testing procedures. when we finish our investigation we do intend to make our findings public. >> chair thanks the gentleman. chair recognizes the gentleman for five minutes. >> chairman, members of the subcommittee, thanks for this opportunity. on behalf of the 12 leading global eooems, i appreciate this opportunity to testify. i'd like to make four summary points. first, the hearing today timely and welcomed and we are fully committed to doing our part to successfully complete this recall while continuing to build on the very significant safety advances of recent years. the magnitude of the takata airbag recall is unprecedented and global. there are no easy answers or quick fixes. that's why we support administer other rosekind's decision to use ntsa authority to organize and prioritize effective manufacturers. remedy programs. we all want a clear, unified approach.

we share this committee's frustration. it is very difficult for us to be ald able be able to tell our customers your constituents, how long this will be resolved. it is highly complex and there are legal impediments. the key challenge in most recalls is more basic and that is getting consumers to take advantage of the free fix especially in older vehicles. the average consumer participation rate for light vehicle recalls after about a year-and-a-half a 83% for newer vehicles but falls to 44% for vehicles five to ten years old, and falls further to 15% when vehicles are older than ten years. because of these concerns our members have cast the alliance to conduct the most intensive public opinion research ever on recalls to learn what motivates some consumers to respond and why others don't. what motivates consumers to go

into the dealership and get it done what messages work and what messengers are most effective. work is under way now and we will share the results with ntsa and you to help forge a multi-pronged effort to strengthen consumer participation. third, recall policy is vitally important and we are committed to strengthening the process for resolving defects. that said, it is just one piece of the safety equation and as the share of fatalities on the road are relatively fractional one, most fatalities, 90%-plus, result from human error, principally impaired driving and failure to use seatbelts. while we've seen profound gains in safety over the last decades, technology offers the promise of even greater advances as we build on crash worthiness and introduce the idea of crash avoidance functionality. all of the new jargon we hear and ultimately self-driving vehicles are part of a continuum that thankfully will save

thousands of live by helping to compensate for driver error. this isn't speculation. this is our emerging reality. fourth and finally, let me state the obvious. oems are passionately committed to improving safety and are very proud of the result we have achieved, both because it is the right thing to do and because it is good business. safety innovation is critical to the competitive landscape. auto companies are vesting $100 billion every year in research and development to comply and xreet and compete in the globally dynamic marketplace. that investment is paying off and our polling shows that your consumers, your customers, your constituents, do see the progress. relative to ten years ago your constituents say cars are safer by 86%. they get better fuel economy by 89%. progress is being recognized and

that's terrific. thanks for this opportunity to share our thinking. we stand ready to work with you and your staffs to make our roads as safe as possible. >> chair thanks the gentleman. >> chairman burgess, ranking member members of the committee, i really appreciate the opportunity to appear before you today. global automakers represents international automotive manufacturers that designed, build and sell cars and light trucks in the united states. our members sold 43% of new vehicles purchased in the u.s. last year and produced 40% of all vehicles built here. individually and jointly, our member companies are committed to working toward a future in which there are zero highway fatalities. the safety of americans traveling on our roadways remains a priority. mr. chairman this hearing presents an opportunity to further this important discussion on improving auto safety. the takata recall is an unprecedented situation. the number of manufacturers and the number and age of affected

vehicles involved, along with the sophistication and complexity of the technology makes this unique. as such, affected automakers are taking extraordinary measures to locate and communicate recall information to vehicle owners so that they know to take their vehicles in for repair. our members have gone far beyond what the law requires. they are distributing multiple rounds of recall notices. they are sending express mail to ensure that the notifications are not discarded. they are using multiple platforms such as advertising social media and electronic communications. they are working closely with their dealer networks to ensure that dealers have the capacity to service vehicles with open recalls. additionally, they created the itc to conduct independent testing of recalled parts as led by david kelly. of course recall campaigns are only one component of creating a safer driving environment. the takata recall highlights the complex nature of the industry and the challenges we face

today. all stakeholders must worg together in the effort to improve vehicle and highway safety. critical areas of focus include proper oversight of existing safety systems the development and introduction of new technologies and driver and passenger behavior. this committee through its authorship of the tread act has given ntsa the ability to require reporting and tracking of safety related data that better allows us to identify problems in an existing fleet of vehicles and to address and solve they will. in part the number of recalls that have occurred in recent years is evidence that the requirements of the tread act, ntsa's ongoing vigilance and the commitment of the manufacturers are advancing the goal of improved vehicle safety. automakers are now deploying advanced technologies which will accelerate the move from crash survival to crash avoidance including forward collision warning and braking, and soon vehicle to vehicle and vehicle to infrastructure communications. according to the d.o.t. vehicle to vehicle communications, when fully deployed could address

80% of crashes involving unimpaired drivers. a holistic approach to vehicle and highway safety must include human behavior which plays a role in a voluntary recall system. for newer vehicles the recall completion rate is upwards of 80%. the completion rate falls dramatically as vehicles age. this is a key challenge in resolving the takata recall and raises an important question -- are there limits to the success of a voluntary system. global automakers and our members are exploring ways the industry can achieve better outcomes, we are working with ntsa officials and are happy to talk with you about new methods for getting useful, effective and actionable recall information to our customers such as including recall notifications in annual vehicle registration processes. mr. chairman, it is important to keep in mind that highway safety is improving. this past december ntsa announced that traffic fatalities decreased by 3.1% over the previous year and by nearly 25% since 2004.

however, there is clearly more work to be done. regarding the takata recall, the most important thing we can do right now is to make sure people are aware of the status of their vehicle. every vehicle owner should go to safercar safercar.gov and enter their vin number to determine if action needs to be taken. personally i did this myself for my vehicle and my children's vehicle. and it gave me the peace of mind to knowing where we're at. global automakers and our members will continue to work toward our mutual goal of 100% recall completion and zero traffic fatalities. thank you for the opportunity to appear before you today. >> chair thanks the entire panel for their testimony today. we'll move into the question portion of the hearing. i'll recognize myself for five

minutes for questions. i've got a couple of questions that relate to the propellant in the inflater. mr. kennedy, primarily going to ask you, but mr. kelly if you have information, because of your independent testing role, please feel free to add. is -- mr. kennedy, is takata the only airbag manufacturer that uses sodium nitrate into its airbags? >> it is ammonia nitrate, sir. i believe we are the only one that uses it as a main propellants. there are other manufacturers that use it as a supplemental propellant. >> is there any other airbag other than those manufactured by takata that has been -- experienced this energetic disruption, i think you called it mr. kelly? >> i can't really speak to recalls for the other suppliers, chairman burgess. i really don't know the answer

to that. >> it's just that we've had -- this is the second hearing that i've been involved in on this issue, and ammonium nitrate keeps coming can up. it is a pretty powerful compound and it just begs the question, is there a linear relationship between the ammonium nitrate used as an inflater and these accidents that are happening. >> well, the studies that we've done and the research that we have from some of the leading experts in the world seem to indicate that ammonium nitrate is certainly a factor in the inflater ruptures. there are many, many other factors. i think you heard dr. rosekind talk about some of them. you heard mr. kelly talk about some of them. it takes a long time as dr. rosekind said 7 to 12 years. it takes high absolute humidity, it takes high heat. what's difficult about the situation is, you can put two

inflaters in that situation, one of them is fine and one of them is not. so that is really what the struggle has been with getting to the root cause. but ammonium nitrate appears to be one of the factors that contributes. >> it's high humidity is an issue. my understanding is some of these are manufactured with a deccicant. presumably that will get completely used up over some period of time. is that correct? >> i don't know that it would get completely used up, sir. it depends on the amount of moisture that is in a particular inflater around the amount of des desicant. we haven't seen that with those inflaters in the field. so we know that's a factor that

contributes to the life of the inflater. >> does takata involved in the make or model of ammonium nitrate without? >> yes all are ammonium nitrate without desicant. >> we are working to transition out of them as quickly as possible. >> i'm sorry. you go out and buy a brand-new car off the show room floor and it could have one of these instruments in it? >> it could have an ammonium nitrate based inflector that doesn't have a desecant. >> is there any reason to warn the consumer they are buying something that may be problematic? >> the recalls that are in process at this point are for certain time frames certain vehicles, certain technologies.

those would not be involved in a brand-new vehicle at this point. we're going beyond the consent order and testing outside the boundaries of what's involved in the recall to really understand what the total scope is. >> i'm sorry you're not providing me much reassurance with that answer. . >> under simple math it's 34 million vehicles, i mean it's almost three years as a time frame. >> well the exact numbers are in it the dirs, but the additional due to these dirs, is about 16 17. i don't mean to minimize it it is obviously a huge number whichever way you look at it. but previously there had been 18

million of that 34 that have already been under we've supplied over 4 million kits already since january of last year. >> let me ask you this. i don't mean to interrupt but my time is up. are any of the replacement modules that you're re-installing in vehicles that are brought in to have their airbag system changed out, are any of those ammonium nitrate propellants without a decicant.

>> i want to follow up on the chairman's question. you've talked about what are the possible reasons including ammonium nitrate perhaps being part of the cause. you're saying, if i understand you correctly, that you are providing replacement bags that have ammonium nitrate without a dessicant. >> yes, ma'am. >> i don't understand that. what is under recall right now. >> certain models certain designs on certain vehicles. >> but why? why if ammonium nitrate may be a problem, would you and why would o i buy -- why would you buy a car that has a potentially

dangerous airbag? i'm not understanding. >> we are working to move away from those as quickly as we can. in a vehicle it is not as easy as just changing the color of the car or changing a bolt. >> no. i'm not talking about replacements now. >> yes. yes. >> so the replacement could be as dangerous as the current. why would you even replace them? >> as i said, without really understanding the root cause and continuing to test outsides the bounds bounds, we're trying to determine what are exactly the factors that lead to this and should we do something different than what we're doing now. as you heard dr. rosekind say, it takes 7 1/2 to 12 years. putting in a brand-new part is a huge improvement in safety. as we continue to test, if it shows that we need to take additional actions, we will take additional actions.

>> does the recall affect cars that are over ten years old? >> yes. some of them i think -- well, the original recalls did. these new ones announced i'd have to look and see because of that overlap. but some of them go back to as early as i think 2000 2001. were the first ones involved. >> my understanding is that you are doing that with older cars but you're not required to do so. so i wanted to ask you if takata has taken a position on the vehicle safety improvement act, hr-1181. >> no, we have not publicly. i'm aware of the bill. i'm not aware of all of the particulars in the bill. but we certainly support any effort that would help improve the return rate on recalls. >> so let me give you some of the items in the bill and see if you would support that. hr-1181 would increase the

quantity and quality of information shared by auto manufacturers with ntsa, the public and congress. specifically requires manufacturers to include in their quarterly submissions to ntsa additional information on fatal incidents possibly caused by a defect, and assess why the incident may have occurred and removes the limitation on the number of model years that should be reported. is this something that sounds supportable to you? >> well it's a little disingenuous for me because it is not a requirement for our company to comment on. but it would seem like that would be a good idea in order to increase the visibility on some of these issues that have been going on in the field. >> do you think it would be a good idea to not limit to ten years the number of mandatory -- of recalls asking that cars older than ten years be part of

the required recall? >> quite frankly i didn't know there was a limit of ten years. as i said, some of these vehicles are 15 years old. >> would you think that it is a good idea for ntsa to have new imminent hazard authority to expedite recalls related to dangerous defects? >> that's again a difficult one for a supplier i think to answer. but i think anything that improves the safety on the road is certainly a step in the right direction. >> do you think there's any reason to support regional recalls as opposed to national recalls? >> well, obviously our started is off as a regional recall. and the reason that it was -- couple reasons it was doing that, number one was because that's what the science and data showed were the issues were. there are going to be some cases where i think that is probably correct. and it also -- >> people do drive their cars to other places.

>> yes that is true. but the other thing i was going to say, it also helps with getting part into the priority areas as quickly as possible. that's part of the four dirs that we came to agreement with ntsa on in the last couple of weeks. >> mr. kennedy, can i work with you, as well obviously primarily with the members, but talk to you about the legislation? >> absolutely. >> thank you. i yield back. >> you're welcome. >> chair thanks the gentle lay dp lady. >> thank you, mr. chairman. mr. kennedy, i'm going to stay right with you. do you drive a car that has a takata airbag. >> yes, i do. >> you do. >> yes i do. >> what about your family? >> yes every one of them. >> are you concerned -- >> no, i'm not. >> -- about the safety of those. okay, i was listening to your statement and i think i must have missed something here because you talked about manufacturing -- stopping the manufacture of the bat wing air baghdad but you never mentioned the ammonium nitrate.

you kind of left the propellant out of the mix. >> correct. >> and then addressed it with mr. burgess a little bit. i want to ask you if you agree with this statement. this is from an explosives expert at missouri university of science and technology. he said the following about ammonium nitrate. "it shouldn't be used in airbags but it is cheap. unbelievably cheap." do you agree with that statement? >> that it's unbelievably cheap or that it shouldn't be used or are you -- >> both. >> i wouldn't say that it's unbelievably cheap. i would say it is competitive with some of the other propellant formulations that are out there. we use a different formation in some other inflaters. it is a blanket statement that says it should not be used. no, i don't agree with that because obviously we use it.

we've had some issues with some of our ammonium nitrate inflaters but many of them have performed very well. >> are you an explosives expert? >> no ma'am i am not. >> you are not. >> i am an engineer. but i'm not a chemist, i'm not an explosives expert. >> all right. then let's go to what you were saying, you are still using this. so isn't it true that ammonium nitrate is a dangerous substance to be used in airbag inflaters? >> no i don't believe it is a dangerous substance to be used in airbag inflaters. >> okay. you do not believe -- >> we use phase stabilized ammonium nitrate. most of the issues that you hear about ammonium nitrate are it losing its phase stabilization. >> all right. then isn't it true that ammonium nitrate is cheaper than other compounds such as tetrasol.

>> probably maybe tetrasol. but at the time that we started to use ammonium nitrate, the competing material out there was guanadine nitrate. there is not a huge difference between those. >> you're an engineer. . isn't it true that your own engineers at takata warned you about using ammonium nitrate. >> i am from some of the newspaper articles i've read. i assume you are referring to mr. lilly's comments. >> mr. britain and mr. lilly. >> what i can tell you is this. every vpmentdevelopment program any product any supplier ever makes there is always a spirited debate about what are the right components, what's the right design, and there are tradeoffs on all of those things. the previous materials that we used for propellant was sodium

azide. that was extremely toxic. it also had the unwanted effect that when it was deployed it did not burn very cleanly and there was a lot of effluents that were put into the vehicle and people with respiratory issues were bothered by those. every propellant every design there is always an argument. >> i want to move on. given that you're recalling cars that may have already been repaired, have there been any field incidents reported in inflaters that were installed as parts, any of the remedy situations. have you had in he occurrences with those? >> not that i'm aware of, ma'am. >> so all of the replacement parts have performed 100% satisfactorily in the cars in which they have been installed.

>> what i said was i am not aware of any of the replacement parts -- >> would you double check that and get back to us and let us know. >> yes, ma'am. >> what does takata believe we know from testing today that we didn't know a year ago? >> we know a lot. not just from our testing. i know i heard some of the gentlemen refer to another report which was released. we brought the doctor from that institute into our facility in february. we brought a team in ntsa in. >> what kind of changes are you making with that information then if you're still using the propellant that's a problem. >> as i said, we do have later designs that use desiccant. we also have production on one using guanadine nitrate. i think you'll see our

production of ammonium nitrate ramp down. >> thank you to the witnesses for being here. i apologize i had to step out. glad to come back. mr. kennedy, you indicated that you expect that the use of ammonium nitrate would decrease in the future. why is that? >> well, it's certainly got a bad reputation through all of this. as i said, it is one of the contributing factors. that everyone believes is involved in this issue. >> can you, sir, signify or guarantee that as long as ammonium nitrate is used in those products, those products are safe? >> well we believe properly manufactured and designed ammonium nitrate can be done properly. >> so the -- you indicate in

your written testimony a little while ago that in certain circumstances these conditions can result in an alteration in the propellant wavers and inflaters that could potentially lead to overaggressive combustion. so your statement though is that if it is properly manufactured, and then under the right circumstances, those conditions would not exist. >> well, we have seen those in very rare cases. and that goes back to the root cause discussion we were having a little bit earlier. we do not have the definitive root cause. we know a lot. we know a lot more than we did in december based on all the testing that we've done and all the testing that our outside experts have done. >> so the testing that you've done as indicated, if i understand you correctly -- please correct me if i don't -- is that the ammonium nitrate or substances used in the production of these waivefer and certain conditions of heat and

humidity could lead to -- >> could lead to. >> but your plans are to phase out the use of the ammonium nitrate in your products. >> well, we have been phasing that down and phasing later propellants. but a lot of them, even some of the ammonium nitrate ones were with desiccant. now are moving to what's called a guanadine nitrate. >> you said that's a similar cost? >> yes. >> so why not adopt that earlier? >> we made investments in order to process ammonium nitrate. we were having good success with ammonium nitrate. it was competitive. as i said it had a number of these other advantages to it that our customers enjoyed. so it was not something that until some of these recent issues really thought and gave us a reason to rethink it. >> some fairly significant disadvantages of late though. yes? >> i'm sorry? >> some fairly significant disadvantages of late though, i

would imagine. >> yes, sir. >> sir, i think you tried to touch on this but forgive me if i'm still a little bit confused. in an article in the "new york times" yesterday indicated that the headline i believe says takata says it will no longer make side inflater linked to airbag defect. >> what did it say? >> takata says it will no longer make side inflater linked to airbag defect. basically says you will not be using ammonium nitrate. there was another piece in another newspaper i saw today saying that ammonium nitrate still would be manufactured. and a piece in reuters that i think said that it wasn't going to be, then the piece was withdrawn. so can you cry to clarify for me, is ammonium nitrate still being used in the products and should people -- what should people do? can they have confidence in the airbag product that's going into their cars? >> i'm glad you asked that question. there was a lot of confusion yesterday once our written testimony was released.

>> both cited your written testimony, one said that you are, one said that you're not. >> it's a long story. we've had people working on that since it came out. as i think i mentioned earlier, we are continuing to use ammonium nitrate in our propellants. fay stabilized ammonium nitrate both with and without desiccant. we did say we were going to quit making these bat winged shaped in inflaters. we've seen it's more prevalent in the bat wing propellant wafers. >> given that i only have 30 seconds left i'll stop going forward. mr. chairman i'll yield back. thank you. >> you're welcome. >> gentleman yields back. chair thanks the gentleman. recognizes the gentleman from new jersey. >> thank you, mr. chairman. good afternoon to you all

gentlemen. i was at the hearing in december. i was the vice chair then, as i am now. mr. terry was in the chair in december. i quote from the transcript mr. kennedy, directly from the transcript of the december hearing on this matter. i had asked your colleague about this whole matter. i had stated, quote takata's current view based upon reliable information does not support a nationwide determination of the safety defect in all vehicles equipped with the subject driver side inflaters. this is not the view of the agency at the federal government. obviously ntsa that protects the american people. and so you are dramatically and diametrically in opposition to the view of ntsa. is that accurate? and then your colleague discussed this with his colleagues, there was a translation problem but he then answered the question and he said, quote, this is direct

quote from the transcript, yes correct, that is our statement. then i went on to say, in conclusion, and we will be asking this of ntsa later in the hearing, on november 26 ntsa demanded a national recall. of course that was not the view of takata at that time. what has changed mr. kennedy between then and now? >> much has changed. much. >> there has been one additional death. >> there was the one additional death -- >> that certainly has changed. >> in texas. that was as i think also mentioned was a vehicle that had been recalled four years ago, unfortunately. >> but not to the owner. this was a subsequent owner. that's an important factor for the american people to know. >> it is a very important factor. a very important factor. i agree with you. but back to your original question of what has changed at that time we had i think 8,000 tests done. now we've got 50000 tests done.

we've seen some patterns start to emerge in some of the testing and the data that we've accumulated. that's what's led us -- and all of the other testing and analysis that's been done by outside experts. we've hired experts i think you've seen the one report -- >> yes i was the person who quoted that. moving on. the issue of ruptures was first known by takata in 2004. the first six deaths i believe, occurred approximately in 2009. so this has been an ongoing problem of great significance. in the last six months, how much have you been fined? i believe it is $14,000 a day. how much in total have you been fined, mr. kennedy? >> i think dr. rosekind answered that. >> i'm asking for your answer, mr. kennedy. >> i believe it was total is up to $1.2 million. >> and have you paid that? >> to my knowledge, no. >> and why is that?

>> that's part of the discussion and negotiation with ntsa. they have agreed to suspend it as part of the consent order but they have reserved the right to incur further penalties as they see fit. >> now, based upon your testimony to the chairman and to the ranking member is it possible that replacement airbags will continue to have ammonium nitrate in them? >> yes, sir, they will. some of them will. >> and you are confident that they will be safe for some period of time or an extended period of time? >> we feel that they are safe and that's why, again as part of the consent order, we are continuing to test outside of the scope of the recalls and we are continuing to test to make

sure that the remedy parts are safe. >> should those who are having an airbag replaced ask whether or not their new airbag will contain ammonium nitrate and perhaps ask for a different replacement airbag? >> i'm not really sure how to answer that, sir. >> and are there new automobiles fresh off the assembly line that contain ammonium nitrate airbags? >> yes, there are. >> thank you. >> you're welcome. >> mr. bozella, you indicate that the rate of compliance with recalls drops dramatically. did i hear you right that it's 15% for older vehicles and could you explain exactly the years involved where it would be as low as 15%? >> yeah. i don't know that i mentioned

exactly the numbers -- >> perhaps you didn't. >> but you're exactly right congressman, the trend is that further out into the ownership of a vehicle, the recall completion rate is lower. if the question is why is that, second and third owners, these vehicles are often owned by second and third owners. they're difficult to find. so the manufacturers are doing everything they can right now working very hard to increase those completion rates. >> in conclusion because my time has expired i'm concerned about those who have vehicles that very purchased not new. this would be people who might not be awareness sarl necessarily as someone who purchased a new vehicle. this is a great concern and i want to work with you and others and the committee to make sure that all this gets resolved.

>> i thank our panelists. the day before this subcommittee's hearing in december, takata sent a letter to ntsa in which the company rejected a national recall. part of the stated reason for rejecting the national recall was takata's contention that it was not required by law to make a good faith determination of whether its product contained a safety related defect or to conduct a recall because takata is not a manufacturer of motor vehicles or of replacement equipment. mr. kennedy, this question was asked of your colleague in december. but i want to hear from you now. do you agree with that statement made by your company in december? >> it sounds like a lot of legal talk to me. i'm certainly not a lawyer. >> it's not legal. it's very simple. it says here that it is your

contention that you are not required by law to make a good faith determination of whether a product has contained a safety related defect or to conduct a recall because takata is not a manufacturer of motor vehicles or of replacement equipment. >> i really don't know the answer to that. i would have to do a little bit of research and get back to you on that. >> all right. very well. by entering into the consent order with nhtsa it is my understanding that takata has committed to nhtsa's jurisdiction. is that correct? >> i believe that would probably be the proper term. >> we've come to an agreement with nhtsa. >> so that's correct. >> yes. >> very well. do you now agree that takata is subject to the jurisdiction of nhtsa at least as to the laws and regulations related to safety related defects? >> again it's an area -- you're

asking me a law question that i'm not really properly qualified to answer. i could certainly look into it and get back with you. certainly we recognize nhtsa authority, if that's really the question that you're asking. and we've worked very hard with nhtsa, especially over the past three or four months, to come to the agreement on the consent agreement, the preservation order, the dirs -- >> let me ask you this. do you now agree that takata's required to decide in good faith whether your products contain a safety related defect? >> we clearly did say in the dirs that a defect may arise in some of the subject parts. so i guess the answer to that question would be yes. >> mr. kennedy, is takata paying for all of the replacement airbags? >> i'm not sure what you mean by -- we're selling them. >> well, there are airbags that now need to be replaced. >> correct. >> right? are you paying for them? >> we are working with each one of our automaker customers to

discuss financial responsibility and we're -- >> what does that mean? >> that means that we're having discussions with each one of the automakers. >> so you're not paying for them. >> i wouldn't say that we're paying 100% for everything with every automaker. >> so you're negotiating what you will pay and what you want won't? >> which is a normal course of business -- >> i'm just asking. >> yes. it is a normal course of business in the automaticotiveautomotivevy. >> a "new york times" article from may 20th stated takata says automakers shared the blame for this massive recall because, "testing spes if i cases pre specifications failed to reveal the -- >> that's part of the report. >> is that correct? >> we believe that is correct. >> can you explain that statement a little bit more? >> yeah. what it means is whenever a supplier provides a product to an automaker, there's a specification that you're required to meet. there's a certain set of tests

that you have to run, a certain quantity of tests that you have to run. and we do that. and as a general rule, we do that with every new product. we review it with the oem and they sign off on it and say, yes, we accept this or no we don't. these products went through that process. what the report was trying to say is that the specifications that were out there at the time don't -- did not capture the issues that we're seeing in the field today. >> you're saying the manufacturers failed to uncover the fault. so -- >> what we're saying is the specifications that we tested to and provided parts to did not encompass the scope of this problem. >> and so they -- you're saying that they failed to uncover these faults. >> i'm maybe not going to quibble about the wording but that's exactly -- that's what -- >> so you're not taking any responsibility -- >> no, ma'am, that is not what i said at all.

>> okay. >> that is not what i said at all. >> okay. so you're saying they share the blame because they should have uncovered the fault during this testing of shes fypecifications. >> i'm saying in the auto miff industry products are developed to meet specifications. typically if you meet the specification you have provided a part that is acceptable. >> i thank you, mr. kennedy. >> you're welcome. >> yield back, mr. chairman. >> mr. bamwol was trying to provide and answer for you as well. with unanimous consent, he be allowed to answer. >> i appreciate that, mr. chairman. i say that not has a lawyer or an engineer or someone who neglect it's these contracts, but the specs that are let out when a contract like this is negotiated relate to performance specifications and do not relate to the fundamental notion that the product should be safe. this is about the form of the deployment and items like that

in terms of which cars it is going to be appropriately fitted for. but there is an understanding that the supplier will provide a product that complies with fmbss. and part of that is making sure that the controlled explosion is a controlled explosion. >> gentle lady yields back. mr. guthrie recognized for five minutes for questions. >> thank you very much. i'll direct this at mr. kennedy as well. if you really don't know the root cause, and you really don't know if the product that failed was manufactured to specification. or the tests might have met specification. was it manufactured to specification and it failed anyway so therefore the -- if you don't know the root cause you don't really know the answer to that. do you? >> that's part of the difficulty that we have with this issue. you've heard mr. kelly talk

about it. you heard dr. rosekind talk about it. it is a very multi-faceted very complex issue as to what's going on. and there are different types of inflaters. you heard i think dr. rosekind say ten different inflater types involved in this. one of them and the parts that we've gotten back in the past few months we have seen what looks like a manufacturing defect that we think allowed moisture into the inflater. that's on one. the others we haven't been able to make that determination. so we have expended a lot of effort with a lot of experts to try to get to that. but, unfortunately, we have not yet got to a definitive root cause across everyone of these inflaters. >> understand my background is not automotive industry. you get the product specifications, the blueprint and you meet to that and you ship to that. if they fail within the

specification then that's an engineering issue. if you didn't manufacture it to the specification that's your issue. seems like you don't know exactly where that is. borrowing what my friend from tennessee, miss black billion burn blackburn was talking aboutburn was talking about, how do you know if the replacement parts are not going to fail? >> that's a very good question. many of the replacement parts we're using are different designs now. everything on the driver's side will be a completely different design. as i said about 50% of what we shipped last month were with our competitors' inflaters that do not use ammonium nitrate and have not demonstrated issues in the field to my knowledge. that will go up to 70% here in the next months or so. so we are looking to change to different inflater designs or alternate designs for the replacement parts as quickly as we can.

>> you're already sending replacement parts now. >> we have been sending replacement parts. >> if you're going to bring in a car for a recall to replace, how do you know those aren't going to be -- >> that's the reason the could be sent order is writ-- the consent order is written the way it is in order to require that we continue to test the remedy parts an we continue to test outside of the scope of the recalls in order to make that judgment.test outside of the scope of the recalls in order to make that judgment.parts an we continue to test outside of the scope of the recalls in order to make that judgment. . >> until you know the recalls, you don't know that these replacement parts -- >> we have confidence in the ones we're making. the process has changed a bit over the years. a lot of them were using alternate designs that never really experienced issues to our knowledge. but there is a percentage of them and that's exactly why the consent order is written the way that it is and why we are continuing to do the analysis that we're doing.

>> okay. i think you said earlier you're shipping about 700,000 replacement kits? >> we shipped 740,000 in may. >> up to 1 million -- i guess you ship daily. >> multiple times, every day. and we get multiple trucks back every day with parts back from the field. >> how are you prioritizing who gets those? >> up to this point we have been able to keep up with demand for replacement parts. there are a couple of part numbers that are on back order right now. we expect to that have back order completed in the next two weeks. obviously it is going to expand with this expansion when the letters start going out to the consumers. but that's why we're adding additional capacity both internally. we've got seven new inflater lines coming in over the next 6 to 12 months. we've got additional inflater lines going in at our competitors. additional kit lines going in at our manufacturers facilities. >> you also have to maintain current production at the same

time. >> we also have to maintain current production. that's a very good point. >> i have a question with the -- would you all talk about the replacement part if it's in your -- if you'd like to comment on the replacement kit process that's going on. anything you guys would like to comment or? is it within your purview? >> we will be looking at the replacement parts and efficacy of the replacement parts as part of our investigation. >> i'd simply note that the complexity of this one is enormous. it is not just the 30 million, 34 million units in the u.s. there are global issues as well. and so production, allocation, prioritization are all hugely important significant issues. that's why we think in this instance nhtsa was appropriate to assert its coordination capacity and there's no other way to solve this in a fashion that guarantees fairness, and

guarantees as expeditious a response as possible. >> i would just add, congressman, that the manufacturers are doing what they need to do to take care of their customers knowing what they know now. >> thanks a lot. i appreciate it. i worked in manufacturing. we didn't have any what we would call inverted diamond or safety issues on our product but trying to find the recalls and when you can recreate the problem is when you know the found the root cause. we're all anxious to get to that point. >> as i said, any one failure is unacceptable to us, but in the analysis the failure rate is so low, its's just -- we haven't been able to do that. then we just want to turn it off. >> looking forward to getting to the bottom of it. thank you, i yield back. >> chair recognizes gentleman from new jersey five minutes for

your questions, please. >> thank you, mr. chairman. we've been hearing conflicting reports on whether -- this is for plp kennedy. we've been hearing conflicting reports reports on whether the replacement parts are different than the defective inflaters. some reports have talkeded about a change in the chemical composition. at the december hearing, mr. i guess it's shimizo of takata talked about improvements made in recent years, but said the inflaters were the same so i just wanted to understand this issue a little better. mr. kennedy, is there any difference between the replacement inflaters and the original defective inflaters? >> it depends. as i mentioned about 50% of what we've sent last month, those are completely different than our original inflaters. on the driver's side we will be using either alternate takata

design or outside for everything and the driver's side is the one that has had the most issues and severe issues. on the passenger side, right now, there are a percentage of those that are outside inflaters. but there is still a percentage that are, the same design inflater that was in the original, in the original modules, but manufactured at a later time. >> in takata's defect information regarding inflaters they know that and i quote, continues to produce a small number of tsti four inflaters for use as remedy parts. takata tends to cease production including use as remedy parts, so again when does takata tend to stop producing the inflaters?

>> we have a couple of carmakers with some older vehicles that have not qualified a new inflater yet. we are working and they've been working very hard to do that with us. and what the plan is in that dir is i think they call it phase four, the phase four would be to go out and get all of the remedy parts that we supplied that were of that design. the psdi 4. >> when that happens and they stop producing these inflaters, what will takata use to replace the old? >> we have it depends oncompetitors. we're buying from trw and we have a later generation takata inflater calls psdix with desacon in it and some will be

using pstix. >> are we to assume the reason takata's stopping its production is because they're unsafe? >> the back wing propellant geometry was one of the factors that was called out in some of the testing in the analysis that we have done in some of our outside experts have done as a factor, so, in order to just eliminate that factor, we said we would quit making that. we don't make it for production any longer. >> in fact there could be a problem. >> correct. >> now you say you're going to replace the inflaters in four stages. you mentioned i guess that the four stage will include subject inflaters previously installed as remedy parts. >> yes, sir. >> will the people that have the original inflaters replaced with the new inflater say for

example in december 2014, will they have to have them replaced again? >> anyone that had an inflater replaced would have that replaced again, yes, that's correct. >> so, i imagine that someone who's had their inflater replaced as part of this recall may not realize they have to have it replaced again, so how do you plan to communicate that to the consumer? >> that's another great question and another part of the consent order and agreement we have. we are going to work with ni tirks sa and the automakers to do a proactive safety campaign. we have been working with a professional media firm that has done these things in the past. we know honda last year had initiated a kind of a media campaign where on your cell phone, you called up google, there would be a banner at the bottom that said check your air

bag. we talked to honda. we know what worked, what didn't work so we have 60 days from the consent order signing on may 19th to come back with this plan to n its a and work with the enns and help increase that visibility and get the message out. >> thank you. >> you're welcome. >> chair recognizes gentleman from houston. five minutes. >> thank you, mr. chairman and welcome to our witnesses. my first questions are for you mr. kennedy. one thing has come through loud and clear at this hearing from all of y'all is the lack of we still don't know about the root cause of these defects. we have ties to humidity, heat, des cants bat wings, all sorts of things, but no root cause. and that bothers me. the united states navy was a p3 o ryan. the modified version of l 10

elect road. that plane had a bad defect. that meant the wings fell off the plane. that was ta root cause of two crashes. that's hard to find because those planes were torn up when they hit the ground. they didn't know what happened but yet we found out what happened, found the root cause and those planes didn't fly for six years in our navy. so, i've heard you say you know that there's heat, humidity, desacants. propellants. you have some propellants out there without desacants. >> correct. >> how many? >> ifld have to check, but it's a significant number. >> houston texas, we are 95, 95% humidity and 95 degree so we're ground zero for these problems. how about there? do i need to tell my people back home guys, they're all here 100,000 car, 50000 cars?

>> i do not know the number, sir. >> what's the problem with finding these cars and replacing it with a desacant. put that in there right now. >> that's exactly what we're doing with every one of those ps 4 inflaters. that's what the first tir is. >> so, by the end of this year, there will be no bags out there without some sort of the propellant. is that right? >> no, no, that's not what i'm saying, sir. >> oh, that's the problem. you said that's one of the problems. i think ss safe to me. tas propellant having a problem with the heat, how about putting the desacant with the propellants. maybe find the root cause. >> alternate inflater. that's the plan with the ones that have shown to be issues in the field. the later inflaters that we're replacing those with will have

desacant or from one of f our inflaters inflaters. >> my question here from the gentleman with the manufacturers. these recalls. who's going to pay for that? takata? the manufacturers the dealers? who's going to pay for all this recall? >> consumers do not pay. that's the critical point. my hunch is there may be some debate about who bears the cost. i think our perspective on that is is clear. >> i would agree with mr. banewall. consumer will not pay. we need to take care of the customer. manufacturers need to take care of the customer working at the dealer suppliers and the with the regulator to do so. >> how about the -- about the cost, for example, my truck has a recall notice. i've got that taken care of. replace the oil. out there to have five minutes and an hour, how this is hurting

their business? spent more time on recalls than selling cars and fixing cars that have to be maintained? >> the dealers come at -- they are reimbursed for the recall and it's oftentimes governed by state franchise rules, but they're made whole. >> one final question for you, mr. banewall. remember the first panel i talked about last victim of these air bags. carlos from spring, texas. as you know, he bought a used car, 2002 accord and the defect came out recall notice came out in 2011. got in a crash this year. never knew his car was defective. how can you guys make sure we track those cars from recall to actual owner because he had no chance to have the recall. he had no idea his car was defective. >> it's an important point and one we're very sensitive to. the fundamental notion with safety is that it's a shared

responsibility. consumers have a piece f it the dealers do and certainly the states. so we've got to do a better job of tracing the ownership so that we can communicate and that's one of the reasons we've gone through this exercise as i mentioned about conducting resernl to figure out what makes people go in and get the yob done. we've got to find a wii to turn that trigger so they go in and get the work done. >> it's a great question and i would add to that that's as i mentioned in my testimony we ought to consider looking at the point at which an owner registers or reregisters his or her car as a point for further notification in the case of the incident you mentioned. had that approach or procedure been in place that owner may have been notified at the point of registering that used car that there was an open recall. we think that merits some it's worthy of merit. >> time i yield back. >> thank the gentleman.

chair recognizes gentleman from florida, five minutes. >> thank you. i appreciate it so very much and thank the panel for their testimony. mr. kennedy, can you verify that some cars that were previously called and supposedly fix will have to be recalled again for a second replacement? >> yes, sir. >> yes, do you have any initial numbers on how many consumers are affected? if not, when will you know and how will the consumers be notified? >> you mean consumers that would had to bring their cars in twice? >> correct. >> i don't have that information yet, sir. a lot of the oems, automakers are still getting the quantityies quantities, so after that -- >> how do you plan to notify the consumers? >> we're still working on that plan. as part of the consent order, we were given 60 days to develop this plan and we certainly want to do it in conjunction with the automakers. we don't want to do something that's going to be at odds with the automakers.

so, we have a media firm that's familiar with these types of activities. we have some ideas on paper we're working and we will certainly be reviewing those with n its a and having their involve. . >> why weren't these issues dealt with the first time they were recalled? in other words no excuse. it's inexcusable as far as i'm concerned, but give me an answer. why aren't these issues dealt with. >> it's a fair question and it's a difficult question. i think you've heard from a lot of different people today. it's an extremely complex issue. there are when we first started seeing some issues back in 2005 we did national recalls on a large number of parts and we thought we had identified root causes. we thought we had gotten everything from the field. we thought we were doing all the right thing, then we started doing these sporadic issues in the field. and that's what led to the

action that started last year. so it's it's been very elusive to us and it's been very, very difficult to get a consistent pattern that would tell us exactly what the root cause is. >> mr. kennedy i have a couple more questions. how can you possibly ensure consumers, my constituents, the second replacement will be effective and a third will not be necessary? >> well, on -- >> can you assure them that will be the case? >> on most to have the replacement parts, they're going to be later designs or from our competitors when we're putting those in. there are still a few. that's why as part of the consent order, we are still testing the remedy parts to make sure that those are going to be sufficient for the life of the vehicle. and why we are continuing to test outside of the ranges of the recalls that were in the dirs that were announced a

couple of weeks ago, so we're trying to cover that. i can't tell you right now that everything is done, but we are continuing, we've anticipated that problem and we have an agreement with nitsa that allows us to continue to look at that and if actions are required, we will take actions. >> since the first air bag inflater rupptured in 2004, it is true that takata tested roughly 128 air bags from 2004 and 2000. is that correct? 2004 to 2008. is that correct? >> not familiar with that number. i can double check. >> please get back to me on that. do you believe enough was done to investigate this issue and bring awareness to consumers on the risk and threat of defective air bags? >> on the original ones? >> yes. >> we were able to identify what we thought and what our automaker customer rs thought was a solid root cause. we had manufacturing data, we

had test data. we were able to recreate the problem. >> but more has been done. >> you could probably always say more could be done, but what we did, we thought and the root cause and to take action and that's what we did. >> mr. bingwall, one last question. have any companies suggested removing nitrate -- >> that's an answer i don't have the answer to. i will find out and report back. >> please get back to us. thank you very much. i yield back. >> chair recognizes gentleman from oklahoma. five minutes for your question, please. >> thank you, mr. chairman.

i've sat here and enjoying watching you. you're very skillful op the way you approach the answers. i could probably take a lesson or two fwr that. but at the same time, we don't seem to be getting the answers. you can tell the frustration. we've got a a young lady sitting over your shoulder bearing the scars of a mistake that was made and we're still not getting the answers. i'm a business owner. i understand when we fail, when we make a mistab. but now what? what the solution was we did a recall and we replaced them with other things that were still faulty. there's no engs kus for that. zero. maybe this panel is just looking to hear you say we screwed up, but i know that's cause legal issues for y'all, but a screw up is a screw up.

taking blame is just that. hey, we messed up. we heard this while ago. who's going to be responsible for this? i don't know. what do you mean? who made the product? whose product was it? whose name was on it? that's who should pay for it. i just wonder, i'm sitting here thinking, well, okay, maybe that's why we haven't been moving very fast because you haven't took ownership of it. at the same time, we got no telling how many vehicles are out there, more young ladies or young men are going to bear the scars again? or worse than that someone's going to not be able to finish out their life in what? what is that worth to you? how do you put a dollar amount

on that? if what if that was your daughter? i've got three at home. i can tell you what it's worth. do you have a daughter? >> i have a daughter and a son. >> and a son. >> wouldn't you be passionate about it? wouldn't you want to owner to be owning up to it saying we're going to do whatever it takes, we'll take responsible for it? >> and we believe -- >> but you know sir, you're still making what we believe, 2004, we're 2015. how long have you been making air bags? >> since i believe 1987. >> how many more studies do you need to have? >> as i've said and i think i'm not trying to be evasive, you heard it from other people that have been involved in this. they're very smart people, too. >> evasive. >> a very multifaceted issue. >> that is a great term to use. we use political terms here all the time. we know how to talk a little bit

around in circles. we're looking for ownership. i understand it's complex. the products you make is very complex. i've been hit in the face with a few of them. >> me, too. >> yeah. fortunately, i survived. i understand the issue about from impact to stopping you, the safety behind it. it's going to be complex. but a problem's a problem. it's not that complex. you do what it takes. you know you have to figure out, okay, what's a life worth put a dollar amount on it. i don't know how you can. instead, you said that the complexity of it, we don't really know the make up of it, but our competitors are finding out a product to replace. your competitors? you guys, it sounds like to me you're willing to do anything but take ownership.

your competitors? i can't imagine saying my competitor is going to fix my problem. >> we were doing that in order to get parts in the field faster. some of our competitors have products. >> you've known about it since 2004. >> not to the level we have here, sir. >> 2004, you identified there's a problem. you said you could recreate the problem. you knew there was a problem. >> and we thought we had a root cause at that time, too. >> did you replace them? >> yes. >> how did you track them down? >> we worked with the automakers who were involved. >> but we still haven't got people notified. >> and that is a problem. >> and if i sell and ends up in california and somehow ends up with mad cow disease, it's not born with a birth certificate or a serial number or a bar code but yet, we're able to track it

all the way back to my farm. we can't do that with an air bag? >> we can tell you exactly what air bag we sent, the oems, automakers can tell you what vehicle it's in. the issue for the most part has been getting that recall -- >> the cost, the root of the problem. t the cost. >> no sir i disagree. >> if we wanted to find a problem, you cannot convince me we couldn't find a solution. except we haven't even agreed on the panel in frnt of me who's going to pay for it. i think that's the root of the cause. mr. chairman i yield back. >> chair recognizes the gentleman from illinois. gl thank you, mr. chairman and for the four of you, thank you for being here and thanks for being willing to talk with us about these very important issues. you know, december hearing, i asked our panel which included bmw, toyota and honda if they agleed that sharing part numbers

and other identifiable information with the automotive recycling industry would help increase safety. they agreed and expressed support to improve methods and to share part numbers with recyclers. earlier this february, transportation secretary fox stated that he also supported auto manufacturers providing part numbers and that further more manufacturers should provide this information in an easy to use format. the key here is this approach would not require the creation of new government program or bureaucracy, but it's something the industry should tackle on its own. it appears that we have a unique instance where regulators and industry seem to agree on approach to address a problem in large part because everyone understands that sharing this information will improve safety. but my question is this. if you know the answer, when and how to your members plan on making this information available to recyclers and are you aware of any discussion in

the industry to help share this information to improve safety? >> you can go first. >> i don't know the answer to your question. i'll go back members that were on the panel and get back to you. >> mr. banewall? okay. so, if you guys could because i understand you may be unaware of the issue if you could maybe get that information and follow up with my office, that would be helpful as we continue to explore this issue going forward. i would is ask you this. what can your organization do to kind of help facilitate this and make this happen? >> we'll have a conversation within our association and we'll be able to get back to you after that point. >> great. >> so, i simply note that this question of resolving and getting recalls done is an important priority for everybody and we do view this as i said shared responsibility and we're willing to work with anybody to make sure we can get to job done

as quickly as humanly possible. >> great. mr. chairman, that's all the questions i have. if you'd like my time, i can yield it to you or yield back. >> we'll accept you yielding back. the gentleman yields back. chair recognizes miss clark. >> thaupg, mr. chairman. i'd like to request unanimous consent to submit a written statement of the american car rental association and the consumers for auto reliability and safety into the record. >> thank you sir. >> i recognize myself just for one follow up. the propellant and this question really is for anyone. my prior life, i was a physician, i did work some in emergency rooms and i remember air bag deployments with sodium and i remember burns and eye injuries, forearm burns, knee burns when the bag went off. but i also recall there were

environmental concerns and salvage yards and there was concern about the sodium getting sbit environment. are there other propellants that are being worked on? is there like a purely adapt propellant carbon dioxide or nitrogen, something that wouldn't have the characteristics, the explosive characteristics of immode yum nitrate? >> yes, sir. there are a wide variety of inflaters out there. some are just a cylinder filled with gas under high pressure and you have a small igniter that hits the little burst disc and the gas comes out. usually it's not nitrate in most of them. then there are alternate solid fuels out there.

we can provide all kinds of different information if you'd like to take a look. some are better than others. >> what's the barrier for getting something that is less explosive than nitrate to less toxic toxic? >> it really goes back to some is of the trade offs i was talking about earlier. size, weight, performance. cost. some of those gas inflaters are bigger, so it's harder to get them in a steering wheel for instance. we can provide any information you're interestinged. >> i would appreciate you making that available. seeing there are no further members, i want to thank our witnesses for their participation in today's hearing. it has been a long one. members have ten business days

to submit additional questions. i ask witnesses to submit their response in ten business days and without objection, this is adjourned.

a story from reuters on what members of the house energy committee have been talking about that owners may need to have the takata air bags in their vehicles replaced more than once. auto industry officials and safety regulate erors said today that there's a shortage of replacement parts and uncertainty over whether repair

parts already installed are defective. this may cause many consumers to ignore the recall. as many as 34 million vehicle owners in the u.s. could be affected. read more at reuters.com. former governor chafee will be in arlington, virginia to announce he's a democratic candidate for president. we'll have that live on cspan 3 at 5:30 and on thursday, rick perry will announce he's running for the republican nomination, live thursday, 12:30 p.m. also on cspan 3 and streaming as well. this summer book tv will cover book festivals from around the country and top nonfiction authors and books. this weekend we're live with the chicago tribune's fest,

including our three-hour live in depth program, lawrence rooigt and your phone calls. near the end of ewan jurks june, watch for the reading festival from the franklin d. roosevelt reading library. in july, we're live at the harlem book fair, the nation's flag ship african-american literary event and at the beginning of september, we're live from the nation's capitol for the national book festival and that's a few of the events this summer on book tv. >> and in the senate today sweeping reforms approved edd in the nsa surveillance program as the hill reports the legislation reforming the nation's surveillance laws now goes to president obama's desk. days after a stalemate caused the nsa's powers to lapse. the vote came more than 36 hours after three parts of the patriot act expired, which caused the nsa to wind down its program.

you can read more, go to the hill.com. next a look at the industry of online medical care. analysts explore the regulatory barriers including licensing requirements. the roll of state boards and regulation. coverage and reimbursement of services and policy concerns. this is hosted by the cato institute. it's about an hour and a half. anymy name is simon lester. thank you all for coming out today. thanks to those of you watching on the the internet and cspan 2. we have what i think will be an

interesting and informative policy forum for you today on removing online barriers to medical care. sometimes referred to as tell medicine or telehet. i've written about a narrow aspect of the issue, about how international trade agreements address it. what happened was this. i was following the canada eu trade negotiations and i saw it in one of the legal texts they released, that germ n had excluded it from its commitment. they were saying we're not going to liberalize. this annoyed me, so i wrote a paper saying actually, in trade negotiation, governments should try to liberalize cross border trade in medical services, but i realized if i were to just hold a forum on that aspect of it it would be hard to fill my office, so i decided to broaden it a

little bit and invite experts. i think we'll all benefit from their knowledge of the issue. this is a new topic for many people, so i think it's best to start with the pacics and then get into some of the nuances as we go along. here is the issue in its most basic form. for most people, medical care is something that takes place in a doctor's office or hospital. you go to the doctor's office you wait a bit, they have these 1970s paper form, you wait more and they take you to another room and you wait again. it's pretty annoying but what if ip stead of that, you could take out your phone and place a skype call to a doctor, do some other thing, get some lunch go to a policy forum, then when the doctor is available, you have your conversation. it sounds convenient. it's actually being done although i haven't done it myself. the problem is in the highly

regulated area of medical care, there are lots of hurdles that get in the way and a number of start up companies that are trying to break them down. but it's not easy and it's been a struggle. so so, our first panelist is going to give us an overview of that emerging industry. the regulatory barriers that they face and efforts ongoing efforts to address these barriers. renee is a senior counsel at the law firm of epstein, becker and green focusing on health care policy. i came across her name when i was reading an article about these issues where he was quoted i feel like that's a good sign you're doing something right when the economist is is quoting you. then to jeff rose. jeff is bringing a fascinating case on behalf of a texas vet who was fined by his state's medical board for offering veterinary advice online. among other things this case involves important issues of

free speech and although it involving a veterinarian, it has large implications on human beings. jeff is going to give us a background of this case, tell us about status and its prospects. then finally, we have josh, who's an actual doctor. nice to have one of those on a panel talking about health issues. he's also a policy wonk and a former high ranking government official dealing with health care matters. a dean and professor at the johns hopkins school of public health. before that, he was at the fda and secretary of health for maryland. josh, i suspect although i don't know what he'll say, maybe the voice of caution saying hold on there, you free market loving libertarians, we can't just throw out all the regulations here. we mo need some in place. each is going to speak for about 12 to 15 minutes, then we'll open it up to the audience for questions. if anyone has any cell phones, please turn them off. with that, let me turn it over to renee, who will get us

starteded. >> thank you very much. by way of disclosure, even though -- yes. even though simon did spruceintroduce me, i represent a lot of stakeholders, homts, health system, plans, some of the leading telemedicine companies, so some of my comments may be skewed in that direction. so, i've got a quick powerpoint we're going to go through here. one of the things that i always start with is definitional. telemedicine, telehealth. as you can see, some of the major stakeholders can't even agree on what it means. medicare has a very restrictive definition of they use the word telehealth, which invoovl violas two-way communication.

it has to be audio-visual. so, i've put this up there just to show you that we can't even agree on a definition of what we're talking about. can't even agree on the terms. i see somebody here from the american telemedicine association. for me, what i'm talking about these issues, i really look at it very broadly. to me, it's just a delivery of health related care services education and information by a telecommunications technology. that's it. very simple for me. some of the usages of telemedicine, we'll get into some of this later these are really the sort of three modalityies modalities. some folks will tell you, will say the monitoring is separate on the part and i think gary and i have talked about this before. they consider remote patient monitoring separate, but just wanted to give you a flavor where there's a complexity here we need to pay attention to. we've talked about real time.

where digital images and audio files are stored. went to a provider who can look at them at some later point. there's really no interactive communication between patient and doctor. remote patient monitoring is what it sounds like. you monitor patients across distances and providers get information and can intercede during the process. what is driving issue? the discussion of telehealth? 17 years and this is i think for the last year, the first time where they have arrived. what's driving some of this? part of it is the ageing population. supposed to reach almost 370 million people by 2030, but i think even more important than that is a percentage of those folks that are going to be 65 and over. almost a fifth of the population. obviously, the older your

population, the older you are, the more health related issues you're going to have. do we have the capacity to take care of the ageing populations in addition to all the other things we need to do in the system? this is all coupled with the fact that a lot of folks are predigiting a shortage of physicians. you see here almost 65,000 by next year. going to double by 2025. so, you've got an increasing population, increasing share of aged population, plus, you've got the shortfall of physicians. you also have a health care system that's really in a transition from a fee for service environment where payers pay for services. so the one i will call income for outcome, where your payment, your reimbursement is really based on health care outcomes, equal thety, metrics, we're in that transitional phase right now. with all the problems that everybody has read about. it also, technology.

the sophistication of a lot of the health technologies that exist today is is incredible. incredible. and the question is can our health care system absorb pay for and aud quatly manage the risk of this new technology. that's part of the reason we're here. now, in terms of the telehealth market yore view, these numbers are all over the map. but what i can tell you is they're very bullish on this market. bcc research predicts that the global market is going to reach 28 billion by 2017. global health data does one better and says it's going to be about 33 billion. bergen estimates we're going to be about 22 billion by 2020. and ihs predicts we're going to be in the neighborhood of about 500 million by next year.

powers watson, one of the leading employer, employee benefits firms says the use of telehealth could result in 6 billion a year in health savings across the board for u.s. companies. just to give you a flavor of what's happening. we'll talk about the landscape that's changing. we've talked about the transition from a fee for service environment to one which we're really paying attention to outcome. regulatory issues, first one we talk about is life insurance. i'll talk about it for about fooift five minutes because i think it's an important issue in that i think there's some ready made solutions that some folks are attempt ing attempting. the other thing, too, about license yur is we look at it from a physician perspective, but there are other providers that we have to consider. scope of practice.

and how the relationships are established. and why those requirements may be a barrier and how some states are taking care of that. coverage and reimbursement. from very restrictive payment approaches by medicare to a mixed bag in medicaid. to a better overall picture for private payers. we probably won't touch on the rest of this given my limited time, so let's just talk about licenseure. the piece you need to understand is is it follows the patient. there are medical practice acts all over the united states to govern what constitutes the practice of medicine but somebody's prak the tising medicine, they need to be licensed in the state. what state do they need to be licensed in if you've got a physician one location and a patient who's out of state? in the united states it's where the patient is located. you can see telemedicine the f you've got a duelly licensed

physician in pennsylvania providing care to somebody in north dakota. they need to be licensed in north dakota, unless they meet a number of exceptions and we're going to talk about some of these solutions that have been developed. this has been a long standing barrier. and one of the reasons i think is if you think about health care in the united states although there are some local differences, i think for the most part, a of the core requirements are the same across the board. the doctors practice the same in california practice in you areurban areas, really a difference in practicing medicine in miami new york, chicago. that's the question that needs to be addressed. there are some exceptions to obtaining a full regular license that talk about some of these here, a special telemedicine license. exception as well, which we

don't need to get into, but those exceptions usually don't revolve the overall issue of obtaining license in other states. the federation of state medical board, which represents 70 state and medical boards across the country has come up with a compact that only applies to physicians. it's a system by which license ability may look easier. depending on whether or not a state is a part of the compact. so for all-states that are part of the compact, being licensed with one compact states makes it easier to get a license in another compact state so you can practice. if you still have to apply, it's not like a nurse license compact where you're deemed license and if some other issues with the compact, so far i think six states have signed on officially. for the compact in a part.

the federation of state medical boards, they need seven to make this work so we're almost there. i think another 15 have bills in various stages of the legislative process so you could see ten, 11 state ss be members by the end of this year. so, this is one stakeholder's attempt to address the license issue. the other big issue i see, before we go on, i should talk about nontradition license compacts are being developed for nurse practitioner, physician assistants, but nurses have their compact, which ipg 24 states are a member of but interestingly enough for the nurse compact, the big states are not members. texas, california, florida are not members, so it limits the utility of the compact. the other issue i really quickly touch on is scope of practice.

how physician patient relationship is is established. the one thing here i want to emphasize is that in order for physician patient relationship to be established among other things most states require some kind of examination of the patient. what constitutes an examination varies from state to state. in a lot of states, an in person examination of that patient is required. as you can imagine in the telemedicine encounter, that may be difficult. some states have seen fit to pass statutes which allowed that examination to occur by telemedicine, meaning if you can get the same information you can get in the telemedicine encounter that you can get in perscription, those states say that's fine. the problem is we have not yet developed enough diagnostic technology to make those examinations to facilitate those yet.

and so what we see a lot of or what i see a lot of is telemedicine services without even doing an examination. there is a video connection with that particular and a lot of folks concluding that's not enough. now, the federation of state medical boards again came up with a model policy for the appropriate use of technologies that sought to loosen some of the restrictions. involved in the practice of telemedicine and one of the things they talked about was the examination issue. to decide whether or not they had information to diagnose and treat. unfortunately, the model policy

sort of exists in -- some state medical boards have seen fit to adopt some or all of this, but there's really not a lot of energy behind passage of the fsn b model policy. a lot of other stakeholders have developed incredible protocalls i know the american telemedicine association has an accreditation program for direct to consumer care. the american medical association is developing their own set of protocalls so there's a lot of activity that's occurring right now. the other thipg i want to talk about is is is reimbursement. i should tell you under the medicare telehealth benefit just a little under $14 million was paid out last year. out of 615 billion in total reimbursements last year.

doesn't really pay, the first being the approach taken by medicare is this is really for people in the most rural of counties in the united states. that's the first restriction. there are only certain kinds of providers that can provide fs is ises and be paid under this benefit. the patient cannot be in the home and receive services and have professionals be paid under this. the last thing only certain codes are paid for. there seems to be a trend in psychiatric services having those reimbursed as opposed to others. there's a bias that telemedicine is not suitable for nonurgent primary care type purposes. medicaid is a little different. most medicate programs, it has

more flexibility to decide what services they will not cover. medicaid, most programs cover telehealth and telemedicine in some form but the coverage requirements vary state by state. some of them follow the medicineare very restrictive rules. some are more liberal on the issue. if you cover remote patient monitoring, if you cover scorn forward, the, there's no ewan uniformity. really, there's no logic to what states can and will cover. i think this could change. especially as medicaid programs come under pressure. the private payer world is probably in a better spot. a number of states and gary, you can correct me if i'm wrong, have statutes in place that require private payers to pay for telemedicine services if they are still covered. so to cover telehealth and

telemedicine. the definition varies state by state. ultimately, they don't mandate the same reimbursement levels. i should caution you on that, but the private payer approach i think is a little bit better than you have with the public payers. the other thing, too even in states that don't have the statutes in place what we find is a lot of private payers see a benefit in providing these services. whether they're required or not and i've listed here some plans that none of them are clients. some plans that are known as being progressive about telehet and telemedicine services. i will finish by saying the one other aspect to really, really pay attention to in the coming years is employers. a lot of employers are very, they're encouraged by what they see and the value they see in telehealth and medicine.

there's the impending cadillac tax coming in 2018. we can talk about that at some point, but employers need to be incentive incentivized to look at a way to control the kovs their employees. >> thank you. that's a great introduction. turn it over to jeff who's going to take us through a case study. what happens when you provide services online. >> sure. thanks. and thanks, renee. so, one of the reasons why telemedicine presents such a challenge is because medicine is is a vivid illustration of a peculiar reality in america, which is everything is is forbidden unless it is expressley permitted, so this amazing, fresh innovation comes along and all the medical boards say well, you can't do that. we need to write 10000 regulation, we have to subdue it with a regulatory process because after all, this is america. if we don't have a statute you

better not be doing it. and in part that's because we have a 19th century or early 20th century regulatory model. we have 50 different states, each with their own boards and that doesn't even take into account the fact americans can now talk to people all over the world. there are billions of people who would benefit from the expertise of well educated americans and it's completely unclear whether or not they can get it. now, the thing about telemedicine is that at bottom, it's just two people talking to each other. that's it. people are talking to each other. one person wants some knowledge that another person has and they want to share it. now now, at least by reputation, we live in a free country, so, what does the first amendment have to say about that? and this turns out to be a really interesting and one of the most important unsettled questions in constitutional law. imagine and this is a true story, imagine a group of scottish missionaries go to

rural nigeria and a married couple finds a stray cat and they think, we're going to adopt a stray cat. but there are no veterinaryians, no pet food, but one thing they have a cell phone tower and so, these missionaries can get on the internet. now, go all the way around the planet and you find ron hines, a retired, physically disabled texz licensed veterinary. he spent his career working with exotic animals at a research facility here in maryland. he worked at sea world he was in private practice. he's just an amazing veterinarian, who after he retired because his disabilities made it impossible for him to work, he still wanted to help animals, so one day he and the missionaries in rural nigeria, start writing e-mails to each oh about what to do with the cat. how should we feed the cat make sure it stays healthy? so, ron and the missionaries are

exchanging e-mails and ron starts doing this with some other people, too. mostly for free. although occasionally, he would charge a flat fee of a couple of bucks. just to cover the cost of his website. he never made any money doing it. so what has just transpired? a disabled 70-year-old man in texas writes an e-mail to a scottish missionary about a cat in nigeria. that's a crime. and ron hines had his veterinary license suspended, he was fined, forced to retake a portion f o the licensing exam and shut down his website and stop doing it and why is that? because under texas law, you have to physically examine the animal before you can offer any opinion about it. so, this house bound physically disabled veterinarian was supposed to get on a plane and fly to nigeria before he could offer an opinion of any kind about this cat and never mind

there are no veterinarians and the cat would be without care without ron. ron wasn't prescribing medication sending drugs, just offering an opinion. that's it. two people talking to each other. so, what's the first amendment have to say about that? because it's supposed to protect the right of americans and of which ron hines is an american and indeed anybody subject to american jurisdiction generally speaking to have useful conversations about the world. well, we brought a lawsuit and the trial court, federal trial kaurt said you know, you're right. the state of texas tried to get it dismissed on the grounds that when two people talk to each other, if the conversation is subject to occupation alliance alliance -- he writes an e-mail that says you should try to feed your cat some shredded pork or manager. the law treats that as though ron is taking a scalpel and cutting a hole in the animal. he said it is conduct even if it's just words, so the first

amendment doesn't apply. not that you happen to lose under what balancing test there is, it's that it doesn't apply at all. so, the federal trial court said the first amendment applies. the state of texas asked for a special kind of appeal an we went up to the federal court of appeals in march, the federal court of appeals reversed. and they said you know what? we disagree with the trial court. we are going to call that conduct. that you are speaking and you are giving someone individualized personal advice we're going to call this conduct. so what's going on? the collision between two venerable constitutional doctrines. one is that state governments have broad authority to license occupations. that is well established in the law. we challenge it all the time. it leads to all kinds of

irrational borders to entry. one of the reasons why medicine and other profgsessions are expensive and hard to get into, lobbyists create all kinds of barriers. supreme court have said states have broad latitude and the protections of the first amendment are broad. and so what happens when those two thipgs intersect? well, the supreme court had an interesting case. several years ago that was about advice to foreign terrorists and some american doctors and physicians were providing vidized advice to foreign terrorist groups about how to resolve their grieve enss nonviolently. one was the kurdish liberation movement and the other was the tamla movement in sri lanka. these groups were concerned about being prosecuted for providing individualized advice which they considered support to terrorist groups so, the question that went to the

supreme court was is individualized device consists of nothing but speech, just talking to them about the law. is that something protecteded by first amendment and the supreme court said yes. the first amendment applies. the federal government has a huge interest in suppress inging advice to terrorists because it's -- it frees up resource, but the first amendment applies. so, we tried to take that president and we said to the federal court in the fifth circuit, if the first amendment at least applies to individualized technical advice to murderous foreign terrorist surely to save a veterinarian in texas who's talking about a cat. no. here's another case. which involved what are called animal crush videos and so there are people out there,

perhaps probably not anybody in this room, but there are people who like to exchange videos about animals getting tortured. it provides them with sexual itlation. the question they applies to a statute that restricts communication in the form of animal crush videos. and the supreme court said you know what this is america, this might be repugnant speech, but the first amendment applies, so the first amendment applies to animal crush videos. so what does this mean for ron hines, the veterinarian in texas? what it means is, if he decided he wanted to talk to kurdish terrorists about how to, like, let's say they have a herd of cattle or something like that and they're using that herd of cattle to support their fighters or something, he could talk to them about that, and the first amendment would apply to that conversation if he were to be prosecuted by the federal government for providing material support to terrorists. now, if ron hines also wanted to exchange animal crush videos with scottish missionaries in

rural nigeria the first amendment would apply to animal crush videos. according to the fifth circuit the first amendment doesn't apply if ron hines is actually just trying to help an animal. so if he wants to help terrorists, or he wants to trade fetish videos, no problem. but if he just actually wants to sit down and talk to somebody to help their animal no, no first amendment protection. so this is actually a big issue. the federal courts of appeal disagree about the extent to which the first amendment applies. so we have a case from the early 2000s in california that involved medical marijuana. and this was before -- california at that point i think had said that medical marijuana would be okay, physicians could prescribe it. so doctors have a controlled substance license from the drug enforcement agency to be able to prescribe drugs. and it turned out there are a group of doctors who wanted to be able to say to their patients, look, i'm not going to

prescribe marijuana for you. i can't do that. but i'm going to tell you that actually in your case i think there is a valid medical reason for using marijuana. so a conversation between a doctor and patient. the u.s. court of appeals for the ninth circuit said the first amendment protects that conversation and the drug enforcement agency can't pull your controlled substances license just because you're a doctor having a conversation with a patient about medical marijuana. as long as you're not illegally prescribing it. because the first amendment applies even to doctor-patient communications. that should have been a good case for us. we cited it extensively in the fifth circuit. on the other end of the country, in the 11th circuit, there is a case going on right now sometimes called the glocks versus docs case about guns. and some gun rights activists got a law passed in florida that for bade physicians from asking whether they own guns. as part of a checkup they might

say are you wearing seatbelt because accidental gun discharges and suicide by gun, those are legitimate public health issues. so anyway, the gun lobby didn't like the fact some doctors were asking people about guns and they thought it was an invasion of privacy so they got a law passed that said doctors aren't allowed to ask people about guns. so, of course, a group of doctors brought a lawsuit and said, look, the first amendment protects my right to have a conversation with a patient. and that just because we're in a doctor-patient relationship doesn't mean we have completely surrendered our free speech rights and the government can tell us to do and say whatever we want. the 11th court of appeals said no, even if it's just a conversation, you're not touching them, doing anything that is conduct to which the first amendment doesn't apply. you may notice that the medical marijuana issue is kind of a liberal issue right? and the ninth circuit court of appeals on the west coast kind of a liberal court. and on that liberal issue, the

liberal court decided the first amendment applied. the 11th circuit is kind of a conservative court. and this was like a pro gun thing. and wow, coincidentally the kind of conservative court decided the first amendment didn't apply when it was a conservative issue. but we have a square disagreement among the federal courts of appeal, a disagreement that was that was exacerbated by the decision in the vet speech case that just came down so the supreme court actually has to step in. and the supreme court is going to have to decide whether or not the first amendment applies when there is a conflict between occupational licensing and free speech. and so we're in the process right now of writing our petition to the supreme court in the vet speech case. and this is actually the perfect case. because what's going on here is you have ron hines talking to people generally speaking on the other side of the world about animals. that's it. they're exchanging e-mails about animals. so this isn't even the most intense telemedicine context you can imagine. this is right at the edge. so if the first amendment is ever going to apply to protect

the free speech rights of licensed professionals and their clients, then it is going to apply in the context of ron hines' case. and this is the perfect clean case for the supreme court to take. the other thing too there are some cases making their way through the court system right now that have to do with what's called repairive therapy providing psychological counseling generally speaking to minors who are gay or say they're gay and their parents don't like it and send them usually to christian-based psychologists. and there is a movement that says the first amendment should protect the right of therapists to engage in gay conversion therapy. now, one of the great things about the ron hines case is it is just about people talking about animals. it's not about gay rights, not about guns, not about medical marijuana, not the hot button cultural issues. it presents the case perfectly in a benign context where the supreme court can address the first amendment issue without worrying about making collateral

statements that might have ramifications. so fingers crossed, we'll try to get the supreme court to take the case and perhaps this time next year we'll get a decision that will tell us to what extent the first amendment applies to occupational licensing and this will have implications far beyond the practice of veterinary medicine, psychologically, law all things that can be done as a result of the internet. so thank you. >> thank you very much, jeff. it's fascinating case, and i will keep following it and i wish you the best of luck with it. >> thank you. >> i'm hoping for a supreme court decision to -- hoping it goes a certain way. even if it doesn't something fun to talk about. so let's go to our last speaker now. josh sharfstein and i'll turn it over to josh. >> thanks so much. i really appreciate the chance to be here. i appreciate the invitation from simon. and i thought both presentations were terrific. really interesting. i'm a little bit in the sesame street segment, where they say

which one doesn't belong and you're supposed to pick it out. that's me a little bit in this panel. i'm a physician, not a lawyer like the other three panelists. i've been appointed to city, state and federal positions by democrats. and so i'm coming from a slightly different perspective. i do appreciate that kato's internet password is obamacare saves lives. i'm just kidding. that's not true. i thought that was changed yesterday. now it's just a little joke there. so i -- i actually started reading simon's paper and i was like, i don't think there's going to be a thing in here that i find attractive. and i just found the paper absolutely fascinating and interesting and provocative. and i thought that both of these presentations were also very interesting. and there's a lot to agree with about the points that have been made. and let me just say that for me tele med sen kind of struck home when i was visiting a rural hospital and they showed me a

ward where the patients were being entirely managed by a remote team of physicians. so there were -- it was intensive monitoring. it wasn't like your phone calling a doctor and showing them your rash. it was a hospitalized -- you know, situation. and i never had seen anything like that before. and they go well, actually, there's a doctor watching all of the monitors. and we have one nurse or a couple nearsurses here that will get a call from that doctor if there is an issue to check on. it's better if there were a doctor asleep down the hall. and i thought is this a good thing, is this not a good thing? i couldn't get my head around it and what's the best way to regulate it. i think when it comes to telemedicine it's a similar question as a lot of things, which is what is regulation. is regulation sort of red tape protectionism that hurts consumers, and just keeps things from happening that would save lives, or is regulation necessary to prevent exploitation of patients and consumers and protect the public health. and the answer oftentimes

having worked with different levels of government, is yes. it's both. the and there's no simple one or the other and it depends how well it's done. and the key is figuring out how to strike the rightel balance. in this case i would say you see with professional boards, there absolutely is protectionism out there. my last job i was responsible for more than 20 professional boards of different kinds. and i was called on to mediate when the doctors and nurses fought or the nurses and the dentists. there was a huge fight in maryland between the physical therapists and the acupuncturists over dry needling. dry needling is what physical therapists want to do but ack you punk at yourists say that's unlicensed practice of ack you puncture. and i decided at one point to do a public comment period. and usually we do 100 comments. it's a lot. and i got over 1,000 comments on

all sides of the issue. very revved up. i picked up my-year-old from school, and he's like, you know, dad, what's dry needling? and i said why do you ask that isaac? and he said well because my gym teacher gave me this letter to give to you. so just -- i used to say that it's not a safe place to be between the dry needlers and the acupuncturists. and at one point i proposed legislation in the state of maryland that would take these scope of practice disputes out of the medical boards and all the litigation give them to a -- give the ability for the legislature, just the ability for the legislature to appoint a committee to resolve it in the public interest. and the line out the door of all the lobbyists who were testifying against that bill was an image i will keep in my mind. nobody wanted that. they just wanted to battle it out. so i do --