along in terms of helping people estimate costs and sort of partake in the economics of smart decision-making. >> i just have one more thing. that's just about this whole issue when we talk about consumers of choice architecture design. it's really how we present this information to consumers. there's been some studies consumers will go with the default, so we really have to see how we're presenting the cost information. so, careful thought needs to be put into that. >> very good. thank you. >> we have a lot of folks lined up. we would ask you to be as brief as you can in stating your question. and before that, state your name and affiliation, if you have one. >> hi. my name is steve spitz. i have two related questions on costs. one, i had an experience in a hospital where they said i needed certain common procedure and i asked what the price was.

i gave them my insurance information and they came back and they said, we don't know. i would like to know how common that is and what is being done to try to let folks actually know what something costs. i might add, i had at the time a high deductible, so it was an important question about my out-of-pocket costs. the second question is medicare part "d," when i noted it in the biography, mr. white was involved with in 2003, has a provision prohibiting the government from negotiating prices with the drug companies. and my question is, why is that still in the law? >> you want to take that one, ed? >> why don't you start and -- >> i'll do the first one.

the second one real quick. the first one was, why can't they tell me what the price is? like i said, forget about the e-mail. ask them what a price is and it's like getting trade secrets out of cuba, right? it's next to impossible. what we're seeing is that what the price is and what i owe are two different questions, right? so if i have coverage, i think a lot of the plans are really good at estimating your costs but sometimes not always. for medicare, the vast majority of people have third-party coverage. so, it varies what you owe. there's a bill moving through the house, part of of cures so it's in the senate now, for medicare you have to provide consumers a max out of pocket across the hospital outpatient department setting and the ambulatory surgery setting. that's kind of a blunt tool. what we need to get to and what's going to be really exciting is as more data comes into the system, we're going to

be able to parse this and cut it and slice it so i can tell you if you're on medicare, this is exactly what you'll owe for this procedure at this facility. if you're insured in the commercial market, this is what you're going to owe. if this you're uninsured, this is what you'll owe. we see the price you pay is going to depend on what kind of coverage you do or don't have. is kind of the first question. the second question is the hhs is prohibit the under part "d" from negotiating drug prices. the private sector is not. and the private sector plans, pbms and managed care health insurers aggressively negotiate discounts in part "d." i can't remember what the latest figure is but it's somewhere around 20%, 25% discounts off prescription drugs for seniors. the interesting thing when we enacted that law, we talked to

cbo about that specific provision. getting in the middle of these negotiations, private sector negotiations to get drug discounts, versus letting the folks who do this on a daily basis negotiate the discount, the private sector. they said if you had that provision in there it would probably mess with the negotiations but you definitely wouldn't save any money. if you repealed that provision in law today, what cbo will tell you is it will not save a single dime. the reason is those pbms and those health plans are already negotiating the discounts and already being passed onto consumers. that's one of the reasons we did it. >> joel, going back to the first part of that question, someone sent forward a question on a card -- a suggestion, actually, after a long description of a situation to which it would apply. is it possible for providers to get access to health plan cost calculators so that they are

able to inform consumers about their expected out-of-pocket costs before the services are rendered? is that a practical possibility? natalie or joel or for that matter, anybody else on the panel? >> you know, it's -- i wouldn't say it's commonplace today. it's definitely something we're exploring is in fact that whole in-office doctor's visit. you know, i remarked early on about how we don't want to intersect that relationship, but certainly how do we make more shared decision-making tools available at the point of service so that when you're taking out your pad to write a script or you're comparing different treatment options that you have transparency in that today. i wouldn't say it's commonplace. i would certainly say that's where the market would like to move. >> one caveat though. from the consumer perspective some of this matters, too, on how the claim is submitted.

so, we saw this in the discussion around preventive services when i talked about the confusion there about what you may be able to access as a consumer about cost sharing. part of it is how it's submitted by the provider and part of it is how the claim is submitted by the carrier. how all that flows may dictate whether or not you have a co-pay for that service which you might have expected none for. this comes up regularly. that's another sort of unknown in the pathway from the care you receive to the bill thaw get. >> yes, go right ahead. >> i'm dr. caroline poplin, a general care physician. price is proprietary information. every insurance company negotiates a different price with every provider or with every large provider. hospital. so, the price is different depending on not just what your plan is but who your insurance is. the insurance companies don't want other insurance companies

to know what kind of a deal they got from a big hospital. so, that won't go away. my question is unrelated to that. i have two. a quick one for rebecca. you said that surveys show that health insurance providers are less trusted. i wonder where that information is, where you got it from. the source. >> yes. >> i want to make sure this is on. i can share that with you. i think it was -- it was from numerous sources but i'm happy to share that with you. i think it's on my slide that it was noted. you know, that's been declining over decades. still some of the most trusted providers are the health care professionals themselves. but we've seen this gradual decline with health plans. >> natalie one of your slides makes the same point, right? that insurers are pretty far down there. maybe if you had that source,

you could provide it as well. >> yeah. i didn't have the -- this are plenty of publicly available sources. i think it's sort of skepticism with institutions in general, but our sector has come under criticism with respect to trust issues. i think because there is so much opaqueness around costs and how that whole sector works. >> and you had another question caroline? >> yes, a real question. something that hasn't been mentioned at all. you assume people know what they want or they'll recognize it when they see it, at least. and behavioral economics has shown with regard to health people really have no idea about what they need except for chronically ill people who know what their conditions are, know what medications they're taking, know what they need better than a healthy person. for example, it's said women are much more afraid of breast cancer than they are of

cardiovascular disease but cardiovascular disease is a much more likely threat than breast cancer. so, if they don't know what they need, how can they choose it? >> i would say that's the question we're trying to answer. again, everybody's going to have their different take on who they think they might need or what they're most worried about. that's why information needs to be presented in various ways so that consumers can look at the different -- whether it's preventive care, whether it's maternity care, whether it's joint replacement. you're right, they don't know what they don't know. >> that's right. >> and the sensible thing to do would be to give comprehensive plan for everybody, like apparently they do with california exchange. that was, i think, what the gentleman said last week or the week before. that the plans on the exchange were standardized. >> standardized to the degree that you can know that with a certain set of them you can get

a bunch of services without having to meet your deductible first. >> is that all? >> that's particularly useful. you still have the actual real value, the levels set at general level of generosity and they come with big deductibles as joel was saying. so, the silver level plan is at 70%. av is far lower than the typical employer plan, which is discloser to 80% or 85%, or higher. that means you have higher out-of-pocket costs. i believe in california they said there's a certain set of services you get without having to meet your deductible. for a healthy person that would be important who wouldn't necessarily see the value of their health insurance if they didn't know they could get three primary care doc visits and a set of generic drugs without meeting a $2,000 deductible. >> i thought it was much more standardized than that not just preventive services. ed, were you there? do you snrm. >> that was special drugs and -- like high ticket, high cost things, there were a bunch

ofthys primary care visits, prescription drugs. >> the transcript from that briefing is on our website, by the way. i think we're here actually, i think this gentleman was in line first and then two people over here and then we'll go back this way. >> thank you very much. bob from the bmj. consumers are really drowning in choices and options there. one thing the system tried to do with preventive care was at least limit the package and define it a little better. we heard today that they may not have done that good of job here. i guess my question is primarily, you know is there any rule for simplifying and standardizing what insurers can offer and how they can offer it? >> wow. >> well, so -- the actuarial value is supposed to be a way to bucket plans in relative

generosity. i touched on this. one of the requirements for all plans is there has to be a meaningful difference in the marketplace, but that still leaves a lot of wiggle room. the kind of things they're doing in california or other state-based marketplaces to limit the number of plans or products any given carrier can offer or to standardize them so some set covers the same thing in the same way is one attempt to do that. that's certainly within the authority of the marketplaces. >> my actual daisht reason i said wow was i would actually argue the other way. i think people like choices. i think when you think about someone with bres cancer versus someone who has cardiovascular disease versus someone who has cancer they'll value different things in different plans. one of the things -- one of the reasons, i think we see -- well, the affordable care act did a very good job of saying plans have to do x, y and z. i think a by-product of that x, y and z has been limiting

options for plans in order to offer lower prices. that's why we're seeing some of the higher cost sharing in the plans. so, i think that to the extend that plans can do a better job explaining the nuances and the difference in their coverage that will be very important. but i think limiting choices is probably the opposite direction at least that i would say we should go because health care is so personalized. it's becoming increasingly personalized. as we develop those cures and therapies for cancer, cardiovascular disease, things benefiting from preventive medicine, we should go the opposite way. >> i would agree with that. even though i talk about how some consumers can be overwhelmed with choice. we do like our choices. everybody's in a different situation and also there are threshold on risks really

varies. again, the solution is or the answer is, how do you present those choices? >> i mean, you were talking about the framework for choice and presumably there are standards for the optimal size of the choice universe for individual consumers. is that fair? >> yeah, that's correct. >> also i talked about how we present that information to consumers. what you present first is really important because consumers often -- even though we want to allow all that customization, there's been studies done that consumers don't always go in then and then customize it. how you present it, that default position is really important. whether it's just showing the premium, showing the deductible, whatever it's showing preventive services. >> natalie? >> not to pile on, but i think the -- a little more nuanced in that we talk about the paradox

of choice and when you're overwhelmed with too many things where you can't distinguish between them, it adds to your frustration. it's about curating that set of highly relevant options where it's very clear what the difference and the trade-off ofs are between them. so, i think it's having choices but you've got to know -- you've got to know what they are. they've got to be relevant, too. >> okay. >> my name is ken. we predominantly help people who are below 400% of poverty level so people who have very low health insurance literacy. my question to the group is why not work at insurance companies reducing complexity and reducing the jargon instead of trying to educate these consumers on jargon and trying to get the consumers to learn the program as opposed to changes the program? >> yeah. >> you know, that's precisely what we're doing. we're actually going sort of

artifact by artifact lesser by lesser, screen by screen, and really looking at it through the lens of the consumers, which is quite new, i'll say, for our entire sector. we used to sell to employers primarily, now we're selling to consumers. one of the examples i mentioned early on is taking the 40 most commonly misunderstood terms things that probably everyone in this room is very familiar with room and recoding those. taking every customer journey making it more easy and simplified. banking, retail hospitality has already done. we're a little behind as a sector, but that's very much the focus of the consumer strategies that the large health plans have under way today. >>. >> i would say we need to be careful we're empowering the consumer and not blaming the

consumer. you're absolutely right, the information needs to be presented in that understandable way, that plain english way, so consumers can understand. i would just add onto that, health care professionals needs to be part of this, too. there needs to be more information on how they can communicate clearly to patients and seeing if information is available in other languages as well and when it's translated in other languages that's also understandable and accessible to people. >> and i think some of this reflects kind of the bumpiness of the shift in strategies. one of the things the affordable care act did, for the industry, people are now looking at this direct to consumer type channel. whereas before they were going to the employers or to the brokers and agents. that's a difference. so, there's some bumpiness in the marketplace and turbulence. i think probably what you're hearing is a lot of the carriers recognize this, they're working on it. there's a lot of really smart marketing and other people in the system who are probably

going to get us back to something that's more plain english, accurate reliable and that consumers can really understand and get their arms around. >> one more thing. i'm going to bring it back to the sbc. to the extent this is out there more and more and consumers can really build experience with using this to choose plans and use their coverage, i think it becomes easier. it's an education process they're going to learn the terms and how to use their benefits. the glossary ed talked about, there's an info graphic on the last page that talks about how deductible co-insurance and out-of-pocket insurance works. we heard from consumer testing and that was enormously helpful to consumers to make that concept understandable in a way they haven't been before. >> okay. >> linda bennett, and i just want to pay back on a statement rebecca just made and joel and others have said about plain english. but that the demographics now and in the future are that there

are more limited english proficient or non-english proficient speakers as consumers and stakeholders. and so, beyond translating for the plans or the sbc and having good navigators explain when they get that card and they go to a provider, i'd like to ask natalie, what is anthem and the industry doing to make sure you're in-network providers have access to the interpreter in-person services they need so that they have good communication and you have an empowered consumer? and what are you doing to make sure that there's a system, a system of support? are you monitoring the electronic records where they say, look, we know this person has limited english proficiency.

they prefer their documents and something else. are there providers providing them with an interpreter? >> i want to make sure i understand the question. so you're saying at the site of care where we have sort of limitations or constraints in terms of english speak you know, what are the support capabilities to ensure that the physician is engaging with the patient? >> in the language the patient prefers, they have an interpreter. part of this was the state of washington for its medicaid program, they have a state wide interpreter program where every provider can -- that's medicaid covered can get on and say next wednesday, i need someone in russian to speak russian at 10:00. i need someone in mandarin at 11:00. i need someone in spanish at 3:00.

>> i can't speak to sort of what the health plan is doing specifically in that venue. i'm not sure if anyone else can speak to that. i think that hospital systems and providers probably have a response thato that. being careful how does health plan intersect with that relationship. we want to make sure, which is where you're going, we reduce the hassle factor we make it simple and easy. i'm not sure i'm well enough educated on what anthem specifically does in those venues. >> okay. yes, ma'am? >> hello. i'm with smarter health care system. >> you need to get closer to the microphone. >> i'm sorry. i'mary i'm ariel zina.

and providing information and providing clear information on costs and quality was raised as one of the solutions to facility those informed decisions. but i wanted to highlight that in april kaiser family foundation study showed only 6% of consumers actually looked at price information and only 2% to 3% actually use that information. so i was wondering in light of that, given consumers kalt they don't actually want a real relationship with their health plan, who is really responsible for providing that information and informing consumers? also, when that information is presented in a clear and understandable way how do we ensure that consumers actually are using it rather than just assuming they want that and if it's available, they will be accessing it? >> i'll start. so, yeah there's this issue about consumers saying they want quality and cost information, but also knowing they're not

always accessing it. but the thought behind that is it's because it's still not presented in a way usually that's accessible to consumers and really answering the questions they have about cost and quality. so, i think part of it, again, is how we're presenting that information. you know as far as the high deductible plans, we do know that recently i think there was a survey by families usa that 25% of families that had the high deductible plans were actually foregoing health care were not taking their medications as often as they needed to, were skipping follow-up occasion were skipping preventive care. and i think some of that research showed that sometimes consumers were picking those plans because they couldn't afford the higher premiums that gave them a lower deductible. some people may not have looked at the information as carefully as they should have. i'm not sure there's a way we

can ensure consumers read and understand something but we can do a lot better presenting the information. >> where i are on that adoption curve. i would say we're probably still on the linear part. we haven't gotten to the knee of the adoption curve. when things become open table easy or amazon easy i think that's where you see the kick up. we know we have traction. we know there's still data quality issues, et cetera, but there is certainly demand. it's just not sort of served up in a way that's incredibly convenient and incredibly digestible right now. i think the intention is there the strategies are there, the investments are being made and you know the one thing that i think sort of reinforces is this is the amount of third-parties and external investments in these solutions, vitals cast light, sort of -- and other third-party groups that are making massive investments in this area of capabilities. >> one of the things that i

think is absolutely critical is the information also has to be actionable. it doesn't really do me a lot of good if you tell me the lowest cost provider in des moines. i don't live in des moines, right? it's got to be in-network, right, or out of network right? it's got to be an actionable type solution for the consumer in order for them to use it. >> i'm not sure which of you was first. i will leave it to your sensibilities. >> thank you. bob grist with social medicine and institute health. when ed introduced this topic, he said that the subject is can an empowered consumer drive quality and costs. in our health care system after the ada -- aca. and i think we've heard lots of information about costs going up and people being overwhelmed with choice.

what i learned so far is that empowerle the consumer really means overwhelming them with choice so you can blame them with the fact they don't get what they need. but what i don't hear any discussion of is the strategy on capitol hill to defund the agency for health care policy and research, which is designed to study health care quality and to translated good practice into systems that providers can be held actable for. in other words, while we're focusing here so much on consumer choice, the very function of government to improve the regulatory system or to even conduct research on what quality means is being taken away from us.

the house help committee, probably represented by people around the chairs in the audience here, has voted that as early as the beginning of 2016 to zero out the budget for the agency for health care policy and research. how can we take seriously a conversation about health care quality and choice when we're undermining the very foundations of government's function and doing this. >> okay. there's a question. anybody want to respond to it? by the way, it's the agency for health care quality and research. thanks to a former co-chair of the alliance board bill frist. >> i love a.r.c. i think they do great work. i think the answer to this problem is going to be found in private sector. it's not going to be found

through a.r.c. >> i think you're referring to a.r.c. agency for research quality. they've done a great job in producing plain language summaries for consumers and comparing treatments. so, you know, i would hate to say our organization would hate to see that funding go away. we think they're instru meblgts in producing information for consumers and being able to compare treatments. >> we have just a couple minutes left. this will be the last question, as carnace used to say. i would ask if you would multitask by starting to fill out the blue evaluation form while you're listening to this insightful question. >> so my question goes to when i think of empowering stakeholders, i think about the expansion of hsas and other medical savings accounts. have you seen people making the phone calls and finding out their drug is half the price at walmart than it is at cvs?

have you found people are foregoing care or pursuing more efficient care based on those decisions? >> and i have a related question on a card. would you like to identify yourself sir? >> james cardwell. >> okay. the card question says 97% of insurance plans have price transparency tools but only 2% of policy holders use the tools to shop for prices. what can insurers and congress do to promote the use of price shopping? are we shoppers or can we be made into shoppers in this health care field? >> i think you need to be clear that for a set of services you're not set to be price shopping. it's not buying a refrigerator or car and you can take your inteet time and do all the research you want. even for those services where you might have time and incentive within the form of a high deductible to do shopping, we've heard today that it's

difficult to know the price. i would argue that price is just one factor consumers might consider. the price of the service, the price they pay out of pocket but it's also on convenience and preference for providers and other factors that come into play. i'll share my one example of person who tried to use price to make a decision treatment. for my daughter i had to choose between 40% co-insurance on a $17,000 drug or a $70 shot. my carrier could not tell me what my co-pay would be if i went ahead and got this procedure, what my costs would be out of pocket. they just -- again, it was based on how the provider was going to submit it and how it got paid. even in the best of sirgs when you make best effort to do price comparison into factors you're taking into consideration, it can be hard. >> i think we're getting there. weir getting better data, more

powerful tools private sector initiatives were put here. i have an hsa. i love hsas. i worked on the law when it was first enacted. they do promote shopping. i think in our heart we're all shoppers. we all make comparisons. we make judgments every day about a whole number of things. one of the areas i would highlight, we took a look on state-based exchanges and on healthcare.gov. unless hsa was mentioned in the title of the plan, you couldn't tell whether that plan was hsa-qualified or not. so right now under the tax code however you feel about hsas there's a significant tax benefit to signing up for an hsa. and it's high deductible health plan, but consumers aren't getting that information just by going to a website. one of the things we need to change this could be done regulatorily or through

legislative action we ought to tell consumers that this plan is hsa qualified, this plan is an hmo, this plan is a ppo, and they may be eligible for significant tax benefits if they go that route. >> with respect to the portion of the question about transparency and how effective is that and modifying mind sets and shifting behaviors is, you know, market dynamics dictate when you have more skin in the game, you do start making some of those tradeoffs. so, what we've seen -- there was a great article published in "health affairs" that when people are served up the right information and are put in a position to make those tradeoffs and a significant portion of them sort of do make choices towards more affordable treatments at the same quality, but not to the same intensity you would find in other sectors

like consumer packaged goods. it's just a different level of intensity. >> well, we have a lot of green cards to which we were not able to get, for which i apologize. but i think that also reflects the level of engagement of our consumers of health policy information here. thank you for spending a beautiful friday afternoon inside a very cool hearing room helping us grapple with one of the most multifaceted health problems. thanks to anthem and the national consumer league for helping us think through this topic and assemble a great panel. and speaking of said panel help me thank this panel for some wonderful discussion.

>> we'll come back to this topic in september. thank you very much. we have more live programming coming your way today with a new horizons mission update from nasa. we expect to hear how the visit passed pluto has been going. we'll see new images from the trip. you can watch that live at 2:00 eastern on our companion network c-span2. from the hill today, louisiana governor bobby jindal

has suspended his presidential campaign and will stay in louisiana as the state deals with the aftermath of thursday night's tragic theater shooting. we're going to do whatever we can to support our community. this is a time for us to come together, jindal said friday morning. the presidential hopeful did not expand on how long his campaign will be suspended and his campaign did not immediately return a request for a comment. again, that from the hill. it's almost as if they were matter and anti-matter. >> they led a game. freedom breeds inequality. i'll say it a third time. >> no, twice is snuff. >> always to the right and almost always in the wrong. >> anything complicated confuses. >> film makers robert gordon and morgan neville talk about their documentary "the best of enemies" on the 1968 debates

between buckley and goodall. >> there's not someone in their ear, very unlike today. you know, today, i believe, there's someone saying, you know, the numbers are dwindling. talk about you know, hot topic, hot salacious topic number two whereas then i don't think that was the norm in tv at the time. and i don't think these guides needed it. >> howard k. smith was the moderator, who was a distinguished newsman, who i think was really kind of embarrassed by this. he was moderating, but he disappears for, you know, sometimes five or more minutes at a time. i mean today you wouldn't have a moderator not jumping in every 30 seconds, you know, so i think really everybody at abc just stood back and let the fire burn. >> sunday night at 8:00 eastern and pacific on c-span's q & a.

veterans affairs secretary robert mcdonald testified on capitol hill earlier this week warning of the potential consequences of a $2.5 billion budget shortfall, which would include hospital closures and employee furloughs. house veterans affairs committee chairman jeff miller and committee members from both parties criticized the va about the lack of accountability and not revealing the budget issues sooner. secretary mcdonald said his department came to the conclusion in mid-may that they could not solve the budget problems. he urged the committee to transfer up to $3 billion from the new veterans choice program to close the budget gap. this is two hours, 45 minutes.

good morning, everybody. welcome to this hearing. i appreciate your attendance. we're, again, gathered to discuss va's budget execution for this fiscal year. and you if will remember, less than three weeks ago, we gathered to hear deputy secretary sloan gibson testify regarding a budget shortfall at the department of veterans affairs. i'm sure everyone may be asking why we're here again on the very same topic. and i intend to explain in just a minute. but as we all know, the stakes have been raised considerably since the deputy secretary's testimony on june 25th. at that hearing deputy secretary gibson was asked the following question by ms. brownly, and i

quote, if congress doesn't act on the fiscal year 2015 budget shortfall, what is going -- what is it going to look like in the va in july and august and on october 1st? end quote. the deputy secretary responded that we get into dire circumstances the longer we go, but that quote, before we get to the end of august we are in a situation where we are going to have to start denying care to veterans in the community because we don't have the resources to be able to pay for it, ent quote. the deputy secretary also testified about antiquated financial systems contributing to the problem, costs associated with the new hepatitis c drug treatments and an unrealistic assumption of how fast va could set up and effectively utilize veterans choice program. now, imagine my surprise when on

july 13th i received a letter again from the deputy secretary that in the absence of providing the flexibility that va is seeking to plug the shortfall with choice fund money, that va hospital operations would is shut down in the month of august and that non-va care authorizations would cease at the end of july. this is unprecedented. a true budgetgate, if you will, of our time. first, never can i recall or other individuals that i've talked to can recall or any agency for that matter other than va, completely exhausting its operational funds prior to the end of the fiscal year with the consequences for va being cessation of hospital operations. second, never can i recall an issue of such enormous magnitude

evading the direct attention of the president, and until just recently, you and i speaking about it, mr. secretary. this is not a flying under the radar issue. and i feel that it's exactly how the va and the president have treated it for an effort -- in an effort to avoid responsibility of what's going on. so that everybody understands where i'm coming from, let me start by reviewing how we've arrived at this point. the first real hint of serious financial issues came as a result of a briefing for our staffs with the va on june 4th on a very separate topic. at the conclusion of the briefing, committee staff noted that there appeared to be a $2 to $3 billion difference between va's projected $10.1 billion

obligation rate for care in the community compared with the funds that va budgeted for care in the community. the va official that was briefing agreed with the discrepancy but stated cryptically that just because va was on pace to spend $10.1 billion, it didn't mean that the money to address the discrepancy was either found or was available. that assertion was repeated upon further questioning, leaving it to staff to read between the lines what was meant. at around the same time during a june 8th visit to the cincinnati va medical center, i myself began to hear rumors of an impending financial issue consistent with the cryptic warning that had been provided by va officials in a staff briefing on the 4th of june. as a result, on the 10th of june i called on either the secretary or the deputy secretary to testify on the state of va's budget.

as a consequence of my calling this hearing, staff received a prehearing briefing again at our request on june 18th. it was at this briefing that va for the first time publicly revealed a possible $2.5 billion shortfall in funding. notwithstanding this briefing there was no mention of a hospital shutdown. on the 23rd of june we received a letter from the secretary citing the looming shortfall of $2.5 billion, and also requesting of the appropriations committee a transfer of funds from the medical facility's account to the medical services account. again, there was still no mention of a hospital systemwide shutdown. and finally, at the hearing on june 25th itself, there was no mention of a hospital system shutdown coming in august. mr. secretary, i'm disappointed

about the slow, painstaking revelation of this crisis by the department that's led by you. i understand their excuses as to why we're in this position, however, somebody somewhere took their eye off the ball. just as congress established a cap on spending for the denver project that va busted, congress also provided a budget for va for fiscal year 2015, which the president signed into law, and it, too, is now busted. in both instances va has left congress with very little time to react to a crisis created by va's own management decisions. while we will not penalize veterans for va's management or transparency failures, the days when va can come to congress and just say cut us a check are

gone. asking for flexibility without supporting information is not enough. similar to the way a large corporation board of directors sets a budget and a corporate management implements that budget, the president and 535 members of your current board of directors, set a budget and expect you and your staff to carry out the department's mission. is that that is, to manage the taxpayers' resources in a fiscally responsible manner. just as emerging circumstances in the private sector might cause a ceo to go back to the board armed with information supporting a request for additional resources or flexibility, we have the same expectation. and despite unsupported hints of a problem bit department that supporting information was not provided until extraordinarily late. we've already passed legislation to take va out of managing major construction programs.

perhaps we need to bring in an outside entity to manage the department's finances. i hope not. i recognize ranking member brown for an opening statement. >> thank you, mr. chairman. and thank you for calling this hearing today to discuss the va's current budget shortfall and the possibility that va may have to close hospitals or rags ration health care. mr. chairman, i know everyone in this room agrees that this committee is committed to providing the resources that va needs to take care of our veterans. we all need straight answers to our questions. how much is needed and why? we're all supportive to make sure our veterans get the care that they need but yet again

we're faced with an 11th hour va budget crisis. we must all work together va and congress in order to properly anticipate the resources needed for va. the va must do a better job of predicting requirements. it is important that va starts planning, anticipating what our veterans will need and where they will need it. we have been hearing that this shortfall is due to the increase of veterans coming to get medical care, resorting in more veterans being treated outside of va. i also think it takes care of the veterans with hepatitis c. many of whom are vietnam veterans, who we recently honored in a celebration in the capitol, should be one of our highest priorities. but i wonder if this shortfall

is fundamentally due to lack of planning and forecasting or for a variety of programs which would provide services to our veterans. so today let's figure out what we need to do to ensure that our veterans are getting the health care that they have earned and begin to figure out what steps we need to take to and prevent any more 11th hour budget crisis. in february the secretary began asking this committee for more flexibility to move money between accounts that would enable him to run his administration more like a business and better care for the veterans. let me repeat that. in february -- and, again, in march -- the secretary came right there and asked us to give him the flexibility to run the va like a business so he could care for the veterans. we have over 60 additional

accounts that the va has to decide whether or not to allow flexibility. and as we track the vso support and providing -- allowing the secretary access to charge towards funds i want to present for the record the va physician productivity is up 8.5% and it gives the account of every category that we are servicing veterans for fiscal '15 and the increase. i want to submit that to the record. in addition -- >> without objection. >> in addition to that, i want to submit for the record a letter from each of the service organizations indicating that they support the secretary

having the flexibility to move this money around. when we did the choice act, the purpose of the choice act was to provide services to the provide services to the veterans. we didn't say what services? just services to the veterans. and the secretary needs the flexibility enable to provide those services. with that, mr. chairman, i yield back the balance of my time. and did you take the va's without objection? >> yes. >> their letters? >> without objection i will accept those letters. and i do appreciate you submitting those letters of support and remind my colleagues that all the veteran service organizations also support my accountability bill as well. so as we meet later on this week to talk about it i hope that we will keep that in mind. i would remind the members that

this committee and the senate as well rejected on a bipartisan basis an attempt to go into the choice fund to fix the budget shortfall at the aurora hospital as well and i think we need to focus, rightly so as ms. brown has pointed out this morning, forecasting and getting a better grasp on what's going on with the dollars that are appropriated to the department of veterans affairs. and that's why we've asked the secretary to be here. and i know you had to change your schedule in order to come, and i appreciate that. without question, once we spoke, the secretary said, i will be there, along with dr. schmidt. so, mr. secretary, you are recognized four your opening statement. i know you also have some charts you brought with you. i don't know if we are going to post them up here or if people

have -- >> we've given them out, mr. chairman. >> okay. all right. thank you, mr. secretary. you're recognized. >> mr. chairman, if i may, i'd like to start -- and i know you would agree with this -- by honoring our five service members who were senselessly killed in chattanooga. on behalf of all veterans and on behalf of our department i extend my deepest condolences to their families, their fellow service members and their friends who grieve their loss. we will never forget their service to our nation nor their supreme sacrifice on behalf of all of us and the freedom that we so cherish. thanks to the chairman and the ranking member for joining your senate counterparts at our most recent four corners meeting at va's central office last thursday morning. and i appreciate this opportunity to it continue our dialogue publicly so veterans and all americans can understand these important issues. representing veterans and service members this morning are senior leaders of some of our

most important partners, veterans and military service organizations and i want to thank them for being here as well. a year ago today at my senate confirmation hearing i was charged to ensure that va is refocused on providing veterans with the highest quality service that they've earned. i welcome that opportunity. for the last year i've been working with a great and growing team of excellent people to fulfill that sacred duty. over the last year since my swearing in nine of the 17 top leaders in va are all new. we have to get the right people on the bus and we have to get them in the right seats on the bus. because of their hard work, va has increased veterans' access to care and completed 7 million more appointments this year than last year. 2.5 million within va and 4.5 million in the community. so 7 million total, more than last year, 4.5 million in the community, 2.5 million inside

va. we've increased va care in the community authorizations, including choice, by 44% since we started accelerating access to care a year ago. that's 900,000 more authorizations than the previous year. while choice has been just a small proportion of that 4.5 million, it's on the rise and utilization has doubled in the last month. today because of growing -- growth in access the department is struggling to meet veterans' needs through the end of the fiscal year. we need your help. you've already appropriated funds to meet these needs, but you haven't given me the flexibility or the authority to use them. without flexibility we will have no option at the end of july but to defer all remaining nonchoice care in the community

authorizations until october. provide staff furlough notices and notify vendors that we cannot pay them as we begin an orderly shutdown of hospitals and clinics across the country. these are unfortunate conclusions to an otherwise productive year of progress. in had fact, we've doubled the capacity that we thought was required to meet last year's demand by focusing on four pillars: staffing, space, productivity and va community care, or what we sometimes call choice care. we have more people serving veterans. since april 2014 we've increased net staffing by over 12,000, including over 1,000 new physicians and we've used choice act funding to fire over 3,700 medical center staff. we have more space for veterans. we've activated over 1.7 million square feet since last fiscal

year and increased the number of primary care exam rooms so providers can care for more veterans each and every day. we're more productive, identifying unused capacity, optimizing scheduling, heading off no-shows and we're also stopping late appointment cancellations and extending clinic hours at night and on the weekends. we are aggressively using technology like telehealth, secure messaging and e consults to reach more veterans. clinical output, as you can see in this chart, has increased 8.5% where our healthcare budget has increased only 2.8%. we are aggressively using care in the community. the choice program and our accelerating access to care initiative increased veteran options for care in the community.

we provided va care in the community authorizations, including choice, for 36% more people than we it did over the same period last year. a total of 1.5 million individual va beneficiaries. in short, we're putting the needs and expectations of veterans and beneficiaries first, empowering employees to deliver excellent customer service, improving or eliminating processes and shaping more productive and veteran centric internal operations. that's my va. our top priority to bring va into the 21st century. our strategy is paying dividends for veterans. we've increased va care in the community authorizations, including choice, by 44% since we started accelerating access to care a year ago. that's 900,000 more authorizations than the previous year. between the end of june last year and may we've completed

56.2 million appointments, a 4% increase over last year. and there were 1.5 million encounters during extended hours, a 10% increase. and that's particularly important to our women veterans. even with that increase we completed 97% of appointments within 30 days, 93% within 14 days, 88% within 7 days and 22% same day appointments. for specialty care, wait times are down to an average of five face. for primary care, wait times are down to an average of four days. and we have an average of about three days for mental healthcare. so we're making verifiable progress for veterans and with your support va can be the best

customer service agency in federal government. but even as we increase access and transform, important challenges remain and there will be more in the future as veterans' testimony graphics evolve. it's now clear that the access crisis in 2014 was predominantly a matter of significant mismatch of supply versus demand exacerbated by greater numbers of veterans receiving services. that sort of imbalance predicts failure in had any business, public or private, especially when we promise veterans' benefits without the flexibility to fulfill the obligations. so a fundamental problem is va working to a budget, not to the package of benefits and services veterans have earned and have been promised by congress. budgets are static, our requirements are fluid, and changes in veterans' needs and preferences for care far outpace the federal budget cycle. here is an example. last year on average we added 51,000 veterans to our healthcare rolls each month.

this year -- this year the average monthly -- monthly average of new enrollees has been 131,000. 131,000. that's 147% increase. and we welcome them all and i'm sure you do, too. but we can't miss that today enrolled veterans only rely on va for 34% of their care. just 1 percentage point growth in reliance increases costs by approximately $1.4 billion. let me say that again. today enrolled veterans only rely on va for 34% of their care. just a 1% increase -- a 1 percentage point increase in reliance increases costs by $1.4 billion. so we're working hard to best serve more veterans, but without flexibility we can't provide what they need the way you've directed it.

we've reached a decision point. congress can either shape a different benefit profile for veterans or give va the flexibility and money for legislated entitlements. my worst nightmare is a veteran going without care because i have the money in the wrong pocket. i earlier compared the inflexibility we faced to having one checking account for gasoline in your household and one checking account for groceries, the price of gasoline falls in half and you can't move money from the gasoline account to the food or grocery account. well, the inflexibility we're talking about today is even worse than that, it's even more puzzling. i can't move money from the food account to another food account. from a care in the community account to another care in the community account. all a together we have over 70 line items of budget that are

inflexible, yet the veteran has choice. freed up they would help us give veterans, the va that you envision, and that they deserve. we need flexibility to move money from line item to line item just like you would a business. we need flexibility to move money from va community care to choice and from choice to va community care. both are care in the community. we need flexibility to transfer both directions depending upon demand because we will not ever be able to predict the demand exactly. we owe it to veterans and ourselves to be more agile 15 years into the 21st century. it was february we asked for flexibility to move resources. it was may when we again asked for flexibility to use some choice program funding to provide care in the community. i'm asking again for the simple flexibility to serve veterans with the money you have already appropriated so we can resource the capacity that we've grown.

more flexibility will go far toward meeting veteran care and increasing access across the country. pun for the denver replacement medical center will be depleted by earlier october and work on the project will cease unless we receive congressional authorization for the full cost of the project and flexibility in fiscal year '16 to transfer $625 million of our existing resources to the major construction account. we have presented several plans to congress, the latest being on june 5th and we will have an update shortly. we anticipate the corps of engineers will award a contract to complete the facility in october and assume construction management on the project if we receive full authorization and that flexibility that we seek. to improve community care for veterans we need to streamline

an ant waited business processes for purchasing care. for years a variety of authorities and programs have provided community care to veterans and i have trouble holding this up and talking at the same time, but you have had this at your table. today we have seven different programs for providing community care. each one has its own exclusions, each one has its own payment options. it's incredibly confusing. we have traditional va care, we have choice, we have patient-centered community care, we have two separate plans for emergency care in the community, we have something called arch, we have indian health service and tribal health program and these don't include other programs for veterans' beneficiaries. it's all very difficult to understand. veterans don't get it, providers don't get it, our employees don't get it, and i can tell you from our breakfast earlier last week members of congress don't

understand it completely. we look forward to continuing to work with you on an integrated network of va and community care and a single integrated reimbursement system to get the providers we need on board. you see what happens is providers cherry pick the program to get the highest reimbursement rates. on may 1 we sent you our proposal, the purchased healthcare stream lining and modernization act, a bill to make critical improvements in provider agreements and give us the flexibility to provide timely local care to veterans. our proposal modeled on the purchased care authority in the choice act includes protections for procurement integrity, provider qualifications and reasonable cost. flexibility with respect to choice is central to resolving the budget shortfall and ensuring veterans continue receiving timely care as we strive to meet the 30-day access goal.

on top of the $7.5 billion of va community care we already provide, congress added new entitlements for veterans in the choice act, but there are many programs that the choice act doesn't cover. because choice authorizations and community care authorizations are in different buckets, we have a funding short paul, in spite of the fact that at both types of care are community care. at the current rate we expect care in the community in 2015 will cost an additional $2.5 billion. new hepatitis c drugs for veterans will cost an additional $500 million. all we seek is flexibility. flexibility through limited authority to use money for community care to the extent those exceed our fiscal year 2015 budget. to meet these growing requirements next year va needs

the adequate funding the president's 2016 budget request provides, but the house proposed $1.4 billion reduction means 688 million less for veterans' medical care meaning as many as 70,000 veterans may not receive care. further, it means no funding for four major construction projects and six cemetery projects and 17,000 veterans and family members may not receive va burial honors. the construction budget was cut 50% and that's at a time when over 50% of our buildings are over 50 years old. the increase in requirements we're seeing anticipates greater challenges ahead.

services and benefits peak years after conflicts end. remember during my budget testimony i talked about the fact that we're now seeing the peak years of the vietnam crisis, even though the vietnam war ended 50 years ago. the healthcare requirements and the demand for benefits increase as veterans age and exit the work force. so full funding of a 2016 budget request is a critical first step in meeting these challenges, but we have to look much further ahead for the sake of afghanistan and iraq veterans. in 1975 just 40 years ago the year i graduated from west point, only 2.2 million american veterans were 65 years old or older. that's 7.5% of the veteran population. by 2017 we expect 9.8 million will be 65 years or older, that's 46% of the veteran population. what does that mean? well, consider this. va provides the best hearing and technology -- hearing aid

technology anywhere. medicare doesn't cover hearing aids and most insurance plans have limited coverage at best. so choosing va for hearing aids saves veterans around $4,200. as va continues to improve access, more veterans are going to come to the va because they want to and because it makes financial sense. so it's a foregone conclusion that the cost of fulfilling our commitments will grow for the foreseeable future. it bears repeating that the 2014 access crisis was in part a vietnam debt, not a debt of afghanistan and iraq where service members still serve. so we can't be short sighted, we have to respond today with a long-term view that underlines a commitment to va transformation. veterans who have preserved our freedom are watching us, as the military draw down continues

service members are also watching us. and young men and women who might choose to serve are watching us. they rightly expect us to fulfill our obligations with the same degree of dignity and fidelity with which they put their lives on the line for our nation. if we choose shutdown we fail all of them. given the commitment we made at breakfast last week to keep working together, i know we will honor all of our obligations to veterans and their families of every generation. thank you very much, mr. chairman, and committee. we look forward to your questions. >> thank you very much, mr. secretary. i would like to ask, you talked about additional enrollees this year and i don't have the numbers right this front of me. did you say that was a net number so it would include those that died or is this just new enrollees? so you had 100,000 new enrollees, how many folks died and came off the system? >> i don't have the number, mr.

chairman, of how many died, but i can tell you that with 7 million more appointments this year versus last, that a lot more are alive than are dead. >> and i understand that, but you made a point of talking about how many new people enrolled into the system and i just want, for clarity purposes, i think it's important not just to focus only on that number. >> we will get you that number. >> that we get a net number. >> we will get you the number of the number of people who died and the number of enrollees. >> and i think the simple question i think that we need to talk about today -- and i know you wanted to focus on the appropriations process which is still ongoing. i would hope very soon that the senate will move and move a piece of legislation so we can get the va budget passed, i think it's critical that we get that done, but if we didn't have the choice program to fall back on today, that $10 billion, $9 billion, whatever the number is today, how would this problem be solved? >> well, mr. chairman, we agree

with you. as we said last week, and as we've said from the very beginning, we very much favor the choice program. the choice program is the shock absorber that has allowed us to care for veterans at a time when -- when more veterans are entering the system and when that care is necessary. you know, the choice program allocated $10 billion for care over three years. we're already spending $6 billion for community care from the current va budget. so the idea that has been propagated in the media that shower' against the choice program or we're gutting the choice program is absolutely positively wrong, proven by the data. $6 billion we've overspent $6 billion this year in in community care. community care is absolutely essential. >> i think the issue is your hepatitis c drug, $1.5 billion or whatever the number is for hepatitis c is part of the issue, and i don't think any one

of us thinks that we should not be providing that drug. in no budget submission that i can recall was it discussed about that, although i'm hoping that somebody -- and ms. brown actually talked about the forecasting -- that somebody was looking at the approval of that drug and that it was coming on and that if it did come on that it was going to cause a significant issue as it relates to the non-va care item, line item of $6 billion, which is gone now. it's never been gone before, but all of a is sudden this year it's disappeared. and my question was, if we didn't have the pot of money that you're looking at now to solve this crisis, how would we solve the crisis? >> mr. chairman, what we're saying is that based on the laws

that the congress has passed there are certain benefits we have to give to veterans and the budget has to match that. without the choice act the budget clearly would not match the laws that we provide to veterans. remember, as i said, only just about over a third of veterans are using the system and with every new 1 percentage point of veterans who enter the system we're talking about $1.5 billion. i think -- an incremental $1.5 billion. i think the point you make on the hepatitis c drug is an important one. i talked about the length of budget cycles in the federal government. we started the appropriation for 2015 because it's an advanced appropriation sometime around 2015. these drugs were invented between 2013 and 2015. they couldn't have been anticipated. we had two more hepatitis c drugs come out. we're going to have new drug

inventions in the future. how do we work together to create the flexibility in the budget cycle so that we can deal with incremental demand of veterans and new special causes like new drugs? and that's what we're proposing to work together with you on. >> according to your staff the veterans health administration has taken a number of steps to curtail the shortfall, including revised guidance on the use of non-va care, halting all nonessential hires, purchasing and travel and pulling salary dollars for medical center can accounts. one area that i see that hasn't been looked at and that is the issue of bonuses. what is sacred about the bonus, $350 million bonus pot that would prevent you from accessing that money? and if you need flexibility we will be glad to give you flexibility to use that, too. would you not look at every crevice possible? >> mr. chairman, you probably

recall the meeting you and i had in your office where we went through the relative ranking and the accountability steps that we've taken within va. one of those steps, as you may recall, is nobody in the veterans health administration, nobody is receiving a bonus for 2014. and also the relative ranking that we did of their performance, no one in the veterans health administration received an outstanding rating and i would defy you, as i did that day, to compare our relative rating, our relative performance rating, versus the relative performance rating of any other department of government and the best companies in the private sector because we were following the principles of the best companies in the private sector. >> and i appreciate the meeting that we had, the information you provided and my time has expired but i want to get for clarity,

nobody within the veteran health administration is getting a bonus? >> no executive. yes, sir. >> there's a very distinct difference between executive and the line employee. i just wanted to make that clear. ms. brown. >> thank you, mr. chairman. first of all, let me just say that it was a beautiful services that we had here last week in the capitol for the vietnam veterans and, you know, that glitter is very nice, i mean, they deserve it, but they also deserve the services. now, i participated in every choice meeting, every conference, voted on it and the purpose of the choice was to provide veterans services to veterans, their care. can you expound more on the flexibility that you need? because when i think about it, i think about the gi bill. veterans can go to any school that they want to, so the money

follows the veterans. so can you expound on that flexibility that you need, that you've come to congress both openly and in private and explain to us that you need the flexibility. >> yes, ma'am. thank you ms. ranking member. as we've said, there are about 23 million veterans in this country, only 9 million are signed up for our healthcare system and probably only 6, 7 million use it on any given day. so there's an opportunity for every veteran to use our health system and we would like that, but in order for that to happen we've got to have the flexibility to be able to deal with an influx of veterans as we improve care. one of the things that you're probably aware of is if you get your knee replaced with medicare it will cost you roughly $5,000, if you are a veteran and you get your knee replaced using the va you save $5,000. so to the degree we improve our

system and we improve access to our system more and more veterans will enter the system. as we said earlier, every percentage point of veterans who enter the system is going to add another $1.5 billion of cost. with 70 plus line items of budget where we can't move money interest one line item to another it distorts what we do. it causes situations like we're this today and the whole purpose of the choice act was to improve care for veterans. the whole purpose of the choice act was to get veterans care in the community. what we're talking about is a shortfall in care in the community. so it really defies my logic to understand why we can't use choice care money for care in the community since that's the

reason it was appropriated. the money has already been appropriated, it's sitting there, we'd like to use it to care for veterans. as more veterans come into the system we want to care for them, too. >> one of the complaints or challenges is -- that you talked about knee replacement. so if someone goes into one of the choice programs for knee and the doctor determined that both knees need to be replaced, you condition do it based on exactly how the choice is working right now because that other knee has had to carry -- i mean, i know it's getting technical -- can the medical person explain to me why? >> so i think if the veteran needs both knees replaced under the choice program they could get both knees replaced, it would require a second authorization for the second procedure that needs to be done. i think that the challenge for us is really, you know, the chairman asked, well, what would we do if we weren't in the situation where we have the

choice funds. and the fact of the matter is we probably this year would have done what we always have done, we would have managed to a budget, but we didn't do that this year. we managed to our requirement and that requirement was that no veteran would wait more than 30 days for care. and while we have worked very hard to make the choice program an option for that patient who needs that knee replacement the fact of the matter is today a lot of our care is going -- we're buying it through mechanisms outside the choice program, but we are doing it so that no veteran waits more than 30 days for care. and then accessing the resources to be able to pay for that is, i think, our challenge today. >> my concern is those community programs that we've been working with for years, universities, other stakeholders. what's happening to those programs? because we've cut the uses of some of those programs because of the shortfall.

>> we have curtailed the use of those programs for elective care today. our interest is actually making choice programs the premiere program. to make that program the predominant way that we get care and we have worked very hard with both health net and tri-west to get the 87,000 providers that we have used in the past, some of those are our academic affiliates, to sign up to be providers under the choice program. and for our academic affiliates we offer them both indirect and direct medical education overhead expenses and the reimbursement that they have negotiated with cms. >> thank you. thank you, mr. chairman. >> mr. lamborn, you're recognized. >> thank you, mr. chairman. thank you for having this important hearing. secretary mcdonald, you've come in here basically demanding $3 billion or healthcare in large part shuts down on august 20th.

and i'm just amazed that we're in this position. do you -- do you and your leadership team at the va have any accountability or any responsibility at all for this happening, and if so, how much? >> well, of course we do. and as secretary -- deputy secretary gibson laid out in the last hearing on the same subject, just a few weeks ago, there are many reasons that we are where we are. and i think we all share some of the responsibility, including members of congress. we have a new program called the choice program, it's hard to predict new programs, we have seven different ways of providing care in the community and at the time the choice -- >> okay. >> excuse me, sir, you want to interrupt? >> yes. let me interrupt because my time is limited. we've described what the layout

of the land is, you -- >> i was going to go through the reasons we are where we are and i was going to show you what accountability we have. >> okay. do you have any role in this -- >> we all do. >> -- is what i'm getting at. >> we all do. one of the first things you learn your first day at west point is to say no excuse, sir. one of the thing that baffles me is we're dealing with a computer system that's over 30 years old, called the fms system, it's written on cobal which was a language i wrote in 1973. we've got to change the management system of the financials of this enterprise called the va. the problem that we have is when we benchmark private industry our i.t. budget is about 50% of what a healthcare system i.t. budget is, so we've got to fix that. at the same time we've got to improve our management of the financial systems and we're going to work hard to do that. at the same time it would help us if we had flexibility rather

than over 70 line items of different budget that we can't move around. >> see, my issue is that every time one of these problems comes up on an almost weekly basis it seems like this year, we want -- we hear pleas for more money or more flexibility or something like that to go forward, but we never really get to the bottom of what caused it in the first place. that's just what i am and the rest of us here are trying to get to the bottom of. >> do you want me to repeat my opening statement in i thought it was pretty clear on what caused it. last year you talked about mismanagement not giving veterans care, and now it's too much care. congress passes the law -- >> no. here is my real problem here. you say on august 20th there is no other option except for an emergency supplemental by congress. and you are going to start closing down operating rooms and hospitals, clinics all over the country, and with a $60 billion

health care budget out of $160 billion total budget, there is no other way to see around this problem you tell veterans they can't come into the operating room after august 20th. >> sir i did not say that. i did not talking about using a supplemental. i was talking about using the $10 billion appropriated by congress for care in the community to care for the community. that's the lunacy of why we're here talking about this. you appropriated $10 billion, and we are talking about using it to pay for care in the community. >> mr. chairman, i yield back. >> ms. brownley. >> thank you, mr. chairman. and thank you mr. secretary for your continued leadership to right the ship here. i appreciate it very much.

i do think flexibility is part of the solution, not the panacea, but part of the solution. i think clearly we need to be more nimble to serve our veterans and to serve them appropriately, and the way they deserve it. closing hospitals is not a choice, as far as i am concerned. i think we have an i.t. system that can't track spending and can't reconcile a budget in a timely way, and i would argue -- and i think you've eluded to this in your testimony, but i would argue that, yes, there has been an increase in demand from our veterans, but i would also argue that the v.a. is pushing more resources out the door than they have in the past. and that's a good thing. because pushing more resources means that more veterans are being served and being served appropriately.

i guess, you know, my question, you've mentioned about areas that we need to improve upon, and you mentioned i.t., we're spending 50% of what private industry spends in their i.t. systems, and better management, checks and balances. what are we going to do? i think we need, before we move forward in any way, shape or form, we need assurances these kinds of things are going to get fixed. we can't move towards flexibility and hope and pray that the next time we will be better off. we need assurances that these are going to be fixed and that we will know in a timely way where we are. if we ask the question today, we know exactly where we are in terms of money that has been spent and what the balances are, so share with us the specifics

and when you think these things are going to be fixed so that we don't approach another fiscal year with the same kind of calamity that we are facing today. >> thank you, and i, again, want to reiterate, we do own these problems and want to fix the problems and i didn't want to give any different kind of impression with the questions, and it starts with getting the right people in place. as you know, we just got confirmed mr. laverne counsel who is the secretary for the office of information technology. she was the i.t. leader for johnson & johnson and dell. i have been working to recruit her for many months, almost since the day i was confirmed. we have to get the right leaders in place, and i think we now have them. what we then need to do is benchmark other operations, which we are doing.

in the case of the financial management system that we use, the fms, the cobalt system i am talking about, we have to replace it and until we replace it we have to take brute force effort to make sure we are doing a better job of keeping track of the budgets and keeping you informed of them. one of the issues here was when you passed the choice act, you demanded in the choice act that we account for here in the community in a different way than we were doing it previously. you asked us to centralize that, and that change helped exacerbate this situation. nevertheless, we tried through brute force to try to keep that accounting whole so that we could understand what was going on. but there is no question we have got to do a better job. >> mr. secretary, for me at least, i presume we have the

right resources to find the people for the right job, and that's part of the solution. i have to say that i don't have a lot of confidence, having served on this committee now for 2 1/2 years, that the v.a. -- you have not asked us for additional money for an i.t. system, yet. i presume that will come. i don't have the confidence that within a year we will have a new i.t. system that provides tools necessary that we would need to be able to have a timely data and timely information in terms of where we are. is there something that you are working on specifically to give us -- >> obviously, this is a high priority for us. before we design an i.t. system to deal with seven different ways of paying for care in the community, we ought to work together, as we talked about at the breakfast last week, to making one way to pay for it and making the i.t. system will be

easier. >> thank you, i yield back. >> thank you, mr. chairman. thank you, mr. secretary for being here. i think you did a pretty succinct of what's going on here. and i guess my biggest problem, frankly, and i agree with having more flexibility in accounting, and nothing irks me more than seeing new windows put in a v.a. and we don't have other things, so i agree with that. i am most concerned about the fact that we didn't know about this whole situation until, what, two weeks ago or less than that? we had mr. gibson here, and all of a sudden it's like a crisis. i think, from my perspective, i was kind of hoping that you would have a plan to reform the v.a. and, you know, make it, you know, all good, and you talked

about some of that here, but i have not really seen you come out and tell me -- maybe the chairman knows something i don't, about the reform process going on. i am really disappointed in the $3 billion shortfall. why didn't we know more about this in advance? what is the story with that? why don't we know about it sooner? >> congressman, i just want to draw your attention to this, we give you this on june 5th. it was about denver, about replacing the denver facility, but i thought it was important at the time we published this to also give you a heads-up on the work to reform the v.a. if you turn to the back of the book, the last 56 pages are all about the transformation of v.a. and we have sat down with those members of congress who are

interested and gone through the detail, and they happen to be mostly in the senate, but we would love you to take you through the detail. and we set up an advisory board that includes some of the most outstanding ceos in the country helping us, and every member on this committee has 56 pages of what is going on. we're happy to spend more time with you. and we would like you to be part of it, and in fact we would like to have hearings talking about what we are doing to transform the future. relative to the shortfall, our first knowledge of it was around the middle of may. at the time we had a meeting with the eight corners, both the senate and the house appropriations and authorizing. and at that time we mentioned three issues that were emerging: one was hepatitis c, and one was denver, and denver was the

reason for the meeting, and the third was the cost of care in the community and at that time we thought we could solve the problem, we thought we could solve it by putting more veterans into the choice program and therefore not relying as much on our internal care for the community budget. we obviously could not solve the problem. we also thought we could use unspent money from previous years to do it, and we got legal opinions and omb opinions -- >> is there unspent money from previous years? >> yes, sir. anytime you have budget line items over 70 where you are inflexible in moving money from one budget line item to another, you will have unspent money. in fact, one way to rid the government of unspent money is to allow more flexibility between accounts. that's the way businesses do it. >> so in the last five years, and as those obligations are expensed, the obligations --

there are funds that get deobligated, and those funds sit in the treasury for -- >> how much is there? >> for about the last five years, there is $1.3 billion. >> i had another question about maybe third-party reimbursement for nonservice connected care, and i have heard that is an issue that the collections are not what they should be. can you give me a situation update with that? >> i think -- so our collections this year are actually up significantly. i don't have the -- i haven't refreshed that number in my head, and i think it's about 7% higher than we anticipated, and we are working hard to improve the collections. a lot of patients who have

insurance have actually met a gap coverage, and without an eob they -- >> eob? >> explanation of benefits. because we are not a medicare provider, those providers don't pay us. we are working hard to collect every penny that we can. >> i am out of time, apparently. >> ms. titus. >> thank you, mr. chairman. a lot of that money that's leftover, though, was used quietly to pay for the continuation of the denver project, wasn't it? >> are you talking about the money in the treasury for the last five years? >> wherever you found that. >> it's not available to us. we can't use that money. we thought we could, and it's money that essentially becomes, as i said, deobligated as

expenses come in. also, sometimes that -- there are new expenses for whatever might have happened in, let's say, in '14, and that money is used in that year, so you can actually become anti-deficient after the fact, so to speak. so that $1.3 billion was not available to us. we had hoped it would be. i was the staff person that had the cryptic conversation with the house staff back in june, and we had -- we thought we had a plan when -- i mean, in my opinion, quite frankly, we are a victim of our success. i mean, we have gotten many more veterans care -- >> okay. but where did you find that money for denver? >> the money for the denver project that we've talked about for this year came from the current year budget, not from previous years' budgets.

>> also in that report that you reference, that's where you also listed, as a possible solution for denver, taking a 1% across the board cut, which in retrospect now seems like not a very good idea when we are so in the hole now, we could not have afforded a 1% cut, but at that time apparently you thought you could. >> that's correct. >> well, there is a lot of teeth gnashing and hair pulling here today. i agree with many of the things that already have been said, but the fact of the matter is we can't let hospitals close and we have to look for flexibility. i think some confusion here is over the difference in the care in the community programs that have been consolidated and choice. and it seems to me there is very little difference from those, aside from naming and contractors and they are both about care in the community. is that accurate?

does that mean flexibility is not that big of a problem? >> yes, your statement is accurate in principle. in execution, though, it's incredibly complex. i would ask you to look at the chart that we gave you. what you will find, we have seven different programs, all of which have different payment methods and different exclusion amounts. i was traveling with a senator that brought in providers and they all complained to me about every program we had except for one. and obviously i knew the reimbursement rate for that program was higher. because you have different reimbursement rates you have providers distorting the system and encouraging one program over another. what we proposed, and we've provided legislation to the chairman and senate is to bring them all under one program and

one reimbursement rate and make it easier for the veteran and va employee. >> doesn't that mean the flexibility that you need from the choice program to that consolidated community in the care would make sense? >> yes, ma'am. >> i am trying to help you. >> that's exactly right. you go to one program you have one budget. >> there is one really important point here. our community care programs are what we used to call purchase care, and used to call fee, and there are a lot of things in those programs right now that are not covered by choice and will require statutory change to fix that. so long-term care is not covered by choice right now. home care is not covered by choice. >> can you work with us to look for legislative fixes and not just the senate but maybe some of us on this committee? >> we absolutely have. we are working on 13 things that we think need to be changed and have made a commitment to sit down from staff from this committee and the senate to address those issues.

>> one last thing. i have been notified that you all are looking at moving southern nevada from the vision 22 to 21, and that means veterans instead of driving four hours to los angeles will drive eight hours, nine hours, ten hours to san francisco. i will be speaking this week later with somebody, but i want to put it on your radar because this is something that we are very concerned about. >> thank you. we are trying to simplify the organization structure, but we want to make sure that it's better for veterans and not worse. >> thank you. >> mr. secretary, have you provided us with draft legislative language that would combine -- >> i have not as yet. i made a mistake when i said that. we have not yet provided the consolidation legislation language. >> thank you. and, ms. titus, the biggest

difference between the non-va fee care of what sits in there today and the $10 billion choice, the non-va fee care money, so that was the biggest thing that was done from our standpoint. mr. hillscamp. >> mr. secretary, i appreciate you coming. this is a very difficult discussion for me. i had great hopes we would move forward in the last two years to fix some of these programs, but as i see it, you are coming here before us with the most massive shortfall in va history, nearly $3 billion. i am not certain -- when did you personally know when you had the short fall?

>> what i said was around the middle of may. >> middle of may. and if i understand the numbers correctly in this particular line item it's approximately 50% over the budgeted amount? is there a level where they come to you earlier than halfway through the fiscal year to say, hey, we have a problem? do they not come to your attention until they are 50% over their budget? >> when there is budget overage, you try to fix it. >> but again is there a level? 50% over budget. >> remember there's a $10 billion source of funds called choice. and what we're talking about -- >> i do know that. i do know that. and what i would like to know is why you low balled non va care

estimates? >> i didn't low ball. >> the actuals -- you came in and projected they be 25% less of the actual figures for 2014. you came in and projected you would save $1.5 billion, and they would be lower and they are coming in at 1.5 billion over your estimates. so on one hand -- >> when did i say that? >> in the budget submission to congress. >> in my 2016 budget testimony? >> let me give you the figures that you provided the committee and maybe your staff didn't tell you this and that's why i ask about the 50%. fiscal 2014 $6.3 billion of actual spending and you come in and say we need a $4.9 billion, and that's a 25% cut. and then you are surprised to come in and say you are going to spend more than in 2014.

you low ball the figures by $1.5 billion, and then you come here and say not only did we not cut $1.5 billion, we are going to add another billion on top of it. >> i am not familiar with the figures you are talking about. maybe jim is. >> i don't need your explanations -- >> as i learned about it we got the information as quickly -- >> mr. secretary, please. >> we're here today. >> mr. secretary, i would like an explanation of why you projected a 25% reduction in this line item and now you are saying you want a 25% increase over last year. >> i am not familiar actually with the information you have, and i would be happy to look at it. what i can tell you -- >> if i could yield back. >> very quickly, i believe it was the vha cfo that did provide that information to us. >> and here is my concern, mr. secretary. and i know in our closed door meeting in february you did tell

us on this panel, you do support va choice, but then you come in and requested to raid those funds and use them elsewhere, and then we hear from others in the department that you have many employees that are not very supportive of choice, and somehow we don't have a lot of veterans moving into choice, and came in well under budget. but what you wanted in next year's budget, we decided we're not going to do that. but then somehow, a few months later, we come in and request essentially what we wouldn't do for you earlier. i believe your department either low balled purposely or severely created a severe mistake. how can you claim that massive cut? that's what i don't understand. >> so actually i don't know what you have, but i can tell you this year we started off with a budget of $8.2 billion for care in the community, and -- >> no, you are wrong on that. that's what you spent last year.

>> no, i am not wrong on that. >> the budgeted amount was $7.2 billion. that's what you put in your budget. >> what we budgeted internally this year was $8.2 billion for purchase care, and we had hopes that the choice program would offset some of that and we took $688 million out to pay for hepatitis c drug. >> out of a $3 billion that leaves 80%. but those are not the numbers you provided to the committee. i would like to see those clarified, mr. chairman. one last thing as well, and for the secretary, for everybody here, i know yesterday you apparently told the vfw that we were cutting the va budget, and that has never happened, and hopefully that has been misreported in the media that

you told the vfw that congress has cut your budget, but i don't want to know how many employees have been fired for the waiting scandal. is that only two? is that correct? >> i think as you know we sought discipline ation for six gone and two already retired and we have over 100 investigation for wait-time manipulation, and last week i think you saw an announcement that the fbi has actually indicted someone, so these investigations do take time, congressman, and the good news is they are getting to fruition, and as they do we are taking action. as you know, since i have been secretary, since over 1,300 people have been terminated. we take this very seriously. that's why we have nine of our 17 members in new leadership team, in our medical centers, 91% of our medical center directors or leadership teams are new. the leadership is changing and i hope with that change we have a

change in culture and a change in performance. that's why we've had 7 million more appointments this year than last year. >> thank you. >> mr. secretary we do have an outstanding question in to you an outstanding question to you in regard to the 1300 people that were terminated and how many are probationary and we are still awaiting the information for that. >> we'll get you the answers as quickly as we can. our h.r. systems are similar to the financial systems so we have to count them by hand. >> miss custer. >> thank you mr. secretary and i appreciate you being here with us today. i want to try to focus in on an issue that i think may be causing some confusion in the question of community care, the v.a. has recently redefined what had traditionally viewed as nonv.a. care to include other programs to champ v.a., state veterans homes, of which i'm

very proud of the one in new hampshire, community nursing homes, i think you've mentioned home healthcare. and i just want to be realistic, given the aging demographic of veterans in new hampshire we have 65,000 vietnam veterans who we are committed to serving. but just so that we all understand going forward we're referring to this as sort of a crisis situation in the short-term. but long-term, if we're making the commitment, a bipartisan commitment that we've made to shorten time frames for waiting, to provide greater access, to high -- hire more professionals, i want to understand exactly what is in this umbrella of community care and how we expect to meet this need and pay for this need going forward? >> so under -- in the

legislation, we were required to centralize all of the programs under the chief business office and to centralize -- >> required by whom. >> by the choice legislation. and we did that. and when we did -- we called them purchased care really. when i came in it was fee care. but we were calling it non-v.a. community care. and we said when 20% of the care on a cost basis is out in the community, it is not non-v.a. care, it is v.a. care and we call it v.a. community care. we're trying to change how we talk about it and the mindset in the organization about what we're trying to accomplish. so you are correct. that bucket of things includes both outpatient and inpatient care that you think of the purchase care stuff that we do. it also includes our nursing home care our state home care, our home care, champ v.a., the

list of things that are there and i'm happy to get you the detailed list of those and the break-out financially of what is being spent in each of those buckets. >> and is it your proposal going forward that we would consolidate all of those into one program that we on capitol hill refer to as choice, but it could also be referred to as community? >> so we have all of these programs and we also have as the secretary said seven different ways of acquiring those services, through sharing agreements contracts, pc 3, all of these things. i think our proposal, and we really want to sit down with the staff and jointly hammer out what a future state might look like. i think that the choice program is a good program. i think if we can figure out how

to make that model work across all of these community care benefits so we have a more unified and structured way where we have one billing system one way to authorize the care, one way to get information back the same kinds of providers that can provide those services then i think we could be much better off because we could actually explain it not only to other people but to ourselves. >> and then let me understand when that was consolidated under the choice act, to a central -- presumably here in washington or is it located somewhere else. >> well the cbo -- the chief business officer is here but we have pieces of that office in atlanta and denver and austin. >> so when that was consolidated it sounds like there was an unintended consequence or inadd

vertent result -- inadvertent result in that you no longer had the information that is very regional. i know in our area these are individual decisions and as the secretary mentioned the reimbursement rates whether a particular clinic or a nursing home or a home care program is going to accept this rate, enter into a contract, have we -- is it fair to say and it issin addverrent but congress wrote it that way is it fair to say that created a problem. >> i think you hit the nail on the head. the programs -- well most the care the nursing home care the state homes was managed locally by a medical center and they had a budget for it and the clufrpgy information -- the clunky information systems that we had and they kept track on it. and when we centralized that we should have anticipated some of

the problems but we didn't. and i think that we lost a lot of intelligence about the obligations that were being made and -- because you have the authorizations in one system and the obligations in a different system. and at a time quite frankly when we have unprecedented volume of care that we are having in the community. so maybe we should have anticipated those things but it was an unanticipated consequence and we did not anticipate this to happen. >> and i appreciate your candor and this is something we have to own on our own side of the table having drafted the legislation that way. i think we were probably anticipating a bigger data -- a better data system which clearly we have a problem with but this is not unique to the v.a. that the federal government makes authorizations and obligations and then ends up having to pay the piper.

so our balance here as members of this committee is meeting the needs of the v.a. and the veterans all across our districts in every corner from el paso to pittsburgh by northernmost town in new hampshire, on the canadian border. but the question becomes going forward, how do we reintegrate that vital local information and my time is well up. i apologize, mr. chair. i watched his clock and i thought i was on the way down, i was on the way back up. excuse me. >> was there a question that needed to be answered? >> mr. chairman, i think the answer is we're going to work with you to develop the legislation that intergrates the different ways of community care. >> miss brown has a question. >> i want to follow up to that question. because once we pass the choice and we move -- and we have the kind of system, you all caught

the problem because when you all reviewed it and you were looking at the requisitions coming in it wasn't adding up. and that is when you all went in and did an individual audit. can you explain that? >> yes, that is exactly correct. so back when the first quarter ended, we were -- it was clear that we had about a 40-something percent increase in authorization but on plan with the $7.6 billion expenditures for purchase care in the community. when we sat down and said somehow this doesn't make sense, i could think of a lot of reasons why it might make sense but we didn't know and we felt like we needed to look at this. and so we did in january and in february look at that. it took us a while to understand exactly what the problem was going through the system. and then once we did that we

had to sit down and reconcile millions of authorizations by hand to understand the magnitude of the problem. and it wasn't until really late april that we understood the magnitude of that problem. we put a plan together, which we thought was going to resolve the situation, and as i said, the pillars of that plan started getting pulled out from underneath us. and it wasn't really until may, the middle of may, when we said, look, the plan is not viable and we don't really know how to fix this problem without driving more of the care through choice and accessing choice dollars for their intended purchase which is to buy care in the community. >> thank you. >> i do think it is important to note that just prior to folks finding out that this was an issue, we swept 150 --

>> was that you? >> no. but somebody has a cell phone on that needs to be turned off. we got $150 million that we swept out of the v.a. to give to denver is that correct? >> i believe so. i don't know for sure. >> so you knew theres with a shortfall coming, but you thought it was critical that you go take $150 million and give to denver rather than allocate it to -- >> mr. chairman, i wouldn't have sequenced it that way. i think the action on denver predated this understanding that was discussed. i mean please understand that every -- every tool was being pulled out of the tool box to do away with this to the point we had medical center directors