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[Unofficial Transcript]
[Mr. Gowdy] The committee will come to order.
Let me thank everyone for their patience and indulgence. I apologize for the vicissitudes
of our voting schedule. We are sorry for any inconvenience.
I will start this hearing as we do all of our oversight hearings by reading the mission
statement.
We exist to secure two fundamental principles: First, Americans have a right to know that
the money Washington takes from them is well spent, and second, Americans deserve an efficient,
effective Government that works for them. Our duty on the Oversight and Government Reform
Committee is to protect these rights. Our solemn responsibility is to hold Government
accountable to taxpayers because taxpayers have a right to know what they get from their
Government. We will work tirelessly in partnership with citizen watchdogs to deliver the facts
to the American people and bring genuine reform to the Federal bureaucracy. This the mission
of the Oversight and Government Reform Committee.
If the witnesses would like, they can come to the table at this point.
Thank you.
I will recognize myself for an opening and then recognize the gentleman from Illinois.
The purpose of the Oversight Committee is not necessarily to balance the relative merits
or demerits of a law or proposed legislation. Other committees do that. Oversight is calculated
to ensure trust and confidence in the institutions of Government, to investigate areas that demand
transparency and accountability. Our duty is to ask fair questions with an expectation
of an honest and complete answer on behalf of the people we represent. That is why we
are here today.
Many in this room, including myself, fundamentally oppose the health care legislation passed
last year. We have serious concerns with Federal mandates on individual citizens and massive
new government spending programs in such an austere fiscal environment, but those conversations
are reserved for other forums.
The current health care law was marketed to the American people as a means to provide
high quality health coverage options to every citizen in our Country while ensuring that
those who like their current coverage can keep it. Over the past year, it has become
abundantly clear that companies are having trouble complying with the new law. In order
to escape the onerous burdens placed on businesses by this legislation, many of these companies
have sought waivers from the Secretary for Health and Human Services, with varying levels
of success.
The necessity of these waivers arose because many companies employ a health coverage strategy
that provides some employees with mini-med plans that run afoul of current Federal rules
mandated by the new health care law that set a minimum annual dollar limit on essential
benefits that health care plans must provide in 2011, 2012, and 2013. Thus, the myth that
if you like your current health care you can keep it has been exposed for around three
million employees.
Through an amorphous process shrouded in ambiguity and understood by few, the Administration
has exempted over 1,000 companies from certain requirements and at the same time has neglected
to afford others the same accommodation.
Our first question today is substantive: In light of over 1,000 companies requesting waivers
from the burdens of this law, what did the President mean when he said, “If you like
your health insurance, you can keep it,” and what are the failings of this law that
necessitate a waiver process to begin with?
Further, the entire waivers process is predicated on the ability of the Secretary to grant waivers
in the first instance. However, this seemingly fundamental step -- the statutory basis for
waiving compliance with the law -- appears to have been wholly neglected by the plain
language of the statute. What is the legal authority by which the Secretary can grant
waivers? Where in the health care law does it specifically grant the Secretary the authority
to waive compliance with the law?
Congress all too often in recent memory has abdicated its law making responsibilities
to employees or appointees in the Executive Branch who are not elected and are not accountable
via popular election to the American people. It is not Congress’ job to simply pass big
ideas and leave the details to another entity. It is also not the job of agencies to invent
statutory authority where none exists.
However, the most important questions today concern the procedural aspects of this highly
nebulous process. Initially, how were these waivers advertised before a link was placed
on the HHS website? What was the process by which subsequent waivers were applied for,
reviewed, accepted, denied, determined, and appealed?
The American people expect open and honest answers to these legitimate questions. Waivers
to the health care law have widespread implications, implications that demand transparency and
accountability from the Federal Government.
In order for companies to compete on a level playing field, as is the custom in our Country,
they must know their burden of proof -- the standards their applications will be evaluated
by. They must know why certain companies’ applications were accepted and others were
denied. There must be an identifiable process, not a labyrinthine morass of vague standards
with no statutory definitions.
The waivers process, such as it is, lends credence to the conventional wisdom surrounding
enactment of this transformative law. People don’t know what is in it or how specific
provisions are affecting America’s business and individuals. These are due process, equal
protection, and fundamental fairness questions that are essential to be asked and also to
be answered.
[Mr. Gowdy] I will now recognize the distinguished Ranking Member, Mr. Davis, for his opening
statement.
[Mr. Davis] Thank you very much, Mr. Chairman.
Let me just say that in the relatively short time that you have been chairman, you have
selected two hearings that I think are very important. I thank you first for the one dealing
with education and trying to make sure that all of our citizens have access, especially
those in the city of Washington, D.C. I also thank you for dealing with health care, which
is what we are going to be discussing today. So I thank you for yielding.
The subcommittee’s first hearing was on the issue of improving access to quality public
education. The second one we convened to discuss how best to ensure the public’s access to
quality health care coverage. Given the significance of these two issues for the American people,
I think this subcommittee is off to a great start.
However, I do want to point out that our colleagues on the Energy and Commerce Committee conducted
a similar hearing on this topic less than a month ago that pretty much already answered
the question as to why the waivers are needed during the three year implementation period.
So it is my hope that today’s hearing will actually provide us a chance to conduct oversight
of HHS’s mini-med waiver process with the intent of discussing how the process could
be improved versus spending time debating whether such a process should even exist.
With the one year anniversary of the enactment of the Patient Protection and Affordable Care
Act just a little over a week away, today’s hearing, entitled Obamacare: Why the Need
for Waivers?, basically helps to show why passing health care reform and ensuring quality
affordable coverage for all Americans was so important. The landmark legislation called
for the end of low cost mini-med health plans which offer far too many hard working Americans
inadequate benefits and a false sense of protection.
While the elimination of lifetime and annual limits on the amount of coverage to be paid
by a health insurance plan was a key aspect of health care reform, no one really expected
this sweeping and monumental change to be fully implemented overnight. This is why the
Act envisioned a transition period between 2010 and 2014 to allow for the reasonable
conversion of millions of people from poorly designed, limited benefit plans to plans that
provide more comprehensive health care coverage.
I understand that in order to get us to the point where all Americans have access to enhanced
health care coverage, the Secretary of Health and Human Services is gradually phasing out
these substandard plans in a manner that does not subject consumers to hefty premium increases
or reduce overall access to coverage. Hence the issuance of one year waivers to businesses
that have demonstrated their inability to meet new coverage limits this year.
Despite claims to the contrary, HHS’s Section 1001 waiver process has been transparent,
as evidenced by the multiple publications of regulations governing process in the Federal
Register and the wealth of information and guidance on the annual limit waiver application
process available on HHS’s website.
In addition to transparency, the process has also been fair. More than 94 percent of applicants
who applied for waivers received them. And let the record show that most of the waivers
issued went to non-union plans.
In fact, the waiver process we are discussing this afternoon may actually serve as a best
practice example of good governance for other agencies to follow when engaging American
public and business communities.
Mr. Chairman, I am glad that today’s hearing provides us an opportunity to discuss some
of the benefits of the Affordable Care Act and its ultimate impact on improving access
to high quality and affordable coverage for all Americans. I thank our witnesses for being
here with us this afternoon and look forward to their testimony.
[Mr. Davis] Mr. Chairman, while I am closing, I know that there are a number of members
of the Committee on Oversight and Government Reform who are not members of this subcommittee
who may wish to participate this afternoon. I would ask unanimous consent that they be
allowed to do so.
[Mr. Gowdy] Without objection, so ordered.
Thank you, Mr. Davis.
The Chair would recognize the gentleman from Arizona, Dr. Gosar, for his opening statement.
[Mr. Gosar] Chairman Gowdy, Ranking Member Davis, and our tireless committee staff, thank
you for holding this important hearing today. I look forward to delving into the important
issues at hand. Thank you also to our witnesses for sharing and appearing today on our behalf.
Almost one year ago, the President signed into law what he and the House Majority at
the time called comprehensive health care reform. At the time, House Speaker Nancy Pelosi
said, “We have to pass a bill so we can find out what is in it.” As we learn more
about this immense piece of legislation, we find it gives unelected bureaucrats unprecedented
ability to dictate the parameters of an individual’s health care. It also dictates what type of
coverage small business owners can offer their employees. Needless to say, there is much
cause for concern.
Specifically, Section 1001 of this onerous law eliminates lifetime and annual limits
on the amount of coverage a health insurer is required to pay. It turns out that millions
of Americans use these annual limit plans and are satisfied with them. So the Center
for Consumer Information and Insurance Oversight, CCIIO, was instructed by the Secretary to
grant waivers to this elimination and therefore allow businesses to continue offering annual
limit plans.
On March 14, 2011, CCIIO Director Steve Larsen, who is here with us today, said that for the
first year we will set up this fairly straightforward, simple process and that we are now in the
process of evaluating the plans out there and what is the best guidepath to 2014. I
think that today we will discover that, indeed, the waiver process was not straightforward
or simple at all.
On March 23, 2010, the so-called Health Care Reform bill was signed into law. Only three
months later on June 28th, Health and Human Services issued an interim regulation that
created a Section 1001 waiver. On September 3rd, the Agency issued further guidance listing
vague criteria through which individuals and employers could qualify for a waiver. On December
8th, HHS finally issued a waiver application.
Yet even without this application, HHS granted over 300 waivers. How? What day was the first
waiver granted? To date, over 1,000 waivers have been granted to Section 1001, saving
2.4 million Americans from being kicked off their health care coverage. I submit to you,
ladies and gentlemen, that HHS has not whatsoever made this process straightforward or simple.
Take, for example, HHS’s website on the screen above. There is no provision on the
homepage for a waiver application or even for OCIIO, which is now called CCIIO. Or is
it EE-I-EE-I-O? I feel like Old MacDonald Had a Farm with these acronyms.
Let us assume that you are well acquainted with this arduous process to search for CCIIO.
It turns out that CCIIO has a homepage. If you click to the bottom of that page -- follow
us along -- and scroll all the way down to the bottom left, you will see Regulations
and Guidance. This is far from clear to the average Joe, who turns out to need to click
right here. Under Regulations and Guidance see Annual Limit Waivers. Under Annual Limit
Waivers there are four, count them, four guidance regulations. Good luck combing through those.
As you can all see from this demonstration, there is a long way to go and a lot to examine
before we can claim to have a transparent, easy process for America’s job creators
to navigate this law.
Add in the cost. Where did the money for CCIIO come from? Was it shifted from our priorities
in HHS’s or CMS’s budgets like dialysis centers and others services for the needy
and sick?
How did these special waivers find their way into the earliest days of this timeline without
a waiver process? Were special favors involved? Why wasn’t a blanket waiver issued as with
other flawed parts of this attempted Government takeover of health care?
These are a mere sampling of questions I hope you are ready to answer. I know inquiring
minds throughout America want and need to know.
Thank you, Mr. Chairman.
[Mr. Gowdy] Thank you, Dr. Gosar.
HHS produced to this committee guidance concerning standard operating procedures. I would ask
unanimous consent to insert into the record the HHS guidance governing standard operating
procedures.
Hearing no objection, it is so ordered.
[The referenced information follows:]
[Mr. Gowdy] I will now recognize the Ranking Member of the full committee, the gentleman
from Maryland, Mr. Cummings.
[Mr. Cummings] Thank you very much, Mr. Chairman, to you and to our ranking member.
Next week is the one year anniversary of the Patient Protection and Affordable Care Act.
This landmark health care reform bill prevents insurance companies from denying children
health insurance because of preexisting conditions, prevents insurance companies from dropping
beneficiaries simply because they get sick, provides small businesses tax credits to extend
coverage to their employees, and provides seniors with a 50 percent discount on brand
name drugs through Medicare Part D.
Another significant improvement this law made was to direct the phase out of so-called mini-med
insurance plans that place restrictive limits on coverage. These plans provide meager benefits
and often leave patients high and dry when they become ill or are involved in an accident.
For example, a Wall Street Journal article in September 2010 featured a prominent fast
food chain that offers its hourly employees a limited benefit plan that caps annual benefits
at only $2,000. This plan covers almost nothing when someone needs serious medical care. A
single trip to the hospital could cost tens of thousands of dollars and leave beneficiaries
without coverage or with extensive out of pocket costs.
In July 2009, the New York Times featured a story about a man whose limited benefit
health plan capped hospital services at $10,000. When he had to have a heart procedure, his
insurance plan covered only a fraction of his $200,000 hospital bill. As a result, he
and his wife were forced into bankruptcy, like many Americans, despite the fact that
he was supposedly insured.
Former health care executive Wendell Potter referred to these plans as essentially fake
insurance. The reality is that people with mini-med plans often do not realize how terrible
their health insurance is until they get sick or hurt and really need it.
The Affordable Care Act directed the phase out of these deficient plans, but it also
gave the Secretary of HHS authority to create a waiver process. This is a temporary fix
to help employers that offer mini-med plans whose premiums would increase in the short
term with an abrupt transition to high or no annual limit plans. In 2014, waivers will
not be necessary because consumers will have access to comprehensive coverage through State
health care exchanges that reduce premiums by increasing competition and spreading risk.
There have been allegations on the Republican side that the HHS waiver process has been
neither transparent nor fair but the facts do not bear this out. According to Agency
data, HHS has approved waiver applications for 1,040 plans and rejected only 65. The
overall approval rate is 94 percent. Allegations that unions have received preferential treatment
also appear unsubstantiated. According to the same data, HHS approved 85.5 percent of
waiver applications from union plans or plans serving union members and 97.4 percent of
non-union waiver applications.
Unfortunately, today’s hearing seems to be little more than a do over of a hearing
held last month by the Energy and Commerce Committee -- the same allegations, the same
documents, and even the same HHS witness.
At that hearing, Ranking Member Henry Waxman issued a memorandum analyzing 50,000 pages
of documents provided by HHS that found no merit to these allegations. I would like to
make that memo part of our official hearing record.
The memo also pointed out that various industry applicants were in fact very happy with the
waiver process, thanking HHS repeatedly for their prompt and courteous attention.
Mr. Chairman, our committee can play a positive role in making sure the Affordable Care Act
is implemented effectively. Rather than using the one year anniversary to criticize a process
that has been incredibly flexible and favorable to the industry, let us work together to make
sure that real health insurance coverage is extended to 32 million Americans who do not
have it today.
I am very pleased to see one of our witnesses, Steve Larsen, who played a major role when
I was in the State legislature in Maryland for 15 years. He has served in many, many
roles. I can say that of all the public servants I have worked with, he is one of the most
honorable, honest, efficient, effective public servants I have ever met.
With that, I yield back.
[The referenced information follows:]
[Mr. Gowdy] Thank you, Mr. Cummings.
The Chair would now recognize the Chairman of the Full Committee, the gentleman from
California, Mr. Issa.
[Chairman Issa] Thank you, Mr. Chairman.
As the ranking member said, another committee has looked into this problem. And it is a
problem when over 1,000 waivers need to be granted, whether it is 94 percent, 85 percent,
or 100 percent. You ask if the Patient Protection and Affordable Care Act ready for prime time.
The answer clearly is that it is not. It was ill conceived and run through in a manner
where Speaker Pelosi “wisely” said let us pass it so we can find out what is in it.
That, in fact, is the reason that these thousands of pages are only now being analyzed to find
out that compliance is not available.
Contrary to what the ranking member said, it is likely that a year from now waivers
will continue to be granted, and a year from then and a year from then. Why? Because, as
President Obama has admitted, it is hard to bend down the health curve. It is hard to
do some of these things. In fact, many of the goals of the Affordable Care Act will
not ever come to pass.
Health care continues to spike and spiral up. What was considered to be a Cadillac plan
based on dollars just a year ago would be undoubtedly a Bentley plan today.
As we look at this on every committee of jurisdiction, including ours, let us bear in mind that two
million workers out of uniform and another million workers in uniform are part of a Government
health care plan that we oversee. Indian health care and plenty of other plans continue to
have the problem of spikes in cost with no likelihood of abatement.
Our committee has a responsibility to find ways to insure and protect Federal workers
through an affordable health care plan. We additionally have an obligation to see that
this law passed lives up to its goals or is rescinded.
The committee must look at this in light of its post-passage spike in cost and the admission
by the President himself that the cost curve is, in fact, not being bent down. Sixteen
million, not 32 million, uninsured Americans will be covered. They will be covered based
on Medicare, one of the most inefficient delivery systems that we can find. So this committee
is dedicated to being honest about what a law is or is not doing and seeing that, in
fact, inefficiency in government goes away.
As most members of this committee are becoming acutely aware, Medicaid is not the right way
to provide health care coverage. Yet we continue to see waivers for conventional systems that
were vilified during the legislation while we see an expansion of Medicaid, one of the
least affordable -- from a cost standpoint -- ways to provide health care. It is in my
State of California well known that Medicaid patients are actually more likely to show
up at an emergency room than the uninsured overall.
This and other factors tell us that we need to look at all aspects of this, not just the
1,040 applicants granted waivers. With that, Mr. Chairman, I thank you for doing our committee’s
work.
I would reserve a point of order on the ranking member’s request to put the work already
in another committee into our record. I believe it is our practice to put in limited amounts.
If there is a specific citing that the ranking member would like to limit to, I would remove
mine. But to simply put Mr. Waxman’s full activities in I think would be inappropriate.
He left this committee. He is in another committee. It is in his record.
With that, I yield back.
[Mr. Gowdy] Thank you, Mr. Chairman.
The Chair would now recognize the gentleman from Missouri, Mr. Clay, for his opening statement.
[Mr. Clay] Thank you, Chairman Gowdy.
When a party is in the minority, without the authority and responsibilities of the majority,
some nuisance tactics are to be expected. But being in the majority changes things,
or at least it should.
Take, for instance, the title of this hearing. The use of the term Obamacare is not helpful
in any way. I think it is purposefully provocative. We all know that using a negative catchy term
for the President’s signature domestic program, a program that affects each and every American
in many positive ways and fundamentally reforms health care in this Country for the better,
is red meat for red States. We all know that.
The Affordable Care Act protects sick people from being dropped by insurance companies
because they get sick. If my Republican colleagues believe that insurance companies are to be
allowed to drop sick people from coverage once they get sick, they ought to say it.
The health care reform legislation protects people from being denied coverage by insurance
companies because they have preexisting conditions. If someone really believes that insurance
companies ought to be able to deny coverage to people with preexisting conditions, they
should say so.
Health care reform, an unfulfilled dream of both Republican and Democratic presidents
for decades, means positive changes for virtually all Americans. If you want to roll back the
progress that we finally achieved and leave Americans without health insurance, without
health care, and without health, you should tell the American people that straight out.
But clearly it is unhelpful to use misleading terms and slogans like death panels and Obamacare.
Reducing the President’s signature domestic program, one that benefits all Americans,
to a misleading term detracts from real oversight. It is also unfair. It would be like Democrats
reducing the previous administration’s signature domestic program that benefitted all Americans.
Well, if someone could remind me what that was, it would be unfair to call that program
a negative nickname, too.
Mr. Chairman, I yield back.
[Mr. Gowdy] Thank you, Mr. Clay.
I would point out that people within this very administration have called this piece
of legislation Obamacare. I do not recall any moral outrage at the use of the terms
Bush Tax Cuts, Bush Wars, Reganomics, or Carter Malaise.
[Simultaneous conversations]
[Mr. Gowdy] Anyone who doesn’t want to use the phrase Obamacare does not have to use
it.
[Mr. Clay] But it was paid for or implemented by tax reform. So what does it mean anyway?
[Mr. Gowdy] Mr. Clay, are you through?
[Mr. Clay] I am through.
[Mr. Gowdy] I would like to welcome the witnesses at this point. Let me also say this: Members
may have seven days to submit opening statements and extraneous material for the record.
We will now welcome our panel of witnesses. We will start with Mr. Steve Larsen, who is
the Deputy Administrator and Director of the Center for Consumer Information and Insurance
Oversight at the Centers for Medicare and Medicaid services. Previously he has served
as the Director of Oversight at the Office for Consumer Information and Insurance Oversight
when it was within the immediate Office of
the Secretary of HHS.
I ask a moment of your indulgence.
[Pause]
[Mr. Gowdy] With your indulgence, I will introduce everyone. Then we will start with you, Mr.
Larsen, and go on if that is okay with our witnesses.
I will apologize in advance. My South Carolina upbringing may not allow me to pronounce Haislmaier
correctly. I am willing to get it right if you will correct me and tell me what it is.
[Mr. Haislmaier] It is Haislmaier but I even have relatives who call it Haislmaier.
[Mr. Gowdy] Well, Haislmaier. Ed Haislmaier is the Senior Research Fellow at the Center
for Health Policy Studies at the Heritage Foundation.
Scott Wold is an attorney at Hitesman and Wolf, an employee benefits law firm located
in Minneapolis, Minnesota. Mr. Wold’s practice focuses almost exclusively on employee benefits.
Ms. Judy Feder is a Professor at Georgetown University where she also served as Dean of
Georgetown’s Public Policy Institute from 2000 to 2008. She is currently a Fellow with
the Center for American Progress.
Welcome to all of you. Let me swear you first. I thought I was getting away from that when
I left the DA’s office.
[Laughter]
[Mr. Gowdy] Let me find the oath. I am going to get you to all rise. Raise your right hand.
Do you solemnly swear or affirm that the testimony you are about to give this committee will
be the truth, the whole truth, and nothing but the truth?
[Witnesses respond in the affirmative]
[Mr. Gowdy] Let the record reflect that all the witnesses answered in the affirmative.
We will start, Mr. Larsen, with you. We will recognize you for your five minute opening
statement and then we will move from my left to right, your right to left, and finish with
Dr. Feder.
[Mr. Larsen] Thank you, Chairman Gowdy, Ranking Member Davis, and members of the subcommittee.
Thank you for the chance to appear before you this afternoon.
My full testimony has been submitted for the record.
I serve, as was mentioned, as Deputy Administrator of CMS and Director of the Center for Consumer
Information and Insurance Oversight, or CCIIO, within CMS. Since taking on this role I have
been involved in implementing many of the provisions of the Affordable Care Act including
overseeing private health insurance reforms, establishing the health insurance exchanges,
and ensuring that consumers have access to information about their rights and coverage
options.
Prior to becoming Director of CCIIO, I served as the Director of the Office of Oversight,
which worked with the States to implement the new insurance rules.
As Director of CCIIO, I am committed to improving the health insurance system so that it works
for consumers and businesses, both now and in 2014 when consumers and businesses will
have more quality health care options. As part of improving the current health insurance
system, the Affordable Care Act ensures that consumers are provided meaningful and reliable
coverage for their premium dollars by phasing in restrictions on the annual limits insurance
policies between now and 2014, the subject you have asked me to discuss today.
Right now, about 160 million Americans get their health insurance through an employer.
However, not all coverage offered by employers is the same. A very small percentage of employees
are offered policies with low annual limits -- caps on the amount of benefits that are
provided under the policy in a given year. Often these policies are provided by employers
who hire lower wage, part-time, or seasonal workers.
While having such limited coverage may be better than no coverage at all, this coverage
unfortunately can fail those that need it most. These policies can have high deductibles
and annual dollar caps as low as $2,500. Some are better with $5,000 or even $25,000 in
coverage but in the case of a serious illness or accident, the coverage can be inadequate.
In 2014 consumers will be able to purchase fuller health insurance coverage in State-based
exchanges but, in the time between now and 2014, we need to maintain coverage for the
small percentage of employees with these limited policies until better options are available
for them in 2014. Immediate compliance with the new Affordable Care Act provisions on
annual limits could cause disruption of this coverage.
The Affordable Care Act specifically directs the Secretary to implement the restrictions
on annual limits in a manner that ensures continued access to coverage. This is accomplished
by phasing in the annual limit restrictions for most policies and, for this year, we established
a waiver process. All employers and insurers that offer limited benefit plans may apply
for a waiver if they demonstrate that there will be a significant increase in premiums
or a significant decrease in access to coverage without a waiver. Applying for a waiver is
simple and basic with only five elements that CCIIO has clearly published on our website.
It is important to note that more than 30 percent of applicants have fewer than 100
enrollees. Small businesses are able to take advantage of this as well as large ones. We
administer the process fairly without regard to the type of applicant or size of business.
We have published our standards for reviewing the applications in the regulations implementing
the law and again in the bulletins implementing the regulations.
The vast majority of waivers, more than 94 percent, were granted to health plans that
are employer-based. Of the waivers approved, 41 percent were to self-insured employer plans,
31 percent to HRAs, 23 percent to Taft-Hartley plans -- these are employer plans governed
by collective bargaining agreements -- and 3 percent to issuers. Only 2 percent of waivers
have been granted to union plans.
The limited benefit plans for which waivers are allowed cover an extremely small portion
of people who have employer-sponsored coverage. Since setting up this waiver program, CCIIO
has granted waivers to plans covering less than 2 percent of all covered people in the
private insurance market.
The vast majority of employers who applied for a waiver have also reacted to the application
process positively. We have been open to feedback from applicants and, based on their input,
we improved the application process so that it is timely and responsive to their needs.
Thank you for the privilege of appearing before you. I would be happy to answer your questions.
[Mr. Gowdy] Thank you, Mr. Larsen.
Mr. Haislmaier?
[Mr. Haislmaier] Thank you, Mr. Chairman.
In keeping with your opening remarks that the policy issues are for other committees,
in particular the Energy and Commerce Committee, which would have jurisdiction, I am not going
to address that. I will note that in my prepared remarks I did give a brief overview of the
policy issues just to give the members of the committee some background.
There has been some discussion of the policy issue here. In that connection, I would simply
like to make one point that came up in some of the members’ statements. I think it is
somewhat relevant here as a policy background.
When you look at the statute, Congress’ intent in this is unclear. To say that Congress
intended to phase out these plans is actually not true. There is no evidence that Congress
intended to do that. This was not in the House bill. There were no hearings on this provision
that I am aware of in the Senate bill. That may have been the intention, but there is
no evidence. One can also say that there is no evidence of the other, too, that there
was any intention to exempt or preserve these things. So Congress has presented a piece
of statute here that is unclear. That is the first point.
The second point is that it is important to understand that the phase out that Mr. Larsen
and others are discussing is, again, a construct that HHS comes up with. There is no requirement,
suggestion, or any other element in the statute with respect to a phase out.
Now, what we get to in the end of my testimony and what is really at the heart of the question
this committee, I think, is dealing with is whether this whole process is actually appropriate.
I think that is a valid question.
In looking through the statute and the regulation, I was able to find, in my view, no actual
explicit justification for HHS taking the actions that they have in doing the waiver.
So regardless of what one thinks about these particular plans or what one thinks about
whether Congress intended to get rid of them, intended to keep them, intended to do it quickly
or later, the question relevant to this committee is, does HHS have the authority to do it?
It does not appear to me that they do, but I am open to hearing the arguments of people
who maybe have more expertise in regulatory law than I do.
The other question that occurred to me is, could a reasonable case be made by HHS that,
whether it had authority or not, Congress had put it in an impossible situation in the
statute and that the Agency or the Department could only resolve the statute through the
waiver process. As I indicate in my testimony, again, I do not find that to be the case either.
Congress seems to have simply asked HHS for one very simple thing: Fill in a number. Congress
decided that instead of setting a dollar limit in the statute for the interim years, it would
delegate that to HHS to come up with a number. That is what the statute plainly says. So,
interestingly enough, HHS came up with three numbers.
When I read the regulation, and I was just looking it over again here while I was waiting,
I don’t see in the regulation, maybe Mr. Larsen could point me to it if I missed something,
any explanation of how they arrived at the numbers $750,000 or $1.2 million or $2 million.
Indeed, in the table of data that they present, and I am not questioning the data, the breakouts
aren’t according to that. The breakout is half a million dollars to a million dollars.
Well, how did you get $750,000, which is in the middle? There is nothing that tells me.
There is no idea in here as to where these numbers came from or why they did a three
year phase out.
All Congress asked them to do was set an interim -- an, one interim -- number. So clearly,
in my view, the statute doesn’t require this. HHS could have responded to the requirements
of the statute by simply taking the analysis in the regulation and saying that, based on
the foregoing analysis, the number prior to 2014 shall be, and set the number. Everyone
would then have known what it was and could determine on their own whether they needed
to comply or not.
Finally, the question is a public policy question of whether this kind of waiver process is
appropriate or desirable in public policy. I would argue on several grounds that it is
not desirable for this particular kind of a waiver process in public policy. While there
is no evidence I am aware of of corrupt practices, it certainly invites the temptation or the
opportunity for favoritism. It certainly does provide for unequal application of the law.
It furthermore creates the perception, and possibly the fact, that the regulatory process
is being used or subordinated to political ends as opposed to simply enforcing the law
that Congress wrote.
So I think there are many reasons to question the suitability of the entire process.
Thank you for your patience and your time, Mr. Chairman. I will be happy to answer questions
from the committee.
[Mr. Gowdy] Thank you.
Mr. Wold, we will recognize you for your five minute opening statement.
[Mr. Wold] Thank you, Mr. Chairman and members of the committee.
As you mentioned, I am an employee benefits attorney. On a daily basis I work with employers
both large and small with respect to their employee benefits plans. So in the last year
since the Patient Protection and Affordable Care Act was passed, as you can imagine, we
have spent a large amount of time working with this particular law as it applies to
our clients and their plans. I am here today to talk about one particular aspect of that
experience over the last year, that is with respect to the waivers from the annual limit
First I would like to note how as an attorney I became aware of this program or this process.
We did review the legislation, at least the parts of the legislation that applied to employer
benefit plans. And we did very closely monitor regulatory implementation. When the regulations
came out, we took a close look at those. So the first time I learned of the possibility
of a waiver program was in June when the regulations on the annual and lifetime limit restrictions
were published.
I noted in reviewing those regulations that there was authority given to the Department
to issue or create a program providing waivers for certain types of plans.
The regulations didn’t contain a lot of detail and so we didn’t really learn much
about the program itself until later in September when the first piece of guidance was issued
regarding the program itself.
As attorneys we subscribe to a number of different benefits news publications, I guess I would
call them. Typically they are online. So either daily or weekly we get informed of different
developments that are occurring in the employee benefit area. It was through those processes
that we learned about the guidance being issued with respect to the waiver program, and of
course we went out and reviewed it. I am not aware whether it was publicized in any other
way, but that is how I became aware of it and as attorneys we certainly monitor those
types of things.
One of the things that we then did was we worked with a number of employers in applying
for the waivers. Most of our experience was not in the context of mini-med plans. There
has been discussion of mini-med plans and how the waivers are applicable to them. We
do have clients with mini-med plans and have applied for waivers for those plans. But a
number of our clients and most of our experience in this area has to do with health reimbursement
arrangements.
Health reimbursement arrangements are not traditionally thought of as mini-med plans.
They are typically used to supplement other group health plan coverage. They are an account-based,
defined contribution health plan. The employers will make those available so that employees
can have dollars to use to reimburse out of pocket expenses.
HRAs have really been, I would say, largely ignored in this whole process. They are group
health plans and they are subject to these rules in general. In the preamble to the interim
regulations there was a specific exemption provided to certain health reimbursement arrangements,
something called integrated HRAs. The problem was that there was no definition or any guidance
provided as to what an integrated HRA is. So there has been a lack of clarity in the
benefits community about which HRAs are subject to these annual limit restrictions and which
are not.
In addition, it was never clear, at least from the published guidance, whether HRAs
could apply for waivers. The guidance talked about mini-med plans or limited benefit plans
but there was no mention of HRAs. We did some investigation. We called the Department and
informally got an answer that, yes, HRAs could apply for these. That is how we were able
to go through that process with our clients who sponsor HRAs.
The difficulties we experienced, especially with our clients who sponsor health reimbursement
arrangements, suggest to me that the waiver process was not the best method to go about
providing this relief. I won’t take a position on whether the relief was actually needed
or a good idea, but I think once it was decided that some of these plans would have time to
continue to be maintained as they were, the waiver process created a number of challenges
to employers. There may have been a better way to do that.
Thank you.
[Mr. Gowdy] Thank you, Mr. Wold.
Dr. Feder?
[Ms. Feder] Thank you, Chairman Gowdy, Ranking Member Davis, and members of the subcommittee
and committee. I am glad to be with you today. I am happy to testify on the Affordable Care
Act and its implementation.
Because of its importance, an ever growing body of research tells us that assuring Americans
affordable health care and affordable insurance matters enormously to their health and well-being.
As you noted in the outset, almost exactly a year ago the Affordable Care Act, or ACA,
was enacted to provide that assurance. The law assures most, if not all, Americans essential
health insurance coverage by building upon, not replacing, the current health insurance
system, securing what works and fixing what doesn’t.
Today, about 170 million Americans get health insurance through employment. The Affordable
Care Act strengthens job-based health insurance through consumer protections like the prohibitions
on annual or lifetime limits on benefits and through penalties on employers with more than
50 employees who use newly available tax credits to purchase insurance directly because their
employers do not offer affordable coverage. According to the Congressional Budget Office,
under the ACA, job-based coverage will remain in the future the primary source of health
insurance coverage for working Americans that it is today.
At the same time that the Affordable Care Act secures what works in providing health
insurance, it fixes what is generally recognized as broken -- the non-group health insurance
market. Although in theory people who do not get coverage through their employers can buy
it on their own, in practice the non-group market is not a safety net. On the contrary,
insurers survive in this market by attracting and ensuring that they attract consumers when
they are healthy and avoiding us when we are sick.
To address this problem, the Affordable Care Act takes what is often referred to as a three-legged
stool approach. You need all three legs to make the stool work. Unless we require health
insurers to take us all, regardless of our health needs and without extra charges for
preexisting conditions, people will be denied coverage they need. Insurers can only accept
all comers if they can expect all of us to buy insurance when we are healthy and not
to wait until we are sick. We can only expect everybody to buy health insurance if they
get help to pay premiums if they can’t afford them, help the ACA provides in the form of
tax credits.
The Congressional Budget Office estimates that with arrangements under the ACA, about
19 million people will be covered through health care exchanges and receive tax credits
by 2019. Another 16 million people on top of coverage projected under pre-ACA law will
be covered through Medicaid.
This Medicaid expansion reflects another fix in the ACA. Today, the same low wage workers
whose employers don’t offer coverage have been denied Medicaid benefits as well, no
matter how low their incomes. Fortunately, the ACA brings an end to this discrimination
by extending Medicaid at full Federal expense to all individuals whose incomes fall below
133 percent of the Federal poverty level.
Though sorely needed, changes in our health insurance system can’t take place overnight.
The ACA is designed to strengthen and extend the health insurance coverage Americans count
on, not to disrupt it. The law recognizes that building new marketplaces will take time.
Until the full set of new insurance rules and subsidies are in place, people who have
inadequate coverage may want to hold onto it despite its limitations. Therefore, the
administration has been willing to grant waivers from some of the law’s early requirements
which, if fully imposed, might leave some people with nothing.
The aim of the law’s early requirements and benefits is to make matters better without
making them worse until the full law goes into effect in 2014. Far from indicating weaknesses
in the Affordable Care Act, these waivers reflect its strength in matching requirements
with capacity. It behooves administrators of the ACA to be sensitive to disruptions
alongside improvements and to assure a balance that enhances people’s protections as the
law intends. It behooves overseers of the law’s implementation to recognize the big
picture, the enormous problems the Affordable Care Act was enacted to address.
It is designed to strengthen what works, fix what is broken, and avoid unnecessary disruption.
Its potential, when fully implemented, is to end discrimination based on preexisting
conditions and assure most, if not all, Americans access to affordable health insurance coverage.
All of us should be working to make sure that we move as quickly and as smoothly as possible
to get us from here to there.
Thank you, Mr. Chairman.
[Mr. Gowdy] Thank you, Dr. Feder.
Let me say this to our witnesses and to our guests in the audience: One thing that you
will find total unanimity on in this subcommittee is our desire to be good stewards of your
time as well as the time of the people who are gracious enough to be with us. I am informed
that votes are immanent. What I would propose to Mr. Davis and to my colleagues is that
we continue on until votes are called, that we adjourn long enough to go cast our votes,
and then that we come back and that we do it as quickly as we can to be good stewards
of your time.
I will recognize myself for five minutes at this point.
Mr. Larsen, I am not going to spend any time quarreling about the statutory authority for
waivers. I am not even going to discuss the substantive aspects of the health care law.
What I want to focus on is the waiver process.
Can you tell me when the waiver process was first made public?
[Mr. Larsen] Yes, thank you, Congressman. I think, as was mentioned, the regulations
that identified the phase in of the annual limits as well as the waiver process were
published, the interim final rules, in June. Within 90 days of that, I think on September
3rd, we published the first bulletin that laid out the waiver process and what we think
were very simple and straightforward provisions of the application process for the public.
I think it was mentioned that there wasn’t an application initially. In fact, in order
to make the process very simple, we just laid out the types of information that an applicant
could provide. Later on as we got more applications, to improve the process we did develop a form
that people were to use online, a spreadsheet if you will.
[Mr. Gowdy] Let us assume it is September 3rd. Were there applications for waivers that
were made prior to September 3rd?
[Mr. Larsen] Not to my knowledge.
[Mr. Gowdy] Were there waivers granted prior to September 3rd?
[Mr. Larsen] Not to my knowledge. We didn’t have the application process set up.
[Mr. Gowdy] That is my point.
[Mr. Larsen] Right.
[Mr. Gowdy] Are you sure there were no requests for waivers prior to September 3, 2010.
[Mr. Larsen] Requests for waivers?
[Mr. Gowdy] Requests. Applications or requests.
[Mr. Larsen] I have been advised that there were three.
[Mr. Gowdy] What process did you use, given the fact that there was no public process
that had been promulgated at that point for those three?
[Mr. Larsen] I assume that they were held until we set the process up. That is my assumption.
[Mr. Gowdy] When you say process, are you referring to the regulation that used the
words large and significant?
[Mr. Larsen] No, when say we set up the process, I am referring to the bulletin that we issued
in September. That was when we identified that there was a process in place. We issued
the regulation and then we established the process through what we referred to as sub-regulatory
guidance, which is the bulletin that we put out in September.
[Mr. Gowdy] So your testimony is that there were three applications, whether that is formal
or informal, for waivers prior to September of 2010?
[Mr. Larsen] That is my understanding, but I would like to confirm that for the committee.
[Mr. Gowdy] Okay. So how did the companies know the process before you promulgated the
regulations?
[Mr. Larsen] Well, again, the regulations were issued in June. I would say the regulations
did two things among many others. This was part of a broader regulation. But with respect
to the annual limits provisions, we established the tiered phase in for annual limits.
After looking at what was happening in the marketplace and what types of annual limits
were out there, we established for the first year the $750,000 restricted annual limit.
Again, it is very important to note that the statute specifically contemplates that there
will be no annual limits in 2014 but what it refers to as restricted annual limits --
[Mr. Gowdy] Well, I wasn’t going to go to the statute but if you are going to bring
it up, you will also have to concede nowhere does it grant the Secretary the express power
to grant waivers.
[Mr. Larsen] I am not sure I would agree with that because the clear reading of what is
there is that there will be a phase in of the annual limits provisions.
[Mr. Gowdy] Well, the word waiver does not appear anywhere in the statute. Would you
agree with me there?
[Mr. Larsen] Well, I will agree that the word waiver does not appear in that particular
section.
[Mr. Gowdy] Okay, that is the one we are talking about.
[Mr. Larsen] But I don’t think that is, as a lawyer at least, the normal test for
whether it is reasonable to interpret a statute --
[Mr. Gowdy] Speaking like a lawyer, let me ask you --
[Mr. Larsen] I know you are a lawyer, sir.
[Mr. Gowdy] Not much of one, I was just a prosecutor.
[Laughter]
[Mr. Gowdy] Let me ask you this: If there is a denial, is there an appeals process.
What burden of proof does an applicant have to make to be considered, rejected, and then
considered again?
[Mr. Larsen] Actually, we do have a reconsideration process. Again, it is a very simple process.
We consistently were guided by the principle of making this as easy and as simple as possible.
We advise applicants that if they are denied, they can ask for reconsideration. We will
work with them to collect whatever additional information we need to look at the application
again.
So there isn’t a hard and fast burden of proof because our goal in implementing this
provision was to ensure that employees could continue the coverage they had. We didn’t
want to make it burdensome. In fact, if we had to make a choice, our objective would
be to err on the side of making sure that people could continue their coverage. We weren’t
out to deny people. We wanted to make sure that people could continue their coverage.
[Mr. Gowdy] I have run into the red light so I will now recognize my colleague from
the State of Illinois, Mr. Davis.
[Mr. Davis] Thank you very much, Mr. Chairman.
You know, I was just thinking I know people who swear at lawyers and I know others who
swear by lawyers. So it just depends on who you are looking at.
Mr. Larsen, the new health care law is intended to phase out what we call mini-med plans.
These plans provide low benefits and often leave consumers high and dry when it comes
to actually using them to access medical care. We have heard many horror stories about people
who rely on these plans thinking that they are insured, only to get sick or have an accident
and be left with nothing.
In July of 2009, for example, the New York Times featured a story about a man whose limited
benefit health plan capped hospital services at $10,000. He had to undergo a heart procedure
and his hospital bill was $200,000. When it came time to pay, his plan provided next to
nothing. He and his wife were forced to declare bankruptcy despite the fact that he was supposedly
insured.
Mr. Larsen, some might conclude that these plans should be prohibited immediately. Can
you tell us, simply, why do we need these waivers at all? Why not just prohibit these
horrible plans outright?
[Mr. Larsen] Yes, sir. What you describe, I think, is the dilemma with these plans.
They provide some coverage for the employees that can purchase them but in too many cases
they don’t provide sufficient coverage or people don’t understand that, in fact, they
don’t have coverage. So with a day or two in the hospital, they have reached their limits.
These really are a bridge to 2014 when fuller, more comprehensive, and affordable coverage
will be available. Although this is not great coverage, or good coverage in some cases,
it is some coverage. We want to make sure that people can maintain access to that coverage
through this process. So the waiver process permits individuals to continue that type
of coverage until better coverage is available in 2014.
[Mr. Davis] Now let us take a look at the other side of this argument. There are those
who have argued that since you are approving 94 percent of the waiver applications, that
means the underlying health care law must be flawed. For example, my good friend, Representative
Cliff Stearns, Chairman of the House Energy and Commerce Subcommittee on Oversight and
Investigation puts it this way, “If the law,” that is the Affordable Care Act, “is
so good, why are so many waivers to the law being granted?”
How do you answer or respond to that?
[Mr. Larsen] I would respond that the waiver provision that was contemplated in the statute
shows that the law is, in fact, working because it allows employees to continue this coverage.
Remember that it is a small percentage of employees, less than 2 percent. Most people
who have coverage have much more comprehensive coverage. This allows them to continue it.
So I would argue or submit that it shows that the law is working. The majority of policies
that can meet the annual limits with minimal impact on premiums will do so. And the statutory
goal is to ensure that we are phasing out the annual limits in 2014.
[Mr. Davis] Then why won’t the same employers that are seeking waivers today seek them in
2014?
[Mr. Larsen] At that point, we will be much farther along in the reform of this very broken
health care system. It is important to keep in mind that these fixes are a result of a
broken system where people are denied coverage for being sick, are having their policies
rescinded, or have limited benefits. In 2014, more comprehensive, affordable coverage is
available for employees of small businesses and individuals.
[Mr. Davis] Thank you very much, Mr. Larsen.
It reminds me of when my father was explaining the differences between how people see things.
If you ask if it fair for birds to eat worms, you get a different answer depending on who
you ask. If you ask the bird, you get one answer. If you ask the worm, you get another
answer. I guess they both feel that they are right.
[Mr. Larsen] I hope I am the bird.
[Laughter]
[Mr. Gowdy] Thank you, Mr. Davis.
The Chair would recognize the gentleman from Arizona, Dr. Gosar.
[Mr. Gosar] Mr. Larsen, when did Health and Human Services first know about the two million
Americans, that they would lose their health care coverage even if they liked it? When
did you first know that two million Americans would lose their health care based upon this
[Mr. Larsen] I am not sure I am following your question.
[Mr. Gosar] Well, let us go further. President Obama clearly said, “If you like your health
care plan, you can keep it.”
While limited, mini-med plans provide some coverage to about two million people. True?
[No response]
[Mr. Gosar] About 1.8 million, to be exact. But the law as written and as understood,
and we are talking about attorneys -- I am not an attorney, I am a dentist -- of 7-11,
Lowes, National Restaurant Association, National Retail Federation, and the US Chamber of Commerce,
the bill as written eliminated this health care coverage, period. Is that true or not
true?
[Mr. Larsen] Not true. As I described earlier, it does two things. It sets up a phase in
of restricted annual limits leading to no annual limits in policies but preserves the
ability for this small part of the market that has very, very low annual limits to continue
until we get to 2014.
[Mr. Gosar] Did you know those groups met with the Secretary for Health and Human Services
in June of last year about that very issue?
[Mr. Larsen] I don’t think I did. We had meetings with groups as well to talk about
the development of the waiver process. I don’t know who met with the Secretary, specifically.
[Mr. Gosar] Who was involved in developing the waiver process?
[Mr. Larsen] We developed the waiver process, HHS.
[Mr. Gosar] On your own with no outside inference at all?
[Mr. Larsen] No, our staff developed it. We looked at the regulation. We met with stakeholders
who had an interest in the process. We took their suggestions to heart, which were to
keep it simple, to make it easy to apply, to make it prompt so that it didn’t take
too long.
I think we did all of those things. We have a 30 day turnaround time. Again, we think
it is simple to use. We have gotten a lot of positive feedback from a number of groups
that, in fact, it is very straightforward.
[Mr. Gosar] Mr. Wold, the whole process of this waiver, would you call it cumbersome
or straightforward?
[Mr. Wold] I would say somewhere in between, probably. In some cases, it worked very well
for our clients. In other cases, it didn’t.
There were certainly issues with respect to identifying what information needed to be
provided, at least for the early applications that we submitted before the application form
was released. We developed our own template form that we used based on the guidance that
was in existence. In some cases, that worked. In other cases our clients heard back that
no, they need to provide some additional information or no, we have this form now and they need
to provide that. So there were some cumbersome aspects to it.
[Mr. Gosar] If you were trying to help people along and trying to work with them, would
you put the waiver form on the sixth page, hidden away in your web-based application?
[Mr. Wold] No, I wouldn’t. When we worked with our clients, we issued what we call a
client alert to all of our clients notifying them of this waiver process. We had found
the link, obviously, by that time and included the link. I would have made it more prominent,
yes.
[Mr. Gosar] Okay. So if you were from outside Washington, D.C. -- God forbid -- and maybe
back out in Arizona or California or whatever, this is an arduous process, is it not?
[Mr. Wold] I think it is for the average employer, yes. In part, that is why they come to benefits
attorneys to help them with that process. But I think that if you didn’t have the
means to hire a benefits attorney or didn’t have a third party who is an expert in the
benefits field, for the average employer it would be arduous.
[Mr. Gosar] So Mr. Larsen, we spent some considerable effort upon this web design. We spent a lot
of time and energy trying to incorporate the waiver process, did we not? It came at quite
an expense in time.
[Mr. Larsen] I am sorry?
[Mr. Gosar] To develop the waiver process and to put it on a web-based system took some
time?
[Mr. Larsen] You mean for HHS?
[Mr. Gosar] Yes.
[Mr. Larsen] No, I would not describe it as a large expense. We had a number of staff
working on it. Again, we tried to keep it simple. We put it on the website. We put out
a press release.
Most small businesses even and larger businesses have their benefits administered by these
third party administrators who, by all indications we got, were very familiar with this process
and were aware of the process. I am not aware of feedback that we got that people were not
aware of this or troubled by it. Even Mr. Wold found it. He spoke with HHS people. He
got his questions answered, I think. I don’t want to speak for him but I have read his
[Mr. Gosar] Thank you, Mr. Chairman.
[Mr. Gowdy] Thank you, Dr. Gosar.
The Chair would recognize the gentleman from Maryland, Mr. Cummings, for his five minutes
of questions.
[Mr. Cummings] Thank you very much, Mr. Chairman.
Mr. Larsen, some of your critics have raised questions about the Secretary’s authority
to issue waivers that allow limited benefit plans to be extended and gradually phased
out by 2014. For example, in a February 10th, 2010 letter to you, Chairman Issa said that
it was unclear which section of the Patient Protection and Affordable Care Act grants
authority for HHS to waive the statutory provisions that end limited benefit plans.
As I understand it, the Affordable Care Act added section 2711 to the Public Health Service
Act. There is a clear language in that section that states, “The Secretary shall ensure
that access to needed services is made available with a minimal impact on premiums.” Is that
right?
[Mr. Larsen] That is correct, sir.
[Mr. Cummings] That is where you get your authority?
[Mr. Larsen] We think that authority is clear in that provision.
[Mr. Cummings] As I understand it, this section gives the Secretary the authority to pursue
a mechanism to phase out limited benefit plans by 2014, but to do it in a way that has minimal
impact on those plans.
Under this provision, the Secretary issued an interim final rule that explains in detail
that issuing short term waivers would help phase out these plans with minimal impact.
Is that right?
[Mr. Larsen] We did both phase out annual limits and reference the waiver process for
mini-meds, yes.
[Mr. Cummings] I thought about this a bit. You seem like you would be damned if you do
and damned if you don’t. If you don’t give some people some leeway for these mini-med
plans to continue, people will say you threw people out of their insurance. On the other
hand, when you provide a waiver for them to continue it, they say that the program doesn’t
work, although it isn’t supposed to be fully functioning until 2014. That is a bit of a
dilemma there.
Would you agree? You don’t have to agree with what I just said. I am just wondering.
[Mr. Larsen] I think I have said previously that I think that had we not been granting
waivers for this small number of low limit policies, people would be arguing that the
law was ineffective. So we are, as the President suggested, allowing people to keep their coverage
through 2014. It is not specifically contemplated in the statute and so it is being suggested
that we are not following the law.
[Mr. Cummings] Your office was given responsibility to issue this guidance, address applicant
questions, and review applications for suitability. Is that right? Is that part of your job?
[Mr. Larsen] Yes, sir.
[Mr. Cummings] The committee staff reviewed hundreds of pages of comments submitted by
interested parties regarding the waiver process. They had trouble finding any submissions that
indicated concern with the Secretary’s authority to issue the waivers under this provision.
Did you know that?
[Mr. Larsen] I am aware that, in fact, most if not all the comments are supportive of
the waiver process.
[Mr. Cummings] Generally, I would assume that the industry supports the waiver process?
[Mr. Larsen] It does.
[Mr. Cummings] How do you know that? You haven’t had any complaints from the industry? I am
sure they didn’t come running into your office saying, hallelujah, we love this.
[Mr. Larsen] Well, we have gotten comments on the interim final rule which were supportive
of the waiver process. And in the course of administering the process as well, we have
received positive feedback both from individual applicants and trade groups associated with
businesses that need waivers.
[Mr. Cummings] Some critics have suggested that the process by which annual limit waivers
have been issued is biased in favor of certain groups such as unions. For example, in the
February 10th, 2010 letter to the Secretary, Chairman Issa made this statement: “The
current process gives credence to the perception that bureaucrats are picking winners and losers
in a politicized environment where the winners are favored constituencies of the administration.”
Is that accurate?
[Mr. Larsen] That is not true. We do not favor any particular type of applicant or any applicant
from a particular sector. We have applied the standards that we set out fairly across
all the applicants.
[Mr. Cummings] Is political support for the Obama Administration or health care reform
a factor your Office uses in evaluating applications for annual limit waivers?
[Mr. Larsen] It is not.
[Mr. Cummings] You understand you are under oath?
[Mr. Larsen] I do, sir.
[Mr. Cummings] I think that will be it. I yield back.
[Mr. Gowdy] Thank you, Mr. Cummings.
The Chair would recognize Dr. DesJarlais.
[Mr. DesJarlais] Thank you, Mr. Chairman.
Dr. Feder, I guess we will start with you. I was listening to your testimony and you
seemed pretty confident about the upcoming success of the Obamacare, or ACA as you call
it. How would you rate the Government’s management of the Medicare system right now?
[Ms. Feder] Of the Medicare system?
[Mr. DesJarlais] Yes.
[Ms. Feder] I know that the Medicare system is extraordinarily effective in assuring access
to affordable health care for the Nation’s seniors and those people with disabilities
that it covers. It has been so for some years. That does not mean that it does everything
right.
One of the advantages of the Affordable Care Act is the new mechanisms it creates to reform
payment mechanisms in Medicare to make it much more efficient.
[Mr. DesJarlais] Do you think Medicare is efficient and financially stable right now?
[Ms. Feder] I think that health costs are rising. Medicare’s rate of growth in health
care cost per capita has actually over the last multitude of years been slower than growth
in the private sector.
[Mr. DesJarlais] Do think health care costs are going to stop rising?
[Ms. Feder] I think we are going to have to do everything we can to make us get better
value for the dollar in the system.
Medicare has in the past been a leader in that effort. The private sector has followed
when Medicare has been a leader and I think that is what we need again.
[Mr. DesJarlais] Do you think Medicaid is a good system and that it is financially stable?
[Ms. Feder] When you talk about payment, Medicaid is paying a very low rate.
[Mr. DesJarlais] Is it a broken system?
[Ms. Feder] No, it is not a broken system. It is the Nation’s long term care safety
net and enormously valued for covering those that it protects.
[Mr. DesJarlais] Okay. So you think that the Federal-run programs right now, Medicare and
Medicaid, are doing pretty well?
[Ms. Feder] What I said was I think that they are enormously valuable in terms of protecting
people. Relative to the private sector, they are doing, if anything, better in terms of
efficiency. But I think we need to improve everybody.
[Mr. DesJarlais] Okay, that is a good point. You think it is doing better than the private
sector.
[Ms. Feder] In terms of its per capita rates of health.
[Mr. DesJarlais] Do you know, prior to the implementation of Obamacare, approximately
what percentage of Americans rated their health care as good or excellent?
[Ms. Feder] I would have to check.
[Mr. DesJarlais] It is about 75 percent.
How many people was the Affordable Care Act or Obamacare supposed to cover? What was uncovered?
[Ms. Feder] The Congressional Budget Office says that it will expand coverage by over
30 million people.
[Mr. DesJarlais] Okay. You said that 19 million would go in the exchange?
[Ms. Feder] Nineteen million in the exchanges receiving credit.
[Mr. DesJarlais] And another 16 million would go on Medicaid?
[Ms. Feder] Yes.
[Mr. DesJarlais] If you break that down, I guess my math is correct, that is about 35
million people that you are saying are uncovered right now?
[Ms. Feder] I am saying that the Congressional Budget Office says these will be additional
people who will receive coverage, the expansion of coverage.
[Mr. DesJarlais] Well, the fact that we are having this hearing today about waivers makes
me feel that maybe the health care act itself was flawed and now we are trying to find a
way to make it look better.
I guess I have grave concerns about the systems right now. In fact, we are about to go vote
on a way to keep the Country running because, as we all know, we are broke and our deficits
are increasing at remarkable rates. Yet somehow we think that we are going to add people to
a health care system, decrease cost, and increase quality.
Do you really believe that with increasing health care costs?
[Ms. Feder] What I would say -- only reiterating what the Congressional Budget Office found
-- is that the law is fully paid for, that it actually slows the growth in Medicare spending,
and that it covers people at the same time. I think that that is the right thing to do.
[Mr. DesJarlais] Mr. Haislmaier, you haven’t had a chance to talk much here. Do you have
an opinion on any of that?
[Mr. Haislmaier] All of the foregoing is not true, I suppose. Look, the hearing really
is not about health policy but about this waiver process. I could debate with Dr. Feder
some of her comments all day.
I just want to make it really clear for the committee that there is no mention of a waiver
in that portion of the law as Congressman Cummings cited. In fact, the preamble to the
sentence, Congressman, is “In defining the term restricted annual limit for purposes
of the preceding sentence, the Secretary shall ensure that access to needed services is made
available with a minimal impact on premiums.” So the instruction to the Secretary in the
statute is purely to define the term restricted annual limit. It doesn’t even contemplate
a phase-in.
Mr. Larsen, Mr. Davis, and some of the other members had made the comment that this was
intended to phase out. It may have been. If it was, we don’t know. The reason we don’t
know is that there is nothing beyond the statute to give any indication of Congressional intent.
This was added later in the Senate version of the bill. There were no hearings on this.
Whether it was or wasn’t intended, there is no phase out in here. There is no waiver.
Finally, Mr. DesJarlais, I could direct your attention to one of my footnotes in my paper.
I cited that, in contrast, I found 21 subsections of this legislation, PPACA, where there is
explicit new, not existing, waiver authority. There are many more that refer to existing
waiver authority, but explicit new waiver authority was deliberately granted by Congress
to the Secretary of HHS. That is in 21 separate other sections. And there are more instances
because in some sections waiver authority was granted in more than one place and there
were also examples where waiver authority was granted to other departments outside HHS.
My point is simply that if Congress had intended for this to be a phase in, it should have
said so. If they intended for it to be a waiver, they should have said so. They did neither.
HHS has exceeded its authority, regardless of what one thinks of the policy. I have offered
how you could either abolish mini-meds tomorrow or you could wait until 2014. I point in my
testimony that there are three different ways to do it.
Thank you.
[Mr. Gowdy] Thank you.
Given the fact that the bell is sounding, we will recess for votes and we will reconvene
as quickly as we can all reassemble. Thank you.
[Recess]