making well in excess of $100,000 a year in their retirement. 80% working with defense contractors and then going in and making up to $2600 a day to give their advice. in other words, a retired admiral or general can make more in a day than a corporal in afghanistan will make in a month to do what he's supposed to do anyway. fulfill his stuartship and having spent a career in the military. i don't know the full cost of that, but according to "usa today," these people are being paid between 200 and $340 an hour plus expenses. they are hired as independent contractors and not subject to government ethics rules. they operate outside public scrutiny and many work for weapons makers and in effect are able to either gain information

for companies or exchange data. that's not the military i grew up in. that's not the military you and i served in. that's not the pentagon i served in in the 1980s. these are the kind of things i@" >> thank you, gentlemen for your service and for being here to answer our questions. secretary gates, when we captainure an enemy combatant, do we read them miranda rights? >> no. >> why should we do so if we capture one in this country?

>> that's a question better addressed to the attorney general, senator. >> you were the director of the central intelligence before you were secretary of the defense. >> yes, sir. >> i assume you have an opinion on this. >> my view is that the issue of whether someone is put into the american judicial system or into the military commissions is a judgment best made by the chief law enforcement officer of the united states. >> before they get to commission, there is a question of beinga able to ask questions and we know there is a chilling effect when we give someone miranda rights. if we are not doing it overseas, i'm not sure why we would be doing it in this country. >> we have been placed protocols now that and there is authority under the law that if a person

is deemed to be a threat to the national security as a self-confessed terrorist would be, there can be delayed in mirandizing to allow time for questioning. we have the authority to do that even in the article three system. >> my colleague was talking about making it work and he has a different view to mitigate the risk of a terrorist attack, accident or natural disaster. in mayport, i know you support that and i appreciate that, but there is no money in the budget for the nuclearization projects or other projects that need to be completed. >> there is $239 million for the mayport military construction for mayport. >> thank you. >> mullen, will you designate a ship to mayport in the coming months? >> actually, it's something that

it's not mine. that in the end would be a decision that the navy would recommend and it would come up to the secretary. >> are you bringing one up soon? >> we can talk about that later. we have given information about the fact that it's 35% over budget which i think is about $18 billion if my numbers are correct. this program started in the mid 90s and we went to the moon quicker than we produced this plane. i appreciate your efforts to try to get this under control. i saw there was a suspension of the performance benefits. my question is in terms of acquisition reform, it seems to me there needs to be reform across the department of defense, probably across the

government. not just performance bonuses, but penallies under the vendors. is there a person you charged as responsible to lead the effort and are you looking at the contracts to make sure they bear the cost if programs were delayed? >> under secretary carter e, he is responsible for that and taking a look at a large number of contracts. >> i had an opportunity to be there yesterday to speak with general petreus and in follow-up to my trip to afghanistan at the end of october which i went with senator burns in the white house, we noted that our information out to the afghan people. maybe not doing as good as it could be. the general talked about the fact that we were successful in the surge in iraq because of the power of ideas and not the power

of the forces. this is the need to commit more focused energy and potentially more fun to providing information to the afghan people to counteract what the taliban does. >> it's misinformation. there good efforts being done with the colonel craft. he was doing good work with trying to get radios out there to folks to working with governors to get information out quickly to counteract propaganda from the taliban. is that something that has risen to your level and do you understand the need to improve our efforts? >> absolutely. we have spent a good bit of time in the situation room with our agency partners. strategic communications in afghanistan a high priority. >> i'm out of time, but i would like to ask one more question. on the 313-ship navy, the plan is currently to have 10

carriers. is that sufficient where refitting the enterprise, do we need to keep the enterprise in operation until it comes on line? what's your thoughts? >> the current requirement is for 11 and i support that. the 10 carrier issue is to be decided literally down the road. obviously how we build them generates how many they are and when we retire them. i don't think we should keep the enterprise. it's unique and incredibly costly and the decision to decommission it after the next appointment and take the risk in that gap i think is a decision that i support, recognizing there is risk associated with that. >> thank you very much. >> thank you very much, senator. senator burris. >> thank you and i would like add my thanks to your wonderful service you do for our country and for those in our military personnel for haiti, i want to

extend my thanks to them and also remind our government that we are there as assistants and not to take over or occupy a country as people are concerned about. make sure we keep that message going forward. the defense integrated military human resource systems. the largest program ever implemented for the human resource which will replace over some 90 legacy systems, intended to bring all payroll and funks into one integrated web-based system. in august of 1996, the department of the task force concluded that the multiple service personnel and pace system caused a significant short coming, particularly in

the joint arena and excessive development and maintenance cost. the recommendation was that dod should move to a single all service, all component, fully integrated personnel and paced system with common core software. this program for the defense department said it was necessary. why is it a poorly performing program today and why is it not necessary and what has changed? >> this is one where i think both admiral mullen and i have something to say. first of all, after 10 years of effort, poor performance and difficulties with the program, i would say that what we have gotten for a half billion dollars is an unpronounceable

acro him in. many of the programs i made decisions to cut have been controversial within the department of defense. >> in my prior life as head of the navy and as a budget officer, this has been a disaster. the characteristics you described are good characteristics to have. i talked about making a program too perfect and you can't get there. it was proven that they couldn't get there time and time again. i applaud the termination of the program. that doesn't mean we shouldn't try to create the enterprise efforts that you just described. we have to do it in a way where we are not spending the kind of money we are spending going nowhere. >> we will run into the military and people don't want to give up

more. if we can pay the personnel management, all civilian. ies under the one-payment system. why can't the military exercise one payment system? it would be my assessment that you run into turf problems that the military is not willing to say that a person had a great fix in the navy to be paid in the army. it's the same system. you cut a paycheck and you don't have all these, but you have five or six different systems in the military. we can save millions of millions of taxpayer dollars by combining the systems. >> i don't disagree that we could get there and we should have that. it was costing us a tremendous amount of money to go nowhere in this and even in the private sector when you talked to individuals who have tried to combine various multisystems, it is always a challenge. the challenge is there and the

goal is one that is a good goal. we were not getting there. we're wasting our money. >> we will take it up in the future? acronym acronym. >> the money is for $300 million in the 11 to set the conditions for the transferred to state department for responsibility for training the police.

>> there people at that. acronym the acron acronymthere a number of categories like that. a lot of it is -- there is only 158 million of the $1 billion, only $150 million is for equipment. the rest is all connected with our transfer of responsibilities from costs associated with a transfer of responsibilities either from ourselves to the iraqis or from the differently defense to the department of state after our troops come out. most of those costs are associated in that area along with sustainment of and training for the iraqis who are going to be taking our places.

>> my time expired, but gentlemen, i hope the civilians can do it and get one pay scale system. the civilians and the military can do it without five or six different system. thank you, mr. chairman. >> thank you. a couple of quick items i think, feel free to submit that unpronounceable acro him in for the record.nym for the record. you referred to the civilian court system. one house keeping announcement before i call on the senator, when we begin our hearing of don't ask don't tell, we are on schedule to begin before noon. we are going to follow the same

early bird order as the current theory when we reached the don't ask don't tell hearing. senator? >> thank you. the last will be first for that hearing? >> i didn't say reverse order.@e more than seven million dod computers that are being used to support our war fighters and for other dod operations.

acronym we also know every single day there attempts to hack into those computers. acronym some of these are from nation states like china. what is your assessment of the effectiveness of dod's current cyber security effort? >> i think we actually are particularly with our classified systems are in good shape. most of the attacks that we have in the classified to unclassified systems, we are not happy with where we are. that's why we have an initiative to skreat cyber commands and also have money in the budget

and made a priority in the qdr and the budget for cyber in terms of training individuals to be expert in this area. we made it a top priority for the services to fill all the slots in the education programs for cyber. i would say we are in good shape now, but we look with concern to the future. we think a lot more needs to be done. >> thank you. admiral, last year the president announced a major policy change on how our country would extend protection against ballistics missiles to nato allies. i joined senator levin on a trip to talk to the czech republic, pola poland, and russia about this

issue in march. i support the change and part of the change in direction is that the agents surface combat ands would become a primary means of accomplishing that important mission. they are dedicated to perform the mission will likely be tied to specific areas of operation. that means that they are not going to be fully available to perform many of the more traditional missions that we typically assigned our major surface combatants. a number of analysts suggested that means we will need a larger number of major service combatants if all of these missions and roles are to be executed successfully. how does the decision to assign

major service combatants with the new dedicated defense mission affect your assessment of the size of the overall fleet? >> we will start in an earlier discussion on the need to get to that and one of the things i worried about for years is that we would have enough in particular surface combatant to be able to meet the needs that are out there. although i do not subscribe to the theory that these ships would become the ships like strategic ballistic missile submarines. it's the only thing we do. we invested too much and i think in the broad capability, wide ranging capability of surface ships to dedicate them to one mission. as this program has both been

adjusted, it focuses on regional theater evolving threats. i think that's the right answer. we would have certainly some indications and warning and have the ships to flood to a certain area. understanding what the threat is. i'm between and i think we need to look carefully at how many we need. we need to upgrade the ones we have. while we are upgrading some, we need to look seriously in modernization. do we have upgrades for the ship we built to meet the threat in the longer term as well as looking to see if we need more. i am more focused on the upgrade than we have additional. >> thank you. >> thank you, senator collins. senator bill nelson? >> i want to compliment you on the relief efforts in haiti.

you make it happen. acronym he's answer we will have to do something different. i was just told a very troubling story of a relief effort by a group of floridians, doctors, prominent people that took a private plane load of medical splice down to a number of our doctors who have been on the ground just doing heroic stuff. just before they got there, the customs had been turned back over to the haitian government. as they are unloading the plane of all the medical supplies to get it to our, in this case,

university of miami doctors who were there the day after the earthquake. the customs officials wanted bribes to release the medical supplies. and we can't allow this kind of thing. you all have done tremendous things in getting us to where we are, the humanitarian mission, but for the long-term, we will have to have an international trusteeship i'm not expecting a response, but i want to compliment you for what you have done. i have the privilege of sharing

his emerging threats in the subcommittee. acronym as we withdraw forces in iraq, the requirement for the special operations forces they rely on the counterparts for many support functions. what do we do to ensure the operations forces are being one of the things we are doing is moving the funding of the special operations command and

in terms of their development, we are plussing up the development that they are supplied with and much of which is unique to them. we are increasing the number of slots that they have and this budget for fy 11 increases by 2800 people to continue that capability. >> part of moving to the future is investing in the wars we are in and there is no more critical capability in my view that we are investing in these wars. that will serve us well for the

future. acronym we have the military members now and these were growing 2800 and this is at least in my interaction with the admiral about as fast as we can grow and find the people the quitance in 2010. for years i believe the whole military has to be looking at the characteristics and they look for the forces. the tension you describe between the special forces and the services that provide the people and the early training and

recruit them is a good tension and we will have to continue to deal with that. acronym and keeping that by reengining the old platforms. what's the roll n afghanistan? >> it is principal ly tracking targets from on the ground. as you ask that question, i think j star is being the revolutionary aircraft that it was for desert storm. even in the early to mid 90s in the balkans where we deployed them prior to the time we actually finished successfully testing them. they have provided an

extraordinary capability. the adaptation to this persistence requirement which we approved more readily and been able to do, they are valuable in tracking targets on the ground which is why this investment is so important. acronym. >> thank you, senator nelson. senator haskale?

it is said that i want to make sure i'm happy with that. acronym. >> we want to make sure it's a mistake i made and i want to it make that courtesy. >> thank you for the cooperation. i think in some instances there is a fiction that these earmarks are being com pettily live given out when the requests are being honored maybe informally. we are trying to get to the bottom and make sure they got as much transparency as possible. i read everything i can get my hands on for the joint strike fighter and when we are going use the fighters. acronym i am confused about the date. depending on whether you are talking about the team that went out or whether i see quotes from

schwartz, let's get on the record and when do you think the joint strike fighter will be operational for the military? >> even with the restructuring of the program, the training squadron is still scheduled to deploy to the air fore base in 2011. mat rene corps will have operating capability in 2012. the air force in the 2nd quarter of 2013 and the navy the 4th quarter of 2014. those are the latest estimates i have been given. >> okay. i heard you say those earlier. i wanted to make sure that it's clarified and i want to tell you how much i respect the fact that you fired somebody. you have done this several times. i washed you do this and it is unusual. i don't think people realize how

unusual it is for a secretary of defense to fire people when these things happen. traditionally there thz not been people who have been fired. i want you to know that i noticed and it's hard to do and it's important that you send that signal of@@@@@@@@ !@ @ @ @ >> we would condition to modernize a portion of the c 5s, but there would be some of the older c 5 a's we would retire. >> are you advocating we repeal the tying of your hands while you advocate for the closing of your line and that they retire

the c 5? >> any greater flexibility i can have i would welcome. >> i want to make sure that i get your endorsement for us retiring our hand tying of you as it relates to the modernization they had huge problems. it turned out to be much more expensive than it was intended to be. it's my understanding and we are not using the c 5s in haiti. >> i don't think so. >> we are using as we always do, the reliable easy to hand on short runways, load them up and get them out, cheaper to fly c 17 in haiti is correct. correct? >> yes,ma'am. >> i would say for the record out of 204,000 landings or strategic lifts since 1997, 4%

could not access and half of those were in iraq. >> i understand that and i know it's important to remember that the capability was pretty darn important over the last 6 to eight years in terms of military operations. i think we will have the same situation in afghanistan. aren't there airstrips in afghanistan that are not and they are more friendly than a c 5? i would like to briefly get into prescription drugs in the military. acronym i think we are painfully aware of the suicide problem we have and aware that there has been a modernization of prescription drug availability in the military as it relates to

ptsd and mental health issues. i know we have a task force looking at the issues and i wanted to bring to the attention of the committee that and to you as this task forces looking at prescription drug use, not only should we look at the anti-depressants that have become ubiquitous as it relates to treating our deployed forces when they are having stress issues, but also the prescription drug for pain. i particularly mentioned to general casey oxy contin. and the fact that we know that oxycontin has a higher street value than heroin because of the addictive nature of the drug. i will be sending you a letter

that the prescription drug task force will take a look at how widely available oxycontin is in the military and whether or not its overall effect has been harmful or positive. i wanted to ditto senator web on the mentoring program. pretty ugly. the revolving doors deserves as much attention as the revolving door in congress. thank you, secretary gates. >> huge. thanks. >> first, let me compliment senator mchaskell for her line of questioning. harry truman would be proud. you are focused on saving the taxpayer money and it reminds me of the incarnation. i used to scrub the budget so carefully i had a nickname of ebeneiser. i like to begin by complimenting

you and associating myself with what he was saying. it was a breath of fresh air that you are bringing increased accountability to the programs. some of the practices that have been allowed to exist for too long in defense department contracting and weapons system would never survive in the private sector. the fact that people are being held accountable and being asked to to share the burden and the over run is the right thing to do. i want to comment you for that and hope we will see more of the same. we are gathered here in a time of great distress for the american people and for our government. people are being asked to make sacrifices. the the president called for a freeze on spending and we are being asked for 3.4% increase in defense spending? is that correct? >> 1.8% in real growth. >> real growth. my point is i support that because of the challenges we

face. i wanted to put it in context of people asked to make real sacrifices and it makes more important to those who want to save tax dollars wherever possible. looking at the big items for meaningful savings have to do with commitments in iraq and afghanistan and the prospect that they will head in a better direction, allowing us to save money there. acronym i know you have given likely case estimates. if huh to say it was something other than the most likely case, let's start with iraq. the way things are trending there. would it be more or less likely we would be able to withdraw more aggressively there than you are currently planning on? in so doing, do the money we are being asked to commit to? >> i think the view would be it would be risk to try to

accelerate the withdrawals beyond the time table he has. >> no real prospects for savings beyond what has been estimated there? >> i think not. >> in afghanistan, my view and skeptics who look at that and say we are going to do our part and we are making a commitment to keeping the taliban and the al qaeda surrounding a platform to attack us? we will do what is necessary. the question is whether the afghans are capable and willing to do their part. you look at the history of that country and the complexity, even with our best efforts, skeptics wonder if we can get the job done. there is not much prospect for -- if events are going to deviate, it's likely on the downside and no the upside. no prospect for additional savings there. >> i suspect not.

i would tell you that as the president announced, there will be a review of our strategy in afghanistan at the end of this year. i think both the admiral and i are committed that if we determine that our strategy is not working, we will not recommend just plunging ahead blindly without a change of course. >> i think a healthy skepticism is good. i think a terminal skepticism at this point is far too soon. we see signs and many places now of uplifted spirits with the afghan people with securities turned around. i'm not under estimating the significance of the challenge, but from a resourcing and leadership standpoint and a commitment on the part of the afghans that we can see as a result, it's better than it's

ever been and we are a few months into it. we are all hopeful. i think we realize we have to be realistic as well. mr. secretary, that's what you outlined. reviewing progress and assessing the partners in pakistan and afghanistan and making the hard decisions at the appropriate time. let me ask a couple of other questions. have you requested all the predators and reapers you can use and you need? >> yes, sir. we have pretty much maxed out the lines. those capabilities, in more than a few instances, the challenge is not just the air frame or the platform, it's the ground station and the crews. it's the linguists that enable us to use the information. it's the whole package that we have to put together. >> for a long time, it was a shortage of pilots.

>> it was both air frames and platforms. i would say the air force over the last year to 15 months, the air force leaned into this problem. general schwartz told me they are training more uav pilots than they are fighter bomber pilots. >> that's quite a change. that's a system that has been delivering for us. i'm delighted. my time expired along with five colleagues. we were in kabul earlier this month or last month on this february. i want to convey we met with many of the members of the armed forces and in particular the special operations down there. they are doing an outstanding job. i want you to if you can relay our o appreciation for the service they are rendering to our country. >> senator reed? >> thank you, mr. chairman and thank you, gentlemen for your

testimony. some points with respect to the trial and i think the secretary, you sort of indicated that that decision was the province of the attorney general. just as a matter of fact, had he turned over to military custody, he would have been provided a lawyer, is that correct? >> yes, sir. >> given the fact that we have harmonized the rules between the fbi and other agencies in the government including the military that the tools available for interrogation would have been very much the same? >> yes, sir. >> i think something else too. again, this is not a question of venues. it's a question more of how we combat these terrorists.

a lot of them describe themselves as holy warriors. if we reinforce their self-described holy warrior description as trying them as essentially in a military trial and not a civilian trial, doesn't that reinforce what they think they are which is basically that they are not terrorist criminals? they are some type of holy warrior? >> i suppose that that's the case. i think that we are in a good place. when you have the ability to use both the civilian court system and the military commission and to be able to make decisions on how to prosecute an individual based on a case by case basis depending on those specific

circumstances. the attorney general consulted with me in terms of the decision on the christmas day bomber. i told him i would defer him on that. i think we need to use both of those venues and i think it will depend on the circumstances in each case. >> thank you. and mullen, in afghanistan, there has been, i believe, an increase in the afghani forces which are absolutely essential to long-term strategy. there is a pay increase that helped, but what others have helped? >> what an intangible was was the fact that the commitment on the part of the united states and nato nations specifically and the totality of it. not just the military side. the leadership of the

afghanistan, visibly more committed. acronym the general was out with the period who connected with his people in ways that have been important as well. acronym it's a combination in which their leaders feel strong in addition to the incentivized pay increases specifically. acronym it's the institutional capacity both from a training infrastructure standpoint as well as trainers to absorb that many. we are trying to get right, right now. acronym. >> the attorney general

consulted on the five 9/11 terrorists and not the christmas day bombers. acronym. >> mr. secretary, you have once again proposed robust funding for the department of defense in this @ún @ @å@ @ @ @ @ @ @ @ @ & qdr, there is a discussion of dealing with access environments and utilizing the subsurface operations which i presume is not just submarines and unmanned

vehicles. can you amplify what your plans are to. >> and i have to get back to what the specifics of that would be. i would only say from every capability that we have, theability to sustain and create and sustain access globally often times is very important. often times it's focused in the western pacific. it's broader and the capabilities are broader for the future. acrony acronym. >> i'm the last one standing on this round of activity. let me try to be quick. i have last issues, but first more global. again, thank you for all the work you are doing and the impact. you can tell me just so i have

the number correct, what's the total capacity in regards to troop we have there? >> we actually had over 20,000 with the release of the aircraft carrier vincent who actually left the helicopter capability ashore in haiti. with the release was down to under 17,000 today. >> do we have an idea of what the resource cost has been so far? the dod? >> about $150 million so far. >> do you have an estimation of what you think in this budget process that you are planning to expend for the next year? >> i am not sure of the duration and length. we estimated $300 million to $400 million and we will have to revise depenning on how long we are there and the degree of commitment. >> do you have within the budget that the president presented the

resources to meet that goal? >> no. >> that's good. >> we can cash flow it so we need to be repaid. >> we have the money thanks to the money to cash flow it. >> do you think and believe you have a clear mission of what you should be doing there yet to find? >> it's very clear and the haitian government and the un mission were in support who has been magnificent in the effort. it is a supporting effort pacifically. >> very good. >> i can go quickly on the subject that they brought up on oxycontin. not only what the drugs and activity in the sense of distribution, but the efforts for individuals trying to get

off of it. i have talked to several soldier who is had it as pain management and they have limited resources. if you could for the record give me how that works and what you do for the soldiers and what you do to get them out that was situation. if you can do that for the record. >> and then give me the iraq status again. we had a year ago how many troops there were there roughly? about a year ago. acronym how many troops did we have about a year ago? what was our peak level? >> 140? 150. 104,000 today. and the marines are out. >> by the end of august we will be down to -- >> about 50. >> 50,000 remaining? >> right. >> and then the other date of next august where will it be? >> the following year, end of 2011 we will be out.

>> and again to echo what i think you said, we are on track? >> we are. >> very good. i am trying to rapid fire these. i know my time is limited. do you still in the presentation of the budget have a robust and other issue and separate program? i know that has been a big plus with the military. you have been leaders in the area. are you still fairly in your mind aggressive in this arena? >> yes. >> let me be parochial as you had anticipated. with regards to the gmd, i appreciate the missile ground defense system and the work you have been doing in alaska and the efforts you have over the years with the transition of what's going on overall with missile defense. the way i understand this is you will finish off and do you have the resources in this budget or do you allocate utilizing other resources to get the final completion of the 12 and the decommission of the six?

>> that's budgeted for. >> in this cycle? >> yes. >> is there anything beyond even the six decommissioned? do you have to budget or do you have that in the cycle? acron acronym. >> i know you mentioned it and i think it's important, maybe again at a later time as you know, we have three in the european and the pacific comm d command, is there a process to bring the joint commander and how we deal with that? are you going through a process now? >> they would use the normal process. we do that routine and there is

no view that i have heard of that don't see us from an intention to create another command to handle this. acronym and brought to to our attention and we have a long way to go. >> my time is up, but the coast guards really have been hollering at all of us. i would love to be engaged in that and have a huge opportunity and also a huge potential conflict. your work would be greatly appreciated. my time is up and i tried to give you a variety pack. acronym acronym we will see if anyone has one question. i will have 1 and see if others

do okay. i will call on you too. my question is the following. there was a study that the institute for defense analysis did on that f136. the question is it's about three years old and we looked at how much would need to be invested and the possible benefits and the cost. my question sell you ask the institute for the defense analysis to update that study since we had a couple of years of additional investment. you can do that? >> i don't know why not, but let me get back to you. acronym. >> is there anyone here? let's try a question for anyone.

acronym acronym my questions go to the ability and the small contractors to have the opportunity to do business with the defense department where they may need some type of assistance with their development project. you understand there major dollars to think to get a piece of equipment that the military may need. we have a specific company in mind where it's cleared through generals and you can't get the decision to make those. you talk about saving the technical equipment for your space stations and the drones and other military aircraft. it seems like the bureaucracy with the bigger company seem to

charge much more money. stiles they try to subcontract or sub-subbut this can be sold directly with the military. there seems to be a bureaucracy that they run into. is there a system or device that a small business can get the opportunity to sell that product to the defense department which ask a better product and a cheaper product to save taxpayer dollars? >> let me give you an answer for how we deal with small business and if you will provide us with the specifics of the case you have in mind, we will look into it. >> secretary, i can certainly do that. >> my experience is exactly what you said, senator. it's very difficult to get small, innovative, creative companies into the business. my experience is too often

competing against the bureaucracy. they can't afford it and can't afford the overhead and don't have the people. it puts them out of business. they go too often in the private sector. there great ideas out there. i have seen small companies go other places and put out a business or be consumed by the larger contractors. acronym over the years it has been to try to get them to support these smaller companies. some of them have. it's a real challenge. it's a shortfall to what we do overall in the overall contracting business, if you will as we try to look to the future. >> we are talking about saving. if the numbers are correct, hundreds of millions of dollars. >> i have one question. we need to take a-minute break

for everybody's sake. >> mine is quick. i admiral mullen, i want to follow from the comment you made earlier in regards to the discussion of the life cycle of equipment and so forth and how the procurement process works and how sometimes the line folks are not engaged in that. i guess the question is, are you making efforts to change that? because i agree with you 100%, that the line people are not involved, you end up with a product and a good example might have been the payroll issue. i won't go into that. as a former mayor, i dealt with payroll transformation, it is a nightmare. is there something you're working on to make that transition? >> i think this is an area of focus. we have a system right now that would only allow me to pull something in, it does not come to me naturally orks quite frankly and more importantly to the service chiefs naturally, particularly on the acquisition side. >> are you working to change that? >> i am. but i don't see -- i don't see

healthy change coming in that regard in the near future, because that fundamental principle that was laid out in 1986 in goldwater-nickels that separates us is still there. >> let us know how we can help. i agree with you on what you're trying to do. >> we're going to call just now on senator chambliss, senator lieberman, and we're going to really break no later than noon here. we all need a five-minute break. senator chambliss. >> thank you, mr. chairman. mr. secretary, i was not going to get into a discussion on f-22, particularly we have been down that road, but when you responded to senator mccain's question about why you didn't discuss problems with the f-35, when we were having the debate last summer, your response was you didn't have the independent cost analysis that you have now. well, i thought it was pretty ironic that the report from the independent commission, the jet came out about two days after

the vote in the senate, where the f-22 in effect was killed. but and i couldn't understand why you didn't know about that, didn't know that report was coming, but really the 2009 report was simply a validation of exactly what that same commission reported in 2008. now, i assume you knew about the 2008 report, and for whatever reason you didn't give much credence to it, but am i incorrect about that sumtion? did you not know about that 2008 report from that independent commission or did you just seek to ignore it? >> i honestly don't remember, senator. the restructuring of this program has been due not just to the report of the jet from last fall, but to the time that the undersecretary for atnl spent on

this issue just in the last few weeks. and that's the reason that the restructuring has only been announced in the last few days. it is because he completed his nvestigation of which the jet ' >> i heard your comment about you're not intending in any way revisit the f-22 issue. is that correct? >> correct. >> that's in spite of the fact that the assumptions that you based your decisions on last year were wrong. that the f-35 is going to slip. and that your department has no idea of what the cost of an f-35 is going to be as we'd been told in a hearing by dr. carter. and now it's gotten to the point where i understand you've even relieved your program manager of his duties as of yesterday on the f-35.

so you're not going to in any ways revisit it even though we're struggling with the issues we talked about might come about with regard to the f-35? >> no, the ioc is based on information that i was given in preparation for the hearing. the iocs for the services of the arrival of the training squadron all remain pretty much in track. the different will be somewhat fewer aircraft delivered. >> do you intend to allow the expiration of foreign military sales of the f-22? >> my impression is that is prohibited by law. >> well, you've been instructed in the authorization bill last year that you will do a review of foreign military sales and the prospect of those sales. and there's another independent commission outside the department of defense that's also tasked with that. so is that review not under consideration at this point? >> i'll have to check, senator.

>> could you get me an answer on that, please, sir. let me ask you a quick question on the budget. i want to go back to the mrap that's specifically designed for afghanistan. tell me again about that vehicle. what's the difference in that? than what we're using in iraq and what's the budget difference there. >> the cost per vehicle is roughly the same for the all-terrain vehicle and the mrap. the mrap designed for afghanistan is designed to operate off-road where the mraps in iraq were designed to operate on the road so there's quite a difference in the engineering as well as in the power train and

so on. >> any of those vehicles in afghanistan today? >> yes, sir. we probably have that somewhere between 500 and 700 right now. we're ramping up the production right now we'll be send in 500 to 1,000 a month, pretty quickly here >> do you have any idea when that will begin? will it given before the weather warms up? >> yes, sir. again, we're probably either this month or next going to be at 500 a month going into the country. >> thank you, mr. chairman. >> thank you, senator chambliss. >> thanks to the witnesses for your service. it strikes me at three hours that we're coming closer that we're violating your rights under the geneva convention. but i thank you for your strength as shown here today. i frankly -- seriously, i don't think we had a better team than you at the department of defense in a long time. and i thank you for your service.

i think this is a good budget. but i think it meets the needs of our military within the resources that we have. i want to ask a question i think that hasn't been addressed. both of you talked about the proper balance between allocating funds to meet the unconventional threats we're facing in the war against islamist extremism terrorism and then being set to meet the threats of large potentially competitors. somewhere in the midst of both of those is iran. and now still the major state sponsor of terrorism in the world according to the state department -- it seems to me that it is also the most significant threat multiplier out there if it goes nuclear.

we all want to find a diplomatic way to get the iranians not to go nuclear. the senate passed a very strong sanctions bill last thursday unanimously which goes to conference now and hopefully will come back soon. but i wanted to ask you the extent to which the budget that you present to us will enable us to deal with this threat. if iran goes nuclear, it is -- it greatly strengthens their terrorists proxies including some who have killed a lot of americans in iraq and causing some trouble in afghanistan. it probably ends the nonproliferation -- nuclear nonproliferation regime. admiral mullen, at one point i saw you quote in the normal dispatch of your responsibility you are preparing -- it's your responsibility to prepare plans for potential use of military

force against iran regarding the nuclear weapons and then general petraeus said something similar recently. i want to ask you if that's the case and how would you describe that. and in what context would you put that preparation. >> i would put it in the context, i think, senator that you laid it out. the potential for instability is still there. as many are hopeful that the engagement dialog has legs and actually can produce something. i would agree with your assessment that achieving that capability it becomes a whole ball game as to what the downside potential is. i don't see much upside potential. we certainly over a long period of time have recognized that and focused on that. and we work contingencies all the time and it was really in that context that i was speaking of that. and the president has said, secretary gates have said, i've said all options remain on the table and certainly the military

is one of them. >> let me ask you a different side to this. in recent trips over the last years to the middle east. there's a kind of increasing military connection, a very positive sense between ourselves and our allies there. i wonder if you'd comment on that. and to what extent you see it in relationship to the current -- our future iranian threat? >> we have made considerable progress over the past two years or so in developing a regional maritime surveillance, air and missile defense cooperation in the gulf region. it is a step at a time.

it is in my view, clearly motivated -- they are motivated because of their concerns by -- with iran's armament programs and leave aside the nuclear weapons, the number of missiles they're building and so then. -- and so on. and so we have made considerable progress in those relationships. >> i thank you. my time is up. i know we want to give you a minute or two. thank you again. >> that concludes this hearing of the chart i referred to which i prepared relative to the afghan army will be made part of the record. secretary, we would ask you and chairman mullen to present this chart to your folks. make sure that it's accurate. if there's any errors in it, please let us know immediately. and ask general rodriguez please to provide the information that he's committed to provide. admiral mullen -- >> just one for the record and it's brief. in senator thune's question he

was asking about decommissioning bombers and, in fact, what i didn't say is there's consideration for a reduction in the number of bombers and overall start and negotiations which have not come to conclusion yet. >> we will ask the staff to give him that information. we're going to recess now for 5 minutes. when we come back after opening statements, we are going to call on senators in the same order that we called on them for the first hearing. we'll stand adjourned for 5 minutes. [inaudible conversations]

[inaudible conversations]

>> now, for educators, c-span offers the new c-spanclassroom.org. we've redesigned the website to make it even more useful for teachers with the most current and timely c-span videos for use in your classroom. you can find the most watched video clips, organized by subjects and topics. the latest in education news. plus, the chance to connect with other c-span teachers and it's all free. sign up at the new c-spanclassroom.org. >> now a senate hearing on healthcare programs in the president's fiscal year 2011 budget request. the witness is health and human services secretary kathleen sebelius. max baucus chairs this finance committee hearing. >> gandhi said every worthwhile

accomplishment has its stages of drudgery and triumph. the beginning a struggle and a victory. the effort to enact healthcare reform have seen this struggle. as we look back to the progress that we have made and look ahead at the short distance that we have yet to go, i remain confident that we will soon move to the stages of triumph and victory. we're on the brink of accomplishing real healthcare reform. we're on the brink of reform that will help millions of americans to afford healthcare coverage. we're on the brink to improve and the efficiency of healthcare for all. every day reminds us for the need of reform. the latest report by the nonpartisan congressional budget office warns once again that the growth of federal healthcare spending represents the, quote, single greatest threat to budget stability, end quote.

that's because healthcare costs continue to rise faster than the growth in the economy and faster than the growth in wages of the american families. in the last eight years average wages have increased just 20%. with the average cost of employer sponsored healthcare coverage has doubled more than five times. and health insurance premiums have tripled. the high cost of healthcare means that 1 in 4 americans lives in a family that spent more than 10% of its healthcare in 2009. and 4 out of 5 of these families have health insurance. the high cost of healthcare also militias the ability of american companies to compete. and the high cost of healthcare makes it harder for small businesses to provide health coverage to provide new workers or stay afloat. america spends twice what the next highest spending country spends on healthcare. with u.s. healthcare far too often produces uneven he quality

and poor outcomes. more than 46 million americans lack any form of health coverage. another 4 million are under insured. 54 million americans will be uninsured. and the cms office thinks that that number will go even higher reaching 57 million by the year 2019. we've tried incremental reform. we created rights and protections in 1996. for people who purchase group health coverage. and we covered millions of uninsured children in the enactment of the children's healthcare program. but we reached a point where it's increasingly difficult to fix the system one step at a time. we cannot add 46 million uninsured healthcare system to a broken system and we cannot control the growth of health spending without covering the uninsured. over the past year we learned

how hard it is to reform the healthcare system. but just because it's hard does not mean that the task is any less necessary. just because it's hard does not mean that we should look the other way. and just because it's hard does not mean that we have to compromise so much that we fail to address the problems at hand. madam secretary, thank you for all your hard work over the past year. and the work of your department in helping us to craft healthcare reform. thanks to your guidance and leadership, we know that we can start covering the uninsured with preexisting conditions this year. we know we can provide immediate assistance to bridge the medicare drug gap the so-called doughnut hole. we can jumpsuit quality improvement in medicare and medicaid. and we know that we can make immediate progress on insurance market reform. i'm pleased to see that the

president's budget assumes enactment of health reform. the budget accurately reflects the health reform the potential to reduce the digital by 150 billion doctors over the next decade. and as the president said in the state of the union address, it has also the potential to reduce the deficit by $1 trillion over the second 10 years. this year the finance committee will have a full agenda. and reducing the deficit. but to given the daunting long run fiscal challenges that we face, we cannot give up on the quest for health reform that addresses the interconnected problems of cost, quality, and access. i urge my colleagues on both sides of the aisle, and both sides of the capital and both pennsylvania avenue to not give up. we must succeed in reforming our healthcare system. of course, we face other daunting challenges. the medicare physician payment formula needs reform.

hhs took an important step by removing drugs from formula. and just last week the senate recognized a long term solution to require a short term investment by exempting part of sgr from the new statutory pay holders. i hope this will urge us for a permanent solution for the sake of seniors who need continued access to medical care and beyond healthcare reform there must be temporary assistance to needy families this year. and we have more work to do to improve our child welfare program. the president's budget did not assume a five-year reauthorization. so we must use this year to lay the groundwork for reauthorization. let me conclude where i began. i agree with president obama. we cannot give up on enacting comprehensive healthcare reform this year. we have gone well past this effort's beginning. we've endured our share of struggle. now let us at long last bring

this bill to victory. with your help madam secretary and certainly with the help of the president, i feel quite confident that we'll accomplish that objective. senator grassley? >> thank you, mr. chairman. thank you, secretary sebelius, for being with us today. particularly, in these very extraordinary times. our nation is beginning a slow recovery from one of our worst economic downturns. now maybe more than anytime in history people are focused on our nation's economic challenges and they're worried or maybe words that come out of my town meeting, people say to me, i'm scared. they watched unemployment soar. auto industry going to bankruptcies, banks shutting their doors and families struggling to make ends meet. and as our constituents have tightened their belts and tried to rein in their own household spending, they've seen some in washington support spending increase after spending increase.

they've watched as the federal debt has increased by $1.5 trillion since president obama took office. and on the heels of that, they've just seen a debt sealing raised to make way for even more deficit spending. so as i travel around iowa, my constituents know these facts and figure about -- and they know the figures affecting our economy as well as the debt. and they know it more than many washington insiders. they also know that this budget only takes minor steps towards a very major problem. they know that under this budget, the amount of debt held in 2008 will double to 12.3 trillion. by 2013 and then triple to 17.5 trillion by 2019. and the question they keep asking is when will washington

come to its senses and realize that we can't afford all this? all of the bailouts, all of the stimulus, all of the new spending is paid for with our constituent's hard earned dollars and they seem to express concern about it. and they want to know what we're going to do about it. they fail to see the return on investment that some have promised. and as a result, they've lost faith in government spending. as we consider the 2011 budget with you, we need to be thinking about how we can restore that trust. that trust begins, i believe, with transparency and accountability. in my years serving the united states congress, i've made it my mission to ensure that transparency and accountability are more than just buzz words. they got to be meaningful. i've held both republicans and democratic administrations to the same standard. when president obama was running for office, he pledged to make

government, quote, open and transparent. end of quote. another quote is, he promised, quote, to provide a window for all americans into the business of government, end of quote. actions speak louder than words and, unfortunately, a year into this administration we have seen that this principle is not always put into practice the way it was talked about in the campaign. transparency and accountability require an open and frank dialog between people's representatives in congress and those in the administration.3 at this time i have over 10 responses overdue from the department of health and human services on matters ranging from healthcare fraud to public safety. those are listed up there. and the number of days that we've been waiting for answers. if departments across the federal government -- i think my oversight efforts are often

resisted, frustrated, and impeded, impeded by bureaucrats who are more interested in governing than opening up. while this lack of transparency and accountability is nothing new in washington, the american public was led to believe that more could be expected when they voted for the president that wanted change. promises were made. principles based on transparency and accountability would be repeated over and over again. and obviously, the vast majority of americans believed. well, i want to continue to work on the american people's behalf to hold government accountable for its actions and ensure that the administration conducts its business in the open and transparent manner that was suggested. while these accountability and transparency problems persist, i'm pleased at least to see that addressing fraud, waste and abuse in medicare, medicaid and chip has a prominent role in this year's budget proposal as it should.

if we learned anything during the healthcare reform debate, it was fighting healthcare fraud, waste and abuse is really a bipartisan priority. we all have seen the staggering estimates of around $60 billion of taxpayers money being lost. this seems to be a conservative estimate. so i look forward to hearing from you, madam secretary, today on the proposals to strengthen fraud, waste and abuse, prevention, detection and enforcement. but before congress can weigh the merits of your legislative proposals as well as your request for increased funding, we need to know what and how you're doing with what you all currently have. and i mentioned earlier congress has the duty of government oversight. this includes reviewing annual reports that you're requiring to produce. one of these annual reports is on payment error rates. the latest one was due last november.

but congress has yet to see payment error rates for specific types of providers. so obviously this seriously impedes our ability to conduct oversight. and it limits our ability to evaluate how the federal government is addressing fraud, waste and abuse. so i look forward to hearing from you today on the status of that report. mr. chairman in regard to that, i ask unanimous consent that the slides on payment error rates from cbs be entered into the record. >> nobody else. -- no objection. >> thank you. the budget also assumes a six-month fmap extension to states. while i do agree the states still need assistance to meet ends meet, i think it's time for congress to cut the strings attached to the aid that we're sending it. as states struggle to balance their budgets, having the federal government provide them assistance that prevents them from touching medicaid doesn't

make much sense. we should give states control of their budget so that they can be more innovative and efficient with how they provide access to care. and, of course, you're a former governor so i hope you would agree with that. that flexibility is very important being a good governor or a state legislator. i look forward to discussing this and other issues with you. thank you. >> thank you, senator. i very much like to welcome our witness. the governor of kansas. hhs secretary. we're happy to have you here, madam secretary. as you know your full statement is being put in the record. i just urge you to summarize it. [inaudible] >> committee members, i'm glad to be here today to discuss the president's 2011 budget as it regards the department of health and human services. and i think you'll find the budget builds on some themes the

president laid out in his state of the union. strengthening security and opportunity for america's working families, investing to build a foundation for future growth. and bringing a new level of accountability and transparency to government. and it abides by the president's pledge to try and identify programs that are redundant, obsolete and ineffective. as you know, health and human services provides the health that americans depend on and actually delivers human services to many of our most vulnerable populations. and we think that it's important to make some of the investments our country has been putting off for years including investments in fighting healthcare fraud, strengthening our public health infrastructure. and getting more focused on prevention and wellness. so i'd like to give a brief overview of department priorities focusing specifically on areas of medicare and medicaid and chip. excuse me.

and i know that we'll have a chance to deal with some questions. and look forward to working with all of you as we move this forward. i would start with fraud and abuse as ranking member grassley has already noted. taking this seriously is something that is long overdue. it's something that the president feels very strongly about, which is why he asked the attorney general and i to work together in the creation of a new antifraud focus, which is known as the healthcare fraud prevention and action task force better known as h.e.a.t. we've already had some unprecedented success with now seven strike forces in cities around this country. where we can monitor and observe changing patterns of billing practices and a whole host of

new prevention tools which we anticipate will be enormously effective. so the president has included resources for new systems and new personnel to focus on this effort. and this is one of the efforts that we know -- actually returns significantly more than any investment that we make. tomorrow will be a year from the date that the children's health insurance program was expanded. and we know that in 2009 more than 2.5 million children who were previously uninsured got coverage from medicaid and chip. one of the efforts that our department takes very seriously is the outreach effort provided by congressional funding. and we intend to work with state and federal partners to identify and enroll the estimated 4 to 5 million children who are

eligible right now but still not enrolled. the budget does extend the fmap enhanced match that congress applied in the recovery act. and as a former governor i can tell you this is one universally welcomed relief for states who still have not seen their budgets recover. and since medicaid is one of the most significant expenditures that any state in the country makes in terms of the budget on healthcare having an enhanced federal match is something that is supported, i think, by republican and democratic governors. we ensure access, up to healthcare and disability who depend on medicare with new operations in cms that will help

us change from a relatively antiquated claims processing into an actively purchasing quality care system. making the next generation in healthcare technology to help providers raise the quality of care for all americans. continue to fund patient-centered research projects which empower providers and patients to get the most up-to-date information before strategies and protocols that work well. this budget also, chairman baucus referenced the physician payment rate -- the budget assumes a 0% update for physician payments reflecting the last number of years that congress has taken care to make sure that seniors did not see a dramatic decrease in the provider rates for their doctors.

we support the longer-term strategy and look forward to working with congress to that end. so this doesn't continue to be a yearly debate. there's a continued investment in neighborhood community health centers following up on the recovery act investment. but an additional investment that will provide 25 new sites and will eventually provide care for about 20 million people a year, 3 million more than were served in 2008 with high quality, low cost preventive care. there's a continued investment in our healthcare work force recognizing that healthcare delivery falls short unless you have the providers who actually deliver that care. and the indian health center continues to be a presidential priority trying to live up to the commitments made generations

ago to american indians and alaska natives in trying to reduce the woful health disparities that we continue to find. our budget continues to find new funding for a 21st century food safety system through the food and drug administration. we right now live in a global food marketplace. just, for example, half our fruit and nearly two-thirds of our seafood comes from overseas. and yet we have a 20th century inspection operations. so resigning a food safety system which gives american consumers the confidence that the food that they serve to their children is safe is something that we again take very seriously. following the signing last year of the tobacco legislation, the budget makes a serious investment in the battle against smoking. we saw dramatic decreases in

smoking rates for years in america. but they now are holding steady at 20%. and, frankly, that's way too high. so additional focus on better ways to stop smoking, new research, community-based projects is part of this ongoing effort to try and lower the dramatic costs that are underlying a lot of the chronic health conditions and directly related to smoking. public health security continues to be a focus. we know that we need to be better prepared for our public health emergencies. whether it's caused by natural disaster or by attacks by our fellow man, we know that medical counter-measures stand at the front of those readiness efforts, the vaccines and treatments, respirators that help reduce the spread of infections. this flu season we've all had a bit of a wakeup wall responding to the first pandemic in 40

years. and having an opportunity to look at where our system worked well and where there are gaps. so we continue to believe that funding new strategies, new technologies, new research through nih, work at the fda on scientific breakthroughs but also looking at a whole host of counter measures is more important now than ever. and i asked my assistant secretary for emergency preparedness to actually use the h1n1 experience as a template but give a report back by the end of the first quarter of this year, which i look forward to sharing with you, mr. chairman, and members of your committee, to look at where the gaps in our responsiveness system are. and what kind of strategies on a multiyear basis we need going ahead he. and finally, mr. chairman, i wanted to mention some of our critical programs that don't

deal directly with healthcare but deal with the human service side of our budget. we know that investments in children particularly at-risk children continue to be terribly critical factor in how well and prosperous they may be in later life. so this budget again focuses on early head start and head start providing enough resources to serve about 66,000 more young children than just two years ago. but what we know is middle class families are not just taking care of their kids these days. often they are also dealing with aging parents. so there is a new family caregiver program recognizing the fact that about 80% of long-term care services are provided by family members. often that's great news for the elderly family member who get to be cared for by loved ones but it can be financially and physically exhausting for the caregivers.

so this provides for our agency on ages additional support everything from counseling for caregivers, assistance at adult daycare centers, for periodic stay, respite help to assist families who are trying their best to balance these care giving roles. and states and communities are also part of the focus on some additional relief under the tanf program for some of the essential services that they're providing. so, mr. chairman, that's some brief highlights of the health and human services budget focusing on the health and well-being of americans and delivering essential human services. i think that we continue to work to improve the every day lives of americans.

look forward to working with you to enhance the health and well-being of the american people and look forward to the opportunity to answer questions on this budget. >> i'd like you to explain to all of us why healthcare reform creates jobs. and how it saves jobs. certainly the president went to new hampshire and other states who were helping encourage more job promotion in our country. we in this committee -- not in the committee but we in the senate will soon pass a jobs bill. and clearly to get the economy moving again, we have to do all we can do to create new jobs. and because healthcare costs are rising so much higher than wages, you know, five times since -- i think it was last eight years, and premiums rising three times the wages, it just seems quite clear that there's a tradeoff there.

that the employer is buying for health insurance to pay the health insurance and employees and that's lost wages. and the more we can get healthcare reform here passed here to lower the rate of increase in healthcare costs, the more that's going to help the employee get higher wages. and if you could just expound on that a little bit, madam secretary, just to help explain to all of us and the country basically why healthcare reform really is a jobs-creator and helps businesses and employees keep jobs. >> well, mr. chairman, not only is the healthcare sector a huge part of our economic picture. it represents about a sixth of the overall gross domestic product in america. so in and of itself, doctors, nurses, healthcare providers, health i.t., workers, a whole

host of workers in the system are certainly part of our economy. but just focusing on small business owners who are often regarded as the critical engine of the american economy and produce more jobs in the long term, i hear over and over again as i travel around the country about the crushing costs of healthcare for employees. and small business employers are often in a catch-22 situation if they don't provide coverage for the employees, they lose good employees. they can't retain the best and the brightest who follow healthcare to the bigger company or the bigger market. >> and there's incentives to help small business, isn't it correct? >> there's absolutely a major incentive. and, in fact, it would go in effect in front 2010. it's one of the early deliverables in health reform to assist small business owners to essentially stay in the healthcare market, come into the market.

eventually there would be not only that assistance but an opportunity for lower income workers to have coverage again. i think the job feature of that is you not only would have more productive companies but we'd be more globally competitive. we'd be able to by reducing the overall healthcare costs not shifting them from industry to industry have an opportunity in this global marketplace to compete more effectively, whether it's selling cars or widgets with competitors around the world. i think the third aspect that's a jobs aspect is really about having more productive work force. health and wellness, prevention of illness, prevention of long-term chronic illness, keeping employees in the work force, reducing six days has a direct positive impact on our work force. we have poorer health results than many countries around the world. we have employees who live sicker and die younger than many places.

so having those kind of investments from health reform and a more productive work force i think in the long run makes america more prosperous. >> is healthcare reform necessary for the administration and hhs to start implementing some new ways to reimburse providers to get reimburse based on quality than quantity that is, you know, limiting readmissions for excessive admissions for the hospital and purchasing in hospitals is another example and organizations. don't you need legislation in order to begin to enact a lot of these reforms will clearly reduce the rate of growth and healthcare costs? at the same time improving quality. same time improving quality. >> in both the house and senate bills, there's a major direction to begin shifting a payment system to quality outcomes. so that everything from prevention and wellness,

eliminating what americans now pay in co-pays for a lot of preventive care so encouraging screenings, early detection, saving lives of cancer and other chronic illnesses that can be identified early and corrected. but also as you mentioned, you know, hospital-based infection. we have 100,000 americans each and every year dying not because what brought them to the hospital but what happens to them in the hospital. and so a focus on hospital-based infections and really directing our payment system to first provide incentives for hospitals that do very well but eventually very well stop paying for care that is poorly delivered or makes people sicker. >> i thank you very much. my time is expired but i thank you. senator grassley? >> this week i wrote to express my frustration with the lack of responsiveness -- okay.

last week i wrote to express my frustration with the lack of responsiveness to my request from hhs and its subordinate agencies. i'm still waiting for responses to more than a dozen letters that i've sent last year to hhs, fda, cms and cdc. in my lear last week i asked you to get back to me january 29th but i haven't received a response from you. so i'd please like to have you let me know when i'll be getting a complete response to all of my outstanding requests? >> well, senator, i share your interest in transparency and openness. i know that we are now on a regular briefing schedule with your staff members. we're attempting to respond as thoroughly as possible to the information you request. it's my information that we have

given you complete responses to a number of the requests, the majority of the requests. some we're still working on and what i can assure you as quickly as we get the information together, we will get it to you. i know that the staff correspondence is often ongoing and conversations are ongoing to try and clarify to make sure we're getting you exactly what you want. >> well, it seems to me that one of the problems is expediting the clearing process within the department and its agencies so that letters from congress are answered thoroughly and delivered in a timely fashion. what are your plans to expedite that clearance process? i mean, it sounds like -- the letters are written and are sitting on somebody's desk for approval. >> well, senator, as you know, we have a large agency, which is not an excuse for untimely responses. i have met on a regular basis with our executive secretariat and actually now receive at my

request a weekly report on the status of correspondence, where it is, who's got it. and following through the pipeline. so we are -- i'm taking this very seriously and very personally. >> okay. well, you can see up here -- >> actually, i can't. >> and how many days it's been. we've been waiting for responses. and it seems to me like the list keeps getting longer and longer. you know, if we answered our letters as senators like that, we wouldn't get re-elected. let's go on. on another issue, as i mentioned in my opening statement, i'm a strong supporter of transparency and accountability. and as president obama mentioned the other day, he's disappointed there hadn't been more transparency in the healthcare debate. the budget assumes comprehensive healthcare will be enacted. in order for that to occur, i'm assuming negotiations between congress, the white house and stakeholders are continuing to take place.

could you commit to me today that going forward any negotiations involved any of your senior staff in an effort to pass comprehensive health reform will be done in an open and transparent manner? >> well, senator, i don't know what conversations with is this true staff you're talking about. our staff is available to you and your members and meet with them regularly. they're available to other members. i don't control the negotiations that go on between the house and the senate or the conversations. our staff provides technical support across-the-board. >> so you're saying that your staff isn't anything more than that and negotiations with the white house or anything like that? >> sir, i have conversations on a regular basis with republicans and democrats. but i don't convene the housed and the senate. and i'm not a principal in the negotiations nor are my staff. >> okay. i wrote to you in december

asking you to explain why congress didn't receive the fiscal year 2009 comprehensive error rate testing report or cert as it's called. and that report was supposed to be out in november. the annual report shows national payment error rates for medicare fee for service program. this report shows improper payment rates for each type of provider like hospitals or dme suppliers and congress relies on this report to evaluate how well or not so well medicare is doing when making payments. i also ask you to tell me when i can expect the final report. you haven't responded to that letter. i've had before me as i always showed the senate -- or the senator for putting it in the record, cms' november presentation to committee staff on fiscal year 2009 medicare improper payment rates. each member here at the dias has copies.

everyone, i hope, would turn to page 8 of the slide. you'll see that in november 2008, the error rate for durable medical equipment was 7 3/10 report in november 2009 that number jumped to 51 9/10%. and a very significant jump. if you go to page 10, that number goes up even higher to 73%. 73% is the rate that cms got when it used the, quote-unquote, most stringent criteria for calculating the error rate. that criteria that's supposed to be using. so question number one, how do you explain sitting on these numbers especially when this country is in the midst of healthcare reform discussions regarding legislation that would delegate more authority to the department on a broad range of financing and delivery system changing and new payment models? >> well, senator, i think a couple of things. first of all, i think that we took very seriously the previous

criticisms by the inspector general that the previous administration under hhs was not being accurate about its payment rates. >> i agree with you. >> and i'm pleased to hear that. so that the change this year using the criteria that we agree should have been been used for years was a new system. i'd like to also -- i know you are well aware of this since you follow this closely but just to make this clear to other committee members. an error rate is not a fraud rate. there are different issues. it could be as little as the doctor's signature not being legible or something in the wrong column. but again we think it should be accurate. we are working diligently under this new system. we put out the global numbers in november at the time the budget was due -- i mean, at the time the report was due. we hope by the end of this week to have the underlying numbers. but this shift has not been one

that has been necessarily very quick because it's been a change through a traditional system in every single error rate. and we needed to recalculate. we wanted to get it right. we wanted to abide by what the inspector general said we should have been doing all along. and i promise it will be hand-delivered to you. but i've been told by the end of this week we should have all the underlying numbers ready to go. >> thank you. and i hope you realize 73% is still a very, very high rate of error. >> no, i understand. senator rockefeller, it's your turn. >> thank you, senator grassley. secretary sebelius, i'm glad to see you. a couple of points i'd like to make. one with respect to what senator grassley, who's my dear friend and who i said some very good things in his election years in the omaha paper. >> it wouldn't be omaha. des moines maybe. >> i was concerned about

something else. i didn't give you the proper respect. would you please respect. -- repeat it? >> no. >> the des moines register. >> we do have a good relationship. >> we do. >> but it occurs sometimes in this question of -- i think you have 70,000 employees. you have, you know, responsibility over an enormous array of things. i don't know how many letters i write you. but i often find that it's a good thing -- and so does my staff, simply to call either you in my case or in their case some of your staff people. because letters -- letters can actually be very inefficient and they take a much longer time to get over to you and then get back to you. and they have to go through a process and sometimes they're put in general language. sometimes just a phone call. and as you indicated, staffs

being in staffs is of what i find is the best way to try and work problems out. i'm just saying that for whatever it's worth. isn't it true that healthcare is the single -- at this particular point, the single greatest economic engine in the united states economy? that is in terms of rapidity of growth of jobs? >> i think that is an accurate statement. >> my understanding is that over the past two years, there have been 631,000 new jobs simply in the -- something called the healthcare sector. and that there have been -- in just the last month 22,000 new jobs. which is interesting because the economy isn't doing very well as has been explained and people are frustrated by that.

and we're all trying to work on how can we create more jobs. well, if we can just do healthcare reform, get it done, we will have contributed enormously to that and identity already producing an enormous number of jobs. so to me it's one of the best -- and i think that's according to the bureau of labor and statistics so i'm not doubting what they say. let me shift just a bit. there are over 100 community health centers that applied for the american recovery act. and received in my own state the applications that we had that received about a 90% score on their proposals for facilities and investment program, which is fip.

but they were left unfunded due to funding limitations. now, you talk about the important link between healthcare investments and economic growth. don't you think it's also possible that if the -- if we come back with the jobs program -- i mean, these are very important -- it's like health service corps people. if you don't have them, you suffer. if you do have them, your people particularly in rural areas, which iowa and west virginia have a great number of gain enormously. that if there are shovel-ready projects. and i'm thinking right now again of community health centers -- that if we get some more money for that, that it would be possible to do more with that particularly with people who score 90% or over on your own criteria? >> well, as you know, senator,

it was the recovery act provided a major investment at community health centers and they were wildly oversubscribed by terribly, i think, beneficial projects that just weren't able to be funded based on the amount of money available. but no question having a health center that produces workers in that area and they operate as a community center often and have a huge beneficial effect on neighborhood well-being, on workers and on jobs. and it's a construction project and then a long-term service project. so we appreciate the continued investment in the 2011 budget. i think it is definitely a jobs program. that also yields better health results for the communities in which they are located. 20 million americans have low cost, preventive healthcare for

themselves and their families based on these community health centers. and often the strain on hospitals and community hospitals is reduced as a result because people are accessing health providers sort of more appropriately and actually getting help through a health center. so i think it has lots of beneficial ramifications. >> good. my time is up for a moment. >> thank you, senator rockefeller. senator wyden is next. >> thank you, senator grassley. and welcome, secretary sebelius. secretary sebelius, we're obviously all paying attention today to the fact that the budget assumes that comprehensive health reform is enacted. and there would be savings of about $150 billion over the next decade. now, the president has said that an essential part of

comprehensive health reform is expanding consumer choice and competition. and i share the president's view. one way the president seeks to promote choice and competition is by creating a working marketplace. a set of exchanges kind of like farmers market where people could compare the various products. how would you in your view creating these health insurance exchanges contribute to the savings that are envisioned in the budget by enacting comprehensive health reform? >> well, senator, i think that having a new marketplace, as you say, with competing private sector plans, which is what is envisioned not only has a beneficial effect for individual purchasers so small business owners, self-employed americans,

others who often struggle with the high cost of care right now would have some choices, would have some options. but also i think in the long term competition holds down costs. it's a great market strategy. and if you have competition versus a monopoly you really have an opportunity for the market to work. so, you know, my experience running a state employee health plan in kansas was that we made sure that employees had at least one other choice -- at least two choices wherever they lived in the state. some were actually created by the state system to provide competition. what we found is that got us the best prices at the lowest cost. people wanted access to that pool of workers. they wanted to -- in kansas we had the largest health pool in the state. 90,000 covered. people wanted access to that and

they ended up being very competitive in terms of the prices and services that they offered. that would operate within states in multistate areas. and i think give folks choices right now that they don't have right now. >> i want to continue to work with you and the president on this as you know. my concern has been that most americans don't have choices today. and, of course, a member of congress can fire their insurance company. they can say in 2009 if you're not treating me well, i can go somewhere else in 2010 so i intend to work very closely with you and the president and chairman baucus and senator grassley on this. because there isn't a marketplace today and we need one. let me ask you if i might about another area that i know we share similar views on and that is the treatment of those who are chronically ill. the evidence shows that somewhere in the vicinity of 75%

of the healthcare budget goes for a relatively small percentage of the population, maybe 10%. there are bipartisan bills here in the senate. senator burr and i, for example, have one here. also in the house ed markey and chris smith to promote what's called independence at home. and there you would have in effect a coordinated team of practitioners who have in effect agreed to take smaller payments so it does not add to the deficit in order to give better care for people at home. you all don't of that in the budget. and i would just like to hear your thoughts about what kind of priority the independence at home effort would be for you and the department in the years ahead? ell, senator, i think that concept would be embodied in one of the health reform components in that centers for innovation, certainly one of the strategy is

that is operational in some areas and, in fact, in the northeast corner of the country we just added medicare to a provider coordinated care strategy that is under way in vermont and northern massachusetts which operates very much along that way. i think it's a huge priority. back to the state issued as a former governor, the total eligible population, those who are poor enough to qualify for medicaid and those who are old enough to qualify for medicare are again the fastest rising cost in the medicaid budget of any state operation. and often are chronically ill, often have multiple issues and states are way out ahead of the federal government right now in looking at ways to deliver better care at a much better cost and certainly the independents at home is one of the strategy is. it has a huge party for me.

>> thank >> thank you. thank you, senator. >> thank you, mr. chairman, and i would ask consent that my statement be made part of the record. thank you. madam secretary, under the president's health centers receive a increase of $290 million for the 2010 budget, which is on top of 2 billion they received in the stimulus package. in addition, as senator wyden knows, the budget assumed the health reform is passed, and that would provide mandatory and unlimited funding for key near the health centers. the president's state of the union address, he said families across america are tightening their belts making tough decisions. the federal government should do the same. how is mandatory and unlimited deficit spending for committee health centers with an additional increase of $290 million, plus on top of the $2 billion provided in a stainless package, representative of those common?

>> senator, i think the experience of health providers, patients, community leaders across america is that the investment in community health centers has been a great way to lower health care delivery costs. regardless of where they are in the country, the delivery of highly effective, preventive care at a significantly lower cost than the sword of competing system, has been proven and the ability to reach out, in this case, to lots of americans who either don't have insurance coverage at all, or who have very modest coverage. again, has been very effective in terms of preventive care delivery. so i think that the increased footprint of community health centers, working in tandem, which they do in many parts of the country, with the primary

delivery system with community hospitals, with provider groups, has been a wonderful way. whether people have insurance or not, to deliver health care at very cost effective strategy. >> i've been a supporter of the community health centers, but this seems to go quite a ways. i know that some private entities have sprung up in the meantime like cvs that are supplementing this. this seems to me to be quite a huge increase. but to move onto a little different, since i have limited time. i think your chief actuary, richard foster, said the medicare payment cuts in the senate bill could lead to as many as 20 percent of all hospitals, nursing homes, and other medicare providers to have to operate at a loss. how many jobs would be lost, if one out of every five health providers is losing money, and therefore, goes out of business? do you think that mr. foster's

analysis is correct the level of medicare cuts in the senate bill may be unsustainable? >> senator, as you know there have been lots of different analyses of the various strategies regarding medicare. i think the most obvious point about medicare right now is that it is unsustainable on its current course. is scheduled with the current situation to be totally out of funds within nine years, and those numbers change every year. so that it's clear that not doing something -- that doing something is necessary. and one of the things that i think our department took very seriously was looking at strategies for areas where we

are overpaying for various services and goods, overpaying subsidizing private insurance companies for various kinds of medicare advantage program. not taking fraud and abuse are so, which again returned by -- we have already in the less than one year that i have been at the head of hhs, we've had over $4 billion returned to the medicare trust fund, based on various kinds of settlements and fraudulent activities that we have shut down. so we are taking all of that very seriously. and i think that clearly, if you had some significant reduction in providers with the medicare system, there would be certainly job loss, but again, the most eminent loss of jobs in his 21 pay cut that is facing medicare providers if congress fixed the

sgr rate. that would be a dramatic job loss, i think, for seniors around this country. >> i've known that medicare needs more funds, and i know that $5.5 trillion that we're talking about could go to medicare to fix some of those things, and i'm hoping we will take a look at that. i also have additional questions i would like to ask him health i.t. and i'm looking for to my report on doctor gruber, who represented himself while he was making $400,000 for the department. and that didn't show up on the list that i got earlier in the year when i requested it. so i'm looking forward to the. thank you. >> thank you, mr. chairman. madam secretary, let me ask you about improper payment rates and medicaid. talk to senator grassley about that. under the president's budget, an additional $26 billion would be spent on the medicaid program,

but according to some figures i've seen as much as 10 percent of medicaid payments are improper payments, which cost taxpayers $3.6 trillion over 10 years. of course, as you know, this is a shared expense program. the state and the federal government share in that expense. i've been trying to, my staff is in trying to get from your staff since july a detailed statement about improper payment rates, and so far we've been refused that information. you may not be aware of that, so i wanted to bring that to your attention. and i'd like to ask you, would you see that that information is provided to us so we can make a better informed decision about your proposal of spending an additional $26 billion in the medicaid program? >> yes, senator, i would. i'm not specifically aware of your requests. i assure you, i will check into it.

as you know that, our department does not pay the medicaid providers directly. that really is done at the state level. the contracts are at the state level. each state has a different kind of arrangement that our medicaid program did not look like i was on nebraska's or our providers are different. one of the difficulties, senator, may be that collecting that data from 50 states around the country and updating it and making sure it is accurate maybe one of the challenges. because we don't hold that data in the department of health and human services. >> about 60%, roughly, of those our federal tax dollars. >> we pay a match. but we don't contract with the provider. >> i understand that i would think your department would have an interest in whether federal tax dollars as well state dollars are being squandered. >> senator, that is one of the efforts in the fraud and abuse area. we have a whole series of new initiatives that will be worked

out with our state partners to look at fraud and abuse and waste and air raids in the medicaid program. >> and i heard you say that earlier, and i would like to get to that in a second, but that's why we need state-by-state numbers, which is what we read requested from your agency. and would like to know whether those are robert payment rates are a writer mayors or determining eligibility. that's simpler what we want to get information. we're not reaching any judgment yet. we would like to get information and i would appreciate your commitment to get that information promptly. but i would like to talk to just a second about fraud and abuse. as a former state attorney general, i can tell you that neither the federal government or the state government, state governments have enough resources to chase the fraudsters and the people who are trying to cheat the taxpayer after the fact. and we need to do a better job i think on the front end of certifying providers could and stopping it on the front in. and i would just ask you to look

at one piece of legislation that i've introduced along with other senators called for seniors and taxpayers obligation protection act. you may be firmly with it, which does exactly that, try to stop it on the front end as opposed to chasing it on the back end. i'm not being critical of what the enforcement efforts. that's important, but i don't think you'll ever have enough resources, either at the state or federal level, to chase all the fraudsters down. i think that's why we need to start on the front and. >> senator, i absolutely agree with that. i definitely will take a look at her legislation. we have begun some new certification practices, durable medical equipment was one that we had a huge increase in some erratic buildings that we have instituted third party verification's, more provider numbers, a much tighter. but i agree, every scheme we come after the backend there

will be a new scheme at the front end. so i look forward to looking at your legislation. >> thank you very much for that. i appreciate it. you talked about the fact that medicare will become insolvent in less than a decade, and of course, that has been subject to a lot of concern by the american people as they see us spending more on programs, our failure to meet our responsibilities to deal with current unfunded liabilities. while we have heard that health care reform is entitlement reform, we know from dr. elmendorf in the congressional budget office that the health care bills, reform bills cannot be used to both pay for health reform and address the solvency of the medicare program. he said the key point is the savings to the hospital insurance trust fund under health reform would be received by the government only wants, so

they can be set aside to pay for future medicaid spending. and at the same time pay for current spending on other parts of the legislation. or on other programs. at least to dr. elmendorf's opinion, you can't double spend that money. can you talk to us about your proposals or the administration's proposals to deal with these $38 trillion in unfunded liabilities for medicare? >> senator, i think that the health reform actually does include a number of proposals, which would certainly slow the growth rate of the medicare trust fund spending without violating any of the benefits that are currently relied upon by not only seniors, but some of our most disabled citizens. and they not only look to save

money and the overall purchase of prescription drugs, they look to make sure that we are not paying for or overpaying for services and procedures that are not cost effective. they slow the growth rate by having competitive bidding in areas like durable medical equipment getting a better bang for a buck while still delivering the services to beneficiaries. but also i think there's an enormous enormous amount of health reform anticipates prevention and wellness, and having a different kind of strategy so you don't wait until a senior enters medicare and paying for acute services, but hopefully lowering the overlying -- underlying conditions for chronic disease is. >> thank you very much. >> thank you, mr. chairman. madam secretary, welcome. one of the first questions i want to ask you is regarding

lower income assistance, which is the critical program for my region, and throughout the country depending on the severe circumstances of the weather. and senator reed of rhode island and i sent a letter along with 46 other senators concerning the methodology that was used to distribute the low income fuel assistance funding, the release of the emergency funding, for example. 40 million of the 490 that was released, was set aside for heating degree days. our state received 80% less, and rhode island received 50% less, for example. on the heating degree funding, states like florida, and i understand has been unusually cold in florida this year, received 3.9 in emergency their alaska, minnesota and maine received nothing. because of the calculation of these heating degree days. so while we would have 30 days, last december, mainly have 44

times the energy required. so i'm trying to make sense of what was the methodology used in this distribution? i'm not arguing that florida and texas should never receive funding. i'm arguing the point about why there was such a radical difference in the amount of funding the cold weather states, severe cold weather state received in the release of this emergency funding. last year mainly see 29 million, this year it is formally. rhode island lost more than 50 percent of its funding. we submitted a letter to you, and i would appreciate if you have a response or today to understand why the money was distributed in this fashion. >> certainly, senator. we will get the details formula to you, but there were several factors this year that were looked at. one is the cost of heating oil is significantly lower this year

than last, which affected some of the cost in the northeast dates which rely heavily on heating oil. i think you was over $100 last year, and it was down below 80 this year. so there was a significant wave. as you've already said, some of the southern states have typically cold snaps which again, was not a factor a year ago and needed to be calculated in. and thirdly, the formula, not only included the overall look at the heating issues, but also unemployment numbers. so those three factors were the formula used this year to redistribute the fund. >> i think you would agree that is a dramatic change, given the enormous cost of heating oil that could be 50, 70, $80 a barrel as it has been this winter. and it is more than $2000 for a

season. a state has very low wages. i think that's true for a number of the states that have signed this letter as well. senators who represent those states. i hope we can have further discussion. i understand it occurred in these other states and i'd don't deny they should have received some that's not what this is all about. i want to make sure that we have a fair and equitable you know consideration during these -- especially during this very difficult time. and the fact that home heating oil is a very expensive proposition in our state were 80%, you know, depend on it, frankly. on the issue of health care, when we talk about jobs, the reverse is true as well. from what i'm hearing in my state among small business owners, very concerned about the calculation of the potential costs that could arise with health care reform. it was one of the big issues i had a number of farms in maine. and the potential to raise the

cost of doing business where they would hesitate to invest in future capital equipment or at any jobs. i heard that repeatedly. particularly talk about medicare payroll taxes, 52% increase. that was included in the legislation, including mandates. so there are a number of issues that could potentially raise the cost of doing business, and i have deep concerns that that is going to the depressed the ability of small businesses, especially to turn around the economy. we talk about those tax credits, and he are important. but it also requires small businesses to pay up front. they're going to have to lay down some money in order to get the benefit of that tax credit. they might not even be in that position. so i think that we have to look at the overall calculation and all of this. there are some things that we could do short of this comprehensive reform immediately on legislation. senator lincoln and i have introduced on small business

exchange, along with senator durbin. i person basis. it would help to open the doors to small businesses. that should've been done long ago. but i also think we have to calculate what is the impact of health care reform as it's already been designed on small businesses and the potential to lose jobs as well. >> senator lincoln? madam secretary, do you wish to respond? senator snowe's time has expired but it's only fair for you to have an opportunity to briefly respond. >> no, i think the jobs calculation for small business owners issued. as you know, i did a couple of forums in maine, heard from some of your constituents directly. i do think that the low, the lens as you know the small business tax credits in both the senate and house bill would kick in in 2010.

they would then be a more affordable market down the road. there would be fixes in the system along the way. so at least while i think it's always important to look at the impact, i think there's no question that the group being squeezed in the current health care marketplace is often self-employed, and small business owners who have no choices, higher prices, and fewer options, and often lose employees based on the fact that they can't keep them a. >> thank you very much. senator lincoln? >> thank you, mr. chairman. i want to thank my colleagues from me for bringing that issue a because i do believe the largest percentage of the uninsured do fall into that category of small businesses. self-employed, independent contractors, and i think it's a great step forward in terms of what we could do that would be meaningful in this overall health care debate and i certainly enjoyed working with her. she does a great job. just a couple of questions i'd like to throw out, and maybe you

can answer them. i think i have about four here. i just want to touch on the technological divide between rural and urban america. in your original federal register notice on health i.t., you're going to fund world stage, those with underserved areas and those who need to catch up. unfortunately, in your funny for health information exchanges and other grants like the beacon community grants, it appears the funding is on a per person ratio. or funding committees that are more advanced in their implementation. problem with that is we never get started in world america. and so i would just like to see some assurances that the health information technology is going to be available to all americans, particularly rural citizens like those in my state and making sure the digital divide does not contribute to the increasing health disparities that exist in world america between rural and urban citizens. so i hope that you all will focus on that and help us in terms of making sure that everyone is going to have a fair

shot at that help i.t. the older americans act, it's the nutrition programs were provided with an urgently needed 100 million under the recovery act. however, the budget, the fy 2011 budget only totals about 8 million my concern is that recovery funds that are going to be expended, and questioning why the elderly nutrition programs are not included in the recovery extensions in the president's budget. i think that something important to focus on. the elderly are one of our most vulnerable groups. i was pleased to senator wyden bring up coordination of care and all of those different efforts. hoping that you can elaborate a little bit on the coordination of care demonstrations. i've been working very diligently on those over the past several years, and understand the importance that that place in us getting the biggest bang for about. but also getting better

outcomes, particularly in medicare. one of the thing was that the department released a draft of the healthy people's 2020 report. in its 216 pages, it contained 556 objectives which is great, we're glad we're focusing on so many things. but i was a little bit concerned or disappointed i suppose in the worst alzheimer's or dementia were never mentioned. of the top 10 causes of death in the united states, alzheimer's disease is one of the only one of the 10 without it's own topic area in the draft report. and noting it affects about 5.3 million americans with the number expected to rise by mid century to as many as 16 million americans, it is certainly a growing public health crisis. and i hope that you can look at the possibilities of perhaps before the publications, final report looking at additions that could at least include a separate topic area perhaps on

alzheimer's disease, just as the other top 10 causes have in that report. i think it would be a very strong message that we are focused on that in this country. and in the last would be that medicare extenders, i want to compliment the chairman for working with is on the medicare extenders and these different issues that obviously we feel like going to fall off the edge of the cliff, whether there be caps, physical therapy, physical speech occupational, the pathologist also, i think ambulance, rural hospitals and others. i know that you and i visited on the phone about that, and understand your position, but if the administration does not have the legal authority to extend those policies, what do you believe you can do to be helpful to us if, in fact, we can get those move down the road? how can we be helpful to those providers? that's a lot but i just want to get that out there in any of that you can jump on would be great. >> let me assure you that health

i.t. has a variety of strategies. looking at different areas, but the health extension offices, which will be established throughout the country, are very much focused on underserved areas, are very much focused on assets that need to be brought in. and that really is their primary objective, is to make sure that they are not sort of forgotten areas of the country, forgotten providers, smaller hospitals, smaller provider groups. so that footprint is very much aimed at that. i know that there is some concern that the nutrition aid for older americans is not enhance along with some others. i would say that there are a variety of new strategies for older americans, but including the caregiver strategy and others that have new funding in the budget, but i hear your concerns at this tough time, that we need to keep, you know,

seniors who rely on those programs in our sights. in terms of 2020, what i'd love to do, i mean, i would carry that suggestion to doctor howard company, and actually have him follow up with you about that. i think that is one that is very appropriate, too. is much more intimately involved with those 500 recommendations that i am, and i think this is a great time to provide that input. the medicare extenders, as i've suggested, senator, we do not feel we have the administrative flexibility to merely push them down the line. as we talked about, there are strategies about holding bills but that can only be done for a period of time. i assume that eventually, if it's fixed legislatively, we can do some retroactive repayment, but at this point we don't -- our general counsel has looked at this very carefully and feels that we really would be in violation of the law if we just

ignore what the deadlines are for those. >> thank you very much senator. i think we're putting therapy caps in the extenders package. >> you have done wonderful. >> that's what i understand. >> i think that will be in the legislation. >> thank you, mr. chairman, very much and welcome, madam secretary. and thank you for your leadership on health care and health insurance reform. first, just a comment, and thank you to the chairman for working hard on helping to change the way we pay physicians through what's been dubbed the sgr. i know we will be doing something there, which is very important, and wanted to just argue, madam secretary, this payment system, it doesn't work. i was pleased to offer the legislation to repeal it. i still believe we need to do that, and i hope the administration will work with us long-term to do that.

i appreciate your efforts to take the cost of prescription drugs out of that corner, which was a very important first step, but i'm hopeful that you will, as well, look for other ways in which you can fundamentally change that. we change the incentiveincentives and health reform, and if we're able to move that forward am i think it is one of the positive things in there. but i would just urge you to continue to work with us. >> look forward to it. and as you know, better than many, given your long efforts in this area, the uncertainty for providers, and for patients, about the future of their medical care is really undermines the confidence and a great health care system. and i really look forward to a long-term fix to making sure that we can live up to the trust that we have committed to, medicare beneficiaries, that they will have a provider, they will have services delivered. >> thank you. we need to get that done. wanted to speak about and ask

you about graduate medical education, which we know is so important. we need to get more students, more physicians into primary care, and of course, again, that's another focus of what we've been working on with health care reform. and we know there is a broad primary care crisis. what i do want to know that we have hospitals that want to train more physicians, in michigan, in my state, i know in maine, in florida and other places. but they've been frustrated by cms regulation on new residency programs and medicare's, graduate medical education program. unfortunately, it was the process was changed. i'm sure you're aware of this, but originally and a balanced budget act of 1997, there was concern expressed about flexibility and hospitals moving forward. they were going to expand the

residency programs. and cms initially allowed hospitals to qualify for residency slots under a cap when they created new programs. and they defined the pro-grams that would receive an initial accreditation picker was a very straightforward process, hospitals move forward and so on. and then in august of 2008, there was a new regulation. . . and unfortunately, this is resulted in revoking funding for programs that today, you know, are ready, willing, and able to go forward to be able to train our primary care physicians. and, in fact, we have programs in michigan that -- who may close as a result of the lack of funding. and so given the fact that we need more physicians, we need more primary care physicians as we know. know, i'm if you would

asking if you would work with us to address this change that was made over a year ago. and be able to allow hospitals to proceed to do what they had been authorized to do. >> well, senator, i would look forward to -- august 2008 was a bit before my time. >> i'm aware. >> the new team's time. but i'd can glad to go back and revisit that and actually take a look at that with your staff. absolutely. >> thank you. and then finally i would just briefly urge and ask about your focus on mental health services. i felt that one of the positive things that we have done in crafting our health reform initiative was to include mental health. >> you bet. >> and substance abuse services both? definitions on chronic care and prevention and so on and we are seeing states making drastic cuts in mental health services. so i'm wondering what areas of

the president's budget would improve or expand on these critical healthcare services? >> well, actually there's -- the new regulations for the wellstone parity act are now out. and we look forward to making sure that they are enforced around the country. and that certainly is as a result of a lot of good effort. we have a wonderful new administrator in the substance abuse and mental health services area. pam hyde, who comes with private sector and public sector experience in various parts of the country. and has already engaged in lots of across-government efforts. we're working with the defense department on homelessness for veterans. we're working with the department of housing on chronically homeless kids. we are looking at substance abuse services as critical in prevention. there's some exciting new studies about the ability to actually prevent mental illness

and work on this and preventive care. so there are actually investments in the 2011 budget which add behavioral health services to a number of community health clinics which had no mental health services in the past but now will have an infusion of investment to make sure that along with primary care there'll be behavioral health services available, more mental health professionals. so we're looking at areas across the -- our agency and across the government where we can actually make sure that mental health isn't a silo off to the side but it's part of the whole look at healthcare moving forward. and a much more holistic approach. we've got a significant dialog underway with the agency for children and families knowing that, you know, a lot of the prevention of substance abuse really starts at a very young age. in making sure that we have those services available at head

start and early head start programs also. >> thank you. thank you, mr. chairman. >> thank you. madam secretary, there's a lot of concern about fraud, medicare and medicaid and other programs administered by hhs. i think you'd agree are intuitive sense is that a lot of those allegations are probably true. there is a lot of waste under the headline of fraud. we just don't stop. and senator lemieux came to me with an interesting idea. he's pretty concerned about waste and fraud if florida. -- in florida and in the country generally. and i remember a couple three months ago we were looking at home healthcare outlier percentage in florida and some of these counties are way, way

above the cap of the seniors in those same counties. what his idea is this. maybe we could take a page from credit card companies. as we know, if the credit card companies have put together these very sophisticated mathematical algorithms, about their credit card holders, just like google does. google knows what books you buy and wants you to buy similar books based upon your purchasing matter. but the thought that senator lemieux had, just as a credit card company will notify you as a credit card holder, if there's some charge that's an outlier, you know, you say some charge made down in brazil, and you're not in brazil. >> and i was here. >> and you were here. and they call you up. did you make this charge?

is this something you bought. it's authorized or not authorized and they know because they have pretty sophisticated computer systems. maybe we could do some of this in medicare and medicaid and some of the programs. now, that gets into prompt payment -- how long does it take for a provider to be reimbursed and so forth on the surface it has some appeal. senator lemieux talked to the credit card company to find out how that might work here. and often it is -- it's the private sector that comes up with pretty efficient ways of doing things. after all they got the bottom line to worry about. they got to compete. so i just -- i update that you've given a lot of thought to that. maybe you have. but anyway, i was kind of intrigued with his idea. and any comments? >> well, actually i had a conversation with senator lemieux about this notion recently because as know we set

up our second strike force in florida. and it is a hot bed of activities. but i think it has some real interest. we have asked our folks -- he has a piece of legislation to have some conversations with him. but i think the kind of real time data-sharing that he's talking about, looking at abrant patterns, the way they identify these things in a credit card if, you know, 90% of my charges are from washington, d.c. and suddenly something shows up or i've never been abroad and something shows up, they flag it. that's exactly what we're trying to do. with sharing data with the justice department, watching billing patterns. in florida, senator, just, for instance, 10% of the patients getting home healthcare live in the state of florida. 95% of the patients who have $100,000 or more in billing of home healthcare live in florida.

so we match those quickly and kind of went after it. but that's exactly the kind of -- i hope to learn what the credit cards are doing. >> i encourage you to pursue this aggressively. >> yes, absolutely. >> i don't want to be corny about this but we're talking about taxpayers money here. >> you bet. >> you can stop a lot of this where it will enhance the credibility of the program. >> and getting out in front of it is absolutely right. yeah. pay and chase is not as effective as trying to stop it in the first place. >> find new ways -- >> right. >> to cut and run. >> right. >> basically, could you outline for us -- remind us with some of the early deliverables would be of healthcare reform -- it will not go in effect that's not passed for several years. would you outline some of the fancy terms early deliverables?

>> well, assuming the passage of health reform soon in the year 2010 it's anticipated that we would have states put together high risk pools to provide affordable coverage for the really uninsured chronically ill folks. often who don't have coverage at all right now. a number of the significant insurance reforms would occur. so people would not any longer be able to eliminate insurance recovery with children with preexisting conditions. they'd have to be covered. you'd have to remove the payment caps that currently interinterrupt cancer treatments and chronically services for people who have insurance coverage. children could stay on their parents policies the 20-somethings -- i got to tell you as a mom of a 25-year-old that's really interesting to me. until 26 or 27 you could be

covered as a dependent under your parents coverage. we would begin medical loss ratios on insurance coverage. and how much is going to overhead and ceo profits which right now is enable to be determined. so preventive care would cease having co-pays right away in 2010. >> so there's significant early deliverables here? >> absolutely. and the fraud and abuse would start right away to really crack down on the system. >> thank you much. senator carper? welcome to the committee. >> it's good to be here. i apologize for arriving late. >> i love to have you here. >> i had the pleasure to welcoming on delaware on monday a number of high school students, exchange students from countries all over the world. i was struck -- we basically had a q & a session in the state

senate of our legislature, legislative hall in dover. one of the issues we got into was healthcare. and they were curious about healthcare and healthcare reform and curious as to why we spend so much more money than any other country. their curious as to why we don't get better results. and there are three students there from japan. a couple from okinawa. and they said basically we spend half as much as you do -- i think we spend 16% of g.d.p. in japan they spend 8%. according to different kind of measurements that we have for wellness, healthiness life expectancy, they actually beat us hands down. and they spent half as much and they covered it everybody. they don't do it through a socialist system. they have private insurance companies. they have private providers. but i was struck by that conversation. today when i come down to

washington on the train as i do almost every morning of the week, the train goes by in newark, delaware, almost just before you hit the maryland line there's a big chrysler plant. well, it used to be a chrysler plant. it's closed. and where 4,000 people used to work every day. today nobody works there. at a day and age when we're really concerned about trying to make sure people have jobs,s loss of manufacturing jobs from this country, can you help us -- you may have already done this but i'm going to ask you do it again. just connect the dots for us here. why is affordable healthcare, quality healthcare -- why -- how does it connect with the need to create jobs maintained and create a nurturing job environment for creation. >> there's no question we spend almost twice as much and get worse health results than any other developed nation.

and part of it is we continue to pay more than anybody in the world for health issues that really don't result in people being healthier. so we overpay for products and services. we pay for procedures and not for quality outcome, which encourages, i think, more testing, more protocol, sometimes people would suggest even more hospitalizations but not necessarily keeping people well in the first place. we've not invested as many have in health and wellness. and a large part of that health and wellness is a huge gap in who has access to preventive health services, a health home follow-up care so that when we have 46 million americans without health insurance at all, they enter the health system in more serious shape, in more chronic conditions and use often emergency rooms as the least

effective, most expensive way to get healthcare treatment. you know, some of it clearly has to do with diet. we don't eat nearly as much tuna as the japanese. and that would probably make all of us a little healthier. but the jobs, i think, are directly related because our manufacturing sector has been the first to be absolutely uncompetitive in a global marketplace when chrysler was competing with companies around the world who were not layering $3,000 on healthcare costs that were sold or not trying to compete. so we have to get to a strategy where we have a healthier nation. and a more equitable share of health expenses paying for outcomes and quality and finding ways to lower the deficit in the long run which will make us not only healthier and more prosperous but certainly nor and he have. -- competitive.

>> i think i shared this, i held a number of town hall meetings differently than i did before. we did telephone town hall meetings. the first one we had 4,000 people on the call and the second was 6,000 people and i was struck by the hunger of the people in my state, what was really going. what we were doing. one of the aspects of the legislation that we're passing is something that's designed to help better ensure that we go after fraud particularly with respect to medicare and to medicaid. there's a provision in our bill supported certainly by senator baucus by senator wyden and all my colleagues. we need to incentivize the states and previously the states had 60 days to identify fraud to collect the money and turn it over to the federal government. as a result, they did almost none of it. they couldn't do it all in 60 days, a few of them could, they just let it go. and what we're doing -- under the legislation we change you have a year to go after the

money and split it with the federal government. that's under the legislation that the senate passed. you have in the administration budget about a $250 million increase of additional resources to fight waste and abuse in medicare and medicaid. would you talk a little bit about that. we know it's huge out there and i think we're using private contractors to go out and recover at least in three states in the last couple of years money fraudulently taken out of medicare. we recovered i'm sure $700 million last year and we're taking it to all 50 states. can you talk about all these resources and the partnership with the private sector will help us get back more money? >> well, senator, the president, i think, takes very seriously that we be good stewards of taxpayer dollars. and certainly anyone stealing out of medicare or stealing from the state partnership with medicaid is stealing taxpayer dollars and jeopardizing the trust we have with seniors. so this budget has an 80% increase in resources. new data systems, new sharing with the justice department, the

attorney general and i at the president's request are now leading a joint justice, hhs effort where we now have strike forces in seven different cities to try and not only send a very strong signal that we take this very seriously but have been enormously effective so far. this will give us a much bigger footprint around the country. i was sharing with chairman baucus, can share data real time watching aberrant billing practices and go after the state partnership at the medicaid level knowing having the footprints on the grounds and u.s. attorneys as well as the state attorney general who can be very aggressive partners in pursuing fraud is all to the good. and we know that there's a huge return. it's estimated to be anywhere from $2 back for every dollar we spent to $4 back, which is what the attorney general says to every dollar we spend. and so this is money that not

only make sure medicare and medicaid will be there long term but also allows us to prosecute the criminals. and prevent fraud in the first place. >> uh-huh. one of the things that i always been fascinated with my colleagues have heard me say this before, how do we harness economic forces, how do we harness market forces to drive good behavior and the thing is the medicare deal. before now, really even now under current because we haven't passed a senate-passed bill, even now states aren't going after -- >> you want to give senator wyden a chance. senator wyden is being very gracious to let you proceed. >> private citizens healthcare providers are required to report fraud. they don't have to. they are encouraged -- one thing i'd like for us to think about incentivizing behavior.

rather than just saying we encourage you to report, why don't we say maybe we want you to report -- you're expected and required. if you do just like we do with whistle blowers now we incentivize them and allow them to keep some percentage of whatever is recovered. we may want to do that in terms of people who blow the whistle in medicare fair and make sure we incentivize them and they'll benefit from that financially. >> senator, i think that's a great idea and we'll take a look at it. we have a great sort of seniors army that train volunteers to go then to their friends at meal sites and neighborhoods and they have become a tremendous sort of strike force. we figure we got 20 million undercover cops on the ground. and if there's anybody who takes stealing from medicare seriously, it's those medicare beneficiaries who are very aggressive in their efforts. and that's been a huge help to tipping us off to bad billing practices. to fraudulent activities to

people who would steal ids, a whole host of issues. >> good. keep it up. mr. chairman, thank you. senator wyden, thanks for your patience with me. thanks. >> thank you, mr. chairman it's been a very good hearing. we've gotten a lot out of it. >> we're going to do more. >> absolutely. and i'll be here with you. thank you. madam secretary, i want to ask you about one other area. and that is that an enormous amount of expense and frustration for the millions of people who use our healthcare system, especially, in the providers and the patience, is the staggering array of different billing systems that we have for american healthcare. and as you know, getting a standardized billing system has almost been the longest running battle since the trojan war. i was actually reading some history on this recently.

this is what lu-sullivan a wonderful physician wanted to get done and here we are practically aeons later and we are still wrestling with this. i think it would be very helpful if you would do two things. one, give us an update on where we are at this point. getting a standardized billing process. and second, i'm curious whether you all and your staff were taking a look at some of the efforts around the country that looked like they are bearing fruit. the one that i've been interested in is minnesota. minnesota seems to have come up with a standardized billing process and then it limits the insurance companies from coming up with sort of exceptions, which invariably jack up the rates and make things more complicated.

start if you would by giving us almost a state of where we are, 2010, on getting a standardized billing process so that we end this bureaucratic water torture for the providers and the patients who constantly tell us about all these forms and different paper and the like. where are we today? >> well, senator, i think the good news is that there's administrative simplification in the senate and the health reform bills which i would suggest will greatly accelerate progress in this area. absent some kind of a lever, it is a difficult task. it's one that i know personally well because i worked on it in kansas. i think i'm safe in saying that kansas now, like minnesota, is about to have a uniformed billing system. but it is not an easy -- everybody is fine with doing it.

once it comes to the table to talk about it -- as long as you use their system. and as soon as you begin to deviate a little bit -- i am convinced that it's a huge cost-saver. and a huge, as you say, torture-saver for providers and patients. and one that we have been anticipating implementing through the health reform strategy because i think that gives leverage to then have a congressional mandate and follow-ups and make sure we can get the providers -- you need the providers and the payers at the table simultaneously to figure out the strategy of timetables that work. but it's something that i take very seriously and really leader board to working with you to implement. >> i think the provisions in the legislation -- both the bills are good. but what concerns me is that the absent the kind of leadership

you're talking about, will take another 8, 10 years just working through those models. and somebody else will be in your seat and will ask almost the same question. >> we don't intend to take nearly that long, senator. >> i like that part. >> the states are well ahead. >> i like that part. thank you, mr. chairman. >> thank you, senator. it's true we heard all the time as do you, all the paperwork, all the forms, it's a mess. i remember as early '90s, during the last healthcare reform era, i just happened to go to a montana hospital. with you floor is filled with people doing paperwork. i went up to canada to look around. at the edmondson hospital. there are three people in the whole hospital, much larger than the montana hospital, doing paperwork. three people. that's all there was.

and we all know about the administrative costs in the american system. how much higher it is than in other countries. i urge you to this -- you saw this thing. so once and for all we're not talking about this all the time. and you said states are doing much better. you'll find the state doing the best job are doing and clearly we have to pass healthcare reform to make this happen. because once healthcare reform is passed it will force more simplification because it will force healthcare companies -- they won't have quite as many different alternatives and co-pays and deductibles and preexisting conditions and all that stuff, frankly. so i really urge you to just light a fire under people. and you just lower the boom to get this done 'cause we know how bad it is. we know the american people are fed up with it. and rightly so. it's basically the question that senator wyden just asked.

so i would urge you in the strongest terms possible to get this done. we want to work with you. this is a shared effort. >> i appreciate that. >> but we need together to get it done. >> you bet. >> you need to tell us what you need. whether it's legislation. i strongly urge you to do that. now, i think we're getting healthcare reform passed. i'm very confident we're going to pass healthcare reform this year. but i'm going to ask you this. if you could say off a biannual basis to give us a progress report on standardizing forms and getting rid of a lot of this paperwork would make a huge difference -- and the point is not to put you on the spot. the point is to let us know what the progress so that together we can jointly solve this. >> senator, i think you made a big step. i mean, one is paperwork.

and one is the numerous forms. so electronic health records and standardization as you launched in the recovery act will go a huge way down to eliminating a lot of the paperwork and standardizing operations and driving protocol but that doesn't get rid of the 15 different. so you fill them out electronically it drives providers crazy. so we got to do both simultaneously. >> i personally want you to quantify it. one of the major drivers in getting results is quantified benchmarks, standards, quantifying numbers, how many forms, how many lines. that kind of thing. >> a lot of. 30 cents out of every dollar we figure is in overhead cost. >> i urge you to get back to us and what your plan is and the benchmarks and the progress you are making and not making 'cause it's something we need to do. >> yes, sir. >> thank you.

second, the same is waste, fraud and abuse. a lot of questions here have been about waste. about fraud, about abuse. so i would like you to again in a biannual basis to quantify, your best guess, what the waste is and all the programs in your jurisdiction. what the fraud is. and where -- and i don't know how you quantify abuse. you have to quantify it in the number of dollars. again, we work together as we get improvement. i'd like you also to give us a goal. zero is unattainable. but if you could give us a goal, you know, what percent by what date in benchmarks because that's how we're going to get results around here. that's one thing to talk about things. it's something else to quantify it with numbers.