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 it.

i think you would probably drive a ford. what do you think of that in the few remaining seconds. respond to me. do you think it would be appropriate, a show of good faith to the american people that you guys and gals that are running this show, that forced it upon us, would be in the same plan that the american people have to be in? >> it is my understanding that the president and his family are on the exchange. i don't know this for a fact, but that's my understanding. and if it is determined that the rest of us should be on the exchange, i would happily do that. >> if that is true, please let me know and i know we are limited in time and i yield back to the chairman. >> i thank the gentleman for yielding back. now mr. green for five minutes. >> my good friend and colleague from georgia i'm going to miss. i normally drive chevys and i'm on the plan. we had to buy ours through the exchange. so -- but i want to thank the chairman and ranking member and our witness for testifying. for decades the united states

had highest rate of uninsured in the industrialized world this drives up costs and puts families at risk of bankruptcy when they get sick. the main reason is why we have a health sick system rather than a health care system because millions of americans can't get the care they need outside of the emergency room. and our own district in texas, urban district, affordable care act enabled 20,000 people previously uninsured to get quality affordable coverage. overall, the insurance rate in our district has fallen by 8%. 52,000 in the district will have access to coverage if texas had expanded medicaid. and hopefully we'll still get to that. earlier this month the new england journal of medicine, not fox news, not left or right wing internet site, but the new england journal of medicine released two reports on coverage under the aca. would like to read a quote for them. with continuing enrollment that numbers of americans gain insurance for the first time or insurance that is better in quality, or more affordable than previous policy will total in

the tens of millions. and mr. chairman, i'd like to have unanimous consent to place that article into record. thank you. mr. slavitt, are you familiar with the reports? >> yes, at the high level. >> earlier this week, the gallup poll released their latest numbers. are you familiar with that survey? >> yes, i am, congressman. >> the similarly the urban institute and commonwealth fund conducted surveys. can you discuss that also? >> i'm familiar with those too, yes. >> okay. would you agree that the findings of both gallup and new england journal of medicine are consistent with the millions of americans sign up for health care? >> they're consistent, very encouraging. >> okay. the only thing keeping millions more americans from signing up for the coverage is the repeals of a republican governor and state legislatures to expand medicaid. if they did, another 5 million americans would be eligible for insurance. mr. chairman, i think the

affordable care act coming out of the chute, it was a problem. it has been fixed and hopefully we'll see in the renewals it happened. but it is working. a lot of us had tough times october to mid-november who supported it. mr. slavitt, what is cms doing to address the execution or the technology lessons learned from the first enrollment section? >> well, congressman, i got to this project when it was beginning to turn around at the end of october. i think what we're doing now is essentially carrying over from -- just as we did in the turn around. no magic to it. it is basic blocking and tackling, good communication, it is quite frankly a lot of the recommendations that had come out of the gao report and making sure that we have precise requirements. it is daily management. it is senior level accountability that goes all the way up to the secretary. >> you know, i advocated in

texas having served a lot of years in the state legislatures that we should have had a texas plan that we could have done. some states had good examples of their plan. some not. could you talk about that, that, like, i know the state of maryland and other states had problems. and i don't know if they're fixed or not, but were they similar to what we had on a national scale for our states that didn't have a state plan? >> in terms of the challenges? or just in terms of what they got done in their state? >> yeah, were they on a smaller scale having the same challenges that we were? >> i think it is probably safe to conclude at this point, toward the end of 2014, that it was the rare state, maybe kentucky is one of them, that didn't underestimate how difficult this would be given all of the complexities of tying into medicaid, tying into insurance companies, offering the consumer website and the first year of any new program, and in my experience, whether public sector or are private sector, sometimes bumpy.

same will be true in the second year. but those problems become more and more minor and we get better all the time. >> to the best of your knowledge, for example, if a state wanted to create their own plan now, there is nothing in law that would prohibit them from approaching cms or hhs, that or expanding medicaid coverage. >> that's correct. >> thank you, mr. chairman. i' i'll yield back my time. >> i now recognize mr. burgess. >> i want to underscore the importance to me and even though mr. cohen is no longer at cms, i would like to see that. >> we sent -- we recently sent it, so if you don't receive it, i'll follow up with your office and make sure that you have it. >> very well. it is kind of -- i was thinking, it was a year ago really right

now that your boss, marilyn tavenner was here and we talked about the upcoming launch of healthcare.gov. but, of course, it was just a little less than a month after the unilateral decision by the president to delay the employer mandate. i remember asking mrs. tavenner about was she involved in that destination and she asserted she was not. i asked her how she found out about it, she said her chief of staff told her, which i found rather astonishing, if my chief of staff came and gave me information like that, i would be curious where that came from. she seemed to lack curiosity about how that decision was reached. but let me ask you this. a year later, employer mandate is supposed to kick in about a week and a half after election day, in november. is it your understanding that the employer mandate will, in fact, be enacted in november or

can we expect a further delay of that? >> so i'm still working my way around the federal government, trying to understand how it -- my understanding and you could please correct me if i'm wrong is that that is a irs and treasury area of responsibility. so haven't been exposed to that so much yet. >> my personal belief is that we'll never see the employer mandate. i have no inside information obviously. i'm not speaking for the committee, just myself. when you look at the disruption caused in the individual market, october, november, december of last year, and remind yourself that that was only 15% of the insurance market that had that convulsion, had that happened to the entire, both the large group market, small group market, individual market, all at once, it would have been pretty disruptive. now, you heard mr. gingrey talk about members of congress and members of the administration should take same thing people

have to take. i agree with that. in fact, i did not take the bc exchange that was offer to members of congress and their staff. i said, look, i'll do what other people in my district have to do. i went to healthcare.gov, bought a bronze plan off the website, biggest mess i've ever been involved in in my life. but i finally got through, took about 3 1/2 months to do so. now i'm wondering what my rate is going to be next year. i've got the most expensive insurance health insurance policy i've ever had and enormous deductible. but what can i look forward to in the next insurance year? you talked about you wanted asea successful open enrollment? is it going to be successful? what are rates going to look like? >> so i think we're at a stage now where, and, indeed, this is one of our high measures for success, making sure there is enough choices and enough affordability and, of course, each state is going through their own process and going through rate reviews.

we have seen some states publicly now come out with their rates. i believe rhode island, washington, california today is going to have, i think, an announcement with their rates. i couldn't tell you, congressman, about texas because i don't know. but generally speaking, what we have seen are rates that are in not the double digit increase levels, but in the midsingle digit levels. that's not going to necessarily be the case in every county in america, but that seems to be what is happening on average. >> but still, i mean, you've mentioned that three or four states where we have a long way to go before renewal rates across the country are in evidence. >> no question. >> you're the principle deputy administrator. do you have any responsibility or involvement in the renewal or rate filings? >> i think these -- these rate filings get reviewed and approved at the state level. there is a process and i think it is -- we're in the

midprocess. i believe right now that the -- >> let me interrupt you because my time is running out. do you receive interim reports or updates on what those state filings are? >> i think there is an initial submission and i've seen a high level report, but this is not yet final information. >> and are -- is your office going to make those rate filings public information? will we have the availability to access that? >> when they become final, absolutely. >> again, as a healthcare.gov member from the state of texas and the federal fallback, i would like to know what my renewal rates are for next year. thank you, mr. chairman, i yield back. >> i recognize miss schakowsky for five minutes. >> thank you, mr. chairman. i just wanted to tell you, mr. slavitt, i don't know if your office and your position is actually in charge, but we have gotten tremendous cooperation from cms when we have had

constituent issues. and, you know, clearly it comes up. consumers get confused, have a lot of questions have some problems. i get irritated sometimes on the other side. i feel like there is an embracing of these problems, rather than a constituent service attitude to fix the problems. and when we have tried, we have had -- we had good success. and so i just wanted to tell you i appreciate that. i also just wanted to say that the minority staff has done a district by district, the benefits of the health care reform law in all the districts in the country, and it is just wonderful to see how the number of people that in my district, 283,000 people in my district, including 51,000 children and 120,000 women now have health insurance that covers preventive

services without any co-pays, co-insurance, or deductibles. needless to say that is huge. >> very good news. >> and up to 36,000 children in my district with pre-existing conditions can no longer be denied coverage by health insurers. it is just lots and lots of good news including the new medicaid enrollees that are now being covered. but i did have a question. so we're talking somewhat about the states that have expanded medicaid and have not. 26 states, district of columbia, expanded medicaid coverage under the affordable care act. and in those states medicaid is seeing great success. enrollments increased substantially and the percentage of the population without insurance has declined dramatically. and i'm asking, you mr. slavitt, if you've seen studies that compare the decline in the number of uninsured in states

that did and did not expand medicaid. >> yes, i have seen those studies. >> can you tell me what you found? >> the states that have expanded medicaid and i'll get back to you on the exact figure, have seen significantly lower rates of uninsured than those states that did not expand medicaid. >> but we have seen a decline in any case, in most -- >> decline in any case and bigger decline in states that have expanded medicaid. >> and have you seen the estimates about the number of americans that would receive health care coverage if all 50 states expanded medicaid? do you know the size of the estimate? >> i believe that it is an additional 5 million if i'm not mistaken. >> thank you. and if that is the case, then i believe you that it is this is really an appalling number. 5 million americans who would receive health care coverage if republican governors and state legislatures took the simple step of expanding medicaid.

it is obviously good for people when more people have health insurance. but mr. slavitt, what about health care providers. how does the medicaid expansion help them? >> so, my information is anecdotal, but it appeared that with the dramatic reduction or significant reduction in uncompensated care, it appears that this is a very good thing for providers. >> and this committee has spent the last three years looking for some affordable care act related scandal and despite all their concern, they have systematically ignored an ongoing health care tragedy. the dereliction of duty by republican governors around the country who refuse to expand medicaid. for those who have not been following this closely, the affordable care act provides 100% federal funding for the first three years to states to expand medicaid coverage to millions of low income

americans, right? >> that's correct. >> and yet for some reason republican governors and dozens of states have refused to expand coverage to low income insured individuals and their states, correct? >> that's correct. >> this, to me, is a real scandal. the expansion doesn't cost states a dime, it provides quality affordable coverage for millions of americans working hard to get by. yet some republican governors and state legislatures are deliberately refusing to provide coverage to millions of uninsured americans. and, mr. chairman, that it seems to me is an issue the subcommittee really should look into. and i yield back. >> gentle lady yields back, now recognize miss blackburn for five minutes. >> overseeing the implementation, getting to the bottom of the questions is very important. and continuing to do our due

diligence, and i know that several people have mentioned the new england journal of medicine article from last week. the health reform changes and health insurance coverage. and my friends across the aisle have wanted to tout that as being something to prove their point. i think that it is important, though, to go in here and look at how the authors came to the conclusion that 5.2% more had insurance, that there was a decline in those without insurance from september 2013 to june of 2014. and then the authors mentioned the limitations of their study. they said that the study did not distinguish between persons enrolling for the first time and those changing their enrollment and i really wonder how many of those that had to buy more expensive policies, new policies that were obama care compliant,

how did that affect that number. and the authors measured improvement in access to care by asking two questions. first, did the survey participants identify a personal doctor and did they report difficulty paying medical bills? well, it seems to me a more important outcome measure would be whether a person was actually able to see the doctor because in our district we hear from people, they can't get access to the doctor. they have got access to the kwo queue because they have the card, but not to the doctor. while my colleagues across the aisle talk about how many people have insurance, i would like to remind everyone that having an insurance card is not the same as having medical care. and i continue to hear from people in tennessee who lost their health plan, they liked it, they can't keep it, i hear from people that have not been

able to keep their doctor because of the narrow networks in obama care. i hear from people who go to the doctor and need a test, but can't get the test because their co-pays and co-insurance are too high. they can't afford it. this stuff is too expensive to afford. finally, we're hearing from some of our tennessee insurance carriers, they are going to have a 19% increase in the health insurance premiums in 2015. so it's kind of like added insult to injury. you've got this stuff, you can't use it because it's too expensive to afford. the co-pays are too high. you have an insurance card, but you can't get into see the doctor and you're having to wait. i don't understand why my colleagues across the aisle continue to defend this thing. but today we are shifting our focus to oversight and the way taxpayer dollars -- i remind everyone, taxpayer dollars are

paying for this and the people don't like it. january 1, 2014, hhs certified to congress the american health benefit exchanges the marketplace were verifying their applicants for advance payments of the tax credits, cost-sharing reductions were indeed eligible. however, the gao secret shopper investigation found 11 out of 12 secret shoppers were able to obtain health insurance and qualify for premium tax credits usi usi using fictious documents. when i had my marketing business, we would run secret shopper programs for malls, shopping centers, chambers of commerce. would you identify where your problems are and you get in there and you clean them up. the problem is the system allows fraud. if you've got 11 out of 12 that

something is wrong, mr. slavitt, that is a failing grade. there have been over 30 delays in implementation. the president has made multiple unilateral changes, and we're here to learn about the contracting practices that took place at cms with the botched implementation of this law. we are looking at the gao study. this thing is not much better. let's talk about this contract. so january cms awarded a contract to a new company to continue work on the federal marketplace. it was $91 million contract, correct? >> correct. >> okay. now gao says that cost has ballooned to more than $175 million, is that correct? >> you can answer that question. >> that is what the report says. i don't agree with that characterization. >> thank you. i will smith the rest of my

questions. i yield back. >> thank you. though just called a vote. we'll go through ms. elmer's questions. you are recognized five minutes. >> thank you, mr. chairman. i would like to go back to the discussion you had with my colleague from ohio mr. johnson. you made comments where you pointed out in the real world, and you know, that things are much more realistic and that ideologically many times things seem like they are going to be better than they are. i would say to you, sir, that is exactly why i ended up running for office being a nurse because i did see and my husband as a doctor saw that the plan going forward was not going to be realistic. we have learned over time that that is the case and there were

many promises made that have not been kept. well intended, but not true for the american people. so i do share with you that same sentiment, but realize too that that is why we feel so strongly about this issue. you did have an change on the cost of health care.gov and what it should have cost. you reluctantly did not answer the question of the cost being $1 billion. is $1 billion too much for the implementation thus far? >> thank you, congresswoman. i have not seen a study yet which looks at what the appropriate costs for building the entire health care.gov system should be. of course, i do acknowledge that

our colleagues at the jao pointed out that there were absolutely inefficiencies and waste in the way the contract was managed. at the very least we know there was some. i would hesitate to say though that it was entirely waste because there was a really significant set of systems built. i think those systems have significant long-term value for the country. >> you know, there again it gets back to that same issue of what is realistic, what is achievable and you know, simply throwing money at it then looking back in hindsight to determine what did work and didn't, i think we all are learning from this experience. that of course has value. i don't know how you measure it, but the american taxpayers are still on the hook for this. and that is again why we are taking the approach we are, which is when is it going to be enough? when are we going to achieve the goals at a cost-effective measure? i want to look into some of the

issues with security breaches. are you aware at this time of any problems that the website, from the building of the website and that there are still concerns? are you aware of any right now? >> so there have been no successful malicious attacks, and certainly to the best of my knowledge, no one's individual data has ever been compromised from the health care.gov website. >> so to the best of your knowledge, and just based on the answer you gave, you are not seeing that there were any related information breaches in health care.gov or traveling through the federal exchanges that you would consider a security breach? >> we have not seen any malicious attacks that have been successful, and we've not seen anybody's personal information in any way get compromised. >> what is the definition of a successful breach? >> i'm not trying to be cagey.

other than to say that nobody has successfully penetrated the security system, to the best of my knowledge, congresswoman. >> are you aware of any companies building, operating or otherwise working on federal exchanges, obtaining access to information that they should not have? anyone who is outside of the system or working on that have? >> not to my knowledge. >> and information on enrollees or applicants, none there, as well? >> not to my knowledge. >> are you aware of any changes to site protocols or standards to address breaches to access information? >> i think it's fair to say that the security team does continuous monitoring and makes changes and puts in new patches as different security things are found out about in the industry

and so forth. it is continuous monitoring. >> can we obtain that information over time, any of the changes and updates that may have taken place for the committee? >> sure. let me figure out way can share. i don't want all the things our security team does to be well understood by the wrong people, but i want to make sure you get the information you need. >> thank you, mr. chairman. i yield back. >> they called votes. mr. slavitt, thank you for your testimony. members will have days to get questions to you. we appreciate a quick and honest response. >> mr. chairman, can i move to strike the last word briefly? i judge just want to, dr. burgess mentioned earlier hhs didn't respond to the committee's request for an analysis of its legal authority to make payments with the risk program. i've just been told hhs did respond to the request and provided a response to the committee on june 18th, 2014. in the response they also included a legal analysis.

i wanted to clarify the record. i wanted to also make sure that if dr. burgess or you or the committee staff did not receive that, we will get another copy to you. >> dr. burgess? >> in fact, i did not receive it, but would be anxious to look at it as and see if it answers the question as was asked. mr. chairman, if i could have the indulgence of a brief follow-up. >> real brief. >> when this thing went live the back end part of the system was not built. is it built and available and ready to use? the part that pays providers? >> the part that pays the issuers, the issuers are getting paid today. >> doctors and hospitals? >> they get paid by the health plans, not by the marketplace. >> the back end part of the system is up and fully functional? >> no the back end part of the system is going through continuous releases. today we are paying the issuers

on an estimated basis that would be a coming release this year where by the end of this year they'll begin to get paid and a policy level basis and next year continued automation will occur to tie everything to do with the back end of cms' systems. >> have the right people been paid the right amount of money? these are taxpayer dollars. >> we'll follow up with questions. we'll probably reconvene. our votes will probably take us to 11:30. this will be in brief recess until 11:30. and we are back. thank you very much.

government accountability office. he provides overall direction for gao's review of contracting activities at defense and civilian agencies. you are aware the committee is holding an investigative hearing and has the practice of taking testimony under oath. do you have any objections? >> none whatsoever. >> the chair advises you under the rulings of the house, the rules of committee you are entitled to be advised by counsel. do you desire to be advised by counsel during your testimony today? >> no, i do not. >> in that case please rise, raise your right hand. do you swear the testimony you're about to give is the truth, the whole truth and nothing but the truth. >> yes, sir. >> i are under oath and subject to the united states code.

you may give a five-minute summary of your written statement. >> thank you, mr. chairman. ranking member toget it's a pleasure to talk to but healthcare.gov and the work we've done looking into that system. when the website was launched in october of last year, there were, of course, a number of problems. we got a lot of requests from the congress to review what happened and why. those requests came from both the house and the senate, from both sides of the aisle. we got requests from committee chairs, from ranking members congressmen, across the board. and what we decided to do was to combine all of those requests and conduct a body of work that addressed all of the issues that

were raised in those various requests. we have a number of engamingments undengamingment engagements under way to address the issues. one we'll be talking about today is contracts but let me mention we have one that is nearing completion on privacy and security concerns with respect to the website. we also have a report that is on track for issuance later this year on information technology management. that report will look at the use of best practices in the development of this information technology system. but i'm going to be talking today about our first report that was issued, publicly released yesterday, that is on the contracting aspects of healthcare.gov, and i'm going to be talking about our three objectives. the first thing we reviewed was

the acquisition planning by cms for the website. secondly, we looked at the oversight of cost, schedule, and performance of that system, and then thirdly, we looked at a range of contractor performance issues with respect to healthcare.gov. we focused on the largest task orders and contracts that were involved here. our report mentions that cms had spent about $840 million for development of the system, and that was through march. obviously the spending has continued and that number is likely higher today, but as of the time that we completed our work, it was $840 million. and we focused on the largest. we reviewed in-depth two task orders, and one contract. just briefly, those task orders

are one two, first to cgi federal for development of the federally if facilitated marketplace. that's basically the website itself as well as some back office systems that support the enrollment process, the financial management process, planned management, et cetera. we also looked at a task order awarded to qssi, and that's for the data hub. the data hub is a system that interfaces with other agencies. there are roles that other federal agencies need to play to make this system work, the internal revenue service, the department of homeland security to verify immigration status, et cetera, so lots of agencies have a role here, and the hub data system is that system that allows for communication among

all of those agencies. and then the third contract that we looked at is one with accenture. that was awarded on a sole source basis in january of this year for continued development of that federally facilitated marketplace. before i get to our specific findings, i just wanted to make an observation that there really are some common threads that run through all of the work that we did here, and those threads are first of all complexity. this was an enormously complex undertaking. as i said, there were lots of federal agencies involved, a number of states involved, industry partners, health care plans, lots of players. there were also lots of systems that had to interact with each

other and that added to the complexity. another thread that runs through and you'll see that when we get to the findings in a moment, is the pressure of deadlines, that the affordable care act itself set january 1st, 2014, as the date when the enrollment took effect, the department of health and human services backed up from that january deadline, and set an october 1st, 2013, time for when the system needed to be ready to go when they could throw the switch, the goal live date, that sort of thing, they needed to have things in place by october 1st of 2013, and that drove a lot of the decisions that were made by cms. and then the third thread that runs through all of our findings is the changing requirements. things were constantly evolving,

which made it difficult not only for cms personnel to keep things on track, but also for the contractors to keep up with those changes. some of those were anticipated changes, things they knew going in. they did not yet know but others were, they were learning as they went along. let me get into the specific findings in the three areas that i mentioned. in the area of -- >> could you summarize, because you're already a couple minutes over. we want to ask you a number of questions so if you could summarize your final findings. >> sure. in the area of planning, our bottom line assessment is simple yet sobering, and that is that cms began and undertook the development the the healthcare.gov system without

adequate planning, despite facing a number of challenges that increased both the level of risk and the need for oversight. in the oversight area, we saw increasing costs across the instruments that we looked at, both of the task orders experienced, cost increases, and the new contract awarded to accenture also saw cost increases. those cost increases were due to a number of factors, as i said, some requirements were unknown at the time they awarded these instruments, when those costs became known, when those requirements became known, the costs increased. the cost schedule and performance issues were exacerbated by inconsistent and sometimes absent oversight, and

then in the third area, about contracting performance, we saw primarily in the cgi federal task order an increasing sense of frustration on the part of cms of the contractor's inability to be able to comply with contract requirements and meet deliverable schedules. that frustration grew to the point where they decided not to renew the contract with cgi and instead to move to a different solution, which is to award the contract to accenture. so those were our three findings. we have a series of recommendations to address some of the issues and i'd be delighted to get into the specifics of that as the hearing moves forward. >> thank you, mr. woods. we appreciate your thoroughness and your candor in this. as you described things like

inconsistent or absent oversight, you said oversight weaknesses, a lack of adherence to planning requirements, compounded by acquisition planning challenges, and when mr. slavitis testified earlier, fortunately or unfortunately the ga report wasn't news. as you're going through this, with regard to the oversight, did people within cms know these problems were brewing? >> we saw some indication that the problems were known, particularly with the cgi issue that i mentioned earlier. that was well documented what their concerns were. other aspects, though, mr. chairman, were not quite as visible, and let me point out one area. we found a number of instances and our accoucount was about 40 where changes were being made to

the contract requirements at the direction of people that did not have the authority to do that. >> within cms? >> within cms. these were largely -- >> when you say did not have the authority, did you mean they had not discussed with mr. cohen or miss tavener? >> well the only person within cms has that the authority to change the can are the in a manner that increases the government's obligations is the contracting officer. >> who was? >> i'm sorry? >> and who was that? >> i don't have the name right at my fingertips. >> what i'm wondering here is, do you know if -- so the problems with the website, it took longer to develop it, the security was under question, people had problems signing up, and with inconsistent or absent oversight so i'm wondering in some cases you're saying there was actions taken without authorization, several dozen of these i believe that's documented. so people were making change orders and that was leading to some problems, but there was

also absent oversight, so some people in charge were not meeting, were not paying attention, were not monitoring this contract, or they were monitoring some things and making the wrong decisions. was it both or one or the other? >> a combination of things. there are a number of people with different roles to play, as i mentioned there's the contracting officer, but there was also on the program side a governance board review process, and that process was designed to provide high level management oversight, and what we found there was that that process simply did not work as intended. >> now we also had heard that there was a mckenzie report commissioned by then secretary sebelius which made it pretty clear they weren't going to meet their deadlines. did they know within cms these deadlines couldn't be met and that under the pressures which

you had listed such as the january 1 deadline or the complexity of this, did they know this really wasn't ready for prime time? >> we found some indication in the files that we reviewed that, in the springtime frame, the spring of 2013 that estimates were made the federally facilitated marketplace would only be 65% complete by the october 1st deadline. >> so they knew then in the spring. did they know that in august and september? >> there was the state of knowledge continued to progress from the spring through the end of the summer, and they became increasingly concerned that the deadline would not be met. one of the principal oversight functions and processes that we saw and that we were very concerned about is there was

supposed to be, according to the original schedule, an operational readiness review conducted in the spring of 2013. that operational readiness review was moved from the spring to the fall, to september of 2013, just weeks before -- >> when they did that review, did they know it wasn't going to work? >> well, as i said, there was some indication in the files that they thought only 65% complete. >> so when -- >> the purpose of that operational readiness review is to either confirm that the system will work or find out what's wrong. so there's enough time to fix it. >> when miss tavener or mr. cohen came before this committee within days of the launch and said everything would be fine by october 1, what you're saying to this committee is, there was ample evidence to say that was not true? >> we saw some indication that

there was progressively increasing knowledge that there were problems in meeting that launch date. >> and did mr. cohen know that? >> i don't know that. >> but either through lack of oversight, he should have known it, or he knew it and reported this committee under oath that everything was fine on august 1, it was going to be ready for launch. what you're telling us is there's ample evidence in what's reviewed that people within hhs knew it was not ready and people under oath told this committee something entirely different. >> i don't know what specific individuals knew or did not know, but we saw evidence in the files that we reviewed that there was knowledge within the agency that the operational readiness was in jeopardy. >> thank you. i'm over time. >> this is an important issue. so you're saying people within the agency knew that the website

was not ready, correct? yes or no. >> we saw -- >> you saw it that people -- do you think that people in the agency knew that the website would collapse on october 1st? yes or no. >> i can't speak to that. >> you don't have any, do you have indication from the files that people in the agency knew that the website would not work on october 1st? >> yes, we saw that, yes. >> can you produce that to this committee, please? >> there was a series -- >> no, can you produce it? >> absolutely ma'am, yes. >> thank you. my next question because miss tavener and mr. cohen did come in and testify under oath several days before as the chairman has said that the website would work. do you have evidence in your files that miss cohen or miss tavener knew this website would not work? yes or no. >> no, i can not speak to the knowledge of any individual. >> in your opening statement you

talked about some provisions the gao was coming up with to strengthen the website for some recommendations for privacy and security concerns. is that correct? >> well, this particular report that we're speaking to today, just deals with the contract. >> right, but you talked about -- >> not for security and privacy. >> okay so you're not looking at privacy and security? >> other teams within gao are looking at and that work -- >> are you aware of any security breaches in the websites? yes or no. >> no, i am not. >> okay. now the gao made five recommendations you referenced in your opening statement, to cms to avoid the mistakes that you had identified. is that correct? >> yes. >> and i just want to go through those recommendations, because you said we should, and i think it's important to know. the recommendations i think are good recommendations, but they're a little vague, and so i'm going to ask you about each

one of them, if you have specific details, but then also i'm going to ask you, mr. woods, to supplement your testimony and provide to this committee and to cms specific details on each one of them, because i think it's important for the kcms to actually be able to implement these recommendations and our last witness said he agreed with the recommendations and he did want to implement them. the first recommendation is that cms should take steps to assess the causes of the increase in costs of the continued development of healthcare.gov, and the delays and functionality of the website, and develop a plan to mitigate those costs and delays. can you briefly give us a little more detail on what steps the gao believes cms should take to make those assessments? >> certainly. we did see cost increases in the accenture contract, the current contract. >> what steps do you think cms can take to rectify these problems? >> we think that they need to

step back and identify the causes, the reasons why costs continued to increase in that particular contract. >> okay, and do you have any thoughts what should be included in a mitigation plan? >> they need to make sure that costs are under control and that the schedule can be met. >> yes, i think those two things are key. now the next thing the gao recommends is that quality assurance surveillance plans and other oversight documents are collected and used to monitor contract performance. how can those documents be effectively used to monitor performance? >> the quality assurance surveillance plan is a standard document that's required in most efforts of this size that provides a road map for how the agency, any agency is going to oversee the contractor's

performance. >> right, does the gao have thoughts on how it can be used to do that? >> yes. >> okay, if you can give us that information, that would be great. i want to go through your other recommendations. >> certainly. >> briefly, while i still have time. the gao also recommends that kr cms formalize existing guidance of responsibilities of personnel assigned oversight duties. the roles and responsibilities were spelled out in some way. how would formalizing existing guidance prevent confusion about the responsibilities and authority going forward? >> this gets to the issue of unauthorized individuals making changes. >> okay, great. >> and when they learned of that, there was internal guidance provided to all of the people, but that has not been institutionalized. it has not been made part of the permanent guidance at -- >> okay so they already have a way they're doing it, that just needs to be formalized. >> it needs to take the next

step. >> the next thing you recommend giving staff direction on acquisition strategies, and developing a process to ensure that acquisition strategies are completed on time. can you flesh that out a little bit for us? >> that was a very important deficiency that we identified. >> yes. >> is that there were a number of steps that cms took to expedite the rollout of this healthcare.gov, but each of those individual steps added risk to the process, and the purpose of the plan or the acquisition strategy is to first of all identify those risks, to be able to come up with a plan to address them, and we found that that acquisition strategy was not prepared. >> so does gao have some ideas what this process could look like if it done appropriately? >> the process is already in place. >> okay. >> the regulations at hhs are very clear. in kt ffact there's a template.

it wasn't done in this specific case. >> they need to follow the existing regs. >> exactly. >> perfect. last, you recommended ensuring information technology projects adhere to the requirements for governance board approvals before proceeding with development. what exactly does that mean? what governing board are you referring to? what are the requirements, and why did the board approval process fail the first time around with healthcare.gov? >> the agency had a system in place that provided for an oversight board to review the progress of the system. the problem that we found is that those governance board meetings were held with incomplete information and that decisions were not made as we would have expected to either approve, disapprove or make modifications. >> so what you're saying is once again, this was a failure to follow the existing rules that they had. >> there was a process in place that did not follow. >> thanks for your indulgence.

>> north carolina for five minutes. >> thank you, mr. chairman. thank you, mr. woods, for being with us today. as i'm sitting here listening to your report findings, i am incredibly amazed by the inefficiency that went forward with a plan of action that was in place, and i keep coming up with the same question of why. why were these steps taken? why was action taken the way that it was? why were there unauthorized individuals making decisions. i think one of the most glaring questions that i have based on your findings is that, and you use the word, that they expedite, they took measures to expedite the rollout, that that added risk, obviously, and it was a failed strategy

essentially. why, in your opinion, based on your findings, did they stay with that october 1st rollout date, when they knew based on what i'm listening to, that it was not going to be accurate and successful and that it would be a failure? >> well, the law itself, the affordable care act set a hard deadline of january 1st, 2014, and they needed to have some period where consumers could determine their eligibility, look at plan availability, and make decisions about what plans they wanted to choose by that january 1st date. >> so they stuck with the october 1st date, knowing that their time was running out, and that they -- so now this is me just again trying to process why they would go forward with something that obviously was not

put together well and steps were taken, it wasn't an efficient system and yet they were moving forward, so based on your knowledge, they had to go forward with that october 1st date, so that they could have the enrollee numbers that they were looking for by january 1st. regardless of the fact that it wasn't going to work? >> that's been cms's position is they needed to stick with that october 1st. >> they had to stick to that date because they needed those numbers of individuals signing up essentially. yes? >> well, they needed to comply, to have a system in place by october 1st, by january 1st in order to comply with the affordable care act. >> okay. so i'm going to go back to some of the questions also on the tech surge, when the tech surge was implemented.

to the best of our knowledge and based on the report findings, we understand there was a tech surge in october to fix the site after healthcare.gov's failed october 1st launch. based on your investigation, what actions did cms take in october to fix the site? >> in october, they continued to work with cgi federal, but the level of frustration reached the point in november of 2013, where they sent yet another letter detailing the shortcomings of the contractor, asking for corrective action plan. cgi responded to that and clearly disagreed with cms's assessment at that point. >> okay, so they were disagreeing with it. there were other contractors involved, too, is that correct? >> there were many other contractors involved, right. >> but particularly it was cgi

that, where the frustration was, where the disconnect was. >> they were responsible for the heart of the system, if you will. >> okay. >> and that's where most of the dollars were in terms of contract expenditures. >> so to that point based on the fact that cgi was the main contractor for that, were there other contracts, was their contract extended? were there any new issued contracts based on the frustration that cms had? >> the cgi contract had been extended earlier until february of 2014. >> and that was before october 1st? >> i believe that was before. >> it was already extended before october 1 as soon as. >> that's correct. >> okay, so then to that point, were there any other, again,

getting back to this, were there any other contractors that were selected knowing cgi was not doing necessarily what was necessary for the repair of the website? >> the only contract that i'm aware of is the new one to accenture to continue with development of the federally facilitated marketplace. >> and can you refresh my memory on when that actually took place, when the new contract went forward? >> that was january of 2014. >> that was january, okay. okay. well, mr. speaker or excuse me, sorry, mr. chairman, i have gone over on my time and i apologize. thank you, thank you mr. woods. >> thank you. now going to recognize the gentleman from virginia, mr. griffith, for five minutes.

>> thank you so much for being here today. i appreciate it very much. the report indicates that cms did not engage in effective planning or oversight. what do you recommend they do in the future to make sure they have proper planning jeempb sight? because they apparently dropped the ball. >> they have the tools in place. >> okay. >> one of the primary tools is a strategic plan, an acquisition strategy is what it's called. there's actually a template in the hhs regulations for each of the areas that needs to be addressed, and fundamentally, it's a tool designed to identify the risks that the agency is undertaking and to be able to come up with a plan to be able to mitigate those risks, but they did not follow it. so the tools are there, they did not use the tools that were there. >> i want to ask you an open-ended question because i think it's important that we get this perspective from time to time, and that would be out of

the report what have with he not asked you about that we probably should have asked you about or the people watching this at home, something they ought to know about your report that you haven't already covered in your testimony here today? >> one thing that comes to mind is the next enrollment period. i think people are wondering are we going to experience similar problems or are we in better shape. that's why we have one of our recommendations that's focused on the current contract with accenture, where we've seen some cost growth, and we think the agency needs to make an assessment of why that cost growth has occurred, whether they are in fact on schedule and whether there are any risks to the 2015 enrollment period. >> my hearing is not as good as it should be. you're talking about the cost growth? what was that phrase you used? >> cost increases. >> okay. >> and we have somewhat of a disagreement with the agency

about the term cost growth, and that's why i'm reluctant to use it. their position is that any cost increase since about april of this year is totally based on new requirements. so it's unfair to call that cost growth. our position is that when you look before that, when they initially awarded that contract at an estimated value of $91 million, and now it's at 175, that the agency needs to make an assessment about why that, why those costs increased from the 91 to 9the 175, and that is not the end of it. there are, that contract continues in place today. our numbers are dated in terms of, you know, we completed our audit work a couple of months ago, so costs on that particular contract are almost certainly

higher today than they were at the time that we completed our audit work. we think the agency needs to make an assessment about why costs continue to grow. >> well i think they do as well, and i appreciate you raising that point, and it's kind of interesting that it would seem to me some of those new requirements are probably because it didn't work the first time around. wouldn't you agree? >> there are enhancements to this system. they're constantly changing and trying to make improvements to the system. the ones early on i think you're right, that those are related to the inability of the system to function as intended originally, but the agency tells us that the more recent cost increases are due to enhancements. >> all right. well i appreciate that, and i appreciate your testimony here today, and i'm happy to yield my last 55 seconds to whomever might want it. >> i will, thank you. thank you. i do have one follow-up

question, and it has to do with the conversation you were just having with my colleague. when we're talking about the cost increases, you had mentioned the enhancements are what has been cited as the reasoning. my question for you is did cms get congressional approval for the additional funding or spending i guess i should say? >> i'm not aware of what that process was at all. >> so to your knowledge, based on the report, you did not see any effort put forward to come to congress for additional funding for spending? >> i can't speak to that. we didn't see it, but that wasn't part of our review. >> okay. thank you, mr. woods, and thank you to my colleague for yielding. >> thank you. i'm going to do a second round with ms. dagett and i. follow-up here. are you saying that cms is not analyzing why the contract with accenture is growing in cost?

>> we don't think that they have done that fully yet. >> this original contract which was a cost plus contract, who signed that contract? who is responsible for that? >> those contracts are signed by the contracting officer, and as i said, i don't have that name. >> those have to be approved by mr. cohen or miss tavener in the chain? >> i don't know. >> is that something your study encompassed to find that paper trail or look at that? >> we did not review that, no. >> let me ask you, too, you talk about the pressure of deadlines, january 1, 2014, but a number of delays were put into place, employer mandate, or the retirement issue, enforcement of canceled plans, individual mandate to the shop plan. should the rollout have been delayed as well? >> i'm not sure about that but your observation about delays is

accurate, when they realize that they would not be able to be fully functional by october 1st, they did make some tradeoffs, and pushed projects that they thought they were initially going to be able to complete by october 1st, pushed that off into the future, and the small business program that you mentioned is one of them. the financial management module was also pushed off until a later date. >> but none of those delays caused a delay on the website. none of those -- many of those things i mentioned, they didn't cause a delay in the website readiness. these several dozen other changes internally which were one of the factors in the delay, in the website readiness, though, am i correct? >> well, the website was launched, i'm not sure -- >> but you had said a number of decisions made during i guess it was 2013 to 2012 were part of

the complexity. one there wasn't proper oversight of the contract and second a number of internal changes were made by someone who didn't have the authority to make those changes. >> that's correct. >> so do you know or can you find out for us in terms of someone making these changes, who approved the decision for them to make these changes, or who gave that person the authority to be in that position to make those changes? do you have that information? >> there are a number of people working with the contractors on a day-to-day basis, and the 40 instances of changes or direction to the contract was made by multiple individuals. some of these were technical people, as i said, working side by side with the contractor, some of them more and more senior officials. all of the changes, though, ultimately, were ratified by the person with authority to do that, and that is the contracting officer. >> but what did it go to the

level of miss tavener or mr. cohen? >> i don't know. >> is that something your records to review? we need to know if your records show or if you can find out for us. you have an excellent investigation but it's very important to know this, if they knew or should have known in terms of approving these changes or being aware that the website wasn't ready or, well, let me ask that part. do you have any information on those? >> well, as i said, we'll certainly review our materials and provide an answer to that question. >> because it comes to this point, this committee, members of each side of the aisle have different points with issues with regard to health care reform. that's fine, part of what makes our nation great, people have differences of opinion, they move forward on that. there are certain standards within a committee that i think she with you be unified in understanding that if someone comes before the committee under

oath and claims that something is ready to roll on october 1, thatter should be able to sign up, knowing full well that it's not, it's either incompetence, it's dereliction of duty, it's sloppiness, it's lack of supervision oversight or it's perjury to this committee, perjury in terms of making a claim they know is not true or making a claim they have no business of making. the only answers to questions like this is the website ready october 1 is yes, no, or i don't know. anything beyond that, when the claim was made by mr. cohen to this committee under oath that october 1 everybody would be ready to sign up, it's clear from your investigation and your testimony that people within the agencies knew it was not ready. so any information you could provide us that tells us if they knew and made false claims as committee or if they didn't know and made false claims to the committee it's important for the integrity of this committee to let us know, and if you could submit those, that information to this committee, i'd be

grateful, your paper and other reviews. miss dagett recognized for five minutes. >> thank you very much mr. chairman and mr. woods, i can understand why the chairman is concerned about this, based on your testimony today, so i want you to think very clearly about what your investigation found, and what you have testified to this committee today when i ask you these questions. because i don't want the record to be confused, and i don't want a misimpression to be left. are you aware of either miss tavener or mr. cohen coming before this committee and lying about whether they knew the website was not ready. >> no, i cannot speak to that. i don't know. >> you don't know. do you know mr. miss tavener or mr. cohen personally knew the website was not ready? >> i do not know. >> you don't no he that.

do you know whether miss tavener or mr. cohen specifically approved those changes? >> no, i do not know. >> you don't no he thknow that ? >> no. >> do you know who within the agency did approve those changes? >> ultimately those changes were ratified and approved by the contracting officer. >> the contracting officer so you could give us that information through that list? >> absolutely. >> thank you. i just think, and i know the chairman agrees, we don't want to loosely be throwing around allegations of perjury or anything else, when we -- we don't want to put words in your mouth either so i think we're clear on that. there's one more thing i wanted to clarify about your testimony today. your first recommendation that, in your report on this topic, as we discussed, was take immediate steps to assess the causes of continued ffm cost growth and delayed system functionality and develop a mitigation plan

designed to ensure timely and successful system performance. is that right? >> that's correct. >> and that's the one you're concerned about cms following as they look at the implementation of the 2015 program, is that correct? >> the effort that's under way by accenture is to move the development forward to be ready for --? right. >> -- the 2015. >> and that relates to that recommendation? >> yes, it does, we -- >> and huh? >> we think that cms needs to make that assessment in order to ensure itself -- >> right. >> -- it's on track for that enrollment period. >> for next year? >> right. >> now, you were sitting here i believe when we heard the testimony of the previous witness. is that correct? >> yes, i was. >> mr. slavitt. and i specifically asked mr. slavitt if he had reviewed the five recommendations gao had made. do you remember hearing that? >> yes.

>> and do you remember hearing mr. slavitt say that cms agrees with all five of the recommendations? do you remember hearing that? >> i remember hearing that, yes. >> so i would just, i would just, you know, sometimes i like to have both the agency witness and the gao, so that they can answer each other's issues, but i just want the record to be clear that mr. slavitt has said that they recognize this recommendation, they intend to comply with it and i think mr. chairman we should follow up and make sure that happens. thank you, i yield back the balance of my time. >> i recognize dr. burns for five minutes. >> thank you, mr. chair opinion. mr. woods, thank you for being here and i commend the general accountability office on great work. this has not been easy and i appreciate how difficult it's been to be here today and i appreciate your forbearance. along the lines of what miss dagette was just asking you, do you know whether or not the center for medicare and medicaid

services is adopting your recommendations right now? >> what they told us is that they fully agreed with four of our recommendations, and they partially concurred with our fifth recommendation. >> have you any evidence that you can point to that shows that, in fact, they are taking steps to comply with four of those recommendations? >> we've seen some indication. >> you have their assurances but is there anything that you can point to in data, in fact, that they are taking those recommendations? >> what they told us is, what they told us is they are providing additional training in certain areas that they plan to implement those recommendations, we're hopeful that they do. we have a normal regular process for following up with agencies to make sure that if they tell us that they're going to implement recommendations, that they, in fact, do so. so that process will continue at gao. >> i look forward to the

follow-up hearing we have about that implementation. now, you know, a lot was written in august of 2012 about the lack -- cns's or hms's lack of production on rule-making as it related to the essential health benef benefit.s's or hms's lack of production on rule-making as it related to the essential health benefit.ms's or hms's lack of production on rule-making as it related to the essential health benefit. in fact that rule-making was delayed, the rule actually came out about a week after election day that year. i don't know if you recall that. in your work, was there any evidence that that delay was politically motivated or am i just being overly sensitive and overly cynical by the rule coming out a few days after election day 2012? >> we found no indication of that, sir. >> so your inference is i'm being overly cynical? >> we can't -- we found nothing to -- >> let me point out to shayou, s came up several times today. mr. cohen was here i think it

was about 10 or 11 days before october 1st, and i asked him a very direct, very specific question. in fact, i tried to do what john dingell said, yes or no, the website will be ready on october 1st. he gave me what i presume to have been a well-rehearsed and studied answer, because he repeated it verbatim twice, and it essentially said on october 1st, consumers will be able to go online, see premium net of subsidy, and make their purchase. now as we know, that didn't actually turn out to be the case. so it is a valid question to ask. he must have known that ten days before the launch date, because it sounds like from your report that it was pretty clear that things weren't going well. am i wrong about that? >> i simply can't speak to what he knew or didn't know at any particular point in time, but i can say that we found indications in the documents that we reviewed that the system

was projected to be only 65% wa only 65% complete by that october 1st deadline. >> if you had been asked that question and answered it unoath, would you have answered it the same way mr. coen did? >> i can't -- >> you have written in your report october 21st deadline for establishing enrollment through the website, cms identified significant performance issues involving ffm, facilitated federal marketplace contractor but the agency took over only limited steps. can you provide for the committee what correspondence, evidence relied on to make that statement? >> absolutely. we can summarize what led us that conclusion and we'd be happy to do that. >> as a part of making that

statement, did you have access to internal e-mails within the center for consumer information and insurance oversight and cms? >> we reviewed lots of do you mean, contract documents, e-mails, memos. so we had very good access to cms. >> i would ask that be made available to the committee, transcripts, make it available to the subcommittee. >> i believe we already have that information in the subcommittee. >> lets find out. >> it's been produced already. >> again, i would ask we be certain you have the information the committee asked for. >> we'd be happy to work on t t that. >> let me ask you, open

enrollment is going to be shorter than last time. in your opinion, are they going to be ready for second open enrollment period? >> i'm not in a position to make that judgment. that's why we had the recommendation we did is that we think cms needs to make that assessment of cost and schedule to make sure that they are on track. >> we said in the record that's the risk, some impact on the 2015 enrollment period and that's why we had the recommendation we did. >> thank you for you answers. thank you for being here. >> without objection the documents entered in the record. thank you for your thorough and candid report. all this committee requests is honestness, thoroughness and reputation of organization is based on that ability to honor

and thoroughly provide to a candid world. we appreciate that members have skefrl questions for follow-up. we ask that you respond to that in a quick manner. we also ask your commitment, majority and machine ort staffs so they can revee and ge get details. participate in the hearing, remind members 10 business day submit [inaudible conversations] >> this week's q&a. >> she was so beautiful and so smart and also so witty that she became, she was just always irresistible to men. i never saw even in old age, i gave her an 80th birthday party and richard cohen was at this party. they sat together after having coffee. at one point she began to stroke

his beard. heavens, he said, i've never met an 80 year old before i want to leap into bed with. she had this quality, seductive quality her entire life. >> sylvia jukes morris on the life and career of claire booth luce ensuring about the personal relationship during her final years, sunday night at eight asia and pacific on c-span's q q&a. >> sunday on booktv is "in depth," former republican congressman from texas and presidential candidate ron paul. is written more than a dozen books on politics and history with this latest the school revolution, on america's education system. join the conversation as he takes your calls, e-mails and weeks live three hours sunday at noon eastern on c-span2. watch a more booktv next week while congress is in recess. booktv in prime time monday at 8:30 p.m. eastern and tuesday

through friday at eight featuring a wide range of topics including the middle east come immigration, marijuana common covering the fairs and festivals from across the country. booktv, television for serious readers. >> student loans make up the second largest portion of household debt in america after home mortgages. the senate banking committee looked at a private student loan debt affects families and the u.s. economy. this hour and have long hearing begins with committee chairmen tim johnson. >> good morning. i call this hearing to order. financial institutions play a role in higher education in many ways, from private student loans to student loan servicing, debt collection, and campus banking.

student loan debt is currently $1.2 trillion and continues to be the largest form of consumer debt in the country after mortgages. this issue is especially important to me, as my home state of south dakota has a higher percentage of students graduating with debt than any other state in our country, at nearly 8 in 10 students. rising student loan debt affects everyone and undermines our economic recovery. increasing numbers of americans with student loan debt are putting off buying a home, starting a business, and saving for retirement. and high student loan debt makes it harder for students to stay in rural communities, like south dakota. while the level of student loan debt is significant, equally

significant are the level of delinquencies and the options for borrowers in repayment. recent data shows that nearly one-third of borrowers are delinquent and borrowers are entering delinquency faster than before the financial crisis. the cfpb has found that borrowers are unable to obtain affordable repayment options and have difficulty working with student loan servicers to correct payment errors. last year, i held a hearing on this issue, encouraging lenders to work with borrowers to avoid default. a few months ago, the cfpb began overseeing large student loan servicers, which brings an estimated 49 million borrower accounts under its watch.

this is a positive step; however, we saw during the mortgage crisis that responsible servicing is a critical component of loan management. both the education department, as the originator of federal student loans, and private student lenders, have a duty to ensure that their loans are effectively managed every step of the way. this means making sure students have full access to information about their loan options before taking on debt and providing affordable loan repayment, responsible servicing, and careful debt collection. financial institutions have also partnered with a number of higher education institutions to

offers debit and prepaid cards to students, sometimes as a means to facilitate federal student loan refunds. i look forward to hearing more about these arrangements, including what impacts these relationships may have on students. with that i turned ranking member crapo. >> thank you, mr. chairman. beginning the path to higher education is filled with great excitement and opportunity for students across the country. however, students are faced with financial questions they might not have considered until this point, such as how they will pay for college, whether they should finally open a bank account, and how they will budget their money. banks and credit unions throughout the country serve an important role helping students sort through these financial issues in this new chapter in their lives, and many entities provide financial literacy tools to help students improve their understanding of the financial burdens they are about to undertake. today, i would like to focus on

two issues that impact students and their financial institutions in the higher education market. first, in the student loan market, both federal and private, there has been a growing field of research focused on the high student debt burden, now roughly $1.2 trillion, and its impact on the financial opportunities and decisions of recent college graduates. recently, the consumer financial protection bureau noted that the federal government's share of outstanding total student debt topped $1 trillion for the first time, roughly five times higher than existing private student loan debt. i share my colleagues' concerns hi about the negative impact of high student debt on the financial lives of recent graduates. i also have concerns about the significant and increasing role of the federal government in this market, which ultimately leads to excess exposure for the u.s. taxpayer and diminished student borrowing choices. the factors we should be focusing on are the rising cost

of college and failure to inform students properly about the loan repayment process before starting school. since 1974, the cost of college has risen roughly 350%. there have been relatively few market forces to keep costs down, as students can borrow up to the cost of attendance for an undergraduate program and take out almost unlimited federal loans in graduate school. students are not adequately educated about the impact their borrowing will have on life after graduation. it is unclear if students have the proper information to compare loan types, earning potential for different career choices, and what their monthly payments will look like when they graduate. these issues should be addressed before a student ever receives a loan. the second issue i would like to discuss today is the department of education's proposed rulemaking for the federal student loan disbursement

process, an issue that has received bipartisan attention. as drafted, the proposal would impact student accounts that are completely unrelated to the federal student loan disbursement process, which may cause unintended consequences for students and colleges and universities. with the proposed rule, the department of education creates an indirect, backdoor regulation of bank products requiring them to alter features for accounts that may never be used by a student to receive student loan disbursements. unfortunately, this could force banks and credit unions to simply exit campus markets leading to diminished student choice, restricted convenience, and more unbanked young people. as the department of education moves forward, it must work with the prudential banking regulators to understand the compliance challenges its rule may introduce, and the negative impact it could have on the supervision of banks and credit unions. there is no doubt the financial challenges associated with

higher education today can be daunting for students. i look forward to hearing from our witnesses about how we can improve student financial options, convenience, and financial literacy. thank you, mr. chairman. >> thank you, senator crapo. are there any other members who would like to give a brief opening statement? >> mr. chairman, thank you very much. i would ask unanimous consent that a letter that i will submit to you from the seven reaching institutes in kansas been a part of the record. >> without objection. >> mr. chairman, let me just for my opening statement highlight, the last part of what senator crapo, ranking member crapo was indicating your our seven universities regions university in kansas, kansas state, university and the, pittsburgh state, and wichita state university are all expressing a

concern support the general concepts of the direction of the regulations the rulemaking is going, in particular issues senator crapo just mentioned in regard to other accounts is significant issue for them and for their students. the letter basically indicates they agree with the departments stated objectives to ensure that students have safe, convenient and free access to credit balances in their account. they want to raise the issue in regard to the regulation that would, quote, regulate any arrangement under which a student opens or is referred to open a financial account into which title iv program for me be deposited. regulation could be in trip to a financial institution had any arrangement, however informal with that school, and regardless of when and why the student or

parent opened the account with that financial institution. that would have a chilling and in some cases terminal effect on good business partnerships that benefit students and universities alike. students often far from home need access to safe, secure financial services. financial experience is a necessary part of student life and is essential to an inner long-term financial health. knowing this, many schools signed agreement with banks to provide on campus financial institutions at low or no cost to students. such services include secure on campus branches, atms, debit cards and financial education programs, any action that could take away students safe, convenient and free access to one group of a central services while it simultaneous the drives up the cost of education for the same group of students deserves to be studied with extraordinary care. i would ask, as i said, the letter be made part of the record, and hope the witnesses will address the concerns that i have raised. thank you very much.

>> thank you. i would like to remind my colleagues that the record will be open for the next seven days for any of the materials you would like to submit. now i will introduce our witnesses. david bergeron is vice president for postsecondary education policy at the center for american progress. i recognize senator warren to introduce our next witness. >> thank you, mr. chairman. i'd like to edit his christine lindstrom from the higher education program director for u.s. pirg student chapters. ms. lindstrom is a 14 year veteran of the student pirg and she now works with the chapter to organize campaigns across the country for more affordable, more accessible higher education. our work has helped make college more affordable for american students, whether it's pushing for reform through the college cost reduction and access act,

or advocating for more cost textbooks. so ms. lindstrom, it is good to have your today. thank you for coming. >> kenneth kocer is the president of the south dakota association of student financial aid administrators and director of financial assistance at mount marty college in yankton, south dakota. i thank you for driving all this way from south dakota to testify before us today. i know you've been in the financial aid sector for almost 25 years, and i look forward to hearing more about your expertise and helping students make smart decisions across south dakota and the country. richard hunt is president and ceo of the consumer bankers association. i thank you all for being here today. i would like to ask the

witnesses to please keep your remarks to five minutes. your full written statements will be included in the hearing record. mr. bergeron, you may begin your testimony. >> thank you, mr. chairman, thank you to the rest of the committee for inviting me to be here today. we are at a critical moment of the year. our young people are in the process of preparing to go off to college, many for the first time, and they're going to be dealing with issues that they never had to deal with before, as was mentioned a couple of the opening statements. and when we think about that experience that our students have, it's different than the one we had. and today, 21 and a half million students will be enrolled in our 7500 institutions. and 12% of them will be going online. when i went to school, there was

no such thing as online. never thought of anything like that happening. and so the student population is expensive different things, and one of the things that's very different is the level of data they are taking on. students graduating with a bachelor's degree in 2011-12 graduate with $26,500 in student loan debt. that was an increase in just four years of 33%. graduate students graduate with $55,600 in debt. that was an increase of 46% in just four years. and while i worry a lot about the students who graduate from our institution and higher educational level of debt are taking on, i also worry and probably worry more about students who are taking on debt and are failing to graduate. 10% of the students who drop out from institutions reported that levels of $33,000 or more.

that has to be concerning. i'm also concerned about the students who take on a mix of private and federal loans. i point out in my testimony the difference in borrowing levels for the students who take on both private and federal loans. it is much higher. it is much more concerning. and this affects several of you -- as you indicate in your statement, the life choices students can make, whether they form a household. whether they buy a car. whether they buy a house. whether they start a small business. so we know that there are concerns, and legitimate concerns. some people argue that this is not new. there's a recent study by another organization that said things have really not changed. and i would assert they really have changed.

because you can discount one of the findings, and that is the length of time that it takes to repay student loans. they said they went from 7.4 years to over 13 years. that's a huge impact on families ability to save retirement for their own children, retirement education. so we need to pay particular attention to the. the center for american progress as indicated a very strong support for doing something about refinancing student loans, both federal and private, and we believe that is a critical issue and one that we need to address. we've also indicated that there needs to be some reforms in the bankruptcy protection that is afforded to student loans, both federal and private. private and federal student loans are not dischargeable in bankruptcy currently today. that is something that exists

for nearly all other borrowers in our economy, whether small businesses or individuals, and it really needs to be we thought so that students who, when they enroll in programs that were of high quality but where the industry they were seeking to enter, you know, disappears because of changes in technology or the economy, shouldn't have that hamper them permanently and hamper them in ways that prevent them from being able to do the things that they need to do for their families, or to improve our society by starting small businesses. i'd like to talk a minute about the issue of student loan servicing. i tell the story in my written testimony of the development of state-of-the-art world-class regulations for servicing debts. in the 1970s.

clearly things have changed since the 1970s and we really need to update the way we service and handle our student loan portfolios whether they're federal or private. we really need to improve those and develop and implement the tool or quit that i'm happy to answer any questions that you have when we get to the point in the hearing. >> hankie. ms. lindstrom, please proceed. >> thank you, chairman johnson and other distinguished senators for giving me the opportunity to speak. once again i am christine lindstrom with the u.s. public interest research group. the topic of today's hearing is fraught so i will focus our remarks on issues that used heard has been actively tracking and promoting specific in the campus banking space just come up in several senators introductions.

since 2007 we work to ensure that students are protected from trips and shots that are layered and high cost products like campus credit cards, private student loans and campus bank accounts and debit cards. right now since are being hit with high fees that are hard to avoid as it tried to access their federal aid refunds for campus sponsored bank accounts and prepaid debit cards. we found in our 2012 report, they campus debit card trap, that two in five college students in the country are exposed to debit cards on campus that may drive up the cost. students is some chances are charged steep and unusual these to get to their federal financial aid, including in transaction fees at the point-of-sale, overdraft fees at $37 or more. on the whole these accounts are not necessarily a better deal for students than what they might find through a bank not affiliated with the campus.

still, industry-leading banks and financial firms can see 40-75% of students on the campus using the campus bank product, campus-based products after a few years of marketing. so how do they do it? first, banks and financial firms behind these products often rely on multimillion dollar revenue sharing agreement with campus administrations. the contracts include receiving direct payment to use the school's logo, providing bonuses for recruiting students, and discounted prices in exchange for marketing access. in addition, they use push marketing and other strategies to steer students in opening up these new accounts over using their existing bank accounts. higher one, a prominent financial firm in this market, pre-males a car to every student on campus before they have opted in or out.

the cards are co-brand with college logo, their accounts that students can link to the student id card. student cam get freebies like banks and a t-shirt for signing up. finally the fees can be high as i mentioned an unusual. these on university sponsored cards include a variety of in slight fee these come and activy fees, overdraft fees, atm surcharges, these to reload cards to check your account balance. i could go on. the fees can be hard to avoid. for example, if a merchant only accepts and debit or if there's no free atm available. all campus bank accounts and prepaid card services can charge

overdrafts. overdraft coverage is a form of credit since the financial institution covers the consumers shortfall and a sub school he repaid the ballot extended plus a fee. some banks engage in the abuse that you abuse it back is not purposefully we order and transactions to maximize overdraft fees. many banks and financial firms that are playing on campus right now have been held accountable for their abusive practices in this arena. overdraft fees are inconsistent with the department of education existing rules on school sponsored accounts. department of education rules also require that students be provided convenient fee free atm access. in practice, access can be limited. one argument that's been made in defense of these campus banking products is to me low-income students are not able to our a bank account other than on campus.

these are the unbanked students. cfpb found that less than half a percent of college students in america are legitimately unable to secure a bank account. so a new student comes on the campus without a bank account, she doesn't have one because she chose not to have one, or she hasn't gotten one yet. students do not need campus sponsored bank accounts. so i urge you to consider legislation that bans revenue sharing agreements between colleges and banks or financial firms craft a specific to offer bank accounts and related banking products to students on canvas. the conflict of interest inherent use of count is problematic for the student consume and it needs to be addressed. thank you. >> thank you. mr. kaye, please proceed. >> chairman johnson and members of the committee, thank you for inviting to testify this one on the important topic of private education loans.

at mount marty can't we promote the progress for students as the first and best option for considering the loan to assist with educational costs. estimate colleagues across south dakota. in particular, financial aid administrator council stood on the many benefits of the federal student loan program including the building of subsidies interest for certain borrowers, options for loan forgiveness and multiple generous repayment plans. yonder these benefits the federal direct loan program also offers a firm and forbearance options, federal consolidation opportunities, and in many instances lower interest rates. even students being counseled to utilize and exhaust the federal student loans available to them, ma some still find they need additional resources. private loans can fill the gap in certain cases by funding a student educational costs and federal resources fall short. institutions and south dakota have a lower tuition rate when compared other states, yet even we find some students need to utilize private education loans.

and surveying my colleagues throughout the state, as many as one-third of students receive private education loans. i'd like to share an example of a gap i described that may cause a student to utilize a private student loan in order to cover educational cost. let's institution cost $18,000 for tuition, fees, room and board, setting aside any indirect costs like books, transportation and personal calls. if the student is not pell grants eligible, the only guaranteed federal building the student has as a first you depend on a grad student is a direct loan for the amount of $5500. this leaves over $12,000 the student would need to find a way to fund. lacking parental support, this shortfall in federal loan eligible he's the student looking for other options. for this reason private student loans with proper consumer protections to fill an important need for some students. i'd like to briefly walk through the processing procedure for private student loans. it begins with the student selecting a private lender they

feel best suits their needs. in south dakota a number schools provide a site with student cam access a historical list of private loans that students at that institution have utilize in the past. importantly providing a historical list is different a providing a preferred lender list in which case the schools recommend specific private loans to students. a historical list displays features of the different private loan programs, enabling since to make comparisons that hopefully lead to an informed decision. once a student selects the private loans they wish to borrow they apply directly to the private lender. the lender approves the loan and a certification request is sent to the school. the school reduce the students education cost of attendance and financial aid resources that the student is all received, for example, are loans and grants, to determine the amount of the private loan for which the student is eligible. by involving the school in a private loan certification process it allows fiscal to track all borrowing a student is

incurring and counsel the student on the overall amount of their loan debt. from an institutional perspective we consider this a good practice as it provides us with more information to assist in preventing students from over one win. through the process of certifying private loans fiscal condition of the student is not far beyond the calculated cost of attendance. there are quite a few private lending institutions that currently utilize school certification as a prerequisite and determine whether the student is eligible for the private loan or not but lenders are not required to do so. having provided some context on private education loans out like to offer the following recommendations. recommending -- recommendation and one is to require school certification for all private education loans. the process should be revised to continue to counter the impact of lender marketing and to assist in managing student over borrowing. replacing student -- students also the case with full school certification would give institutions the opportunity to ensure that a student is aware of the benefits of federal loans before the student commits to a

potential unless a favorable private loan. by requiring that an eight administrative review the students remaining eligibility under the cost of attendance limits we can help reduce unnecessary student borrowing. recommendation number two, provide one single website where students can see all other education borrowing from the federal institution and private sources. sdasfaa supports nasfaa's recommendation to create a universal loan portal for students. cargo ship mandate the creation of a single web portal were soon can ease of access information about all other student loans. this would allow all education loans from the federal government, i but lenders and colleges and universities to be reported to one central database. students need access to one-stop shopping with you can manage your student loans. many borrowers have multiple loans with different loan holders and maybe enters stages of repayment. having a central website where students can view, access information would help students as they mentioned their borrowing and repayment. the creation of such resource

could result in -- thank you for the opportunity to speak to and i look forward to any questions you may have. >> thank you. mr. hunt, please proceed. chairman johnson, ranking member crapo, a very good morning. my name is richard hunter i'm president of consumer bankers association, a trade associati association, leaders in retail banking at this hearing is most timely as many of the nation's 11 million students are preparing to head for campus. the need for fair, clear and transparent process for these kids have never been more important. our members provide student loans and banking services to some the nation's college students and their families. i appreciate that particular offer insight in these products, services and associated marketplaces. he for i addressed the topic of today's and, we cannot ignore the real crisis facing students and their families. the rising cost of a four-year

college education. since 1980 the average tuition for four year degree has risen 1100%, more than four times the rate of inflation. over half of our college students need some form of financial need. we must make college more affordable or we allow the sustainable to the detriment of our nation's future leaders. we strongly believe in the pursuit of higher education. it is critical for economic mobility and the success of our nation's economy and international competitiveness. we have a sacred bond with our students and play and affordable as they can the financial and professional futures by developing a good credit rating and aiding them in earning a college education. private and federal loans have a complementary role in helping students achieve their educational goals. however, private student loans are about a sliver of the overall marketplace. today, 92% of all student loans are originated by the department of education, and they alone have over $1 trillion on their

balance sheet. unlike federal loans, private student loan applications undergo a robust underwriting process based on a variety of factors. including and most importantly a determination of the borrower's ability to repay the loan. private -- 90% of student lender loans have a cosigner. sends private student loans to get a government guarantee, the lender errors the risk of loss, not the taxpayer. private lenders have stringent understand resulting in lower the legacy and default rates. just this week a new report came out by measure one found that less than 3% of private student loans were 90 days or more delinquent. 3%. on the other hand, the federal program has a current default rate of 14%. with some reports estimate more

than 40% of the loans will be in default or become delinquent. we are committed to working with students one on one utilizing every tool necessary including restructuring, refinancing and affirmative. private student loan borrowers are required to buy disclosures at multiple times throughout their origination process. these are student and comes to look at the federal loan program before opting for private loans. it is up to each borrower to determine the right mix of federal and private loans to meet the educational needs. in addition to the small but critical role in student lending market, cba members play an important role by offering banking services on campuses such as checking and savings accounts designed to meet students unique needs and help establish their credit history. in some cases, banks do partner with education institutions to offer services such as accounts of the student id card, financial literacy programs and assistance with financial aid

assistance. the council offered to negotiate agreement often has students from the fee structures or fully transparently disclosed and are completely optional for students. recently the department of education entered into negotiated rulemaking on the topic of cash management. this includes the disbursement of student aid refund, or federal aid in excess of what it needed to pay school tuition and fees. we work in good faith with the department and are disappointed, a consensus was not reached. with serious objections to the direction of this draft will, a bi person group of 5 54 the houe and senate colleagues including senators klobuchar, and others had similar concerns. while the department has authority to write rules concerning title for financial aid disbursement, the proposed rule would go much further by ray getting the availability and terms of financial accounts. this includes debit and prepaid cards available to students from

already heavily regulated and well supervised depository institution. we but they should be outside the department's go. whether it is a college athlete a checking account or a pride -- privacy mode want offer these parts in a way that serves the student will. they give for the opportunity to testify. >> thank you for your testimony. as we begin questions, i'll ask the clerk to please put five minutes on the clock for each member. mr. bergeron, many student loan borrowers are unable to refinance your student loans and have been locked out of taking advantage of historically low interest rates. what challenges exist in refinancing student loan debt, and what recommendations do you have to address this issue? >> as i indicated in my -- mr.

chairman, as i indicated in my testimony, you know, i think the issue of refinancing student loan debt is perhaps the most critical. it gives, which is the borrower the ability to take federal loans combined with private loans and we pay them as a single package with their total debt being considered. the center for american progress released a report last your where we made specific recommendations for refinancing, and we worked, you know, with staff from both the house and senate and republicans and democrats to propose and work on regulation to carry out that. you know, senator warren has a bill that was voted on and did not reach the requisite number of votes to move forward, and i hope and expect that that would

be something that is taken up again by the senate. i think in the long-term you have to find a solution, and the solution that has been offered by senator warren is a good one. i think that if we can move forward with that, there are other polls that have been put forward by members, you know, that should be considered. the idea, you know, creating a conduit like vehicle as was done under the axis act a couple years ago to make student loans available during the credit crisis provides a mechanism, a model for the kinds of public-private partnership that could be traded to create a marketplace for consolidation loans, particularly those that are distressed. but i think as a first order we should look really hard at what already is pending the for the

senate. >> mr. kocer, do you support mandatory certification of private student loans? how does certification help student borrowers, and in one way does your institution, mount marty college, use certification to meet its own needs for information about student debt? >> it's very important for school certification because it gives us more contact to the borrowers first of all. when a school certification comes in we know there's an additional on that student is looking for and we have the opportunity to counsel them on how a lone will affect them and what the possible repayment could be for them. so that's the first advantage of having all schools survive is to get the contact, get the up front counseling i now can affect them further on. it also helps us with school certification to prevent over borrowing for students, using school segregation we only allow them to bar up to the amount of cost that is at our institution that would prevent them from

over borrowing. >> ms. lindstrom, last month president obama announced the expansion of the pay as you earn program. can you discuss why this proposal is important anybody believe more of these could be done to improve repayment options for borrowers? [inaudible] >> is it on? all right. yeah, i mean, david mentioned the 1.2 trillion as to do, mr. chairman. obviously, that's not only a trek for the individual borrowers behind that figure but a drag on the economy more generally. so it's important to make income-based repayment options attract as many borrowers as possible. and president obama's actions

would enable more than 5 million more borrowers to take part, or partake in the benefits than previously. and so i do think that that's very important, and it's important to make those opportunities attractive for borrowers. that said, i do think that borrowers who do qualify for these benefits are getting in these programs, and that actual is another big problem that i'd love to see lawmakers tackle. there's a major system failure were borrowers who qualify for these alternatives could be beneficial aren't getting in for these programs. so we have to get away to do with that look at the way the services are being compensated to ensure there's a smooth path for borrowers to build access the pay as you earn program now and an expansion,