colleagues that are returning. the subcommittee has a responsibility for many big critical important issues. we're getting in to one now. today's hearing is part of the committee's continuing oversight of the aftermath of the security breach in july of last year. at this point, the fact of the incident will establish i won't repeat them. needless to say it was astonishing and completely unacceptable. through the hearing in closed briefing last accept they're aware of the immediate corrective action taken. today's hearing focused on the broader implication of the incident including structure failure that enabled it to occur. reviewing the testimony from the first witness panel as well as other reports on the nuclear security stretching back fifteen years i'm deeply concerned we have been identifying same problem for more than a decade. for instance in 1999 report by

president foreign intelligence advisory board it said the doe, quote embodied science in the very best and security at the worse. close quote. highlighting a string of occurring security problem in the 1990s they describe it as a quote dysfunctional bureaucracy incapable of performing. in tbow, a few years after congress created this in an effort to address the concerns another study by the commission on science and security found the same problem. in 2005, an independent study security conducted by admiral richard again made similar findings, saying that the problem are quote, they're not new, many continue to exist because of the lack of clear accountability excessive bureaucracy, and organizational. lack of collaboration and unwielding processing. those reports from 1999, 2002,

and 2005. so where are we today? anyone paying attention the answer is undenial. nowhere. the assessment done after the incident show that the exact same problems remain. regardless of the structure issue. there's also a problem of accountability. the only people fired as a result of the are a few guards. but no federal have been fired. some have been saying they have been reassigned to other positions within dodd or allowed to retire but not fired. it's not accountability. it's the exact opposite of what the secretary did after the air force nuclear facility problems in 2007 and 2008. the demonstration of cbilityd in the air force is senior most leadership is my example of a foreign system of accountability. and should be everyone's. our first panel of witnesses will help us explore the changes

needed. they are authors of separate essays. military application through the security administration. and the honorable gregory freed mono. i want to thank our witnesses for appearing today and the time they put in preparing their testimony. it's a labor. we do appreciate it. i have a longer version of my statement i'm without objection offer for the record. hearing none. it's ordered. i want to turn to my friend and colleague from typical, mr. jim cooper. any opening comments you may have? >> thank you, mr. chairman. i look forward to working with

you and our colleagues on the important issues. i would like to ask and be with a shortness of the time that my opening statement be inserted in the record. >> thank you, sir. we're going to be calling for votes in awhile. we will dispense with a reading of your opening statements and submitted for the record. we will go straight to the questioning of the witnesses. the witness will be general austin. let begin the rounds of questions. and we'll have a second panel after that. i'll start with the questions. general austin, you and seem to have read the many report and independent reviews conducted

briefsly. your letter to secretary chu calling it quote a considerable body of work that has been done on the subject over the past decade. close quote. in particular you negligence review done by admiral northeast in 2005. you heard me in my opening statement mention a few. there are more. how do your findings compare with those of the findings of the previous reports? [inaudible] >> your microphone. >> thank you for the question. i would say probably the most disturbing thing we found was the are curing evidence of problems that having existed before. when you take a close look at admiral's work that he did, i count about 111 recommendations that the department of energy showed us a a matrix.

we can grades on them, and without doing an exhaustive detailed cross check of what admiral found and with a we were finding, but doing a rather cursory look at a this, i would take issue with a variety of those assessments in terms of the health of those particular findings. of course, since 2005, there has been and a lot of time over the course of the eight years and i can't say that i saw any evidence of reaching back from the report. i don't know how fresh the management of the findings and recommendations was. i don't know the last time they revisited that or a regular fee nam that they revisit the findings. a few of them that point toward culture and things we found to be a legacy of challenges in the department of energy, no team approached toward security. struggling to succeed in atmosphere of conflicting viewpoints. headquarters versus the field,

land versus lab, site officer versus -- union versus management. in has been recurring challenges as site and field officers will see and need to upgrade security. we saudis plin in term of having a broad strategic vision for what the overall security requirements and standards should be. and a sensitivity to elevate the unique feature of the sight as opposed to having standardized -- having to defend wanting to be different. without discipline and strong central management of that, folks can conceive, design, and develop and deploy testimonies -- systems that are not fully vetted as they need to be. >> why do you think it was

allowed to happen. it happened over yours. the e.u. after each of the study order any consequences and lapse back to the culture? or was it never any consequences? >> we found it difficult to have traceable authority of the field up the chain of command to find unambiguous certainty that somebody was in charge of one element of security or another. because that seemed ambiguous, and because there was a prevail ing notion that it is an eye's on hands' off surveillance mantra, that the field -- the sites have over time enjoyed being distanced from the headquarters, and sort of, you know, unafraid and i was in the military organization, we didn't like interfencer from the headquarter. however when it comes to

security i think it may be good central management. i believe it's good for security. >> do you believe if there will be somebody at the top of the command chain held responsible for the findings of any of the earlier study in a significant way by, i mean, termination it would have helped to eliminate that culture's continuous? >> that would be one action that could be taken that action alone i don't think would necessarily have resulted in all of the changes that would have occurred. i think it gets everybody's attention. i showed up on the air staff the same weekend that we had our unauthorized transfer. an epic failure on the air force. i was there for the next three years working that particular problem. the air force did not, you know,

we worked it for the first year. when we lost the chief and secretary. life was different and the air force had to rally not a security problem but an enterprise failure. and because we looked at this in the largest context, i believe that after spending nine months working the problem to no one's satisfaction, that it certainly was an extraordinary accountability action by secretarygates, which had the air force focusing on the problem we failed to focus on before. it's true. >> thank you very much. i recognize the ranking chairman for any questions he may have. >> thank you, mr. chairman. will a lot of issues here. too much red tape in the bureaucracy, questionable contractor performance. i think one thing folks back home want is what do we get for taxpayer dollars. the inspector mentioned daily wide we're spending a billion dollars a year in protection of

facilities. he mentions in his testimony that $7500 million per year spend on complex wide protective force of about 4,000 workers contract professionals. that would be 175,000 compensation for each guard. that's a lot. a lot of folks back home wondering if we get any security and result in return? like the focus of today's hearing is the y12 facility which we discover now wasn't even nun proofed muchless terrorist proofed. and expenditure call for the y12 facility we spend $150 million a year protecting that one plant.

and yet we couldn't catch two 70-year-old and one 80-year-old as they breached the perimeter and as the chairman pointed out, it's hard to find that anyone was -- except the lowest level guard and doesn't seem like it's a fair way to treat a security of this type. so i know the time is of the essence. i want to encourage the ig and i appreciate the work to help us understand this. but the bottom line is taxpayers need to get results for the dollars. right now in doe it doesn't seem like we're getting the results. i know, the sometime short. >> you're asking me for a comment? i think you have synthesized the high point in the record. i mount point out safeguards and

security has been a management department at the department of energy for the last decade. this is a continuing problem. if i may respond subsequently to question from the chairman to general olson, we have found over time and i think the chairman faced that exactly correctly there's been a lack of sustained effort to cure a problem. there's been a short term fix and then the fix and the effort of fix evaporated over time. and secondly, if i can security cannot be a sideline, it's got to be integrated to the very essence of a production-plant like y12 and the other production facilities. it has to be an integrated approach from the get go to the end. rather than a separate function. so i think those are two highlights. and your issue that you have highlighted, mr. cooper, about

cost are course, that concern us a great deal. >> doesn't just concern us. we pay no telling how many collars for cameras at y12 that didn't work. and an alarm system that gave off hundreds of false alarms a day. where is the refund from the contractor? you know, the best we can tell people about performance bonuses? excellent ratings. this is astonishing the taxpayer got back so little for their money. thank you, mr. chairman. i yield back the balance of my time. >> thank you. the chairman recognizes my friend from arizona. >> thank you, mr. chairman. thank you for being here. i don't want to mischaracterize my friend's comments about the 80-year-old nun. if seemed like he did that in a rather diminishing way. i understand she was spry for

80. that should be taken in to account. when you make the comparison about the guards being spent costing $175,000. that's about what congress gets paid. i'm afraid the connection and parallel are frightening for someone like myself. we wonder if we we are all not a little bit overpaid. it's easy for us to, as i just did, make little jokes about them and sort of step back from almost a hollier than thew position. how could it happen? and yet in a sense, that's a little bit of a our job. that's our job here on the committee to try to exert some oversight that will hopefully will change a culture that has made a particular error here in a better direction. i know, that if we really honest with ourself we look at this

from a larger perspective. history has been pretty unkind to those who have tried to maintain the security. it it we had done that well decades ago, when we first gained this technology, the soviets would never have gained the technology. and there never would have been a cold war. it's not as unprecedented. i think i remember some story where we had to drop up with of our atomic bombs off the coast, and out of a plane. i think it's still there years ago. these are not as unprecedented as they seem. but because they are so serious, it occurs to me that we have to try to back up an ask ourself why is there's a hallmark for us letting these kinds of things be so easily secured? when the implications are so profound? i guess i'm going it ask you a question for all of the panel members. if there was one thing that you

could do in this particular instance, and in a broader instance of trying to help civilians infrastructure and our military apparatus understand the need for more security when it comes to nuclear technology, and weapons that have these profound implications. what is the one thing, general, i'll start with you, you suggest we do? is it a mind set, is it a sis systemic issue? >> sir, can i tell you that we in particular and i think doctor mentioned it as well. the cultural challenges facing the department of as opposed to trade space. that is a very profound challenge because taking culture

on head on is a very challenging effort. but we found that this and i've had recent discussions informally with people not involved directly with this where security is now perceived as, you know, we have to go through the hurt right now. and securities perceived as where everlast person is working in the department of energy see security and safety and emission as things not to be tended to. but rather prioritize but rather have a common view .

>> i would echo what he said. that's the primary thing you have to do is work on the culture. rather than repeat that, given culture as an issue that must be addressed i think the next thing that we have to think about is lines of authority. we have to be very clear on who is responsible for what. we have to followup and give the authority necessary to execute the responsibility. once we do those two things throughout of chain command we can hold people accountable. but one of the continuing things that doe has struggled with was the defining role and responsibility and then giving the appropriate authority to execute those responsibilities. and that has been a long standing issue that we really need to straighten out in order create that accountability and ownership of that security mission. >> i concur with what has been said previously.

maybe this is too far down in the weeds, if there was in addition to what has been already said. if there was one problem, i guess it goes on what the general just referred to. we need to be sure that employees of all levels are empowered to raise serious issues and to -- there's a process in place to ensure those issues are in fact addressed. i think that applies in terms of safety, certainly applies in term of security, and certainly was a root-cause problem, we found with the at least with regard to the 12 issue and security general throughout the department of energy. >> thank you. >> i recognize this gentleman for five minutes. >> i would like each of the witnesses to take a minute and a half and talk about where we are today. this is all history. what has been done along the lines, if you know, to carry out the recommends that have been made? we'll start with the general.

>> i left over a month ago, before i left i can tell you there was structure changes occurring within the security organization. so they were in the process of implementing the recommendations to stand up and organization and operationally focus organization that would ensure standardization across the fields. they were also in the process of creating standards and criteria for security so that people in the field would know what standard they needed to meet and what criteria would be used to evaluate them. there were personnel changes that occurred in order bring in what i call true security expertise. security is a special skill, and we have people throughout the country who have those skills. and we need to seek out the individuals and bring them in so they can bring the skill set to us. that was ongoing.

basically all the recommendations that i had out of my report were being enacted at the time of -- i left. >> with regard to the recommendations we made in our earlier report, congressman, we have not received the final departmental position, so we're not in a -- we've heard -- we l dote l information what steps have been taken. we have waiting for that. both in the groups their reports we have also issued a report on the contractor assurance system which is a system that they have in place to evaluate the contractor actions. we intend to go back at some point in the future and look at the process and determine whether the fixes sha that have been committed to and promised have been in fact, -- been made. >> when is that point in the

future? >> i guess that's the point in question. i wasn't prepared to answer it. >> it is a high priority for us because obviously security is essential in a nuclear weapons environment. >> sir i left the effort in the first week of december, and the recommendations, which we were exposed to were not in the charter that secretary chu had given us. i don't think it's -- i don't think i'm in a position to commend. >> let met go back to you mr. free month. one of the oversight review organizations is you? and it would seem to me that holding people accountable is what you guys do. i'm concerned about your response that some point in the future and so on and so forth, i would like a more precise answer. and with that, mr. chairman, i yield back.

>> thank you, gentleman. the chairman recognizes mr. nugent for five minutes. >> just to follow qupup on the -- followup on the question. you do thes inspection you prepare a record, you send it to to be and they're the ones that have to make things accountable; am i correct on that? do you hold them accountable or deposit administrators hold their rank and file accountable? >> well, our reports in these instants, congressman, were sent to the secretary. it's ultimate lit secretary's responsibility to hold his intord intord nant possible. >> when you took over as related to the incident in the air force, were people held accountable at the upper lines deash -- echelon folks that were

easing pickings. or do you look at the culture which i've heard from you in troord how it occurred? it was the lower level leadership. a couple of group commanders. there were a handful were colonel.

you won't realized that there is a process. it seems to terminate and we are on a path and we have adequate information in which personnel changes have been made great changes have been made in the systems. the question is will that be sustained going forward? >> really, from the leadership,

you can change systems and policies. but if there is no one there to actually make sure that the rank and file are following the policies and procedures, nothing gets done. from a positive standpoint. we can talk the game, but at the end of the day, how does this hold the upper-level administrators accountable for security that is so important to this nation? >> how you suggest that happen? >> well, i think the administrator reports to the secretary of energy under the current format. ultimately, there are changes as we speak. ultimately it will be the responsibility of the secretary to set the tone with regard to security and make sure that the subordinates and direct reports certainly understand the emphasis and his desire to

ensure that he can come back to them and receive confirmation that security has been treated as a priority. >> i want to thank all three of you for your testimony today. and i thank you for your direction in regards to what the issues are, and more importantly, you have identified the people that actually have to make it happen at this point. so i thank you very much. >> thank you, gentlemen. it is astounding to me. we are not talking about and equipment size. we are talking about nuclear materials. i keep hearing about how it's a culture and we need to have responsibility of the chain of command. nobody is talking about firing anybody. as was said earlier, when the secretary talked about the chief

of staff, got everyone's attention. we have to go to those levels of responsibility and run somebody ought to make sure that everybody understands that security is an issue and has to be part of the system. i do not hear anybody calling for that. that is just me. >> thank you, mr. chairman. i thank you all for being here today. mr. friedman, i am an alumnus and i appreciate your service so much. in fact, it is so important that you refer to a hands-off approach. can you explain why this is a concern, why did this contribute, and where did this approach come from and what has been done. what has been done to fix this beginning with the general? >> yes, sir, i song, hands off. it was interpreted in the security community to mean that

federal personnel were not really to interact with security duties they were only able to watch them execute duties and not even always allowed to interact with the contractor as they accomplish those duties. what that evolved to was basically a completely federal hands-off policy. saying that i can't tell the contractor what to do. i can give general direction, but the federal personnel failed to give additional directions that said anything about how this would be. nuclear security is critical. it is inherently a federal responsibility. that means that they have a responsibility and a duty to be a little bit more specific. and in fact, tell contactors exactly how to do nuclear security. but there are variations and things like that. what evolved over time, rather

than evaluate, if you asked me to evaluate security, i will come up with scenarios that i think are significant. than then i am going to ask the contractor to execute him. we took this, to the federal government out of this world. what it did is let the contractor decide what scenarios we would be evaluated. it was all about contractor self assessment and federal oversight was diminished. what happened is we really didn't have any insight. federal personality did not have insight into the details of how the contractor was executing us. so that really is eyes on, hands-off and where it evolved to. >> i appreciate you racing on. i am very grateful and i have had the opportunity to visit so many times, to see the extraordinary personnel and i

have seen such a positive thing. it is startling to me that something like this could occur. >> i associate myself with the general's remarks and i think she's characterized it perfectly. if i can take a minute and describe a specific that was in the original findings, there were very expensive cameras and detection equipment that was inoperable for up to six months. just the backlog of repairs have never been addressed. the local and federal officials were aware of it. but they did not feel that they were in power because of this essentially. they did not feel that they were empowered to force the contractor to reprioritize the work that was being done to make sure that the equipment was operating as intended. it was a vital essence, essential part of the perimeter defense mechanism at the site. that is an example of how we

have gone to the point where, as i said earlier, we need to empower these individuals to make sure that if they have a problem like that, number one, they can bring it up with the contractor and ensure that the issue is addressed. number two, if it is not addressed, then it goes to the administrator. and if there is appropriate action taken. >> that is particularly startling. when we think of this, we think of this is better. i know that your report indicates that there should be in depth reviews of contractor security. certainly that would include that the equipment is working. >> absolutely. it's vital. there is no excuse, as far as i'm concerned an environment such as this. one of the most sensitive sites in this nation to have equipment inoperable and not treated as a critical priority to get back online as quickly as possible.

>> for the protection of the american people, the new technologies that we have should be used to the highest and best use. i appreciate your efforts, all of you, to do this. i yield the balance of my time. >> i thank the gentleman. the chair now recognizes the next for the next five minutes. >> thank you for what you have done to serve our country. you can jump in on this question. the general, i would like to ask you a two-part question. when there was the unauthorized transfer, the air force really drill down and saw this as a broad issue that had to be addressed, even going so far as to re-emphasizing the importance of the mission and how does that

contrast with what is being done, if there is a contrast with the emerging emphasis, we are elevating this in the priority in the terms of the way that the air force reset itself, tempo and appointments, and the price you pay for that. it was atf this in the nuclear part of our mission. we were born and not strategic attack. but we had lost that focus because of other competing priorities. so when we look at the provincial military education for our ncos and officers, we reassess that there was insufficient and in some cases very little to nonexistent

elements of nuclear in this program so that a broad brush was painted across all of this, as opposed to just those who have nuclear mission responsibilities today. we felt it was important that everyone in the air force should have a broad sense of what we are about as ehrman. so we attack that. we looked and evaluated and change these programs that we were satisfied that the modules are nuclear were they at that education. but we didn't want to cash or contract back, if you will, deterrence to just the nuclear operators. everyone needed to understand the larger context the best we could. the whole service was energized in the face of this type epic

failure. and the challenges that i think we are facing, we do not necessarily find a pervasive valuation that this was a mission failure that could be a wake-up call across the enterprise. the guys made a very bad mistake. but the guys at savanna river have not made that transgression. so those that may be systemic in other places with the distance that is preferred, we did not witness this suffice to say, truly how can we ventilate the deficiencies there and see them here. i believe that that took place. but i just think that the self-critical capacity can be improved to make that assessment broad and legit. >> anybody else?

general inspector general? >> i agree with what general austin stated. when i took a look at the federal organization and the assessment model contained, there were structural flaws in both the organization and the assessment model, which is why i recommended a change in the organizational model and a new assessment model to reach out beyond to all of the other organizations. it does affect all sides. >> i would say that one of our important recommendations,, the lessons learned and there was a tremendous wake-up call. mr. cooper described as, they could've been three people, the

intruders, who are armed in a different way in a malicious way with bad intent. it could've been a tragedy. our point was, one of the points we made that it was important that the lessons go throughout the entire energy complex so that we are in a mode of preventing this kind of thing from happening again. not simply reacting should it occur at another location. >> we now recognize you for five minutes. >> thank you. the point goes back to what i said earlier. that is we have learned real lessons. but apparently we have been hearing this for a long time. the folks that are listening to this, this committee is not going to let this go.

doe is quick to fix this problem going forward in a meaningful way. until they do that, we will make them wish that they had. this is not going away. does the ranking member have any more comments? >> we are about to call for votes. i want to thank the witnesses for their time and energy and attention. we appreciate you. we will go into recess now for our votes and bring our second panel backup after the votes. thank you. [inaudible conversations] [inaudible conversations] [inaudible conversations] >> i would like to call this hearing of the strategic forces back to order and apologize for the delay.

i thank our panelists for hanging around and i look forward to your comments. i know that it takes a lot of time and effort for the hearing. but it is important to us. thank you for that. what i would like to do, or full statements have been submitted for the record. jim and i both read them. and i would like to ask each one to take a minute to look at the content of your opening statement and then we will will go to questions four times the fake. >> okay. first we have the secretary and the acting administrator for the nsa. >> thank you, mr. chairman. members of the subcommittee. we are grateful for the

invitation to appear before you to provide action we will take to strengthen security in the wake of the july 12, incident. we appreciate the engagement of the community and recognize the important role the hotel. the secretary and i recognize the problem that led to this point, and we have acted swiftly to identify the issues that rebuild. since the incident, several major incidents have taken place to improve security for the long-term. i just mentioned in deference to your request, just a few. we have restructured the contracts to integrate security into the line of command and it was terminated at a ability to hold accountable the head and

the sides, the department's chief of health safety and security, including rigorouse oo notice on short notice limited scope performance and testing activities as directed by the secretary. it will be conducting a final review in april. the secretary also directed hhs to conduct immediate assessments of all category one site to identify any immediate security issues and to follow-up with full security to ensure effective security measures are being implemented at the sites. it is conducted to identify causes. followed by the report, which i know you have heard about. the former deputy administrator was tasked with reviewing this

organizational structure. you have heard about the recommendations, which we are implementing so we can talk further about that there were individuals, all of whom have distinguished and long careers in national security. each one provided thoughtful advice in the structure, specifically all facilities and we are discussing their advice on how to improve this across the enterprise. this series of personnel and management changes that i have described today have been made to provide effective security across the complex. we are working to carry out the structural and cultural changes required to secure this at all of our facilities. the mission is held at vital and urgent, and nowhere is that more true than here. the security is a core

responsibility of the department in support of the president and defense of the nation. the incident served as an important wake-up call for our entire complex. the department is taking aggressive actions to ensure the reliability across the enterprise and will continue to do so. in that effort, the department looks forward to working with the subcommittee to ensure the security of the nation's nuclear materials and i will be very pleased to answer any questions or you that you may have and members of the committee. >> thank you. did you have an opening statement? >> no, i did not. >> okay, great. thank you. i will start off with the questionings. as the deputy secretary of the department of energy, you have talked about this being unacceptable and you just made some reference to some great actions. you talked about how you have now completed integration in the

chain of command with a new contractor. what is different in this line of chain of command? >> at the time of the incident, there were two separate contracts at the site. one was the overall operations contract. >> are you talking about the line of chain among the contractors not within the department? have you altered that in any way? was a contractor notifies the department of anything, good or bad, has that contact person been modified at all? >> yes, but the way it is structured effective. i will go back to the part that you asked. one of the things that was found in the report is there was lack of clarity that the organization for nuclear security was exercising some authority as was

infrastructure and operations. that was confusing and we have ended that. we have made it very clear that the line management must go down from the administrator through the infrastructure operations office, and that has removed the security organization from now. it has been clarified so that role is to develop the plans as a staffing function and to evaluate the performance. additional change that the evaluation of performance under the contract is no longer done by the field sets, which was creating too close of a situation between the people on the side between the contractor and the fed. so i believe that we have really clarified and put the other fact -- there was also confusion that was created by having these two separate contracts and we

immediately folded the security -- >> okay, under this new structure if we were to have an incident, who would be the ultimate person responsible? for security at that? >> the line management is always responsible going straight down through the secretary. >> barkley through. the secretary, deputy secretary, the director of the federal site and then go straight from that person to the senior contract official statement that was not the case when this incident occurred? >> there was confusion because there were directives that were coming out of this organization that could have been confusing in terms of where the accountability was in terms of people at the site. >> aside from the contract with it being terminated, which was about to expire anyway, you mentioned that responsible people were reassigned.

you put removed from their responsibilities. why were they not fired? >> the first thing that we have to do, as you have seen many times, hold the people accountable. the top three responsible for nuclear security were removed from those positions. those on the relevant federal side were removed from their positions. >> why were they not fired? >> that is true, sir. there are additional disciplinary actions that have been on the way. we have due process with various procedural safeguards that occur in our system and those are now being pursued. but the important thing is to get those people out of that one, most of them are out entirely, and we have ensure that people knew that they have lost had lost our confidence in the top two officials

responsible on the contractor side were also moved. >> you heard me earlier talk about secretary gates. he fired the secretary of the air force and the chief of staff when he had a similar incident. i think that was the motto. do you disagree? how he responds to serious security violations? >> i certainly agree. the accountability is absolutely crucial. i am not deeply intimate with the details of this incident. i have the highest regard for secretary gates. but i think that the principles that he described are very much ones that we share. >> i would hope so. i would hope that you start reflecting those going forward. that is the kind of action that sends a clear message that these lapses in security will not be tolerated. the other factor here is that this has been going on for 10 years. we have had so many studies. the folks at the top of the food chain really should have known about this before it happened.

but with that, i will turn to the ranking member. >> thank you, mr. chairman. i welcome the witnesses. i am sorry that we have to be here. in a sense this never should have happened. you talk about accountability and the main contractor. they are still receiving 60% of the award fee for $36 million right after the incident happened. >> mr. chairman. >> i'm not the chairman chairman, i'm the ranking member. >> mr. ranking member, i'm sorry. the award fee under the terms of the contract, and it's a fair question to pursue how we structure these, the only amount that was available for security was zeroed out. later they got to 40% was going

beyond that. other things are happening in terms of stockpile work and so forth and the way to this fee is a bucket. we took the fee that was available to take away this and that was something we followed up in subsequent incidents as well, seeking to go back because we agree the american people should not be paying for underperformance when it comes to security. >> call back? >> the numbers that you cited there, there is an episode for the contract. >> i thought you said there were further efforts? >> there was a 10 million-dollar fee in the complex. >> immediately prior to the incident, your agency, in its wisdom, had given not an excellent rating for the safeguards and security work.

he received the full 51 million-dollar incentive fees in fiscal year 2011, even though as has been testified to, it took months and months to do repairs. why did they get their entire incentive fee via this? >> this is exactly one of the deficiencies in the structure that receives the incident. the report makes clear a tendency to have their view, but have this evaluation on paper review. separating that roll out and putting it into the headquarters would hopefully corrected. we did not see things in advance as we should have. obviously, had we, we would have replaced the cameras as we should have. i'm hoping, and i believe that

the cultural changes that we are going to institute will prevent this kind of thing from happening in the future. >> with all due respect, it doesn't sound to me like you're taking responsibility. aren't you the deputy secretary, having been the deputy secretary for some time? >> yes, sir. from the moment i heard about this incident, i have been doing everything i can in every dimension to make sure that nothing like this ever happens again. >> i do feel deeply responsible. >> you have been doing everything you can. question to my colleague, it was cemented five months after the hearing testimony? >> you needlessly duplicated one question twice. it doesn't look like much effort was put into this. i know that this is just an exchange of paper. but i feel like you are taking responsibility? >> yes, i do.

i take responsibility for everything that happens in the department. >> hazard pay been reduced? are you threatened in any way? what sanctions have you faced? >> mr. congressman, i am doing everything i can to address the problem. i will do that as long as i'm in this position. i will be open to make sure that nothing like this can never happen again. >> meanwhile, your department is spending about a billion dollars a year hiring 4000 guard personnel and in some places it is a contract, other places it is a subcontract. it seems to be no rhyme or reason. if you divide the salary component of that, 700 million, that is $175,000.

where's the money going, what results are we getting for this? >> my guess is that the guards are not being paid nearly that much. >> who is making the difference? >> congressman, i do not have that exact calculation. there are a number of physical assets in terms of facilities with thick walls and various permit or fences and security systems. all this of this requires an investment. to be clear, the money itself is not going to solve the problem if we don't have the clarity and the lines of responsibility and the authorities that go with it and a cultural shift that was required go with it. it is not a problem that will be solved. the dollars are very important. we need to get all assets, but that is only part of the problem. i am not suggesting spending

more money, but i'm asking about the value that the taxpayer about for this outlay. this is according to your own idea of money spent on employee compensation. >> we have large quantities of plutonium and uranium, that material is very well defended. it is of absolute paramount. >> how can you possibly say that? >> congressman, the episode that occurred, as we have repeatedly testified in a prior hearing, it is absolutely unacceptable. it is a wake-up call. >> so how can you say was well defended? it was not well defended. that is why we are having this hearing. >> congressman, what i'm trying to say is that there are a number of additional layers of security. it is unacceptable that it penetrated the perimeter fence.

that is unacceptable, it would take appropriate actions to look at these layers. including military style forces, various physical impediments, and i can assure you that there are many more layers that are defending that very sensitive material. >> so we really have nothing to worry about? there were many more layers of security left and it was fine? >> congressman, that is not what i am saying. secretary chu and i have been consistent. this was unacceptable. and it is shocking is a breach of the security that we thought was in place. that being said, your specific question went to the actual material itself. i am only saying that it is quite the opposite. to say that we do have additional measures of protection that are needed. it is unacceptable and we have to make sure that that part gets fixed as well.

>> still does not sound like he's taking responsibility. >> i would like to be very clear. i accept responsibility for this. >> what punishment have you suffered for a? >> other than attending mishearing? >> i am working on this problem, sir, as hard as i can. >> thank you, mr. chairman. >> i thank the gentleman. the chair recognizes mr. turner of ohio for five minutes. >> thank you, mr. chairman. mr. secretary, i would like to thank you for your effort to try to address this. i happen to know that you are a very hands-on secretary. you and i have worked together and i was very impressed by the fact that you do rise to a very hands-on level. that is why i think this whole problem, it leaves most of us wondering where are we and i'm

going to ask a couple questions. the level of oversight where we have concerns is what i want to frame. a broad base of questions. >> [inaudible] >> [inaudible] >> [inaudible] >> congressman, it depends -- >> it doesn't depend. it ever encompasses the scope of possibilities. is there ever a situation? >> it could, yes.

>> okay. in taking that broad statement, we have acknowledged that there is a situation where a failure could result in termination due to performance. i will ask you the next step of that. i am not just asking your opinion because you are in the chain of command here. so would one of those situations beware all of the safeguards are down? where someone could get all the way into one of our buildings and nobody does? let me be clear. we had a breach where people actually died all the land. all the way to the building. that is what i'm saying. is there ever a situation where no one penetrated this breach, but the safeguards were down it would've permitted a? that is what i would have considered. >> what i cannot do is answer a

hypothetical. to it's not a hypothetical. it's very clear. you have a job that has no margin to protect these facilities. we only can talk about these situations through the application technology operated by people. and the people are subject to their performance as to whether or not it works. so if someone is not performing, even if there is not a breach, if the system is down and someone could get all the way into the building. is that enough for them to be terminated due to performance? this committee things that we have an agency that has the responsibility for protecting this facility and we have a system where those in charge think that you don't even have to do your job to keep your job, then we don't have something that is working.

if the system goes down or someone could go in and touched the touch the side of a building and no one does, due to the performance, is that the type of performance that results in termination? >> i can tell you that has resulted in removal from positions. >> the answer is yes? >> removal from positions what we did. >> that gets into a level. >> you are testifying before the committee today that if the entire security system of our nuclear infrastructure facilities went down and the perimeter of the building that allowed someone to go in and it was a result of their performance. >> i did not say that, sir. >> please tell me opposite. it has to be true the result of someone losing their job. if not, we need to pass a law and stop oversight. because if you don't have performance to be able to protect the facility, then we don't really have protection.

we do not have security. is it a terminal offense? >> you and i are both lawyers and you're asking me technical legal questions and i want to make sure that i understand. >> if you don't have clarity, the committee meets with something in the next piece of legislation that makes it clear that due to the performance of individuals, that the security system would be an offense resulting in termination. that is certainly what the american public. >> congressman, as i told the chairman and as i told you, we are always ready to work with you and this committee to make sure that we have the right kind of laws in place. i am not trying to be evasive. there may be a very simple answer, but i am not acting as a lawyer. >> i was asking you the scope of responsibility and authority questioned.

[talking over each other] >> to that level, we want to know if this has to do with the determination. >> i yield back. >> mr. secretary, is the due process we are talking about the union contract? >> i'm talking about the procedure process that and a federal employee is entitled to. >> they can have that in response to the termination, can't they? >> you terminate them and they get the process to appeal it. >> it just seems to me like you are claiming that they have a right to go through all of this before you can terminate them. >> what we can do and what we did do, mr. chairman, was removed these people from the responsibility for anything having to do with security, immediately pending what further disciplinary action was available. the action is subject to due process.

>> i think the due process wouldn't let navy to you will get into a nuclear facility. we now recognize mr. wilson's. >> thank you, mr. chairman. i share this with the former and current chairman. it seems to me that with the breaches that occurred, there should have been termination shifting persons around. it really doesn't achieve the level of accountability for something that is important. i have the perception of having actually worked here and by working here i actually had a good feeling about the permit manner of security, the persons who are monitoring and indeed, those acting, and i felt secure and i know that the people who work there, lived there, raised their families there, they fill secure. but i am concerned about studies

that there is a culture that has not stressed security. so how can we reassure people who live in these communities that do realize that they are a culture and have a lack of security and it needs to be addressed. >> that is a great question, congressman. you can reassure them by saying that the top three security officials at the headquarters were removed from their positions and the two top officials were removed and the contractor that actually has the professional force was terminated at the management and operations facility. they were also retired and taken out of the picture. everyone in the chain of command from individual responders and the senior officials responsible

we have undertaken the organizational and structural changes, we have replaced all the cameras, the wire around the facility. all of the improvements, all of the things that we should have known about what found out about the unfortunate and terrible incident. >> mr. mueller? >> i would agree that the deputy secretary has said that first and foremost, culture is going to be affected by leadership and their attitudes toward security and safety and everything else that we do. we are working very hard and have been making serious changes to direct this and address it. especially with everything else we do. >> i am equally concerned.

there used to be a lot of reliance on self-assessment that the overseers are depending upon us. is that being changed? >> that is being addressed. i think that does contribute to the problems. per the recommendations, we believe that it starts with the basements of the assessment, instead of having that ss in the field where there is a possibility of it being too close, that function includes the headquarters organization and that is going to be further subject to overview for the safety and security office. >> ms. miller? >> i would like to emphasize that we have the sites directly reporting to the administrator. in this way, we expect security as well as other things. but mainly security to be a

clear line of accountability from the administration to the site manager as the implementers of the policy that the security policy organization that the deputy secretary was referring to, those policies in order that they are issued, which is their responsibility, it is also their responsibility to assess the performance of this in implementing those it is just as clear that the line of accountability for implementing it goes directly to the administrator. >> related to that, there was a recommendation that headquarters staff visits the sites and rotates between them. is that being done? >> headquarters staff is now both in the implementing side as well as the policy and assessment side. regularly scheduled, as well as

the rotations, we have put this in and we are very conscious of the fact that people staying in one place for too long may lead to people becoming complacent. >> i think you both. i know that when the staff visits, it creates an extraordinary level of attention and i thank you. >> thank you, gentlemen. mr. frank is recognized for five minutes. >> thank you, mr. chairman. secretary, i would like to get a few questions in here if i could. i have had the opportunity to see hearings on this before. i have probably expressed a commensurate level of this and i don't seek to remind anyone of the materials that are kept in these facilities that are highly and technically challenged to

create and weaponize, it is a much lesser difficulty and the implications are profound. i think everyone knows that. one question that i would quickly like to ask. seems like the contractors that have reported these lapses in the safety precautions were treated differently than those who ignore the warnings. is that your perspective? >> i am not sure. >> it seems to be on the ground contractors that were there, i am told there was that there was a significant reporting on their behalf prior to these incidents, saying that we had technical >> yes, sir. some of those deficiencies have been noted in earlier reports that it's true.

>> yet they were, they were handled pretty roughly, it sounds like. i believe that they are. i would like to get to another thing. the previous panel emphasized the line of responsibility. i think that's something that is almost ubiquitous throughout the entire thing. it appears that this has not been addressed effectively because the doe continues to have an oversight office under hhs and it now has a split security between policy and oversight and programming execution. i'm just wondering how to these ensure there is an accountability for making sure the security program is properly executed at the sites? >> okay. let me just say very quickly that both involved have had

their leadership removed. so they both have the appropriate accountability price. and on the second one it is a very good question. we believe that part of the problem here, as the general pointed out was that there was this confusion. the clarity down to the infrastructure operations, that is the one i mentioned. they are responsible for execution. they had to take away the interference which was coming out of the na 70 nuclear security organization and that is all inside to have a further check. it is to have a check on the check outside it of this administration. >> is it your testimony that the

line of responsibility, any ambiguities have been dealt with? >> we are in the process of implementing the recommendations and i would like to come back to this committee when i can tell you more. >> that seems a little similar to this whole discussion. >> we agreed. >> shifting gears quickly, i will ask you because we are running out of time, when you think about these breaches of securities in the future, i am just wondering one specific question. there is a significant increase across the world with intentional electromagnetic interference, these device capabilities, which seems to me to really put the facilities at risk. and even further, the potential of the major event, either

geomagnetic or otherwise. can you tell me, are we protecting the critical defense apparatus against these three things? >> congressmen, i am well aware of your thought on this challenge. what i am here to tell you is that we are addressing the threats which don't, as you know, the fact everyone, but far beyond that. we would love to work more closely with you on the subject, the executive orders, and the presidential directive that was just part of this problem. it is something that is a

problem that will take a lot of work to get to a safe place. >> okay, thank you, mr. chairman. >> sir, i would like to clarify. he stated that you are in the process of implementing this study and findings. that is not at doe. woody doing at doe to deal with the problems? >> it actually goes well beyond and will require various parts of this which has technical capacity to deal with this issue. >> i'm talking about the earlier issue dealing with the chain of command, a report by the contractor. >> mr. chairman, those issues are among those that have been addressed by what we call the three wise men. we are having internal

discussions precisely on this question of how to make sure that the larger organization works effectively in ensuring the same kind of oversight. as you know, mr. chairman, there is some material that is outside of the situation and we have to make sure it is protected. there was some confusion between all the directives that were departmental wide, and the recommendation of general simmonds. we need to be clear of those that are binding and anything beyond that would require a way to augment or strengthen and should not be meant to confuse or distract the overall directive of the whole department. >> you have five minutes.

>> thank you, mr. chairman. i appreciate the testimony to both of you have given. i was reading your testimony as well. although you have explained verbally the organizational structure, it is not clear to me exactly how that organizational structure is actually in place. therefore, i would appreciate it if you could delegate to our committee staff a detailed organizational chart along with the accompanied job descriptions. >> i am happy to do it, sir. i believe that would be helpful for me to understand the words that you have said and how it works out. how works from the previous questions asked. it is within the department and the organizational structure there. if you would do that.

>> we would be happy to provide it. >> i would like to understand more completely your testimony. and i think you. >> i yield back, mr. chairman. >> i thank the gentleman. why do you think it is? you heard an earlier panel. why do you think it is that these long-standing, well documented deficiencies of this particular facility, they were allowed to go on for so long. anything that is? >> the things that we have found since the episode, mr. chairman, even though some of these things were noticed, the internal reporting chain was broken. that was the phrase used in some reviews. you can rest assured that if we had known was actually -- >> you were not aware of any of those studies from 2002 until

2005? >> well, i was talking about the studies over 10 years and the most recent. >> after the episode, i became aware. >> i'm aware that you are aware of it. >> this is one of the ones that you are referring to. i helped former senator baker look at the episode at los alamos and i was aware that the thing that we found there was the same kind of security mission and it was a source of challenge. but i did not realize that particular problem was still persisting to the degree that it was. >> what were you not aware of? >> i was not aware of the cultural and the situation which

we found out post-talk, it had not come to my attention. if it had, i would have acted. >> who do you think should have reported it to you? >> these are very high ranking, important, thoughtful people who are making these reports. were they put on the shelf? were they given to policymakers that could implement changes? >> we should've told you about that. >> i don't know if he would've told me. >> would ms. miller have told you about a? >> it was a 2005 report and i just don't know what happens in terms of the shelf life of these reports. we are responding to the

responsibilities that we've got. we have to look at the problem and we obviously have to be fully accountable for it. we must always go back and see what has been done through time. that is why we looked at the report. >> who do you report to on security matters? >> it is the deputy secretary. >> were you aware of this study? >> i became aware of it. i joined them in 2000 and. >> okay, 2010. when you arrived then, how long was it before you became aware of this? >> i knew of it a little bit before then. i did not become aware of the contents for probably the first year that i was their. >> you knew about it by 2011 in the midyear. did you take any action to inform the secretary that you have this cultural problem that needed to be addressed? >> i did not take any actions to

inform the secretary. i did take actions to address actions. >> did you fire anyone? >> no. >> let me ask. given the studies that i have referred to, the commission did this in 2002. the chief of security clearly should've been handed a copy of the studies. do you not think? >> that would have been on his watch to know that we have an installation under the domain of responsibility. and we now have a study that talks about these problems. does it make sense to be given a copy of it?

>> would you turn your microphone on, please? >> i would assume that those reports come when they came out, would be reported through the department contemporaneously. >> and the relevant person would have been the chief of security, wouldn't it have? >> the organization was different at that time. >> what i am saying is that i do not know who is the chief of security in 2002 or 2005. the same guy has been there for 20 years. the guy who is the chief of security now it has been the chief of security at the department of security for 20 years. all of these installations fall under his responsibility. my thinking is that if the report comes out and says that we have a flawed cultural security problem, but that should have been presented to the chief of security. no remedies were taken to the

equipment and the other deficiencies in that system. who did the chief of security report to? >> he reports to the secretary and the deputy secretary. >> okay. >> just to be clear, that person does not have authority over this. >> why not? >> because that is the nature of the problem. in other words, we need to make sure that it runs the straight through. >> so you are responsible for the line of authority? >> was the secretary fired? >> no, sir. >> i recognize mr. cooper. >> thank you, mr. chairman. i think we are talking about hhs? >> yes. >> i think we are talking about those that have been there. i was interesting because in

2013, just a few days ago, he talked about staying in the article that he believes nuclear arms complex operated better while directly under the energy department's defense program prior to the formation in 2000. i think that he means by nuclear agency, he means our agency. it is a pretty amazing charge from someone you praise and trust. it has been there a long time. we all rely on his viewpoint a lot. we we're wondering if nsa should have jurisdiction here? enough we have taken a step backward sends 2000. ..

and it might be correct. it might up -- might not be officially supported by the top brass, but this is, you know, part of the organization that you respect and trust. this is a respected individual. questioning the function. and, of course, the commission will be established to look into lots of issues anyway. this is a problem. >> congressman, we have, all of us, fought long and hard exactly about what the best way to do

security is going end of this episode. we will continue to do that and take advantage of the great wisdom of the three experts. we always encouraged the continuing question in attitude and not to be complacent about where we are. we will keep working as hard as began. >> observe the chance to keep working at the problem. i'll dig in terms of if i deserve. and trying to address the problem. i feel that's my responsibility. >> you have hard time the of circumstances that might even lead to levels of state and responsibility. >> that don't mean to imply that.

the problem could not recur bride changing the structure and that all the individuals accountable. again, we will continue to tear everything we can turn the confidence of this committee. >> maybe you could answer with the average card, protective force member makes and when you divide out, one pattern $75 going teach position under the how much taken pay, benefits of the votes actually getting into this amazing some. penlight federal judges. their pay like congressman -- i assure you, able be five months. we will get that to you, sir.

>> thank you. >> we don't have anymore questions. the one thing i want to point out, lest through a plant -- we should just abolish the in essaying a backstabbing everything doe. the foreign intelligence board said that the m bought the scientists added best. highlighting problems that we have failed to correct, dysfunctional bureaucracy that has am proven it is incapable of performing. the thing and be take away from this is yet to be capable of

reforming yourself. we're serious as a heart attack. be expected to be remedied. we need to know specifically the you're willing to terminate people that at doing that job. the chief security officer might be idealist, but we look at serious reforms in the line responsibilities so that if -- and the help we don't ever have another instance like this, but you can show us so we can see exactly who is irresponsible and that they were dealt with in a prompt and appropriate manner. >> we not only except by wellcome working with you in this committee and exactly that dimension. we very much agree obviously,

there are continued concerns we need to address. we complete the agree accountability is a critical part. however, we don't just have a people problem. we have a structural problem. we have a cultural problem and we need to fix that. accountability, culture, cleared the lines of responsibility, authority to go with that and with your help hopefully we will get the place where we never do experienced this kind of episode again because it is something that is absolutely as we said from day one unacceptable. >> thank you. >> additional questions. who will keep the record open for ten days. i asked you submit questions in writing and as the responses in

writing. >> this hearing is adjourned. >> thank you. [inaudible conversations] >> coming up tonight, the senate finance committee lakes into

implementing changes to the nation's health care delivery system under the affordable care act. transportation officials ellen perris for the coming year. the house armed services committee examines improvements in security. >> we will discuss the pending an automatic spending cuts the democratic representative of maryland whose district includes the suburbs of washington d.c. and along with air force one. also joining us to take your questions will be representative randy for is a virginia republican, a member of the armed services committee. live on c-span every day at 7:00 a.m. eastern. book tv. >> friday, president obama hosts congressional leaders of the white house to discuss the

$5 billion in automatic spending cuts begun to affect 11:59 p.m. tomorrow. the first face-to-face meeting between the leaders and the present this year. book tv. >> i think that eisenhower held will the crisis so well, the fact that he was a very decisive man. people think of him as this very pleasant man with the winning smile and the rest. behind that smile there were some very icy, blue eyes. and eisenhower looked at the crisis he made decisions that did not have liabilities when they're mated the top of the head are emotionally. he never made an emotional decision. he never allowed his emotions to control them when big decisions

had to be made. >> reflects on his years as vice-president. [inaudible conversations] [inaudible conversations]

>> president abraham lincoln once said the best way to predict your future is to create . in 2009 we did not like the future we suffer the health care system based on a fee-for-service payment model. doctors and hospitals are getting paid for the amount of care delivered as set how well they delivered patient -- care to patients. so we created new and better ways to deliver health care. save taxpayers' dollars and improve patient care. medicare and medicaid, in partnership with the private sector is now working to create the road map for the future of health care delivery. we are here today to make sure we're on the right track. there is a slowdown in health care spending. we need to do more and to do it faster to change the way medicare and medicaid pay for health care.

at the hearing we hope to boost the country's economy output, the leading economists, the number one way to reduce health care spending is to end fee-for-service. everyone agrees that fee-for-service drive some volume, access, and placed. we know this weighing kurds is the wrong things which is why health care reform changed the incentives. medicare and medicaid are testing different programs to determine which were best. in october medicare role of a program of the simple, yet revolutionaries' promise. going to pay hospitals to get the job done right the first time. hospitals are penalized if patients are readmitted to soon after being discharged. communities are rising to the challenge. montana, local service partnering with medicare.

under this program patients at high risk to remissions will get extra help making the transition from the hospital back to the community. today we are here run new data showing a significant first that a medical -- medicare hospital remissions. the rate for patients returned to boston for treatment has fallen by more than a full percent over the past several months after the infirmary was stuck for decades. medicare and medicaid also implemented a new program in october that pays hospitals more for delivering medicare and penalizes them for options. this idea will not sound revolutionary. makes sense. the brakes fixed. he should not have to pay for the broken windshield.

starting in october hospital can be penalized if he go well with not attack and the hospital is responsible for giving u.s. surgical infection. hospitals can be rewarded for greg customer service. that means doctors and nurses, explain medications and develop a plan and coordinate care. more value of each taxpayer dollars spent. we also need to help work better together and coordinate care. medicare and medicaid need to reimburse hospitals and doctors to keep patients healthy. the organizations are starting to make this happen. medicare, almost 300 accountable care organizations including in billings montana have to end up to serve more than 2 million beneficiaries. in these organizations doctors and hospitals and other providers are together to give patients coordinated care. providers will work to ensure

patients get the right character right time. medicaid has also come to provide new solutions to the cost challenges. beneficiaries in minnesota are among the first to participate in a new integrated care model beveling patient outcomes. providers will be held accountable by insuring savings as well as total cost. my state of montana started a program for diabetes in cardiovascular disease. the goal is to help participants lose weight and keep it off which makes them healthier and reduces costs and the medicaid program. we need medicare and medicaid to support the state efforts and offer stability. look forward to examine the progress that has been made and do more.

so listening to president lincoln, realize we're in charge of creating our future. to lower costs and improve quality and create the future of health care delivery. >> thank you, mr. chairman. thank you for convening. much the hearing. last week time magazine ran an article. the longest article in the country's history. some exploration of the high cost of medical care in this country and what this means. a fascinating article. it got me thinking. the last five years i have spent a lot of time talking about health care. signed into law nearly three years ago and was supposed to make health care more affordable for patients and consumers. now, the affordable care acted a lot of things, but as far as i can tell it has done little to address the biggest concern that

people have come the actual cost of care. i hope that somehow we can take a serious look. i think it would be well worth the committee's time to do so. today we are here for different reasons. but the committee held a hearing where they heard from providers of third-party payers in the private sector who have come together to do some interesting things, try to improve care while reducing cost. well i agree that the private sector can make great strides in this area we cannot prevent that minute -- forget that medicare is the nation's largest player. that being the case, we are serious about efforts to encourage innovation and a must include medicare. i have been clear about my opposition to obamacare. my concerns about the adverse impact of this law and the premiums are national spending continues to grow. however, the chairman and i

agree that health care providers and parents of all shapes and sizes need to work together to provide patients with higher quality of coordinated care. according to the medicare payment advisory commission most recent report, in 2010 individuals, government, and businesses spend a total of 21 half trillion dollars on health care. today 45 percent of all health care spending comes from government. in 2014 when the medicaid expansions began there share will rise to 50%. the congressional budget office will testify in 2021, eight years from now, spending on medicare and medicaid will grow to over one half trillion dollars. by virtue of the size medicare will have some important influence on the over all delivery in our country including what the right policies in place medicare can be a driver change. that being said, the private

sector in making systemic improvement. i hope that we will be able to reassure. as most providers will tell you, in addition to the rapid aging of our population we have to contend with increasing numbers of patients such as diabetes or heart disease. these patients are sicker and more expensive to treat. about pryor's are doing their best, oftentimes the health care system is not structured to allow care to be easily coordinated. currently we have a system of isolated asylums. pages this the care and a variety of settings. doctors' offices, hospitals, nursing some stomachs after, and it is not uncommon to have an incomplete picture of a patient's overall care. in addition, provider incentives

in place incentives created by insurance stress mechanisms are not well aligned with the purpose on veterans' health and lower cost. we can certainly continue providers continued to tell me that fear of lawsuits, all human service. be a system price with the financial incentive to manage care. a former medicare defense. to say, back then, 37 -- more than 37 years ago. talking about this system reform . my goals should be to ensure that patients receive the right care in the right place at the right time. there is an appropriate role for the private and federal government to reduce and provide better care and health outcomes. i know that changes will take

place immobile we have to move beyond simply reporting what providers are doing to avoid health care outcomes. in our own home state of utah we're privileged to have several defense health care providers. not all providers are created equal. much of our system gets off on the right hand while the left hand is not know what it is doing. in the middle with very low coordinated care. and i am actually, without any real progress, moving toward greater care coordination. many areas can be avoided when providers focus on care transition. the league has been a lot of attention -- attention paid to the center for medicare and medicaid innovation, also know and -- known as the mmi. we remain concerned, but there

is an enormous budget and very little accountability. and hopefully it will hold another hearing this spring that focuses exclusively on the results of the $10 billion in taxpayer money that was given to them to advance the cost of higher quality, lower cost, and more efficient care. and so, thank you for this hearing in valley authority hearing. i am hopeful that we will have good news to share on the progress that cms is making. >> thank you, senator. my colleague. the committee. the staff. the witness table not too long ago. hard to resist, i explained.

and of the gun at anybody brighter and smarter. certainly health care. good. so glad you're here. the bad news, acting principal deputy administrator for medicare and medicaid services. it's great to have you back. good to see you. the rules here. >> chairman? thank you, member. committee members. thank you for the average city to discuss our problems with the medicare program and transform the delivery of care. in the three years of the affordable care active employees to report. we have put in place many a program policy following the goals of the health reform act. for the first time we consider we're paying for value, not simply the volume of care. quality is improving costs are growing. simply put, medicare cost has

gone downward. the last thing is, put in place the payment mechanisms to reward hospitals for the overall quality of care. finalizing regulations, defining what it means to provide care and so-called a cl regulations. we have transformed our position payment system to shift its emphasis toward primary care services and care coordination. established the center for innovation which is currently testing more than 35 new programs and is working with over 50,000 health care providers and never 3700 hospitals. we have shifted the business model in medicare. before the affordable care act, premiums and extra benefits. today they completed on both premiums for maxtor benefits, and the quality of care that provides for new members.

cms is transferred, -- transformed our framework. chasing down provided for payments. cms has overwhelmed the payment problem, dramatically lowering spending without compromising quality of care. over the next several months we will focus on several new areas. we are working with hundreds of hospitals and health care providers to test the service payments together in new ways to figure out the best way to pay for a total of seven care. we will continue to work to implement the value modifier policy to continue to shift our position payments system to reward top performance positions and providers. we will continue to find it and test ways to best provide and coordinate care, including to vulnerable populations such as we do eligibles.

given our work, we cannot provide this data that begins to demonstrate that the strategies put in place of the last several years are working. as center of office, we have more than 250 ceos operating in the traditional fee-for-service medicare programs serving more than 4 million beneficiaries. this tells us that providers and positions are stepping forward to participate in any payment and delivery models. datapoint number two. after more than five years of holding steady, the rate for all cost possible for remissions is starting to trend downward. point number three, 37 percent of medicare beneficiaries who have chosen a private medicare plan are in a forest plan. this is up from 16% 4 years ago.

quality of care is improving. did one member for, the rate of growth and per-capita medicare spending has been an historic the low rates for three years in a row. tremendously exciting from my perspective to be sure we have more work to do, but the work today and the dative we're seeing some give us great hope that we can bring medicare to sustainable financial footing and to improve the quality of care. i will be happy to answer questions. >> thank you. first, my first question, coordinating the private sector. for medicare. put together a coating session. clearly if this is going to work , coordinating the private

sector. truly has some of the same agreed upon incentives. how successful that has been. the progress we're making. >> we steady best practices. to really understand why we're trying to implement so we can reap the are built off of best practices. very exciting programs with private payers. we try very hard to understand how the private sector is creating financial incentives. we also try to capture our regulations and no way is open and transparent so that private payers can copy our -- not copy,

but to try to build off of they're medicare experience. they also are courting to establish a ceos for their contract and bill lot of those regulations as cms is finalized. finally, several of our new emigration models other being tested and then all pair component. your model, ford example, or to get the contract. pioneers have to demonstrate that they also have contracts with private payers to demonstrate working within the entire health care system. another pilot to test how to build primary-care medical mom's which has a concept where the riders get the contract to demonstrate that there also working with private payers to ensure that we're all pointing in the same direction. we hear from others, but they're

building off of the value based purchasing strategies. and we're trying to learn from this strategy's. also to tap our regulations as models for private payers. >> when are we going to see results? we have demonstrations. aligned with cml my. you mentioned that 2508 cl, of the demonstrations. when every going to see some results? >> one result that we are seeing that i believe is a combination of different factors is the reduction in cost. when you think about one percentage point being lower than the previous five years that translates. and i believe the payment policy, the innovation malls

that are being created, there are some results. the challenge is to assign cause and effect. many of these models we expect that the policy results many to be cautious sharing the day and that we see. a very anxious to see results as well. any model that is scalable they cannot be scaled. go to various purview. very much committed to share. but think one positive learning is a provider is a very eager to step up. overwhelmed by interest. >> the other system of venture results. >> we set up -- rebuild every model with the assumption that

it can be scaled. and the law requires the innovation scale for the past that is reviewed by the chief actuary. so our team develops the date capability and monetary systems and the end point hopefully being that this model can be brought to scale and passed a first pass the reverse review. >> does it make sense to share the interim? >> we're happy to work with you. share results to share data. >> thank you. >> describing your testimony. each payment reform initiative

has different incentives are. proven to be strong enough to actually change. >> said thing so. we have ted continue to study the trends that we are seeing, but they're moving in the right direction. one of the setting trends is hospitals that's traditionally operate. now assessing ties to the community to keep their riders to physician networks. one of the most exciting transformations is what you describe, we have in the program. we need to continue to evaluate. i believe what we're seeing, the combination of payment policies and continuous portions of the congress to better and they care

. >> the delivery under way in which cms has not waived. what are those initiatives? >> i have to double check for you which demonstrations and which have not. the program, all we worked hard with the oversight. the commissions. adjust this. reviewing ways to relax those requirements. at the same time your site principles that we have. that will continue to go through you that if we can't -- it providers demonstrate clinical innovation, working together in new ways really improves the point of the model the mayor comfortable to relax those

requirements. we have relied -- regulations. a time limit. we will continue to monitor whether we are seeing in the behavior is that a troubling of the gaullists and now look at the end of -- the framework that the entire oversight. >> i have to get back. >> the patient protection and affordable care act cut $360 billion to create a new incentive. this is especially concerning cents currently more than one enforcing years better benefits. an ant's care coordination and hair care coverage offered to the program. according to external estimates, the combined effect of the sequestered the cuts and higher

taxes and other knew policies will result in at least an 8% cat to the maker vances' program for the year 2014. i understand that some of the reagan policies announced an advanced are governed by the statute. but cms does have considerable discretion over many policies that have been announced. toward that end want to clarify where you have discretionary authority regarding the rate notice. as we both know, they have historically chosen to develop rates based on the assumption that congress will not patch is scheduled physician payment cuts in there for payment rates are artificially low. the believe the statute prevents cms from assuming more realistic payment rates, especially given the fact that congress has fixed the psbr for last 11 years. if you can answer that simply is

no, i would appreciate. >> there are many elements your question, and i will try best answer all. we have been tremendously pleased to see the dramatic growth in medicare beneficiaries using private plans says passage of the affordable care act the one-third. at the same time, premiums have come down by 10% in 2012 in sure that they continued at a strong choices but at the same time ensure that feelings are accurate. our notice has proposed changes to our payment methodology. one of the reasons why the rates have proposed to be lower is the fact that overall medicare spending is lower. a very good news story for the overall medicare program. we have also taken our

discretion to propose changes to the rest is just the model that we use for plan. that is an area we are seeing that does have discretion. this cms long-term practice not to assume the cost for the sdr that always happens after the rates are finalized. our rate notice. we have received comments to take a second look, i think the best way for us to stabilize the program is for a long term fixes to the sdr. >> my time is up. have another question on this, the archer price controls. i hope you'll answer that first as well. >> last question. an important one. >> i understand. >> thank you, mr. chairman. ockham.

your good work. let me ask you about your response to the fact that medicare reimbursements barry's dramatically across the country. i see my colleagues, number of us on a bipartisan basis have focused on the fact that our states are going to be clobbered the federal government for doing good jobs. reassess we get penalized for good quality and holding costs down. now we're starting, very good model, one that we like. the question of a shared savings approach. our concern is, what are you going to be able to do to address the fact that low-cost states like ours are going to be disadvantaged from the get go because we start off with this lower reimbursement rate. >> fee-for-service payments and

quality varies dramatically. we have some parts of the country that operate at very high quality levels and low cost i think all of our believers of the a portable care act is to develop policies that promote parts of the country to operate bias quality level at the lowest total cost of care. you'll also see a tremendous variation have dramatically -- >> your approach then to make sure that we don't get penalized is to say that somehow we will just lose our region as a measuring rod because -- go ahead. >> sorry to cut you off. >> we want to know how we are not disadvantaged at the outset. >> i believe the best spin strategy at the traditional fee-for-service program is

pressed to create incentives that the hospital level, the practice level, to reward high quality care at less cost care. that is why i believe value based purchasing programs is so important because over time it will reward hospitals, not to spur better quality, but lower total cost of care. the value modifier there we are working to implement is vitally important to the strategy. the overall go should be to create the incentive structure not the regional level, but at the provider level, the physician practice level because even in low-cost regions there's still tremendous variation within they're region. >> i certainly support the goal and where you're trying to go. i am does not sure we're going to get there fast unless we root out what is a baked in discrimination against a lot of parts of the country given good quality and have been penalized for it. we will be following up with you. i want to ask you one other question about chronic care.

as you know, where most of the medicare dollars go. hart, stroke, cancer, diabetes. it continues to escalate. medicare in 1965 and began today. and senator has noticed it in terms of that article in time magazine. as with the medicare dollars del. i looked at the two models, the suspected medicaid and medicare with respect to chronic care. and it looks like you all are working on a very effective model with respect to medicaid and the role of the state. the health home specifically targets coordinate care for those who have this chronic condition. it does not seem to me that medicare is doing that. in fact, there is a different meaning. but it looks mostly about like realigning payments for doctors on primary care. it does not put the same focus,

and particularly given the growth of medicare, i want to shore that up other ideas, give us a chance at targeting on what most of the medicare money goes. we deal with that 70 percent, and your long, long way. the demographic tsunami and the challenges. >> is a great question, senator. the first wave was really around building in the accountable care model and the strong primary-care medical homes within medicare. dallas phase i tower with the center for innovation immobile we're hearing from physician specialty societies. for example, and colleges, that wants to shift to a different mollen be accountable for the qualities holocausts of care. the same mr. of cardiology. so reveilles -- i believe that haze to will be to relieve build

upon the shores savings mall so we have. -- the context. channel the energy that we're hearing from position specialty societies to build pan am models specific to conditions, oncology, cardiology, and then the promise for the next wave of innovation. >> is always good to see a former finance staffers trample only come to one of those shares your and. >> easier to sit behind you. >> well, good. you know, i think, like a lot of my colleagues, go to have serious concerns about medicare fee-for-service payment system. referring to your testimony, you outline of the ways the medicare is trying to improve care coordination. i appreciate the steps the you're making. and those -- and eve continue

for don knapp. i want to focus on the system the you're stepping away from. so, is there in the defense with emphasis, is there news events from medicare fee-for-service where the value is paid based on the quantity of service provided without any regard for the outcome or quality of care provided or any responsibility to coordinate care with other providers. >> i believe that we should work , and the congress has given us this challenge, every fee-for-service payment, it should be tied the quality of care of comes and the total cost of care. we are further along with an hospital. the payments system, and it is increasingly tied to the have comes and the total cost of care within those walls of hospital.

over time from authorized and charged to transform all of these payments systems to achieve the same goals. we have to make sure that we have the right measures. we have to make sure that we don't create perverse incentives, but i agree with you, senator, that we need to work together as half -- >> medicare fee-for-service. we're working away from. there is evidence for it. thank you very much. in reference to the charts. since you mentioned coordination between medicare and medicaid, would like to bring him something with you that had discussed the most extensive medicare beneficiaries giving

states greater control over acute-care for these most 6p a beneficiary's. rhetorical questions. allies fear, wind to the tell people they haven't come the medicaid why the you have control over income beneficiaries. why did they give one of many different models to coordinate care. people with then come give medicare. would like to know what you

think because i am concerned about displaying these individuals, the splitting of the individuals makes no sense. >> i believe the models that we are testing to better integrate intel to the program. strengthening medicare. fee-for-service medicare program . the care is uncoordinated. the care beneficiaries balance between different care centers. we want to make sure that we are using the best of the medicare program eligible demonstrations,

that control to states. rather, building a very powerful federal-state partnership stake the best of the programs i think really the goal should be to make sure that the beneficiaries have better care, more coordinated care, and reduce the duplication described during your first question. >> thank you. >> thank you very much. it is good to have the before the committee. i just want to start by what i think is important news, all you have been saying today. we have many challenges around health care costs. that has been our focus as we have looked at how to put in place health care reform that works for people, quality, the present cost and now we actually reduce cost and not just shifted around which is what the health

care system has done. the emergency room, costs a lot more money. and how that we make sure what actually matches shifting costs. but you were saying right now that he wondered and 50 organizations, the rate of admissions, remissions has gone down. quality is going up. per capita costs going down. and the medicare advantage program is seen as tim% premium reduction as well as, i have seen, 28 percent enrollment. something like that. and we know that coming down, the over payments for medicare advantage. under medicare. i wonder if he could speak a little bit more to accountable care organizations. we have a number happening they're actually very exciting in terms of the possibility. detroit medical center's.

that whole support to help the sickest patients get advance support at home and prevent hospital remissions so that if you have an example, 87-year-old patient the stage for heart disease the lakes in the middle of the night and would normally come if they have concerns, go to osbourne, emerges a room, b and nostril, kafka might go to the nursing center which costs tens of thousands of dollars which is not the weather would like to spend there time, under this model, the same moment at home services, be able to call the nurse in the middle of night and get help and possibly the able to allow that patient to stay home rather than go through everything a hospital. could you talk a little bit more about the aclu and how you see that expanding and the importance of relief making sure

those are successful. >> well, we have been very surprised and pleased with the response that cms received for the ec of program. 250 a cmos. we expect that number to continue to grow. also last by congress to have an annual process to allow more organizations. what is really exciting is, we are being started by a physician practices in large part, so it is not necessarily just hospitals but of developing a ceos, to visit -- positions to step forward. recreated different tracks to find models for the organizations to show us what is possible to build more advanced accountable care models, but also to teach others were coming into the game at the same time. to your point, senator, the pcl model really is about making sure that care is paid for a non face-to-face settings.

they have greater resources to coordinate care in managed care, build the infrastructure of nurse practitioners, and other health care professionals to watch patients navigate for the health care system. i think that the ac on mall, the promising models, transform the-press service, give incentives for that care coordination and provide the face-to-face time that happens ora. >> it is certainly optimistic. i wonder if you might also speak to another type of demonstration contract, the strong start initiative which is focused on pre-term birth based on a premature births that the boat mothers and babies a risk. this is included in the maternity care, home demonstrations. and number of us are working on legislation where we call it

quality care. sanders as well. the hospital for. . focused on being able to reverse premature. preliminary results. >> reducing the number of preterm we just began this demonstration take evidence based protocols to the cement

those to care providers to create messages as soon as received them. >> i'm sorry. delivery of health care. as to do with the 2009 cms ruling or policy, i guess, i should say regarding direct provisions. hospital physicians in rural healthcare organizations recognize the unnecessary policy change. cms characterize the change as a statement clarification of existing policy in place since 2001 and an attempt for clarification retroactively interpreting the policy to require physician privilege by the hospital providing supervision and the supervisor present in the same department

at all time with all patient therapeutic services when historically that has not been practiced. i am concerned that cms clarification is a significant change in medicare policy that would place considerable burden on hospitals, especially rural areas and i am concerned a panel convened is not sufficient for critical access hospitals. my question is, would you agree to return to the pre-2009 interpretation as policy? >> then made will recall policy clarifications. i believe they may interpret it as fundamental changes. we her love concerns and complaints. i traveled through north dakota to meet firsthand with critical access providers, and we heard a tremendous concern regarding the challenges that are providing

critical access. we decided to back down, slow down, create this position, hospital prior review panel to help us understand what services required direct supervision. the understanding it is working better from a critical hospital perspective. i would love to hear your views on how we can prove that, but i believe we are working to address the concerns we heard and seen hospital care first hand, it was helpful for me to understand how to work together with the hospital community to solve this issue. >> and glad you went out and got retrospective and would be happy to provide feedback that we get from providers. it is an important issue. >> absolutely. >> your testimony allies a long list of initiatives being implemented with the goal of improving health of comes and land costs. the question is, if these

proposals are trying to significantly or sufficiently lower health care costs, why is the independent payment advisory board necessary? >> well, the independent board is outside of cms. i cannot speak to it directly. what i can say is from the person operating the medicare program, is tremendously helpful that pressure from congress and outside boards to keep spending low. we work in cms to ensure that we're building policies to keep spending low, ensure quality is improving at the same time. having the system is tremendously helpful to insure that we're pushing on all of our payments systems in a way to maximize quality and reduce total cost of care. >> does not sound like it is all the necessary free to accomplice the initiatives. those are things that cms is doing on its own.

>> senator, this focus needs to continue. the pressure need to stay on, and there are multiple ways to receive that. having that is the best way, in my judgment, to continue the focus that has been there for the past several years. >> last question as to do with electronic health records and the rate at which cms is implementing this stage one, in the last six months stage 1s been implemented or published a final rule and already seeking feedback. there are still a lot of important things out there a question the effectiveness. my question is, do you believe that cms is conducting appropriate gator you before accelerating into states to win three to insure that that program is on the appropriate path toward opera ability between health system them

providers. >> a couple of ways to answer your question. we're pleased with the rates of adoption of hospitals and physician practices to respond to these new incentives. one of the things that we hear from entities participating in the delivery models is that it would not be possible but for a strong electronic medical record. i believe that we have to evaluate the impact of the program, not just the program itself but the tell changes we're seeing with in the health care delivery system. health care emissions, as is a sign that health care systems, health care silos are talking to each other better to reduce the lack of care coordination. we are committed to overseeing the program, happy to work with you and your staff to best understand how we can overseas and are also concerned on some of our ports that each are may

lead to inappropriate spending or services. we take that concern seriously, but there were committed to ensure this program continues to expand about preserving the integrity of the programs. >> thank you. >> thank you. again, thank you for having this hearing and many have the hearings that you are having on this subject of the implementation of the affordable care act. that think it is of the upmost importance given the size and scale of them back to our economy that the agency is held accountable during the process, and as of may appreciate their reminder. so maybe you can become an extraordinary emissary to the agency as it relates to the communications. i think the main thing that many members your show of -- level of frustration about. i wanted to follow with my colleagues, senator right and grassley about the value index.

.. >> when it is the most

significant changes to the medicare program, probably the hardest policy to implement from a couple different perspectives. medicare beneficiaries with chronic conditions see many physicians, twelver 15 in one year. how you can assigned accountability for the patients total care is challenging with multiple primary care physicians and specialists. we have chosen to phase in the value modifier starting with those over 100 professionals we have confidence we can assign value in quality to a large practice we're committed to the schedule outlined by congress but this is the heart as policy we will need all the advice from this

community in the position community but we started the process taking effect 2015 we will see more rulemaking this year. >> believe it starts 2013 not fully implemented until 2017. have lots of times i'm glad you think it is the whole savings. >> saving dollars in the medicare budget because medicare will take everything we have just the aging population and living longer. but in the affordable care act, we have to provisions the basic health plan which is in annual premiums a lot lower than the exchange -- put that over here.

this population is a narrow population that somehow the agency seems to be anxious instead of implementing 2014 but anxious to give this population just above the medicaid rate and more affordable benefit plan is against the interest of the overall act. can you shed any light on that? i would appreciate it. >> i have not personally worked on this issue so i cannot speak to the decision making. and the stand you have been promised a schedule how to fully implement but we're happy to work with you. >> she will not have my support, i am not interested in how she will implement the act but interested to

live up to the way the affordable care act provision say it should be implemented in right now nobody will own ups that the states could receive 95% of the tax credits to provide cheaper care to the beneficiary's instead of making it the out of pocket expense. i am not interested in having a the schedule for what will be implemented but interested in the agency doesn't have a more cost-effective solution to save the exchange when it is a false issue in my viewpoint. >> i am understand. >> mr. blum thank you for being here it is impressive you have a three-year record of capital cost to bring

that down. the delivery system is the best hope we have to continue the trend. this hearing is important to. to talk of a recent decision with pediatric dental benefits has me concerned practice six year anniversary of the 12 year-old who died in by a state for dental care that was not available. we've made a lot of progress in six years and i applaud the efforts made. so now you are allowing for a separate deductible with standalone dental plans. i am concerned similar to mental-health services it is second-class health care instead of the essential benefit package which is what our intent was for affordable care.

what is the idea to major at t2 that does not take place by reasonable coordination of benefits to provide pediatric dental is an a reality especially with federal government in the lead to establish exchanges? >> what we learned as medicare is when -- benefits and not fully integrated that could be worse total health care consequences for a bright kid get back to with direct answers but i do agree with the general principle when benefit is broken up enough corrugated that leads to bad quality of care. i will get back to you with direct users. >> i appreciate that. the federal government will play a key role you will have a role with the state's

so there is a real opportunity as the exchanges are set up to play the leadership role. thank you for getting back to me. so with minority health to establish the disparities, we've made some progress in looking at the cancer death rates. generally there was progress made the look and specific areas with colon cancer and breast cancer, where screaming and treatment are critical to type of care, the disparities are still great can you share the commitment from t2 with minority health issues? >> it is tremendous. the affordable care act i

required t. to set up a separate office to focus on minority health to make sure programs are coordinated and responding to our challenges. what we have done with the flu vaccine now we and the capability to track claims do pinpoint sickos to target resources. the strategy to employ that screenings are taken advantage of it is to use this information to build community programs for the working with health organizations and focused on the pockets were screening uses lower than the national average but i agree with your statement. >> resources devoted to these efforts and progress made we would appreciate there.

there are many offices and we tried to coordinate efforts and if you keep us informed i will appreciate that. >> to have a permanent solution to this can we get a permanent policy? i am not sure how wise but i am concerned if we're not setting up another bureaucratic problem for those who rely on a predictable policy. can you share with us how you plan to implement that will not lead to two egyptian all problems for the industry? >> whenever we have policies that suspend to be reauthorize that creates challenges for beneficiaries. it should be you should know

your benefit levels and providers should see a predictable payments to the assured with the services it and we have tried to improve the payment policy by combining them with the same time. a combination of smarter policies and targeting factors not all therapist have fraudulent care but accommodation new york and fraud and abuse approach will hopefully relax the need for congress to constantly reauthorize the policy. >> we are grateful for your testimony and presents an your public service this is

very difficult to tackle the issues that relate to delivering better care but it seems like you're beginning to a unlocks the door so to speak. still in their early stages is there anything you have learned. >> one of the lessons when they see complete dated to beneficiaries when of the benefits the participative have is the ability not just

to see their own claims information that part a am part be prescription drug and that could lead to lack of care coordination so having an affirmation to create the management structure that is powerful for the providers with a new bundle payment initiative say to know us they had no idea they would go to attend different skilled nursing facilities. just seeing the data was one of the most powerful changes that was occurring. >> your testimony has

analysis but in particular to pages of the testimony was struck me of reducing hospital regressions is a health issue because people are sicker with the readmission that they are in jeopardy but it is a huge cost application but on page four to establish the remission program than later use say be measured their readmission rates for very expensive conditions for beneficiary heart failure, heart attack and pneumonia. on page eight you talked-about aiming to save

60,000 lives by averting millions of hospital conditions. i want your sense of how that's going and how successful you are at reducing the emissions. it is self-evident for a patient of the family and as well as a huge cost savers. >> one of our primary measures for assessing how successful we are with the payment reform strategy is the rate of hospital readmission rates have tracked rates there is a

consistent down word trend. many policies are deployed through partnerships over patients but congress acted so and said that quality of care is assessed for readmission rates. it has changed the model for health care delivery systems. i used to hear it is impossible to reduce. to many community factors and they were not built to do this but now i hear it is possible and they see results in our data. we have tremendous variations in the current rate is 17 point* 8% to some parts are much lower so we know it is possible to drive the average down further but

congress acted to save the willis us quality of care through the reid commission rates. >> thank you. good to see you again. thank you for spending time with us in delaware and think senator hatcher raised the issue to fix the sgr problem. also what is the thought as health care providers without a permanent solution doctors cannot fully participate in reforming our health care system. we have a responsibility to figure this out to.

when you sat behind these guys with your hat today policies might be acute kennedy before replacing the payment system? >> guide and the heather a new crisis in the phase physician cut creates havoc for beneficiaries and health plan payment systems and is a tremendous challenge to manage programs through the cut. there are two ways to break down the sgr with the artificial baseline that continuously assumes 28% cut

there is no way around that number that'll make congress can authorize but we need to figure out continuous waves to pay for physician payments or press management to pay for those services in their testing a variety of models to expand the focus how to expand the care model but that will not substitute for the baseline issue that congress pass to authorize. >> thank you. one of the health care costs is obesity and we're hearing large numbers through health

care. give us an idea what cms is doing for obesity and also wrote medication adherence and how we do a better job. >> with the affordable care act many preventive benefit services, annual wilma's visit to one of the greatest of opportunities to lew tie beneficiaries to their primary source for primary care. i think a continued emphasis on when all this, it is the strategy to address obesity. weir's seeing promising results as they create

voluntary incentives to better manage education management with some signs or other traditional medical channels. more emphasis. >> thank you. >> delaware is one of the 10 states and we don't have any could choices. some may say that in other states as wealth. what should we do with coinsurance that between high quality medicare and traditional medicare.

>> sometimes the challenges to expand medicare but sometimes a challenge is a payment policy and say can establish sufficient networks because one dominant health care system may continue with the house plan i don't believe paying plans more lead to higher choices sometimes you have a delicate the provider contract level but that underscores what the strategy has been to create those that have the best of managed-care plan also to make sure it is as strong as possible so that is the

strategy to make sure they are as strong as possible so they can still receive the same coordination and managing principals. >> florida has the opposite of delaware. of birds of 40 of 50% is on medicare band age. let's talk about that. the insurance companies are screaming bloody murder but shouldn't they have known that the whole idea the

changes of medicare's advantage was to cut out the 14 percent of the they had over and above medicare fee-for-service as a result of the prescription drug bill. >> before the affordable care act we said they were 14% greater than fee-for-service polyester made today and then repays even the rather. >> is that 4 percent reduction in see you have announced? >> is current rates. >> it is? >> the 2013 is still propose but today we pay for

percents of the reduction has gone from 13% down a 4% and we have seen double-digit growth and decreases of the premiums, quality is improving and it is a great sign we can continue to see the program. there are many reasons to the reduction but we have proposed trades that the goals are to that the goals remain strong. >> then here is the question. to the senior citizens the premium has kind -- calmed down but it has gone up because it is more popular now be reduced the subsidy

to insurance companies over and above the medicare fee-for-service which is part of the reform. >> we were going to do that with a quality breeding system called the stars. the higher-quality you have, the more starters you have a new work plan. seniors can walk with their feet because they will choose a better quarry plan. prep what in fact, is happening that practice is happening for two reasons.

one, they made the business decision they will do better and for those in respective of payment changes over time will have a great financial model of the program. >> where people sign up with better quality also a financial incentive from medicare than why are the insurance companies screaming bloody murder yet you are screening out the excess? >> some have not made data transformation and you want to help the plans continue that as a demonstration could not know they are facing what is proposed the

greatest challenge but i believe they made that transition from four-star / five start care would have a strong business model with in the medicare program. >> so to summarize, your goal is to have all plans for an five stars and if insurance companies get to that quality level they will make money. the senior citizen, a full very happy in the overall cost of the taxpayer is lower. is that the goal? >> and every beneficiary to have the opportunity to seek out the four or five star plan. >> i am good. >> thank you everyone.

this is clearly progress. thank you very much. of you to get back to assume the information would be helpful. thank you very much.