shot blocker in s.e.c. history, in nca history. and his ball dogs stay alive -- bulldogs stay alive! we're back with more after this. >> i've heard a lot of different things about my health and, you know, you took yourself out of the game, that last game because

you wasn't healthy or nothing, just made. . >> live from the comcast sportsnet studio, this is geico sports night. >> breaking news at this hour, the washington post is reporting there's a buy out of the washington wizards. an official announcement is expected to come tomorrow. >> and yet, another player comes to dc and never plays a game. >> hello, everyone, i'm rust tailor. >> and i'm michael jenkins. >> we're going to begin with the

wizards and. >> later, off another steal with a clean pass for the emphatic throw down with a throw after 1. that comes washington. >> strong drive, he throws it down over fender, one more look, young getting high and putting it down. the wizardses goes down by 7. later, the defense creating the wizards, james singleton coming up with the block, in transition for a couple, part of a 12-1 wizardses run, washington up 2 at the break. wizards keeping up pressure at the second half. behind the back to mike miller for the transition layup. washington still in front by 3, but memphis response, check out the nice crossand up and under move by oj mayo, part of the 12-2 run with the grizzlies up

by 10. later in the 4th, adds insult to injury. randolph, knocks down the trade to the corner, the grizzlies hold on 99-94. >> overall, the effort was good. i think considering everything, this team is a great rebounding team, led for most of the game until we went for that stretch in the fourth quarter where we were 1 for 10 to start the fourth quarter and there were so many defensive rebounds. we had a good effort, good solid effort. still to come, chris miller has an exclusive interview with his son, and he shares the controversy.

. >> yesterday's bullpen session creating the buzz in florida. throwing to pudge rodriguez, remember he sat back and watched during the first bullpen session on sunday. first started spring strang for march 9. he told tom wos well of the washington post, he reminded him of noel an ryan. he called it off the charts good. of course, there are other players on the nationals as well. roger morgan is one, and he injected life to the clubhouse. since the trade from pittsburgh, also took a rather unusual path to the big leagues, with a background in hockey. morgan was excited about the team u.s.a. win over canada on monday. he's been letting canadian team mate pete oher have it ever since. >>reporter: so what did you

think of this last round between u.s.a. and canada. >> no comment, i'll leave it alone. i've already been busting pete up pretty good so i'll leave it alone. >>reporter: are you excited? do you think they have a shot at gold. >> very excited. i used to play ryan miller when he was living in california at the time, because he was originally from michigan, so -- and basically, ever since then, i've just kind of been rooting for the guys. go on, rock on, brother. >>reporter: what was your position in hockey then. >> i started off as a defense men and when i moved to canada, since i was always rushing they moved me up. >>reporter: give me the story. i don't know this. >> you don't? >>reporter: no. >> dang, yeah, i moved up to canada, at the age of with the brenden vipe hockey, and very, very, ve

taller, so i kind of figured you know, maybe i should get down to this. >>reporter: so the parents, everybody moves from canada. >> yeah, from myself, been on my own since 16. >>reporter: what about school? what did you do? >> got my visa, went to school up there, just like a lot of players that come here and get their working visas and school visas, i did that in canada for four years. >>reporter: all in dreams of making it to the nhl. >> yeah, but i was still playing baseball at the time too. spring time roll around, i play baseball.

>> well, the result in and of itself wasn't that much of a shock, but the final score and the way this thing played out certainly was, canada just crushes russia tonight. the russians going down 7-3, cory perry with a couple goals for the canadians. scary moment in the third, trying to knock down a pass, skating off the ice in obvious pain. he came back and was already. canada now faces the winner of sweden and slovacia in the semifinal on friday. in another quarter final, earlier today, team u.s.a. on into the semis thanks to a 2-0 win over switzerland. the first american olympic shut out since mike richter did it in 2002. parisa scored the goal and the

poise stands out most to him. >> we don't get frustrated and tonight like i said is a perfect example of where a team is now scoring, hitting some posts, power play is not going great, and that's easy to get frustrated, and we did a good job of proving that we're able to be patient and take what's given to us. >> all right. next up for team u.s.a., the winner of finland and the czec republic friday night. earlier tonight, giving us his take on the win for the us as well as their chances for gold. >>reporter: a positive for team u.s.a.. they didn't have to lean on ryan miller to bail them out. in fact, they brought about 27 shots in front of ryan miller before the shots got through to the goal tender. the negative, they've got it get more goal scoring up front. zach had the goals, including the empty netter, but need more from cane, langen bruner and others. this is the down fall of the

u.s.a. team. they don't have a lot of natural fire power and that could come up to haunt them, no matter who they play, the fins or the czecks in the final game. a positive note, i think miller is the best goal tender in the tournament. that's why team u.s.a. still very much alive for gold medal in these olympics. >> the washington capitals on the ice today. less than a week now before the team with the best record in the nhl begins their stanley cub run towards the nhl play offs. here's lisa hillary. >>reporter: the washington capitals resumed practice on wednesday, minus a few key teammates who are still in

to come on this edition of geico sports night. . >> are you upset for gilbert's nonapologetic attitude. >> of course it's both. >> just a taste of chris miller's sit down interview with robert polen. we'll hear it when geico sports night returns. st: switto greave % oron insu f d thman fir st: switto greave % oron insu ♪weet knoat mont whatcoulask ong

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the subsequent, i guess for lack of a better term, nonapologetic attitude that he had, which led to his suspension by the commission. >> yeah, of course it's both, i mean, you know, gilbert committed a felony, even if he hadn't -- he did apologize, but he didn't mean it. now, i think he does mean it. but he did commit a felony. if somebody did that in another

workplace, and they weren't a celebrity, they would have been, you know, charged with a felony, and that's what gilbert deserves, and he has acknowledged that. on top of that with the business in philadelphia with mocking the whole thing when it was so over the top, it was devastating to myself and my family, especially given my father's own record. my father was a very generous and socially committed person around a lot of things, but on this one thing, he literally changed the name of the team to -- as a statement against gun violence. how many people do such things? he did it. and then on top of that, to have gilbert, okay, he did a very bad thing, and then to make a mockery of it, and i think -- i think he's learned his lesson and is ready to become a responsible citizen. >> after the philadelphia did

the photo in philadelphia, what was your mother's reaction and your reaction to it? >> i remember seeing i was actually at my parents house, and i remember her looking at the paper with that gigantic picture, and she said, can you believe this? i said, what? i actually was blushing, i actually didn't look at it carefully. i thought it was just, you know, celebrating, but then i was on the metro and i saw people reading it and i'm going, oh, my god, how could he possibly behave that way, so it was, at that point, there was obviously no choice, and we were in touch with the nba, david stern, and we were going to take action that day, but he said, i'll take action that day. >> the organization took down his likeness, took down his merchandise ice for people to sell. what was the thinking behind that at the time, and will that continue until there is some resolution until he comes back.

>> you know, he's awaiting sentencing on march 26, and i think we'll have a clearer sense of where things stand at that point. i mean, let's face it, gilbert is a fabulous basketball player. >> gilbert, for the win. yeah, he won, he is amazing! >> an incredibly exciting basketball player. we wouldn't have signed him to the contract we did if we didn't have very high expectations for gilbert, and the best outcome would be if he's a great player again on this floor, and let's see if that can all come together. we need him to act as a mature adult, and we need some evidence that he's ready to do that, and there is some. let's wait and see over the next month or so. >> we had a great career in philadelphia but those days are

over. hear from fallen eagle brian westbrook on his next move in the nfl after the break. ifd buerengin a c. u coly ne o. ich uld ve?sy, h, mour - uhy mo ur mlite oh. mbli how s thf? ou le ta offbeermuch ll, uld. whate taabouknow

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over. any truth to that rumor? >> no, you know, i've heard a lot of different things about my health and, you know, you took yourself out of the game, that last game because you weren't healthy enough and a lot of different people, especially in philadelphia, just made up lies on me. and that's my experience, in my opinion, to boost their ratings, but they're all lies. i didn't take myself out of that last game. i was willing to play, and i wanted to play. it just wasn't in the plans for me that day to play, and nothing about my health will stop me from playing at this point, and didn't stop me from playing in that last game. coach had a game plan, he went in and executed the game plan and used the players he wanted to execute that game plan. >> the wizards lighting a bottle found its way out tonight. falling to the grizzlies at home.

going back to verizon center and checking in with chris miller with the post-game wrap up. >>reporter: for the youngest team in the nba, the memphis grizzlies could have gone one or two ways after the heart-breaking loss to the los angeles lakers on tuesday night. instead, they answered the bill, dominating the wizards in the points in the paint department, 58-48. >> that's their strengths. that's what they do. that's their strengths and leading the league as far as the points in the paint, and the first (indiscernible). >> came out and played hard with intensity and made mistakes on defense. can't let a team like that get to the rim at will, you know, and get layups. >> they were taking shots and i was tipping them instead of grabbing them. that's pretty much what helped them out. if they had second hand shots it would have been a different

game. >>reporter: in the second, he would key up, scoring 15 of his 17. >> we just picked our intensity up. he came in and gave us a lift, and he kind of pushed us into what we needed to do, and we played like we were supposed to at that point. >> you really just didn't know what to expect, having jameson, ca-ron and gilbert out. it was a little difficult for us in the first half. we felt we didn't play good at all and were only down one point so we wantd to make a concerted effort in the second half to come out with a lot of energy and do what we do well, rebound, run, and just play well together. >> while one streak continues, another ends. the wizards four-game streak of scoring 100 points or more is over. as for the grizzlies four-game winning streak against the wizardses, it's the longest

active winning streak against any team in the nba. at the verizon center, chris milli, comcast sportsnet. >> thanks, chris, and we'll right back to wrap up this edition.

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>> you're watching comcast sportsnet. >> text wpl and your comments to 68683 and you can see your comments on tv tonight on washington post live in mere moments. standard text rates apply. thanks for being with us tonight. i'm russ tailor and i'm michael jenkins. >> back at 1 a.m. enjoy.

different insurance companies and the people on the exchange so you could choose between competition between different insurance companies and they couldn't exclude you were your kids because of a pre-existing condition due to think that would help you with your insurance trusts? mr. arnold? >> it sounds like it might, yes. >> ms. henriksen? >> yes. i believe that it's free enterprise i guess, and you are allowed the privilege of shopping for almost anything else. why shouldn't it be insurance, too. >> ms. meister? >> we are penalized for individuals having individual plans. >> and you know, ms. meister, i want to ask you about something because you said you thought it was a good idea if the extended medicare don't age 55, and with every passing year that the idea sounds better to me, too. what were you aware of those proposals just didn't say we are going to pay for people to have

medicare, the option to have to body in? and you would be willing to buy into medicare is what you're saying. >> absolutely. >> i just wanted to clarify that. i want to export one more thing with three of you because i think that there has been some miscommunication about insurance companies selling insurance across state lines. were you aware right now insurance companies can sell insurance companies across the state lines but if they do that they have to comply with the wall of the state they are selling that? mr. arnold were you aware? >> i wasn't. >> is henriksen? >> i wasn't either. >> meese meister? >> nope. >> trustees states like california, colorado, iowa, georgia, they can sell insurance across the state lines but if they do that they have to give people the insurance coverage those states require so if

california says you have to cover maternity benefits were prostate cancer screening or something else then they have to do that. the proposals come from the other side of the aisle have made is to say people could sell insurance across the state lines but they would only have to comply with front lobby of the state where they are incorporated. it would be like how a lot of corporations incorporated delaware because those are very favorable to the corporations so they could incorporate in a state which is very low requirements for coverage and i want to talk to you about that, ms. henriksen, because you have two kids. would it help you to be able to buy a low-cost plan but one that didn't offer a very minute coverage is for you like mammography or screenings for your kid, would that help you?

>> i guess i would have to see specifically -- >> what it was. >> -- but we are so lucky all three of us to be healthy to be. we never go to the doctor. we have very little costs incurred through insurance. so it would be interesting to see what i could eliminate and what i would then need. i could pick and choose i guess. >> you could pick and choose, but you wouldn't want to buy a plan that would barely cover anything if you got sick. ms. meister, would you want to buy a plan that wouldn't cover the specific medications that you needed? >> i would have to work it out and see actually figured out the financial side and see how much my medications cost per year and how much i been covered. evin malae have a deductible for the brand. i believe it is $500 until that kicks in its four months into

the year. >> thank you. >> thank you. mr. braley for questions and we will refer mr. green to get settled. >> i began my remarks by talking about the fact negative not a democrat who limits my conversation to health insurance reform because i believe that health insurance reform is a key part of comprehensive health care reform and i am so glad the three of you were here today because you helped put a human face on what is wrong with health care and health insurance delivery in this country right now. the town hall meetings back in my district last summer when i learned is that people who oppose health care reform and especially the health care reform we have been talking about don't want to talk about the human face of health care so i want to spend a few moments talking about that. one of the people who came up to me in my last town hall meeting ripped the house health care bill and then said after the

meeting congressman, i need your help. he said what can i do? my brother was diagnosed with long hodgkin's lymphoma and he lives in the northern part of your district. the closest place for him to get treatment is the mayo clinic in rochester minnesota but he can't get treatment there because they are not in his insurance plans provider network. another young woman interviewed me during the of the bate who was a classmate of my sons, sat down to interview me in the first thing i noticed is she had a cleft palate, injuring her interview she told me she was so excited because her parents almost saved up enough money for her last surgery and i looked at her and citizen that covered by your insurance policy and she said no it's defined as cosmetic surgery under my plan. so a woman 21-years-old born with a birth defect just like cystic fibrosis or servile policy which are covered under health care policies has long 21

years with a birth defect that limits your ability to eat, talk and most importantly her self-esteem. the last 1i want to talk about is my nephew's some, tucker right. he was 18 months old when he was diagnosed with liver cancer to be hit to third of his liver removed and enormous medical costs and thank god he's still alive. but he will almost certainly reach his lifetime cap under his private health policy by the time he's 18. he will almost certainly have another bout of cancer before he turns 18. his parents are doing fundraisers to cover the uninsured medical costs. both work full time and have good health insurance yet if his parents want to change jobs they would not be able to because of the exclusion for pre-existing conditions. all three of you have lived this in your own lives so i want to

ask you this meister, you have chronic asthma. you talked about that. if you opted to terminate your policy with anthem and purchase an individual insurance policy to get a more reasonable deductible or premium, you would have to go additional medical underwriting, correct? >> i would imagine so. ischemic because that's the way this works. and given the chronic asthma do you think that would be a problem in getting additional coverage? >> personally i worked out every day. i live a fairly healthy life so i don't -- but on paper that's a different story. >> you have to fill out the same questionnaire. and ms. henriksen, you talked about your son's problem with the condition with a hole in his heart. when you fill out any application for underwriting purposes, you are required to go through your family health history and that would appear. does that concern you? >> completely. >> and mr. arnold, you were the one who concluded your

compelling remarks with ayes down to all the fuss about doing what's right and you also have been affected by this because these are the type of things that make it frustrating for people to get private insurance because it can be so daunting. is the experience you've had consistent with the other witnesses and people we've been talking about face every day in trying to get health care coverage? >> absolutely, yes. i will repeat everything they just said but what was said by ms. meister about being underwritten again and pre-existing conditions either not being covered or causing the base rate on the policy to be marked up by my insurance agent told me 20 to 21% these are the kind of things that can happen. >> mr. chairman, health insurance is supposed to help when we are sick, not punishing us for requiring medical care and i think what we heard today

reinforces the need to get health reform donner now. as a country we cannot afford to wait any longer. passing meaningful health care legislation that eliminates disqualification based on pre-existing conditions is absolutely essential so that every american can have access to quality comprehensive health insurance and i yield back. >> i should note early representative hill is with us and is a member of our committee. we had a hearing on rescissions in his district early in indiana. like i said earlier, we are happy to go wherever we need to go to these hearings because of important we put a human face on the cost of health insurance. we have the votes coming up. i'm going to try to get through this panel if we can. mr. green, or open for questions please. >> i appreciate my colleague from iowa's questions on -- and your responses to recover what to look at it from a different tact. if you have four insurance regulation in california in texas we've never had any

regulation. it is literally the free-market. having been involved as a state legislator in trying to deal with fairness for my constituents and purchasing individual policies and having a son who had the same problem in his small-business trying to find individual policy he couldn't find one. in high school he was diagnosed with colitis and nobody wanted to write him exit $2,000 a month. she has found it for an hmo or speech ppo so he can get for his two boys and his wife because he just couldn't do it. so problems in individual market and oversight, whether it is in california or texas or virginia and that's the issue and that's why i want to -- the lack of oversight or the ability to look with the premium increases you all are getting ready to experience, my concern is this is something that the members of congress have to defend when we travel anywhere and believe me

it's made us much where we are traveling. i want to ask some questions in addition to paying the top executives handsomely between 2,007 and 2008 wellpoint spent over $27 million to host 103 executive retreats of the company promises. the democratic caucuses here actually had the retreat of the capitol. 55 of the retreats over half the costs are over $100,000. to put that in perspective the median income in the united states in 2008 was $52,000. so you can see over half the retreats for over 100,000 said it was all over the median income. in 2007 will point spent 3.7 million to host 782 attendees at broker agencies zandt and lavish resort and spa and arizona for five days and like to put a picture of that slight. later that year wellpoint said 154 attendees to the four

seasons resort and mandalay bay hawaii for authority breaux greer event that cost the company 850,000. that's over 5,000 a person, and if we can put that slide there. in 2008 during the height of the recession, wellpoint paid over 1.32 million host 360 attendees of the four ssons hotel in san diego. and if we could put that slide up there. do think those struggling with health care costs would be about to send the employees and agents on the lavish trips such as these? >> no, definitely not. i would like to know what they are doing a piece retreats. >> mr. arnold? >> of course not. >> ms. meister? >> no. >> what is your reaction to the images and figures? because i know what my

constituency would be if i was at this locations. and since you're ultimately paying the freight or are asked to pay the freight, does it mean to wonder of your premiums have gone directly to the -- pay for this all retreats? >> i wish i was an executive at wellpoint. [laughter] >> it seems unconscionable the company with a spending record that would reach deeper into the pockets of the policyholders at a time when so many americans are struggling to stay afloat it also seems to me any company that can afford to send hundreds of employees to these lavish retreats of the world can afford to maintain reasonable and affordable premium rates for its customers. and does what bothers me on the individual market. we don't see that regulation a oversight on the state level and that is why media on the national level and i know president obama early this week announced that. there are parts of his bill that i have problems with or his suggestion. but one of the things i like

this if we are going to sell insurance across state lines to individuals with a baby in houston, texas or san diego or anywhere else, i would like to see that there is oversight on what they're doing with that money to justify the premium increases. thank you, mr. chairman. >> thank you, mr. greene. continuing with questions, ms. sutton from ohio. >> thank you, a mr. chairman. and thank you for your compelling testimony. i think that your story speak to the stories of many americans across the country, including my constituents. to follow upon my colleague, tester screen's questioning, i would just like to talk a little bit about the executives at wellpoint. not only do we see the lavish retreats, the pictures reflected on the screen, we also know that as premium rates increase and become more insulated and health insurance coverage slips further out of reach for people just

like you it's important to ask where are the revenues coming not only to the retreats but also executive salaries. wellpoint stated publicly that these most recent premium increases were necessitated by the rising medical costs and shrinking risk pool that it needs the rate increase is in order to stay afloat. but i understand companies do need to turn a profit. we all understand that. but why don't understand is how well point can claim that these increases, the hikes that are literally bankrupting its policyholders are necessary to stay in business especially when we see what we see. when its spending millions upon millions of dollars compensating its top executives. date of received by the committee show wellpoint paid six tickets over $347 million in 2007 and in 2008 alone. in 2008 wellpoint paid $115 million to 85 senior executives compensating 39

executives over $1 million each. that year when executives made $9,000,000.2 executives made over $4 million. i guess i would like to ask you, our witnesses and policyholders how you feel about a portion of your premium payments holding these salaries at this time? base meister, do you believe the company that can afford to pay six it is nearly $10 million has the right to demand higher premiums from you so that it can, quote, keep up with the market? >> no, i don't and i agree with something is henriksen said, she said as i raised my rates like they raised our rates, i wouldn't have clients and that is the same in my business. there is reasonable and then there's just outrageous. >> ms. henriksen? >> not to be funny but it makes me sick to think that all of this money is going to

executives in this economy when so many people are struggling and i do make good money coming get my industry is really struggling. there are no new hotels being built, you know, no presidential -- there's no building going on so i suffer because of that. >> mr. arnold? >> , of course think it is unconscionable it believes the number i read was in the last quarter well-paid the process the profit of over 4 billion even if you cut that in half it is an incredibly healthy profit so it speaks to as i sit in my testimony profiteering versus profit making. there is a difference and profit-making is fine. drives the economy and is the foundation of american business but profiteering when it affects people like ghazaliya pass is wrong and speaks to a lack of

decency the lack of decency it may be legal but it's wrong and that is why it requires government intervention and regulation. >> you make the case well and i don't think the company that pays its executives more than $100 million a year has any right asking americans to subsidize these outrageous salaries in the form of increased premiums and stripped-down coverage. it's not like you're getting more for what you are paying. thanks. >> the gentlelady has yielded back. we have three votes on the floor and the first is the rule to allow the debate to begin on antitrust exemption if we are going to take away from the insurance industry so it is a critical vote and thus far on party lines so i am going to recess hopefully we are back here almost 25 minutes and i would like the panel tuesday if they can. i would love you to stay because we have ms. schakowsky and

mr. hill and caps and eshoo had questions. it's been a good family we would like you to stay. let's try to be back in about 26 lynn scarlett 25 minutes to read this book might stevenson platts say 25 minutes. we are in recess until 12:45. [inaudible conversations] [inaudible conversations] >> thanks for coming back right away. all of the members. let's resume this hearing. when i left ms. schakowsky you

are up for questions if i remember and thanks to the panel again for staying. >> thank you, mr. chairman and panel. it occurred to me that this panel would only take place of the industrialized nations in the united states of america. that in every other industrialized country they have made the threshold decision that health care would be provided in some fashion may be through the public sector often entirely to the private sector but still to all of their people. the other thing that occurred to me. when we look at all three of you, and i guess i would have to endure some dee dee to -- your son peery we're talking well say, high functioning individuals, not a bunch of sick

people which underscores that, you know, it is hard to reach hardly any age at all without having some sort of pre-existing condition. i had, and i don't know where they disappeared to hear, this is from blue shield of california. it's a little old, 2006, a three page, for column list that says applicants who have any of these conditions listed below may be declined without medical record review. things like adoption in progress, how about that, dress micro calcifications, lots of women have that, by the 80's with hypertension, we were talking about dalia's daughter

-- pregnancy of itself, spouse or significant other, varicose veins would be a pre-existing condition that would deprive people of just know, you can't have this insurance. i wanted to see if we could put up on the screen and the committee recently learned that these recent premium increases may only be the tip of the iceberg. is their anyone here to put up the internal -- >> there you go. >> will point analysis of what potential increases would do for them. these are various scenarios. the first scenario calculates they call them saf, those are

rate caps. if they left it unchanged, that is the rates unchanged. the second scenario proposes to lower the rate caps to 37% which is two percentage points lower than the rates that anthem filed with the department of insurance and the third proposes and i quote, to remove these caps completely. the scenario would result and they say in a maximum of 228.4% for certain plans and had this scenario been implemented over 27,000 customers would have received a 228% increase. the fact they would even consider into this scenario to me is incredibly shocking but i

guess my conclusion is we cannot just leave the insurance companies in the driver's seat deciding how they will regulate themselves according to the rates. what our bill did and what the president's bill does is established rate review that could actually prohibit some of these rate increases and i wanted to hear your feelings about that. meister and go across. >> that is why i said before. we need to have a maximum percentage put on of how much insurance companies can raise their rates each year just like some cities have rent stabilization, the stabilization of insurance rates. >> some states do that. i am a state that does not, one of the 25 states that doesn't do any rate regulation whatsoever.

ms. henriksen. >> all i am all for an national committee that would reduce the rates. i feel that california has been neglectful in that sense so i know it is based on where you live and all that kind of thing but i believe in national rate regulation would be very beneficial. >> you call it a national health insurance rate commission i think is what we are talking about. >> i agree with that and would also add i think if there were rate regulation on insurance companies that would put pressure on medical providers, hospitals and doctors we keep hearing are raising their rates so irresponsibly. if that is true that would force them to change their ways as well and very quickly what you

said about on regulated insurance premiums keep rising it's true. my rates went up 26% last year 8% now. why should i have any reason to believe they won't try to raise them another 40% next year? it's logical to think that they borrowed. >> thank you. member of the full committee. you have questions of this panel and thanks for being here members of the subcommittee. cemex before mr. chairman for having this hearing. i appreciate the opportunity to participate and i very glad we of the rules that allow the members of the other subcommittees to be able to join you. this is a very important hearing and i want to thank the witnesses. so vinnie members have said you put a human face on this. and why all my questions are not directly for you but rather the executive i just thought that i would enter for the record i did

write to the president and ceo of wellpoint after the news came out about the rate hikes up to 39%. but i think that it is a telling thing that anthem blue cross, the unit in an e-mail message urged their employees to oppose health care reform and that e-mail is reported to have said reform proposals would, quote cost tens of millions of americans to lose their private coverage, and it seems to me that this panel is right on the edge given with the increases were. so i think that more than anything else you have helped separate the political rhetoric that has gone across the country and what the facts are because this is your life. you are speaking of real life experiences.

i can't think of a bitter panel to have come in and testify. this case is not over. i think that there are -- i know that there are many of us that to our last breath will fight for the kind of reforms that need to take place both in the health insurance industry and health care as well because this simply cannot be sustained. not individuals, not families, not local governments, not state governments, not the federal government and not businesses, either. so think you for travelling across the country to testify. i admire your spirit and i like the way that you keep following up with members saying it's the weirdest. it's not often the case with witnesses, so think you. thank you mr. chairman. i'm going to have to leave for mike committee meeting that thank you for your which slid as

hospitality. >> if thank you. that concludes questions of the panel and committees went to thank this panel for coming. let me just say one thing. mr. arnold, in a question that was put to you a clarification i don't want to get into the health care debate because it's more important we hear from you -- we have had enough health care debates. we need to act and move legislation along. but there were questions about your premium, what you would pay and what he would pay underneath the house bill as was passed. i think mr. burgess times questions along that. he was quoting from the congressional budget office and that would take place in 2016. they wouldn't be with the current premium would be to get lost in the house bill would have a full plethora of services that would not be denied because of preexisting injury or illness, you have preventive care, there's a number of benefits in the bill that is probably not covered in the current ones just to clarify the record that number is thrown out

to be more than the current policy would be in 2016 and we know what your policy would be in 2016 from anthem at the rate we are going to get such as the clarification. again, that me thank this panel. with all due respect i will let you go for a minute i'm not quite what you pontificate. >> based on the 2,000 my figures of the bill had passed last year the german is correct because one of the benefits go into effect for four years from the passage of the bill. ..

swaybacked of what the maximum allowable even with those procedures not covered under medicare. i just wondered if you have some direct experience? they do plan to question about that. >> would be happy to yield. >> it turns out the day-care could be less than what private insurance plays in any particular area but the private insurance companies negotiate their rates presumably with the doctors and health care providers. they and medicare are faced with increasing cost of health care that is the fact it does not mean anybody is doing anything wrong but the system cost more and more money.

one of the things we try to do is not only reformed the system so people don't have to fight to buy insurance but hold down health care costs overall. that is important. >> i join with the chairman unthinking these witnesses. you have been terrific thank you so much. >> thank you for your testimony. >> elah by to call up the second panel of the witnesses we have ms. it braly the chief executive

officer of 12.. and cynthia miller chief actuary. >> we will not allow signs well we tried to conduct of a hearing. just put them away. put them away. very good. thank you. and is a policy to take all testimony under oath please bid five used you have the right to be advised by counsel doing it your testimony do you wish to be advised? >> no. >> please rise and raise your right hand and take the oath. do you swear or affirm the testimony you're about to give this the truth the whole truth and nothing but the truth on the matter before that committee? >> let the record reflect the witness answered in the

affirmative. if you like to submit a longer statement for the record that is fine. >> thank you, mr. chairman for this opportunity to discuss rising health care costs and then the four sustainable health care reform. this is an important week for all americans i hope you join me in thinking to arouse helped summit will be the beginning of a truly constructive positive process in which every american can have confidence prime especially pleased to be invited to speak with you because i do stand the burden of rising health care costs put on families. because of our role in health care it is often insurers who have to deliver the bad news regarding spiraling health care costs there is nothing of like better than to report to our

members the medical cost trend is going down. that is what i appreciate the opportunity to explain why costs arising not only in california but across the country. the increase in california are due to factors we have been sounding the alarm about for years. the rise of health care costs in healthy people opting out of the system and other issues arise such as the tough economic times we are experiencing today this led to the rate increase you have seen from our company and others in california driven by many factors including hospitals and other health care providers charging higher rates new medical technology underpayment by government programs the growth and chronic diseases like obesity and the aging population these increases are generally compounded when younger healthier

members drop insurance levying those who most of the health care to foot the bill these issues are acute in california where our experience has been a medical inflation is of the double digits. also we are required to offer erred coverage was to guaranteed issue programs by themselves lost almost $70 million in 2009. those are important programs that serve an important purpose but the cost is borne by other members in california. and as a legislative proposal discusses the issue of rising cost it cannot be considered sustainable health care reform. unfortunately the levying proposal in washington do not do enough to control costs and not enough to get everyone into the system. be put forward substantive proposals on both of these funds.

my testimony submitted includes specific reforms but i will highlight three. first, congress could address medicine and inappropriate care by including it a meaningful malpractice reform in the legislation. second, congress could require the principles of of moves the guide how the payments are made it may seem technical but these kind of reforms can have a lasting impact on quality and cost for current reforming the health insurance market congress must enact policies that have a risk pool as imposing other requirements of the marketplace. reno other facet hospitals clinicians payers and americans contributcontribut e to the growth and health care cost and all need to be called upon to reduce the cost.

every dollar the nation spends on health care less than 1 penny goes to the health plan profit. isn't time to gas glittery going to do about the other $0.99? unfortunately the deals and made with the drug companies hospitals and physician groups and labor unions let but legislative proposals considered this far is not the core solution for a lower cost higher-quality health care. rising cost pressure at all of us. it is a serious problem facing the country not only a serious discussion but met meaningful action. wellpoint will want to participate in both. maybe tempting to shift the blame but to do so would be a triumph a sound bite over substance. insurers are among the least profitable part of the system and the part that helps the most to make a

meaningful reduction of health care costs. insurance industry margins are dwarfed by the others of health care for real reform needs to focus on the areas where systematic savings could be realized. of the elephant in the room is the growth of health care spending despite the attention we have garnered garnered, we need to address the all of them. thank you for the opportunity to be here today. this is a critical time for our country and the health care debate and i look forward to discussing ways in which we can work together to control rising health care cost. >> thank you ms. braly. and ms. miller. >> i have nothing prepared. >> of me ask this question of the will play motivation and increasing premiums and others have mentioned

mentioned, profits are not a motivating factor in california by been written testimony said you were disappointed the critics cited profits as the primary reason companies were increase in the cost of premiums. let me ask you, there is a document please look at tab 13 it is the e-mail sent october 7th in response to a voice-mail. in fact, i think ms. miller you left the message. the average increase is 23% and intended to return california to a profit of 7% vs. of the is this year. are you attempting to raise profits 7% by increasing their premiums is that the purpose behind that email? >> it is important to

understand that email was during the process of setting their rates and only refers to part of the california individual business broker and makes reference to the fact we had a 5% profit in 2009 but that did not turn out to be the case we lost money in the individual market in the individual market on the california business. what we had targeted in the rate increases we have asked to implement in 2010 is less than 2%. >> but the email said we have to get to the 7% to add the 7% profit. >> the e-mail sent october 7th berates were filed november 7th but medical claims continue to escalate. >> than november 22nd tablet 22.

there is an e-mail november november 2nd then filed on november 7th from the regional vice president asking for premiums that would put us 40 million favorable one week later bryan curley said if we get the increases on time we will see the gains upside of 30 million after downgrades and rate caps. i guess my concern is to say publicly we're not increasing rates to increase profits by yet e-mails indicates you have a a minimum increase in order to maintain profits. >> it is important to remember that we lost money in the individual market in california in 2009.

that is not a sustainable business market so we're talking profit increases in absolute dollars but if you look at the profit margin for 2010 it is less than 2%. >> okay. we have seen an internal corporate documents that you use a variety of accounting mechanisms to manipulate the profit figures. we have seen five different accounting measures used to describe profits including pretax income, oppose tax revenue, operating gains, underwriting margins, profits. if i remember correctly, wellpoint come at the end of 2009, the last 90 days the profit was 2.$7 billion? >> let me speak to that fourth quarter and 09 is in which resold the pharmacy benefit management company that we had had and invested in four years.

our belief was by selling back company and partnering with a pharmacy benefit management company we could do the important thing that many panelists described which is getting lower-cost drugs for our members. those earnings are no longer parts of our company because we sold that. when you look at total earnings for 2009 and look at the net margin which is appropriate, we were at 4.8 % of that was the march 10. >> what is that a quote in real dollars? >> about $2.3 billion. >> 2.8 billion was profit been 2009 a year that everybody would consider a horrible year economically and hopefully 2010 will be better. i am concerned about the hard-working americans are

asking to increase premiums to the wealth of the wellpoint investors. yesterday the hearing was in california on the rate increase and anthem president defended the profit margin during the hearing and said it should be about 2.5 and 5% is a figure that would be acceptable. between 2.5 and 5% is reasonable with profits. but when the policyholders take the hit self-employed coming individual individual, self-employed people take 30 or 40 or 50% is seems like every year you have to have a profit is a reasonable to except -- expect every have a profit? it would be great if we to

guarantee every business had 2.5% profit. >> over the five-year period hour profit margin has declined. we continue to get more efficient as a company and business and working hard to reduce health care costs and have high cost affordable health care. it is important to be a business that is sustained and have an appropriate profit and we think 4.8 % margin on a relative basis is very efficient. when you look at that compared to others in the health care system from a biotech companies are 23%, of pharmaceutical companies are in the 20%, we have a chart in the written testimony even community based hospital margins are 6.9% profit margin. we are part of the system striving to get to more affordable health care for

all of the members. >> the only way is to knock off the profits better being paid for by the average american. i don't mind you making a profit but at the end of the year a horrible year you still made billion dollars and that is not enough? >> we serve 34 million americans across the country than it is appropriate to be sustained so we can be there for those members when they incur the health care cost. we want to be solvent as an organization and continue to invest in ways in which we can get to a more affordable higher-quality health care equation. >> i do not mean to inject the health care debate but that is why so much of us believe then the public option you are killing the average consumer. we have to put the option of there today we year doing antitrust exemptions hopefully that will help. >> i appreciate you being

here today and having an actual fact actuary at the same time we do not have the state act sure you could compare notes because i presume you presented those to the state board of insurance? is that correct? >> yes. we are required to do rate filings that recertified they meet in the law and are reasonable and the independent it oxide -- outside actuarial firm also verify they thought the rates were reasonable and appropriate. >> those went to state regulators? >> yes. our fighting was on november 7th. of the independent actuary reviewed the filing mid november and issued a letter december 15th they believed the rates were appropriate. >> is it possible to provide the committee with a copy of that lever? do we have that? >> are believe so. >> we

may already have it. >> what was the response of the state regulators with the actuarial information they were provided? this is outrageous? how do you? >> the state is supposed to respond within 30-- to the filing. we heard nothing from the state until christmas eve then we got a several questions from the actuary about one of the products and then we responded to those questions that we heard nothing else from the department of insurance until all the news broke of the rate increases from the "l.a. times." >> you had to know this was going to be trouble a 39% rate increase in this climate? do know what we have been doing the last year? you knew this would be trouble you did the reports

showing christmas eve. do you know, what else? they passed a bill in the senate. you knew the landscape into which you were entering. that they do make a judgment whether or not this is the best time to do this? >> it is always a challenging issue to raise rates and address the issue, our desire is to have more members and the goal is to continue to serve members is not easy. it is difficult to continue to have to raise rates. process was under way clearly there rates have been filed. we have the certification. >> i will run out of time. talk about the rate increases, we also talked in the mail about a cushion to allow for expansion it sounds like what we do. we ask for twice of what we

need hoping we get half. did you file this with a cushion and? >> it is important to note when you look at the individual product in california because of our participation with hipaa and the high-risk pool option come agreed to have an 2009 day 68 point* $9 million loss when combined with the individuals to buy the product in the open market, the loss was $10 million altogether. would be priced the product for their rates with 2010 with the department they assume they would have a margin of about 2.4% or after tax margin of 15 4%. >> you felt even though you would get significant negative publicity because of those facts you could justify their rates?

>> you do get that publicity >> it is a difficult position even to break even in the rates are in the 20s in terms of the overall average for the we were concerned which is why we also capt. the rates at the top end because we did not want rates for individuals to go in excess of that capped. >> i must ask because it has come up all betty. could you have doctors better now raising their rates in your network? might experience is we took what you gave us we did not negotiate with all respect to the chairman medicare sets the rates you say we will pay a percentage of medicare take-it-or-leave-it part of that is a negotiation. is california substantially different? >> we can talk about the physician trend versus the hospital trend which is a much more significant driver

>> and the pharmaceutical trend is a driver if you take a position reimbursement off the table you have a savings between five and 18%. it is not the biggest driver in your book of business direct a physician trend is six per second -- in california hospital is 10 and pharmacy is 13. >> all expenditures do flow through the position and if they do not write the prescription and the patient does not get the treatment although they are a very small part of the cash outlay they control and tend to be a driver or constrictor of cost for cory always wonder why we ratchet down physician payment when doctors are normal people and we tried to do more and therefore we see more

patients and order more tests and write more prescriptions because we have to pay our overhead. have you looked at a corporate level maybe if we pay doctors differently we could get control of the cost curve? >> absolutely we think the partnership with the doctors is key to changing the reimbursement system to change the outcome. >> you know, the representitive from california will not allow that interaction to occur? right? that partnership? >> that is an important part of the future of the reimbursement system to partner with doctors in look at different ways to reimburse. >> but we would all go to jail at that is off the table is there any other way? >> we think there are elements under medical malpractice reform where doctors understood they would be protected. the question that you raise the most expensive thing in

health care is the pen in the doctor's hand, if we could make them protected and me willing and able to focus on evidence based medicine that i think we will get to it at those procedures or test third diagnostic tools. >> that is off the table and tomorrow's discussion we will talk about reform we will say caps and they will say no and that is the end of the discussion. thank you. >> thank you mr. burgess. mr. chairman? >> california has a tour reform law. in fact, we have a lot the american medical association would like to have for the rest of the country. are you saying that has held down costing california? >> that costs continue to rise and we have a number of issues relating to health care cost in california. >> but you said if we had a medical malpractice system

is one way to hold down costs. we have one. it has not been sufficient to keep you from raising premiums you asked as a 25% increase precarious and raising premium was not something we wanted to do. the senior executives at wellpoint determined eight increase of 25% was necessary. is that right? >> that is correct. >> a document produced from your internal files that wellpoint october 24th october 24th, 2009, but a senior actuary he mailed the head of the market division to mr. sassi. >> writing that they must reach agreement on a filing strategy quickly specifically in the area of two refile with a cushion or do we file adolor level that

does not allow for negotiations? the email says you consider filing a rate increase that was padded because you expected california to reduce the proposed increase is that the accurate conclusion? >> i don't think so her ghosn di describes the e-mails. earlier in the process there was a question of the medical trend. what we filed did have a margin of 2.4% of the operating margin of one .4% and reflected the trend we were experiencing in california. there was not a commission. >> it is hard to understand the words differ in the because they say a cushion allow for negotiations. you decided you needed 25% but it sounds you are willing to go up 20% there is a presentation prepared for your board of directors outlined a strategic plan

for 2010. let me put that slide up on the board it is titled key assumption individual pricing distinguishing between the rate increase for 2010 and according to the slide the rate is listed as 25 or 26% but the assume 2010 rate increase is just 20%. is seems to say you're asking 25% but expected to see the lower 20% through negotiations. that sounds like padding. how do you respond? >> i will respond days answer that. it is important to know this was prepared before the rate filing before they were finalized and recognized the political reality departments of insurance have political pressures and

will change rates in response to those pressures. what happened is medical cost continue to escalate through the last three months of 2009 and the 25% rate it was necessary to achieve a profit margin of less than 2%. >> it sounds like you were prepared to ask for a rate higher than what you needed as a negotiating tool. but you had to make a decision they wanted the average increase of 20 5% really looking at the average of 20%. you can see it seems to month approval delay in this is exactly the same thing they were asking for more than you need the tissue built in a large cushion. here's what i think is going on. you are raising rates far above what is necessary necessary, trying to squeeze

every dollar profit out of policyholders in california and across the nation in. added time when families are struggling you're trying to charge inflated rates that had profits to support the salaries and the trips and retreats and everything else. >> mr. chairman. we have described in 2009 in the individual business of california the prices were not adequate to cover the losses in the guarantee issue that are required to be covered we had a loss and the pricing that was filed and certified and reviewed and evaluated by other actuaries confirmed. >> the state actuaries? >> they came in specifically >> you said you're trying to be more efficient. is the biggest deficiency trying to shift people on

two plans where they have to come up with more money out of pocket? >> we could be making less money when they shift to products that have less benefits. the goal is to make sure we have product offerings. >> we heard three witnesses this morning that all seem reasonable health the belfry were told they would get a 39% not the average 20 or 25. but they were and what they could get a plan that would cost less they have to pay more at of pocket for drugs the tissue would not cover those a higher deductible is that the fish and? >> we tried to make sure the customer can get access to a product they want and afford. for example. >> their right to have what they have paid for it. >> as reflected as the pool

of insured changes because sometimes healthy individuals leave and people stay in the pool that are more expensive that cost overall continues to go up. >> you would argue we need a pool that includes everybody? >> correct. >> if you pull people together, then these individual risk analysis because you spread the cost? >> we are an advocate for reform with the elimination of pre-existing conditions provided there is a mechanism to keep everyone in the pool so we don't have this phenomenon. >> bad is the bill that does that passes the senate what the president has called for. let's get everybody insured and put them in a pool and then use spread the rest. of the individual market seems to be doing that if you have an illness you will not even be considered for consideration if you're in

the plan and you have an illness we will not drop you but shift you to another plan to pay more money out of pocket. you are individualizing insurance so the individual has no leverage. do what you ask for drop down. >> the individual analysis is not based on the house status but who was in the pool but your point* is important the concept and goal was to eliminate pre-existing and get everybody in what we have seen the effectiveness to keep somebody in the pool fell apart as legislation move forward and then there was greater concern you don't have the right mechanisms in place to keep them in the pool and they would opt out. >> what would you do? >> make sure there is a continuous coverage requirement. >> somebody says i don't

want insurance what would you do? i don't want to pay this i cannot afford it. >> then there should be and enforceable penalty of at sonat sort and a requirement to have continuous coverage because people john been and out of coverage where there is the mandate they consume health care concern the policy and a jump out and the cost escalates. >> if we tried in the house bill to cover everybody and require that everybody get coverage and spread the cost out. we did not get a lot of support from the insurance industry. i have gone way beyond my time. thank you, mr. chairman. >> first come on behalf of the representitive the web site to add to the record a letter that she wrote february 11 to ms. -- ms.

braly unanimous consent? >> may i see a first? >> i will hand it to you. >> and the letter that representitive roche, roche, -- roach she wrote your and them blue cross unit in the mail message urging employees to oppose health care reform and it is important to have said reform proposals will cost tens of millions of americans to lose their private coverage and she makes the point* of the 39% rate increase flies in the face of the concern of those that would lose coverage. could you respond to that? >> we're very concerned with the legislation that was proposed because we didn't feel that it addressed in

the concept of a dressing or getting everyone in the pool. as a result combined with other changes including changing that danger reading that our analysis that we shared publicly and have available. it varies by state. weaker probably give the details around california but by restricting that age restrictions we found young individuals would see in excess of 100 6% rate increase that was before tranche. that would be in addition to the rising health care cost resaw allows well. >> the began by talking about how happy you were to be here to talk rate increases but i want to remind you the name of the hearing is premium increases by 86 and flew across '08

and the individual health insurance market and what i expected was not to lecture us to what to apply in our bell but explain to us and a good start would to answer some of the concerns. i don't know if he were here for the testimony of jeremy arnold who talked about a whopping 74% increase that he has experienced. of our ms. henriksen who are just calculated pays $24,504 per year. if i am correct and if i heard you correctly, you say you never even met the deductible? so you pay this amount but did not get any benefit from the health insurance because you did not meet the deductible or respond and it would be nice if you would. she wrote two letters talking about how for months

if she were paying for a costly and unnecessary benefit, switched plans and finally did get a letter that her premiums we're going to be raised to 38% although she could change to lesser coverage and pay only 16%. isn't that fabulous? i do have a couple of questions but i'd want to tell you something, i think 39 percent rate increase at a time when people, americans are losing their jobs, losing health care is so incredibly audacious, so irresponsible, you know, we see these lavish retreats and places i would be interested to know what your salary is as the ceo and an

incredible ceo salary brighten know how many people said that makeover $1 million per year at your company. what? how much money do you make? >> my salary is 1.1 million. i receive stock compensation and with a value of 8.5 million and last year the annual incentive payment of $73,000. >> of course, it makes sense you would need a big rate increase now that you told us that. i want to know you said in your written testimony that the anthem blue cross is in line with many competitors kid new name and a california competitors have raised rates about 39%?

>> guess the number of our competitors and in the individual markets products available hours are competitively priced and in many cases lower-priced both for-profit and not-for-profit. >> they were approved by the commission and? >> bay are available now. we are a very efficient company and the administrative costs continue to go down. we do have competitive rates and many times they are less expensive than other products currently available. there are a number of competitors in california. >> has your company met the legal requirement of 70% this of premiums collected in the individual market for the payment of medical claims? >> yes. we submitted the filings you

have to keep been nine negative product is sold then the commercial market for the loss this occurred in the hip pratt day ship but and graduate program are born in that marketplace as well. so in the end it would produce a tax return of one .4%. >> you don't figure across the company you just look at the profits made or lost in the individual market. >> yes. there is an important reason actuarially to price the product during those products if you might it talk about that. >> data want to hear about it. because it seems to me when you have a company that provides not to widgets or luxury items but health care it might make sense to look across the whole company to see what kind of profits because people in the

individual market are often least able to come up with the very high rates. what about 80 or 85% medical loss ratio? >> the medical loss ratio is 82 point* six. one thing that is important about the individual markets in some states where there is regulation to restrict the ability to raise rates all competition has left. if you look at name in 1993 there were 11 carriers offering products now there is us and another company that is not a major national competitor because we are blue cross. we don't want to the of the individual market so we need to make sure it is viable for our customers so we can continue to cover costs as they continue cost we can provide for those cost. >> i yield back. >> nothing to yield.

>> thank you very much to mr. chairman ms. braly the last panel read did hear from some anthem policy holders that have high rate increases some rays of 38%. the third have a written notification increase of 30%. some of those are markedly higher than the average that wellpoint has reported publicly and if it's a policyholder and a tough position they can drop or get a less comprehensive policy. i would like to show you and ms. miller the document that suggests the rate increases in fact, are much higher in the future. you can look at the documents seven in the binder and this is a

wellpoint internal analysis of the potential rate increase included as part of the leadership pricing memo a document providing recommendations and analyses about the individual market in california. of like to put this document on the screen. do we have that document? thank you. ms. miller calmat ast wellpoint and chief actuary i want to make certain i understand the three officials. scenario number one, it appears that well point* makes no change in the caps? >> that is correct answer point* number two has a reduction after accounting and 4h. am i reading that correctly? >> yes. >> scenario number 3-d focus of attention is the chart that caught my attention it

appears to be considered the possibility of removing rate increase caps altogether and it says "remove it completely. below that header is the chart that says if wellpoint implemented the program and removed them entirely for certain plants over 27,000 policyholders would be subject to a 228% increase in monthly premiums? is that right to? >> i don't see the number of policy members but i see the number. >> if we took up the analysis and i were a wellpoint policyholder subjects to the second received at 228% increase in my premium cost? >> yes. these are labeled scenarios

not proposals. when we do our actuarial work we look at the rate increase is necessary. that is the starting point* and is meant to illustrate that if we did not cap these would be the increases. but in fact, we did cap the rates it is not a proposal but to illustrate how dramatic some of the increases were. >> i get that. if the caps were off by urinalysis in order to maintain using ms. braly they gray jay viable marketplace would require to raise my premium by 228%? that is where we're headed. that is the problem. do you consider, ms. braly come it is a viable market place it for the machine tool industry had 15 workers that they have ben lael too

and they are trying to hang onto their jobs and health benefits they get a notice in the mail saying they will get 220% premium increase? is that a sustainable? >> absolutely not which is why reactive focus on the cost and that is why we are part of the mechanism. >> that is self-serving if you said it is 82% 20 years ago the medical loss ratio was in a range of 95%. of the business model is working for you so you can pay your salaries and maintain bottom-line but it is coming had a great expense to other people. >> did ministry them expense really does focus on disease management, we have 2500 nurses to work with our customers to make sure they get the benefits. >> i don't mean to interrupt but we have a situation hear

that your own internal analysis suggests obvious conclusion it is not sustainable. if left to strict marketplace interpretation of market viability that what you would have to charge in order to maintain the financial solvency of their business if that requires that machine tool company 220% that is not a market that is viable to anybody on the receiving end as a rate increase stance suggests the market model is fundamentally broken. >> we agree we need a sustainable solution particularly in the individual market where we see these issues extremely in terms of rate increases. >> you are in agreement with

the proposition i just made with the current insurance model is fundamentally broken and where the premiums are going up potentially 220%? >> we need to continue to create an opportunity for both consumers to be better purchasers of health care and understand the dynamics through our investment as well as innovative as how we fundamentally change. >> when you say the consumer can be a better purchaser of health care when you send out the premium notice whether 40 percent or 228% when somebody calls you negotiate their rate? fam agreed to work with the customers to make sure they can get another product potentially they can afford or that has benefits they want or need. >> literally, .

>> finish up. >> i think the point* has been made. >> thank you, mr. chairman chairman it is an honor to be with your subcommittee. i see ask a couple of members of the previous ban all i want to say q4 being such wonderful witness is used both for a lot of my constituents i represent a lot on the central coast and they were very eloquent. i could not say that to you. buds to this panel, listening to a couple of my colleagues and your responses to them, it makes the case for me that we really do need more competition within the health-insurance market. here is a story from one of my constituents "week as

many others, have received notice from anthem hour it premium will increase by 30 percent starting march 1st. we're both self-employed we currently afford and ppi with a $5,000 deductible now anthem is offering a $7,500 deductible if anything serious happens to our health we lose everything to pay the medical bill even though we technically have insurance. here is another. >> of 61 year-old male with individual health-insurance from anthem blue cross i received error rate increase $616 per month up too $800 per month. the premium on by a anthem policy going up from 545 up at $700.12 -- $712. i want you to be aware of the 30 percent hike in insurance rates.

ms. braly these are hard-working people i know who have no choice but to purchase on the individual market and it does not seem like they get much. you must raise prices to make up for healthy people who dropped out but isn't it true long engaged in the practice their precision? i am well aware anthem has been fined for doing that in years past and and after dropping be as a consumer in the event i would become sick is not an attractive enticement for me as a health the customer to join forces a you can help to keep their costs down you don't market yourselves very well progress a time when your company brings in record profits of the rest of the economy is suffering i want to know what steps you will take to make quality health insurance products affordable to the people like my constituents

who want to be responsible and purchase health insurance five chest cannot do that? respond quickly. >> thank you for the opportunity about what we're doing two make premiums more affordable. when read bigger issue with hospitals in california, but our goal is to have zero increases. often they come requesting a 40% increase and if there is not competition and the regulators have said it is inappropriate for us to terminate them from the network because then we have an access problem. as a result we don't have the ability too not agreed to the very high rate increases from the hospital so we will continue to fight on behalf of our customers to make sure that health care they're receiving is affordable and high quality. it is a difficult fight and

by resell the pharmacy benefit management company to get pell lower-cost drugs because they drive the overall increase in me q. shift the blame to the hospital's? >> we're working together. >> nothing in your own system you can find flaws with? >> will look at our e efficiency of to look at our ratio we continue to improve while we provide more services in terms of getting to the underlying health care cost. >> i will again address the topic that has come up and i saw slides showed of the places you hold retreats. it is a sticking point* but not the whole story but it is so visible it is pretty galling for people who have had to sacrifice vacations the past two or three years because of the economy and their personal lives by yet

to i will finished said you can have the rest of the time to respond. you continue to make these retreats the part of your working relationship to your employees and consumers are making sacrifices to hold onto the insurance as it is being denied. these retreats hold more sway with your company and the health and well-being of your subscribers and i well allow you any time left. >> those meetings have ben characterized as retrieves but that is incorrect. those our meetings we have with our customers. >> which customers? >> i am the quarterly from representatives from the customer advisory group was. >> who are those people? >> business people who buy benefits. >> so you sell your benefits

at the lavish resorts? >> we meet with brokers and agents one said she would work with her agent. >> that is where she was when she was trying to get ahold of her. >> we make sure the brokers and customers note the benefits and what plans and services we can provide. >> can you justify the cost as we raise premiums? >> we continue to look at being more efficient. we do need to meet with the agents and brokers and customers and they provide employment on how to improve services in the case. >> you ever meet with premium holders? >> they do. i am delighted to and i appreciate the opportunity. >> day you hear their stories in addition to our you heard this morning? >> it is a challenge. we are on their side.

>> they don't feel like it. >> we want them to understand there is misinformation what drives the premium increase it is important to understand the march and available to the firm said a broker company and the hospital and where we stand on a relative basis because we fight everyday to make the benefits more affordable. >> thank you, mr. chairman. >> there was a request earlier in a letter dated february 11 from a member of this committee to ms. braly be endured without objection it will be injured. second round of questions? >> you said a couple of times you want to make health care services for your beneficiaries, you want to provide more services are more efficient services for them are good services. is that we'll have been

saying? you see that as your role? >> a critical role to get access to affordable quality health care. by providing those services that we do, that creates real value for the customers. >> some of these documents have a different picture there is a document titled wellpoint individual 20 days in 2010 plan opportunities not reflected in the forecast. it is a business plan. under this business plan there is a section called risk-management and it says our medical loss ratio should improve as we eliminate subsidies and other initiatives then you have the number of initiatives. to take pre-existing waiting periods and adjust them to b-12 months or legal maximum to make sure they have to wait as long as the maximum

12 all-out. second come reinstate reinstate-- reinstatement all these 60 days after termination and will require a under rating -- underwriting and premium of back pain pants that makes it difficult for people to have access to the good quality care. says wellpoint news that premium dollars to use for medical claims? . .

will that are used to pay for medical claims. if you're going to reduce payment for claims you're producing payment for claims for legitimate medical services. >> we are trying to make sure the pool of members that we have

is not disadvantaged in the marketplace. one of the reasons rates are going up in 2010 is healthy people are making the choice when faced with harsh of the premium increases. we recognize -- >> what does medical loss ratio mean? >> what is a medical loss ratio? is the claims paid, the medical claims paid slash premium. >> so you're trying to reduce the amount of claims that you will pay for people in order to make sure that you are still within the medical loss ratio but can reduce the claims for people, is in the right? >> no, you can't reduce claims without changing your medical loss ratio. that's not possible. >> if you are looking for ways in a business strategy to manage the risks, these all sound very nice, managing the risk, and in the ways you do that is to deny

people access to care so you don't have to pay for that care for a longer period of time. the sounds like you want to make sure the you've got less money going into paying for care. >> specifically in the individual marketing in california there's a minimum loss ratio requirement we can comply with in fact into guarantee issue products we describe the medical loss ratio or medical cost ratios exceed by far premium increases that we can -- >> the reason you have a medical loss ratio is we want to guarantee insurance companies are using premium dollars to pay for medical care for the customers and not for overhead corporate expenses and profits. >> which is why -- >> you have to balance that out but it sounds like your people are looking at business strategies to reduce the amount of payment of the premium dollars from medical care for customers. >> actually, if we take some of the risk management ideas we can

potentially reduce the cost for the overall pool and therefore not have -- >> but for the individual involved, that individual is not going to have access to more efficient care. they are not great to have access to good services, they are not going to have access at all because you're going to hold down the cost for the overall pool. but that individual is going to have to go without or pay for the services you wouldn't otherwise before. >> that's one of the critical elements about the reform if an individual doesn't buy his or her policy when they are well and there is an underwritten market that if we allow them, like we do in some markets where we have a guarantee issue like new york and maine to wait until they are sick to buy the policy then tabled by the policy. >> nobody wants to do that. but you've got people covered in your business -- you can't stop them because the law won't let you drop them. you've got people covered and then want to shift more costs on to them and use more of the

premiums for overhead instead of for services. why do we need is meaningful health reform to guarantee that the insurance companies are using premium dollars to pay for medical care for the customers and not for the overhead corporate expenses and profits. what is -- in the bill we have 80% requirement that the money collected premiums be used to pay for health insurance claims. >> correct. >> you're 85%. you don't do that now -- >> we are at 82.6%. i want to address that question, too. when every administrative dollar that we spend we want to produce a lower cost of care as a result of that so we make investments -- estimate you don't produce a lower cost of care. to produce a certain amount to meet the ratio and certain amount to make sure that you are meeting your expenses and profits. but people are being denied care

and that's why i fink health insurance reform is so necessary and i dispute your statement although i don't have time to go into it that this bill does not bring more people into the pool. an individual has no power to deal with you but if they are pulled together with others, then those people have the opportunity under health care legislation to say we want to make sure 85% of the money that you collect pays our health care claims. a lot more money going to retreat expenses and salaries. we want it for that purpose and then you can spread the cost out. thank you, mr. chair. >> mr. burgess for questions please. >> let me just clarify on the american medical association site last night, and of course they are not your biggest ally or stay in the the report at 84.8% which was right at the at the 5% figure that was mandated

that the bill. is that the whole company and its different to california? >> they may be looking it's the true financial statements instead of the gap. the gap shows that the year and we were 82.6 which is an enterprise-why it. so i'm not sure where the 84.8 but there are products >> they tweeted it so i know it's right. we have all these profit discussions today. i thought blue cross was a nonprofit. >> there's many companies who have blue cross licenses. we are a for-profit company that as we described not-for-profit companies continue to have margins sometimes in excess of hours because we come together as former blue cross independent states and we create a lot of efficiency in scale at wellpoint so we are a more efficient

lacrosse plan -- blue cross plan. >> i'm sorry mr. waxman is gone. one of the areas i disagree with mr. waxman but you agree with him is we need a mandate, in forcible mandate, rigid mandate in this health care bill. mandates are an anathema of the free society. my submission is that they do not work. we have a tremendous mandate right now with the irs. everybody knows you've got to pay income tax and if you don't you may not be sure of the penalties but you know it's bad and you don't want to find out, and our compliance with the irs is about 85%. well, we have 15% of people uninsured and the voluntary system in this country so i don't know how much sure to become more compliance we would get with a mandate, and yet we ask honest people to give up significant freedom when we did the medicare part b program several years ago and part of my job as a member of congress was to go out and talk to people

about the changes coming to medicare and i can't tell you the number of people who would tell me you can't make me take that prescription drug benefit. no, ma'am. i am not here to make you take it. it is there if you want it. well you can't make me take it. i said that's right. you can do what you're doing right now and that's okay. you can't make me take it. what are you doing right now? well i don't have drug coverage. you can keep that no coverage as long as you want. there was a penalty involved and we got criticism for that you didn't sign that the new benevolent period, which at that point was six months after initiation that they would pay if you got sick because we were trying to make ebenefits look more like insurance and less like entitlements and the story with medicare part b of the wit is in perfect it has provided a benefit now to 92 or 93% of the seniors who have a prescription drug benefit of some sort and 92

or 93% are very satisfied so that is a pretty good track record. we did that without a mandate and the model that we should follow in my opinion is that model which is to create programs people want. if you get a mandate which is a program you want but if you get a mandate then there is no reason for you to try to compete for any of these subscribers business. and yet, how much better with libya few said that we are going to create programs people want and will want to stay with us over time. i wish i could have a longitudinal relationship with my health insurance company. i have with my car insurance company since i was 18-years-old but health insurance you shop around every year to get the best deal and when you are in a small business or your employer shops around for the dustin deal and as a consequence you want to keep your insurer over time. one of the reasons i went with a high deductible policies so i could have a longitudinal relationship with my insurance company. we are better off if we construct programs people want

rather than tell them what they have to have. now you've got i think it's already come up that it would -- the increases in the california individual market could be as much as 106% of the confines of the house passed a bill and that is a pretty significant figure. now, mr. stupak is correct, none of the benefits start for four years which might not happen to you right away. but of some point because of the benefits is going to go up, and the truth is no one really knows because we do these budget scores, but no one really knows. look how far off the mark we were when we passed medicare in 1965 with what it costs us today. and mr. waxman talks about your medical loss ratio. look at our unfunded liability in medicare and medicaid. that's what -- that's what's stirring people in the face. yeah, we've got a lot of problems we have to face the are complex and are hard to do and we need to do them. we have a bigger problem staring us in the face which is the unfunded obligation that we have with our existing public option if you will get those bills are going to come to be for any of

us really have planned, and we've got -- that's really where we need to be focusing right now. we are not doing our part very well right now with medicare and medicaid. before with 50% of the market that we pay for right now, we are asking to go to 75% at the federal level. that's a -- that is a big task of the american people and why we are getting so much push back on the bill. they don't think we are to many good job with what we've got now and they don't want to give another 25% of the market. thank you. i yield back. >> thank you, mr. burgess. but me wrap up a couple questions if i may. miss braly, you indicated the drivers for the increase, the 39 present increase that you are seeking doctors were 6%, hospitals 4% i think you said, and pharmaceutical 13%, right? >> hospital trend is about 10%, the trend of six and pharmaceutical trend is about 13 for california for the 2010 rates. >> the case of its about 29%.

does that leave 10% for administrative cost? >> cindy can take you through the different elements that went into the price increases. >> i'm trying to keep this simple so the average people like me can understand how you come up with 39%. if you are projected -- and these are all projected use it, right? what is the other driver than? >> the trend i'm describing the trend in each of those elements. >> secure 39% and looking for a destination for your going to need? >> cindy can give more detail how we got to the 39%. because you have rising health care costs and you also have what we call ed first selection due to the fact that a lot of the -- >> ms. miller will submit for the record. but what is the driver then? doctors, pharmaceutical, hospital? what else? >> correct. we are also having adverse selection, meaning the healthy people, their premium is going away -- >> how many healthy people did

you have last year and the individual policies? >> you know, we look -- >> just how many people did you have? >> 800,000 -- >> and many people this year? >> we are expecting 25,000 negative basis between the two regulated companies that will have -- >> 25 -- the individual policy, how many less? >> about 25,000 less we think we are projecting. what happens in the individual product -- >> by understand. >> -- because to go into her policies. >> and they can't afford it. >> part and? >> and they can't afford it. a lot of people in this country go very cause they can't afford it -- >> which is a lost cause because we want to have that customer and we won that customer to have coverage. [inaudible] and cade for 2009 the corporate profits were 2.3, almost to bring for billing because you sold a management company? >> we sold p.m. and we have

operating earnings as well. >> what was your company profit in 2008? >> the profit margins were 4.8% of their relatively similar base, so actually the marchant -- 4.6 and 08, 4.8 is the overall margin in 2009. >> so that is about the same as 2009. what would that be in the dollar signs in 2008? >> i'm not sure. we probably had $62 billion worth of revenue totaled so not a disk similar number. -- a 2.4. >> we can get the exact -- >> so 2010, when you anticipate it around $15 billion? >> 15 billion? i'm sorry. ceramica isn't that what he said? >> no -- sprick okay, in 2010 where are you going to be? >> we are going to have lower operating terms in 2010. it's a reflection of the economy

and our membership -- >> your profit will be what, 4.8%? >> we expected to be in the same range potentially, yes. >> so you're always expecting that least the last three years or profit will be the same? >> it's been pretty steady in that range, 4.6, 4.8 would be appropriate. >> okay. >> which on a relative basis health care and other industries is very modest. >> well, you might think it's modest but if you're looking at a 39% increase or in michigan when you proposed 56% increase that's not honest. >> we are not lacrosse blue shield of michigan. >> i know you're not, but -- michigan is non-profit and you are nonprofit -- you are for profit, i'm sorry. you are in maine and they've had double-digit increases. you mentioned earlier about mean the one that dominates. >> meen is one of the places we are one of the few players left

in the individual market because others have left. >> the less players in the market the easier to manipulate the market. because your size. >> what happened is the regulatory environment and mean and particularly the individual market was regulated in the way it was. everyone left except us. pro we are not going to leave, we are going to stay in our geography and continue to serve our members. >> meen is expected to be 23% this year, right? >> we filed for a rate increase and they denied that and we are in litigation with the regulators about ability as provided in the statute to have appropriate margin. >> does the doctors' costs 6% or is it less than maine? >> the dr. costs are high and other parts of the country is one of the most high -- because it 6% to california? and looking for the drivers and

mean. you have drivers in california which the doctors are 6% from a hospital 10%. >> i can take that question mr. chairman. the driver -- >> what is it? >> of the top of my head i don't know the trend. the driver in may and its guaranteed issue and there is no requirement for people -- people wait until they are sick to purchase coverage and it drives up the cost of care. maine has the highest cost -- >> guaranteed issue is you are guaranteed to present a policy and it's up to the consumer whether or not they can afford it. we call it purging the individual market. >> only people who know they are going to incur health care costs more than the premium by the policy and that's not a sustainable business model and that is why all the other insurers left the state because they were forced to lose -- >> that's not the last panel said. they don't take insurance because the expect to gain more than what they pay. the last panel they basically paid and never accessed it

because you have such high deductibles and co-payments and everything else. >> obviously there are people using the coverage because otherwise our medical loss ratio would be zero, and that is insurance. you buy it when you don't need it so that it will be there when you do need it and if everybody waits until the need it to buy it we've result of the situation that we have today in the individual marketplace pure we have escalating insurance cost which is again why we have talked about the fact that we need sustainable health care reform and need to address not just the insurance market reform which we agree need to occur but you also have to address the underlying cost of care. we are only charged with the cost that come through to us. >> i still will see how you got the lead could justify 39% -- >> the average was 25. you want to talk about each element -- estimate we have all witnesses today say they are at 39% but using the average --

>> i don't know how the panelists were selected -- and again we don't like raising our rates that much. we know it is a hardship on these people but at the end of the day -- >> do you believe you can actually raise your rates where no one will want to take your policy any more? >> part and? >> do you think you are going to finally get to the point -- i said earlier -- duty key will get to the point where basically you are killing the goose that laid the golden egg? no one will be able to afford you? >> it is an issue that we've got to get to the underlying cost of care because we want access to health care. there are wonderful at the enzus, wonderful technologies and we want to make sure that we continue to have access and our customers continue to have access it needs to be affordable, so we have to think about how -- >> do you believe you will be at a point no one can afford it? >> i think that as human beings we greatly value our access to health care which is why we continue -- >> i agree and every family has to make a value judgment, can i afford it today or not.

when my rates go up 39% as the first panel said we look at it and pretty soon it's going to be can i afford it anymore, dwight just drop it and hope i don't get sick? >> which is why we are in the market singing we have to get to reducing health care costs making sure people are not getting unnecessary procedures or redundant procedures. we played that role in health care to eliminate us from the process eliminates the opportunity to get to that value equation without us -- >> i don't disagree but for the average family when they are sitting their saying migrates just went up 39% or if you want to use your words the average in your case 25% and man i can't afford any more it is as much as my house payment as the first panel said, then i look at the end of the year and are not coming you made $2.358 billion salaries are in millions of dollars for executives how can i sustain that because i'm the one who paid it, not them and you're getting to the point no one can afford it.

>> and we are serving 34 million americans across the country, and our goal and desire is to try to get for them affordable health benefits that they can continue to access the quality care, the drugs they need and want. >> when i came to congress like the first panel, small business people, 64% and people have health insurance. now we are down to about 34%. that's why we have to something on health care in this country because the cost is killing us and we are going and are doing -- and are doing. >> can i ask one last question? we have a vote in a minute. do you have an opinion as to whether or not it will bring down the health care cost? >> i believe it is not going to affect health care cost one way or another. >> is it going to affect your business? is there a reason not to it? >> the unintended consequence we worry about from the mcpherson bill is there are shared data

with the evolution of health i.t. in particular. if we address some of the call with the opportunities through the sharing of data we heat for those to be eliminated as part of this process. >> the would be true in anything. infection control ideas, identifying and eckert did indeed is going to be critical -- >> exactly. as the health itea the chances and we are investing to make sure we can use that data as meaningful information we would hate for that to be eliminated as an unintended consequence of that repeal. >> what about professional baseball. but the real unintended consequences? >> no consequence. >> that is the flood case. you don't want to go there. with that, let me conclude this panel and thank you both for your testimony today. that concludes all questioning. i want to thank all witnesses for coming today and for their testimony. the committee will provide members of ten days to submit additional questions for the record. i ask unanimous consent that the content of the documents binder's be entered in the

record provided the committee's staff me free dak any information that is business proprietary relates to privacy concerns or else all enforcement since. without objection the document binder will be entered in the record. and also ask consent a letter from mr. dingell to the national association of the insurance commissioners and their response dated to do for the 17th, 2010 be submitted as part of the record. without objection, the documents will be entered in the record that concludes the hearing. the subcommittee is adjourned. thank you, all, again. [inaudible conversations]

[inaudible conversations]

this hearing will come to order. madam secretary, we are delighted to welcome you back here before the committee. if i can just say quickly as soon as we have a quorum madame secretary, we are going to interrupt quickly for a goal and are you will support wholeheartedly which is to get a bunch of state nominations out of here and a couple of legislative items. so, the minute if you don't mind we will interrupt to do that. we had this scheduled during the snowstorm that obviously didn't take place. i don't think any of us can think of the time in history when we have had a greater need for energetic diplomacy to make the case for america globally, and we appreciate your

incredibly hard work and your many travels in the effort to do just that and we welcome the chance to hear from you today. the international affairs budget is the backbone of our civilian efforts worldwide and from fighting hiv/aids to supporting our aid workers and diplomats on the frontline states like afghanistan, pakistan and iraq this budget secures the tools we need for a more effective foreign policy. i think the secretary would join me in agreeing that the funds that we have are not all many of us wish we could have but we are living in a difficult fiscal environment, and they are nevertheless might lead needed for our national security. as defense secretary gates said in expressing his regret that america effectively abandoned afghanistan after the 1980's he

said if we abandon these countries once we are in there and engage there's a very real possibility we will pay a higher price in the end. it is with this history in mind and the lessons learned the hard way we turn to the budget today to have this discussion. the total winter of national affairs budget request of the 58.5 billion represents 2.8% increase over fiscal year 2010 amounts including this year's supplemental. this money is a fraction of a fraction just 1.4% of the overall budget of our country. we are discussing just one 16th of our national security budget and compare that with a 2011 defense budget of 708 billion. it is clear at least to this senator that our foreign policy is somewhat out of balance. this year's budget represents the beginning of our efforts to

change that and to move funds that migrated elsewhere back to the state department budget. one-quarter of the additional 6 billion in this budget for iraq, pakistan and afghanistan is for programs previously funded through the defense department. including iraqi police training and pakistan counter insurgency capability fund. as we grow our civilian capacity we are going to have to defend civilian budgets. for programs that are literally vital to our security a matter how they are funded. as we discussed last year i believe congress ought to get back into the business of writing, authorizing legislation. senator lugar and i have recently introduced legislation authorizing the state department management and operations and passed the foreign assistance revitalization and accountability act out of this committee. madam secretary, i am pleased to support your budget request for robust funding for the international affairs budget and

i look forward to hearing from you as i know all the members of the committee do on a full range of foreign policy challenges which is always what these hearings to get advantage of. for my part if i could just say very quickly i am really pleased to see that this budget includes a 30% increase in funding to address international climate change especially in the week copenhagen. i want to say something about that. a lot has been said about what wasn't accomplished copenhagen but the fact is all of the parties that went there you it wasn't going to be, nor was there an expectation of a final treaty or agreement. what was accomplished hasn't received the attention that it deserves. the copenhagen accord united the world's foremost in a terse and most of the rest of the nation's behind an unprecedented new commitment to reduce emissions and report on their progress and for the first time nations agreed to financing target's.

we are able to convince others to take action in large part because we made commitments ourselves. president obama told the world, quote, i confident america will fulfil the commitments we made cutting emissions at a range of 17% by 2020 by more than 80% by 2015 in line with final legislation. we charge of our workforce and have made our commitments and we will do what we say. those are the words of the president. as a country we put our credibility of a line, and i look forward to working with members of this committee and others as we are now with senator gramm, senator lieberman and others to get a comprehensive energy jobs, energy independence pollution reduction and climate a bill through the senate. madam secretary, eager to hear your thoughts how you think we can keep our word on the range of issues launched from copenhagen but the adaptation of assistance and other issues.

needless to say there are more issues on the table perhaps than any time in recent memory. all of them consequential from iran to north korea to the middle east and you are engaged in all of them and we look forward to having good discussions with you about them today. let me just thank you again on behalf of the country a think all of us are appreciative of your expenditure of energy, and we are particularly grateful to your department and others for the emergency response to haiti. it has been a tremendous effort. i want to thank the people we work with directly who have helped families through a very difficult period some in massachusetts and elsewhere, and we are grateful to you and to the country for the response. it's been a remarkable response and appropriate. senator lugar. >> mr. chairman, i join you in welcoming secretary clinton and we are pleased to have russell

is the opportunity to examine. not only the state department's budget but also priorities and policies reflected in those numbers. our discussion of the foreign affairs budget comes at a time of great domestic economic stress. many american families are dealing with lost jobs, falling in, and declining security and the nation is also attempting to address a national debt situation that limits our policy options and could have grave economic consequences in the near future. in this context, our foreign affairs budget must efficiently deal with our most immediate problems as well as addressing the negative trend is that could undermine the breathing space necessary to promote domestic recovery and solvency. we should start with the recognition that secure international conditions are inherently fragile. we have to expect and prepare for international political, economic and security shocks such as war, terrorist attacks,

energy disruptions from even natural disasters as we have seen in haiti. will defense can undercut our own economy's ability to recover and emergency expenditures that put further pressure on the national budget. this is especially true at the time of economic stress. we know that from history, society is living with severe economic conditions often do not make good political choices. economic desperation can spawn ethnic rivalries, demagogic governments, extremism and violent conflict within and between nations. the united states is heavily engaged in afghanistan, iraq and pakistan and these front-line states will require substantial resources. its vital the be used effectively. each of these countries present unique and difficult transparency to allegis. if our investments are to be successful we must insure strong implementation, monitoring and review mechanisms are in place

that can account for the vast amounts to be spent in the coming years. beyond areas of heavy diplomatic and military presence, the most critical expenditures are those that prevent problems and spiraling into crises. in my judgment the wmd proliferation, energy insecurity, global food shortages are the underlying threats most likely to create the type of instability that can lead to conflict and thereby the real our domestic agenda. i know the president and you, secretary clinton share my concern with these problems. i appreciate that additional funding is being devoted to this department's non-proliferation and energy diplomacy activities. countering the threat of biological, nuclear and chemical threats requires robust engagement around the globe and department nonproliferation experts are making important contributions in the former soviet states iraq and

elsewhere. state department efforts to expand the number of the progress and front-line states will only grow in the years ahead. likewise bolstering the multilateral nonproliferation mechanisms such as the international atomic energy agency. there is a vital contribution to meeting the threat of wmd. the foreign relations committee has paid much attention to the impact of energy security of our foreign policy. i am encouraged more emphasis being given to energy concerns at high levels in the state department our energy crisis isn't defined by a single threat, our current energy mix produces near-term concerns of foreign oil supply of manipulation and price volatility which will grow over time. wasted economic gains from attainable energy efficiencies are rather -- from energy efficiencies are a drag on economic recovery. and we are also concerned about the possible crises that could

occur a dramatic climate change takes will dustin chairman pointed out. while some threats share solutions, others require us to prioritize policies to measure it with relative immediacy of the threats. i especially appreciate the strong and visible commitment that you come secretary clinton, have made in addressing global ponder. unless the nation's work together to reverse the negative trends and agricultural productivity, we may experience frequent food riots, war fervor for the food sources. we almost certainly will have to contend with mass migration and intensifying the global health issues stemming from malnutrition. with these factors in mind, senator casey and i introduced the global food security act last year. we are hopeful it will serve both as a practical starting point for improving the efficiency of the united states and global efforts in this area and as a rallying point for those who agree that food

security should play a much larger role in our national security strategy. the lowercase eagle passed by the foreign relations committee may 13th, 2009 is the product of more than two years of study involving numerous foreign country visits and consultations with agriculture and development experts. over the course of the last year the administration under your leadership has undertaken its own intensive study of food security. as we have compared notes with administration officials it has become clear that the secretaries global ponder and food security initiative has reached many of the same conclusions as we reach, most efficient ways to expand food production and address under. both of the lugar casey bill and the global hundred and security initiatives focus on increasing agricultural productivity and income that is promoting

research and technology being attentive to the special role of women farmers and emphasizing the nutritional needs of children. both which construct partnerships with host country governor indigenous organizations and institutes of higher learning and the private sector. and i look forward to working with you to pass the global food and security bill. i would also mention the importance of fixing our foreign assistance programs. if we are to avoid any experimentation, usaid must have a decision making will on the capacity to evaluate programs and disseminate information about the best practices and methods. these are reflected in the bill senator kerry and i produced last year, the senate bill 1524. the foreign assistance revitalization and accountability act. i am eager to review this department's quadrennial diplomacy and development view and the national security council's presidential study directed on the development when

they are ready. but in the meantime, congress should be offering its own ideas on how to improve our government's development capacity and the kerry lugar assistance reform bill has strong support in the community and is co-sponsored by a bipartisan group of now 24 senators the lesson of whom are members of this committee. this level of backing for a bill related to the foreign assistance is extremely rare. the bill has garnered wide support because it strengthens usaid and emphasizes creature evaluation and transparency of our foreign assistance programs to ensure we maximize the dollars that are available. i'm hopeful the executive branch will recognize the bill co-sponsored by a majority of the senate foreign relations committee and nearly a quarter of the full senate should be given substantial weight in the review process. once again we appreciate very much that you are with us today and we look forward to our discussion on these and many other matters.

thank you, mr. chairman. >> thank you for a much, senator lugar. we have a quorum now that the move to the agenda as we can get the secretaries testimony. there are 15 nominations, for legislative items in the lists on the agenda. the legislation includes senate 2961 the lugar bill that encourages u.s. treasury to support the debt relief for pt from the international financial institutions. i understand senator demint would like additional change to this bill but that does not preclude his support at this point in time so we will agree to work with him prior to the consideration to address his concerns. the agenda also includes the senate resolution which reintroduced with the senators casey and menendez, john miranda and nelson and that is on the recovery rehabilitation rebuilding of haiti following the humanitarian crisis. there has been one request for a holdover on one nomination and so we will vote on that nomination of the next business

meeting. so i'm not aware of any request for a roll call vote. if there is not i would suggest we vote on block. is there for the date? >> let me thank senator lugar and hewey obviously this is not a comprehensive response to the haiti issue. it's trying to do with the debt issues that he has and to look more to the grants than loans at this point given the problems. we originally included all material dealing with trade issues to eliminate any barriers that exist to get job opportunities, economic opportunities to read the jurisdiction of that involves finance committee and others so we have to be sensitive about those concerns so we will try to include those when we get to the floor of this as well and the second part of the bill encourages the trust fund to be built internationally to deal with infrastructure needs just staggering for those on the issue. i want to thank senator lugar and your feet to you, mr. chair

for being supportive. >> thank you, senator dodd. if i could comment and then recognize you. your leadership in that arena for years is well known and appreciated and i just want to thank you for that you have come back from a trip to latin america and we appreciate and honestly as i know they do your continued vigilance on the issues so we thank you for that. >> i want to thank you for including the resolutions on sudan and yemen this is essential to the counterterrorism efforts but the need for the broad comprehensive framework and the sudan obviously we have critical year in the future of the country so i thank ups too couldn't agree more. is there further comment. if not we will vote on glock. all of those in favor aye, opposed, nay. the icepack have it in the agenda is approved to. thank you for letting us do that and we'll forward to your

testimony. appreciate it. >> thank you mr. chairman. senator lugar members of the committee it is a pleasure to be back in the senate. to be with all of you and participate in this hearing. when i was last year to discuss the budget emphasized my commitment to elevate the diplomacy and to limit s-corp pillars of american power and since then i have been heartened by the bipartisan support of this committee interest congress. i want to thank the chairman and ranking member it all of the members for bipartisan support in moving state department nominees. 140 were confirmed in 2009. we are now looking to get up and nominated for your consideration the leadership team at aid and we are grateful for the expeditious support and we hope they can move quickly when they hit the floor but i thank you

very much and let me also take this opportunity to express appreciation on behalf of the men and women who work every day at the state department at usaid here in our country and around the world to put our foreign policy in action here the budget presented today is designed to protect america and americans and advance our interests and values. fiscal year 2011 request for the state department and u.s. aid totals $52.8 billion. that is a $4.9 billion increase over 2010 but as the chairman pointed out of that increase, 3.6 billion will go to supporting efforts in front line states. afghanistan, pakistan and iraq. other funding will grow by 1.3 billion which is a 2.7% increase that will help address global challenges, strengthen partnerships and ensure the standiford bay and usaid are equipped with the right people and resources. over the past six weeks in haiti

we've been reminded again of the importance of american leadership. i'm very proud of what our country has done, and we will continue to work with our nation and international partners to address ongoing suffering and transition from relief to recovery. but i'm also acutely aware this is a time of great economic straight for many of our fellow americans. as a former senator i know what this means for the people you represent every single day. so for every dollar we spend as a senator lugar said we have to show results. the slightest support programs vital to the national security, the national interest and leadership in the world while guarding against waste, duplication, irrelevancy and i believe we have achieved those in this budget. these are more than numbers on the page. ditto the story of challenges we face and resources needed to overcome them. we are fighting the two were

smack that form this the went sacrifice of civilians as well us troops. we've pursued a dual track approach to iran but has exposed its refusal to live up to its response of the bodies and help achieve a new unity with our international partners. iran but the community with little choice but to impose greater cost for its provocative steps and we are now working actively with our partners to prepare and implement new pressures to iran to change its course. we also achieved unprecedented unity in response to north korea's provocative actions even as we leave the door open for a restart of the six-party talks. and we are moving closer by the data refresh nuclear agreement with russia, one that advances national security while furthering president obama's long-term vision of a world without nuclear weapons. with china we seek areas of common purpose while standing firm. we are making concrete our new beginning with the muslim world, we are strengthening partnerships with allies in

europe and asia and friends in our hemisphere and countries around the world from india to indonesia, south africa, brazil and turkey and we are working under the leadership of former senator george mitchell to end the impasse between israelis and palestinians. at the same time we are developing an architecture of cooperation to meet transnational global challenges like climate change and use of the planets oceans. with regard to the laughter i want to reiterate my support for u.s. exception to the convention of the law. our country stands to gain immensely from the treaty. everything we know from what we are picking up with respect to other countries yules to eight could use of the tools that we will lose out in economic and resource rights in terms of environmental interest and national security. in so many interests, some instances our national interest and common interest converge.

we are promoting human rights from africa to asia to the middle east, the rule of law, democracy, internet freedom, fighting poverty, hundred and disease and working to ensure economic growth is broadly shared principally by addressing the rule of girls and women and i want to applaud the chairman and subcommittee chairwoman barbara boxer for putting this issue on the back of the foreign relations committee. our agenda is and vicious because our times demand it. america is called to lead. i think we all believe that. and therefore we need the tools and resources in the 21st century to exercise the leadership wisely and effectively. we can very our heads in the sand and pay the consequences later or make hard nosed targeted investments now. let me just highlight three areas where we are making significant new investments. first, the security of the front-line states. in afghanistan we tripled the number of civilians on the

ground, civilians are in bed with our troops and marja in areas going on. when an area is cleared they are a part of the american team along with our international allies who go in to hold and build. our diplomats and development experts are helping to build institutions expanding economic opportunities and providing meaningful opportunities for insurgents ready to renounce violence and join their fellow afghans in the pursuit of peace. in pakistan the request includes $3.2 billion combating extremism, promoting economic to the limit to strengthen space institutions and build a long-term relationship with the pakistani people. that is the vision of the initiative and this includes funding for that and i want to thank you again, mr. chairman and senator lugar for your leadership. the request also includes a 59% increase in funding for yemen, senator feingold, to help

counter extremist threat and build institutions and economic opportunity. in iraq we are winding down our military presence establishing a more normal civilian mission. civilian efforts will not and cannot mirror the scale of our military presence but rather they must provide assistance consistent with priorities of the iraqi government so our request includes $2.6 billion for iraq. these are resources that will allow us to support the space process and ensure a smooth transition to civilian wide security training and operational support. as the funds allow civilians to take full responsibility for programs, the defense budget for iraq will be decreasing by about $16 billion. that is a powerful illustration of the return on civilian investment and illustrates the point that the chairman was making that this is part of the security budget for the united states and should be seen as part of that whole. we are blessed with the best troops in the world as we have

seen time and time again but we also need to give our civilian experts resources to do the civilian jobs, and this budget takes a step in that direction. it includes $100 million for a state department complex crisis fund replacing the 1207 fund through which the defense department directed money toward crisis response and it includes support for the pakistan counter insurgency capabilities on which previously fell under the defense department as well. secretary gates and i are working literally hand-in-hand and are committed to having a seamless relationship between the defense department and the state department and u.s. aid to further american security. the second major area is investing in development and this budget makes targeted investments and fragile societies which in our interconnected world bear heavily on our own security and prosperity. these investments are a key part of our effort to get ahead of crisis rather than just respond.

positioning us to deal effectively with threats and challenges that lie ahead. the first is in health. building on our success in treating hiv, malaria and tuberculosis, our global health initiative will invest $3 billion over six years starting with 8.5 billion fy 11. to help our partners address specific diseases and equally importantly build strong sustainable health systems as they do. this administration is also pledged to invest at least $3.5 billion in food security over three years and this year's request includes 1.6 billion of which 1.2 billion is funded through the state department. and i greatly appreciate the work that senator lugar and senator kerry have done to help target the united states effort when it comes to global hundred and food security. so this funding will focus on countries that have developed effective comprehensive strategies where agriculture is

central to prosperity and hunger remains widespread. on climate change we could not agree with the chairman more. therefore we requested $646 million to promote the united states as a leader in green technology and to leverage other leaders cooperation including through the copenhagen accord which for the first time to underscore the german's point brings developing and developed countries together. this is such an important initiative. we need leadership from the rest of the world. this is an opportunity for us to push this initiative and ensure that we have support to give to the core climate change activities and to spread the burden among other countries so they share part of the responsibility meeting this global challenge. the budget also includes four went 2 billion for humanitarian assistance programs, our efforts in haiti made clear state and

usaid must be able to respond quickly and effectively. all of these initiatives are designed to enhance american security, help people in a meeting and give the american people a strong return on their investments. our aim is not to create dependency. we don't want to just pass out fish, we want to teach people to fish and we want to help our partners device solutions they can sustain over the long term. in the essential to this is a focus on advancing the quality of opportunity for women and girls. they are a key drivers for economic and social progress. and that brings me to the third area that i want to highlight. none of this could happen if we did not retrain, eckert and empower people for the right job. state department and usaid are full of talented committed public servants. but unfortunately we have too often failed to give them the tools they need to carry out their missions on the ground. rather than building their

expertise, we have too often rely on contractors. sometimes with little oversight and often with greater cost to the american tax people. this budget will allow us to expand the foreign service by 600 positions including an additional 410 positions for the state department 200 for usaid. it will also allow us to staff the stand by element of the civilian research core, a critical tool for responding to crises. while deploying these personal generates new expenses in some accounts it does reduce expenses and others by changing the way we do business. we are ending an overreliance on contractors and finding opportunities to save money by bringing these functions into government and improving oversight so mr. chairman one thing should be clear from the much of the state department and usaid are taking a lead to wrangle the united states

foreign policy. as we finish the first quadrennial develop review and as the white house finishes the coordination of the presidential directive, we have a unique opportunity to develop and match resources with priorities. the que br will help ensure we are more effective and accountable and i want to thank all of you for your individual contributions on so many of these issues that are important not only to your constituents but our country and the world and mr. chairman i look forward to continuing to work close with this committee and i would be pleased to take your questions. >> thank you for a much, madame secretary. we will do seven minute rounds. recently i just came back from pakistan and one of the things they repeatedly brought to my attention, the fragility of the

economy obviously but also the sort of balancing act that they have to perform which you are well aware of in terms of their public opinion, the relationship with the united states and what they are called on to do -- de pointed out they are about to undergo another round of volume of negotiations and the pressure already of the imf restraints have been significant in terms of price increases and other things their citizens are feeling. i wonder if you would sort of comment on what other steps we might contemplate that can have an impact. we can have a very significant amount of money going in and additional assistance, the 3.2 billion you talked about, but it strikes me that there is a broad economic challenge and provision of services challenge to their people that's going to have a profound impact on the outcome of what is happening in western pakistan and ultimately

afghanistan and you are no stranger come madame secretary, to our thinking that what happens in pakistan will almost be an important, as important to what happens on the ground and afghanistan. therefore, should we be thinking about a free trade agreement or a broader free trade agreement or something that is going to send a stronger signal from us about the economic possibilities or should we work with the imf to make sure the next round doesn't result in an unpalatable unacceptable pressures on their citizens so that we on to the good we are trying to do in all these other efforts? >> chairman kerry, do have asked one of the most important questions that we have to figure out how to answer. to the credit of the pakistani

government and president zardari, they have complied with the imf conditions. they raised the price of wheat, they raised the price of electricity, the of demonstrated a political will, which house resulted in some positive economic outcomes. but they have a ferry her difficult road to negotiate any of them for several reasons, and i will tell this committee what i told a group of pakistani business leaders with whom i met when i was there, it was a very large prestigious group representing a broad cross section of the pakistan economy, and i told them we did need to do more to promote trade and i