that in terms of
small providers and rural providers who cant make the pivot. We
are going to try to give them some financial help.
But at a time certain in the next couple of years, if you want to
be part of a provider in our State program, you have got to e-prescribe. We have a non-profit that has been assembled of our health
care providers in Minnesota that will share medical records electronically. That is not a government central storage of data. It is
the ability for providers to mutually go into databases with proper
security in place and pull out medical records. So if you are in Duluth, you can get the record from Minneapolis that you may need,
even though you had two different providers.
From an employer standpoint, Madam Chair and members, 125
plans are low-hanging fruit, you know, and they are not costly to
set up for employers. It is a relatively modest and easy thing to do.
But if they do that, whether the employer actually pays for the insurance, or an individual comes to the marketplace and can declare
the benefits of a 125 plan, it is a significant savings either for the
employer and/or the employee. So I would encourage that type of
approach as well.
But if Iand there are many, many other things, but if I were
to leave you with one thought that I think is just critical, is we
have to reform the payment system. Some would argue that the
way to do that is to move to a single payer system. For me, I dont
think that is the correct approach. I dont think it is realistic. I
dont think it will work.
For me, I think the idea is to get transparency around quality
and price, and be very aggressive about that. And the new reform
that we have in Minnesota is to try to put to the side the thirdparty payers, the insurers, the health plans, and have them become
vendors of the providers, but have the providers come forward and
be the bidders of the price.
They can name whatever price they want. But once they name
it, it is good for a certain period of time, and it has to be available
to the whole market, whether it is an individual, whether it is a
small business, whether it is the government.
When we go to Minute Clinic, which was started in Minnesota,
there is no mystery about what stuff costs. You know, go to the
CVS up on the wall when you walk in. If you want the flu shot,
there is the price. You know, if you want the strep test, there is
the price. It is simple. So we need to have price transparency and
ways that average Americans, average Minnesotans, average citizens of Governor Rendells State, can see in a user-friendly, simple
format, and then I think we also have to align payments, whether
they are coming from individuals or third-party payers, to quality,
and not defined just by the volumes of the procedures.
If you pay providers by how many procedures they perform, you
are going to get more procedures. If you pay people to keep people
healthy, and define what that means, either in terms of initially
optimal care, but ultimately outcomes, I think that is a better use
of our money and a brighter future.
So that is the direction we are headed in Minnesota. I would say
it is mission critical for our country. This issue, as one measure
and you know thisthe rate that these programs are growing at
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the state level, and, candidly, at the federal level, this will usurp
the vast majority of our States budget within 20 years, probably
within 15 years.
It has enormous implications for our ability to do almost everything elseK-12, higher ed, roads and bridges. It is the big vacuum in the room. And if we dont find a way to deal with this, it
is not only going to be a very severe challenge to small businesses,
but the rest of what we are trying to do as well.
Thank you for listening. I would be happy to answer your questions after Governor Rendell.
Madam Chair, I haveGovernor Rendell is being very kind and
is offering me to take questions now, because I am going to try to
catch a plane, and then he is willing to suspend his comments, if
that is okay with you, Madam Chair.
[The prepared statement of Governor Pawlenty may be found in
the Appendix on page 38.]
Chairwoman VELA ZQUEZ. Thank you. Sure. All right. Without objection.
Okay. Let me address my first question, of course, to you, Governor. And I would like maybeif Governor Rendell wants to comment on this
Governor RENDELL. Sure.
Chairwoman VELA ZQUEZ. very first question. We all know that
small businesses across the country are struggling with the rising
costs of health care. And one of the main problems in many states
if the lack of competition in the health insurance market.
This was reiterated yesterday by the Nevada merger between
United Health and Sierra that was approved by the Department of
Justice. Governor Pawlenty, while I appreciate that Minnesotabased United Health employs many citizens of your State, I was
hoping that you can talk about whether this increase in consolidation concerns or presents any concerns about competition.
Governor PAWLENTY. Well, I will give you one otherMadam
Chair, thank you, and members. United Health is a large company
located in Minnesota, but oddly it is not allowed to do business in
Minnesota. We have an old law in Minnesota that prohibits forprofit health companies from providing health services in our State.
I think we are the only State in the nation that does that. So what
we have is three non-profit providers, three health plans that control 85 percent of the market.
In the early 90s, we did a reform where we were going to try
towe were the first in, and heaviest in, in the HMO. I wasnt
there then, but that is what we tried to do. And what happened
is initially there was some progress as to cost containment. They
took the low-hanging fruit. But I would suggest to you that in Minnesota our market is not robust from a competitive standpoint. We
have three non-profits that compete.
What they do from year to year is cannibalize each others market share, so when one comes in as the low-cost provider one year
for these big employee groups, they get selected. The losers come
back and underbid them next year. And so they just trade relative
market share from year to year.
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The quality of services and offerings dont vary significantly,
other than on marketing labels. And we could stand for much more
robust competition in my State. I think the semi-monopolization of
our health care market in Minnesota, and the vertical integration
of it, has not served us well. Now, that is not a comment about
what is going on in other states or United. It is a comment about
the fact that we have allowed, and encouraged in some ways
through public policy, the vertical integration of the health care delivery system in Minnesota. And it has not served us well.
Chairwoman VELA ZQUEZ. Okay. Thank you.
And let me goGovernor?
Governor RENDELL. I want to add very quickly on that. Ironically, we are trying to get United to come into Pennsylvania to
spread competition.
[Laughter.]
But there are things you can do. The reason that there is no competition is when you have two or three or one dominant carrier in
an area, they are allowed to negotiate with hospitals and doctors
clauses that make it impossible for competition to come in.
And I would recommend that Congress take a look at those type
of clauses, sort of the most favored nation clauses, and outlaw
themplain and simply outlaw them, make it impossible for them
to negotiate those, because providersa hospitalif you are 80
percent of the market, you are the HMO, and you want that type
of clause, the hospital is in deep trouble if they dont do that. So
they are forced to take an abusive regulation that stifles competition.
That is something I would urge you to take a look at, and something I think you could legislate.
Governor Pawlenty, we have been here in this Committee, and
throughout the Congress, trying to enact legislation that will allow
for small businesses to be able to purchase health coverage. And
one of the bills that we passed was the creation of the association
health plans.
I supported that legislation, which would allow for small firms to
pool together for purchasing health insurance. And despite passage
of the bill in the House numerous times, wide support from the
small business community, and the backing of Minority Leader
Boehner, and the President, the proposal was unable to get
through the Senate.
And during the debate some states expressed concerns about allowing firms to buy coverage across the state line, and the National
Governors Association actively oppose AHPs. As a Governor, do you
have reservations about allowing small businesses to band together, if the plans were regulated by the Federal Government, as
opposed to the state?
Governor PAWLENTY. Madam Chair and members, I would even
take it one step further, and say, first and foremost, we need to
make sure that consumer protections are in place. These policies
and rules and regulations are complex, and to have typical consumers try to sort through that without some guardrails and protections in place is something that we need to be very careful
about.
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Assuming that those are in place at a state level or a federal
level, in the world of the internet, in the world of the iPod, in the
world of global markets, in a world where regional and state
boundaries are, you know, melding, why is it that in Minnesota I
cant buy a California insurance plan? Or why is it that I cant bind
together with similarly-situated people?
I am speaking for myself now, not NGA, but it seems outdated
and parochial to limit these offerings to the state that you happen
to live in when this is largely a transaction involving the exchange
of data and the exchange of information. So my personal view, not
the NGAs view, is that association health plansand assuming
consumer protection is robust, consumer protections are in place,
people should be able to buy insurance wherever they want, and
in whatever form they want. It is a free country, and you shouldnt
be bound by your own states boundaries in that regard.
Governor RENDELL. I would differ just slightly. I certainly agree
with the sentiments Governor Pawlenty offered. But one of the
things I am fighting forand in my testimony I will mention it
is for the State Insurance Commissioner to get the right to regulate
health insurance rates. He regulates car insurance, homeowners insurance, but doesnt regulate health insurance.
And if we get that rightand I think it is very important consumer protection, so no one can be denied coverage because they
have a prior existing condition, which is a yeast infection, for example, we need the Insurance Commissioner to have that right. How
does our Insurance Commissioner regulate a product that is being
offered in California?
But if you go toand I believe Congress shouldsome form of
national health insurance, maybe a form that relies on a working
arrangement with the states, but if you go to that, then I think it
makes sense.
Chairwoman VELA ZQUEZ. I now recognize Mr. Chabot. And I will
ask the members to please address the question to Governor
Pawlenty, becausegiven the time constraint, and then we will
have Governor Rendell make his presentation, and we will have an
opportunity to ask questions to the Governor.
Mr. CHABOT. Thank you very much, Madam Chair.
And, Governor Pawlenty, you proposed a path to universal coverage rather than universal coverage. Could you elaborate on why,
in your State, you decided a more incremental approach?
Governor PAWLENTY. Yes. You know, we are pretty far along the
continuum, as I mentioned already, at 7 percent uninsured, 93 percent insured. And so as we looked at the various models that have
been proposed, either academically or on the ground around the
country, we think we can make very substantial progress, beyond
even 95 percent, with the types of payment reforms that I have
suggested in my earlier comments. And then, we are going to harvest part of the savings from those payment reforms and plow it
back into an existing or style of program that we have in Minnesota, provide more access to the uninsured.
We hope that most of the savingsin my view, about two-thirds
of itwill go into holding down premiums, and then more for access. In my opinion, and you have got to be careful about a man-
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date where you say everybody has to be insuredand then, if
youthe health care that you have available in your marketplace
isnt affordable, you end up criminalizing poor people, or penalizing
poor people.
So I think a better approachand we think we can get there
without such a mandatewould be due to the payment reform and
provide the ability for individuals to go into the marketplace and
purchase it themselves, or through their employer or association.
Mr. CHABOT. Thank you. And in your written testimony, you had
emphasized that states should continue to have the flexibility to try
new approaches. Could you discuss why that is so important?
Governor PAWLENTY. Well, we celebrate this year the 100th anniversary of the National Governors Association. And one of the roles
that we think we can play is to be laboratories of democracy, that
we can go out, try new things. We are a little smaller. We are little
more nimble. We can do things a little quicker. The good news is,
if we can show that it works, you could perhaps take some comfort
as a Congress before you took it national, without having to take
on all the risk.
On the other hand, if we do things that dont work, and they
turn out to be stupid, then you could prevent that from being visited upon the whole country before we road test it a little bit in
the states. So having flexibility, first of all, respects federalism, respects state rights, and that is the tradition of our country.
But second of all, it preserves this role as a laboratory of democracy where we can be experimenters and hopefully deliver results
that might be appealing to you.
Mr. CHABOT. Thank you. And, finally, in your written testimony
also you referred to making consumers meaningful partners in
their health care. Could you discuss why that is so important?
Governor PAWLENTY. Well, it has been my experience, sirand
I am sure it has been yourswhere when people have some skin
in the gameI dont mean that medically, I mean that financially
[Laughter.]
the tend to behave differently. And, you know, if weI go out
in the hallway here and have a cardiac arrest, I dont have the
time to look up, you know, who the best local provider is in terms
of a quality web site and look up price transparency. But for those
things that are schedulable, predictable, preventable, and repetitive, it seems to me having consumers interests financially aligned
with best price/best quality is a good thing to do.
And the good news there is, in our research, in most instances
the highest quality providers in many cases are also lower cost providers. Not in all cases, but in many cases. And so this investment
of consumers changes their behaviors in ways that I think will
serve the financial systems well, but, more importantly, will also
drive them to better health care.
Mr. CHABOT. Thank you very much, Governor.
I yield back the balance of my time, Madam Chair.
Chairwoman VELA ZQUEZ. Sure. Mr. Gonzalez.
Mr. GONZA LEZ. Thank you very much, Madam Chairwoman, and,
of course, welcome.
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The first and most burning questionand I apologize if someone
asked it. I was outside actually meeting with a bunch of physicians
from the State of Texas in the city. I mentioned Governor Rendells
suggestion on the most favored nation type provisions, and actually
the Texas legislature is going to be looking into that. I asked
themthey ought to come in here, if there was some room.
But the most pressing question, and I dont think anyone has
asked it yet, but I know it is on everybodys minds, given where
we are in the primaries. I would ask both Governors: if nominated,
would you accept? If elected, would you serve?
[Laughter.]
You can answer that some other time, instead of putting you in
the hot seat.
Governor Pawlenty, I really wantedthere are a couple of
thingsthe most interesting things we have been discussing about
pay-for-performance and such. But, first, just protocols. And you
were talking about the optimum care and such. How do you establish those benchmarks? I think you made reference to diabetes
treatment, and you said that is easily identifiable, what you should
do, what are the basics, what is the proper care, best practices, and
such.
But if you are talking about treatment across the board, whether
it is a particular disease or regular treatment or whatever for
otheror just checkups or whatever, how do you ever get to that
bottom line, first of all, as to what would be the minimum of best
care, best practices? How do you establish that?
And then, secondly, I guess it is, how do you establish pay-forperformance criteria? Because we have asked Governor Leavitt,
Secretary, HHS, and he hasnt been able to give us an answer to
that, at least the last few hearings that I have attended. So those
are the two questions.
Governor PAWLENTY. Thank you, Congressman Gonzalez. I can
tell you in Minnesota that we envision this in two steps. We are
not ready yet, nor are the databases ready yet, nor is the delivery
system ready yet, to pay purely for health care outcomes. The systems arent robust enough. The culturemedical culture is not yet
advanced enough.
But conceptually, we see that, and there is acceptance of it. In
the meantime, as a proxy for outcomes, we want to pay for adherence to world-class standards, which gets to your point. Again, this
is not the destination, but it is the pathway to the destination.
We have a hometown advantage in Minnesota, because we have
the Mayo Clinic. And so we have the Mayo Clinic and others who
have sponsored something called ICSE standards. I forget what it
stands for, but it is ICSE, and it is basically a depiction of worldclass standards in many courses of treatment. And so when doctors
come and saydid say, You know, why do I want to practice medicine by a cookbook? You know, I have got my own standards, and,
like, you really want to take issue with the Mayo Clinic as being,
you know, low quality?
And so we are not saying you have to do that, but we are saying
we will pay you more if you do do it. So in the case of diabetes,
we have this program called Bridges to Excellence, where we say,
all right, we have got about 6 or 8 percent of our current diabetics
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in Minnesota on these optimal care treatment regimes, we want to
get that to 80 percent over the next 10 years. So we are saying to
our providers, We will pay you more if you can get your patient
load to 10 percent next year, and then, after that 15 percent, and
after that, so it is a bonus system based on these ICSE standards.
But I will acknowledge to you that is not the endpoint. Those
treatment protocols or standards are proxy for better health, better
health care outcomes. They are not the outcomes themselves.
So we had some resistance in Minnesota, and still do to some extent, but the medical community has come around these ICSE
standards mostly. There is still some dissent, but they have mostly
come around it, and most because of the credibility of the Mayo
Clinic and the people who stand behind the standards.
Mr. GONZA LEZ. Thanks very much, Governor.
Governor RENDELL. Congressman
Mr. GONZA LEZ. Government Rendell?
Governor RENDELL. I will take a quick shot at that. Number
one, obviously, standards are always debatable. But we know that
there are certain things that we shouldnt pay for, and our Medicaid program has informed providers that we are not going to pay
for medical errors anymore. We are not going to pay for obvious
medicalpreventable medical errors.
You know, right now in the current system, you go in for the amputation of your right arm, the hospital by mistake amputates your
left arm, your provider pays for that. Then, for the remediation of
the left arm, including the placing of a prosthesis, your provider
pays for that. And then, they get around to amputating the correct
arm, and your provider pays for thata third time. No one business, no other field of endeavor in the United States of America,
would business people put up with that, paying for that type of performance.
And we are not in our Medicaid program anymore. We have notified them. We have worked on it with our hospitals, and our hospitals have agreed that this is a fair system. We are not going to
pay for obvious preventable medical errors. That is a standard that
should be applied across the board.
Secondly, we do knowthe industry, the science of health care,
knows what works and what doesnt work. There are 10 states
and I think Minnesota is one of themthat allow for thewhat is
called the Taylor model, named after the doctor who formulated it,
for treating chronic care diseases like diabetes.
Right now, in Pennsylvania, if you have diabetes, the only thing
we will pay for is the time you spend with your primary care physician. Most primary care physicians are swamped. They tell you you
have diabetes, they will give you a pamphlet on diet, they will give
you a quick run-through of how you test yourself, you are out of
the office. And the next time they see you may be when you are
going into the hospital for amputation.
The Taylor modelthe health care system pays for a nutritionist
who works almost on a weekly or every two week basis with that
patient, saying, How are you doing? Is your diet too restrictive?
If it is, I can make substitutions. The Taylor model pays for a physicians assistant who will tell that person how to test themselves,
or, if it is too painful, will suggest an alternate method, and make
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sure that the patient is living up to those procedures on a weekly
basis.
The Taylor model pays for the pharmacists time as well. You
manage the disease. You dont just treat it; you manage it. We can
show you, in the 10 states that have the Taylor model, the hospitalization rate for diabetes compared to Pennsylvania. And we estimate we will save $2.1 billion if we can get down to the hospitalization rate of the 10 states who manage chronic care diseases.
So it is doable.
Mr. GONZA LEZ. Thank you very much.
Chairwoman VELA ZQUEZ. Time is expired.
Mr. GONZA LEZ. I yield back.
Chairwoman VELA ZQUEZ. Governor, at what time do you need to
leave the room?
Governor PAWLENTY. Madam Chair, just in a few moments.
Chairwoman VELA ZQUEZ. Okay. So I now recognize Mr.
Fortenberry. Is he here? No. Who is next here? Mr. Westmoreland.
No? Mr. Akin, okay.
Mr. AKIN. Thank you, Madam Chair.
I have just a real quick question. Are you assumingand in your
State is the health insurance policies, are they portable, or is that
not the case?
Governor PAWLENTY. Generally, no.
Mr. AKIN. And do you support that idea, or have you looked at
that? Or what is your position on that?
Governor PAWLENTY. Yes.
Governor RENDELL. Same answer.
Mr. AKIN. That is all I had. Thank you, Madam Chair.
Chairwoman VELA ZQUEZ. Mr. Altmire.
Mr. ALTMIRE. Governor Pawlenty, thank you for being so generous with your time with your flight on the other end. I spent my
professional career before being elected in health care policies. This
is something I have thought about and worked a lot. And I talk
about pay-for-performance all the time, and I want to commend you
for your testimonyand I will commend Governor Rendell after his
testimonybut for what you have done to take a leading role in
pushing that.
And I agree with everything you said about the incentives that
exist, and it is almost as though the incentive of the provider is for
the patient to get sick. They make more money the more often they
come to see them, and you have taken steps to address that.
So, quickly, my question is: given the impact that pay-for-performance will have on health care providers, and particularly solo
and small group providers, practitioners, what steps have you
taken in your state to make sure that they are fairly considered
with their interests?
Governor PAWLENTY. Thank you, Congressman Altmire. It is a
great question. And I also want to say in the interest of full disclosure, what we have done in Minnesota is early stage. I think I
would be misleading this Committee if anybody said we have got
a full-blown pay-for-performance program, it is embedded in the
culture, deeply embedded in the payment system. We are at the
very beginnings of paying at the margins for diabetes, obesity, and
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a few other things. So it is a start. We think we know where we
need to end up, but it is just beginning.
As to your question about rural or smaller providers, in Minnesota we are trying to address that, and one way is through
health information technology. That if you are in an area of greater
Minnesota, and you need access to this type of information on
standards, practice protocols, or the like, that you have the capabilities to access that. And we also dont make the system mandatory.
You know, in the end, if we are going to pay for outcomes, we
should be agnostic as to how they get there, you know, making
sure there is consumer protection and it is legal and ethical and
appropriate. But we have got this intermediate step where we are
paying for procedures now, and now we are going to go to best
practices, and hopefully to outcomes.
But we could say to small and rural providers, Here is the outcomes we expect. How you get there, you know, is part of the art
of medicine. And we will see you on the results side of this. But
we are not there yet with the system we have. But to answer your
question, we are trying to provide some support to transition them,
to make sure they have access through technology to the same information everybody else has got.
Mr. CHABOT. Would the gentleman yield? I thank the gentleman
for yielding.
Madam Chair, if I could make a suggestion. Since the Governor
has to leave literally very soon, in moments, perhaps, because a lot
of members have been here, if each member could maybe ask one
question so we get to as many as possible.
Chairwoman VELA ZQUEZ. Without objection, yes.
Mr. CHABOT. Thank you.
Chairwoman VELA ZQUEZ. Mr. Westmoreland. And we will come
back a second round.
Mr. WESTMORELAND. Thank you, Madam Chair.
And, Governor, thank you for being here, too. I wanted to ask
you about the flexible benefits program that you allowed small
businessor I guess insurers to offer small business. It says that
I was just reading a statementthat the plan must be offered on
a guaranteed basis to all small firms.
So are you saying that there isthat each small business cannot
come up with their own menu of plans that they would want based
on the employees getting together and saying, We need this, we
dont need this, but they would all have to be offered the same
plan?
Governor PAWLENTY. Within a range ofCongressman Westmoreland, within a range of benefit options they can design. But
once the plan is offered, it has to be available in the market broadly.
I will also tell you this program has not been particularly successful. Not because I dont think it is well designed and well intentioned, but it has been woefully under-marketed. And in my view,
the health plans do not have a large incentive to sell this particular
product. It is a low-profit, low-margin, high administration product,
and I would say to you the impact of this in Minnesota so far has
been very modest.
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And so I would not bring this up yet as a success, and I think
more flexibility perhaps would bebut the heart of the matter is
the health plans have very little incentive to aggressively market
that plan. And they are marketing, frankly, more revenue-robust
plans.
Mr. WESTMORELAND. Do you think it would be better if they were
able to offer different plans to different businesses?
Chairwoman VELA ZQUEZ. Remember, one question.
Governor PAWLENTY. Yes. Congressman Westmoreland, yes, but
within a base of consumer protection. You know, again, this is an
area where consumers can get really exploited if we are not careful.
These plans and policies are very complex.
I used to be a lawyer. I try to read this stuff. I cant understand
my benefits and rights, and so you have got towithin a range,
you have got to protect the consumers.
Chairwoman VELA ZQUEZ. Mr. Sestak.
Mr. SESTAK. Thank you. Governor, you made a response to a
question earlierI think the response had something to do with,
you know, an individual having skin in the game, you know,
changes the behavior because they have to pay a part of it. Why
cant you extend that skin in the game analogy that you want to
change behavior by having a mandate, so that people are involved
in it? And isnt that the same philosophy that, therefore, their behavior might change if they are involved in a particular sense? If
they are not, you then have to wait until they go to the emergency
room. Isnt it the same analogy?
Governor PAWLENTY. Madam ChairI am sorry, Congressman, I
cant see your name plate there, butSestakyou are speaking to
an individual mandate for coverage. We have an individual mandate for automobile insurance in Minnesota with the threat of a
criminal penalty, and the non-compliance rate is well north of 10
percent. And the reason for that is, in part, some people just arent
responsible, but a large part of it is people cant afford the insurance. And so there is a reality there that lies underneath that.
The other thing is, at least in Minnesota, we are so close to what
many would define as, you know, reasonable universal coverage
that we dont think it is necessary. We are already at 93 percent,
you know, and we think we can get to the Massachusetts standard
without that.
And the other thing I would be careful about, the Massachusetts
approach is a work in progress. And I would suggest to you that
there are some unique circumstances there that may not bethat
you cant replicate. Specifically, they cut a deal with the Federal
Government where they have got a big bunch of transition money
that is available for a couple of years and then it sunsets. And that
was part of a deal they cut on some Medicaid negotiation issues
that sunsets.
Number two, they promised affordability, and itthe jury is still
out yet on whether over time that is going to be an affordable plan.
You know, originally, they had hoped to do it under $200 a month.
I think it is north of $300, and maybe in many peoples minds, if
the legislature keeps putting stuff in there, it could be a $400 or
$500 a month plan.
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Now, they have added some people to the rolls. No question
about that. But I dont think that mandating something through
government is the best way to go, particularly when the main barrier is you have got people who cant afford it. And so I think a
smarter way to go is to try to make it affordable and help them
through the marketplace, if need be give them some financial assistance. But saying, Poor people, you know, get this or you are
going to be a criminal, seems to me not the wisest path.
Chairwoman VELA ZQUEZ. Mr. Fortenberry.
Mr. FORTENBERRY. Thank you, Governors, for joining us today. I
am in your neighborhood. I am from Nebraska. And I really appreciated your opening comment. I think the major challenge before us
all is: how do we improve outcomes and reduce costs? And to that
end, I think you identified three absolute critical factors, one being
both transparency in terms of quality of care as well as price, and
in addition to that the use of health information technology to increase efficiency, but also encouraging/incenting healthy behaviors.
In that regard, I want a clearer understanding, though, as to
what level of subsidy the State is providing to the various components of the health care plans that you have talked about, and
whether or not health savings accounts are an important component of that, because the health savings account, in my view, particularly when you canagain, allowing someone to use the price
mechanism for their own care, in partnership with their health
care provider to improve an outcome, but also save a little money,
is a very important way in which we can, again, achieve, again, a
better outcome and reduce costs.
So I am curious as to the level of State subsidy and whether
health savings accounts are an important part of that.
Governor PAWLENTY. Well, thank you. And if I could just jump
back to the other Congressmans question. The other aspect of a
mandate is if you mandate it, and people cant afford it, then you
have just either made them criminals or you have sent the government the bill. And you guys are broke, we are going broke, so it
iswhere does that lead?
As to your question, Congressman Fortenberry, HSAs philosophically for me, are a right direction, a right option to present. I will
say their impact in the market so far has been modest. A cousin
of HSAs, as it relates to consumer empowerment, consumer responsibility, is what you do with financial alignment ofyou can go
wherever you wantmy attitude is, go wherever you want, but if
you pick a high-cost, low-quality place, we are not going to pay as
much of that as we would if you went to a high-quality efficient
place.
And, you know, that is oversimplified, but within the deductibles,
co-pays, those types of mechanisms, I think you want to align those
mechanisms to high-quality efficient places. And those are powerful
incentives.
I will tell you one quick, true story. A guys daughter got injured
in Michigan. He is a Minnesotan, a Minnesota health plan, so he
is out of network with a Michigan provider. She has a knee injury.
It is not life-threatening, and they wanted something like $1,600
or $1,800 for the MRI in Michigan.
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He gets a friend to drive her home. In the meantime, he is in
an HSA, so he gets on the phone to Minnesota MRI providers. He
gets quoted a $1,200 price, a $900 price, an $800 price. Finally, he
finds a place that, if he pays cash up front, cash discount, he got
it done for like $600.
So now not everybody is going to jump on the phone and do that,
but he was a motivated, involved, engaged consumer, and got the
price of that procedure down from $1,600 to $600. That is the
power of having people say, Hmm, if I have got to pay something,
maybe I had better think about what the price is and what the
quality is. I am sorry?
Mr. FORTENBERRY. The mechanism by which the State sets it up.
Governor PAWLENTY. Oh, yes. We have endless numbers of State
programs in health care, and we are going broke over them. But
one of our flagship programs is called Minnesota Care. You know
that if you areoversimplify it, if you are a senior citizen or older,
you get Medicare, which is a good program. If you are disabled or
poor, you get Medicaid, which is a good program. If your employerbased coverage, you get your coverage from your employer, the people who are falling through the cracks of course are the working
poor who dont make enough to, you know, buy their own, or dont
get their insurance from their employer, but make too much to
qualify for the public program.
So the in-betweeners in Minnesota might qualify for something
called Minnesota Care. It is a sliding scale subsidy program for you
to go out and buy insurance, or we buy it for you, in the private
market. And that is the way we deal with the in-betweeners, the
working poor that fall through the cracks. And it is a big program,
and the amount of subsidy varies depending on income level, and
then it falls off completely. And it is a good program, but it is an
expensive program.
Chairwoman VELA ZQUEZ. Ms. Clarke.
Governor PAWLENTY. Madam Chair, I am afraid I am going to
have to go. But if I could thank you for your understanding, and
I also want to particularly thank Governor Rendell for his patience.
And I owe him one now.
[Laughter.]
And owing Governor Rendell is not a good thing.
[Laughter.]
Chairwoman VELA ZQUEZ. Thank you, Governor. Thank you so
very much, Governor.
Okay. Well, I now recognize Mr. Sestak for the purpose of introducing our next witness properly.
Mr. SESTAK. Thanks, Chairwoman Velazquez and Ranking Member Chabot.
I am very pleased to introduce Governor Rendell. When I got out
of the Navy two years ago this month and entered politics, and I
asked somebody what to do, he said, Do what Ed does. Everybody, you know, calls him Ed. You can go to every train station in
the morning at 6:00, every hoagie shop during the day, and every
restaurant early evening, and every bar late at night.
[Laughter.]
And then, finally, they said, Make sure you do what he did as
make sure Wawa names a sandwich after you, because we have
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up there the Rendelli Wrap, which is chicken strips with buffalo
blue cheese. I havent gotten the last one, but I followed everything
else and I am here.
He certainly is a man of the people. After he took over in 2003,
even though I watched from a distant way at sea, he basically took
very strategic investments and revitalized communities of people,
enhanced their education, an really began to expand health care,
starting with those who were disenfranchised at the time, the
young children, all the way to mental health and drug addiction.
I am really pleased that we are addressing this today with him,
because it is a real brain-drain on small businesses at times. They
do create 70 percent of all jobs, but they dontarent as able to
provide health care, so, therefore, those kids, those entrepreneurs,
those startup types, are being potentially more attracted to large
businesses rather than small.
And so what we will hear from him is a prescription for Pennsylvania that has several components to itcover all children, cover
all Pennsylvanians, but also to address costs bywhat I am most
taken by is the impact that we are going to address this issue of
health-caused infections, all the way down to chronic disease management.
In short, his approach is exactly who he is. It is everybody contributes, everybody benefits in a common-sense, comprehensive approach to health care. And at the end, just before I introduce him,
on a personal note, as every new politician does early in their career, they get into trouble.
[Laughter.]
They make some decision to speak somewhere potentially, as in
my case, and where segments of a certain community were either
blogging me to death, or whatever, and I decided to stay the course.
There was one politician who decided to show up that evening
uninvited to stand beside me at a pretty trying time, and so I very
much thank you, Governor. You really are not just a great politician, but, without question, a selfless individual who is truly, in my
opinion, a profile of courage.
Thank you.
STATEMENT OF THE HONORABLE EDWARD G. RENDELL,
GOVERNOR OF PENNSYLVANIA, HARRISBURG, PENNSYLVANIA
Governor RENDELL. Thank you, Congressman.

Chairwoman VELA ZQUEZ. Welcome, Governor.
Governor RENDELL. Thank you, Madam Chair.
Let me just give you, first, a quick look at a thumbnail sketch
of where we stand in Pennsylvania, our situation, not quite as rosy
as Minnesota.
In the last seven years, from 2000 through 2006, health care inflation has risen in Pennsylvania by 75 percent. Regular inflation
health care premiums have risen by 75 percent. Regular inflation,
17 percent; median income has grown by 14 percent. So you can
see just how far, how fast, small business or all business employers
have fallen behind the health care premium rate of growth, and
how the employees who contribute have fallen behind. Their buying
power is much, much less than it was seven years ago.
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I would submit to you that if we fast-forwarded to 2013, the next
seven years, and those statistics continue, health care as we know
it in Pennsylvania, and my guess is in almost all of the states represented by this panel, will be over. There will be no employerbased health care in the United States of America. I think that is
unsatisfactory and wouldnt be a good result for us.
In Pennsylvania, we havethe good news is we have about 92
percent of our people covered. The bad news is it is 800,000 adults
without coveragea little less than 150,000 children. Of those who
are uncovered, 74 percent of them work, and the vast majority of
them work for small businesses. And I am using the federal definition of small businesses50 employees or less.
Twenty-seven percent of them have been uninsured for at least
five years. Premiums for employer-based health care rose in 2005
by 9.2 percent. It was the fifth straight year that premiums increased by at least 9 percent.
In less than 10 years, the average cost for premiums for family
coverage in Pennsylvania through employer-sponsored health care
has gone from $4,800 in 1996 to $11,400 in 2005. During that same
period, if you were just trying to insure your employee, coverage
went from $2,000 to $4,600. Stunning increases.
And the most stunning fact of allPennsylvania is second only
to California in the number of citizens who, between 2000 and
2007, have lost employer-based health care; 491,000, effectively
one-half million Pennsylvanians, have lost employer-based health
care in the last seven years, second only to California, as I said.
Now, what can we do about it? I think what we have to do is
take strong and decisive action, do it quickly, do it smartly, and I
believe the answer is a combined federal and state program.
But let me tell you a little bit about what we have tried to do
in Pennsylvania. You have heard Congressman Sestak said, and
the Chairwoman said, we have a plan called Prescription Pennsylvania. It has three components, all equally important. The first
component is to contain and drive down costs. If we dont do that,
nothing else we are designing here will matter, becauseGovernor
Pawlenty used the vacuum analogybecause everything will be
swept away unless we can contain and reduce certain costs. We believe we can do that.
The second component of our plan is to cover all Pennsylvanians.
But if you did that, the average premium for a small business or
a large business would drop by 6.2 percent. If we covered all Pennsylvanians, it would save the health care delivery system $1.2 billion in Pennsylvaniaa 6.2 percent reduction in that small businesses premiums. And I want you to keep those percentages in
mind.
The second thing we want to attack is medical errors, and we are
attacking them in a number of ways. As I said, in our Medicare
and Medicaid program, we are stopping paying for obvious and preventable medical errors. We want big businesses to join us in doing
that. Preventable medical errors cost $2.1 billion, about 10 percent
reduction in premiums if you get rid of all them, and I know you
cant.
Hospital-acquired infectionsI think Congressman Sestak made
reference to that. We require our hospitals to report the level of
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both medical errors and hospital-acquired infections. Last year,
there were $4 billion of hospital-acquired infections. You know
what that is. I come in for an appendectomy, I am otherwise perfectly healthy, but I get infected by something that occurred inside
the hospital. It is stunning.
The average cost of hospitalization in Pennsylvania is $32,000. If
you get a hospital-acquired infection, the average cost is $180,000.
Are hospital-acquired infectionsand you have all now heard
about MRSAare they preventable? Yes, they are. And Scandinavian countries have pretty much zeroed them out. They are preventable.
Some good work is being done here. The Pittsburgh VA, Congressman Altmire, is the leading Veterans Administration hospital
in controlling hospital-acquired infections. They have an interesting
protocol, which I dont have time to tell you about, but over the
course of the average stay that protocol costs $377. It is masks and
gowns and hats for everyone who comes within a certain amount
of the patient. It costs $377, so you pay me now $377 per patient,
or you pay me later $150,000 per patient.
We passed in Pennsylvania the first comprehensive hospital-acquired infection bill in the State. We make hospitals file an HAI
control plan. We make them adhere to best practices. We reward
them, give them monetary rewards, for incremental reductions in
hospital-acquired infections, and we punish them.
I have said, and my Health Commissioner stands ready, if a rate
of hospital-acquired infection does not come down or grows over a
certain period, we will take away the license of that hospital. And
I dont care if it is the most blue chip hospital in Pennsylvania, if
they are not going to take it seriously, we will take away their accreditation.
The next thing we do is to free up our non-medical providers to
do more in the health care delivery system. We passed comprehensive legislation to do that. And as a result, nurse-run clinics are
cropping up all over Pennsylvaniain big box drug stores, in food
stores, in supermarketsand they give treatment in off-hours.
So we have stopped the flow of people going to emergency rooms
for non-emergency treatment, because they can go to these nurserun clinics. It increases accessibility, particularly in rural areas, in
hard-served urban areas, and at the same time it cut costs, because
instead of a primary care physician, you are getting a certified
nurse practitioner delivering the same treatment. Instead of a dentist, you are getting a dental hygienist, delivering the same treatment at significantly less cost.
Chronic care I alluded to, and so did Governor Pawlenty. We believe we can cut out most of those $2 billion of unnecessary hospitalizations that come from an improper method of treating chronic care diseases. Just take hospital-acquired infectionsif we could
eliminate half of the $4 billion that is being spent now by the
health care delivery system, that would be another 12 percent reduction in the cost of premiums.
So can we constrain health care costs? Is it useless? Of course
not. Of course not.
In our State Employee Benefit Program, it employs 58,000 employees. Rather than all of those increases that I have told you, in
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the last three years we have had zero increases. Why? Because we
went to generic prescription drugs for everyone. You cant get a
name brand. You cannot get a name brand.
We have wellness programs where we give employees financial
incentives for meeting wellness standards, and those things have
caused us to be able to hold down our plan. So anyone who tells
you that we cant constrain costs in the health care delivery system
is not telling you the truth.
The second part of our plan is cover all Pennsylvanians. That
doesnt relate directly to small business.
The third part of our plan is how we attack insurance reform,
and insurance reform is very, very important. Small businesses in
many states get killed by the rating system. If you have got 10 employees, and two of your employeeslet us say they are 28-year old
menleave, and you hired or replaced them with two 25-year old
women, your rates, unless they are controlled, will spike through
the roof. Why? Because they are child-bearing years, and there are
potential risks.
Many states still allowand Pennsylvania is one of themstill
allow that type of demographic rating. We want to change that. We
want to go to only age, location, and geography, as things that can
cause differential in prices. We want to make sure the highest price
that an insurance company can charge per employee is only twice
the level of the lowest price that they charge. That is crucially important to small businesses.
We want to pass a law that says 85 percent of the premium dollar goes to providing health care, not to advertising, not to salaries,
not to overhead, but to health carea crucially important aspect
of this. And as I said, we want to give the Insurance Commissioner
the right to set rates and to adjust some things that are clearly unfair practices.
Cover all Pennsylvanianswe offer a goodstripped down but
good basic health care producthospitalization, prevention, unlimited doctors visits, generic prescription drug coverage, mental
health and substance abuse coverage. We subsidize it using some
federal funds, 33 percent federal funds, about 30 percent State
funds. We subsidize it by asking the employer to pay $130 a
month. The employee pays either $40 or $60 in contribution per
month, depending on their overall family income.
It is a good, stripped down, affordable plan, and we believe it will
cover virtually everyone who works for small businesses. This is
only available to small businesses, 50 employees or under. And it
is only available to low wage businesses. Low wage businesses are
defined as businesses that have a median incometheir average
payroll is less than the median income, which in Pennsylvania is
$42,000 times, let us say, 10 employees. If their payroll is lower
than that, they qualify for the product. But we are requiring all insurers in Pennsylvania to offer this product without the subsidy.
We also offer it to people who are self-employed. We offer it to
people who dont have coverage in any other way. We even offer it
to people who make more than 300 percent of poverty, but they
come in and buy it at our cost. Our cost is $240 a month that we
pay to subsidize. So it is a good, workable plan. It will cover most
of the people in small businesses.
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And at the same time, insurance reform is crucial, it is absolutely crucialsmall businesses get hit more by insurance company
practices than anything elseand containing costs. Those are the
things that I believe can give us a workable, affordable, accessible
health care system in both Pennsylvania and across the country.
[The prepared statement of Governor Rendell may be found in
the Appendix on page 45.]
Chairwoman VELA ZQUEZ. Thank you, Governor.
And I am going to ask unanimous consent that the Chair and the
Ranking and all the members will have an opportunity to ask just
one question. Without objection.
Governor, if I may, I would like to talk to you about the funding
vehicles for the CAP program. And I know that has been the center
of the debate in the Pennsylvania legislature. And under your
original proposal, the fair share assessment would have required
businesses pay into a fund if they do not offer health coverage.
And this plan was similar to the Massachusetts reform, but I understand that it was opposed by some lawmakers. Can you talk to
us about the original plan and why you believe there was some resistance to it, and how are you funding this initiative now?
Governor RENDELL. Well, real quickly, we had three sources of
fundingone, to increase our cigarette tax by 10 cents a pack, still
keep us far lower than New York and New Jersey; two, to tax
smokeless tobacco products. Unbelievably, Pennsylvania is the only
State in the union that doesnt tax cigars and smokeless tobacco
products. When I came in, I said that cant be right. North Carolina, Kentucky, Virginiano, we are the only ones. So those were
the two sources.
And the third source was the fair share assessment that got at
the free riders. And I believe, conceptually and in every way, that
there shouldnt be free riders. Whether you are a small business or
whether you are a 1,000-employee business, if you dont provide
health care, you are driving up the cost of everybody else.
If you have got 1,000 employees and you dont provide health
care, everybodys premiumevery small business in the State who
does provide health care is paying over 6 percent additional to their
premium because of you. So we proposed a 3 percent payroll assessment, payroll tax, whatever you want to call it.
Because it would have impacted on small businesses, it got very
little support in the legislature, including by my own Democrats.
Even though we phased it in for five years for small businesses, we
had a lot of small business protections, but it still becameyou
know, eventually you get the message you are not going to get it
through.
I still think it is the best way to go. There should not be free riders in the system. Why should one machine shop with 10 employees offer health insurance to its employees and the other, who is
competing with ityou know, two miles down the roadget away
without offering health insurance, and those 10 employees get
picked up in ways that we all eventually pay forratepayers and
the State and eventually pays for.
So as a substitute, it is really too complicated and not worth
spending the time. But we have an abatement fund for our doctors
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from their medical malpractice insurance liability that they pay to
the State in Pennsylvaniayou pay private premiums, and you pay
to the State for the catastrophic fund. We abated that fund; especially for specialists, we abated it when we were in the middle of
the medical malpractice crisis.
We have kept that abatement on, and it has worked very successfully to stabilize the practice of medicine in Pennsylvania. but
it is racking up big surpluses, so we are tapping into the surplus
to pay forto cover all Pennsylvanians.
Chairwoman VELA ZQUEZ. Thank you, Governor.
Mr. Chabot.
Mr. CHABOT. Thank you. First of all, I represent Cincinnati,
Ohio, Governor, and I would appreciate it if your Steelers would
quit beating up on my Bengals. So
Governor RENDELL. Next year.
Mr. CHABOT. All right. We will see. Hopefully, we will do better
next year.
But my question is that there are some uninsured individuals,
especially young people, who could afford health insurance who just
choose not to be covered. What would you do, what do you do,
about individuals in that situation?
Governor RENDELL. Well, interestingly, I favor mandating so
those people arent free riders either. I favor mandating. But,
again, it was one that I knewwe have, as Representative Altmire
and Representative Sestak will tell you, a little bit of a conservative legislature. And I have dragged them kicking and screaming
into the 21st century.
But there were certain things that I knew I couldnt accomplish,
and what we said in Pennsylvaniawe will try it without the mandate for five years, and then see if the free riders are hurting the
system. Do you know who wants those 28-year olds in the system?
The HMOs, and with good reasonbecause if we are going to force
them to coverand in Pennsylvania we intend to force them to
cover cancer patients, everybodythey should have the right to
have the healthy 28-year olds in the system.
In fact, they are called by the health care profession the
invincibles. They are 28-year old males, they never think they are
going to get old, they have never seen a doctor, they dont think
they have any need for a doctor. In fact, I was an invincible once.
I was playing basketball and I took a pass on one of my fingers.
And I didnt go to the doctor for three days because I thought I
could heal it myself. As a result, I have a crooked finger for the
rest of my life.
The invincibles are the ones that everybody wants. In Pennsylvania, we have designed a bizarre system. If you have cancer, and
you are not covered, you cant get health care coverage. If you are
a 28-year old, and you are perfectly healthy, everybody wants to
cover you. It is you-know-what backwards. It makes no sense at all.
[Laughter.]
You know, it makes no sense at all. And to make the system
work, to be fair, if we are going to keep the system of insurance
companies delivering the basic productand I think we should
I think you need to get the invincibles into the system for the benefit of the insurance companies.
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Mr. CHABOT. Thank you, Governor. I yield back.
Chairwoman VELA ZQUEZ. Mr. Ellsworth.
Mr. ELLSWORTH. Thank you, Madam Chair.
Governor, thanks for being here. Governor Pawlenty talked a lot
about the performance pay or time payment to quality. Could you
tellin your studies, you have obviously studied this a lot. Can you
tell me your views on that and some of the pitfalls you see and/
or the challenges? I know you said it was in the infancy stage, but
just what your experience has been or how you view that.
Governor RENDELL. You know, we have a wonderful medical profession in this country, wonderful hospitals, wonderful doctors, the
best in the world. And Pennsylvania really, in teaching hospitals,
leads the way. But you have got to motivate the system to change.
Think about it for a second. Why are there $4 billion worth of
hospital-acquired infections? Why are there? Dont the hospitals
care about the quality of care that they deliver? Arent they worried about what happens? By the way, that $4 billion, also 2,500
deaths a year; 22,000 cases of hospital-acquired infection, 2,500
deaths.
And the interesting thing, all the cost containment stuff I talked
about, better way of handling chronic care, hospital-acquired infections, medical errors, all of those things improve the quality of the
system. Normally, when we save moneyI know when you try to
save money in Washington people say, Oh, you are hurting people. Here, we are saving money and helping the quality of the delivery of the system.
So preventable medical errors are step 1, and we are doing it in
the Medicaid program. We intend to do it for everyone in our system, for our seniors, for our employees. I mean, we are the 800pound gorilla. The State of Pennsylvania actually insures 24 percent of the people who get health insurance in the Commonwealth
of Pennsylvania. So we intend to do it, and I am talking to employer groups about doing it.
Why? Because it will motivate cost-saving and quality-inducing
changes that we cant seem to motivate anyway. When I visited the
Pittsburgh Veterans Administration Hospitaland if you all have
time, go there and see what they have donethe protocol is neat
and it makes sense, but the thing that is so important is everybody
has bought inthe doctors, the nurses, the janitors, the maintenance men. We had a janitor who showed us, with great pride, his
storage room, and he said, Governor, I dont leave work until I
make sure there are enough caps and gowns and masks in here so
nobody can use as an excuse that they didnt have available caps
and masks and gowns. Everybody has bought in.
And right now, the medical profession isnt thinking about cost
savings. A some of our great teaching hospitals, I have had people
tell me that surgeons look at hospital-acquired infections as a cost
of doing business. Well, we have got to motivate them to start
thinking about quality of care and about cost reductions.
Mr. ELLSWORTH. Thank you. I would yield back.
Chairwoman VELA ZQUEZ. Ms. Fallin.
Ms. FALLIN. Thank you, Governor, for coming today. I was just
slipping out to another meeting, but they told me I was next to ask
a question, so I am going to stay for just a second.
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Governor RENDELL. Well, thanks for staying.
Ms. FALLIN. I was interested in your comment about the two men
and the two women, and the two men left and the two women were
hired, and the insurance premiums went up for the small business,
if I remember the story right. And you were talking about how the
women were of child-bearing age, and so the rates went up because
they were rated differently, and how are we going to resolve the
difference on ratings in various stages.
And, you know, as I was sitting here thinking about that, Mr.
Chairman, I was thinking about how women are kind of discriminated against with the ratings on health care and health care costs
for insurance, and how, you know, I could see where employers
might rather hire a man than a woman if their insurance premiums are going to go up because a woman is of child-bearing age.
So I just thought that comment was kind of interesting. I hadnt
really thought about that in the past.
Governor RENDELL. It is devastating. The smaller number of employees you have, the smaller your pool is. Demographic rating allows them to rate just your pool of employees. Community rating
is you rate all of the people in that HMO in the entire state or in
the entire nation. We should basically have community rating with
a few nodsobviously, age would be one, the geography would be
one, because in certain part of the countryin Philadelphia it is
more expensive to have health care than it is in Tioga County in
the northern tier of Pennsylvania.
So some limited number of factors in which they can spike rates.
But, again, we want to reduce the spike to no more than two to
one. Right now, some rates spike seven, eight, to one. Heaven forbid you have got five employees, and you justyou want to hire
this brilliant woman who has got a brilliant resume, she is 29
sorry, she is 39 years of age and in her mid-30s she successfully
fought breast cancer. Wait until you seein states that have demographic rating, wait until you see what happens to that small business overall premium because they have hired somebody, even
though the breast cancer is in remission, who has had breast cancer.
So, yes, I think there is a lot of discrimination in the system, as
long as you allow demographic rating.
Ms. FALLIN. I appreciate your comments. Thank you.
Chairwoman VELA ZQUEZ. Ms. Clarke.
Ms. CLARKE. Thank you, Madam Chair.
And thank you, Governor. Why do you think that only certain
small businesses get access to the subsidized health plans under
the CAP program? And why not all small businesses?
Governor RENDELL. Well, because let us say you are a hedge
fund, and you have 20 employees, and the non-administrative employeeslet us say the 12 professional employees are makingoh,
on an average, the hedge fund these days$3 million each. We
dont think the state should be subsidizing them.
But we do saywe do offerby regulation, we would make the
HMOs offer the same plan to them at costyou know, at cost. It
wouldnt be subsidized, but they could get it if they wanted it, for
$240 a month per employee. They probably wouldnt want it, because they would probably want a few things like, for example,
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only dental emergencies or cover all Pennsylvanians. Now, a hedge
fund is not going to want that plan, obviously, but that is why we
did itjust to make sure that those firms who really cant afford
to do a non-subsidized plan take it.
Chairwoman VELA ZQUEZ. Mr. Buchanan.
Mr. BUCHANAN. Thank you, Governor, for coming in. I am in
Florida, Sarasota, Florida. I want to thank you for your leadership.
One of the things I would just say, with all of this discussion about
national health care programs, I am glad that governors like you
are leading in this, because I am scared to death to let the Federal
Government deal with this. If we can find the best practices within
a given state, and then take that, because as you mentioned it
could break the country. I mean, we are already tight on federal
dollars. I know you are tight on dollars in Pennsylvania. So that
is just a statement.
I have been in business for 30 years myself, and I have seen this
cost go up. You know, we had, two or three years ago, 1,200 employees, so we have dealt with this. We use a lot of different insurance companies. And you mentioned a lot of different things.
One thing you didnt mention that does come up a lotand I
would just get your opinion, and I know this is a little bit political,
but I think there is a lot of blame to go around for a lot of things
hospitals, doctors, and, of course, insurance companies. But one of
the things I do hear a lot of our doctorsand we dont have a lot
of doctors coming to Florida, and I am concerned about thatis
this whole concept of defensive medicine. What is that costing us?
You know, it is not about the trial lawyers. It is about you lookingputting everything on the table. But when you look at defensive medicine, you look at a lot of the doctors 20, 30 years in practice, specialties, that deal with surgery, have put all of their assets
into asset protection, their wifes name. Then, you have the cost of
MedMal; many times that gets passed through. Or, in our State,
I have got to tell you, a lot of doctors dont even take it, cant afford
it. texas has come up with their cap where it is $250,000, and that
seems to lower premiums.
But I will tell you last week I was with a neurosurgeon. We had
our week in the District, and he said to me, he said, Vern, he
said, I give out 10 times more in CAT scans than I used to. I
shouldnt, but I do because a guy comes in or a gal comes in, has
a headache. I have got to have them run down all these tests because of that chance1 in 10,000that it is more than what I
think it is. I have got to run all of these tests. They are expensive
tests, and, you know, that justthat gets passed on to, you know,
Medicare in our case.
And so I dontwhat is your whole thought on that aspect? And,
again, I just want to make it clear, I am not just pointing out one
area, because
Governor RENDELL. No, no, no.
Mr. BUCHANAN. there is a lot of blame to go around, and I
amI share
Governor RENDELL. And you are absolutely right. And when I
came in, we did things to, first, stabilize the medical malpractice
crisis, because we were right up there with Florida in the level of
our premiums. And premiums were increasing 50, 80 percent. I am
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glad to tell you that, because of the things we did, we have had
three years wheretwo years where premiums stayed zero, and
this year the two major companies dropped them by 7 and 11 percent.
There are too many junk cases in the system, too many outrageous verdicts. There are ways you can do reasonable tort reform
that dont throw the baby out with the bath water. The case I gave
you about the never event, the amputation of the wrong arm, is
there anybody here who would not want some compensation for
somebody who goes into a hospital and loses an arm that there was
never anything wrong with? Of course not. You are not suggesting
that either. There has to be some reasonable compensation.
I think the long-range plan that we have adopted in Pennsylvania by rule of criminalof civil procedure, excuse mewe have
adopted a mediation program. The one that Chicago, Rush Hospital, it is a very famous programthe mediation program, within
a month, if there is a claim, the claimant comes inthey can bring
a lawyerthe hospital and the doctor are there. There is a mediator. They hear both sides. The mediator makes a suggestion.
He says, Mrs. Rose, you know, this is a very close case. I am
not sure there was error here. I am not sure you would convince
a jury. But, you know, you do have some injuries. It wasnt your
fault. We are going to give you $80,000, I recommend. She can
take it, or then reject it and go on to court. She is not waiving any
rights.
It is amazingin Russia, I think it is 73 percent of the cases are
settled within one month in the mediation program. And what that
does is knocks out most of the legal costs. Most ofit is notthe
big verdicts are the ones that get the attention. But if you talk to
an insurance company, what it really is is the junk lawsuits that
are thrown in where someone is hoping that they will settle for
$35- or $50,000. It eliminates most of those junk lawsuits.
And it eliminates the insurance company, the hospitals legal
bills, because if it is a junk lawsuit, even if they win it, often they
run up $100,000 in depositions and pre-trial stuff and all of that.
So, yes, I think we should have reasonable tort reform. I dont
agree with a $250,000 cap, because I could sit here and give you
examples, and I dont think any one of you would think that
$250,000 were compensation. Someone goes in fora 25-year old
sheet metal worker goes in for a herniated disc operation. Through
undisputed malpractice, he getshe comes out of that operation a
quadraparaplegicnever hold his child, never have relations his
wife, never walk again, never bathe himself again. $250,000 above
medical costs forhe will probably live another 50, 60 years? I
dont think that is fair.
But having said that, we can certainly do somethingand you
are right, we should do somethingbecause there is too much defensive medicine being practiced, and we have got to get a hold on
rates, and we have got to have a balanced approach.
I would love it if the Congress could get together with the next
administration and do something reasonable on tort reform that
doesnt take away rights in the most extreme and brutal cases, but
at the same time doesnt make the medical system do all of these
things.
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Remember, $2.1 billion of avoidable medical errors, and that is
the assessment of the Patient Safety Authority in Pennsylvania
that is made up of mostly either former doctors or practicing doctors or academicians, not the assessment of trial lawyers. So we
want to reduce those, too, because it is patient safety.
We focus on the monetary aspect of the tort system, but it is also
patient safety, too. A physician told me about hospital-acquired infectionshe said, If my wife had to go in for surgery, let us say
on her elbow, he said, I would have someone do it in my office
before I would put her in the hospital.
Chairwoman VELA ZQUEZ. Okay. Time is expired.
Mr. Altmire.
Mr. ALTMIRE. Governor, Congressman Heath Shuler sits next to
me here in the Committee, and he wanted me to pass on to you
that, in preparation for you coming in, he went back and reviewed
your comments from the Philadelphia Eagles game where you used
to do
[Laughter.]
against the Redskins, the media and television worker.
Governor RENDELL. Absolutely.
Mr. ALTMIRE. He was very much looking forward to cross examining you.
Governor RENDELL. Sorry I missed it.
[Laughter.]
Mr. ALTMIRE. But he did want to pass on his regrets that he was
unable to be here.
The purpose of this Committee is to study national policy as it
relates to small businesses that are struggling with affording
health care. And you have done great work in Pennsylvania, and
you have made small businesses the staple of your reform policy.
So I was wondering if you could explain, to the degree you could
extrapolate, how we might look at this from a national perspective,
what you have done in Pennsylvania.
Governor RENDELL. Yes, that is a good question. And can I say
to the Committee, when you talk about state plans, when Massachusetts pounds its chest and says, We have a State plan, and
California and Pennsylvania are going down that road, it is a statefederal plan. Your planunder my plan, the Federal Government
would pay 33 percent of the cost. So it is not fair to say it is a state
plan. It is somewhat similar to how we deal with Medicaid; we
share the costs.
And, again, no disrespect to Senator Obama, Senator Clinton, or
Senator McCain, but I think one thing you should possibly examine
is, do we promote states going down this road? And do we reserve
for the Federal Government a couple of key things that the Federal
Government can do that nobody else can do?
Governor Pawlenty talked about bringing technology into the
system, and we desperately need it, and it will save tens and tens
and tens of billions of dollars a year across the nation. Well, right
now, we are going down that road a little bit, but I dont believe
we will ever have a truly interoperable health care technology system without the Federal Government stepping up and at least putting matching dollars into the fray.
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And when I say matching dollars, not necessarily for the
statesmaybebut also for the institutions, because they will benefit by it. We should have a card that you can take out of your wallet like a credit card, and that card should beit should be the
type of card that if I am visiting friends in Seattle, and for some
reason I fall unconscious, while they are bringing me into the
emergency room, somebody should take that card, stick it into a
computer, it should give you my entire medical history, my blood
type, what I am allergic to, etcetera, etcetera, and at the same time
read out tests.
I may have had an EKG just a week before in my doctors office
in Philadelphia. That will save us so much money, and, again, improve the delivery of health care services. How many episodes
they are called ADEswhen someone gets the wrong prescription,
and they get grievously sick because they get the wrong prescription. If you had that card that went from provider to provider,
pharmacy to pharmacy, and you could stick it in the computer, we
would eliminate all ADEs.
And so I think the Federal Government is the only vehicle who
can up-front that money. But it is a particularly important role.
Stop loss-if you had three corporate executives herebig business, medium business, small businessthey would tell you that
what kills them the most and drives up their premiums is the one
or two percent of their employees who have significant illnesses,
chronic care, heart disease, cancer, brain tumor, etcetera.
Well, stop lossI thought it was the best idea that came out of
Senator Kerrys campaign. The Federal Government pays 75 percent of the costs above the first $50,000. They pay 75 percent of
the cost. If the Federal Government did those two things, maybe
we have a system where the state government provides the coverage, federal money matches it, maybe we have a system that
works there without, you know, doing a massive program, just two
basic things.
Now, there is a cost involved for this. You all knowand I know
you are all smart enough to know this, and you have been here
that we are not going to get a program that will improve health
care, constrain costs, give everybody access to health care, without
some upfront cost.
But the option of doing nothing is the most costly of all. If we
do nothing, those 75 percent increases in premiums in the last
seven years in Pennsylvania will continue. And I would submit to
everyone that that is not an option. Right now, doing nothing is not
an option for our health care system delivery problems.
Chairwoman VELA ZQUEZ. Mr. Davis.
Mr. DAVIS. Thank you, Madam Chair.
Thank you, Governor, for being here today. I come from the State
of Tennessee, and you have probably followed TenCare down
through the years.
Governor RENDELL. Sure.
Mr. DAVIS. TenCare was such a good program that it went broke,
and the current Governor had to pretty much dismantle TenCare.
How does your States program parallel TenCare?
Governor RENDELL. Well, it is different, because we have a sliding scale of subsidies, number one. We make the employer and the
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employee contribute. That is crucially important. It is crucially important. And we believe we have done the actuarials and all of
those things well enough that we have got revenue streams that
will control theit is always easy to do the first year of these programs. It is easy to do the first three or four years.
What you should judge these programs by is: what is the funding
going to be? Are you going to be okay 10 to 15 years down the
road? And I think we have worked very, very hard with actuaries
and everybody else to try to make sure that adequate funding exists for the program down the road. It does no good to design a
health care program and then have it go bust seven, eight years
later. It just increases peoples frustration.
So I think it is very important that what we do we dowe study
it, we do it well, and we do it practically. And it is not worth doing
if we are going to try to do it on the cheap. And, again, in the long
run, I believe we will save a tremendous amount of money, but it
is not worth doing if we do it on the cheap.
And putting technology into the medical system is a good example. There is going to be significant upfront costssignificantand
maybe it is the Federal Government, the state, and the providers
that share the burden. But there will be tremendous cost savings
down the roadtremendous cost savings down the road.
So, but you are rightI mean, we have tried to planI gave the
people who are working on Prescription for PennsylvaniaI said I
want to know where we are going to be 15 years from now. And
I think that is the crucial part of it.
Mr. DAVIS. And if you look at health care now, I think health
care needs to be patient-centered. Patients need toreally, not
even government, not business owners. We need to have patientcentered health care.
Governor RENDELL. No question.
Mr. DAVIS. And I think that is where we get off base sometimes
when we are looking at health care, and if we could get it back
down to the patientactually, I had a health care conference last
week in my district, and I brought in U.S. Chamber of Commerce,
I brought in National Federation of Independent Business, I
brought in American College of Physicians, I brought in hospitals,
I brought in large insurance companies, I brought in consumers.
And I think it is vitally important that we have the stakeholders
sit together and talk about the issues that are important and what
we can afford, what we cant afford, what we need to do. One of
the things that came out of the hearings last week in my district
is we need more primary care physicians. There are so many physicians that are actually being trained, and then they cant afford to
pay their loans off by being a primary care physician, they have to
be a brain surgeon or a cardiac surgeon or
Governor RENDELL. That is an incredibly relevant point. To address that in Pennsylvania, we have actually increased our Medicaid reimbursements to primary care physicians as part of this.
But interestinglymy staff always tells me I am not allowed to
give the exact percentagebut there is a New England Journal of
Medicine study that says certified nurse practitioners can do X percentageand it is pretty highof what a primary care physician
can do for 40, 45 percent of the cost.
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We need to unleash nurse practitioners and RNs. We need to unleash them to do the things that they are trained to do. Most of
those nurse practitioners, many of them have Ph.D.s, and so you
can set in rural parts of Tennessee and rural parts of Pennsylvaniayou can have those nurse practitioner-driven clinics that do
an awful lot of good in providing basic health care to citizens. You
dont need to go to a doctor for a flu shot, right? I mean, there is
no reason to go to a doctor for a flu shot.
One of the cost-saving devices we haveand this isthis question reminds me of itwe are requiring every hospital in Pennsylvania that has an emergency room to have a 24/7 non-emergent
care facility staffed by nurse practitioners and physician assistants,
because we designed a health care system in this country that is
open from 8:00 in the morning until 5:00 at night, Monday through
Friday. Heaven forbid you get sick on the weekends or you get sick
at night. You have to go to the emergency room for non-emergent
care.
Your dog bites you, just you are rolling around having fun with
your dog, he gets too playful and bites you at 9:00 at night, where
do you go? You go to an emergency room. You go to the emergency
room, the attending physician gives you a gauze pad, says, Put
pressure on it, and then he utters the most dreaded words known
to mankind, We will get to you as soon as we can. Four and a
half hours later, they bring you into a room, the doctor looks at it,
gives youwipes it with an antibiotic, and gives you two stitches.
What we want is, when that admitting physician looks at you,
says, No, go down to Room 101. You dont have to be here. You
go into Room 101, a nurse practitioner or physicians assistant
looks at it, puts the antibiotic on, stitches you up, you are out in
a half hour, 45 percent of the cost to the system. Forty-five percent
of the cost to the system.
But you couldnt be more right; patient-centered is crucial, and
we have got to find a way to do these things. And communication
is important. You know, I asked the hospital execs, I said, Why
dont you do something about hospital-acquired infections? If it
was impossible to do something about it, I could understand. Then,
it would be a cost of doing business. But Scandinavia has done it,
and certain hospitals in the U.S. have done it. And they said,
Well, it is hard to get the doctors to buy into it.
Chairwoman VELA ZQUEZ. Time has expired.
Governor RENDELL. You are not a good administrator if you cant
get the doctors to buy into it.
Chairwoman VELA ZQUEZ. Mr. Sestak.
Mr. DAVIS. Thank you.
Mr. SESTAK. Thanks, Madam Chair.
Governor, I wanted to follow up with a question I had asked Governor Pawlenty, but I didnt get a chance to kind of follow up with
him. The reason I amI am curious about this mandate question,
because the theoryand I understand how Massachusetts is
unique and all. I dont think anyone was asking to criminalize anyone.
Governor RENDELL. No.
Mr. SESTAK. Criminalize with
Governor RENDELL. Not at all.
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Mr. SESTAK. insurance. But my question stems from so many
kind of comments that were made hereif you have managed care,
if you can prevent the diabetes from getting worse, the cost of
going to the emergency room when it is acute for those who dont
have insurance, the fact that millions of the 47 million uninsured
can afford insurance, the youth that are living on Wall Street and
doing well.
So the concept has been that the mandate has the healthy as
well as the unhealthy in the pools, and then you theoretically have
the premiums go down, because the healthy are mandated to be in
it. The benefit also is less go to the emergency room.
Governor RENDELL. Absolutely.
Mr. SESTAK. Because you have managed that care. So my question is: I know you have touched upon this, I think in your plans
thinking of the 300 percent and above, because you would have
subsidies, obviously, whothose cant afford it, you know, so that
you could do it. So could you give me your opinion on this concept
of mandate?
Governor RENDELL. Well, I willyou know, this business, and
then, you know, this issue has reared its head in the political campaign. It is ludicrous to suggest that the poor are going to be
criminalized or in any way punished or be in violation, because
they wont be able to afford it. For example, on Cover All Pennsylvanians, if you are 150 percent below the poverty level, if your
family is, you get into the CAP program without paying a dime,
without paying a dime.
And as you go above 150 percent, the premiumsmonthly premiums rise for you. But if you are 150 percent and below, you get
in without paying a dime. It is as plain and simple as that. And
Massachusetts was much like that, etcetera, etcetera, etcetera.
Nobody is going to keep a poor person out because they cant pay.
What the mandate was designed for isironically, is to help everyone and to help the insurance companies, because every one of
those 28-year oldsand there are plenty of them, there are plenty
of themif I was aI was an assistant DA working for the city
of Philadelphia, but if I hadwhen I went to private practice, I
had my own little practice, I didnt have health care. I was 29
years old.
But if something happened to me, I would be treated in an emergency room. And that cost gets paidpassed back to the taxpayer
and to the ratepayer. No free riders ought to be the rule. It is absolutely basic. And, you know, as I said, we do itand Governor
Pawlenty is right, there are a lot of people who avoid insurance.
But most of them dont avoid it becausesome of them avoid it because they cant pay, but in this case no one is going to have to
worry about not being able to pay for it. So I think it is a fair system.
And if you had an insurance companythe Congressman made
a good suggestion to have not just political people at one time, get
a panel of one person representing everything. The insurance company guy would be waving his hand frantically and saying, Well,
if you are going to make us take someone with a pre-existing cancer, then you have got to give us the 28-year old. And that is right.
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Unless we want to go to single payer, and, you know, there are
pluses and minuses to single payerunless we want to go single
payer, we have to do something that is fair and balanced for the
insurance companies as well.
Mr. SESTAK. Governor, one other question that I am intrigued by
in watching Massachusetts. And sometimes it is not just the theory; it is how they executive it. So the quasi-government connector
that is permitted to take all of these small businesses and pool
them together to where to some degree you can Wal-Mart it, then,
through competition, having mandated that the healthy are in as
well as the unhealthy, again, the question was asked here, and I
understood his answer isI think what his answer was, I
wouldnt prescribe anything. But yet, do you see value in pursuing
that?
Governor RENDELL. Sure. Absolutely. And by the way, I know the
Congressman asked a question about the health savings account.
It isnt here. If you are a small business, and you offer health savings accounts to your employees, that counts. You dont have to go
into Cover All Pennsylvanians. That counts, even though I think
when you get to lower income working people health savings accounts are not very realisticnot very realistic, but, still, we allow
that to count.
And certainly, allowingI mean, there are a lot of ways to skin
the cat here, and allowing small businesses to group together are
important, except the insurance company guy who is not here, he
would be howling. He would be howling, because he would by
and, by the way, one of the thingsand I think this is important
for both Democrats and Republicans in the Congress-we are not
going to get this, a good system of affordable, accessible health
care, without stepping on the toes of the insurance companies.
They are going to be forced to take some things they dont like
they dont like. But they should understand that this plan, what
you are looking at, will step on their toes. Single payer is the death
penalty for them, and they ought to accept the fact that everybody
is going to have sacrifice a little to make this work.
I dont know if any of you saw this, and maybe it was just in
I thought I saw it on Washington TV, so maybe you did see it
but it is this woman who works for one of the insurance companies
that has gotten a series of bonuses because she has been tremendously successful in denying claims. She has been their single most
successful person in denying claims. Again, sometimes you should
deny claimsI am not saying thatbut the system is all out of
whack.
You know, you cant do that, any more thanwhat would you as
a Congress say to Mary Smith, 35 years old, self-employed, she had
a little health plan, she got cancer, the health plan coverage period
ran out, she cant get coverage now. She was clearing $26,000 a
year in her small business. She has no way of fighting for her life.
I mean, what do we say to her? The richest country in the world,
the only country that doesnt have some form ofthe only developed nation that doesnt have some form of guaranteed health insurance. What do we say to that lady? Sorry, you are out of luck?
It would be too tough for the insurance companies to pick it up?
There is no catastrophic fund?
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The little State of Delaware has an interesting plan. They will
and this is impractical for the big statesthey will cover 100 percent of the expenses in fighting cancer for any Delawarean citizen
who gets cancer and doesnt have health coverage and cant afford
health coverage. I asked Governor Minner how many it was, and
it was like 732 people. You know, would that we could do that in
Pennsylvania. You know, I would do it tomorrow.
I mean, how do we explain that to people? You know, you have
great coverage. I have great coverage, you know. How do we explain it? I just dont think we can.
So I would, again, urge the Congressand I appreciate Madam
Chair and everyone on this Committee taking this issue seriously.
It isI think it is the seminal issue of the next 10, 15 years in
America. And you have got to solve it, and we will work with you
in every way we can. I dont think we want to just absolve ourself
of any fiscal responsibility for the delivery of health care. We will
work with you on any reasonable system that is set up, but let us
get this done.
Chairwoman VELA ZQUEZ. Thank you so very much, Governor, for
your generous time that you spent with us, and also for all of the
efforts that you are putting together in Pennsylvania to expand
health coverage for the uninsured.
And particularly, for this Committee, it is the Small Business
Committee, there is no way that we address the lack of health coverage in our country without addressing the issue of the lack of
coverage for small businesses. And in todays Wall Street Journal,
they report on the federala new federal study that says that federal spending on health care will reach $2 trillion by the year 2017.
So this is our biggest challenge, and we cannot wait, and this is
why for us to have you here has been not only a great honor but
a great service to the work that we do in this Committee in trying
to reach consensus to see what kind of legislation we can move forward, and not to wait until the next administration is in place in
the White House. Too many people are suffering in this country,
and these are working people.
Governor RENDELL. And remember, we can contain costs. It is an
achievable goal. I know that from our own experience, but I believe
it with all my heart. We just need the will to do it.
Chairwoman VELA ZQUEZ. Thank you. I ask unanimous consent
that members will have five days to submit a statement and supporting materials for the record. Without objection, so ordered.
This hearing is now adjourned. Thank you.
[Whereupon, at 12:32 p.m., the Committee was adjourned.]
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House Hearing, 110TH Congress - Full Committee Hearing On State Strategies To Expand Health Insurance For Small Businesses

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FULL COMMITTEE HEARING ON

STATE STRATEGIES TO EXPAND

COMMITTEE ON SMALL BUSINESS

Serial Number 110-72

U.S. GOVERNMENT PRINTING OFFICE

For sale by the Superintendent of Documents, U.S. Government Printing Office

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HOUSE COMMITTEE ON SMALL BUSINESS

HEATH SHULER, North Carolina

MICHAEL DAY, Majority Staff Director

DEAN HELLER, Nevada, Ranking

Subcommittee on Contracting and Technology

DAVID DAVIS, Tennessee, Ranking

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Subcommittee on Regulations, Health Care and Trade

LYNN WESTMORELAND, Georgia, Ranking

Subcommittee on Urban and Rural Entrepreneurship

JEFF FORTENBERRY, Nebraska, Ranking

Subcommittee on Investigations and Oversight

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Velazquez, Hon. Nydia M. .......................................................................................

Pawlenty, Honorable Tim, Governor of Minnesota, St. Paul, MN .......................

Velazquez, Hon. Nydia M. .......................................................................................

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FULL COMMITTEE HEARING ON STATE

U.S. HOUSE OF REPRESENTATIVES,

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Governor PAWLENTY. Madam Chair and members, thank you so

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