reach of the aca's employer mandate beyond the clear limits congress imposed on the irs' authority.the according to those courts, the irs is unlawfully subjecting more than 250,000 employers and 57 million workers to that tax. one of those workers is kevin pace.ns, mus a jazz musician who is not far n from here in northern virginia. according to the "washington post," pace lost $8,000 of income in the first year the irs unlawfully imposed that mandate on his employer. as a direct result of that mandate. according to one estimate, this illegal tax reduces a typical reduces affected worker's income by nearly nearly $1,000 and has eliminated nearly a quarter million jobs. those federal courts likewise iminat found the rule expanded the the reach of the aca's individual mandate. subjecting an estimated 11

million taxpayers to an illegal tax averaging $1,200 each. whatever good the irs hopes to accomplish with the funds raised by these taxes is irrelevant. the authority to levy taxes and spend federal dollars rests with in king v. burwell, four virginia taxpayers allege this tax credit rule is subjecting them, kevin pace, and 57 million other americans to illegal taxes. the supreme court heard oral arguments in march. a ruling for the challengers would invalidate that real, create an estimated 237,000 jobs, free 57 million americans from illegal taxes and increase affected workers' earnings by nearly $1,000.$1 now, my co-author, jonathan out ho adler, and i, have written at length about how neither the aca or legislative history provide islative support for the irs' participation of the statute. indeed, both the legislative history and the statute squarely foreclose the irs' interpretation. today for the remainder of my testimony i'd like to discuss the troubling picture that emerges from what little we know about how the irs developed this rule and why we know so little

about how the irs developed this rule. the available evidence suggests irs officials recognize the aca did not give them authority to m impose the taxes yet they impose these taxes anyway.au treasury and irs officials perform little or no analysis of the aca and legislative history. they used legislation rejected by congress in order to support they f their theory of congressional intent and they failed to su consider important dimensions of this issue. the irs' proposal to implement these taxes and subsidies in federal exchange states met tained immediate and sustained criticism including from some members of this committee as far back as 2011. the administrative record offers no support or substantive explanation, no statutory support, the plain meaning of the tax credit eligibility ligibi requirement that recipients mustli enroll in health insurance recip through an exchange established by the state.

the administrative record contradicts arguments the government offered before the supreme court and reveals those arguments to be post-hoc rationalizations.rvin men mr. carvin mentioned the term of art argument the solicitor general made before the supreme court. what little we know about the administrative record shows that dispositively that the irs did not believe this was a term of art. the irs attempted to hide its actions and reasoning from congressional scrutiny. according to an article in the ac "washington post" which interviewed several members -- several officials at the treasury department and irs who lv were involved in the developmented of this rule, one former official said, quote, the overriding concern was not generating negative news stories. the overriding concern of the officials who wrote this rule ember was not feelty -- fealty to the

law, but avoiding negative news stories. the irs continues to try to avoid scrutiny. in december of 2011, the then-ranking member of the senate finance committee, a member who's here today, senatoranna hatch, sent a letter to the nc sent a department of the treasury after the promulgation of this proposed rule and before it was finalized, disputing the legality of the rule and asking the treasury department to turn over all documents related to the development of this rule and the irs' reasoning behind this rule.ent have the irs and the treasury department have been ignoring that request for 3 1/2 years. the irs is taxing and spending the american people's money without permission from or accountability to congress. the american people need to know how this happened and that begins with transparency. i thank you very much for your time, and i look forward to your questions. >> thank you, mr. cannon. professor grewal? >> thank you very much, mr. chairman. i suspect if the irs had shown up today, it would tell you that it tried to carefully obey its statutory authority when it issued regulations under section 36-b. wh i want to explain why that's

nearly impossible to believe. at the outset, i'll say i don't take any particular position on n the the king v. burwell issue and don't know whether obamacare is a good idea or bad idea.s why i that's why i'm sitting here in the middle. but i do want to discuss three ci circumstances where other regula regulations under 36-b clearly contradict the legislative e. language. and if you think established by the state is clear, you'll think these ones are very clear, even offered a case of beer on twitter to anybody who could come up with some colorful counterargument. the in the first circumstance, a statute plainly grants credits only to citizens when their income falls within a particular range. 100% to 400% of the relevant poverty line amount. irs doesn't like that result and potentially expanded credits to several million persons below the 100% amount. c again, if you think established by the state is clear, a statute

that refers to 100% to 400% is far clearer. and the second circumstance is wo the aca has two related provisions. one provision says that if you're a large employer and you offer health insurance to your employees, we want you to automatically enroll all those employees in coverage, and the regula department of regulations will ti issue regulations saying as much. much. if you're going to have a plan, get everybody in there. as a sweetener to this, the persons who are enrolled won't ill ge get credits under section 36-b t because they're going to be getting coverage under the employer plan. with no credits, that means there's no penalties on employers when they automatically enroll employees in their existing plan. the irs does not like that result, and it has issued a regulation saying that in some it circumstances, you will actually get a credit under section 36-b even though you are getting coverage by your employer and your em the employer will relatedly get hit with the penalty. the third category i want to discuss relates to unlawful aliens.

congress recognizes that some per very low-income persons who are here lawfully can't get medicaid. some states say, well, all right, you're not a citizen, butbefore y we'll help you, but please wait five years before you apply for medicaid. the statute section 36-b says te that, okay, we'll help you out with credits on the federal -- sorry, on the state exchanges and arguably the federal exchanges. if you are here lawfully, you, yourself, can get a credit for policies purchased on an exchange. the treasury has issued a regulation saying even if you are here unlawfully and you meet the income requirements, you are eligible for a credit. eetth the statute is very clear that b says you must be here lawfully to get this benefit of this special rule.fi all of these three provisions pro may be good ideas in the ab abstract. i don't know. they seem reasonable on one level, but they clearly violate guage. the relevant statutory language. in closing, i just want to talk ab emphasize that as we talk about the treasury expanding 36-b, we

don't give enough attention to the fact that an expansion of 36-b means more penalties from employers. unlawful credits lead to unlawful penalty collections. irs the fact that the irs in expanding section 36-b is illegally collecting penalties s from private businesses should ties fro receive more attention.d thank you, mr. chairman. >> thank you, professor.rs of ms. wydra?ee >> thank you, chairman cruz, ing ranking member coons, and members of the subcommittee for inviting me here to testify before you today. mou i must take issue, i'm afraid, however, with the substantive st today premise of today's hearing. at least as reflected in its title which suggests that the treasury department rewrote the affordable care act when it ensured that tax credits would a be available nationwide to all s. americans who need them.ewriti far from rewriting the statute, i would assert that the treasury department applied the aca according to its text statute design and purpose when it te

interpreted the act and made this rule. similarly, i must take issue, i'm afraid, with my esteemed in. colleague, mr. carvin. what you just heard him describe a few moments ago is not how statutory interpretation works. how you heard him describe the affordable care act is also not how anyone involved in enacting the statute understood the law to work. republican and democratic members and staffers alike involved in drafting the law have made clear that no one understood the law to preclude tax credits for residents of f states that opted to use the federal fallback provided to them in the law instead of electing to set up an exchange for themselves. to the contrary, statements by rs of members of congress at the time and reports drafted by committees and the cbo all cb assumed that tax credits would avail be available in every state on any exchange without making a distinction between state-run, and federally facilitated exchanges.that did any members of congress

stand up at that time and profess the vision of the tax credit provision that we heard mr. carvin and other critics of the treasury rule put forth? as mr. carvin had to admit when the supreme court asked him this very question? there were none. but i'd like to back up for a moment to talk about the language of the statute, itself, because i think it's important to correct what i see as some mischaracterizations. as justice scalia reiterated a last year, it is a fundamental cannon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme. pluc in other words, not plucking a forward phrase out of a statute and using it to defeat the very fundamental purpose of the entire act which in this case was to provide affordable health insurance for all americans.to hel to help achieve this aim of broadening access to health care and insurance, the statute provides for the establishment of exchanges on which individuals can purchase quality affordable health insurance. section 1311 provides that, later

"each state shall not later that january 1st, 2014, establish an american health benefit exchange." the act clarifies, however, that there is, "state flexibility in meeting this requirement." a state may elect to set up the exchange for itself or if a if a s state chooses not to establish an exchange or cannot establish es an exchange that meets the act's requirements, then hhs, according to the statute, shall establish and operate such exchange within the state.uses t when the statute then uses the term, an exchange is established by the state in the statute, it refers to exchanges established vel by t at the state level by the state as well as exchanges established at the state level by hhs standing in the shoes of the state. with now, with respect to the eligibility for tax credits allowing individuals to afford to purchase insurance on these exchanges, the act expressly presents income level as the method by which an individual is determined to be eligible or notthe for tax credits, not the entity which runs the health insurance

exchange in that state. what about the phrase seized upon by critics of the treasury department's rule found in the - provision for calculating the f amount of the tax credit from --y who purchased a policy on an ange p exchange established by the ur state?could pl well, you could pluck a forward phrase out of moby dick and say it was a story about a sunday whale watching cruise. that's not how you read a book and not how the supreme court s tells us you read a statute, either. reading the law to provide tax nat credits nationwide on both state-run and federally facilitated exchanges allows theand fe provisions of the aca to work of t harmoniously which is something the supreme court has told us clearly is something that shouldthat i be a guidepost when we're reading statutes. in contrast, the reading asserted by the king challengers would deny effects to the regulatory scheme by subverting b the act structure and design and basic purpose and rendering important provisions absurd. something the supreme court has told us we should avoid when ould avo reading statutes.

i believe the interpretation of the law reflected in the treasury rule making tax credits available nationwide to all americans who need them regardless of the state in which they live, accords with the plain text of the law and allows the law to work in the way that congress intended. interpreting section 36-b in this way allows the fundamental market reforms at the heart of the law to work in the way that they were intended and is the best interpretation of the law when you read the law according to way that the supreme court tells us we should read statutes. i'd be delighted to answer any questions the court has and, i mean, the panel has. delight i'm used to being in front of judges. but thank you for your time and i'd be delighted to answer further questions. >> and i can promise you none of us will be wearing robes.robes. mr. weiner? >> thank you, mr. chairman, ranking member -- ranking member coons, for inviting me to testify today. let me say first i think it is wrong or at least premature to

be talking about a violation of the rule of law by the treasury department when the supreme were court may yet tell us, and i think will tell us shortly that they were right. second, i'd like to say the affordable care act, in fact, is working. 14.1 million americans more have insurance than they did before. the rate of uninsured americans has dropped from 20% to 13%. health care price inflation is at its lowest level in 50 years lowes and the rate of increase in t insurance premiums has declined. the third, the opponents of the aca in the king case would roll back this project, and they contend that the treasury department charged with implementing congress' intent nd should have found that what congress intended to do was to enact a self-destructive

statute, one that coerced states to set up their own exchanges by threatening if they did not to impose a federal backup system that didn't work. now, why would congress have done that when the whole point -- why would they have had a nonfunctional backup as a e threat when the whole point of the backup was to ensure that the statute did work in those jurisdictions?ngress p and why would congress plant a anyway? time bomb in the statute, anyway? well, the argument is that the dep irs and the treasury department, those questions were off limits cause because the language was so clear that there was only one t permissible interpretation. let me answer one more question, and that's why would the states have an incentive without the coercion to establish exchanges? and the states, themselves, asked -- answered that question questi in the very case that mr. carvin handled. mr.

when they amended the complaint in the nfib case, the state governments alleged the exchanges were coercive. why were they coercive? not because they threatened subsidies of the citizens of those states, that they didn't set up an exchange.ey wer they were coercive, the lawsuit e th said, because the states would e regula cede regulatory authority if the federal government established exchanges. that's not my position.that is that is the state's position and that is their incentive along with a lot of grants to establish exchanges. now, the opponents really have to take the position that the statute has one and only one ble permissible reading because there is a strong presumption that you read statutes to be effective, that you read just statutes in furtherance of their evident purpose.

justice scalia says that in his says th book, "nonstatutory interpretation." and the argument here is that the ar this self-emulating i interpretation that the treasury department was so derelict in rejecting can prevail only if it is impossible to construe the statute any other way.way. it's crystal clear, they say, but no one at the time the statute was enacted was aware of it. in fact, it was so obscure that it wasn't discovered, and that's the word that has been used, discovered until months after the statute was enacted by a ke lawyer whose announced mission was to find a statutory glitch that would take down obamacare. nor is this a one and only

interpretation except now by an authoritative interpretive, probably for at least four members of the supreme court. the solicitor general, senate and house leaders and staffers and ho who are involved in the drafting draftin of the bill.nsurers. health insurers. the american hospital association.s. american cancer society. 22 states.statut the former director of the cbo. all of these people interpret the statute the same way the irs does and to say that their interpretation is impermissible is to question either their literacy or their candor and neither is really endowed. let me just say with regard to the irs and their process, truth is a defense, and the irs engaged in a process that produced a reasonable result, reasona one that did not gut the

statute, as the interpretation onsist offered by the aca opponentsen would do. one that was consistent with the commonly -- with the commonly understood meaning of the statute by those who enacted it at the time. thank you. >> thank you very much.th i'd like to thank each of the members of this learned panel. you know, i agree very much with the testimony of mr. carvin, that this is fundamentally about the rule of law.law. this is fundamentally about the an impos question of whether the federal of ta government can impose billions of dollars of taxes upon millions of americans directly ut wheth contrary to the text of federal explicit law. it is likewise about whether the federal government can spend billions of dollars explicitly prohibited by federal law. if the answer to both of those questions is yes, if the administration's interpretation is acceded to, it makes the

constitutional law making function superfluous.e limits if the executive have the are al authority to tax and spend directly contrary to statute, the limits on the executives' the le authority are altogether d. abrogated. the legal question is not complicated. the statute provides that monthly premiums for qualified enrol health plans enrolled through anle exchange established by the state, the entire argument here, is whether the federal exchange established by hhs is in exchange established by the state. now several witnesses have sioned testified that no one possibly t

envisioned that an exchange established by the state meant an exchange established by the state. i would note, if we can have the second panel, please, i would note that at least one person understood that very well, ts someone who has been described as one of the leading architects pr of obamacare. wh professor jonathan gruber who, indeed, achieved worldwide fame when he candidly admitted that passage of obamacare depended upon, as he put it, the stupidity of the american grube people.r politi and professor gruber quite 're candidly said, "what's important, that to remember politically about this is if you're a state and eir ta don't set up an exchange, that x one means your citizens don't get their tax credits."ery we now, i would note we heard ll several times no one understood this. well, apparently professor gruber understood it very well but was relying upon a lack of transparency and as he put it the stupidity of the american people to keep it hidden. i want to focus on the decision-making process that

occurred at treasury and the irs. mr. weiner mentioned that no onening t is questioning the candor of treasury of the irs. well, it's difficult to make and assessment of that because they're unwilling to show up and defend their decision-making. so what i can tell you is they're not here. mr. they are refusing to recognize the oversight responsibility of the senate.ing so i'd like to ask you, mr. process cannon, you have examined this question closely. what do we know about the decision-making process at the irs and treasury in establishing the rule here? >> well, unfortunately, very , very little, senator, because as i ore mentioned before, a request by senator hatch for all the documents related to the has b development of this rule has ee been ignored by treasury and irs for 3 1/2 years. in september of 2014, the fr

chairman of the house oversight can committee, after being frustrated by treasury and irs' unwillingness to release those a yea documents to hisr. committee issued a subpoena for those documents. treasury and irs have been ignoring that subpoena, for how long ago, september of last year. almost a year. yo >> let me stop you on that point because it was said a moment ago no one is doubting the candor of treasury or the irs.how up t you're telling me the treasury and irs are denying a congressional subpoena, refusing to show up to this hearing? is that correct?ee >> that is -- well, the , not congressional subpoena has to do with a house committee for the document, not a subpoena to show up to the hearing. they're ignoring a subpoena to provide the documents which i think bears on the suggestion made by the ranking member that if they don't show up at this hearing, perhaps compulsory process could be pursued. compulsory process has already been pursued against treasury and irs -- tcould >> the obama administration is defying that process. that seems at a minimum not an's

exercise in candor, living within the ordinary bounds of the english language. evum >> it's not an ideal transparency, no. >> now, my understanding is staff was permitted to review some documents under highly restrictive circumstances. can you describe those circumstances as you understand them? >> well, after much persistence by the staff of the house oversight government reform committee, the treasury and irs did release some documents. 386, 387 pages, i believe.of it, a fair amount of which was the final rule, itself. w about half of it, a lot of it ive maybe i would think a fifth, 20%easury of it, was my work that they just released to the committee. only about 5% even commented on was there any substantive discussion by treasury and irs officials?ng. and it was never -- here are the factors we're considering. it was just mentioning these things tangentially. those are the documents they th released --

which don't tell us a lot -- >> also allowed to review some documents but not take notes, not make copies. >> there are many documents sion re treasury and irs have not villowed t released and on two, three sometim occasions staff were allowed to etimes review those documents. pa they're allowed to go into a room sometimes with pen and paper, sometimes without pen and paper. not allowed to take documents out of the room or make copies. they're allowed to look at them and make notes. on one occasion, they were not allowed to make notes. >> no notes, no copies, no transparency to congress, no transparency to the american people, defying subpoenas, refusing to show up at this hearing.e my understanding is the and na documents they're fighting tooth and nail to avoid sunshine he coming upon show that initially career staff at treasury and the irs analyzed the phrase, an exchange established by the state, and concluded it means exactly what it says, an exchange established by one of the 50 states. is that correct? >> well, i'm not sure about that, senator.s what we know is that -- this is from the in-camera review, 't

they're allowed to go into the room with documents but couldn't take pen and paper with them.e they had to scramble out of the n everyt room and write down everything they remembered.embethat tax from that in-ca ramra review staff were allowed to look at different drafts of the proposed rule before the proposed rule was issued.recita from what we know of their review of those drafts is initially irs officials had included that statutory requirement that tax credit recipients be enrolled, quote, through an exchange established by the state.hat around the same time a treasury was official raised this issue with the irs, that requirement, that statutory language was dropped from the proposed rule. >> so, mr. cannon, i want to make sure this committee understands that.g, alt our understanding, although to be clear, the obama tion is administration is blocking erately release of the documents so it f tran is all deliberately hidden in the lack of transparency that professor gruber bragged about. but our understanding is the initial version of the rule drafted by career staff at the

irs and treasury attempting to follow the law followed the plain text and concluded it had to be an exchange established by a state but then subsequently iteasury appears that political establis appointees at the department of treasury overruled that decision an and substituted instead a sion con political decision contrary to bu the judgment of the career staff but consistent with the political outcome desired by president obama and the white house? >> what we know for a fact is that that provision, that statutory provision was dropped from the implementing regulations around the same time this political appointee at the treasury department intervened. we don't know anything of the substance of those discussions, what happened there. what we do know that was a statutory hat provision that was on its way of being implemented as part of the proposed rule and then it was treasu dropped and that's significantry because that tells us a couple things. one, it tells us treasury and irs officials never believed that the phrase, the statutory

requirement through an exchange established by the state was a term of art as the solicitor general now argues. >> my understanding is some of d that the documents have notations, s us tre initials, perhaps may reflect an individual who also worked in f art as the white house as part of the now argu policymaking apparatus. is that correct?tanding although this is all murky and ions opaque by design of the administration, but is that your understanding as well? >> there was white house input design o into the development of this ration rule. there's white house input into the development of many rules.>> in we don't know exactly who provided that input. the de >> the initials l.f. were written on at least one of these documents? >> i have not reviewed those documents but that is what house docu investigators report. in >> all right. let me ask a final question. the administration is arguing pursuant to chevron deference that it is the courts owe deference to its efforts to mr. ca implement this law.at the i want to ask mr. carvin, if therehe process that there appears to be for

the a suggestion occurred here, is th although quite deliberately the administration is blocking any effort for the american people to know if it occurred, but if it is the case that career te to professionals at treasury and on its f the irs in their expert judgment read the statute to mean exactly what it means on its face, that an exchange established by the state means an exchange established by the state, and if it is the case that political operatives ordered those career professionals to disregard the law and reach a political sion t conclusion instead, is it your ha understanding that that sort of partisan political decision to disregard the law is the kind of decision that is ordinarily given chevron deference? as y >> no, mr. chairman. as you know, one of the er and o principle things that agencies rdimatic can't do under chevron is behave in an arbitrary and capricious manner and obviously the paradigmatic of it is simply implementing political ar objectivesbi. in terms of process, you're not deferrin

deferring to the tax expertise le. of the irs, the task force which i think is undisputed, drawing up these regs was not just irs people. it was hhs and white house operatives.es.his was so i don't even think they went through the pretense of pretending this was a neutral interpretation of the law. i hasten to add, of course, chevron's inapplicable here any way because the statute is completely unambiguous so there's no opportunity for deference and as justice kennedyory cons pointed out during oral ody, c argument, there's a strong l trea cannon of statutory construction because this body, congress controls the purse, moneys will come out of the federal treasure only if that's done unambiguously. caltcome, i >> thank you, mr. carvin. come i would note if it is, indeed, the case that partisan political operatives in the obama administration instructed career professionals to disregard the law and reach a political outcome, it's not surprising s what that they were afraid to come rh here and testify and explain that that's what occurs and

perhaps give some context to whyd. the three witnesses on the first panel chose not to attend. senator coons? >> thank you, mr. chairman. i'll note you've taken nearly te ten minutes in your first qu question, i hope i'll have of tim roughly the same period of time if possible.ssue we i believe the core issue we are ion seeking to have a conversation the about here today is the opriat availability of subsidies, the d role in the aca, and the d. appropriateness of how the aca has been interpreted and applied. so let me first speak more t genera broadly to that general context. out i the aca, as mr. weiner pointed able qua out in his testimony, is working.f many thanks to the aca, 16 million for t people have gained access to americ affordable quality health insurance and since october a 2013, the uninsured rate just to take one of many positive statistics for the non-elderly adults in america has fallen by nearly 35%. th this success would not be is

possible without the availability of the premium tax credit which provides nearly 8 million american individuals in the 37 states using healthcare.gov with an average subsidy of $3,200 to purchase health insurance. as we all know, this historic decrease in the number of s and uninsured is only possible under the aca, is only possible that it becomes affordable because to the the 87% of individuals who signed up under healthcare.gov qualify for subsidies and this was central to the intent of the law in my view, eliminating subsidies which may well be the outcome of supreme court action if they, i think, rule on this in a way that is advocated by some today. di would result in a massive sr disruption in the individual market with millions losing access to affordable insurance and average costs of remaining insured increasing that is significantly. it is my contention that that is not required by the structure, the text, the history of the law. in fact, the opposite. that the text and the history history and the structure of the aca leads to only one possible conclusion. are ava that tax credits are available ameri

to all poor, working class, and middle class americans, those who earn between 100% and 400% of the poverty level. as we all know, there are many who have opposed the aca for as we al principally ideological reasons.r they fought it in congress and lo lost.gi they fought it before the treasury department and lost. they fought the individual mandate in the courts and have lost. now another group of opponents treasury has raised another legal they f challenge.d have asking our courts to bless a r grou contorted reading of the law in a way that would sabotage a corechalle provision of the act and undue the way that the subsidies work to the fulfillment of the core goal of the affordable care act. now, neither the distinguished chairman of the subcommittee nornguished myself were present as the law of the was crafted, but there have been a number of quotes in the press recently from those who were actively engaged suggesting that this cramped reading that's being advanced runs directly contrary to the universally held understanding of those who were engaged in its drafting and implementation.co from doug elmendorf, head of theho wer

cbo at the time, to members of e. the joint committee of taxation,e cbo at charles clapton, former senator enzi, senator snowe, herself, qu recently been quoted saying they recall did not see or recall any ing distinction between federal and state exchanges as this was have gon being drafted. and the denial of subsidies based on that would have gone contrary to their understanding of the intent. so let's be clear, in my view, this hearing is just another part of a five-year effort to deny working class americans any help in affording health ny wor insurance, having failed at frontal assaults the aca's opponents are trying to contort the letter of the law, this important law, to defeat its . spirit. with so for some insight into that, let me begin with mr. weiner, if i might. in your view, is there any doubtin y at the time the aca was adopted ouequently it was understood to mean what treasury has subsequently said it meant? at the time that it was passed? and what, in your view, happened to create the dispute that we're

discussing today? >> senator, there's no doubt at all of that proposition., in we see, for example, jonathan see, gruber's statement several yearswas adop after the statute was adopted. he's an economist, an academic economist. well, i see your jonathan gruber and i raise it with four aces. senator orrin hatch who said back in january, 2010, that -- establi that establishing an exchange is not a condition of receiving federal funds.t. and that was stated by other people as well. in june -- well, i mentioned when the states amended their complaint. october 2011. the american legislative council -- exchange council, a.l.e.c., alative

right-wing organization told the states in urging them not to rnment ex-establish t exchanges, there's though penalty for a state in up allowing the federal government there' to implement an exchange. november 2012, nebraska's an governor explaining why ge states -- why the state wouldn't set up an exchange, said there's no real operational difference between a federal exchange and a state exchange. officials assessing exchanges in georgia, south carolina, west virginia, all these states idies we advanced knowledge that way the subsidies were available. this is the way the statute was understood and since it was understood that way, it really doesn't prove much to say that orpora the treasury department incorporated the language of the statute into an early draft of the regulation. argue s. >> thank you, mr. winer. if i might the majority witnesses have urged us to read

four words in isolation and cision i've, argued that at least only one possible interpretation. me the supreme court in its 2007 decision, national association of homebuilders versus defenders of wildlife said the ambiguity re ofad phrases can only be construed exc whenha placed in context. how does the context of the entire statute support the reading that exchanges established by the state includes exchanges established by the, for the state by the secretary of hhs. you touched on this in your previous testimony. i'd appreciate you revisiting the point.i' >> thank you senator. you, se yes, the supreme court has made in nu absolutely clear inme numerous s of a courtll rulings by justices of all ideological stripes that think statutes are to be read if theirres of entirety, in their t context, and to effect wait rather than defeat their essential purpose.

i think it as important that si there aregn basically three main features of the affordable care act that make its insurance markets work. you have the mandates which requires that either you sign up for health insurance or pay a tax penalty, assumeing you have the income to do so. the important market reforms such as preventing insurance companies from discriminating the im againstpo individuals with prooe existing conditions.ng and then, of course, you have what we're talking about here today, which are the tax credits which make it affordable for e act' americans t' enter the insurance market and to make the entire reform work as it's intended to by the law. so in looking at the statute as act to a whole and in looking at the issue before the supreme court in king v. burwell it's important to note the role ever the tax credits in effectuating the key purpose of the act to make insurance available for all

americans. and so i think when we're looking at the exchanges, it's important to note that when you're talk being about who is going to run the exchange, whether or not the state establishes its own exchange or the federal government does it according to section 1321 establ standing in the shoesis of the state, the idea is still to ensure that tax credits are nag widely available to all state americans who need them. otherwise the act simply doesn't work. and numerous provisions of the o ne law are rendered absurd if you take the reading of the tax t credit provision that critics have put forth. you know, we talk about what congress intended. and when youth look at what they intended it was, again, because ended. of the purpose of the act and the way that it is struck tired, exhibit congratulate to achieving the purposes of the ey law that every american who ed, it needs these tax w credits be able the wa to have them.y that is the way that it was scored by the congressional ax budget office, the statute. that's the way that the joint committee on taxation understood the law to work.

that is the clear congressional intent behind the law. and so when you look at the law in the way the supreme court tells us, looking at it in context, reading the text of theaxat raw. law, looking against the tent backdrop b of federalism, knowing if you take the critics of the op department's rule you could basically put the states to an irrational choice, either set up an exchange ort' take the federal fall back, we will take away er set u millions, perhaps even billions ack of dollars from your constituents who need those tax credits desperately. away mi that simply doesn't make sense, and it's not in line with the way the supreme court tells us ' we should read statutes. >> thank you. that wastatu helpful. >> thank you, senator sessions? >> thank you mr. chairman. well the fact that you say there's a goal to make insurance available for all americans doesn't mean the statute can be be

written to in anyway you like to to effect wait some theory of care. congress is, will be faced with the legislative responsibility if the courtcong rules to deal with ft sta the statute as it is left nge bu standing.s it's going to be a difficult challenge, but i think that's what we're paid to do.this has the president doesn't get to make up the law as he's done so often. it's really troubling to me the extent to which this has become at the the theory around here. that the executive office must it do something. congress will fail to act.e but when congress fails to act, s it acts.ate ex it makes a decision. it says no to some of these things. it didn't pass the law. unless the state exchange st language was in there. that's what congress passed. so i really think we're in dangerous ground when we get this far away from plain the h

statutory law.eport with regardfr to the health care cost i see in cnn money a recent report from cnn money, united health care costs in florida is up 18%. humana up 30% in texas. that's two of the biggest states and two of the biggest insurers in america.t i th i doesn't know how well it's simpl doing in practical work. now, let's take another area that i think is even simpler that you raised in your study. that the affordable care act provides tax credits to u.s. citizens with incomes between 100% and 400% of the federal poverty level.ct t are you aware of anything else in the affordable care act that o, for would a alter that number? that range? 100% to 400%? >> no, it's for aliens, there's an exception. congress decided that for aliens they would come up with a

special rule because aliens could not get medicaid. but for citizens there's absolutely no statutory but for exception, and the irs has lation effect thad it meant by irs alte regulation. >> so by regulation, irs altered that what would appear to be plain language to extend credits for citizens that would affect several million people below 100% of federal poverty level, is that right? >> right now the estimate by te by keiser is 4 million people ar aren't eligibleen for medicaid butt sati don't satisfy the 100% statutory so w floor. soev we're talking several million people yes. >> and mr. carvin, you've studied this.is. are you aware of any exception ding s that could be used to justify don' adding several million people stat when they don't fall within the rule h statutory range? >>od it's precisely the rationale

used for the irs law here.l it's a good thing to give poor people insurance.at congress cut it off below 100%. we don't like that, so we're going to take billions of s prec dollars from the federal treasury and help poor people.e for al we don't need no statutory want language. we'll just do what's right. so no it's precisely the same analysis you've seen here. it's supposed to be available for all americans and therefore we can do whatever we want. >> another one it seems to me iscitize dramatically clear andns has been violated as you noted section 36-b of the aca grants credits to some non-citizens with low incomes only if they themselves are lawfully present in the uchbts and cannot obtain medicaid coverage. irs regulations issued pursuant member to that statute, however,

contradict the statute and allow subsidies if quote, the taxpayer or a member of the tax taxpayer's family isgr lawfully present in the united states.the and, quote, the lawfully presenttion to taxpayer or family member is not pl eligible for the medicaid program. do you find any statutory basis for the administration to find such an exception to what appears to be plain language? >> absolutely not. and the odd thing about that as opposed to the other two. the other two have the courtesy to announce what they were doing in the preamble to the regulation. for this one, there's no pposed explanation at all. just the text tothe of the regulation to goes beyond the statute, without any hint that they're expanding t of t the credit to persons not re e lawfully residing here.ully >> i think your analysis is important to us.

this -- we've had a number of . studies that talk about really, a lawless approach to peopl governmental administration.expectat and the american people have a ed the right to expect that when a law is passed, the chief executive will follow that law. and this is just plain. mr. carvin you've studied the aca. is mr. greewald correct?ration t is there anything that you can find that would allow the administration to provide health care coverage to individuals if a member of their family is ark re lawfully present in the united states? >> it's yet another revision in done, a series of stark revisions to the aca that the obama administration has done all pursuant to roughly the same analogy, which is we want to make this better. we want to make it work in the e comp way that we want, and all the kinds of legislative compromisesminist that go into actually crafting statutes will be disregarded if

the people in the administration view it as inconvenient. >> well i think the statute e for code just been written our goal is to make available health care for all americans. that wasn't what the law said, chairm however. thank you,ha mr. chairman. >> thank you, senator sessions. senator blumenthal? >> thank you mr. chairman. you n mr. carvin, you argued in the supreme court, did you not? >> i did. >> you argued for the plaintiffs? >> correct. >> are they here today? >> no. >> you know, this hearing has been conducted with a lot of hype and hyperbole, not uncharacteristic of the hype >> you around the affordable care a.ct. but there are some facts, and asd reag ronaldan reagan said, facts are stubborn things. the fact is the affordable care o

mill act is working.icans, m it has provided insurance coverage to millions of americans. more than 10 million americans.happenin and not only did congress intend certain results, but what congress intended is actually happening. we're dealing here with reality on the ground. in connecticut, which has a onnect healthic exchange like 13 states do, the uninsured rate has been cu cut by one half. from 12.3% to 6%. to 7.7% of account account conconnecticut consumers have qualified for the tax credit. millions of people around the country are protected from fo discrimination based on and ye

pre-existing conditions.f peop asle the attorney general of lth ca connecticut i had cases for people. there's been health care expanded as well as substance abuse programs.s work 52 million americans have benefitted and the aca is working. and the public health and o cess preventionat fund has provided connecticut alone with $31 million for tobacco cessation. health coverage enrollment assistance. those facts in effect, i think, ce support the argument that rpreta congress not only intended certain consequences and the interpretation suggested by ms.

widener and mr. wiener fits as ts of part of the statutory whole and the context of the statute but also the results of the statute. i'd like to ask mr. wiener whether that interpretation in effect of the statutes, the reality on the ground comports with what congress intended.s >> yes, it very much comports the st with what congressat intended. congress did say in the statute that the goal was to extend health care, affordable health care to all americans and said it sincex times. that was in language enacted by congress not sol purpose he intuited by a judge. it was what congress said it was wy trying to achieve in the

statute. >> ms. widener, do you agree? >> yes absolutely.ealth snaltser sessionsca joked that the statute should have been written to say that it should be benefitting all americans." so tha it is affordable health care fort ma all americans.congre that is the stated purpose of the law. eligi and it wouldn'tbi make any sense for congress to have written the >> a tax credit eligibility to defeat that purpose. >> and mr. carvin, i assume you disagree? >> the model that was followed l for in the aca for the subsidies is precisely the model for s doin medicaid. we all agree that medicaid was conditioned on the states doing certain things. my friends on the left here would say it would be insane to end medicaid payments for the neediest americans and yet, the aca conditioned the medicaid on ' states doing certain things.of and that's because this body thought we can get the best of both worlds. we can get the states to do precis

something, and we can get . universal coverage.you gi precisely the same logic obtains here. you give the states a real incentive to do things and then the premiums will flow, if the state does it. so there's two purposes to the n exch aca. one is stated in 1311. way t states shall run exchanges. the second is we want subsidies tates to beru available. the only way to accomplish both purposes is to condition it on states running the exchanges, just like congress conditioned me medicaiddi funds on the states altering their medicaid eligibility standards. there's nothing inconsistent was u with the purpose, nothing illogical unless this body is so no, going to say it was utterly reason illogical to doab what it did with let m medicaid. so no personally logical, perfectly reasonable.t. >> your friends on your perspective on your left are on script our ioright. >> i was giving a geographic

description, not an ideological one. >> in a sense reflects the es tha different perspectives that we may bring to these issues, and i rye respect yours, but i would just suggest, again that congress establishes a system that fits together as a whole. it's working as a whole. we can argues hypothetically. actua we can use rhetoric. but the fact of the matter is congress actually did something good here. i can say that because i wasn't a a part of congress at the time. and i approach this area with a lot of humility. ve very simply, in my view, a r the ruling for the plaintiffs in king v. burwell will be ory st catastrophic to millions of appro families who owe their health insurance to the statutory structureno that congress approved. not a perfect structure.

not absolutely perfect in all of its wording in statutory language. but a ruling for the plaintiffs in my view would be a human tragedy, as well as a legal travesty, and so i'm hopeful that the reasoning that you advanced the court will not suck seesd seed, but i thank you for being here today, and i thank the members of the panel. >> thank you very much. i would note on the exceptions all o of the expansions of health eople care. studies show that virtsually all of the expansion has been on up on medicaid. that nearly as many people have rance had thei ar insurance canceled as have signed up on the exchanges for private insurance and the ictabl data arey compelling that forcing people onto medicaid ends up predictably producing worse health care outcomes. with that, senator hatch. >> i might also add that more people are not going to the emergency rooms because they

can't get care. too long a wait to get the care that they need. also i want to bring out that there were about 30 million people that didn't have health care when we started this issue and this bill. guess how many there are today? make between 30so million and 35 wi million still don't have health care. maybe you can make some ll j explanations about that. you quoted my letter mr. wiener i'll just put the letter in the record if i can.carv >> without objection. >> also mr. carvin, let me just say another thing to mr. wiener. with respect to mr. wiener the quote that you made from my law law review article where you say it was a reference to a supreme court's holding in south dakota versus dole.ticle. now i do address that issue in put th

my ucla law review article. let me put that into the record as well. >> without objection. >> mr. carvin, you've been carrying a lot of load on your shoulders here. proponents of the president's position have argued that congress could not have intended to deny subsidies to federally established exchanges. but isn't, isn't it a fact that a very good reason that congressis would haveh ex wanted to limit reate subsidies to state established exchanges was namely to incentivize states to create these exchanges and congress couldn't order the states to so i create exchanges directly, so itates to needed a way to incentivize the states to create exchanges. i think, isn't that a perfectly nal pr reasonable argument as to what was going on here?ntless

>> you're entirely right about the constitutional provision. this body has countless statutes insent emphasized theco same way.s also the clinton administration bsidie health cares proposals also conditioned subsidies on state is th cooperation. so far from departing from the nually norm, this is the norm that this body is continually used, not only in the health care area not only with respect to medicaid and the apartment ca, but with respect to virtually every provision, which is, sincet we w we can't force the states to do it, but we want them to take an operational role the best and n traditional way of doing it is conditioning federal funds on all r having the states become our cooperative partners. >> all right, let he just ask this question to you.

and mr. canon as well. i want to read from you from my law review article and ask you e to comment. would have us believe that statutes are infinitely malleable. up canea mine down right can mean left.ment. established by the state can mean established by the federal government. what matters to them is advancing some alleged salt toryat fur purpose regardless of what the statute actually says.se of us that furthers the president's agenda. those of us on the other side however insist that text does r. matter. words matter. they always have. statu what the statute says is what matters, because at the end of the day, the words in our are wh statutes and constitution are what bind our leaders and what prevent them from doing whatever to. they want to. now fidelity to text the text o foundation of utlaw.agree wi >> we're not talking about ripping text out of context.

i fully agree with my friends that you need to read this in context. i have said thatd probably 400,000 times. and i've always supplemented it sup with thepl point that context es for reinforces, for th te reasons i've already articulated at every turn that 36-b should be interpreted to mean what it re n says. so we're nott so talking about some green eye shade, pulling words out of context.e, se read in context, this serves a very valuable sensible purpose and there is no reason to depart from the plain language. >> mr. cannon, in your written testimony, you discuss an investigation that two house ir committeess' conducted into the irs's drafting of the obamacare keaway subsidy rule.that now what are your take aways from that investigation.trou and what are the host troubling things that the house investigators found? ? well, as i mentioned in my testimony, i think the most troubling things are those that

show, that indicate that the treasury department and the irs recognized that this statutory language posed an obstacle to how they wanted to implement the as they statute. so they jettisoned what the statute said. they exercised power as they saw fit. and this is not a victimless sort o sort off scenario here. and there are 57 million individualssubjec and employers in this country subjected to illegal tax becauseone of the irs decided it would ignore the clear language of federal law. one of those people is kevin pace. his income of $8000. he's a jazz musician.s a lo do you think $8,000 is a lot of money to you? it's a lot more money to a jazz musician. others who are affected by this rule are seeing their incomes hit by $1,000.hit othersby are prayingpaying penalties to the irs and individuals from which it app they're statutorily ex-e.knew

and the irs, it appears, from s lang what little weua know that the irstried knew that this language regard prevented them from doing i that, but they tried to find a work around, they tried to disregard t the other problem, the other argume thing that this investigation made b shows is how the arguments that the government has made before ed whe then supreme court are not the, were not the reasoning that the irs used when it developed this rule. the fact that theyst jettisoned the statutory phrase through an ew it exchange established by the state through their implementing regulations tells us they knew it was not the term of art that corp the solicitor general claims.federa if it were a term of art, there would be nreo reason to take it ed r out of the theeg proposing or out of the draft proposed regulations. you could keep it in there if itng these was a term of art. but they knew was not.and so t they knew was an obstacle to implementing these taxes and spending that money, so they threw it out. >> mr. carvin let me just ask e is

you this. under the well-known chevron doctrine, if it is ambiguous, interpretation can be sustained om t only if ithe is a product of quote, reasoned decision making unquote. from the evidence we hehave, do you wlief that the irs subsidy why rule is the pro dubts of reasoned decision making, and if not, why not? and what does that tell us about the lawfulness of the rule? >> as i indicated -- >> and you could also answer if s po you care to the arguments for those who are arguing for the as i administration. >> are wit'htor respect to your ng the specific question senator hatch, no.minist as i indicated to senator cruz fulfilling the dlaunl calais in is -- i would in addition point out that it strikes me as incredible. i believe the solicitor general, th t

said this in oral argument.rs from anybody's perspective, the semina motion that thisl body was s, delegating to the irs the s to t seminal decision on whether to have these subsidies which my friends to the left agree is very important to the act, strikes me as quite counter not f intuitive. this was not filling inil the gaps in a statute. was this t was the basic policy o the decision. so no congress spoke precisely to the question at issue as the cision chevron phrase has it.irs, m congress made a decision. so there was no room for the irs, muchless white house operatives to change the basic language in the statute. >> let me ask, is it graywall?on >> ougraywall yes. >> i hope i'm pronouncing yours veral right, mr. wiener. you identify in your written testimony several irs regulations that granted

obamacare obamacare subsidies outside the statutory income range.this individuals automatically enrolled in employer health care aliens. plans. and even some categoryies of unlawful aliens. what does the fact that the irs granted limits on its subsidies in some instances tell you. >> regarding the king v. burwell issue f that regulation is s valid, it's impossible to ntion believe that it's because they paid close attention to the it statute and statutory authority. it could be by accident that the regulation's valid. but i think with so many instances it's obvious to me that they are implementing the to see law that they wanted to see ed. enacted rather than what actually was enacted. >> all right. i think i've taken, appreciate the extra time that the chairman and ranking member have granted me. appreciate you both.i thin >> well, thank you senator hatch.d rankin

i'd like to thank each of the witnesses here. we have haheard, i believe, . incredibly important testimony. testimony that i think has particular sail against to the he mil residents in states who have not established state exchanges, to the millions of young people, young people fresh out of h of you college, millennials who the obama administration is trying to exact billions of dollars in illegal taxes from each of you. to legal immigrant like my father, 58 years ago. if you live in a state that has not established an exchange, the testimony we've heard today at ma this hearing is that the obama se on administration is trying to impose on you, personally to la thousands ofw. dollars in penalties that are flatly contrary to law. and i would note that these penalties coming from the di individualsp mandate

disproportionately hurt the most vulnerable among us. the people being hurt by these ng peo illegal taxes are not the warren buffets and bill gates of the ey' world.ns that they're young moms, m an african-americans, hispanics that are suddenly finding a big tax bill that is due from an extrac administration that is ignoring and violating federal law to extract illegal taxes.and i and i would note the testimony this panel has given.e irs that the career professionals at the irs and treasury department recognize they were bound by lawitical not to collect those taxes. from millions of people who sugges conditions owe them until political operatives, the testimony suggests, overruled s testim them instructed them to disregard the law and collect taxes. from people who did not owe them and could not afford them. that testimony is quite stunning and it is testimony

that every american ought to consider. an i want to thank each of the witnesses from the sub committee. and the committee will keep the hearing record open for an additional five business days. which means the record will be closed as of the close of closi business nextng thursday june 11, 2015. i note senator koons wishes to make a closing remark. >> thank you, mr. chairman. we came to this hearing today of the with differing h views of the history, the structure the than purpose and the k impablt of the leave w aca. i thank the witnesses for their testimony, but i think we leave with sharply different views of the path forward and what the nother purpose was of this hearing today. and my view, this is just another part of a five-year-long effort to deny working class havi americans any help in affording health insurance. to having fail the at repeated frontal assaults, the aca's impor opponents are trying to advance

a contorted view of this letter to defeat its very spirit. and i, too, will raise the specter of the tax increase. am the opponents find the idea thataffordab every american should have e that access to affordable health insurance so offensive. they are willing to advance a cause which if successful would immediately raise taxes for 7.7 ort to million americans by an armverage of $3200 a year to destabilize this law and to bring it down. i hope they are not successful, and instead i hope the affordable care act continues to be improved and strengthen hank t access to health care in this country. >> thank the members of the panel, and the hearing is now adjourned.

and we'll have more on health care when health and human services secretary sylvia burwell testifies before the house ways and means committee. she'll discuss the king v. burwell case challenging subsidies in the health care law and the hhs 2016 budget request. live coverage starts here on c-span 3. on our next washington journal, we'll talk to colorado freshman senator cory gardner about the defense programs bill. then california congressman on president obama's strategy to fight isis in iraq and syria. phillip gordon talks about his recent piece for politico on how the middle east is falling apart.

washington journal on c-span. you can join the conversation by phone or on facebook or twitter. the new congressional directory is a handy guide to the 114th congress with color photos of every senator and house member, plus bio and twitter handles. also a fold-out map of capitol hill and a look at congressional committee, the president's cabinet, federal agencies and state governors. order your copy today. it's 13.95 dollars through the c-span store at c-span.org. next, a house veterans affairs sub committee hearing on non-va services for soldiers who normally receive care from veteran facilities. the hearing is 90 minutes.

good afternoon. this hearing will come to order. i want to welcome everyone to today's hearing titled "circumvention of contracts in the provision of non-v.a. health care". this hearing is the second in a series of hearings examining illegal v.a. procurement practices, resulting in massive waste of taxpayer resources in serious jeopardy to the quality of health care received by our nation's veterans. in our previous hearings on procurement on may 15, 2015, we focussed on the mismanagement and misuse of purchase carts and avoidance of contract requirements, spending limitations and warrant authority. a v.a. senior executive, mr. jan

fry testified that these are in the billions of dollars. he has studied abuse. by far the most prevalent method by which veterans received non-v.a. care is through the individual authorization, so-called fee-basis process. under title 38 of the code of federal regulations, section 17.52, the v.a. is authorized to obtain non-v.a. medical services when demand is infrequent and the needed health care is not available in house. or through an existing contract. unfortunately, the v.a. uses this process even when these requirements are not at issue. moreover, v.a. admits that the execution of these authorizations does not comply with the contract requirements

of the federal acquisition regulation or f.a.r. and veterans affairs requisition, v.a.r. mr. fry will testify that by long standing and massive circumvention of the f.a.r. and v.a.r. in the fee-basis view, they have billions of improper payments that represents material weaknesses in audit controls. the o.i.g. reported on inaccuracy and inefficiency of fees paid through the fee-basis program. it was reported that v.a. medical centers made hundreds of millions of dollars in improper

payments, including duplicate payments and incorrect amounts. most troubling is that v.h.a. had not established fraud protection controls because it did not consider the program to be at significance riche risk. o.i.g. said think could be paying as much as $380 million annually for fraudulent claims. and in may 2014, contrary to v.a.'s assertion that previous illegal purchases can be institutionally ratified, oig reported that v.a. further violated the law by institutionally ratifying illegal purchases and avoiding important checks and balances. today gao director of health care randall williamson will testify about the continuing limitations and oversight of health care service contracts

and will focus particularly on the inadequate management of clinicians who provide services under contract with v.a. facilities. we will also hear from united states army veteran christopher labonte whose horrific experience with vfrnts afrpts represents a case study in the risk associated with non-competitive contracts, with affiliates and the importance of quality control and oversight of contract performance standards. ago i said in the purchase card hearing, violations of procurement laws are not mere technicalities. it is not just a matter of paying a little more for needed supplies and services as some apologists for v. afrpts have asserted. among other things, without competition, businesses may be

awarded, based on, business may be awarded based on cronyism and the directing of business to favored vendors including those who may who may be employees or former of former v.a. officials. without contracts, patient safety provisions are not legal requirements. v.a.'s mismanagement of the fee basis program is not a justification to dispense with ffrmts a.r. or v.a.r. requirements. if the atom bomb can be built and wars conducted under the acquisition regulations, surely v.a. can deliver patient care under them as well. with that i yield to ranking member custer for any remashes she may have. >> thank you mr. chairman.

this is a followup hearing to the hearing two weeks ago. and today's hearing will be on the basis of vchblts a. purchase of non-v.a. health care. at the end of the day, we can all agree we want to see our veterans receive the health care they need at precisely the moment they need it. but i want to make clear that neither i nor my colleagues view this as a blanket rationale for not following proper procedure. federal and va acquisition regulations exist for a reason. they exist to ensure that there's proper competition when appropriate and that the best practice and price possible is obtained when the government purchases goods and services. for the va, these laws protect veterans, save taxpayer dollars and ensure our veterans receive the highest possible quality of care. the va states in its testimony that it's had a 30-year practice of using individual

authorizations without applying federal acquisition processes and procedures. at the same time, it seems that the va has taken the position that individual authorizations are indeed contracts and should be viewed as such, even when acknowledging that va officials appear to have acted in a manner inconsistent with procurement law. now va is arguing that it needs new statutory authority quote, to resolve what has emerged as serious legal questions to its purchased care authorities. this new authority would, police italy ex-eva from procurement regulations and requirements and allow the va to continue with the same practices that it has been following for the past 30 years. i, personally. not convinced that this is the best solution given va's lack of significant oversight in this area. in fact, i would argue that the problem is not that the legal questions have arisen over va's

purchased care program but that for too long va has operated a program where the legal basis has been challenged and yet va has never changed course or modified its procedures. va's authority to purchase care without having a contract in place is predicated on individual authorizations being used, quote when demand is only for infrequent use, period, closed quote. i'd be interested in finding out how much of the $7 billion expenditure for non-va care in fy 2014 has been obligated under this authority as compared to situations where contracts are in place. as we examine the current legal authority for va's purchase care program and whether this authority must be modified we must first get to the bottom of how this program has been operated over the last number of years. it's absolutely critical that we understand how va's legal interpretations changed and were

communicated and enforced. it's hard to expect accountability when there are no clear signs pointing out the way. the testimony of mr. fry and the fairous legal arguments made by the va in litigation makes it seem unlikely that over the last number of years clear policies and procedures were in place. gao's testimony points out, quote, significant weaknesses in va monitoring and oversight of its non-va medical care program. perhaps it is now time to stop applying quick band-aids and resolve right now to fiction what is wrong. it took years for va to get into this problem and it will take time to fiction itx it. but the first step is to acknowledge these problems and quickly and forthrightly come up with a concrete plan to focus them. finally, i'd like to thank mr. labonte for appearing before us today to report his story which

is absolutely horrendous. he reminds us that the bottom line is the quality of care for veterans. this quality can be impact the by lack of accountability and process when it comes to making sure that all relevant laws regulations and policies are followed. and with that, mr. chair, i yield back the balance of my time. >> thank you ranking member custer. i ask that all members waive their opening remarks as per this committee's custom. with that we have the first and only panel at the witness stable, on the panel, we have mr. edward murray, acting assistant secretary for management and interim chief financial officer of va office of management. mr. gray gibbons principle executive director of va's office of the acquisitions, logistics logistics. mr. doyle, chief procurement

officer. ms. philipa mr. jan fry deputy assistant secretary, mr. randall williamson director of gao's health care team and mr. christopher labonte united states army veteran. i asked the witnesses to please stand and raise your right hand. do you solemnly swear under penalty of perjurey that the testimony you are about to provide is the truth, the whole truth and nothing but the truth. >> i do. >> mr. murray you are now recognized for five minutes. >> good afternoon, chairman

kaufman, ranking member custer and members of the committee. thank you for the opportunity to discuss the department of veterans affairs care to veterans by contracting with community providers. mr. chairman, the subject of this hearing involves some complex territory related to procurement process, legal interpretations and the processing of hundreds of hows of purchased care transabs per year. i know we will be discussing these areas in detail, and that the committee's oversight is important. we will always depend on a mix of in house and community care with care in the community continuing to grow to ensure veterans get the care they need in a timely way as close to home as possible. so, while the discussion here may be technical, we're discussing transactions that represent the purchase of health care for a veteran who needs it. when purchasing care in the community, the va depends on both federal acquisition-based

contracts and non-f.a.r. agreements, also referred to as individual authorizations. these are used in many situations because a provider may have a relatively small number of veterans referred by va as part of their total patient mix. for those providers, it may not make business sense for them to enter into a ffrmts a.r.-based contract to provide care. this is especially true in rural areas. all those these agreements are not f.a.r. kplients, va uses controls to make sure that a qualified provider and the services billed are consistent with va regulation before a bill is paid. these safeguard veterans and protect taxpayer dollars. use of va care has risen draw matzically. in 2006, it was roughly $2.7 billion. for fy 2015, we estimate $10.4 billion. over those years the different

authorities for purchased care have not been applied consistently and have been marked by conflicting interpretations. with the determination by the department of justice that individual authorizations are contracts and therefore must be f.a.r. kplients the va began reviewing its internal processes working on a plan for integration and oversight of all care. we have recognized the problems and proposed a solution. last year in informal discussions with committee staff, va note the issues that would need to be addressed by statute. in february's budget submission, we noted that the department would be putting forward a legislative proposal. on may 1st, we provided a formal proposal for comprehensive reform, including very specific requirements for non-ffrngts a.r. based agreements. the legislation would also authorize the secretary to enter

into veteran care agreements. similar community care purchased throughout the veteran's choice program. the legislation recognizes that f.a.r. should be used when it can. every two years they would review all f.a.r.-based agreements. i believe you will find the legislation provides strong protections for veterans and taxpayers. mr. chairman we look forward to answering the committee's questions. >> thank you mr. murray. mr. fry are you now recognized for five minutes. >> chairman kaufman members of the sub committee. thank you for inviting me to testify today. you just heard mr. murray's testimony on the purchases. if you are not now confused i am surprised.

i would be completely confused if i were not familiar with the facts. we obviously do not intend to -- mr. murray stated there was and is confusion, inconsistent application and conflicting interpretations. as va senior leaders we have had many years to correct these deficiencies. here's some facts that may help you decide if conflicting interpretations exist. in october 2012, a very senior va official said trouble was looming as regarding purchase of non-va care. i asked for details about legal documents he hinted of. he refused to reveal anything. i since the same official and his subordinate a written statement, addressing his plight hoping i would receive additional information from him. he declined to respond. on december 3, 2012 i september a note to senior executive from the office of general counsel

requesting a legal opinion as to whether individual authorizations for non-va care were considered f.a.r.-based contracting. i received no response. and for a third time on january 15 2013. on february 28, 2013, nearly three months after i requested the initial opinion the office of general counsel provided me a legal opinion dated september 10 2009. this opinion categorically declares ffrmts a.r.-based. there's to confusion in this legal opinion. neither my predecessors nor myself have ever granted authority for vha to acquire non-va health care except by ffrmts a.r. methods. you may wonder why i have never seen this legislation and why there was reluctance to provide it to me. that is ann ig ma. mr. murray and i testified under

oath in 2010 say thing fee-basis care was not f.a.r. based. why was it kept from us in preparation for the hearing. given the apparent rekals transengaged by vha and counsel i submitted a hotline complaint in march 2013. my submission was initially refused, questioning my motive for the complaint. i stubbornly persevered, and they subsequently accepted it. i am unaware whether oig ever investigated. i requested assistance conducting ratification of massive violations of law. in may 2013, secretary shinseki was briefed. he was made aware of our illegal actions. i was not invited to the meeting. in june 2013, i wrote a letter to representative issa outlining my concerns on these illegal matters and others.

my letter never made it to him. two conspired to prevent chairman issa from knowing of these vie laces of laws of the assessment team voted with mine as the lone opposing vote. they sponsored a motion which passed to raise the reporting level for va material weaknesses. i believe this was an effort to avoid reporting matters to the american public. from july to november 2014 we clab rattly devised a myth odd for non-va health care. the leadership rejected the motion. the illegal act continues unabated. this past friday, deputy gibson

made my and other illegal acts a personal issue. i will allow you and the court of public opinion to decide for yourselves if what i've briefly described constituting corruption, malfeasance. improper payments continue. veterans receive health care without protection of mandatory terms and conditions and no one is liable. i believe these are two relevant questions. how can we hold sub order nants va employees accountable if we pick and choose the laws we want to observe forsake of convenience. when will the va senior leaders be held accountable. the issue of illegality was

positively affirmed. not a single leader acted. we've lost our way. senior leaders are required to obey and enforce federal laws. our actions and inactions do not fit anything i've experienced in 40 years as a military officer and public civilian. i'm prepared to answer all questions the sub committee may have for me. >> thank you mr. fry. mr. williamson, you are now recognized for five minutes. >> thank you chairman kaufman, ranking member custer and members of the sub committee. i am pleased to be here today to discuss our work on delivering care through non-va providers. non-va providers treat veterans using either a fee-for-service arrangement or a prearranged provider network. they also render care in va facilities under a contracted arrangement or affiliation agreement with university medical schools.

in fiscal year 2013, va spent almost $5 billion for non-va provider medical care for more than 1 million veterans. as more veterans seek care outside the va system it is important to assure that non-va care is of the highest kwelt, reliable, accessible and efficient. weaknesses were realized and i will focus on issue va needs to resolve in this area. in may 2013 ga reported that va does not collect data on wait times for veterans referred to non-va providers. therefore, va cannot assure that veterans are receiving access to medical care that is comparable to veterans receiving care at vamcs. also they do not have automated systems capable of collecting data for all services and charges tied to a specific episode of care during a

veteran's office visit or inpatient stay. as a result va does not know how much it is paying for episodes of care from non-va providers and cannot ensure that non-va providers are appropriately billing va for veterans care. in october 2013, we reported on weaknesses in va's process for contracting with non-va providers to provide care at va facilities in specialties that are difficult to recruit, that supplement va clinicians in high-volume areas or fill critical staffing vacancies. specifically, we found that contracting officer representatives at vamcs who monitor contract performance on a variety of contracts for goods and services, including clinical contracts had heavy work loads and lacked training on how to gauge and post award monitoring of clinical contractors which compromised diligent oversight of non-va providers.

robust va oversight is essential to ensure that non-va providers deliver high-quality care and fulfill the responsibility of their contracts. finally, in march 2014 we reported serious weaknesses in the way va was administering and overseeing its program for reimbursing non-va providers for emergency services for non-service connected veterans in processing claims for non-va providers, we found pat everybodies of non-va compliance attributed to poor oversight at both the local and national levels. therefore, some veterans were likely billed for care that va should have paid for and many were not informed that va had rejected their claims for reimbursement for care from non-va providers. as a result many me have been denied their appeal rights. while va has made progress in addressing recommendations we

made on these three reports, only about one third of them have been fully implemented. moving forward as new components are added to va's non-va medical care program, such as patient-centered community care referred to as pc3. it is anticipated that the number seeking medical care through non-va providers will continue to grow. it is vital that va establish robust oversight and accountability and non-va medical care program. such that relevant va staff at every level understand the importance of and are held accountable for ensuring that veterans receive high-quality, accessible and cost-effective care for non-providers. this concludes my opening remarks. >> thank you, mr. williamson. mr. labonet thank you for your service to the united states army. and you are now recognized for five minutes. >> thank you for giving me an

opportunity to speak to this committee today. i'm christopher kevin labonti. in my specific case there have been numerous unethical issues i've had to face. i've provided a written statement which describes in detail these issues. i was coerced into a highly invasive surgery which was performed by a student with no experience and background. i have submitted evidence to prove this statement and then the evidence in my written statement. the medical center has also been negligent in my health care. they have been kplis its in allowing unqualified personnel to gain entry to the medical center and provided some of the worst health care i have ever experienced. i have submitted an index of medical evidence along with may written statement proving the willful negligence not only from the doctors but the administration. on the day of my surgery, they changed the consent for surgery

paperwork to allow a stuchbts from cue wait to be the primary surgeon performing my surgery. i have no recollection of signing this document as medication was already administered for anxiety presurgery by the doctors. not only were bone shards left in my mouth. months down the line, the doctor cut my nerve. as a result of this surge rirks i now have a try gem nal neuralgia. try gem nal neuralgia, also known as suicide disease is described as one of the most painful medical conditions known to man. the va report admits to damaging a portion of this nerve cutting it during the surgery in august 2013 by the doctor. according to the doctor's social media pages, he has devouts islamic views. i was deployed to cue wait and

iraq. i was deployed at the same time that the doctor was at the university of kuwait. it's no secret that many people in this religion want to harm u.s. soldiers. my question, why was he allowed to treating combat veterans. the affairs system should be sensitive to the needs and they should feel comfortable with their doctors. as a combat veteran i should have been given the choice to have the doctor involved with my care especially involving a highly dangerous surgery that required me to be unconscious. i wake up every day and cry in pain. if you can imagine the worst tooth pain you have ever felt that is how all the teeth feel. i have to take muscle relaxers for facial pain.

i take narcotics for nerve pain. i have to take anxiety medication to keep my facial muscles from tensing and pressing my nerves. the migraines feel like someone is kicking me in the skull. my diet is limited to soft foods that do not require much chewing. i'll not only need continuing medical care for my mouth and jaw but have to wear oral pros thets ibs for the rest of my life and have chronic pain and require pain management for the refrs of my life. i am extremely disappointed in the va health care system. their pray or thes seem to be profit protecting bureaucrats, and veteran health care last. i refer to it as death care. from my experience, the not owe

should read delay deny and hope he die. >> thank you, mr. labonti. >> the oral statements will be entered into the hearing record. we will now proceed to questioning. mr. labonti how long have you been waiting for va and/or emory to address the situation created by the surgery? >> since august 16, 2013. >> so nearly two years. >> nearly two years. >> mr. murray, in the september 2011 fee-care white paper it was recommended va conduct a cost benefit analysis of contracting

out the processing of claims as with other payer models. like blue cross, blue shield et cetera. and their applicability for va. what was the rest of the cost benefit analysis? >> thank you for your question. i'm not aware of that being conducted, but i believe i'll ask my vha head of contracting activity if he's aware of that analysis. >> sir i'm not aware of that analysis. >> mr. fry, any comment? >> i'm not i'm not aware -- i can't give you an answer on that. >> okay. mr. fry mr. mcdonald was publicly critical of you after the last hearing conducted by this sub committee on may 14

2014. the secretary may 14 2015. . the secretary stated that he was aware of the problems and characterized your memo as showing what he needs to improve, unquote. he further stated it is your, quote, responsibility to fix it unquote. what is your response to secretary mcdonald's statement. >> we all make statements and wish we could retract them. since that time mr. mcdonald came to see me last week. and he expressed appreciation for me raising these issues. in answer to your question, specifically, i don't run contracting. i'm responsible for overall policy in the va, and i have one

of since heads of contracting activity who does report to me but i do not run contracting for va. i think anyone who reads the document that i provided to the secretary will see that i have struggled in trying to right the ship, and i certainly was asking for assistance from he and the deputy secretary given that i have been unable to on my own, to fix what was wrong. so you know again, i make comments, sometimes, that i wish that i could withdraw, and perhaps he does as well but i sincerely believe at this point that the secretary appreciates and probably is more angry than i am at seeing this waste given that he is trying to move us forward, and every time we move forward one step and this malfeeance is rzr$ñuncovered, we move backward 12. >> i hope you're right that he is upset. mr. williamson, your testimony

states va didn't collect data on wait times from non-va providers leaving the department unable to analyze such critical data and did not provide critical oversight in monitoring of related claims or even the performance of the services provided. gao made 222 recommendations to address va shortfalls but how is the department addressing them at this time? >> on all 22? i could provide a lot of that for the record, but i will say that they have made progress. it's not like they're ignoring us. they are meeting with us. they're making progress. but to consider a recommendation from our perspective we require some rigorous documentation and va hasn't provided that documentation as of now. on many of those. >> okay. thank you, mr. williamson. ranking member custer?

>> thank you, mr. chairman. i have a question at the top, just to get to the bots ol of the issue as to what legal authorities provide the basis for the purchase of non-va care and so i'm asking our representatives from the va to provide the following documents. the 2008 guidance from the chief acquisition officer and office of general counsel that non-va care was not governed by f.a.r.? i think that was the original 2008. and then the may 2013 white paper provided to sentcretary shinseki. and i think from the testimony it's 2014, the department of justice ruling that referenced that va must consider all fee-based care actions as being

f.a.r.-based. so, i want to i'm interested in going back but i also want to try to go forward where we go from here. i think whenever we're talking about health care, we're talking about sort of a triangle of access, quality, and cost. and it seems to me part of the problem we have in terms of public policy going forward is the sheer scope of this problem. because part of what the choice act entails is to bring in private sector net work coordination through tri-west and health net. essentially, that's what we're talking about here. it's massive in scope to have individual contracts, and my district is a rural district in new hampshire. i know about these contracts. i know about these authorization authorizations authorizations. could you comment, and we'll start with mr. murray, but i'd be interested, mr. williamson,

with your knowledge of reviewing this if you had, even if it's an opinion at this point, do you think we can get out of this morass by simply changing the rules of contracting? or do you think that we should try to bring in the authorizations and the, even the f.a.r.-based contracts into these privaten sec sector networks? and i'll set it up to mr. murray, if you would. >> so the choice act does have tri-west and health net. and as you now, we have not got off to as quick a start with those programs as we would like. rest assured that all leadership, the deputy, the secretary are doing our utmost to exercise those programs to the maximum ability, extent, to

get care to those veterans that urgently need it that have earned it and deserve it. the model looks like it i go to the access meetings every morning. many of the members of this committee have been invited to the access meetings the we believe it will be a very effective model for providing care in the community to our veterans. >> can you envision a time in the future where those network will be sufficiently extensive, where you would have dealt with the cost issue whether it's medicare reimbursement rates whether you would have the quality issue addressed via the oversight by these third party administrators, request you envision a time when we wouldn't need to have these one-of individual contracts? >> i will defer that question in a moment to acquisition folks and the vha gentleman here, but it's about signing up building

the network. having those providers in the network, the right type of providers in the network, and certain geographical areas of the country. we see this in the morning through our meetings with the dep sec. it's all about ensuring that you have the right clinical care the right physicians in the right -- >> is there an attempt to get the physicians that you're already dealing with through these individual authorizations, is there an attempt to get those physicians into these net works? >> absolutely, absolutely. so health administration leadership, if dr. tishman was here he could tell you all about the options they're exercising reaching out to their current provider network and getting them signed up or encouraging them to get signed up for choice through tri-west or health net. so, you know it's all hands on deck. everybody moving forward to do

that. >> we'll have to come back to mr. williamson in another round. my time is up but thank you. >> doctor? five minutes. >> thank you, mr. kaufman. thank you all for being here this afternoon. i think, to me what i've learned from this is that it's not as easy to get health care in the private sector for the va as one might think. i think the tri-care model is interesting. but, you know, tri, they pay tri care the medicare rate, and tri care pays the actual providers less than the medicare rate. in my district nobody wants to sun up for this because it doesn't pay very well. and it's been you know problematic. some of the choice people are offered choice, but there's no

providers providers that will do choice because they're getting paid liis than medicare rating. they pay tri-west medicare rates, but tri-west don't pay the people providing the care those rates. and to get those numbers, it's been tough for me to figure that out. but may concern more is about this, for today, a little bit, is about this apparently illegal activity that's been happening. i am just wondering let me ask mr. doyle, are you aware that some of these things were illegal, mr. doyle? i mean that's what mr. fry seemed to tell us that all these purchases are illegal and then you got a legal opinion that this is not the way it should be done from long time ago, which he didn't know that was the case. what you're sort of in charge of procurement of outside care,

right? >> yes, sir. as the chief procurement, logistics officer, we do do contracts for non-va care. so is your opinion different from mr. fry? >> i'm not a lawyer. i'm not a judge. i refer to my legal council and i don't think they'd say it's illegal what we're doing. >> there's a difference between what you believe and what mr. fry believes, is that right, mr. fry? is there a basic difference here? >> i think what counsel will tell you, these aren't illegal they're improper. 's illegal to go through a stop sign in my neighborhood but it's improper to spend billions of dollars outsides law in the va. it makes no sense. this is the same argument the same specious argument that counsel used several years ago when there was an argument in these chambers about the buying of pharmaceuticals without contracts. and at that time the deputy

secretary was here at the table and he, in his oral statement, was about to make the statement that it was improper and not illegal. in this body absolutely confirmed that it was illegal. if we are going to a court of law, the supreme court i'd love to have the argument made that these are improper, not illegal. this is the court of public opinion. the court of public opinion, not a court of law. these are -- >> let me isn't fee for service providing different than contract? i mean i'm a prior physician. i worked at the va for 20 years, and i was a fee-for-service any sis. so i didn't have a contract. i agreed to a fee. and frankly, i wanted to do a contract, but it was so difficult to get the contract, it would take months or more than a year to get the contract negotiated and completed so they couldn't get it done. so they priored to do it

fee-for-service because they could get it done right away. i doesn't know exactly what the details were. >> i'm sorry to hear that you weren't on contract. sounds like an unauthorized commitment. i'm not familiar with the methodology they used to bring you on. but if we're required to have a contract, we're required to have a contract. >> let ghee to a different thing. mr. labonti, let me ask you a question about your care. you said that you don't think you signed a consent form before you had narcotics or some sedatives. >> i signed a consent form after i was administered and aesthetic to calm me down before the surgery. it was a digital pad. i wouldn't call it a consent form. i don't recall signing it, but apparently i scribbled on the digital pad under anesthesia to give the resident the primary surgeon light instead of the surgeon that was supposed to be

conducting the surgery. to me, that sounds illegal, but i'm not a lawyer. >> it's highly unusual in my experience that, nobody where i come frshs nobody's allowed to sign a consent after they've had any drugs so i, that's usually witnessed by somebody. i imagine you have all these documents, are you doing a law suit in reference to this stuff? >> there's a court claim pending. what's also unusual is that ibrahim heron is the only resident that has a bachelor's degree instead of a doctorate. i found that unusual too. there's a lot of things unusually about the atlanta va medical center. >> i think maybe that needs a little more work than we've seen here today mr. chairman. i'm out of time, thank you. >> thank you, doctor. >> thank you mr. chairman. ms. anderson, i'll ask you because mr. fry earlier summarized what he thought your

response would be to the question. was this or was this not legal? >> and not to put too fine a point. this, these were not illegal actions or illegal activities. yes, they were not f.a.r.-kplients. an illegal contract, and i'm speaking as a lawyer. an illegal action or illegal activity it's not enforceable. these, these commitments are enforceable. in fact, the federal acquisition regulations acknowledge, understands that that, that there are times when officials not authorized to commit the government, they do chit the government, and there is a formal ratification process. the courts and the boards have recognized that when the government makes a commitment, pays, receives the services

that the government can't hide behind the fact that you didn't follow the ffrmts a.r. the government received the benefit. and there's a legal theory for recovery on that. so i, i respectfully disagree with with mr. fry's position that these are illegal contracts. >> it sounds like i may or hey not be following the distinction. it sounds like this is an obligation by which the va is legally bound to fulfill. did someone at the va do something illegal in committing the va to this obligation? >> if we're addressing merely the fact that a person not chit committing, not authorized to perform entered into a contract the answer is there is no illegal activity. >> then so mr. murray, to follow up, if this was not illegal, was this improper?

>> thank you for your question. it's, proper is an interesting question, because if you establish the obligation, the provider provided the service, the provider billed correctly and the provider was paid. one would argue that it was proper, but not f.a.r. kplients. >> should the obligation have been entered into in the first place? was that proper? >> it so, thank you again for your question, so was it proper? if it was, so proper -- i don't understand word proper. >> i'd lake to address that. and this is going on the appropriations, the appropriations