spoken personally to world leaders, especially in the middle east, will tell you how to impose tough sanctions. when you ask the question while they were, they say no. there is no way that they're going to work. i went point to remake the determination that the sanctions, no matter how successful a measurable aspects are not going to prevent the iranians, whose game is intended to just run the clock on this until they have the weapons, that we have to find an exercise in alternative means? where's that point? >> mr. ackerman, i can't give you a precise point. i mean, all i can say is i think there is still time to continue the approach that we've used to tighten pressure, to try to make clear that there is an

alternative pathway through which iran could have a peaceful nuclear program and enjoy the benefits of context with the international community. but it's going to have to take some very concrete steps to address international concerns about its nuclear program. i think there's still time for a serious diplomatic effort to produce that outcome. >> analysis in question of secretary levey. >> i just got a comment, mr. ackerman. having the distinction you draw between north korea and iran is there a difference i think also the potential effectiveness of sanctions. and the basic point i think is that iran doesn't want to be isolated. and perhaps a is not so much the case of north korea. iran doesn't want to be isolated. they look out from where they are now and see lack of investment coming in. they see the inability to do business with major financial firms. they see the inability to do

business with first-tier energy firms. they see it at that as on their oil and gas production in the medium-term, the inability to create jobs, et cetera. they don't want to be this sort of pariah. and as bill pointed out, there's no guarantee here at least gives us a reason for confidence. >> let's assume that you're widely successful and in the period of all give 90 days, you cut the gnp, their economy and everything else by 99% and they have an atomic weapon. they have a nuclear weapon. where are we? >> i think the point -- >> i think your clock runs faster than theirs is the point i'm making. they think we have to have a plan b. because plan a by anybody's estimation, even if successful beyond our wildest dreams and a real quick timeframe is not going to change the dynamic.

>> the time of the gentleman has expired. the gentleman from florida, mr. mac is recognized for five minutes. >> thank you, mr. chairman. and thank you to the ranking member as well and for the witnesses today for being here. i also -- someone earlier said they didn't hear you talk about china in your opening statements i also didn't hear you talk about venezuela in your opening statements. and let me suggest that venezuela is in violation of the iran sanctions act. that being said, if both of you could answer why have we not sanctioned hugo chavez, that is question one. and i'll let you answer that will quicken them in couple of follow-ups. >> welfare, i'll start by saying we did sanction when venezuelan bank because of its connection to an iranian bank coming the

export development bank iran, which wear dirty extinction. we will continue to monitor very carefully the venezuela and iran and relationship and particularly venezuelan relationship with u.n. security council resolutions and hold them to their international obligations. >> secretary levey. >> as bill pointed out, we have taken action and identify conduct in violation of conduct and will continue to do so. >> what information you have on the allegations of gasoline in excess of 1 million u.s. dollars has been sent from venezuela to iran, utilizing china's national petroleum corporation in the national oil company clerks >> five to try to get you an answer on that, sir. i don't know. >> i have no further information >> okay. then, well, let me suggest that

venezuela has violated the sanctions that by its shipments of gasoline to iran. next question, what is the status of the joint venezuela iranian international development bank and its u.s. alleged connections to iranian military entities and nuclear ambitions? >> i'll get back to with a more complete answer, but in general, i'll say we've been looking very carefully banking ties between iran and venezuela. we have -- when we've identified sanctionable activity, we've taken action with a subsidiary of the development of iran, which we sanction. there is also a fair amount of bluster but we have also seen from venezuela, where the airplane up some of these guys and sometimes the establishment substance behind the bluster as

they like us to believe. and we have to make sure that we cut through all that and act based on the evidence. will have to get to in a more detailed answer. >> let me suggest this. that's their problem. if they choose to bluster about it, we need to hold them accountable. i mean, i think as he listened to some of the other members, they're trying to run the clock out. and so let's take their word for it. if hugo chavez says that he is sending gasoline, take his word on it. if it thinks iran violation with this iran sanctions act, take his word for it. now if you don't take his word for it, there's punny of evidence also to suggest that in both those cases, he is in violation. the problem i have is when you have and act like the iran sanctions act and you apply it to some and you don't apply it to others in your slow on the

draw, others figured we'd take a minute. so if were going to be serious about the area and sanctions that, it starts with countries like venezuela. we need to hold hugo chavez accountable. i think that as you look through, you'll find even more connections that are in direct violation of the iran sanctions act. and me ask you this, secretary levey. will you set up a task force on database involving developing iran's nuclear capacity and other corrupt activities? >> i guess the question would be more of a state department lead, but were happy to take a look at it in detail and take whatever action is appropriate. i want to assure you, there will be no hesitation to take action against venezuela or any other country, for that matter, if we

identify sanctionable activities. no question about that. >> well, i'll suggest again that he is in violation. and so actions need to be taken. secretary burns. do not just reinforcing what stewart said, will take all the resources they need to get to the bottom of all the concerns that she greatly raised and where we come across evidence, will certainly hold the venezuelan government accountable. >> time of the gentleman has expired. the gentleman from california, chairman of the terrorism non-proliferation trade subcommittee, mr. sherman, five minutes. >> the chaired several members have focused on china. china taxis in 100 ways, the economic security of americans, cooperates with them subsidizes word regimes. and this is best exemplified in the example from the reagan member of our subcommittee, where china facilitates the

transfer of missile technology from north korea, which is subsidizes to iran, which it uses the threat of its u.n. veto to protect. and i don't blame so much beijing as they play washington. we have congress have a choice between two approaches. one is to continue to denounce china in this room and others in the hopes that her words will stink so badly that beijing will change its policies. and occasionally we grant to the administration the authority to actually hit china a little bit, just does it thought i would allow you to sanction companies, but we know you want to attend a significant degree. one approach is to continue our current policy. the other is to take a radical approach, such as the bill i proposed, which within six months would end most favored nation status for china.

given the power of wall street, i think it is clear that at least at the present were going to continue our present policy. as to plan b, saudi arabia told us what our plan b was. i'm hoping plan a works. secretary burns, i was struck by your opening comments in which he said that sanctions were a mere complement to negotiations. now one view is that iran really wanted to buy a moment with the united states. another view is that iran wants nuclear weapons so badly that nothing but the prospect of the brutal murder of all regime leaders by their own people would cause them to a band and their nuclear program. assume -- they realize that maybe less optimistic than you. to send a second iran, are our sanction policies enough not to

just encourage a coup by iran to join us in negotiations, are you building towards sanctions long enough to force a determined ledger and iran to choose between regime survival in the event of a nuclear program? >> mr. chairman, those moments are nothing i've ever associated with doing business with leadership. i think our approach is also pretty unsentimental. >> a little closer to the night. sure you know what i said is that kumbaya moments are not what i do. we sharpen the choice is the leadership faces to try to ensure that it sees both the possibilities of addressing international concerns about its nuclear program, but also the costs. >> the question is, do you have a plan a double force this

regime to force the program or do you only have a plan of sanctions that would encourage irrational regime to try to reduce the sanctions? >> as we've described to you, mr. sherman, what we have is an approach that is very unsentimental, which seeks to sharpen the choices for the leadership and imposes a stiffening set of costs. >> letting the fund. the idea of stiffening implies that we have a lot of time at the executive branch complied with the law back in the mid-90s, we might have that time, but we don't. we've got to take action immediately bites the iranian economy. toward that the recently enacted law provides for sanctions for those who provide gasoline to iran. the standards are a million, 5 million the law.

is the failure to launch formal investigations against and actually sanction firms due to a lack of will or just a believe that we don't know who it is that's providing this gasoline? do we not know which tankers are rising at a rate and ports? do we not know who owns those tankers, even if we don't know who owns the oil on them? do we not know from which refineries they arrive? what do we have intelligence? why have you not sanctioned or even began formal investigations against any entity taking gasoline to iran? >> with regard to a gasoline refined petroleum product, i think it's pretty striking that just in the few months since cisada past there was a draft in the amount of petroleum product iran is importing. we always mention the number of

companies which are pulled out of that business. so i think what we've seen is a quite significant move in the direction that we've all intended. >> secretary, thank you for your answer, but it wasn't my question. >> time of the gentleman has expired. >> thank you, mr. chairman. i want to thank all of the iranian americans that are here in the audience today, concerned about a mutual concern that we all have at camp ashraf and the delisting of the mek as a foreign terrorist organization. i know the state department and foreign bears committee are supposed to work very closely together. my question from secretary burns, is why has the state department refused to brief the subcommittee chaired by mr. sherman on the delisting of the mek? ..

>> i would point out the state department refused to do a briefing at the ask of our subcommittee for a month, but did arrange for the cia that addressed some of the questions. >> that's my point. that briefing yesterday i attended was not by the state department, but by the cia. those two agencies are not the same. i'm just curious why the state department, it appears to me is so obs nant even after going to

court and the court ruling against the state department ruling them to provide information about the nek in this lawsuit, information that is required to be delivered in january which is next month the way i figure it, and why secretary clinton in 2009 said that she would review the whole designation of the mek in the next two years, that has not been done. the two years is up in january. i want to know what information the state department has that is so relentless on your part that they should remain on this list. do you know that information? >> we are reviewing in response to what the court said and to what secretary clinton said. one step in that review is to allow the mek to review the unclassified material that led to former secretary rice's decision in 2005. we will await their input and complete the review as we

promised, and if there's other questions beyond the briefing cucted yesterday afternoon as i said, sir, i'd be glad to take those and get you further answers in the meantime. >> it appears to me just to be getting worse and not better. people are very concerned about their relatives that live there. what is some hard line new procedures that we are taking as the united states to ensure the safety of those people in camp ashraf. >> as said, we take seriously the concerns raised about inadequate availability of medical treatment and other kinds of activities at camp ashraf and there's two individuals in particular and we made sure they had access to the threement they needed.

-- treatment. we hold them to their obligation to make sure the basic human rights of the people there are protected, and we continue to do that. >> in other words, the opposition is we are just encouraging the iraqis to do the right thing. the hard lined evidence that we are encouraging in a diplomatic way that they protect the safety of the people in camp ashraf. >> we and the u.n. mission continues to encyst the iraqi -- insist the iraqis meet their obligation saying they are not subject to forcible reab traition to a person who might prosecute them, they have access to the medical treatment they need, and we'll continue to push that hard. >> lastly, my own opinion is that the greatest hope for iran and the world is a change in

regime in iran. it's not to go to some type of military conflict and hopefully the good folks in iran change their own rogue, unauthorized illegitimate government in my opinion. what are we doing for that if any? >> sir, as i said in my opening statement, the president and secretary took very seriously the importance of supporting human rights of iranians. we do that by applying this and designating individual and senior irani officials who are guilty -- >> you're taking my time. i have that answer in writing. my question is what are we doing to promote the opposition in iran, not human rights, and i'd like to have an answer to that. >> if the administration would lay out a number of different things you are involved. thank you.

the time has expired and the gentleman from florida is recognized for five minutes. yes, among my limitations of power is the ability to get your mic to work, and even the other ones are fast evaporating. you want to come up? no. >> [inaudible] [inaudible] >> what? we're -- we're -- >> [inaudible]

i think we should start it again in five minutes. >> thank you, mr. chairman, this is a nice place for a freshman to sit. i'd like to commend you for your leadership on these issues and thank you secretary burns for your testimony. on september 30th, deputy secretary steinberg announced that state oil and eni and world dutch pledged to end investment in iran energy sector and as a result the personal rule provided for there was no investigation into their activity. the special rule provides that and as the notice stated that they are not longer engaging in or have taken steps towards

stopping activity. my first question is to what extent do those four companies continue to operate in iran's energy sector? >> just to add, sir, there's a 5th company since then too which the special rule applied impacts, a japanese company. broadly, it's a demonstration that that instrument, an important one, is working to produce the outcome that we want. with regard to the companies you mentioned, i can try to get you a more detailed answer, but we've had detailed conversations with nose companies. they are winding down quite rapidly, and they have given us clear assurances that not only are they winding down current operations, but they are not participating in any sanctional activity in the future. >> do we know how quickly? >> i can't give you the precise answer, but it's in the very near term, and in some cases already wrapped up, but i'll try to get you a clearer answer. >> if you could for each of

those, and do you know though, is it, is it weeks, months? are they finishing existing contracts? >> no, it's, you know, i can't give you a precise answer. i promise i'll get you one, but it's in the very near future. these are companies that are pulling out of the iranian surgery sector and committed to not engaging in future activity. >> okay. i would -- so, i think in most cases we're talking about weeks, i can't tell you if it stretched beyond that, but i'll get you an answer. >> i'd appreciate that. can you confirm that those companies that the ends of the september certified they were leaving will no longer be doing business in iran in the next several weeks and i'd appreciate that very much. that leads to the next question again with respect to what

companies have said they are going to do and when they're going to do it and what constitutes credible evidence that the "boston globe" reported that the company promised the united states government they will end operations in iran on completion of existing contracts and sitings further that existing contracts worth $100 million will be in iran until 2013. according to that report, those contracts, they entered into 12 new contracted valued at more than $400 million even after telling american officials they were going to seize activities. do you have anything further on their efforts and when they are leaving iran? >> no, we remain concerned for them about the reasons you described, and we'll continue to press those concerns. i don't have anything to add on that point unless you do, sir.

>> mr. secretary, then, does this report, and this is, i think, the main question i had today, does the report that cites internal documents of the company like this report that was published in the "boston globe" does this constitute credible evidence that has or will cause an investigation to be launched against them? >> you know, in trying to determine credible evidence, we go through all of those reports. we also talk to companies themselves. we talk to governments, you know, of which those, you know, companies are hosted. we also obviously go through all the information in our intelligence community. i can't give you a simple answer on that except to say we exhaust all the information we have at our disposal. >> i understand. if you determine that these internal documents are valid and actually come from the company

itself and the broader question then is if any one company identifies, self-identifies as a company that is doing business in iran, does that constitute credible evidence, and if it's not clear, shouldn't that constitute credible evidence? >> it certainly is a very important factor in coming to that judgment just as you said. i mean, i think just to take a step back for a second, you know, last summer asked the question about, you know, how many questions or how many instances are there where there may be sanctional activity? i mentioned in a hearing there was 7-10 in july. since then, we sanctioned one company, five through the use of the special rule have pulled out or are pulling out from the iran energy sector and launched investigations into several others. we are trying to follow through energy jetically --

energetically and thoroughly on these issues. >> the time expired. i'm going to interject here which is probably not the way to do it, but i'll take it as a privilege as the last hearing of my chairmanship, at least for awhile. [laughter] and just, the law provides for this credible evidence threshold and provides for 180-day investigation. i don't know if that is what mr. deutch was getting at, but there's an investigation within that 180 and the threshold of credible evidence, and we shouldn't fall into the trap of needing enough evidence to make a final determination about a sanction in order to decide whether or not to launch an investigation, and with that, i

think i've exhausted whatever privilege i gave myself, and i better go on to the next member. gentleman from california, mr. royce, recognized for 5 minutes. >> thank you, mr. chairman. the story i pointed out from the post actually predated wikileaks, the story on the obama administration concluding that iran was, was being helped by china in terms of the development of its nuclear weapons and its missile technology. it comes from a story last month. our state department special advice sore for -- adviser for nonproliferation presented chinese officials with a significant list of companies and banks assisting iran with its missile and nuclear technology. i think what concerns us is the "wall street journal" said yesterday the procurement activities in china is growing.

it's on the upswing, and we know that china looks the other way as weapons trade between north korea and the islamic republic of iran ends up entrenching both regimes, and that reality pours cold water on the latest u.n. sanctions revolution that the administration lodged this morning, a resolution that puts congressional sanctions on the back burner, and i can't help but feel a sense of lost time, but as stewart levy pointed out, the new legislation includes potent new financial sanctions, and these are patterned after section 3.11 of the pay patriot act used on north korea which brings me to my question. i remember when that was imposed. the bank of delta asia, and it

had a certain effect on the hard currency that ended up being constricted from the hanldz of the regime, -- hands of the regime, and i thought you might want to layout what the effect was on north korea at the time, and it worked probably because there was concern about reputational risk on the part of the banks that participated in that effort, but i'd also ask you is it possible that chinese banks today are concerned about reputational risk and therefore could -- this could be just as effective. let's go through it if you would. >> well, thank you, mr. royce. you're referring to an action that we took under the patriot act back in 2005, i believe, to designate a bank in makow under the appropriation act under 311

and to summarize quickly, the overall effect is it led banks around the world to stop doing business with north korea because we had put into the public domain a catalog of the kind of activity that north korea engages in and the fear that banks had they would be swept up in that led the financial institutions to say this is not worth the risk to continue doing business with north korea. i think as i said, this was a more contained target, if you will, and so we've applied some of the same prince. s in going after the iranian strategy in that there's a much broader integration into the financial system that we are already dealing with and just one action like that would not have the same dramatic effect, but we have drawn upon the same principle that rep pew table institutions don't want to do business if they fear they would

be caught in illicit activity like iran's missile procurement and support for terrorism and so forth. that's the reason why we had the ability to have the affect we've had thus far in the banks, and we already had a significant effect, and fasada significantly increased it because it created a situation where any bank that continued to do business with the banks we pointed out is now at risk of losing access to the u.s. financial system. it made, if you will, a multiplier effect on our designations, and it has had a dramatic effect thus far, and to come down to your final point which is, i think, that that effect even applies with respect to chinese banks. as many people have expressed, and as bill has said, we're quite concerned about the role

of china in this whole strategy, and we're continuing to press it. we have one thing in our favor is that chinese financial institutions seek to have a global business model and a global footprint, and therefore they take these reputational concerns seriously and that gives us the ability to be somewhat persuasive with them. >> my only regret, mr. chairman, is those sanctions were ultimately lifted, and i think, you know, it's sanctions enforcement, sanctions enforcement, the stakes are too high, it's the enforcement that gets the demonstrative effect. thank you. >> talk later. the gentleman from california, mr. costa.

>> thank you for this hearing, but unfortunately, i don't think time is on our side. clearly as noded by the -- noted by the members here on the dias is china continues to be a problem with the sanctions and this must be enforced. i'd like to move this to a little westward on another country that i think is an important participant, a nato ally, turkey. mr. secretary levy, how have the turkish banks responded to the new sanctions, and are turkish banks continuing to work with banks that the u.s. has sanctioned? >> with respect to turkey, i think on the one side there's a couple points worth making.

turkey voted against the resolution as we know, but they implemented they will instate the resolution and also stated they'll leave to the private sector about what business the private sector will do, and i've been to turkey since this was passed and other treasury officials have also been there since it passed, and we engaged with the private sector there and the banks and private association and the government officials, and what we are finding is that the private sector and the banks in turkey are reacting similarly because they are concerned about the potential of losing access to the u.s. financial system and they are concerned about their reputation. i can't give you more details about this in the open setting, but that's the general trend. >> to enforce sanctions, in in fact we find their banks continue to do business and

would we impose the sanctions? >> yes. >> ambassador or secretary burns, i'd like to bring this back around. we zeused early -- discussed earlier russia's role in making the sanctions work. do you believe there's a correlation or connection with our efforts to secure the s.t.a.r.t. treaty that is pending over in the senate as to how russia's behavior will be as we go forward on enforcing these sanctions? do you think there is, in your view, a direct correlation here? >> well, just two points, sir. first, i think russia's partnership in the diplomacy leading to resolution 1929 and its own decision to cancel the s-300 sale was crucial. without russia's partnership we

wouldn't have resolution 1929, and without resolution 1929 it's unlikely we would have seen a significant set of measures from the eu and others. it was a shared concern about iran's nuclear ambitions is right at the core of our relationship with russia over the last couple years. certainly the s.t.a.r.t. agreement is in the interest of both of our countries. it's very much in the american national interest and as the president and secretary made clear, we hope very much that it can be ratified this month because i think it is an important demonstration of a partnership with russia which is also producing important dividends with regard to our shared concerns about iran. >> i'd like to ask a final question and i noted it earlier. the revolution regard in iran, how effective --

affective are these sanctions in trying to impact their ability to continue to operate? have we made any determination? i mean, clearly they are in essence part of the government, but obviously, and i don't know whether secretary levy you feel best prepared to respond to this, but it seems to me that the revolutionary guard in iran is at the head of many of the problems we deal with here. >> the short answer is that you're right that their involved with the problems, but the only good news i got is that is now something that is not just recognized by the united states, but by the international community, so one of the most significant pieces of 1929, which i think was widely underestimated when it was first passed, one of the significant pieces of 1929 is its designation of a number of irgc

companies for sanctions in the resolution. that led to other countries, including the eu as an organization and similar action was taken by japan and south korea, and the overall effect has been to create a dynamic that has companies around the world saying they won't do business with the irgc, and if you add to that, the way the iran gets into secretive conducts and you don't know who you are dealing with iran, and the likelihood you deal with the irgc, that gives you sanctions. i'll give you a good example of this -- >> well -- >> but i don't have to. >> well done. [laughter] >> thank you very much, mr. chairman, and let us note the good job that you've done in

conducting being chairman of these hearings over the last two years, and it's been an honor to work with you knowing then and also considering the fact that we are demonstrating for the world that here in the united states of america people can disagree, but we have respect for one another, and we treat each other fairly in trying to decide policy, so thank you, mr. chairman, for your leadership over the years. i'd like to associate myself with the concerns of congress poe in terms of the citizens of camp ashraf, and i think that it's disconcerning to understand that we have to play games with the government of iraq after we have invested such a massive amount of treasure and blood. we need to hear from iraq, from the government of iraq, a solid

commitment that they will not betray the people of camp ashraf to the mullah dictatorship. that would be terrible, and we would lose leverage ect.. if you could pass that on, i would appreciate that. thank you, secretary burns, for your analysis there of the relationship we have with russia in dealing with iran. it's easy to see and put this in one dimension to understand russia's built that nuclear power plant, and we also understand when they signed the contracts, they were in a horrible economic situation and felt they were being pushed to make such deals, and so you have testified today that we have cooperation from russia now in dealing with iran, but i think also this hearing has dmon -- demonstrated that our china

policy has been a dismal, dismal failure, not only the chinese not cooperating, but we can see, not just iraq and iran and that area, but chinese, of course, provided the nuclear weapons for pakistan through korea, and they're using -- the chinese seem to use korea as a puppet, and the chinese, of course, have just been playing a very negative role in the world, and my complement to the chairman also should suggest in his opening statement, he outlined the problem with china. if we're going to have a peaceful world, we have to start dealing with china in a more forceful way. one last note, and i'd like you to answer this, but i understand that oil now is being

transferred, some of the sanctions you're talking about have been working, but oil is now being transferred in a large amount of oil from iraq, from the crude area of the iraq. is that true, and let me just know if it is, that we passed a resolution that i authored that would establish a counselor, and we passed that and that would not have passed if we knew the curds were shaping large -- shipping large amounts of oil. what's going on with that? >> we heard reports of oil smuggling across the border of northwest iraq and there's a state department treasury team in baghdad recently to talk specifically about those concerns and emphasize the need for this practice to stop. i don't know if stuart wants to add to it, but we take it

seriously. we followed up, and we continue to. >> is this oil smuggling or winking and nodding of the government oil smuggling? >> there's reports of smuggle that's worry worrisome and whatever the implications, it needs to stop. >> i have found it disconcerning i find out of wrongings of other countries through these leaks of classified documents with wikileaks. we have to work on the fact that we as members of congress deserve to know if hostile countries know what's going on and our government is protesting something that's going on with the hostile government, meaning our government knows about it, the american people, and certainly congress should know about these things, and for example, there is a -- we know that at least one weapon

systems from china has been shipped over where we protested it, and the american people don't know anything about it. thank you very much. >> the time of the gentleman expired. gentlelady from nevada, ms. burkely. 5 minutes. >> [inaudible] [inaudible] i was the origin nailing koa upon -- original cosponsor, and i think they are working, but not as fast as we would like -- [inaudible] >> why don't you come up here? >> [inaudible] >> your mic's not working.

>> [inaudible] >> and your papers. >> i hope you heard all the accolades. >> 30 seconds off for the accolades and we're go from there. [laughter] >> care i mentioned -- sorry i mentioned it. i had an exchange of ideas with a high-ranking turkish official yesterday and in the discussion he assured us, members of the foreign affairs committee, that turkey was in fact doing everything they can to help implement the sanctions against iran and have a successful result from the implementation. that seemed to me a bit out of the sorts with the fact they voted against the sanctions, and it's my understanding that they've done gist about everything they cannot to --

that's my phone -- not to be helpful. my question to you -- [inaudible] >> i want to add to this. the turkish government made clear as they did to you they are determined to implement resolution 1929 and whatever the sanctions. whatever the vote, they are obligated to do that, and we will work closely with them to ensure that. we have already seen evidence of some turkish companies as i mentioned earlier pulling out of the supply of refined petroleum products from iran. the truth is the total volume is not that great. i think 2% of turkish exports go to iran, and 2% of imports come from iran.

the public statement that stuart said turkish firms have more at stake in business with the rest of the international community and the united states than iran right now. turkey made clear they share our profound concern of a nuclear iran. we had differences over this, i think, but they have allotted stake in this too and played a constructive role in iraq in helping iraqis produce a government and they are mindful of the danger sometimes of iranian behavior in iraq, and so i think there's a partnership with turkey that is not perfect, but we need to continue to work at because it's significant for us in a lot of different ways. >> [inaudible]

>> is there any loopholes in the law -- [inaudible] >> no, ma'am, we're just trying to make the best possible use of the instruments that have been provided, especially there and as we described today, that's what we're working very hard to do. >> as you work through this, and do what you're doing, is there something glaringly missing or a tool you find would be helpful. would you share that with congress so we can remedy that situation? i think this is important in the ramifications of the sanctions that are not working are catastrophic in my mind, and while i think nothing should be taken off the table, and i've been very vocal about that, the reality of not taking everything off the table is challenging, so these sanctions have to work because the alternatives are far

more dire, so anything we can do to help you to make these work and bring the iranian economy to a sneeze, would be important. i thank you very much again for your service. >> time has expired and the gentleman from nebraska is recognized for 5 minutes. >> thank you, mr. chairman, and let me add my voice to those who thanked you for your leadership over the last few years. we are grateful for your service and look forward to continuing to work with you. thank you for coming today and appreciate your hard work and the dual-track policy is very important. with that said, the iranian people have a deeply historic and deep cultural sensitivity to the fundamental notions of justice, and yet they are ruled by a religious group pressing

its people and preventing iran from taking its place from the members who are responsible to the international community. we are awaken to the headline that iran has the bomb, and this is a game changer. if we look back at this, we see a pattern here where russia in previous engagement empowered this development, and china is clearly committing a sin of comission, and north korea has an exchange program with the country, and the businesses are still involved there. having iran obtain nuclear webs in the -- weapons in the most volatile area of the world is leaving questions for saudi arabia, egyptians, and turks, and they spark a nuclear arms race again in this most difficult part of the world, and no one in the international community will be served if they use the bomb or

give it to a proxy and it goes off in berlin, tel-aviv, or new york. i don't think we can get our mind around the horror that would ensue. again, i appreciate your hard work on this, but here we are as a committee in the united states congress holding hearing after hearing talking about the iran sanctions that is an important part of the dual-track strategy. is this going on in the eu? is the russia doing the same thing? expand upon your discussions with the chinese. you had earlier said we emphasized restraintd with chie -- restraint with china, okay, thank you, but restrain. the nature of this dilemma and the probability of what's coming has to compel us all to act swiftly, and the burden of this should not just fall to this

committee and you, but it has to be an international effort of the highest urgency, so again the question primarily being give me the disposition of your counterparts in russia and the european union and talk about china's engagement here. >> first, i absolutely agree with you. there's an enormous amount at stake here. what's striking about the last year is the growing realization on the part of many other partners around the world, in the eu, russia, parts of asia about what's at stake and the dangers of a nuclear-armed iran, and what that led to is an unprecedented set of measures, not only resolution 1929 that provided the foundation for it, but an unprecedented look that they were reluctant to take before that japan, korea, norway, and other countries have taken and steps russia have taken that they were not prepared to take in the past

like curves on transfers to iran and canceling of a major arms sale. all that reflects,ic -- i think, is a widening stake. we will continue to work with our partners to drive home to iran the choice it faces and the importance of it choosing a path to allow its people the connection to the rest of the world as you rightly said that i think they thirst for, and that we saw very vividly in the writing and the other concerns that played out on iran's streets the summer before last. >> do we have the time in >> we feel a real sense of or urgency, and we need to see action as quickly as we possibly can, and that's why we're going to drive this as ennear jetically as we -- energetically as we can. >> who else is driving it outside the united states? >> i think in the european union

you see a willingness to act and on the part of russia and major allies in asia and the partners in the gulf, so, i know, i think there's a greating recognition of what's at stake here, and we're going to do everything we can to build on that. >> all right. thank you. >> the time expired and the gentleman from georgia, mr. scott, five minutes. >> thank you very much, and welcome to the committee. so, it is without any question in both of your minds that iran is after a nuclear weapon? >> i think we see increasing concerns leading people towards that conclusion. i mean, if irani wanted -- iran wanted to demonstrate its purpose, it would not be hard to do it. they could answer questions that were posed and the counsel proposed.

>> so, without question, you will go on record saying they are after a nuclear weapon? that is your conclusion; is that correct? >> i think we have to as policymakers, we have to make that assumption because we have to pursue a policy that assumes that is what they are doing. >> okay. we talked about china, talked about russia, we talked about north korea, and all of this presents a very dangerous geographical and geopolitical secretary clinton their yo of -- scenario on an ax us. -- axis. this brings us to another country that could hold a balance, and that's india. internal documents ya fascinate -- india fascinates me on their approach to this and it's important to examine india

particularly in view of the fact that they now are from some information rejecting the sanctions, and that is particularly but cue lar in -- pee cool lar to the fact that a few years ago they supported the sanctions. they were put in power under the bush administration. tell me what is going on in india. >> well, sir, i mean, the indian government has made very clear its commitment to uphold the new u.n. security counsel sanctions resolution 1929 in everything we see of its behavior suggests its serious about that commitment. for example, one indian company, reliance, that had a several petroleum products in iran, pulled out already and they condemned iranian behavior.

in its last vote last november, it voted to condemn the iranis at a moment when the countries were on the other side of the vote, so the indians, i think, have made very clear their determination to do everything possible to ensure that iran does not develop a nuclear weapon. >> that's what bothers me. i have information here that says, for example, india's foreign secretary made india's position explicit this month saying restrictions on investmentings in iran's energy sector could have a direct and adverse impact on indian companies and in fact they look forward to more investment by adm companies directly into that energy sector, and sort of goes on to say that the united states is thousands of miles away.

they are next door and have a long centuries-old relationship. it seems to run counter to what your assessment just said. >> well, sir, two things briefly. first, the indians at the highest level have made clear their concern about a nuclear armed iran. second, you have to judge by the practice on the ground. reliance, one of the may juror indian -- major indian firms pulled out in business from iran and a gas field indian company involved in the past there has also begun to pull out. i think the facts suggest a real concern on the part of india. >> do you think that the sanctions are going to work? there is some worry about that, and particularly as i mentioned earlier, north korea, china, and even russia would not be in this

position with iran if it were not for russia in a plan that seems to might have been a convenient cover for them to pursue. i guess my point is i guess a military option on the table in your opinion and how reel realistic is that? >> first, i think it's significant that the last administration recognized this as well that russia is significantly adjusted the terms of the project so it would not only supply the fuel for the reactor, but also takes back the spent fuel under safeguards to reenforce the point that iran doesn't need a domestic enrichment capability in order to have a peaceful nuclear program. that's the first point. the second point -- >> finish the answer to the last question, but the time expired.

>> the president made clear we have not taken any options off the table, but what we are focused on now is making diplomacy and in dimensions, engagement, and negotiation, but also political and economic pressure work. >> time of the gentleman expired and the gentleman from illinois is recognized for five minutes. >> thank you. the -- [inaudible] take a look at the iranian sanctions act passed in 1996, i believe, and then the latest act that we passed this spring all, of course, dealing with sanctions. can you, can you give an opinion

or at least some thoughts on the best way to, as it were, toughen up these laws to give them real teeth to come up with the real results that we're looking for? >> i just start simply by saying i think what we have before us now in the laws passed by congress, signed by the president, but also in security counsel resolution steps that other countries have taken is a very broad array of instruments. what we need to do now and as we described we've been doing very energetically in recent months is imply those and enforce those as vigorously as possible. i think we'll continue to have a significant impact if we continue to do that. >> i agree with that. the sanctions we have in iran are the toughest in the world, and we have made a very, very high priority to implement

them. one thing that when we say that fasadas had a positive impact, to put that in context, the effect they have is on behavior of companies outside of the united states. it does have that impact, and if we go ahead and continue to implement that, i think it can have a great effect because now there is a broader recognition of how important this is going beyond the united states. we have a much broader set of governments that agree with us in the fundamental principle that this is a very high priority. >> if these sanctions don't work, then the next step would be a blockade, and the next step would be some type, i hate to use the word, but military action. do other countries around the world realize to the extent that the united states does the importance of complying with these sanctions?

>> i think, sir, as i mentioned before there's an increasing recognition of that. you see that in the behavior of many other countries, i won't say all of them, but many other countries in recent months in particular. i think there's the growing awareness of what is at stake here and the importance of trying to make this approach work. >> that's -- i agree 100% of what you are saying, but how do you increase the awareness and get the message across to other countries in the world that this is probably the last best shot that we have dipmatically to do something? >> well, as i said, i mean, i think many other leaderships around the world have already come to that conclusion. they concluded because of iranian behavior itself, they concluded that because they also see the concerns of many others in that part of the world whether it's in the gulf or other parts of the middle east, and they understand the risk

that a nuclear-armed iran would pose to a part of the world that's central to the global economy, so i think many other leaderships are coming to those same conclusions. >> mr. levy, did you want to comment on that? >> i agree entirely with what secretary burns said. >> okay. well, i appreciate your time on it. it's obviously an issue of most concern to our country and the stability of the whole area. thank you. i yield back. >> i thank the gentleman, and recognize the representative from american somona. >> thank you for calling this important hearing. i want to commend secretary burns and secretary levy for not only testifying before the committee, but too often, i think we don't say enough on this side of town on how much we

appreciate the services you provide not only to our present, but to our nation. the importance of what an implementation would be effective or not seems to be the question we're trying to determine here, and i'd like to share with you a -- [no audio] this was research by the congressional research, and i want to share this with you and want your comment on it. "because so many economic powers imposed sanctions on iran, the angsts are by all account having an effect on iran's economy, however, data on iran's economy is sparse or incomplete, and it's hard to get a complete picture of sanctions on it. officials have spoken scene said it has this effect, and others

say, however, there is not a con consensus that show sanctions are causing a shift in iran's commitment in the nuclear program. the key strategic objective of the whole idea of sanctions." would you care to comment on that? [laughter] >> [inaudible] [inaudible] >> i think those mics --

>> well, i'm losing time, mr. chairman. >> yeah, we're told there's rebooting process going on that will take a minute or so. >> oh, now i think we're back. >> okay. >> so much for modern technology. please, proceed. >> so let me just start to answer your question about the impact of sanctions in iran. i think in terms of octoberive impact -- of impact on the iranian economy, i think they showed what's mismanagement of the economy. you can look at a number of indicatorring showing oil revenues for the government declined over the last three

years. >> i don't mean to interrupt, but sir, how much is the estimate of the oil reserves iran has, and how much oil reserves does iraq have worldwide in terms of its capacity for whatever because it seems to me this is one of the fundamental reasons why we're in the middle east,s concern about whoever is going to take position of this oil supply, and ironically, it was the chinese company that won the bidding. they didn't lift a finger. billions and billions of dollars that we expends, the chinese got the oil. i want to ask you, secretary, how much oil reserve does iran have in >> iran has considerable reserves on both oil and gas. i'll get you the specific figures and iraq does too in terms of oil reserves, so i don't know whether stuart wanted

to add to the answer on the economic impact on iran. >> well, i know from the administration's point is you feel that sanctions is proving successful, but here's the problem that i have and has been raised by my friend from florida. china is in this mix in the most important way to the fact that it's in china's national interest to get as much energy resources as they can get, and i don't think iran is any exception in all the efforts made worldwide, africa, wherever they get energy supplies, they will do this, and so is india. is it in china's national interest they get this oil from iran one way or another? >> sir, i think it's clearly in china's national interest to have stable reserves in the gulf, and if you have a nuclear iran or unstable believer in the

gulf, you can easily put a jeopardy access to energy resources in a part of the world that is critical to the global economy and chinese economic growth, so i think that strategic concern focused attention in beijing. >> here's a question, and i have 6 second. very, very difficult -- >> he can answer though. >> it's difficult for us to tell the chinese what to do, and this is the biggest problem we're faced with thp thank you, mr. chairman. >> that's an observation. the gentleman -- he's not here. the gentleman from florida, mr. kline is recognized for five minutes. >> thank you, mr. chairman, and the ranking member for the opportunity to serve on this committee and staff for being a great support of making us all look good, and who worked with me for the last four years is an unvaluable --

invaluable tool and those providing resources to the last administration to the current administration, so thank you for your work. a few thoughts. number one, there's a lot of talk about china which is support a consistent aggression across the board. i think we saw the sanctions were passed that word was already getting out and started seeing anticipated reaction by businesses around the world, but more particularly since the sanctions have passed, the united nations and united states and other countries were starting to see more, and aggressively encourage you to as fast as possible continue that process. relating to chie know, there's -- china, there's other companies that specifically and very openly are doing things that would be considered sank sanctionable as i understand it. it's not a question, but a very strong statement that i would

make and joined by most of the members on this committee, we need to go after them. i know there's a lot of delicate issues between the united states and china related to a variety of things, but if china supported this at the level and the importance of why a stable middle east and a nonnuclear iran is essential to their future and everyone else's future they have to get on board and be held accountable like everybody else in the world. iran has been a facilitator. what is it that we can do, and why are we not sanctioning the central bank of iran? >> with respect to iran, for the first time, the u.n. security counsel actually expressed concern about the activities that the central bank of iran that previously had been

something we were expressing concerns about in that we had seen it engaging in the source of deceptive conduct that other iranian banks were engaging in. with respect to the central bank, though, it is already in the united states a violation ever sanctions to do business with the central bank of iran. in fact, it's a crime for a u.s. person to engage knowingly in a transaction with the central bank of iran. >> and to take it to the next level, other countries, our allies? >> i think having this in the security counsel resolution helps to bolster us when we do what we do all the time which is sharing information, express concerns, and try to raise awareness. ..

can. they will do whatever they can to avoid sanctions, and that's a presumption that we had goings. in. and so, what we have tried it it continue to expose that so thatd not going to we make it moreha e difficult for them, but we also in the process make the private sector in the world even more weary of doing business with mod iran. ith iran. so the central bank of iran is one concern we have in that regard, but it is not the only one. so our engagement on this issue

is -- has a number of concerns that we would raise. >> okay again, i would encourage that. also, there is a reasonable of examples that have been brought forth the uae is one example where companies are getting around to -- [inaudible] [inaudible] >> is my mic working? we've engaged very intensively with the uae. they take the implementation 1929 very seriously. they take very seriously their desire not to be abused by iranian alyssa condit. and so that series is a purpose has been reflected i think in

recent months with their actions as well. >> can i just ask one more question it relates to the anticipation of what happens with sanctions online, were very indicative of a process. and we offer a varied strongly about that. we work with some of the members of the notion of layers of additional things that can come down the road. we all know time is that the essence of what you continue to process. the extent ideas can continue to come forward with the experts were additional things we can and should be doing, even in the form that these are the next as we will continue to take him i think they will continue to build layers of enforcement and message that are very, very substantively important to getting the possibility of change of behavior. thank you. >> time for the gentleman has expired. the gentlelady, ambassador watson. >> thank you very much.

[inaudible] [inaudible] >> we know you have -- >> as time goes short, in many ways, i want to get to the bottom line. we've talked about sanctions. we've worked with the e.u. and the surrounding countries of iran. this is really going to ambassador burns. ec ahmadinejad and i have been told by a panel of british parliamentarians who are able to go into the back door of iran,

that the people in the streets don't necessarily go along with the ideology of ahmadinejad. do you think that we can converge on the current leadership of iran, to sit down and negotiate with us about the sanctions, about nuclear power in fallon. are we at that point? and is very separation of the top leaders, the ones that are speaking in the common people in the street. i remember i ran, another decade and we had a very -- we had a very good working relationship with -- [inaudible] -- project in the very near future? [inaudible]

[inaudible] >> two comments. first, in the summer of 2009, all the discontent he saw unfolding on the streets of iran was a real disconnect between the thirst of many coming many iranians for connections to the outside world and for the individual rights that are so important to us in any society in the world. i think what the leadership has done since then is quite ruthlessly suppressed the green movement. but i don't think it's eliminated those concerns, that discontent, that thirst for connections to the rest of the world. second with regard to the prospects for negotiations, i mean, all i can tell you is that we will approach, we and our

p5+1 partners will approach the next set of discussions with the iranians with real serious purpose and what will emphasize sincere is a choice available here. we are not taking issue with the right of iran or any other country to a peaceful nuclear program. what's at issue here is its responsibility, like any other country in the world, to demonstrate that it's going to conduct a purely peaceful program. and because of ultimate stress that's been built up because of iranian behavior in recent years, it's going to take time and hard work to build some confidence. but we're going to approach this is the real seriousness and with a clear focus on that choice because there is a path whereby iran and its people can have access to peaceful nuclear power, just like any other country in the world. they just have to convince the international community of the

seriousness of their willingness to live up to the responsibilities and that's really what's at issue here. >> just yesterday several members of this committee on the leadership of her great chair, met with turkey, the manager from turkey, the ambassador, et cetera. and the gist of it to me as they are at the nonstate go-between iran and the countries of the west. and i felt a little differently after hearing them, mr. chairman, then what we thought before we went into that meeting. i think it was explained quite clearly that they wanted to continue trade with iran. they wanted to continue to address them in terms of being, shall i say, more cooperative, in terms of the sanctions, and looking at their nuclear development of uranium as

something that cautions the rest of the world because we feel the irresponsibility of the leadership. i somewhat applaud the turks for playing that role for us. we're going to continue our discussions with, i'm hoping they will have an impact, and can you comment? >> i simply say that whatever technical differences with turkey in the past, turkey is an important partner for the united states and many come in many areas. certainly turkey has made very clear that its interest argues very strongly against nuclear armed iran. turkey is as much state as anyone in that region and avoiding the ability and the risk that would come from a nuclear armed iran. so we are going to continue to work with the turks on these issues, not just that issue, but

iraq, lebanon, many other areas were turks can continue to play a constructive role. >> thank you very much could lead to the gentlelady has expired. our last question is the gentlelady from texas, ms. sheila jackson lee. [inaudible] >> it is my hope that this is the last hearing. [inaudible] [inaudible] [inaudible]

-- they've been asked and answered, but i'd like to ask that question, particularly as it relates to human rights. do we know in particular that we've had a series of stoning deaths that have occurred, particularly mckinnie mohanty ash on t. i have a verdict of a debt i stoning. we know that there is discrimination, religious discrimination. should miss, what do we in the united states expect to get out of sanctions? strong or not so strong? >> i think, ma'am, we are aiming for the strongest possible set of measures that produces changes in behavior. certainly with regard to the nuclear issue, so that iran chooses a path of demonstrating to the rest of the world that he wants to pursue a responsibility peaceful nuclear program, but also in issues like human rights. i think i'm human rights will

try to take full attentions of the provisions he decided. i think identifying individuals as possible for abuses as a way to hold them accountable and demonstrate our commitment. i think the truth is the iranian leadership would like nothing better than to paint opposition movement as foreign agents and we need to be careful about because the green movement, for example, has made clear that it a homegrown movement and they can't afford to be seen as an instrument of anybody outside the country. so we're very mindful of that. we don't support particular opposition groups or political factions, but what we do, what we are determined to do is stand up for universal human rights. and finally, i would say it's important for us to work to mobilize others in the international community to make the same point. >> as a result of sanctions, any direct changes in behavior as a result of sanctions. and i just -- of my time is up,

let me clear the fact that i'd like to receive the same answers that congressman ted asked for and you might want to comment on whether any efforts that we have that we can't represent iraq, and the iran sanctions are having any positive impact. but if you would articulate any changes, let me just finish these can take up the rest of my time. and thank you. do we have any movement? a lot of my colleagues have asked about china, india and others. do we have any ability to impact their behavior as they seek a very necessary resource that is the energy they are using for their growing economy? >> i think we have seen some movement, for example, on the part of india as i mentioned to you before, as the result is they look at not only resolution 1929, but what other countries in the world are doing. i think you see an interest in

diversifying their sources of energy in the world. i think with regard to human rights, we have from time to time seen some movement and changes in behavior when you've had a strong international chorus of concern in particular cases in the third committee and the united nations a few weeks ago, there was by far the largest soviet of countries condemning iran for human rights abuses. so the more that other countries speak out, i think the more impact it may have on concrete behavior. >> if you could speak directly to the iranian people. for example, they were listening. the world is frustrated by the inertia of the iranian government and certainly we are not to provoke opposition efforts to dismantle any nondemocratic manner. but there has to be some movement for this country to come into the world form of the

21st century meaning. democracy, trade and interaction with their other world country. i hope the iranian people are listening and will not accept the human rights abuses and began to demand that iraq, in particular iran, work with the world community. >> the gentlelady's time has expired and i'm going to just -- we won't get off quite that easy. ask one last question. in september come the treasury department sanctioned the iranian bank, eia chief corporate in germany for providing financial services to iranian wmd proliferators and facilitating transactions on behalf of other sanctioned banks. why has the german government refused to take action against the bank? what are we doing to convince the german government to close them down? and are we considering any

sentience against any entities doing business with the eih? >> mr. chairman, you're right, we do take that action against eih in september. we consulted, in detail come with our german colleagues on that action that they are looking at the evidence were able to share and looking out at themselves. we do, as you know, have authorities that go beyond what most other countries have an ability to take action on administrative record and relying the permission they don't have to make public. but the germans have been good partners on the thumbnail i cannot seriously. the answer to your final question though is answered by the effect of his father, that now we have designated the eih, with for those of you who are not familiar with it was a very

big financial facilitator for iran and europe and one was one of the main ways in which they were accessing your transactions. now we have designated the eih for iran's proliferation program, any bank that does substantial business or engages in substantial transactions with eih, but they risk their access to the united states financial system and we will take that provision very seriously and enforce that is appropriate. >> well, thank you both. thank you and thank you both for coming here. i know how busy you are and how much is coming up even on this subject in the near future. we appreciate you very much taking the time to come with us and also for what it's really -- i mean, so much of it is quiet. so much as government to government. and the time you're spending on this site think -- the one thing, the other aspect of wiki

links as terrible and deployable as it was, it demonstrates this administration's commitment to this issue is intense, sincere, and during and hopefully at the end of the day successful. thank

>> the senate commerce committee

held a hearing yesterday looking at so-called mini health insurance policies. these policies pay for basic medical expenses, but also include strict spending caps as well as $2000. once those caps are reached, patients must pay for medical expenses out of pocket. witnesses at this hearing include chief human resource officer of mcdonald's, which currently offers employees many health policy. >> i want to apologize not for those of us who are here, but for those of us who are not here. because it lays on the democratic side who would be a lot of people here, but we are having three days of three and a half hour caucuses. and how much we are getting done, that's something that only i can tell you. but i can't. and so some will be coming in, and the problem basically is most committees aren't having

hearings during the lame-duck session, and sadly i don't see the reason for that if we think it is a good time for hearings. but if people are sitting in a caucus until 3:30 p.m. or four, that makes it harder. so i do apologize and i apologize for keeping you waiting. let me make my opening statement, and then senator hutchinson, and then if others, they are not being many, just want to see a brief word, that would be fine. is that all right with you? okay. more than a million americans wake up and go to work every day thinking they have health insurance, but i think the fact is they don't. they don't have the kind of comprehensive health insurance that most people in this hearing room, most certainly do have. they have something called limited benefit, or many medical

insurance. now, this is an insurance product has been around for a couple of decades but it didn't really get going until two of the larger, largest insurance companies started marketing them. and those were significant at the. they started selling it, and then it became, it has become a much more. wendell potter, who sort of made his name when he became passionate came before this committee and he told us how at the gets rid people they don't want to have to incher because they risk may be too high. and he's a formidable person. and he testified before committees last year about these plants. and he called them faking insurance, his words, designed to earn big profits for the injured but provide little value to customers. now, this is how mini meds were. most people in this room don't

have express as indicated if you work at a restaurant or retail chain in this country, or if you're a young adult working a part-time or temporary job while you are looking for a permanent one, mini meds might be the only option that you have. those who offer this make a nice pitch. they hand out a nice glossy happy people found everywhere, but the statistics aren't quite as good. so here it is. that's what mcdonald's handset to its hourly restaurant employees, and part of what underlies this hearing, from my point of view, is what our human beings and how are they going to be treated? and if you're a corporate person, or if you're an hourly person, does that make a difference works in terms of how you should be insured. are you less valuable because you're not a corporate person?

are you more valuable because you're a corporate person, or is everyone equally valued? well, they will be in 2014 when we get our state exchange is going. but we have to get from here to there. so this little booklet i held up tells new but don't employees how they can get health insurance plans that can help them pay for the medical needs when you're sick, injured or have an ongoing medical condition, closed quote. comprehensive statement. and all those great benefits only cost mcdonald's employees as little as $14 a week. deducted out of their paycheck. but buried in the fine print of this policy, and confusing industry jargon which we have become very familiar with on this committee, not just on health insurance but on a lot of other ways that people manage to take money out of other peoples pockets and put it in theirs.

it's a very different story. the true story is mcdonald's mini meds policy will not pay for your bills if you have serious health problems. and i will go into that later. a mcdonald's employee from monticello, kentucky, learned this lesson the hard way. she thought she had health insurance through her mcdonald's job, until she needed treatment for colitis. now she has more than $10,000 of unpaid medical bills. but on the other hand, it is said pay for the medical need we are sick, injured or have an ongoing medical and condition. told one thing, in reality, another thing. mini med insurance policy, most calmly sold to mcdonald's hourly employees has an annual limit of $2000. so if you're in the hospital,

you use up your $2000 just for the room you have, the bed you sleep in. it doesn't get you i.v., designate you an extra, doesn't your cat scan, it doesn't get you any medication, it doesn't get you any cause, any bandages coming any anything. so that's the thing, they say $20,000, but actually it is $2000. keep that in mind as i go along. mini med insurance policy most commonly sold to mcdonald's hourly employees have spent $2000. limit. anything more than $2000 mcdonald's workers pay that out of their own pockets. so what will $2000 cover in our health care system? not much. it will cover the cost of having a baby. that's about $9000. and it will cover one you of health care for person with diabetes. that's about $7000, on average. as we are going to you from or

what is today, the cost of heating a health problems like cancer, which i grant is dramatic, but which is something that many, many, many, millions of people have, or have suffered or will suffer in this country, can easily exceed $50,000 or even $100,000 on an annual basis. they could get a lot more if you have to get into brain surgery. so today we are going to learn more about mini med insurance policies. some people are going to say that even though these mini med policies have skimpy coverage they are quote better than nothing for consumers. i want to destroy that phrase before this hearing is over. but i won't do it in my opening statement. they say that mcdonald's employees and other workers should be grateful that they have this coverage, even though it will protect them against the cost of a serious illness or accident. but we're going to hear people argued that mini med insurance is worse than nothing. i will argue that, too. because of his sense of security and expectations leading people

down beautiful roads end up with large brick walls. it gives people a false sense of security and makes them think they have health insurance when they really don't. by the time they realized they don't have health insurance it's already too late. they have already received a huge hospital bill, or have had their testing or surgery canceled because the so-called health insurance is worthless, will not cover those things. i'm very pleased to say that the days of these mini med's plans are numbered. the new health care reform law, not loved by all, but by this person, is slowly putting an end to health plans that place caps on essential services, health services. that will happen with the state exchange. annual limits will no longer be legal. lifetime limits will no longer be legal. insurance, you make money on some, you lose on others, and mr. potter talk to us about the

five largest health insurance companies not involved in mini meds, particularly, but he said that in 2009 they made 14.8 -- $4.6 billion of profit, while at the same time using the power of recession. that is, the power to cut people off even though they have a policy. they cut people off. they cut off 3 million people, those companies, in that year while they were making this kind of money. that is disturbing. well, i'm very glad that you came. i have over talked, and i will probably continue to do that. senator hutchison will keep me under control. but my point is it's not 2014 yet. all of this will disappear again. mcdonald's won't be able to do that been. there are more than a nine

americans today who are covered by these policies, they really don't know that the plans are doing more harm than good. no reason why they should. so i thank you all for coming, and i turned out to my very distinguished co-chair, senator hutchison, from texas. >> thank you, mr. chairman. i'm glad that you have called this hearing on mini meds, because of course they have had a lot of attention recently, and especially since the passage of the health care reform act. much attention has been paid to the related decisions by the department of health and human services to grant waivers and create carveouts on the health care laws requirements for mini meds in order to avoid the swelling ranks of the uninsured. these policies are not a new phenomenon. they have been around since the 1980s. and for the better part of the last decade, there has been a public debate about with such

limited but affordable policies are on balance a reasonable option for employers and their employees. now we are addressing the question under the shadow of a law that appears to priest suppose the answer to answer this question we have several very important witnesses, including one from texas, i'm very pleased that doctor devon herrick is here from the national center for policy analysis. they've been very much leaders in the area of alternatives for better health care coverage. and i'm glad you're here. i do think, into however that when some from the department of health and human services also should be required before we make any decisions about how we feel about mini meds. this past summer at the health and human services department has acknowledged the need for a waiver of the health care laws ban on annual benefit limits, so that individuals covered by mini meds would not be denied access

to needed services or experienced more than a minimal impact on premiums. to date, 111 employers and insurers covering more than 1 million people have received such waivers from the department of health and human services. while these include chained restaurants like mcdonald's which is representrepresented at today's hearing, the biggest single waiver for 351,000 people, a new york union providing coverage for city teachers. just last week the department of health and human services announced it would also give mini meds a special one year reprieve from the laws, medical loss ratio provisions. mini med insurance will be permitted to multiply their medical care expenditures by a factor of two to meet the law's requirement of 80, 85% of them in revenues to be spent on the delivery of health care.

and am announcing this special consideration for mini meds, the department of health and human services expressed concern about the possibility of over 1 million individuals who have coverage through these plans, losing all coverage completely. so i recognize that this is not a hearing on the health and human services waivers, but it does give attention to the question of whether mini meds are an option that would create no option if they weren't eliminated. so, i think that your point, mr. chairman, about a $2000 limit seems very unrealistic, if that is, in fact, the case take that is not a good limit. however, a $750,000 requirement for a limit, which is in health care reform bill also is going to be excessive for a number of people to be able to afford,

including some small businesses. surely there is something in between here that would create a more reasonable alternative. i think the health care reform bill could very much keep employees from having any coverage whatsoever, which would at least give them the ability to have checkups and their children to have shots, and that sort of thing. so i think we need to be very careful in treading on this ground, and look at yet another piece of health care reform bill that may have gone so far overboard as to throw the baby out with the bathwater, so to speak. thank you very much. >> thank you, senator hutchinson. i've talked at length -- d. want to make a statement? >> let me just make the statement and go to you. to senator ensign. i have talked with kathleen sebelius. these waivers are entirely

temporary, as you indicated come in some cases they are just a year. in all cases they don't go beyond the beginning of the state exchanges in 2014. so it's a very temporary business, and i think they did it for whatever reason that i also agree with you it would be better if we had someone here. it would be a crowded table, but it would help. senator ensign. >> thank you, mr. chairman. just very briefly i wish that not only someone from hhs was your but also from the congressional budget office, simply because did the cbo take into account these mini med plans, and potential for people dropping their health insurance in these mini med plans, and then dumping the people, those employees into the exchanges. and for those costs figured into whether or not this thing was actually going to hurt the deficit or not. and i think that's a significant issue that needs to be answered,

when the scorn from cbo, because this thing was said to have reduced the deficit. and we are seeing all kinds of unintended consequences with this new health care law. the mini med problem was just one of many. train to use it in your opening statement that these things do more harm than good. and my question, kind of a rhetorical question, but my question would be if they do more harm than good, why did hhs grant waivers? i become if they're doing more harm than good shouldn't we just, shouldn't hhs just, sorry, that's the way the law is and these things, we are not going to grant any waivers, if, in fact, they were doing more harm than good? but what hhs i think recognize is it is better to have at least some in charge than no insurance, and that's why they are granted these waivers. at least hhs should be here to answer that question. so thank you, mr. chairman,. >> thank you, senator, ensign. and if there's no other statements to be made, let's go

to our panel and we will start with mister stephen finan. senior director of policy at the american cancer society. >> afternoon, mr. chairman. spent all of your statement already in the record. so you don't have to leaf through the pages if you don't want to. >> good afternoon mr. chairman. my name is stephen finan, senior director of policy at the cancer that would. with advocacy affiliate of the american cancer society, a nationwide community-based voluntary health organization dedicated to eliminating cancer as a major health problem by rethinking cancer, saving lives and through research, education advocacy and services. we are grateful for the committee's interest in so-called mini meds health insurance plans. and out like to share with you what our organization has

learned about the underinsured and paint a picture all too common in america about cancer patients and survivors with inadequate insurance face bears a financial burdens in getting quality health care they need to fight their disease. as defined by the american cancer society, adequate health insurance ensures timely access to the full range of evidence-based health care services included revenge and primary care, treatment and survivorship it coverage should be comprehensive and protect individuals from incurring catastrophic expenditures. so what is being underinsured really mean for a cancer patient with a mini med health insurance policy? cancer is approximate 200 separate diseases, and a surprisingly the cost of treatment can vary enormously. in 2009 we had a study of for certain medical conditions. stage two breast cancer, stage three colon cancer, myocardial infarction, or heart attack, and type i diabetes. a compared coverage features to

illustrate potential needs. for the stage two breast cancer cases the net, as they charge for treatment built by providers, institutions and suppliers to approximately $111,300. for the stage three colon cancer case, care cost intends to dashing as their $250,000. under these centers outlined in a study for the heart disease patient the as the charges totaled about $77,800. for the diabetes scenario, totaled over $7100 for one year. clearly such expenses are not financially viable for a patient with a mini med policy that has a low annual limit or other type restrictions on benefits. earlier this year the nationwide polls among households of cancer patients aged 18 or older, and if i haven't been with someone under 65 with cancer said it had

difficulty afford health care costs such as premiums, co-pays and prescription drugs. nearly one-third of families with someone under cc by with cancer have have trouble paying for basic necessity or other bills ended at quarter of them have been contacted by a collection agency. additional findings from this poll are provided in a statement that was the better for the record the american cancer society offers a program called the health insurance assistance service to its call center in austin, texas. it is a free resource that connects callers with health insurance specialist to work to address their needs. bryant's have to let is one example of a patient with heard from who are facing the intrusion choice of saving their lives or their life savings as well as inadequate health coverage. at age 25, brian was recently diagnosed with testicular cancer that is a full-time college student and works part-time at a retail store. to plan his employer offers has a $10,000 limit on benefits that he has exceeded the limit and that has to pay for his

treatment out of pocket, but he continues to pay the premiums so he can keep this coverage in the next plan year. mr. bellville, a cancer but is especially here in a minute also called hia and we brought his story to the attention of this committee. mini meds are an example of why reform is so crucial. average coverage has long been an unattainable for many americans and improper in recent years has grown worse. if we want all americans to have meaningful access to quality health care, we need to change the insurance market rule, provide subsidies to lower income and middle income families, streamline administrative processes and greatly increase transparency and accountability. the affordable care act provides a solid framework for achieving these goals. transit acknowledges that can maintain stable in the security market all plans may not be able to be merely conform to the laws requirements. immediate compliance could result in termination of coverage for people who would otherwise have no other coverage at all. that's why the law gives the administration the power to temporarily placed certain

requirements. but at the same time we cannot allow cancer patients to fall into financial ruin because they unknowingly purchased inadequate coverage. hhs must take steps to require plans with what was to improve their products between now and 2014, and make the plan participants fully aware of the exception, waiver issue should not be a free ride until 2014. to make reform meaningful, we must find ways to work together with pragmatic intent to ensure implementation, health help improve. thank you, mr. chairman. >> thank you very much. mr. eugene melville? >> good afternoon, chairman rockefeller speeded where are you from? >> i am living in riverside, california. i grew up in boston, massachusetts, spent much of the from california to? >> yes, i came in from california. >> think you. >> good afternoon, chairmen rockefeller. i met good afternoon chairman

rockefeller. ranking member hutchinson and distinguish numbers of the committee. i would like to thank you for the opportunity to share my story with you. my name is eugene melville. i am from riverside, california. and it was racially diagnosed with oral cancer. i was asked to attend today's hearings to discuss the difficulties i'm having with getting the treatment i need because of the limitations of my current health insurance coverage, the american cancer society, cancer action network, acs can't was able to make the committee of where of my story because i call the american cancer society health information assistant service for help of trying to get access to the medical services i need to fight this disease. i'm hopeful that my story was demonstrated by the adequacy of health insurance coverage is so important, a last thing anyone wants to be told when they are diagnosed with cancer is that

their health insurance provides inadequate coverage to fully address the treatment that they need. however, that's what's happened to me. that's the reason why i traveled here today. i have worked for a big box retail chain for several years. i do not plan to identify my employer during this testimony today, as i'm not here to drag their name through the mud. the problem is that that health insurance is offered in the marketplace. health insurance that i currently have is a policy my company offers two part-time employees through aetna. when i purchased the insurance, my understanding at the time was that the policy had a $20,000 annual limit on benefits. i knew my policy had limitations. however, i bought the policy would at least provide some financial buffer if something catastrophic happened to me. well, i went to the doctor, and for what i thought was an injury from a car accident in july of

this year. however, during his examination by doctor became concerned about a lump in my neck. the doctor referred me for diagnostic screening and a biopsy. the biopsy showed that i had cancer. the doctor referred me -- i went to an oncologist. he recommended that i have laser surgery to remove a lesion on my tongue, and surgery on my swollen lips, my neck. five days before the surgery, the administrator staff at the hospital informed me that they had canceled all my appointments and procedures. they explain to me that my insurance company had told them i had reached the annual benefits maximum in my policy for 2010 calendar year. of course, i was confused, devastated by the information they provided me. i knew i had a $20,000 annual cap on my policy, but i also

knew that i had not been to the doctor for any medical care procedures that cost anywhere near $20,000. so i understood how the insurance policy -- i seemed like i should have insurance policy work. i paid biweekly premiums out of my paycheck. and it wasn't going to cover any of the treatments recommended. i had just been diagnosed with cancer. i was trying to come with grips with this news, and no one ever wants to hear the dreaded words from their doctor, you have cancer. ..

on physician visits and outpatient treatment and a $20,000 annual limit on hospitalization. further the hospitalization coverage does not cover payments for more than $200,000 for lab test legal said the gulf supplies and medications. as i learned cancer treatments such as chemotherapy, radiation and surgery done in doctors' offices or at an outpatient treatment center. so my treatments would not be covered by my plan. as an individual recently diagnosed with cancer, the $2,000 my policy provides for doctor visits and outpatient treatment doesn't even begin to cover the cost of the lifesaving treatments that i need for my

oral cancer. instead of receiving my daughter's -- i have been strug piece together coverage to treat cancer. i was able to enroll in the medically indigent service program at riverside county regional medical center in california. even though i finally have access to treatment i do not feel i receiving the same treatment that i would if i had health-insurance. just last week the doctor is the program informed me that they are only planning to treat my cancer with chemotherapy and radiation despite the

recommendations from my oncologist for a laser procedure. it has been months since my diagnosis and i continue to experience significant discomfort on my tongue and neck due to the cancer. swollen lymph nodes in my neck. the insurance has fallen far short of what i need to fight a chronic disease such as cancer. i hope my testimony will make a difference. the don't want anyone else to have to go through what i'm going through. our hope you will continue to support the full implementation of the affordable care act so that employees like me can have access to comprehensive health care coverage that is transparent and presented to the people in terms that they understand. >> thank you very much. and now mr. aaron smith is co-founder and executive

director of an impressive group called younger invincibles. >> members of the senate commerce committee, thank you for having me here today. my name is aaron smith and 9 executive director of the invincibles. a nonprofit non-partisan organization that advocates on behalf of young adults ages 13 to 44. founded by students and young workers during the health care reform debate this provides a voice for young adults in washington on an issue that directly affect millions of young americans. we have continued that work with the passage of affordable care act and recently submitted support of the law in federal district courts in virginia and florida and coordinated a national education campaign on the dependent coverage provision which will allow two million young adults to get coverage on their parents's plan. health care needs of young adults are rarely discussed the 20 one million young adults

currently uninsured. the largest group in the country. the term young invisible is based on the false idea that young adults to not want to buy insurance because they think they don't need it. in reality adults want insurance but numerous factors act as barriers such as low wages and jobs without benefits. this is countered by an extremely high youth unemployment rate. many plans disproportionately impact young adults because we make up a large percentage of the restaurant, retail month temporary staffing industries. this underscores the impact on young adults. 40% of enrollees are under the age of 30. that is a problem for young workers. something is better than nothing. this is the argument you will hear in support of many med plans but there a problem for young adults. 24-year-old man lives in

michigan. he has autism. for the past few years he was fortunate to have a double the retail chain store making a dollars and hour and working 20 to 30 hours per week. when he took the dubya was told about a health insurance options for employees that would cost only $100 a month. it was a significant part of his paycheck but his parents knew this was important and assumed it would cover his basic needs of the sino. unfortunately last year had a seizure as the result of his condition. he and his pet expected insurance to cover him. they were wrong. his insurance plan did not cover the ambulance ride, cats can, in emergency room visit or prescription to treat him following his emergency. the did not have the money to pay for his care so his family was forced to pay $3,000 out of pocket for this one incident. the young man and his mother say if they had known his insurance covered so little that would have at least tried to buy private insurance to protect themselves. fortunately he was able to get back on his father's plan due to the new provision allowing young adults to stay on their

parents's insurance up to age 26. as he still struggles with his condition rest of his life at least he and his family can worry less about his medical needs being covered. this story illustrates the problems in the plan. with benefit caps over $5,000 adults often face thousands of dollars in medical bills should they get sick or injured and despite the miss for young adults have significant medical needs. nearly one in ten young adults have between $5,000 to $50,000 in medical bills each year and they go to the emergency room more than any other aid depended the age of 75. one emergency room visit can cost thousands of dollars and many of these costs are paid out of pocket and at times can go and compensated. if you need bankruptcy for young adults making it dollars an hour, many med plans are often deceptively advertised young workers as full coverage when in fact they're not comprehensive

at all. for first-time health insurance consumer and new to the system and terminology this can be particularly problematic. a recent survey found only 29% understood the meaning of a premium and only 30% knew what lifetime coverage limit meant. insurance plans and their deductibles, coinsurance etc. are complicated enough even for experienced consumers. for young people completely new to the insurance system distinguishing types and quality of insurance is that much more difficult. as a result they're more susceptible to the economic allure of many meds. of course primary and preventive care are good things in and of themselves. if employers want to offer workers and inexpensive preventive care packages can't access to a clinic we will welcome that but that is not what is happening. many employers advertise these plans as real insurance because it attracts workers who desperately want to be covered. these plans will not cover you when you needed the most.

they're simply not adequate coverage. young invisibles paying close attention as we look at more information. our goal is to move as quickly as possible for full implementation in 2014 when young adults should have a variety of affordable quality options for insurance. by that point mini mad plan should be a thing of the past yet employers can and should help now to transition to a system where all americans have coverage. it is in all our best interests to bring workers into the health insurance system to pay their fair share for affordable medical care that will keep them healthy, protective. that is a bowl we can all get behind. thank you. >> thank you very much. now, executive vice president and chief of human-resources of mcdonald's corp. welcome. >> i am the executive vice president of human-resources of

mcdonald's corp.. 30 one hundred independent small-business owners or franchisees' of an end operate nearly 12,500 mcdonald's restaurants throughout the united states. mcdonald's usa owns and operates approximately 1500 additional restaurants. for many of our employees mcdonald's is their first job. our goal is to provide those employees with competitive compensation and benefits. health-insurance is one of the sweeter benefits such as dental, vision and retirement savings provided to our employees. we have sought to max the health insurance options make available for the needs, desires and capabilities of our employees. to understand the options we provide to our employees it is important to understand a little bit about our employees. at restaurants owned by the company over 3-quarters of our employees work part-time. averaging slightly less than 18 hours per week. there is considerable turnover

and the tenure tends to be rather short. lasting about 17 months. most often by 18 months the employee has the the left macdonald or has returned to school or been promoted to a more senior position. we are proud of our long tradition of promoting from within. today 70% of our restaurant managers, 50% of our corporate staff and 40% of our top 50 executives are remarkable individuals who started their careers in entry-level positions at a mcdonald's restaurant. for the company address stress nearly 80% of which are hourly part-time employees we offer four choices for health-insurance. three low-cost limited benefit plans and one is a higher cost comprehensive medical option. the comprehensive plan provides

significantly higher benefit levels but naturally at a higher premium. if the employee elects anyone of these plans mcdonald's contributes $10 a month in their first year and twenty dollars thereafter until such time as the individual is promoted to a longer-term full-time position with eligibility for our core benefit plans. the limited benefit plans have different limits. $2,000, $5,000 or $10,000. with correspondingly higher premiums. mcdonald works hard to make sure that its employees understand the coverage limitation as well as the benefits provided by these plants. all of the documentation provided to employees details the limited nature of the coverage. whether or not an employee has reached their benefit limit and very few do they continue to benefit from their participation

in the plans. they receive significantly reduced prices for prescription drugs and health care services through negotiated discounts. given the house and continue increasing cost of health care those annual insured benefit limits may appear low. yet it is important to note that even though the lowest annual benefit plan is overwhelmingly the most popular choice among hourly employees, approximately 90% of covered employees do not reach the annual limit for these benefits. although we do not have the ability to direct franchisees' on the wages and benefits they provide to their employees we did insist that our insurance carrier make available the same plans to our franchisees'. we are pleased that over the past five years participation in these health plans has increased threefold and nearly 80% of franchisees' offer these plans. for those employees who are

making mcdonald's a career including all restaurant managers, assistant manager is, certified swing managers, primary maintenance employees and corporate staff, we offer several comprehensive plans. these plans are designed so higher compensated employees are required to pay significantly more in premiums than lower compensated employees. with respect to our limited benefit plans based on numbers provided by our carrier the loss ratio for these plans apparently has ranged from a low of 78% to a high of 91% over the past five years with the most recent year being 86%. in closing, earlier this fall the department of health and human services granted 100 temporary waivers from certain statutory benefit targets. those waivers specifically exempted plans made available to

employees by many businesses and unions. at the time there were press reports that speculated on what mcdonald's would do if our current health insurance carrier stopped offering limited benefit plans. the removal of these options only weeks before her next open enrollment period would be disruptive to the company and our employees. we would have been forced to go back into the insurance marketplace and obtain the best available affordable option to offer our employees. we fear those options would not measure up to those currently offer. we would have taken action to make sure that our employees were provided the best health insurance options available. at mcdonald's we are proud of the benefits we offer to our employees. we cannot control the rising cost of health care. we cannot dictate what insurance products health insurers are willing to offer. but what we can do and what we

are committed to continue doing is to strive to make available to our employees and those of our participating franchisees' benefit options that fit their needs. thank you. >> thank you. mr timothy jost from washington university school of law. >> thank you. good afternoon. good afternoon, senator rockefeller and members of the committee. once fully implemented in 2014 the affordable care act would dramatically reduce the number of uninsured americans. equally important is the assistance the legislation will provide to underinsured americans. it is estimated that twenty-five million americans under the age of 6520% of all insured american adults are underinsured. over half of them report problems gaining access to care.

62% of bankruptcies in 2007 had a medical cause and almost 70% were in short. $2.6 billion of their debt was owed to health-care providers was only small part of the $43 billion that health-insurance providers -- health providers eat every year because of uncompensated care. underinsurance is a serious problem for american consumers and american health care providers. between 1 million and two million americans have limited benefits or many bad policies. these are often not aware of how inadequate their coverage is. $250 a day for example for hospital care for one such policy does not cover 10% of the average cost of hospitalization in the united states. once the affordable care act was

constitutional again in federal court since i'm a law professor, once it is fleet commanded underinsurance will be largely eliminated. also plans in small growth markets would cover federally defined essential benefits and caps will be placed on out of pocket health care costs for all plans. annual dollar limits on health coverage will disappear. most importantly, premium tax benefits and medicaid expansions will make it possible for americans to get access to real comprehensive insurance and many americans currently insured through minimeds will be elected -- ineligible for medicaid wants expansion goes into place. in the interim significant protections are in place for plant years beginning september 23rd, 2010. lifetime limits on coverage of band and annual coverage are

$750,000. beginning next year, insurers on individual and small group markets will spend 80% of their premium revenue on health care or quality improvement beginning in 2012. all health plans will need to disclosed their plan benefits and limitations on coverage in a standard, easily readable format. they will no longer be able to hide limits of their benefits. two of the most important reforms will not be applied to a limited benefit plans. h h f has waived requirements for one year, from 1.7 million americans. it has also announced health plans with annual limits of $250,000 or less will be allowed to lower their minimum medical loss ratio from 80% to 40% and i would like to point out that

both of these wafers are in compliance with a low wall. section 2711 authorizes hhs to waive the annual limit requirements section 2718 allows the to but just the minimum medical loss ratio. so hhs's actions on legal and also understandable prior to 2014. there may be few alternatives available and for some, don't believe all but for some enrollees' they are better than nothing. i would like to also point out, the benefits in the plan for which is allowed waivers very significantly. they are all under $750,000 a year but some are much higher than other plans and i understand hhs is planning to post audit website the actual amount of benefits so that it

can be seen. the one requirement that hhs has imposed through its way for guidance which is very important is a requirement of disclosure. disclosure is important because in some instances the premium for limited benefit plans are not significantly different from those with comprehensive plans including higher deductible plans. alternative coverage may also be available to some people who are on many met through high-risk pool or through state medicaid program for their children. enrollees receive a limited benefit plans for their employers may be able to demand better coverage or find an employer that offers better coverage to fully understand how limited their benefits are. there is no requirement which is unfortunate in the hhs medical loss ratio than they give madison -- there should be for the same reason. limited benefit plans leave americans exposed to too great a

level of financial and health risk. until they disappeared is essential for plan fully comply with requirements of the law and consumers be fully informed of any wafers or just put granted to their plan and also that consumers fully understand how limited their coverage is. thank you. >> thank you very much. finally doctor devon parrick from ca joe of analysis. >> mr. chairman -- >> can you pull that -- >> mr. chairman, ranking member hutcheson and members of a committee, i am senior fellow with national center for policy analysis and i welcome the opportunity to share my views and look forward to my question. 1 to two million americans currently have a health plan that features limited benefits. sometimes called many bad plans. they are increasingly popular among low income workers,

seasonal and part-time employees and firms too small to afford generous health plans. a typical design of of many med plans includes coverage for a number of physician visits, ancillary tests, limited number of patient hospital days and prescription drugs, deductibles and co-payments are pretty low and the maximum amount of medical benefits they claim to be given is capped anywhere from $1,000 to $50,000 annually. minimed plans are affordable. premium coverage can start as low as $250 per year for single coverage work for family coverage in some cases as low as $1,000 a year. one reason minimed plans are affordable is because of the amount of risk of the insurance company is lower than a comprehensive plan and kept at a

predetermined level. the affordable care act and the health care reform law presents insurers from capping limits of zero -- $750,000 a year phasing out completely in 2014. by design a limited benefit plan cannot meet these requirements and remain affordable. without waivers, minimed plans will be banned in the marketplace. another threat to the existence of minimed plans is the medical loss ratio regulations requiring insurers, 80% of insurance premiums on medical care. the nature of minimed plans is such that marketing and administrative costs especially in industries have higher turnover. it is hard to meet these regulations. public health advocates often deride minimed plans as inadequate but i believe this is

misguided. in any given year most people covered by health insurance experience very low claims. for example for per-capita medical expenditure does not surpass $3,000 a year until you approach age 50 on average. about half the population spends less than $1,000 a year on medical care. 80% of the population will have annual medical expenditures of $4,000 in any given year. high medical spending tends to be concentrated among older individuals. some critics of minimed plans assume minimeds are the result of stingy employers but this is not the case. economists all agree it is workers themselves who bear the cost of employee health coverage. they bear the cost to reduce wages and direct contributions, health benefits are really just

a form of non-cash compensation as part of the worker's total compensation package. it is the minimum compensation required higher than workers -- they will be priced out of the market for labor. it will deprive workers of these low-cost limited benefit plans. many workers will lose coverage in the long run, they could lose their jobs. my 2014, we estimate by cbo data the minimum benefit level required for workers in medium to large firms will approach $5,000 for individuals. work $12,000 for family. if you break this down this = $2 per hour for single coverage and $6 an hour for family coverage. add to that the required federal minimum wage of $7.25 in 2014 and you get minimum cost in medium to large firms at $13 per

hour or $27,000 per year. workers who cannot produce that much are at risk of finding themselves out of work and it will be a hardship to expect workers with modest means to contribute sums of money equivalent to have their wages. the affordable care act provides nothing for low-income workers of large firms. a better way would be to have a uniform tax credit as proposed by senators coburn and mccain. let me conclude by saying it featured limits in return for lower monthly premium are not for every one. these plans cap benefits at a level never intended to provide protection in the event of a catastrophic medical illness. during the health care reform campaign debate the president told the american people and i quote, if you like your

insurance plan you will keep it. no one will be able to take that away from you. minimed plants provide a level of benefits many americans come to rely upon and loss of this coverage will make them -- thank you. >> thank you. philosophically, when you say coverage most people don't reach beyond $2,000, what is health insurance? health-insurance assume the risk. most people are not going to have to use a lot of health insurance particularly when they are young although its mr. smith knows the largest users of the emergency medical services are in fact between the ages of 17, and 29, mental health and chronic diseases. they have these things but

sometimes because they are young they need to take care of and they do and they run into a crisis. is a matter of risk. nobody implies that 80% of all americans are going to come up to the requirements of what their plan might be. the comparison i would make if you are serious about health insurance is you would be comfortable with the fact that the car you are driving with brakes on it work 90% of the time. 10%, they don't. that describes health-insurance. you can't just say oh you see lots of people are really only using up to $2,000. you also have to look at those who don't because that is what

health-insurance is about. you make money on some, you lose money on others but it has to be there. for those for whom it has to be there like mr. malval, the answer which has been bandied about quite a bit is it is better than nothing i would say it is worse than nothing because of false expectations. and false hope that it raises and that little brochure i held up, how many people are going to read that? i tried to last night. it is half in spanish and half in english. it is a work of art. but 10% that need it need it and if you are a corporation providing health insurance, you cannot treat the 90% or 10% different than the 80% or 90% different from 10%. your brakes have to work all the time or you won't drive your

car. we went through this with speed and acceleration with toyota and other vehicles. all of a sudden the car speeds up. most of the time it doesn't. i went through this myself, two american cars but when it does speed up you can't control it and you run into what mr. miller ran into in this case the car in front of you. you can't control the speed at all. i really want to put the rest the idea that mr. nelville doesn't count because he is part of the 10%. of mcdonald's and other corporations there serious about health insurance which is why it has and why it would be useful if hhs were here but i talked with wind with them about this as my staff has and what they

are waiting for as you pointed out, there waiting for the state exchange. they are state run and state regulated. there is a little period of a couple years where hhs had to kick the can down the road as you indicated, going into open enrollment period. they understand that and the state exchanges are coming up and a full concentration effort to get them working right. when they come up there will be no more minimed plans. they will not be allowed to exist. and that is a very important aspect. i have 30 seconds more. i won't use it. i will wait until the next

question. senator hutchison. >> mr. flourish, mcdonald's as we said is one of the businesses that has received laborers from hhs and according to your testimony in response to company surveys only 3% of your current employees said they would be willing to pay more than $35 a week for health insurance. the chairman said that you have a cap on your minimeds of $2,000 in benefits.. do you believe that mcdonald's has -- if that is true i would like to ask is that true and if so, do you think mcdonald's has found the best plan possible for this $35 per week health coverage for your employees? >> we did survey our employees to find out whether they would

be willing to pay. we factored that in in the marketplace and work with outside experts and said who are the organizations we should take a look at to construct a this insurance program. we came up with a group of companies. we had a strong internal team that looked at these proposals. we have a more customized plan with the insurance carrier that we have and what exists elsewhere in the marketplace that meets our needs. the fact that we have seen a tripling of our enrollment over the last three to four years in terms of hourly employees enrolled in the program and more franchisees' offering at we stay close to what other companies are offering.

we are positive our plan is one of the -- >> it is a fact the $2,000 a year limit. what is the amount an employee would pay per week for a policy with that kind emanual limit? >> $11. and $5,000 option and $10,000 and we offer a comprehensive option for hourly employees as well. >> for the $5,000 limit, what would that phoebe for the employee? >> $15. we tried to stay within this after we surveyed our employees and stay within this range of what we consider affordable for them. >> $15 a week amount by the employee could provide a $5,000 coverage. so what you are saying, you start at a low level, then

higher and premium goes up to very much higher premium with higher maximum, you have a range of options apparently for your employees. >> that is correct. >> according to what i understood your testimony to be, 90% of your coverage even at the lowest maximum level don't reach the annual limit. is that correct? >> if you take all of the $5,000 and $10,000 the majority are in the $2,000.90% of that total population of 2,000, 5,000, and 10,000. >> let me go to doctor herrick. you mentioned in your written testimony that tennessee has a program for families with incomes in between medicaid and

private coverage. it provides low-cost health insurance benefits worth $25,000. he said 98% of those employees don't reach that cap which is certainly believable. do you think that is an affordable option, but would it meet the requirements of the new federal reform law or would they have to significantly change their policies? >> that would not meet the requirements of the affordable world care act. there was a maximum benefit of $25,000 which was $15,000 could be used for the hospital care. at the time, in 2007 it was reported that the benefits actuarial firm and consulting

firm reported 98% of the enrollees never reach their caps. i health care costs figures tend to be concentrated among older individuals. people on medicare and by and large most don't really experienced anything in a given year. it is very tragic when it does occur but i am not sure any health plan covers all risks. >> the chairman mentioned the state plans or options when they come into effect are going to be run by the state and regulated by the state. but they do have the federal requirement which is going to mean they have to meet certain standards. even companies that provide 35% of the premium are not going to meet federal standards. doesn't that cut off a lot of

plans that give a level of coverage, $25,000 limit coverage that will not make the federal plan and be out of range of people who are on these policies? >> absolutely especially if you work for a medium-sized term which employs 50 people. there's no additional subsidy for affordable care act. workers themselves bear the cost of coverage. they will be priced out of the market when employers are required to provide an entire level of coverage and pass on the cost to them. >> my time is up. >> i want to make one correction. you are aware that in the health care plan starting this year or

next year, 35% of health-care premiums will be subsidized for small businesses? 50% up to 50% will be subsidized? >> i am aware of that. that is the average wage that phases out as the average number of employees reaches 25 and i can't recall the exact estimates. small firms will qualify for that program. >> i think you are wrong on that but everybody left. >> we are here. >> i am somebody from a state of thirty-eight million people but it is okay. mr. melville, thank you for

coming to share your story. what you have done is put a human face on a health care system in desperate need of reform. hy don't think doctor herrick totally gets it. the one will pay 8% of their income and tax credits will kick in and i will say this to you. you don't choose the time we will get sick. >> correct. >> a lot of the things we did it won't be corrected until 2014 and starting to come in slowly. i apologize to you if you have not been protected from what has happened to you. i want to explore this with you because from what i understand, you believe you had a $20,000

cap on your policy every year. is that correct? >> i felt it was a buffer. >> who led you to believe there was a $20,000 cap on your policy have opposed to at $2,000 cap? on paying the bills for your illness? >> it wasn't an individual. >> was the insurance company not disclosing this the proper way? was the employer -- how did you come to the conclusion that you had a $20,000 cap when in fact had a $2,000 cap and called mr. finn or the cancer society, thank god you're doing what you do, what sold as a $20,000 cap was that your understanding? >> >> i believe the company is at fault for lack of disclosure. i was under a false impression.

when i didn't get diagnosed for cancer. there is a buffer here and i would be willing to get three jobs to pay whatever would come up. unfortunately i would know everything without $200,000. >> you will join a lot of other folks because one of the reasons we act on health reform is you look at all the bankruptcies, 60% are related to health care crisis and people say these policies are better than nothing. if you don't get sick you are fine. my own limited experience of the health-care system, $2,000 is the blink of an eye at all hospital so let's get real. you are paying -- not you but the average person at mcdonald's is paying hundreds of thousands of dollars a year for that

minimum policy. maybe they would be better off saying that money. in some cases i am not so sure it is better than nothing. i could be wrong on that. let me just get to you, sir. i believe the insurance company and your company should make things right for you because i believe you were misled. i don't know who did it but you are a smart man. i don't know what you're work is or your education. i just know you are smart. i can hear it. >> thank you. >> i have to tell you you were fooled into thinking this policy covered $20,000 worse and it didn't. and your insurance company will make it up to you. why should you be subjected to less than top tier treatment?

you are a hard-working person who has played by the rules. you say you got three -- >> senator rockefeller said it in a nutshell. and all the variables, they know what the variables are according to statistics. and working with insurance companies, the insurance companies -- insurance is a gamble. they are betting you are not going to get sick. however, nondisclosure, being naive, whatever it is, not being informed, i couldn't make an intelligent and informed decision simply because this is what my company offered me and i n knscn. workiinio cap and it turns

out you are not getting the treatment you were told was the most effective treatment at the beginning of this battle you are facing. >> they wanted to do laser surgery on my lymph nodes and my neck. when the $2,000 limit came up i got a call from the hospital saying you can't come here anymore. your limit has been exhausted.

>> now you have to go to a place where indigent care which isn't a pleasant experience, i just want to say i want you to do more questions. i will hold until the second round. >> mr. nelville. >> yes, sir. >> but -- now -- we some how -- senator boxer and number of panelists and i disagree strongly with this but a few of the panelists, we have kind of settled what appears, it is okay. 90% don't require more than $2,000. but 10% due.

that makes you think, what is the obligation to the 10% who do in that we understand insurance is about risk and people do get sick. i don't think it is enough to say that i am really happy and really applaud mcdonald's or others for having 90% if that is where it stays or is who don't have to use more than $2,000. the more basic question is, would a car where the brakes only work 90% of the time but didn't work 10% of the time would that get approved? would that be in any car sales shop? the answer is no. if we ran into problems they would be penalized and all kinds of things. to me it is outrageous.

but you did your best to figure out what you are going to get and we looked carefully at your policy and here is what we found. the policies limit all doctors' office visits and outpatient tests is only $2,000. not the $20,000 to which you understandably gravitated because it was a higher number. you gravitate toward that. policies limit emergency room service. only $600. if things are not working out you go to the emergency room which is one of the reasons we passed that bill to ensure thirty two million uninsured americans which will reduce the need for uncompensated care which would allow premiums for other people to go down. but here is the tricky thing about this policy.

the hospital coverage. your policy covers $20,000 of room and board costs at a hospital. >> that is correct. it is not in the outpatient service. >> that is what are -- [talking over each other] >> you need to be admitted into the hospital. >> it is nice to have a room and a bit. >> i concur wholeheartedly. >> but it only covers of $2,000. most other goods and services you receive and tests in a hospital. for example, under this $2,000 limit, medical surgical supplies, syringes brendel bandages, ivs, x-rays, cat scans, all operating room and recovery expenses, you cannot afford that. so you have a nice bed, in this

room but you got snookered. they were banking you would get sick on the hope you would get sick. that is what they do. we had to outlaw recision, when you have an insurance policy but the insurance policy -- the insurance company decides they don't want to cover you because you may be at risk. you may be at risk for pre-existing condition, includes see section. it includes being pregnant. it does in fact and can include having acne. it can include all kinds of things. nobody is watching any of this. nobody understands this. is not being reported on. that when you get sick, you have to get help. there is no way around that.

so mcdonald's and other companies, doctor herrick to the contrary, you can't just be happy about the 90%. you have to take full responsibility for the 10% or you are saying they don't matter. because -- >> there is your gamble for the insurance company. like senator rockefeller, you explain earlier. i just want to add i got a letter in the mail from my insurance company. i had just been diagnosed with cancer 30 days prior and i got a letter in the mail saying you need to fill out this form because we feel it is a pre-existing -- pretty terrible. i called them and said if you don't send it in we are really going to take a look at you. i am going to write whatever i want because it doesn't really matter. it wasn't pre-existing. i know that. it was a diagnosis. it was pre-existing i never

knew. >> i understand you. let me ask mr. floersch. are the 90% who don't come up to $2,000, are they more important to and your policymaking about health insurance than the 10% who have major medical or at least more than $2,000 of medical requirements? how do you separate in your mind the human being factor of the 90% -- the insurance company gets away with and therefore you can apply their coverage? it is in -- the breaks that don't work, you don't drive a car at all. the principle is sacrosanct. why are the 10% different in your mind? why can you let them go? let them suffer depression led

from suddenly go into bankruptcy or whenever because 90% aren't a challenge to you? how do you make that distinction? >> we don't look at the 90% differently than the 10%. >> you do. >> we do offer comprehensive option for our employees. they have the opportunity for free limited benefit plan options and a comprehensive option. we do offer that comprehensive option for hourly employees. the other thing i should say is we are very clear in our material. i know you talk about the brochure here. in the first two pages we have eight references to the fact that this is a limited benefit. we are clear. we have a definition of what is outpatient services. we have a video we show to our

employees. very clear about how this is broken down. i agree with what everybody has said. we need to be very transparent about this and we take this very seriously. i just wanted to make sure -- >> what you are saying is we are transparent in saying if you get sick, sort of the most extreme example being cancer, the most scary example of that, we understand that but we have something which will handle that. in fact you don't because the premiums won't cover the kind of health care that mr. nelville is going to need. we say we can take care of you but you don't. you do take care of yourselves. the corporate health care plan is absolutely magnificent. top of the line, gold rim. that is why it confuses me from a humanistic point of view how

you can so comfortably do that and because somebody shows they are particularly good so you take them into the corporate ranks and suddenly their insurance covers virtually everything. gold insurance plan. in the meantime to 10%. why is it wrong for me to be worried more about the 10% than the 90% who by good fortune particularly yours don't get sick the on $2,000 a year? >> the fact the we do offer the comprehensive option for the same group of employees and we're very clear in our communication about what the plans -- benatar feel comfortable with what we have done. >> i would say to my staff if we pass this around, do you have this? this is what he is talking about. you don't have it?

can we get it to them? my time is way over. so ago to -- >> let me go to senator max baucus. >> thank you so much. >> mr. floersch, what percentage of the low income people health-care plans do you pick up? what percentage do you pay? >> $10, $20 -- $10 per month -- >> the range. what do you pay for your employe ease on average? what do you pick up? what percentage do you pick up? >> what percentage of the subsidy?

>> of the health care premium to you pick up? the pick of $20? do you pick up $10? what percentage do you pick up? >> anywhere from 10% to 20%. for the hourly employees. >> would you pick up for your corporate people? >> we pick up 80% for our corporate people, 80% for our restaurant managers, 80% for our certified swings. >> explained that. >> 70% for our executives. >> explain that to me. the people who earn the least you pick up the least of their premiums. is that what you are saying? >> we have comprehensive options. the first promotion a person gets at mcdonald's to if worse supervisor after six months of being on the job and that only takes a couple years to get to that role to get -- >> i get it. you are telling me with a

straight face that an hourly employee could afford the same level of coverage that you get? what you do is you pick up hardly anything of the lowest income people. if you look at -- you look at what starbucks pays for its workers, 75%. i am just saying to you as a human being, and i think you post a $4.5 billion profit in 2009 and i want everyone to the release successful but i am saying to you as a moral issue that i can't legislate morality but i am saying to use the fact that essentially you pick up 70% or 80% of your higher income workers and 10% to 20% of your lowest workers i think you ought to take a look at that. m