differently or would you -- >> i think in context it's easy to understand what the secretary was saying, which is that the cooperation, the collaboration, the diplomacy that we've been conducting with south korea, china and our other partners in the process has got an message through to pyongyang that when it acts strategically, when it tests a nuclear device and it is the only country on earth to have done it in this century. when it launches a three-stage intercontinental ballistic missile, the world will react. it will react strongly and unanimously. so i think that's what the secretary is referring to. it is absolutely the case the secretary's also spoken to this, as have other senior officials that north korea's recent behavior is unacceptable. the fact that it continues time after time to launch these ballistic missiles violate u.n. security council resolutions, that cannot be counted -- >> i would certainly agree with you and the administration there that it is unacceptable. i certainly wouldn't have called it "quieter," but that's okay. i'm going to turn to ambassador

king, if i can. ambassador, you've done a commendable job representing the north korean human rights portfolio. i also recognize the difficulties you face since the administration doesn't make the human rights issue in my view enough of a top priority. i think it best a second-tier issue behind nuclear proliferation. even if it's given sometimes lip service by calling it a top priority and constant focus. as such i'm disappointed that following the release of the u.n. commission of inquiry report, in my view little has been done. no human rights sanctions no executive orders, and no move for a vote in the security council. ambassador king, can you tell us what is being done at this time to hold north korea accountable for the mass atrocities described in that report? i mean it was a horrific thing to read. and why there's been so little movement since the report's

release. and then also, are you aware that there are three americans currently detained in pyongyang and i'm deeply concerned particularly about their well being and safety and one of those individuals, jeffrey fowl is from right outside my district in ohio. i'm told he's being brought to trial, accused of carrying out hostile acts against the country. can you provide us with an update about this situation where in the process the administration is to get these individuals released out of north korea? i certainly understand in a forum like this you have to be careful because we don't want to jeopardize their situation or put them in any more jeopardy than they already are. so i understand that but to the degree we can handle that in a forum like this, i would appreciate some comment. >> thank you very much for the question, mr. chairman. with regard to the attention that we give to north korea human rights, i believe it was lyndon johnson that said you've got to be able to walk and chew

gum talt.at the same time. i think that's what we're trying to do pushing on both the nuclear issue and the human rights issue. as we talked earlier, there is a lot that has been done this year with the release of the report. we've been attempting to use the u.n. report to continue to put pressure on north korea. in the u.n. security council we've already had an informal meeting where we've had 13 of the 15 members attend, discuss the report and discuss its recommendations. we're also in the process of looking towards activity in geneva. we'll continue our pressure in geneva at the human rights council on the human rights report. we're also going to have discussions in the general assembly in october at which the commission of inquiry's report will be discussed. there will be a resolution that will be prepared and adopted in the general assembly by the end of this year. we're very active in terms of

looking at how we might further push this forward in terms of action by the security council. with regard are to sanctions we're looking at sanctions. one of the issues that we need to do is try to do whatever we do in concert with other countries. sanctions by the united states alone are very limited effectiveness. we have very little relationship with north korea. we have very little trade. we have very little economic connection. and to the extent that we can work together with our allies and jointly adopt sanctions and look at actions that we can take together i think the more effective those issues will be. a brief quick comment. the three americans who are being held in north korea are a great concern to us. we've communicated with the north koreans our concern. we've requested repeatedly that they be released on humanitarian grounds. this includes mr. fowl as well as kenneth bay and jeffrey miller. we're hoping to be able to have some gro proprogress on that.

we continue to press the north koreans. we continue to work through the swedish government which takes care of our interests with regard to american citizens there. i have briefed your staff on this. i know you were aware of that. if there is anything that we can provide you directly, be happy to come up and talk with you about that. >> thank you for that. i'd like to continue to follow up with you at the staff level on mr. fowl in particular. but all of them. thank you very much. i now recognize the acting ranking member gentleman from california, mr. bera. >> thank you, chairman. ambassador davies in your opening testimony i think you laid a framework that said any movement forward really starts with the framework that was laid out in the 2005 six-party talks. that is a starting point for us to move forward. also, ambassador king and ambassador davies in describing north korea, you describe them as global pariah.

we described them -- the crimes against humanity the human rights violations. and it is -- from this vantage point, when you look at the kim regime, it is a regime that is less focused on its people and more focused on itself and creating its place. so i empathize with the difficulty of these negotiations. we can continue to further isolate north korea, but we've also seen when we do that isolation how the kim regime responds if provocative manners. i think you accurately lay out that this is not a u.s.-north korea negotiation. this is a u.s.-japan-korea-china-russia negotiation in the framework of regional stability. and of those countries, we all

have a vested interest in creating a stable region. but the key really in this case lies with an active engagement on china's behalf. i guess ambassador davies, i'd like you to comment on the talks that we've had with china how china is viewing the new north korean regime, and comment on china's role in moving these conversations forward. >> happy to do that, sir. thanks so much. yeah, klein and yeah, china and north korea are not at their above the historical moment right now. china was very vocal and active beginning over two years ago when the new third generation of leadership took over in pyongyang in signaling to the north korean regime that they

would not support north korea taking provocative acts and north korea went ahead and did it. so in a sense north korea has not been a good partner of china's, of late. and this has triggered, i think, a debate in china about the nature of its relationship with north korea. the chinese have begun to take acts that are somewhat remarkable in the historical scheme of things, publicly signaling and warning north korea not to engage in strategic provocations publishing this 900-item control list which is somewhat dramatic cutting off banking relations with the foreign trade bank, premier trade bank of north korea. also imposing strictures on some custom controls and so forth.

so our role in this is to work with the chinese to try to figure out -- and this is the top-down. the president's been very engaged in this from the sunny land sultof last summer how can the united states and china enter diplomacy and convince north korea its future lies in living up to the promises that it made in the middle of the last decade abandoning these weapons, coming back into the fold of the international community, behaving better as an international actor and the chinese have done these unprecedented things. we've said to china that we appreciate it very much. there is only one problem with the acts that china's taken and that is, of course, that they haven't yet worked to fundamentally change the calculus of pyongyang. so this is a work in progress

bub but we made progress. i think the new leadership in beijing understands they can't continue the status quo forever. this is a case where i think if we keep at it in a multi-lateral ef endeavor with the rok at the base of our concerns we can ultimately make progress. >> if we look at this north korean regime that is provocative and potentially destabling in the region, as an increase in trade between korea and china, japan and china ourselves and china our economies are increasingly interconnected in trade and we all benefit from a stable region that allows trade to occur. there is a real -- china has to recognize that an unstable region is not in china's interest and really creates some problems. so we do have to move forward in

a regional conversation. we do have to move forward with partners and i hope china is there increasing the pressure and increasing -- and i say to north korea that they're on the wrong path. >> gentleman's time's expired. we'll now recognize the gentleman from pennsylvania, mr. perry is recognized for five minutes. >> thank you mr. chairman. gentlemen, thanks for being here. was a little late so i missed your testimony but listening to some of the answers to some of the questions you just -- it just made gave me some new questions and some new things to think about. mr. davies when you talked about we have made gains, one of my questions is going to be this strategy of strategic patience and many would contend that it really hasn't done anything. my question would be what are the significant results of that? quite honestly i feel like asking what are the significant or insignificant results from the context -- maybe i should first ask, this strategy of

strategic patience, what's the time frame of this? are we looking at like 1,000 years? 100? is this my lifetime? because, you know, convincing north korea's leadership that this isn't their pathway to the future, i mean who are we kidding? does anybody in this room think that these people have the same mindset about their future that the people in here have? the leadership? maybe peasants, maybe the underclass, maybe the people cited in the human rights council report have that view of some brighter future possibly. and what would motivate the people at the top to change anything? i'm really curious. what -- let me give you a question. what are the significant or insignificant results? how long is the strategy supposed to go and what makes

you think that these folks would change their mindset whatsoever? >> well, a couple of things. strategic patience is like a bumper sticker that gets stuck on a car, then just doesn't get taken off even when the views of the driver change. i've been at this job 2 1/2 years. i've never described our policy as strategic patience so it predates me. it's inaccurate. secretary of state when he was asked about it when he first came into office said that's not our policy. our policy is strategic impatience with north korea. we're going to continue to do everything we cannot to sit down

and have a coffee klatch with most in pyongyang, this regime, is surviving. they want to preserve the status quo. they don't want anything to rock their boat. they're now -- it's the world's only historical example of a dineastic communist system, father, son, now in the third generation. they obviously want to keep that party going on. what we are seeking to do with china, south korea japan, russia and the rest of the international community is pump up the volume of a message to north korea that that's the road to ruin for north korea. that trying to pour scarce resources into the development of these expensive weapons systems, while also trying to feed their people, which they have not been able to do adequately for now almost a generation, isn't going to work. so what they need to do is give up these weapons, begin to play by the rules.

>> as far as the west or somebody in the west or coalition partners telling them that it's not going to work, from their perspective at the top, well, it's worked for three generations, we are not going to rock the boat. with all due respect, folks, the human rights council includes the likes of cuba and the democratic republic of the congo and some of these bad actors that abuse their own citizenry and acting like that's going to be a vehicle to shake north korea's leadership off its foundation, i'd like to have whatever you folks are drinking and eating every day because you've got a wonderful view of some rose-colored future. to me, we're the united states. now i'm -- listen. future. we're the united states. this is a 20-year-old failure, in my opinion, so it's not fair time pose all of this upon you. but taking the same actions of the past -- okay, not strategic -- to me it's

strategic apathy or avoidance. doing the same thing over and over again for the next 20, 30 40 years and expecting a different outcome. if i'm here in 40 years we'll have the same conversation. you can go ahead and comment. >> we're not just talking about diplomatic messaging and sending them nice letters. we're talking about cutting off inputs through sanctions, and there's great successes. when panama rolled up the largest shipment of north korean conventional weapons in july of last year on a korean freighter trying to go through the panama canal that was an indicator the rest of the world gets the message. when 80 countries condemn north korea's decision to test a nuclear device at the beginning of last year and took action to join with the sanctions regime internationally to impose costs on north korea, that's what we're talking about here. no, we're not talking about an

attempt to convince through a high school debating society. we're talking about reduce their running room, prevent them from selling their weapon systems that they need to sell in order to get inputs for their weapons program. but we're also talking about keeping a hand open to north korea if they have this change of mind. that's the diplomacy part of them. i was engaged with them at the beginning of 2012. we cut a modest dale with them to give them a chance back which is security guarantees. they chose not take it. instead they launch ad rocket in honor of the 100th anniversary of his grandfather's birth. that was his choice to make. the result was near universal condemnation and action taken by nation states. it's a little bit like watching paint dry. i understand that. the cold war took three generations. sometimes these problems are so big they take patient

application of increasing amounts of pressure accompanied by diplomacy in order to get these actors to realize they are going down a path that's leading them nowhere. that's our strategy. and the alternative, we're all ears. >> the gentleman's time has expired. i would like to associate myself with the frustrations of the judge from pennsylvania. i think well said. the gentleman from virginia is recognized for five minutes. >> well if we're associating ourselves with frustration i'm frustrated too and i'm sure you are and everyone in the audience is. i'm not quite sure what the relevance of our frustration is to fashion a public policy that creates change. and i would like to explore that with both of our witnesses. first of all, as you know, or may know, we managed to build the other day on the floor, chairman royce and myself that

passed unanimously adding to the sanctions regime on north korea and i assume you both probably were aware of that and welcome your reaction. i mean i assume you support it and hopefully if it becomes law we can use it as another tool in the bag. ambassador davies? >> for us it's a third rail to comment on pending legislation. i think sanctions are a tool that's a value and i think we demonstrated that through the actions we've taken unilaterally and working with our partners around the world. we remain very open to further sanctions options. whether they make sense to deploy them to use them i'm committed to finding a multilateral way forward. i wish there was a silver bullet fired to solve this problem. >> let's explore that just a little bit. where do you think the pressure

points are -- i mean i heard what you were saying about china which was quite intriguing, but in some ways if china has lost leverage over the regime at pyongyang then where are the pressure points that the west can turn to or south korea can turn to the try to rein in behavior or, you know reward good behavior punish bad behavior. where are those leverage points? >> sure. well china hasn't lost leverage. they've just decided there are limits to the leverage that they are willing to exercise. so when it comes to food and fuel for north korea china is absolutely critical in that respect. so there is more that china can do. but we think it works much better if the world in particular the neighbors in north korea act together on this supported by the rest of the international community.

so this is the achilles heel. it can't feed itself because it's broken its own economic system hollowed it out over the years. so in terms of ways to put pressure on them these are some of the ways that we can use to do that. >> and i appreciate that. but the normal kinds of leverage when you look at sanctions regimes, you know, we're looking at it on russia right now. well the ruble is exchanged. they have a stock market. they have external investment. they have trade flows. all of which can now be influenced in a way they were not as influenced when they were the soviet union. so they are feeling some heat. we don't have that kind of leverage with the north korea regime, do we >> we have limited leverage because we have almost no trade with them, that's correct. >> of course, they use their nuclear program as leverage over the west in terms of food supplies, emergency food

supplies and the like. >> that's correct. >> yeah. >> i should say one of the biggest points of leverage is the strength of our alliance relationships particularly south korea because it's their peninsula and japan. our ability to defend our friends and ourselves against north korean threats is a huge part what we have. >> let me explore the china relationship again. if i understood your testimony in a sense there's been a reassessment in china of the nature of relationship with pyongyang. is that your testimony >> they are debating it. >> they are debating it. do you believe as part of that debate the new leadership in beijing -- first the economic ties to some korea is for more than north korea? >> sure.

>> given they are a stakeholder in the success of the capitalist korea economy do you believe they are more open to pressuring the north for say market reforms similar to their own? >> they've been trying to convince north korea for years to engaging reform of their economy and the north koreans have resisted that. >> what leverage are the chinese prepared to use to rein in belligerent behavior try to achieve some of those market reforms, and are they prepared do you believe in some kind of timetable to move eventually towards an accomodation with the south if not outright reunification with the south. >> this is one of the fascinating conversations that have occurred during the recent summit meeting between the

president of china and president of south korea. beijing is voting with its feet. president of china has met multiple times with its counterpart in south korea. has yet to travel to north korea. things are changing. i wish they were faster. these are the changes i'm observing. >> the gentleman from north carolina is recognized. how has ruhani's regime changed the relationship? >> we watch any prolie feration or signs of proliferation between him and his regime. >> any suggestion that north korea and iran have intentionally focused on different aspects of nuclear weapons capability to speed up

the final result of both countries. >> you're starting to get me deep down into intelligence matters. these are the sort of things we would be happy to brief you on in a closed hearing. again, a matter of serious concentration and strong study by the administration. >> given iran and newark's cooperation in the past, do you think it's likely that north korea would share any future nuclear test data with iran? >> that's calling for speculation on the part of the witness. i just don't know. >> i don't think we're bound by the federal rules of civil -- >> i'm sorry. again, i mean i think intelligence information -- >> the witness will answer the question. >> thank you, urine.your honor. >> you may proceed.

>> pardon me could you restate that. >> it's a concern of iran and north korea have cooperated in the past. >> i think there's every incentive between them to cooperate to some aspect of this that's correct. >> you don't think, the rihani regime hasn't changed any of that dynamic that has led to the cooperation in the past? >> not that i'm aware of but one would hope there would be changes. >> a report suggests north korean energy needs have been met by iran and that iran's desire forearm armaments have been met. what do we know about trends in oil consumption by north korea and if they are stockpiling iranian oil? >> i'm not aware of iran oil to any great extent i will say to north korea. i'm not aware of that. >> switching to russia a little bit. how have increased tensions

between russia and west affected russia's relationship with north korea? >> well, russia's relationship with north korea fundamentally changed in 1989/1990 when the soviet union disappeared and the client relationship that existed did you say appeared and so now they have a very, very small economic relationship quite frankly. they have a political relationship. but it's not nearly as important as that between beijing and pyongyang, between china and north korea. >> so you don't believe that the russians have intensified or accelerated any weapon sales to north korea in recent years? >> i'm not aware of anything significant in that regard no sir. >> you know, north korea skirts international sanctions in a lot of different respects. you know one thing i believe they are one of the largest suppliers of counterfeit cigarettes in the world believe it or not and counterfeit

currency as well. any current administration actions to close these loopholes and more rigidly enforce the sanctions that you would like to expound on for a minute and ten seconds. >> sure. from the standpoint of counter counterfeit goods, there was a day it was a booming business. that day has passed. we watch that very closely. north korea will obviously, stop at nothing to try to gain resources to use, to develop its weapons program and that's why we concentrate so much energy on nonproliferation not just unilaterally but with our friends and partners. >> thank you mr. chairman. >> the gentleman from georgia is recognized for five minutes. >> thank you, mr. chairman. in listening to your testimony i think it's rather interesting,

again, with one of the key players with basically the rogueness of north korea and what they are doing in their relationship towards iran should be at least something studied a little bit more and using your words and i may have gotten this just a little bit wrong. but it was something to the effect of study and watching what is going on. that to me -- and i want says something in your testimony it says ultimately, mr. chairman, our policy aim is to bring to realization that north korea must take steps necessary to end this isolation. in light of that, what we'll call the desirous goal what many experts contend that administration strategy of strategic patience of wait and see have not yielded anile results but has served north korea by offering more time or

affording more time to pursue its own objectives. what's the administration's assessment of its strategy of engagement and strategic patience? >> our assessment is that we've made some progress not nearly enough. we got lot further -- >> what would you say your greatest accomplishment is? >> our greatest accomplishment is in achieving in just the last couple of years two united nations security council resolutions with teeth that had attached to them resolutions. these were unanimously achieved. china voted for them. russia voted for them. hezbollah, hamas, iran this whole nexus of issues we're doing more than studying and watching this. obviously what we're doing is seeking to disrupt illicit shipments, enforce these sanctions. we're doing it with our partners. we know they naturally would like to deal with each other. we are doing everything we can to prevent that from developing.

>> what other things beyond two united nations resolutions which may or may not have the teeth or enforcement some would like to see, beyond that what's the next step. what is the next big accomplishment. what is the next big thing to ensure what you say is your own goals, to encourage north korea to become a model citizen which under the current leadership i'm not even sure it understands the definition of model citizenship. it's a discussion here to have. what would be the next process? >> we would settle for north korea starting to do what it promised to do a long time ago and has tentatively started to do in past which is to take steps in the direction of denew cle -- denuclearizing. eventually the dismantlement in

the nuclear weapons program. that's what we've been engaged in for many years and we made progress in particular with china keeping the solidarity of china and rok with us. no daylight between any of the three allies in order to get north korea moving down that path of denuclearization. we're in a pressure phase. that's what we concentrated a lot of pressure on is putting pressure on north korea so it understands it only has one option and that's the peaceful option of denuclearization. >> i understand that. i discussed with it my very capable staff. but there seems to be at least somewhere along the line for north korea at least some ways around what has been quote put in place for strategic containment and isolation for

them because at this point some of that is just not, in fact, if anything there's been actual i don't want to say regression but not a lot of progress shown. they seem to be happily going about the fact that they are isolated and would like to get back but they want to do so on their own terms. i guess the concern and the good part and you appreciate the chairman having this discussion is just simply the fact of working with others which is a good thing but somewhere there's a gap in the system. somewhere there's roug nation, others who will have dealings with north korea and not pursue these assets and i think that's where maybe a situation which there's a much bigger stick along with a carrot that can influence this and especially with our south korean partners in this process as well. so, again, i think it's not an easy situation to answer and i appreciate your answer. >> thank you. >> the gentleman yields back. we'll go a second round which

will be two of us so should be wrapped up in ten minutes or so and we'll have votes here shortly. i'll begin with myself here. recent ly recently japan and north korea have re-engaged on japanese nationals being abducted in the '70s and '80s and froze relations in the past number of years. i met with a family whose daughter was abducted by north korean agents back in 1977 at the age of 13. i met with them a number of times over the years as well as a number of families. it's truly a sad and outrageous story. pyongyang further agreed to investigate the abduction of japanese in return for lifting of some sanction. it's a sad state of affairs you

can leverage kidnapped citizens for relief in sanctions. what do you think is the likely outcome of this agreement? what is north korea's motivation for re-opening the investigations and how much advance notice did the administration have before japan and north korea reached their agreement? do you have any concerns about these negotiations considering north korea's long record of deception and deceit? >> well, we stand with japan in terms of their desire which we completely understand to resolve this humanitarian catastrophe. i met with that family a number of times myself. we understand why not just the government but the people of japan want this resolved and we support their efforts. the japanese have kept us very closely informed as they these

limited steps with north korea. and we've indicated to japan and we've said publicly that we're supportive of all of the efforts that japan is undertaking as long as they are undertaking transparent lyally and what's very important for all us is the shared concern of japanese we have the concern of the north korea nuclear missile threat. we'll watch and supportive of it and see where it heads. north korea is now on the hook. they got to conduct this investigation that they promised the japanese they would conduct so we'll be watching very closely to see what kind of results the north koreans come up with and whether or not it meet the tests that the japanese are imposing on them. >> thank you. also ambassador davies in your

prepared statement you said that china is quote north korea's last remaining patron, unquote. considering its budding relationship with russia and illicit networks with countries in the middle east, iran especially, i wonder if that's completely accurate and the recent economic trade deal between russia and north korea comes as an opportune time for yang yang. provides pyongyang with an economic boost that it needs to counter the sanctions and to counter balance the chinese who have been putting some pressure on them but not nearly enough. for russia this deal undermines u.s. efforts to cut off north korea's financial and economic well being while enhancing its own web of influence vis-a-vis the u.s. for example in the

ukrainian crisis. can you tell us what sort of goods russia is providing to north korea weapons or oil or gas or food or whatever and how is the russian/north korean relationship is being considered in efforts to effectively pressure north korea since russia is also trying to bolster ties with china. is anything being done to counter this trilateral cooperation between these nations. >> mr. chairman, the russia/north korea relationship is very small in terms of trade and some of the steps that moscow announced were basically recognition of the state of afirst. they announced some debt relief for north korea. nobody in moscow expected they would get that debt repaid to begin with. the trade is measured in a few

hundreds of millions of dollars a year. they talked about some new projects that could be of interest. infrastructure projects. these are longer term nunds takings. so farther a bit at the margins. so we stay in touch with the russians. i go out to moscow and talk to them about this problem. we have a shared interest in denuclear beization denuclearization. we may have tactical differences that we'll continue to work on. right now i think it's fair to say that the agreement, the level of agreement we have on strategic issues with russia outweighs some of these deals that you're talking about at the margins now. >> thank you very much. my. >> i'm is expired.

gentleman from california is recognized. >> thank you. my staff has given me an article from yesterday's paper that says north korea threatens nuclear strikes on the white house. i won't take that seriously other than maybe they are watching some dvds from hollywood as well that are getting smuggled in. i do take seriously that they continue to try to develop longer range missile technology and so forth and as they acquire and develop that technology they really are a threat to not only our regional partners and allies but then, you know, guam and some of our territories all the way to hawaii that we do have to take very seriously. and that does create a sense of urgency in moving things forward. you know, my colleague from virginia kind of underscored the challenge here. sanctions with the regime that

does not seem to care about what happens to its people are very difficult. and the kim regime is not taking the interest of the north korean people at stake here. so they are the ones that clearly are suffering. so we have a limited tool box here. just thinking those various jones, your opening testimony was touched upon where china is north korea's last remaining patron. what would happen if china joined us in the sanctions if we're just thinking through and really did cut north korea off? how would north korea respond? >> well, china has said that they support fully united

nations sanctions and i talked about some of the signs that the chinese are beginning to take unprecedented action in that direction, signalling to north korea they will pay a price if they don't come around in particular on the nuclear issue. this is why when we talk to the chinese we try to talk about how we can work in concert to bring pressure on thenorth korea in a surgical way. we're going to keep at that because we think increasingly the core chinese interests in stability on the korean peninsula and our core interest in security that these are converging concerns. and we are seeing signs for the first time in decades that the chinese also recognize this that their stability will be affected

unless we can address proactively north korea's pursuit of these weapons. so that's where we're concentrating our energy and we're saying to the chinese there's more you can do. we respect the fact you'll make decisions about how you do it. but we need to do more. and it's more effective if we can do it together with our partners. >> we're increasingly showing north korea there really is only one path forward that is de-escalation, de-nuclearization and becoming a more conventional nation. you know shifting to a different scenario again north korea continues to posture with you know missiles towards the south korean border and so forth. again not helpful. what would south korea's response be at this juncture i

think south korea has shown incredible restraint given some of north korea's provocation in recent years. if, in fact there was a misfire accidentally or intentionally that were to land in the south korean city seoul is not that far away, what have the south koreans indicated their response would be at this juncture. >> the south koreans are increasingly resolved should there be a provocation on the park of north korea they will respond. in 2010 there were two deadly attacks by north korea on south korea including that resulted in deaths of south korean civilians. so this is what our alliance with south korea is all about. ensuring that together we can present this united airlines front on the peninsula to north korea and they can understand that they can't repeat the aggression that they perpetrated on the south in june of 1950.

those days are gone. best path forward is, in fact, the vision that's been laid out by the president of south korea who has talked about a path forward involving peaceful use fulful unification. so par pyongyang, north korea has rejected that. >> i want to make sure people in south korea know that as one of our close allies in the region we do stand with them in the right to defend themselves. >> absolutely. >> to make sure those listening in north korea understand that we stand with the north koreans. >> job one for us. >> thank you very much. gentleman's time has expired. i think that is the end of the questioners this afternoon. we want to greatly thank the panel and for your testimony. members will have five days our first

witness the director for medicare and medicaid services, this is mr. slavitt's first testimony before the subcommittee. you might remember he appeared

last october to talk about the site. the concern about healthcare.gov is the reason we're holding this hearing today. exactly one year last week members may remember we heard from governor tabiner that healthcare healthcare.gov would be working. our reviews on the website were brushed aside but we know how our fears were well foupdednded. the rollout was a disaster. i think all would agree with that. mr. slavitt, we're here to talk about how things are progressing. we hope we get the same candor

as you had last year. mr. slavitt's new role comes at an inopportune time that led to the healthcare.gov disaster. today the geo has revealed a review of the failed laurchlnch of healthcare.gov. considering what this committee learned, they didn't have expertise, couldn't meet deadlines and didn't have the organizational skills to amass this massive undertaking. a broken website that the president prolsedmised would be as easy to use as any website cost the taxpayers $1 billion. it took a lot of taxpayers' money and their hard-earned paychecks to come up with $1 billion. my colleagues may want to complain that we're spending too

much on the failed launch. i'm not surprised, they don't want to talk about it but the impact to this falls on the roman period. we are still unsure that the web security or the cms will ever put in place a functioning payment system. when asked today about the healthcare.gov's contracts, the geo will report that as we head into open enrollment this fall, patients' families need to know how this law will affect them because each day acs is making our health care system more expensive, fragmented and more restrictive. earlier this summer they were required to notify the health care plans of premium rates in 2015. we hope the public will know them in time to plan for their purchase and whether the public will ever see $2,005 in savings the president promised.

we want to know if americans were able to keep their doctor or keep their plan in they liked it. this year we heard testimony from representatives of the insurance industry who knew that requirements in the health care law required cancellations of millions of policies. we hope the administration tells us if they plan on cancellations again this fall. last week the irs finally began releasing information related to the enforcement of the employer mandate. this may be surprising to many. the administration has, after all, delayed this several times. but it certainly raises questions of what happened when one of the law's controversial pieces finally go into effect. finally, i remain concerned about the overall impact of this law. millions of americans had their health insurance canceled because of the law only to find the plans they are now forced to buy are more expensive in premiums deductibles or all of the above. some may qualify for subsidies and others do not.

at the same time, the law's massive cost and destruction to the economy will continue to be felt for years. i again thank both witnesses for testifying and now recognize the ranking member for five minutes. >> thank you so much, mr. chairman. well i've got to say i don't really think we could go on august recess without having another hearing on the affordable care act because this is now the 12th one we've had in the last 10 years. as i've been saying the last couple years the aca oversight is a really important topic. but i would feel a whole lot better if we were actually doing oversight with what's happening now on the aca instead of rehashing issues over and over again. you are right, we will stipulate the rollout of the aca was an unmitigated disaster but i guess i'd like to know how long we're going to keep beating this drum. because if you look at what happened sipsnce the unmitigated disaster of the rollout, things are actually improving. and just about every prediction

mafs made that was made about the law turned out to be wrong once we got going. so i think we should figure out how to make the law work even better for the millions of americans who are now enrolling and getting health insurance. so in the last year, we've had hearings where the majority ntsz insisted that americans would be hit by insurance rate shock. instead the majority of new enroll enrollees in aca coverage are paying less than $100 a month. they said the healthcare.gov website would never be fixed, but thank god it was and millions of americans used it to sign up for health coverage. they insisted people would not sign up. but the insurers came in and said that's not correct, that people were paying. they said the rates would skyrocket, but that's proving not to be true. in fact, in many cases

enrollees will be able to reduce their premiums next year. they insisted that americans did not want or need health insurance coverage but over 20 million americans have received coverage over the aca and the uninsured rate has dropped precipitously since january. the vast majority of new enrollees are happy with their plans. these are facts, and in the interest of making this hoorgearing as fact-based as possible i want to add, with unanimous consent, each of the fact sheets of the committee into the record. >> without objection. >> thank you. i just want to talk about some of the benefits of the law in my home state of colorado. in colorado there are 240,000 state residents who were previously uninsured but who now have quality health coverage

because of the affordable care act. in colorado, our uninsured state resident -- uninsured state residence has declined by about a third. almost 2.1 million people in colorado, including 460,000 children and 860,000 women now have health insurance that covers preventative services without any copayments or deductibles. 50,000 young people in colorado retain health care through their parents' plans. 1.8 people in colorado are protected by aca provisions that prevent insurance companies from spending more than 20% of their premiums on profits and administrative overhead. because of these protections over 210,000 individuals in the state received approximately

$41.7 million in insurance company rebates. up to 294,000 children in colorado with preexisting health conditions can no longer be denied coverage by insurers. so even if you disagree with the law, it's important to note that the aca is helping our constituents. i hope we can end these relentless attacks and we can help more constituents obtain coverage under the law. we should look at the example for medicare part d. i can attest to it because i was here. many democrats, including me did not vote for the law and had real concerns about how it was implemented. but we still had town hall meetings and other events so that our senior coverage could cut their drug costs. i hope next year we can look in a bipartisan way to make aca even better rather than find ways to undermine it and repeal

it. i know witnesses are coming forward today. i know they are going to propose contracting for healthcare.gov. anything we can do to improve that contracting is good for me. i hope they have learned from the website's flawed launch and i want to know the plan to make sure they do better moving forward. and i want to welcome you, mr. slavitt. you're new to cms. you'll have primary responsibility for the website, so i hope you can tell us what you plan to do in 2015. >> we'll recommend dr. burgess for five minutes. >> thank you to the chair and thank you, mr. slavitt, for joining us again. our subcommittee throughout development and the rollout of healthcare.gov, this subcommittee had repeated assurances that the systems were and would be ready to go and that implementation was on track. we had a hearing in september

lifrlly literally days before the launch of healthcare.gov. we had repeated assurances from the director of consumer information oversight, mr. gary cohen. he said unambiguously that on october 1st americans would be able to go on line, would be able to see premium net of subsidy and would be able to sign up. we all know now that those assertions were fact challenged. the center for medicare and medicaid services undertook this mammoth project without effectively planning for its development or its oversight. this has led to hundreds of millions of taxpayer dollars being wasted. again, gary cohen, other hhs officials told us time and again that the website was working. that was factually incorrect. it was not working and it still may not be working because the back end systems, those systems

that are responsible for actually paying providers, have not been built. consumers may believe the website is fixed because some of the front end problems have been addressed. but there is no way to verify inaccuracies about things like citizenship and income level or ensure that the correct subsidies are being paid for insurance premiums. thanks to this investigation, we now have definitive proof that the department of health and human services was fully aware that these systems were not ready for prime time. their own contracting documents shows that they only expected 65% of the federal exchange to be ready on october 1st. and then of course we're continuously reminded that the promises made by the administration simply couldn't be kept because the groundwork had not been done and the website was not prepared.

we are all still wondering what happened to the promised $2500 in premium savings that every family in america could look forward to? we're all wondering what happened to the ability for people to keep their doctors? we're all wondering what happened to the ability for people to be able to keep their insurance plan? mr. slavitt mr. cohen also was asked in his last appearance here in january about the issue on the risk corners and the risk sharing. the question came up about what if there is not enough money in the risk corridor to actually cover the premium shortfalls that the insurance companies are experiencing? and would he look to -- that was mr. cohen -- would he look to supplementing those funds from general revenue of the treasury of the united states? he couldn't answer the question.

i asked him if he could provide us with a legal memorandum upon which he relied to obtain the ability to get funding from other sources if the internal funding was not enough to cover the cost of the risk corridors. that was january. i'm still waiting. i would like to know if i'm going to receive an answer to that question, and if so when that answer might be forthcoming. fact of the matter is both the department of health and human services and the white house failed to heed internal and external warnings about the lack of readiness of the exchanges. now we have the general general accountability office report, and it is astounding to see that all the money that was spent, and not wisely, the organization continues to ignore recommendations and continues to

pump money into what seems to be a futile effort. we're well on track to sink $1 million into the wealth of this website. we have very little to show for our money. i'm eager for the testimony of the witnesses today and thapg the -- thank the chairman for the recognition. i now yield back the remainder of my time. >> mr. waxman, five minutes. sdplz thank you >> thank you very much, mr. chairman. this is the 12th hearing this committee held on the health care act since enrollment began on october 2013. these hearings, if you look at them, all have one purpose. to undermine the affordable care act regardless of the facts. the hearings have misled the public and i think squandered tax taxpayers' dollars. in fact, the affordable care act is an historic success. it has made comprehensive health care reform a reality for the american people. more than 8 million people have

signed up for private health insurance plans through the public and private marketplaces exceeding efforts by over a million people. an additional 7.6 million people have enrolled in the chip program. 3 million people under the age of 26 have enrolled in their parents' health care plans. in my district alone if i can be parochial, 17,000 residents who were previously uninsured now have quality affordable health coverage because of the affordable health care act. so i'm giving you some perspective that the law has been a success. it is accomplishing what congress and president obama intended. instead we have another hearing of this committee or another subcommittee of this full committee trying to say how the

affordable care act has problems and did things wrong and presumably they think it should be repealed. well, in a lawsuit there is a world called stipulate. we can stipulate to what the ga has reported. and they have reported some things for which we ought to be concerned. because despite the success of the law, the initial rollout of healthcare.gov has serious flaws. i'm glad we're going to hear from gao, government of accountability office, on their investigation of healthcare.gov contracting. we should always try to learn from mistakes. not dwell on them but learn from them and i'm glad mr. slavitt is here to tell us what the administration has learned and what is being changed as a result. i've had experience with flawed

contracts. i was chairman of the oversight committee and we released a report that identified nearly 200 contracts worth over a trillion dollars that involved significant waste fraud abuse or mismanagement. the fbi had a contract created virtual case file system that had to be canceled after spending over $100million. the contract to build a high-tech border fence that was to keep out all these immigrants, and that had to be wasted after spending a billion. a deep water contract built boats that would not float. now, my point is not to excuse the healthcare.gov problems but to put them in context. with the exception of tom davis congressional republicans showed little interest in these enormous wastes of taxpayer

dollars when george w. bush was president. i think we should care about waste, fraud and abuse no marrytter who is president. i'm glad to the health care act was fixed. not exactly quickly but fixed nonetheless, and in time to help millions of americans apply for health care coverage. i want to know what to do different next time. see, we told you so. there are problems. we told you there would be problems. okay. and then their conclusion is, repeal it so they could replace it but they've never given us a replacement. people are getting insurance who couldn't get it in the past because they had previously medical conditions. people are finding that their insurance can't be canceled just because they got sick. women are not discriminated

against. people who can afford it can now get insurance because we give them tax breaks in order to pay for it. so i'm eager to learn what the agency is doing, so involved in 2015 goes more smoothly. we have unequivocal proof that health care reform is a success. we now need to make the 2015 enrollment period as smooth as possible so we can build on this success. let's go for trying to make things better, not dwell on things that were wrong especially if you learn the lessons and fix the problems. >> gentlemen, the time has expired. just a message to members and to our folks giving testimony today. we're expecting votes around 10:30, 11:00 -- 10:25 10:40, i should say. we'll try to get through this. i would ask that members really stick to their five minutes as we go through this or i'll really bang it hard.

and we will move forward. if we need to be interrupted by votes, we'll come back right after votes to complete things. i now introduce the witness on the panel for our first hearing. deputy administrator for the centers of medicare and medicaid services. in his new role, he will be responsible for nationwide policy and a coordination program as part of a new management instructor that comes in response to lessons learned in the rollout of healthcare.gov. i'll now swear in the witness. are you aware that the committee is holding an investigative hearing, and when doing so it has the practice of taking testimony under oath? do you have any objections to testifying under oath? >> no,i don't. >> and i would advise you under the rules of the house and of the committee, you are able to be advised by counsel? do you wish to be advised by counsel during this testimony? then stand up and i'll swear you in. [ witness was sworn ]

>> the witness answered the affirmative and you are now under oath in title section 1001 of the united states code. you may now give a five-minute summary of your written statement, mr. staphlavitt. i'm andy slavitt, principal administrator of cvs. i spent the last 20 years working with health plans and employers on solution to health care costs, quality and access. in the private sector i started my own health care technology business and ran larger scale health service organizations with more than 30,000 employees. in late october of last year, i began my involvement with the affordable care act implementation when i joined a group of people helping the cms team on the turnaround effort of the health insurance

marketplace. i'm very pleased to be here with you today and we'll briefly walk through the progress of the affordable health care act to date. there is growing evidence that suggests the affordable health care act is making a difference in the millions of lives of americans. in the first full year, millions of americans selected a private insurance plan through the state or federal health exchange marketplace and millions more have retained kovrmcoverage on their parents' policies or applied for aide in chip. we're seeing an overall growth in our health spending which has continued into 2014. this is good news for consumers with a typical premium paid in a policy purchased under the marketplace under $100. good news for taxpayers as the recent medical fund trust report shows. and importantly this success is not being achieved by government policy alone but in partnership with the private sector as

insurers grow by competing to provide better access to quality affordable services. now, as we move into our second year of marketplace limitation, we must build on the progress that's under way and heed the lessons of the last year. let me outline for you our highest priorities. first, we are focused on increasing value of our plan in the marketplace. this means increasing the shopping experience. secondly, we have technical and operational priorities. we must continually add automation that has begun with critical releases this summer and will continue this year and following years. while the consumer website is, of course, live, we are adding functionality to allow consumers to easily renew their coverage. whether on the consumer facing side or the back end, our

technology improvements will be more continuous and more incremental. we have a very strong sense of our critical path. our software releases so far have been on time and we are managing these deliverables daily. third, let me address our management priorities to include execution. as part of the turnaround team, i experienced firsthand the challenges of the first year of marketplace implementation. at cms, i'm now helping to oversee a series of changes to improve the management of the marketplace. as secretary burwell announced in june, we have created clear, top-down accountability. we have also improved the management of and with our key contractor, revenue-driven contract reviews.

we have built more testing into the schedule. even as we address the major concerns for the last year new ones will emerge, and our management structuring team must service and address issues if a disciplined manner just as we did during the turnaround. this coming year will be one of visible and continued improvement, but not perfection. we are in the early stages of a program newly serving millions of consumers and are still learning about the best ways to support their unique needs. and we are setting up and testing new processes and new technologies along the way. from my experience at this stage, businesses begin to see how closely their design matches the battle-tested needs of the market. good organizations focus prioritize and learn and continuously improve their operations and the services they provide. it is not always easy but we understand what we need to do and are making the right

progress to have a successful open enrollment and continue to deliver on the promises of the affordable health care act to improve health care access, cost and quality of all americans. thanks and i look forward to your questions. >> thank you. i appreciate your comments and appreciate your candor here. in fact, my very first job as a young man was mucking out horse stalls, and i felt like the difference -- what i got to do was i got to ride the horses so it was a nice reward. the difference between that job and this job is i don't get to ride the horses. so i appreciate your honesty and candor in this and want to ask you questions along those lines. you may recall a year ago congress was told repeatedly the healthcare.gov website was fine it was ready. in the months and days leading up to it, everything is ready to go. and the president said it would mirror the public's use with other web sites. so i have to ask, will healthcare.gov be fully ready

this fall? >> thank you, chairman. i obviously wasn't here last year. it does sound like certainly from the gao report that i've seen that a couple of things happened. first the technology field was bigger than people expected and secondly, as the gao pointed out, there were significant issues with the management of the project. >> you said it would be perfection. are there going to be some hiccups in the website implementation this fall. >> i think this year we can expect a vastly different situation. for one, we have a website that's already up and live and running, we're adding continued improvements and we're adding them in a much less risky fashion. we're doing releases frequently over the course of the summer, putting things live into production. we built in a big testing window. so everybody will remain on

their toes. they're nervous everybody knows what they need to do but we expect to have a good rollout. >> but the gao said there are still specific risks for the enrollment period. but you think they'll be ready? >> i think we can identify the risks, service them -- >> i don't want to take out my shovel. i would love to tell the committee, here's the actions we're taking to move forward. the committee would love that so we're not caught up in this guessing game. >> i suspect it won't be perfect with millions of people. there are certainly different situations. many are enrolling in insurance in the first time and it a bumpy process at times. i think we're committed, though, to people by and large who are dog a good job, but there will clearly be bumps. >> in anticipation how many will you enrolling in the fall? or how many will be enrolling for the first time? >> i do not know that. >> do you know in terms of your

review of this how many of those have been enrolled the first time? >> i've only seen the media reports, but it was i think far greater than half but i've only seen that in the media. >> when secretary sebelius was here, i asked questions but i'll repeat them. how many were new? how many got a pink slip and were discontinued? how many were eligible because of medicaid? and of all those signed up how many were paying the same less or more? and she said really the website has no way of knowing any of those things. would you agree that's true. i think we're getting an idea of what previous insurers were paying. when we see these numbers, however many signed off, including the 45 million are

served new by this. >> so the administrator has a chart in her office which she calls her prettiest picture and it's a graph of the uninsured rate over time. and it drop to a 13% -- >> is that specific of review by your office, to specifically look at people insured before and secretary sebelius told me there was no way of knowing that. >> there is no way of determining that from the website. we know the uninsured rate is down to 13%. >> have you tried to sign up for one of the plans on the website? >> now that i'm a federal employee, i'm in the fhebp blue cross plan. >> you don't have to be in the affordable care act yourself? >> no, i'm a federal employee. >> well, okay. i'm just cuserious, have you reviewed with people if they tried to access their physicians, the plan allows the initial visit and other preventive care, not as much as i would like, but have you

surveyed persons to find out if they have been able to see their physicians for follow-up appointments, their costs, have you reviewed their costs, payment levels, co-pay deductibles, have you reviewed any of those things? >> i'll have to get back to you on that. i don't think we have hard data but i can look and try to follow up. >> i'll keep of track time here. mrs. degette, you're recognized for five minutes. >> thank you. i agree it is important to make the federal exchange website and also the state's work as well for people and i'm sure mr. slavitt, you agree with that too, don't you? >> yes i do. >> we want to make it as easy as we can for people to enroll, especially as we reenroll in the 2015 plans. is that correct? >> that's correct congresswoman. >> now, up until now, even despite the admitted problems with the website, 8 million people enrolled in the

marketplaces, is that correct? >> correct. >> and about 6.7 million enrolled in the medicaid expansion, is that right? >> that's right. >> so obviously people were able to utilize those websites to get health insurance, is that right? >> that's correct. >> now, i was looking at the part of the gao report, and the gao made five recommendations in the report. are you aware of that? >> yes i am. >> and what is your opinion of those recommendations? >> we agree with most of those recommendations. >> which ones don't you agree with? >> i think the only thing in the gao report that i think needs a little further clarification, not that i don't necessarily agree with it, it is the characterization of the eccentric contract and i think it was characterized as ballooning in cost when in fact i think the eccentric contract was there was initial contract

before the work was completely scoped -- >> let me stop you, because that was one of their findings but that wasn't one of their recommendations. their recommendations -- >> correct. so i agree with all of their recommendations. >> you agree with all five of the recommendations. and what steps are you taking to implement those recommendations? >> so we are doing a number of things. first of all, in the contracting front, it is very clear now who can give work to eccentric, how work gets approved, how that contract gets managed and frankly, importantly, they have skin in the game to make sure they deliver. there is -- again i wasn't here last year, so i can't speak to precisely how the project was managed. but now there is daily intensive management of the project risks, issue and concerns are surfaced and dealt with. we built early warning indicators so there is an -- there is an accountability

difference that i think is very significant. >> are you looking at the interoperability issues as well? that's one of the problems we had before. >> this is as you point out, congresswoman, many different pieces of this project in order to go out. the coordinations and systems integration is something that was missing last year and is in place this year. >> are you doing anything that goes beyond the recommendations in this gao report? >> yes, well, fortunately or unfortunately the gao report wasn't news to the people at cms. i think the people at cms who worked hard but lived through that nightmare don't want to go through that again. so i think actions were under way well before seeing this report and i think they fall under the categories i've talked about, contracting reform, technical and managerial oversight, focus and discipline project, management. >> we keep hearing about how

expensive the cost overruns and everything else and setting up healthcare.gov were. as an aside, i would like to know how much this lawsuit against the president is going to cost, but be that as it may mr. slavitt, i want to ask you, do you think we're going to be protected from cost overruns for the 2015 enrollment period? >> so, again i wasn't here last year, but the two things that went wrong last year, one of them actually was simply the inability for anybody and quite reasonably so and in private sector to estimate how big this project is and how complex it is. we have got a better handle on that now and i don't expect those overruns. secondly, to the point of the gao report, the contractor wasn't managed tightly with clear deliverables and requirements. that's been put to bed as well. those two things are in much, much better shape. >> and were you -- one last

question, were you aware that the uninsured rate in this country dropped 25% after the implementation of healthcare.gov and the full implemention of the aca. >> yes. that sounds right. >> i'll yield back. >> i'll recognize mr. harper for five minutes. >> thank you, mr. chairman. and thank you for being here today. and i have a couple of questions i'd like to ask. first of all, who is performing the role of systems integrator now? who is doing that? >> optimum. >> i'm sorry. >> my prior company. >> who has that role now? >> optimum the firm. >> okay. i got you. some questions i'd like to ask about some reports. earlier this summer we learned there were nearly 4 million

inconsistencies in the applications submitted via healthcare.gov. those inconsistents are for citizenship status or income. the failure to calculate these property could mean that millions of americans could have to pay back incorrectly calculated subsidies. so earlier this summer it was reported that there were millions of these, first of all how did this happen? and can't the website check for accuracy accuracy. >> sure. so appreciate the question. inconsistencies occur because of the changes that occur in people's lives. and people that end up having more current information than government databases so we have run last year during open enrollment hundreds of millions of checks against government databases to check on income and citizenship status and so forth. and some occasions where people particularly are in low wage jobs in seasonal work, and

other kinds of circumstance their income is unpredictable, or in other cases they haven't filed taxes before because they haven't made enough money. what happens when that happens just to give you a perspective on this, for a typical family of four there are 21 records searched through automated process. if one of those records turns up not to be a match because of income or some other thing, we have to pursue documentation and we do indeed pursue documentation to try to ensure that these people are, in fact telling the truth. as we have done that -- >> how could a person on a forum be a citizen or not be a citizen? isn't that something that you can verify? >> there is documentation status there is -- whether it is a naturalization status and so forth those are sometimes not as current in the government database as what the individual resident has in fact, done in their life.

>> so in an application on one application could have multiple inconsistencies. >> that's correct. >> and do you have a number of how many americans were affected by this problem? >> so i think there were a couple of million people who had inconsistent information that needed to be matched of some form or another about i would say roughly half of those are income changes. these are people who will have to have -- come back to the website and we're urging people to do that make some adjustment because it will spill out, of course, on their tax form. of the other half, we have cleared as of july 1st 425,000 inconsistencies, and 90 -- greater than 90% of those are indeed in favor of the individual consumer who had more up to date information than we did. >> and this is obviously something we want to make sure doesn't continue, so what assurances can you give us today that we won't see these problems during the next enrollment

period? >> well, i think we're learning is that a certain amount of these data discrepancy problems will be a fact of life because of the fact that we have people who do have variations, high variations in their income levels. and so that's going to occur in the coming years. what is going to be different next year is we have now just released software that allows us to get at those inconsistencies much more quickly. what is important, though is that people who we reach out to, we need additional documentation from, get in touch with us and get them back to us. >> thank you, sir. i'll yield back. >> mr. tonko for five minutes. >> thank you mr. chairman. mr. slavitt, welcome. and you earlier went through some national stats and i received information out of my district, we have been waiting to get info and in the 20th congressional district in new york, 11,000 residents who were previously uninsured now have

quality affordable health coverage because of aca. the number of uninsured residents in my district declined by some 23%. 214,000 individuals in the district including 137,000 women and 54,000 children now have health insurance that covers preventive services without any co-pays, co-insurance, or deductible. and 260,000 individuals in my district now have insurance that cannot place annual or lifetime limits on their coverage. and up to 37,000, 37,000 children in my district with pre-existing conditions can no longer be denied coverage for health insurance purposes. i think that's a tremendous bit of improvement. we obviously want to continue to grow those numbers. but it is comfortable to know that that kind of success is coming the way of our district. and so mr. slavitt, part of the promise of creating the one stop

marketplace was the ability to shop for health plans, side by side, and apply in an apples to apples comparison. while the federal healthcare.gov site has done a good job in this regard, in displaying the premiums and deductibles of various plans, it has been more difficult to assess differences in health plan networks or whether a particular doctor is in network for a given plan. could you tell us what cms is doing to make it easier for consumers to access this information in advance of the upcoming open enrollment period? >> thank you, congressman. so you're indeed correct, and in fact, last year i believe the typical consumer had dozens, several dozens of options to choose from in health insurance. and our job is to try to continue to grow that. as you point out, we have to make the information people are looking for more readily apparent, more easy to see, so

we are asking the insurance companies this year to put direct links to the provider directory that fits the individual plan, but i would also ask consumers to do and ask if you talk to people in your district is that those directories that the insurance companies keep, they're not always up to date. they try to keep them up to date, but it is always good to call the insurance company or to check with your -- if there is a physician you want to see to make sure that they're in the network, because this is really important information for people to choose from. >> okay. and in terms of allowing a consumer, for example to search only for plans in which their doctor is covered, could -- >> we don't have that ability. that's the kind of thing that might come in future years. >> what kind of obstacles stand in the way of that happening? >> you know i think one of the lessons learned from this project is to take disciplined incremental steps to making

progress, not trying to do too much, and, you know, this -- our schedule is pretty much filled with things that are important to make sure we're executing well. and i think those are the kinds of innovations that i could really see us getting excited about adding in future years, but didn't make the cut this year. >> if i could just ask you a quick question about the medicare trust fund, the trustees report as you know, came out on monday and they're talking about the fund being secure through 2030. that's 13 years longer than was projected in 2009 when the aca was passed. the report noted that these changes may be due to the cost saving provisions of the aca. do you believe that to be correct? >> well, i'm not going to say i'm an expert, but it sounds logical. >> and in fact since passage of

the aca, the medicare costs have grown at or near record lows, is that not correct? >> that is correct. >> so would you anticipate any continuing or additional benefits coming via medicare? >> yes, i would. >> okay. well, we appreciate the leadership that you have borne with the aca and we thank you for the improvements and i know on behalf of the district that i represent, the numbers are very encouraging. i share them with you here this morning. and we're going to continue to work to further improve so that one of these fundamental rights that the affordable and accessible quality health care for all is continued. and strengthened. with that, i yield back and thank you, mr. chair. >> i recognize mr. griffith for five minutes. >> thank you mr. chairman. i do appreciate that. mr. slavitt, thank you for being here this morning. you indicated and testified

you're previously employed by optimum qssi, correct? >> that's correct. >> i think i heard you say you left there three weeks ago is that correct? >> a little longer than that that's correct. >> how long? >> i could get you the exact date. >> i don't need the exact date. between three and four weeks. >> something in that nature, yeah. >> here's the question. you now work for cms. and from what i understand you're very talented individual and that's a good thing for cms. but if i understood your testimony as well, you indicated that your previous employer is managing the website as the systems integrator, is that correct? >> that's correct. >> okay. so then the natural question as an oversight committee is how are you able to manage your former employer and doesn't this create a conflict of interest? >> sure. yeah. thank you for the question. so congressman there is as you know, an ethics pledge i signed

and along with that disposed of all of my stock basically that i had in the company, completely -- >> you disposed of all of your stock? you said basically. >> all of yes. >> okay. >> yes, i'm not trying to qualify that. >> i didn't think you were. but i wanted to make sure on the record you said you got rid of all of your stock -- >> got rid of all my stock and any other ties as appropriate. i have signed -- not as appropriate, as is appropriate, so now as a public servant, i have a very clear set of rules to follow. i have an ethics pledge and within that ethics pledge, i have a limited waiver which allows me for the purposes of health reform implementation only on the website to be able to interact with all of the contractors, including optimum

as it solely befits the implementation of the project. i do that and exercise that very carefully and very prudently. but that's publicly available waiver that i can make sure to get to you if you like. >> if you would that would be great. >> okay. >> i would like to talk about that waiver process. because normally in my experience, when you move from the private sector to the public sector, there some kind of period of not dealing with your former employer that is usually a year or more and if you could explain that process, how they came to this and you said it was limited waiver and we'll look at that later. if you explain that process, i'd appreciate it. >> it is a 15-page document, which is -- i can get you the details. >> i'd appreciate that. >> it is a two years is the waiver and i think the only exception -- sorry, two years is the agreement not to communicate with my old employer and there is this narrow exception for interaction relative to this implementation

process process. >> all right. i appreciate that. let me ask you questions about your former employer because optimum qssi is a subsidiary of united health group. isn't that correct? >> that's correct. >> and in their earnings call, the united health group president and ceo stephen j. helmsley recognized employees and said we try to move our employees around in different divisions of the company, and so i'm a little concerned about how much of a firewall is built between optimum qssi and united health group because united health group is participating in some exchanges and the federal exchange and so we have a situation where again there is an appearance of a conflict, or impropriety because if you're shifting folks around i said to

one of my staffers, they have a machine like they did on men in black and they zap their memories and they remember nothing they saw because it would appear that the folks at qssi who then report to united health group and in fact larry renfro has an office a title or hat in both companies. if that's the case, aren't they able to gain information on competitors by participating in the process and all of the meetings and then get an advantage over their competitors in the health care websites. >> let me clarify two things. >> okay, please. >> first, nobody on the healthcare.gov project is permitted to go back and to go outside of the project and transfer into united health care. that's expressly prohibited. secondly just an important clarification because it is a little confusing united health care and united health group are two different things. united health care is the parent

company, has two different divisions. and so i don't want anybody to have the impression that optimum is a part of this insurance company, it is actually a sister company, a separately run entity. >> but a wholly owned subsidiary, correct? >> correct. >> i have follow-up questions that i'll present for answers after the meeting. >> okay, thank you. thank you. i recognize mrs. castor for five minutes. >> thank you, mr. chairman. good morning. throughout the country everyone is seeing the benefits of the affordable care act. as of today, americans who are interested can access new fact sheets that provide statistics based upon each congressional district. so i encourage you to go to the democratic website of the energy and commerce committee and -- or call your member and we can provide those. i want to share some facts about the benefits of the law in my florida district and the tampa bay area. there are over 24 how individual,000

individuals in my district who were previously uninsured and now have coverage because of the affordable care act. the number of uninsured in my district has declined by 15%. that could have been higher if the republican-controlled legislature and our governor would have expanded medicaid in florida. in fact, almost a million additional residents could have health insurance. that's 43,000 of my neighbors in the tampa bay area who could have been covered but they remain uninsured because florida refused them medicaid. but over 40,000 people in my district were able to purchase coverage through the new health insurance marketplace. and nearly 10,000 young adults were able to retain coverage through their parents' plans. 43,000 of my older neighbors received medicare part d prescription drug discounts worth $8.2 million. that's a great shot in the arm

and terrific money back into their pockets. so as we plan for the second year of open enrollment, we all want to make sure that we don't have the computer problems that we had last go round. i want to ask you some questions about premiums, especially for the 2015 period. now, open enrollment begins in november. is that correct? >> correct. >> november -- >> 15th. >> so folks need to at some point -- when will the website be ready to compare plans? >> so we're going to be sending out notices to people starting in october to come back to the website, update their information, and letting them know that on november 15th, they'll be able to either -- if they choose come back to the website, shop for a plan compare premiums and choose the plan they want or as happens with medicare part d, medicare

advantage and most employers, if they choose to do nothing, they'll be able to oomautomatically reenroll. >> the deadline is in february. >> february 15th. >> february 15th of 2015. republicans predicted that premiums would skyrocket for the next go round, increasing by 50%. we can now test those numbers because the new rates are rolling out across the country. are there any signs of out of control rate increases that the republicans have predicted? >> so far the rate increases have been publicly available from rhode island washington, delaware, have all been in the midsinal dith le midsingle digits. california will come out with their numbers today. so i think that will be closely watched because of the size of the state. colorado's has been steady by and large. while this isn't going to be true for every single individual

and every county in america by and large the early results look positive, very positive. >> great. and is it accurate to say that there are more choices in the marketplace this go round or will it depend upon the state? >> there will be more choices this year than last year. >> so what does competition tend to do when you have -- when consumers have more choices? >> better prices better value better services. >> does that mean that if you have greater competition that puts pressure on the insurance companies to keep their premiums low? >> i think this is one of those win-win situations where the private sector can grow by providing more value to consumers and that appears to be what is happening. >> and what else -- what else helps keep premiums low under the affordable care act? >> well certainly the preventive visits do, the ability for people to qualify

for tax credits. i think there is a whole host of things that -- >> one of my favorite ones what we did in the affordable care act is the 80/20 rule, the medical loss ratio that says when a consumer purchases a policy, they have to get something meaningful and insurance companies can't spend too much on profits and administrative costs. and when they do, they have to rebate the money back to consumers. and for -- i represent the state of florida, we're really happy that our consumers are going to receive $42 million back this summer. i've already heard from many of my neighbors and sometimes those rebates go back to the employer, so you do need to keep an eye, isn't that right? >> yes, the number i've seen are that something like $9 billion has been returned and saved to consumers in that process. >> that's been very important. thank you very much. >> the time has expired. now recognize mr. johnson for five minutes. >> thank you, mr. chairman.

mr. slavitt good to see you today. you and i have had chances to interact before. and i appreciate you being with us. i agree with mr. griffith based on your background looks like cms is going to be the beneficiary of your experience and background. >> thank you. >> you've talked about your many years in the private sector. could you give a very quick summary of your years of experience and expertise and what it primarily focused on? >> sure. so i started my own health information technology company back in the '90s. a small business that ended up serving consumers and ended up selling that business. i worked with optimum for a number of years. oversaw the health information technology business and grew that. worked very closely on building lots of industry wide capabilities around things like revenue cycle management

population health management worked closely with hospitals, with physician groups, with health insurance plans, state governments, all really focused on quality cost and access issues. >> okay. and to summarize i think when you were responding to mr. griffith s griffith's questions, you led the team that made healthcare.gov usable in october, correct? >> that's correct. >> i want to ask you, you have all of those years of experience and expertise in information technology specifically in the health care arena. how much should healthcare.gov have cost? >> that's a really good question. and i'm not sure i know the answer to it. it is a -- it is not unusual for large scale health projects, for example, i can think of big

project kaiser permanente when they installed records cost a billion dollars to put in place. it is hard to know what the benchmark is to build a consumer facing website instead of back end systems that connect to 50 states, to medicaid plans, to insurance companies. so i'm not quite sure. >> let me help you a little bit because i don't know if you remember or not but my background is a 30-year information technology professional. i have been through the lessons learned and the trial by error of trying to project costs of complex it systems like this. the gao says we spent nearly a billion dollars on this, with the cost climbing. do you believe that taxpayers have received a good return on their investment thus far? >> congressman, i think two things happen and it is hard to know how much fits into each category. one thing that happened is clearly this was a more complex

project and needed a lot more work than people expected and for that part -- >> that goes -- that goes back to the genesis of some of the questions we got into the last time we were here. if you have a firm set of requirements. and if you have a systematic life cycle design process, it is much easier to project those costs. i know when i was doing large scale program management on large it systems the general rule was in the life cycle of a complex system that the implementation part the design, the building, the implementation part is only about 25% of the cost the life cycle cost of a system. the rest of the cost is in maintenance, operations, and further on down the road. so if this thing is already cost the taxpayers a billion dollars or more to get to where we are

today, we can reasonably expect that this is going to cost billions billions more over the life cycle of this thing correct? >> yeah. i couldn't put an estimate on that. >> but you do agree with the concept in general that maintenance and operation costs a heck of a lot more over time than the initial implementation does. >> i think there will be an ongoing operating cost. i don't know if it will be greater. i have to look at the budget request which i don't have with me. >> okay, the budget request has nothing to do with how much it is going to cost. you understand how the industry works, you understand life cycle software development. you understand that. but i appreciate it that you don't really want to answer -- >> i don't know the answer. >> gao says ultimately more money was spent to get less capability. do you agree with that? >> i think there were clear inefficiencies -- >> a lot of it is still not

working. >> there were clear inefficiencies of how this was managed. did i also say, in the real world, it is not always possible to know your scope going in. in an ideal world, you can. but i think the estimates proved it, they needed to do more -- >> thank you mr. chairman. i agree it is not always possible to know the scope, but it is possible to fence the scope and therefore knowing that what you're going to pay for is what you're going to get which is clearly not what happened here. >> please keep it in the time frame, because we're expecting votes in a few minutes. i want to be fair to everybody. mr. yarmuth you're recognized for five minutes. >> thank you very much, mr. chairman, mr. slavitt, thank you for your testimony and your work. one of the -- i want to talk about some of the things that happened in kentucky since we're doing an update and i'm proud of the experience we had so far in my state. but there was actually some pretty astounding news early whier this week regarding the trustees of medicare coming from them about the prospects for viability of the medicare trust

fund. are you familiar with that information? >> yes i am, congressman. >> could you tell us what has happened? as i recall when we passed the affordable care act in 2010, the trustees were projecting the trust fund would be insolvent by 2017. >> i believe if i'm not mistaken that the -- in summary the projection is that the trust fund was -- life expectancy extended to 2030. >> that's pretty astounding in four years the projection extended the life -- the viability of medicare by 13 years. and there is also some really fascinating and i think impressive data about expenditures they essentially were flat year to year no increase when historically they have been running at somewhere between 5% and 10% annually. is that correct? >> that's correct. >> all right. thank you. one of the things that i know we spent a lot of time talking about, people who signed up for insurance, the private

insurance, in -- under the affordable care act, this is data that has come about from the commission of medicaid in kentucky. and i think this is so impressive. if you look at the top map, that is the 120 counties of kentucky color coded by the amount of percentage of uninsured citizens in those counties prior to the aca. and red and orange, which are most of the counties in kentucky, i think, all but probably a dozen were rates of 17% to 20% and then more than 20%. this is the bottom map is the current situation. and it is staggering to me because the green is under 11% 8% to 11% and blues 5% to 8% and dark blue, less than 5%. we have counties in appalachia, in southeastern kentucky that

went from having the highest uninsured rate in the state, over 20%, to the lowest uninsured rate, under 5%. and that, to me, is a staggering accomplishment. in kentucky, we essentially have insured about half of the previously uninsured population of the commonwealth, in the state that has very poor health historically and currently and people who are desperately in need of health care. what is even more important i think, than that is that the report of the commissioner, again, medicaid, in kentucky, talked about how preventive service utilization has increased dramatically. almost 16%, an annual dental visit, which they weren't doing before, adult preventive services increased by almost 37%. breast cancer screening by 20%. colorectal by 16%.

very, very important health measures that i think will pay off for the commonwealth economically, but also for the life of these citizens going forward. and also what is very important to note is how much reimbursements went up for providers in the commonwealth. totals of -- let's see, reimbursements for those now covered under medicaid expansion went up by $284 million. manufacture the hospitals s many of the hospitals and doctor and providers who were providing uncompensated care for kentucky residents are now being compensated and that also is a benefit to the taxpayers and the treasury of the commonwealth. i just mention those things because it is very clear to me that states that embrace the affordable care act and committed to making it work are having very, very positive experiences.

the adverse experiences were coming in states where the administrations of those states the governments decided in some cases just not to participate in and other cases to try to sabotage the law. i thank you for your work and for the information you brought to us today. i yield back. >> gentleman yields back. mr. gingrey is recognized for five minutes. >> because of the medical loss ratio, i think they were talking about the state of florida, how much money was returned to the consumer of health insurance through the plans. let me start out by specifically asking you this because this is also been reported. if an individual ended up receiving an incorrect subsidy, that they were not entitled to what will be done to rectify this issue specifically will they be sent additional funding if the subsidy was too low? or will they need to pay back

the money if the subsidy was too high and when will consumers know if they owe the government more money? >> thank you for the question, congressman. so if individuals have changes in their income the best advice is they should come back to the website and update that information so that their tax credit and premium can be updated. for those adjustments that are not made when it comes to tax time, they'll either receive a refund or they'll have additional that they'll owe. >> well i think we need to get some specific answers on questions like that because this pay and chase model as we know in the past absolutely in regard to let's say pay and medicare claims that were fraudulent and then you have to go chase them down and try to get them back, you never do. you are aware of this gao report that came out, i guess today, and it states that in january, cms awarded a new company, a

contract to continue work on the federal marketplace for $91 million, right? >> correct. >> gao says the cost now has ballooned to more than $175 million, is that correct? >> that's what the report says yes. >> and the investigation of course ended a few months ago. do you know if the cost, the estimated cost of $91 million that is now $175 million, that's in the report, has it gone up even further since the report? >> no, i think the estimate of the total contract and, again not what's been paid, this is what is being budgeted, is about $170 million that's correct? >> that's pretty big area, $91 million versus 175. how is it you can offer a contract for $91 million and have it grow that much over such a short period of time? >> so i think the proper characterization of that

contract is that the scope of the contract was completed after the initial contract was awarded. so i don't -- i wouldn't characterize the cost as ballooning, i would characterize it as the proper scope with the contractor accenture was determined after they got going. and the reason for that, if you don't mind me saying, is because they needed to be brought in an urgent situation to take over for a contractor that was leaving and so they agreed to an initial amount, and this was before my time and then agreed they would come back after they got started started the transition from cgi and then would come to terms with how much the scope ought to be. >> mr. slavitt, in my remaining time, let me ask you this, you've been with cms for three weeks. and you're the number two guy there, right? >> correct. >> back in 2009-2010 time frame when we markded up this bill, a

lot of us on this side of the aisle felt like if the american people were going to have this affordable care act, unaffordable care act forced down their throat, that members of congress and members of the administration, the president, cabinet members, political appointees like yourself, you're not a career bureaucrat -- >> that's correct. >> you've been appointed by the president to come into this important position. we felt and still feel many of us still feel that you ought to eat your own dog food. and members of congress i think it is appropriate, we are doing that. we had to come off the federal employee health benefit plan and get on the d.c. health link, and yet you members of the administration, the president, and his family really ought to be doing the same thing. i know you worked in it, but let's say if you worked for ford motor company would you drive a chevrolet? i kind of doubt