described earlier look at all the implications and the consensus and recommendation was to close for whatever reason, and it could be one. it was still up to airlines if they would allow the. so it's not a bag. spent you say it's up to the airlines spent the airlines still decide what they allow over -- i'm just trying to get some of the history and how we arrive at this. this is a pocketbook, whatever. this is a big deal. i'm trying to figure out how this could not be conceived as something potentially dangerous to the people on the plane. might not bring the plane down, but i think it could cause serious harm to the people who

are flying on the plane. and i would have liked to have seen more thought go into it. but it's, you know, you decided the policy. you talk to congressman richmond, but right now you are losing time with knives going through the machine. explain to me now the difference is that if you see a knife going through that at 2.45 inches long, how you going to stop it and how that would be any shorter period of time than the present policy? >> a couple factors there, congressman. one is that our policy would require first the passenger take it out and put it in again just like they would any other metal device or something.

so basically the divestiture of that. so as a coast to the x-ray up in the air just to be seen like a watch or anything else. we are given discretion to say they been looking at these items for years. our average tso as you have five years experience. they are very good at this. they will have discretion as to whether that is right around there, not going to be measuring. they are instructed not to open a nice. we don't want any open eyes at the checkpoint. and then it appears to be in compliance with new policy, they will let that go. we've had a good briefing with the union when we notified them of the polls before the first questions was, well, we give proper training to them. secondly, will you not punish them or penalize them if they make an error in judgment? and we responded a friendly in both of those, yes. >> so it's your testimony for

this committee that the present policy that you have announced and proposed to implement does not cause any harm to the traveling public? >> so, there's obviously any number of scenarios that could be raised, flight attendants raised some with me yesterday. when we get into the what if category, that's what risk-based security is about. what if, and then we fell in the blank, and then we make a judgment, decisions based on the probability, what the intelligence says. and then with the consequences may be. so there's no guarantee. i'm not saying that. there's no guarantee. part of this is just a question of what the american people and congress think tsa's role and responsibilities are. >> so if congress now says maybe you should reassess this policy, are you prepared to do that?

>> if congress does in a bipartisan way, has legislation that -- we will adopt those, whatever those issues are. given all the input that i've received, including the excellent input i received from the flight attendants yesterday, i think the decision is solid and it's time to move forward with the spent fuel back. >> the chair when i recognize other members of the committee for questions they made wish to ask the wind. i plan to recognize members who were present at the start of the hearing by seniority on the subcommittee. those coming late would recommend any order of arrival. we will begin with the chairman from alabama, mr. rogers, you are recognized. >> thank you, mr. chairman. thank you for being here and we're very fortunate to have you in this very important job. i found you in my years in this committee very confident and

capable. i want to commend you on this list that you come up with. i'd like for it to be longer, but is a good start and i think it's common sense what you have done. i'm a big fan of the precheck program, and i think it's a great risk-based approach to screening. but as i've talked to you in hearings before and in private before, we've got to push it out a little bit faster and work some of the kinks out. as you know a lot of people still confused about it. it's not at all the airports, and there's an inconsistent application. can you tell us, are you working with airline partners in ways to clear up what the program is, how people can get into, where it's available and where it's not? can you talk to us about that? >> thank you, congressman. and the airlines have been great partners on this. the five major carriers and in their several others that are coming online later this year. so i should know we are

currently at 35 airports, 35 busiest airports. ins recently the extension of five more airports. we will be afforded by the end of this month. we will add additional airports later this you but we'll will also look at the major airport category airports. that additional precheck lane at the airport. so for example, at atlanta hartsfield a on monday morning instead of one lane or two lanes, we may have three or even four lanes open to handle that monday morning rush of commuters going through there. we are also looking at ways to expand the known population in ways that allow additional people to go through. we are aware of what we're doing, pilot program in our indianapolis, have and now honolulu. we use a variation on that the day after the super bowl in new orleans. so instead of 12, 13, 14,000 people travel on average, 39,000 people left new orleans that

morning. the k-9s that you are such a strong supporter of, those are key enablers for this strategy to move forward. we are which with private industry. we put out a request for white papers saturday april 1 with would be a partnership between us and private companies that they would be begging for our criteria, of individuals who may sign up for a program such as precheck. they do the vetting and then we decrease the population that way. >> would that be something traveling public would pay for to get this? >> yes. the other aspect is, it has -- sign up for global entry. again is a great program, $100 for five years, $20 a year. but it has been public and for some and what we're working on within tsa is to have a tsa precheck sign-up through tsa

structures they don't have to go through cbp. you can go through a portal to say yes, i want to go international travel, that's why. i want just domestic at what we've found the last quarter of calendar year 12, 41% people signed up for global entry just wanted to tsa precheck benefit. so how can we maximize that? that's what we're doing. >> i've talked about this before but i also would like to see get to the point to wher where onceu sign up and approve precheck it works across all airlines. i know your airline partners have proprietary concerns. are you working toward a database that would protect your proprietary interest but also of travelers to use local airlines for precheck? >> we are, in the airlines have been good partners in this. we're not quite there yet. >> how long do you think it will be before you get there? >> i will have to get back to you on that because it has been something that frankly a bit hopeful that we would have already been there, but, frankly, i think because of

mergers and other issues, that complicates things a little bit for everybody. >> lastly, repair stations. been 10 years since we've been waiting on a rule. can you tell us that's going to happen real soon? are you going to have a rule for us to push down? >> i can tell you that. >> can you tell me -- >> there is good news. today, i got an update that omb has excepted the rule and so that starts the clock so that would be a public notice -- public notice shortly. so for the first time in quite a while we are making progress. >> do you know how long the clock will take? >> they have a review. no, 60 or 90 days, so because it is a final rule. and then sometime this year. that's where we are stinky or certain sometime this year it will be finalize? >> should be. >> that's a lawyerly response. thank you very much. i yield back. >> the chair now recognizes the

gentleman from california spend i ask unanimous consent the statement in opposition to tsa's announced change to the prohibited item list that the committee received from the transport unions worker and delta airlines be inserted into the record along with public statements opposing the changes by the coalition of airline pilots association, the association of flight attendants, the american federation of government employees, and the federal law enforcement officers association. >> no objections been good afternoon, administrator pistole. after september 11, 0 planes have been taken down by sharp objects where sharp objects would've been used to my understanding, they're been through a dense as well. spent there was one attempt at hijacking internationally but if you talk about domestically, to have been through. internationally there was one attempting to thousand and. it was a plastic knife. >> and also, zero major stabbing issues with sharp objects.

>> zero that i am aware of. >> for me then, that begs the question that we will look at the number of attempts or successes that have taken place involving sharp objects post-september 11, the answer is there have been zero, and that begs the question, and that number get better rates and the answer is no. but it also begs the question cannot get worse? and to me the answer is yes, it can get much worse. and so i ask how does allowing sharp objects on board now published the goal of maintaining zero planes being taken over or having zero incidents involving sharp objects? i also understand, administrator pistole, that the shift towards risk-based threat assessment, i appreciate the shift towards focusing on ieds, but just because this is a new threat does not mean that old threats still existed i would imagine that if we were to ask how many incidents occurred before september 11, involving sharp objects, we would also found that the answer was zero.

yet the threat was still real and tragically, we pay the price on september 11. [inaudible] >> on this board, three knives -- [inaudible] >> reflected by the checks in the end. i think most people out there would have a hard time telling the difference between what is allowed and what is banned. and i'm wondering, do you think that any one of these nights would be more or less dangerous than the other? and do you think one of these knives would be more or less successful in taking over an airplane and causing another terrorist attack? >> thank you, congressman. erase a number of good points and our working group and experts consider those issues in quite some detail. in terms of context, the international, again, eric community has allowed anything six centimeters or short since

august 2010, here in the u.s. terrorists don't need to use those. they don't need to use these. they have things on board already, whether it's in first class, a metal knife or fork, whether it's a wine glass or wine bottle that they break and use. there are any number of things that could be used as a data instrument. the whole purpose of risk-based security if you take information we have, both about tears and 10 and tactic to make sure that we're preventing prior attack, the hijackings obvious of 9/11 which multiple layers of security, i'm sure you're familiar with not just physical security, on the classified side, the intelligence, about who is traveling, all those things. so it really gets into what if the intent of the person on board as opposed to the object. so if we're sent to focus on objects, and we're always behind the eight ball. the whole purpose is to focus on intent of the person.

so comes down to mission tsa, is this to prevent disturbances by andy beta passengers on board? i don't think so. >> wouldn't you agree that if we looked at the check knives that would still be alive which appear to be just slightly smaller in size, in order to attack they could do great damage to a flight attendant and great amateur passengers, and perhaps and hopefully not, but great damage to people on the ground in a plane could be used as a missile? >> if you're asking whether i think individuals with a small pocket knives could take over in her car, i don't think so because of all the other list of security we have in place, including the thousands of federal officer who are armed, the locked cockpit doors, the crew and passengers who would not allow that to happen. if we had a group of terrorists if you will get on a plane here in the u.s. without anybody in

the law enforcement community knowing about them, they haven't come up on anybody's radar, then we had a feeling of the program rather than just at a checkpoint spent and i would just conclude, mr. chairman, by saying for 11 years we have not had an incident since it didn't 11th. and i think largely because of a lot of good work tsa is done, and so that's what i'm asking why now and why do we want to go back? so thank you, administrator. >> the chair recognizes the gentleman from pennsylvania. rookie mistake. the chair now recognizes the congresswoman from indiana, ms. brooks. >> [inaudible] >> having been a former united states attorney, i actually served at the time tsa was

formed, and have been a member of the joint terrorism task force, have helped lead the effort and have been involved with law enforcement, and your former agency, the fbi, for quite a number of years, and have often, and have even visited tsa in my new role at the indianapolis international airport just within the last month, and visited with tsa, david kane, running the agency there. and i have certainly done -- have been impressed by the manner in which tsa and your previous agency of the fbi goes about making the threat assessment, about making changes in rules and regulations, and the amount of time and effort that goes into making those changes, and have incredible faith in our law enforcement

agencies. i know that the indianapolis airport is now part of, as we talk about changes, whether it's in the type of items allowed, but you've also just order a risk-based secretive program as you've mentioned called managed inclusion, and it's being piloted at the indie nabs airport as well as tampa. can you please expand on that a bit about the managed inclusion and with the expenses been, with the customer expense has been, how it's being administered and how it's impacted not only efficiency but what you hope is what the. >> to safety. of the passengers, and of those who travel. certainly those, the pilots and the flight attendants who travel. how is managed inclusion brought into the whole risk assessment procedures that tsa is administering? >> into congresswoman brooks.

managed inclusion is a natural outgrowth and one of the initiatives from the standpoint that i heard from this committee many times and from many members of congress and the flying public, the fact that virtually everybody traveling everyday is not a terrorist so why treat them as such? so the idea is to have a precheck line with those who are in precheck him and we had over 70 people now go through precheck including indianapolis, and i received positive reports in terms of interaction and hopefully you've had a positive experience also. managed inclusion is recognition if we can assess with some confidence that travelers or in a regular lane did not have an explosive device on them such as we saw in the video, something like that. through a passenger screening k-9, a dog that screens basically the vapor, doesn't pick up on that, and then

officers don't observe any suspicious behavior, then it the regular line is busy in the precheck lane is not so busy, people can be invited to go through that. so we started on november 1 in indianapolis. a day before thanksgiving, which everybody knows is a very busy travel day, at a checkpoint of course one of two checkpoints in indianapolis you quit 31% of the traveling public go through the precheck lane. and again it was a matter of as they went through they were allowed to keep the jacket on, the belt, shoes, or laptop in a carry-on bag. they would basically asked them as they came through in terms of trying to get speed, how was it? people almost unanimous said hey, great. appreciate this. if you did enjoy this, basically as a free sample, sign up so you can have a least a high competent to be able to go to the on a regular basis. so we are piloting it and continue that in indianapolis,

honolulu. we're looking at other airports that might make sense in but it really helps us try to provide it in the most efficient way for the most significant threat. >> and is that essentially the type of system you used after the super bowl in new orleans, and will there be those types of efforts at other airports where you have large contingents and large gatherings of people? >> exactly. so the notion that in new orleans as i've mentioned, where the our special events, where the huge influx of people we send in over 100 security officers and then reconfigure one of the main checkpoints where there were six lanes, make five of them basically precheck length. so even though there were long lines, these 39,000 people, people were moving instead of standing there for minutes at a time, people were moving virtually the entire time. and got very positive feedback from a number of people, especially ravens fans. >> absolutely. thank you very much.

i yield back. >> thank you gentlelady. i see that the gentlelady from hawaii, ms. gabbard has also joined us today. i ask unanimous consent she be able to participate. without objection so order. at this time the chair will recognize the gentleman from texas, ms. jackson lee. >> chairman, thank you, congratulations for your leadership of the committee. congratulations to my friend and colleague, mr. richmond, for his service as ranking member. mr. peston, welcome, as you know we've had a very strong working relationship along with ranking member over a number of years. i remember distinctly the creation of tsa being on the select committee on homeland security at our member distinctly sort of directly -- directing the tso process of recruitment to be more effective way before your time to reach out into neighborhoods across america pick and i think it generated a team that is

committed. i supported you in your uniform change. i've supported you in the sense of the law enforcement concept, and i congratulated you on the democratic convention, how professional those individuals were. let me also acknowledge nick daniels who i know is well-trained having come from this committee, who is here with you right in back of you. but let me say that process is obviously a concern, and i've always commented that to hear an announcement in the news, however a member might have missed some of the notice to the office, is really both disappointing and challenging. because you are associated with tsos, and i've spent a lot of my legislative career defending the competency of such. let me just ask a quick question. how will sequester impact your -- it needs to be quick. i understand mib a thousand that

is going to by attrition, and others. can you just say yes, about 1000 what to attrition or retirement? >> yes, about a thousand at the end of may. >> would you cut any others on top of that? >> we have not put a hiring freeze on yet and we're just starting to limit those slightly. >> so there may be longer lines? >> there may be later this spring. clearly in the summer. >> no windows and take it to the epicenter, the crisis. school let out, et cetera. so today as we speak on april 1, can a mother with two or three children carry her bottle of water and special type orange juice through the lines? >> no. medically necessary liquid? >> let me just say, she likes a special brand but it's not sold in the concession. so these innocent bottles of orange juice and water cannot be taken in? >> they cannot. >> and if i was to splash a

flight attendant with orange juice and water, and i know there are flighted tennis and i have great respect for them, i assume they will still be standing? if it was a bottle of water and i was a disgruntled passenger, they would be okay? >> yes. >> we were thing. certainly wouldn't want to be thrown but if you just took the water, they would be okay. >> sure. >> so here's the question, and let me be above board. you may have had a meeting with the flight attendants. over the years i've introduced legislation for mandatory defensive training. you had an answer to a question that i would beg to differ. your absolut vodka my good friend is going to allow me to share his example. i thank him for his leadership. you are probably right, mr. peston, that the airplane would not go down, but what you have is a compact area that

flighted tennis or data with passengers, and other the new laws, no doors will be open for their release. and my question to you, i'm going to even leave out a little manicure set, that if is going to take this knife and i like my friend very much, and to collect his trim, we believe? >> i assume. >> what he believed speak as if you're saying if you stab him? yes, i assume he would bleed. >> so what we have is either an organized series of activities that might injure every single flight attendant that is on that plane. making that plane almost a moving disaster target. now, we know that we have some very energetic passengers, potentially, that would come to the eight of these flight attendants. but as far as i'm concerned it would be a the mobilized, a crisis situation that would

occur. and i understand the logic that says my tsos have more important work to do. but my concern is, if it can injure, then it is a problem. your suggestion is that these are not eligible because they equate to something that could be explosive. some years ago we were talking about technology to detect what this might be. i'm sorry we didn't get to that point, but the very fact that we have, and i will not do anything to my good friend. let me clear the record, nor will i do anything on an airplane. but we cannot in any way suggest that someone with some sort of mental illness, some sort of situation that brings about a tragedy, some series of incidents that we've had with an airline pilot who have some sort of medical emergency that

required him to be tied down. and as i know, let me just say this, generally speaking, domestic flights, generally speaking, air marshals are there but no one knows what the schedule is. i just want to live at the. is that accurate? >> yes, ma'am. >> here is my final point. final point is, it is her difficult for me to believe that we don't have mandatory training for our flight attendants, that the solutions will be that we will add voluntary hours. and you can add to me whether you have the money to voluntary trained them, i'm not sure, i know it's an airline issue, the fact that you are allowing a weapon that can cause a terrible injury, and you are allowing it to come on without pausing for a moment with the concerns of members of congress. i'd like this to go back to the

drawing table and i'd like congress not to have to introduce legislation, though i intend to do so, for that reason. you need to stop this now. these cause bleatings. these cause injury. these can cause a terrible tragedy. and i don't want to take it to the next level but it can possibly cause someone to lose their life's been if i may respond in? >> i will give the administrator a brief moment to respond. >> first let me thank you for your strong support to get the nature champion of the workforce throughout her tenure, so thank you for that. i think there's a fundamental disagreement or philosophy as to whether tsa should be responsive for disruptive passengers. so i view what the legislation of tsa and our mandate is to keep terrorists off planes. to whether the object as i've had almost 27 years as an fbi agent and having a weapon on the, and then when a child because i was authorized to

carry the, that was not a concern because there was no intent to do harm. if the suggestion is that we should somehow be able to screen for mentally unbalanced or people who drink too much of light, to try to keep them off planes can i believe that's outside the scope of our mandate. and we sure don't have the budget to do that. so i don't think you're suggesting that but i wanted to be clear that that's not what we are focused on. the fact is there are so many objects already on flights that can cause, harm your talk about. my question, what is the intent of the person with a dangerous object? if it is a person you described first as a terrorist, then there's a challenge and i think it's a good idea to work with the airline to provide additional training for flight crew, everybody involved, and we do not have the funding for that. thank you spent i think the administrator for the answer. we understand we have a hard stop at 430 time that i want to get through mr. payne and ms. gabbard's question and my

hope is we can get through a second round as soon as possible. the chair recognizes the gentleman from new jersey, mr. payne. >> thank you, mr. chairman. i'd like to thank the ranking member, mr. richmond, on the committee and also the ranking member of the whole committee for being your. unicom and just listening to you, mr. pistole, you know, i don't member hearing you say that tso have more important things to do. but i don't think there's anything more important than making sure securing the safety of passengers, and irrespective of what size the knife is, i think it is a flawed policy. for the reasons that you just mentioned, why did anyone another opportunity if they are intoxicated, if they are

mentally ill to be in the position to have something that they then could use, is a problem. but that's not my main focus. the committee has done a great job in bringing that issue to light. i represent the 10th congressional district of new jersey that includes newark airport, which is unfortunately had a troubling security record over the last several years. and it's interesting, you know, one of the planes that emanated on 9/11 came out of newark, and the reason that this committee since now, because of that tragic event, you know, 11 years ago, you know, major security breaches continued to occur there. some deeply concerned that the proper resource is not been allocated to new york liberty. and that insufficient training

is not being conducted to ensure that tsa management has the resources and the ability to do what was necessary to make travel safe and secure for people in my district, and the millions of people who use the airport every year. these breaches are nothing less than alarming. just last week the press, the press, the press reported on some very disconcerting results of a covert, so-called red team test, that was conducted by tsa at newark international airport. it was reported that the tsa had failed to detect a fake bomb being carried to the airport by an undercover tsa investigator. now in its response to the -- >> we will break away from this hearing and take you live now to capitol hill. and medicare payment advisory commission releasing its annual march report to congress today.

that report containing recommendations on updating medicare payment policies. the commission's chairman glenn hackbarth will testify he for this house ways and means committee on health, and the report on the adequacy of provider payments and the medicare program. we see texas republican kevin brady is the chair. live coverage now on c-span2. >> provide financial incentives seeking most appropriate care in the most appropriate setting. it's my hope the committee can work together in a bipartisan way, to advance these much-needed structural reforms, to save medicaid for the long haul. today however we are hearing from medpac on the topic of medicare payments provided. we are pleased of the commission to discuss recommendations in its report which was released this morning. for updating payments in a way that assures medicare families have access to high quality care, also being fair to local health care providers and the american taxpayer.

the insight and guidance we received from medpac is very important as we seek ways to reform medicare and medicare programs. for instance, improving the accuracy of her pride terry payments. the medpac recommendations also focus on payment system changes that encourage accountability by local health care providers to deliver high quality care at the most affordable cost. these are important discussions as we move towards payment that reward providers for the quality they provide rather than the quality of what they have done. i really appreciate the point that ranking member made in her first hearing, to paraphrase he said we need to bring value over volume to the medicare program. the challenge of course is to find common ground as we seek these disclosure and -- solution but one payment i want to mention is the physician payment system. democrat or republican, truth is enough is enough. this year right now we have a golden opportunity to eliminate

the long problematic sgr once and for all and reform the medicare pays physicians. i know that medpac have a significant thought into this topic. i look forward to hearing more about those ideas today. structural changes to the program and the assistance that are accurate and by the right incentives are complementary pieces. i applaud the medpac commissioners and staff for the work they've done in this area, but as i mentioned last year, i respectfully ask you to do more. it's abundantly clear medicare is on an unsustainable path. in fact, two independent agencies, congressional budget office and actuary department of health and human services estimate that medicare is part b trust fund will be bankrupt by 2023. additionally, cbo projects that by 2022, medicare spending will top $1 trillion, 90% more than we currently spend. these trends continue we can't save medicare for every generation.

or guarantee a sustainable future. findings solutions to these problems now is our challenge. president's health care laws didn't lower health care spending. congressional budget office director element or free so they testified they could not attribute any particular factor to explain a lower health care spending other than of course the economy. additionally, cbo estimates that obamacare delivery changes would yield a minuscule $417 billion in savings. that barely registers. but regardless of how we feel about health care law, going back, medicare's hospital ensures trust fund will go bankrupt in 10 use. we have to act now. the clock is ticking in today's hearing to help us address this challenge. medpac's analysis is valuable in helping us better understand when growth in medicare spending is appropriate and when medicare payments need to be adjusted. we also look forward to

receiving medpac's next report to congress in june which will highlight additional opportunities for reform beyond the changes in the payments. we rely on medpac's recommendations. that's a key element in designing policies to improve the medicare program and say that over the longer. so i welcome are invited witness, medpac chairman glenn hackbarth. thank you for joining us today, and i look forward to hearing your testimony. before recognize ranking member mcdermott for the purposes of an opening statement, i ask unanimous consent that all members written statements included in the record. without objection, so ordered. i now recognize ranking member mcdermott for his opening statement. >> where is your saint patty's day tied? >> i'm in trouble. spent you know it's coming. >> i'm in trouble. >> mr. chairman, i'm grateful for your calling this hearing today. it's one of our regular reports at cms, and it's important that

we actually have people come in and make these reports and give us a chance to ask questions. and i appreciate mr. hackbarth coming back. you hear the other week. we won't always agree on the recommendations that medpac makes, but it does good work and it takes three sleet its charge to ensure appropriate payment access to government oversight keeps people accountable for the interest of the people, the experts of our field. it's sometimes easy for us sitting appear to stand on our respective sides scream at each other across the aisle. but your agency can help us define -- to find common ground and to counter the self-serving claims of the special interests our offices are filled with them. today, the facial -- as a look at the portal care act opportunities to explore innovative payment and delivery systems, some of which are based on medpac's work.

but the freedom to think in new ways about how to pay for services outlined the needs of providers and patients and delivered care, i believe we can continue to improve costs and quality for everyone until, while still protecting medicaid. appreciate medpac's commitments to evidence-based data. i'm one of those who believes that you can have whatever opinion you want, but you can't have your own facts. and i like the fact that you are a fact agency. this agency has proved itself to be credible, ma nonpartisan and committed to transparency, and well-founded methodologies and results. medpac's efforts can take a coverage of what each year at the underlying economics of each section, drive buffer conditio conditions. we share your goals and ensuring payments are both appropriate and adequate. medicare is an entitlement. to a defined set of benefits. it is not an entitlement for

specific reimbursement for providers or plans. while we want to ensure that hospitals and doctors and others earn enough off of medicare to preserve, sometimes people lose sight of the program's purpose which is to serve the people. we want to ensure that the payments are appropriate, not too high. that said, given medicare's size and the health needs of the medicare population, and their reimbursement rates, many in the health care sector have made and will continue to make a very pretty penny off the program. i remember when doctors didn't have a certain way to get paid when they saw old people. they had to rely on the children of or the collection agencies or bags of potatoes, or whatever. so of people coming to grips poverty over proposed legislation or piece of legislation, we would all be

well advised to take such claims with a grain of salt. and they we should pick up the phone to call medpac, find out just how pressed the group in question is. even so, while data are important when must let ourselves lose sight of the people behind the numbers. as health economists know to come you can put a person on a hot stove and another one on the block of ice, on average sure, they're comfortable temperatures. individually they might disagree. with that in mind i hope that we will receive the recommendations of the context of our current environment and consider the challenges of the year ahead. in the time since these recommendations were voted on, the sequestered has been implemented with no end in sight. republicans failed to address this in the budget. instead of replacing across-the-board cuts with more justifiable targeted proposals, they kept the sequestered and added to it. these recommendations are

healthy and timely reminders that there are still plenty of well justified potential provider savings that should be pursued before asking patients to pay more. and i thank you again for joining us, and we look forward to your testimony. >> thank you, mr. mcdermott. today we're joined by glenn hackbarth, the chairman of medpac. mr. hackbarth is no stranger to the subcommittee having served as medpac's chairman for more than 11 years. is appear before the subcommittee numerous times. we are pleased to have you with us. we reserve by the minutes for your opening statement to your entire written statement will be made part of the record, and welcome. you are recognized. >> thank you, chairman brady and ranking member mcdermott. i appreciate your kind words about medpac. since they're so new members of the subcommittee i thought i would take just a second to introduce medpac a little bit further. we are a nonpartisan advisory

body to the congress. we have 17 commissioners appointed by the gao. six of our current commissioners have clinical training, either as physicians or as nurses. five have experience as hospital executives. five as leaders of integrated delivery systems. four in health plan management. two former presidents of the national world health association. three with high level government experience, as well as several eminent academics. and, of course, some of us have more than one of these credentials in our background. by law, are march report presents to the congress update recommendations for the various medicare payment systems. our statutory assignment from you is to recommend rates that are consistent with the efficiency delivery of services to medicare beneficiaries. our analysis of payment rates

considered the supply of providers, their access to capital, their financial performance and the quality of care they provide. in considering an update recommendations, we start with zero. in other words, keeping the rates at their current level. any increase in the rate or decrease needs to be justified with evidence in one of the categories i just mentioned. our march report this year includes a total of 19 recommendations, including ford related to special needs plans under medicare advantage. across those 19 recommendations, there were a total of 302 yes votes from medpac commissions, five no votes and three abstentions. so there's a substantial consensus in the commission in favor of the recommendations in our report. if i could highlight just one thing in my opening statement it would be recommendation to

repeal the sgr system, sustainable growth rate system, medicare physician payment program. as you well know, cbo recently we estimated the cost of repeal, and it is dramatically lower than it has been in recent years. from our perspective sgr repeal is now on sale, and the sale price may not last so we urge you to take advantage of this opportunity. we also urge you to include in the repeal legislation to other things. one is provisions that we rebound space between cognitive and -- with particular emphasis on primary care. second provision designed to encourage movement towards new payment systems. as we see it, payment reform, that is, moving away from fee-for-service to new payment

models like accountable care organizations, fondling and bundling around medical home, moving to payment reform is the single most important step to improve quality for medicare beneficiaries while minimizing taxpayer burden. payment reform is essential because it encourages and supports delivery system reform whereby clinicians and other providers, except joint responsibility for both the quality of care and the total cost of care. medicare's current payment systems which are silent payment systems based on provider type, in fact facilitate if not encourage fragmented care delivery in inhibit collaboration across providers, it inhibits the smooth flow of resources to where clinicians -- [inaudible] so those are my opening comments, mr. chairman, and i look forward to answering your questions. >> thank you, mr. chairman.

let's start at the beginning. the report acknowledges what we all know which is medicare will be broke in 10 short years. out urgent is it for us to act now to make that program solvent over the long-term? >> so as i indicated in my comment, the most important thing for us to accomplish is to support reform in care delivery. that's where the action is. and assorted changes that we're talking about, for example, moving to accountable care organizations, around episode require providers to develop new relationships with one another. we believe those relationships are important the quality of care with low-cost, but they will take time to develop. and so moving in that direction now allows us to have the necessary delivery system reform in time to help us five or 10 or 15 years down the road. >> is it possible to make social security solvent for the long haul without reforming

fee-for-service? >> no. we think reforming fee-for-service is an essential part of the effort spent back in the report you make to recommendations, generally, one on the principles of sgr reform update, and you outlined principles but can you talk about, because once we get the replacement right, tells us, we have to do the hard work on the offset. so can you talk before this committee some key until the sgr reform and your next of offset for once to get the replacement right to? >> so the major principles i touched on in my opening statement, repeal, rebalanced payments within the physician fee schedule, and encourage movement the new payment systems. in terms of offsets, in october 2011, we sen sent this committee and the other committees in jurisdiction of

let her with almost $300 billion in offsets. actually let me just clarify that. we had about $200 billion in offsets, and $100 billion in suggested changes in the physician the conversion factor. so at the time the total cost repeal was about $300 billion, and we have a package that would roughly achieve that goal. since that time as i indicated, the cost of repeal has fallen dramatically. so not all the things on that list would be required. we do have roughly $100 billion worth of current unconnected medpac recommendations before this committee and the congress. we would also think it would be appropriate to have some balance between physicians and other participants in the medicare system. in our october 2011 letter, we

have the balance when their physicians, two-thirds of all of the other participants in the medicare system. there is no magic to that split but it might be still a reasonable approach. >> final question really advice for the committee. as we look at this, it's reminds me trade magazine every year, you know, and addition of what the people are and. you sort of thumb through it to find out what people make on average. looking at the support look at the margin, to sort of in the past who is right for picking, you know, in provided that's going forward. but that's been part of the problem. we are really not focus on quality reforming this process. so it's not so we inversely driven. how should we as a committee use this as a tool in designing a permanent reliable quality

driven sgr, or replacement for the sgr? >> as you say, we don't think that you only look at the margins. in fact we think sometimes looking at average, margins is deceptive. what you have asked us by our statute is to recommend consistent with the delivery of service. and sometimes the average margins don't help you understand what the efficient level of payment is. so we tend not to base our recommendations sold on average margins. that is just one input. in addition, we look at quality of care, the entrance and exits of providers in particular area. within our recommendations, there are, however, certain provider groups, namely skilled

nursing facilities and home health agencies where we have seen consistently very high margins for a very long time, double-digit margins. and in those cases we've recommended an actual we basing of the rates. in other words, don't just update from the current rate. lower the crime rate. so that it is -- for the current rate. so it is more with the cost of the. so those are two areas we think in particular there is an opportunity, skilled nursing facilities at home health agencies. >> thank you, chairman. mr. mcdermott? >> thank you, mr. chairman. one of the issues that we hear about all of us go to various events, people, but i can't find a doctor and i'm on medicare. i know you get an annual survey but i'd like to talk about what you found in that. >> yes. each august, september, we do a

survey of 8000 people, 4000 medicare he beneficiaries and 4000 people who are just prior to medicare eligibility. by age. and are privately insured. and would ask a series of questions about the access to care, and then also ask them about their ability to find a new physician if, in fact, they are seeking a new physician. on the issues about their satisfaction with access to quality of care, medicare beneficiaries have consistently reported higher satisfaction with her access to care than the privately insured patients just under age 65. the differences are not huge but the pattern has been pretty consistent over a time. on the questions related to finding a new physician, if you're seeking one, medicare

beneficiaries report about the same level of difficulty as the privately insured patients. those numbers have bounced around a little bit in recent years but they're basically the same. >> is that basically the question of finding a primary care physician? >> yes. actually we ask questions of both. we asked if you're looking for new primary care physician, and the separate question if you're looking for a new specialist. the challenges, both in medicare and in private insurance tend to be in terms of finding a new primary care. >> so as we take on 30 million new people under the account will care act, we are going to be in some difficulty with primary care physicians? >> we have not looked specifically at the implications of the affordable care act, but we do see indications, particularly in some portions of the country that finding a new primary care physician is difficult, again for both

medicare and privately insured patients. this is the reason why in talking about sgr repeal i emphasize the importance of increased payment for primary care. that is where we see the potential access problems for medicare beneficiaries. >> can ask a question about medicare advantage programs? they cover everything that traditionally medicare covers. are they allowed to play with co-pays and other things to make a difference in how their use or to limit the risk? or make people say well, i think i'm going to get out of here because i've got something that isn't covered, or it costs too much, or -- >> yeah, so they do have some flexibility about the benefit design. and for the reasons that we discussed in the hearing a couple weeks ago on benefit design can we think some

flexibility is appropriate. in fact, we would like to see them have a bit more flexibility than they have currently in some areas. for example, having tailored co-pays for particular patients with particular illnesses. that's the idea behind value-based insurance design. having said that though, you need to take care that benefit design is not used to enroll a favorable selection and discourage the high-risk patients. so that flexibility needs to be within a regulatory framework that protects against risk selection activity. so we're trying to strike a balance. flexibility for more value-based insurance design without scanning behavior. >> tell me about the spread if i'm in one plan and my diabetes is taken care of and it cost me $100 the other when it costs 40,

does that spread across two programs and co-pays? a 5-dollar difference? what are we talking about? >> i can answer that question off the top of my head, dr. mcdermott. i would be happy to respond to that in writing. >> as a final thing, i noticed in today's paper the ftc is suing a hospital in idaho, for buying a doctor's practice under the noncompetitive question. some of the things in the aco, or in the aca, the affordable care act, these accountable care organizations come it seems to me that there's a lot of problems out there about how you control costs and how medical systems can move to do that, that are inherent in the law. i would like to say something a little about that. >> this is another challenging area.

in general we believe that developing formal relationships among different types of providers is a good thing and a necessary part of trying to improve the value of care. when providers of various types work independently without coordination, we know what the results are. that's the experiment we run for the last 40 or 50 years. we get a high cost and uneven quality. so we favor some integration combination. that doesn't always have to be in terms of a formal merger or ownership. there are a lot of different ways that configuration can happen. having said that, there is a fear that as these combinations develop, they will have undue market power, and be able, using the market power, get very high rates of payment from private

payers. if not from medicare. and so there's a balance to be struck. and you know we don't want complete consolidation, but we do need some we organization of care. this is one of the reasons why i personally favor physician led acos. if all of the aco development is hospital focused, you tend to get more consolidation, and more market power that ca could leado higher prices for private payers. ..

in a private practice it would be hard for me to do a quick count -- >> you do have some? >> yes, we do. as i said, we have in our current membership we have six clinicians. for example, one, dr. tom dean practices in a small town in south dakota and brings to us the experience of family practice physician in the environment. >> good. as you know ambulatory surgery payments are based on consumer price index urban which reflects inflation in the entire economy. ned pact previously said cpiu is

a poor proxy for an input price increase since there is no empirical evidence to suggest that the inflationary challenge is different from hospitals they both have to hire and retain nurses and purchase a similar medical supplies. shouldn't the payment updates reflect the outpatient hospital market basket otherwise payments between the two sectors will continue to diverge over time as cpi tends to lead the market basket by about a percentage point. >> as you indicated, mr. johnson, we don't think the cpiu is an appropriate adjustment factor for the asc's. we recommend the cost data be collected from asc's. one of the purposes of which would be to develop in a more appropriate index for ascs although there are some similarities in the services and

inputs used by ascs and hospitals the mix is significantly different. so even the hospital in -- inflator wouldn't be. >> how do you adjust for the difference is? >> right now without the cost data it is very difficult to do that and that is one of the reasons we think ascs should be required for the cost data to medicare. >> and they don't do that? >> they do not. >> in every part, the commission found the current system undervalues primary care and undervalues specialty care. i agree primary-care physicians are different. i am also aware of potential primary care shortages over half of doctors in texas are not taking new medicare patients. however, is medpac concerned about the access to the cognitive specialists who build a lot of office visits but would face cuts under your

recommendation? >> we have made over the years a series of recommendations about how the relative values are calculated in the physicians fi schedule. in general, those recommendations would increase the value for what we refer to as cognitive services coming on procedural services so specialists to provide a lot of the services actually could benefit from our recommendations. whereas those that are doing procedures or imaging would tend to be paid less. >> okay. thank you mr. chairman. >> thank you. >> mr. chairman. >> thank you for the work medpac does. you're probably familiar with the recalculation of medicare spending between now and 2020 that cannot in february the

updated their baseline from just last august. this is what they found a pity that they found a reduction in medicare spending during that time period of 3.5% or $382 billion which is a significant which tells me something is happening out there something is turning and it may be a little too early to tell what exactly does and may give us hope that we've been working with medpac throughout the years as far as recommendations you've been making to this committee in the delivery system and payment performed which was included in the health care bill. and i don't know if you are familiar with the article that came out today last week on march 4th it's transferred out of icu. i would ask unanimous consent to have this article in certain the record at this time. >> without objection. >> the article states cost measures and all appear to be helping keep medical prices flat according to health care providers and analysts.

also every session which ended in june of 2009 especially for optional care such as cosmetic surgery. dan the adviser of the health was quoted as saying we are beginning a long period of adjustment in health care. institutions are taking those cost control and quality improvement more seriously. a little bit later in the article it states in the four years leading to the expanded health insurance, the government has used authority and the patient protection affordable care act to try to reshape the economics of health care through regulation and financial incentives. that appears to be keeping a lid on medical costs. and then later in the article the chief executive for 13,000 employees hospital system up in duluth minnesota was quoted as saying it all goes back to the affordable care act and how it is changing so many components of the way we do business.

the language argues not only on the health care business is completely different from the language argues even five years ago. and again there is more to the article. so if something is happening it's starting to gain traction right now and obviously we listen close to what they were recommending through the years and included virtually all of the delivery system reforms that medpac was making in order to help drive the system to better quality, better access and a better price. and now cbo is saying almost $400 billion savings in medicare over the next eight years and it's still somewhat out as far as driving that. those you're talking about a little bit earlier the medical home is moving forward to the hospital readmissions as part of aca and a bundle of payments and

all that what do you see as far as the implementation of the delivery system and payment reforms and regards to why are we starting to bend the cost curve in the health care system and whether or not that might be sustainable in the long term. >> i am hopeful. the hospital executives and other providers without being convinced there are meaningful changes happening. as to which share of the change in the trend is attributable to those real changes in the care delivery versus temporary factors like the economy i don't know the answer to that. there is a robust debate about that issue. i would say so even if you believe as i do that there are real changes happening, that is not quite the same thing that

they would be sustained in the long run. in the 1990's i was the private health plan executive and the ceo of a large multi specialty medical group. that is as you recall the period of managed care. real changes are happening in health care delivery in the 1990's and in fact we saw a significant slowing of the rate of increase in health care costs. the budget of last. that wasn't sustained. the changes in delivery, the change in health care spending provoked a reaction. whenever we try to bend the cost curve, there will inevitably be some winners and losers. and we know that the losers will push back at some point. >> i hope in the future that medpac shows how we can exarate some of the financial incentives or payment reforms given the

track record that's being established that might be helpful for the committee. >> and i think that the reform is the perfect opportunity for us to start making those changes together. >> thank you mr. chairman. mr. hackbarth, thanks for your time today. back in the 2007 report and now it's reiterated. you're concerned of the ease for which critical access hospitals could manipulate the medicare hospital wage index system for a prospective payment system hospital and medicare dollars and entered the one state entirely since the enactment of the affordable care at this scenario has occurred and is referred to as the boom state boondoggle why is this your concern about it? >> in the hospital payment system we adjusted payments for

local wages across the country since there is so much variation and that is an appropriate thing to do. the problem that we have had is over the years there's been a lot of ad hoc changes in that system for adjusting wages, special rules, special categories created. and what we saw in massachusetts, the case that you referred to is one of the special rules being manipulated for the purpose of increasing medicare payment. we recommended in 2007, as you know, a complete overhaul of the wage index a system including wiping out of the special rules that subject to manipulation. recently the institute of medicine was asked by the congress to look at the same issue and came up with recommendations quite similar to the ones we made in 2007.

so we need to get away from the special provisions that were sort of a rifle shot additions to law because they are subject to manipulation. >> this is a zero sum game, right? when these things are manipulated, and i know that is a characterization that i would characterize it as a manipulation when they are manipulated they are manipulated for the benefit of one at the demise of other hospital or the demise of another state. >> that's correct. the wage index system is a zero sum game. we distribute a fixed amount of dollars. let me shift gears. senator kirk had a difficult golf experience and then he suffered a stroke and we've been heartened by the story of his recovery and now his return to the senate he gives an incredible amount of credit to institution in chicago we have a

sister institute in the suburbs called mary ann chollet and i want to get to this question of the 60% rule and how this is the 75% rule and the 60% rama. congressman hyde, my predecessor, served in the last days at marion joy so it is an institution -- it has a great reputation but they are an incredible downward pressure. when i speak to the president of marion joy, she said they evaluated more than 7400 patients only admitting the 2400 patients, which means two out of three were turned away. it's a selective admissions process, and their argument is look, this shows the system isn't being abused and so forth. can you speak to the 60% rule

and what happens if it rose to 75 percent because we have real concerns if we move in that direction. >> in the portion of medicare we have several different types of providers. we have the and patient rehab facilities we have long-term care hospitals, which of skilled nursing facilities and the home health agencies and the patient is requiring services after hospital admission can end up in any one of those for places. what we see in the data is the patience with the same diagnosis, the san clinical problem. >> the challenges that the payment rates for those different settings are dramatically different. so in the case of the in patient rehab facilities in particular, they are very important

institutions for patience with a particular set of needs that we need intensive rehabilitative therapy. in the skill facility or health if it costs much higher in the in a patient rehab facility. and so, the 60% rule or the 75 percent rule is a crude attempt to assure that the and patient rehab service intensified cost service is focused on the patient who need it and cannot be cared for just as well as a skilled nursing facility. it is an arbitrary rule. it is a crude rule and the sort of rule that you need to impose when we don't have an accountable party convention

coupled with responsibility for the cost and quality. so the direction that we want to move away from these are bircher a rules like the 60% to the systems where a clinical organization would say this patient with hip replacement can go to the skilled nursing facility, this patient with a more complicated problem really needs to go to an inpatient rehab facility and that person is accountable for the cost and quality-of-care and the payment system there is no accountability. >> thank you. i yield back. >> the whole challenge on the care and the reimbursement in the settings are clearly going to be focus of the committee going forward so thank you. >> thank you, mr. chairman. dr. hackbarth, i must say that you may be 17 unelected bureaucrats, but i think medpac has over the years served us

very well. it's too bad there isn't a mechanism for congress to be required to respond to your recommendations. the health care system would have been better off and would have saved a lot of money. just an observation and not a political comment. there are three areas i would appreciate you helping me with. one, the notion you highlight in your report that we are overpaying some of the very low performing medicare advantage programs that balance the list of concept rewards, good ones, penalize programs. we have seen some improvement. can you comment briefly about that problem that you see with the overpayment of the

underachievers? >> yes. >> so, in general, as i have said before this committee many times, i believe, we believe that having private plans as an alternative, a choice for medicare beneficiaries is an important thing because often they can do things traditional medicare find hard to do in the seibu systems like coordinate and integrate care for the chronically ill patients. so that is a good thing but that doesn't mean all private plans are equally good and perform equally well in those activities. some of them are truly exemplary and among the people that everybody points to as the very best in the country, but in fact there is a huge range of performance among the the medicare advantage plans. one context in which this came up recently was the cms demo for

quality bonuses. and what they did in this demonstration project was extend for quality basically to like 90% of all of the plans participating in medicare. we have to objections to that. one is 90% probably don't deserve quality bonuses but even more important than that the decisions made by the congress and ppaca for ma. so we felt the money was being spent indiscriminately. >> i'm hopeful we will be given to return to that because we really do want to coax more capacity and quality of medicare and that program are the same you also reference hospice care

and some difficulty that you see there. this is an area that i would deeply appreciate brief comments, but perhaps being able to follow-up with you because we are seeing such a dramatic advances in the public if care that we are watching the people who choose this option some have not just a higher quality-of-life but they actually lived longer in that setting and coincidentally it costs less than keeping people in the intensive care or extreme procedures. do we need to be evaluating the principles of hospice to do some fine-tuning so that we are not having the areas of abuse but we would capture the potential of higher quality and lower-cost care for others. it's safe to say that the

current medpac commissioners i've served with my tenure of medpac believe that the hospice benefit is extremely important for the medicare beneficiaries and we are heartened by the fact that if you look back over the last ten, 15 years, utilization of the hospice benefit has increased over time and we think that that's a good thing so long as that's what the beneficiaries want. we do have some concerns about the hospice payment system, however. and we believe the current payment system is subject to manipulation and before that manipulation takes is a very long hospice state in fact often multiple recertification is of eligibility for hospice.

our concern is that is what the payment system currently rewards so we have made recommendations on how to address that problem. let me stop there and i would welcome the chance to talk in more detail. >> i think this is an area that is worthy of consideration of the committee. there may be adjustments that need to be made clearly in the payment system but by the same token the definition of. i am hopeful there is a way that we can get deeper into this to help with medpac or others but insurers the program but target's said in a way that maximizes the benefits and minimize some gaming of the system. >> thank you. >> welcome, mr. hackbarth, we

appreciate your testimony and your report. i want to touch very briefly on the comment that you made on a fee-for-service that we ought to be moving away. it's not your testimony, however, is it that the fee-for-service ought to be out lot. >> not out lot, but we do think that we have to have encouraging movement and the payment systems and there is so much talk about how they can reduce cost. i really want to emphasize the new payment systems increase quality for the medicare beneficiaries. >> but you wouldn't outlaw fee-for-service. whether or not things are being tested much procedures done. it increases the cost. do you look at the practice of defensive medicine.

we don't have an independent estimate of that. we've looked at the literature of that. in my own view there may be too much emphasis on trying to calculate precisely what increment that cost. i think that those estimates are understating the impact it has on the medical practice. >> there are some estimates it may be as much as one out of every three or four health care dollars with the hundreds of billions. >> we haven't tried -- >> wouldn't that be why is to look at that? >> it's a very difficult estimate to make and i'm not sure that we would be able to do it better than the various people that have tried to do that. >> i think would be why is for medpac to begin considering that. its hundreds of millions of

dollars of waste. the need for more resources this is an area where i think that we could make great progress to. the incentive of treatment in patients for certain settings and i am confused by why the same service for a patient in the outpatient setting non-hospital outpatient setting and the same service for the same exact procedure the same service being provided in the hospital and outpatient setting why the payments are different. your report last week looked at the equalizing and what was your conclusion or thoughts about moving in that direction? >> so, we have already made recommendations to move towards

equalizing the payment for evaluation of management services. and we are in the process of looking at other services beyond that initial group where we ought to move towards equalizing the payments. it doesn't make sense to us to pay dramatically different rates as you know for the same service simply based on what name was over the door. right now given the transitions that are under way in medical care organizations, the program is at risk and medicare beneficiaries are at risk for much higher cost. even when they go to the same physician. >> have you looked at combining the essey schedules? >> pardon me? >> have you looked at combining the fee schedules? >> what we have done, consistent with our assignment in the congress, we want to set the payment levels at the level of

the provider. so, if the physician office is the provider of the service we ought to be paying at the physician office level. now, there are some services where we think that the right level might be between the physician office level and hospital outpatient levels. we are looking at some of the services right now. >> what are your metrics for efficiency? >> right now we in this particular example, if we can get an adequate supply of a particular service and physician office under the physician fee schedule, that is the efficient provider. adequate supply at this rate why should we be paying more in hospital outpatient department for the exact same surface? >> how much do you think you can save by equalizing the payment? >> well, again, we looked at initially their recommendation on the valuation and management

services. >> so $900 million, about 200 million would accrue to the medicare beneficiary for the past recommendation. >> now we are looking at additional groups of services that potentially would add to that number. >> thank you peter >> did i hear that right, the reimbursement office evaluation would be $900 million then -- >> 200 million to the beneficiaries, 900 million total. >> thank you mr. thompson for holding the hearing. mr. hackbarth, thanks for being here. i want to talk about access to primary care. you cover this in your testimony. is it as difficult for medicare

folks as it is for private insurers? >> this is a general problem beyond medicare. it's medicare and private. >> yesterday i had a visit from a constituent who was a med student, and his concern was when today is students get out of school they are carrying considerable debt. this was a problem for all students, but medical students it tends to be more. he told me he didn't think there was anyone in his class unless they were going to school as part of the military that would leave with $200,000 in debt, and his feeling was that high debt would in turn help the students

determine what field of medicine they would want to pursue and because primary care is a historic low reimbursement it stands to reason that there is going to be a shortage. is it your belief and medpac's believe that the cost of medical school is a factor on this? >> it is a factor. it isn't the only reason that people elective going to specialty care, but it is a factor. >> it's probably not. you are probably right. but i would assume there are folks that want to go into primary care but once they get over the sticker shock that it pushes them over the edge into going into a type of medicine that maybe they hadn't set out to go into maybe they wanted to be primary-care doctors but once they come to the realization they would have a hefty bill to

pay them that causes them to go into specialty? are there other medical professions, nurse practitioners, things of that nature that because of the cost of care they tend to go into areas with a higher reimbursement and primary care? >> you are asking whether we have evidence of that nurse practitioners, for example, elected engaging specialty care versus primary care? i don't know the answer to that. >> is that something that you look at? >> we haven't looked at that in the past. we can try to do that. i don't know the issues that may be raised in doing that analysis. >> it may be worth looking at because the distribution of sleeper and what the nurse practitioners and physician's assistants and the like are doing that i am assuming it would have an impact on the price of the care. >> i would say that i believe that nurse practitioners and

physician's assistants are a necessary part of dealing with our primary care issues. i think we have not taken full the advantage of the capabilities of the non-physician practitioners. frankly i think we are going to have to. we decided today to increase the number of primary care physicians trained it takes a long time for that pipeline to produce physicians. >> given the fact that these reimbursement rates are affecting the delivery of health care particularly as it applies to medicare, the commission's proposal freezes the existing reimbursement rates. how do you square that with what you just told me? >> of the proposal that you are referring to is our october, 2011 letter to this committee and others.

the context for the letter was at that point sg are repealed $300 over ten years. and since we knew that the cost of repealed was the single biggest reason why sgr hadn't been repealed, we felt obliged to come up with a package to cover the 300 billion-dollar cost. the only way that we felt that we could get there was to take $200 billion from hospitals that made plans and other participants in the system and about $100 billion worth of the cost out of the fee schedule, that necessitated the cuts in the conversion factor for specialty physicians and a freeze on primary care. now that the cost of the repeal is much larger, you would have a different set of options for how to structure that thankfully. and potentially commit you could elect to have increases for primary care if you so desired.

>> i think it's important we get something back on that because if in fact a part of any proposal would be to freeze primary-care when we all acknowledge that the lack of primary care is one of the reasons that the health care costs or where they are and that this is one way to lower that cost curve and provide a more sensible delivery of medicine i would think that we wouldn't want to -- we wouldn't want to miss that point. >> there are two ways to look at this. one is how much it costs to go to medical school and the like and in that context to freeze the primary care physicians. the other way to look at it is to the relative fees paid to primary care versus the specialty care and our proposal

in october of 2011 says if you are constrained on the number of dollars that you have, maximize the gap by cutting the specialties while holding primary care constant. if you have more money available, it would obviously be desirable to increase the primary care. >> thank you mr. chairman. >> mr. smith? >> thank you mr. chairman and mr. hackbarth for sharing your perspective and insight on some very important issues today. it's my understanding and i think this topic was touched on briefly but there are various factors leading to the consolidation. could you elaborate more on that and perhaps share what you see as the impact to insurance premiums as the result? >> there are basically two. one, there is consolidation that is aimed at developing new organizations that are better able to effectively care for

medicare patients and other patients. so they are indicating in a way that they collaborate to better coordinate and integrate care. that is the good type. then there is the other type that is basically aimed at maximizing the market power so there have been a whole lot of antitrust lawyers would refer to horizontal mergers where hospitals are joining together they are not integrating the physicians. they are just building hospital systems that have more leverage of the insurance companies. that is more problematic. the tricky part is that some of the good integration also leads to market power that can lead to higher prices for private parties. >> i can appreciate a lot of things about how different health care is delivered, how

differently health care is delivered across the country and certainly representing a rural area i think there is still consolidation for various reasons. shifting gears a little bit in terms of reimbursement i notice the commission has recommended steps that medicare can take to make sure that it is paying accurately for each individual physicians service without getting into the details why would you say it's important the determinations are accurate and what is the implication for getting them wrong? >> there are two types that we discussed just a minute ago. if the prices are wrong, it can influence the physician pipeline from the future. so if we consistently under pay for the primary care in the long

run while to few primary care physicians we feel that is happening. the other type of problem is that if you overpay for certain services, you are likely to get more of them and an example of that, we believe would be about imaging services where we think that medicare has paid too much. we have encouraged a lot of investment and imaging equipment to take advantage of the mips pricing and once the equipment is in place, the profitability goes up dramatically. you want to use that equipment more and more because the marginal cost of using it is low. so, you can have two types. one is on the supply of the physicians, and one is on the type of service rendered. >> could you elaborate on how we shift to a system that more

accurately reflect the actual costs and how we may not have a federal policy that tends to put things out of balance? >> of the physician fee schedule as it is constructed is focused on what are the costs involved in providing a particular service under the fee schedule and they are established for each of the services of a goal is to accurately measure the input in the cost that goes into producing the services to really think there are errors and that measurements and not small occasional errors, but brought. if we've made a recommendation to the congress and to the secretary correcting those errors.

we have discussed in the schedule that focuses only on measuring the input cost. the market for all of their goods and services in the country the price is not only reflect input cost, they reflect the value of the product and they also move to reflect the balances and a supply for the demand. the construct of the medicare physician fee schedule pays no attention to the value of the service to the patient is more to the imbalance of supply and demand. the latter is why we have recommended and the congress has enacted a primary care bonus. it's a way of dealing with the value and supply part of the equations a fee schedule ignores to disconnect thank you. i yield back. >> mr. hackbarth thank you for testifying i want to focus on

the home health agency issue if i can. first i want to offer you a constituent case that we experienced a few years ago and get your reaction to that and also focus on a couple of your recommendations a few years ago in this area. on the constituent matter we had a constituent that came to us after having three days of home health care and the home health agency built $1,500 for that care. it was submitted to the medicare program and was doubled at $300,000. some of the reimbursement was actually doubled what was billed by the home health agency and the explanation from cms is we days are reimbursed on authority day episode of carrier based on the nature of the care over three days and that episode, that is what the reimbursement amount is. is that a particular issue that you are aware of that we would pay, reimburse double what was actually build and to say what would your recommendation on how

best to deal with that situation. >> we exchanged some correspondence on this. when it first came up a couple of years ago. so, in the home health area and many of the other medicare payment systems, we paid on a per episode basis. in doing so we recognized some episodes would cost less, some what cost more, but those differences would tend to average out. the reason for the payment of the episode basis is that it creates an incentive for the effective management of the services. you eliminate the incentive to do more home health visits by paying on an episode basis to use genex in this instance paying double what was billed incentivizes who to do what? wouldn't it incentivize providing more care because you are going to get more

reimbursement than what your actual innocence retail billing would be for the service? >> in some cases the episode payment will be high year than the cost incurred. but in other cases it will be less than the cost incurred. and as i say -- >> the respect of service, you are saying? >> of the patient is to the home health agency cares for. some of them make money, some of them lose money in double tend to average out. the reason for using that approach is to create incentives to not provide more visits than are necessary. the problem that we have -- >> wouldn't it make more sense if the home health agency bills for say the $1,500 that the formula for the reimbursement ought to be the lesser of what that episode of care was under the current formula or what is billed, whichever is less. wouldn't that make more sense?

>> i suspect over time what he would have is all of the people who have fewer visits in the episode would gravitate up saying we want to maximize the payment to the and so we will just increase the number of the physics until we get to the limit. >> okay. so that is why medicare blades that but there is an important issue on home health, and that is the payments are way too high on average. >> that is where i was going. back in march of 2011, you recommended the secretary should implement new authority to suspend payment of new providers of the indicate significant fraud. what has been the progress from your recommendation to years ago that you can see from your position what progress has been made to address that particular problem? >> well, i can't provide a quantitative answer to that. but, they're has been fairly

intense focus on fraud in home health in particular areas of the country like south florida. i think there's probably more that needs to be done. but it is increasingly the focus of attention at hhs. >> real quickly, you also recommended two years ago a per episode co-payment for the home health episode that are not preceded by the post acute-care. what is that rationale for that recommendation and particularly for the low-income beneficiaries. and i visited a number of those types of homes in the last few years. i can't foresee some of these individuals being able to provide any co-payment for the service is getting in the home. what is the rationale for the recommendation and what do you think that it would be for the co-payment established for the low-income individuals? >> so, under our proposal, the newly eligible medicare beneficiaries would not be

subject to the co-payment. so, if we use that as the definition of the low-income, they would be protected. we think having a co-payment for all services is important in a fee-for-service insurance program like medicare. that is one of the only tools that is available to manage cost. with regard to the home health in particular the recommendation focuses on what we refer to s submissions from the communities of these are not patient is coming out of the hospital or the skilled nursing facilities are patient is the largest admitted from the community. there are no clear clinical guidelines on when the community initiated the home health service is necessary and appropriate. it is a gray area. like some medical services in fact in the last hearing we had

an exchange about this. you don't worry about the patient initiating demand when the service is something that's been for risky. nobody wants to undergo that but home health is different. there is no risk involved or inconvenience involved in fact it often likens the burden on family members and friends. so it's very attractive in that regard, and if it is a free service, why not use it? so we have recommended quite a modest co-payment like $150 per admission. for the average hotel that is so if this works out to about $8 a visit which we think is an appropriate check for people to say is this really something that i need. >> all i yield back. >> we are not going to do the

second round by web like to recognize the ranking member for comment and question and then the doctor for the final question. mr. mcdermott? >> thank you, mr. chairman. i just want to take a second to enter into the record or ask unanimous consent to enter into the record an article from "the washington post" by sara cliff dated today that's called "wanting to debate medicare cost you need to look at this chart first." it shows hospital readmissions in medicare or dropping and shows the percentage of gdp over the next future. if you use what's gone on in the last few years it is going to stay level rather than continue to rise to the .7. i think you are familiar with these numbers and i think the members of the committee ought to be aware of this particular article that shows the aca is already having an effect before these things going to impact --

before they went in last year. >> without objection. >> i appreciate the indulgence and just a few quick questions. i was -- this whole issue of the post acute-care and the differential treatment, and you mentioned it ought to be a clinical organization that ought to be making the decision about the venue of the treatment for patients. you wouldn't consider it a clinical organization? >> i am referring to the providers. >> i just want to make that clear and visit the home health for just a second. because a lot of issues about overpayment and home health and the like, isn't it true that if you look at the number of counties in this country and where the real challenges of our it's like 25 counties out of 3,000 or something like that. >> yeah. so, the patterns of home health use is a very dramatic. the variation of home health is much greater than the variation

of almost any other service. >> shouldn't we be looking at those targets? >> we should look at those areas in particular. but across the whole country we are still overpaying for the home health service. >> let me just touch on that if i may very briefly. the margins that you talked about and i think that your margin analysis comes from the methodology. >> this is our own methodology. >> what margins refresh my memory. the profit margins they are making. stat for the home health we are projecting for 2013 of around 11, 12, 13%. >> are you familiar with a study analysis 2013 study that news is financial reports that put the

margin and take into account significantly greater information than the methodology that puts the market around 2.5 -- >> the information supplied on cost reports by home health agencies. >> maybe we can follow a format and see if we can't get more accurate data. this is a real concern because dhaka we're lowering the reimbursement and we may significantly adversely incentivize movements of those in the fungibles of the high cost venues and that is the last place. we don't think that there is a risk of that by lowering of the home health rate.

there is a lot in the report to digest because there will be follow-up questions. we have 14 days to submit questions and there will be a number of them including related to some, i would ask a question submitted by the members to respond properly as you have in the past. with that, the subcommittee is adjourned.

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the conservative political conference action is holding its meeting in washington, d.c.. donald trump spoke this morning and talked about the 20 to fall campaign. let's take a look at a portion of what he had to say. the governors say it's the stupid party. what a horrible statement? that is the statement is going to come back and haunt you when the democrats start using it and you have to change it and change that thinking. when i have somebody in my watch somebody that spends $400 million on campaigns perhaps the worst ads i've ever

seen. they did adds that i felt were being paid for by the obama campaign. they were so incredible. you remember the famous superhero ad people want a super hero. when you spend $400 million you don't have one victory, you know there is something seriously, seriously wrong. i've made over $8 billion. in fact when i was thinking of running i actually filed my financial statement. a lot of people were actually surprised. but more than that i have employee add tens of thousands of people yet i am criticized by total white -- light weights. it's unbelievable.

when you see these guys that know they can't find a clean shirt and they say donald trump, he is nothing. thousands and thousands of people. so i am very proud of what i've done and i think that if he made one mistake, and i like mitt romney a lot, but if he made one mistake, it's that he didn't talk enough about his success because honestly, people really want success. they want a leader that is successful, and he has done a great job. they were on the defensive instead of taking that offensive. just recently the acres in the middle of miami an amazing place but it was improperly run for years and years tiger woods just run the tournament this year a record television ratings and

did fantastic. it's an amazing place by going to fix it. i'm going to make incredible. i'm going to make that place incredible. that's what we have to do with this country to reduce the mcdonald trump this morning on the second day of the 40th annual conference. we are getting older together and we are not the same. our rates have dropped dramatically and we are beginning to have an inverted pyramid that does not -- that makes our challenges as it relates to the entitlement and social security even greater.

slow-growing developing countries have for decades lower fertility rates, japan, europe, particularly in russia. they've dropped to be reached even to 1.8, the lowest drop in the last three years and recorded history. we have tried and true way to deal with the am in count. demography doesn't have to be destiny if you change course and the path that you can take is to allow for a strategic reform of our immigration law so that we can bring young aspirational people that will rebuild the demographic trend to make our system secure and jump-start our economy that will create an uplifting of our hopes and dreams but also directly impact immediately impact economic growth. >> u.s. economic growth and

immigration policy. florida governor jeb bush on immigration wars. part of book tv this weekend on c-span2. supreme court justices anthony kennedy and stephen breyer testified before the house appropriations subcommittee this week on the court's budget for 2014. the supreme court requesting a total of $86.5 million. that is a 3% reduction from last year. they talked with the committee for about an hour-and-a-half, and they were asked about the possibility of allowing cameras in the courtroom. >> the meeting will come to order. good morning to justice kennedy and justice breyer. ..

i think we all know that an independent judiciary that has the respect of the citizens is something that is very important to our country. the fact that you decide these controversial questions, obviously that's something that our founding fathers thought was really important. and while you you're budget is t as big as some of the other federal agencies, you have one of the most importantly roles to play, and we appreciate that. and outside of the confirmation process this is probably one of

the few times that the two branches of government get together and interact, in my opinion it's one of the most important things we can do, recognize and respect each other. i think you all know the federal government is continuing to operate in an environ of scarce resources, as i want to thank you all for the efforts you have made to be more efficient, to contain costs as best you can. the overall budget request this year i understand is $86.5 million. that's $3 million over the current c.r. level. but i noticed yet and women almost $2.2 million of savings. and that's important. most of the increase that i see in your budget is going to fund the restoration activities in the buildings north and south are so we look forward to hearing your testimony this morning, and we look forward to hearing you talk about the

resources that you need to carry out your constitutional responsibilities. we welcome any thoughts you have about the court system in general, and we want to make sure that the court has the resources it needs. so we appreciate your efforts. again, to contain costs in these difficult times. so now before ask for your testimony i would like to ask my ranking member, ranking member serrano, for any comments you may have. >> thank you so much come and good morning. i've had the privilege of having to before the subcommittee both as chairman of the committee now as ranking member. we didn't get deputy for us last year, so i didn't ask you questions that's always on my mind, which is whether someone born in puerto rico can serve as president of the united states. i realized not being a lawyer that i probably first have to get elected so he can become an issue. i'm trying to avoid that issue.

the question is out there if you wish during her testimony to render an opinion. i think it would be historic, and i think i got one last time. thank you, mr. chairman. i would also like to warmly welcome you both back. as i said in past years this is one of the rare opportunities for our two branches to interact. because it is our question sometimes range the abstract appropriation issues affecting only the supreme court. as our nation's highest court, many of us look to you for important insights and issues affecting the federal judiciary as a whole. that is certain the case today. as a result of sequestration the federal judiciary must have a significant budget cuts that will affect all aspects of our system of justice. chairman crenshaw and i recent receive letters from the administrative office of the u.s. courts that details the impact of sequestration on the federal judiciary. to say the least, the impact is severe. many federal courts will be unable to operate at the same

level of efficiency, and many employees may be furloughed or laid off. there would be less supervision and programming for criminal offenders, the very things that help us to prevent people from going back into prison. our court security will be lessened even if our federal courts continue to deal with trials that pose significant security issues. i'm particularly worried about our federal defender program where layoffs have occurred prior to sequestration and show no sign of abating at this point. additional funding reductions caused by the sequester will undoubtedly force for the difficult choices, and undermined the ability of our federal public defenders did do their utmost to help their kinds. or many concerns that we have come and visit some of the questions that we'll be asking today. so we welcome you back, and it is, chairman crenshaw, the unique situation. this is one of those hearings that i always look forward to,

and as you can see by that camera, the whole world is watching us. so we will have what i know will be a good hearing. thank you, mr. chairman. >> thank you, mr. serrano. i would like to recognize justice kennedy for your opening statement. if you could keep that within five minutes we left time for questions, and certainly submit your written copy for the record spent thank you, mr. chairman. ranking member serrano, members of the committee -- [inaudible] >> it's a green. isn't on? thank you. justice breyer, joined me in bringing greetings from the chief justice and our colleagues. we have with us the principal officers of our court. in order, jeff, counsel to the president. a martial of the court. kevin kline, of our budget and

personal office was worked very closely with your committee and the communication between your committee and our budget. is extremely valuable. and kathy arber, our public relations officer. and gary kemp, our deputy clerk. as you both indicated, drinking and congressman serrano. -- this is an institutional constitution dynamic here this morning. we talk often of separation of powers and checks and balances, and we use those words interchangeably. actually they have a different -- separation of powers means that each branch of the government has powers of its own. that it can exercise without, and much -- must exercise without interference of the other branches.

checks and balances means you can have complete separate apartments. at work together and this is an example of checks and balances. and we come here to indicate that as a separate branch of the government, we do think our budget request is of a high priority. by nature and by tradition. very, very careful in the expenditure of public money. we are good stewards of the public treasury. doesn't mean that there aren't instances where congress can point out that an expenditure might be too large or unnecessary. but over the last year, especially over the last years, congressman serrano, have been extra careful to present me with a minimum budget. as you indicated, mr. chairman, the budget for the entire third branch of the government is .2%

of the federal budget. .2%. and our budget is .002. our budget as you indicated is 74 plus million for the operations of the court, which we will talk about. there's an additional 11 million for buildings and grounds, and we are very proud that this is, as part of our budget, the operations of the court, is 3% reduction over last year. in looking at the reason for the 3% reduction, looks to me like that might be one time, i'm not sure we can do for you the next time, that we are committed to try because we think that the courts must always set an example for prudent and proper

respect for the people of the united states and for the way in which we spend their money. as you indicated, mr. chairman, and mr. serrano, the ministers office of courts budget which is 7 million, is of tremendous importance to the functioning of the entire judiciary. the supreme court has cases that the public is very interested in, but on a routine basis we are charged with ensuring that the justice system as a whole is efficient, fair, accessible. and most of our time is spent in reviewing cases that are decided in the routine course of the administration of the criminal and civil laws of this country. when the budget of $7 billion for the courts, before you, i

believe next week, it's important to their a few things in mind. number one, one-seventh of the budget is for defender services. one-seventh of the federal budget. this is for the defenders the surface, but one-seventh of our budget. then we have a huge amount of our budget as you indicated, i'm talking the entire federal courts now, not the supreme court, a very substantial part of that budget is for supervisory lease of those are in the criminal system, and for pretrial sentencing report. and this is absurdly urgent for the safety of society. but the federal courts routinely, day in and day out, supervise more people about it in federal prison population. we supervise more than 200,000

criminal offenders. some of them -- if the congress thinks that because of some automatic cuts, this has to be cut back, you are doing a few things. number one, in my view you're putting the public safety at risk. number two, you are undercutting the ability of a separate branch of the government to perform its function. i'm sure that every agency, mr. chairman, that comes before you will get a special reason why you should lay their budget alone. you all have to go through this. but please consider that .2% of the federal budget for an entire third branch of the constitutional government is more than reasonable. what's at stake here, efficiency

of the courts and the courts are part of the capital infrastructure of the country. and not only part of the constitutional structure that make the government were. they're part of the economic infrastructure and the social infrastructure. the rest of the world looks to the united states, the judicial system that is fair, accessible, and it must have the necessary support and resources from the congress of the united states. saving with respect to judicial compensation, congress has always been excellent in giving the resources that are necessary for the proper discharge of her duties, and we hope that that will continue when you hear and consider the requests of the administrator office of courts, courts next week. and with that, perhaps my colleague, justice breyer, has an opening remarks. incidentally, mr. chairman, we are waiting for your case on the puerto rican presidency to come

to us. but you also have to be 35 years old, at least. have you met that requirement? article ii, section one spent i'm a double that soon. [laughter] it may come up some day. you may get someone born over there running. but thank you for your semi-opinion. >> justice breyer, d. have comments you would like to make -- do you have comments you'd like to make? >> mr. chairman, i agree with my colleague, justice kennedy. i can't resist adding, i mean, any lawyer always asks two questions. i would like, your question is could someone from puerto rico become president of the united states. i know many possible people from puerto rico who could perhaps could be elected, and i modestly

in this room, i will not say exactly who, that i would point out that lawyers always ask two questions. first, why? and the attitude of the question is in puerto rico, part, an important part of this country. anti-communist. second question, why not? when i say why not, i don't hear any answer. so i've answered with two questions. >> thank you, sir. i think you just made the front page of all the newspapers on the island. and india, too. i think you. >> may be mr. serrano you could just run for president, and if nobody challenges that, it will be fine. and if they do, then these good gentlemen will be speech was interesting am at a don't want to take much more time, it becomes an issue when you territories. but if you recall the senate, just to be sure, passed a

resolution saying that john mccain could affect service president because he was born in the panic -- panama canal zone which technically is not part of the states territory. the senate passed a resolution saying yes, he can. that has to be the court someday will have to rule on the. i'm pretty sure, confident, an attorney speed i have not given an opinion. >> i understand. and no one here would -- let me just say that my exploratory committee are coming together in the next half-hour. >> the likely explanation for visiting article ii, section one, a natural born citizen and 35 years of age was so that we would not invite your appeal royalty to come pashtun european royalty to come and be i could. number one, had to be 35, so wouldn't be an infant with the governor. and number two, born in the

united states. that's the probable recent. >> we will get back to that issue. but let me start our questions. we talk a little bit about the financial side and, obviously, that's what our committee does is appropriate money for the various agencies that we oversee. and the one thing that you talked about, justice kennedy, and one thing that i would applaud that you'll have done at the supreme court is trying to be very judicious, very efficient with use of taxpayer dollars. and it's on everybody's mind now because of the issue of sequestration, which as everyone knows is kind of a washington word for an across the board for conine type cuts, that nobody probably thought was going to happen -- for conine type cuts

to consider to be kind of a deterrent to make sure that congress did its work to find additional savings. the special committee that was set up to do that didn't find those savings. on the good side, over the past couple of years, congress has actually reduced spending, 201 2010-2012, overall spending went down by $95 billion, and that's the first time that is happened i think since world war ii. but i think one thing we all agree on is that is if we are going to reduce com, if were gog to make cuts to the budget, then a better way to do that is to do that specifically. that's why we sent here as an appropriations committee. we hold hearings. we listen to testimony. we make tough choices. we set priorities, and sometimes we add money and sometimes we take away money. and regardless of how we feel about increasing or decreasing spending, we all a great i think there's a better way to do it than this so-called sequester.

so we find ourselves in that situation. year part of that. i think the reduction in the nondefense side, on the defense side it's about 8% over the remaining seven months. and so my question is, and i think you've answered to a certain extent, you already, seems me are working as hard as you can to make sure that you're spending money efficiently. but i have to ask you, since we have the sequester indicate didn't on march 1, can you see just and the supreme court site, not from the broader -- we'll talk to some of the other administrative courts and their issue but just in your standpoint, in the supreme court, what kind of impact will that sequester have on you while? does that mean you hear less cases? you where you rose for an additional year or two? i think of you got to save money somewhere. tell us number one how that's

going to impact your operations, and number two, do you think that the sequester will, maybe as you anticipate a, it seems like you do a good job, but you think the fact that there is a sequester and you have to live under, maybe it's a year, maybe it's 10 years, what will that be in terms of your overall planning to try to do efficient and more effective? could you touch on those to think? >> if it's for any long-term it would be inconsistent with the constitutional obligation of the congress to fund the courts. we do not control our workload. cases come to us. we don't go looking for cases. in a typical year, we have close to 9000 petitions for sir sherry. many of them, those were convicted i in the federal criminal system, and also habeas corpus in the state criminal system. we can't control the. and we can't arbitrarily say,

well, we're only going to consider 6000 let the other ones that just go by the schmick we have no choice in that. just like a district court. has no choice in deciding how many criminal prosecutions are going to allow. overcome a civil case it's going to. u.s.a. and, of course, are not open, the legal system is not accessible? this is inconsistent with the rule of law. now, we can, our staff tells us, i think for a few months get by with some temporary, shorter workdays for our staff. if you could find out the way to give us a shorter workday, i would appreciate it. but over the long term, particularly the court as a whole, and for our court, it is

simply unsustainable. >> justice breyer? >> i would ask, as you saw in justice kennedy's figures here in prepared statement, in fiscal year 2012, hit, our 21st century is confusing, but in 2012 we asked for a reduction of 220% of the budget. we went up but not by that much in 2013, now we are requesting three-point 0% reduction. so we have been through it pretty carefully, and we have reduced, and the way we really reduced the heart of it i think is we hired a few people, one to serve computers. they are smart. and they work out a way to share all the computer stuff with other agencies, and the result is we cut our costs a lot. so if we were going to save money by saying getting rid of them, our cost would go. they wouldn't put down.

what do i do? i tell my children for you to come a children, not tell the school grades, how do i spend my day? i spend my day, i agree. i read breeze. i read them and i read them. and then my law clerk helps but i have to sit at the word processor and it's behind my desk and i write. i am there, i read and olympic i say to myself and did you do your homework we welcome you get a job and you can do over the whole rest of your life. so that's what's going on in that building. we have some policemen who are there for security purposes who don't just protect us, but they protect the public. and then have to keep the courtroom and the clean. and if he didn't keep it clean, it's not just us again who would suffer, even the litigants. if somebody comes into a courtroom and they see a column, and that called sort of a whole bennett, sort inside it's falling out over the floor, what

do they think about justice in the united states. those things aren't simple. they don't have to be grand. but they do have to be capped at. and so when you look around and say what are we doing? now we have a press office. what the press office does is it tells people to try to communicate with the public. what's going on. and the answer questions that reporters have so people can know about us. what is there to cut? we go through, we cut some travel. we save the money as i said with computers. and we managed to cut 3%. i think that's pretty good actually. and there we are. 8900 petitions, even if you said we will only hear half, which would be wrong, in my opinion, any, you wouldn't save any money because they are reading them

anyway. >> i might just say in so far as justice breyer indicated, public awareness of what we're doing. when we accept a case, then brief the file, the briefs and the transcript of the oral argument are put on a website at no charge to the american bar association does this for us. i was looking at statistics yesterday and asked my clerk to guess how many downloads, not just hits, how many downloads were there last year, supreme court opinions and transcripts of oral arguments. and the answer, i was astounded myself, it's just under 70 million. that's the education function that we are performing.

we have to have technical staff that can perform this function. and again, as justice breyer as indicated, technology is working so fast that we are hoping there is cost saving but it seems the price of the québec goes up all the time over a four year cycle spent i would just underscore i would really not like to cut -- justice kennedy has dedicated a library, five this. part of the work that we do is talking to school groups, as you do. you talk to the public and to try to explain to them, you know, we're trying to do our job and you try to explain to them what the job is. and people don't know. they don't understand. and you can do the same speech over and over and over, and everybody does that come who is in government, was in public life. and you try taking it over and over and over. and say a third of them in order million on whatever it is, people what they hit the

website. i say thank you. that's going to be so much more than i can do in 1000 speeches. so i wouldn't, i would like to change the. >> thank you for the. and i guess, i guess the second part of my question, would a sequester really increase his intensity that, to find savings but it sounds like you're already on the wavelength regardless of the sequester. it's unusual for an agency to come in and ask for less money one year than they did the last year. i think he should be applauded for the. while we recognize that a sequester, an additional 5% cut would have a negative impact, we appreciate the fact that it sounds to me like you are working every day to make sure whether it's in technology or whether it's in your websites, making an effort to be as

efficient as you can. so we applaud that and we thank you for the. mr. serrano? >> thank you, mr. chairman. once again thank you for being here before us. i want to ask you to questions at once. i knew you can't comment on specifics, but have you heard about the effects of sequestration on the federal judiciary as a whole? do you have particular concerns about the administration of our justice system under sequestration? and secondly, with particular concern about the budget cuts to our federal defense, at what point are we safely impacting the provisions of effective counsel to indigent criminal defendant by cutting our budget so much quick so in general can you tell us what you think the effect will be on the court, in a particular under this particular program? >> congressman serrano, as indicated in my remarks, the administered office of courts and judge julia gibbons was the chairman of the budget committee for the next is courts will be before next week and they will

give detailed answered on -- answers honestly. but the store, the first things that are cut when there is an across the board cut, expenditures for the courts, our pretrial sentences officers and probation officers. this is very dangerous. and then public defenders are also on the list. i'm not sure, could be that if you cut public defender and the indigent does not have an attorney, then the court has to appoint one and pay out of course funds for private attorney, and it will be more. that would be a guest. guess. i'm not sure of that dynamic, but i'll ask. but this is serious business. >> we have, my guess is 100,000 criminal prosecutions a year in

the united states courts. we have to have a capital structure, and infrastructure, a functioning system to handle this. when i first became a judge i thought well, we will sit down and i'll ask this natural law still affect our statutory concepts? is lex jurist still a part, that the concept, concept of law? our workload, i got so much workload, i've got to wade it. justice breyer mission i was in sacramento, the united states district court for the eastern district, which would be the 12th biggest state in the nation by population. they've asked for years for extra judges. they had a weighted caseload of

over 1500 cases per judge per year. they have for senior judges who are entitled to have only one-third workload your they take a full workload because of their sense of duty and commitment and obligation. we simply can't take away the resources from these dedicated senior judges who work, nor to show their dedication to the idea of the rule of law. and the congress must reinforce that by giving them the resources they need. >> and by further question would be, we know that whenever there are budget cuts, and as long as i've been in congress the choice been a discussion as you well said, every agency feels that their budget should not be touched, so long time that the courts need more funding, but we are living through very difficult time and it is a desire to cut, cut, cut. so what what point does it

jeopardize the ability of our system to provide fair representation, to provide a constitutional mandate and protection? and furthermore, would that be just someone's opinion, or at what point does the judiciary itself make some strong statements to congress perhaps to say, look, we can continue to do it this way, your constitution here is on thin ice. can that ever happened? or do we just continue to negotiate overbudget? >> well, at some point the courts do not have the habit of creating crises in order to obtain public attention. via some point if we start dismissing criminal prosecutio prosecutions, this is dangerous to the rule of law. it used to be, and sometimes current jurisdiction. there's a -- state court or federal court.

the old rope when the practice was it was an easy case, the fed state. if it's a hard case we will give it to the state. but states are undergoing even more draconian cuts that are being contemplated by the federal government. in the state of california i've heard there was a problem in los angeles county, los angeles can is bigger than the entire federal judiciary. and asked my core, i said find out, they're going to terminate some judges. they are saying they are closing in superior court. i thought 10 judges. now, in courthouses. in order to pay for other things. and that means there's going to be more cases that had to be tried in federal court. >> go ahead. >> i understand the difficulty. i think it is difficult because everyone always says, what i'm

doing is important, and it is. but i think one question you could ask is would a cat in this particular budget, say the federal defenders, actually mean greater public expense? so the way that i think about it, crime costs enormous cost and it does not help when a serious crime is committed to punish a person who did not do it. i think everybody agrees with that. and so it's absolutely crucial to find out the person who did do it. and that person should be punished, and that means part of that is to have a judge, and part of it is you have a lawyer. so if, in fact, that person can't get a lawyer or a lawyer who is capable of representing him, one, you will get the wrong people convicted. and the right people who went

around committing more crimes. two, the person, if he's lucky, and gets into prison, we will start realizing he can complain about inadequate assistance of counsel. and then he will start writing petitions about that, and eventually the courts will spend more time and effort concerning his claim about inadequate assistance of town -- counsel been it would have cost you to make the solar in first place. so at this moment i was a the public defenders are below the level that would be minimum. and it does really seem to me that there is a serious problem in terms of crime, in terms of justice, in terms of adding cost to the system. if you can't protect the defenders. every society has a. judges, and i know would like to make fun of them, but -- they're not popular, the judges people would like to make fun of the lawyers, but every society has needed from the beginning of

history people who would present a case fairly, honestly, so that the right people are not the wrong people are punished. and that's the job in part of the public defender. >> thank you. i mention it opening statement capital infrastructure. worldwide, parliaments, legislators, legislatures, are somewhat reluctant to give funding to courts. they think judges have an easy job. some wish they had a job. when we go to other countries we say look, a functioning legal system as part of your capital infrastructure, you cannot have a dynamic economy. you can not have prompt and fair enforcement of contracts. you cannot have a safe society, and lunch at a functioning legal system. it's part of the capital infrastructure. >> thank you, mr. serrano. mr. womack? >> thank you, mr. chairman.

and my thanks to the justices, very, very want to acknowledge their long-standing service on the bench, and having a wife that it spent 32 years in the court, i truly appreciate the work that they do, up and down the entire spectrum of our judicial system. i appreciated the two questions that the lawyers always ask. they were white and why not. welcome we are appropriate and we asked three. what, why, and how much. occasionally, and we're finding this to be the case these days, occasionally we add a fourth question, and that is what if. and so we're into kind of that what if scenario now, and i truly appreciate the fact that there's not a lot of things that you can do without, that you currently have that you desperately need in order to

have an effective judicial system. i want to drill down on one final detail, and that is that last year there was a modest increase request for some additional officers. and i'm curious if those additional resources have been put to use, what effect they are having, and, indeed, are they part of the what if scenario in the sequestration. and what effect that would have on your court. >> we asked for half of the officers we thought we needed. and it's worked out. one of the problems if you hire to few people think of overtime and it's not a cost effective but we've been able to curtail that. we will begin opening additional entrances to the courthouse which we must soon. our security people will be strained.

we can manage with what we have now. under the what if scenario, as i've indicated, i think our court staff has said that for two or three months we can probably get by, but after that it will be a problem. >> it's a difficult question, which is where judgment is action helpful. that's called security. if, in fact, you take, whether it's the white house, whether it's congress, what is the supreme court, and each of fewer policeman, you have less seated. security is something that costs nothing, as long as the risks don't come about. but if, in fact, because you have fewer policeman, someone wanting in the building it's shot or someone is seriously hurt, or is there some kind of incident, then you have cost. so the question then is what risks are you prepared to run? and the people who are paid,

think about that, recommended that we get 24 new offices, and we got 12. so we say could you survive with no police? i guess we could survive. all you have done is you would have dramatically increased the risk, as in any public institution of someone being hurt. >> is there any difference between the level of training and the cost associated with employing security at the supreme court and it would be, say, in a house office or senate office building or a capital, or are they considered to be under one sort of qualification umbrella? >> i'm not sure. we send our officers for initial training to georgia for standard police training. but we also have some officers

who are expert in a fairly sophisticated business of threat assessment. and that is institutions specific. different institutions draw different threats. and attract different types of security breaches. and so it's rather sophisticated. in fact, our office works with the capitol police very carefully on prediction and threat assessment. they have done marvelous work force. so there is some sophisticated assessment that is institution specific. >> our staff here is basically the same thing. finally, some cases, although they're all important, are

somewhat out of sight out of mind to the general public. other cases are very, very high profile cases like the affordable care act decision. on occasion, you have to ramp up, i'm assuming, additional resources to accommodate these high profile cases. is that a major impact on the court? and again, in the what if scenario, do we risk, in your words, do we risk creating vulnerability for some of our more high profile things? >> i think in so far as standard crowd control proceeding in the courtroom, we have i think over 100,000 people a year see an argument, some for just a few minutes because we have a long -- we rely can come and watch for a few minutes. i think him and almost always

have a full courtroom. sometimes the line for the high profile cases start early in the morning, or early in the evening. and that has to be one or two extra officers there. the real risk is in the threat assessment area, when high profile cases come. that's something you don't see. >> that's true. judgment of the staff action or, there is some extra on those cases but i would not start there. after allthere. after all, those are the cases where emotions run high. people are unlikely to get upset when we hear a case of whether a, after the word for him into revenue code section imaginary 436 and the next word which should be read as a witch or a bad. we did have a course sort of like that once. but people don't care that much, or they don't get emotionally involved.

and the fact that there are large numbers of people trying to get in and so forth, i think it's a sign that it is important to have the crowd control in those kinds of cases. >> once again, let me reiterate my thanks to you for your service on the bench. i have a whole list of a lot of really tough legal questions, but my college here from kansas is going to ask most of those questions. i'm confident and i'm going to allow him that opportunity. thank you, mr. chairman. >> thank you. mr. quigley? >> thank you, mr. chairman. i, too, want to thank the justices for their service, this is sort of a built-in reflex when you practice as long as i did, may it please the court and wait to get ask questions or they are making me sweat. it's 10 years, 26 in california and chicago, as a criminal defense attorney, highest conviction rate in the county.

that's usually funnier in chicago. one of the things you talked about, both justices, was commuting with public, and it's an issue we struggle with at state level, and that's televising the proceedings. now, there's a video, i mean there's an audio of the supreme court. it gets to your point, one of you mentioned public doesn't necessarily know how things work. clearly, the public's trust in almost all government institutions is at an all time low. the perhaps way overused expression from i think 1916 from justice brandeis about sunshine being the best disinfectant. is that issue still possible to televise the proceedings of the court? >> we take the position -- my

position is, i think the member of the other justices, that we are a teaching institution. .. you can't get exactly the dynamic from the transcript says. so if you were making debate

points you could score a tremendous number of points by taking the affirmative position whether we should of cameras in the courtroom. it's not an unreasonable position. we feel number one that our institution works. and in my own view, there would be considerable reluctance to introduce a dynamic where i would have the instinct that one of my colleagues asked the question because we are on television. i just don't want that in insidious dynamic intervening between me and my colleagues when we only have a half an hour. so we think that in our courtroom cameras would be inconsistent with the tradition. i say we and i think i speak for a majority.

sometimes in the trial court's the cameras, are there so the public can see when the system is broken and when it is not functioning. that's important. and of one of the things we are facing is with newspapers facing critical financial problems, they are laying off court reporters, the press reporters that go into the courtroom. this is a real check because you need an experienced reporter to know if that judges being unfair. you have to have an experienced reporter to understand that. the blogs can fill in for will lot of newspapers do. they can't fill in for this, so it may be that the cameras in courtrooms hard more important, not less when they are paid by the press to do the job the

historic we did. >> i have seen a lot of theatrics in the courtrooms and some of it is from tv cameras or at turney advertising. in my life i can't imagine a supreme court acting in a way other than much they normally would whether there's cameras there or not but i respect your point. justice breyer. this is what you are talking about when i think of the case i can remember the arkansas case which is whether you could have term limits. could you let term limits and my goodness there was a difficult case. jefferson said one thing. hamilton and madison said another thing. you go back into history and if

a million people could have seen that oral argument, i thought that was one of the best. you would have seen my and people struggling with a very hard issue and trying to reach the correct result. so that would be so educational, that would be wonderful. so that is the plus side. so why you're you hesitant? to that begins where justice kennedy was a very conservative institution. where there are trustees it was gone before we came and will be there after we go. the last thing any of us wants to do is something that will make it worse as an institution. so what is the relevance of that? i worry on the subject you will know better than me. we are a symbol. if we bring the cameras into the courtroom and will be in every court in the country. do you want to get in every criminal court and case?

what about juries, what about witnesses and intimidation? i worry about that but they say i'm the expert, you're not. and i think welcome the oral argument is only about 2%. this is not oral argument that matters in the case. it matters and a few cases, yes. and it helps. but that isn't what this is. that's an appellate court argument. you've been in a public court, you understand it. and i am trying to understand a matter of law which will affect 200 million people who are not in that room. but when you look at something on television as opposed to reading about it in the newspaper, you are identified to begin human beings identify with other people. there's the good ones and there's the bad ones. and believe me, there's a good and bad. and, you know, so i think that is not what i am here to do. so people get a wrong

impression. if you want to know what i have come to the conclusion, and i might be wrong but i think is the driving force on the negative side of this, people you find surprising i won't say who they are, they come to me and they say the careful. you think it won't affect your question. you think it will and believes the if i'm on to something with a lawyer i don't care. i might produce the most ridiculous example that i ever thought of because i think it is going to advance me with that lawyer. i'm going to get a question out of him. i'm going to get an answer and i don't care if i look a little bit stupid in the newspaper. i would rather get the answer. so that is my message. what they say to me as you think you won't change. the first time you see on prime time television somebody taking a picture of you and really using it in a way that you think

is completely unfair and mrs. you're point in order to caricature what you are trying to do it because they don't believe and decided they think you are coming from, the first time you see that the next day you will watch a lot more carefully what you say. so what, what is your action? and i said i'm not ready yet. i mean, i want to see more of how this works in practice. i give people the power to experiment. i try to get studies not paid for by the press but how this is working in california how it affects public attitudes about. the real objective studies. that is where i am at the moment. >> i'm going to yield back but i would like the justices to contemplate something i felt about last night when i was thinking of this question to be

when the movie mr. smith goes to washington was released members of the senate didn't want it to happen because they thought it made them look bad. at the same time, the representatives and the soviet union didn't want the movie show and because it made us look so good pivoting there is a duty in the history of the supreme court and what takes place and i think about what it would mean if generations to come could watch the arguments that took place in brown v. board of education or giddeon, moments that made our country a better place, watching at least 2% or part of that i think is very important and i think when you as critical. there is a duty to the system that is unparalleled in the world and i would like my kids to watch. thank you. >> i remember as a lawyer watching the arguments in the

famous busing case and that is still vivid in my mind. that would be great to have the video to plea from time to time. that was probably 30, 45 years ago. anyway. thank you. >> thank you mr. chairman. justices, it is an honor to have you all here today. certainly i appreciate your noting the consultations you have about the rule of law and how important it is to have a judiciary and part of our role is to make sure the resources are there sycophant -- so you can do your show effectively. thank you on that regard. you are not just another agency here to ask for program dollars. you are a third branch of government or maybe the first branch of government in your eyes, whichever it may be. i don't know if they are ranked or not. but your political branch of government and we have a responsibility to insure the

reasons are there and efficient to make sure that all that we create or here in a fair and judicious manner. thank you for that. as a young attorney you received kansas and i was put and to extend justice kennedy coming you had the graduates on your staff there. i'm not sure, justice breyer if you have or have not to be it's a good time to think about it it always good to have a jayhawk on your team to beat ivan to talk about the allocation of resources beyond the supreme court if you might help in that regard to your testimony on the 1% of the entire judiciary budget is the supreme courts, city and 99% are the bulk of the expenses and the challenges we have in our own federal courts making sure that they are properly funded and that they don't have backlogs were it is an important component of what we are trying to do here. i note some courts have heavier caseloads seven others. they have continually had to have the of the caseload and they are having a struggle to be able to resolve that.

we discussed this a little bit earlier when you were here and i wanted to return to this topic again. as we are looking at the sequester and as we are looking at certain things that are going to affect how the judiciary handles their resources, are there fundamental changes we can make or maybe fundamentalism the word, or other structural changes that can be made either in the amount of jurisdiction or the amount of different courts we have in a way that they have less resources than more help to those decisions get made in terms of how we would go forward on that and are there structural changes not just looking at technology or looking at, you know, finding ways to reduce staffing but are there things we can look at structurally that might make the judicial system more efficient?

>> that is such a difficult question intended to give it to a justice breyer first. to begin with, as you've indicated, the courts depending on the location of different caseloads but the courts on the southern border are simply swamped with immigration cases for the obvious reason. our judges are very good. one of the benefits of the federal judicial system is that we can take article 3 judges from all over the country and assign them and our judges are very good about doing that. but, the letter circuit assignments don't quite solve the problem. i think sometimes you can take a look to see if bill walz are producing litigation that are not necessary, this very expensive -- the whole question of tort reform is something the states ought to look at. california has done it extensively in the medical area.

so you can look at the substance of bill law can't look at the litigation and impact that those laws would have. >> a couple of ideas i would suggest one that i thought about a little bit and the other i will suggest because i have not felt it through the first one that used to be of interest to me when i was the chief judge of the first circuit which was more administrative is that there's always been tension between the gsa and the courts because they have to pay rent. the executive branch doesn't pay for court sources. we provide and the judiciary provides the services to the exhibit of branch that they want for free. but why then do the courts pay for the services the executive branch gives to them? i am certain some work can be

done and you can separate those things out i'm not certain, but i think it might help in respect to having more allocation of what tends to be a large share of the court budget and i have a few other ideas but probably sometimes i have a good idea and it's surrounded by ten rather bad ones, so i think i will stop. >> i was hoping you could give an example of media sort of example like you were discussing earlier that we could capture on camera and they could play out leader this would be thone chance to dothat. justice kennedy, i might fall upon your point which i haven't raised but it's a good point. are there particular items that are generating a large amount of litigation that we could discern for some analysis or support that the judiciary could provide? how would we go about finding out where those pressure points are?