Congress Holds Hearings On Health Care Costs

Two congressional committees held hearings related to the rising cost of health care in March. The Senate Finance Committee invited testimony on issues surrounding federal health care tax policy, and the House Energy and Commerce Committee's Subcommittee on Health considered proposals on improving health care price transparency.

Observing that the March 8 hearing was the first on health tax policy to be held by the Senate Finance Committee since 1994, committee chairman Sen. Chuck Grassley (R-IA) said the issue is urgent given the unsustainable rate of health care inflation in the United States, which is threatening the nation's ability to compete in the global economy. Grassley noted that tax preferences for health care represent the single largest federal tax expenditure, amounting to $177.6 billion in 2005 and a projected $2 trillion over the next decade. Given these already very large sums, Grassley questioned whether proposals to provide even more health care tax subsidies were responsible strategies for solving the nation's health care problems.

Grassley said, "From a health policy perspective, we have to ask: Do our current tax incentives make sense? Are they helping to maximize coverage, reduce costs, and improve quality? From a tax policy perspective, we also must ask if our current tax incentives make sense: Are they fair? Do they help produce a good policy result? And do the benefits outweigh the costs?"

In his testimony before the committee, former U.S. Treasury Secretary Paul H. O'Neill called upon lawmakers to "stop tinkering at the margins of tax policy" and instead introduce a requirement that all Americans purchase a base level of individual health insurance coverage, with the tax system providing financial support only to those who lack the means to fully pay for their own insurance. O'Neill dismissed the idea that employers should provide their employees with benefits as "a myth," saying employers "act as a rather inefficient and increasingly spotty pass-through for insurance benefits" and use dollars that would otherwise be available for compensation to pay for health coverage.

Leonard E. Burman, senior fellow at the Urban Institute, argued against eliminating the exclusion of contributions to employer-sponsored insurance from income and payroll taxes, maintaining that leaving the provision of health insurance to the market would likely make coverage more, rather than less, expensive.

"On balance, despite its failings, the current employer-based system supplies health insurance coverage to almost 70% of American workers under age 65," Burman told the committee. "Reform should build upon that coverage base instead of eroding it. Simplistic market-based solutions, though appealing, are likely to come up short."

Burman suggested that current tax subsidies be re-targeted toward those workers who would benefit the most, possibly by replacing the current tax exclusion with a refundable credit for workers earning less than the median income. A more incremental option, Burman added, would be to provide a refundable tax credit or direct subsidy to small employers to help them offer health insurance. Another would be to allow small companies to purchase insurance at large-group rates.

At the March 15 hearing on health care price transparency before the House Energy and Commerce Committee's Subcommittee on Health, Rep. Daniel Lipinski (D-IL) presented details of legislation he is co-sponsoring with Rep. Bob Inglis (R-SC), the Hospital Price Reporting and Disclosure Act.

After personally experiencing difficulties in deciphering hospital charges after being treated for a hip injury, Lipinski said he introduced the bill "to make price information available for all hospitals across the country, and give all Americans the ability to make informed choices about where they seek medical care." Lipinski told the subcommittee the bill would require hospitals to report biannually to the Secretary of Health and Human Services (HHS) the prices they charge for the 25 most commonly performed inpatient procedures, the 25 most commonly performed outpatient procedures, and the 50 most frequently administered medications. This information would then be posted on a "user-friendly website" that could be viewed by all Americans.

Sara R. Collins, senior program officer at the Commonwealth Fund expressed her view to the subcommittee that, while the current level of health care price transparency is inadequate and should be improved, a perfectly competitive health care market cannot exist because patients often lack the time or the knowledge to make their own health care decisions, especially in emergencies or when very ill. Rather than burdening the individual, Collins recommended that transparency be achieved through investment in health IT systems and by having Medicare assume a leadership role in collecting and making cost and quality information available to the public by provider and patient condition.