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THE TRUE COST OF PPACA: EFFECTS ON THE BUDGET AND JOBS HEARING BEFORE THE SUBCOMMITTEE ON HEALTH OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED TWELFTH CONGRESS FIRST SESSION MARCH 30, 2011 Serial No. 112–27 ( Printed for the use of the Committee on Energy and Commerce energycommerce.house.gov U.S. GOVERNMENT PRINTING OFFICE 71–722 WASHINGTON : 2012 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 11:25 Dec 21, 2012 Jkt 037690 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 F:\MY DOCS\HEARINGS 112\112-27 033011\112-27 CHRIS COMMITTEE ON ENERGY AND COMMERCE FRED UPTON, Michigan Chairman JOE BARTON, Texas HENRY A. WAXMAN, California Chairman Emeritus Ranking Member CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan ED WHITFIELD, Kentucky EDWARD J. MARKEY, Massachusetts JOHN SHIMKUS, Illinois EDOLPHUS TOWNS, New York JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, JR., New Jersey MARY BONO MACK, California BOBBY L. RUSH, Illinois GREG WALDEN, Oregon ANNA G. ESHOO, California LEE TERRY, Nebraska ELIOT L. ENGEL, New York MIKE ROGERS, Michigan GENE GREEN, Texas SUE WILKINS MYRICK, North Carolina DIANA DEGETTE, Colorado Vice Chairman LOIS CAPPS, California JOHN SULLIVAN, Oklahoma MICHAEL F. DOYLE, Pennsylvania TIM MURPHY, Pennsylvania JANICE D. SCHAKOWSKY, Illinois MICHAEL C. BURGESS, Texas CHARLES A. GONZALEZ, Texas MARSHA BLACKBURN, Tennessee JAY INSLEE, Washington BRIAN P. BILBRAY, California TAMMY BALDWIN, Wisconsin CHARLES F. BASS, New Hampshire MIKE ROSS, Arkansas PHIL GINGREY, Georgia ANTHONY D. WEINER, New York STEVE SCALISE, Louisiana JIM MATHESON, Utah ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina CATHY MCMORRIS RODGERS, Washington JOHN BARROW, Georgia GREGG HARPER, Mississippi DORIS O. MATSUI, California LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin Islands BILL CASSIDY, Louisiana BRETT GUTHRIE, Kentucky PETE OLSON, Texas DAVID B. MCKINLEY, West Virginia CORY GARDNER, Colorado MIKE POMPEO, Kansas ADAM KINZINGER, Illinois H. MORGAN GRIFFITH, Virginia (II) VerDate Nov 24 2008 11:25 Dec 21, 2012 Jkt 037690 PO 00000 Frm 00002 Fmt 8486 Sfmt 8486 F:\MY DOCS\HEARINGS 112\112-27 033011\112-27 CHRIS SUBCOMMITTEE ON HEALTH JOSEPH R. PITTS, Pennsylvania Chairman MICHAEL C. BURGESS, Texas FRANK PALLONE, JR., New Jersey Vice Chairman Ranking Member ED WHITFIELD, Kentucky JOHN D. DINGELL, Michigan JOHN SHIMKUS, Illinois EDOLPHUS TOWNS, New York MIKE ROGERS, Michigan ELIOT L. ENGEL, New York SUE WILKINS MYRICK, North Carolina LOIS CAPPS, California TIM MURPHY, Pennsylvania JANICE D. SCHAKOWSKY, Illinois MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas PHIL GINGREY, Georgia TAMMY BALDWIN, Wisconsin ROBERT E. LATTA, Ohio MIKE ROSS, Arkansas CATHY MCMORRIS RODGERS, Washington ANTHONY D. WEINER, New York LEONARD LANCE, New Jersey HENRY A. WAXMAN, California (ex officio) BILL CASSIDY, Louisiana BRETT GUTHRIE, Kentucky JOE BARTON, Texas FRED UPTON, Michigan (ex officio) (III) VerDate Nov 24 2008 11:25 Dec 21, 2012 Jkt 037690 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 F:\MY DOCS\HEARINGS 112\112-27 033011\112-27 CHRIS VerDate Nov 24 2008 11:25 Dec 21, 2012 Jkt 037690 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 F:\MY DOCS\HEARINGS 112\112-27 033011\112-27 CHRIS C O N T E N T S Page Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth of Pennsylvania, opening statement ................................................................... 1 Prepared statement .......................................................................................... 2 Hon. Frank Pallone, Jr., a Representative in Congress from the State of New Jersey, opening statement .......................................................................... 4 Hon. Fred Upton, a Representative in Congress from the State of Michigan, opening statement ................................................................................................ 6 Prepared statement .......................................................................................... 6 Hon. Henry A. Waxman, a Representative in Congress from the State of California, opening statement ............................................................................. 8 Hon. John D. Dingell, a Representative in Congress from the State of Michi- gan, prepared statement ...................................................................................... 10 WITNESSES Douglas Elmendorf, Director, Congressional Budget Office ................................. 11 Prepared statement .......................................................................................... 13 Answers to submitted questions ...................................................................... 258 Richard Foster, Chief Actuary, Centers for Medicare and Medicaid services .... 47 Prepared statement .......................................................................................... 49 Answers to submitted questions ...................................................................... 268 Douglas Holtz-Eakin, President, American Action Forum ................................... 99 Prepared statement .......................................................................................... 101 Answers to submitted questions ...................................................................... 271 David M. Cutler, Otto Eckstein Professor of Applied Economics, Harvard University ............................................................................................................. 120 Prepared statement .......................................................................................... 122 Philip K. Kennedy, President, Comanche Lumber Company .............................. 137 Prepared statement .......................................................................................... 139 Rick Poore, President, Design Wear/Velocitee ...................................................... 150 Prepared statement .......................................................................................... 152 Larry Schuler, President, Schu’s Hospitality Group ............................................ 162 Prepared statement .......................................................................................... 164 SUBMITTED MATERIAL Article entitled, ‘‘The Republican Response to Obamacare,’’ from Bloomburg Business Week, March 24, 2011, submitted by Ms. Capps .............................. 188 Letters of March 30, 2011, from Health and Human Services to Mr. Waxman, submitted by Mr. Waxman .................................................................................. 190 Working paper entitled, ‘‘The Impact of the Medicaid Expansions and Other Provisions of Health Reform on State Medicaid Spending,’’ by The Lewin Group, December 9, 2010, submitted by Mr. Cassidy ....................................... 194 Article entitled, ‘‘New Jobs Through Better Health Care,’’ by David Cutler, submitted by Mr. Cassidy .................................................................................... 226 Statement of the Small Business Majority, submitted by Mr. Waxman ............ 239 Committee rules on the Truth in Testimony form, submitted by Mr. Waxman 250 (V) VerDate Nov 24 2008 11:25 Dec 21, 2012 Jkt 037690 PO 00000 Frm 00005 Fmt 5904 Sfmt 5904 F:\MY DOCS\HEARINGS 112\112-27 033011\112-27 CHRIS VerDate Nov 24 2008 11:25 Dec 21, 2012 Jkt 037690 PO 00000 Frm 00006 Fmt 5904 Sfmt 5904 F:\MY DOCS\HEARINGS 112\112-27 033011\112-27 CHRIS THE TRUE COST OF PPACA: EFFECTS ON THE BUDGET AND JOBS WEDNESDAY, MARCH 30, 2011 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. The subcommittee met, pursuant to call, at 10:02 a.m., in room 2123 of the Rayburn House Office Building, Hon. Joe Pitts (chair- man of the subcommittee) presiding. Members present: Representatives Pitts, Burgess, Whitfield, Shimkus, Rogers, Myrick, Murphy, Blackburn, Gingrey, Latta, McMorris Rodgers, Lance, Cassidy, Guthrie, Upton (ex officio), Pallone, Dingell, Engel, Capps, Schakowsky, Gonzalez, Baldwin, Weiner, and Waxman (ex officio). Staff present: Allison Busbee, Legislative Clerk; Howard Cohen, Chief Health Counsel; Paul Edattel, Professional Staff Member, Health; Julie Goon, Health Policy Advisor; Ryan Long, Chief Coun- sel, Health; Jeff Mortier, Professional Staff Member; Monica Popp, Professional Staff Member, Health; Heidi Stirrup, Health Policy Coordinator; Phil Barnett, Democratic Staff Director; Alli Corr, Democratic Policy Analyst; Tim Gronniger, Democratic Senior Pro- fessional Staff Member; Purvee Kempf, Democratic Senior Counsel; Karen Lightfoot, Democratic Communications Director, and Senior Policy Advisor; and Karen Nelson, Democratic Deputy Committee Staff Director for Health. OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REP- RESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA Mr. PITTS. The subcommittee will come to order. The chair recognizes himself for 5 minutes for an opening state- ment. We had a very instructive field hearing, our first, in Harrisburg last week, on the 1-year anniversary of the signing of PPACA. What we heard about the health reform law’s costs on Pennsyl- vania alone was chilling. Governor Corbett stated that after the Medicaid expansion had gone into effect, roughly one in four Penn- sylvanians would be on the program. According