in mind is what was happening with benefits that were being offered, what workers were seeing when they were offered health benefits. you saw deductibles, you saw increase in co-payments for office visits, increase in co-payments for non-prescription drugs, for pharmacy co-payments.

health plans though there were some exceptions to this general cost shift onto workers, whether it was through value-based insurance design, wellness programs or telemedicine. lots of changes going on with the benefits being offered to workers. the next set of slides, some of this was already covered but the next set of slides just goes through the timeline of all the different things that affect employment-based coverage. you have the slides. i'm not going to go through them individually, but you saw 2010 was a big year for provisions affecting employment-based coverage. 2014 was a big year for provisions affecting employment-based coverage, and even to 2018 you have the excise tax on health care plans on horizon also known as cal tax, which we'll talk about in a few minutes, and a few provisions that didn't have effectiveness dates in the legislation that employers may have to address at some point.

just a couple of items to go over. one, the employer-shared responsibility provision assuming you're all familiar with this, but it's worth reviewing. either employer offers coverage or pays a $2,000-per-full-time equivalent employee penalty. if at least one full-time equivalent employee receives a premium tax credit. that's the piece to really focus in on. an employer that doesn't offer coverage does not have to pay a penalty if none of their employees receive a tax credit. and that has implications for the supreme court case as well which we'll talk about in a minute. currently, employers must offer coverage to at least 70% of their full-time employees. 2017 that goes up.

some employers are excluded from that calculation. only workers employed 40 hours a week are included in the assessment. and employees of businesses maybe small businesses, there is a provision to look at whether or not those businesses are under a common control as to whether or not the businesses would be subject to the $2,000 assessment. the effectiveness date for this was moved from january 1st of last year to this year for employers with a hundred or more full-time employees, and next year it takes effect for employers with 5299 full-time employees. and keep in mind the environment before it passed. in 2009 when you look at employers affected by this mandate, those with 90 to 199 workers, 95% of them were already offering coverage. and among employers with 200 or

more employees 98% were already offering coverage to their employees. so in some ways, this provision isn't necessarily a mandate to offer coverage but a mandate to give an incentive for employers to continue offering coverage if they were but some didn't offer coverage to all their employees they didn't necessarily offer them to all their dependents, and then you have the other provisions such as the requirement to offer affordable coverage, minimum value coverage that took effect as well. and those are some of the qualifications here. for example, the definition of a full-time worker changed. it's now effectively 30 hours or more per week. employers must offer coverage to not only workers but dependents, but dependents are defined as children up to age 26. dependents do not include spouses. employers must offer the minimum essential value, benefits and

they must also offer full coverage. one of the things to keep in mind was this family glitch. basically, affordability is determined by the premium for employee-only coverage. it's not determined by the family premium. so an employee may not be able to afford the family premium despite the fact the employer is offering an affordable package as far as employees are concerned. and when that happens, when an employer offers coverage to the family that is not affordable for the employee, spouse and children aren't necessarily eligible for a tax credit in the individual market. they may be exempt depending upon their income, they may be eligible for medicaid or championship as well. but it's been estimated that between 2 and 4 million spouses and children may be affected by this family glitch. instead of a $2,000 penalty there is a $3,000 penalty that takes effect when the employer does offer coverage but at least one employee opts out because

coverage is either not minimum value or not affordable and goes to the exchange and gets subsidized konch incoverage in the exchange. if nobody opts out, there are no assessments that are triggered. when it comes to implications of king versus burwell for employers, if the supreme court rules that subsidized taxes are not allowed in the exchanges that actually is good for employers. employers are only made to pay the assessment when the employee gets tax credit. if it's deemed that employees in these 34 states cannot get a tax credit, then essentially the employer doesn't have to offer coverage because there is no penalty associated with not offering coverage because their employees can't go out and get a tax credit in those 34 states. and there are all kinds of other issues that come up especially for employers that operate across state lines and what this

may mean for them. there is a small business health options program, the shop exchanges. this is the marketplace for small businesses to shop for health insurance for their employees. one of the advantages of it is that it increases choice of carriers and plan options for both employers and workers which is something the small group market hasn't seen a whole lot of. it allows employers to set a fixed or defined contribution. some key dates, this was supposed to take effect last year but was delayed until this year. in 2016 it will cover businesses with up to 100 employees, and starting in 2017 the states may allow employers with 100 or more employees into the shop exchange but that's at the individual states' discretion. you already heard about the individual type of shop exchanges. there are tax credits available to small businesses. if a business has less than 25 employees and an average wage of less than $15,000, those tax

credits can cover up to 50% of the employers contribution. if the employer contributes at least 15% at a premium the credit is only available for two years and it phases out the larger the employer and the higher the average wage is. there are provisions for workplace wellness programs in the aca. it allows employers to provide financial incentives of as much as 30% of the total cost of coverage when tied to participation and some type of wellness program. hipaa already allowed for 20%, and it allows 50% for reduced tobacco use. incentives can come in premium accounts cost-sharing reductions or other benefits. and incentives tied to participation in a wellness program and/or by meeting certain health-related standards. and employers must provide

alternative standards and takes effect in 2018. it includes an ex sis tax of 40% on . there are higher thresholds for plans that cover early retirees, there are age and gender mix of workers. we haven't seen yet exactly how that's going to take effect. in terms of calculating the tax it's not straightforward. it's just looking at premiums. it also takes into account reimbursements from fhas and hsas. note there was a release last week from the irs that provided a little bit more information and one of the things in that release is that if a worker contributes to their hsa through payroll deduction that's actually considered an employer contribution for tax purposes. and as a result that would be counted towards the threshold.

so there are all kinds of questions that still haven't been answered yet because we haven't seen regulations on this, but the effective date is 2018. i think that's it. thanks. >> thanks paul. can i just ask a factual follow-up? when you're talking about the threshold for applying this cadillac tax if they exceed 10,200 for employee-only coverage, for example, how does that compare to the actual normal cost of individual policies through the employer at this point? >> well, at this point i think the average from the kaiser survey is about 6600, if i'm not mistaken. obviously there are people up here that could correct me for employee-only coverage. and 15,000 or so for family coverage 16,000. so the average is well below the threshold, but you know with an average you've got those below it and those above it so certainly there are some plans that are going to trigger it. it's not as straightforward as looking for the premium so if

you're counting fha contribution or hsa contribution, that will boost up the plans that may be in that threshold. i think the issue is that premiums have been increasing faster than general inflation, although that gap has shrunk increasingly, and the cadillac tax is indexed to overall inflation after the first year. so the expectations, while there may not be a lot of plans affected by the tax initially, over time more and more plans would be affected by it if they don't make changes to avoid it. >> thank you very much. and paul is exactly right. diane's organization is the co-sponsor of the definitive survey of employer-based coverage that i commend to you if you haven't taken a look at it, the kaiser hret survey. a renaissance woman, diane is stepping into the breach to pick up the thread of questions about medicaid and chip.

and i should say we don't have her slide in your packets, but we will have them mounted on our website after the briefing. diane, thanks very much for being so flexible today. >> you don't have the slides because they were done at 10:00 a.m. this morning. medicaid clearly, as jen's overview noted is a key building block within the affordable care act, but one of the things to remember about the program is it's been around for 50 years rgs, and it has other changes that were embodied in the affordable care act. today i'm just going to go over some very high level changes and i urge you to come back for the medicaid 101 to go into greater depth. clearly one of the main things the affordable care act was doing was extending coverage to low-income adults through the medicaid program. it was also seeking to modernize the way in which eligibility and enrollment happened in medicaid to simplify the process, to

streamline the way eligibility determinations were made, and the way income was counted. and it also provided substantial federal funds to the states to help them put in place the expanded coverage as well as supported a wide range of changes in the delivery system, not just for acute medical care, but also for long-term care services. but the key piece of what the affordable care act was seeking to do was to fill in the gaps in eligibility that had occurred for medicaid, especially for adults. and one of those key provisions was that medicaid was never available for childless adults adults without dependent children, unless they qualified on the basis of disability. so that the affordable care act changed the way in which medicaid eligibility was going to be set to be based solely on income and not on the characteristics of the

individuals. and was going to try to put in place a uniform standard across all states to eliminate some of the variation in who was eligible on the basis of income to 138% of the federal poverty level or a little over $11,000 for an individual. and that was because of the tremendous variation that occurred in who was eligible for the program by income as well as category. and here you see the medicaid program together with its partner, the children's health insurance program or chip provides very broad coverage on income eligibility levels for children across the nation. virtually all states covered children@ at at least 200% of the poverty level as well as pregnant women. but there was variability in the standards for workless parents and jobless parents and a lack of coverage for childless adults without disabilities. so the affordable care act sought to fill that, but the

supreme court, not in the king versus burwell case, but in its previous case, decided that it was coarseercive on the states if there was financial participation on the cost of the coverage and gave states the option not to provide coverage to the expanded adult situation, so that would have been some of the working parents above the old income eligibility levels as well as the childless adults who had previously not been covered, creating a coverage gap between the medicaid eligibility standards and eligibility for coverage in the marketplace. and as one of the glitches that occurs when the supreme court enter intervenes and doesn't change other provisions of the law only makes something optional. individuals below the federal

poverty lefrl werevel were all going to be covered under the program in the aca division so they were therefore left ineligible for gaining access to coverage in the marketplace, the subsidies that have been talked about earlier. so anyone below the federal poverty level who was not already eligible for medicaid by the old standards was left without coverage. those who were between 100 and 138% of the federal poverty level could gain coverage in their marketplaces in their states and subsidies through the coverage. and so what you see is that in the states that expanded medicaid, there is a very nice flow. childless adults get coverage through medicaid, and then they phase into getting coverage in the marketplace as their income goes up. parents are covered equally and children have already had higher coverage gaps. so there is no real coverage gap

there. yet in the states that did not expand medicaid, those who are childless adults below the federal poverty level have no coverage option. those who are parents can be covered if they meet their state's very stringent early income eligibility levels. sometimes it's 17 25% of poverty. many of the states that did not expand had the lowest coverage levels incomewise for parents. and if they were a childless adult, they were ineligible. and then therefore, between poverty and the state standard they fall into the coverage gap and then once they earn enough to be above 138% of poverty, then they can go into the exchange or between 100 and 138, they can gain exchange coverage. and children again because of the coverage that chip and medicaid have already provided

remain covered at much higher income levels. so nationwide as a result of the 22 states that have not expanded coverage, we see that about 3.7 million low-income adults fall into this coverage gap where they are too poor to go into the exchange for coverage and above the income eligibility levels for medicaid coverage. and as you see, many of them fall into the southern states, and so we see in the states that had some of the highest uninsured rates, some of the highest poverty rates that there is the most limited coverage for the poor. now, in addition to the coverage, which has gotten all of the attention in terms of medicaid choices, every state did have to modernize and improve its application enrollment process, try to coordinate that process with the federal or the state-based

exchanges. and so you see that we've seen a great deal of effort put into replacing paper applications, in-person applications, places where there was no data exchange about eligibility to try and have this vision of no wrong door, anyone can go either apply at the marketplace or apply through the state, simplify the way in which they get through, try and really keep the doors open so that the enrollment process is more available. as a result even in some of the states that did not expand medicaid coverage, the process has become more consumer friendly for people already eligible. and so we have seen increases in coverage in those states of the people who were previously eligible but not enrolled largely due to many of these improvements in the way the process works up front. and second, most of the states

have been seeing that they have expanded coverage. some real benefits to their population reduction in the numbers of uninsured. as ben's slide showed you, this has been particularly important in the low income population and the expansion states have seen greater productions in the uninsured than occurred in the non-expansion states. but we've also seen increased revenues to providers, increased jobs in the health care sector increased state savings in the expansion states as they began to be able to provide less uncompensated care move some of the other services that had been provided to the indigent population onto medicaid coverage and increase state economic activity. so all in all, many of the states that experienced the expansion have done so with both economic success as well as better coverage for their citizens. in addition to trying to really focus on getting the coverage

right and making the process seamless and easier for people to gain the coverage that they need, the aca also sought to improve what happens after you get coverage to improve the access to primary care services to improve the way the health system works for the low income population, and to try and develop other ways to provide services especially to the population in need of home and community-based services as an alternative to long-term care in nursing home facilities. so they boosted payment to primary care doctors. under medicaid, that was a two-year boost. unfortunately, that has now expired. some states have kept that in place. they invested very heavily in expanding community health centers so that in medically underserved areas there would be facilities that could take care of the newly covered population. they really put a great emphasis on more preventive services and

on public health activities and tried to develop within medicaid as well as medicare in the private sector more patient-centered medical homes and accountable care models that are now really being tested in many places. and new options for the elderly and disability population to be able to control more of their home and community-based services and options for care. so we're really seeing at the end of the day both a coverage expansion in medicaid but a real reform of the administrative structure especially for determining eligibility and determining how to get people connected to managed care plans into other health system reforms. and so medicaid may be 50 years old, but it's entering the next 50 years because of the aca as a much more modern and change program that is much more responsive to some of the ongoing changes in our overall health care system.

the outstanding question of course remains is what will happen to the states that remain on the fence about whether to provide the expansion or not. many are seeking waivers or changes to try to come in at a slightly different tilt to the affordable care act provisions so they can cover their citizens. but the story is still out on where we'll finally end up. i would only remind us that medicaid itself was phased in over many years. not every state took up the option when it was first passed in 1965. thank you. >> that's terrific. thank you very much, diane. one quick question for you, too, if i can. you mentioned the standardizing of the income measurement as part of the eligibility changes that the aca brought. what happened to the asset tests that were in place for medicaid

recipients from the time of the law's enactment? >> well as the children's health expansions were expanded, the asset tests were gradually dropped as an eligibility determination mechanism for children, and with the affordable care act for coverage for low-income adults through the family coverage. however, medicaid also covers a substantial number of individuals who are elderly and have disabilities who qualify, some through the supplemental security income program and others through -- there is provisions in the medicare program that still do require the asset tests. so there is still an active asset test for many of the elderly and the disabled who qualify for the program, but not for families under the new determination of income called magi. i should also say, since i'm

over my time i'll say it anyway. the other provision that is now very clearly coming to congress soon in the affordable care act was the children's health insurance program that actually has helped boost that coverage of children that i showed and the income eligibility levels for children was funded through the affordable care act through the end of 2015, which is fast approaching, and the requirements that states operate those programs and continue the eligibility were intended to go through 2019, but congress is going to have to make a decision fairly soon about -- very soon, actually, about whether to extend the chip funding beyond 2015, and as they extend it are they going to extend it as a straight-up program the way it's currently structured, or will they make other changes to it. we on the mac pack commission

have recommended a two-year extension of the program just as it is and have also said that it's really important over the next few months and in the next two years, if that's the length of the extension, to figure out how to really integrate coverage for children and chip into either the exchanges in the medicaid program or rather to continue the program as it is currently structured as a middle ground program. >> thank you very much. and as you can infer from that response medicaid itself is one of the most complicated programs that we have going, so let me reiterate diane's suggestion that you plan to be here on the 20th of march for the specific perimeter on medicaid. now, if you have questions that you would like to have addressed by one of our panelists you should either repair to one of

the microphones or take out that green question card write it down, hold it up and we'll bring it forward. and let me just take advantage of how long it takes you to get into position. spoke too soon. i would ask everyone at the microphones to identify themselves and to keep your question as brief as you possibly can so that we can get to as many questions as we can. yes, sir. >> yeah, hi. tony hausner, formerly with cms, the last two years volunteer with the affordable care act. one of the things i've seen over the past year or so the center for budget and policy priorities helped to bring it more clear to me that both the consumers and the nav gatorigators have a lot of comparisons to make the

deductibles, insurance, the different co-pays, and i was overwhelmed by how many things they have to compare. and i'm wondering, i've seen one tool, the washington consumer checkbook, who has done it for illinois simplify that. but i'm wondering what solutions the panel has for that kind of dilemma that's confronting consumers who are signing up for the affordable care act plans. >> we'll turn to sabrina, but let me just ask how many in the audience know what a navigator is? good number, but nowhere near a majority. you might remedy that. >> sure. so just quickly, the affordable care act requires exchanges to establish a navigator program. navigators are responsible for conducting outreach and education activities to let people know what's available to them and what their rights and obl gagtszigations are under the law

and navigators are also supposed to help people and let them know what they qualify for and help them sort of figure out what is available to them and what is the optimal plan choice. although the law does include within it some new standardization for health plans, in other words, they all have to cover the essential health benefits and they have to offer coverage at these precious metal tiers, there is still an enormous amount of flexibility for the carriers, particularly around cost sharing but also around specific items and services that are covered, and as a result it can be really overwhelming for consumers to try to figure out what's right for them in their family. there has been an effort and consumers' checkbook is a terrific organization that has done -- has developed decision support tools, on-line tools to

help people filter down or narrow down their choices and we're really hopeful that in addition to illinois more exchanges will deploy those types of tools. but other states are actually looking at greater standardization of health plan options. in other words, really narrowing even further the kind of flexibility that the insurers have to for example, vary co-payments or deductibles for specific sfzervices. so that may be something to look to for the future. the second year they're better looking to do it going forward now that we're kind of past some of these bigger operational hurdles. >> thank you. >> i'm dr. caroline poplin. i'm a primary care physician, among other things. one follow-up to his question. has there been any study looking

at whether the carriers are deliberately structuring their choices in such a way as to attract healthy people and push away sick costly people since they're getting the same premiums for the healthy people as the sick people. my question was about employer-sponsored insurance and the requirements of the aca. how do they compare -- how does the benefit package compare? does it have to cover the same 10 benefits, or can an employer get away with a much stingier less useful package? >> good question. >> i can cover the benefit design issue, the first question you asked and maybe turn it over to paul. one of the shortcomings of having just 10 minutes to present is i didn't have a

chance to cover all the provisions of the affordable care act of benefit design, but one is using benefit design to benefit discrimination of individuals. that said, there is not a whole lot of clarity what discrimination and benefit design looks like and there has been some earlier evidence that some insurers have been doing what you suggested which was trying to design benefits to discourage sicker people from enrolling. for example, some insurers were recently sued because they put all the hiv/aids drugs in the highest cost formulary tier even the generic ones. so it's really incumbent on the federal and state regulators to perhaps put out some clearer guidelines about what discriminatory benefit design is, and then actually provide the oversight to prevent plans from doing that.

then i'll turn it over to paul for your other question. >> yeah, so i think your other question relates to the essential health benefits and whether it applies to employer plans. >> i would add one other thing limits on out-of-pocket costs? >> we'll get to that. the essential health benefits, it depends on the employer. for employers that are purchasing coverage through an exchange, they have to comply -- by definition, they have to comply with the essential health benefits. for those outside the exchange that are fully insured, they have to comply with it. for those large self-insured employers, i don't think they do, but they still have to provide minimum value coverage, so they have to cover 60% of something, and there was some guidance that basically requires to make sure they don't provide hospital coverage, which i think was the big issue. but when you look at what they were already providing, they were, for the most part, already in compliance with the central health benefits. that was a concern that needed to be addressed.

as far as the out of pocket go, i think the employer plans have to comply with the same out of pockets as all other plans do. >> as the exchange plans do? >> i believe so. or maybe it's just the lifetime limits were removed and the annual limits as well. >> can i ask also, it seems to me we've heard a lot about what people call the three r's. is there an after the fact adjustment if you end up with a risk pool that's more sicker or unsicker than average? >> i don't want to hog all the time, but yes. that's an excellent point, because the health law provides a risk adjustment, risk corridor and reinsurance program so all three of them are risk

mitigation programs designed to sort of help in the early years help insurers who take on more risk than they anticipated. the risk adjustment is a permanent program so that if you end up getting more sick people than a competitor, it actually is a rob peter to pay paul kind of system. the hope is that for example, on your benefit design question that it will actually encourage insurers to take on sicker people chronically ill people but if they can manage their care really well and keep them out of the hospital, they actually end up winning under our risk adjustment system. but, you know that has not gone into full effect yet so i think there is just a lot of questions about how it will work. >> thank you. >> yes, ma'am. >> i'm jeri fairbrother. i'm senior and advocate at george washington. i have a question about funding

streams that were available before the aca to cover people who were not insured. the 330 for federally qualified health centers and disproportionate chair payments to hospitals. i believe that those were reduced or cut off in the aca because the presumption was that everybody would be covered. so i was wondering what the status was and what's happening in the states and they are reduced or cut off what's happening in the states that still have these uninsured. >> well currently the disproportionate share hospital payments are scheduled to be reduced, but those reductions have not yet gone into place and the administration is charged with trying to develop a formula for how they would be reduced over time. clearly those provisions were put into the law with the expectation that all states would be expanding the medicaid program, and now that it remains a state choice, it throws that kind of a provision a little bit

down the road to be fixed or looked at. the availability of community-based services and the community health centers are, or the 330 program that you mentioned, was substantially expanded by the affordable care act and that is kind of irrespective of what states expanded or have not expanded, so there has been a real infusion of more assistance into the medically underserved areas where more of the low income population live. >> and diane, do you have sort of dominion over the numerous cards that have been sent forward. >> so, sabrina one of the first questions they would like you to explain in depth is the difference between cost-sharing subsidies and premium tax credits. if you can just clarify how those two work together and what they are. >> sure i'll give it my best shot. so the premium tax credits are designed to make your premiums

more affordable. so your premiums of course, are those up-front monthly payments that you pay for your health plan. they are available to people between 100 and 400% of the federal poverty level on a sliding scale basis and essentially, you get your tax credit, you can get it on an advanced basis or you can wait until the end of the year and collect it at that point. most people are getting it on an advanced basis which essentially just reduces the amount of their monthly premium payment. the cost-sharing reductions or cost-sharing subsidies, often you'll see csrs, are available to people between 100 and 250% of the federal poverty level and they are only available if you enroll in a silver level plan. they are designed, as i said earlier, to sort of basically increase the value of that silver level plan by reducing

deductibles and co-payments. and again just as with the tax credits, they are provided on a sliding scale basis. so at 100% to 150% of poverty once you sign up for that silver level plan it actually gooses up the value of that silver level plan to i think, 97%. is that right? >> 94. >> 94% actuary value. so that plan is really covering most of your co-payments and deductibles. between 150% and 200% of poverty, it's goosing up the value of your silver level plan to 87%. so, again, sort of making it a little bit more than a gold level plan. and then between 200 and 250% of value, it's just slighting increasing the value of that silver level plan to i think, 73. thank you, jen for keeping me honest.

73% actuarial value. so you're eligible for the premium tax credits so your premium payments are reduced, but at the point of service when you're going to the doctor or hospital, you're also paying less in your out-of-pocket costs. i hope that covers it in depth. >> jen, maybe you could also comment since this will be occurring in april on the reconciliation process? >> sure. i was just going to add that point. sabrina had mentioned this earlier, but another key difference between the premium tax credits and the cost-sharing reductions is that the premium tax credits have to be reconciled because they are a tax credit. people who accept advance payment of those premium tax credits, they are based on what people project their income to be for the coming year. so people signing up for a coverage in january projected their income for 2015 what they thought they would make. and then come tax time in 2016

the amount of the premium tax credit they receive gets reconciled against what they actually made over the course of the year. so if they made more than they projected, they may owe some of that tax credit back and they would pay it in the form of additional tax when they file their taxes. if they, in fact, made less income than they anticipated then they would get an additional refund on their taxes. and so, importantly, the cost-sharing reductions are not required to be reconciled in the same way as the premium tax credits. >> follow-up on discriminatory health packages. to your knowledge, is there any data on the prevalence of these packages, particularly in the case of hiv drugs? and two, are there any lawsuits against either the states or the

providers to prevent these discriminatory packages? >> or stra-- al rip lee stra teej i can health -- al ripley, strategic health resources. >> to my knowledge, there is no outline of how discriminatory providers are. they have tried to put out some guidance to insurance companies of what they think would be discriminatory benefit design but it's still pretty vague. to date what has happened is that you have individual organizations that have been looking at some of these health plan benefit designs which, by the way, can actually be hard to get ahold of if you're not enrolled in the plan. and so we are aware of some

lawsuits that have been filed with the federal office of civil rights at hhs alleging that the benefit designs are discriminatory. i believe some of those lawsuits have been settled, but i think that my personal opinion is that ideally you would have the feds or the states to put out some clearer guideposts or boundaries for insurance companies to prevent the practice in the first place as opposed to waiting for it to be litigated. >> this has been a particular issue in the state of florida and there has been an in-depth look there at providers and they've been looking at the drug plans in five different states to see if there are any patterns there that would be discriminatory.

>> al miliken, al media. depending how the supreme court decides, how many people would you estimate are going to be significantly affected by the decision? i was curious if all of you would, you know have similar opinions about that. >> when we look at enrollment in the 34 states with a federally run marketplace they're about right now 7.5 million people who are receiving subsidies in those states. so the subsidies for those people would immediately go away. many of those people would then no longer be able to afford that coverage. so the expectation is that they you know would immediately drop the coverage. but the implications go beyond that because, as sabrina pointed out, when you kind of take away the legs of the stool, the

requirements that insurers guarantee issue and restrict rates based on health status remain in place. so what you're likely to have happen in those states is what's referred to as a death spiral in the individual market. in other words, that many of those people, young and healthy adults leaving the market the people who are going to stay and do what they can to afford coverage are those that need it the most, so those that are sicker. what you see insurers doing to the extent that they can is increasing premiums. and possibly and eventually without any changes made to the law, everyone or most people will be priced out of that market. so it affects not just the people who are receiving the subsidies, but really everyone who is currently purchasing coverage in the marketplaces in those states. >> and from the low income

perspective, if those states that elected not to expand medicaid coverage, many of the individuals between 100 and 138% of poverty have gone into the marketplace, and most of those are federally facilitated marketplaces. so we estimate that about 2 million people who would be covered by medicaid if the states had expanded are now benefiting from being eligible for coverage in the marketplace, and most of them would lose that coverage as well. >> one other aspect jen. i'm thinking if you're an insurance executive and you're trying to figure out what to do for the rates you're going to file in 2016 to charge in 2016, you're facing sort of a strange timetable, are you not? >> that's fine that's one of the difficulties. the insurance companies have to file their rates for 2016 by may 15 of this year.

that would be before the supreme court would hand down its decision. the rates have to be filed based on current law, so the insurance companies can't build into the rates a court decision in the favor of the plaintiff. so there is real concern that they could be locked into a rate that doesn't represent the risk status of their pool for all of 2016, which i can tell you is making a lot of these executives extremely nervous. >> one of the questions we got from the floor was what would be a plausible plan b if the plaintiff prevails in king versus burwell, and then parentheses, be realistic. well, one plan b would obviously be for congress to clarify the am by

ambiguity and say it's federally or state based. but i'll let my other panelists come up with a different plan b if they have one. >> there is no good plan b. the problem is -- i'm not a budget expert but as i understand it, cbo will almost immediately readjust the baseline. so if congress were to go back and try to fix the language that costs money in the budget right? so not only do you have a congress that probably is not inclined to make a quick fix, you also have a budget problem right? it's also not easy for states at this point to just, on a dime, establish a state-based exchange. there are significant costs involved you have to have state authority, which means getting it through your legislature, or even those that potentially could do it through executive order, you know, there are questions about how you could raise the revenue to operate the

exchange. so there is just a lot of unanswered questions and i don't see an easy or simple plan b at this stage. >> hello my name is daniel. i'm at the center for making progress. i wanted to ask a little about have you all studied what the aca does in terms of cost savings? you had some numbers about how states are seeing savings as a result of medicaid and these insurance plans, but how much is that really from absolute savings as opposed to the government giving them money and the states claiming that as kind of savings in that they're not spending the money and it's more the federal government giving the money? >> well, actually some of the savings come from programs that they've been operating for the indigent population that once that population gets insurance coverage, they don't need to continue to operate that

program. so it's individuals with coverage are able to, as one of the earlier and provide uncompensated care. to help keep some of its public hospitals and safety net facilities going. some of it is community health centers being able to stretch grants that they get to operate for care of the uninsured to now have more people with insurance who come in with medicaid and provide some additional revenues for the community health centers. we need to remember there are still going to be uninsured populations because of the fact that many were excluded -- the immigration issues excluded some from coverage. there are others who will not have signed up for coverage, who need to continue to rely on some uncompensated care. but many of the states have also seen improved revenues from the

fact that it generates economic activity in the state and that that then gives the states better revenues, which helps to offset some of their budgetary costs. >> thank you. >> hello. thanks so much for presenting sort of a breakdown of the 2015 open enrollment data. i was curious if you had any estimation as to what percentage of rural residents were enrolled in 2015 plans? >> yes, so, i have not actually looked at this, but -- in depth, for 2015 but there is data available from hhs by zip code. and when we did do analyses for 2014 enrollment in rural areas did lag behind enrollment in urban areas. i think there are a number of reasons for that. a lot of people signing up for

coverage especially those who are getting coverage for the first time needed the help of assisters, and the assisters are more serious to access in urban areas. i think there were efforts in place during the second open enrollment period. to have greater availability of assisters in rural areas. so it's possible that when we analyze the data for 2015 we'll see that there was an increase in enrollment in rural areas. but i think it is still very much an area where we need to focus attention. not only are the coverage rates a little bit lower but access to care is also much more of a problem in rural areas. >> thank you. >> we have only about five minutes left, so i would ask while you're listening to the last couple of questions if you would pull out the blue evaluation form and start to fill it out, that would be very helpful. thank you. >> this is a question that i'm

going to direct to paul. if the federal government wants to encourage employers to offer health insurance to employees why would it include the cadillac tax under the aca? which discouraged high-quality employ-sponsored insurance. what's the harm provided by employers offering coverage exceeding $10,200 per employee, or $27,500 per family? >> that is a good question. employment based coverage has always benefited from a preferential tax treatment in the sense that the amount that employers pay towards coverage on behalf of workers is not included in worker income, and the amount that workers pay through payroll deduction reduces their taxable income. the concern is that because a dollar of health insurance is not subject to taxes and one dollar of wages is, workers prefer health insurance over

wages to some degree or increases in compensation in the form of more generous health insurance, and we know that more generous health insurance results in more use of health care services. and some of those services are good for people to be getting, some of those services may be unnecessary, and therefore people may be overinsured to some degree. there has always been an interest as far as back as the reagan administration in changing the way health benefits in the workplace is taxed. and this cadillac tax is one way that, you know coming from the top down, it addresses high-cost health plans that are often though not necessarily always but often associated with plans that provide very generous benefits. you may remember in the summer of 2009, i think the poster child for this tax was goldman sachs, when it came out that they were spending i think about $40,000 per executive for their

health benefits. it is a crude way of going about it. there are some issues with it and there are some things we haven't seen exactly how it's going to be addressed but the intent is to reduce these very very generous benefits or at least find a source of revenue to pay for other provisions in the bill by taxing these benefits. >> the last question here is really about the value of having health insurance coverage and asks if we can speak to the cost-benefit or cost avoidance by more people having coverage and eliminating cost by preventing conditions for becoming worse or people getting care in lower-cost environments. and i think this question speaks to the purpose of the affordable care act. which was to recognize that the uninsured population uses the health system very differently than people with insurance

coverage. they often delay care postpone care, end up in many cases sicker, and when they arrive for care, they're often more expensive because of the delayed care. we know that there are real consequences in cases like the early detection of cancer, can make all the difference between being alive, and being prematurely put to death by the fact that your condition was not treated when it was responsive to treatment. so that in that set of issues came the need to try and move more people into the state of having insurance coverage, and especially with the big focus in the affordable care act on early access to primary care, and to preventive services, and presentive services being available without cost sharing. and there were also, and we will get into that i know in the medicaid section, in the medicare section, and then in the health care cost section about all the efforts to try and

restructure the way the delivery system works to change the way the payment policies work to try and provide for more incentives to use the system in less costly settings, but also to pay and reward care, for performance and for value. so that's just an advertisement for the fact that the next three 101s are really going to deal with all these issues in a way that we could only skim the surface today. >> perfect segue. it gives me the chance to say thank you to first of all you for providing a rich background of questions to illuminate a number of positions and provisions in this law. second, for showing up in the first place. under a difficult set of circumstances. thanks to the kaiser family foundation, not only for co-sponsoring, but also contributing so richly to the discussion.

and i'd like to ask you to join me in thanking the panel for giving us so much progress on this. [ applause ] don't forget the evaluations and as diane said, we'll see you in a couple of weeks to talk specifically about medicaid. thank you. and taking it you live now, house homeland security appropriations subcommittee secret service director joseph clancy getting ready to testify after a string of security lapses at the white house. also talking about the agency's budget and funding needs, including $8 million he wants to make a model of the white house for training in suburban maryland. and most recently two secret service officers left a

going-away party after reportedly drinking, drove back to the white house and nearly ran over a suspicious package that was under investigation. two officials suspended. we'll hear what he has to say this morning before the homeland security subcommittee.

too loud? a new system. we got to get used to it. today we welcome joe clancy, the recently appointed director of the united states secret service. his first appearance before our subcommittee. mr. clancy welcome. >> thank you. >> appreciate you being here. thank you for your willingness to serve and our nation. the 2016 fiscal year budget for the secret service is $1.9 billion, an increase of $273 million above fiscal year 2015.

this increase is due in large part to preparations for the upcoming presidential campaign cycle, deployment of the former obama detail, and additional funds based on recommendations of mission panel -- of the mission panel who reported out in december on the need for significant reform in service. director we look forward to the discussion of these increases with you learning whether you plan to address any of the recommendations contained in the various reviews of your service that have occurred over the past few months. before ending however, i want to address an incident that was news last week. according to reports two senior secret service agents on the president's protective detail arrived at the white house complex checkpoint in a government car after allegedly

consuming alcohol. as the agents proceeded towards the checkpoint they drove through the scene of an active investigation. a violation of standing rules of behavior was not reported to headquarters until days later. for an agency trying to restore its reputation three years well-publicized scandal, this incident brings embarrassment and renewed scrutiny to the secret service. simply put this conduct should not be tolerated, and congress is disappointed to see it on display again. director, i look forward to hearing your comments on this issue. first i would like to recognize ms. al ard. >> thank you mr. chairman. director clancy, welcome to your first appearance before the subcommittee and congratulations on your appointment as director.

i hope you will find us to be tough but fair partners in your efforts to make the secret service the very best it can be. the agency has endured a significant criticism over the last several months indeed over the last few years and unfortunately much of it has been justified. i, like chairman carter and others on the committee, were disappointed to hear last week about yet another incident of potential agent misconduct. this time the incident involved senior personnel including a member of the president's obama's protective detail, who drove a government vehicle through an investigation scene near the white house. allegedly after consuming alcohol. perhaps even more disturbing, if true, is an allegation that a supervisor overruled an initial decision by officers on duty to conduct sobriety tests. applaud your quick notification of the inspector general in this case. but i hope you won't wait for

the conclusion of the i.g. investigation to start addressing what went wrong. if the allegations of misconduct are accurate i worry that they may be indicative of a larger cultural problem at the secret service. but we will certainly be discussing that incident this morning. i don't want it to completely overshadow the good work that the vast majority of secret officers and agents are doing every day. i saw that good work firsthand when i visited your los angeles field office last week. i was particularly impressed by the quality of a staff briefing in which usfs personnel were discussing the final security plans for the president's visit to los angeles the next day. in the interest of time i won't elaborate on everything i saw, but i do want to highlight one program that the los angeles field office is implementing in a very impressive way. the los angeles electronic crimes task force.

as you know, ectfs are a strategic alliance of law enforcement, academia and the private sector. dedicated to investigating and deterring cyber crime 73 it is a roundtable concept comprised of local, state and federal law enforcement partners. the ectfs facilitate collaborative investigations through the exchange of information, shared assets, and common strategies. this month i am proud to say that the l.a. ectf was selected out of 80 nominations to receive the 2015 centurium award for investigation in investigations for the peace officers association of los angeles county. director clancy we stand ready to help the secret service regain the respect it deserves for the good work done every day by your dead indicated officers and agents on behalf of our country. thank you for joining us this morning. i look forward to discussing your proposed budget for the

coming year, as well as your plans to point the secret service in the right direction. >> thank you. and now i'd like to recognize the chairman of the appropriations committee, mr. al rogers for any comments he'd like to make. >> thank you, mr. chairman. thank you for being here with us this morning mr. director. this constitutes the first hearing of this subcommittee. and i'm immensely pleased that we finally managed to pass a full-year spending bill for the department to support our men and women on the front lines. and bolster agencies vigilant for anti-terrorism efforts on our home turf. unquestionably your organization is a vital piece of this puzzle. now the secret service carries out a unique but absolutely

critical dual mission of protection and investigation. the investigative component of your charge is essential for the financial infrastructure of the country, and by extension the entire u.s. economy. your mission is to protect our president, his family, and our dignitaries from a host of potential threats and that requires discipline and dexterity, unparalleled skill, and yes, professionalism. unfortunately, the service has been beleaguered by a series of embarrassing and unacceptable lapses in security and other missteps. this will not stand. just when we think we've assessed the problems associated with september's white house fence jumper and developed a plan to close existing gaps in security moving forward, news broke that two agents drove around a security barricade at

the home where president lives during an active bomb investigation. drunk. now you've personally committed to me and others that leveraging your lifetime of service to this organization to restore the secret service to its once storied reputation. i certainly want to take you up at your word, give you every chance to achieve that goal. but incidents like these demonstrate just how far you've got to go. how short of time you've got to do it. we're going to provide the adequate funding for your agency. but it's going to be on a short string. we expect results. your fiscal year budget request includes $1.9 billion. which constitutes a $273 million

increase over enacted levels. in addition to the presidential protective service, this supports the service's network of 42 domestic field offices 60 resident offices, and resident agency offices and 24 offices abroad. notably, this request includes a significant increase to accommodate your responsibilities leading up to the 2016 election and prepare for president obama's detail when he transitions out of office. $87 million is also included to support security enhancements at the white house complex pursuant to the recommendations of the protective mission panel. mr. director we all look forward to hearing how you intend to use this money. to right the ship. so the secret service can focus on its truly critical mission at hand. we want to thank you for taking

on this chore and for being here today. we look forward to your answers. >> thank you, mr. chairman. now i'd like to recognize the distinguished ranking member of the appropriations committee. >> thank you very much. i'd like to thank chairman carter ranking member roybal-allard for holding this important hearing today. thank you director clancy and thank you for joining us. the secret service has had a long and storied history of excellence and professionalism. but recent incidents have diminished its reputation over the last few years. and raised serious questions about its ability to protect the president. clearly we have a lot to discuss. just last july through the report accompanying the house funding bill this committee expressly stated that it was, and i quote, deeply disappointed with recurring allegations and

misconduct within the secret service. . going a step further we with held a substantial amount of headquarters funding in the fy-15 appropriations bill until new guidelines for professional conduct were submitted. hard to believe here we are again. not only were we rocked by the white house fence jumper last september, but now we are confronted by yet another unfortunate incident that appears to entail significant misconduct. on march 4th, two possibly intoxicated secret agents drove a government car through an active suspicious package investigation. i say possibly because according to news reports no sobriety tests were administered. the agents were not arrested. and there were allowed to leave the scene. the president's budget requests

nearly $87 million for protective mission enhancements in the wake of recent secret service missteps. while i agree that more resources are necessary for security enhancements, hiring and training, funding alone won't be enough to solve the secret service's problems. this latest episode seems to be more evidence of a cultural issue that has not been adequately addressed by changes in senior management. director clancy, you just recently assumed your position. but you've been with the agency for an impressive 30 years. we want to work with you to restore the public's confidence in the secret service. we want to support you with the resources you need. but the responsibility is ultimately yours. you must provide the leadership and insist on the accountability that is necessary. i look forward to a productive

discussion this morning. thank you, mr. chairman. >> all right. director clancy. i'm going to do -- we now recognize you for your opening statement. i'm going to ask you if you can to try to keep it to five minutes. >> thank you mr. chairman. good morning, chairman carter, ranking member roybal-allard and distinguished members of this committee. i am pleased to appear before you today to discuss the president's fiscal year 2016 budget for the secret service. as a newly appointed director, i'm honored to lead the men and women of this important agency through this challenging time. despite the allegations of misconduct involving two senior level agents at the white house complex on march 4th, 2015 i have been impressed by the selfless dedication of the workforce as a whole and our people's willingness to take on the necessary reforms in the

betterment of the mission. with respect to these recent allegations, secret service has turned over the investigation to the department of homeland security's office of the inspector general. to ensure thorough and independent review of this incident. i have committed our full cooperation with this investigation, and eagerly await the oig's findings. turning to our budget, i want to thank all members for your work on the 2015 department of homeland security appropriations act. for a second year in a row this subcommittee worked diligently to provide the secret service with additional resources to support our staffing, our training, and operational needs. in addition, 2015 bill includes $25 million to begin the necessary enhancements associated with the protective mission panel's recommendations that were included in a report to secretary johnson on december 15th of 2014. the panel's recommendations have brought focus to staffing

training, and leadership deficiencies in the agency. and technology and perimeter security requirements at the white house complex. however, since the secret service's mission extends beyond the issues addressed in the panel's report i am committed to zero base in the agency's budget to determine the full extent of our operational requirements. the 2016 budget builds on the protective mission enhancements that are under way this fiscal year. my written statements provide a thorough overview of the budget request. but i would like to highlight a few areas in the limited time i have. the $86.7 million requested in 2016 to address specific recommendations made by the panel can be broken down across four categories. first, personnel initiatives. second, training center improvements. third, white house security infrastructure improvements. and four protective technology upgrades. my priorities are to staff the agency at a level commensurate with the demands of the mission

and ensure that our employees receive the training they need to do their jobs effectively. this includes critical in service training for our agents and officers as well as ethics and leadership development. one of the biggest missions demands over the next 18 months will be associated with the campaign protection. with less than two years remaining before president obama's term in office comes to a close, the secret service is preparing for campaign protection requirements similar to those of 2008. the last time no incumbent president ran for office. during every campaign the secret service's budget temporarily grows to accommodate the surge in protection requirements. of the $204 million requested in 2016, for campaign protection and campaign related nsses a total of $59 million reflected simply reflects the anticipated time special agents in the field will work protection hours in support of the campaign. when people ask how it is the secret service can protect multiple candidates traveling

between different cities and states in a matter of hours i point to the special agents who serve in the field offices around the country. without the support of highly trained special agents who have experience with investigations and protection the secret service would be unable to handle the surges in protective operations associated with the presidential campaigns, nsses and other major events. securing the two nominating conventions is one of the most expensive and challenging aspects of campaign protection. these high profile nsses typically last three to four days and attract more than 50,000 participants each. the secret service began to work months in advance to plan and coordinate comprehensive security operations to identify and mitigate threats that could cause harm to our protectees and dignitaries and to general public attending these events. for example to mitigate the risk of cyber attack on critical systems and key infrastructure that could adversely affect

security plans special agents trained in the critical protections -- i'm sorry the critical systems protection are responsible for securing venues that are increasingly automated and interconnected. to accomplish its cyber protection mission the secret service recruits from within the agency's electronic crimes special agent program, specifically the computer forensics and network intrusion responder disciplines. special agents trained in these areas are responsible for the successful investigations into many of the largest known data breaches in recent memory. just last month a secret service-led investigation rutted in the arrest and extradition of vladimir drinkman a russian national who will face charges that he allegedly conspired in the largest international hacking and data breach scheme ever prosecuted in the united states. superior performance by men and women on the front lines begins with superior leadership. to that end i have worked to open the lines of communication between the rank and file and their supervisors.

i made significant changes in top leadership positions across the secret service to inspire a renewed focus on staffing training protective operations investigations, and professional responsibility. i am in the process of restructuring secret service's executive leadership to better leverage the experience of civilian professionals while allowing law enforcement personnel to focus on their core areas of expertise. with the support of the department, and the congress over the next several years, i am confident that we can put the secret service on a path to suck cease for many decades to come. chairman carter ranking member roybal-allard, this concludes my testimony. i welcome any questions you have at this time. >> we thank you, director, for that report. before i start off with you know, the 800 pound gorilla in the room what happened the

other night at the white house? i was -- i was in the ukraine on a fact finding mission with a subcommittee of this body when we learned of this, and i called directly from the ukraine immediately to my staff to find out what happened, because it kind of knocked me out of my chair, considering the discussions you and i have had. and first of all i'd like you to give us the picture i think happened. because i think what was reported in the foreign press at least, was it sounded like they crashed through a barrier and the first thought was an iron gate or something like that ignoring a crime scene tape, in a state of intoxication. and inquiries further it may not have been exactly that picture we have. so i'd like you to give us a picture of what happened and then i'd like to talk to you a little bit about the protocols

that may or may not have been violated and what protocols are in place to cover the situation here. alcohol is part of a stressful world that an awful lot of people live in. outside of my courtroom there was a cartoon on the wall where the judge is addressing a young trial lawyer and he says you need to know the most important two tenets of the law relative to trial work. caffeine by die, alcohol by night. it was meant to be a joke. it's actually a tragic truth. that in stressful jobs, those two -- those two become a major part of how people get through the day. but alcohol as we all know messes up your judgment and we've got -- there have got to be protocols that address this and we have to deal with it, because it's part of the life we have. and we have -- are protecting the most important position on the face of the earth. that's their job.

whoever sits in that white house, he is the most -- he or she are the most important person on earth politically in this world. more power than anybody else. and therefore more enemies. so, talk to me about what happened and then let's talk a little bit about protocols. >> yes, mr. chairman. on march 4th, 2015 our understanding is that two senior level special agents came to the white house. the initial reports i did not hear this incident until monday. so this was on a wednesday night. i found out monday. once i found out monday and what i heard initially, the initial reports from an anonymous report was that, as you stated two senior level special agents had crashed into the white house. and they were inebriated. i had not heard about that. i asked my staff if they had

heard about it. they had not heard about it. i had asked them to get as much information as they can on the events. and then it wasn't a lot of information available. but we decided -- i decided to immediately send it over to the department of homeland security office of the inspector general. i thought it was very important that we have an independent investigation, that there would be no perception at all that we were involved. that we would not even start doing any interviews. we would give that case that investigation, to the oig. i will also say that i brought my staff in on monday. and we discussed why i didn't know prior to monday of this event. and we had a good stirring talk about that. and then instructed the staff to go out to their management

ensure that these events, any event of misconduct or operational errors have to be relayed up the chain. i'll say that it's going to take time to change maybe some of this culture. there's no excuse for this information not to come up the chain. that's going to take time because i'm going to have to build trust with our workforce. and the best way for me to work or earn that trust with our work force is by my actions. now i know there's a -- i'm very eager to hear the results of this investigation. i don't know how long it will take. but i am committed to due process. what i have done is removed those two senior level agents to nonsupervisory positions outside. they're not working at the white house. they're outside of their offices. and we will await the findings of the oig.

>> let me ask you on the issue of drinking. are there protocols set up to discuss the fact that, you know, every one of your people are carrying a weapon and i -- this, you know this is purely hearsay. someone told me that -- that a person in the fbi said the protocol for the fbi is, if you know you're going to a place where alcohol is going to be consumed, and it's a retirement party where more than one drink might be consumed that they expect their agents to report that to the superior to leave their weapon at home, and to tell their superior that they would no longer be available for call. because they would not be -- might not be in a condition to be available for call. do you have any types of -- and i don't know if that's true or not. that's something that was told to me.

but, this was a retirement party, a member of your group and it was a party. and people were expecting there would be drinking at the party. now, you have any protocols like that in the secret service? >> we do have a ten-hour rule, mr. chairman. where you are not permitted to consume alcohol ten hours prior to your duty assignment. off hours, we don't have protocols for off-hour going to a reception or a party or what have you. there are protocols for driving a government vehicle. i will say that. that you cannot obviously be under the influence. not by a legal limit, but you just cannot be exhibiting any indication that you're under the influence of alcohol driving a government vehicle. and that will all be looked into with the office of the inspector general. i will say that i did see a very

short clip a very short video footage of the incident that evening. and i did see the vehicle that the two agents traveled in. where they drove at a very slow rate of speed onto the white house complex. so that's something that the oig will have, and i'm sure will investigate that. >> going forward are you going to look into protocols that would affect the situation like this? >> yes, mr. chairman. any time we have an incident of this level we certainly have to look at our protocols, look at our policies. are they sufficient? and to be candid, i have been away for several years, and was not as familiar with these policies as i should have been. they have to be readdressed. even the indication that you may be able to get into a vehicle after having one beer, one glass

of wine, that's something we're going to have to address. >> well, certainly the dwi laws are pretty rough. >> yes sir. >> pretty rough. well, you and i have talked about this. you know it breaks my heart to think that once again one of the agencies that has been a legend among the american people in the last six years has just gone downhill substantially. absolutely substantially. and it's a crime. our people need heroes. you are an agency that were considered heroes, that protected every president, no matter what party they were in. and did it in a very effective, and efficient job. and this is very heartbreaking to have this continued conduct. although you're new on the job, but i told you when we visited you got a big job and you're going to have to make heads roll. if there's a -- if there's a place to send people in your

agency that is the mojave desert of the secret service maybe some people need to be sent to the mojave desert so that they know that their behavior is unacceptable. so you think about all that. chairman's got plenty of hearings he's got to attend so i'm now going to turn to the chairman for any questions he may have. >> thank you, mr. chairman. i can't believe you did not learn of this incident from wednesday, when it happened until monday. why -- what happened? why did you not learn of this incident immediately? >> yes sir. and that's what we're trying to find out through obviously the office of inspector general -- >> i don't care about the office of the inspector general. god love them and good luck to them. you're in charge. >> yes sir. >> this is an administrative problem you've got, among other

things. why did you not get word from your subordinates about this incident for, what five or six days? >> yes, sir. not knowing all the facts -- first of all you're right mr. chairman, there's no -- at the least of the description of these events, i should have still been informed of what transpired that evening. any time you have a senior level on the president's detail who is alleged to have even come through a secure area, as he did that evening, i should have been informed. and we're following up on that. and there will be accountability. and i know that our workforce is listening today as we go through this hearing. and they're waiting to see what -- how people are going to be held accountable. and this is my first test. and we'll wait for these facts to come out. we'll wait for that due process and we'll go back through the reports that were written that evening, we'll go back through the oig will interview these

midlevel supervisors, and going up the chain. but, mr. chairman, you're absolutely correct. and i think part of this, again goes to a culture of trust. do you have the trust in your leadership that you can bring this to leadership's attention? and i've got to work to earn that trust and i'm going to do that through my actions. >> well, your actions in my judgment should be punishment termination, firing people who have subordinated their command. you can't run an agency like this, for god sakes or any other agency unless you have discipline in the ranks. and this is a breakdown to put it mildly, of discipline within the ranks of your agency, and that -- that's a cancer that can consume you. now were these people given a

sobriety test? >> they were not, sir, to my understanding. >> why not? >> sir, i can't answer that. >> who said not to do that? >> sir i can't answer that, either. i don't know that those facts are -- have been -- >> well who discovered that this had happened? >> sir it was an anonymous e-mail that was published, and i want to say it may have been several days later. i don't have the facts on when that was released that e-mail, but typically an event like that, there would be some chatter. there would be some discussion if it occurred the way it has been described. >> well who was the agent in charge at that time at the white house? >> there is a watch commander. there is -- at a captain level, who would have been in charge of the white house complex at that time. certainly during that incident with -- >> who was that? >> by name, sir? >> yes, sir. >> i believe it's brawn, sir.

>> bronson? >> brawn b-r-a-u-n and my staff can correct me if that is incorrect. >> he was the person in charge of the white house deail at that period of time? is that correct? >> yes, sir. >> did he report any of this activity to anyone else? >> no, sir. >> have you talked to him? >> i have not spoken to him, sir. again, as frustrating as it is for all of you on the committee, it is frustrating to me as well, to have to wait to do this. >> why do you have to wait? >> sir, i don't want to interfere with this investigation. in the past, when we've seen investigations where different people have interviewed witnesses, stories are perceived differently. and i don't want to have any impact on that investigation. >> have you asked braun for a report on what happened? >> i have asked to see the report.

and i have seen nothing that indicates any written report indicating that this event as described has occurred -- had occurred. >> what kind of barricade was it that they broke? >> sir, it was a -- it's an orange construction type barrel which, when the vehicle approached, initially it backed up because the -- on 15th street and e street which you may be familiar with. you may have come in sometimes at 15th and "e" street. this orange barrel didn't allow the vehicle to go through. it was to the right of the bumper, so they nudged this barrel out of the way. the barrel did not fall over. they nudged it over, they moved up to the checkpoint where the officer typically would be positioned, and it appeared that they were showing their badges to go through the checkpoint. and then that's the extent of the video that we saw, as they

continued to progress forward. >> why were they there? >> sir, my understanding is that the passenger in the seat, in the vehicle was returning to get his vehicle. they had been at the reception, and they left together to -- the passenger had his vehicle parked at the white house complex. >> well, needless to say, we're -- we want to get to the bottom of it. right away. and i'm disappointed that you have not waged your own vigorous tough investigation of this that occurred on white house grounds by security agents who appeared to be inebriated.

to say you're not investigating because you want the inspector general of the department to investigate is hogwash. what do you think? >> sir basing on my limited experience since i came back, i read the report sir, on 2011, the shooting from constitution avenue that some rounds had hit constitution avenue. and one of the officers i remember reading when i first came back was that he was -- this individual was interviewed three different times by our agency, by the oig i believe, and by federal bureau of investigation. and my recollection is that each of those interviews was different. and so which distorted the facts. what were the facts? and what did that officer truly see and hear? and for right or wrong that resonated with me. and i didn't want any perception that we would be -- it can be

intimidating if someone from my staff goes to one of these uniformed officers and said what did you hear? what did you write? what happened that evening? they may tell me and my staff one thing, and another from the oig, they may interview them and they may have a different perception of the words spoken, words are important. and i'm frustrated i'm very frustrated that we didn't know about this. i didn't know about this till monday. i'm frustrated that i can't act until we get all the facts, because i know that our workforce is waiting. what's your action going to be? but i just don't want to act improperly too soon. let me just say this the president, the first family, they're safe. we moved these individuals to nonsupervisory positions.

rather than administrative leave, where they're getting paid for no work. we can still get work out of them. but in a different capacity.. >> yes sir. >> no reduction in pay. no penalties financially or otherwise. right? >> no financial penalties. sir, i would say that i'm sure they're paying a penalty right now. >> well, unfortunately, this is the last in a long line of episodes somewhat similar. drinking carousing on and off duty, that this agency has suffered these last few years. it's not working right, mr. director. >> yes sir. >> if we've got to have some changes. and you've got to be the one that makes those changes. and i don't sense at this moment

that you have the determination to make that happen. am i wrong? >> sir, i would disagree with you with all respect. i will say that there is an element within our agency, there's an element within our agency that does cope with the stresses that many of you have mentioned today by using alcohol. there's no question we have that element. we also have other elements that -- in our agency that go to a different route. some go to exercise. some go to religion. some go to their family to cope with these stresses. but we do have an element that goes to alcohol. three, four weeks ago we kicked off an initiative, a worklife initiative to look at those stresses that our people are under. they are considerable. there's no excuse for the actions. we have to take -- there has to be self-discipline, self-accountability. but we've got to find a way to help some of these people that are going towards alcohol to solve their -- as a coping

mechanism. >> well i'm concerned about their health as well. but i'm more concerned about the health of the president of the united states, and who's protecting him from harm. >> yes mr. chairman. >> and if we've got special agents on the grounds, at night, in the white house ramming a barricade drunk it seems to me that the only discipline that you could exert would be caused by the ability of you and your staff to terminate as punishment, so that every other agent knows boy i don't want to go there. that director's going to fire me. that's what makes the mind work. what do you think about that? >> i agree with you. i think deep down, within our agency, as in others people want to see discipline. people want to be disciplined. they want to have people held accountable. i just want to respect the due

process. as frustrating as that is. and let my actions speak for how we're going to move forward in this agency. >> we'll be watching. >> yes, sir. >> and waiting. >> yes, mr. chairman. >> thank you, sir. >> ms. lowey. >> thank you. and i want to thank you but there's so many hearings today. i just want to follow up briefly, because with all due respect, i'm just shocked by your testimony. first of all, you said it wouldn't have been reported to you other than a whistle-blower. i mean it wasn't someone in the chain of command that reported it to you. and then you said what really shocks me it will take time to change the culture. i don't understand this one bit. it seems to me it should take time to help people who think

this is the culture to go get another job. how can we as members of congress have respect for an agency that feels it's okay. we're not talking about someone drinking at a party. we're talking about a respected member of the secret service who was absolutely drunk. how many people do you know, how many friends have you -- do you know who may go to a party and then take a car and go ram into a fence or some other barricade. i find this testimony shocking. following up on my colleague, i just don't understand it. i would think it would take five minutes to change the culture before you even know the fact, you can say based on the allegations, if, in fact, you are not aware that this kind of activity is inappropriate for a member of the secret service you better get it now, and go

find another job. that's why i'm so puzzled. i can't believe you said it will take time to change the culture. can you explain to me why it's okay for a member of the secret service to get so inebriated that they would take a car and run into a barricade? >> if those are the facts and they may come out exactly as you stated them, then you're absolutely correct, and that -- we will -- we have a table of penalties which explains exactly how they could be disciplined. when i said that the culture, it's going to take some time for the culture to be changed, specifically i'm talking about if there was an event that night, as is described. let's assume that it was as you described it. why wasn't that reported up the -- to my office? and i think that's a long-standing process, possibly

where people don't want to relay bad information. and we have to prevent that. but to your point, you're right that we -- my actions are going to determine how that culture is changed. but i don't have the ability to just fire people at will. in the government i don't -- my understanding is you cannot do that. it doesn't mean that due process -- after due process there aren't some actions. >> maybe my statement is not clear. i understand due process. but do you think it would be inappropriate to send out a very strong message that this kind of behavior is absolutely inappropriate, wrong, for a member of the secret service? did you do that? >> i did that. that statement went out, without going into the specifics of the events on march 15th. although referenced that. we did put out a statement saying that there's accountability, this type of

activity is not tolerated and that we've got to -- we've got to shape the future of this service. >> i guess i just don't understand because in my time in congress, which is 26 years i've had such enormous respect for the secret service. protecting so many of our people in public life including members of congress. so i just don't understand, even off duty, how a respected member of the secret service could get so inebriated that they take this kind of action going into a fence knocking down a barricade. i don't get why it would take time to change the culture and that's why i'm puzzled, sir, with your comment. and i would hope it's very clear that if they're off on a thursday and not on duty, they can get so ineven rated that they can go into a fence but when they're on duty, they

understand this behavior is unacceptable. i would think, i don't want a member of the secret service frankly, who's capable of getting so inebriated that this kind of an action can be accepted. it can be accepted when they're off duty but not on duty. this is why i'm totally puzzled. i don't think there's any doubt that this action took place. is that correct, sir? >> that's correct. >> so, is it clear now that it's going to not take time to change the culture? do you understand why that doesn't make sense to someone like myself? who has such respect for secret service? i don't think we want this kind of person in the secret service. whether they're on duty or off duty or you don't want them -- behaving this way at any time. that is not the kind of person you want in the secret service. they can go find another job, frankly. >> yes, ma'am.

>> so, can the culture change immediately or do you still believe it will take time to change the culture? >> i cannot terminate people this afternoon. that's -- >> i understand that. but can there be a very clear directive that if you are a distinguished member of the secret service, whether you're on duty or off duty, you cannot get so inebriated, and it is not accepted that you're capable of taking a car and going into a fence or killing someone on the street. these are people with guns. >> yes. and again, i agree with everything you're saying. i will tell you that again the workforce is hearing your message loud and clear today. and we've been stressing this through training, through mentoring, through coaching, through this discipline that we've put in place one year ago so people know the rules. it's up to individuals to have the self-discipline to follow those rules and conduct themselves in a professional

manner, obviously on the job, and off the job. >> well i just want to conclude by saying i do hope you can send a strong message again, and make it very clear to the distinguished member of the secret service that it shouldn't be business as usual even if they're off duty. because i know i was the author of the 0.08 law, and to go get so inebriated that you're going to take a car and go in to a fence, you need to be pretty, pretty inebriated out there. so i do hope you send that strong message, and changing the culture can be done immediately not take a long time. and i understand you cannot accuse anyone until an investigation is complete. but you can make it clear that whether you're on duty or off duty this kind of behavior is unacceptable for a distinguished member of the secret service.

thank you, mr. chairman. >> thank you, ma'am. >> thank you ms. lowey. ms. roybal-allard. thank you for yielding. it's your turn. >> okay. >> director i have to say that i am equally concerned by some of the responses that you have given today. and i hope that i misunderstood you in terms of your saying that you needed to wait for the ig's report to take any action. seems to me that there are many things that can be done now and actions that you can take now before that report because it's quite obvious that there are lots of problems within the secret service that the incidents at the white house and others are just indicative of those problems.

i wanted to elaborate on your opening statement. i think it's important that the public loud and clear hear not only that you acknowledge that there are problems facing the secret service, but that you're actually implementing an effective plan in turning things around. things that you can do now. right now, you can demand and with a discipline, that you're immediately notified of any other incidents. hopefully there won't be such incidences, but there are things that you can do now. also, as you're answering that question as to what you'll be doing over the next weeks and months to assure secret service personnel, white house congress and the public that you are moving in the right direction,

if you could also talk a little bit about what you're going to send a message of discipline. not dealing with this case, but just in general that certain things are not acceptable and that there will be consequences and as reports in the paper, if if true, the incident at the white house, those who were involved in that were given a less stringent approach than the service has taken in the past. if that's true why and and i just wanted to give you an opportunity to respond to that as well. >> consistency is very important. i'm not aware of how our discipline would differ from the past. i have been briefed on some of those recent incidents.

i talked to our legal counsel, our human resource people to see what options we had in terms of first steps in regards to this incident. i will tell you in general and we may get into this later we are going through a restructuring through our organizational chart and that will be a subject maybe later during this hearing. but the idea of discipline and give you examples before every trip on a foreign trip any agent on that trip is given a believing on ethics and what's expected of them. before our personnel meetings, before a visit in any city. the agents working that visit are briefed on the visit, but these topics are constantly brought up. unfortunately, wref an element and i would argue it's a smaller element. we have an element that is causing this agency great

distress. and i can tell you that those agents, those officers and our personnel, who as you saw in the los angeles field office last week, who go home to their families. who go to their church. who exercise, whatever. they are as disstressed at this as all of you. it's their reputation. they, they work these eight-hour, ten-hour, 12-hour days under great stress and it is a very stressful environment. and then you go home and see the media reports that we are alcoholics. and that is something that we've got to just work life initiative i may have mentioned, we kicked off a few weeks ago to try to address these stresses and how do we handle people that go in the wrong direction. ultimately, it goes back to what actions to i take and does the agency take in terms of discipline. >> well, that was my question

director clancy. what are you doing now, what are you plans now to address these issues? separate and apart from the incident? how are you getting that message across, ib inclouds and i just want to highlight what chairman rogers said, that the best way to make sure that these things don't happen and to weed out those who are the bad actors, is for a hard and swift disciplinary action which could mean immediate dismissal. so, what is it that you're actually doing now to start addressing the problems within the secret service? more specifically. what are you doing now? >> some of these measures were put in place prior to me arriving and i think they're good measures. for example, the office of integrity. reports directly to the director. so rather than in the old days if there was an issue of

misconduct in a local field office, that special agent charge would handle that and there may be inconsistencyies on the way discipline was handed out. so, over just over a year ago, this office of integrity was stood up to ensure consistency and within that is a table panel, which is modelled after other agent isiescyiesagencies, so that we're not stand alone. >> can i just stop you right there. because -- obviously whatever has been done, you're mentioning a year ago, it's not working. things aren't working. so the question is what is it that you are planning to do to make whatever these systems that are in place, if they're good systems, to reevaluate them and make sure they are working so we

don't have incidents like this, so the message is loud and clear that if the secret service agent, you know rings whatever the violation is that there is going to be immediate and quick you know disciplinary action. something that really is going to count like as chairman rogers said, you're dismissed. period. so the point is whatever's been put in place, whatever's been done done, it is not working. and i guess my question is if you're not able the answer it now for the record, what are the plans you are considering putting into place that will make the system work and send the right message to the secret service so that they know there will be a harsh penalty if they violate whatever the rules are of the secret service. that's my question and like i

said, if you can submit it to the report if you don't have all the information now, but whatever has been put in place, whatever has been done in the past obviously is not working. >> i agree with you, it is not working and i would prefer to put together a document spelling out what we are legally able to do with what we cannot do and where we would move forward, try to correct this. it's not working. gl well, but legally and mr. chairman, then i'll turn it over but legally can't do are you saying there's some, when someone violates rules is drunk, whatever, that they have, you don't have the authority to dismiss them? >> i don't have the authority to dismiss them on the spot. >> on the spot. but there are rules in place. >> there are rules in place where there's a process and place where you make a proposal and the individual receiving that proposal has a chance to

appeal that proposal and it's somewhat of a drawn out process. >> maybe you need to look at that as well. >> mr. stewart. >> thank you, mr. chairman. director, thank you for coming here. kind of a tough hearing. i'm going to jump on and you'll forgive me for that. before that know, i'll tell you, i recognize that you and most of the agents who serve under you are honorable, they're driven by love for country and they're trying to do the right thing. but leadership is taking care of not the good people in some cases. it's taking care of the problems and you have enormous problems ahead of you in my case or in my opinion. as a former military guy, i am stunned by this environment. and this culture and i'll elaborate on that in just a minute. i think there's two problems here. one is this.

we have this behavior of drinking and drive inging and kind of carousing around. there's lots of examples. i've got three pages that i can do go through. i kind of get that. i understand that a little bit. it happens. it's troubling, but it happens. we have to deal with it as we've talked about but i think a greater problem to me is the fact that there was an officer who was aware of this or many officers, at least one, who was aware of this and took steps to protect their friends. rather than to hold them account bable. if anyone is aware of this and they didn't tell you, they have lost your trust. how could you ever trust them again? you may not be able to fire them, but you should assign them to the furthest type of the aleutian islands in my opinion because they have lost your trust and the trust of the american people and they have shown loyalty to their friends and co-workers rather than to their responsibilities and i