is live coverage on c-span. >> our speaker today is at the center of a lot of interesting issues of today's washington. epa administrator lee said jackson, who declared greenhouse gas emissions a threat to the public welfare, is being criticized by senators and congressmen from both parties and is being sued by a least three states. she is at the center of the debate between those who think the government should require businesses to cut global warming emissions and this is such a move would harm an already fragile economy. senator jay rockefeller and several fellow democrats are asking them to wait two years before regulating carbon emissions is it will harm their coal producing states. republican senators, led by a senator from alaska, one to go further and stop her from ever

regulate such missions to the governors of texas, virginia, and alabama have all souter, claiming her plans will kill jobs. in response, she has agreed to delay regulating carbon emissions by the end -- until the end of the year. still, she plans to issue rules for greenhouse gas emissions by next month as congress is held to create cap and trade program to cut global warming emissions. global warming is not her only issue. in her first year at epa, courageous is it the first new national small brutal in 35 years and his governing chemical use and consumer products for the first time in three decades. she sets to finalize next month's new mpg rules on cars. she finalize roles to cut cargo ship pollution by 80%. jackson is the first-ever american to serve as epa administrator. before relieve the epa, she was chief of staff to new jersey's governor and commissioner of that state's department of environmental protection. please welcome to the national

press club, epa administrator lee said jackson. -- lisa jackson. [applause] >> thank you so much for that provocative introduction. [laughter] and in afternoon, everyone. i happen to be a little bit sleep deprived this afternoon. like a lot of you, i was up watching the oscars last night. if any of you so much with your feet, you know i predicted "avatar" to win best picture, so i missed the mark on that one a little bit. but even if the movie with the environmental message did not win, i was so proud to see best picture go to the movie with the woman director. today i am happy to have a chance to bring you the best of both of those two experiences for our speech today. as i get into my speech, i ask you to remember that the movie

with the environmental message has actually made a lot of money. [laughter] i truly am grateful for the opportunity to speak about how the good people at the environmental protection agency have been making moves. we restored science is the factor in all our decisions. we develop rules that will protect old -- protect children, keep people healthy, save lives. we've taken long overdue action on climate change, including a revolutionary clean cars program built on the historic finding the greenhouse gas pollution endangers public health. on that last point, the overwhelming scientific evidence was recently met with arguments that washington, d.c., experienced an unprecedented blizzard in record snowfall this winter. this unexpected change in our climate somehow disproves climate change. today, i want to talk about a

misconception that threatens to do more harm to our progress as a nation than the carping over climate science. that is the misconception that we must make a choice between cleaning up our environment and our growing economy. i have worked and environment protection for 20 years. i have seen meaningful environmental efforts that time and again with predictions of lost jobs and revenue. lobbyists and business journalists have done such a good job of engraving and into our way of thinking that many of us believe, sadly, that we must choose between our economy and our debarment -- in vernon. people have not done the best of of communicating our side. we have lost the messaging war, and we have to work to present the alternative. but bell said history and the fact there is out. i am here to show you to the the choice between the environment in the economy is indeed a false choice. well conceived, effectively implemented in bern --

protection is good for economic growth. let me repeat that. in fairness to production is good for economic growth. do not get me wrong. environmental regulations are not free, but the money that is spent is an investment in our country and one that pays for itself. internet to protection makes us healthier. it eliminates contributors to costly and often deadly diseases like asthma, cancer, and heart disease. we in this sun is one of 23 million americans with asthma. i know the financial and emotional burdens of hospital visits and doctors' appointments. when the air is dirty air the water is contaminated and people are getting sick, those kinds of health costs are multiplied by millions of families. they are burdens of small businesses trying to provide health care to their workers. good internal protection is critical to our health, and because of that, critical to our economy.

second, environmental protection makes our communities more prosperous and our work force more productive. those of you with kids in college will understand the words of a man who said to me, businesses come to communities like parents can colleges. they look at the environment to make sure it is healthy. the look of the people to make sure they're getting what they need to thrive. the want to know that this place means a better future, and they do not put their money down that they do not like what they see. this is something that we see all the time in our ongoing work on environmental justice. the idea is that environmental degradation is an obstacle to economic prosperity is a pillar of the environmental justice movement. in a place for new jobs are needed the most, in turn into degradation is an entry barrier for new investments in businesses. it is what we see in the inner cities where air pollution makes kids miss school. what we see on tribal lands were open landfills are rampant and

drinking water is polluted. earlier this year i met with a tribal leader told me that his community was facing 50% unemployment. what we see in mississippi, which is having trouble attracting jobs because their water, even though it meets federal safety standards, is brown. poison in the ground means poison in the economy. a weak environment means a weak consumer base. and an unhealthy air means an unhealthy atmosphere for investment. but the claim green help the community is a better place to buy a home and raise a family. more competitive in the race to attract businesses and as the foundation it needs for prosperity. these are two reasons why our environment is essential to our economy. but what -- i want to focus on the role environmental as a place for a critical driver of our economic success. our capacity for innovation and invention. just yesterday, it was written

that america still has the best innovation culture in the world. he immediately followed that by saying, but we need better policies to nurture it. this is was marred environmental protection does. it creates a need. in other words, a market for clean technology. and then it draws innovation and invention. in other words, new products for that market. this is our convenient truth. smart and furniture protection creates jobs. -- smart environmental protection creates jobs. that might be difficult for some people to handle. so let me lay out some common ground. everyone wants a clean environment. 10 out of 10 republicans surveyed want clean air to breathe. 10 at up to and democrats think safe water is important. as col 20, and they would actually agree. the boston globe editorial put it last week, even anti- government protesters know it is

no fun having a two-party with contaminated water. [laughter] a received as many letters from red states as i receive from blue states. from new bedford, massachusetts tatar creek, oklahoma. last year an amendment for epa to locate residents away from lead pollution in kansas was sponsored by republican senators. senator roberts called it one of the rare instances of true bipartisan support. oftentimes, the same offices that are blasting out press releases on the overreaching, faceless epa bureaucrats are also asking the same bureaucrats for help. it is a textbook example of irony and is all too evident in today's politics. when it comes to people's health, everyone wants a strong environmental protection. everyone also wants a strong economy. we all want robust job growth. no one favors higher costs for

starting businesses are manufacturing products. i have two teenage sons which means that by a lot of stuff. i am in active american consumer, and the last things i want to see are higher prices for food or utility bills or shoes or clothes. so we all want a clean environment, and we all want a strong economy. but you may not realize is that we have all seen proof that we can have both. in the last 30 years, emissions that this extenders are bullish as a cause smog, acid rain, lead poisoning, and more decreased 54%. at the exact same time, gross domestic product grew by 126%. that means we have made huge reductions in air pollution at the same time that more cars and on the roads, more power plants went on line, and more buildings went up. the question is, how does that happen? the answer is innovation.

innovation is the sweet spot. it is where our economic and environmental interests meet. it is or businesses and conservationists can come together to hash out solutions, solutions that have filled american history with environmental achievements and help us lead the global economy. americanism to were leading environmental technology industry. by conservative estimates in 2007, environmental firms and small businesses in the u.s. generated $282 billion in revenues and $40 billion in exports. supported 1.6 million american jobs. and that number does on include all the engineers and professional services firms to support those businesses. take for example new jersey's corporation which landed commercial production of the catalytic converter. if you drove here today, your car had a catalytic converter in it to burn unleaded gasoline. today those things are standard, but 30 years ago when epa used

the clean air act to phase in unleaded gas for catalytic converters, they were extremely controversial. many major automakers oppose them. the chamber of commerce claimed "entire industries might collapse." using the clean air act in this way was said to be a poison kill for our economy, as in the midst of all too familiar around washington today. yet the auto industry survived. dangers of lead pollution in our air is 92% lower than it was in 1980. by 1985, reductions of lead in our environment estimated health benefits of $17 billion per year. the initial cost of the rule was paid back 10 to 13 times over. in 2006, the corporation was bought for $5 billion. that is just one good example of how it works. the new environmental group led to new innovations would lead to -- will lead to new innovations

with lead to new jobs. you may remember the phase-out of ozone depleting cfc's. there were the chemicals in aerosol cans and other products that led to a growing hole in the ozone layer. i remember people wondering if there were going to have to give up hair spray or deodorant and not being too happy about it. and they were not the only unhappy ones. the chemical industry predicted severe economic disruption. refrigeration company's forecast of shutdowns and supermarket coolers and chiller machines used to cool office buildings, hotels, hospitals. companies that use cfc's in manufacturing believe the transition would be next to impossible. the demand destruction never came to pass. refrigerators and air conditioners stayed on. when innovators to cut the manufacturing challenge, they found alternatives that worked better than cfc's

some develop new technologies. by making their products better and cleaner, the american refrigeration industry actually gained access to overseas opportunities. these examples speak to a long history of innovation, new jobs, and better health care environment protection. yet, many still claim that regulation is too costly and believe the scaling back is the best thing to growth. we have already seen that in action. this theory that less regulation should be good for the economy was put to the test in the last administration. in that time, there was no apparent benefit for businesses or consumers. prices on most products went up and costs of fuel increased astronomically. in a savings and men have been expected for businesses certainly did not translate into higher wages for american workers. in fact, the health impact for millions of americans suffering

from asthma, cancer, and heart disease coupled with a steady rise in health insurance costs created yet another level of success for families and businesses. today where is slowly but surely pulling up and out of the economic downturn. but many of their #!)rrn@ @ @ @" prosperity. we have to abandon old disputes when working in partnership on new innovation.

partnership like the clean cars program which took shape and president obama brought together automakers, autoworkers, governors from across the country, and environmental advocates to craft an historic agreement. cleaner car standards will mean at 950 million tons of carbon pollution cut from our skies. $3,000 in savings for drivers of clean cars and $2.3 billion that can stay in home in our economy rather than buying oil from overseas. it will also mean new innovation. american science is can step up to produce new composite materials that make cars lighter, stiffer, and more fuel efficient. our inventors and entrepreneurs can take the lead in events battery, technology for plug-in hybrids and electric cars. manufacturing can produce this new components, which begins up to all the makers in the u.s. and around the globe. new environmental protections, and new innovations means new jobs.

this is the direction we're moving in 2010 as well. epa is already proposing smog reduction and finalizing the first standards and 35 years. we're developing air pollution standards that we know will foster innovation. and we're working in partnership with utility companies to figure out how we get there. boosting production and use of advanced biofuels. to double our use of renewable and break our dependence on foreign oil. that will benefit world communities, smart -- sparked new demand, and the clarity on regulations stand, promote investments to expand in effectiveness and uses of renewable biofuels. and of course, we will continue to face down in our climate crisis and move into the clean energy future. as you might expect. we are running into the same old tired arguments. once again, industry lobbyists

are trying to convince us that change will be absolutely impossible. once again, alarmists are claiming that this will be the death knell of our economy. once again, they're telling us we have to choose. economy or environment? most drastically. we're seeing efforts to further delay epa action to reduce greenhouse gasoline. this is happening despite the overwhelming science on the dangers of climate change. despite the supreme court's to dozens of a decision that epa must use the clean air act to reduce the proven threat of greenhouse gases. and despite the fact that leaving this problem for our children to solve is an act of breathtaking negligence. supposedly, these efforts have been put forward to protect jobs. in reality, they will have negative economic effects. the clean cars program could be put on indefinite hold, leaving

american auto makers once again facing a patchwork of state standards. without a clear picture of greenhouse gas regulations, there will be little incentive to invest in clean energy jobs. america will fall further behind our international competitors in the race for clean energy innovation. finally, the economic cost of the unkept climate change will be orders of magnitude higher for the next generation, and it would be for us to take action today. i can in good conscience support any measure that has the burden on to my two sons or to their children. i find it hard to believe that the parent gets it to their child, we're going to wait to act. this debate also has this argument over something that the american people and many businesses have already decided on. recent years have seen a growing grass-roots environmentalists and that is directly tied to our economy. informed consumers are demanding more of their products.

business leaders are recognizing cost savings potential of energy efficiency and sustainability, and they're putting serious money into innovation. this is a grass-roots environmental movement that votes with its dollars. seven in 10 consumers say the they will choose brands uttered doing good thing for people and the planet. 74% believe that our companies should do more to protect our planet, and more than half of americans will look for environmentally friendly products on their next purchase. these changes are healthy and not on the margins of their economy. wal-mart, the largest retailer in the world, has said goes to use 100 peace and renewable energy, to create zero ways, and to sell health year, sustainable products. two weeks ago, the announced a plan to cut 20 million metric tons of greenhouse gas emissions across the life cycle of their products in the next five years. they made the announcement on

the webcast on, of all places, treehugger.com. procter and gamble produces products a touch almost 3 billion people per day. they are planning an announcement next week encouraging all other brands to shrink their environmental footprint. a general mills factory in minnesota is recycling old homes from their serial for biofuel. they're sitting $500,000 in fuel costs in the process. green giant is reducing pesticides and chemicals, water pollution and, with sustainable farming. these are companies we all know and use. best buy, starbucks, and they are responding to consumer demands. consumers want to know that their products do not have a hidden health and environmental costs. companies must respond to parents who refuse to buy baby bottles with bpa in them or that leaves dangerous chemicals in their dirty water. industry can try to resist and

ignore epa, but i know and they know that they resist the forces of the green marketplace at their peril. time is put to rest the notion of economic growth and karen michel protection being incompatible. it is time to finally dismissed this. we need a new approach, one that plays to america's greatest strengths of ingenuity, invention, and innovation. we need to regain the leadership and development of new products that protect our health and our environment. and we need to capitalize on the growing green marketplace here and around the world. that approach would be a return to basics which is a program for the epa in 2010 because this year marks epa's 40th anniversary. when epa began 40 years ago, the first administrator, wrote that the technology which is bulldozed its way across the environment must now be employed to remove impurities from the

air. to restore vitality to our roots and stems, to recycle the waste that is the head with a byproduct of our prosperity. that is just as true now as it was then. we cannot retreat from a rapidly industrialized planet in the global economy. we must integrate conservation and a passion for planetary stewardship in a global rush towards economic growth. on us and good, the anti- government crown must understand that ever expanding economic opportunity is not possible with the house's inability. without protection for the water, air, and land that people depend on, we can only go so far. without clean energy, the global economy but will be running on empty within our lifetime. time to stop denying that to be those stop play on the politics of delay and denial, and start thinking more broadly about what is going to help us all move forward together. which brings me to my final

point. another piece of common ground we all share. we're all counting on the ingenuity and creativity of the american people. now i am done with the false choice between the economy and the environment. i want an epa that is a leader in innovations that protect our health and our environment, and expand to new opportunities. i am not interested in leading an agency that only tells us we cannot do. i want to work together on all the things we can do. this is about rising to meet our most urgent environmental and economic challenges. not shrinking from them, with the sphere -- with the excuse that it is just too hard. that is not a good enough answer. at no point in our history has a problem and solve by waiting putting our heads in the sand. progress is the opinion of the

possibilities firm building a healthier, more prosperous future, and bringing the best we have to offer to the table. it is what we have done before. it is what we have to do again today. it is not something we can leave for tomorrow. i want to thank you very much. i am happy to take some questions. [applause] >> and thank you for your time, administrator jackson, as their numerous questions dealing with climate change. the first question, if you'll step up here and we will address the audience. christine was on c-span this morning, and she was in the climate change the bid is so politicized that the argument for legislation should be entirely about clean air and not about climate change. are you concerned that recent controversy about climate change

science will hurt chances for legislation this year? you think the climate message needs to be downplayed in favor of clean air? >> as that of the environmental protection agency, and will not be in favor not giving the best science to the american people. the science is crystal clear. there is certainly an organized effort to throw doubt in people's minds. there's some indication that may be working on some level. it said of the epa, after continue and stand here and make it crystal clear that the science is not unsettled, that we do know that our emissions of greenhouse gases are accumulating in our atmosphere and interfering with the way our atmosphere is supposed to work. it is changing our climate. it means a catastrophic problems for us going forward. so i cannot, as head of the epa. surly legislatures will do what they will do and politicians will do what they think is necessary to make progress. but i hope we all keep our eye

on the ball here, which is to transition to a cleaner energy. >> given the epa's knowledge of the science and priorities, why hasn't the administration send a legislative principles to capitol hill regarding its preferred approach on climate change? >> i do not think there has been a bigger cheerleader for a transition to clean energy and a need for comprehensive clean energy legislation than president obama. i have joined him several times and we will do again today, that we need congress to act. we have seen the u.s. house of representatives act. now we're frankly waiting on the u.s. senate. the hope has been all along that the continuing efforts in the u.s. senate, and we have some continuing to go on as we speak today, will result in legislation that can pass that house and in a bill that the president and look at. >> is cap and trade the

necessary system to slow climate change or with a carbon tax rather admit -- other methods work as well are better? >> is a trick question. the truth of the matter is that people have varying ideas on how best to deal with climate change. also, how best to use the marketplace. my speeches about the marketplace, to incentivize the move to clean energy. between losses that exists today, exist for now, and the fact that there is no price on carbon, that is essentially free to put as much carbon dioxide into the atmosphere is you want. but there is a chilling on the investment in this to happen nine clean energy technology. the recovery act. lot of public money in to clean energy technologies. but this will not take off. the kind of innovation i just spoke about what happened if we do not see private financing follow. so i think there other ways to put a price on carbon. clearly the president has talked

a lot about the ease with which a cap and trade program fits into our economy. >> and the topic of market oriented mechanisms, your agency's budget for 2011 says the epa wants to examine this for cutting greenhouse gases. some have taken that to mean that the agency might pursue carbon trading programs for some ministries of the legislation for cap and trade to the whole economy cannot get through congress. with the epa tried to forge ahead with carbon trading as they do not pass that? >> first, i refuse to speculate because they believe congress will step up to this challenge, hopefully sooner rather than later. i think people are over reading the budget lakewood. epa has a history of relying on market-based incentives in our regulation as it is. i do not think he should read into that that we have some plan people do not know about to enforce a cap and trade regime. we do not at all. what i have been strong about this, and i think you have heard

in this speech, the ability of the clean air act to be used reasonably in sensibly to help move markets and help drive innovation, to help bring along the transition to clean energy economy. i've gone further. its use rainout can be entirely consistent with legislation to come. there is no reason we cannot do that while watching what is happening on the legislative front and make sure we do not get to that place. >> following on your statement that happen trader carbon legislation will be passed sooner than later. let's a comprehensive plan and said being later the 2010. with a sector specific bill for in areas such as utilities be possible this year? >> there are all kinds of alternate plans that people are talking about now. coughlawhen energy truly does tr economy -- entire economy in

some way. so much of our energy is fossil fuel base. as we move to cleaner forms of energy, we will have to judge practically all of our economy. it will be important as the bullhook a route -- of alternatives to realize the more you move away from an economy wide approach, although you can make some progress, you lose opportunities to harness the private sector investment to look at approaches that are win- win @@@@@@@ @ @ @ @ @ @ @ @ @ @r

generally thought to be said of the art models. we model every regulation we put in place. we do it to look of the impact on the economy. my argument is we have never looked of all the benefits in the economy. but the modeling takes six to eight weeks. it takes a long time because the models are interrelated and complex. and the time, now that we get legislation, but as we get specifications -- [inaudible] >> several months ago, the epa postponed a decision on an ethanol label to raise the amount in field to 15%. they said a final decision would likely be made in mid march, which is next week. since we are about their, do you have news on the issue today? are you still expecting a final ruling in march? >> i am sari. i have to back up a little bit. p epa has already been final rules that encourage the next

generation of biofuels. and grandfathers' in the current supply of ethanol. it is made in this country. that has big an issue and one of real concern. people were afraid they would lose that industry. the waiver issue is different. it is how much of the law can be in gasoline that you put in a variety of applications. cars and other engines. it depends on testing. but i have said that that testing is to be complete. we do not want to find out that the ethanol plant has any and known adverse consequences to engines. that is not good for ethanol. it would not be good for its future and certainly not good for the consumers, the american people. the testing will be done in march or april with the department of energy. >> the u.s. auto industry has been given numerical fuel economy targets to meet for new cars and trucks built. new and modified power plants, oil refineries, and stationary

sources of been told they need to use the best available technology to control emissions. what is that going to be? could you give specific examples of the technologies that a new or modified power plant would use to comply with epa rules? >> i am an engineer by training. it is very hard not to talk about technology all the time. i believe technology is key to the challenge of climate pollution, just like every other challenge we have. the other thing about technology is is, especially in this space, rapidly evolving. i think the best available control technology comes from the clean air act. it comes from an act that foresaw the need to constantly be ratcheting standards depending on where best available control technology is. i will not make news on what technologies are best for dealing with carvin today. but you have heard about a range of them. president obama has been is the co-chair in charge of the task

force to get carbon capture in sequestration technology, the eddied that we need to be able to capture carbon dioxide pollution and then put it somewhere where it will not enter our atmosphere. >> how do you respond to republicans such as senator and hospices without strong moves by china and india to curb global warming, the u.s. would be harmed economically? >> first, i would ask them to read my speech. i really think that we're missing an opportunity if we do not realize that the technologies that they're going to be used to move us into cleaner energy, lower carbon, less water use, all those technologies are going to be born here and to the world. i would say there's no reason to wait for china and india to act if we truly believe that there is a reason, environmental and economic, to act now. there is every reason not to wait. there is every reason to move

forward as expeditiously as we can so we do not see what seems to be happening continue, which is that we innovate, we invent, and then it goes overseas to be manufactured in used because there is no market for it here. >> how do you respond to what some audiences overseas will say about a climate debt? that rich companies, like the u.s. and europe -- soviet union, cause global warming and should have to split most of the bill? >> their arguments about how, on an international stage, to attack a problem like climate change. i think those discussions will continue. i do not have a specific answer on that. you can understand the underlying concern which is when you're talking about developed countries and in talking about nations trying to develop, you can understand the equities and the needs of those nations to try to develop in a way that gives first and foremost their

citizens access to energy, something we probably take for granted in this country every day. the ideal is that as those countries develop, they develop in a way that jumps over dirty energy and moves to cleaner forms of energy. so that as they're growing, and i think technical assistance is a wonderful way to help to insure that. epa has been doing a lot of that word. so have other parts of the government. we can try to avoid some of the problems and some of the issues that we're having to deal with. >> you recently announced a review of the rules surrounding the use of chemicals in consumer products. do you plan to require companies to disclose to the public research showing that the chemicals used in the products are safe? >> well, i think the news is that consumers are demanding to know what is in the products that they buy. more and more the kind of right to know, based on the old right to know legislation, which is

been so powerful for environmental protection as a whole, is foremost in their minds. and companies see that. my speech talked about the needs for companies to prove to consumers, the ultimate end users, and not just individual consumers but even corporate consumers, the products they're buying are safe unsustainable. i believe we're on the brink of finally modernizing the chemical safety laws for this country. when you think about the fact that there 30 years old and about the fact that they have been widely perceived, not just by epa, but by industry as well, as toothless, i think we owe it to the american people to answer their increasing concerns and police for help. and certainly for me, as a mother, as a consumer, it is one of my seven top priorities for epa. >> you have long said you make your decisions based on sound science and the law. how do you make decisions when the science is concerned?

>> the science on climate change is not concerned, but there pieces of science that are uncertain. and as a scientist, as an engineer, i have great faith and comfort level with the india of peer review, independent peer review. i call for peer review all the time. i talked to my staff and i will first ask where the data is from and if it has been peer reviewed. as we learn about chemicals never knew existed and byproducts of processes that we never measure before, we have to. we owe it to the american people not to take that information and estimate for the worst but to test and rigorously studied. we also want to sum up what we know in a timely manner, not years to now when it is too late, to give them the best information they have. that is what we are insisting on every day at the epa. >> your agent to make decisions

every day that affect every american, which means communication is vital. on a scale of a to f, how would you grade the effectiveness of the epa and how would you improve it? >> in my communications staffer here in my audience -- great job. [laughter] i do not want him to get complacent, so i will stay strong b +. i do nothing that is very tall. i do think that epa has to step back and realize that epa is organized bird. about 90% of what we do as an agency is under the water line, a really invisible to the average american. the 10% above the line is the 10% as says there is a plus and the federal government which has 01 mission, and that is clean air, clean water, safe products. that part of our mission, i think, we sometimes take for granted.

probably there is no challenge greater as we looked at our mission and to make sure that people do not think that because we have an epa, i do not have to worry about it. we are rapidly reaching the time where epa cannot do it without citizens taking actions in their own lives. we can talk about cleaner cars, but what will make this thing goes consumers to purchase them. i think it is very important that we not only continue to expand our conversation and not just with environmentalists but with people from all backgrounds and all walks of life, people who do not think of themselves as environmentalists. but making clear that just because those with the epa that they do not have a job to do. >> how does one in baltimore stakeholders be on public interest groups and industry groups in the discussion on epa? >> i think that question is a nod towards the fact that one of -- another of our seven parties

this year is expanding the conversation on environmentalism and working toward environmental justice. expanding the conversation is a mouthful. it means to do you talk to and what you say to them? have a staff member who tells a story about how every year his grandmother would get the buses started to get called and put plastic sheeting over her windows. i always tease him and say she is not part of president obama's weatherization task force. it was probably not about clean energy, but she knew it affected her utility bills. she now limited difference in her quality of life. she is helping our agenda on clean energy and energy efficiency. we have to move to communities come to consumers, and all state and local governments speak to those people and to speak to all people. i am is special interested in speaking to people of color because i think there is a myth out there that is sometimes true but on always that we have other things to worry about as

communities of color. i am an african-american woman who grew up in the subway in new orleans. for me, i did not come to the environmental movement because of its beauty. i came because i believe we have to fight pollution. as prosperous as where's the country, we have to also insist on clean air, clean water, and claim land. >> do you see offshore drilling is part of is more climate change strategy? >> you know, the president has called for it. in understand and agree with his belief that our energy strategy has to be buried in should include increased offshore drilling when it can be done in a way that is protective of the environment. i also think it is important to remember that he is called for other forms of offshore energy. i come from new jersey, a state that has embraced the idea of offshore wind power as part of what it would like to see as its offshore energy mix of the future. i think the conversation about asking communities to think

again about resources that it might have as well as about energy efficiency, cutting down on how much energy you use in the first place, is really important. >> the epa put out a list in late december identified four chemicals that would face stricter labeling and reporting requirements. why was bpa not one of them? does this mean the agenc will not regulate the chemical? if >> will answer the question stubble-second question first. it is a chemical commonly used in plastics and in many consumer products. epa is planning to finalize an action plan on bpu in the near future. so if people are worried that we're backing away from it, they should not worry. the bigger news was the fda's change in its records of the chemical. i do not remember the actual bureaucratic term. but essentially, we're finally it a place where our government says there is real concern.

it is starting to do the work to determine the level of that concern. it is even going far enough to say to consumers in the meantime, here's how to minimize the chances that bpa will end up in water you drink the water you might consume or in your body. >> howdy plan to structure permitting for agricultural pesticide applications? >> these are pretty good questions. the sixth circuit ruling@@@@@@ tell people they need a permit.

that is a huge undertaking. we are doing it in partnership with u.s. department of agriculture in many state agencies. you can rest assured that permit, when it goes out, because so many people are concerned about it, will be out for comment and will be done in a way that i think shows we're building on programs that are already out there as we comply with the court rules. >> reducing emissions from a large oceangoing ships to cut carbon dioxide emissions dramatically. will the epa regulates global warming pollutantsm ships at enter u.s. ports? >> you know, we have already taken, i think, historic steps on oceangoing vessels. there are a couple things to remember. that work has to be done in conjunction with the international maritime community. so we could probably regulate 3

miles or 10 miles or something offshore. many states of said that. but a real comprehensive legislation will come from regulating the ship engines in a way that we change the fleet over time. so a cleaner, more efficient fleet. the real success story with oceangoing vessels as been around particulate pollution. our science has shown that if you reduce the sulphur content of the fuels burned in those ships 100 miles of shore, you have impact's if you do it in california all the way to kansas in terms of air quality. you will see improved air quality from a simple stuff like that. that is up right now in front of the international maritime organization for approval. epa is proud to work with the coastguard and our partners in canada to insist on probably the most stringent -- i think had it not been for the united states

efforts to put on stringent standards for the kind of will bring the ships, we would not see it change. we're certainly happy to continue the kind of thinking. >> how would you characterize the progress of the superfund site cleanup, and what is your strategy for dealing with the more difficult sites such as large mining sites? >> superfund is chugging along. the president's fiscal year 202011 -- 2011 has a budget request for cleaning up sites. that is right on par, just tiny bit under last year's amount. but it continues his call, the president's call for reinstatement of the tax on chemical feedstock that supports the superfund. certainly i do not think there is any argument that we have this magnesite, whether they are mining sites or others, that require an incredible amount of work to clean up. we did the canal in new york

city, for example. while we're proud of the fact that we are at a point in the superfund program molesting this that makes us optimistic that all parties are going to get it cleaned up, it will be a very expensive undertaking. i think more money for the program dedicated so that those in need to do cleanups' know that the government has monday to step in is a very good thing. i think we will continue to not only work on superfund, but there's an increase in the president's budget proposal for brownfield sites. many communities are lucky not to have a major superfund site, but they have these little brown phil sides, this old dilapidated places that have since closed down. they're standing in the way of economic growth. there's more money in this budget because we recognize that a little bit of seed money from the public sector can unlock private investments in those sites. >> another money question. whether the epa's plans for a dressing on top removal money in

its environmental index during 2010? how likely is it that the epa will succeed in toughening mining regulations? >> the epa is currently in the process of reviewing those mountain top mining permits that have been held with three years and years, almost decades would be a fair way to say it, of litigation. this is a practice that is quite emotional for many people in america. there are thin streams of coal above mountaintops, in appellation exclusively, and the practice that is most cost- efficient is to simply blow off the top, a level it, removes that, and then all the rubble from the top of the mountain gets put into valleys and almost inevitably filled streams. what we're finding at epa is that the process of filling the streams as a detrimental impact

on water quality. as you might expect, the more you feel, of the more likely you'll see problems with water quality. i am proud of the fact that epa will review each and every one of these outstanding permits to try to minimize if not end in the environmental degradation to the water. after all, for epa, we fight for clean water under the clean water act. our role is limited to insuring that these projects, if approved, do not have a detrimental impact on clean water and will continue to do that. i have promised senator byrd that we would get clarity of guidance out for those companies who have permits that are in the process. that'll be happening very shortly. >> leave the epa be moving forward with a low carbon fuel standard under its authority under the supreme court decision with massachusetts? >> now i wonder if these

questions are coming from my staff. [laughter] i do not know. i think the several states -- the idea is that states, most recently a thing california, but other states have talked about it as well, will simply ask that feels good less carbon intense overtime. and biofuels and advanced biofuels are part of the picture as well. we will continue to have discussions. in many cases, these are led by the states. but we will continue to have discussions about the right way to move to lower carbons. >> moving back toward a broader question. do you worry that in the current fiscal climate that state budget cuts will lead to their inability to enforce clean air and water ax? >> as a former state commissioner, my most recent job was head of the new jersey department of environmental protection, a little detour with

governor corzine. of course i worry. i know that budgets all over the country are being squeezed. i know what is happening in new jersey. and i will say this quickly to the nation's governors as they make the hard choices, clean air, clean water, the people who work on those programs leaners they are incredibly important. here is better news. the president's budget includes money, more money than they have ever seen, to support them. it is not a good place to cut. you're turning down federal funding for the people who go out and write the permits, that businesses will need it the want to expand or go on and enforce the regulations that citizens call with the concern. of course i worry. when not in the in the governor. it is a tough job of producing a balanced budget. but we heard that loud and clear from the states. that is what the epa budget has more money than ever this year for states. >> we're almost at a time.

before asking the last question, i have a couple porn matters to take care of. first, to remind our audience of future speakers. tomorrow, we have ambassador wrong occurred, the u.s. trade representative who will discuss the trade agenda. on march 15, a week from today, we have dick armey, the chairman of freedom warriors. on april 5, the commissioner of the internal revenue service, will be speaking to us as the clock ticks on your tax returns. for a second item, the moment we of all been waiting for. i would like to present our guests with the traditional and coveted national press club mog. [laughter] >> my goodness. i will have to check with ethics officials. >> regardless of whether you can accept it, we thank you for coming today. >> thank you. >> i would also like to think the national press club staff including its library and broadcast center for organizing today's events. our last question is, in the

program "the some sense," the environmental protection agency is portrayed as an agency with no fear controversies than the one today. -- that is in "the simpson's." would you put a bubble over the city like they do in the show and what is your feeling toward the to trail of the agency in that program? >> first, i love that show. lisa sims and rocks. when i first came in, last april 1, i called all my managers together, was small band we were back then, and all the mysterious meaning. and we watched "the simpsons." we did it because some of them had not seen it. but if you are an epa employee, it hurts a little bit of its picks to the effect of the american people got to the point where they lost trust in the agency. but the agency could be

corrupted enough, if you will come to think of an idea of light doming of this city as a way of protecting the environment. epa is back on the job. we challenge their cells are the past year to make sure we reearn the trust of the american people. i hope we're doing that. i cannot think of a better job to have. all this bring films out there, says i am von the pointing out, no matter where you think of the clean air act, air is all of ours. it is just as important to your said of mind that we all pitch in to keep your air sixth. >> thank you. [applause] >> and as the air is filled with springfield size they're really, remember, for more information about joining the national press club and of how

to acquire a copy of today's program, please go to our website towww.press.org. thank you for being here today. thank you for viewing and listening. this meeting is adjourned.

publicaffairsbooks.com. host: barry lynn with the new america foundation has the cover article in this month's "washington monthly," "who broke the american job machine?" in the article, you wrote that between 2000 and 2007, american businesses created only 7 million jobs before the great recession destroyed that. in the 1990's, prior to the dot- com bust, they treated more than 20 million jobs. you said there was no net job creation in the 2000's. why is that? guest: this is the first time

there's been a failure to create new jobs, and elastic, since the 1940's, when we have not treated -- not created 20% additional jobs and in this country it is quite and it -- it is quite a change and what we've seen in the postwar history. there are a lot of reasons why we've seen such a falloff in new job creation. what we're positing in this article is the relatively new idea, that it is also one of the main factors is one that we have not looked at significantly, and this is consolidation. there has been this massive consolidation of power over the u.s. economy over the last generation, that we really have not analyzed. no one has been paying much attention to this, and the political ramifications, a policy ramifications. you know, it is really -- what happened is that in 1981, the

reagan administration changed how we interpret monopoly law, and since then, we have seen this truly dramatic consolidation in our industrial sectors, service sectors, retail, finance. it has a lot of facts --@ú@ú@úúz with this, i wanted to look at how consolidation affect all aspects of our life. one of the things that surprised

me, when i went into the stores and malls and discovered all of these cases of consolidation that were really quite phenomenal -- for instance, if you go to the mall to buy some glasses, eye glasses, and you see all of these different stores competing with each other -- you might go to lens crafters, or you might go to target optical -- no matter which one you are going to, you are going to the same company. it is an italian eyewear company. then you go to the independent boutique, and it happens to manufacture these number of brands in this country. if you are buying donna kar ran, what you're doing is dealing with the same company. sanding with milk. i went into a store, wal-mart, in tennessee. you go back to the milk case and

you see all these different brands of milk. i remember the names their -- may feel the dairies, at dairies, great valley, the in- house brand for wal-mart -- at all that milk was coming from the exact same company. it controls 90% of the milk in the southeastern united states. host: you also wrote about toothpaste. the vast array of toothpaste options on display is mostly the work of two companies, colgate- palmolive and procter and gamble. how different is that scenario, the toothpaste aisle, then it was a different -- that was a decade ago? guest: there was quite a bit of consolidation even back then. but we have seen significantly more. you mentioned tom's of maine,

taken over about four years ago. host: that was independent before? guest: that was independent. we saw this track called category management, where a large retail in wal-mart forced the large companies like procter and gamble and colgate- palmolive to exchange information on pricing, they decided jointly where to put the boxes on the shelf. essentially, you have these two kind of engaging in what we might call collusive behavior. even though you have two companies that control it, it is actually one single unified operation. host: asheville, north carolina, jerry, independent color. go ahead. caller: again, thank you for c- span. i want to relate very quickly that when we're talking about

this time frame, 2000 to 2007, there was a favored nation agreement put out to china, and it takes three to five years, a little bit more, for major manufacturing to move out of our country. the loss of manufacturing jobs and the lack of growth has much more to do with that effort or decision than anything. i wanted to point out one other thing -- with the stimulus package and the release of money, there was ordered $57 million given to a wind farm -- there was $457 million given to a wind farm in texas, and of that money, there were 300 construction jobs, short-term, relatively, and 2000 manufacturing jobs, that went to china. when you look at relationship, or we stimulating, who are sponsoring? -- who are we stimulating, who

are we sponsoring? host: do think that is a bigger reason for loss of jobs than of showing of jobs? guest: i read a magazine called "global business -- ran a magazine called "global business" from the late 1990's to the 2000's. it goes back earlier than 2000, it goes back to nafta and the wto, where you saw this radical change in how we change and organize our industry, especially with china. what we're not saying in his article is that consolidation is the only factor. offshore is a big factor in job destruction. but what we are also looking at is what is happening to job creation? in the past, we saw massive shifts of jobs in the united states to china in the 1990's,

but also in the 1990's we saw this real job creation machine that was operating in which new, different companies were coming on line, bringing their ideas to the markets, doing ipos, growing to scale and creating new jobs. what we have seen in the last decade is that major fall-off in the rise of new companies with new ideas, creating new jobs, and that is something that is really quite radically different from the 1990's. just for instance, we're talking about went some group of people get a better idea -- say, information technology apparatus -- what happens is that in the old days, he would grow up, you go out and compete. nowadays, you improve your technology, improved your viability, and some a very large company will come and buy you out very early on in your development.

the companies that provide the jobs in the 1990's, the growth in the 1990's, apple, microsoft, intel -- those are now the companies that are blocking the rise of companies. that is one of the significant changes we are seeing in this country. host: michigan, good morning to jim on the republican line. caller: okay. that last caller just called in -- the kind of hit on the nose -- jhhe kind of hit on the nose with the jobs leaving the country, and nafta, that hurt us. when you go to buy something, nothing is made in america. they let all the jobs leave the country. as far as the tech jobs, not many people can get them. you love that about 20 years of college, -- and, -- you have got

to have about 20 years of college, and people cannot afford to go to college anymore. host: you write in your article, "what killed the american job machine yielded no shortage of debatable answers, one of the more compelling, sessions has been monopolization. the fact that the term has faded from our elite discussion does not mean -- from our daily discussion does not mean that the thing itself has vanished." you also write that one result of this is a lack or lessening of research and development and innovation. what is a company, when it consolidates, cut back in those areas? guest: when a company consolidates, when a large company controls the entire marketplace, you can actually make more money just by

exercising power. you can exercise power down on your suppliers, including your work, because workers are supplying you with work. you can basically pay your suppliers last. and you charge your customers more. there has been this massive consolidation within the beer market in the united states. we have two companies in the beer market that control about 90% of all the beer in the united states. one of those companies, anheuser-busch, based not in said it was but belgium, reported very -- based not in st. louis but in belgium, reported very good profits last week. this company got a huge profits and they did so by basically paying the suppliers less and charging more. the profits that go to these people in belgium, that goes up.

and in the old days, when you had a real rivalry, if you want to grow your income, you have to grow your business, you have to create something, you have to hire people to create new work. that is one of the things we've seen that is really quite fantastically different now compared to even a decade ago. host: washington, david is a democrat there. go ahead. caller: 0, ok. i blame a lot of it on ronald reagan and his supply-side economics. i kind of believe that cutting taxes does not promote capital investment, because when the taxes were high, companies make capital investments in order to cut down the tax rates. the tax rate was 7%, but nobody paid that, -- the tax rate was 70%, but nobody paid that as

soon as they lowered taxes, they put them back in the company. r&d can be written off instantly, almost. the trickle-down economics does not work. there is too much suck up along with the trickle-down. there is more supple and then there is trickle down. -- more suck-up than trickle- down. guest: there are number of factors interacting in the environment to create jobs. supply-side economics is one of the factors. but one of the things that we really need to come to grips with in the country is that it is not really just a matter of taxes, the soft side of policy, but we are seeing -- it is the architecture of power we are dealing with, how power is used. when you allow this kind of consolidation, corporations are governments, private governments, and there is a lot of talk about how big government

is getting in the way. we have already got big government in the way, eight is just private government. wal-mart, compared to a generation ago, controls more than 30%, up 40% of certain lines of business in the country. these were distributed out to tens of thousands, hundreds of thousands of family businesses all across the country everyone had a little finger in this pie. what has happened is that is one company has kind of taken it all and to itself -- taken in all unto itself and exercise power in ways that leads to less. you go back to what the judgment in flint was talking about, absolutely what we have seen with china, really quite radically -- big change. part of the reason we've seen so much movement offshore in activities is because of this monopolization.

once you control the marketplace, you can determine where it is going to be built and you can do it in any way you wish. monopolization actually leads to more offshoring. host: clay, independent. caller: before 1914, at the federal reserve iris act, we at tariffs. lincoln was for high tariffs. then as soon as the federal-irs -- federal reserve-i rest, with the stroke of a pen, wiped out russia and turned it into the soviet union and killed 35 million christians, and then wipe out the farmers of america, and then went on to spread china -- red china. that is who is behind it.

they are communists, they terrorized africa now. they are looting africa for the raw materials to destroy america. host: we will get a response. any thoughts? guest: clade mentioned that before 1914 we had terrorist. the action that terrorists will into the 1970's -- clay mentioned that before 1914 we had tariffs. we actually had those well into the 1970's. we had a strategic sense of how to run our economy. we look at ourselves as a nation state, and we had to figure out how to serve -- basically have the industrial systems we need to be strong in defense, we wanted to serve our workers by creating jobs, we wanted to ensure that people had a

relatively high quality food on their tables, and we had a strategic and coherent approach to managing all of these issues, and it involves tariffs, taxation policy, and involve competition policy, managing competition, ensuring that we had rivalries among the big companies. we don't do any of this any more. )b$$ host: duncan, thanks for that

call. you wrote in that article that -- but since ronald reagan we have had a couple of democratic presidents. why has it not gone back to town for review of consolidation of monopolies? -- tougher review of consolidation of monopolies? guest: that is an important

point to it is not a partisan issue. the clinton administration promoted consolidation almost as dramatically as the reagan administration did, and in several cases more so. the obama administration has shown no interest so far in taking any kind of strategic reassessment of competition policies, antitrust policies, anti-monopoly policies. really nothing, zero. this is not republican and gop, but the people who control both parties versus the rest of us. the people who control the top levels of both parties are into consolidated power, into using these private governments to serve certain people. the rest of the folks, those of us who are spread out in all the parties, and the independents, we don't have many folks who are taking our side in this. anti-monopoly policy -- the purpose is to protect us

against consolidated power, political power. that is the way it has been with the tea party did a lot of people talk about that as an anti-tax movement. if you understand it properly, it is anti-monopolization of commerce, people who did not want the british east indian companies to monopolize the trade of tea. they wanted free commerce. host: james agrees with you on the politics of this. huntington, new york, michael on the democrats' line. is that you, michael? go ahead i will put you on hold. let us go to california, independent line. caller: the question is -- i feel the answer is the legislature, and your guest is correct. the idea that there were

restrictions and laws against monopolies -- that theory was broken when george bush started thinking out of the box. i thought to myself, i wonder why they made the box. franklin roosevelt said something that is not so much that it has to the abundance of growth, you have to have enough to add to those who don't have anything. that is what measures our progress as a nation. what has happened to our nation -- i firmly believe it has been turned over to some $5,000 suits known as our legislature. thanks for your time, fellas. guest: it is important for us to understand that there is actually a lot we can do about this. going back to what duncan said before, many said he was angry, we have to remember that this is not the first time this has

happened in america. it happened in the late 19th century, when you had rockefeller, jpmorgan, and a consolidated power. people in the government, and back then it was teddy roosevelt, said, let's use the power, and we ended up with this corporatist morass or we have consolidated private power and public power all combined into a dangerous force. eventually we actually just broke the power down, distributed that power out, and that happened in 1935, with the second new deal. after the supreme court, there was this just is called louis brandeis, and he believed in the stupid power, essentially the jeffersonian -- he believed in distributed power, especially jeffersonian and madison and in his beliefs. -- madisonian in his beliefs. you have got to let people out in the world create jobs, it is

to beat it out to the entrepreneur -- distribute it out to the entrepreneurs and investors in america so that they can create new jobs. starting in 1935, this is what we did. there was a radical reconstruction of the american economy that lasted into the 1980's, where we saw these people sort of overthrow the anti-monopoly laws and begin to consolidate power. host: when you hear president obama talking about the need to create jobs, what sort of action to you want to see from the administration? guest: the idea -- so far what they've been doing this man the kind of saying, "well, if we do these stimulus packages, we will create jobs." stimulus packages don't really create jobs. what they do is really save jobs, keep downward spiral from getting worse.

some people say that the stimulus has no effect. that is not true. the statistics we have in place. but if we are going to create -- stimulus -- the stimulus keeps what we have in place. but if we are going to create jobs, we have to stop these big companies that keep small companies from innovating. there is a guy down in texas, and he has a far safer or syringe, a retractable needle, a brilliant device. since the 1990's when he came out with this device, he has been fighting this giant monopoly day after day after day and has been unable to grow his company. there is case after case after case after case where you have these giant entrenched powers who are preventing the release mark entrepreneurs -- the really

smart entrepreneurs, business people, venture-capital lists, from creating the businesses of tomorrow. host: our guest is barry lynn with the new america foundation to the lead article in "washington monthly," "who broke america's job machine?" about 15 more minutes of your calls. michael in huntington, new york. caller: please talk about the effects of the recent supreme court decision on these international monopolies that are controlling our economy. host: are you talking about the citizens united case? caller: that is the one in which they said corporations had the right to free speech of people. host: okay, thanks for the comet. guest: just the idea that a corporation as a person is an absurdity.

corporations are institutions. the idea that corporations or bad or good is also absurd. they are institutions, tools. what we're supposed to do is use these tools wisely, like with any kind of tool. on its face, the idea it that is a corporation is a person -- this is like an old fiction in american legal system that goes back to the 19th century, and it has had this pernicious effect, on and off, over the last 150 years. it is on its face an absurdity. but the effect of this -- you know, we saw quite a considerable consolidation of power within the media system going back to the 1996 laws put into place by bill clinton. if anything, what we're seeing right now is that the distribution of power -- i am not sure of the fax of the kit -- i'm not sure if the actual

effects of the case are as big as the wood and 20 years ago before we had the internet. this is not one that keeps me awake at night. host: nashville, brent on the republican line. caller: thank you for taking my call. i would like to speak to the subject of monopolies and add bid agriculture to big oil and big pharma. i would like our guest to speak to how to create more jobs in the agriculture sector. the issues of a food security, when you have 3 or four companies running. and also the national security presented by poorly processed food, the cause of many of our ailments, the so-called western diet. how are we going to merge the food on the table at our health and economy and create more jobs in the agriculture field? guest: that is a great question.

i don't write about that so much in the article, but i right about that elsewhere. i start off with a story about food security and how consolidation actually erodes the quality of our food and makes it harder to fix. if there is a problem, if you of one company, one plant, that is making everything, and we have a problem with the plant, we cannot fix it. we had a case a few years ago with the pet food, were all these dogs and cats died. they found out that one plant was supplying 150 different brands of pet food, and they cannot fix -- it took awhile, because here is one company, and if it closes down, you don't have any benefit whatsoever agriculture is a huge problem in our country, and it has an effect on us in terms of our health, the security -- food security, and it actually has a

huge effect on our jobs. a generation ago, there were hundreds of thousands if not millions of people in this country who were growing takes on their own farms, chickens on their own farms. a couple of companies have essentially stripped that business -- tysons and smithfield -- they have dominated that absolutely. for the average person to make money off of a growing pigs and chickens -- the other system is not that much more efficient, and it is more dangerous. you could end up with stiff resistance, safer for us as consumers -- safer systems, silver for us as consumers, but also a system that would create more jobs and opportunities for independent farmers. host: houston is next up. democrats' line. caller: i am c-span viewer. i thank my cable company said the we can enjoy it sees -- i

pay my cable company said that we can enjoy it suspen -- so that we can enjoy it c-span. you brought up justice brandeis. he was good then, but wasn't he after the declaration was sent up -- i have heard it described as black male to woodrow wilson, which set up the federal reserve and got us into world war by. -- world war i. the slogan was getting away from the mainframe and you could have your own computer and your own data. the developed a bunch of tools that engineers could use to rapid -- rapid development tools that engineers to develop really fairly quickly on their own, with a few employees, application interfaces. they did not use that much

memory, but they were fast and crisp and were great. as we zoom ahead, we see that microsoft has kind of gotten rid of all those tool sets that they used to develop that mom and pop, if they had an idea and put a lot of effort into their craft, they could build something they could sell. and to this so-called net framework, it takes a lot of memory. what we've come to know is that we have kind of come full circle. people are backing up data on their internet server, and doing taxes on the internet server. they have turned the computer into an appliance, and microsoft is all in india developing the interfaces that are being pushed out of those servers. it is funny, too -- this might be something to think about. they have gotten rid of all

those tools that made the lowest common denominator tool that nobody can really shine using those, nobody can really get an idea across. host: all right, we will get an answer from barry lynn. answer from barry lynn. guest: he is absolutely right.

system, you have to pay mr. gates a big chunk of money for the privilege of doing that. even though you are not buying this product. once -- buying his product. once you standardize that, you can live off of that for a very long time. once you standardize, centralized, you end up with too big to fail. when something goes wrong, the disruption can be quite significant. what you kind of what is this distribution of power, just in the white you on distribution of opportunity -- just in the way you want this edition of opportunity. host: you write about an infrastructure company, and the term you use is "stashing technology." guest: the model that cisco followed to grow in the 1990's

-- they call it innovation through acquisition. it is really acquisition of innovation. they be white up a bunch of small companies. -- buy up a bunch of small companies. some of these they connect into a chain of integrated activity. there is some value in integrating ideas and products. but at a certain point, some of the stuff is just taken over to prevent other people from using it. so some consolidation absolutely is necessary, especially in technology. but you really have to have someone there making sure that there is real opportunities and that you have got for the people to get some gain. that rivalry is part of the system. that is where the traditional antitrust system is where you get three or four companies, five companies competing. host: good morning to joe on the

independents' line. caller: thanks for c-span. my view on who broke the job market -- i think the american people did it. we voted in reagan, allowed him to destroy unions, institute his "tinkle-down" theory, allowed in after it happened, people shopping at wal-mart, knowing that -- that money is that a loud enough that to happen, knowing that money is just going overseas. it does fall squarely on the american shoulders, what happened. there has been a lot of a shift towards everybody for themselves, the individual mentality. the individual is important, but only in the context of a society. that is kind of how things stay

in balance. we hear how we need to pander to these large corporations, with big bonuses, to keep them in america. i think they might be one of our best weapons on the rest of the world. let them go to the other countries and destroy them the way they distort -- the way they destroyed us. they are more thieves then mercenaries. they are just out for themselves. guest: at absolutely agree with that. that is why i am hopeful, because it was our failure as a group of citizens of an independent republic to hire representatives who would protect our interests. we failed. it also means we can fix it, but what we have to do is get different folks, or even -- a lot of people over here in washington are really great

people, they mean well, but they're not hearing the right message from us. they are not -- a whole bunch of people are saying we have got to throw out government entirely. what we have to do is use government wisely and effectively. there are two jobs that are primal for all government -- you have to use government to make sure that no one inside your own country is sitting in giant corporations that are dangerous, and you also have to use governments to protect yourself against foreign nation states. we are not doing a very good job in either case, but we have done it in the past and we can do it again. the last caller is dead on, that is our fault and in our power to fix it. host: this e-mail from minnesota. guest: the idea that

corporations, international corporations taking over the world -- i don't buy that at all, because what happens is that a nation state effectively used will control almost any corporation. in the case of wal-mart, wal- mart sort of drives the chinese and american economy, and it serves as the conduit for moving chinese manufacturers into the united states. now, is a wal-mart in charge of that relationship? i am not sure. is the united states and a charge of that relationship? no. we do not interact with wal-mart in any way. are the chinese in charge of that relationship? i would say yes. exercising power on to the corporations in ways that turn these corporations into their tools. the future is not corporations ruling the world. it is actually, as it always has

been common nation states. the corporations are the tool of the nation state that is actually used their at the table. host: michigan, good morning to bob -- joe, sar, on the republican -- sorry, on the republican line. caller: god, i love that c-span, because it gives normal people a place where they can voice their views. i have been wondering if there is any data or numbers when we started doing free trade with china where how many jobs were actually created, you know, for americans, from that free trade, versus how many have been lost from the free-trade. that is what my question was did what i was just listening to the other callers, and you are talking about how the elected officials -- but when i voted

for clinton, it's out of like he was against nafta, because i was totally against it and he stood up during the debates and said, "how can the average american worker compete?" one of the first things he signed into office -- he signed when he got into office was nafta. guest: that last point was dead on. i remember the 1992 campaign very well. bill clinton said he was against nafta, said that he was going to protect the american economy and jobs against privation from a foreign nation states and foreign corporations. in that election, even though he said that, we should remember that ross perot won 19% of the vote that year but there were a lot of angry people who voted to protect the american economy in the fall of 1992. and you are absolutely right, that what bill clinton did is pretty much straight off the mark -- he put all of his chips into passing nafta.

from the beginning, he basically did abate and switch. -- a bait-and-switch. what we need now is to look at what actually exists, -- in a clear, and clear away all of these ideologies, all these weird interpretations of what is going on, all this free market stuff, and just look at the political reality of our political and economic system, and if we admit what is out there, we can really face it. host: barry lynn, now at the new america foundation, and the co author of this article in "washington monthly," "who broke america's job machine?"

÷÷÷÷÷÷÷÷÷÷÷÷÷÷÷s the governmental affairs subcommittee on federal financial management. >> will come one and all, specially to our witnesses who have joined us, to those who went to high school in delaware and those who did not.

to those whose last name rhymes with the word that legislators fear, that his veto and in the congress or in the state legislatures, to those in our audience we are glad that you are here. today we are going to hear from several witnesses about the medicare prescription drug program. something i voted to create and we are going to hear about not just the good that it is doing and i understand it is a program that roughly 85% of the folks who use it think it is a good program and a program coming under budget for the last four years and that is all well and good. it is not a perfect program. to a certain vulnerabilities to waste fraud and abuse has two other programs of this nature. the witnesses today will tell an important story. i was surprised when i first heard about the gao inspector general report showing that the critical and basic antifraud safeguards for the medicare prescription drug program were not in place, at least not yet,

putting the program at a higher risk to waste and fraud. let me say one of the interesting things about being on this committee, homeland security and government affairs committee is the opportunity to delve into literally every corner of the federal government to look at programs where we don't especially-- do an especially good job for taxpayers and people we work for to put a spotlight on those and to look for problems where we can do a better job and sometimes to look at the-- as they are not serving the purpose for which we are actually paying for them to serve. and, this is a program we are going to talk about, the medicare prescription drug program that helps keep people out of hospitals, saves lives and it is a very good thing for our citizens. it is also as i said earlier susceptible to waste and well we don't want to diminish the positive aspects of the probe when we want to focus on what we can do better and as my staff eras heard me say time and again

everything i do i know i can do better and one of my favorite sayings is if it isn't perfect, make it better and as good as this program is it is not perfect and we can make it better and we want to do it. is especially important we have that focus in a day and age when we as a nation just in the last eight years, we basically doubled our nation's debt. think about that. in eight years we increased our death by as much as we did in the first roughly 208 years. pretty amazing is that? we are on track to do that again in less your support to do it for a good things. the president has called for a free zone's discretion beginning october 1 and called for creating our pointed folks to serve bipartisan. entitlement spending and revenues and it is important we look at other spending that is going on to see how we can provide benefits and do so maybe for not much more money or maybe even less money.

the safeguards that we have in place are important and the safeguards maybe we need to have in place are not only important to protect taxpayer money but

congress anti-american people are in the midst of an important conversation about our nations health care system. there has been some disagreement about exactly what needs to be done. wasn't that a nice way to understate that there has been some disagreement about exactly what needs to be done but almost everyone agrees the cost of our system must get under control. i with a bunch of students, high school students across the world in dover delaware the other day and i had a chance to spend time with them. several were from japan. one of the questions they asked is how did your health care system get so screwed up? they meant why is it that you spend roughly twice as much as the rest of the world yet with what worse results?

that is a case in japan. they spent half of what we do for health care coverage, get better results and they cover everybody. and we don't-- they can't be that smart and we can't be that dumb. we have to figure out how to do this and compete better against them globally and here at home. there has been a lot of talk around here about trying to bend the cost curve of health care. i have used that term once or twice myself. there a number of reasons for the rising health care costs over the past few decades. it is clear prescription drugs are one of the drivers of that increase. the benefits of modern pharmaceuticals are evident, but so were the cost. 1985 until the average american spent about $90 a year, $90 a year for prescription medicines. today we spend over $700 a year. that is an increase of 740%. having said that they are medicines we can take today to save lives and keep people out of hospitals and having to be in

clinics on a regular basis. is the cost really worth it? we can arguably say in many cases it is but of of course eliminating fraud is important in a straightforward way and lowering costs for prescription drugs. unfortunately health care is too often the focus of criminals who take advantage of our system and whether they care is provided through government programs or through the private sector, tends to defraud the system are and fortunately on the rise. u.s. attorney general eric holder estimates medicare fraud totals around $60 billion a year. and estimate echoed by others in law enforcement fraud. $60 billion a year. that is not all in the prescription drug program but some of this. the second estimate in the program is the level of improper payments each year. the federal government with the estimates of overpayments, under

payments, undocumented expenditures and other mistakes and fraud experienced by each agency. the total for the last fiscal year 2009 was almost $100 billion in improper payments. medicare has the largest reported chair of that total at about 36 billion, roughly one third of improper payments for medicare. unfortunately the department of health and human services has not been able to determine the level for the prescription for programs of the amount wasted in part d. is largely unknown. and that is something we are anxious to do, to get under control. quiet the rise in medicare fraud? as when willie sutton, an infamous 20th century bank robber was asked why do you rob banks? he would always reply, that is where the money is in there is a lot of money in medicare. unfortunately a fair amount of criminal activity. there is another reason and the drugs themselves, the drug problem of addiction to

over-the-counter medications. the problem of medicare prescription drugs fraud is more than just a loss of taxpayer money. it is also about harm to her system when fraud results and drugs diverted to legally use. we have a chart that demonstrates the impact. senator mccaskill, welcome. it is good to see you. you are just in time to s-sierra first chart of the day. you are looking here at growth from 1994 to 2004 and the prescription drug abuse up by 8% and at a time when the use of drugs, it looks like is up 60% and our population is growing by about 12%. so, that is a good picture for us to keep in mind. the only thing, as i was saying the only thing that is outpaced

this number is the-- in fact more americans abuse prescription drugs than-- listen to this. senator klobuchar, i get to start my day with you and come close to ending my day with you. more americans abuse prescription drugs than the that number the number who abuse cocaine, the number who abuse heroin, hallucinogens, ecstasy and inhale its combined. in fact they were one out of five teenagers in america that using a prescription drug. one out of five. aside from our financial responsibility we have a social responsibility to ensure that our public health care system isn't used for further intensified, and subsidizing public health crisis. in a previous report focused on a similar problem with medicaid, the gao reports to the subcommittee some major sources of fraud and abuse involving

controlled substances. binder stan some of the same techniques are used with medicare. the first broad technique included beneficiaries, a practice known as dr. shopping in which recipients go to six or more doctors for the same type of drug. in these cases beneficiaries are feeding their addiction are selling the pills for on the street. drug dealers make a profit while the government unfortunately taxpayers foot the bill. brought an abuse of prescription drugs also appears to be getting beyond the grave. in prescriptions when prescriptions are received by dead ted beneficiaries are britain by did doctors. the department of health and human services specifically the center for medicare, centers for medicaid and medicare services established oversight schemes to prevent the medicare prescription drug program and it is been-- sometimes called-- protecting the program from fraud is a team effort involving

federal workers in medicare involving the law enforcement at both the state, federal and local level. medicare prescription drug plans, pharmacies and doctors and beneficiaries themselves. as they recovered governor i understand the challenges that come along with running a major program like medicare. but as many of us have heard, in this room even today, it is not perfect. let's make it better and we share responsibility to do that with the medicare prescription drug program. our witnesses are going to report to us today not only in the current challenges of waste fraud and abuse in the program but still help us identify some solutions. before they do that look me let me yield to senator mccaskill for whatever she would like to say in thank you for your commitment to ferreting out waste, fraud and abuse including in the medicare prescription drug program. >> thank you mr. chairman for holding this hearing. i was particularly interested in your comments about prescription

drugs than the and the abuse of prescription drugs. it has become a common fact that in many communities in this country heroin is not cheaper than oxycontin on the streets. which gives you some idea of what is going on with oxycontin. it is a serious and significant opiate that is highly addictive, that has been widely prescribed. my lay opinion in a per greatly prescribed, and right now for kids that are on heroin, it is cheaper for them to get the heroin than the oxycontin which by the way the oxycontin feels very similar to heroin. so, it is a serious, serious issue in the oversight of prescription drugs is incredibly important and i look forward to drilling down a better oversight of this program.

it is a wildly expensive program for this country. by 2018 we are going to be spending $3000 or recipients and 90% of all the money spent on this program comes right out of the federal treasury and of course there is never been an attempt to pay for that with any kind of offsets or pay-fors. it was all put on the credit card when it was passed, which is i find highly ironic. some of the righteous indignation from my friends on the other side of the aisle about how dare the federal government intern to a new entitlement program run by the government without paying for it or that is expensive when that that's that is exactly what's medicare d was. so i think it is time we take a hard look at this program and as to whether or not the taxpayers are getting the bang for their buck, whether we are requiring the competition that brings value to the taxpayers for this and whether, if we are doing an aggressive enough job of finding the cheaters.

we all know they are out there. are we investing enough to find the cheaters? and, the abusers that are taking advantage of this very generous government probe and. thank you mr. chairman. >> thank you senator mccaskill. senator klobuchar. >> thank you as a special guest to join this committee for one our outward like cinderella. i am actually a member of the gg sherry committee and have taken a particular interest in medicare and medicaid fraud, just because $1 when dollars are so tight and people can hardly afford to pay the premiums it is just outrageous that we are losing about $60 billion going out of the system to places that it should never go. >> was this an issue that you had in your previous work? pie did. as a prosecutor we have beefed-up our white-collar fraud area and we did a lot of this medicaid medicare fraud. it was always the most

vulnerable people getting ripped off in the money is going to storefronts with names that don't even provide any services. the other thing i learned since coming to the senate and being on the judiciary committee is a lot of this fraud takes place in certain hotspots they called them in the department of justice, certain areas that have the least efficient health care systems are not only is the government not chucking but rather companies don't work together well enough so there's just no check on this kind of fraud. a sickly they are robbing the american taxpayers of money. i've introduced a bill called the improved act, which required the direct deposit of all payments made to providers under medicare and medicaid. medicare regulations are ready required to read depositing or electric funds transfer but these regulations have not been uniformly enforced and lacks verification and identification requirements and check cashing stores make it easy for scammers to commit fraud and disappear without a trace. this bill would start off with

medicaid and codified the existing medicare. has been endorsed by the national district attorneys and national association. to really make this health care system work we are going to have to root out the fraud to deter the fraud from happening in the first place a thank you for holding this hearing and allowing me to sit in. >> we are glad to have you here. thanks for your previous work in this and bringing that experience to bear here with us today. i'm going to briefly introduce our witnesses. we will be joined by other members of our committee. i'm told we will have a series of votes that start any minute now and we will have to two boats and what we will do is probably go from 10 minutes or so after the boats began and somehow we will recess briefly and slip out, do two boats back to back and come right back. our first witness today, kathleen king director of health care team at jal where she is responsible for leading studies of the health care system

specializing in medicare management and prescription drug her bridge. ms. king is over 25 years experience in administration. we thank her for being here today and i learned she is from, grew up in wilmington delaware from one of the hide-- find a schools around. next witness, robert vito regional inspector general for evaluations and inspections at the department of health and human services. mr. vito works in the inspector general's philadelphia office and his leadership has been credited with billions in savings for the medicare program. or next final witness here on this panel is mr. jonathan blum, blum. pronounced like palm. director of the centers for medicare management and the acting director of the center for drug and health plan choice. the senators have widgets in the hundreds of billions of dollars and are responsible for the

regulation of payment of fee-for-service providers in medicare prescription drug programs. we thank mr. blum for being with us today and look forward to his testimony. ms. king what are you go ahead. stick close to five minutes and if you go well beyond that we may have to/@@ @ @ rb

and cms, the centers for medicare and medicaid services issued regulations requiring sponsors to have compliance plans detailing their plans to prevent and detect fraud, waste and abuse. those plants planted seven required elements that reflect industry best practices. i am not going to name all of those elements here today. they are in my written statement that they include things like having written policies, effective lines of communication, having a compliance officer that reports to senior management. after the implementation of medicare part d, we were asked to look at the compliance plans offered by the sponsors and cms'

oversight of those planted we issued a report in july 2008, that is the basis for my statement today also we did speak to cms recently to updated. is part of our work we looked at by a sponsors that provided part d benefits to more than one third of beneficiaries. and we went on-site, our team went on-site, spoke to individuals, review documents and kick the tires if you will. and what we found in that study, that of the five sponsors, that they hadn't all implemented the seven elements of a requirement plans. five had completely implemented three of ailments and from there at very downward. we also found at that time that cms' oversight of the process was limited. for example in 2000 and eight, we found that oversight was limited to review of the initial plans that sponsors submitted as part of their application tommy and in 2006 cms issued what is

called chapter 9, which is their guidance to plans on how to implement their compliance plans or cut the plants were not required to update their compliance plans after that dates nor were they required to update them for the 20007 and 2008 years. turning to audits, we found that cms did not do the audits that is specified in its 2005 oversight strategy. there were a number of audits supposed to be done, 10 by medics and i think you would hear from medics later in 2005 and 2006 and 35 and 2006 and 2007. at that point in 2006 cms had the resource constraints doing part to an increase in the number of plans participating in part d, did not enable them to do all of the audits that they had planted to switch some audits from on-site audits to

desk audits which involved a review of documents in papers sent by the part d plans. to update our report for this presentation today, we spoke to cms again, and they told us that recently, between 2000 and eight in 2009, that the medics had conducted 16 audits, desk audits of the part d's compliance plans and after that decided that they wanted to do to on-site audits, and as part of that they found some deficiencies and cms decided at that point that they should do more on-site audits. as of today they have not decided exactly how many they should do. cms also updated issued a proposed regulation in 2009, to update its instructions to plans

on how to fill out and how to do their compliance plans because they found that not all the sponsors understood them and they told us recently that they expect this regulation be made final very shortly. that concludes my prepared statements and i am happy to answer any questions. ..

>> with the creation of the party benefit provides an opportunity to use the knowledge regained all the years of fighting for it in the medicare and medicaid program. to that end we should use this opportunity to design a system that works to prevent fraud and the improper payments rather than recover the funds after the money has been spent. plan sponsors and medicare drug integrity contractors known as medics play key roles of this ever. since the inception of part d leu ag has the of the body of work that comes up with the. >> accuracy that each of these groups have in place and me found while some safeguards have been in place since inception others were employed in a limited capacity and some remain unimplemented. to put it simply, there is more work to be done by plan

sponsors and the medics progress the administrator of the benefit, cms plays a primary role to detect fraud, waste, and abuse of the developing a safeguard strategy too not address the accord nation and lacks the details that would turn a from a broad strategic concept into useful management tool. although cms required t9 sponsors to have compliance and provided guidance under development agency has yet to finalize any audit to make sure the plants are comprehensive and effective despite the fact that oig is sponsors' compliance did not address all cms requirements profound searches sponsors only had brought or missing when a more are required elements with internal in deterring -- internal monitoring procedures part

of the 217 requires sponsors to initiate corrective action we found many plan sponsors have identified central fraud did not do so. even more disturbing is the fact 20 percent of the sponsors did not identify a central days single incident of fraud, waste, and abuse for govett would be remarkable but seems highly unlikely for addition to rely no plans to target of fraud and inappropriate payments, a cms has publicly stated by using state of the art systems, agency and medics would prevent problems before they occur which is a goal but it we found that rather than using the techniques cms and medics relied largely on complaints. weill they have their place they are by their definition reactive rather than proactive. unfortunately the medics to engage in more proactive measures because they did not have access to the part

d pharmacy data until the second year of the program and did not get the data on the position services until the third year her the third year when the metics investigated potential fraud they did not have the authority to direct the obtain information such as prescription and related medical information from pharmacy, pharmacy benefit managers and prescribing physicians. finally, the medical taste medics would authorize the compliance plans there were not given the approval to do so. it is up to cms to address the issues we found and to accomplish this task we recommend cms has a comprehensive integrity plan and also needs to conduct audits in a timely manner and establish mechanisms to hold sponsors accountable is also the medics from directly obtaining

information they need from pharmacies and benefit managers and physicians. most importantly, finally we recommend all key players have more data analysis of claims and payment information and embrace proactive methods of fraud detection per rican assure you part d will be a major focus of oig we're currently performing additional review some of which will likely identify improper part d payments that might have them preventive there were stronger protection and prevention programs. there is more to be done to insure the integrity of the t. bear program and we stand ready to assist them in their efforts and i am happy to answer any questions you may have. >> you have to wait a few minutes because we will recess and come back and 20 minutes and then you are on deck and we thank you for your patience. thank you. we are in recess.

[inaudible >> that is enough sun. [laughter] -- but we had some boats and may have more later on bit they do for your patience 84 joining us today. >> thank you chairman darfur

and thank you for the opportunity to talk about cms efforts and strategies to improve performance and the quality to elevate the overall accountability's accountability of part d program. the administration cms is committed to ensure we have the best possible program possible and we understand that we have a tremendous responsibility and a tremendous obligation to ensure that we will provide benefits consistent with the law and protect taxpayer dollars in venture beneficiaries of the high quality program they expect. want to highlight a few points from the testimony but the happy to answer any questions you may have. first i want to highlight party is tremendously complex. we have 4,000 different contracts that provide part d benefits prepare plans sadr stand-alone, a comprehensive, hmo, but part d benefit is delivered by

4,000 different entities and require cms to develop many different strategies to oversee the program to make sure all 4,000 contracts of the same consistent dahlias and goals that cms has. the second play down one to emphasize that in order to manage the very large program and deliver by 4,000 different contracts, we use a range of different data to ensure that we are monitoring the program and understanding issues and acting and issues and being as proactive as possible. cms has quality metrics and prescription drug claims and monetary position complaints and cms responds very quickly to any issues the data sources tell us. cms also has a very

aggressive and robust audits strategy. 2009 it conducted 348 targeted and routine audits and ensure that bid submitted are accurate and ensure that plans follow our rules and that plans to understand our rules and payments are accurate and that beneficiaries receive the services they are entitled. but again, thus go and complexity, cms us to dedicate resources as part of the as possible and target resources as prudently as possible but are committed to overseeing their audits through desk and on-site a strategy to make sure we have the best possible program. cms has shifted to a more performance based system that we target our audit resources to those party

plans at present the highest probability. we don't just do random audits but we target those to the plan represents the biggest of vulnerability to the program. undertaking several new initiatives to strengthen our ability to oversee the program,rá , we're working very

hard to complete the positive error rate for the part d program is a high priority for you and the congress and also for the president. we have completed three components to the five part composite in error rate and expect to produce all five components to have the part d error rate by the end of next year. last, the president has made fraud, waste, and abuse one of his highest priorities for the medicare program. he has proposed historic and

new resources to root out and fight to medicare fraud and abuse also part c and part d. it is true in the past cms lacked resources to do sufficient oversight and auditing but i am confident that with the resources we have that congress has given cms the we have sufficient resources to address concerns of the past. cms has more to do but we have made tremendous progress but have more work to do. we have several concerns we're working very hard to redress. concerns about marketing practices by part d plants and working very hard to ensure that they market their plans to beneficiaries, the communications are accurate, responsible and not -- and appropriate. we have response to providing clinical access and also concerns about

plans that have aggressive growth strategy is. those that grow the fastest seem to present the highest vulnerability so cms will target more resources towards those as they seem to be growing. with fact all be happy to answer any questions you may have. >> thank you mr. blum. i have a question but i would invite other witnesses to respond. has been undergrad it and a graduate student i studied economics i have always been intrigued, i finally got the hang of it but one thing that always intrigued me is the market forces to shape good policy behavior. there were hard times with federal agencies actually selling the surplus property

within their per year. they would just hold onto it pay the utility bills, security costs and find out that for the most part agencies of they go to the trouble fixing of the property, the money goes back to the treasury and it can be hell to pay for the cost. but then the a is different. babies and% of the sale proceeds use it to fix up property. another example is a health care bill that is passing the senate and the house or in now. but trying to incentivize people and companies if they stop smoking and high blood pressure and cholesterol bring it down and keep it down. how do that? one idea is to allow the employees at stop smoking and lose weight and control cholesterol and blood pressure to receive premium

discounts up at 30% if they do the right things for themselves and a group under which they are insured. another example under federal law, it used to be if you were a whistle-blower, you work for mr. vito and the worker of his company for the federal government, they are kirk's. [laughter] that is a big leap of faith. but they improperly bill and take money that they don't deserve come and you are an employee. you know, about it coming at you report it. you blow the whistle and he will try to fire you. your history. self not only to incentivize to be whistle-blowers but why don't we at least try to protect them to get their job back and recover the lost wages. then we decided to go a step further if you are a

whistle-blower done malaysia job projected in your respective there's a recovery you can participate receiving between 15 and 30% of the recovery from the federal treasury. i was told this week the irs may have a similar arrangement with votes to our reporting tax fraud or e evasion and money recovered recovered, some participation or seven reward can be provided to those. we can have all the stuff we're talking here about federal agency trying to make sure people there doing their job the part of me says one of the way to make sure that that is happening is to actually incentivize pope -- balks if they are aware of fraud to read -- report it. nido levy go to citizens if you have done everything but also actually improve and enhance their own financial or economic situation by

participating in the art recovery. could you respond to the idea as something that my work corrects all of you i am thinking how that approach might be implemented with respect to identifying fraud in medicare part d and number one reduce the huge deficits and never to strengthen the medicare trust fund and a number three try to do this in a way with the effective market forces and policing poor's. >> you take the first shot. >> thank you for the question. it was a long question. [laughter] >> i think the greatest challenge cms has with part d benefit to ensure that all contractors that have contracts of the program share consistent goals and a share consistent values with cms in those eyes to our

ensure the beneficiaries in the best possible way, but also the taxpayer dollars are used as prudently as possible. cms has more work to do and create a stronger culture of accountability. we have to insure our contractors understand they share the same responsibilities best the cms. we're open to every idiot to promote that accountability. i interstate and you have legislation to require to report fraud by a part d. that requires congress to give cms that authority but i think any to solve that cms can add to regulation nor congress can provide to ensure that our contractors your the front lines for the part d benefit share the same values that you have an

cms has. >> i will come back to you for follow-up spiegel it. >> i believe that is happening in the medicare program already. >> senator we're having trouble hearing you. >> is the better? >> some of our largest settlements. >> i am sorry i do not like acronyms. >> that is when a whistle-blower, someone who works in a company realizes the company has done something wrong then they

either come to the government or they segmented and say there is a problem here. we would like you to be aware and see if you would like to join with us in going after this case. of some of the largest settlements we have ever achieved have come from those actions. >> what you are suggesting is something that is working and can work very well. >> thank you. >> ms. king? >> please make sure your microfinance nine rican hear you now. >> i think one of the most effective strategies on fraud and abuse to prevent it from occurring in the first place, i think we would really encourage the front end things like having effective compliance plans in place and the cms oversee

them carefully because it is much more effective to prevent fraud they and from paying and chasing. >> i suggest maybe bree nidal of the above. i am joined by senator mccain. what i am pursuing is to figure how we incentivize folks to go out to and help us identify of the fraud that is occurring. whistle-blowers and those that reach financial recovery with the government they can purchase of 85930% and the irs has a similar program of the things recovered because of tax evasion. and also with the sale getting to keep part of the proceeds and looking for ways to use economic forces to do a better job. we're not doing a great job

has you know, part by real to you if you have a statement go-ahead your job and with questions. >> thank you, mr. chairman bert by apologize to the witness is. we have the votes we were interrupted and i thank you for all of you for taking your time here to help us with this very important issue i ask them a statement be part of the record, mr. chairman. mr. blum as a and a stand at the medicare prescription drug improve my and modernization act requires all part d sponsors have a program to detect and prevent fraud, waste, and abuse. cms regulations established to require more comprehensive compliance part d plan sponsors. cms contracted as you know, with medical drug integrity country church-- contractors to audit the compliance

grants. 16 desperate audits were conducted late 20008/2009. asea must determine the value in monitoring the oversight efforts was limited. cms is now engaging the medics to conduct comprehensive on site audits and expects to have 20th 30 completed this year. we are in agreement so far? >> yes senator specter according to the inspector general however although medics were given orders to conduct a compliance plan orders but not the authorization to proceed. why where did they given the authorization? does i mean cms paid for audits never done? >> thank you for the question senator. it is my a understanding that in the past, the cms or its contractors and medics undertook the audits through just got its act the audits

focused on reviewing plans and to they have compliance plans in place? they have been found to have limited value by to our reminded is one thing to check back but another to go on-site to the part d plan to make sure they have the programs in place and education and process these in place. so they can complete 16 audits in the past but decided not to issue final reports but we have changed that process to be more on site and audits to share the same and values as cms. >> when will the start? >> the process has started now. we're finalizing plans going forward and i expect us to

fell our obligation and also to make sure that our contractors and medics share in that as well. secondly cms is an a process to finalize new regulations to give us more oversight on these compliance plans to furthere#ig%),z&z& predecessor?

>> correct. >> ms. king do you have a comment? >> senator, i think we recommended in 2008 as cms conducted these audits. they have started them. rethink we believe that audits and on-site audits as we conducted when we did our worker helpful and have a strong prefect. >> you have confidence that now in the fifth year of operations we will get it right? >> senator, we're not always an aberration israel's speculate about the future will look at the evidence before us. >> and the evidence before you indicates? >> we have spoken to cms about their plans to do on-site audits in there in the process of making final regulation rules to clarify

their authority. i have no reason to think they are not going to do what they aren't saying they will do. but we can to make a judgment about its completion effected this until after it has happened. >> can i suggest mr. chairman six months from now we can get a report from the gao and maybe you can tell us what the evidence is then? >> yes. >> do either of you have a comment on this? >> i want to tell you that we have been doing this work and we believe prevention is the best way to make of fraud, waste, and abuse. w. prevented is set of systems that the payments that are problematic before they go out before they

occur. >> dander stan prevention is vital but finding out whether the prevention has been carried out? >> we agree. we started doing the audits 2006 to see if the applied -- plan had compliance. we found out they didn't. they have them but not all of the elements in river not certain if they were there protecting the program. we recommended at that time cms to audits in 2006. we continue to follow up through 2009 to see if they did that. >> what did you see? >> barren unsuccessful in meeting but we ask them to do that is why we continue to follow-up to make sure it happens. we are just like you. >> mr. chairman the reason why i am focusing attention on this, as you know, , this issue was discussed and agreed upon by the president

and of all members that there. my only applies is in the fifth year of operations i think we have the right to expect what we're finding out today. i am not blaming you personally or anybody else but it seems the fifth year in operation we have given the acceptance that there is significant fraud, waste, and abuse that can be limited. the president talks about eliminating $500 billion with fraud, waste, and abuse that right now i don't have a lot of confidence that we have the procedures in place to really significantly impact that. i hope i am incorrect in that impression up to date but i am encouraged by the comments of the witnesses.

there are a lot of other areas to discuss but lacy senator mccaskill here also and i thank you for the time and think the witness is. >> your idea of coming back in six months is a good one turquoise think the idea of us having a hearing nablus the same witnesses or others to see what kind of progress is being made because the last four or five years ago we have made is not enough pork i hear the focuses to say had we incentivize financially? to help identify the five and make sure we read afford it. they say that is well and good but they need to do the cost recovery at the end everything needs to be in between. senator mccaskill? >> des was really my materials for this hearing i have led the moments where i read this intense and i said

what? then i read it again and said what? a you kidding? twenty-four of the 86 medicare day sponsors 24 advent 862008 did not report to one incident of fraud. okay. and i believe in santa claus and the tooth fairy. if you believe that many of these sponsors that are saying no incidents of fraud, then the auditor in me says of kcal amaya they are high risk and we're on that. i know the aig report is what talked about this. one of the things in the report that i noticed is we don't even require them. we suggest that they report fraud. are you kidding me? we are giving them 90% of

the money for this program right out of the general treasury and we are not even requiring that these people report fraud? mr. blum is that a regulation to be proposed is that something we need to do two say they are required to report every incident of fraud they believe is occurring? >> senator before you respond. >> we have offered legislation that i hope will be if we end up taking a sidecar approach in terms of adding to the senate pass health care bill letter the elements would be to require friday reported. i don't think we have the ability in this legislation too also provide the incentives as we do for whistle-blowers and a the irs. i am interested in doing that but i am sorry to interrupt. >> to have the ability of people we give that much money without a lot we

should be allowed to them by regulation the cannot leave choir than to report friday was will give them a gun to go to the bank's. >> we have voluntary reporting choir ms. but it seems awkward to have some things through regulation that is voluntary. to be a regulation should be required. cms has concluded that cms could change its regulations to have the mandatory reporting requirements the cms would not have the authority to enforce it. to our conclusion congress has to give us the authority to enforce to make the change meaningful. we could change the regulation but we could not in force us that says congress passed to give us the authority. >> that is depressing to me but that is something that would take a lot to require people that we're giving

money to to tell us if they think there is broad going on. i don't argue the point* but if we try to get a fixed, that is terrific. we talk a lot about what fraud and abuse of like to get the reaction of gao on the issue of waste. we have a mind numbing a number of two races out there for seniors broker if somebody has to take a look retort plan 42 is the best. if somebody has to take another drug may be planned 21 is the best for them and there can be a real difference in cost savings depending on which plan has negotiated the best price for which drug is covered in each of the mind numbing the number of choices. do we have any date systems systems -- data systems whether or not seniors have

made the best choice based on what their prescription needs are? what may preface the question and i look forward to your answers, it is not that i am interested in what seniors are taking but if they have not made the best choice coming guess who pays for it? we are paying for a progress there and completely the wrong plan and they could save 50% by switching the plan, 45% of the money up too 45% comes directly at of the united states treasury. what chance have been made to identified -- identify by data points that massive amount of waste in the system that is enriching the profits of these pharmaceutical companies? >> senator, if i may, i will give you a long answer that i hope answers your question that i am not aware of any

data systems and actually capture brother seniors are making the best choice is. cms has a plan finder that enables people to go to a website and figure out which drugs the best meat their needs. we don't know how many do that but there is also a provision and a lot that has to do with people who are duly eligible for medicare and medicaid. in some cases they are subsidized plans they down pay a premium and over one years been a prepay 100% of those cost? >> yes. we are. basically. if those plans go above the average, the people in those plans are randomly assigned to other plans. and there are things called intelligent assignment where you can figure out what would be the best plan for

them but the law requires random assignment. sell it. >> so the law says it is okay if we place mrs. johnson the plan that will make her plan twice as expensive because you are required to do a randomly? >> not twice as expensive because they are reassigned below a certain level but that person might be reassigned to a plan that does not best we their drug needs. >> but they could be reassigned to a plan that would cost the united states government more than it should because that plan has not negotiated a good deal with a given drug company that recipient might need more of. >> exactly. yes. >> there are provisions in some of the health reform bills that would address this issue is. >> thing to mr. chairman. >> i am glad you're here. welcome a. >> thank you very much and allowing me to be here. i am focused on this issue

on this judiciary committee and i continue to be astounded we lose so much money when budgets are tight and losing $16 billion every year on medicare and medicaid fraud. of this thinking and senator mccaskill was saying lobbying net of banc one of my favorite story is one guy did ride -- rob a bank and passed the note and the note to was his own check with his address and his name. a lot of these people when you look at the 90% negative fraud cases that mr. vito was referring to they are just associated with seven companies it is not just a low hanging fruit but falling and rolling on the ground. based on these findings it would appear the resources at cms might be best utilized by focusing on the

food analogy of a few bad apples. this cms have the ability to focus on prevention efforts on companies that appear to have increased incidence of fraud? >> thank you for the question. believe a lot of things play into this question. first of all, they don't get those statistics of they would never know. we got them because we wanted to find out. what we we're trying to learn about, we knew that complaint plans nobody was doing the review some renews cms had no idea how well the plans where or how effective the word to detect fraud, waste, and abuse. we tried to get that to be done but that was not done. another way to attack it was to go get the information from the plan sponsors to figure out how much they have detected. there's a lot of things that go into that. but if you don't know how

well the plan compliance plans are working and you see those statistics, then it makes you really wonder what needs to be done and how do focus on the ones that are reporting a large numbers are not the ones that are reporting in the numbers? all. do you see what i am trying to k@"gáaggza

jon may be able to answer that. >> cms has a range of tools that uses to enforce our requirements with corrective action plans, enrollment suspensions, termination and worst-case scenario. i am not personally satisfied with the burmese reported. cms niece to do better and identify plants that represent the highest risk to the program. we're targeting resources to those plans that have biased risk and they should consider lands in reporting fried giving the indication in resources need to be applied. we move to the strategy to apply of their resources to those plans the present the greatest of all the ability to have a range of different did to identify the vulnerabilities but this is the areas cms should

explore. >> to help sell when we talk about some much money i think people would be outraged when you're agency came and testified, it she developed a hot spots that have to look debt that for what these hotspots are not just the plans but the type of provision services? >> cms agrees that we have geographic areas of the country that seem to be higher areas answer 10 services that tend to be higher in dedicating more resources toward those hotspots and three talked about operation and he a new partnership working with the department to justice and that i g2 target those parts of the country that have the greatest vulnerability to the program at large. >> it does seem if you could

get some wind your major people prosecuted or some major money in the sense of message and right now we don't have that. people think they can rip people off and read that wind and of those examples but i know it feels like people are just trying to diagnose the symptoms and not treat them at. >> we agree. the administration i believe has taken the unprecedented action in the past year to dedicate more resources to request more resources from the congress and take a historic and new investment in operation heat and it has proven successful. we have more inventions and cms in the past does not share and what affirmation with at the partners and the secretary and tippy the secretary have been cleared to work and partnership with the idea of a cinder from a

justice to address the concerns you are raising. >> last year the investigation from medicare claims contained in a burst of an estimated 1,650,218,200 deceased positions and 385,000 or 300,000 the equipment in every case said the kaman they wear unwitting instruments that made money from and solace group -- troops would be doing two combat criminals using this type of fraud with? >> i am not aware of these diseased providers with part d but we do know it is an issue with the traditional fee-for-service program. part of the strategy is to

use data analysis and much different ways but to focus on the front end but it is claims processing, data sharing. >> making sure everything is electronically deposited and going to the right place? >> absolutely. cms in the past has had barriers to the data sharing, analysis come up working as hard as we can to break those down the be as prudent -- confident as we can. >> the key for joining us. i want to ask in the but if we want to recover these moneys to prevent the fraud from occurring, we get the money is that have been defrauded and take money from the medicare trust fund or from the taxpayer pockets. we need to incentivize

somebody to help recover the money. one of the things we do in the medicare program, the last, using a recovery of auto contractors in texas, florida, and place in nephew. we try to track down fraud. the first year there was almost nothing the second year of little bit and last i heard $700 million of three states. i believe that should be to extend that to all 50 states and can you tell us what type of timetable? also their recovery should keep anywhere around 10% of the moneys they required. but can you confirm that? >> we determined the last program is still very success of -- successful.

they are contractors. they are allowed to keep a share of recovery and right now prove eight focused on the fee-for-service program with part d. it is mike understanding that on a nationwide basis that cms agrees that the pilot was successful that contractors to the program are a very interesting idea and something congress should consider. today the contractors have not focused on the traditional fee-for-service programs from i do need congressional authorization to allow the recovery audit contractors to work and of fields? >> rainie the authorization to extend. >> can you come back on the record please with that? >> if i come back to rethink

ms. king and also to 15 prepare testimony described only 16 audits and that it took two years. is it 86? i think you also referred 24,000 plans. the 16 audits involve 86 sponsors crack separate audited? help me explain that. >> i might be able to help. maybe i can confirm for the record. >> if there were 16 audits that is not worth the paper they're written on. >> the sponsors are at the corporate level. they have contracts than they have plans. they are relatively small number of sponsors i think

86 is about that number. >> is that right? >> that sounds correct. >> but when you get down to john there are sponsors then contracts and they can have multiple plans and so that is how you get down at the 4,000. but most of the compliance programs are at the corporate level so they would be at the sponsor of level and i believe that would go at the 86. >> 16 negative 86 and this was after one false start when the original plan never have been? >> now we hear cms will redo the first 16 audits and then the new administration is making a stronger and more serious effort to audit the fraud complaints.

but i think we're at the starting gate. that's what it sounds like. is that a correct characterization? >> i think it is fair to characterize it that we are creating and implementing a new strategy for our audits with the compliance plans. i think it is fair to say in the past cms dedicated the resources toward the audits and we have changed at and thanks to congress, we have new resources for part d oversight and have adequate -- have adequate resources for the compliance. it is also true in the past it was conducted through reduce. we found those to be very limited in value. working with them at six answer criticism and very

good suggestions by gao and i g they believe they should be conducted on site and make sure that they don't have the documentation in place but the process and the system and the education program and executives understand the rules. to remind we have to do these on sites and plenum plays process these to do on-site audits and that is the current strategy. >> one last question i yield to senator mccain. i and a stand reporting 36 billion high degree at almost 100 billion of improper payments but the good news agencies are starting to identify and report next we have to go recover the money that has been improperly paid if there is recovery to be had.

but $36 billion figure for medicare in 2009 did not include payments for prescription drug of medicare. when will medicare and medicaid services of improper care? and when i heard before anecdotally is saying 2012 and that just seems like a long way into the future. if that is indeed what you're going to tell us i hope you can work with our committee and the congress and others to find a way to speed up the process. is that we were looking at? bana we're on track by the end of next year so before 2012 by the end of 2011. we are placing a very high priority on the work and we understand congress and did ministration in order to

correct issues need to understand what the issues are. we have completed three of the components and working very hard to finish the last two to have the five part composite error rate reported by the end of next year. >> so by the end of the next calendar year? >> correct. >> very simple terms you complete the five components what does that mean? it is a reporting system why don't improper payments? not getting the money but it is being reported? >> the way cms currently is proceeding is a five parched error rate. the first part is complete is regarding how well cms systems pay the claims. we have a very low error rate less than 1%. the second component is to measure accurately we deal with the subsidies. again it is a less than 1%.

the third component is to measure accurately cms makes payments to eligible beneficiaries that qualify and that hovers about 1%. so relative fee-for-service those three components have very low air raids but that is not the full picture it also has to be accurate through part d plans to claims and how accurately to the report rebates they collect from a pharmaceutical manufacturers? we will see more data to the intensive process and cms in a decade the resources to complete the two components timely. we did allocate those. >> thank you. we have decay those resources to those last two components. i don't have the estimate and i cannot tell you arrange they will be but we are very much committed to

providing that congress with a five part composite. >> thank you very much. >> very briefly if i could try to put this into perspective, mr. blum my information in 2009 cms estimates 21 billnign@@@@ @ @ @

130 billion to a private part c plans and on part d we spend 50 billion for the part d contractors for the error rate reported last fall is 7.8%. parsee is higher, 14 .6%. >> what could be that disparity between is 7.8 1015 point* six? >> peake has the fee-for-service program and part c are so different because we pay on part blamed -- her claim and part c is said different measure to calculate the error rate. for the fee-for-service program contractors audit the claims to make sure there is documentation to support those claims. the error rate is not a

fraud rate but is a breakdown of how accurate according to a cms fee-for-service rules were the claims paid? one part c that is per member per month but those plans report also service data because that is the combined status and what cms has found is the health status reported plans does not match the documentation and dave provide to support those claims. >> my understanding 87% potential fraud and abuse were identified their external sources? is that a little disturbing? eighty-seven% should be identified by people who were doing their duty? >> cms has used contractors in the past for the majority of the reviews for the back end reduce to measure and

identify fraud. we as an agency believe our role is to prevent fraud before it happens. >> but a plan to emphasize again, if there is no one who would disagree with trying to eliminate fraud before it happens but it is obviously happening. and it is obviously not being detected when only 13% of the detections are done by the agency itself and 87% arden by others is since. mr. blum, there is no one that disagrees we should try to prevent a but we know it occurs so do you think you should be focusing more attention on that side of the equation rather than relying on patriotic citizens to identify a set of the fraud and abuse? >> i agree the agency has a responsibility and a role to

make sure that every claim to the extent possible is paid accurately. we have dedicated and the congress has given cms new resources and the president requested a resources and we have changed the way cms interacts with law-enforcement agencies to ensure they also have access to the same information that we have. i agree the agency can do more and has done more and will continue to do more. >> finally, it ms. king ready is satisfied retaking the necessary steps to address this problem seriously? . .

they get nine to 12% of the monies they recover and that is pretty good and i want is to look long and hard at what we are doing with first of all to compensate them for blowing whistles and we need to take a risk and make sure we can, i'll believe we will get passed legislation this year and maybe even this month that says we encourage folks to report fraud and in the case of medicare part d were medicare, where we require them to and come back later on to share with some way to incentivize them to do that not just because it is something they have to do. one last question i have for mr. vito. we will take it easy on you mr. vito so the last question your testimony describes the importance of data analysis, what some call datamining and medicare drug contractors are

tasked with proactively analyzing the purchases, costs and distribution of medications to root out the waste, fraud and abuse, but the medics did very little i am told according to your testimony. could you comment more on the situation and why this work is critical and where i think we will soon hear from them and they are going to testify they have increased their proactive data analysis and does this indicate an improvement and should more be accomplished in kenmore be accomplished? >> largely their efforts of identifying fraud was based on the complaints, which in fact is something that happened already. their strategy at cms and the medics was to use proactive data analysis to identify the problems and prevent them a four they occurred. that largely did not happen, because the medics who were tasked to do that did not have the data to do that analysis.

>> can you tell us why they didn't have the data? >> i cannot tell you why specifically they didn't. that would be a question for cms but when we went to them and asked them,. >> when you say them? >> when we went to the medics as part of our medic review we said let us see the product of data analysis. let us see what you are doing to detect fraud waste and abuse because for example, you put out information today about people who are abusing drugs. if you had proactive data analysis you might be able to find that. you might be able to see that happening and when you see that happening then you can prevent it at that time rather than waiting until after-the-fact when something bad might happen besides just paying the money. so there are significant benefits. cms recognize how important it is to do that proactive data analysis and they wanted to get it done but they just had problems implementing it in making it happen. now we are told that the medics

have the data and they are actually utilizing that data to do proactive data analysis. we are also in the trust verification work as well, so our goal will always be to find out if exactly that is happening. what you need now is you have the data. now they have to start utilizing the data to the best way that they would be able to get the best benefit out of it. cms has to be monitoring them to make sure, helping them to make sure that they are able to get that done and we will as well. >> the last question before we excuse this panel is, every now and then i ask witnesses to come as we try to drill down and try to find out where we can save some money, and ask the witnesses to say what can the branch of our government be doing better? we talked about the agencies and everything we do we can do better and i know it is true for

me and i suspected this for all of us. what's should be legislative branch be doing on this committee in particular to make sure one we are preventing fraud from occurring and the second place to the extent it is identified and three make sure we stop it and for that we cover much of the money as they can for the trust funds and for the taxpayers. what more should we be doing? ms. king? >> senator i think oversight hearing such as this draw attention to these issues and point out. >> i hope so. >> where improvements can be made and you know we are always available to do further investigations into issues like this so we would be happy to assist you in that. >> good, take us. senator king alluded to that and we would like to follow-up with that. >> as it relates specifically to this hearing and this work one of the areas that we saw is that the medics did not have the

opportunity to directly go to the pharmacy, they pbm's the plan benefit managers as well as did not have the opportunity to go to the physicians directly. we see that if you would provide some legislation in that area that would help them a call bush that and help them be able to get their investigations and do better work. >> thanks for that. mr. blum would you comment on the point that mr. vito just made an and add whatever you would like. >> i agree that congress can help cms share information, give access to information both with cms deafened also with the various partners that we used to help us oversee the program, but i think there are some very important provisions pending now on health reform that will give cms more tools to oversee and to strengthen the part d program. one provision that the house passed bills give cms more

authority to reject plan bids. today we have very limited authority. plans have to meet certain screens, have to meet certain checks but at the end of the day cms has few opportunities to reject part d plan bids altogether. having that tool will give cms more ability to promote the best possible part d contractors and i think that is one area that congress can help cms. >> good. alright, we appreciate your being here. we appreciate your testimony and we realize, i think we are making some progress. and we are not making enough as you know. and i feel, and i think my colleagues feel a certain passion to wanting to step this up to the next level, from our

and ended your end as well. this is one we will continue to follow-up on to see how we are doing and see if we are making progress and to find out what you will need to be doing particularly cms and find out what we need to be doing to support and encourage those efforts of thank you very much for joining us today and that-- with that we will invite our second panel. thank you. [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> i will ask the committee to come back to order, the audience. welcome to our second panel, mr. apple. our first witness is mr. howard apple, president of safeguard services. safeguard service is one of the contractors that provides compliance for fraud waste and abuse center for medicare and medicaid services. our second witness at the panel,

at the desk today is dr. christian jensen, the the chief executive officer of quality health strategies. i understand it is another of our contractors that provide oversight for the medicare part d program. welcome and you are both recognize. try to give us your statement at five minutes apiece roughly and if you go over that it would be fine but much over that i will have to renew in. we are going to have a meeting at 5:00 that starts with the finance committee so we will jump right in. let's have you give your testimony and then we will ask questions. mr. apple you are recognized. >> thank you senator and i will have a written record for the statement. this will be an abbreviated one. mr. chairman and distinguished members chairman and distinguished members of the subcommittee thank you for the opportunity to discuss safeguard services role in helping cms combat fraud and abuse in the medicare prescription program. my name is howard apple and i'm the president of safeguard services. for background enactment of the

etiquette modernization act of december 8, 2003 were presented the largest chance for medicare since its inception by creating a new prescription drug benefit for medicaid beneficiaries which is part d. the beginning of september 2006 cms geographically divided the united states and awarded contracts united states and awarded contracts to three medicare part d contractors, the medics. there was medics north, south and west. each medic was responsible for performing program safeguard functions to detect, deter and prevent fraud waste and abuse and to medicaid fuller abilities associated with the part d benefit services provided within their geographic jurisdiction. sgs was awarded the contract which consisted of 24 of the states and world in the u.s., the district of columbia and the u.s. virgin islands. in september 2008 cms reduced number of meta-contractors to two organizations resulting in the reassignment of medic west

h. the medics north and south. medic north's jurisdiction included 35 states for u.s. territories in the district of columbia. additionally be taos was supporting the center for drug and health plan efforts to address they new or emerging they were merging areas of compliance and enforcement related to advantage part c, part d in the program of volunteers that carefully elderly for the states and territories. under the medics north contract for cms sgs responsibility included allegations or suspicions of fraud waste and abuse in the part d program within our jurisdiction. complaints were received from a variety of sources. the majority of complaints were received via the cms's toll-free part d hotline and through cms's tracking module. typically complaints about telemarketing scams and appropriate enrollment or just in rome and within the plan, explanation of benefit errors, and proper marketing practices

and drug diversion. additional responsibilities included innovative techniques to identify potential fraud waste and abuse fulfilling requests for information from one person agencies and conducting compliance audits for part d sponsors. in october 2009 sgs contract was modified and cms decided to rely on the responsibilities of them medics functionally rather than geographically curb. medic north became a mission of providing a nationwide support the cpc's compliance to bridge the gap between compliance and enforcement activities matched by the program compliance and oversight group and cpc a nationwide fraud waste and abuse task and managed by the program integrity group. our responsibilities now include providing audit technical assistance conducting plan sponsor readiness and compliance assessment, investigating

complaints against agency brokers involving violations of medicare regulations and want tw accomplishments we have had today. from december 2006 through november 14 of 2009 we handled, we received over 10,000 calls via the toll-free hotline. we handle over 3000200 complaints from beneficiaries. we initiated over 1100 investigations and referred over 120 instances of fraud and abuse to the oig and other law enforcement agencies. we also fulfilled 300 requests of information such as part d data from law-enforcement agencies and referred over 170 agents brokered misconduct cases to insurance commissioners.

these accomplishments resulted from developing a collaborative a constructive relationship with cms and all organizational levels which we continue to foster through weekly meetings ad hoc meetings and conference calls. thank you mr. chairman for the honor of speaking to you today and i would be happy to answer any questions that you are members of the system committee may have. >> thanks for your testimony. i will ask you to suspend for just a moment. i am getting a phonecall that i need to take and we will recess for two minutes. don't go away. i will be back.

[inaudible] >> thank you very much. i am dr. christian jensen, the ceo of quantity health strategies or qhsr to which is a nonprofit corporation. health integrity is one of qhsr 's subsidiaries and has a medicare drug integrity contract. are written testimony that we have submitted contains many more details on our experience with medicare program integrity contracts, but i want to note that we are also the holder of the zone program integrity contract for a region four, which includes the southwest and for task orders one in five of the audit medicaid integrity contract. the history of these contracts has been well covered by a mr. apple, and cms as the

program has evolved, has taken some important steps to try to improve the integrity of medicare and medicaid. there are some unique differences between medicare fee-for-service and medicare managed care programs, and medicare part d and that was alluded to by mr. blum, the complexity of medicare part d. the data systems and the data itself are much less mature with medicare part d. and the risk model is much more complex. it includes cost-sharing, risk sharing and coverage gaps and so forth. and there has been, as our ready has been alluded to, a lack of direct access of the medics to downstream providers. for example we were not able to get physician and pharmacy records.

for most of the time of our existence. i would like to share with you that the oig report represented a picture of the medics as of the end of calendar year 2008. and, during 2000 and nine, many of the challenges and the difficulties that we had encountered in bringing this program to successful maturation were overcome. eyesight a few. medicare part b. mack data access was obtained in late 2008. during 2009, and that is what these numbers alluded to, about 2500 call-center complaints call center complaints were received and processed.

138 calls were processed for law-enforcement. 121 fraud referrals were made to law enforcement. 157 referrals were made to state insurance commissioners. warty seven proactive analyses were from all sources are now open, and 267 investigations resulted from proactive analyses. with 28% of all our investigations during 2009 resulting from proactive analysis. 12 referrals have resulted from our proactive analyses and we have 203 investigations from proactive analysis, which are still underway. also during 2009, health integrity focused great efforts on trying to ensure that the law-enforcement community and that plans were fully educated

concerning the differences and the subtleties and the financial impact of part d fraud. and as a result, we have seen three part d indictments in 2009 and 2010. we have had a great deal of success and collaborating with plan sponsors. we have established part c and part d plan working groups. they meet quarterly. they include lot of force meant. they include the plan sponsors and for example, the referrals that we received from plan sponsors went up from 90 and 20072396 in 2009, and we have artie had 244 in the first two months of 2010. health integrity has only been a

national benefit integrity magic since october 2009, 5 months. but, already this national experience has strengthened our ability to identify new and emerging regional fraud schemes, to identify existing national scope issues, and to focus on fraud and its prevention through vulnerability reporting, fraud alerts and other measures and i would like to thank senator carper in the subcommittee for this opportunity and i am pleased to answer any questions. >> thanks dr. jensen. you, and in your statement, you mentioned, i will paraphrase but i think he said we had a great deal of success and i think for dating was the word you use, coordinating with plan sponsors in the question i would ask of both of you, how do you measure success in the work that you do?

>> you talked about in your statements, referrals and investigations begun. how do you measure success? sometimes in our schools we measure success not by whether kids make progress at the end of the school year but we can't success on whether they show up and whether there is disciplinary actions. >> one measure of success although it is perhaps a progress or a process measure, rather than an outcome measure because we are not at the outcome stage yet with many of these investigations by the number of referrals and their dramatic increase from the plans. somebody is getting that message that the medics are here and that they can handle these complaints or referrals that they receive about fraud, and that there is a responsibility on the part of the plans to make

those referrals. >> mr. apple how do you measure success? >> there are two ways of measuring success. you can look at quantity and say, we referred to as many cases this many cases to law enforcement. but what i look at more and what my team looks put my team looks out more from metrics are the quality of our work, the quality of our work. so, for example, if in one year we referred 10 cases to law enforcement, and five of them ended up not being accepted because they didn't believe the quality of the work was that good as a benchmark. if the next year we find 100% of our cases work separate because of quality that is one benchmark to me of success, and at sgs we truly, the mantra is not quantity.

the mantra really is quality of work. when we refer cases to law enforcement we request information. if we get a letter back from law enforcement saying that was very helpful, that saved us tons of hours of work to get this case through, that timmy is a to me is a measure of success. >> is there some way that we are measuring success in the work that you all do? where we actually quantify dollars that we have prevented from being defrauded from the program more dollars we have recovered that were fraudulently diverted? is that part of the measurement of success? >> that is then there is of course the return on investment issue. and, what cms puts into funding is contractors. what are they getting back and what are the taxpayers getting

back for that? that is a difficult thing to measure sometimes when you have a lot of variables. >> i mentioned earlier the program that we are in running in three states with recovery, audit contractors were recovered $700 million. that is pretty easy to say this problem is working and they get nine to 12% as a percentage of their preferred compensation for their efforts but you know we can say,@@@@@@@

safeguard contracted we are prohibited by cms from looking, from measuring success by return on investments. the reason being, it is we don't want to be perceived as bounty hunters. so in other words you don't want to just say we referred 50 cases to law enforcement and not really but that the quality of our work. but, in the z. pack independent safeguard contract we know how much we cover. there is a mechanism for us to know how much we recovered and that is one way of knowing a return is far greater than the expense of running our programs. i have behind me the program director and doug, i believe you have told me we have no way of

getting their records to know how much was recovered on the medic part d. >> feel free to come to the table and identify yourself for the record please. pull your chair up. >> for the record my name is doug. and they. >> what is your last name? >> quays. and the program director for what is now the compliance of enforcement medic. weise to be medic north as mr. apple referred to. the problem is because of the intricacies of the, and the ways that the part d and part c. programs are paid in a captivated rate it is difficult to quantify the loss to the government. it is not like part a and b where somebody submits a claim and get paid so much for a claim. instead they get paid a monthly rate per member to administer the plan, and then they did, the

sponsors that a certain amount and say this is how much we think we can quantify. we can provide in this plan for the beneficiary so it is very difficult to quantify the laws. that is why it is difficult russ to turn around and showed the return on investment by referral. at this point we have been referring law enforcement to cms for assistance in trying to quantify the amount. on our referrals. >> let me just add onto that what i was saying, under part a in part b program very different mechanisms to see at tricks. number one, you could stop payments from going out the door. you could put repayment edits in. you can meet recovery of overpayments so that is a more effective way of knowing what was recovered in what your return was. you do not have that in the medic program. >> all right. dr. jenson. >> okay, they are anecdotal or

isolated reports. so for example, we conducted an investigation into allegations about a pharmacist in a southern state submitting high claims were false claims for high-cost hiv and antipsychotic drugs. the investigation revealed that particular pharmacist had submitted $200,000 worth of prescriptions to medicare part d which were never provided to the beneficiaries or prescribed by the physicians. that pharmacist was taken out of practice. that perhaps is one example of a saving. another also took place in a prominent southern state, where a pharmacy billed medicare part d for medications that were never rendered to beneficiaries nor prescribed by physicians

which totaled over $1 million. between february 4, 2008 in june 26, 2009. and, the owner of the pharmacy was indicted in the southern district of that state on charges that he owns two pharmacies which build many -- make medicare for approximately 20 million and received $6 million in payments. he was sentenced to incarceration but senator there are other values to this program which cannot be measured in dollars. i . out also an investigation of a physician and a nurse practitioner who were overprescribing controlled substances than our current ache analgesic drugs. known drug traffickers were seen going into the office and as a result of his prescribing, 10

patients died of overdoses of prescription drugs. that dr. was indicted october 2000 and eight on 14 counts that alleged her actions led to the death of three patients in 2006. her trial is set for next month. and, the director of an assisted living facility, who stole controlled substances from chronically ill patients for her own personal use. she was indicted on 11 counts of false statements relating to health care matters. and, those things are important perhaps but it is difficult to measure them in money. >> okay, thank you. a question really for both dr. jensen and mr. apple. let me give you a couple of questions. your comments and your testimony

that suggested some improvements on several fronts, identified by the gao in the inspector general. medics i believe are supposed to ensure the anti-fraud complaints were in order and being implemented correctly. yet the center for medicare and medicaid for prevented you from starting-- at least that is what i'm told. would you say your progress and auditory started once you were given the authority to audit the anti-fraud plans of the sponsors? second, why were you not given the authority before 2008, and finally are their current-- you are awaiting permission to begin? >> i could start with that. quite frankly we did not know why we were not given the authority. we were just told we were not able to conduct audits until i

believe it was october 12000 and 8 and again, this is the customer telling us this and we follow what the task order required of us. we believe that, we believe as we do more on its. >> sir, my last question, are there current audits that you are awaiting permission to begin? >> as i speak here today, we are conducting an on-site audits under the new program, and expanded order and we are told that many more are being implemented. >> my question was are their audits you are awaiting permission to be getting? >> no, because we do not request permission from cms. they tell us which orders they want conducted. this is directed by cms. >> we did wealthy had the authority to do 10 knots which work as audits, and i would say

that we too were prepared to do many more audits. the medics were ready to carry out that responsibility but the orders did not calm. and, of the 10 desk audits we did, we did find some areas of weakness but the desk audits are subject to the criticisms that have been made already here this afternoon. >> let me just interrupt you if i may. describe in terms that everybody can understand what a desk audits is, describe the audits you want to be conducting. >> the desk audits itself was essentially, you asked for information from the sponsor. >> been? >> being? >> sgs. >> as just dance for?

>> safeguard services, that is my company, safeguard services and a request would be made for plans to provide the data to prove that they were meeting the seven elements required to be a sponsor. the difference between god and what sgs is doing now is now we are going on site and we are looking at the effectiveness of their pro-grams, of their compliance programs and this would be the best example senator. on a desktop audit, sgs might receive information that proved training sessions were provided on the following dates, a, b, c and d. when you go on sites you could get extra records like attendance records. how many people actually attended? let me see that curriculum you

provided the attendees to make sure it is relevant to the work you are doing so you really can delve into the effectiveness and not just a fact that they check the box and had compliance. >> dr. jensen, the same questions. the kind of thought it that you think you ought to be doing. >> in my view, an on-site audits as has many advantages over the desk audits. an opportunity to verify on sites directly and experientially what has been stated in a document. >> okay. and, do you feel you have the ability to go on-site and conduct the kind of on-site audit that is more appropriate? >> mr. chairman the audits we are doing now are much more effective and my team believes that these audits will be very effective. >> the division of labor tweener to medics believes that

responsibility now with mr. apple's organization. >> okay. one of the questions i asked the first panel i asked them to tell us what we needed to be doing to enable them to do a better job and they gave us a couple of ideas and we explored other ideas during the course of their testimony. but, in terms of what you need to have in order to be, to unleash they fully effective, what do you need in terms of change in attitude, change in direction, change in regulation, change in legislation? what do you need to unleash a sin nominal i guess that's an assaulting the fraud that is occurring in this program? >> mr. chairman i come from a background of law enforcement. i have a long history of law enforcement and you made a reference to willie sutton robbing the bank because that is

where the money is. medicare fraud is a little bit different and that fraud many times his paper driven and i will tell you that anytime you have medicare fraud, if you have sufficient data you will find that fraud proactively or reactively, and with that as a basis, my comments would be the more data that can be available to the medics are better off the medics will be. additionally, if the medics were allowed to obtain medical records directly, rather than going through the sponsors, i believe that would be beneficial and third, something that was not addressed is what the medics are able to look at the a in b data, the fact is that psc that do the a in b are not allowed to look at the d data and i believe the more people, the more investigators that can wrap their hands around data and crime problems you will get a better picture and more

productive results. >> we are going to write you and ask you to reiterate that and amplify on the points you made in writing. >> i would be delighted. >> i echo what mr. apple says particularly with respect to data. one of the reasons we are here and some of the criticisms which have been made of the program have been made, or because of are because of the lack of data in a timely way. the larger the database, the greater the potential for identifying fraud and that is what i i am enthusiastic about. anything that the legislative branch can do to facilitate, that would be greatly appreciated. >> okay. i think those answer my

questions. at anything that either of you want to add to what has been said? also, not just for this conversation we have had with you on this panel, but looking back to a conversation with their first three guests, just to reflect on that anything that you would like to underline, specially noteworthy? >> i think airings like this are so essential. it makes us all better and i appreciate the ability to be able to participate in this hearing. thank you mr. chairman. >> and annie points? >> no, you think every one of their points were on line. i don't think i could add to@@@

remember that that was a snapshot in time. that was at the end of 2008, and here we are a good year pass that, and senator carper there has been a lot of progress and a lot of upward movement and a lot a lot of lot of successes since then. >> would you say we still have some to go? >> absolutely. in your own words, anything can be improved on. >> i agree. it is not enough to be good. we have to be great and continue to get better.

>> we appreciate you being here today. thanks for your preparation and take us for your responses to her our questions. thank you for coming out of the audience to come to the witness table and some of our colleagues or unable to join us today and will submit questions in writing. i will be submitting a couple of questions in writing as well. members have two weeks to submit their questions to file conclusion of today's hearing and i would ask that when you receive those questions you respond promptly and again thank you. we do look forward to improved further work that is being done. thanks very much. the hearing is adjourned. oo