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THE HEALTH CARE LAW’S IMPACT ON JOBS, EMPLOYERS, AND THE ECONOMY HEARING BEFORETHE COMMITTEE ON WAYS AND MEANS U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TWELFTH CONGRESS FIRST SESSION JANUARY26, 2011 Serial No. 112–03 Printed for the use of the Committee on Ways and Means ( U.S. GOVERNMENT PRINTING OFFICE 70–870 WASHINGTON : 2011 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 G N RI A E H with D O R P H1 H S R6 K5 S D anorris on VerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870 COMMITTEE ON WAYS AND MEANS DAVE CAMP, Michigan, Chairman WALLY HERGER, California SANDER M. LEVIN, Michigan SAM JOHNSON, Texas CHARLES B. RANGEL, New York KEVIN BRADY, Texas FORTNEY PETE STARK, California PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington DEVIN NUNES, California JOHN LEWIS, Georgia PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts GEOFF DAVIS, Kentucky XAVIER BECERRA, California DAVID G. REICHERT, Washington LLOYD DOGGETT, Texas CHARLES W. BOUSTANY, JR., Louisiana MIKE THOMPSON, California DEAN HELLER, Nevada JOHN B. LARSON, Connecticut PETER J. ROSKAM, Illinois EARL BLUMENAUER, Oregon JIM GERLACH, Pennsylvania RON KIND, Wisconsin TOM PRICE, Georgia BILL PASCRELL, JR., New Jersey VERN BUCHANAN, Florida SHELLEY BERKLEY, Nevada ADRIAN SMITH, Nebraska JOSEPH CROWLEY, New York AARON SCHOCK, Illinois CHRIS LEE, New York LYNN JENKINS, Kansas ERIK PAULSEN, Minnesota RICK BERG, North Dakota DIANE BLACK, Tennessee JON TRAUB, Staff Director JANICE MAYS, Minority Staff Director G N RI A E H with D O R H1P ii H S R6 K5 S D anorris on VerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870 C O N T E N T S Page Advisory of January 19, 2011, announcing the hearing ....................................... 2 WITNESSES Austan Goolsbee, Ph.D., Chairman, Council of Economic Advisors .................... 6 Douglas Holtz-Eakin, Ph.D., President, American Action Forum ....................... 38 Scott Womack, President, Womack Restaurants .................................................. 60 Joe Olivo, Owner/CEO, Perfect Printing ............................................................... 67 SUBMISSIONS FOR THE RECORD Mr. McDermott ........................................................................................................ 138 Mr. Pascrell .............................................................................................................. 140 Mr. Rangel, NFIB .................................................................................................... 166 Campaign to End Obesity Action Fund ................................................................. 167 James T. Lette ......................................................................................................... 169 LumaCorp ................................................................................................................. 170 Main Street Alliance ................................................................................................ 171 National Business Group on Health ...................................................................... 174 National Partnership for Women & Families ....................................................... 177 National Private Duty Association ......................................................................... 179 G N RI A E H with D O R H1P iii H S R6 K5 S D anorris on VerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00003 Fmt 0486 Sfmt 0486 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870 G N RI A E H with D O R P H1 H S R6 K5 S D anorris on VerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00004 Fmt 0486 Sfmt 0486 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870 THE HEALTH CARE LAW’S IMPACT ON JOBS, EMPLOYERS, AND THE ECONOMY WEDNESDAY, JANUARY 26, 2011 U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, DC. The committee met, pursuant to notice, at 9:04 a.m., in Room 1100, Longworth House Office Building, the Honorable Dave Camp [chairman of the committee] presiding. [The advisory of the hearing follows:] G RIN (1) A E H with D O R P H1 H S R6 K5 S D anorris on VerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870 2 HEARING ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS Chairman Camp Announces Hearing on the Health Care Law’s Impact on Jobs, Employers, and the Economy Ways and Means Hearing to Examine the Impact of Taxes, Regulations, and Mandates Contained in the Health Care Law on Economic Growth and Job Creation January 19, 2011 House Ways and Means Committee Chairman Dave Camp (R–MI) today an- nounced that the Committee on Ways and Means will hold a hearing on the impact the ‘‘Patient Protection and Affordable Care Act’’ and ‘‘Health Care and Education Reconciliation Act of 2010’’ will have on the U.S. economy and employers’ ability to hire new workers and retain existing employees. The hearing will take place on Wednesday, January 26, 2011, in 1100 Longworth House Office Building, be- ginning at 9:00 A.M. In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consider- ation by the Committee and for inclusion in the printed record of the hearing. A list of invited witnesses will follow. BACKGROUND: The Democrats’ health care overhaul imposes more than one-half trillion dollars of tax increases and numerous pages of mandates and onerous regulations on employers. Employers of all sizes are expressing concern that the new mandates and regulations will deter them from hiring new employees, threaten their ability to retain existing workers, and harm their ability to increase wages for existing employees. The new health care law compounds the uncertainty employers and entrepreneurs are facing amid the most challenging economic climate since the Great De- pression. Making matters worse, some insurance companies and employers have already increased their health care premiums, in part, to comply with the new health care law, exacerbating the drag on the U.S. economy from rising health care costs. In announcing this hearing, Chairman Camp said, ‘‘Employers have repeatedly expressed their concerns about the effects of the Democrats’ health care law. This hearing provides us the opportunity to directly hear from employers about the higher taxes and new mandates that are in this law. This will also serve as a basis for how this Committee, and Congress, can best respond to the concerns of employers and workers and refocus its energy to develop common sense solutions that prioritize affordability, job creation, and economic growth.’’ FOCUSOFTHEHEARING: The hearing will examine the economic and regulatory burdens imposed by the enactment and implementation of the ‘‘Patient Protection and Affordable Care Act’’ (P.L. 111–148) and the ‘‘Health Care and Education Reconciliation Act of 2010’’ (P.L. 111–152). It will explore the impact on jobs stemming from the new taxes and new federal regulatory requirements. It will also analyze the impact of the employer G mandate on job creation. N RI A E H with D O R P H1 H S R6 K5 S D anorris on VerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870 3 DETAILSFORSUBMISSIONOFWRITTENCOMMENTS: Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word or WordPerfect docu- ment, in compliance with the formatting requirements listed below, by the close of business on Wednesday, February 9, 2011. Finally, please note that due to the change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical problems, please call (202) 225–1721 or (202) 225–3625. FORMATTINGREQUIREMENTS: The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discre- tion of the Committee. The Committee will not alter the content of your submission, but we reserve the right to format it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response to a request for written comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee. 1. All submissions and supplementary materials must be provided in Word or WordPerfect format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and sub- mitters are advised that the Committee relies on electronic submissions for printing the official hearing record. 2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee. 3. All submissions must include a list of all clients, persons and/or organizations on whose behalf the witness appears. A supplemental sheet must accompany each submission listing the name, company, address, telephone, and fax numbers of each witness. The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call 202–225–1721 or 202–226– 3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including avail- ability of Committee materials in alternative formats) may be directed to the Com- mittee as noted above. Note: All Committee advisories and news releases are available on the World Wide Web at http://www.waysandmeans.house.gov/. f Chairman CAMP. The Committee will come to order. Good morning. Today’s hearing is on the health care law’s impact on jobs, employers, and the economy. We will have two panels today. Our first panel will feature Austan Goolsbee, who is chairman of the Council of Economic Advisors. I will begin by making an opening statement, and then I will yield to my friend and ranking member, Mr. Levin. I want to start by reading the following quote. ‘‘I know one of the things that’s come up is that the 1099 provision in the health care bill appears to be too burdensome for small businesses. It just involves too much paperwork, too much filing. It’s probably counter- G N productive. It was designed to make sure that revenue was raised RI A E H with D O R P H1 H S R6 K5 S D anorris on VerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00007 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870 4 to help pay for some of the other provisions. But if it ends up just being so much trouble that small businesses find it difficult to manage, that’s something we should take a look at. So there are going to be examples where I think we can tweak, and make im- provements.’’ That was President Obama on the day after the November elec- tions. The President was saying the health care law appears to be too burdensome for small businesses, that it involves too much paperwork, too much filing. And last night, in his State of the Union Address, the President again referred to the 1099 provision, as we have come to call it, as a flaw. But more importantly, the President asked us to identify and bring to him items that need to be fixed. And clearly, in a bill that’s over 2,000 pages long, there is more than just the 1099 provision we need to address. With unemployment rates stuck above 9 percent for the last 20 months, and with my home state’s unemployment at nearly 12 percent, I have one simple question today. How is it that Congress passed a health care bill that is ‘‘counterproductive’’ to American employers? Especially at a time we need to be looking at solutions that encourage, not impede, job creation. That’s the focus of our hearing today, the health care law, and its impact on the economy, on employers, and their workers. If signed into law, the Democrat’s health care law imposes more than a one-half-trillion dollars of tax increases and thousands of pages of mandates and onerous regulations on employers. My friends on the other side of the dais have argued that we shouldn’t be debating health care anymore, that we need to move on, and focus on jobs and the economy. What they need to recog- nize is that employers of all sizes are expressing concern that the new mandates and regulations will deter them from hiring new employees, threaten their ability to retain existing workers, and harm their ability to increase wages for existing employees. The new health care law compounds the uncertainty employers and entrepreneurs are facing under the most challenging economic climate since the Great Depression. Making matters worse, many insurance companies and employers have already increased their health care premiums to comply with the new health care law, exacerbating the drag on the U.S. economy from rising health care costs. That’s the problem with the health care law that puts Wash- ington, D.C., the Federal Government, at the center, instead of pa- tients and doctors. And when you take a Washington-knows-best approach to legislation, you usually end up with a bill that only works for Washington, instead of working for the American people. At the end of the day, the health care law fails to control costs, it fails to let Americans keep the insurance they have and like, de- spite the President’s promise, it fails to protect jobs, it fails to en- sure seniors have access to their doctors and hospitals, and fails to prevent tax increases from hitting middle-class families and the small businesses we need to move our anemic economy forward. The hearing today is just the first of many with regard to the health care law. It’s my intention to give the American people and G N employers, both large and small, the opportunity they did not have RI A E H with D O R P H1 H S R6 K5 S D anorris on VerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870 5 when this law was being written, to testify in an open hearing about the impact this law will have on them. We know what the experts have said. We all know that the non- partisan Congressional Budget Office has estimated the health care law will increase premiums for millions of families by up to $2,100 on average by 2016. That’s $3,200 more expensive than the Repub- lican alternative I offered last congress. We all know that the Obama Administration’s own officials have predicted that as many as 7 out of 10 employers will have to change the coverage they offer to their employees because of the law. We all know, from the joint committee on taxation, that there are well over $500 billion in new taxes, many of which will hit middle- class families and small businesses. That’s what the experts have told us. Today we will hear something different. We will also hear from real employers, and what they think about this law, and what they think the impact will be on their businesses and their employees. I look forward to hearing this testimony and getting more of this sort of insight in the future. After all, these are the very people who have to live with the decisions that are made here in Wash- ington. But before we do, I ask unanimous consent that all Members be allowed to submit an opening statement for the record. Chairman CAMP. Hearing no objection, I now yield to the ranking member, Ranking Member Levin, for the purposes of an opening statement. Mr. LEVIN. Thank you, Mr. Chairman. Dr. Goolsbee, I under- stand, will be here until 10:30. He will have a chance, Mr. Chair- man, to respond to some of your criticisms that I don’t think are valid. But we want to hear from you, Dr. Goolsbee, so I will be brief. Last night, the President said some very clear things about the health care issue. He said, ‘‘Instead of re-fighting the battles of the last two years, let’s fix what needs fixing, and move forward.’’ My concern about the hearing is that, indeed, we will be re-fighting the battles of the last two years. For example, as to 1099, we introduced legislation in the last session. It passed here. It was opposed by the then minority because of the pay for. Ironically, much of what is in the bill was in the pay for is now the law of the land. We should have acted on 1099 last session. In his speech, the President also said, ‘‘What I’m not willing to do is to go back to the days when insurance companies could deny someone coverage because of a pre-existing condition.’’ He went on to point out that the law is now making prescription drugs cheaper for seniors, and giving uninsured students a chance to stay on their parents’ coverage. So, I repeat, he then went on to say, ‘‘Instead of re-fighting the battles of the last two years, let’s fix what needs fixing, and move forward.’’ I think that’s exactly what we should do, and I would hope that would be the tone of the hearing today. I yield back. Chairman CAMP. Well, thank you. Welcome to the Ways and G N Means Committee, Mr. Goolsbee. Under our rules you will have RI A E H with D O R P H1 H S R6 K5 S D anorris on VerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870 6 five minutes. Your written statement will become part of the record. And so, welcome, and you may begin. STATEMENT OF AUSTAN GOOLSBEE, PH.D., CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS, WASHINGTON, D.C. Mr. GOOLSBEE. Thank you, Mr. Chairman. And I would like to say good morning to Chairman Camp, Ranking Member Levin, and all the Members of the Committee. Thank you for inviting me to testify here today. And I know we were up late, and I saw several of you last night, and I appreciate your time. The Affordable Care Act was designed to make sure that health insurance coverage is affordable for individuals, families, and businesses. And while millions of people are benefitting now, much of the impact of that act will begin when the major coverage provisions take effect in 2014. The best evidence that we have gathered from outside experts suggests that, in addition to slowing the growth of Medicare spend- ing and significantly reducing the deficit over the next 10 years and the 10 years after that, that the Affordable Care Act can be a significant benefit to the job market by easing the burden of health care costs on small businesses, and by reducing the growth rate of health care costs for all businesses. Now, the impact of the Affordable Care Act on the labor market is an important topic. I applaud you for having this hearing. I be- lieve there has been a significant amount of confusion on this issue, and I am happy to have this opportunity to try to clarify that. I think the President laid out last night in a way that is most helpful, and you iterated in your opening statement, Mr. Chair- man, that we should try to work together to improve—whatever is broken or problematic we should fix together. Anything that re- duces costs is going to help jobs in this country. Health care has, for years, been one of the most pressing cost issues facing the business world. Those costs have been rising dra- matically, long before there ever was an Affordable Care Act, and the Affordable Care Act’s intention is to try to address that. I would highlight two basic mechanisms that I think the Afford- able Care Act can have a—has had and will have a significant posi- tive impact on the job market. The first mechanism is in the area of small business. Now, the role of entrepreneurs and small businesses in job creation and in the economy is well known. Equally well known is the fact that small businesses have, for years, con- sistently said that the cost of health care is one of their most significant problems. Small businesses that want to provide insurance for their workers face much higher costs than large firms do for exactly the same plans. And in many states they also face the risk that a single sick employee, or even an employee’s ill family member, will send their premiums through the roof for all of their employees. The Affordable Care Act has begun to help make small business more competitive by making health insurance more accessible and more affordable. One of the first provisions to take effect is the small business health care tax credit that helps offset the costs of coverage. That applies to as many as four million small businesses G N that may be eligible right now for that small business tax credit. RI A E H with D O R P H1 H S R6 K5 S D anorris on VerDate Nov 24 2008 04:34 Dec 03, 2011 Jkt 070870 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70870.XXX GPO1 PsN: 70870