costs and improve care for private sector payers. our partnership for patients is a great example. reducing hospital-acquired infections, reducing preventable ress government programs, but certainly helps all our private sector partners, which is why we have more than 3,000 hospitals as well as a lot of major employers who are thrilled with this initiative and eager to step up and help us figure it out. >> i appreciate that. i just urge you to maybe quantify results so that we know if we're being efficient with various innovations. turning now to exchanges. i see you asked more money for the exchanges that go into effect in '14. how many states do you think will have exchanges operating by themselves, how many not? and if you could -- what are some of the worries, well, some of the good news, but what are some of your concerns about the exchanges and how many employers do you think are going to drop

coverage to the exchanges because they don't want -- it's cheaper for them to pay us a penalty than it is to fight health insurance. the exchanges will take care of it. mr. chairman, we're actively working with states across the country and engaged, i think, 48 states in a variety of programs from planning grants to implementation grants, strategies that they're putting in place a step at a time. right now i think it's impossible to tell you exactly how many states will have a state-based exchange, how many states will be in a so-called partnership effort, where they'll begin by running parts of the program at the state level, the federal program or one parts of the program and they'll build toward a fully functional state exchange some time after 2014. what i am confident about is that we will begin enrolling

individuals across the country in exchange programs in the fall of 2013, so that they can be fully covered by 20 shp. and i think states are in a variety of conditions of engagement at this point. in terms of dropping coverage, again, the only real-life example we have in terms of this sort of framework being in place is the state of massachusetts, where a very similar structure for employers and a penalty if people didn't carry insurance and the availability of an exchange. and we found in the state of massachusetts that actually coverage increased, it did not decrease when the exchanges were fully functional. i think when you talk to business leaders, they'll tell you that providing affordable insurance coverage is not only a cost factor, but it's a way to keep and maintain the best

possible employees. to recruit employees, it's a strategy that employees are eager to engage in, but often can't afford. so having a structure particularly for smaller employers, i think, will encourage them to stay in the marketplace. and we're already seeing a number of small employers who left the marketplace take advantage of the tax credits available for employee coverage. and i think that's an encouraging sign. so we have asked for additional resources, and that's really to focus on the functions of the federal exchange, which we will be setting up. many of those are one-time expenditures for an infrastructure and i.t. system. >> i appreciate it. thank you very much, senator hatch. >> thank you, mr. chairman. secretary sebelius, we're glad to have you here and pleased that you're with us. now, regarding the contraceptive mandate, i'm going to ask you questions that i think require only a yes and no and we'll get through this more quickly and hopefully i won't have to do it

in subsequent rounds. regarding the contraceptive mandate that's raised such religious concerns, i want to make crystal clear what the mandate is actually enforced today. now, those religious freedom concerns have been directed at the amendments to the interim final rule issued last august. last friday you finalized those rules, as i understand it. i have that final rule ready right here. and it states that you finalized those very same controversial proposed regulations, quote, without change, unquote. is that correct? >> we finalized the ifr with an additional delay period for those religious employers who find objection to offering contraception and they will have a year delay in implementation so we can work out a strategy

where they can abide by those religious institutions. >> my question is it's still the same directive, but subject to having a year, hopefully, where you can negotiate the changes that might need to be made. >> the wager rule is as it appeared in the original rule with the exception that employers will not purchase, provide, and will not offer, if they object, contraceptives directly to their employees, but the employees in those religiously based facilities will have access to that care with no additional co-pays and no co-insurance. >> i have a copy of it here. it says three regulations finalize without change interim final regulations authorized in the exemption of group health plans and group health insurance coverage, sponsored by certain religious employers, from having to cover certain preventativive services under provisions of the patient prevention and affordable care act.

and then also, it states in here -- in other words, we are currently operating under the same language that was objected to by some in the religious community. it also says the departments have determined that it is appropriate to finalize, without change, these amended with the group insurance, et cetera. >> mr. chairman -- i'm sorry, senator hatch, we announced that we will be promulgating the additional rule dealing with the religious employers who currently do not offer contraceptive coverage because of religious beliefs and that that rule will be in place and effective by august of 2013 when the ifr would apply across the board. >> and his statement on friday addressing the proposed compromise on this mandate, president obama said, quote,

from the very beginning of this process, i spoke directly to various catholic officials, unquote. now, prior to friday, february 10th, did you consult with any individual catholic bishop or the u.s. conference of catholic bishops about this so-called compromise? >> i did not speak to the catholic bishops. >> okay, that's all i know. to your knowledge, prior to friday, february 10th, did anyone in the administration consult with any individual catholic bishop or the usccb about that so-called compromise, to your knowledge? >> i know that the president has spoken to the bishops on several occasions, yes. >> was with it about that so-called compromise? >> i -- >> you don't know? >> i really don't know. >> are you aware of any consultation prior to friday, february 10th, by anyone in the administration, the president's re-election campaign, or the democratic national committee with any person affiliated with planned parenthood of america or the aclu about the so-called

compromise? >> again, senator, i know numerous conversations were had with religious leaders, with employers, with insurers -- >> with these groups as well? >> pardon me? >> with these groups as well? >> i assume some of those groups were talked to. i really have no idea -- when you ask if anyone in the administration talked to anyone, i -- >> okay. i wrote you last july that your proposed contraceptive mandate would be, quote, an affront to the natural rights to life, religious liberty, and personal conscience, unquote. i know for the record that your response to my letter completely ignored this issue. last october, 27 senators joined me in writing you again, asking for any analysis requested or obtained by hhs regarding these religious liberty issues. the response from your department completely ignored our request, and there were 27 of us who asked for it. the president's chief of staff and press secretary have since claimed that this mandate is consistent with the first amendment and the final rule you issued last friday states that it is consistent with the first amendment and the religious freedom restoration act, which

is the bill that i brought through the congress. let me just ask you again, did hhs conduct or request any analysis of the constitutional or statutory religious freedom -- or the statutory religious freedom issues? >> senator, i think -- >> if you know. >> -- what you heard was the president talk about two important principles, the availability of preventive -- >> no, my question is -- >> -- women and religious freedom -- >> my question is a simple question. did you or anybody at hhs conduct or request any analysis of the constitutional or statutory religious freedom issues? that's a simple question. >> well, we certainly had our legal department look at a whole host of legal issues -- >> did you ask the justice department? >> i did not, no, sir. >> okay, that's all i want to get. well, my time is up. next will be senator binghamton. >> thank you, mr. chairman. madame secretary, thank you for being here. let me just say for the record,

i appreciate the reasonable position that you've arrived at with regard to contraceptive services. i think it adequately protects religious liberty and it's at the same time protects the right of women to obtain contraceptive services when they choose to. so that's a different perspective than the one senator hatch was expressing. let me ask you about a provision in the affordable care act that relates to our workforce, our health care workforce. we put a provision in there that i felt was very important. it created a new independent and nonpartisan national workforce commission. the commission is tasked to provide congress and the administration with information and guidance on how we can align our federal resources to meet the health care workforce needs of the nation. this was a recommendation -- this resulted from the recommendation by the institute

of medicine and was modeled after medpac, this commission is. the commission was strongly supported by senator baucus, senator murray, myself, and several others. it's my understanding the commission members were selected by the gao in september of 2010, which is nearly 18 months ago, but they've not been able to work, because they haven't had any funding. now, i think there's some provision in this budget to provide initial funding and i just wondered if you could give us an update as to what can be expected. is this commission going to be allowed to proceed to do its work and when? >> well, senator, i share your interest in the work of not only this commission, but the

necessary work that needs to be done, looking at the entire health care workforce. whether or not we had an affordable care act, we have some workforce challenges as america ages and as we laook ata misalignment of where the health care providers are and where the people are, don't often match. so that we have been working on this from day one, as you know, the recovery act provided some resources, the affordable care act continued those resources, more training, more gme, more shifts in focus. we are eager to have the appropriations to get the commission up and running. we think that's an important advisory group and an important piece of the puzzle. we've been using internal resources to, with our planning and evaluation staff, our agency on health resources services administration, which has a lot of the workforce issue with cms, to look at all the levers we

currently have and all the analysis we can do about what is projected to be needed in the future and what ways we have them moving in that direction. but i'm hopeful that we can work with congress to get the commission fully funded and operational. >> well, i'll continue to communicate with you on this. i think this is a very low-cost item in the broad perspective of our health care delivery system, but i think it's an important one. let me ask about, on the health insurance exchange, senator baucus asked you about that, but one concern i had is that in our zeal to be sure that states can do whatever they want, by way of establishing these health insurance exchanges or do it the way they want, i should say, i'm concerned that the underlaying

i.t. systems that are being developed, state by state by state are not going to be able to communicate with each other, are not going to be -- they will not have the common elements that they need to really have good information for us nationally on what's going on here. i know our state is spending a big chunk of the money that you've provided in the planning grant, to work on an i.t. system. i know every state in the country is spending a big chunk of the money that's being provided to them, working on the i.t. system. is there something that you are doing to ensure that we don't just have everyone inventing the wheel in every state in the union here? >> yes, senator, i think your concern is well placed and well founded. we did, early on, release some early innovator grants, specifically for i.t. systems so

that states who were frankly already well underway creating a healthwide i.t. system could actually move ahead of the pack and share what they were learning with other states, to sort of reduce the reinvention of the wheel over and over again. we also have resources going to states so that they can look at a more comprehensive approach, as for consumer ease and availability, so a consumer doesn't have to figure out where he or she might fit if they are medicaid eligible, if their kids are eligible for the children's insurance program, if someone is eligible for the exchange or a tax credit for the exchange, but that the system, indeed, encourages that, so there were some, again, early i.t. money to look at a more comprehensive approach. and we are certainly gathering

states on a regular basis to share with one another, what are the templates, what are the effective strategies, what's our rating in place? what this looks like to try to minimize people having to start all over again, and to accelerate their progress towards an effective exchange i.t. system that works. >> senator cornyn? >> thank you, madame secretary. we're having a little bit of a shuffling here, but we'll get through this. i note that the rate of uninsured in the country was at 17.1% in eleven, which is up about 7% over 2010, and even more than that from 2008. and one of the reasons given for the increased number of uninsured is the number of individuals losing

employer-provided coverage. the congressional budget office originally estimated that only some 7% of employees would lose their employer-provided coverage, as the health insurance exchanges were implemented in 2010. mckenzie, the business consulting group, has estimated that at minimum, somewhere on the order of 30% of employees would lose their employer-provided coverage, and it could well be as high as 50 to 60%. and indeed, i think it's easy to see why that's true, because the financial incentives for an employer would create a reason for them to drop their employee coverage and to then require those individual employees to seek their coverage in the health insurance exchanges. and, of course, the employer-provided coverage is

subsidized as a fringe benefit by the employer, not by the american taxpayer, but once they go into the exchanges, they will be eligible, those individuals will be eligible for taxpay taxpayer-provided subsidies in the exchanges. can you tell us how the president's budget deals with this issue and how we're going to be able to afford to provide taxpayer-provided decease for this 50 or 60% of employees that are now provided with employer coverage? >> well, senator, i think a couple of things. the economy certainly has a lot to do with employer coverage being lost, but i would also suggest that every analysis that i've read suggests that the extremely high cost and often lack of choice for small

employers is also a driver in this marketplace, where people are dropping coverage, particularly in the small marketplace. large employers are keeping their coverage, small employers and individuals are often dropping coverage. and then people in the recession have lost coverage. so the availability of state-based insurance exchanges in every part of the country, with competition and by every congressional budget office and every analysis estimate, significantly lower premiums based an reduction of administrative overhead, pre-negotiation, and kind of an active purchaser role, i think, again, means that people will be coming back into the marketplace. i can't speculate on what it is that people are looking at. what we know on the ground is that the only state with a full

write operational framework is the state of massachusetts. employers did not drop coverage in that state. they did not choose to exit the marketplace. in fact, more came into the marketplace. they have a higher rate of employer coverage right now than they did prior to the exchanges being set up, with a very similar kind of framework, with a penalty and a tax subsidy. and finally, mr. chairman, i mean, senator, the issue of subsidies, employer coverage is subsidized by american taxpayers. they are part of a business expense. it's why some individuals are in this current market not in as advantageous a situation. and, again, with an exchange, individuals, entrepreneurs, those who set up their own business operations would be able to participate in a much larger pool with much more competitive rates once the insurance exchanges are

operational. >> madame secretary, i -- it seems to me that the economics for the employer are pretty clear. that rather than provide whatever the figure is, a $10,000, $8,000, $6,000 insurance policy for an employee, that it's cheaper for the employer to drop that coverage and to force the employee then to go to the insurance exchange. they save much more than a tax deduction, it's an out of pocket cost, and so it seems to me that the administration has grossly underestimated the number of employers that will drop their employees from coverage and indeed costs will explode far beyond the 7% that cbo predicted in the bill. and thus, it seems to me impossible for the president to keep iz promise that if you like what you have, you can keep it,

because the way the so-called affordable care act, which i think in truth will become the unaffordable care act is structured, it provides the incentives to drop people and cause them to lose their employer-provided coverage. >> well, senator, right now i would just say the market is entirely voluntary. and what we find is that employers find it to be an enormous benefit to have affordable, robust health coverage for their employees. and one of the issues i hear from small business owners, constantly, is they are frustrated by having their best employees go down the street or around the corner or down the block, because that is, by far, the most important benefit. so i think there are issues above and beyond cost, and i think if the system is more cost effective if we are successful changing some of the delivery system costs, lowering overall

costs for both private sector and public sector, there's enormous benefit that lies ahead with full implementation of the aca. >> senator wyden is next, but he's graciously allowed senator roberts to ask one question so he can get to his agriculture committee. then we'll go to senator wyden immediately following and then senator coburn after that. >> i thank the ranking member or the vice chair. i apologize to my colleagues for breaking ranks. i think you're accustomed to that anyway, so. madame secretary, nice to see you, kathleen. >> senator. good purple. >> thank you. didn't quite get the job done the other night, but we tried. we're talking about basketball, mr. vice chairman. >> all right. >> go wildcats, tom, i'm sorry. certainly not sooners.

at any rate, you've been to children's mercy, you've been a strong supporter when you were governor, i really appreciate that in kansas city. they received the children's hospital graduate medical education funding. i think a large percentage, i believe, a number that was quoted to me, was 80% of the doctors at this hospital trains with these dollars stay in the surrounding area, which is obviously a very good thing. my question is, the recipient hospitals are training more than 5,600 fte residents per year. if we don't adequately fund this program, how on earth are we going to fill the gap that creates in the pediatric workforce pipeline? i'm a little worried about the funding level for this program, which is exceedingly important. >> senator, you're absolutely right. i think the children's hospital is not only in the kansas city area, but around the country do not only a great job on training

pediatric residents, but on care delivery. and as we look at, again, the workforce of the future, i think the focus in our department is on trying to maintain, as much as possible, residency slots, training, primary care, which clearly include pediatrics. in a better budget time, i think these numbers would be significantly higher. we are trying to balance how to drive more dollars in teaching hospitals to primary care pediatricses and look at all of the sources of the levers. so you're right, funding is not what we wish it would be, but we're going to continue to work with hospitals like children's mercy to make sure that they can do the great job that they're doing. >> i look forward to working with you on that and i will submit the rest of my questions for the record, mr. chairman, and thank you. and i apologize, again, to my

fellow colleagues. >> thank you, senator roberts. one last -- one thing i'd just like to establish. when can we expect an answer to our letter the 28 of us wrote to you with regard to legal analysis on this freedom of religion issue? can you answer that letter? >> senator, i don't know where the letter is -- >> well, we'll get you one. >> but i'll rye to respond as rapidly -- >> if you would do that, i would be very grateful. >> certainly. >> senator wyden? >> thank you, mr. chairman, and welcome, madame secretary. madame secretary, as you know, in our part of the country, we have a lot of good-quality medicare advantage. you have programs, for example, like group health in seattle that are so popular all the single payer folks always tell me, whatever you do, just make sure you protect group health. so i was particularly interested in the numbers that you all have

put together that indicate that in the last year, and this is countrywide, not just in the pacific northwest, medicare advantage enrollment has increased 10% since this time last year, while the premiums have fallen about 7%. now, this is particularly noteworthy given all the predictions that came up during health reform. what do you think is behind a trend that indisputably seems pretty encouraging? >> well, i think, senator, it is very encouraging. and the 7% is, again, the decrease inr national average. in some places, it's significantly higher. and over and above that, i think we're at 99.7% of medicare beneficiaries have a choice. there are only a very few isolated areas where there isn't

currently a medicare advantage plan in operation. so i think it's a combination of strategies that were really part of the affordable care act to negotiate for health benefits and look very carefully at pricing strategies of indicating to individuals for the first time, we have a quality rating system. and what we're seeing is beneficiaries beginning to make substantial changes on their own, based on the quality of those plans and in this case, i think competition is paying off. but with an announcement that, you know, the medicare advantage plans on average were being paid about 12% more than fee-for-service medicare, with no resulting health benefits. and i think the market is adjusting to the notion that payment strategy is coming down. >> let me ask you about one

other area, madame secretary. i always like to do the positive news first, that, unfortunately, isn't so positive. and that's the question of the drug shortage matter. yesterday, i talked to a father of a 3-year-old in oregon and the 3-year-old has leukemia, and the family can't get their leukemia drug through their insurer. now, the finance committee held an important hearing, chairman baucus and senator hatch have been very interested in this drug shortage issue. and we were told that in effect, when the government sees that there's a drug shortage -- this was the testimony that we had in the finance committee -- it usually takes a year or longer in order to get the drug out again. and what that tells me is that's too late for many parents. you know, these parents, like the family i talked to yesterday say the government ought to have