i hope we have an opportunity tt have an unlimited amount of it t amendments and we can get the bill corrected and we can make it at the end of the day at the bill that willca generate a for, significant vote on this floor.n .. and let me just say that -- that one other issue that -- that concerns me is an amendment that is -- was filed by -- by senator tester, and i know his heart is in the right place on it, but no less than about 30 national agricultural groups wrote a letter to chairman harkin as well as to ranking member enzi on monday saying they were opposed to that amendment, and if it's included in the bill, they are going to be opposed to the bill. that again is one of these

that again is one of these >> i would ask unanimous consent, mr. president, that a copy of this be entered into the record. >> without objection, ordered. >> so i hope at the end of the day that the amendments will be allowed, that we can come up with a bill that is a positive bill and closes these gaps we have in the food safety inspection problem in this country. we have worked very hard on a provision that is included in the base bill that will improve the inspection process and make it easier and give more authority, and more importantly more teeth to the folks charged with doing the inspection, and if that is the case, we can get the right amendments done, and perhaps at the end of the day we can get a true bipartisan bill passed and we can all feel good

about supporting it. with that, mr. president, i would yield the floor. >> in a few moments the head of medicare and medicaid says repealing the new health care law would be a mistake. in a little less than an hour an after half, a hearing on the dispute of fees that broadcasters pay to have their signals carried by cable tv. this is the does piewt that -- dispute that led to customers not having service not baseball world series in the east.

>> the head of medicare and medicaid says that repealing the new health care law would be a mistake. president obama gave dr. donald berwick a recess session in july. he testified on capitol hill for the first time on monday about the health care law and its provisions for patient protection. this is a little less than an hour and a half. >> montskeu said all people are

born equal, but they cannot continue in this equality. they recover it only by the protection of the law. when it comes to health care, the affordable care act gives seniors, patients, and health care consumers historic protections under the law. the new law protects by hemming to ensure they get the right care when they need it. the old system before health care reform was failing too many seniors. take christine brown. christine's father had a blister on his toe. that blister became infected and would not heal. they tried everything. every doctor they went to prescribed a different medicine. no one coordinated his care. there was no record of his medications. at the managing care, it was too

late. the infection had spread, and the only way to save his life was to amputate the leg. christine's father is now confined to a wheelchair for the rest of his life all because of a blister, all because no one could coordinate his care. the new law protects patients like him. they help doctors communicate and coordinate with each other. the old system with health care reform was failing too many seniors. the hhs inspector general released a report and found that nearly a quarter of seniors hospitalized suffer an advent event in the hospital, and nearly half of those are preventable. the new law helps protects patients from preventable adverse events. medicare and medicaid will crack down own hospitals that don't

prevent infections. nearly a fifth of seniors before reform had been readmitted to the hospital. when patients leave the hospital, they clearly don't want to come back. they should receive the follow-up care they need to stay well and out of the hospital. the new law protects patients from needless readmissions. medicare penalizes hospitals that don't treat patients right the first time. the old system before health care reform, has been failing health insurance consumers. far too frequently, insurance companies drop coverage when patients get sick. the new law protects patientings from this and other abuses. far too frequently, insurance company executives use premium dollars for lavish bonuses instead of patient care. the new law requires health insurance companies to spend at

least 80% of the premiums that they collect on providing health care. the new law puts a limit on funds for administrative costs, salaries, and ceo bonuses. the old system before health care reform was failing the medicare trust fund. before health care reform, medicaid would have been bankrupt by the year 2017. medicare would have gone broke in six years. the new law protects medicare from going broke. the new law extends the life of medicare by an additional 12 years. in the old system before health care reform, health care costs were out of control. in the last 8 years, average wages have increased just 20%. with the average cost of employer sponsored health coverage has doubled. family insurance health premiums

have tripled. the new law will protect the american families against these increasing costs. the new law transformed medicare payments from paying for quantity to paying for the high quality care that seniors deserve. what does paying for quality mean? paying for quality means protecting seniors of repeat tests. it means protecting seniors from unnecessary procedures that waste time and money and empowering doctors with electronic medical records putting patient information at their fingertips. paying for quality mean providing doctors with the latest evidence that way patients and doctors can make the best informed decisions. paying for quality means investing in primary care so that seniors have an advocate to help them navigate the health care system. what does paying for quality not

mean? paying for quality does not mean cutting benefits that seniors are guaranteed. paying for quality does not mean a one-size-fits-all washington solution. they must seize upon the innovations that work at the local level. paying for quality does not mean interfering with the doctor-patient relationship. the doctor-patient relationship is sacred. the old system before health care reform was failing to crack down on fraud and abuse. the new law protects the taxpayer by giving law enforcement officials new tools to combat fraud. the new law puts an end to wasteful overpayments to private insurance companies to participate in medicare. these overpayments to medicare advantage plans used to cost the program tens of billions of dollars every year. under the new law, seniors in

medicare are protected. seniors can feel confident that medicare dollars will benefit patients, not line the pockets of insurance companies. the new law slashes wasteful payment, and it does so without taking away a single guaranteed benefit under medicare. i want to say that again. this is important. health reform protects the medicare program without taking away a single guarantee. in fact, the new law adds benefits. like lifetime of free annual checkups and closing the donut hole. the old system before health care reform was failing seniors, patients, and health care consumers. the new law gives them historic protections. repealing the new law would

return us to the failures of the old system. repealing the new law would cause medicare to go broke in just six years. repealing the new law would increase the deficit by hundreds of billions of dollars. repealing the new law would put insurance company bureaucrats back in charge of health care. repealing the new law with threatening seniors health with repeated care and poor coordination. today we hear from the pointman on the new law and from the administrator of medicare and medicaid services, dr. don berwick. he's in charge of making medicare and medicare more efficient and modernizing them for the 21st century.

it provides the protection of the law. we look forward to hearing it carried out. senator grassley. >> thank you, mr. chairman. i and the members of this committee take the importance of this committee and our constitutional role as the united states senate very seriously. you, dr. berwick, were nominated di prom to serve as the -- by president obama to serve as the administrator. you and i personally met in my office to discuss, and we did this in june, to discuss your nomination, and despite repeated requests from me and my colleagues, we were never able to get a nomination hearing, and instead you were appointed under recess powers on july 7. i believe that was incredibly unfortunate for you and for the position that you now hold.

i think you should have had the opportunity to come before this committee and explain and defend yourself and make the case in person that you're the right person to be the cms administrator. you were appointed 134 days ago, and yet, this is our first chance to get you before this committee to testify and answer questions. the phrase better now than never comes to mind. today, the contenters for medicare and medicaid services has over 4400 employees, not including thousands of outside carrotters and a -- contractors. that's a bigger budget than even the pentagon. through the medicare, medicaid, and chip program and services provides health care coverage to about one in every three americans, almost 100 million people. that's a lot of people, but that

number is set to grow even more. the partisan health care overhaul will add about 16 million to medicaid. it has a price tag on the federal government of 334 billion. that begins on your watch. in addition to this big massive coverage expansion, you've been given president authority to implement new payment and delivery models. your decisions in this area will influence a significant amount of economic activity and determine how the new health care law affects health care coverage that millions of americans rely on. we need to discuss your thoughts on the pending $500 million in medicare costs and the massive medicaid expansion that you're charged with implementing. now, the office of actuary and providers across the country expressed serious concerns that

the deep medicare cuts hurt access to care and hinder quality improvements. both republican and democratic governors are worried that the medicaid expansion will bankrupt state budgets. while some supporters label these claims as scare tactics or misinformation, we take these claims very seriously. with all that is changing in the health care system and the sheer number of people that rely upon your agency for care, you have one of the most important jobs in government today. that is why it is so disappointing that you were recess appointed without a hearing. it contradicts policies by candidate obama about having the most open and transparent administration in history. as i'm sure you know, i take oversight and transparency very seriously. i hope you share my enthusiasm.

i hope you will show an even greater commandment to transpairns and collaboration than any of your predecessors, but based upon the number of letters still outstanding, i'm concerned about the didn'ts of that -- depth of that commitment. the american people deserve nothing less, and i look forward to hearing your testimony. >> thank you. the administrator for senators and medicare and medicaid services. dr. berwick, thank you very much for coming. it's good that you are here because many senators have many questions, and i know you'll answer them. it is our usual practice that your written statement is automatically included in the record. i encourage you to speak and give the witnesses 5 minutes, but if you need more, go ahead. >> thank you very much, mr. chairman, mr. leader, members of

the committee, thanks a lot for the chance to meet with you this morning. i feel very privileged to be here. my full testimony is submitted for the record. i'm a physician. i'm the son of a general practitioner who practiced for 40 years in rural connecticut, and from my father, i learned the image of health care that i still cherish, responsive, embedded in a community and connected to it and focused on the needs of patients and families. my father made house calls p. he knew everybody's -- he knew everybody's name in town. he did it all. he rounded at the local hospital every single day before his afternoon and sometimes evening office hours. he took his own x-rays and he read them. in my own professional career

which is 40 years long so far, i also practice as a doctor. i'm a pediatrician, but i practice in a very different kind of health care world than my father started in, more interdependent, full of new and wonderful technologies, and much, much more complicated. when everything goes well, that modern health care world can work miracles compared to what my father could do. my father watched children die of leukemia that was always fatal. most children of leukemia today are cured, and they live. he had little to offer people who had heart attacks except oxygen or bedrest and hoping. today, new treatments have cut heart attack death rates to less than half of what they were 30 years ago. with the miracles of health care

have also come major new challenges. the complex drugs and powerful treatments bring hazards with them. from science, we know often the best way to treat diseases like diabetes, but that poses us with a question, how do we make sure that treatment, the best treatment, is within the reach of every single american? we also need to address the rising cost of health care, the cost that by itself is a barrier in getting the right things to people. in my very first day on the new job, i was passing through a metal detector getting in the building on the way in, and i

saw an intimidating security guard starring at me, and he beckenned me to come over and he said, can i talk to you? i said, sure, you can talk to me. you have a gun. he said, you're don berwick? i said yeah, why do you want to know? i'm jon mccormic and she died because of a medical error. i'm making sure that's not happening to other children, he said, and i want to do everything i can do to help you in your new job. i don't know the particular error that cost little taylor her life. i do know that she was not alone. as the chairman said, the inspector general released a report showing again that far too many medicare patients suffer or die as a result of

medical errors. for me, eliminating that harm is a top priority. what i also know is that all over this nation, there are hospitals and clinics and offices that are making thrilling progress towards better, safer care. i've worked with these places for 20 years. there are hospitals that have reduced their infection rates to 0, that reduced pressure sores by 90%, that have reduced waste, that have become truly excitingly patient centered. this has to do with cost also. what's true in every other modern industry is true in health care too. poor quality costs more than good quality does. doing things right costs less than doing things wrong. hospitals and clinics all over the country are proving that. denver health, for example, reduced their cost by nearly $50 million by finding and removing waste like asking nurses to fill

out forms for hours instead of just using their time for what they want to do like taking care of patients. better care leads to better cost through improvement of care. what i mean to say also is that improvement of care is not just possible, but it is actual. it happens every day in this country, but that raises the country again, how can it happen everywhere? how can we, as a nation, take full advantage of everything we already know? the biggest waste of all comes from when fail to meet the needs of patients and families who need us the most, the chronically ill. you probably know someone with cancer or heart disease or lung disease, and you know that they need health care that helps them through journeys, but not fragments. they need us not to drop the ball or what medications they are on or their name. i feel incredibly lucky to join cms at a time of enormous

promise of the time of our nation's health care. i think we can and should aim for three goals at once, better care for individuals, better health for the american people, and lower cost through improvement and bet every care delivery. i know that all of that is within our reach. in the pursuit of that, the affordable care act is a landmark. it's the best opportunity we've had in a generation or more to make progress towards the health care that our nation needses and wants. we have already started. millions of people have already seen benefit from this. close to 2 million beneficiaries have received checks to help them with their prongs drug costs. next year the beneficiaries in the donut hole will see a 50% discount on prescription drugs.

this is available free with no copayment at all. that keeps them healthy. we've turned up efforts to prevent criminals and we're putting more boots on the ground, using better technology to protect them and empowering seniors to report fraud when they see it. through enforcement we are getting millions and millions of dollars back into the trust fund. we have much better ways and new ways to report on health care performing so beneficiaries are better informed and the care providers can learn from each other and we can reward the system for improving. we have a marvelous new center for medicare and medicaid innovation that we started yesterday to accelerate that learning and envings. the new law stengthens quality and uses good market forces. on behalf of beneficiaries to find them the best deal on supplies and medicines, and as a

result of that, i'm happy to report the medicare advantage premiums on health care went down next year. when we raise the quality of care for beneficiaries, we raise the quality of care for all americans. every single day that i come into the cms office now, i'm thinking about the people we serve, those 100 million people and thinking about taylor mccormick. my brother, bob, gave me a sign for my desk, and that sign says, how will it help the patient? that's the first thing you see when you visit me, and it's the first thing on my mind. this is crucially important though. we, cms, hhs, government, we cannot do this alone. we can help and will help, but the best roads to better care are through improvement and the best roads are locally built, community by community and state by state. this also has to be done why

strong public and private partnership. going alone is not a good plan for cms. i've been meeting with stake holder groups of all sorts. they know the changes needed, and they all ask how can we help? i think that's really good news, bus that's the only way we can get this done together. every since i became a doctor, i've been trying to help make health care better, safer, more reliable, more patient-centered, and more equitable. i know that is possible and vast improvement is possible. i believe there's no better position in our nation to help pursue those goals that i'm privileged to occupy, and there's no better time than now when the affordable care act has laid down. there's better care, no more stories like taylor's, better health so people can live full and happy lye of --

lives even with a chronic illness. that's the root of quality without harming a hair on anyone's head. i know it's possible, and i've seen it, and i'm privileged to work to make cms a constructive force and effective partner for the health care of all americans. thank you very much for the privilege of being here and i'll be happy to answer questions. >> thank you. what are your priorities? you can't do it all at once? cut costs, hospitals, whether it's dlir ri system re-- delivery system reform or trust funds, there's a lot of areas in which you can work. do you have a first, second or third list? >> first is to protect the trust fund and protect the viability of the system, but it's to protect the beneficiaries, 100 million people who depend on us

to deliver to them the best we can and working with other agency in the government, private sector, reducing waste within our own work, improving cares for individuals and what you outlined in your opening remashes, moving -- remarks, moving towards coordinated care and helping settings all over the country figuring out and reaching out for better ways to take care of chronically ill people, and then getting really serious of prevention upstream. a lot of the illnesses that erode are well [laughter] -- well-being and if we work on obesity and avoidable heart disease, we can make a lot of progress. i'm pushing hard for progress on all of those areas. >> there's a lot of talk about the cost of chronic care. can you give us a sense of how chronic care can be bet every addressed?

>> yeah, if you can imagine a medicare beneficiary, plz jones who has -- i was visiting regional offices and i visited a senior center in atlanta, and there was a woman there who said she worried about i have five medicines, six doctors, four different facilities, i'm not sure the people are talking to each other. i need a team. she was saying what seamless care is, it's a net around the patient to work well together. if we drop the ball, things get worse. if one doctor prescribes a medicine that conflicts with another medicine from another doctor and they don't know it, she could end up bleeding and in a hospital, not at home where she wants to be. >> right. we've all heard that. how do we get there? how do we get better coordinated care?

>> you need to envision it and reward it. the new affordable care act gives us a range of possibilities making it possible for clinicians to get together to do the work they want. accountable care organizations, medical homes, health department homes, medicaid, these are ways to come together to do the work we need to do. >> tell us about accountable care organizations and how far along they are and in what parts of the country? >> it's a new exciting part of the law to encourage that coordinated care for chronically ill people and accountable care takes care of a group of patients with a primary care base and get rewarded for that and there's payments when things go well in the accountable care world, and that operates on a fee service side of medicare. it's not medicare advantaged or advantage care.

.. senator grassley. >> dr. berwick, it is not your fault or anybody's fault on what the schedule of the senate is, but there is at least 70 minutes of questioning here and we have both starting at 11:00 so i was wondering if you would commit to it appearing again before the committee, after the thanksgiving break so we would all have a chance to ask

questions we want to ask. >> senator, think that is the prerogative of the chair to call a hearing or not. i can't guarantee when we will have another hearing although it is my intention to have a good number of hearings because it is very important for this committee to hear from the administrator about his plans. >> okay. i will go on to the next.. prior to your nomination you lead a group called the institute of health care improvement or i age i. it has numerous health care companies with both clients and donors which give rise to potential conflicts of interest in your new position to help shed some light on these potential conflicts during your initial confirmation process. my staff asked you to provide three most recent forms, 990 including schedule b which detailed donors and donation

amounts. you agree to comply with this request. indeed, you even agreed to have my staff meet with your ih -ite chief financial officer to ensure the financial information provided was accurate and complete. it is now november and the information still hasn't been provided. no chief financial officer has come to me with my staff though your installment subverted the senate's constitutional prerogative board bison consent. it did not subvert its obligation of oversight, so i restated my request in an effort to ensure that there is transparency for your potential conflict of interest and accountability at cms, so the question is dr. berwick you stated in an earlier letter that you planned divesting any interesting companies you may oversee and have interaction with cms. is this divestiture complete and

if so, we provide the committee with records documenting the divestiture? >> thank you senator. i recall that and when you asked for that information i intended to try to provide it. if it happened it was not of my soul authority to provide that information. and now of course i'm recused from contact with ihi so i cannot provided on my own initiative. what i can assure you is that all of my past activities, my finances were thoroughly reviewed by the appropriate ethics officers under congressional rules before he took office. i was given an ethics agreement to review. i signed and agreed to to every single condition. i've applied -- not complied with every single one fully in compliance with the conditions of that agreement which were supplied to the committee. >> the waivers were not supplied to the committee. could we have copies of the waivers?

>> i have requested no waivers yet senator. i am recused from contact it because there are a couple of organizations from which i'm recused that i think have important potential information for cms i requested and received the right to request a waiver when and if needed and i haven't done so yet. >> okay then let me be specific. you also stated in an earlier letter that you were seeking ethics waivers due to your connections with kaiser permanente and the commonwealth fund. did you obtain these or any other waivers and that is what i would like to have provided for the committee. >> understand senator. yes, those two organizations i asked permission to seek a waiver when necessary for the conduct of my particular duties at cms. i've not yet requested those waivers because that issue has not arisen. >> dr. berwick, health reform was supposed to improve medicare programs, but these findings, i'm not going to take time to give now but i made reference to

them, particularly with the actuary said come indicate that some medicaid cuts in the new health care law will move the program in an opposite direction by jeopardizing access or beneficiaries. dr. berwick, would you agree with rick foster when he made those comments about the health care bill potentially jeopardizing health care for beneficiaries? whether these cuts will jeopardize access to medicare part a writers? >> medicare, not medicaid? >> i am sorry. if i said medicaid, this is all medicare. >> the actuary's estimates are just that, they are estimates based on his best judgment. we can look now at facts as they are developing. our intention is to increase access to care for medicare beneficiaries. we are strengthening part a, part b and c indymac and as we go they will be more attracted to beneficiaries.

i think they will find themselves in better shape after implementation of this act. >> the senators indicate the order. neck senator rockefeller, senator hatch and senator bingaman and senator bunning. >> thank you mr. chairman. dr. berwick i would like to ask three quick questions in a row. >> senator roberts would like to recognize to make a statement. >> i revise my comments. i certainly don't want you to punt senator rockefeller. i didn't up with that in intelligence committee. i am suffering from cms induced paranoia, so i might have to leave. i hope you can treat that as we go further. did the chairman indicate to the ranking member that we will have an opportunity, we will try to have an opportunity to talk to dr. berwick before thanksgiving?

>> we said sometime that we did not say when. and in good faith, and is reasonable. >> i think the obvious statement by the senator from iowa and the ranking members five minutes obviously i can't do this because i have other applications. i have to leave and i apologize for that, but i would hope we would have an opportunity to do that. i would like them to ask unanimous consent to submit some questions for the record. >> without objection. >> and thank you dr. berwick for coming. >> can the time be put back to the original? >> absolutely. >> dr. berwick under health reform the federal government is paying for the vast majority of the medicaid expansion of the health reform. it averages about 95% on a nationwide basis, actually up to 100% in four or five states between 2000 -- 2014 in 2019. the first question, it stays

reject this funding into and to not expand their medicaid programs, where else could these vulnerable citizens get coverage is question number one. question number two, it is an interesting one i think. i want to ask you about the practical impact of medicare. when people are uninsured for 10 to 15 years before they sign up for the medicare program, as a physician can you tell us what would happen to your efforts to improve quality and lower the cost of care if we do not move forward with covering 32 million uninsured americans under health reform? and you see the link there. the third question is, could you explain how this law gives states flexibility? everybody says it is government-run. in fact, it is state run. it is exchange is. could you explain how this law gives states flexibility and

reforming health care delivery? he referred to that in your statement. could you talk about how it gives health care providers the ability to innovate and improve health care for patients? those are the three questions. >> thank you senator. with respect to the first the choice the states make about their participation in medicaid my job is to medicaid program ever stronger and more attractive and more viable for states and i understand states are dealing with a lot of very serious financial issues right now and they are very much on my mind. as you pointed out the new law gives us the chance to help states with the transition to broader coverage for people who really needed. the same things that are making the state suffer under the recession are hurting people with marshaling, and they will find themselves with no insurance and nowhere to go without the benefit of this new law in place. we are doing a 100% federal match for the newly eligible medicaid beneficiaries and as you say over a multiyear period it goes down to 90%. rear reaching out to states with

a 9010 match, the 90 cents out of every dollar the states are going to spend to smooth their enrollment procedures across these new forms of enrollment. we are reaching out to states with that in helping them with waiver authority and we are strengthening medicaid every day. it is a much longer program now than it has ever been before. with respect to the practical impact on medicare or failing to ensure people in the pre-medicare area, you are absolutely right. someone doesn't get chronic congestive heart failure on the day they become a medicare beneficiary. their diabetes doesn't suddenly occurred h. 65. has been there all along and when the especially people with these underlying risks of chronic illness can't get access to health care their care deteriorates. their kidneys get damaged in their hearts could damage. they lose their way. than medicare and stop, you are right, holding the bag for that. the states are paying for that anyway. that person who has undetected hypertension or diabetes,

certainly their kidneys will get worse and eventually that care will be given in most states that state will pick up the tab in a different way so pay me now or pay me later. the best way to provide care is to anticipate the needs of patients at all stages of life, not just within the medicaid grew. you are absolutely right about that. is always reflected in the care of the chronically ill. the do eligible population, 90% of americans, 9 million americans in a dual eligible population 9 million people account for 40% of the cost to medicaid and that is one of the recent states are having these terrible problems. the best thing to do for them is to help them heal, to get them better care that will reduce the burdens on states. we don't have a one-size-fits-all solution here. state-by-state there will be innovations that will surface. we can support that through waivers, through the demonstration projects now anticipated in new law and preexisting legislation and now we have these new wonderful assets in the law, the center

for medicare and medicaid innovation and the center for dual eligibles which will soon be established and that will be able to support states with locally designed ways to get that her care to people who really needed or could just yesterday when we set up the center for dual eligibles we announce the possibility for up to 15 states to get grants to help up to $1 million just to plan better care for dual eligibles in those states. >> others would have initiative. >> and my work prior to coming here at the chance to work with thousands of clinicians all over the country and hundreds of hospitals and i can see the inventive energies out there. i've met with physician groups since i've arrived at almost every physician organization is raring to go to help discover new ways to better coordinate their care, to get involved in patient safety. we can support them also through the new center for medicare and medicaid innovation and we can

now make them more and more aware of what is possible. the new law has innate capacities for more transparency so that we can see where high performance lies in this country among hospitals and among physicians. for hospitals we can tie that to payment as well. that transparency builds knowledge and people can begin to learn from each other. that will help physicians as well. >> thank you dr. berwick. >> welcome dr. berwick. happy cohabited to hear. let me just make a brief observation before ask a question or two. today is simply the first of many opportunities for us to have an open and honest dialogue on the impact of the new health care law and the centers for medicare and medicaid services, cms, that is in charge of the largest federal health care programs. medicare and medicaid and of course the children's health insurance program. this agency has a larger budget than the pentagon and its actions direct the -- impact more than 100 million americans.

since the passage of this new health all we have seen the reality has failed to match the rhetoric on everything from the promised cost reductions to americans keeping the coverage of their choice etc.. i fear this is only the beginning of the syntax and that it is essential that we fully understand the consequences of this new law. on november 2 american people issued a clarion call for more transparency in response to this out of washington. it is our responsibilities to listen and respond to their concerns. obviously asking us to cover all of our concerns in this hour-long hearing with only five minutes per side or per person, is like asking us to drain the pacific ocean with a thimble. this cannot simply be a check the box exercise and although this hearing has been long time coming, i'm all statements as the passage of the health law, i am glad you've are finally here. i plan to make sure that my constituents in the american people are fully informed of all the important actions being undertaken at cms.

and i sincerely hope you and your staff will be willing and responsive partners in this exercise. keep in mind, usually a person makes a nomination, the nominee talks to members of this committee. we have a hearing and that we have a markup. for this 800 billion-dollar agency the president just recessed -- without any of that. i think many constituents are outraged. and i have a high respect for you as a doctor. now dr. berwick as i was reading through your testimony, i came across a claim on page 3 that the new health care will actually increase medicare part a trust fund solvency by 12 years to 2029. i have also found this claim to be very puzzling. as you may already nelly sent a letter to the medicare trustees on june 24 of this year along with senator gregg on the issue of double counting medicare savings in the new law.

the health health care law conts more than $500 billion in cuts to the medicare program which were claimed by the administration not only to improve medicare's solvency but also to fund new entitlement spending, or new entitlement spending at the same time. this is like claiming the american families can use the same magical dollars to pay their mortgage and their grocery bills at the same time and it is really nonsensical. don't just take my word for it. here's what the nonpartisan congressional budget office said on december 23, 2009. the key point is savings to the hospital insurance trust fund under the health law will be received by the government only wants so they cannot be set aside to pay for future medicare spending and at the same time pay for current spending on other parts of the legislation or on other programs. in fact your own actuary, at cms, also agreed with his viewpoint and it is april 22,

2010 when he said the following. in practice, the improved financing cannot be simultaneously gives to finance other federal outlays such as covers expansions under ppaca and to extend the trust fund despite the appearance of this result from their respective accounting convention. so my question is a pretty simple one. do you agree with your own actuary who i strongly believe is rightly telling us that you cannot use the same magical dollar to extend the solvency of the medicare part a trust fund while also using it to pay for new federal spending? is isn't this budgetary gimmickry? >> no senator, in estimating the effects on the trust fund we are following, the actuaries following standard accounting principles. it has been done correctly. is not double counting as i understand it. the congressional budget office -- my understanding is we where following standard accounting principles and that

money will go to helping extend the life of the trust fund. the congressional budget office has also asked that $140 billion of savings are the first 10 years of this new lots of little business as usual and a trillion dollars for the decade following the end we are seeing the results now and a lot of implementation. we can see some of the savings now beginning to accrue. prior to allow you know we engaged a competitive bidding for durable medical equipment. we saw costs fall 32% just in that trial, returning something like $150 million a think back to beneficiaries and those nine trial areas. we are strengthening medicare advantage, resulting in lower cost thereby working very hard with those plans. >> cutting a lot of medicare advantage. you are not strengthening medicare advantage. you have cut a lot of people out

of medicare advantage especially rural america. >> normal turnover, senator. >> that is not normal. >> more than 99% of medicare beneficiaries have access to medicare advantage plans under the new programs. >> a lot more expensive. my time is up. let me just say this. i've got a lot of questions for you but this hearing isn't going to allow us time. normally, you can count count on me supporting you if i can. i think -- i hope when we send you questions in writing that this administration will permit you to answer our questions because this is a dog on the important committee. we overview of 60% of the spending in this country and i want to know what is going on that i want to know, i want answers to my questions. so i just hope you will answer questions when we send them in

writing to you and take the courtesy to show them to you because we clearly don't have time in this hearing and we certainly have the time since you were recess appointed to even get down to somebody's questions that are very important. i have no doubt that he will be will be able to answer some of them. thank you mr. chairman. >> i just reinforce what you said senator and i do expect cms to allow full response to the questions. one of your first words were, do it right the first time and answered fully the first time. i am trying to help you out here. >> i agree with that but let me just say that this is pathetic. i am not meaning to be critical because we are in a recess period. my gosh we have to have time to ask the most important man in america on health care the questions that are relevant and

important. >> we all have sufficient hearings. senator bingaman. >> thank you mr. chairman. dr. berwick, take us for being here in thanks for your willingness to serve in this very important position. i would like to go back to this office of inspector general report that you referred to on medical errors. i think the euphemism that the report uses is adverse events in hospitals. and i guess what i am interested in hearing from you, if you could tell me, is your reaction to some of the recommendations. one of the recommendations in the report is that cms should provide further incentives to hospitals to reduce the incidence of adverse events through its payment and oversight functions and then further down it says cms should look her opportunities to hold hospitals accountable for

adoption of evidence-based practice guidelines. this is something you spent the last several decades working on. i would be interested in your views as to what opportunities you think you have under this new law to make progress on this. >> thank you senator bingaman. correct, patient safety has been an object of my ongoing professional concern and work for well over two decades. unfortunately inspector general's report was not a surprise. we know that nations are injured and american health care far too often. the good news is we know those injuries are are bendable and they can find hospitals and clinics all over this country that are reducing rates extremely low levels. they are all types of places, little tiny hospitals. we just got communication from a hospital in upstate new york in ogdensburg i think, had almost eliminated infections but that i thought were inevitable. and norfolk hospital near here,

almost five years i believe without a central line infections and we can make substantial progress but we have to make it more possible for hospitals to do that including the affordable care act has tremendous opportunities for doing that. there's a lot of focus in that act on health care required conditions in hospital-acquired infections, others names for adverse event. we now can make them more public, measure them better, post those measurements on hospital compared beneficiaries know about that and tie payment to hospitals to their ability to reduce those, those avoidable forms of harm and injury. i tell you i've returned to the hospital community and talk to the hospital leadership in the hospital associations a number of times inside the right. they are enthusiastic about this. everyone knows we need to promise every single american the safest possible health care that anyone find anywhere. >> let me also ask about a related issue and that is the measurement of outcomes.

be made provision of in this law for trying to accelerate the adoption of outcome measures for the health care industry, and i believe the way we have got it, the way the law reads, the first set of acute and chronic measures required to be released by cms within 24 months of enactment, the first set of primary care and preventative care measures are due within 36 months. i would be interested in any views you have about the importance of these outcome measures and what you anticipate being able to do in that regard. >> i am aware of your leadership on that issue. i'm very grateful for it and that provision of the act. in proper stewardship of an exchange, what needs to be measured and defined and paid for is what you really want in health care. we don't really want fragments.

we don't want pieces of care. we want with the health care chief which is good health, long life, comfort, relief of anxiety those are outcomes. that is what happens to the -- maturing or measurement systems and linking that to payment so we move more toward purchasing what we really want will be better for patients and all of our beneficiaries and not just beneficiaries, all of america. that involves investment and the development didn't use of those outcome measures. we are well underway though. a lot of the work on value-based purchasing, the mayor -- medicare star rating has more more measurements one of which by the way is what the patient reports about their own experience. that is not come too. this involves public-private partnership because the more we can align those measures with what is happening on the private side in private plans and private delivery systems it will rationalize and make more sensible positions in hospitals what we expect of them. involves work with the national

quality forum and other consensus-based entities to help us develop these measures altogether and i've been meeting with all of the stakeholders as i write. you are absolutely right, that is the correction to move. >> thank you the chairman. >> thank you senator bunning. >> i would like to point out the opening statements took almost 30 minutes although senator baucus won't make a commitment to bring it back to testify before the end of year. i can assure you that you will not get special treatment next year. i suspect that you will be spending a lot of time testifying before the house of representatives, partly because we in the senate have been shut out. why did you decide to accept a recess by president obama in july? you certainly had a choice to say no, and that you wanted the nomination process to work. i have heard that people argue the nomination had stalled. however, is clearly untrue.

you weren't nominated until april, a mere four months before your recess appointment in the finance committee which is run by democratic chairman didn't even hold a hearing on your nomination as of this day. senator hatch brought out some things about some early statements about 12 years and 29 and how the bill pill has helped the medicare, but it also failed to mention that the biggest problem medicare faces, the dramatic cuts to the physician payment rate wasn't addressed in the health care bill and still isn't fixed. on december 1, dr. started getting a 23% cut when they see medicare patients. the cost of fixing this formula is probably somewhere around

$300 billion, which will require more cuts to medicare are adding to the deficit for future generations. according to the ama press release, that one in five physicians overall are nearly one third of primary care physicians are restricting the number of medicare patients in their practice because of low reimbursement rates and the threat of future cuts. so as i see it, democrats were able to extend the solvency of medicare by 18 years, but didn't bother to fix one of the most expensive problems, medicare faces each year, which will require more cuts in the future and make it harder for seniors, seniors to find doctors to treat them. to me, this is not success. >> thank you senator bunning. u.s. the number of questions. let me begin with fdr, the physician payments.

the president has stood firmly behind the call for the permanent fix. i completely agree with that. i believe the ama has requested a 13 month extension of the sgr. to give us time to work that out. i hope that congress acts on that and i support the president. >> we have not had a bill before us. is not acceptable for physicians and beneficiaries to be facing a 23% cut on this. just as in a good idea. with respect to the recess appointment the reason i accepted it serves the president asked me and i want to serve this country. it is an immense privilege to be able to do this work. to stop my choice to be recess appointed but when asked i came because it is my duty to do that. >> but didn't you know your recess appointment was very very controversial? >> what i know is that the president of the united states asked me to serve to help my country get to the better health care system we all wanted me. that is what my career's been devoted to end as long as a congressman's wisdom chooses to have me to the service i feel very privileged to do it.

that is all i can say about that. >> with respect to commit haitian as u.n. senator has said i want to have dialogue with you and all the members of congress. i tried before my appointment to visit with each of you and any that wish to see me i saw and spoke with. since been in a request that an individual level to me with any member of congress that is, where i've said yes to an donna and i look forward to ongoing dialogue and exchange this committee and all members of congress. is my job to do that. >> i want to us one more question before my time runs out. i was struck by the conclusion in her testimony where you promised to you and others at cms will continue to be as open and as transparent as possible. you have to realize that many people may be a little skeptical of this comment. particularly considering the administration you work for. for starters, your recess appointment was an end run around congress, which clearly wasn't an open and transparent

process. the health care reform debate was far from open and transparent. republicans got locked out of any negotiations and democrats ended up having to jam a reconciliation bill through congress to get the final bill passed. in fact, i couldn't even get that all members of this committee, to support an amendment i propose that said we needed to have final and complete cbo scores, just the scores, along with the legislative language before the committee passed the health heah health care reform bill. so, open and transparent. we have not been. >> i look forward to any forms of dialogue that i can engage in with you senator. >> i will guarantee you this. you will get open and transparent and it will be on

the other side of the house. they will see to it that you are open and transparent, because they are going to oversee cms very closely. thank you are a much. >> thank you senator. am i just also say that we are working with the other side of the aisle to make sure that doctors do not get extended cuts in medicare. we are working on that right now and hope to get that enacted. so doctors don't face that cut. we will find a way. i know, i know, i know. >> thank you mr. chairman. dr. berwick you cannot find a more important issue in health care van and of life care. and the approach that i have supported is the opposite of rationing. for example, right now, traditionally, patients had to give up the prospect of security of care in order to get the

hospice benefit. i don't think that is right. i think they ought to have all the choices, and i wrote a provision that is in the bill that he ganz the program that, for the first time, would give patients the right to get both the hospice program and curative care. so we start to principles. empowering patients to make choices, and making sure they have all the options hospice care, curative care, all of the options. are those the kinds of principles that you believe would really enhance quality of life in this area of end-of-life health care? >> verse, thanks for your leadership on that senator wyden and some of the important issues i'm grateful for. my principle is that every

person in america, certainly every beneficiary in medicare and medicaid should be able to get all the care they want and need when and how they want to needed. if someone in hospice care needs and wants cured of care at the same time i am completely in agreement with you. as a physician i am. when i saw patience, my question always was what does that patient wanted and needed how do i get it for them and in this particular case of being able to offer curative therapy that sounds totally consistent. >> the second question i want to ask you about is on page 13 you make some very commendable statements about how states are to have a key role in making sure that there are a wider way of options for integration in health care. this is something i feel very strongly about involved in writing that provision, empowering the states to innovate and my new governor,

and are going to be others, very much wants to speed up the opportunity for the states tbn of edith, to have a chance to champion approaches that ensure we don't have one-size-fits-all health care, that they have an opportunity for flexibility, more choice and more competition. would you be open within the department, because it has to be a departmental effort, to start reaching out now with the governor, to start looking for ways to be encouraging of this approach that would give not just my state but every state as much flexibility as possible as soon as possible to be innovative? >> yes, senator. i would. the cliché about the laboratories of democracy is not just a cliché. it is true and the diversity of approach we are seeing emerge, and it's been there for a long time and i think we should be doing everything to converge

consistent with protecting the trust fund and protecting the well-being of the fisheries. we have duties to discharge from the federal level but releasing this energy is an extraordinary important thing to do. we are doing it. we announced an opportunity which was originally intended for six stage, expanded to a state so we can get multi-payer work going on organizing care for chronically ill and i took the liberty of saying it is not just day to those communities and localities have also need the same flexibility. we see tremendous examples. >> let me see if i can get another and that i appreciate your answer because we do want to speed up the opportunity for oregon and every other state to have a chance to be innovative. on medicare advantage, it was pretty clear to us that not all medicare advantage was created equal, that there were some programs a very exceptional

quality and there were some others that frankly some of the ceos ought to be put in jail, some of the hearings that chairman baucus had. so we created in the legislation an opportunity for bonus payment for high-quality plans based on the star ratings in the department. the whole point of this is to drive quality. how do you see bonus payments making medicare advantage more choice oriented and more competitive by focusing on quality? >> if i might, the bose has started and i want to give as much time as possible to answer questions. if you can answer that because time is expired and 15 seconds. >> the law measures and raise the quality of these plants and attach star rating systems is a strong step in which we reward plans as they improve their quality. is only logical and will help plan to beneficiaries both.

>> thank you senator and thank you dr. berwick. senator stabenow and senator ensign. >> thank you mr. chairman and welcome dr. berwick. very much appreciate your leadership and your experience. i think you are in the right place at the right time and we are fortunate to have you. i did want to first just comment, as you know the keystone initiative in michigan hospitals has been a real driver in terms of quality initiative dealing with hospital borne infections, reducing cost the city lights and focusing on quality and i know that as a part as you move forward the way for looking up this. also just for my colleagues, my legislation is senate bill 1776 we did put forward and thank you to the administrations support. we could not get past the filibuster and portion away but we are going to keep working on that.

i have a few quick items i would like to talk to specifically about the new law and sears says would mean to seniors, two families, two moms and children. we have now a new prescription drug in a fit that first of all this year provides a 250-dollar rebate or help to seniors. i know many are very grateful for having that help if they fall in the doughnut hole. next year half of the cost of folks who fall in the gap in and prescription drug coverage for their branding prescription drugs will be reduced, so 50% reduction. could you speak dr. berwick about what would happen in your churchman to seniors in terms of higher prescription drug prices if this were repealed? >> i can't think of a worse plan and bad on so many other

accounts. to mean seniors would not be getting the 50% discount on prescription drugs during the doughnut hole. we would ask in return $1.8 million, 250-dollar rebate checks that they are getting this year. we tell them they look forward to the doughnut hole not closing so they will not be able to afford lifesaving medicines. we tell them we are not going to improve their access to preventive services like colonoscopy and mammography, that they won't work on the safer care that i've been asked about, that they are not going to study and improve health care acquired conditions overcome unnecessary readmissions that we are not going to improve chronic illness care the way the new accountable care organizations and medical homes would allow us to do, that we are not going to be more transforming -- transparent about performance. that we are not going to work hard on fraud and abuse and criminal behavior such as stealing from the public trust fund or not going to extend the trust funds by 12 years. it is just over in 2017. to be a terrible plan.

>> so prescription drug costs for seniors will go up next year if this provision is repealed. >> if it were repealed, the 50% discount. >> as well when we have combined mental health and public health. one of the things that is very important in this new law which is something that is very important to me, was to look at total health. i know early warning signs of alzheimer's and dementia is often missed and so having the ability to be able to get the screenings at no cost, to be able to look broadly at mental health and physical health. if that is taken away, and seniors are more at risk for these conditions, do you think we are going to see more cases of undiagnosed alzheimer's and dementia for seniors and their families? >> sure senator. i was delighted to see the attention of you for health and mental health issues in the law. the annable well physical which this law provides, it it

includes important steps towards really responsible screening for these conditions. if detected early we can intervene early and save a lot of damage. >> ended then one final area because there are so many ways in which unfortunately taken away services is not in the interest of families and seniors or taking away tax cuts for small business and so on in the bill. but we know that about 60% of the policies and the individual insurance market offered up to this point have not included paternity care. one of the things i'm proudest about and i know some of the folks who go to a baby doctor, one of the things i'm proudest about is the fact that going forward moms and babies will be covered and i wondered if you might just speak to what happens to women and their unborn children if in fact health care reform is repealed? >> thanks for your leadership on that and i thank you is a pediatrician. yes, the new law allows extension of more services to perinatal care and coverage of

children. i think something like 2.6 million children are already covered getting kids under coverage. the secretariat to greater attention to lead national efforts to get 5 million remaining kids covered who are eligible for chip but not in that program. >> thank you mr. chairman. a provision that senator carper and i worked on dealing with healthy behaviors in the health care reform bill were having difficulty, it is not your role but we are having difficulty getting answers from hhs. but, dealing with the whole healthy behaviors issue, do you see, because the healthy behaviors issue doesn't apply to the medicaid or medicare populations, but do you see ways that we could implement this idea of encouraging healthier behaviors to medicare or medicaid basis? >> definitely, senator and by the way fewer having the response to an issue, please

let's deal with that afterward. i would be happy to look into it further and work with you on it. but prevention is such a crucial area. so much of the morbidity we deal with comes out of the behaviors we choose are the conditions of the environment that we can alter, and yes it does affect elders substantially and so working with the medicare medicaid beneficiaries both on choices that they make helping them discover better patterns of nutrition and choices they make about substances they use, that is very important. the extension of the portable care act of wellness visits for seniors will allow physicians and seniors to be together now to talk about how to stay healthy for as long as possible and the extension of coverage for children under medicaid through chip in getting some of the single adults into that is not accomplished through cms is an important step forward to what you want. >> but the incentive, there were

financial incentives for healthy behaviors, and you know it is just not preventative services. we have tried preventative services and they don't save nearly the money. is matter-of-fact when you look at cbo base a presented at -- preventative services cost money but rewarding healthy behavior save money. safely is a pretty good model on this and the reason we were able to get that part in the bill. that is what i'm talking about. do you see ways for financial incentives within the medicare or medicaid program to be applied so that we change people's behaviors because of we don't change people's behaviors, the cost of health care in this country will continue to skyrocket. >> i think helping people understand their self-interest is crucial and an interesting area you are exploring and i would be happy to talk with you more about it senator. >> okay, lastly one of the other things that safeway did as they provided, and because medicare and medicaid have this

information that can be applied to the private sector -- safeway was a large enough organization to be able to put together a transparency to allow, to have their employees help them shop basically to become shoppers in the marketplace for health care. one example around the san francisco area because they are self-insured for the first 25,000, they pay for things like colonoscopies. they paid and they looked at a one-year data and they looked -- paid as little as -- for colonoscopy and as much is $8400 per colonoscopy in the same year. and that kind of information, if you could provide cost and quality transparency in the marketplace, you could get more market forces. is that something that you could foresee that medicare and medicaid could provide just as

an information without obviously protecting privacy but i'm talking about just without comes, with costs so that more people could actually shop in market forces could play more of a role in the health care field? >> i remember you mentioned that to me and it is a very interesting area. i think in general the whole idea of empowering beneficiaries is more information on what is available about their options and where they can find the care they need to use that power of the beneficiaries decision may king to help drive quality across the board is a very important pencil and i agree with you on the importance of exploring that everywhere we can. >> i guess can i get a commitment from you that you will, within your agency works to try to figure out ways that you can make this kind of information public? >> making more more information available from the medicare. >> but i'm talking about cost

and quality across the board, like what people charge for various, what hospitals charge for a total hip replacement. all of those things, not just what medicare pays but you know what doctors charge and things like that. if we had more that information available at just think we could have a lot better shoppers in america on health care. >> i share with you and interest in that. >> thank you very much. senator cantwell you are next in you are in charge. you can adjourn the hearing. >> thank you mr. chairman. i could go on forever but because i think this is an important hearing and they think mr. chairman you stated beginning with your opening comments that this is about legislation that is estimated to save you said hundreds of billions of dollars in the reform of our medicare system. some people are saying let's do vouchers instead or privatize it or do something else but the truth is that this legislation has very powerful tools for reducing the cost of medicare

moving forward, and if we get rid of them somehow, we are going to be in a world of hurt. so i just wanted to get your commitment on some of those provisions. one, the rebalancing of a way from nursing home care to community-based care. our state is saved about $243 million in a 10 year time period by shifting away from nursing home care, and so i want to see, think the estimates are to save $10 billion federally over five years, how integral you think that shift is. obviously, there is also a provision this legislation that allows people and community-based care to hold onto their assets so really it is going to have more people staying at home and having the benefit of getting home-based service. the value index, moving away from fee-for-service to a cost efficiency model. we think that could save anywhere from up to $100 billion for health care system, moving

that 30% of waste fraud and abuse in the system to model based on quality care, so i am curious to how essential you think that is to the success of medicare moving forward. the basic health plan, and other tools to give states the ability to negotiate on lower insurance rates for their consumers and is cms going to give technical assistance to states and how to implement that and obviously not penalize stay to a party gone down that road. the pbm transparency provision we think is probably another provision that could save as much as 10% on brand-name drugs by giving the aggregates types of rebates, price concessions to cms for that we really understand it. all of us are tools that they put in this legislation. how critical these things are,

how will you work to implement them and how can we get your guarantee that these are the critical frameworks for cost controls? >> i agree with you. these are all important levers for doing what i said my opening statement we can do, making care better and more affordable at the same time, take the rebalancing work and the work we are progressing now on home and community-based services. people don't want to be in hospital so a way to get them into communities with the proper support, it is better for them and better for their families and loved ones and it will in general lower cost substantially. some very important examples of progressive work. and yes, there is no authority in the slot and feel-good legislation to help states tryout their forms of home and community-based services and i'm totally in favor of that are going to grading care through counter care organizations and using the value index. the idea there is that we should pay for what we want. we want quality and we want

better outcomes than we want satisfaction on the part of beneficiaries. why would we pay for fragments, little piece but little pieces that of understanding for for a value of lies in order to that we have to have tools. >> how big of a component to think that is for the success of medicare in reducing medicare cost moving forward? a small piece or a very large piece? >> a large piece. measure what we want and attaching incentives and rewards for going there is logical and powerful. >> great. we have a vote on and i'm sure we will have a chance to talk to you again about these but i think it is very important that we understand that the tools are here. they are already law and we now have to get about implementing them and the more people talk about delaying them, the more we are going to delay cost controls and the public will greatly benefit by this so i thank you. >> thank you, senator.

[inaudible conversations] >> and if you a hearing on the dispute over the fees that broadcasters pay to have their signals carried by cable tv companies.

>> fox television's company news corp. poll its channels from cablevision systems in new york and philadelphia for two weeks last month without access to the world series and other programming. this dispute between the companies was over what is known as retransmission consent fees. fees that broadcasters like fox pay cable companies to carry their broadcast. senator john kerry's is proposing to change the way that system works. features is two-hour hearing.

speedy hearing will come to order. could after now if you. i apologize for being late. we have one too many caucuses and in the course of this organizing few days here but we appreciate the opportunity to have this hearing and i thank you for your patience and also for bearing with us as we moved it back just a little bit to accommodate senate schedule. we are here today with a group of senior industry officials to examine the recent disputes between video distributors and broadcasters, and i thank all for being here and given the truncated time i'm going to try to summarize my statement and we will try to move as rapidly as we can to the testimonies. at issue in these disputes are the fees that broadcasters charged distributors were retransmitting the broadcast signals sent over the public airwaves. too often the negotiations over those these lead to both sides putting up web sites and ads,

calling each other greedy, urging consumers to take aside and warning those consumers about the loss of service. that is typically followed by tense last-minute negotiations and in some cases the pulling of the signaling continued recriminations until one side or the other bends or breaks as the case may be. at the end of the process, after that period of consumer uncertainty, there is no transparency in the price reached or the nature of the agreement. "the new york times" now characterizes retransmission consent come for patience patients as a quote regular event, and bloomberg news says quote, tv blackouts in the usa briefs the highest level in a decade and may climb as pay-tv operators bite higher fees sought by content producers. during the most recent of these disputes, millions of cablevision subscribers interested in watching fox had to find a place other than their home to do so.

one couple ended up having to watch the giants game in a bar instead of in their living room. the wife, marilyn o'dell, told "the new york times," we are too old to be in this place. and on the other hand, for bar owners subscribe to cablevision, they lost business. an ap story quoted one saying, this is ridiculous. i am relying on people to come and who are giants fans and they are walking out, even though i paid for the football package. and he went on to say that quote, regular everyday people get caught in the middle. and that is precisely what rings is here today. our goal is to discuss alternative ways to resolve these disagreements and to protect the consumers. that is what brings us to the table. our predilection is not to get involved, not to try to somehow manage the marketplace in ways that you know are inappropriate

and our first i think in thing for everybody here is to want that are good place to work effectively, but when the consumers keep getting crunched in the middle and keep coming back to us and saying we feel powerless, and we seem to get screwed. we are tired of it. that is when we come to the table. our constituents should not need the ponds in these corporate negotiations and i'm concerned that without a better, more transparent process for dealing with impasses in negotiations inadequate fcc oversight, more fights and disruptions of service are what people have to look forward to. prices for consumers will rise and independent programming will get crowded out. during the recess, he circulated an alternative process for resolving an impasse. it would still allow a broadcaster to pull a signal, wouldn't take away your market power, but it would limit it to a last resort after the fcc have

executed some oversight over the negotiations to ensure that the parties are acting in good faith. hopefully, we can encourage greater cooperation by staving off the pulling of the signal and imposing transparency on offers in case of a true impasse. ultimately, parties are going to ask consumers to take sides and deny them service, then frankly, consumers deserve to know why. ..

>> we'll go into the testimony, thank you. >> thank you, mr. chairman, video programming in marketplace america today is incredibly robust and diverse. video content owners negotiate dozens or hundreds of deals with their distributers. most get done quietly, but as we've seen lately, any negotiations are more difficult. this year they have captured the attention of the press and policymakers alike. in the case of cable vision's negotiations with abc and fox, millions lost programs while deals were being worked out. in light of these disruptions, it makes since for the committee to hold a hearing on the laws

that impact distributer negotiations. there have been extraordinary changes in the tv marketplace since the rules credited in 19 1992. americans can watch high definition digital broadcast over the air for free and can be on pay tv services offered by cable companies, dish companies, and telephone companies. in 1992 there were far less cable channels available. satellite was not a robust competitor to cable, and telephone companies were not in the pay-tv picture. companies have access to a remarkable array of online video content that they can watch from their computer, tv, cell phone, or mp3 player. it may be time to consider

revising our retrains regulations. while i appreciate the thoughtful work senator kerry has done on the issue, i have concerns on the idea of putting the fcc in the middle of negotiations. we shouted take a holistic look at the copy right rules to see if we should move them in o more free market interest rather than competition. indeed, congress directed the g oorks o and the copy right office to study that. during a hearing last year on stella is one of the several provisions that impact the negotiations. like i did during that hearing, i urged my colleagues today to

think whether our regulations fit today's market place. this hear k is part of the process to review the appropriateness of those regulations, and i want to thank the chairman for holding today's hearing. i want to thank the panel of witnesses before us. we know you are busy executives, and we appreciate the time you've taken today. thank you, mr. chairman. >> thank you. i also recognize that you are busy folks. television is a powerful force, but i believe the system we have to developing television content, packages that content, and driebting that -- distributing that content is broken. it may serve companies well, but it does not serve us well. as consumers and probably more importantly as citizens. let me explain why. when it comes to developing content, our entertainment

machine is too often in a race to the bottom. in fact, it is in a race to the bottom, getting close. even worse, our news media has all but surrendered to the entertainment, and most of the news is entertainment opposed to news. up stead of -- ib stead of a watch -- instead of a watchdog, we have a barking of a 24 hour news cycle. we have journalism that is ravenous for the next rumor, but insufficiently hungry for the facts that can nourish something called our democracy. as citizens we are paying one heck of a price in the dumbing down of america. you're partly responsible for that. when it comes to packaging content, why do consumers have to order so many channels?

why do they have to pay so much when households watch so few channels? the old add damage of 500 channels and nothing on as never been as true as it is today. when it comes to delivering content, why do we pay so much, the federal communication tells us from 1995 to 2008, the average monthly price of cable service rises three times of the rate of inflation. no wonder customers are cutting in record numbers and turning back to the over the air television and turning on to programming over the internet and other sources. they are tired of paying rates that go up so much every sing of

year. in our hearing today we do not get at the root of the problems, and i'm here to make this statement. that is is a broader discussion we will need to have and will have, and indeed it's a conversation we owe to the citizens of this country. today's hearing is important and timely because we make a good faith effort to address one of the symptoms of these broader concerns. we're talking about retransmission con acceptability. this is a policy that allows local broadcasters to negotiate with cable and satellite companies or carrying of their local stations. when it works, they see it on their satellite systems. when it fails, they are filled with the dark screens and denied access to local news and sports

programming. that's what happened obviously to millions of television viewers in new york who turned on their sets to watch the world series, but didn't quite get to see that. let me caution our withins today -- our witnesses tod. -- today. this affects our situation. when we do that, we'll seek to do more than referee your corporate money disputes because more than just retransmission consent ails our television markets. we need new catalyst for quality news, and entertainment programming. i hunger for quality news. i'm tired of the right and the left. there's a little bug inside of me that wants to get the fcc to say to fox and msnbc, off, out,

good-bye, it would be a political favor to do our work in congress and for the american people to do some faith in their government and more importantly in their future. we need slimmed down channel packages that better respect what we really want to watch, and we need to find ways to provide greater value for television viewers at lower costs because people are tired of always escalating rates. again, i thank you for being here today, and i greatly respect senator kerry and the interest he's shown in this whole area in which he was most expert. i thank you. >> senator rockefeller, thank you, thank you for an important and i think courageous statement. i appreciate it. senator lottenberg has asked for

an opening statement. if we get tied up with every senator, so can i ask for that up -- indulgence? >> mr. chairman, i just want to say that i'm very proud of our chairman for that statement which arctic collates what so many of us have been feeling about the slow decline of bringing news to the consumer and the consumer having available packages that they want to see and that they don't have to buy something that they don't want to see, and that they are not threatened as u you pointed out in the screen going dark, you pointed out in the northeast it happened a year ago in the sue gar -- sugar bowl when the university of florida was playing and there was a big dispute between fox and one of the cable companies,

and of course, that was the threat up until the 11th hour, the 11th hour and 59 minutes, as a matter of fact, so let's put the consumer first, and i'm delighted that we have uni even vision here today. >> we are here today to make sure the american people are no longer forgotten in the fight between the cable companies and the broadcasters, and this isn't about taking the side of the broadcasters or taking the side of the cable company. this is about taking the side of what i'll call the customers who need us to look out for them. the big media corporations believe it's good business to leave consumers in the dark while they haggle over their latest retransmission gain. that's what happened in recent

battle between fox and cable vision when 3 million subscribers already mentioned including 1 million new jerseyians were unable to see their favorite programs or anything they were interested in including part of this year's baseball playoffs. make no mistake, this is about much more than simply being able to watch sporteds on tv. television remains a lifeline for millions of america even in this age of ipads and youtubes. more than 80% of the viewers receive television by sub subscribing to cable services. they rely on this service for news and programming. seniors rely on television as a source of critical information like emergencies in their community that may affect their safety, and many parents depend

on educational programs to help their children get ready for school and it's wrong to hold viewers like these hostage during negotiations and it's wrong to treat them like chess pieces. it's wrong to deny viewers the ability to see programming that they need and that they want and need and pay for. we've got to put a stop to these programming blackouts once and for all, and that's why i'm pleased to work with chairman john kerry and legislation. it will put the focus back where it belongs on the consumers. our proposal would require a cooling off period when programming must be kept on the air during an impasse in negotiation, and mr. chairman, my support to work with you is unbounded.

we're going to get this done. i look forward to hearing from our withins. work together to make sure american television viewers are never again left in the dark. >> thank you very much and thank you for your patience, folks. we are pleased to welcome the ceo of warner and e.c. and you are not feeling well and may have to leave early, but we appreciate you hanging in here. mr. tom rutledge and mr. chase kerry and mr. charles segers thank you all for being here. mr. britt, would you lead off and we'll go down the line? >> good afternoon. i want to thank you for invite ing me here today and i want to

express my appreciation to members of congress who recognize the regime is fundamentally broken and in they'd of reform. i'll focus on three points to demonstrate why reform is needed. first, congress created retransmission concept 18 years ago as a property right to subsidize free over the air broadcasting, but much has changed since that time. when retransmission concept was first created, broadcasters and able operator each enjoyed local monopolies, and as a result they came from equal positions of strength and with a shared interest on reaching an agreement. this produced a process that was essentially invisible to the public, but retransmission concept negotiations now occur in a vastly different environment. today, the pay tv industry is

robustly competitive while local broadcasters have benefits that now distort negotiations. that has allowed to play off of each other and encouraged broadcasters to take more extreme disruptive conditions rather than compromise. consumers are the ones getting hurt. unfortunately, this imbalance in negotiating power is exacerbated by the fcc's rules which take a handsoff approach based on the outdated assumption that broadcasters neither have the incentive or ability to disrupt signals. the fcc has brought statutory authority overbroadcasters and the retransmission rights. there's coalitions with diverse interests asked the fcc to adopt

new rules to protect consumers such as dispute resolution measures. despite wide sport for these and other reformed proposals and the growing number of disruptive retransmission disputes, the fcc has failed to act. instead, the fcc insists its hands are tied when it comes to protecting the public from the consequences of retransmission concept fights. my second point focuses on the impact on consumers who are bearing the brunt of the fcc's inaction. broadcasters have both the incentive and the ability to put consumers in harm's way during negotiations. as we've now seen on several occasions, broadcasters are willing to hold consumers hostage by pulling signals as a negotiating tactic. even when a service disruption is avoided, viewers are subjected to weeks and even months of misleading advertising

designed not to inform them, but to put pressure on tv providers to give higher fees that ultimately will be paid by consumers. finally, i'd like to put to rest one of the arguments often made by those opposing these reforms. namely, that the government should not interview with free market negotiations. time warner cable agrees that free markets are preferable to regulated markets. retransmission consent, however, is not a free market. rather, it is one of the special privileges given to the broadcasters by the government as part of outdated regulations. these special privileges which include must carry rights, territorial exclusivity protection, a guaranteed right to basic care are supposed to

safeguard programming. time warner cable does not object to paying broadcasters to retransmit signals. our objection is to a government sanctioned process putting consumers at risk. in order to protect consumers, congress should encourage the fcc to exercise its existing authority and to mental anguishuate rule -- initiate rule making. in addition, congress should continue to explore legislative changes. if broadcasters truly want to operate in a free market, then they should not be allowed to keep their special privileges, but if broadcasters want to obtain their special privileges, then congress and the fcc should update the rule from preventing consumers to gain leverages on negotiations. we look forward to working with senator kerry and other members on the committee on this important issue, and i'll be happy to answer any questions

you might have. >> thank you very much. >> good afternoon, thank you, chairman kerry, chairman rock feller and members of the subcommittee. i'm the president and ceo of univision. a program reduction business, our radio stations, and our online services, we own and operate 62 television stations across the united states and in puerto rico, making us one the top five tv station groups. today, i'd like to share yiewn vision. i think our experience powerfully demonstrates the importance of the rtc system to the power of the broadcast platform and the communities we serve. traditionally stations relied upon the must carry rules in

order to have cable and received no compensation from multichannel video distributers for our programming. at the same time, our programming like that of other broadcasters was helping propel the growth of those distributers. in 2008, univision took the step of announcing we would embark on negotiations with our distribution partners seeking for the first time fair compensation for the valuable programming our stations offer. over the next 18 months, uni vision had agreements with cable, satellite, and telephone companies. these were reached bout disruptions and their viewers. we decided to elect retransmission consent for

several reasons. first, we recognize in order to meet the changing needs of the rapidly growing u.s. hispanic community, we needed the additional resources that come from a dual revenue stream. second, we believed it would be fair to participate with our distribution partners in the value of our high quality program. indeed, the audience for uni vision's distributer have been paying carry fees for years. finally, we elected retrain mission consent because we saw an opportunity to establish long term, value-creating partnerships with our multichannel distributers such as the leading spanish language video on demand service. revenue from retransmission concept enabled to expand the mission of informing, entertaining, and empowering hispanics in the united states.

for example, we recently launched campaigns to promote the value of education in the hispanic community, encouraged hispanics to participate in the u.s. census, and promote financial awarend and planning in our community. we created univision studios creating programming on our station. we launched a nationwide voter education drive to help boost hispanic voter turnout in the midterm elections, invested in the most rebust election coverage we have ever offered and hosted debates. listening to the rhetoric of content, one might have thought we would have never been able to reach agreements without disruption. as a direct participant in the deals, i can personally attest that we were able to do so because in every retransmission

consent negotiation, there's natural incentives for the parties to reach an agreement. from univision's perspective, the desire to reach a deal without disruption is a motivator. it's our most valuable asset. we believe that our distribution partners face similarly compelling negotiations to reach a deal. they understood that a signal disruption created the risk of subscriber nutrition and severe customer dissatisfaction. i understand the concerns of elected officials that their constituents not have to face the temporary loss of a favorite station on cable or satellite, but we are very concerned that government mandates requiring us to provide our program to a distributer even where we failed to reach a deal would distort

the market by the primary incentive to reach agreement. we are concerned that even the threat of government intervention will have a negative impact on our business. investors know that mandated interim karria -- carriage only -- thank you, mr. chairman, for allowing us to join in the conversation today and i look forwards to any questions. >> thank you. >> thank you, senators. let me begin, mr. chairman, by commending you for the leadership you've shown in this area and as you noted broadcast agreements are reeking havoc and we need to resolve them without holding customers hostage. the dropped legislation was a good framework, and we look

forward to operating with you. i would like to make two simple points today. first, retransmission can set negotiations take place in a liely regulated -- highly regulated environment that favors districters and hurts consumers. it is not a free market. plain and simple, the rules create the potential for network television blackouts and raise prices for consumers. second, because of the government laws created the problem, only the government, the fcc, or congress can fix it. we proposed a few modest changes to stop blackouts and protect consumers. here is why it is broken. fcc rules give local broadcasters a monopoly on local programs and markets. the cable and satellite provider wants to carry that programming, but thinks the local broadcasters price is too high. too bad. they prevent that provider with negotiating with the hundreds of

other stations across the country with the same network content. government rules also require that our subscribers buy the broadcast channel before any other cable service regardless if they want that station or regardless of the prices charged by the broadcaster. the government gives the broadcasters free distribution and gives them carriage through must-carry. finally, cable operators are prohibited by law to drop a programming during sweep week, yet nothing prevents the broadcaster before pulling the plug before a big testify vised event. last month programming from 3 million households for 15 days blocking out major league baseball playoffs, the world series and football. the rules that allowed this

blackout were created by the congress and administered by the fcc, but the fcc claimed to have no power to restore the programming. any claim that broadcaster not been paid for their broadcast channels is false. broadcasters have used existing rules to force other cable networks that they now on on to cable and satellite systems charging billions of dollars for the cable networks in return for permission to carry their broadcast stations. broadcaster own have grown from just 8 in 1993 to over 90 channels today. in fact, the driving force behind the rate increases in cable is the ability of broadcasters to demand take and pay for the 90 channels and tieing them to reconsent of their broadcast stations. government law has created the problem, and so only government, the fcc, or congress can fix it.

we have proposed to the fcc is few modest changes to begin implementing now to take consumers out of the middle. have consent agreements to the carriage of broadcast channels so the actual cost of broadcast stations are clear. sec, require transparency. there's no reason why the cost of carrying networks needs to be secret. retransmission fees should be public, and third, forbid discrimination. broadcasters set the price of carriage, but not on cable and satellite providers.-"f

>> without reasonable revenues,

broadcasters cannot compete with cable channels. we have seen an increase of sports migrating to cable, college football, championship series, and other major events, major league baseball, college basketball. local news could be less local in nature. ultimately, this result would be devastating for the americans who rely on over the air television because they don't have video service. moreover, in a digital world of increasing fragmentation where advertisers have ever-expanding choices, it is unrealistic to believe broadcasters can compete with cable channels without a dual revenue stream. to argue the price are replacing access to dual revenues defies economic reality. second, some claim that the retransmission consent process is broken.

the definition of broken is not when one party doesn't want to pay a fair price. an issue is a rate negotiation for carriage of a channel. they negotiated thousands of agreements over the years. if we were asking for an unprecedented rate, then maybe one could say this process is broken, but we are asking for one that puts us well blow espn and others, all channels with a fraction of our audience. there's large percentage inningses, but fox received no cash cap before and any increase over 0 appears large. the statement that the process is broken is also puzzling given we have successfully included agreements with the three largest contributes without disruption. our deal with cablevision resulted in a disruption despite

we began negotiations with them more than a year before our contract expired, and yet we found ourselves in october working with a company that didn't want to reach a deal despite the fact that cablevision was offered the same rate with the broadcast stations we had negotiated. cablevision agreed the rate was fair, but they just didn't want to pay it. their goal was to politicize the issue and interject the government into our private negotiations. for the disruptions that occurred in the marketplace this year involved one company, cablevision. everyone in the room cares about viewers, however it is important that the government not let a sector, private industry, manipulate a process to gain advantage. we believe there are steps that can and should be taken to protect consumers. first, we request educate consumers on their options for getting signals elsewhere by

hooking up to an over the air antenna or switching to another distributer. we can require the consumers get a rebate credit if channels are removed from their lineup. in conclusion, the retransmission consent law is experiencing growing pains because broadcasters like fox are seeking cash compensation. the good news is the actual interruptions in service are few and far between. in this period of adjustment will be short lived one distributers accept they have to pay a fair price to resell broadcast content just like the other content they distribute. it is the most effective and efficient way to help consumers whether this short unrest. thank you. >> mr. chairman, committee members, on behalf the ovation, the only national network dedicated to arts and culture, thank you for inviting us to

testify. i am the ceo of ovation, a viable, independently owned tfg network that has earned carriage in 43 million homes, paid a fair rate on market based rate to providing consumers. they include time warner. mr. britt was the first. direct tv, when you were returning direct, you launched our service. dish charter communications and even today, comecast cable. mr. chairman, the detrimental affect of this concept threatens the very exist enof independent networks like ovation. i am here supporting reform of these regulations to ensure consumers have access to a diversity of voices in television. senator, kerry -- senator kerry, you pointed out that the old rules are outdated and to continue what the status

quo is bad for consumers, competition, and democratic participation. as an independent programmer trying to remain competitive, your words ring true. this regulatory structure restricts our ability to grow our distribution, maintain fair subscriber fee to the networks #, and reinvest those fees into programming for an underserving consumer. retransmission enabled primarily the largest broadcast companies to bundle channels, easing up band bandwidth and taking up their fair share in fees that would otherwise be available in a free market system. i fully grasp the meaning of being between a rock and a hard place. it's the predicament that innovation and all programmers find themselves in today. on one side it was a well-operated integrated media company who since 1992 traded retransmission consent to retain

carriage and fees to launch all new network. now they are seeking effectively to get paid twice through a redistrict payment of broadcast programming and on fee increases on the cable channels their concept een abled them to launch. on the other side are major distributers who believe they are forced to carry networks they did not want, and now they pay for a retransmission, a free over the air broadcast signal that adversely affects their ability to affordably provide tv to their subscribers. between these companies is the last remaining independent television networks. with retransmission fees likely to top $1.3 billion in 2012, distribute ores will have to look to their customers to make up the difference, and they will have to cut programming costs. independent networks with no

service bundling advantage through retransmission and limit leverage despite the arts will be targeted. as a result, diversity in programming, one of the very reasons retransmission consent carried in the first place will vanish. this is a call for a level playing field. if large broadcasters can use their air waves owned by all americans to extrablght payment for historically free tv services, then let's not allow them to bundle all their services with it. if an alternative dispute resolution process for distributers and programmers is to be considered, please don't limit it to only programmers on concept, but open that dispute process to all programmers including the few remaining independent ones. the greatest measurement of our democracy serves the freedom it gives to people to express their views and ideas and information. you can mandate an examination

of consent and recommend an adjustment the regulation to better safeguard our freedom by ensuring the survival of diversity of independent networks in the media. on behalf of ovation, the only network in america, thank you for your time today. >> well, thank you for your time. thank you all of you for taking time to come in. let me first of all just begin as a matter of a framework. i like to have this kind of hearing. i know sometimes, you know, congress summons the executives, and we have thee show and tell deals. that's not my way of approaching this. i'd like to have a thoughtful dialogue with you folks to really try to understand this tension in the marketplace that obviously has an impact, and i think, you know, our preelection as i said earlier is for the

market to be the marketing, and to let pricing be determined by the legitimate forces of the marketplace. the problem is that what we have here, i think, is a situation where a lot of the participants in that market are expressing the view that as was just said, the playing field is unfair and there's an inability for them to have a normal market relationship. now, to try to understand that, we need to sort of bear down on sort of what the number of things. first of all, i think we ought to dispel ourselves of the myth that this is sort of just a free market, and we ought to bog out, and we don't have an interest. it seems to me the case is fairly strong that when you have the several elements that were laid out earlier by mr. britt, i

think, that you got the retransmission concept, you got spectrum itself, sweeps week, safe harbor, those are all government granted privileges. your access to the american consumer is fundamentally a government granted privilege based on a certain set of standards which we don't always measure very effectively, but within that, you know, we have obviously tried to allow those forces -- i remember when we wrote the 96telecom bill, we were behind the curve because within 6 months of the ink on the bill it was completely jut -- outdated. it was a debate in a new age information, and everybody got left behind, and that's the world we're operating in in many

ways with huge transformational impacts. let me begin by trying to figure out a couple things if we can. first of all, i accept that there are thousands of these agreements in which you all reach agreement. is there something particular that distinguishes those cases where you can reach agreement from these sort of celebrated cases that wind up with a pulled signal? anybody want to tackle that? is there a way to frame why you can reach the agreement easily in some of those cases and the p's seem to be fair? >> sure. i think the easiest answer is if the rate of fee increase to the distributer is proportional to the kinds of general cost increases that are occurring in an economy, it's a reasonable expectation that a deal gets done. when someone comes in and asks for a very disruptive price and

in our case, somebody else paid the price, therefore you must pay the price regardless of what your conditions or market is, then you have a very big rate increase potential or a big cost increase potential to your business, and so i think it's really a question of degree and how exploy at a timive the request is. >> so your judgment, i mean, basically what you're saying is in the most recent case with respect to the world series ect., those fees were accessive, is that correct? >> yes, from our point of view, we had done deals over 18 months with cbs, nbc, univision, and abc, and all of those deals were less than being asked for the particular service in question that had the world series, so that was -- we thought that was a lot, and

we thought it was irrational, and we thought that we should say no to that. you know, ultimately -- >> but to what degree might there be a legitimacy to someone's belief that you're somehow saying, well, okay, let's get washington to get involved in this and, you know, we'll make this a case so that we don't get beat up in the future and in the market just in terms of the normal market forces? >> right. well, # what we reallimented was -- what we really wanted was a price similar to what the other stations we had already done deals with had agreed to absent that, and we had basically a take it or leave it offer. we thought that binding arbitration would make sense. we thought that an abiding arbitration that if anyone looked at the market place in new york and looked what we were

paying would work to our benefit. >> what about what i suggested beyond binding arbitration and beyond forces people away from the market decision, but we're at least creating a sufficiency of a judgment about the negotiation process itself being in good faith and also making a judgment about the transparency? >> right. >> so that people know what's going on. would that not -- if you shed light, if that sunshine existed in that way, would that not create a greater fairness in the bargaining process? >> i believe it would. in fact, that's what we proposed to the fcc previously. we had asked they do three things, prohibit tieing, that they be transparent. the reason you prohibit tieing is there's agreements between 13 channels i believe, and so how you allocate the costs of all of those services is questionable.

we think that in order to look at that and to really have transpaper sigh, you need to -- transparency, you need to seg agree gait what people -- senator kerry -- segregate so the cost is legit mas, and finally, do not discriminate. you know, the broadcaster has power over a small cable operator. they can extraght for the same product. >> do they? >> yes, and our competitors pay different rates than we do. direct tv or dish tv may pay more in some cases or pay less in some cases, but because of your position in lack of transparency, you have the same customers living next door to each other paying a different rate. >> what do you say to that mr.

carrey? >> as i said in my opening comments, we were getting 0 before, so, yes it was an increase, but any increase from 0 is going to be significant, and i do think that you have to have -- look at what we were asking for in the context of the quality of what we provide and look at it competitively again what other channels are asking for, and when you look at other top-rated cable channels, we were asking for a small fraction of it, so, you know, we were asking for an increase and you can say the broadcast business was negligent in past years and may have been the euphoria leading up to 2007 before the market crashed in 2008 and brought home the issues of being a one-revenue business, but what became clear as a

one-revenue business, broadcasters were going to have deep problems, and our network today for the each of the last few years has lost hundreds of millions of dollars while the cable channels we compete with, you know, make hundreds of millions if not in some cases billions of dollars. we have seen proct that is moving. we up until a year ago the college football is moving to cable. we need to have a viable dual revenue business to be able to compete in this market. >> i don't disagree. i can remember the broadcasters, frankly the broadcasters' arrogance in the early years as cable came out, and they wouldn't talk to them. >> excuse me? >> in the very beginning when cable started to come online in the early years of warner, i can remember when they first came to boston and there were negotiations going on and in

subsequent years they had a hell of a time getting broadcasters to even talk to them and work out a deal and get carriage and so forth. the tables have turned, and now indeed there's a very significant revenue. i don't disagree with that at all, but that doesn't license a discriminatory relationship or a completely unbalanced relationship in the marketplace so that the consumer winds up not knowing what's going on, not knowing what the price is related to, and in fact paying conceivably much more than their neighbor is paying because of the relationships in absence of that transparency. i know there's a revenue issue, but shouldn't there be a fair blueness in negotiating that revenue stream? >> we actually negotiate, but i say we take great pride in negotiating or agreements with

consistent sigh in the market -- consistency in the market place. >> is it possible to negotiate without taking signals off the air in >> that's our goal. we got three agreements without going off the air. >> what's the distinctions? >> the one what went off the air in >> yes. >> i think they had the government come in and mandate a solution. they didn't want to pay the rate increase even those the rate increase we asked for we think we went beyond any judgment to be reasonable about it when you look at the quality and the rate, it's a fraction of what the channel would be worth on any competitive basis. >> i want to come back and ask you because i used up my time, and i'll come back and i'll recognize senator lautenberg. >> thanks, mr. chairman, and thank you all for your testimony. we are stuck in not just middle,

maybe a muddle, but the fact is that it's very hard to understand what takes place when mr. carrey you describe your rate increases fair. how do you define fair? i mean, is it -- do you have costs escalating for the transmission that you make to the cable company? >> i guess we look at fair we first look at the market. we're competing today with hundreds of channels. i mean, we are in a market place that, you know, is from our perspective for channels as robustly competitive as any we've been in. we compete with them for audiences and content, so certainly one measure of fair, you know, is what are we receiving for compensation

compared to other channels we're competing with receiving. we are, in fact, our request in this case, you know, has us receiving a small fraction of what others receive who have a rating that is a small fraction of ours. >> mr. rutledge, during the past year, cablevision has been involved in the two retransmission disputes resulting in blackouts where as competitors were able to negotiate agreements with -- without any blackouts. why are competitors able to negotiate agreements without a blackout when cablevision can't? >> well, cablevaition is -- cablevision is trying to hold its rate and hold a valuable of

a product as it can. our objective is to come out with the lowest rate as possible so we have the lowest price for service because we're competing against other providers, and so we've tried to hold the line, and we've looked at our marketplace, and we've actually been successful at holding the line, and we've had low rates of increase on a relative basis, but we're fig -- fighting for our customers and keeping our product as competitive as possible in a very competitive environment. we have robust competition with satellite, two providers, at&t and so we have a very competitive distribution market and price matters. cablevision is very successful in the marketplace and we have

the highest penetration of video of any company in the industry. we have the highest data penetration and highest voice. we have served our customers well, and we want to continue to do that. that's our objective, and that fixuates us on cost. >> do you -- >> i guess, i mean, i do think it's important and mr. rock feller addressed the cost of con feint. i agree what you said. it's a whole lis tick issue. i don't think one can look to is say somehow broadcast networks are going to be reel kateed to second class citizen status and not be fairly compensated in order to deal with the cost of content. if you're going to look at the cost of content, i agree what was said up front. you can't expect broadcasters to carry a unique burden in that regard and not have the opportunity to be fairly compensated.

>> what happens during a blackout? do your advertisers aren't getting what their paying for. >> no. >> and so you -- and so you do you lose revenues? >> yeah. >> is it charged by the day? >> they essentially pay on ratings so if we're not delivering an audience -- >> so are the rates calculated daily? >> every ad is based on the ratings that we receive for the show in which that ad -- >> so the advertiser does not get the exposure, and but is the calculation for those few days reduced to the advertisers?

>> yeah, i mean, if it's a broadcast station where we're not receiving free cast train fission, then the lost revenue is advertiser because we're not reaching the audience. >> what's been the rate of increase you received over the last several years? let's talk about cablevision in particular. do you have an idea? >> well, in retransmission, we've received nothing, so we've had until, you know, this last year, we've received 0, and so that is essentially -- >> that's a recent phenomena? >> yes, and as i said, in some ways you can say broadcasters should have realized this one-rev new business model was not going to survive and be competitive in the world of dual networks. i think the economics strength of the market through 2007 masted a bit, and then, you know, didn't, you know issue

probably made broadcasters, if any, delinquent in recognizing the problem. i think it hit home, and i think it became quite apparent that a single revenue advertising based business was not viable long term, and hence in the last 12 months we've moved to become a dual revenue business. >> mr. chairman, i think the hostage here is, of course, the consumer, and they're paying a price with nothing to say whether or not they're charged less over the week or month that they are out, and the consumer is left outside, in my view, like a spectator. they are not part of the negotiation. they are a victim of or a ben fish rare of as you can see it, of an agreement between the parties, and there is really special place that all of you

occupy because tv watching is now an integral part of life almost like gas and welcome -- electric and things of that nature and since the license is without fee for you to deliver your services, i wonder, you know, i come from the business community, and so i know you're in business to earn a profit, to get a return on investment and so fort, but i wonder what kind of a special obligation you feel to deliver this i'll call it a precious commodity that is now part of daily life for the american people? >> we consider it a tremendously important obligation and a privilege in reality to deliver that content, but we need to

have, you know, a business model that enables us to invest and create great content. in the last few years we lost millions of dollars a year on a broadcast network. that's not a sustainable model. you know, we need to move to a place, you know, where we have a business model that enails us to invest in keeping product like, you know, the nfl, you know, on fox, to continue to produce the local news that we do, and i do think, in fact, it is why you have seen a continued migration of product away from broadcasting and broadcasting with this business model to cable channels with a healthier business model and for us to continue to invest and create great content, that is our goal to create shows like american idol and glee and deliver them to the american public, but we need a business model that enables us to do so. >> thank you. >> when you say we were paying

nothing, we plaid nothing at that -- we paid nothing or we got nothing at that point. it's not because you bundled your cable and broadcast, and that was sort of a quid pro quo for your access; correct? >> yeah, we do. ..

>> isi -- i mean, yes it's been negotiated as a bundle. i'm not sure i agree with characterization as a dalia transfer because we built transfers that value customers and the amount we get for those channels is competitive, not against when you compare rates to the national geographic channel we get left in discovery we compete with. >> let me come back to the competitive and i want to recognize senator lemieux. spriggs before, mr. chairman and for the way you are approaching it where we can have a discussion about these issues. sitting here listening to this occurs to me that there's a lot of regulation of this industry and perhaps it's the regulation that's causing the problem. while i agree television is important and certainly i want to be able to watch football and

baseball i've heard words like a devastating and crisis applied to these things in light of the other things that we are addressing it congress, not sure that they are. but let me say that with all these regulations perhaps the view should not be that we should create more regulation but maybe we should unpack some of the regulations we already have. the world is changing. television is important but there are so many alternate ways to receive content. we are watching television and movies and other forms of communication through various sources, not just the tv but on computer and how this will be transformed the next few years is hard to anticipate. it's going to be very different world and which we receive content. anderson and the importance of content, you have to tell you it. we have copyright laws in this country. we have to tell you those copyright laws, but it occurs to me if we are going to get more involved in this discussion about the transmission consent and bring congress and federal

government more into that process, we are going to create more unintended problems. i think if you look back 20 years ago when this legislation was put in place, it's probably caused many of the problems we have here today. now, perhaps i'm naive and i still knew here also i'm about to leave -- [laughter] but it looks like the the deletion has caused a lot of these problems. i want to ask the folks of the table instead of adding more regulation is there a way we can unpack the regulation so this marketplace can work? >> yes, i think that is a different way to go. if you think about chase was saying he thinks broadcast networks are not viable. this is a different thing and they really need to look and act like cable networks and have two revenue streams. the part of the issue about every transmission consent is that there is a whole set of rules and regulations and laws

that treat broadcasting different than the rest of this television industry. so i would say in response that if we got rid of all those special privileges and what have you for broadcasting, and if she's wanted fox to work with the cable network that would be perfectly fine with us and i think you would see -- >> the only have ktv. >> that is an alternative. that is an alternative. >> do you think you would please the american people? >> i think 80-some of a percentage subsidizing the rest would be happy. alternatively, the question is how do you figure out the amount of the subsidy? so rather than -- i said earlier before in my testimony that we are not protesting the idea of paying. we are just saying that the mechanism for figuring out the amount is broken.

and actually having a debate about who's channel was worth more or whatever is kind of irrelevant. so if we are going to treat broadcasting has a special thing and think it is soluble some of our citizens get it for free, which certainly is what was intended originally, and if we have other people subsidize that then we need to figure out what the mechanism is for deciding that amount. and that's what's broken is that process of figuring out the amount. >> mr. uva. >> thank you, senator. thank you for being here. i believe that what is special and unique about broadcasters is the way we serve the local community on a variety of ways, and localism is fundamentally important in making sure that the citizens of this country are informed each and every day, not just by cnn or fox news on global international news age use or by a network newscast

although we do network newscast just s fox does. we are very committed and we believe very strongly in the ability to stay relevant to the local communities. and that is an incentive for us to make sure that we deliver those newscasts and information that we purchase a peak in the community in ways that are in power in members of the community through public and community service and that costs money and that is where a great deal of the funding that goes to local broadcasters, particularly univision is reinvested and broadcast a special and cannot be treated and looked at the usual basis compared to what the cable networks are. >> mr. kerry? >> i guess i want to first say that the wheat transmission clearly has a unique level of importance and we need to do a

revenue stream, and we've had these other provisions in the end of the business but again is not competitive. it's not a trade. in most of the provisions that exist are ones we can achieve contractually and we are not -- i think the spectrum is important to provide a service for free to 30 plus million americans and actually have the ability of every american to get it for free, so the spectrum put in a different place has a different role and provides unique value that we think is important to provide the opportunity for every american to get a level of broadcasting. the others i think the ad importance to the broadcast industry as a whole and are a part as mr. uva said the localism that exists but for us the transmission as a whole different level of importance because it provides an economic foundation to have a competitive business going forward. the others are things we can competitively compete for in the

marketplace but i do respect the broadcast industry and recognize they are important and the foundations of the localism that has been so important for the local broadcasters and local communities. >> mr. chairman, mr. rutledge wants to finish up. >> thank you, senator. i want to say i think it's a policy question is the united states want to have a broadcasting business. if it does what are the objectives of that coming and historical you've got a broadcast license you've got some spectrum you ought to operate in the public interest and you have an obligation to serve the community and came up with renewals and were subject to question as to whether or not you met those obligations. so the power that has been entrusted to these organizations is enormous. the reason that the world series exists on a broadcast network is because of the public trust that was granted to those entities to serve their communities and they mask their audiences that they did and had the power by the

world series in creating the kind of contant that exists today, so it is a policy question. what do you want from broadcasters and how do they fulfill their obligations to the community? and if you're going to give them dalia will spectrum -- because i can turn that spectrum into a broadband wireless network very effected flee i think and serves a different part of the community. it is a valuable resource to the country and it's being used in a way that sexually abusing the consumers of the country. >> could i just that every household in america did have the opportunity including everyone living in cable television to get the world series over the air for free. >> which makes the notion of charging for it ridiculous. [laughter]

>> we treasure the opportunity to provide a signal for free, others are read transmitting the signal and the building a business based on it, we feel we have a right to be compensated if someone else is building a business based on the retransmission of our content we pay a lot of money for and invest a lot of money in. >> senator pryor. >> thank you, mr. chairman. i want to thank all the changes in technology and society since 1992. i do feel like it is time for us to try to draft legislation that embraces all those changes in the past but also paves the way for more innovation and to be smart about how we do things in the future, so i appreciate your tufting this piece of legislation, mr. chairman, and one thing i like about it as i understand it is there is a revision where the signal states on the air where there's a breakdown in the negotiations and that makes sense to me, but

what i would like to ask of panelists is is that good public policy or what's wrong with that policy of allowing signal to stay on the system when there's a breakdown negotiation. mr. britt, you want to take that? >> i think it's one of the very good ideas that are around. again i think it relates to everything that's been said because broadcasting occupies a unique and privileged place in our society. and depriving consumers of that is a problem. again, some people will say that will tilt the scales in favor of the distributors and other people's the other things. but it is the consumer that is being held hostage, and that isn't a good thing. so we are, again, advocating some sort of better process for settling this. again we are not denying the

value of the networks or whether the there should be payment. there is value but how do we decide the amount without disrupting the public? >> mr. uva, did you want to -- >> senator, thank you. i believe that the government needs to tread very carefully in this area cox and to remove the primary incentives to get a deal done if during negotiations you force a signal to remain at through the negotiations there doesn't seem to be negotiation on the distributor in a timely fashion to get an agreement. furthermore i think the rules as currently exist under the communications act certainly fcc rules, the fcc is empowered to oversee this and if one party has a dispute or claims the other not negotiating and good

faith and in fact bad faith, but during the time it shouldn't necessarily be a requirement -- >> that's a good play. on that issue the has the fcc ever found that the party is not proceeding in good faith? >> i am aware. >> i don't think they have as far as i know. mr. rutledge? >> i think that broadcasting has a special place in the social obligation to its community, and i think that the fcc and through other policy means should intervene when, rather than let signals go off, it does have some disruption, you know, nobody wants to pay high year rate, so i agree to make negotiations more complex for broadcasters, but i still think it's better than allowing people to be held hostage so i think it is inappropriate for broadcasters to troops it falls which are free and unlikely spectrum being used for the public good.

>> mr. uva? >> senator, thank you. i also believe that there is a very important role for both sides to play in educating consumers about twice because of the end of the day the consumer does have the choice to receive the signal free over the air, to buy it from a multiple system cable operators and satellite provider or telephone company. we believe very strongly that educating consumers about the choices they have and the remedies available is also important. >> mr. kerry committed to what that something? >> i would add a couple of things because i agree with mr. uva's points. first in terms of time, you know, we provide a lot of time for the actual negotiations we had. our process with cable was for

the better part of six months, so it's not -- it's not like these have come up and somehow there isn't time to address them. there's a lot of time. we've provided a lot of time to get there and realistically most agreements get done with a deadline and that seems to be the way the world works. at the point of a deadline they don't go along and i don't know -- we were getting zero. we were trying to get a fair rate. if one is going along open and the i'm not sure where the incident isn't for the cable operator to keep it going open-ended lee for as is happening pushed to a point of time which it happened in some other cases this summer where the broadcaster has particularly disadvantageous time of year like this summer when you're on the run and all of a sudden decide that's a good time to bring it to the head and drop it

because of your ship is at the lowest point of times of the deadline is important to get a deadline. and i do think it is generally where it works. we have a lot of channel negotiations. we do this in a lot of cases. i still struggle with this negotiation is so unique. we are not asking for a rate that is presidential. >> i've never done one of these negotiations. i have no idea of complex they are but he said time is not usually a major factor but the deadline is helpful and we understand that put on these are you mostly just negotiated with the number of channels and the price per viewer? it is a fairly straightforward set of negotiations -- >> that's why i don't know if you just extend it with the extension is going to achieve other than just a draft. i agree with you. that's why i said when you've been talking for 13 months you

probably have sifry attack on the table and it just becomes a point in time -- >> to make a decision. >> we've had times of times with the channels and distributors and you get to the point and reach an agreement to read the process worked. this just happens to be a case where the distribution industry wants to politicize and try to change the rules on how the system, yet this isn't that different a process and what we've been asking for is as said before on any comparative basis more than fair. >> would you like to -- >> i just want to make sure that any re-examination or reform lookit transmission includes the dependent program we need to participate in that dispute process if that is put into place. i would say i don't want any of senator kerry's comments to get lost when he mentioned cheese is sitting here saying the broadcast network hasn't gotten paid in reality has also

launched a number of different cable channels based on the retransmission and many of the channels are extraordinary value for the consumer so there is billions of dollars that are being generated by the real-estate that read transmission allows. cable also has good to do and they are launching an art network a week of every day and say they have a responsibility not just the broadcaster and they reached down to a small independent network of privately funded, no government handout and they're putting in art network on cable television but it gets very complicated when we transmission takes about only the valuable bandwidth, but these very public arguments ensue. >> chairman kerry, have one more closing comment rather than a question but if anybody has a response. it's always bothered me in these negotiations the total lack of transparency where a consumer,

john v. were out here doesn't know sam sitting on comcast for example i don't have any idea what comcast is paid and i don't know and i travel and stay with million walls or something and they are on time warner, whatever it is, i have no idea what they pay for that and i cannot imagine any public policy reason for the total lack of transparency. is there a good policy i am missing here? >> does anyone want comment on that? >> realistically i can't think of any real business where you negotiate in a public forum in a public forum i think the competitive complications will be damaging as you try to continue to do deals putting in a public forum the provisions of private negotiations and i can't really think tough -- i'm trying

to think of an industry -- >> it happens all the time when one already knows the market value is for something and they go out and negotiate -- >> we have a pretty good understanding. i mean, there's industry research out there that in a range will tell you pretty much what most of the channels get. they may not be accurate with precision, but there is certainly industry experts and the industry is covered in many ways that that information is there and its publicly available. >> i think what senator pryor is getting out and i mentioned the transparency earlier -- with the transparency may be one of the most effective ways to deal with this without you guys would missing that, quote, heavy hand of government coming in and suggesting what happens here. but there are really more than two parties of the table, with all due respect. you could say conceivably there are four parties at the table. you have consumer, who is sort

of battered in the middle of this thing on occasion, or even, los? price differentials, maybe they are paying a lot but they are not sure what the differential sar and then you've got us, because the truth is that public broadcasting is receiving billions of dollars of subsidy. through the thing called a spectrum. it's worth billions. that is a huge subsidies. and let's be honest about it. so, and there are standards applied to the who gets it and how which i don't think has been a rigorously thought through, there's a public interest there there is a public interest of the table, and so i think that in many cases people in this country for home in emergency

life in our communication or other kinds of information that's vital to the degree a couple of companies called it a commodity in the context of a lot of people would cook monetize it sweet to think the implications are which is where the fcc has certain authorities. what would happen if every transmission is taken away? what would happen? where with your business plan go? there's no transmission consent requirement. >> so we're in advertising only supported business. >> went to survive? >> long term our survival would be threatened. >> what do you think mr. uva? >> is a very threatened -- >> threatened, correct? the fact the government is requiring the transmission consent to create your business plan -- >> to be competitive we are creating with channels -- stat

how do you have a plan of your not competitive it's not a good plan. so, you know, this -- we've got to think this through carefully. i do not want, and i said this at the beginning, i don't think any member here wants to come leaping in an inappropriate way, but i think what's been put on the table this kind of at least for discussion purposes a way of engaging in thinking about what's the harm insurance renzi. suppose people have a better sense with the costs are in certain places for instance mr. britt, what's the difference the retransmission consent payments that you pay to carry the espn versus fox for instance

>> on the top of my head i don't know that but we would be happy to get that for you. we of many networks from those companies so -- we can get it to you. >> you can't tell me whether you consider it fair the source differential? >> it's the result of a negotiation. i'm not sure what fare is in the sense you're asking. >> you've ever walked out and said why we got screwed on that? [laughter] >> i say that all the time. >> i think there's a fair amount of public information. i used to sit on the other side of this and so i am not going to disclose their numbers but it's widely known that espn would have a rate that is five, six times what we would be getting in retransmission to be done was

to have a unique deal unlike anybody else it is a multiple -- >> you were sitting on the other side of that weren't you? when you sat on the other side you thought it was good to pay zero. [laughter] >> about was my job if i can fight that fight. estimate to understand what my job is. >> i do understand. the reality wasn't that long ago and i did see it from both sides and i think it is why in many ways it tried to approach. i've said publicly we could have gone in and asks for a higher number in the justified based on ratings and other things. we didn't try to do that we tried to go with a request we thought was manageable, was realistic but enabled broadcasters to have a model that would be competitive in the i was at directv still.

i would be pushing back at that. that's my job and i would be trying to manage my cost as i can. the fact of the matter is directv, the two companies here make a lot of money. they are not fighting for survival in the of very profitable high margin businesses and we recognize nonetheless they are trying to manage the business intelligence. i respect that but i do think broadcasting content needs to have an opportunity to continue to compete in this marketplace. i don't think it benefits anybody including the guys here if you find the nfl is going to be on the cable network when our deal expires in three or four years and that's where you are headed because you don't have a business model that lets us compete. >> on the understand that and that's why we've met over the

years, 25 years now, many times with broadcasters coming in and complaining about their lack of power in the marketplace which is why i commented on the reversal where we were and then i want to comment to the kovacic am i senator klobuchar. in the 2009 cable industry prices and they concluded from 1995 to 2008 the average monthly price of expanded basic cable grew from $22.35 to $49.65. to an increase of 122.1%. and going forward, the media research firm predicts that retransmission consent revenues for broadcasters would grow from 762 million in 2009 to 1.36 billion in 2011 and perhaps more than 2.6 billion in 2016.

i assume some of these can be passed on to consumers in terms of their monthly mvp. i am not sure. what are we looking at as we go forward? what are we going to be able to say as we go home and they complain about the sort of packaging and what they have to purchase and total amount of money and so forth? >> i guess what i would say is those numbers will still be a small fraction of the aggregate programming cost that exists for that universe. >> that amount of money? >> if you look with the total program cost is for the content for that same universe is a small part of its and with some degree singling them out. >> what we are talking about in

terms of global production costs. >> in global programming costs? >> i probably don't have the number going to spitball it and my guess is it is a 30 to 40 billion-dollar number. 30, $40 billion. i'm doing that very extrapolating of the top of my head so it might be completely right. so, you put those numbers in that context, and again i get trouble on how the broadcasters takes unique blame. i'm not blaming or vilifying other companies, but there are big companies out there that are big driving networks with viacom that have largely talk about networks that are driving and creating new networks around a big powerful networks. it's not just broadcasters bundling. it's everybody