re people who would not have qualified for the choice act? >> i think the short answer is yes, if we were fully staffed up if we had all of the facilities we feed, yes, we could have. but there are instances for example, we've relied and come to rely heavy for example, on state nursing homes to care for veterans. and that winds up being -- i'm going to say a billion and a half round numbers ed. >> that is close. it is a billion and one. >> and that is a substantial amount we've come on to rely for outside providers for that. >> i want to turn to hepatitis c. i'm sorry to hear about the lack of funds to provide temperature for veterans with hepatitis c. more than 180,000 veterans are infected and these men and women served their country and should not be denied access to a cure and i commend the v.a. has done to treat veterans with hep c and

we can't lose ground. the new treatments can be extremely expensive and cost as much as $1,000 a pill. i understand the v.a. has been able to negotiate with the drug companies to a lower cost. and i've heard estimates that v.a. is instead paying closer to $600 a bill, is that correct? >> i -- >> you may not have a answer. >> i would like to not have to answer that question. we work very slowly and collaboratively with the manufacturers of those drugs and have been able to reach attractive arrangements for the continued purchase of those drugs. >> and we continue to have those conversations. >> my -- what i'm curious about is if maybe our veterans are maybe choosing to go to v.a. as opposed to the private care or tricare or other options because

they might get access to this medication more easily and the doctors might be able to get the treatment done in a more timely manner? >> i think that is certainly the case. if a veteran who is medicare eligible was to go to a private provider, he would wind up with a very substantial co-pay to pay in order to receive that care. >> thank you. >> thank you very much. mr. cannon for the record, this congress has provided hundreds of millions of dollars in the past few years, in fact one particular system called core fls and this money was squandered and we actually have nothing to show for it. and i think that additional investments have going -- are going to have to be made to brought up to par. >> can you explain more to me about the core ls? >> it was a financial system. >> oh, you're talking about the i.t. >> yeah. and the name of the system was -- and i agree with what you

are saying, but there have been again hundreds of millions of dollars spent in air somewhere and never been used. >> i appreciate that. and my sense since i've been here is that the rollout, i kind of had a feeling if they didn't have this ability to have electronic medical records and doing it all by paper and photocopying things that they're going to have a hard time engaging nonv.a. providers and that is just my point. >> and an excellent point. mr. bill rackous, you are recognized. >> thank you mr. chairman. i appreciate it very much and thank you mr. secretary for your testimony. >> yes, sir. >> the v.a. has estimated a $2.6 billion shortfall for the remainder of the year which will impact the delivery of care to veterans and may effect the following years' budget. and how accurate and firm are you on the $2.6 billion? >> i think at this point in the

fiscal year we're just slightly over three months away, i would say it is a very accurate forecast. it does assume business as usual. >> how do you come to that conclusion? >> well this was built, as i alluded to earlier, we've had people go back and look and do reconcilements in the fee basis care system looking at past patterns of authorization and numbers of points per and the cost of each of those appointments, looking at the month by month track record and the numbers of authorizations and so which really for a forecast it is built from the bottom up. so -- >> okay. considering v.a.'s inability to accurately plan to implement program and construction projects resulting in cost overruns such as the denver project, how much of the shortfall in your estimation

would you say was due to mismanagement of funds as opposed to the level of funding appropriated by congress? because again since 2009 we're up 40%. do you agree with that and how much is due to mismanagement. >> i don't think anything is due to mismanagement. should we have done a better job of managing the buckets of different money appropriated, absolutely, the answer is yes. but what we basically have done here is pushed to accelerate access to care. this issue -- what has happened back to my point earlier, 36% in terms of veterans that have been authorized for care in the community. >> nonof it is due to mismanagement. >> this is about providing more care to more veterans. that is what this is about. >> how much has the v.a. spent in performance, retention and relocation bonuses for fiscal year 2015?

>> i'll have to take that for the record. i don't know the answer. >> can anyone on the panel answer that question? >> i think most of the performance awards are paid at the end of a fiscal year but there are some paid on an on going basis to physicians. we'll get you a number. >> i would appreciate that very much. can some of the audits in the accounts be reprogrammed to address a portion of the budget shortfall? again do you need specific authority from congress to do that to reprogram some of the funds? >> i would not expect -- i would not expect to need authority from congress to reprogram some of the funds. >> is that your intention to reprogram some of your funds. >> we are looking everywhere we can look to identify funds to support care for veterans in the

community. >> thank you. i yield back, mr. chairman. >> mr. bradley. >> thank you, mr. chairman. i was back in my district last week and had a meeting with our veterans and try west came out and we talked about the choice program and provided more information and education to our veterans there. and i also had a meeting with the visa network director in my district as well and she provided me with some information. i'm hearing from my veterans, i heard from her as well, that the -- a group -- a private group called the oxnard family circle that provides adult day services in my district, they happen to be right next door to our c box. so there is a synergy there between the c bok and the adult

veteran day care center for the veterans. and we've been told that because of lack of funds the oxnard family circle is not receiving any more funds and we now have a cue of 15 veterans waiting to get into that facility and the v.a. has said sorry, we're not going to be able to accommodate that, maybe on case-by-case basis given extenuating circumstances we might be able to accommodate a few. so that is a certain tor me -- a certain for me because i'm beginning to in my district feel the implications of the dilemma you are presenting here. and i'm concerned that that is going to bleed into other areas in-home healthcare services and other kinds of things. at the same time we have providers in the district, mental health providers that v.a. has contracted with and yet we're not utilizing them to the extent that they can be utilized and pushing our veterans to

those contracts. and thirdly i would say that triwest i think is very committed to administering the choice program. they have indicated that they plan on hiring lots and lots of folks to do a better job of providing the choice program. so all of these issues that i'm raising right now are sort of fighting against each other. we're going to need resources for the choice program and in order to increase and enhance the program and we wouldn't want triwest to hire a lot of people and then tell them sorry. we have to push more people to the people we have already contracted with and my veterans in ventura county are not receiving the services and beginning to feel this dilemma. so i'm not sure that i have a question -- i'm not sure i have a question except to say i thank you for your leadership. i do believe if you weren't

asking the hard questions your issue around the financial management system and continuing to ask those hard questions, you and the secretary both, that we still might not be aware of this problem surfacing the way it is surfacing. so i appreciate that. i don't think we can look back in terms of our past mistakes. we have to look forward. and so i do believe that we need the flexibility because the money really needs to follow the veteran and in terms of what he or she selects in terms of their service. so again, i'm just very very concerned about what is happening in my district to my veterans as we speak and wondering if there is any remedy to that? >> and we're concerned as well. two of the categories that you mentioned adult day care and home-based care are two services we're not able to use choice to

be able to fund. that would be part of the flexibility we would love to be able to have because we don't want to see that care disrupted. we'll do some homework on the mental health providers and look into that. and the other point i would make is that i mentioned earlier across v.a., we're up to 33% of all authorizations for care in the community, are going to choice and triwest territory they are up to 41%. and i think it is because of the determined effort that they are making out on the ground day in and day out to see that we're using choice in every case we possibly can. >> if i could just add on about the mental health provider. so we do have relationships, long-standing relationships with 87,000 providers around the country and we are doing everything in our power to reach out to those folks. we have sent them a letter, we have asked local leadership to meet with those providers encouraging them to sign up and become choice providers.

so we want the patients -- the providers that our patients have been seeing to continue to see those people under the choice program. >> thank you and i yield back, mr. chairman. >> could i -- i had a similar situation and i brought in the hud vouchers and we were able to get 30 of our veterans signed up so that -- because they had no income and now they will have that income. so that is something that we need to keep in mind because these agencies need to work together. >> thank you. >> i yield back. >> dr. benishek. >> thank you mr. chairman. thanks for your testimony, mr. gibson. frankly, i'm a little bit shocked by the fact that you sit there and tell me there is no mismanagement and we have a billion dollar cost over at a hospital in denver. and that can't be -- if it is not mismanagement, then it is

the standard way of doing things at the v.a. and frankly i was really hoping that the new secretary would be able to revamp the v.a., because i think that business as usual is not working very well for 30 years and the layers of the bureaucracy, and in the v.a. as compared to the private sector corporation of a similar size would be much more streamlined and i was hoping to see a dramatic change in the organization of the v.a. so that things would be much leaner and meaner and that 20-year-old i.t. system wouldn't be used as an excuse to explain why we're hearing at a late date that there is a $2.7 billion cost overrun. so, you know i still have a level of hope that something like that is still in the offing. is anything like that in the offing, a complete revamping of

the bureaucracy of the v.a. or is it going to continue the way it is? because i'm not happy with the progress we're seeing today, another instance of a surprise cost overrun not being able to figure out that hepatitis c is going to cost us money and all of the things that you mentioned. >> yes. first of all, to be clear there was gross mismanagement in denver. the question, as i heard it, that i was beinged ask had to do with the $2.5 billion. >> well that is part of it. there is $2.5 billion missing. >> it is not missing. >> and it is not somewhere else. >> no, sir, it is not missing. it is money going to pay for veteran care in the community. that is what we're talking about. >> the cost overrun that somehow money in your department is misspent on all kinds of stuff. we don't know what most of it is because it all disappears, i.t., we spent hundreds of millions of dollars and it hasn't been updated and it disappears within your system. and that is what i mean by having a -- more control over

what is happening with the money. >> we would love to come brief you on my v.a., which is the long-term plan for the transformation of the department. we would relish the opportunity to do that. the organizational changes, the cultural changes, the training the staffing. >> i would like to see something dramatic done to change the status of the v.a. so that it is much better than this bureaucracy that we have here now. and this hearing is another example of. >> well -- i would just mention you alluded to the fact it has been going on for 30 years. secretary mcdonald has had ten months so that doesn't mean that we don't need to be getting things done. we do. but -- but i think we have to take into account the fact that changing an organization as large as v.a. in less than a year i'm not sure who would be able to do that inside the

federal government no less. >> i have another question about this fee -- or not the fee base but the choice act. the way -- the slow implementation of the choice act. and i think a part of it is the problem with getting a provider list up there. and as my understanding we were going to be paying medicare rates for care but it is also my understanding that the third-party providers are getting medicare rates but the people doing the rates are not getting medicare rates they are getting less than medicare rates and some of the providers i've talked to said the rates are 30% less than medicare rates so their reluctant to sign up for it because they are losing money. >> that is the issue that alluded to in my opening statement about providers' reluctance to sign on to choice. there is a widely held

misperception and i think a lot of it has to do with the fact that we wound up having to use the two third party administrators for choice off the pc 3 contract where it is below medicare so providers out there associate health net and triwest assigning them below medicare rates but what we pay in choice is medicare. that is what we're paying. and i've personally had conversations with providers and academic affiliates where they go, i didn't know that. >> that is not the information i've had. the people i've talked to, hospital administrators for example, have told me that well, we had a better deal before when we were doing the fee for service or a contract with the v.a. >> they probably had a better deal when they were doing a one-off contract with v.a. but i doubt seriously they had -- i know they would not have had a better deal under pc 3. we would be glad to share to you

the letters going to providers. >> would you like to see that. >> that makes it clear that the -- >> from what i've received anecdotally from individuals. i yield back my time. >> mr. titus you are recognized. >> thank you mr. chairman. thank you mr. sloan for being here you are amazingly patient cool headed and straightforward and appreciate that. i know that the v.a. is just overwhelmed by dealing with problems of the past. but it seems to me that a real problem in addition to an old i.t. system or an old financial system is a lack of a planning system. we've -- we didn't have the planning for the cost of treat treating the hepatitis -- thank you -- and the medical technology is changing so rapidly and new medicine is being developed and we didn't really plan for this backlog

that is developing now with the appeals process which is a result of resolving the backlog with the original filing. and as you mentioned, we don't have a very good way to plan for a demographic and geographic shifts. i've been saying since the first day that i worry about places like las vegas where the demand is increasing. "the new york times" said it was a 20% increase in las vegas. you said in your opening statement that it was 18%, but give or take a few. and we're going through money quicker, our visit is burning through the rvu's, will we run out of money sooner and if that happens what will i say to veterans in las vegas, how do you make up for that kind of money and is there anything in the works to look at the whole planning process? >> that is a great question and a great issue. i was recently the staff -- the staff brought me my briefing deck to give 2017 budget

guidance to the organization, and when i got to the recommendation page, my choices were to nudge one number up a little bit, nudge another number down a little bit and i said wait a minute, that is not the way we're going to do this. we're going to build a requiremented based budget and that is what we expect to deliver to the veteran, the veterans experience. so i'll take appeals as an example, you mentioned it. let's say hypothetically we want to give a veteran an appeal decision within a year of the filing of the notice of disagreement, right now, it is more like four years, five years, something like that. we obviously can't meet that standard immediately. we decide how long it will take to meet that standard. and then the conversation that we wind up having is about the requirement and the resources needed to meet that requirement. same conversation on hep c, the last time i was here in this committee, i proposed the idea let's take hep c prevalence among veterans getting care at

v.a. to functional zero within three years. let's let that be the requirement that we manage to. we all agreed to that and understand what it would cost to do that and then v.a. executes to that requirement. that is how you build a plan that starts with the veteran experience that you are trying to deliver. you're absolutely right. >> i hope so. and i just -- for the record, i agreed to go along with the bridge money for the aurora hospital that gets us to the end of the fiscal year and it was a patch -- a little here and a little there and you took from other projects around the country. but i cannot vote for a 1% across the board cut. i think that is a bad way to do budgeting. i always vote against amendments that do across the board cuts. i think you need to look at where you need the money and where you don't not just slice it across. so i hope you will come with

another proposal because when the time comes, i cannot cut other veterans' benefits across the board to bail out a bad construction project in denver. thank you. i yield back. >> mr. mules camp, you're recognized. >> thank you mr. chairman. mr. secretary, i want to follow up on a few things that have been asked here and take the opening questions from the chairman of the committee is about when did you know and i didn't quite here hear -- hear exactly of when you were novembered about a proximately 40% cost overrun in this budgetary fund. >> it became clear there was a very large variance i would say in mid to late may, in that general time frame. mid-may probably. and we began working with o and b looking at series of alternatives and different possible solutions within funds we may or may not have direct

control over. >> and second question would be -- and i appreciate that. where are we at today on the choice fund how much have you used? i know the president had submitted a budget and there was strong pushback about rating the choice funds. can you tell me where we're at on that? >> i think under 802 it is a little over a billion dollars. is that right. i can't read that without my glasses. >> 437 for care and 402 under the 801 section. >> to $940 million, i was close. i was estimated. >> used or under used or overruized or how much --? >> back when we did our first estimates on choice we were looking at utilization somewhere in the neighborhood of $3 billion in the first year. if we look at what we've done of accelerating care in the community and what we forecasted for choice utilization -- >> compared to february, when you came in and proposed that you raid the choice fund and use

it for other funds which is -- sounds like what you are talking about doing here today, and is it where you predicted it was in february when the president proposed to raid the choice fund? >> i'm sorry i don't understand the question. >> in the president's budget he proposed to raid the choice fund and use it elsewhere. including nonv.a. care if i understand correctly. >> correct. >> and we ran short even though we didn't know about it until may and the president proposed to do that for 2016 in his february budget proposal. where are you at on choice funds and you said $940 million. so what did you project you were going to spend? >> between now and the end of the year? >> yeah. >> i would say we'll be -- an optimistic spend is a total of $1.5 billion and additional $500 million for care and if

that is inside choice that reduces the $2.5 billion shortfall. >> and following up on when you knew about the shortfall and when you told congress, what is typical practice? you wait until the end of the fiscal year and add up the bills and see where you're at? it sounded like you did something out of the ordinary to say hey, let's see where we're at, because looking at eyeballing we're 40% over? is that normally -- how often do you figure out where you're at on the budget? >> we're looking inside of the financial management system which was mentioned earlier providing reports to appropriators. >> well how often. >> at least on a monthly basis. but the point i made earlier, as of march 16th i have a memo that said through the first five months of the year were under -- we're under obligating and it didn't make sense and that is why we had manual reconciles in the fee based care system to find out what had been obligated

because we don't have the automatic interfaces. >> i still don't understand what happened. so the march memo, was the data falsify falsified, inaccurate? >> they were reporting what was in the financial management system and what was in the financial management system didn't take into account all of the specific details of every single individual authorization for care. >> and that is business as unusual. they give you reports even though they know -- >> historically this would have been done at the medical center level where we used to keep the budget but when congress passed the choice act they forced us to take all of the money out of the medical centers and consolidate it in -- >> and you knew that in march. that wasn't a change in march that was a change in the summer. [ overlapping speakers ] >> i'm trying to figure out how you can have a 40% cost over run in this budget and come to congress in june and say by the

way we have a couple of months left and we asked to raid choice in february and i'm concerned about that i'm concerned about the implementation of choice. >> the illusion of the budget document and the secretary said this repeatedly is give us the flexibility to be able to use money to follow the veterans and that was my comment about veterans make decisions faster than the budget cycle. and quite frankly, we can't change as fast as we need to change, to accommodate -- >> if i understand correctly, you hired about 12,000 individuals you hired. >> net increase. >> how many of those are direct care providers? >> more than a thousand are physicians more than 2700 are nurses. i can't tell you how many were psychiatrists, oncologists. >> i would like to know that. because based on the figures you gave us, only a third of what you hired was direct care and two-thirds for something else. >> one of the biggest challenges

throughout v.a. is we don't leverage our providers with sufficient support staff and that means they can't be as ploe ductive as they need to be. >> thank you mr. chairman. i yield back. >> dr. reese, you're recognized. >> thank you mr. chairman and ranking member for holding this hearing. thank you to our guests for being here. my question is more in line with the implementation of the choice program. so we have some money that you want to take from that program and put it into other nonv.a. care and other types of care and i'm always in the view that we need to take care of our patients, take care of the v.a. so if you need to take care of them by purchasing more medications for certain ailments or illnesses, then that is what we have to do. however, what i'm concerned about is why there is this money that is not being utilized with the choice program when i know

many my district after speaking with 70 specialists and in high demand specialties with triwest and loma linda v.a. and other members here have done, that there is not a clear understanding of the process or of the implementation or outreach, there is no education efforts by the v.a. as much as we would like to see. and so the implementation -- the actual implementation is very slow and not very efficient and effective. so why is there money left over from the choice program and is that money that could be used with the implementation of the choice program? >> well that is -- i think we're on the same wave length here. actually first of all, a fine-tune. we're not looking to move money out of choice. we're looking to use money to use choice funds to pay for care

in the community. we don't want to move it someplace else but we want to access it to pay for care in the community. in the opening statement i went through a litany of seven or eight different factors that have gotten in the way. many of them have to do direct think with the implementation of choice. i was surprised the other day in one of our daily standup meetings on access to care, when folks were describing to me the five year process underway to put in place the procedures for utilizing care in the community our old traditional program, and they are still working on them, after five years. we roll choice out in 90 days and i'm reminded that when we first went to the industry about choice to look for a third-party administrator, they said what you are talking about is going to take 18 months to put in place. and the idea that we would put it in place in 90 days, they said it will never happen. and i think eight months into this part of what we're learning

is the time required to recruit providers and change internal processes and the fact that every process has different payment mechanisms and different reimbursement rates as we've alluded to before and i think every one of the issues have gotten in the way of our ability to route care to choice. but as i mentioned before, day by day the penetration into choice is improving. >> so how about the idea of maybe consolidating the seven different community programs. >> yes yes. >> and stream lining them -- >> yes. >> is that under way. >> that is exactly what i described, that i referred to in the opening statement. we want to do precisely that. we're going to need congress's help to do that. you want to make a comment on that. >> and i was going to say we have informed the field that we want choice to be the number one mechanism by which we send people into the community for care. we have work to do. we know that. to try and stream line some of

the processes. we are training our staff today and some of the stream line processes so we'll do more coordination of that care the way we have in our purchase care programs in the past. but that movement, to stream line those various channels is already underway. >> whenever a system wants to change they usually have champions or coaches that go into like a hospital or something else. i think that there should be some coaches that go into a community or a region and help set it up for the providers, set up training for the veterans and work with the members of congress so that we can help others do that same thing. >> i think you're absolutely correct. and as i said, earlier triwest for example and our folks are going around the country meeting with providers in the community trying to get those providers to sign up for -- to be choice

providers. and i think that's been a pretty successful effort on our part and i have to law triwest because they have worked very hard to make that work. >> members, we're going to take a short recess so -- we have two votes. we'll resume the hearing immediately following the last vote. [ hearing in recess ]

we'll resume the hearing. we have members that are still making their way back from the last series of votes. i thank everybody for your indulgence. miss custer are you prepared to go ahead and begin with your line of questions? miss custer, you are recognized. >> i am. thank you. thank you very much and thank you to our witnesses to be here. i was looking for an e-mail that i just received from new hampshire and wanted to thank you because it is a little bit of good news. we have signed up an important

community partner of ours in the north country in new hampshire a sparsely populated area with veterans to be part of the choice program. and i just wanted to reference that because we've talked quite a bit about this transition and how long it takes. and part of that i know is to line up these private community partners, healthcare providers and particularly as we get into care for seniors, adult day care, as we get into home care. where i want to go, if we could is looking forward, because i think we can all agree and there is bipartisan concern about this transition but some of my colleagues may not be familiar with this notion of the other six types of programs. and as i know -- as i've sat down with my v.a., we've talked about when the choice program is

applicable when the other programs are applicable. and it seems to me, there is a multitude of dimensions but if we could just take two one is the availability of services so whether it is a network or whether it is a local provider that is willing and able and available to provide service. and the other, not surprisingly, is cost. and both the cost to the taxpayer to provide the service but also i think you pead a really important point for people to understand about the out of pocket cost to the veteran. because until we have an understanding of these decisions that are being made, we're not going to grasp the dimension of opening up access. and we had a note in our memo that said previously the v.a. has controlled access through

distance and delay. and that is the reality, right? we made this promise to our veterans and then the way we kept a lid on the cost of it to the taxpayer was that for most veterans it was either too far away or it took too long to get the service. so help me going forward with your magic wand here, with the change that secretary mcdonald and you mr. gibson and others are brinking to this -- bringing to this unwielding organization, what would be the path forward to stream line these programs, provide direction within each of the different divisions and different communities and get access to the veteran in a way that is timely and high-quality, and cost-effective and efficient for the taxpayer. >> if i could ask dr.

tuchschmidt to start out on that one because eve done a lot of work precisely in this area. >> and i don't want to get too complex but what do you need from us? is this a congressional change and how can we get together with you in a bipartisan way to make that happen? >> so we have been working spending really almost the last year since the legislation was put in place in november working with deloitte. we asked them to bring their commercial side of their business in to look at our business office and how we manage care in the community against -- and benchmarked against best practices in private-sector health insurance industry. we have identified core -- they have helped us identified core competencies and done a maturity assessment against best practices in private sector.

we are -- have taken that and are developing a plan to really make sure that we can build all of those kpensys using our current business office function on the foundation on which we will build over the next year or so some of the competencies. we'll have to make some decisions about do we build that ourselves or do we buy that, because that expertise is out there and it is -- more cost effective and more efficient to go out and buy it. we have a group right now looking at our tpa processes to say going forward what do those look like and how do they remain and what do we want to put into the tpa contract in the future to run a more robust program. i think part of what we are

going to need help with is rationalizing the programs. i think ultimately we want project arch folded into the choice program so that we can get rid of some of these multiple channels. and i think we're going to need some changes to the choice act itself the way the choice program is structured. i think we've alluded to those changes several times, about medicare providers versus providers that we believe are qualified to deliver that care, those kind of things, 60 day authorization periods. i think us being the secondary payer under choice is problematic. and it is very problematic in places where -- i was just a couple of weeks ago in alaska talking with the d.o.d. folks and engaged with dr. woodson and his folks that is really problematic if we want d.o.d. to be providers for us. >> i have to tell you my time is well past up so -- but this

is the direction -- i would love to get a briefing going forward and if we could stay on top of that. thank you and i apologize to the chair. >> thank you, mr. coffman you are recognized. >> thank you mr. chair. secretary gibson, in march so what we are in effect talking about is the shortfall in the budget available for healthcare. >> correct. >> and so if you look at the v.a. historically i think initially it was for service connected issues for military personnel, not meets tested and then we expanded that to low income veterans on a means-tested basis. and then we expanded it again at some point to give automatic

eligibility to our returning active duty leaving for civilian life, that is not meets tested. and i can't remember that is four or five years that they have eligibility. in march of this year v.a. announces it would no longer use the net worth or asset test to determine v.a.leithibility thus expanding it again. but you did it at a time where the money -- so i guess it is my understanding you have the statutory authority to do that. but you have to make an assessment of whether you have the resources available to meet that expansion of eligibility. clearly you don't have it. and so what are you -- what are you going to do about this? >> you know i'm going to have to follow up on this one for the record. but my understanding was what we did was we were able to substitute other means tests that we were able to access directly from the irs or the

social security administration or something like that in place of an annual requirement on the part of a veteran to file about net worth. so it is my understanding and we'll go validate this and come back to you for the record but it is my understanding that this wasn't a move to open the app ature, it was a move to relieve a administrative burden on the veteran. >> we need to find that out. because i got this information through a veterans magazine. one of the vso's and they were touting it as an expansion of eligibility by virtue of relaxing the asset requirement and making more individuals eligible -- well they would be eligible any way but would have to pay for a portion of their care. this would relax that requirement and so obviously then it is an expansion of care. i think you would assume that more people would go through it. i think that if you would look at that and get back to the committee on that, because i think that is a concern where we

don't have the resources to meet our current obligations and we really can't expand eligibility to new population. >> i think you are absolutely right. i agree with you. and we'll follow up for the record. >> mr. chairman, i yield back. >> thank you, mr. mcnerney. >> thank you mr. chairman and thanks for bringing this to light, this hearing this subject. i'm going to ask a couple of per oakial questions first if you don't mind. given that cost overruns and mismanagement continues to be a problem, do you feel the v.a. could use public-private partnerships for major construction projects where the v.a. allows nonfederal stakeholders and construction experts to work on projects? >> the short answer relatively less informed, is yes. in fact secretary mcdonald and i met about two weeks ago with the leadership of the association of general contractors and a number

of large and smaller contractors that work with us on a regular basis. this was one of the very specific topics that we talked about and in fact we have agreed to come together to look at specifically those opportunities. we are also actively considering an opportunity in san francisco on a specific project for public-private partnership. >> okay. well the cost overruns of the denver medical center cause a delay of the french camp community based outpatient clinic and other major construction projects that the president has prioritized in the fiscal year '16. >> i don't expect that what we're doing in denver will have any adverse impact on any major lease transactions. and depending on the ultimate funding source that we wind up working out with congress, with both the authorizers and the appropriators i can't say it won't effect some major construction projects because

that is one of the options that has been on the table. but i think there is a strong desire on the part of congress for us to not adversely impact those projects so i think it is less likely we would see that as a source of funding. >> well in the april there was np announcement of about 15 page proper projects five of them were too late for the corp of engineers to be involved in and five of them still being questioned. do you have an idea of which projects are still under consideration? >> in terms of transferring -- engaging the core to -- the corp to became our construction agent, there were five that the corp and the v.a. were too far along that it made since for the corp to take on. i think we've taken the number of five up to seven on ones that we've agreed with the corp, we would turn over to the corp for them to be the construction agent. and three that were relatively

smaller transactions that we felt like made the most sense for us to hang on to. >> could you identify which ones are which? >> we'll get that for you. i would be glad to. we have the list. in fact he may have it in his book over here and if it does we'll give it to you before we walk out the door. >> and i'm not sure if this is asked. what is the price deferential versus v.a. medical services versus nonv.a. medical services by whatever metric you may have. >> i'm going to defer to our clinitian here. >> i don't have that in my head but we can take that for the record and get that information. >> okay, well following up what about healthcare out comes. what is the different in healthcare outcomes from v.a. based service versus nonv.a. based service help for veterans? >> again, i don't know that we actually have our own data around that but there are plenty of research studies done looking at outcomes between private

sector and v.a. and basically have found that the quality of those services are comparable, whether it is in the v.a. or outside of the v.a. >> one of the things i would suggest that we do let's plan on a sale briefing for the congressman. this is the comprehensive tool that we use to evaluate care, quality, patient safety, patient satisfaction and many of the metrics that we use are metrics used in the private sector so we have the ability to be able to compare across v.a. and the private sector and we'll get someone like peter almanoff to give you a briefing. >> that would be informative. and how about the new treatments of the hepatitis c. are they showing good health care outcomes. >> it is early to assess that in the process. most of these are month courses of therapy. but all of the studies done to approve the drugs show they have

a high cure rates much higher and less side effect profiles than the drugs we had in the past. >> since so much resources are being expended in that direction, we need to have a pretty clear understanding that it is showing improved results. >> right. >> thank you mr. chairman. >> dr. went strop, you are recognized. >> thank you mr. chairman. an thank you all for being here today. i want to ex pound a little bit on what mr. mcnerney was talking about, cost, versus v.a. and we had this discussion before and you told me you are a ways away from assessing that and the best way is how much are you spending per rvu by physical use and by that i mean the supplies, the administrator and the employees and that is what a private practice has to do and would you what assume we're not at that point correct, is that correct? >> i don't think we are. but i think we are getting closer. jim. >> we have done cost per rvu

based upon -- so the data that i'm about to quote i think is based upon salary our salary and benefits direct cost direct costs. so it's equivalent to what we're paying the provider. our cost is much lower than private sector benchmark. >> sure. it probably would be. but you're not taking into account what the private sector person is paying for their insurance, staff, supplies physical plant, all those things. that's how you can really evaluate what you're paying for rbu. in a business model which is really what we're trying to get to here, which i don't think va was ever in one before, we want to get to that point. you have to be automobile to assess. because at some point you have to say you know what? we have more buildings than we need. or we need more buildings than we have to be more productive. that's really with we need to be headed. and that's why you have to take into account all of those things. that's what that private person is doing. when the va pays that nonva

provider, they're not accountable for all the other expense that's that person takes in. so we're not really comparing april apples to apples if we do that. we can make wise decisions together. we need to keep looking for -- how do we reduce fixed costs and still provide the same level of care? one thing i was encouraged about today, increase in rbus, 10 periods.%. can you tell me how did you it? >> it's a combination of factors. i eluded to extended hours. that allowed us in many ways to make more efficient use of our space. we've gone in and scrubbed primary care panels. we've gone in and looked at appointment grids. we've gone through that kind of scrubbing process. we developed a couple of different productivity assessment tools that now pushed this data out to individual medical center down to the clinic down to the provider.

so that we're able to look and see how relatively productive a particular clinic is in relation to the volume of appointment activity and demand for care and folks are beginning to make adjustments. they realize they have excess capacity. >> are we reaching out to providers and asking them what is it you have to do that makes you less efficient as far as seeing patients? what can we do? we talk about things like you're working out of one treatment room. we know that's inefficient. we need those -- we need feedback from the providers especially ones that have been in private practice. you are eating me up with doing x, y, z, restocking cabinets when i should be seeing patients. so i hope we're get going provider input. >> my sense is we are. we undertook a major initiative

a year ago to look at support staff for our specialty providers. which gathered vast amounts of input out in the field. with off the conclusion that we were way underleveraging our specialty providers. one thing we're doing is ensuring that we're adding support staff into our specialty clinics as an example. >> thank you. >> one other thought i had too, with one of the things you said today. a lot of veterans do choose to go to the va. and a lot of veterans have other care. if the va is their choice, bill their insurance. get on the plan. they have insurance somewhere else. a lot of veterans don't use va because they want more funds to be there for those who need it more. so if they have private insurance, we do bill their insurance. sometimes that is medagap

coverage. we don't get paid. but -- and we don't have the authority to bill medicare or medicaid or tricare. >> well, medicare and medicaid is robbing peter to pay paul as far as the big picture of taxpayer dollars. but private insurance is a different story. >> we do bill those. those collection rates are going up year after year after year. >> dr. abraham? >> thank you, mr. chairman. thank you for being here, gentlemen. i guess a statement first on just fiscal responsibility. i was reading the nig's report last week. i think he said that the va didn't know they had $43 million in an account. all of a sudden it was just found. after just sitting there for three years. that's somewhat of an astounding thought. then i look at the choice act. i read the act. there are $360 million put aside

in the choice act for awards and bonuses and that type of deal. now, you know, being a businessman, i'm totally support a bonus and award whether it's appropriate. but if that's an accurate figure? >> i think what -- no. it's not. >> the initial traunch was $300 million if i was remembering right which is now somewhat higher than that. but it's the money that we wind up paying the third party administrator for basically administering the department.

>> i think you brought up the subject of the rate being paid. what i'm seeing in our district in louisiana and you've addressed this in a previous hearing and we'll kind of address it again is not the rate but just actually getting paid. i was in district last weekend and had three separate providers come up and say i haven't got my money. this has been going on for two and three years. i know you gave us good figures before. but the word on the street, so to speak, is there are still issues out there. >> two things. first of all it's one of the advantages of choice. the provider gets paid about it third party administrator. that is consistently happening within 30 days. we watch that and monitor that. va is historically known to pay low and slow. and that is not how you want to

deal with your provider. what we've done is organizationally consolidate. we were organizationally doing this payment processing through 21 separate headquarters in 70 different physical locations, processing invoices for care. and i will tell you based on what i heard, we were probably doing it in 150 different ways. and so we've consolidated organizationally. we've begun to tackle the staffing issues and processing issues none of which were being tackled unless they were in a work around situation somewhere. instead of establishing a call center available to handle inbound questions from providers

about their payment, we would have a processor that is processing a payment and the phone would ring. they would answer the phone. doing business in a way that you never see in i private sector. we now have that all organizational reporting. we're seeing the times improve. what they're doing is sailing into a head wind. they've got a 40% increase in invoices being presented for payment over last year. there are a lot more invoice az year ago but they're barely keeping up. we have made progress in 16 though. >> one more question. the money for 16 and 17 that you are projecting, you think you're pretty much spot on? do you think you need to come back? >> we're short in '16. the budget is $650 million somewhere in that neighborhood.

that won't be adequate. when we run out of money to do an inside va, we refer those to care under choice. >> thank you very much. do you have another question? >> i do. but i will pass. i'll be last on my side. >> i want to continue my questioning on the hepatitis c. you don't ration hepatitis c care. you don't seem to need. to i want to get some idea about the experience of say, a

veteran who has hepatitis c. does the physician within the va have full discretion about when that medication is supposed to be accessed and prescribed? >> we have guidelines for hepatitis c patient ands new drugs spes figcifying when drugs should be used and hierarchy of people that have advanced liver disease should be treated first et cetera. but the decision to treat or not treat is an individual decision between a clinician and a patient. >> so the doctor, the physician has a considerable amount of autonomy in making this decision. i've been reading disturbing cases in the "l.a. times" recently about a woman who's been -- and her physician and

they're battling a private insurer. the insurer would rather provide the medical at a later stage of the disease. and in this case, i don't know what the experience is for people in medicare, whether they're in traditional medicare or medicare advantage plans but at least in the va you're telling me the current situation now is that the physician's judgment is pretty much honored? >> yes. we respect the clinician judgment. there are many places in medicaid which is -- will not cover the new drugs. there are some private insurances that do and some private insurance that's don't. we have covers the drugs. for the patient who has advanced liver disease as a result of hepatitis c, you're at risk of cirrhosis and liver cancer from the hepatitis c virus. if you have advanced liver disease, you're definitely a

candidate for therapy. if you are infected but don't have active liver disease, right now you're kind of lower down kind of in a priority list perspective. but as a patient i potentially am infectious to other people. so i'm infectious -- it's a blood-borne disease through contact with my wife and my kids and other people in my household, people i might be working with et cetera. you may not have active liver disease, but you may have a lot of concerns. >> you were reluctant to reveal how much you pay for that drug. is there more than one manufacture? manufacturer. >> there is more than one manufacturer. >> i didn't realize there is

this competition. >> there are multiple mafr manufacturers of multiple drubzgs. >> medicare spent $4.5 million in hepatitis c treatments 15 times over what spent the year before. i don't know what the experience of the va is or just what you're spending per patient. i realize you're not willing to reveal that. and i'm looking at what people are experiencing with private health care insurance. it seems to me that people are making rational decisions, especially our seniors who are low income that they are probably getting 5:00 sfoes a doctor who can make a decision and not have to wait on an insurance company. in this case, the va is providing a much more superior

service to those veterans. you mentioned secretary gibson the case of knee replacement and out of pocket costs. i'm wondering what the out of pocket costs are for the seniors limited to medicare if they have to get this hepatitis c medication versus the veteran. >> i think it is $72 million, you would get capped out at that amount under medicare. >> the senior would have to pay that difference? >> yes. >> wow. >> that will be a big problem. >> it is clearly a very strong incentive. it applies not just to the hepatitis c treatment, it applies to whatever a veteran may be pursuing. there is some preventive treatment that medicare has no

kae r. co-pay on. in that instance he has a choice without any economic consequences. he can go to va or private provider and use medicare. if it's procedure with co-pay, then he is making a rational economic decision. >> may i respond. i don't think you were here when we passed the prescription drug bill. when we passed it, we directed the secretary not to negotiate the price of the drugs. so that was a part of the deal. >> it would be illegal for the secretary to address that issue. but i'm just clearing up what happened. you weren't here when we did it. but in addition to that, in the affordable care act that is now standing, we are doing away with that donut hole that you talking about. >> miss brown, i was aware of

that and merely trying to suggest that the va is doing business in a better way. >> oh, absolutely. thank you. >> do you have any questions? >> thank you, mr. chairman and ranking member. good afternoon secretary gibson and thank you for your testimony, specially about the improvements to access to health care for all veterans. i'd also like to extend my sincere thank you you to and secretary mcdonald for sending dr. wayne feffer for the va pacific islands to represent your department during the most important holiday in hawaii flag day commemorating the 115th anniversary of the raising of the united states flag on our island. it meant the world to our

island. i don't know if you're aware of the shortages of medical personnel affecting the services being provided in our va clinic back home in american samoa. for example, we have awedology equipment on hand in the clinic but no specialists to operate it. we also have brand new physical therapy equipment on hand but no pt specialists. so i'm wonldering how many if any of those new vha staff members you hired were for the va clinic in myrrh samoa. >> i'm not able to answer your question off the top of my head. i see dr. writing over here. i'm sure there are folks writing. we'll get you an answer back to let you know. and i'll also look into the vacancies in our clinic there. >> how can va improve the budget planning so that we can react to higher than expected demands for

care and/or increase costs of medications or other necessities? >> that's a great question. and i eluded in my opening statement to the challenge that's we have as a department forecasting reaction to improving accepts, being able to forecast changes in reliance on va care. and being able to get information about market penetration. whether you look at the number of veterans in a particular market i happen to know from early visits and phoenix was traumatically under market and there is part of me that looks at the response that i saw that i described earlier. not necessarily surprised and we don't factor those elements in

or measure them effectively. and we process improve access to care. and he's giving us an opportunity to gain better insight and data. and we are forecasting future instances that we're able to look at those and understand a little bit better what the anticipated response might be. and i would tell you medications i think the lesson that we learned from hepc is very early on when we identified what you might characterize as blockbuster drugs that have a high pricetag. we start thinking and building in our planning as soon as we can. the potential impact of those, there are a couple of cardiology drugs that are in the pipeline right now.

they are supposed to be blockbusters coming down the pike that we're already talking about and trying to make auns loz for. >> thank you. >> if i can add to that. today we use the best firms in the world to do our modelling and projections. i think those models work well in very stable environments. when that environment is bothered, it becomes very hard to predict. i think we've been doing a lot of work to look at and try to understand what would happen if we, a lot of interest in making the 40 mile benefit, 40 miles from a place that can deliver that service. we've been doing a lot of work to understand what does that look like? you have to make a lot of assumptions that may or may not be correct. i think in very dynamic situations, it's hard to do the modelling you might be talking about. >> okay.

thank you. thank you mr. chairman, i yield back. >> thank you very much. miss bradley for a very short question. >> thank you, mr. chairman and ranking member for your indulgence. i really appreciate it. i had highlighted earlier my earlier testimony some of the impacts that my district has already feeling. one of the other issues they raised, too, is the cmp valuations are beginning to slow down as well. i know the folks that work in my congressional office are feeling that impact. i think you've said that $600 million you found $6 hundred million. i'm wondering will that $600 begin to medicate these impacts that my district is feeling in the short term? and then if congress doesn't act on the fiscal year 15 budget short fall what is it going to look like in the va in july? in august? and october 1st? >> well, we had -- i think the

number i should have used, $348 million is the amount of dhash we provided congress notice on that we intend to transfer in to cover additional cost for care in the community. i think the farther we go in the fiscal year without at built to open the apiture and use the funds, we get into very dire circumstances. you know, before we get to the end of august. we're in a situation where we are going to have to start denying care to veterans in the community because we don't have resources to pay for it. and that's -- i don't think anybody wants to see that happen. it will be a very unpleasant and unsatisfactory situation. >> and will you be giving us any of that information so that we have the you know the real

data to understand what -- >> i'm hoping that we wind up not having to go there and that we're able to use choice dollars that were appropriate ford care in the community and pay for care in the community f that's the case then i think we're going to be absolutely fine and we're going to be able to sustain care for veterans. even in the context of this increasing demand that we're experiencing. i think failing that yes there will have to be a lot of communication that goes all the way down to the medical center level. so that members understand what is happening in their particular districts. >> so with the transfer of money, 358, whatever you said it was, can i go back to my district and tell my folks who are waiting for adult daycare that we got some extra money and we'll be able to address their issue? >> part of what we're going lou is leveling across our different locations. and so a lot of that is happening inside of this and

where they may have one center that has some additional resources available more than another medical center would. so there is leveling happening there. there is leveling happening at the top of vha. we're going to continue to look internally in the very short term for opportunities at the top of vha that we're able to distribute out to the field while we're waiting for the appropriators nod on the additional $350 million that we've asked that they allow us to transfer. so it's hard for me to say at this point down to an individual medical center level. here's what that $348 million is going to mean to you. >> thank you, mr. secretary. thank you, mr. chairman. >> thank you, miss brown. final comments. >> thank you. i'm going to say, you know, right up front that i don't support across the budget cuts. so i would not be supportive of across the board cut. because that's just any

programs. and i need to know, we gave you all $15 billion. you have five for health care. >> for staff and facilities yes, ma'am. >> i thought it was just for veterans care. did it just say -- >> there is $10 billion for veterans care, $5 for staff and facilities. >> so i need to know that wla ithat is the you need from us from congress, what do you need us to do to put us where we need to be. i don't want anybody calling me saying we're not providing care. that is unacceptable. >> yes, ma'am. >> and when i talk to my colleagues on the floor they say we don't understand what is the problem. we give you everything you all ask us for. and so i'm at that page two. if you ask us and say this is what you need i'm going to fight for it. i don't want veterans saying we're not providing care.

i read stories about me and my district. when you open up the clinic, then the mayor went through the roof. >> yes, ma'am. >> so help me here. >> so we owe you a formal request, the specific request and the context that we're talking about here. it is a request to allow va to utilize choice program funds, section 802 funds to be able to cover costs for care in the community. meet the criteria for choice. i think that will be the central feature of a formal request to congress for support that will allow us to avoid disrupting care for veterans. >> i hear people in the back of me saying we going to need a number. >> the number we offered is $2.5

billion. it's the forecast as we continue to deliver care in the community between now and the end of the year of what our short fall would be. >> i'm confused. if we give you authority to move the money around, will i not get the call saying we are denied care. that's how we got to the $15 billion is because we want to take care of the veterans when we send them to war, we have an obligation and responsibility to take care of them. >> every step we take to improve access to care, just like opening a new outpatient clinic and the demand goes through the

roof. that is the same thing we're experiencing across vha. we do something whether it's additional staffing, you know addition alphaal facilityies and what happens is all of that additional capacity gets more than consumed with additional demand. and that's why the total wait times are up. it's the accelerating demand that we're dealing with. so you may still get a phone call from a veteran that says i'm not getting timely care. and the veteran is going to be right. because he's not getting timely care. that's because we improve access to care as fast as we can. and the demand grows even faster. >> well, if that veteran wants care at the va it may not be in the time that he wants. but if he wants choice, he wants choice, it should be within 30 days. >> it absolutely should. and if we get the additional flexibility so that different kinds of care are choice

eligible, then you're absolutely right. there shouldn't be a reason for a veteran to have to wait if he's willing to go get care in the community. you're right. >> thank you mr. chairman. >> the one thing that i'm a little confused about is it relates to the short fall. you've talked about in your testimony when you use mitigating factors is the short fall of 2.6 or 2.7 whatever the number is, is that after you implemented the mitigating procedures? >> basically it assumes that biggest mitt ganti gant is that we're successful in getting choice. we think the current estimates are that we may be able to shift $500 million worth of choice eligible care based on today's eligibility criteria into choice between now and the end of the year. that's including in the 2.$2.5

billion. if we were successful that comes down to two billion. it is a pool of 2.$2.5 billion of care in the community where we want to be able to sustain that care for veterans. >> very good. and one thing that concerns me about the answer to one of the questions where you talked about with mr. tacano getting to a point where you're going to have to begin rationing care to folks with hepatitis c, i hope it was not your intent to infer that you would not go to something that you've already testified today to the fact that you can go in and take money out of the bonus program to plug that budget hole if necessary. surely you would choose to draw money out of the bonus plan in order to provide hepatitis c drugs. and not keep that program whole and cause veterans not to get treatment. >> the -- we are not doing any rationing of care today.

we don't expect to do any rationing of care with hepatitis c. the things that allowing us to do that frankly, is choice. we don't have the resources to provide the care within 30 days and we refer that veteran to a provider in the community, we stay close -- >> i understand. that you're still dancing around the $360 million worth of bonus money that's sitting there that you can go to. and i don't want to hear anybody say we choose bureaucrat bonuses over veteran health care. >> i understand the point. yes, sir. >> everybody, thank you for being here. we wish you a happy independence day. we have another hearing in this room in 15 minutes. so with that, this meeting is adjourned.

>> tonight on c-span, all five democratic presidential candidates, former secretary of state hillary clinton, vermont senator bernie sanders former maryland governor martin o'malley, former virginia senator jim webb and former rhode island senator and governor lincoln chafy. they're at the iowa democratic party's hall of fame dinner in cedar rapids. it starts at 8:00 p.m. eastern time live on our companion

network, c-span. >> this weekend the c-span city's tour travel as cross the country with time warner cable. to learn more about the literary life and history of lechlington glexington kentucky. >> in the mid 1940s if you had asked who is a bright chinaing star db shining star in politics, on a national scale, someone that will be governor, senator perhaps president, katherine gram he had schlesinger would have said ed pritchard of kentucky. he is one of the people that worked in the white house when he was in his early 20s. he seemed destined for great things and then came back to kentucky in the mid 1940s. was indicted for stuffing a ballot box. went to prison. so that incredible promise just

flamed out. >> we also visit ashland. >> the mansion at ashland is a unique situation. clay's original home had to be torn down and rebuilt. it fell into disrepair and his son found that it could not be saved. so he rebuilt on the original foundation. so what we have is a home that is essentially a five part federal style home as henry clay had with italian details architectural elements, et cetera, and an added layer of as thetic details added by henry clay's granddaughter and great granddaughter and so on. >> see all of our programs from lexington saturday evening at 6:30 eastern and sunday afternoon at 2:00 on "american history tv" on c-span3. >> early next month a forum with presidential candidates. c-span is partnering with the new hampshire union leader for

the newspaper's voters first forum. all likely candidates have been invited to participate. the forum is live from manchester on c-span c-span radio and c-span.org on monday auk 3 at 7:00 p.m. eastern. >> whether congress is in session, c-span3 brings you more of the best access to congress with live coverage of hearings news conferences, key public affairs events and every weekend it's american history tv traveling to historic sites discussions with authors and historians, and eyewitness accounts of events that define the nation. c-span3, coverage of congress and american history tv. >> the deputy secretaries of defense and energy testified before the house arms services committee recently about u.s. nuclear strategy and modernizing

the u.s. nuclear weapons fleet. texas congressman mack thornberry chairs the arms services committee. >> the kmlt will come to order. committee meets today to have a hearing on nuclear deturns in the 21st century. i ask unanimous consent that my remarks will be made part of the record. let me just say in my view our nuclear deterrent is the corner stone of all our defense efforts as well as a source of stability around the world. and in my opinion for too long we have taken it for granted, neglecting the systems, infrastructure and the people involved in making the complex machines, safe reliable and

effective. unfortunately, the investment that we made in delivery systems and weapons in the past are all aging out about the same time. and that presents us with a substantial challenge especially when we merge that with what other nations are doing. the committee has had a series of events over the course of the past week or so classified and unclassified looking at various aspects of this problem. i understand the oversight investigation subcommittee will have a further hearing on this matter this afternoon. so i think it's very appropriate that we have our witnesses with us today to examine some of these issues. i will look forward to introducing them in just a moment. but mr. smith has been detained for a brief period in his absence i'd yield to distinguished gentleman from rhode island for any comments he'd like to make. >> thank you, mr. chairman. i want to -- on behalf of

ranking member smith and the committee welcome our witnesses here today. i look forward to your testimony. mr. smith is physical therapy appointment and will be here shortly once that concludes. he welcomes you in interest and time, mr. chairman. given the fact that votes are going to be called without objection i'll submit mr. smith's full statement for the record. and i will yield back. >> i thank the gentleman. without objection, it is so ordered. >> again, let me welcome our distinguished witnesses. i think your president sense evidence of the seriousness with which the administration takes this issue. we're pleased to welcome the deputy secretary of defense robert bork, the deputy secretary of energy elizabeth sherwood randal and the vice clarm of the joint chiefs of staff admiral james sandy winifield. and let me also say, admiral, the odds are this may be your last hearing in front of the house arms services committee.

and my memory is something like 37 years of service to our nation. and may i say thank you for all of those years not only in your current job where we've been able to work with you on a number of issues, but an incredible history of service. and so thank you and congratulations. mr. secretary, you are allowed to make a statement. all of the written statements will be made part of the record. mr. secretary, you spla to punchmay have to punch the button. >> thank you, sir. thank you for the support that you continue to show for men and women in uniform. our department of civilians and families. secretary carter and i and everyone in the department greatly appreciate it. we simply couldn't maintain the finest fighting force in the world without your help and without everything that you have

provided us. i'm really delighted to be here this morning with dr. liz randal sherwood from the department of energy and as you said the vice chairman to talk about this very important subject, nuclear policy forces and modernization. i just like to touch briefly on three points. the critical role that our nuclear forces continue to play in our national security, the continuing importance of nuclear deterrent forces given the changes in the security environment and the actions the department is taking to make sure that we maintain a safe reliable and effective nuclear force. now as the chairman and vice chairman say constantly the survival of our nation is the most important national security interest. the fundamental role is to deter an attack on the united states which is the only threat to our nation. extended deterence provides protection to our allies and

partners partners, enhances cohesion and served our nonproliferation goals. while we seek a world without nuclear weapons, we face the reality that russia and china are rapidly modernizing the already capable nuclear arsenals in north korea continues to develop nuclear weapons and the means to deliver them across the continental united states. so a strong nuclear deterrent force will remain critical to our national security for the foreseeable future. as members of this committee well know senior russian officials continue to make irresponsible statements regarding russia's nuclear forces and we assess that they do it to intimidate our allies and us. these have failed. if anything, they have really strengthens the nato alliance solidarity. mass he could continues to violate the inf treaty and our goal is to return them to compliance to preserve the

viability of that treaty under any circumstances, however, we will not allow them to gain significant military advantage through inf violations. we're consulting with allies on the best way forward here. let me just say this about russian military doctrine that is described as escalate to deescalate. anyone who thinks that they can control escalation through the use of nuclear weapons is literally playing with fire. escalation is escalation. and nuclear use would be the ultimate escalation. as secretary carter recently said moscow's nuclear saber-rattling races questions about russia's commitment to strategic stability. china is also doing nuclear upgrades. they're placing multiple warheads on the icbms expanding mobile icbm force they continue

to pursue a sea based element for their nuclear forces. however, we assess that this modernization program is designed to ensure they have a second strike capability and not to seek a quantitative pair ti with the united states or russia. north korea, they continue to expand the nuclear weapons and missile programs and in response we continue to improve our national missile defenses and conventional counter force options and our current plans will keep us ahead of north korean capabilities in our estimation. given the importance of nuclear weapons as well as this volume tide 21st century security environment, the president is directed that we maintain a safe, secure and reliable triad of strategic nuclear delivery systems while adjusting the new force levels. this is the highest priority for the department of defense.

we developed a plan to transition our aging system as the chairman said they're reaching the time where they will age out. carrying out this plan is going to be a very expensive proposition and way recognize that. it's projected to cost an average of $18 billion a year from 2021 through 2035 in fq-16 dollars. without additional funding dedicated to strategic force modernization, sustaining this level of spending will require very, very hard choices and will impact the other parts of the defense portfolio particularly our conventional mission capability. now this modernization we have delayed and we cannot do further -- any delays without doing the infectiveness of our forces at risk. so the choice we're facing, quite frankly mr. chairman, and members is that keeping the existing force or modernizing the force, the choice is modern

joying or losing capability in the 2020s or 2030s. that's the stark choice we're faced with. we appreciate this committee recognized this problem including legislation to establish a strategic deturnt fund. we now believe we have to decide how to resource the fund and the challenge we think we need to talk about and how we solve this. it is a very pressing issue. i look forward to discussing this issue with you and the other oversight committees and i look forward to your questions. >> thank you sir. secretary sherwood-randal the floor is yours. >> thank you mr. chairman. thank you, membersst committee. mr. rogers as well who i had the privilege of travel together idaho national lab. i appreciate this opportunity to discuss the department of energy's role in supporting u.s. nuclear deterence. secretary of energy and i appreciate the priority that this committee places on nuclear matters given their significance to our national security and the

emphasis that president obama has placed on ensuring the safety, security, and effectiveness of our nuclear weapons as we seek to reduce global nuclear dangers. today's heergaring is an important step to build a national consensus on the role for and management of the united states deterrent. i'm hohnnored to testify along my two close colleagues from the department of defense. the department's of energy and defense share a solemn responsibility for delivering the nuclear deterrent and we work on this in tandem with doe providing the weapons and dod providing the delivery systems. our two agencies collaborate through the nuclear weapons council to improve coordination throughout the budget cycle. our coordination is strong and deliberate as you'll hear today. this cooperation depends on the leadership of experienced members of our military like admiral sandy winifeld who as

the chairman noted will be retiring after four years as vice chairman of the joint chiefs at the end of july. it has been a privilege to work closely with admiral winifeld throughout the administration and we joined forces frequently on issues of direct relevance to this hearing. i'd like to take this opportunity to publicly thank sandy for his many years of extraordinary and dedicated service to our nation. we are all aware that united states and our allies and partners face grave and growing nuclear dangers. as president obama said in his april 2009 prague speech, the threat of nuclear war has gone down but the risk of nuclear attack has gone up. with these dangers in mind the obama administration has set forth a clear two pronged nuclear vatstrategy. we must reduce the threat of nuclear proliferation. second we must maintain a safe, secure, and effective nuclear deterrent. at d.o.e. we're charged with playing a significant role in

implementing both elements of the president's nuclear strategy. this is a no fail mission in which we must provide a safe secure, and effective nuclear deterrent without explosive nuclear testing while also presenting countering and responding to proliferation and nuclear terrorism around the world. adds they reduce the arsenal maintaining the arsenal's safety, security and effectiveness becomes all the more important. infrastructure, modernization and the on going stockpile and stewardship and manageme innt program are necessary to ensure the ability of the united states to meet 21st century threats. the stockpile stewardship program is one of doe's most remarkable achievements of the past two decades. every year, doe enabled the secretaries of defense and energy together with the directors of livermore and the

national laboratories the nuclear weapons council and the commander of the u.s. strategic command to certify to the president that our nuclear stockpile is safe, secure and reliable. and for the past 20 years, d.o.e.'s sign tirveg and expertise achieved this without explosive nuclear testing. in fact, our labs now know more about the psychics of the inner workings of the stockpile than they ever did during the days of explosive nuclear testing. our life extension programs refurbish, replace nuclear kpoen toents extend the life stand of our existing nuclear arsenal and ensure continued safety and effectiveness. to maintain confidence in our nuclear arsenal, we must continue to invest in the uniquely skilled nuclear security workforce as well as the science and infrastructure essential to stockpile

stewardship. d.o.e.'s nuclear administration is responsible for the nuclear security enterprise infrastructure necessary to sustain the stockpile and execute all of our nuclear missions. some of the physical infrastructure dates back to the days of the manhattan project. as many of you have seen with your own eyes much of it is degrading, has exceeded its useful life and is in need of substantial maintenance or replacement. equally important, more than 50% of the nsa federal workforce will be eligible to retire in the next five to seven years. there is outstanding tall eblt that we carry forward in this century. building a responsible infrastructure requires investing in our people and our new facilities serbly for

plutonium and uranium and high explosives, nonnuclear component production and laboratory and office work space. secretary and i have made ree re deucing the maintenance backlog a key element of the department's overall infrastructure strategy and we seek your support for this as well as for the new construction that we need. your recognition of our critical mission and your support for the life extension programs and a modernized infrastructure are critical to american national security and to the security of our allies and partners. the secretary and i see the implementation of congressional advisory panel on nsa governance also known as the augustine report as a top priority and one that will enhance our effort as cross the nuclear security enterprise. doe and nsa have taken several

significant steps to improve the operation and management of the nuclear security enterprise. one of the reports' significant find sgz the need to rebuild national leadership focus on nuclear security. with the particular emphasis on strengthening regular communications with relevant congressional leaders on policy element that's make up the nuclear security mission. i will leave the implementation group and i look forward to working with you on this important issue. your support for our governance agenda will be absolutely critical to our success. as i already observed, doe plays a central role with the government in implementing nuclear threat reduction activities. our portfolio of work aimed at preventing countering and responding to global nuclear threats is rooted in our capabilities to develop and sustain the u.s. nuclear stockpile and enables us to implement this important dimension of the prague agenda.

these activities are defense by other means. when we take this material off the global playing field or work discreetly to help countries to do a better job of protecting the material that they retain, we defend ourselves and those who share our values from those who do do us arm. for example, nsa's office of defense nonproliferation safely and securely removed or confirmed the disposition of over 5,359 kilograms of highly enriched uranium and plutonium around the world. that is enough material for 200 nuclear weapons n conclusion, as deputy secretary work has already noted our nation faces numerous strategic challenges including the continuous expansionst russian and chinese nuclear programs. in the wake of several difficult years of constrained budgets and fiscal uncertainty we cannot

afford to delay the investments we need to make if our nuclear security enterprise w your support, we can sustain nuclear did he dee terns deteter nens the 21st century. i thank you today for allowing me to testify and i look forward to your questions. >> thank you. admiral? >> chairman thornbury and distinguished members of the committee. i just missed a ranking member smith. thank you. thank you for the opportunity to share my perspective on nuclear deterence and, sir, thank you for your kind words earlier, appreciate it. chairman dempsey and i view decision make wlg it's the use of force, resource allocation or assignment of risk throughout lens of a set of prioritized national security interests. it goes without saying as deputy secretary work eluded that the survival of our nation ranks first among those interests. following closely by the need to avoid catastrophic attacks on

our nation. additionally, our extended deterence commitments help cover our interest and ensuring our allies that their interests will be protected without developing their own nuclear capabilities. it follows that attending to our force is the most important thing that we do. representing as it does our only way to deter an attack if a major nation state and one of several ways of deterring a smaller attack from a lesser state and also to assure our allies. we accomplish this through our long proven triad and combination of deployed weapons and platforms in europe and at built to rapidly do the same in the pacific. however, while we're healthy today, three factors are contributing to our concern for its future health. first, at the end of the cold war, many felt that the international system had evolved to the point where a nuclear

deterrent was obsolete. however, recent events remind us of the necessity of maintaining a reliable and capable deturnt including a triad for as long as fluke lar weapons exist. we still believe it must be done it concert with our an tag onnists because unilateral gestures gf will have good standing with the regimes. second, all three legs of our deterrent, they're supporting command and control structure and many of the weapons that they employ are coming due for recapitalization within a natural cycle. the fact is that systems age and need to be refreshed, modernized or replaced. russia is going through this exact same experience right now. but the unfortunate coincident timing for us also eluded to by deputy secretary provides a large bill over a relatively short period of time. and, third this is all happening at a time when our resources are actually decreasing.

as it stands any remaining margin we have for investing in our nuclear deterrent has been steadily wid willed away as we pushed investments further into the future. the fact is there is no slack left in the system. we will need stable long term funding to recapitalize this most important element of what we do. we can no longer adjust priorities inside the nuclear portfolio to make things work to string it along. that implies that absent some other form of relief because this is our highest security interest, we're going to have to reach into the other things we do to protect other national security interests. that's going to make many people both inside and outside d.o.d. unhappy. for our part, we have been and will continue to exercise the best possible stewardship we can over our resources. and we'll continue working closely with our d.o.e. partners to ensure the viability and

affordability of warhead life extension programs. i hope congress will do their part to help us. before i conclude i'd like to thank the members of this committee for your strong support for our nation's men and women in uniform during my tenure as vice chairman. thank you again for the opportunity to appear alongside my colleagues today and i do look forward to your questions. thank you, sir. >> thank you sir. as for feared we have votes on the floor. we have to recess and then we'll return as soon as those votes are concluded. and so if the witnesses want to make their way to the room we'll buy you a cup of coffee. i'm not promising how good it is. but with that the committee will stand in recess. i'd encourage members to come back right after votes.

>> committee come to order again. thank you for your patience. let me ask a couple things as other members are making their way back from the floor. secretary work last november, then secretary hagel issued a message to the force on nuclear deterence. let me read a quote from that message. it said, "our nuclear deterrent plays a critical role in ensuring u.s. national security and it is d.o.d.'s highest priority mission. no other capability we have is more important." is that still the case? do you agree with that? or no? >> yes, mr. chairman, i absolutely do as does secretary carter. one of the issues that we found in the nuclear enterprise review

is that once the strategic air command was disestablished in 1991 over a long period of time between there and about 2008 we stopped thinking of the more of a function. that resulted in some very, very bad outcomes. which we have been working to try to overcome since 2008. that is why secretary hagel said mission. it is a mission. we are looking for people who are responsible for every aspect of the mission. and efficiencies are great for savings when you're looking for functions. but this is really about command responsibility in making sure. so i believe that that is absolutely the case and i believe vice chairman and the chairman would agree with it too. ask you and admiral winnefeld this question. part of the reaction one gets, okay, we've been dealing for this for 70 years.

it's gone along pretty well. nothing's changed. we haven't had nuclear testing since '91 or whatever the date is. there's no need to spend this money because we've been making it okay and we've got enough weapons to destroy the world several times over. so, really, you're asking us to waste money to put it into the warheads or delivery systems. what would y'all's reaction be to that sort of sentiment? >> as both the vice chairman and i have testified, and i think all of the senior leadership of the department has said the only existential threat to our nation is a nuclear attack. and the only thing that's more important -- the one step down is preventing a catastrophic attack which we believe would be one or two nuclear weapons being fired at the continental united states or blowing up in the

continental united states. anybody who looks at the way that the international environment is moving especially the way that russia has been describing its nuclear deterrent posture has to say nuclear weapons remain the most this is absolutely critical. we can perform deterrents with a much smaller force than we did in the cold war. that is true. and that is reflected in the cost of the replacement. the peak of the replacement will be nowhere near the peak of the replacement costs that occurred in the 1960's and the 1980's. it performed an important mission. look at the international environment. this is not a time to say that nuclear weapons are useilous. >> admiral? >> i would add to that description of why the deterrent remains relevant to the fact

it's a capital asset. it needs to be maintained. it needs to be refurrished refreshed, modernized. it's all coming down at the same time. just as an example i point out the airlines cruise missile was designed to last ten years. it's lasted two decades beyond that 10-year initial life. we need to recapitalize that asset. that's one small slice of the need to do that. >> finally y'all have all mentioned the cost of all of these systems aging out at the same time. i think yesterday or day before the yesterday the center -- csba released a study are u.s. forces unaffordable. their analysis looking at

various budget requests till 2039 was that at no point would the nuclear forces share of national defense be more than 5% of the budget. does that sound about right based on the projections y'all have looked at? >> they did a credible study. the big difference between their estimates and ours is they included the long range bomber a small portion of the entire program for the nuclear mission. we would say it would take 7% of our budget. right now we're spending about 3%. so about doubling the level of effort that we're doing now to sustain the force, it would require about 7%. they were also correct on the time where we would peak out generally around 2026 and 2027. i would just say, mr. chairman, if you look at the last two times whereas the vice chairman

said we recapitalize this force the peak will be lower and will be spread out over a longer period of time. so it will average about $18 billion $18 billion a year. the important thing that they said in that study sir, it's a matter of prioritization. and both of the previous times we added money, on top of the conventional force mission. on a flat budget, taking that type of a hit would have a major, major impact on the defense portfolio. >> okay. i would just add i think we differ on the numbers a little bit from that report. it's about how soon 3% to 4% to maintain what we have. and about 7% to maintain what we have and modernize what we have. and i think it's important to get that number out. >> yeah i appreciate the differences how you assign the long range bomber. regardless, whether it's 5% or 7% for the highest priority for

our national security it seems that's not unreasonable. >> we have already lost 10% over the past several years. stack that on top of it. if we don't find outside relief on this we will have to take it out somewhere else in the defense budget as the deputy said as you said. and there will be a lot people not happy about that. because other missions that are important to this country will get pushed aside. >> fair point. mr. cooper. >> thank you for holding this hearing i would like to add my welcome to the witnesses. it's great to hear this ringing affirmation for the importance of deterrence. i appreciate you stressing it our committee. one of the latest estimates we

got it will take at least $355 million to maintain our stock pile and all the thingatize that go on with it. we have gotten in the bad habit of not paying for t.it. and not only support it, but start funding it. and start funding it on a regular schedule. i congratulate the administration because they have taken this seriously and have funded the priorities. i hope as we go through the conference, we will be able to figure out better solutions for fully funding and not pretending we're funding things by relying on the overseas contingency operation account. as we discuss these important issues, there are tons of questions to ask. it's a pleasure to work with the

chairman on the subcommittee where we can focus in more detail on these issues. whether it's newest, freshest out in one of the missile fields or somebody who is preparing to fly strategic bomber that in some case where the b-52's are older than any of us on the panel. we've got a lot of work to do. i think the hardest thing to do is get the public to understand why we need to send so much money and be careful with the incredible wipeeapon weez hope we will never use. i'm appreciative to y'all devoting your careers to making this nuclear detirrance real. i hope we will figure out ways to counter vladmir putin's doctrine of nuclear esclatory dominance. and that's something that i see

as one of the main threats y. would welcome any of the panelist panelist' comments on that the best way to counter a new sort of threat than perhaps we've seen before. >> sir, it's interesting we have been trying to de-emphasize the role of nuclear weapons in our national strategy, whereas russia has been trying to emphasize it t. it's because they believe that they are against us. so they emphasize that for deterrence. what we have said is using that type of language is extremely troubling. because of the dangerous implications that it has. that you might use a nuclear weapon to de-escalate a crisis. once you escalate you escalate. there is no way for us to be able to foresee what would happen after that. we are asking the russians to moderate their language.

and to make sure they're in compliance with new start and potentially even reduce the number of weapons below that. >> thank you, mr. forbes. >> thank you for this hearing and to each of our witnesses thank you for your commitment to our country. we are very fortunate to have you with your analytical skills and your sfrigz national defense. we appreciate what you do. you have brought a wealth of experience and wisdom to this position. we thank you for that. and before you leave, i just want to pick just a little bit of that from you. and, you know, part of our nuclear program is not only what we do but what we keep others from taking from us perhaps. or stealing from us. and we all know that china's committed to more or less stealing our lunch every day through both