president talk about two important principles, the availability of preventive -- >> my question was a simple question. did you or anybody at hhs conduct a request any analysis of the constitutional or statutory religious freedom issues? that is a simple question. >> 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. >> that is all i want to get. my time is up. next will be senator binghamton. >> thank you, mr. chairman, madam 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 con a accept ti tra accept tiff services and protects the right of women to -- that is 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 i felt was very important. it created a new independent and non-partisan national workforce commission. the commission is tasked to provide congress and 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 -- this resulted from the recommendation by the institute of medicine and was modeled after medpact, this commission is. commission was strongly supported by senator baucus, senator murray, myself and 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 is some provision in this budget to provide initial funding and i just wondered if you could give us an update 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 look at

misalignment where the health care provider 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 resources. affordable care act continues the resources. more training, more gme, more shifts in focus. we are eager to get the commission up and running we think that is an important advisory group and important piece of the puzzle. we have been using internal resources 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 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 it moving in that direction but i'm hopeful that we can work with congress to get the commission fully fund and operational. >> well, i'll continue to

communicate with you on this trks 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 on the insurance exchange senator baucus asked about that, one concern i've had 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 under lying i-t systems that are being developed state-by-state-by-state are not going to be able to communicate with each other, are 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. every state is spending a big chunk of the money provided to them working on the ii-t system. is there something you're doing that we don't have everyone reinventing the wheel in every state here? >> yes, i think your concern is well-placed and well-founded. we did early on release early innovator grants, specifically for i-t systems so that states who were frankly already well underway creating a health-wide i-t system could actually move ahead of the pack what they were learning to reduce the

reinvention of the wheel over and over again. we also have resources going to states so they can look at a more comprehensive approach 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, kids are eligible for the childrens insurance program, someone is eligible for the exchange or credit for the exchange but the system indeed encourages that, so there were some, again, early i-t money to look at a more comprehensive approach. we are gathering states on a regular basis to share with one other what are the templates, effective strategies, what is already in place, what this looks like to try to minimize people having to start all over again and to accelerate their progress toward an effective

exchange i-t system that works. >> senator cornyn? >> thank you, madam secretary. we're having a shuffling here, we'll get through this. i note that the rate of uninsured in the country was at 17.1% in 2011, up about 7% over 2010, and even more than that from 2008. and one of the reasons given for the increased number offen insured is the number of individuals losing employer the congressional budget office originally estimated some 7% of employees would lose their employer-provided coverage as the health insurance exchanges were implemented in 2010.

mckinsey, the business consulting group, has estimated that at minimum, somewhere on the order of 30% of employees would lose their employer-provided coverage and could 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. the employer-provided coverage is subsidized as a fringe benefit by the employer not the taxpayer, once they go in the exchanges, they will be eligible, those individuals would be eligible for 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 subsidies for this 50 or 60% of employees that are now provided with employer coverage? >> 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 dropping coverage and 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 analyst estimate significantly lower premiums based on reduction of administrative overhead, re negotiation and kind of an active purchaser role i think again means that people will be coming back in the marketplace. i can't speculate on what it is that people are are looking at, what we know on the ground is that the only state with the fully operational exchange with the very similar 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 in 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. 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 in this current market not in as advantageous a situation, in exchange, 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. >> madam secretary, it seems to me that the economics for the employer are pretty clear, that rather than provide whatever the figure is, $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 the tax deduction, that is an out of pocket cost, and so it seems to me that the administration is grossly under estimated the number of employers that will drop employees from coverage and indeed costs will explode far beyond the 7% that cbo projected in the bill, and thus it seems to me impossible for the president to keep his 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. >> senator, right now i would

just say the market is entirely voluntary, what we find is employers find it to be an enormous benefit to have affordable, robust health coverage for employees and one of the issues i hear from small business owners 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 for private and public sector, there is enormous benefit with full implementation of the aca. >> senator weiden has allowed senator roberts to ask one question so he can get to his

agriculture committee and then senator coburn after that. >> i thank the ranking member or the vice chair. aapologize for breaking ranks, i think you're accustomed to that anyway. madam 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,. certainly not sooners. at any rate, you've been to childrens mercy, a strong supporter when you were governor i appreciate that in kansas city. they received the childrens hospital graduate medical education funding. i think a large percentage i believe the number quoted was

80% of the doctor 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 5600 fte residents per year. if we don't adequately fund the program how on earth will we fill the gap that creates in the pediatric force work pipeline? i'm worried about the funding level for the program which i think is exceedingly important. >> senator, absolutely right, the childrens hospitals not only in the kansas city area but around the country do not only a great job on training pediatric residences but care delivery, 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 whicht 1200dy qual

and in this case i think competition is paying off but the announcement medicare was being paid 12% more than fee for service medicare with no resulting health benefits, i think the market is adjusting to the notion that payment strategy is coming down. >> let me ask you about one other area, madam secretary, i always like to do the positive news first, unfortunately isn't so positive, that is 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 a meeting, chairman baucus and hatch were interested in the drug shortage issue. we were told when the government sees there is a drug shortage, this was the testimony we had in finance committee, it usually takes a year or longer in order to get the drug out again. what that tells me that is too late for many parents. these parents like the family i talked to yesterday say the government ought to resolve this yesterday, and why can't the government fix this and stop playing catch-up. so my question to you on this is the president issued an executive order on this last fall, what specifically since then has changed so that the

government is going to get out in front of this urgent problem? i'm not the only member of the senate who is hearing from parents. i want to know what i can tell that parent when i call them back tonight, i said i would call them back tonight and say i spoke to the government's point person on this issue. what can we tell the parent tonight that the government is doing to get out in front of this urgent issue? >> well the good news for the parents of a child with leukemia is that the fda did announce yesterday that they feel in the next two weeks, the leukemia drug shortage will indeed be resolved. people were afraid they were going to run out of the drug in two weeks and it's resolved because we accelerate alternatives. what we know since the executive order that the president issued

in october there have been 200 shortages that were averted they can expedite, this really is, though, senator, a bit of a market ga lifrn where the market capacity -- the pipeline are two and three years off but currently we have the same manufacturing capacity and drug marketers choosing which line of drug to produce at which time. the earlier we're notified and you have a bill pending in both the house and senate that we would be eager to work with you. we've as much as we can administratively. a mandatory notification of drugs that appear to be getting to a shortage gives us then the

ability to put our team in gear and we can be fairly effective at least finding alternative strategies, trying to ramp up other lines, putting pressure on groups, looking in europe and asia for an alternative. but if we don't know it's coming there is nothing the government can do. >> madam secretary i don't think notification alone will do it. i think this is a question what kind of incentives we need to get to manufacturers, the question of the gray market, just notifying people about what everybody already knows about i just don't think it will do it. the chairman has been gracious in terms of the time, i'll continue this with you. >> senator, we would love to work with you on this. i would say notification is a huge piece of it and may be one of the few pieces that we at the government can control, again looking at the market, which we have done extensively, the manufacturing capacity needs to be increased and a number of the

major pharma companies are in the process of doing that, they are just behind the demand. >> i think the government has been behind. >> thank you, madam secretary, appreciate you being here. i have two areas i want to discuss with you. one in your testimony you talked about saving seven dollars out of every dollar you put in fraud prevention, you came up with a number of $4 billion. o outside estimates improper payments over $59 billion in fraud and medicaid and medicare, close to $100 billion a year. we're at 4%. my question is you all signed a contract for $77 million on a cost basis with three firms never done what you're asking them to do. and at the same time another firm, who has done this for 70% of all the insurance companies in this country, in terms of predictive payment, and whether to pay or look, offered to do

this for free for the government. i understand the government can't take free services, but it is concerning to me that we would go with three contractors who have no experience to set up something that could immediately save us billions of dollars and not contract with the one firm who actually has real experience in doing that. can you explain that to me? >> senator, i have to confess i'm not aware of the contracting negotiations or who bid or what the decision was, i would be very pleased to get that answer to you in detail and have the first person at medicare and medicaid to ever focus on fraud, we have a senior leader who is charged with doing that, building the modelling but i will get you -- >> we had him in front of our committee. his answers weren't satisfactory on that as well. the question is we have a cost plus consider, $77 million, getting ready to expire, we'll

renew it on the performance criteria for you all to effectively manage what you're doing you chose somebody that has never done it before and refused to use the person who offered to do it for free, which has the vast experience in terms of predictive modelling. to me it makes no sense and no wonder that people in the country don't have any confidence in us bh we don't have the common sense to utilize things with us. second point i want to go to, in the affordable care act, a nice little trick enhances massachusetts to the tune of $3.5 billion over the next ten years at the expense of 48 other states. by what they did with the trick with one hospital, one rural hospital converting one hospital in the most expensive place to live in massachusetts to a rural hospital. thereby upgrading the wage valuations for the rest of the hospitals in massachusetts. you all had the opportunity to do that or not do that, why is it that you decided that we should go ahead and do that and

decrease the reimbursements for the members of the this committee will cost you $280 million a year for your hospitals that will be going to massachusetts on the basis of one gimmick in the affordable care act. >> i'm sorry, senator, i'm trying to get the details of the act, when you say we have the ability to do it or not do it i'm trying to understand what it is. >> you had ability to grant that waiver or not grant the waiver back to a rural hospital status. you didn't have to. you could have said no, that will disrupt the payments to the rest of the hospitals throughout the country. but you chose to do it anyway. and so the question is we'll take 3.5 billion dollars out of the hospitals from all the rest of the states and transfer it to the highest cost state there is, and on the evaluations in the future, in terms of labor-wage rates we'll protect massachusetts on the basis of that and every other state will

have a different determination because of how we value their inputs in the future. the question is why should one state have the advantage over all the rest of the states for reimbursements that are markly higher and all the other hospitals pay for it throughout the country? >> again, senator, i will look at that specific provision, i know that part of the requirement of the affordable care act are two different studies on wage analysis that will be one is underway, i think the second one is about to be started, we are directed to not only report back to congress but to actually reevaluate the entire cms wage basis, based on that market analysis, so this will be part of that overall look. if it was directed as part of the affordable care ak, it's -- care act, it's not something our department executed it was part of the legal requirements. let me make sure i understand.

>> you had the opportunity to whether you were going to grant them rural status or not and you chose to do that. >> if it was directed as part of the affordable care act we did not. >> certain delegations have written to you asking to make sure you maintain what your decision was so you obviously had a decision or they wouldn't be writing to you i have a copy i can put the letter in the record i know you know what it is. sky this be part of the record. >> no objection. >> the point is when we advantage certain people through legislation, that is exactly what america is sick of, this insider trading, the real insider trading where we cheat this hospitals of 48 other states toed a advantages one group is inappropriate, not fair and doesn't do anything in the long run for the better aspects of medicine. >> senator mendez? >> thank you, mr. chairman and madam secretary for your rv